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OUTER HOUSE, COURT OF SESSION
[2009] CSOH 3
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CA32/2008
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OPINION OF LORD MENZIES
in the cause
DOUGLAS SHELF SEVEN
LIMITED
Pursuers;
against
CO-OPERATIVE
WHOLESALE SOCIETY LIMITED
Defenders:
ญญญญญญญญญญญญญญญญญ________________
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Pursuers: Abercrombie QC et J Brown; McClure Naismith
Defenders: Connal QC,
solicitor-advocate; McGrigors LLP
8 January 2009
Introduction
[1] The
pursuers are tenants of a shopping centre at Whitfield in Dundee. The defenders are the sub-tenants of part of
that shopping centre, known as Supermarket Unit Number 1 of the shopping centre
(hereafter referred to as "the premises").
The contractual relationship between the parties is governed by a
sub-lease between Ravenseft Properties Limited and Johnston's
Stores Limited dated 1 and 11
December 1972. In that
sub-lease the expression "Landlords" currently refers to the pursuers and the
expression "Tenants" currently refers to the defenders. It is not necessary for present purposes to
narrate the history of how the parties came to acquire their respective
interests in the premises.
[2] The
premises closed in about January 1995 and have remained vacant since then. The sub-lease contained a valid and
enforceable keep-open clause. The term
of the sub-lease was from 15 May 1970
until 15 May 2033. In January 1999 the pursuers raised an action
seeking damages from the defenders for breach of the keep-open clause. In that action the pursuers maintained that
the closure of the premises since 1995 had reduced the present capital value of
the centre, and had also resulted in a loss of income (in the form of rent and
service charges) from the other units there.
The action was raised in the Sheriff Court
but subsequently transferred to the commercial roll of the Court of Session. The defenders introduced their sub-tenants Kwik
Save Stores Limited as third parties to the action. After a proof lasting some 63 days, Lord Reed
found in favour of the pursuers and awarded them damages for loss of capital
value and also for accrued revenue losses.
(The opinion of Lord Reed dated 9
March 2007 may be found at [2007] CSOH 53.)
[3] In
the present action the pursuers seek (1) decree ordaining the defenders to
carry out works to the premises as specified in terms of an interim schedule of
dilapidations prepared by the pursuers' factors, (2) declarator that the
defenders are obliged by clause (EIGHTH) (Three) (d) of the sub-lease to make
payment to the pursuers' factors of sums invoiced to them in respect of the
provision of security services at the premises, and (3) payment of the sums
brought out in these invoices. The
defenders deny that they are obliged by clause (EIGHTH) (Three) (d) of the
sub-lease to pay a share of costs of security services, and they also dispute
their liability at present to carry out the works specified in the interim
schedule of dilapidations. The parties
were allowed a debate on a variety of issues raised in the pleadings, but when
the matter came before me for debate the arguments focused on these two issues.
The terms of the sub-lease
[4] The
terms of the sub-lease, so far as relevant to the arguments advanced at debate,
are as follows:-
"(FIFTH) The
premises are let for use only as and for the retail trade or business of a
supermarket primarily for the sale of food and as ancillary thereto an
off-licence and for no other purpose whatever except with the prior written
consent of the Landlords.......
(SIXTH) The
Tenants shall take possession of and use and occupy the premises for the
foregoing purpose from the said Twenty ninth day of June Nineteen hundred and
seventy and shall within three months thereafter commence trading therefrom and
shall continue to so use and occupy the premises and trade therefrom throughout
the whole period of this Sub-Lease....
(SEVENTH) The
tenants hereby accept the premises as in good and substantial order and repair
as at the date of entry hereunder and in all respects as suitable and fit for
the purposes for which they are let and
(One) The
Tenants bind and oblige themselves to uphold, repair, maintain, renew and keep
and in the event of destruction or damage, to rebuild re-instate and replace
the premises and the common parts thereof and all additions thereto so that the
same shall be in good and substantial repair and condition during the whole
currency of this Sub-Lease all to the satisfaction of the Landlords and/or the
Over-Landlords which obligations shall include the maintenance of the premises,
wind and water tight;
(Two) The
Tenants bind and oblige themselves at all time to keep the premises clean and
to clean the widows as often as occasion shall require,
(Three) The
Tenants bind and oblige themselves to keep the drainage channels appertaining
to the premises free of all obstructions and
(Four) The
Tenants bind and oblige themselves once in every three years during the period
of this Sub-Lease and in the last year of this Sub-Lease (howsoever determined)
to paint, grain, varnish and colour in a proper and workmanlike manner all the
external parts of the premises.....
(EIGHTH) In
addition to the said rent, the Tenants shall pay punctually during the whole
period of this Sub-Lease the whole charges and others hereinafter specified and
if required shall exhibit the receipts in respect thereof to the Landlords or
their Agents or Factors, videlicet:-....
(Three) A share
proportionate to the ratio which the floor area of the premises (calculated as
aforesaid), as certified by the Landlords' Surveyors (whose decision shall be
final) bears to the total floor area (calculated as aforesaid), as certified by
the Landlords' Surveyors (whose decision shall be final) of the tenanted shop
and supermarket units and other tenanted subjects erected or to be erected on
the whole subjects (under exception of the electricity sub-station erected or
to be erected thereon) or on some other equitable basis at the discretion of
the landlords in each and every case, of (a) the cost, as certified by the
Landlords' Surveyors (whose decision shall be final) of repairs to and renewals
of the common parts of the whole subjects including (without prejudice to the
foregoing generality) the cost of repairing, maintaining, cleansing and
lighting of all service roads, areas, ramps and open spaces, all sewers,
drains, pipes and cables, all boundary walls and/or fences and all others
common to the whole subjects or any common part or parts thereof (b) the cost
as certified by the Landlords' Surveyors (whose decision shall be final) of
effecting and maintaining an insurance of the said common parts of the whole
subjects against loss or damage by fire and the other risks specified in Clause
Twelfth hereof for such sum as shall represent the full reinstatement value
thereof, together with fifteen per cent of the said value for architects'
surveyors', clerk of works' and other fees in relation to the reinstatement
thereof, (c) the cost, as certified by the Landlord's Surveyors, (whose
decision shall be final) of effecting and maintaining an insurance in respect
of the said common parts of the whole subjects against general third party
liability and (d) the professional charges of the Landlords' surveyors, as
common factors of the whole subjects and the shopping development contained
therein and thereon, in connection with the repairs, insurance and others
abovementioned and in general in connection with the management and
administration of the whole subjects and the said shopping development subject
to the proviso that the amount payable by the Tenants hereunder in respect of
their portion of the said professional charges (calculated as aforesaid) shall
not, at any time, be less than such amount as shall be equivalent to Two and a
half per cent of the rent payable from time to time in terms of this Sub-Lease;..."
Submissions for the defenders
[5] Mr
Connal for the defenders submitted that on a proper construction of Clause
(EIGHTH) (Three) (d), when read together with the whole provisions of the sub-lease,
the defenders were not obliged to make any payments towards the costs of
security cover for the premises.
Sub-paragraphs (a), (b) and (c) of Clause (EIGHTH) (Three) obliged the
defenders to pay certain costs. These
included a share of the costs of repairs and renewals, maintenance, cleansing
and lighting etc, and the costs of insurance cover of the common parts. Sub-paragraph (d) was in a different category
and merely obliged the defenders to pay the professional charges of the
Landlords' surveyors, as common factors of the whole subjects. This provision related to the surveyors' fees
properly connected with the repairs and insurance referred to elsewhere in the
clause, and in general in connection with the management and administration of
the whole subjects. The sub-paragraph
had nothing to do with the instruction of services such as the provision of
security guards. Support for this view
was to be found in the provision that the defenders' proportion of the
surveyors' professional charges should be linked to the rent and should be a
minimum of 2.5% of the rent payable under the sub-lease.
[6] As
to the rules developed for the construction of documents such as this sub-lease,
I was referred to Lord Reed's reviews of the authorities in Macdonald Estates Plc v Regenesis (2005) Dunfermline Limited
[2007] CSOH 123, 2007 SLT 791 and Credential
Bath Street Limited v Venture
Investment Placement Limited [2007] CSOH 208. Applying these rules, the sub-lease was
clearly a detailed document drawn up by professionals; the parties had an
opportunity to spell out what was to be paid for, and had availed themselves of
that opportunity. If a significant area
of charge was not anticipated at the time the contract was entered into, it was
not appropriate to add this in to the contract now. The contract made detailed provisions for the
costs of repairs and insurances, but made no provision for the costs of
security guards. Properly construed, the
sub-lease did not oblige the defenders to pay for such costs. That being so, there was no relevant basis
for the second and third conclusions; the defenders' first plea in law should
be sustained to that extent, their fourth plea in law should be sustained, and
the pursuers' second and third pleas in law should be repelled.
[7] The
second point for the defenders related to the first conclusion seeking a decree
ordaining the defenders to carry out certain works specified in an interim
schedule of dilapidations. The argument
for the defenders was to the effect that in the previous litigation the
pursuers had sought and obtained damages in respect of the defenders' breach of
the keep-open obligation, and that these damages related to the pursuers' loss
for the whole duration of the sub-lease.
The pursuers faced a choice when raising that action between seeking
specific implement of the defenders' contractual obligations and damages for
breach of those obligations. Having
elected to seek damages, and having obtained damages, it was no longer open to
the pursuers to seek specific implement of the obligation to keep open and
trade. In effect, the award of damages
was in substitution for that obligation.
The obligation to maintain and repair fell to be construed in light of
this. There was no suggestion in the
previous litigation (either in the pleadings or in the evidence) that there
might be future trading from the premises at any time before the termination of
the sub-lease in 2033: damages were awarded on the basis that there would be no
further trading. The expert valuation
evidence in that litigation proceeded on the basis of a once for all claim for
loss of capital value, and it was clear that the award of damages included an
element of future loss (see paragraphs [296] and [608] of Lord Reed's
opinion). It was clear that the premises
were no longer a trading supermarket, and that the pursuers had already
received full satisfaction in money terms for the fact of non trading. They could not be compelled to trade. The defenders did not take issue with the
suggestion that the premises will require to be in a good and substantial
repair and condition and suitable and fit for the purposes for which they are
let at the termination of the lease in 2033, but in light of the award of
damages in the previous litigation it was not reasonable to construe the
repairing obligation in Clause (SEVENTH) to the effect that the tenants
required to maintain the vacant premises in such a condition that they could be
let to an alternative sub-tenant at very short notice. The interim schedule of dilapidations which
formed the basis of the first conclusion of the summons proceeded on the basis
that the defenders required to maintain the premises in the same condition as
if they were being occupied for supermarket use; this ignored the fact that the
premises were actually vacant, and that the pursuers had already received
damages to reflect that fact. I was told
that although this point did not result in the sustaining or repelling of any
plea in law, a finding on this issue would be helpful to the parties.
Submissions by junior counsel for the pursuers
[8] Junior
counsel for the pursuers addressed himself in the first instance to the second
point raised for the defenders, namely the consequences of the award of damages
in the earlier litigation for the pursuers' first conclusion seeking decree
ordaining the defenders to carry out works specified in the interim schedule of
dilapidations. He began by accepting the
principle that a pursuer must elect between seeking specific implement or
damages in respect of an alleged failure to fulfil contractual
obligations. He accepted that such an
election was made in the earlier litigation, and that it was not now open to
the pursuers to seek implement of the keep-open obligation at any time before
the expiry of the sub-lease in 2033.
However, the present action concerns a quite different obligation from
the keep-open clause which was the obligation with which the earlier action was
concerned. The fact that the pursuers
elected to seek damages for breach of the keep-open obligation cannot bar them
from seeking implement of another obligation under the sub - lease - for
example, payment of the rent, or the obligation to insure, or (as in this case)
the obligation to repair and maintain.
The provisions of Clause (SEVENTH) of the sub-lease required the tenants
to keep the premises in good repair throughout its sixty three year term. The repairing obligation required the
defenders to keep the premises in such a condition that they could be traded
from immediately. Clause (TWELFTH)
(Three) (ii) obliged them in the event of any part of the premises being
damaged or destroyed to restore the premises to their former condition as soon
as possible, and paragraph (iv) of that clause provided that the tenancy shall
not be terminated by reason of any such destruction or damage but shall
nevertheless endure for the whole period.
It followed, quite apart from the keep-open obligation, that the
defenders were required to keep and maintain the premises to the standard
required by Clause (SEVENTH) throughout the sixty three year term.
[9] The
defenders argue that the import of the decision in the previous action is that
the premises are not going to be traded from at any time until 2033, so what
amounts to good and substantial condition for that purpose may only be to
maintain the premises in a wind and water tight condition and maintain the
security of the shell. However, the
defenders appeared to accept that in 2033 they will be obliged to hand back the
premises in such condition as to be used as a supermarket. That must be correct, in counsel's
submission, as the Landlords might have a replacement tenant lined up to occupy
immediately after the sub-lease comes to an end. The defenders argument therefore amounts to
there being a temporary dilution of their obligation until the termination of
the sub - lease, because this is a non trading shell. There is nothing to justify such a
construction, and it would fly in the face of commercial reality. What would happen if the defenders ceased to
exist before 2033, for example by being wound up? On their analysis, they would have a residual
obligation to repair the premises, but if they were unable to discharge this,
the Landlords would be left with no remedy.
[10] Nothing in the previous action, whether in the pleadings, the
evidence or in Lord Reed's opinion, touched on the question of damages for
breach of the tenants' repairing obligation.
If there had been any mention of this, it would have amounted to a
separate head of damages, and the defenders in the present action would have
been able to table a plea of res judicata. There was no such head of damages, and there
is no such plea in the present action.
In the previous action the court was concerned with the loss of an
anchor tenant in a shopping centre, and the consequences of such loss on
shoppers' footfall - there was no attempt to suggest that there was any
necessary dilution of the tenants' repairing obligation. Indeed, the question of enforcement of the
repairing obligation was specifically reserved, and Mr Michael de Vos who was
the factors' commercial property manager gave evidence to that effect. I was referred to paragraphs [159] and [567]
to [570] of Lord Reed's opinion. An
award of damages for breach of the keep-open clause does not result in the
re-writing of the whole sub-lease, and there is no basis in logic or authority
for such an approach. If this approach
was correct, why should one stop with the repairing obligation - why not take
the view that the obligations to pay rent or submit to rent reviews were
diluted or superseded? Moreover, the
sub-lease contains no method of measurement as to the proper standard of repair
if the standards specified in Clause (SEVENTH) were to be diluted or departed
from. Were the tenants obliged to paint
out graffiti on the external walls, or was this obligation diluted because the
premises were vacant? Were the tenants
entitled to brick up doors and windows of the premises because they were
vacant? What were their obligations
regarding drainage, piping, cabling and painting? What the defenders were asking the court to
do was to re-write the terms of the sub-lease, which was wholly
unjustified.
[11] With regard to the defenders' first submission, relating to
liability of the defenders to pay the factors for costs of security guards,
counsel submitted that this was an issue which fell to be decided on a proper
construction of the sub-lease. He
submitted that there were three possibilities for the court - (1) the court
might agree with the defenders' submissions and hold that on no possible view
could the words of the sub-lease be construed to extend to the cost of security
guards, (2) the court might agree with the pursuers that the words are plainly
wide enough to encompass such costs, or (3) the court might hold that the words
were arguably wide enough but that a precise construction would depend on the
whole surrounding circumstances, in which event it would be necessary to hear
evidence as to these circumstances.
Having regard to the sixty three year term of the lease, the parties at
the outset must have been taken to recognise that retail practice would change
over the duration of the lease, as would general social conditions. They must be taken to have intended to leave
themselves some flexibility, and to have a "catch all" provision. Clause (EIGHTH) (Three) (d) was that "catch
all" provision.
[12] The critical words in the sub-paragraph were the words "and in
general in connection with the management and administration of the whole
subjects"; these words were apt to include the provision of security guards, as
part of the management and administration of the whole subjects. The defenders sought to distinguish the
surveyors' fees from outlays and disbursements, but it was important to note that
this sub-paragraph did not refer to the surveyors' fees, but to the
"professional charges" of the surveyors, as common factors of the whole
subjects. "Charges" was a wider term
than "fees" and was sufficiently wide to include outlays, provided that such
outlays were in connection with the management and administration of the whole
subjects. For example, the factors might
have to make an insurance claim in relation to damage to the common parts of
the shopping centre; to negotiate this claim they might well engage the
services of a loss adjustor, and in that event they would surely be entitled to
pass on the loss adjustors fees to the tenants as part of their charges.
[13] Counsel submitted that the words "management and
administration" are of wide compass, and their meaning is widened by the
addition of the words "in general in connection with", which connote more than
just the managers' fee for managing. I
was referred to Downshire Settled Estates
in re Marquess of Downshire v Royal
Bank of Scotland [1953] 1 Ch.218 (at pages 246/7) and Sweet v Parsley [1970] AC 132 (per Lord Wilberforce at 159).
[14] When asked by the court what was the purpose of sub-paragraphs
(a), (b) and (c) of Clause (EIGHTH) (Three) if the pursuers' construction of
sub-paragraph (d) was correct, junior counsel pointed out that many leases
contained superfluous provisions and words, and that these sub-paragraphs fell
into that category. They are merely
superfluous, and the fact that they are there does not detract from the wide
and general scope of the catch all provisions of sub-paragraph (d). The purpose of providing the minimum of 2.5%
of rent was to make this a viable commercial proposition for the factor. There was no benefit to the landlords in this
provision - indeed, it was in the landlords' interest to keep this service
charge as low as possible, as the higher the service charge the lower the rent
was likely to be. Sub-paragraph (d) was
apt to cover any expenditure incurred by the factor which reasonably required
to be incurred over time in connection with the management and administration
of the premises and the common parts.
Charges went beyond fees, and no particular weight should be attached to
the word "professional" which precedes the word "charges". Although the parties to the sub-lease might
have chosen to add the words "and outlays" after the word "charges", and while
this might have put the matter beyond doubt, nonetheless charges should be read
as including outlays. It was an
unnecessarily formal distinction which the defenders were seeking to draw
between fees and outlays.
Reply for the defenders
[15] In reply, Mr Connal for the defenders submitted that the two
cases referred to in answer to his first point gave no useful guidance. He submitted that in the absence of any
averments in the pursuers' pleadings as to what might constitute the factual
matrix or surrounding circumstances which should be taken into account when
construing the sub-lease, it was not open to the court to look beyond the terms
of the sub-lease itself. There were no
such averments in this case, and accordingly the third of the options suggested
by junior counsel for the pursuers was not available. There was no question of evidence being led
as to the factual matrix or circumstances surrounding this sub-lease; all the
court could do was to reach a construction of Clause (EIGHTH) (Three) (d) in
light of the whole terms of the sub-lease, and find in favour of either the
pursuers or the defenders.
[16] With regard to his second point, in light of the concession
made by junior counsel for the pursuers that the pursuers had made an election
to seek damages and that it was no longer open to them to seek implement of the
keep-open obligation at any time before the expiry of the sub-lease in 2033,
the court need not concern itself with what elements of damages were recovered
in the earlier litigation, because it was for the pursuers to recover all heads
of damage in the one action. Clause 14
of the sub-lease made provision as to what condition the premises should be in
at the termination of the lease, and there was nothing unusual or surprising in
those provisions. There was nothing to
support the pursuers' position that until termination the defenders must
maintain the premises in such a condition that they could be opened for trading
by an alternative tenant immediately. It
was not appropriate to indulge in speculation as to whether the defenders'
argument could be extended to other provisions of the lease, such as payment of
rent or rent review provisions, because these are quite different provisions
from the repair and maintenance provisions.
No arguments about these provisions were presently before the court and
it was therefore not appropriate to speculate about them.
Reply by senior counsel for the pursuers
[17] Senior counsel for the pursuers adopted his junior's
submissions. However, he went on to
agree with Mr Connal that any question of a factual matrix or of circumstances
surrounding the granting of a sub-lease would require to be the subject of
averment, and that in the absence of any such averment in this case all that the
court could do with regard to the question of charges for security guards was
to look to the sub-lease as a whole and to construe the terms of Clause
(EIGHTH) (Three) (d) accordingly.
[18] Senior counsel agreed that under Scots law where a contracting
party was faced with a failure by another contracting party to fulfil his
contractual obligations he must make an election as to whether to seek specific
implement or damages, and that once such election had been made he could not
return after decree and revisit the election.
However, it was not correct that all claims for all breaches of all
clauses required to be made in one action at the same time. A party might seek to bring another party to
book for breach of one clause, elect to take a remedy in respect of that
clause, and bring that action to a conclusion.
That would not prevent him from thereafter seeking to bring the party to
book for another breach of a different clause.
The present action concerned clauses and obligations which were not the
subject of the previous action, and there was nothing to prevent the pursuers
from seeking the remedies which they presently sought. It was incumbent on the defenders to point to
passages in Lord Reed's opinion to show that the issue of repairs had been
considered in the earlier case and reflected in the court's award; the
defenders had failed to do so, and indeed there was nothing in the opinion to
indicate that repairs had been considered.
Moreover, the earlier action was concerned with the whole of the duration
of the lease until 2033; the interest of Kwik Save Stores Limited in the
premises would expire in 2013, and thereafter the defenders would be directly
liable (i.e. without any right of indemnity) to the pursuers for the fulfilment
of the obligations under the sub-lease.
The defenders could point to no authority to support the proposition
that by electing to seek damages for breach of the keep-open clause the
pursuers were thereby prevented from seeking implement of the repair and
maintenance clause. If the defenders'
argument was correct and the pursuers' earlier election had such an effect, why
stop at the repair and maintenance obligation - why not argue that the pursuers
were prevented from seeking implement of the other provisions of the contract,
such as payment of rent or rent review.
Such an argument was, he submitted, unstateable. It was not advanced in the earlier action and
there is no authority to support it.
[19] With regard to the defenders' first point in relation to
security charges, the linkage of charges to rent might perhaps have supported
the defenders' argument if the figure of 2.5% was specified as a maximum, in
which case it might sit with the construction that this related to professional
fees. However, it is stated as a minimum
of 2.5% which, senior counsel submitted, supported the construction that the
pursuers urged on the court. If the word
"fees" had been used in the sub-paragraph, this argument would not have arisen,
but the sub-paragraph refers not just to professional fees but to professional
charges, and moreover in fulfilment of the surveyors' duties as factors. He submitted that these words were apt to
include charges for provision of security guards.
Discussion
[20] I deal first with the first point raised on behalf of the
defenders, namely whether Clause (EIGHTH) (Three) (d) of the sub-lease entitles
the pursuers' surveyors, as common factors of the whole subjects, to recover
from the defenders expenditure on the provision of security guards. In determining this issue in the
circumstances of the present case I must construe the relevant passage in the
context of the whole of Clause (EIGHTH), and indeed in the context of the whole
of the sub-lease. However, as was
recognised by senior counsel for the pursuers, in the absence of any averments
on behalf of the pursuers about a wider factual matrix or about other
circumstances surrounding the sub-lease, I do not consider that it is open to
me to speculate about such circumstances or facts surrounding the sub-lease,
nor (on the basis of the pleadings presently before me) is there any scope for
evidence to be led about such matters.
The issue falls to be determined on a proper construction of the
sub-lease itself.
[21] It is instructive to note that the scheme of Clause (EIGHTH) of
the sub-lease places the primary responsibility for payment of costs and
charges on the tenants. The landlords or
their agents or factors are entitled to require the tenants to exhibit receipts
to vouch punctual payment, but generally the responsibility for payment rests
with the tenants. This applies to
payment of all local and general rates, taxes, assessments and burdens
whatsoever, and the premiums necessary for keeping in force the insurances
specified in Clause (TWELFTH) of the sub-lease.
This is consistent with the underlying scheme of the rest of the
sub-lease - for example, in terms of Clause (SEVENTH) the obligation to repair,
maintain, renew, rebuild and reinstate the premises rests with the
tenants. It is not the responsibility of
the landlords or their factors to pay for these items and then recover
expenditure from the tenants, but rather it is the tenants' obligation to carry
out the necessary works or, as the case may be, make punctual payment
themselves.
[22] Turning to the provisions of Clause (EIGHTH) (Three), the
tenants are obliged to make punctual payment of a proportionate share of
certain costs relating to the common parts of the shopping centre. There are four categories of such costs. The first, in sub paragraph (a) is the cost
of repairs to and renewals of the common parts; without prejudice to this
generality, relatively detailed specification is given as to what costs are
encompassed in this sub-paragraph.
Sub-paragraph (b) relates to the cost of effecting and maintaining
insurance of the common parts against loss or damage by fire and other
specified risks. Sub-paragraph (c)
relates to the cost of effecting and maintaining insurance against general
third party liability in respect of the common parts. Each of these sub-paragraphs deals with the
tenants' obligation to pay a share of costs.
Sub-paragraph (d) is in a somewhat different category and obliges the
tenants to pay the professional charges of the landlords' surveyors. While it is correct to note that the word
used is "charges" not "fees", there is no suggestion that the landlords'
surveyors should be entitled to claim outlays over and above their own charges.
Moreover, the tenants' obligation is to
pay the surveyors' professional
charges: the charges must relate to their profession. I do not consider that the cost of employing
unskilled labour to carry out cleaning works (to take an example) would
properly be comprehended within the terms "the professional charges of
surveyors".
[23] Properly construed, I consider that sub-paragraph (d) obliges
the tenants to pay the landlords' surveyors for their services as factors of
the whole subjects. I accept that the
phrase "and in general in connection with the management and administration of
the whole subjects" is a wide phrase (and indeed the defenders do not dispute
this), but I do not consider that the factors would be entitled to rely solely
on sub-paragraph (d) and to instruct extensive works of maintenance and repair
of the common parts of the subjects and then seek to recover their expenditure
by way of professional charges under sub-paragraph (d). If such costs were encompassed within the phrase
"the professional charges of the landlords' surveyors" I see little, if any,
point in sub-paragraphs (a), (b) or (c).
All of the costs referred to in those sub-paragraphs could, on the
pursuers' argument, be included in the landlords' surveyors' professional
charges under sub-paragraph (d). Counsel
for the pursuers submitted that sub-paragraphs (a), (b) and (c) were mere
surplusage; they could be ignored safely as being superfluous, as was often the
case with provisions in leases. I do not
consider that this is the correct way to construe these provisions. The sub-lease was clearly drafted
professionally, and was agreed between two commercial entities. It will not do simply to ignore three of the
four categories covered by Clause (EIGHTH) (Three). They must have had a purpose, and if so their
existence is inconsistent with the construction urged on behalf of the
pursuers.
[24] I am reinforced in this view by the linkage between the
landlords' surveyors' professional charges and the rent payable. This linkage appears to me to be more
consistent with a narrow construction of the term "professional charges" (i.e.
charges relating to the expenditure of the surveyors' time and skills), rather
than the wider construction which might encompass any works or services
(whether by professionals, tradesmen or labourers) in connection with the
management and administration of the whole subjects, provided that they were
instructed by the landlords' surveyors.
The fact that the linkage between the professional charges of the
surveyors and the rent payable from time to time is expressed as a minimum
rather than a maximum is, in my view, neither here nor there.
[25] I have already observed that the phrase "and in general in
connection with the management and administration of the whole subjects" is a
wide phrase which encompasses many activities - but the important feature is
that it is the professional charges of the landlords surveyors in connection
with these activities to which sub-paragraph (d) is directed, not at the
activities themselves.
[26] Each of these factors persuades me that the defenders'
interpretation of sub-paragraph (d) is preferable to that urged on behalf of
the pursuers. It is also consistent with
the normal English usage of the words in question. I am not persuaded that in normal English
usage what a professional person charges is significantly different from a
professional person's fees. In
particular, in the context of this sub-lease, in which the parties have made
detailed and specific provision for the tenants' obligations to pay for such
items as the "cost of repairing, maintaining, cleansing and lighting of all
service roads, areas, ramps and open spaces, all sewers, drains, pipes and
cables, all boundary walls and/or fences" it would be surprising if the parties
contemplated that the provision of security guards was something which would simply
be encompassed within the professional charges of the landlords'
surveyors. I consider that the
defenders' submissions in this regard are well founded.
[27] Turning to the defenders' second point, namely the effect of
the pursuers' election in the previous action on the enforceability of the
repairing obligations in Clause (SEVENTH), Mr Connal for the defenders did not
ask me to sustain or repel any pleas in law in this regard, but indicated that
parties would find it helpful to have an expression of the court's view on this
point. I do not consider that there is
any merit in the defenders' submissions on this point. On reading Lord Reed's opinion in the
previous action it does not appear that that action was concerned with the
obligation under Clause (SEVENTH) of the sub-lease to repair and maintain. That action was concerned solely with the
defenders' breach of the keep-open clause in the sub-lease. I do not consider that by electing to sue for
damages for breach of that clause rather
than specific implement of it the pursuers are thereby disabled or prevented
from seeking specific implement of other clauses of the lease. It cannot be argued that because the pursuers
have been awarded damages for loss of capital value of the whole shopping centre
and accrued revenue losses that they are prevented from enforcing the
obligations to repair and maintain the premises. The sub-lease contains many provisions which
impose obligations on the tenants; the keep-open clause is but one of
these. Despite the award of damages for
breach of the keep-open clause, other provisions of the sub-lease remain
enforceable at the instance of the landlords.
The obligation to pay rent still subsists, as do provisions for rent review. Similarly, the obligation to repair and
maintain the premises to the standard set out in Clause (SEVENTH) still remains
and is enforceable. I see no
justification for the argument advanced on behalf of the defenders that somehow
this obligation is diluted for the rest of the term of the lease, and then is
resurrected (in full force) at the termination of the lease. If this argument were correct, one might
expect to find some mechanism or standard by which the dilution should be
measured. One might expect to see a
provision that if the premises were (contrary to the keep-open clause) left
vacant, the tenants would only be obliged to keep them wind and water tight and
structurally sound but without maintenance of internal paint work or other
decorative repairs. There is no such
provision in the lease. On the contrary,
the obligations in Clause (SEVENTH) subsist throughout the whole currency of
the sub-lease. One can see the
commercial sense of this - as the pursuers' counsel observed, if the defenders
ceased to exist before 2033 having been permitted to let the premises fall into
disrepair or to a standard less than that required by Clause (SEVENTH) it is
possible that the pursuers would require to expend monies to bring the premises
up to the requisite standard to enable them to be re-let, without any
recourse.
[28] In summary, the pursuers' position is that although they cannot
now seek implement of the keep-open obligation at any time before the expiry of
the sub-lease in 2033, they are entitled to insist on the tenants having the premises
in such a state of repair and maintenance that they could be used for trading
for the purpose specified in the sub-lease.
The defenders position is that they do not require to maintain and
repair the premises to such a standard, and that a lower (unspecified) standard
will suffice until termination of the sub-lease. The defenders were unable to point to any
authority which supported their position, and I do not consider that it is
consistent with the provisions of the sub-lease or with commercial sense. For these reasons, on this point I prefer the
submissions for the pursuers to those for the defenders.
Conclusion
[29] For the reasons given above, I shall sustain the defenders'
first plea in law in so far as directed towards the second and third conclusions
and the averments in support thereof, and accordingly dismiss those
conclusions, and I shall sustain the defenders' fourth plea in law. I shall repel the second and third pleas in
law for the pursuers and I shall refuse to admit to probation the averments in
Article 6 of condescendence. Quoad ultra I shall allow a proof before
answer.
