Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2010] CSOH 67
A89/09	OPINION OF LADY DORRIAN in the cause CRIEFF HIGHLAND GATHERING LIMITED Pursuer; against PERTH AND KINROSS COUNCIL Defender: ­­­­­­­­­­­­­­­­­________________

Pursuer: Martin Q.C. et Bowen; Shepherd & Wedderburn

Defender: Mure Q.C.; Biggart Baillie

25 May 2010

[1] This is an action for declarator that a lease between the parties was validly terminated by the pursuer on 22 January 2009 and for an order ordaining the defenders to remove. It came before me on the procedure roll under reference to the defender's second plea of law seeking dismissal.

[2] The lease relates to subjects at Market Park, Crieff which were leased by the pursuer to the defender for use as a public park and recreation ground. There is no irritancy provision in the lease. Clause (TENTH) provides "the tenants shall, during the currency of this lease, relieve the landlords of their whole responsibility for the maintenance of the boundary fences, walls and other enclosing the ground leased." Clause (ELEVENTH) provides that "the tenants bind and oblige themselves to keep the ground leased in a neat and tidy condition at all times during the currency of this lease." The pursuer avers that the defender has not adequately maintained the subjects in accordance with its obligations under the lease and that the subjects have not been maintained in good order. In particular it is averred that the defender has failed to maintain the boundary fences, walls and others enclosing the subjects. The pursuers aver that on 23 November 2007 they served a notice on the defenders enclosing an interim schedule of dilapidations and calling for the wants of repair identified therein to be remedied within 3 calendar months failing which the lease may be terminated. The boundary wall of the subjects is a listed structure. The pursuer avers that the defenders have failed to carry out these repairs and are thus in breach of the contractual provisions between the parties. A notice of termination of lease was served on or about 22 January 2009 and the pursuers aver that in the circumstances it is fair and reasonable for them to treat the lease as being terminated. The pursuer's second plea in law is as follows:

"The defender having breached a material condition of the lease the pursuer was entitled to rescind the lease, and the pursuer having validly terminated the lease, decree as first concluded what should be pronounced."

The pursuer avers that the report of an inspection of the subjects narrated inter alia that:

"the current condition of the boundary walls, and their deterioration in condition since November 2007, raise concerns about safety, bearing in mind that the walls are located in a public park. Such concerns would arise particularly if the subjects were to be used for a major event such as the Crieff Highland Games".

[3] The defenders aver that the wall is in general terms structurally sound and intact. They refer to planning proposals in relation to the site which would involve a new access within the south east wall and the reconstruction of the south west wall. They aver that during 2009 the defenders carried out various repairs and maintenance works at the subjects, including repairs to the boundary walls. They aver that the obligation contained in Clause (TENTH) of the lease is too vague to be enforced against the defender as it fails to state what the pursuer's responsibility is for the maintenance of the wall enclosing the ground leased. Moreover the schedule appears to include walling within the subject which cannot be covered by the clause which relates only to walls forming part of the boundary or enclosure. They aver that the defenders called upon the pursuer to forward the title deeds for examination so that the defender could establish the extent of the pursuer's maintenance responsibility but that the pursuers failed to do so. The defenders further aver that the notice in schedule failed to provide sufficient time for the defender to inspect the subjects and complete the repairs itemised. They aver that "the defender stands able and willing to fulfil its obligations under the lease in respect of maintenance of the subjects". It also avers that esto there is any breach of contract on the part of the defender no fair and reasonable landlord would seek to rely on the fact as the material breach of contract for the purpose of terminating the lease under reference to Section 5 of the Law Reform (Miscellaneous Provisions)(Scotland) Act 1985.

[4] In support of his argument counsel for the defenders submitted that rescission is only available where (i)  there has been a material breach of contract; (ii)  the tenant has been requested to perform his obligation; and (iii)  the tenant is unwilling or unable to perform in the future. Reference was made to Hamilton v Hamilton 1845 8 Dunlop 308; Edmond v Reid (1871) 9 M 782; Kilmacomb Hydoprathic Company Limited v Hall (1922) 38 Sheriff Court Reports 233; Blair Trust Company v Gilbert 1940 Scots Law Times 322; O'Brien v O'Brien (1945) 61 Sheriff Court Reports 158; Couper v McGinnes (1948) Sheriff Court Reports 249 and Todd v Bowie 1902 4 Fraser 435 in support of these three propositions. In the present case there is no unwilling tenant and the circumstances are not such as to amount to a material breach. Rescission is an extreme remedy and the facts as averred are not such as to justify such a remedy. Rescission requires a stipulation going to the root of the contract or a matter "touching the very existence of the contract". Reference was made to Wade v Waldon 1909 Session Cases 571 and Collard v Carswell (1892) 19 Rettie 987. Counsel submitted that a provision relieving the landlord of responsibility for maintenance does not go to the root of the contract. The landlord can either seek implement of the condition or undertake the work involved and seek damages there anent. Clause (TENTH) is not a material stipulation.

[5] Turning to the adequacy of the notice, counsel noted that this was a rural lease. In such a situation a landlord is not obliged to carry out ordinary repairs or maintenance during the course of the lease although he would be obliged to carry out extraordinary repairs necessitated by natural decay and involving some measure of renewal not simply maintenance. Counsel submitted that this distinction between maintenance and extraordinary repairs was important when considering the meaning and extent of Clause (TENTH). Since the landlord has no maintenance responsibility for ordinary repairs under a rural lease this cannot be what is referred to in terms of Clause (TENTH). There is nothing in the lease to suggest that the tenants were expected to undertake repair or renewal work at their own expense. Reference was made to the Stair Memorial Encyclopaedia volume 13 paragraphs 213 to 214; Rankin Law of Leases in Scotland page 174; Bell's Principles paragraph 983; Erskine's Institutes II.ix.6; Paton and Cameron on Landlord and Tenant pages 134 to 135 and 142; Napier v Ferrier (1847) 9 Dunlop 1352; Johnston v Hughan (1894) 21 Rettie 777; Lowe v Quayle Munro Limited 1997 Session Cases 346 and McCalls Entertainments (Ayr) Limited v South Ayrshire Council Number 2 1998 Scots Law Times 1421.

[6] Turning to the individual wants of repair listed in the schedule counsel submitted that the focus of these needed to be on the landlord's responsibilities of which the tenant is said to be obliged to relieve him. The landlord is only liable for extraordinary repairs and maintenance would not therefore be covered by the relief provisions. Counsel went through the twenty specific wants of repair listed in the schedule drawing attention to the nature of the repair under consideration. Subject to his primary position that past failure only is relied on and that that cannot be enough he submitted that in any event (a)  some items appeared to be maintenance which cannot be covered by Clause (TENTH) as they are not within the landlord's responsibilities at common law; (b)  some appear to be extraordinary repairs which are within the landlord's responsibilities at common law but are not covered by Clause (TENTH) which relates only to maintenance; (c)  that in any event some items relate to areas other than boundary walls and therefore are not covered by Clause (TENTH); and (d)  in any event none of these would be material.

[7] Counsel submitted that where the extreme remedy of rescission is sought the landlord is obliged to make it perfectly clear what the responsibilities are, where the breaches are and what repairs falling under the relief provision the tenant is obliged to carry out. He submitted that the notice and schedule, having regard to the terms of the lease, did not do so.

[8] Esto the breach was a material one the question arises of what a fair and reasonable landlord would do. Although the defender has detailed averments about this there is no specification of the indicators relied on by the landlords to establish that they acted in a fair and reasonable way. These averments fall to be deleted as lacking in specification.

[9] The motion for junior counsel for the pursuer was that the case should be sent to proof with all pleas and averments standing. It is clear from the terms of Clause (FIFTEENTH) that the parties envisaged the possibility of termination of the lease at any stage. The proper approach for the construction of the lease is to derive the intent from the words used; where ordinary words are used to take them according to their ordinary meaning; and if they are clear and ambiguous to give effect to them. Reference was made to Melanesian Mission Board Trust v Australian Mutual Provident Society [1997] 2 EGLR 129. Turning to the arguments advanced by the defenders counsel accepted that or rescission there must be a material breach of contract and a failure to perform after proper notice. Thereafter it is enough to justify rescission if the tenant fails to remedy on notice being given. There is no requirement for anything in the form of a judicial declaration of non-performance. In the present case the pursuers have sufficiently relevant averments of a material breach not being remedied to entitle them to terminate the lease. There are contentious issues of fact in the case and it should not be determined on pleadings before this court. Without hearing evidence as to the nature of the defects it would not be possible for this court to conclude that failure to remedy did not constitute material. As to the issue of the actings of a fair and reasonable landlord the pursuer now accepts that section 5 applies but the question of reasonableness has not be a matter for proof and the assessment of reasonableness must be related to the time of termination. Maris v Banchory Squash Racquets Club Limited 2007 Session Cases 501. In addition the question of whether the landlord was entitled to rescind for material breach after failure by the tenant to remedy has also to be determined prior to the date of termination. It follows that whatever may have been said by the defender's agents after the date of termination is not relevant. Effectively the defenders argument is that Clause (TENTH) is inoperable in the absence of some specification of the landlord's obligations, such as may be included in title deeds. The defenders are not entitled to sit and say in the absence of details they cannot determine the obligations imposed on them by a clause to which they voluntarily agreed, particularly when they have an averment that during 2009 they did indeed carry out repairs to boundary walls. The schedule is simply designed to give notice of want of repair: it is Clause (TENTH) which contains the obligation. Questions of materiality of the notice or specification thereof have to be matters of evidence in light of the entire circumstances. What the schedule does is give a perfectly sufficient basis for the pursuer to prove breach of the obligations in the lease. The pursuers would be entitled to take the decision to terminate the lease particularly given the averment that the maintenance obligations on the defenders are the main substantive obligations on them under the lease.

[10] In a short reply counsel for the defenders submitted that there was ample authority to suggest that materiality can be addressed at this stage under particular reference to Wade v Waldon (supra). The averments relating to events in 2009 would be germane to the question of whether there has been any refusal or inability to maintain on the part of the defenders.

[11] Senior counsel for the pursuers criticised the approach of the defenders. The defenders entered into a voluntary contract and were subsequently served with a notice alleging failure to fulfil obligations under that contract. Their only response at the time was to demand further information. However they now come to court saying that there was no obligation because on a proper analysis Clause (TENTH) has no content. Senior counsel submitted that Clause (TENTH) was intended to be an obligation which the defenders required to fulfil throughout the six year term of the lease. The pursuers served a notice formally stating that the defenders had failed to fulfil the obligations and providing a period within which they were given the opportunity to do so. They did not. Accordingly there is indeed a refusing tenant because at the date of the expiry of the notice they had not done anything and that is the important point in time. The pursuer avers material breach and maintains an entitlement to terminate the lease. The court will be the ultimate arbiter on whether the breach was material and whether a fair and reasonable landlord would take that step or not. This issue depends only on failure by a point in time for the defenders to have done what is necessary. If at the date of the notice there was a material breach, not remedied within a reasonable time then subject to the issue of a fair and reasonable landlord the pursuers are entitled to terminate the lease.

[12] As to the content of Clause (TENTH) it was important to note that the terms of the clause were that the defenders were to relieve the landlords of "their whole responsibility for the maintenance of the boundary fences, walls and others enclosing the ground leased". The landlord's responsibility is the measure of the tenant's obligations. The tenants might have fulfilled this obligation by doing the work themselves or by offering financial indemnity or support to the pursuers. Instead they have done nothing. As to the landlord's obligations there are four possible categories of these (a)  obligations to third parties by way of maintenance. There is no averment that they had such a responsibility and could not therefore call upon the defenders to relieve them on this basis. (b)  Statutory responsibilities relating for example to the listed building. There are detailed averments about this and the defenders are not only tenants but are the planning authority. The averments are made as to their knowledge and responsibilities in this matter. The pursuers require to comply with the Listed Buildings Act which undoubtedly places an obligation on the landowner and notice of this is being given in the pleadings. Unless the defenders are able to aver and prove that there is no such responsibility the pursuers are entitled to be relieved of this by the defenders. (c)  It is correct that there is no responsibility on a landlord for ordinary repairs under a rural lease. However it should be noted that the phrase used in the clause is "the whole responsibility for maintenance" and it is going too far to say in the absence of common law responsibility that there is no content to Clause (TENTH) in relation to ordinary repairs. (d)  Extra ordinary repairs. If it be the case that the landlord is liable for extraordinary repairs, and the defenders has indeed demonstrated that this is so, then the pursuers are entitled to be relieved of that responsibility under Clause (TENTH). The defenders appear to accept that the majority of items in the schedule give notice of extraordinary repairs and if so they are undoubtedly covered by Clause (TENTH). Whether repairs are ordinary or extraordinary is not dependent on precise terminology but is a matter for proof. The use of the word "maintenance" does not preclude extraordinary repairs and the use of the word "whole" implies the widest potential category.

Discussion
[13] It is my view that the pursuers have averred sufficient circumstances to entitle them to a proof on the issue of rescission. They have averred material breach of contract, notice to perform, and a failure to remedy within the period of the notice. It would essentially be a matter for proof depending on the nature of the repairs required, their extent and so on, whether the notice given is a reasonable one. I do not think that it is necessary for the pursuer to aver more for example a positive refusal by the tenant to carry out the obligations or a complete inability to do so. I consider that the averments of notice, requirement to remedy within a reasonable time and a failure to do so would be sufficient. However apart from the issue of the reasonableness of the time allowed there would no doubt be very live issues at proof on the question of whether in the circumstances it would be fair and reasonable for a landlord to act in such a way. As to the issue of materiality, I do not consider that I can at this stage conclude that the breach is not a material one. It seems to me that a critical averment in this regard is made at article 16(E) at page 12B of the closed record when it is averred that the subjects "were let to the defenders for use as a public park and recreation ground for no financial benefit to the pursuers and the maintenance obligations on the defenders were the main substantive obligation on the defenders under the lease." This averment does place the maintenance obligations at the heart of the contract and I cannot say that breach of those obligations cannot amount to a material breach.

[14] So far as the content of Clause (TENTH) is concerned I consider that the averments of senior counsel for the pursuer are to be preferred on this matter. It is in my view an important consideration that the clause relieves the landlords of their "whole responsibility for the maintenance" of boundary fences and so on. I do not think that the use of the word "maintenance" in this context and looking at the lease as a whole can properly be read as excluding the obligation for extraordinary repairs which would otherwise fall on the landlord. Furthermore I consider that the pursuer's averments are sufficient to raise the issue of any obligations arising under the Listed Buildings Act. Accordingly I will repel the first plea in law for each party (these not being argued) and will otherwise allow a proof before answer with all pleas standing.