CA305/05
JUDGMENT
OF
SHERIFF PRINCIPAL
JAMES A TAYLOR
in the cause
Little Cumbrae Estates Ltd
APPELLANTS/PURSUERS
against
Island of Little Cumbrae Ltd
RESPONDENTS/DEFENDERS
The case has been appealed to the Court of Session.
GLASGOW, April 2006.
The Sheriff Principal having
resumed consideration of the cause, Refuses the appeal and Remits the cause to
the sheriff to proceed as accords; Finds the appellants and pursuers liable to
the respondents and defenders in the expenses of the appeal procedure; Allows
the respondents and defenders to make up an account and upon said account being
lodged, Remits it to the auditor of court to tax and to report; Finds the appeal
procedure to be suitable for the employment of junior counsel.
NOTE:-
[1] The appellants are the
landlords and the respondents the tenants in a lease dated 5 and 10 May 2002. The premises let were the Island
of Little Cumbrae, the motor vessel
named "Bean Mhadh" and the dumb barge. The landlords sued the tenants for payment of
rent and insurance premia said to be due in terms of the lease. The tenants sought to compensate against the
liability to pay rent and insurance premia,
monies which they had expended in making good damage to the premises
occasioned by storm in about January 2005.
[2] Clause 5.(1) of the lease
was in the following terms:-
"The Landlord HEREBY UNDERTAKES to insure and keep
insured the Premises in name of the Landlord with the Tenant's interest
endorsed thereon at all times during the Period of the Lease (unless such
insurance shall be vitiated by any act, neglect default or omission of the
Tenant) against the Insured Risks with the Insurers in the Reinstatement Value
thereof and for the Loss of Rent and if required to produce to the Tenant a
certificate from the Insurer stating for what sums and against what risks the
Premises are insured and to what date the premiums have been paid and in case
of damage by any of the Insured Risks with all reasonable speed to cause all
moneys received in respect of such insurance (other than in respect of Loss of
Rent) to be forthwith laid out in reinstating the Premises."
[3] It was a matter of
agreement between the parties that the appellants had made a claim against
their insurers for the damage caused by the storm. The insurers had settled some of the claim
but not all of it. As I understood the
position the sum counterclaimed represented the shortfall between that claimed
by the landlords and what was received from the insurers.
[4] Part II of the lease
contained by virtue of Clause 3 the following provisions:-
"(3) At all times throughout the Period of the Lease at the Tenant's
expense well and substantially to repair and maintain or renew the Premises
except where the damage necessitating such repair, maintenance or renewal is
caused by any of the Insured Risks and the insurance moneys have not nor shall
become irrecoverable through any act or default of the Tenant."
[5] The parties
differed in how Clause 3 of Part II of the lease fell to be interpreted. The tenant's position was that properly
construed the lease was silent upon who should carry out repairs in the
circumstances which pertained.
Accordingly they submitted that a term required to be implied into the
lease imposing an obligation on the landlord to effect repairs. That implied term is set out in the pleadings
at the foot of page 8 to the top of page 9 and is in the following terms:-
"That where the damage necessitating the repair,
maintenance or renewal is caused by an Insured Risk and the insurance monies
have not or shall not become irrecoverable through any act or default of the
tenant, there is an obligation on the landlord to repair, maintain and renew
the damage at its expenses.
[6] The submission for the
landlord was that on any view the lease did not impose upon them any obligation
to effect repairs. The landlord had
limited rights to access the premises as could be seen from the terms of the
lease. Their function was to insure the
premises and should an insured peril arise, to claim upon the insurance and see
to it that the monies recovered were expended in effecting the requisite
repairs. The landlord's position was
that they had fulfilled their obligations in this particular case. Insurance monies had been recovered and
expended. The fact that the insurers had
not paid the sum necessary to make good all of the damage was neither here nor
there. The landlord only had an
obligation to effect repairs if there was a total failure to recover any of the
insurance monies. There was no room for
a term such as contended for by the respondents. The business efficacy rule was best illustrated
by the decision in Eurocopy (Scotland)
plc v Lothian Health Board 995 SLT 1356 at pages 1359 to 1360. To contend for an implied term such as did
the tenant could mean that where the insurance company paid some of the claim
the result would be that both landlord and tenant had a responsibility to
repair the roof. That would be contrary
to business sense and not what the parties would have had in contemplation at
the time the lease was entered into.
[7] In my opinion the
construction of the lease contended for by the appellant is not sound. Even if one leaves aside the interpretation
of Clause 3 of Part II of the lease one can deduce from the terms of the lease
that it was in the contemplation of the parties that the landlords might well
effect repairs to the lease. Clause 4 of
Part II of the lease permits the landlord to enter the leased premises
"with or without workmen...to exercise the rights reserved to or conferred
upon the landlord by the lease".
The position is therefore other than that which was submitted on behalf
of the landlord. Furthermore there might
well be said to be support for the proposition that the landlord has an
obligation to effect repairs by the terms of Clause 5(2) of the lease. That provides that in the event of the
premises being so damaged or destroyed as to render the premises unfit for occupation
and use in whole or in part, then the liability to make payment of rent is
suspended. If the tenant alone had the
responsibility for repair there seems to me to be no reason whatsoever to
include such a provision in the lease.
[8] In my opinion Clause 3 of
Part II imposes an obligation upon the tenant to repair, maintain and renew the
premises. This obligation however is
subject to an exception. That exception
occurs when there is damage caused by an insured risk and the tenants have done
nothing to cause the sum claimed from the insurers to be irrecoverable. It was admitted that there had been damage
caused by an insured risk. It was also
admitted that there was a shortfall in the sum recovered from the insurance
company. There was no offer by the
landlord to prove that the shortfall was in any way attributable to the act or
the fault of the tenant. Thus in my
opinion the exception to the general obligation upon the tenant to repair,
maintain and renew applies. The tenant
is therefore in my opinion relieved of its obligation to effect repairs by
virtue of the exception in Clause 3 of Part II of the lease.
[9] It may be thought that
one did not require to go much further to decide the case. If the obligation to repair is not the
tenant's obligation then it must be the landlord's obligation. At common law the obligation to repair would
fall upon the landlord. Thus in order to
avoid that obligation the landlord needs to make provision in the lease to
transfer the obligation to the tenant. I
have held that the lease does not achieve that.
[10] The tenant submitted that
there was a term implied into the lease as I have set out supra. Parties were agreed
on the law to be applied in determining whether a term should be implied into a
contract. I accept counsel for the
landlord's warning that when dealing with the law of landlord and tenant a
Scottish court should be slow to place much reliance on English authority. He relied upon the opinion of Lord Hamilton,
as he then was, in McCall's Entertainments
v South Ayrshire Council (No 2) 1998 SLT 1421. This stricture notwithstanding, I did find
the case of Barrett v Lounova (1982) Ltd
[1990] 1 QB 348 instructive. In that
case a lease was silent as to who should have the responsibility to keep the
outside of a leased dwellinghouse in reasonable repair. The tenant brought an action claiming that
there was an implied covenant on the landlord to carry out external
repairs. The English Court of Appeal
held that the test as to whether a term could be implied into a contract of
lease was no different than for other contracts. In my opinion Scots law does not differ in
that respect. Kerr L J then set out the
common law of England
in relation to the landlord's obligation to repair. He quoted from Woodfall's Law of Landlord
and Tenant 28th edition (1978) Vol. 1, page 618, para 1-1465
which is in the following terms:-
"In general, there is no implied covenant by the
lessor of an unfurnished house or flat, or of land, that it is or shall be
reasonably fit for habitation, occupation or cultivation, or for any other
purposes for which it is let. No
covenant is implied that the lessor will do any repairs whatever..."
That falls to be contrasted with the common law of Scotland
in regard to the repair obligation for urban tenements. The third edition of Rankine on Leases
puts the matter thus:-
"By the law of Scotland the lease of every urban
tenement is, in default of any specific stipulation, deemed to include an
obligation on the part of the landlord to hand over the premises in a wind and
watertight condition, and if he does not do so, there is a breach of contract
and he may be liable in damages. He is
also bound to put them into a wind and watertight condition if by accident they
become not so." per Lord President Dunedin in Wolfson v Forrester 1910 SC 675 at 680.
[11] Modern texts do not
differ. A similar duty is narrated in
the second edition of Halliday: Conveyancing Law & Practice at
paragraph 44-27. It can thus be seen
that there is a considerable difference between the two jurisdictions. The Court of Appeal in Barrett v Lounova held that the implied covenant contended for by
the tenant was incorporated into the lease.
It seems to me that if the English courts are prepared to imply a term
into a lease of a dwellinghouse the argument in favour of a lease governed by
Scots law having a similar term implied is even stronger. I appreciate that in the present case the
damage extends beyond that occasioned to the heritable property which forms
part of the subjects of let. However, I
have considered carefully the reasoning adopted on pages 14 and 15 of the
learned sheriff's Note in holding that there is an implied term as contended
for by the defenders. I cannot fault it
in any respect. Thus the appeal fails.
[12] Both parties were of the
view that expenses should follow success and I have so found. I was informed that there had been a prior
interlocutor certifying some aspects of the case or perhaps even the whole case
as suitable for the employment of junior counsel. I have not been able to find such an
interlocutor. Accordingly I have
certified the appeal procedure as suitable for the employment of junior
counsel. It is still open to parties to
move that sanction for the employment of junior counsel should be extended
beyond that narrow scope.
