Plaintiffs letting storage space on licence — Defendant agreeing to take 12-month licence — Plaintiffs giving contractual assurances that certain works would be carried out — Works not done — Defendant continuing to occupy premises — Whether failure to comply with terms of contract discharged defendant’s duty to pay licence fee — First instance decision in favour of defendant — Appeal by plaintiffs allowed
The plaintiff company had a lease of a large warehouse at Unit 7, Autobase, Tipton Road, Tividale, Warley, West Midlands. The plaintiffs let, by way of licence, warehouse space to companies who needed storage space. In April 1990, by an exchange of letters, the plaintiffs and the defendant came to a firm agreement that the defendant would take a licence of an area of the warehouse for a period of 12 months. There were incorporated into the agreement as contractual terms, assurances by the plaintiff that: (1) the interior would be dry and clean; (2) the premises would have a suitable electricity supply; (3) a 20ft-high fence would be erected to divide the area from the rest of the warehouse; and (4) the plaintiff would as soon as reasonably practicable even out the forecourt of the premises to provide a level surface. There was no time specified for the completion of those works and the defendant moved into the premises without the works having been carried out. The licence fee was £1,856.25 per week. The defendant eventually left the premises in March 1991.
The plaintiffs brought an action claiming arrears of licence fees amounting to just under £50,000 plus interest. The defendant by way of defence argued that none of the plaintiffs’ assurances had been honoured or fulfilled, resulting in consequential loss or damage and counterclaimed accordingly. The county court dismissed the plaintiffs’ case and gave judgment for the defendant on the counterclaim with damages to be assessed. The plaintiffs appealed.
Held The appeal was allowed.
1. The question was whether a contractual licensee of land was entitled to rely on the continuing breach of the licensor’s fundamental obligations under the contract as discharging him, while the contract subsisted, from the obligation to pay the licence fee.
2. The judge was wrong to hold that the fourth assurance was of such importance that the defendants were entitled to treat the non-compliance with it as suspending any liability to pay for the premises.
3. The plaintiffs had accepted that the fourth assurance was an essential term or condition of the contract, a breach of which entitled the defendant to treat the contract as repudiated. If the defendant had accepted the repudiation he was discharged from the obligation to pay the licence fee in the future and sue for damages for breach.
4. However, it had elected to affirm the contract and remain in the premises. It was entitled to treat the breach of conditions as a breach of warranty and still had a right to sue for damages. But the obligation to pay the licence fee continued while the defendant occupied the premises.
Simon Clegg (instructed by Fentimans, of Knowle) appeared for the plaintiffs; John West (instructed by Lyon Clark, of Wolverhampton) appeared for the defendant.
