Leasehold property — Whether plaintiff landlords entitled to claim for fire damage — Whether defendant tenant equitable assignee — Whether defendant entitled to benefits of covenant under lease — Judgment for landlords
The plaintiffs were the freehold owners of Derby Works, Shrivenham Road, Highworth, Wiltshire. The defendant (“C”) occupied unit 4. He originally traded in partnership with Mr Amer and the lease was in Mr Amer’s name. In early 1987 the defendant bought out Mr Amer’s share in the business. On September 5 there was a fire on the premises which on the balance of probabilities, the court found started as a result of C’s negligence. The amount recovered from the insurance policy and the cost of rebuilding revealed a shortfall. The issue was whether the plaintiffs were entitled to recover against C.
It was alleged that as an equitable assignee of the lease and having paid an insurance contribution C was entitled to the benefit of the covenants and the plaintiffs were precluded from recovering damages in negligence. The defendant also argued that there was an agreement between himself and the plaintiffs that in consideration of C’s performance of the tenant’s obligations he would be entitled to the benefit of the covenants. The defendant contended that both parties proceeded on the basis of a common assumption to the same effect as the agreement and they were estopped from denying the truth of such an assumption. Also that he paid insurance contributions as an agent of Mr Amer.
Held Judgment was given for the landlords.
1. In clause 8(2) of the landlord’s covenants in the lease (“To keep the building or the demised premises insured against loss or damage by fire …”) the word “or” was to be construed disjunctively. If the defendant were entitled to step into the lessee’s shoes relief would only be available concerning unit 4.
2. C was never a tenant but the payments he made were in payment of Mr Amer’s obligations under the tenancy. Consequently, the ruling in Mark Rowlands Ltd v Berni Inns Ltd [1986] QB 211 did not apply. There it was held that a tenant of part of a building in multiple occupation, with only a limited interest in the property, had an insurable interest in the continued existence of the whole building. The law was limited to tenants and not third parties.
3. Agreement between the plaintiffs and C as to allocation of risk was, on the balance of probabilities, not accepted.
4. There was no estoppel by convention. In so far as the plaintiffs were concerned there was no material change in the defendant’s behaviour to show that he was entitled to the same benefits under the lease as Mr Amer. The defendant’s payments under the lease were payments of Mr Amer’s debt.
5. There was no right to subrogation. Equity would not interfere with the express terms of a contract and it was the insurance policy which, in its conditions, imposed and agreed upon the rights of subrogation. The source of funds was of no consideration to the insurers as long as the premium was paid.
6. It was alleged that, the plaintiffs, having received the insurance moneys, had been fully indemnified in the manner envisaged by the provisions of the lease: see Mark Rowlands v Berni Inns (supra), but that argument was not accepted.
William Crowther QC and Benjamin Browne (instructed by Wansbroughs Willey Hargrave, of Bristol) appeared for the plaintiffs; Anthony Edwards-Stuart QC and Edward Cole (instructed by Kennedys) appeared for the defendant.
