Commercial lease – Dilapidations – Supermarket anchor store in shopping centre – Supermarket closing in breach of keep-open clause in lease – Damages awarded for claimant landlord’s consequent capital loss – Whether defendant tenant liable for dilapidations – Whether repairing obligations diluted where damages already awarded on basis that supermarket closed – Whether terms of lease requiring defendant to contribute to cost of security services – Judgment for claimant in part
The claimant held a lease of a shopping centre in Dundee, the anchor unit in which was let to the defendant on a sublease for a term of 63 years from 1970 to 2033. The sublease contained a valid keep-open clause that required the premises to remain open for business as a supermarket. After the supermarket closed in 1995, the claimant brought proceedings against the defendant for breach of the keep-open clause. Judgment on that claim was given in the claimant’s favour in 2007: see [2007] CSOH 53; [2007] PLSCS 74.
In a subsequent action, the claimant sought declarations that the defendant was obliged to: (i) pay sums invoiced to it by the claimant’s surveyors in respect of the provision of security services at the premises; and (ii) carry out works to the premises as specified in an interim schedule of dilapidations. The claimant contended that the former item fell within a clause in the sublease that required the defendant to contribute to specified expenses, including “(d) the professional charges of the Landlords’ surveyors, as common factors of the whole subjects… in general in connection with the management and administration of the whole subjects”. It submitted that the word “charges” could cover more than the surveyors’ professional fees and could include their outlay for matters such as security.
The defendant disputed that contention. In respect of the dilapidations claim, it contended the claimant should have sought to recover for all heads of damage in the earlier action, and that, since the claimant had already been awarded damages for its capital loss in respect of the breach of the keep-open clause, on the assumption that the premises would remain vacant for the remainder of the term, the defendant was no longer obliged to maintain the premises in a state that was fit for a trading supermarket but merely to keep them wind-and water-tight, maintain the security of the shell, and to restore them at the end of the term to a condition fit for the purpose for which they were let.
Opinion: Judgment was given for the claimant in part.
(1) The provision of security services was not a matter to which the defendant was obliged to contribute under subpara (d) of the lease clause in question. The parties had made detailed and specific provision in other subparagraphs for the various matters in respect of which the tenant was obliged to contribute; it would be surprising in those circumstances had they contemplated that the provision of security guards should simply be encompassed within subpara (d) as part of the professional charges of the landlord’s surveyors. Although the word used was “charges” rather than “fees”, it was not suggested that the landlord’s surveyors should be entitled to claim outlays over and above their own professional charges, namely those related to their profession. Although the phrase “and in general in connection with the management and administration of the whole subjects” was a wide phrase that encompassed many activities, it dealt with the professional charges of the landlord’s surveyors in connection with those activities, not the activities themselves.
(2) The earlier action had been concerned solely with the defendant’s breach of the keep-open clause and had not related to the obligation to repair and maintain. In electing to sue for damages for breach of the keep-open clause rather than specific performance of it, the claimant had not thereby disabled itself from seeking specific performance of other clauses of the sublease. The fact that the claimant had been awarded damages for loss of capital value of the entire shopping centre and accrued revenue losses did not mean that it was prevented from enforcing the obligations to repair and maintain the premises. The sublease contained many provisions that imposed obligations upon the defendant; despite the award of damages for breach of the keep-open clause, other provisions of the sublease remained extant and enforceable. There was no justification for a finding that the repairing obligations were diluted for the remainder of the term but resurrected with full force at its termination. Such a position was inconsistent with the provisions of the sublease or with commercial sense: the sublease did not provide for the mechanism or standard by which any such diluted obligation was to be measured. Moreover, if the defendant ceased to exist prior to the end of the term, for example by winding-up, and left the premises in a state of repair worse that that in which it was obliged to deliver them up at the end of the term, the claimant would incur the cost of bringing the premises up to the required standard without any recourse. The proper finding was that the repair and maintenance obligations in the sublease subsisted throughout the currency of the sublease.
Ian Abercrombie QC and J Brown (instructed by McClure Naismith) appeared for the claimant; Mr Craig Connal QC, solicitor-advocate of McGrigors LLP, of Edinburgh, appeared for the defendant.
Sally Dobson, barrister