Landlord granting lease to tenant of quarry – Lease containing clause entitling tenant to break lease when all limestone “capable of extraction has been removed” – Limestone becoming uneconomical to extract – Tenant giving notice – Whether “capable of extraction” meant physically or economically capable of extraction – Judgment for landlord
The plaintiff was the landlord and the defendant was the tenant by assignment of a limestone spar quarry known as Dunston Quarry, Dunston, Lincolnshire. The lease was for a term of 25 years from January 1 1991 and it contained a break clause operable by the tenant giving six months’ notice at a time when, inter alia, “it was no longer economically viable to quarry limestone spar from the area shown coloured yellow on the said plan … because all limestone spar which was capable of extraction has been removed or will be worked out during the notice period . . .”. The tenant gave notice by letter dated July 4 1996. However the landlord claimed that the tenant was not entitled to determine the lease. It was common ground that reserves of limestone spar remained in the quarry and that it was uneconomic to work the reserves further. The landlord contended that the break clause only operated if all limestone physically capable of extraction had been extracted bar a de minimis amount. The tenant contended that the phrase “capable of extraction” did not only mean limestone which was not physically capable of extraction but also meant limestone which was not economically capable of extraction. It was submitted that if the clause only meant resources physical capable of extraction, then the reference to economical viability was otiose.
Held Judgment was given for the landlord.
If the parties had wanted a clause in the lease which entitled the tenant to break the lease when limestone was no longer economically capable of extraction, then an express clause to that effect would have been included in the lease. Since effect was to be given to the meaning of a contractual provision if it was unambiguously clear, and since the requirements for the exercise of the clause had to be strictly observed because it conferred an option on the tenant, the clause was to be construed as meaning that the option to break could only be operated when all limestone physically capable of extraction had been removed.
Bernard Weatherill QC (instructed by McKinnells, of Lincoln) appeared for the plaintiff; Joseph Harper QC (instructed by Aaron & Partners, of Chester) appeare for the defendant.
