Lease – Covenant – Construction – Defendant holding tenancy of steelworks – Secondary slag heap accumulating on land – Dispute arising as to disposal of slag – Whether defendant breaching covenant in lease by allowing slag to accumulate – Declaration granted
The defendant company was the tenant of a steelworks on a site comprising about 52 acres of land at Sheerness in Kent. Three large piles of secondary slag had been generated by the steelmaking process carried out on the site. For many years, the slag had been removed from the site, mainly by farmers for use on farm tracks. Following a tightening of environmental regulations governing the use of secondary slag, the farmers were no longer able to use it, which resulted in an accumulation of the slag on the site. An issue arose whether the terms of the lease required the defendant to remove about 30,000 tonnes of secondary slag from the site.
The slag had no value and could not be resold. The claimant landlord sought a declaration that the defendant was in breach of clause 2(16), which required it not to form or permit to be formed any refuse dump or rubbish heap on the site.
The claimant’s main contention was that secondary slag was “refuse or rubbish” and that the piles of secondary slag fell within the meaning of the expression “refuse dump or rubbish heap” in clause 2(16). The modern equivalent of those expressions was “waste”. Refuse or rubbish generally connoted items of material of which the owner wished to dispose because he had no further use for them and assistance in understanding those concepts could be gleaned from European legislation and jurisprudence in relation to waste under EC Directive 2008/98 (the Waste Framework Directive). The defendant had breached the covenant in the lease by failing to remove the secondary slag as frequently as reasonably possible. The defendant disputed that there had been any breach of covenant. It contended that the prohibition under clause 2(16) fell to be construed as it would have been understood at the time of the lease and referred only to heaps or dumps of “bona-fide rubbish” which would not include slag.
Held: The declaration was granted.
(1) Secondary slag which could not be put to practical reuse in steelmaking or resold for profit could be regarded as “refuse” or “rubbish” as used in clause 2(16) of the lease on the ordinary and natural meaning of those words. However, the meaning of a contractual provision did not depend upon a semantic analysis of words in isolation. It had to be ascertained from the words and expressions used in the context of the lease as a whole, in the light of the admissible background, and having regard to the apparent commercial purpose of the clause.
(2) The principal that a contract was to be interpreted as at the date upon which it was made, and that words had to be given the meaning that they bore at that date, was merely a presumption capable of being rebutted. The presumption was most likely to be rebutted in cases of long-term contracts where the court was faced with a choice between adopting a “static” meaning of the words in the contract which could not change over time; or a “mobile” meaning which could change with time. This was a case involving a long lease of 125 years and it might be appropriate to adopt a mobile meaning of the words used in covenants intended to apply to industrial processes to be carried out on the premises and which could reasonably have been anticipated would be subject to technological development and change over the term of the lease. The adoption of a mobile interpretation did not mean that the court was entitled to change the scope of the contract. It was necessary to promote the purposes and values which were expressed or implicit in its wording, and to reach an interpretation which applied the lease wording to the changed circumstances in the manner most consistent with them: Bromarin v IMD Investments Ltd [1999] STC 301, Debenhams Retail plc v Sun Alliance and London Assurance Company Ltd [2005] 3 EGLR 34; [2005] 38 EG 146 and Lloyds TSB Foundation for Scotland v Lloyds Banking Group plc [2013] 1 WLR 366 considered.
(3) Clause 2(16) was specifically designed to ensure that, if the lessors were to re-enter the site following a default by the tenant, they should not be faced with the presence on site of items or materials that no-one would want, so that either the lessors would be forced to spend money clearing the site before it could be re-let or accept a reduced rent from a new tenant which would itself have to expend monies clearing the site. The words “all refuse and rubbish which may have accumulated” were not to be read restrictively so as to be limited to items similar to tins, cans, boxes and containers, ie., the bona fide rubbish suggested by the defendant. A wider interpretation of the words “refuse” or “rubbish” made better sense given the purpose of clause 2(16). The lease had placed the responsibility for regular removal of such material or items upon the tenant. Although the defendant no longer had a convenient means of procuring the free removal from the site of secondary slag, the resultant accumulation of unwanted material fell within the original purpose and intention manifested by clause 2(16). Accordingly, it was unnecessary and inappropriate to construe the lease by reference to the more modern concept of waste in European and domestic jurisprudence and legislation.
Jonathan Seitler QC and Richard Banwell (instructed by Gordons) appeared for the claimant; Kirk Reynolds QC and Greville Healey (instructed by McGuire Woods London LLP) appeared for the defendant.
Eileen O’Grady, barrister
