Landlord and tenant — Repairs — Right of inspection — Former garage with underground fuel tanks — Clause permitting landlord to enter to inspect and examine condition of premises — Landlord wanting to enter and drill boreholes to assess soil contamination — Whether permitted under terms of lease — Whether clause confined to inspections of non-intrusive nature
The appellant tenant held a lease of commercial premises for a term of 25 years from 1993 from the respondent landlord. The premises had originally been used as a garage and contained underground fuel storage tanks. However, that use had ceased before the lease was granted, and the appellant used the premises to sell and fit car parts and to carry out MOT tests.
In 2007, the respondent informed the appellant that it intended to inspect the premises to ascertain whether the fuel tanks had given rise to contamination, for the purpose of determining potential environmental liability. The investigation would take several days and involve the cordoning off of parts of the forecourt and the drilling of six boreholes, five of which were to be 6m deep and the other 30m deep. The appellant contended that the respondent was not entitled to carry out such intrusive works. The respondent sought a declaration that the works were permitted under the lease; it contended that they fell within the terms of an inspection clause that reserved to the landlord the right to “enter upon the premises generally to inspect and examine the same, to view the state of repair and condition thereof and to take a schedule of the landlords’ fixtures and of any wants of compliance by the tenant with its obligations hereunder”. In the Outer House, Lord Coulsfield found in favour of the respondent, holding that the landlord’s power included the carrying out of works and was not limited to a superficial visual inspection. The appellant appealed.
Held: The appeal was allowed. The language of the inspection clause, construed in the light of the other provisions in the lease, did not cover investigations of the kind proposed by the respondent. The grant of a lease precludes the landlord from any action that encroaches materially upon the tenant’s possession of the demised premises during its term, save to the extent that the landlord’s obligation to maintain the tenant in exclusive possession may be qualified by the terms of the lease. The respondent’s right of inspection, in contrast to other provisions in the same lease, was not subject to any obligation to proceed in such a way as to cause the least practicable disturbance to the tenant, or to make good any damage caused, showing that it had not been envisaged or intended that the exercise of the landlord’s right of inspection would cause any material disturbance to the tenant or result in any material damage to the premises. Had the parties to the lease intended that the landlord should be able to interfere with the tenant’s possession of the premises to the extent of carrying out intrusive investigations lasting several days, a clearer indication to that effect would be expected in the lease. Moreover, if, subsequent to the commencement of the lease, legislation was enacted that imposed liability upon the appellant for the remediation of contaminated land, compliance with which could be determined only by carrying out intrusive investigations, that could not retrospectively alter the meaning of the relevant clause, which had to be construed by reference to the intentions of the parties at the time the lease was entered into.
No cases are referred to in this report.
This was an appeal by the appellant, Kwik-Fit Properties Ltd, from a decision of Lord Cousfield, sitting in the Outer House of the Court of Session, granting declaratory relief to the respondent, Possfund Custodial Trustee Ltd, in respect of a landlord’s right of inspection in a commercial lease.
Jonathan Lake (instructed by Anderson Strathern LLP, of Edinburgh) appeared for the appellant; Gavin MacColl (instructed by Todds Murray LLP, of Edinburgh) appeared for the respondent.
Giving the opinion of the court, Lord Reed said:
Introduction
[1] This case is concerned with the construction of a commercial lease. The question is whether a right of inspection conferred by the lease upon the landlord entitles it to carry out investigations in order to ascertain whether soil pollution may have occurred.
[2] The respondent is the present landlord, and the appellant is the tenant, of commercial premises in Edinburgh, in terms of a lease entered into, in 1993, between the appellant and Nissan UK Ltd. The premises were at one time a garage and contain underground storage tanks that were formerly used for the storage of fuel. That use, however, came to an end at or before the grant of the lease. Since then, the premises have been used by the appellant as a centre for the supply and fitting of tyres, exhausts and similar products and the carrying out of MOT testing. The lease is for a term of 25 years from 25 May 1993.
[3] In 2007, the landlord’s interest was acquired by the respondent. Shortly after it had taken entry, its solicitor wrote to the appellant:
We hereby give you notice on behalf of the Landlords of their intention to exercise their rights under clause 3.11 of the Lease to enter upon the Property generally to examine the state of repair and condition thereof and in particular to have their professional advisors carry out environmental investigations.
The Landlords’ representatives Delta Simons will require access to the property on the 6/7 November 2007 to carry out initial checks and thereafter will be attending the property from 13 to 16 November to carry out the investigations.
[4] The appellant was subsequently provided with a method statement by Delta Simons, the environmental consultant instructed on behalf of the respondent. It stated that the purpose of the proposed investigation was to assess the significance of any potential environmental liability associated with any soil and groundwater contamination that might be present. The investigation would involve several stages. It would first be necessary to carry out a service-avoidance exercise and a |page:40| ground-penetrating radar survey, in order to identify the exact location of the underground storage tanks, other subsurface structures and live services. This would take up to two days to complete. Drilling works would then be carried out. These would involve drilling five shallow boreholes, to a depth of approximately 6m beneath the surface, in order to collect groundwater samples from shallow perched groundwater likely to be present within made ground or shallow deposits. Four of these boreholes would be drilled around the underground storage tanks in the eastern part of the forecourt of the premises. The fifth of the shallow boreholes would be drilled in the western part of the forecourt. There would, in addition, be a single deep borehole to a depth of approximately 30m beneath the surface in order to collect groundwater samples from the major aquifer within the underlying sandstone. The drilling works would take up to four days to complete. Each borehole would be installed as a 50mm diameter land gas and groundwater monitoring well finished with a traffic-strength cover flush with the surface. Approximately 15 soil samples would be collected at various depths and submitted to a laboratory for chemical analysis. Groundwater samples would also be collected and analysed, and land gas concentrations would be monitored. The monitoring would begin at least two days after the completion of the drilling works. A skip would be provided to collect waste arising from the drilling. A representative of Delta Simons would be present for around four days to oversee the drilling works, record observations and collect samples. Cones, barriers and signs would be used to cordon off the areas of the works.
[5] Through its solicitor, the appellant indicated that, although it had no objection to inspections under clause 3.11 of the lease (quoted below), it was not agreeable to the proposed environmental investigations. In view of the appellant’s refusal, the respondent commenced the present proceedings, concluding for declarator that the appellant is obliged to permit it to enter the premises:
in order to view the state of repair and condition thereof and, in particular, to drill five shallow boreholes and a single deep rotary borehole within the Premises in order to inspect and examine the condition of the solum of the Premises.
In its pleadings, the respondent explains that, having purchased the premises, it wants to ascertain their condition and, in particular, whether there has been any contamination of the solum from the underground tanks or from any other source; it maintains that clause 3.11 of the lease entitles it to carry out the proposed investigations.
[6] The case proceeded to debate on the question of whether works of the general character proposed were in principle permitted by the lease, leaving for later resolution, if necessary, issues relating to the details of the works and the extent to which any disturbance of the appellant’s operations might be minimised. The Lord Ordinary resolved the question debated in favour of the respondent.
Lease
[7] As we have mentioned, the lease of the premises is for a period of 25 years from 25 May 1993. The premises leased are defined by clause 1.2.5 as:
the subjects described in Part I of the Schedule and each and every part thereof together with the pertinents thereof… .
Part I of the schedule refers to the “area of ground” described in a 1925 feu charter “together with the buildings and erections on those subjects”. In terms of clause 2, the premises are let to the tenant “under reservation of the exceptions and reservations referred to in the Schedule Part III”. Those reservations include, in para 2, the landlord’s right:
to enter and remain upon the Premises with all necessary tools, appliances and materials for the purposes of repairing, altering or rebuilding any adjoining or contiguous premises belonging to the Landlord… Provided always that the Landlord shall ensure that the exercise of such rights… shall be carried out in such a manner as to cause the least practicable disturbance to the Tenant… and the Landlord shall make good any damage caused to the Premises or to the Tenant’s, any permitted sub-tenant’s and/or any permitted occupier’s fixtures, fittings, stock or equipment.
Paragraph 3 contains a similarly expressed reservation of the landlord’s right to enter onto the premises for the purpose of inspecting, repairing, etc, sewers and other conduits serving neighbouring premises, subject to a similar proviso and a similar obligation to make good.
[8] Clause 3 sets out the tenant’s obligations. In particular, clause 3.4 requires the tenant to keep specified plant and equipment in good and substantial repair and condition. Clause 3.6 requires the tenant:
to repair, maintain, renew, rebuild and reinstate whenever necessary and generally in all respects put and keep in good and substantial condition the Premises and every part thereof with all necessary maintenance, cleansing and rebuilding and renewal works and amendments whatsoever… .
Clauses 3.7 and 3.8 require the tenant to decorate the external and internal parts of the premises. Clause 3.9 requires the tenant to clean the interior and exterior of the premises. Clause 3.10 requires the tenant to keep the premises clean and tidy. Clause 3.11 requires the tenant:
To permit the Landlord and its agents at all reasonable times with or without workmen on giving forty eight hours’ written notice (except in emergency) to the Tenant to enter upon the Premises generally to inspect and examine the same to view the state of repair and condition thereof and to take a schedule of the Landlord’s fixtures and of any wants of compliance by the Tenant with its obligations hereunder.
Clause 3.12 requires the tenant:
to make good all wants of compliance by the Tenant with its obligations hereunder of which notice in writing is given to the Tenant by the Landlord…
In the event of non-compliance with such a notice, the landlord is entitled to enter onto the premises and to make good the non-compliance at the cost of the tenant:
Provided always that the Landlord shall exercise the rights conferred on it by this clause in a fair and reasonable manner in so far as possible causing the least practicable disturbance to the Tenant and making good any damage caused to the Premises or the Tenant’s or any sub-tenant’s or any other permitted occupier’s fixtures, fittings, stock or equipment.
Clause 3.16 requires the tenant not to use the premises otherwise than for the sale and fitting of tyres, exhausts and other specified car parts and accessories and the carrying out of MOT tests. Clause 3.26.1 requires the tenant:
to execute all works as are or may be under or in pursuance of any Act of Parliament… already or hereafter to be passed be directed or required to be done or executed upon or in respect of the Premises… whether by the owner and/or the Landlord and/or the Tenant thereof and to comply with all the requirements of any Act of Parliament already or hereafter to be passed and all notices which may be served by the Public, Local or Statutory Authority… .
Clause 4 sets out the landlord’s obligations. In terms of clause 4.1, in particular, the landlord grants absolute warrandice.
Environmental Protection Act 1990
[9] Reference was made in the course of the parties’ submissions to the principal features of the controls over polluted land established by Part IIA of the Environmental Protection Act 1990 (the 1990 Act) as amended. Part IIA (inserted by section 57 of the Environmental Act 1995) deals with the identification of “contaminated land” (as defined by section 78A(2)), with the “remediation” of contaminated land (see section 78E(4)), and with the “determination of the appropriate person to bear responsibility for remediation”: see section 78F. In broad terms, responsibility lies primarily with the original polluter, but in cases where the original polluter cannot be found responsibility is transferred to the owner or occupier for the time being: see section 78F(2)-(5). The Act allows a remediation notice to be served on an “appropriate person”, after which, subject to a right of appeal against the notice, the person served has a statutory obligation to comply with the notice and carry out the remediation works. Alternatively, the “enforcing authority” (usually the local authority) can itself carry out the remediation works and recover the cost from the appropriate person or persons: see section 78P. Each enforcing authority is required to maintain a public register that contains details of contaminated land |page:41| for which that authority is responsible and of remediation notices: see section 78R.
[10] In the instant case, it is common ground that the premises have never been identified as contaminated land within the meaning of the 1990 Act, and that even if they were to be so identified, it is uncertain whether any statutory responsibility for remediation would attach either to the landlord or the tenant. No reference was made to any other legislation relating to soil pollution.
Parties’ submissions
[11] It is necessary to note the limited basis upon which counsel presented their submissions. Both counsel approached the question as one turning on the construction of clause 3.11. Neither sought to refer to any factual background that might bear on that question of construction: the court was invited to construe clause 3.11 in the light of its own terms and the other provisions of the lease. Counsel for the respondent also contended that since the description of the premises contained in the lease adopted the conveyancing description contained in a feu charter, and the latter conveyed title a coelo usque ad centrum, it followed that the leased premises included the ground beneath the surface. That contention was not challenged by counsel for the appellant, and we proceed on that basis.
Discussion
[12] A lease, like any other contract, must be construed as a whole, and so as to give proper effect, if possible, to all of its provisions. In the instant case, it is necessary in particular to achieve a fit, if possible, between the landlord’s right to inspect and examine, by virtue of clause 3.11, and the tenant’s right to be maintained in possession, reflected in clause 4.1.
[13] Since a lease is essentially a grant of possession of the subjects of the lease for the period of the lease, it is implicit, if not expressed, that the landlord is precluded from any action that encroaches materially upon the tenant’s possession of those subjects during that period. The landlord’s obligation to maintain the tenant in exclusive possession may, however, be qualified by the terms of the lease. In the lease with which the instant case is concerned, in particular, clause 3.12 entitles the landlord, in the event of the tenant’s failure to comply with a notice to repair, to enter the premises to make good the non-compliance, subject, however, to an obligation to do so “in a fair and reasonable manner insofar as possible causing the least practicable disturbance to the Tenant and making good any damage caused”. As we have explained, para 2 of part III of the schedule to the lease also entitles the landlord to enter the premises for the purpose of repairing, etc, adjoining premises, again subject to an obligation to do so “in such a manner as to cause the least practicable disturbance to the Tenant” and again subject to an obligation to “make good any damage caused”. Paragraph 3 of part III of the schedule similarly entitles the landlord to enter the premises for the purpose of inspecting, repairing, etc, sewers and other conduits serving neighbouring premises, again subject to an obligation to do so “in such a manner as to cause the least practicable disturbance to the Tenant” and again subject to an obligation to “make good any damage caused”.
[14] There is a striking difference between the wording of the provisions that we have just discussed and that of clause 3.11. Although clause 3.11 entitles the landlord to enter the premises “to inspect and examine the same to view the state of repair and condition thereof…”, there is no express obligation to do so in such a way as to cause the least practicable disturbance to the tenant, nor is there any obligation to make good any damage caused. In a professionally drafted lease, the omission of such obligations, when they are specified in several other provisions, is unlikely to have been unintended. Although not necessarily conclusive in itself, it strongly suggests that it was not envisaged or intended that the exercise of the landlord’s right of inspection under clause 3.11 would cause any material disturbance to the tenant or would result in any material damage to the premises.
[15] There are other pointers to the same conclusion. The lease does not generally omit commas and other punctuation marks. In that context, the absence from clause 3.11 of a comma after “same”, in the phrase “to enter upon the premises generally to inspect and examine the same to view the state of repair and condition thereof…” tends to suggest that rather than the landlord being entitled, first, to inspect and examine the premises and, second, to view their state of repair and condition, what is meant is that the landlord is entitled to inspect and examine the premises in order to view their state of repair and condition. It is unnecessary for the purposes of the present case to decide the precise limits of the inspection and examination permitted by these words: whether, for example, the reference in clause 3.11 to “workmen” implies, as the Lord Ordinary considered, that the landlord is entitled to uncover parts of the premises, for example, by lifting floorboards. The word “view” suggests, however, that clause 3.11 is concerned with matters that are observable (as distinct, for example, from matters that require the removal of cores and other samples for laboratory analysis). This is consistent with the absence of any requirement to minimise disturbance or to make good damage.
[16] More generally, it appears to us that had it been the intention of the parties to the lease that the landlord should be entitled under clause 3.11 to interfere with the tenant’s possession of the premises to the extent contended for by the respondent (which, as we have explained, would involve intrusive investigations lasting several days and the cordoning off of parts of the forecourt of the premises), one would expect to find a much clearer indication to that effect in the lease.
[17] As against these considerations, it was contended on behalf of the respondent that clause 3.11 was concerned with “wants of compliance by the Tenant with its obligations hereunder”, as its final words indicated, and the tenant’s obligations under clauses 3.6 and 3.26.1 were capable of extending to the remediation of contaminated land. It may be that, in the event that the solum of the premises were to be identified as contaminated land for the purposes of the 1990 Act as amended, and in the further event that a remediation notice were to be served on the landlord or the tenant, then (leaving aside the possibility of a successful appeal) the tenant would come under an obligation in terms of clause 3.26.1. None of these events has, however, occurred. More fundamentally, the meaning of clause 3.11 depends upon the intention of the parties at the time (in 1993) the lease was entered into. That intention has to be ascertained from the language that the parties used. For the reasons that we have explained, the language used in clause 3.11, construed in the light of the other provisions of the lease, is not apt to cover investigations of the kind proposed. If, subsequent to the commencement of the lease, legislation was enacted that fell within the scope of clause 3.26.1, and the tenant’s compliance with that legislation could be determined only by carrying out investigations going beyond the scope of clause 3.11, that would not alter retrospectively the meaning of clause 3.11.
[18] Clause 3.6 imposes on the tenant an obligation:
to repair, maintain, review, rebuild, and reinstate wherever necessary and generally in all respects put and keep in good and substantial condition the premises and every part thereof with all necessary maintenance, cleansing and rebuilding and renewal works and amendments whatsoever.
In the light of clause 3.11 (which is as relevant to determining the scope of clause 3.6 as vice versa) and clause 3.16 (which restricts the use of the premises to uses that would not be likely to be affected by soil pollution from fuel), as well as the terms of clause 3.6 itself, it might be doubted whether that clause was intended to apply to the contamination of the soil by fuel. The question was not, however, fully addressed in counsel’s submissions, and it is unnecessary for us to decide it for the purposes of the present case. The possible scope for argument as to the effect of clause 3.6 does not override our clear conclusion as to the limited nature of the right conferred on the landlord by clause 3.11.
Conclusion
[19] In these circumstances, we will recall the interlocutor of the Lord Ordinary, sustain the appellant’s plea to the relevancy of the respondent’s averments and dismiss the action.
Appeal allowed.
