Tonsley (Strathclyde) Limited and Tonsley (Strathclyde No. 2) Limited as Trustees Of The Tonsley 2 Trust v Scottish Enterprise, 4 October 2016 – repairing obligations in lease, payment clause or common law damages
Outer House case concerning a lease of premises in Strathclyde Business Park in Bellshill.
The lease came to an end in September 2013 and the landlord argued that, in terms of the lease, the tenant was obliged to pay a sum equal to the cost of putting the premises into good and substantial condition.
The relevant clause provided that, at the end of the lease, if the premises were not in good and substantial repair and condition, the landlord had the option either to require the tenant to carry out repairs to put it into that condition or to demand a sum certified by the landlord as being equivalent to the cost of carrying out such work:
“Provided always that (a) if at such expiration or sooner determination the Premises shall not be in such good and substantial repair and condition then at the option of the Landlord either (i) the Tenant shall carry out at its entire cost the works necessary to put the Premises into such repair and condition or (ii) the Tenant shall pay to the Landlord the sum certified by the Landlord as being equal to the cost of carrying out such work..”
The landlord sought over £395k from the tenant in respect of the dilapidations said to exist at the end of the lease. The tenant argued that nothing was due in terms of the lease because the landlord had no intention or need to carry out the works listed in the schedule and the relevant clause in the lease did not entitle the landlord to a windfall profit. The tenant argued that the clause was neither a payment clause nor a liquidated damages clause but instead should have been read as clarifying and confirming the landlord’s common law right to damages (meaning that the landlord was only entitled to the loss actually suffered as a result of the tenant’s breach of its repairing obligations).
Lord Doherty rejected those arguments. Following the approach taken in @SIPP (Pension Trustees) Limited v. Insight Travel Services Limited, Lord Doherty found that the ordinary and natural meaning of the clause provided the landlord with the option of certifying a sum equal to the cost of the works necessary to put the premises into the condition in which they would have been in at the end of the lease if the tenant had complied with its repairing obligations. The tenant’s contention that the clause should be interpreted as only allowing common law damages was found not to be a possible interpretation of the clause.
The full judgement is available from Scottish Courts here.
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 The tenant referred to Mapeley Acquisition Co (3) Ltd (In Receivership) v City of Edinburgh Council and Grove Investments Limited v. Cape Building Products Limited in support of its arguments.