Fairgate International Ltd v Citibank International Plc

Lease covenants requiring removal and reinstatement of fixtures and fittings, and fitting out premises to specified standards, are not necessarily alternatives merely because they contemplate different end states. Where the language does not make them mutually exclusive, the landlord may invoke both. Any inconsistency is resolved by giving precedence to the fitting-out requirements to the extent that removal or reinstatement would be inconsistent with, or unnecessary because of, that work. A notice invoking both covenants is not void for uncertainty where the lease makes clear the work required in principle and leaves detailed specifications to be settled through the contractual approval mechanism.

Fairgate was the landlord and Citibank the tenant of commercial premises under lease terms requiring repair, removal or reinstatement of tenant-installed items, and fitting out in accordance with schedules. Before expiry, Fairgate served notice invoking both removal and fitting-out provisions. It later claimed damages for breach. Citibank raised preliminary construction issues, arguing that the provisions were mutually exclusive and that the notice was void for uncertainty. The Technology and Construction Court held that the provisions were cumulative, subject to reconciliation of inconsistency, and that the notice was valid. Citibank appealed against the first two declarations. The central questions were whether the covenants were alternatives and whether the notice imposed enforceable obligations.

The appeal was dismissed unanimously. Dyson LJ gave the judgment, with Maurice Kay and Buxton LJJ agreeing. The first and second declarations of the Technology and Construction Court were upheld; the third declaration was not in issue.

1. The absence of a conjunction between clauses 2(8)(B)(i) and (ii) did not make them mutually exclusive. The words “all or any” allowed the landlord to require removal of selected fixtures or fittings, rather than all or none. It was inherently unlikely that requiring removal of a small number of items would deprive the landlord of the separate right to require the scheduled fitting-out works.
2. The different states in which the premises might be yielded up did not determine the construction. Under clause 2(8)(B)(i) alone, the tenant would remove the items required and yield up the premises in repair, applying the standard described in Proudfoot v Hart (1890) 25 QBD 42. Under clause 2(8)(B)(ii) alone, it would fit out and equip the premises in accordance with the Third and Fourth Schedules, so far as consistent with the repair obligation.
3. Any apparent inconsistency was to be resolved by giving precedence to clause 2(8)(B)(ii) to the extent that compliance with clause 2(8)(B)(i) was inconsistent with, or rendered unnecessary by, the scheduled works. The absence of express machinery for resolving inconsistency did not make the provisions alternatives.
4. The notice of 28 August 2002 was not void for uncertainty. The tenant knew in principle that it had to comply with the schedules, while the detailed requirements were to be settled through the contractual mechanism requiring the landlord’s surveyor’s reasonable satisfaction. The lease contemplated that the precise scope of work might only become clear after those details were finalised.

1. Court of Appeal (Civil Division): In [2005] EWCA Civ 569, Citibank’s appeal against the first and second declarations was dismissed.
2. Technology and Construction Court, Queen’s Bench Division: His Honour Judge Havery QC held that clauses 2(8)(B)(i) and (ii) were not alternatives, that Fairgate’s notice validly invoked both, and that inconsistent or unnecessary repair obligations were overridden.