Perriam Ltd v Wayne & Anor

A contractual variation releasing a tenant from a continuing repairing obligation may take immediate effect even though it specifies no commencement date. Its meaning must be determined from the words used, the agreement as a whole, the relevant background and the commercial purpose. Where the parties knew that the property was already seriously defective, and the deed contained no reservation of antecedent breaches or mechanism for identifying existing liability, the release may operate as a waiver of liability for the existing condition. A provision should not be construed so that it has no practical benefit. Costs of preliminary issues should ordinarily remain costs in the case where the ultimate outcome is not yet known.

Perriam Limited appealed against a decision of HHJ Cockcroft in the Leeds County Court concerning a lease of commercial premises and a deed of variation. The appellants were guarantors of the tenant.

The deed varied the tenant’s repairing obligations so that there was no continuing obligation to repair or replace the external windows. It also released the guarantors from their general obligations from 17 November 2007, subject to antecedent breaches. The county court held that the window provision did not waive liability for earlier breaches and made consequential costs orders.

The appeal concerned the effective date and scope of the window release, together with the costs orders and the treatment of security for costs.

1. Construction of the deed. The release in respect of the external windows took immediate effect on 24 April 2007. The date of 17 November 2007 related to the general release of the guarantors and did not govern the separate provision dealing specifically with the tenant’s window obligations.
2. The words providing that there was no continuing obligation to repair, keep in repair or replace the windows were expressed in present terms. They differed from the clauses providing for a future release and containing an express saving for antecedent breaches.
3. The proper construction was confirmed by the commercial background. The windows were in a very poor condition, the guarantors had specifically sought protection from liability concerning them, and the deed contained no schedule of condition, identified breach or other mechanism for separating existing defects from later deterioration. A construction preserving liability for the full cost of the existing defects would deprive the provision of any practical benefit.
4. Applying the principles of contextual contractual interpretation in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 and Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, clause 4.2 operated as a waiver or release of liability for the condition of the windows. The appellants therefore had a complete defence to the dilapidations claim relating to their repair or replacement.
5. The appeal against the construction decision was allowed. The appeal on costs was also allowed. The preliminary-issue costs were to be costs in the case. The money paid out of court as security for costs was to be paid back into court within seven days. The question of the costs of the appeal was left open pending agreement.

• Leeds County Court: HHJ Cockcroft decided the preliminary issues on 22 September 2010. He held that the window provision did not waive liability for antecedent breaches and ordered the appellants to pay the claimant’s preliminary-issue costs. He released the security for costs.
• High Court: The appeal was allowed on the interpretation of the window provision and on costs. The preliminary-issue costs were made costs in the case, and the security was ordered to be paid back into court.