Innerspaces Self Storage Ltd v Harding & Ors

A continuing covenant in a commercial lease is construed by reference to the subject matter contemplated when the lease was granted. An assignee’s knowledge of an existing condition does not, by itself, prevent a later claim for breach. However, a covenant to administer and manage an estate does not impose a general, undefined duty to maintain its appearance. Its scope depends on the lease’s language and context, and cannot normally be expanded beyond specific obligations subject to the landlord’s reasonable judgment. An appeal may be dismissed despite an erroneous legal approach at first instance where the established facts show that the claim fails on construction, breach or damage.

Innerspaces Self Storage Limited, the tenant of commercial premises on an industrial estate, appealed against the dismissal of its claim by District Judge Sparrow at Southampton County Court on 29 January 2013.

The claim concerned a heap of rubble on land retained by the landlords. The tenant alleged breach of several lease obligations, including quiet enjoyment, non-derogation from grant, misrepresentation and the obligation to provide estate services. The trial judge dismissed all causes of action.

Before the Court of Appeal, the tenant challenged only the dismissal of its claim under paragraph 6.3.12 of Schedule 6, requiring the landlord to administer and manage the estate in accordance with good estate management principles. The central issue was whether the continuing presence of the rubble heap breached that covenant and caused recoverable damage.

The appeal was dismissed. The Court of Appeal held that the trial judge had adopted the wrong legal approach but had nevertheless reached the correct result.

1. Construction at the date of grant. The obligation to provide the relevant service was continuing throughout the lease term. The lease and the covenant therefore had to be construed by reference to the circumstances and subject matter contemplated when the lease was granted. The tenant’s knowledge of the rubble heap when it took the assignment did not, by itself, prevent a claim for breach.
2. Scope of paragraph 6.3.12. The words administering and managing the Estate were broad enough, in an appropriate case, to require works on retained or common parts or steps to prevent unsuitable activities causing material impairment of tenants’ enjoyment. They were not, however, broad enough to impose a general and wholly unspecified obligation to maintain the appearance of the estate. No sufficiently certain standard or criteria existed by which such an obligation could be judged.
3. Context of the express covenants. Paragraphs 6.3.1 and 6.3.9 contained specific obligations concerning repair, renewal, tidying and landscaping. Those obligations were subject to the landlord acting reasonably and considering the work necessary or appropriate. It was therefore unjustified to imply a wider obligation under paragraph 6.3.12, particularly one imposing a greater burden and producing the uncertain result of improving the estate’s appearance.
4. Alternative factual ground. Even if paragraph 6.3.12 had the wider meaning contended for, the trial judge’s findings precluded a finding of breach or damage. The judge’s observation that there was a possibility of a claim and his hypothetical comments on quantum were not findings of construction, breach or loss. His findings instead indicated no material interference with the business and no proven damage.

The tenant did not pursue its challenges concerning quiet enjoyment, derogation from grant or misrepresentation, and its nuisance-based claim was not pursued.

• Court of Appeal (Civil Division): On 30 January 2014, the court dismissed the appeal, holding that the trial judge’s legal approach was erroneous but that the dismissal was ultimately correct: [2014] EWCA Civ 46.
• Southampton County Court: District Judge Sparrow dismissed the tenant’s claims on 29 January 2013.