L Batley Pet Products Limited v North Lanarkshire Council

A covenant to keep commercial premises in good and tenantable condition imposes a continuing obligation. It requires no notice from the landlord, whether written or oral, before the tenant must act. The obligation is engaged when the premises fall outside the stipulated condition.

Contractual construction is a unitary exercise. The court starts with the parties’ words, read in the context of the agreement as a whole, the admissible factual matrix and business common sense. A requirement that alterations be removed “if so required” does not demand writing where the agreement distinguishes expressly between communications which must be written and those which need not be.

The appellant was the mid-landlord of commercial premises sub-let to the respondent council. A minute of agreement licensed alterations and required their removal and reinstatement at the end of the sub-lease if the mid-landlord so required. The head lease also contained a continuing repairing obligation which was applied to the sub-lease.

The mid-landlord alleged that its surveyor orally required reinstatement before expiry. The Extra Division of the Inner House, in [2012] CSIH 83, held that written notice was necessary and dismissed both the reinstatement claim and an alternative repair claim.

The issues were whether either the licensed-works obligation or the continuing repairing obligation required written notice before expiry of the sub-lease.

1. Appeal allowed unanimously. Lord Hodge delivered the judgment, with which Lady Hale, Lord Kerr, Lord Reed and Lord Carnwath agreed. The mid-landlord had pleaded relevant cases under both the minute of agreement and the repairing covenant. The appropriate disposal was proof before answer.

2. The repairing covenant required the tenant at all times to repair, maintain and, where necessary, reinstate the premises so as to keep them in good and tenantable condition. This was a continuing obligation to keep the premises in, and put them into, the stipulated condition. It did not require notice from the landlord, in writing or otherwise, to activate it. Activity became necessary when the premises were outside that condition. Credit Suisse v Beegas Nominees Ltd [1994] 4 All ER 803 was applied, and the consistent Scottish decisions were approved.

3. The alternative repair claim was sufficiently pleaded. It identified the contractual obligation and referred to the works specified in the revised schedule of dilapidations. Whether those works concerned the premises’ condition during the sub-lease was a matter for proof. A damages claim for breach existed alongside the contractual right to reimbursement. If the works had not been carried out, their estimated cost might remain a legitimate measure of loss.

4. The minute of agreement was a separate contract which gave consent for the alterations. It was not superior to the lease or sub-lease. Its terms expressly required writing for some communications but used unqualified language for others. That contrast indicated that the requirement to remove the licensed works could be communicated informally. The incorporation provision brought the sub-tenant’s obligations into the sub-lease to support the power of irritancy; it did not import the head lease’s written-notice machinery into the minute of agreement.

5. This construction was consistent with business common sense. Certainty did not make a written requirement the only commercially sensible interpretation, particularly when removal would arise alongside the sub-tenant’s continuing repairing obligation. The alleged oral intimation by the surveyor therefore supported a relevant case. A party need not plead its evidence, and the averments gave the Council fair notice of the case it had to meet.

1. United Kingdom Supreme Court: Allowed the appeal unanimously, reinstated the defender’s plea to relevancy and ordered proof before answer.
2. Inner House of the Court of Session, Extra Division: In [2012] CSIH 83, granted the Council’s reclaiming motion and dismissed the action, holding that written notice was required for reinstatement and that the alternative repair claim was irrelevant.
3. Outer House of the Court of Session: Temporary Judge Wise QC held that oral communication could satisfy the reinstatement provision and allowed proof before answer, although her interlocutor inadvertently repelled the Council’s plea to relevancy.