Beatsons Building Supplies Ltd v Noble and others

Landlord and tenant – Extent of demise – Liability for repairs – Pursuer holding ease of commercial premises — Burn running beneath premises through culvert – Liability for cost of repair works to premises caused by collapse of culvert – Whether culvert forming part of demised premises such that pursuer responsible under tenant’s repairing covenants – Issue determined in favour of defenders The pursuer was the tenant of commercial premises on an industrial estate in Penicuik under a lease from the defender landlords which demised “ALL and WHOLE those industrial premises… shown outlined in red on the Plan… TOGETHER WITH… the whole rights common, mutual and sole effeiring thereto”. The demised premises comprised an industrial building with car parking and a service yard. A burn ran under the premises through a culvert comprising a corrugated steel pipe lying at a depth of about 4.5m below the yard. Sections of the culvert became deformed and ceased to support the yard above, causing the yard to subside and its surface to crack and break. The pursuer brought an action to recover the cost of the necessary repairs from the defender, contending that the culvert was the defender’s responsibility as landlord. By a counterclaim, the defender asserted that the culvert formed part of the demised premises and was therefore the responsibility of the pursuer under the tenant’s repairing covenants. The issue turned on the proper construction of the lease. The pursuer contended that the culvert would not be evident to a tenant on entering the lease and that such a tenant would not be anticipating liability for conduits that crossed the premises but did not necessarily serve them. It argued that the lease itself drew a distinction between the premises and such conduits, with the latter being the subject of a specific grant and reservation of mutual rights in respect of the free passage of utilities and access for their maintenance. The defenders contended that their title, as shown on the Land Register title plan, extended a coelo ad centrum and that they had leased the entirety of their interest to the pursuer, with the effect that the extent of the demise corresponded to the extent of their title. They submitted that, while it was possible to separate the ownership of a horizontal section of the land, such as underground mineral-bearing strata, that would require an express and specific provision of a kind not found in the pursuer’s lease. Held: The issue was determined in favour of the defenders. (1) The lease had to be construed in the light of the underlying common law of property, which formed part of the background which the parties would have had in mind when drafting the lease. There was no rule of Scots common law rules setting out any horizontal division of land. Ownership and possession were a coelo usque ad centrum, at least in the absence of any contractual agreement to the contrary, such as the express reservation of mineral rights. Unless otherwise agreed, or displaced by statutory provision, the default common law position meant that the lease of the premises carried with it all rights a coelo usque ad centrum, with a corresponding obligation of maintenance and repair. (2) No horizontal limit could be implied from the terms of the lease. The fact that the lease did not deal with that matter indicated that the drafters did not intend to change the common law position. The definition of the demised premises, as “ALL and WHOLE those industrial premises… shown outlined in red on the Plan… TOGETHER WITH… the whole rights common, mutual and sole effeiring thereto”, was notably full and unlimited. The language was expansive and inclusive, with no hint of any reservation or separation of rights as between tenant and landlord. In particular, the words “the whole rights” appeared to award the whole rights of the landlord, and the words “ALL and WHOLE” were also words of inclusion. It might be that, in modern practice, those words had come to be used like a mere punctuation mark, but that did not rob them of content, particularly for real estate lawyers, who should be assumed to understand the words they used. The landlords owned the solum of land on which the premises stood and there was nothing to show that the solum was being reserved or separated from the grant to the tenant or the intended depth of any such reservation. Where the common law imposed no horizontal boundaries and the lease drafting did not indicate any, the implication was that the parties did not intend any such horizontal boundaries. The clear prima facie position was therefore that the whole of the landlord’s property interest in, amongst other things, the solum was conveyed to the pursuer for the purposes of the lease. (3) No importance attached to any difference between the description of the land on the Land Certificate and the definition of the premises in the lease. The “normal” use of the same description was no more than a customary or common practice. Any discrepancy in the two descriptions did not diminish the full and inclusive definition of the premises in the lease. There was no indication in the lease drafting, far less a clear direction, that any difference in the extent of the property, at least horizontally, was intended as between disposition and lease. (4) That position was not displaced by the ancillary provisions of the lease dealing with the grant and reservation of rights in respect of the conduits. The court should not readily infer that the parties intended to leave any horizontal split to inference alone, based on such ancillary provisions; moreover, the provisions on which the pursuer relied did not support any such inference. The rights given to the landlord over the conduits on the premises recognised that the landlord could enter the premises to repair the culvert but did not create any obligation to maintain the culvert. If the tenant had no rights and duties in respect of the culvert, the landlord’s reservation of a right to use it would be unnecessary. The existence of such a reservation pointed towards, not against, the culvert being included in the demise. Moreover, the fact that not all conduits would necessarily serve the demised premises did not mean that they were not intended to form part of those premises. The existence and formation of the culvert was a matter of extensive regulation on the face of the burdens section of the Land Certificate and no tenant, exercising basic due diligence, could be unaware that it existed. (5) Although the demised premises included the culvert, for which the pursuer was therefore responsible under the repairing covenants in the lease, that was not sufficient to dispose of the matter since there remained an outstanding argument by the pursuer that the repair works should be classified as extraordinary repairs, for which the defender was responsible. Denis Garrity (instructed by ADLP, of Edinburgh) appeared for the pursuer; Roy Martin QC, Alastair Sutherland (instructed by Turk & Connell, of Edinburgh) appeared for the defenders. Sally Dobson, barrister