Tenant of vacated commercial premises has averments of implied lease terms excluded in payment action

Paccor UK Ltd averred that it was entitled to abatement of rent and sought for its landlord, United UK Propco 8 SARL, to repay an amount of rent paid after the damage. The defender argued it was not liable under the terms of the lease and counterclaimed for payment of rent that the pursuer had ceased to make following the alleged damage.

The case was heard by Lord Clark in the Outer House of the Court of Session. Jones QC, solicitor-advocate, appeared for the pursuer and Garrity, advocate, for the defender. A concurrent action relating to other premises leased at the same site was considered separately.

Unauthorised break-in

The pursuer had leased two units in Brucefield Industry Park under separate leases with similar terms. The premises were vacated in December 2015, but the pursuer continued to pay rent and the leases remained in force. Under each lease, the landlord was obliged to maintain insurance, with policy monies to be laid out in respect of repairing or rebuilding the premises following insured risk damage. It was averred that between 16 and 18 April 2019 the units had been damaged by malicious actions and theft by travellers who had broken into the premises and camped on the estate for two or three days.

The pursuer sought declarator that the damage had been caused as a result of an insured risk, allowing for abatement of rent and service charges, as well as repayment of an amount of rent paid after the damage and laying out of the policy monies. The defender challenged the relevancy and specification of the evidence concerning the damage led by the pursuer, on the basis that it did not adequately identify if one or both of the units were damaged.

In its answers to the counterclaim, the pursuer submitted that a letter dated 2 September 2019 in which the defender’s agents stated that the landlord had “not taken any issue” with its choice to exercise the right of abatement amounted to a waiver of the right to insist on payment. Counsel for the defender submitted that, if that was the case, it would amount to a fundamental variation of the lease that would allow the pursuer to occupy the premises free of charge for the remaining duration of the lease.

The defender further averred that the pursuer was in breach of an implied term of the lease to take reasonable care of the premises, including not putting adequate security measures into place to prevent unauthorised break-ins. Counsel for the pursuer submitted that the insurance obligation did not exclude damage caused by negligence on the part of the tenant, and there was no suggestion that the tenant had done anything that would cause the insurance not to be paid out.

No fair notice

In his decision, Lord Clark said of the specification issue: “I do not regard it as necessary for the pursuer to identify, in its pleadings, whether or not each item of damage was to the tenant’s fixtures or additions, or common parts, and to aver that appropriate notification had been given to the landlord. It suffices that fair notice of the damage is given and these other underlying details and issues, including the application of the terms of the leases and the licences of works to the factual circumstances, can be dealt with at the proof.”

Addressing the purported waiver letter, he continued: “Its terms are not, when viewed objectively, sufficient to mean that there was a voluntary abandonment of a right or a defence. It focuses principally upon overpayments. The words merely refer to what the defender has not, up to that stage, done. It would be inappropriate to view those words as meaning that the defender would not in the future, including in defence to the action just intimated to it, take any such issue and had waived its right to payment of rent and service charge during the alleged period of abatement.”

Turning to the existence of any implied terms of the lease, Lord Clark said: “There is no fair notice of any alleged breach of a duty to exercise reasonable care. The pleadings refer to the pursuer having failed to take adequate measures to prevent or deter damage, destruction or theft during the occurrence of any break-in. Fair notice is required of what measures ought to have been taken and why they would have prevented the damage.”

He concluded: “If the insurer wished to avoid liability for damage caused by a failure to exercise reasonable care on the part of the tenant, the wording of the policy could no doubt have sought to achieve that end, although that would be rather unlikely.”

Lord Clark therefore determined that certain averments from both parties would be excluded from probation, and fixed a by-order hearing to determine the specific averments to be excluded.