A decision has been made following the principles of Grove Investments Ltd v Cape Building Products Ltd [2014] CSIH 43 and @SIPP (Pension Trustees) Ltd v Insight Travel Services Ltd [2014] CSOH 137 - Mapeley Acquisition Co (3) Limited (In Receivership) v City of Edinburgh Council  [2015] CSOH 29. Again, the court found that the landlord's entitlement to demand payment in lieu of repairs did not entitle the landlord to recover if it had no intention to carry out those repairs.

Background:

Mapeley let office premises to the City of Edinburgh Council ("CEC").  At the ish Mapeley sought payment of £8 million from CEC, in respect of breaches of lease end repairing obligations. 

The parties disputed the effect of the following clause:
“…the Premises shall not be in such good and substantial repair and condition then at the option of the Landlord either (i) the Tenant shall carry out at its entire cost the works necessary to put the Premises into such repair and condition or (ii) the Tenant shall pay to the Landlord such reasonable sum as shall be certified by the Landlord’s Surveyors as being equal to the cost of carrying out such work…”

Mapeley argued that they were entitled to payment for the cost of putting the premises into the relevant state of repair, regardless of whether it intended to carry out the works. CEC maintained that this clause did not entitle Mapeley to payment for the works if they had not carried out any such works and did not intend to do so.  

Mapeley responded that whether or not they intended to carry out the works was irrelevant; the provisions of the lease allowed them to recover the cost of the works as a contractual debt - they did not need to show that they had incurred an actual loss.

This will, by now, be familiar ground for our regular readers!

Decision:

Our regular readers will also be aware that, following a line of case law such as Rainy Sky v Kookmin,  and indeed Grove Investments Limited v Cape Building Products Limited [2014] CSIH 43, if there is any ambiguity in a clause, the courts will favour a commercial interpretation.

Here, whilst the court accepted that Mapeley's construction of the lease was “perhaps, the more natural reading of the provision” it did not accept that the language was unambiguous. 

The court was instead persuaded that CEC's interpretation was more in keeping with commercial common sense, more in line with the commercial purposes of the lease and less likely to produce a result which was “objectively excessive or disproportionate” whereas  Mapeley's construction might result in a level of recovery unrelated to any loss sustained.

Unlike previous cases, Mapeley did not put forward a diminution in value argument. 
 
Comment:

The decision in this case ought not to come as a surprise but reinforces the fact that if a landlord wishes to recover the cost of repair works in lieu of repair, and exclude any other measure of loss (such as diminution in value) the clause in question will have to be abundantly clear to that effect. Whether a tenant would be willing to agree such a clause is, of course, another question entirely.