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||Neutral Citation Number:  EWHC 295 (QB)
||Case No: CC/2008/PTA/0656
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
||Royal Courts of Justice
Strand, London, WC2A 2LL
B e f o r e :
MRS JUSTICE SHARP
|| HERONSLEA (MILL HILL) LIMITED
||- and -
||KWIK-FIT PROPERTIES LIMITED
Edward Denehan (instructed by CKFT Solicitors) for the Appellant
Timothy C Dutton (instructed by Halliwells LLP) for the Respondent
Hearing dates: 29th January 2009
HTML VERSION OF JUDGMENT
Crown Copyright ©
Mrs Justice Sharp:
- This is an appeal by Heronslea (Mill Hill) Limited ("the Landlord") against an order made by His Honour Judge Copley on 13 September 2008 in the Willesden County Court. The question before the Judge concerned the construction of a commercial lease ("the Lease") between Hallco 480 Limited as landlord, Kwik-Fit Properties Limited as tenant and Kwik-Fit Holdings plc as guarantor. Permission to appeal was given by Mr Justice Cranston on 8 December 2008.
- Paragraph 13.1.2 of Schedule 4 of the Lease gives the Landlord the right to enter the premises (on reasonable notice) for the purpose of making surveys and drawings of the premises. The question for the Judge was whether the Landlord has a right under paragraph 13.1.2 of Schedule 4 of the Lease to enter the premises for the purpose of conducting what it calls an environmental survey which involves the drilling of boreholes and taking of samples.
- The Lease demised commercial premises at 137 Great North Road Way, Hendon, Barnet ("the Premises") for a term of 30 years, beginning on 28 December 2000. The Premises had formerly been used as a petrol station. The rent reserved for the first five years of the term was £32,000 per annum and is subject to review every 5 years. The current passing rent is £37,096.77 per annum. The Landlord is the successor in title of Hallco 480 Limited and acquired the freehold of the Premises on 28 March 2008 for £1.04 million. The Lease remains vested in the Respondent. The premises are in fact occupied by a company in the same group as the Respondent (TPAS (UK) Limited) but for convenience I shall refer to both companies as the Tenant. The Tenant carries on business at the Premises as a fast fit motorist centre.
- On 28 May 2008, solicitors acting on behalf of the Landlord sent an email to solicitors acting on behalf of the Tenant stating that the Landlord wished to carry out an environmental investigation survey on 2 June 2008. Attached to the email was a copy plan showing the proposed location of the various boreholes.
- The Landlord wished to drill 13 boreholes to a depth below ground of 5 metres and one 20 metre borehole. The Tenant refused to consent. Accordingly, on 7 July 2008 the Landlord issued CPR Part 8 proceedings in the Willesden County Court. The question the Landlord asked the Court below to decide was:
"whether it is entitled to enter upon [the Premises] …for the purpose of carrying out an environmental survey, which survey involves the drilling of 14 boreholes pursuant to the provisions contained in paragraph 13 of schedule 4 to the lease"
- It sought a declaration that it was, and an order that it be permitted to enter the Premises for the purpose described.
- It appears from the evidence the Landlord adduced in support of its application that it intended to obtain samples for geo-environmental assessments. Reference was also made to the possibility that there had been leaks into the soil over the years, and that there was significant potential for contamination of the underlying soil and ground water as a result of the current and historic use of the site. The deep borehole would be drilled using a cable percussion rig over a 5 metre square working area. The shallower holes would be drilled using a smaller rig. Each of the smaller holes would require a 4 metre square rig. It was said that the survey would take two days to complete and that the boreholes could be located in an area convenient to the Tenant.
- On 9 September (in a reserved judgment) His Honour Judge Copley dismissed the Landlord's claim and made a declaration that it was not permitted to enter upon the Premises for the purpose sought.
- Although a number of complaints are made about the Judge's approach, the essence of the Landlord's case is that the Judge took into account irrelevant matters in construing the meaning of the word survey in the Lease (for example the motive of the Landlord, and the impact of the environmental survey on the Tenant); and in particular, that he took into account various dictionary definitions of the word survey to ascertain the normal meaning of that word, which was a wrong approach as a matter of law. In the result, and in any event, it is said that his conclusion that the word survey in paragraph 13.1.2 did not include the activities which the Landlord wanted to carry out was plainly wrong.
- Mr Dutton who appears on behalf of the Tenant, does not accept the criticisms made of the Judgment below. In particular, he takes issue with the submission that the Judge was in error in taking into account the dictionary definitions in the way that he did. Both sides accept however that although this appeal is by way of review, rather than a rehearing, since the question at its heart is one of construction, the real question for me to decide is whether the Judge's conclusions were plainly wrong, as the Landlord contends; indeed oral submissions were almost exclusively confined to that question.
- It is convenient at this stage to refer to the principal parts of the Lease, including those relied on by the parties as the context in which paragraph 13.1.2 must be construed.
- The Premises demised by the Lease is said to be "part of Northways Service Station, Great Northway, Hendon".
- In the definition and interpretation section of the Lease (paragraph 1) "Buildings" are defined as "any building from time to time on the Premises". "Environment","Environmental Law"and "Environmental Liability" are also defined.
All or any of the media of air water and land (wherever occurring) an in relation to the media of air and water includes without limitation the air and water within buildings and the air and water within other nature (sic) or man-made structures above or below ground.
all or any binding and enforceable EU national or local law or regulation arising through statute subordinate legislation or common law or any relevant code of practice guidance note standard or other material issued by any Competent Authority relating to Environmental Matters.
all costs expenses liabilities claims damages penalties or fines including in each case all reasonable legal consulting monitoring labourity (sic) and other professional fees arising from the failure by the Tenant to comply with any legal requirement direction notice order or obligation served or imposed by any Competent Authority under Environmental Law.
the pollution of the Environment the protection of the Environment and human health (other than the health and safety of employees in the workplace) the protection of natural amenity or the production disposal release use storage spillage deposit escape discharge leak emission recovery transport of or radiation from any Hazardous Material or Waste.
- The "Plant" which the Tenant is permitted to install, includes "Free-Standing oil tanks".
The Tenant's Covenants
- Schedule 4 of the Lease contains the Tenant's covenants. Those include
i) In paragraph 3, a covenant to repair and decorate the premises and the buildings on it during the term of the tenancy. Specifically,
"3.1 To keep the premises and any building in good and substantial repair and condition and whenever necessary throughout the term to reinstate renew replace and rebuild them…
3.2 To correct any inherent or latent defects in the design or construction of the Premises or any Building and effect any rebuilding necessary for this purpose…
"3.5 If the Tenant is in breach of paragraph 3 then in addition to any other rights which the Landlord may have:"
3.5.1 the Landlord may serve on the Tenant written notice specifying the breach in question and
3.5.2 the Tenant shall as soon as practicable after receipt of that notice and in any event within two months (or such longer period as may be reasonable in all the circumstances) (or sooner in an emergency) commence and proceed with all due speed to remedy the breach and
3.5.3 if the Tenant fails to comply with Paragraph 3.5.2 the Landlord may enter the Premises and carry out the relevant work and the Tenant shall pay to the Landlord on demand all costs incurred by the Landlord in do doing with interest on them at the Interest Rate from the date of demand to the date of payment.
ii) In paragraph 4, the Tenant's obligations on the yielding up of the Premises on the determination of the Lease. Paragraph 4.1 provides that:
"On determination the Tenant shall yield up the Premises to the Landlord with vacant possession in a state of repair condition and decoration which is consistent with the proper performance of the Tenant's covenants in this Lease having first carried out to the reasonable satisfaction of the Landlord such investigation and /or remedial works as a prudent owner or operator of the Premises would carry out to avoid the issue service or imposition of any notice order requirement or obligation by any competent authority or court of competent jurisdiction under Environmental Law or to secure compliance with any such notice order requirement or obligation served or made prior to Determination."
iii) In paragraph 5, provisions relating to the Use of the Premises. In paragraph 5.3 the Tenant covenants not to use the Premises for any purpose which may be or become a nuisance to or cause damage to the Landlord, or which might be harmful to the Premises.
iv) In paragraph 9, provisions concerning the Tenant's Legal Obligations and Necessary Consents. Paragraph 9.2 obliges the Tenant to immediately send a copy to the Landlord of any formal notice relating to the Premises which it receives from an Authority.
v) Paragraph 13, which contains provision for the Landlord to enter the Premises during the period of the tenancy. It is headed "Entry by Landlord". It says this:
"Upon reasonable prior written notice (except in an emergency when no notice need be given) the Tenant shall permit the Landlord and those authorized by it at all times to enter (and remain unobstructed on) the Premises for the purpose of:
13.1.1 inspecting the Premises for any purpose, or
13.1.2 making surveys or drawings of the Premises or
13.1.3 complying with the Landlord's obligations under this Lease or with any other Legal Obligations of the Landlord
Provided that the Landlord shall cause as little interference and disturbance as is practicable and shall make good any damage caused forthwith and to the reasonable satisfaction of the Tenant"
vi) In Paragraph 14, provisions relating to the Tenant's liability to indemnify the Landlord. By Paragraph 14.1.5 the Tenant is liable to indemnify the Landlord for all costs expenses losses and liabilities incurred by the Landlord as a result of or in connection with "the management of the Premises (including without limitation the inspections under Paragraph 3.5.1 and the subsequent supervision of any work)".
vii) Paragraph 16, which is headed "Environmental Matters". It contains only two clauses. In Paragraph 16.1 the Tenant covenants to
"supply a copy to the Landlord of any material notice or written communication the Tenant is required or intends to send to any competent authority or third party in connection with Environmental Matters relating to the Premises as soon as practicable before sending such notice or communication"
In Paragraph 16.2 the Tenant covenants not to
"dispose of dump release deposit or bury Hazardous Material or Waste at on in or under the Premises"
viii) Paragraph 19, which by paragraph 19.3 obliges the Tenant to "indemnify and hold harmless the Landlord against any Environmental Liability incurred by the Landlord".
- Schedule 5, headed "Quiet Enjoyment" contains the Landlord's only covenant. It provides that the Tenant may peaceably hold and enjoy the Premises during the Term without any lawful (sic) interruption or disturbance from or by the Landlord, provided the Tenant observes and performs the Tenant's covenants and obligations in the Lease.
The Approach to Construction
- The modern approach the courts should adopt to the construction of contracts is well settled. The general principles were summarised by Lord Hoffman in Investors Compensation Scheme Ltd v West Bromwich Building Society  1 WLR 896 at 912F to 913G where he said this:
"I think I should preface my explanation of my reasons with some general remarks about the principles by which contractual documents are nowadays construed. I do not think that the fundamental change which has overtaken this branch of law, particularly as a result of the speeches of Lord Wilberforce in Prenn v Simmonds  1 W.L.R. 1381, 1384-1386 and Reardon Smith Line Ltd v Yngvar Hansen-Tangen  1 W.L.R. 989, is always sufficiently appreciated. The result has been, subject to one important exception, to assimilate the way in which such documents are interpreted by judges to the common sense principles by which any serious utterance would be interpreted in ordinary life. Almost all the old intellectual baggage of "legal" interpretation has been discarded.
The principles may be summarised as follows.
(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
(2) The background was famously referred to by Lord Wilberforce as the "matrix of fact," but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subject intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.
The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax; see Mannai Investments Co. Ltd v Eagle Star Life Assurance Co. Ltd  AC 749."
The "rule" that words should be given their "natural and ordinary meaning" reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. ..
If one applies these principles, it seems to me that the judge must be right and, as we are dealing with one badly drafted clause which is happily no longer in use, there is little advantage in my repeating his reasons at greater length. The only remark of his which I would respectfully question is when he said that he was "doing violence" to the natural meaning of the words. This is an over-energetic way to describe the process of interpretation. Many people, including politicians, celebrities and Mrs Malaprop, mangle meanings and syntax but nevertheless communicate tolerably clearly what they are using the words to mean. If anyone is doing violence to natural meanings, it is they rather than their listeners."
- The shift towards a 'commercial approach' in the construction of commercial instruments and against 'literalism' was emphasised by the Court of Appeal in Crystal Palace FC (2000) Limited v (1) Simon Paterson (as Liquidator of Crystal Palace FC (1986) Limited) (2) The Football League Limited  EWCA Civ 180 which Sir Anthony Clarke MR said this:
"17. I accept [counsel's] submission that the relevant context is important and indeed that the court should avoid literal interpretation of words.
18. The most recent statement of that principle in the House of Lords can be seen in paragraphs 18 and 19 of the judgment of Lord Steyn in Sirius International Insurance Co (Publ) v FAI General Insurance Ltd and others  UKHL 54 2004 1 WLR 3251 where he said this:
"18. The settlement contained in the Tomlin order must be construed as a commercial instrument. The aim of the inquiry is not to probe the real intentions of the parties but to ascertain the contextual meaning of the relevant contractual language. The inquiry is objective; the question is what a reasonable person circumstanced as the actual parties were, would have understood the parties to have meant by the use of specific language. The answer to that question is to be gathered from the text under consideration and its relevant contextual scene.
19. There has been a shift from literal methods of interpretation towards a more commercial approach. In Antaios Compania Naviera SA v Salen Rederierna AB  AC 191, 201, Lord Diplock, in an opinion concurred by his fellow Law Lords, observed; 'if detail semantic and syntactical analysis of a word in a commercial contract is going to lead to a conclusion that flouts business common sense.' In Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd  AC 749 , 771, I explained the rationale of this approach as follows:
'In determining the meaning of the language of a commercial contract …. The law … generally favours a commercially sensible construction. The reason for this approach is that a commercial construction is more likely to give effect to the intention of the parties. Words are therefore interpreted in the way in which a reasonable commercial person would construe them. And the standard of the reasonable commercial person is hostile to technical interpretations and undue emphasis on niceties of language.'
The tendency should therefore generally speaking be against literalism. What is literalism? It will depend on the context. But an example is given in the Works of William Palely (1838 ed). vol III. P60. The moral philosophy of Palely influenced thinking on contract in the 19th century. The example is as follows: the tyrant Temures promised the garrison of Sebastia that no blood would be shed if they surrendered to him. They surrendered. He shed no blood. He buried them alive. This is literalism. If possible it should be resisted in the interpretative process. This approach was affirmed by the decisions of the House in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd  AC 749, 775 E-G, per Lord Hoffman and in Investors Compensation Scheme Ltd v West Bromwich Building Society  1 WLR 896, 913 D-E. per Lord Hoffman."
- Sir Anthony Clarke MR went on to say this:
"51…The fundamental point, however, made by Mr Marshall was that the judge's use of a dictionary definition of "outstanding" was misguided when the key wording, he says, was "book or other debts".
52. For my part I would accept the submission that, like any other clause in a contract, clause 2.2(ix) must be construed in its context. I would also accept the submission that it is not sufficient to have regard to dictionary definitions of particular words or expressions. However, that is not to say that it is not permissible to have regard to them. The definitions referred to by the judge were these. The definition of "outstanding" in the fifth edition of the Shorter Oxford Dictionary includes, "unresolved, pending; esp (of a debt etc) unsettled." In the first edition it includes "…that stands over; that remains undetermined, unsettled, or unpaid."
53. In those circumstances the judge was as it seems to me, entitled to hold that an ordinary meaning of the word is wide enough to include contingent debts which had not yet become due or payable."
- It clear therefore that the Court is entitled to have regard dictionary definitions as an aid to construction to ascertain the natural and ordinary meaning of the words in their relevant context. It is also clear that words are to be interpreted in the way in which a reasonable commercial person would construe them; and the standard of the reasonable commercial person is hostile to technical interpretations, undue emphasis on niceties of language or literalism, as explained above.
The rival contentions of the parties
- Mr Edward Denehan who appears on behalf of the Landlord, makes three principal submissions. First, he submits it is necessary to have regard in the first instance to the Lease terms, as context. The word survey must mean something more than making plans or drawings says Mr Denehan, since those activities are expressly accommodated within the words of paragraph 13.1.2 itself. Similarly, it must mean something more than "inspecting the premises" since that activity is accommodated in paragraph 13.1.1.
- He also refers particularly to the following Lease terms as demonstrating the parties' concern with Hazardous waste, environmental matters and the disposal of that waste underground, in support of the Landlord's construction of paragraph 13.1.2.
i) The definition of Building which is said to be any building from time to time on "the Premises" indicating that the Premises were something more the buildings on the Premises.
ii) The definition of "Environment" which includes water below ground.
iii) The inclusion of a definition of "Environmental Law", "Environmental Liability" and "Environmental Matters" – a clear indication so it is submitted that the parties to the Lease were concerned with compliance with environmental law, concerned to provide for environmental liability and concerned to provide for the "storage spillage deposit escape discharge leak emission" of any "Hazardous Material.
iv) The inclusion of a definition of Hazardous material; and the Permitted Use being a use which by its nature gives rise to Hazardous Material.
v) The definition of Plant which includes free-standing oil tanks; and
vi) The Tenant's obligation to keep the Premises and any Building in good and substantial repair
vii) Paragraph 16 of Schedule 4 which contains the Tenant's covenants concerning Environmental matters by which the Tenant covenants not to bury Hazardous Material or waste in or under the Premises.
- Secondly, he submits that the Lease permits the Landlord to enter the Premises for the purpose of making surveys; and the word survey is not limited in any way, either expressly or by implication. In a modern lease, he says which makes several references to environmental matters, it is readily understood that by the use of the word surveys, the parties to the Lease intended it to have a wide meaning. Survey did not have a single normal meaning in 2000 (the year when the Lease was entered into). It had more than one meaning which would have been known to the parties to the Lease. An environmental survey was as much a survey in 2000 as a topographical survey or a valuation survey. He did not shrink from submitting that this would include for example a geophysical survey for the purposes of finding oil or mineral deposits, or that it would be wrong in principle to have regard to the consequences for the tenant of the exercise of such a right to survey so widely defined. There was no qualification that the damage caused to the Tenant should be as little as possible, or that the Tenant should be compensated for any disruption or damage to its business (he drew a comparison in this context with the absence of a right to compensation under paragraph 3 of the Lease).
- The only obligation on the Landlord was to make good the physical damage caused by the survey forthwith. Although strictly, it was not necessary for him to demonstrate a proper motive for the exercise of the right to entry to conduct an environmental survey, nonetheless the Landlord might wish to exercise such a right for the purpose for example of checking whether the tenant has complied with its obligations in relation to the proper disposal of Hazardous Waste.
- Finally, he submits that the background against which the Lease was executed was relevant in one particular respect. The expression environmental survey was an expression used by lawyers before 2000; and it therefore does no offence to the language of paragraph 13 to hold that it accommodates such surveys. In that context, and as the background against which the Lease was entered into, he referred me to the Law Society's Conveyancing Handbook (a document which was not produced at the hearing below) which in 1995 advised practitioners as follows:
"Prospective buyers who are contemplating buying or leasing development land or land which is to be used for an industrial use where chemicals are involved may consider undertaking certain precautions before completing the transaction. They may consider having an environmental survey undertaken.…
Similar enquiries should be undertaken on behalf of a prospective lender…
Lenders and landlords may consider taking covenants from their borrowers/tenants to cover some or all of the following matters:
(a) not to bring hazardous material on to the property;
(b) to comply with environmental law;
(c) to remedy any breach of environmental law…;
(d) to notify the lender/landlord of any circumstances that could give rise to liability for environmental damage;
(e) to provide periodical environmental investigations and audits …;
(f) reservation of a right for the lender/landlord to enter to inspect the property.
An environmental audit consists of documentary evidence only; an investigation may include geological data obtained from e.g. soil samples."
- Mr Dutton makes a number of submissions. In relation to the wording of paragraph 13 itself he attaches significance to the use of the preposition "on" in paragraph 13. Whilst he accepts that the Premises includes what is beneath the surface, it is clear from the Lease that the parties to it, did not always use the word to Premises to cover the entirety of what was conveyed by the Lease. The preposition "on" in paragraph 13, suggests that this paragraph was dealing with activities on the surface of the Premises rather than under the Premises
- He also submits that the activity permitted by the word survey necessarily depends on what it is being surveyed. Paragraph 13 categorises what the Landlord's rights of entry are. In the context of the Lease, a survey will be of the Buildings on the land, or of the land itself. A survey of land, as is clear from the dictionary definition of the word, identifies its boundaries and description. A survey of a Building is another type of survey which might involve identifying its state and condition; it might involve the taking of samples (for example, to see if a wall was damp) or some interference with the structure, for example, the installation of "telltales" to detect movement. But the notion of a survey in either case does not involve destroying the thing surveyed, merely finding out more about it.
- He submits that is instructive to compare paragraph 13.1.1 (which concerns the Landlord's right to enter for the purposes of an inspection) with paragraph 13.1.2. It is only in paragraph 13.1.1 that the relevant activity is permitted "for any purpose". There is no similar provision in Paragraph 13.1.2. Indeed the wording used in paragraph 13.1.2 making surveys and drawings, suggests what is contemplated by the word survey in this context, is closer to a land survey, rather than any other type of survey.
- In this regard, contrary to the submission of the Landlord, the Court is assisted (Mr Dutton submits) in ascertaining the meaning of the word survey in the Lease by referring to the definition of that word in the dictionaries to which the Judge was referred. The meaning for which the Tenant contends falls squarely within the definitions provided in the Oxford English Dictionary, Second Edition. Pub 1989 namely, at 5a "the process of surveying a tract of ground, coast-line, or any part of the earth's surface; the determination of its form, extent, and other particulars, so as to be able to delineate or describe it accurately and in detail; also, a plan or description thus obtained." In contrast, there is no definition which assists the Landlord in the sense that it covers the type of activities which the Landlord wishes to carry out.
- Insofar as the Lease itself is concerned, he submits it is critical when looking at the issue of environmental matters to consider the scheme of the Lease as a whole (and in particular, the provisions in paragraphs 4.1, 16.2 and 19.3). First, no provision is made for any investigation of contamination or the like at the start of the term, even though the parties would have known of the risk of contamination of the Premise because of its former use as a Petrol Station. Instead, during the term, the responsibility for such matters falls on the Tenant who by paragraph 19.3 covenants to indemnify the Landlord against any Environmental Liability it may incur by reason of any relevant breach of its obligations by the Tenant.
- On determination however, by paragraph 4.1 the Tenant has to yield the Premises up to in a state of repair and decoration consistent with the proper performance of the Tenant's covenants, including for example, its covenant not to bury Hazardous Waste. The onus is on the Tenant before doing so, to carry out such investigation as a prudent owner would to avoid any notice etc by any court or competent authority under Environmental Law.
- More generally, Mr Dutton submits it is useful to consider hypothetical situations in order to test whether the result of adopting one side or the other's meanings results in something the parties would have contemplated. On the Landlord's case, it would be entitled to enter to carry out a geological or even a geophysical survey, involving prospecting for minerals and the digging of trial pits to a significant depth. In which case one would have expected the Lease to have made provision to mitigate the impact of such activity on the Tenant's right to quiet enjoyment. The proviso to paragraph 13 makes no provision for compensation for the fact that the Tenant's right to quiet enjoyment is being disturbed. No analogy can be drawn between the absence of a right compensation in this instance and its absence in paragraph 3, since in the latter case, the Landlord only exercises its right to enter the Premises where the Tenant is in breach of its covenant to repair and decorate.
- If paragraph 13 did permit e.g. a geological survey, that would qualify the right to quiet enjoyment since in determining the bargain between the parties, 'the general must give way to the particular'. But the courts should look for clear words when constructing a covenant in a way which might cut down the right to quiet enjoyment, potentially very significantly, and there are none here.
- As to the Law Society's Handbook, Mr Dutton points out it was not in evidence before the Judge and should not be looked at now. He also submits that caution has to be exercised in relation to the use which the Landlord now wishes to put it (viz. as was said in argument, to indicate that the expression was in use at the time the Lease was executed and that the words environmental survey had a particular meaning).
- This was because the Court in this case is not trying to construe the meaning of environmental survey, but what is meant by the use of the word survey in the Lease in the proper context. Second, the juxtaposition of two words is capable of affecting the meaning of each (Red Admirals do not sail, a Bombay duck cannot fly and a Glasgow kiss is not an expression of endearment). One simply didn't know whether environmental survey in the Handbook means a survey of the environment or whether the words are being used in a particular sense as a compound noun. If the court was disposed to look at the Handbook, he submits it damages rather than assists the Landlord's case. The phrase environmental survey is used in general way in the passage cited; and significantly, the word investigation rather than survey ("an investigation may include geological data obtained from e.g. a soil sample.") is used to describe the sort of activity which the Landlord wishes to carry out in this case.
- Finally, if necessary, Mr Dutton relied on the legal presumptions that paragraph 13 should be construed in the way most favourable to the Tenant having regard to the allied principles that the covenant should be construed contra proferentum and that covenants in leases should be construed strictly if breach of them might give rise to forfeiture.
- When construing the natural meaning of the language in its context. I see no reason why the court should not derive assistance from various dictionary definitions, in particular where the ambit of the activities covered by a particular word is in doubt or dispute, as it is here. Indeed it is clear from the judgment of Sir Anthony Clarke MR in the Crystal Palace case, that such an approach (while not sufficient in itself) is permissible.
- As Mr Dutton has pointed out, the Oxford English Dictionary in use at 2000 when the Lease was entered into, contains no definition of the noun survey of the width contended for by the Landlord; and gives a meaning which is consistent with the meaning which the Tenant contends is the natural and ordinary contextual meaning of the word in this case.
- In my view, this, coupled with the immediate context of the word survey, and the broader context of the Lease provisions themselves, strongly support the Tenant's case that the parties did not intend to permit the Landlord to enter the Premises for the purpose of the activity which it now wishes to carry out.
- As to immediate context, the use of the preposition "on" together with the words which follow the word survey itself (and drawings) suggest that the word survey, in the context, means a survey of (rather than under) the land and of the buildings on the land (in contrast with the clause dealing with Hazardous Waste, where the parties provide specifically for what is or is not to be placed "under" the Premises). Interpreting the words in paragraph 13.1.2 in the way in which a reasonable commercial person would construe them, I do not think one can detach the word survey from its immediate context which in my view, the argument advanced by Mr Denehan to which I have referred in paragraph 20 above, seeks to do. .
- As to the wider context of the Lease itself, the fact that it addresses environmental matters (to put it broadly) at certain points, hazardous waste and so on and that the parties to the Lease had such matters in mind in 2000 does not seem to me of itself, to take the matter further. What matters is how those topics were dealt with within the Lease, and whether this can truly be said to have a bearing on the construction of paragraph 13.1.2. On analysis, it seems to me that the way in which they are dealt with and the overall scheme of the Lease, provides contextual support for the Tenant's interpretation of paragraph 13.1.2. The Premises' historic use was as a petrol station. That there might be contamination was likely to be in the contemplation of the parties. Under the scheme of the Lease however the parties appeared content to "let sleeping dogs lie" so far as the question of contamination was concerned until shortly before the expiry of the Lease, when it was the Tenant (and not the Landlord) who was obliged to carry out such investigations as were necessary to avoid "environmental liability" (again, using that term broadly) on the part of the Landlord and to yield the Premises up on determination in a state consistent with the proper performance of the Tenant's covenants – including for example, its covenant not to bury Hazardous Waste.
- When endeavouring to ascertain the presumed intention of the parties and whether the parties would have intended the word survey to encompass every activity which could possibly be so described, it is also material in my view to consider the interaction between paragraph 13.1.2 and the Tenant's right to quiet enjoyment. The covenant to quiet enjoyment would be significantly undermined in my view if the Landlord has the right (as it is contended it does) to enter the Premises, and conduct whatever could be described as a survey, including a geological survey for example, no matter how intrusive, no matter what disruption was caused to the Tenant's business and however long such activities might take; even allowing it – on Mr Denehan's interpretation so it seems to me – to demolish part of any building with the only proviso that it should cause as little damage and disturbance as is practicable and make good any damage forthwith to the reasonable satisfaction of the Tenant.
- Such significant inroads into the Tenant's right to enjoy the Premises free from interference is not a result it seems to me that the parties would have contemplated when executing the Lease. If such had been the intention of the parties to a commercial lease, one would expect to find much clearer words or indication to that effect within it.
- The fact that in this instance, the Landlord might have what it regards as a bona fide reason for entering the Premises, is no more material than whether its motives for doing so are questionable. The real question is whether the Lease on its proper construction permits the Landlord to enter the Premises for the purpose of carrying out the activity under consideration here.
- That the proviso to paragraph 13 makes provision for damage and its repair does not seem to me to justify the interpretation for which Mr Denehan contends. It is also consistent with the Tenant's interpretation of the Lease that some damage might be caused when surveying the land or the Buildings on it (as in the examples given by Mr Dutton in this context, for example, taking small samples from a damp wall, or attaching "telltales" to a crack in a wall to detect movement).
- It also seems to me that Mr Dutton is right when he says it is useful to consider hypothetical situations in order to test whether the result of adopting one side or the other's meanings results in something the parties would have contemplated for the reasons explained in the Investors Compensation Scheme case and the Crystal Palace case in the passages cited above . Put shortly, it assists the court in interpreting the words in the way in which a reasonable commercial person would construe them.
- As to the Handbook, even if it were right to have regard to it in circumstances where it was not produced before the Judge, it does not seem to me that it assists the Landlord's case. If the reasonable person did have background knowledge of the Handbook it does not follow it seems to me that would lead to the conclusion that survey included the activities which the Landlord wishes to carry out for the reasons I have already indicated in paragraphs 36 to 45 above. In any event, the question is not whether the activity which the Landlord wishes to carry out is properly described as an environmental survey but whether it is a survey within the meaning of paragraph 13.1.2.
- It is to be noted that the word investigation is actually used in the Handbook to describe the activity which the Landlord wishes to carry out, is also used in the Lease itself when describing the Tenant's obligations in the context of Environmental Law and was used by the Landlord in its original request to enter the Premises which referred to an environmental investigation survey.
- My conclusion is therefore that the reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time the Lease was executed would not have thought that paragraph 13.1.2 of the Lease entitled the Landlord to enter the premises for the purpose of drilling boreholes and taking samples.
The criticisms of the Judgment below
- I turn briefly now to deal with some of the criticisms of the Judgment below. The principal criticism as I have already indicated is that the Judge erred in law in his interpretation of paragraph 13. He took into account irrelevant considerations such as the motive of the Landlord and the impact of the survey on the Tenant and fell into error by holding that in 2000 the word survey had a normal meaning by reference to dictionary definitions. It is also said that he fell into error by holding that if the parties had intended paragraph 13 to apply to environmental surveys they would have said so expressly.
- As to motive, it is true that the Judge in paragraph 4 of his Judgment did query the reasons why the Landlord wanted to establish the extent of any contamination now when the Lease still had 22 years to run. However, he appears to have been prompted to ask that question by the explanations advanced by the Landlord as to its reasons for wishing to conduct the survey. It also true that that he referred to the normal meaning of the word survey. But in my view, it is plain from paragraph 18 of his Judgment that he construed the word survey in its relevant context, namely that of the Lease itself. I have already indicated that I consider the Court is entitled to have regard to dictionary definitions as an aid to construction.
- In the result, although a number of other criticisms of the Judgment are made, to some of which I have referred, I do not consider, for the reasons I have already given that the Judge was wrong to conclude that the Landlord does not have the right to enter the Premises to drill boreholes and take samples by virtue of paragraph 13.1.2. of the Lease.
- Accordingly, the Landlord's appeal is dismissed.
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