Peel Land and Property Ltd v TS Sheerness Steel Ltd

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Abstract
Landlord and tenant – Covenant. The defendant company was the tenant of a steelworks in Kent. A dispute arose as to whether it was obliged under the lease to remove three piles of secondary slag that had accumulated on the land. The Chancery Division held that, on the true construction of the lease between the parties, the defendant was in breach of the lease in not having taken any steps to remove the secondary slag from the site on a regular basis, and in having formed or permitted the formation of the slagheaps.

Summary
The judgment is available at: [2014] EWHC 39 (Ch)

The defendant company was the tenant of a steelworks in Kent. Three large piles of secondary slag had been generated by the steelmaking process carried out on the site. For many years, the slag had been removed from the site, mainly by farmers. From 2008, environmental regulations governing the use of secondary slag were tightened, and the farmers were no longer able to use the slag, which resulted in it accumulating on the site. A dispute arose as to whether the defendant was obliged by the terms of the lease to remove the slag from the site. The claimant landlord contended that the defendant was in breach of covenant under the lease.

The claimant submitted, among other things, that the secondary slag was ‘refuse or rubbish’ and that the piles of secondary slag fell within the meaning of the expression ‘refuse dump or rubbish heap’ in the covenant. It submitted that the modern expression closest to those expressions was ‘waste’, and that some assistance could be gleaned from the Waste Framework Directive (EC) 2008/98 in European law. The claimant submitted that the defendant had breached the covenant in the lease by failing to remove the secondary slag as frequently as reasonably possible.

Alternatively, it submitted that the presence of the slagheaps was contrary to the defendant’s covenant in cl 2(16) of the lease to keep all vacant land forming part of the site ‘clean and in good order’. The defendant submitted that there had been no breach of covenant, and contended, among other things, that the prohibition under cl 2(16) of the lease referred only to heaps or dumps of ‘bona-fide rubbish’, which would not include the slag.

The court ruled:

On the true construction of the lease, the intention and purpose of cl 2(16) of the lease had been at all times to ensure that the site should be kept free from the accumulation of material or items for which the tenant had no use, and which would require the expenditure of money by the lessors or an incoming tenant were they not removed. The lease had placed the responsibility for regular removal of such material or items upon the tenant. Although, because of regulatory change, the tenant of the site no longer had a convenient means of procuring the free removal from the site of secondary slag, the resultant accumulation of such unwanted material on site fell squarely within the original purpose and intention manifested by cl 2(16) of the lease. It was therefore unnecessary and inappropriate to construe the lease by reference to the more modern concept of waste in European and domestic jurisprudence and legislation. Consequently, the claimant was correct, and secondary slag would fall within the scope of the covenant in cl 2(16) of the lease. Subject to any arguments about waiver or acquiescence, it would seem to follow that the previous tenant and the defendant had been in breach of cl 2(16) of the lease in not having taken any steps to remove the secondary slag from the site on a regular basis, and in having formed or permitted the formation of the slagheaps (see [76], [77], [79] of the judgment).

The secondary slag found in the heaps on the site fell within the scope of the covenant in cl 2(16) of the lease (see [87] of the judgment).

Sirius International Insurance Co (Publ) v FAI General Insurance Ltd [2004] All ER (D) 24 (Dec) considered; Chartbrook Ltd v Persimmon Homes Ltd [2009] All ER (D) 12 (Jul) considered; Rainy Sky SA v Kookmin Bank [2011] All ER (D) 19 (Nov) considered.