Sepes Establishment Ltd v K.S.K. Enterprises Ltd
| Jurisdiction | Ireland |
| Judge | O'Hanlon J., |
| Judgment Date | 01 January 1993 |
| Neutral Citation | 1992 WJSC-HC 4185 |
| Docket Number | No. 2118/1990,[1990 No. 2118] |
| Court | High Court |
| Date | 01 January 1993 |
1992 WJSC-HC 4185
THE HIGH COURT
BETWEEN
AND
Citations:
BANDER PROPERTY HOLDINGS LTD V DARWEN (SUCCESSOR) LTD 1968 2 AER 305
GLENIFFER FINANCE CORPORATION LTD V BARMAR WOOD & PRODUCTS LTD 1978 P & CR 208
FINCHBOURNE LTD V RODRIGUES 1976 3 AER 581
Synopsis:
CONTRACT
Terms
Implied term - Necessity - Absence - Lessor - Obligation - Insurance - Policy - Procurement - Expenses - Reimbursement - Covenant by lessee - Risk of destruction or damage by fire - Costs of reinstatement - Method of calculation - Loss of rent - Professional charges - Lessor's claim to recoupment of insurance expenses - Whether sums claimed reasonable - Implied term not required - (1990/2118 - O'Hanlon J. - 20/7/92) - [1993] 2 I.R. 225
|Sepes Establishment v. K.S.K. Enterprises Ltd.|
INSURANCE
Lessor
Obligation - Policy - Procurement - Expenses - Reimbursement - Covenant by lessee - Risk of destruction or damage by fire - Costs of reinstatement - Method of calculation - Loss of rent - Professional charges - Lessor's claim to recoupment of insurance expenses - Whether sums claimed reasonable - Implied term not required - (1990/2118 - O'Hanlon J. - 20/7/92) - [1993] 2 I.R. 225
|Sepes Establishment v. K.S.K. Enterprises Ltd.|
LANDLORD AND TENANT
Lease
Covenant - Insurance - Premiums - Payment - Lessor's obligation - Lessee obliged to reimburse lessor - Whether lessor's claim for recoupment reasonable - Estimation of costs of reinstatement - Method - Whether implied term that insurance cover be reasonable - Courts Act, 1981, s. 22 - (1990/2118 - O'Hanlon J. - 20/7/92)
|Sepes Establishment v. K.S.K. Enterprises Ltd.|
Judgment delivered by O'Hanlon J., the 20th day of July, 1992.
This case concerns a dispute between the Plaintiff, as Lessor of the premises 4/5 Westmoreland Street in the City of Dublin, and the Defendant as Lessee of the greater part of the said premises, under the terms of a lease dated the 25th August, 1978, made between the Plaintiff and the Defendant, as to the amount payable by the Lessee to the Lessor under the Lessee's covenant to reimburse the Lessor in respect of the cost of insuring the demised premises.
The amount claimed by the Plaintiff in respect of the calendar year 1990 is a sum of £21,084.02. A payment of £4,950 was made by the Defendant before proceedings were commenced, and the Defendant is also entitled to credit for a further sum of £4,612.50 paid after the proceedings commenced - the two payments totalling £9,562.50, leaving the amount in dispute between the parties at £11,521.42. The Plaintiff also claims interest under the terms of the lease in accordance with a clause providing for payment of interest in the event of late payment in respect of any amount found due under the relevant clause in the lease.
The Lease was for a term of 38 years from the 1st July 1978, the Lessee - YIELDING AND PAYING the following rents:-
...................
(e) by way of further rent a yearly sum equal to 80% of the sum or sums which the Lessor shall from time to time pay by way of premiums (including any increased premium payable by reason of any act or omission of the Lessee) for keeping the building insured against loss or damage by fire and such other risks under the Lessor's convenant in that behalf hereinafter contained the said further rent to be paid once a year on demand which said rents shall be paid clear of all deductions ... AND in the event of the said payments remaining unpaid for a period of 14 days from the due dates thereof the Lessee shall pay to the Lessor interest at the rate or rates charged in the Irish Banks from time to time on advances in the A Category but not below £12 per centum per annum and calculated according to the custom of bankers.
Clause 2 of the lease contains the Lessee's convenants and provides as follows in paragraph (10) thereof -
(10) Not to carry on or permit or suffer to be carried on upon the demised premises any user trade or occuptation or to do permit or suffer any other thing which may make void or voidable any policy for an insurance of the building against the special risks and loss or damage by fire or whereby the rate of premium thereon may be increased and to repay to the Lessor all sums paid by the Lessor by way of increased premium on the building and all expenses incurred by the Lessor in or about any renewal of such policy or policies rendered necessary by a breach of this convenant and all such payments shall be payable and become due to the Lessor one week after the Lessor or the Lessor's agents notify the Lessee of the amout of the said payment.
The Lessor's convenants under the lease include the following -
(1) To insure and keep insured the building (except as to glass insurance for which provision is made in Clause 25 hereof) against loss or damage by fire and such other risks as the Lessor shall deem desirable or expedient in some insurance office or with underwriters of repute (a summary of insured risks and the name of the insurers to be supplied to the Lessee on request) and in case of destruction of or damage to the demised premises or any part thereof from any cause covered by such insurance as to make the same unfit for occupation and use to lay out all monies received in respect of such insurance (other than for loss of rent architects" and surveryors" fees and demolition and clearance expenses) in rebuilding and reinstating the same as soon as reasonably practicable ...hellip;..
The current dispute between the Plaintiff and the Defendant arises under the following headings:-
1. The Defendant having been asked to pay the sum of £21,084.02 in respect of insurance charges for the year commencing 1 January, 1990, contended that the figure claimed was much too high, and sought advice from a firm of Insurance Brokers who claimed to have secured a quotation for £15,969.61 plus 3% government levy from a duly authorised and reputable insurer.
2. The parties were not in agreement as to the area of the demised premises nor as to the user of the different sections of the premises, both of which factors were material in the calculation of the insurance premium payable.
3. The Defendant contended that the insurance charges for which it was liable should not incude insurance to cover demolition charges and professional fees in the event of destruction or damage by fire; loss of rent, public liability, or cost of prospective inflation.
4. While the insurance charges on the entire premises were loaded by reason of the nature of the business carried on by the Lessee - being that of Amusement Arcade - about one-fifth of the entire area was, in fact, demised to two other tenants (International Travel Bureau and Air Canada) and the Defendant claimed - in reliance on the express terms of Clause (e) as recited above - that it was only liable to pay 80% of all insurance charges, including any increased premium attributable to any act or omission of the Lessee. The Plaintiff claimed that the entire of such increased charges on the entire building should properly be payable by the Defendant whose user of the major part of the demised premises was the cause which attracted the enhanced premium on the entire.
The Dispute was the subject of protracted and at times acrimonious correspondence between the Solicitors representing the two parties for much of the year 1990. For the Defendant it was contended that the insurance charges were calculated on the basis of a floor area of 27,172 square feet, whereas the correct floor area (according to the Defendant's calculations) was 22,098 square feet, resulting in an unjustifiable enhancement of the insurance charges by 23%.
The Plaintiff responded to this charge by commissioning a new survey of the premises and to this end the over-all insurance situation was reviewed on behalf of the Plaintiff by their Insurance Brokers, O'Leary Insurance (Dublin) Ltd.; by Lisney & Co., Auctioneers and Valuers; by P. C. O'Grady & Co., Architects, and by Patrick O'Donoghue, Quantity Surveyor. A similar exercise was carried out on behalf of the Defendant by Insurance Facilities Ltd., Insurance Brokers; by McCarthy & Co., Engineers; by Wm. Long & Partners, Quantity Surveyors, and by Toplis Hume, Loss Adjusters.
The Lisney Report, which became available in May, 1990, took an external floor area of 27,172 square feet (gross) and a figure for cost of reinstatement, including demolition and site clearance, and professional fees at 15%, (together with VAT on the various charges), totalling in all £3,444,100.
The Defendant, on the advice available to it, claimed that the floor area to be used for the purpose of the calculations should be 22,102 square feet, and the resinstatement cost...
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