Can a landlord's repudiatory breach of a lease entitle the tenant to terminate it?

Ocean View entered into a lease of a building on a modified commercial site from Ramsbury Properties to house 250 of its Mexican workers during their planned seven-month works period carrying out repairs to the Four Seasons Hotel on Nevis. The workers moved in during June 2009 but, within the month, Ocean View notified Ramsbury that they were terminating the lease and vacating the premises, moving into an alternative building. Ramsbury denied any breach of the lease and claimed the balance of the rent for the 7-month term of the lease.

Ocean View argued that its workers had been forbidden from eating on the premises, there was no provision for them to dry their clothing, and the air conditioning was inadequate.

Ramsbury pointed to the fact that the lease clearly stated that the lease was granted for “sleeping accommodation only”. 

The court decided that the words “sleeping accommodation only” did not mean that the workers were forbidden from consuming meals or doing their laundry on the premises. On the contrary, “sleeping accommodation only” included being permitted to carry out the basics of life such as eating, doing laundry, and washing. Its interpretation of the expression “sleeping accommodation only” in the context of this factual matrix was that, under the agreement which was eventually entered into, Ramsbury was not itself going to provide meals or cooking facilities.

In terms of repudiatory breach, the court followed the case of Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 in which the judges explored the question of whether the breach went “to the root of the contract”. They also discussed the caselaw which established that repudiatory breach can apply to a lease, looking at Hussein v Mehlman [1992] 2 EGLR 87 and Chartered Trust plc v Davies [1997] 2 EGLR 83.

They highlighted the importance of the fact that the purpose of the lease agreement from Ocean View’s perspective was to accommodate the Mexican workers so that the hotel repair work that Ocean View was contractually bound to carry out could be fulfilled, which Ramsbury well knew. The consequence of the breach was that Ocean View was faced with the immediate prospect of 60 of their workers going back to Mexico, and if they could not complete the hotel repair contract on time, they would have to pay substantial damages for breach of that contract and would also suffer loss of reputation. In the court’s view, those were sufficiently serious commercial consequences of the breach by Ramsbury as to entitle Ocean View to terminate the lease.