McMullan Brothers Ltd vMcDonagh

Factual and Procedural Background

A petrol leak occurred at a service station on The Road in The City between 4 December 2002 and 13 January 2003. The premises were held under a 99-year lease dated 1 February 1995 between Company A (lessor and fuel supplier) and the Defendant (lessee). After the leak, safety concerns forced closure of the petrol station, supermarket and restaurant situated on the site.

In the High Court, Judge Smyth found that corrosion of an aluminium alloy cap allowed fuel to escape from underground piping. Relying primarily on the lease’s repairing covenants, he held the Defendant 60% liable and Company A 40% liable. Both parties appealed: the Defendant sought to reduce or eliminate his share; Company A cross-appealed, arguing it should bear no liability. The Supreme Court (Judge Charleton delivering judgment, with Judge McKechnie and Judge MacMenamin concurring) dismissed the appeal and upheld the High Court’s order on 5 March 2015.

Legal Issues Presented

1. Whether the lease imposed upon the Defendant an obligation to maintain and repair the equipment from which the leak emanated, notwithstanding the blank second schedule.
2. Whether a letter dated 10 May 2000 estopped Company A from enforcing the Defendant’s repairing obligations.
3. Whether indemnity clauses in the lease transferred full liability to the Defendant irrespective of fault.
4. Whether the High Court correctly apportioned liability at 60% (Defendant) and 40% (Company A).

Arguments of the Parties

Defendant’s Arguments

• The tenant had no obligation to repair under the lease because the second schedule (listing equipment) was blank.
• The 10 May 2000 letter represented that Individual A (the forecourt operator) bore any repair responsibility, creating an estoppel against Company A.
• Even if liable, apportionment should place the majority—or all—fault on Company A.

Company A’s Arguments (Cross-Appeal)

• The lease imposed a full repairing obligation on the Defendant; any omission in the second schedule did not alter that duty.
• The 10 May 2000 letter merely recorded consent to sublettings and did not waive or vary lease covenants; therefore, no estoppel arose.
• Indemnity clauses made the Defendant solely responsible for the loss, so apportioning any liability to Company A was wrong in law.

Table of Precedents Cited

Court's Reasoning and Analysis

1. Lease construction. Clauses 3.6 and 4.2 imposed a comprehensive repairing obligation on the tenant. The omission of a list of equipment in the second schedule was deemed an inadvertent error; it did not create ambiguity or transfer responsibility to the lessor. The contra-proferentem rule was inapplicable because the wording was clear when read with the entire lease and surrounding facts.

2. Estoppel. The 10 May 2000 letter merely documented Company A’s consent to various sublettings. It contained no unequivocal representation that Company A was waiving the tenant’s repairing obligations. Nor did the parties act on a shared assumption sufficient to found estoppel by convention.

3. Indemnity clauses. Applying the Canada Steamship guidelines, the Court held that the indemnity did not expressly or by necessary implication cover Company A’s own negligence; therefore, it did not eliminate the need to assess relative fault under section 34 of the Civil Liability Act 1961.

4. Apportionment of liability. Evidence showed the Defendant failed to monitor fuel stocks and maintain equipment, while Company A had undertaken periodic inspections and replacements without alerting the tenant to known risks. Judge Smyth’s 60/40 split reflected each party’s blameworthiness and was supported by evidence; under Hay v O’Grady, the Supreme Court would not interfere.

Holding and Implications

Appeal dismissed; High Court judgment affirmed. Liability for the petrol leak remains apportioned 60% to the Defendant and 40% to Company A. The decision re-affirms:

• Courts will not rewrite commercial leases to cure drafting omissions where the overall contractual intent is clear.
• Estoppel requires a clear representation or shared assumption; silence or informal practices will rarely suffice.
• Canada Steamship guidelines are flexible tools for construing indemnity clauses, not rigid rules.
• Appellate deference to trial findings of fact remains strong.

No new precedent was set, but the judgment provides authoritative guidance on lease interpretation, estoppel, and contributory liability in commercial property disputes.