The Judge must calculate the commercial rent debt

In a ruling dated June 27, 2024 (no. 23-10.340), the French Supreme Court partially overturned a decision by the Grenoble Court of Appeal concerning a dispute between SCI Les Alpilles, the lessor, and Pro Soccer 5, the lessee, over a commercial lease and rental debts. The dispute concerns water infiltration affecting the use of the premises leased for an indoor soccer activity.

Water infiltration and rental debts

SCI Les Alpilles entered into a commercial lease with Pro Soccer 5 on May 3, 2017. As early as January 2018, the tenant reported water infiltration partially affecting its business. After partial work was carried out, the lessor issued a summons to pay based on the resolutory clause of the lease due to non-payment of rent for the third quarter of 2018. In response, Pro Soccer 5 and its director, Mr. [C], took legal action to contest the summons and claim damages. In 2021, Pro Soccer 5 went into liquidation.

Breach of delivery obligation

The Grenoble Court of Appeal found the lessor in breach of its obligation to deliver for a period of 52 weeks, based on leaks from the roof. It recognized the validity of the tenant’s plea of non-performance, as she refused to pay rent due to the disruption caused by the leaks. Consequently, the court rejected the SCI’s claims for payment of rent and charges, and ordered it to pay compensation to Pro Soccer 5 for financial loss and loss of use.

Grounds for appeal

SCI Les Alpilles appealed to the French Supreme Court, raising a number of grounds, including the following:

1. Breach of the obligation to deliver: the lessor disputed the seriousness of the seepage alleged by the lessee and maintained that these partial defects did not justify the exception of non-performance.
2. Assessment of financial loss: the SCI criticized the Court of Appeal for relying exclusively on a unilateral expert report drawn up by the tenant’s chartered accountant to assess the financial loss suffered.
3. Rejection of claims for rent: the SCI criticized the Court of Appeal for not having assessed the claim for rent and charges, despite the existence of a claim recognized in principle.

Court of Cassation ruling

In its ruling, the Court of Cassation partially overturned the Court of Appeal’s decision on several points:

Exception of non-performance

The Court criticized the Court of Appeal for failing to investigate whether the seepage actually rendered the premises unfit for the use for which they were intended, which was necessary to justify the exception of non-performance.

Assessment of financial loss

The Court recalls that a judge cannot rely exclusively on a unilateral expert appraisal to assess a loss. In so doing, the Court of Appeal violated the principle of adversarial proceedings.

Article 16 of the French Code of Civil Procedure

The Cour de cassation recalls the strict application of the adversarial principle:

“Having regard to article 16 of the French Code of Civil Procedure :

1. It follows from this text that the judge can only rely on an expert report drawn up unilaterally at the request of a party if this report has been submitted to the free discussion of the parties and is corroborated by other evidence.
2. In order to order the lessor to pay a certain sum for the financial loss suffered by the lessee, the court held that the data contained in the analysis carried out by the chartered accountant appointed by the lessor were relevant and could only be accepted, as they were not called into question by any other evidence.
3. In so ruling, the Court of Appeal, which relied exclusively on the report of an expert appraisal carried out unilaterally at the request of one of the parties, violated the aforementioned text.”

Rent and service charge debt:

The Cour de cassation considers that the Court of Appeal committed a denial of justice by refusing to assess the rent claim, even though it had recognized its existence.

Citation of article 4 of the French Civil Code

“Having regard to article 4 of the French Civil Code :

1. It follows from this text that the judge may not refuse to assess the amount of a claim whose existence he acknowledges in principle.
2. In order to reject the lessor’s claim for payment of certain sums in respect of rent, charges and indemnities due as at October 10, 2020, as well as late payment indemnities, the decision states that as the lessor was unable to produce a statement of her claim, the Court of Appeal was not in a position to assess the amount of the claim retained by the first judge, and that none of the appellants’ other documents made it possible to calculate the sums still owed by the lessee.
3. In ruling in this way, by refusing to assess the amount of a loss whose existence it acknowledged in principle, the Court of Appeal violated the aforementioned text.”

The Cour de cassation refers the case back to the Chambéry Court of Appeal for reconsideration. It also dismissed Mr. [C], the head of Pro Soccer 5, whose presence was no longer required in the proceedings.

Text of the decision:

COUR DE CASSATION

RULING BY THE COUR DE CASSATION, THIRD CIVIL DIVISION, DATED JUNE 27, 2024

Société Les Alpilles, a société civile immobilière (non-trading property company) with its registered office at [Address 3], lodged appeal no. Q 23-10.340 against the judgment handed down on December 1, 2022 by the Grenoble Court of Appeal (Commercial Division), in the dispute between:

1°/ Mr [U] [C], domiciled at [Address 2],

2°/ Mr [D] [P], domiciled at [Address 1], in his capacity as liquidator of the company Pro Soccer 5, defendants to the cassation.

In support of its appeal, the plaintiff puts forward four grounds for cassation.

The case file has been sent to the public prosecutor.

On the report of Mr David, councillor, and the observations of SCP Alain Bénabent, counsel for Les Alpilles, and SCP Waquet, Farge et Hazan, counsel for Mr [C] and Mr [P], ex officio, after debates at the public hearing of May 14, 2024, in the presence of Mrs Teiller, president, Mr David, councillor-rapporteur, Mr Echard, councillor-apporteur, and Mr P. Dupuis, councillor-apporteur. David, Conseiller rapporteur, Mr. Echappé, Conseiller doyen, and Ms. Maréville, chamber clerk, the Third Civil Chamber of the Cour de cassation, composed of the aforementioned president and councillors, having deliberated in accordance with the law, delivered the present judgment.

Facts and procedure

1. According to the judgment under appeal (Grenoble, December 1, 2022), on May 3, 2017, Société Civile Immobilière Les Alpilles (the lessor) leased commercial premises to Pro Soccer 5 (the lessee) for the purpose of running an indoor soccer business.
2. On January 17, 2018, the lessee informed the lessor of repeated infiltrations from the roof affecting its commercial activity.
3. On July 25, 2018, after work had been carried out, the lessor served the lessee with a summons to pay the rent for the third quarter of 2018, in accordance with the resolutory clause in the lease.
4. On August 24, 2018, the lessee and her manager, Mr. [C], summoned the lessor to oppose the aforementioned summons and seek compensation for their damages.
5. A judgment of July 6, 2021 opened the tenant’s judicial liquidation and appointed Mr. [P] as liquidator.

Examination of the pleas

Second plea

1. Pursuant to article 1014, paragraph 2, of the Code of Civil Procedure, there is no need to give a specially reasoned decision on this plea, which is clearly not such as to lead to cassation.

But on the first plea

Statement of the plea

1. The landlady complains that the judgment held that she had failed to fulfil her obligation to deliver for a minimum of fifty-two weeks, and consequently rejected her requests that the tenant be ordered to pay her a certain sum corresponding to the rent, charges and indemnities due on October 10, 2020, declare the application of the resolutory clause and the termination of the lease, in the alternative, order the judicial termination of the lease for non-payment of rent, in any event, order the eviction of the tenant and order her to pay him an occupancy indemnity, on the other hand, order her to pay Mr. [P], in his capacity as such, certain sums in respect of the loss of enjoyment and financial loss suffered by the tenant, whereas “the exception of non-performance can only be invoked on the grounds of sufficiently serious non-performance; in the case of a lease, it presupposes that the lessee who fails to pay any rent is totally deprived of the enjoyment of the leased property ; in order to admit the exception of non-performance in favor of Pro Soccer 5, the court merely stated that SCI Les Alpilles had failed in its obligation to deliver between May 3, 2017 and November 28, 2018, given that during this period, certain leaks from the roof had, according to the lessee’s assertions, “partially” disrupted the business, “without explaining how these partial disorders were sufficiently serious and of such a nature as to justify the application of the exception of non-performance, the Court of Appeal deprived its decision of a legal basis in the light of article 1219 of the Civil Code. “

The Court’s response

In view of article 1219 of the French Civil Code:

1. According to this text, a party may refuse to perform his obligation if the other party does not perform his and if this non-performance is sufficiently serious.
2. In rejecting the landlord’s claims, the court held that it was clear from the evidence submitted that the landlord had failed in its obligation to deliver, and that, as regards the landlord’s principal obligation, the tenant had validly raised the exception of non-performance, by refusing to pay the rent and the council tax in full.
3. In so ruling, without investigating, as requested, whether the alleged infiltrations had rendered the leased premises unfit for the use for which they were intended, the court of appeal failed to provide a legal basis for its decision.

On the third plea

Statement of grounds

1. The lessor complains that the judgment ordered it to pay Mr. [P], in his capacity as such, a certain sum in respect of the financial loss suffered by the lessee, on the grounds that “in order to assess a loss, a judge may not rely exclusively on a non-judicial expert appraisal carried out unilaterally at the request of a party ; in assessing the financial loss allegedly suffered by Pro Soccer 5 in the sum of 332,997.26 euros exclusive of tax, the Court of Appeal relied exclusively on the out-of-court expert report drawn up in a non-adversarial manner by the chartered accountant appointed by the lessee; in so ruling, the Court of Appeal violated article 16 of the Code of Civil Procedure, together with article 6 §1 of the Convention for the Protection of Human Rights and Fundamental Freedoms. “

The Court’s response

Having regard to article 16 of the Code of Civil Procedure:

1. It follows from this text that the judge can only rely on an expert report drawn up unilaterally at the request of a party if this report has been submitted to the free discussion of the parties and is corroborated by other evidence.
2. In order to order the lessor to pay a certain sum for the financial loss suffered by the lessee, the court held that the data contained in the analysis carried out by the chartered accountant appointed by the lessor were relevant and could only be accepted, as they were not called into question by any other evidence.
3. In so ruling, the Court of Appeal, which relied exclusively on the report of an expert appraisal carried out unilaterally at the request of one of the parties, violated the aforementioned text.

And on the fourth plea, first part

Statement of the plea

1. The lessor complains that the judgment dismissed her claim for an order that the lessee pay her certain sums in respect of rent, charges and indemnities due as of October 10, 2020, as well as late payment indemnities, on the grounds that “the judge denies justice by refusing to assess a claim whose existence he has established in principle ; that in dismissing SCI Les Alpilles’ claim for payment of the rent due on October 10, 2020, on the grounds that no statement of account had been produced enabling calculation of “the sums still owed by the Pro Soccer 5 company”, the Court of Appeal committed a denial of justice in violation of article 4 of the French Civil Code. “

The Court’s response

Considering article 4 of the Civil Code:

1. It follows from this text that the judge cannot refuse to assess the amount of a claim whose existence in principle he acknowledges.
2. In order to reject the lessor’s claim for payment of certain sums in respect of rent, charges and indemnities due as of October 10, 2020, as well as late payment indemnities, the decision states that as the lessor was unable to produce a statement of her claim, the Court of Appeal was not in a position to assess the amount of the claim retained by the first judge, and that none of the appellants’ other documents made it possible to calculate the sums still owed by the lessee.
3. In ruling in this way, by refusing to assess the amount of a loss which it had found to exist in principle, the Court of Appeal violated the aforementioned text.

Dismissal from the case

1. Pursuant to article 625 of the French Code of Civil Procedure, Mr [C] should be removed from the case, as his presence is not required before the Court of Appeal.

FOR THESE REASONS, and without it being necessary to rule on the other complaint in the fourth plea, the Court :

REVERSE AND ANNUL, except insofar as it :

– declares that Société Civile Immobilière Les Alpilles was in breach of its obligation to deliver for a minimum of 52 weeks,

– order société civile immobilière Les Alpilles to pay Mr. [P], in his capacity as liquidator of Pro Soccer 5, the sum of 68,294.70 euros (exclusive of tax) for loss of use suffered,

– order société civile immobilière Les Alpilles to reimburse M.

[P], in his capacity as liquidator of Pro Soccer 5, the invoice of 300 euros for maintenance of the gutter and repair of the silicone seal,

– order Société Civile Immobilière Les Alpilles to pay Mr. [C] 5,000 euros in damages and 1,000 euros under article 700 of the French Code of Civil Procedure,

the judgment of the Grenoble Court of Appeal of December 1, 2022;

Restores the case and the parties to the status they were in prior to this judgment, except for these points, and refers them to the Chambéry Court of Appeal;

Dismisses Mr [C] from the case;

Order Mr [P], in his capacity as liquidator of Pro Soccer 5, to pay the costs;

Pursuant to article 700 of the French Code of Civil Procedure, reject the claims made by Mr. [P], in his capacity as liquidator of Pro Soccer 5, and by Mr. [C], and order Mr. [P], in his capacity as liquidator of Pro Soccer 5, to pay Société Civile Immobilière Les Alpilles the sum of 3,000 euros;

That, at the request of the Public Prosecutor of the Cour de cassation, the present judgment be transmitted to be transcribed in the margin or following the partially quashed judgment;

Thus made and judged by the Court of Cassation, Third Civil Division, and delivered by the President at its public hearing on June twenty-seventh, two thousand and twenty-four.

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