Awg Group Limited Against Hcp Ii Properties 101 Gp Limited
| Jurisdiction | Scotland |
| Judge | Lord Doherty |
| Neutral Citation | [2017] CSOH 69 |
| Court | Court of Session |
| Published date | 28 April 2017 |
| Year | 2017 |
| Date | 28 April 2017 |
| Docket Number | CA109/16 |
OUTER HOUSE, COURT OF SESSION
[2017] CSOH 69
CA109/16
OPINION OF LORD DOHERTY
In the cause
AWG GROUP LIMITED
Pursuer
against
HCP II PROPERTIES 101 GP LIMITED
Defender
Pursuer: Currie QC; HBJ Gateley
Defender: Lindsay QC; DWF LLP
28 April 2017
Introduction
[1] Ocean Point 1 is a nine storey office block at 1 Ocean Drive, Leith, Edinburgh. The ground floor contains reception areas. The first to eighth floors are offices and each of those floors is let to the pursuer under a separate lease. Each of the leases was granted by the then landlord, Macrocom (743) Limited. Each lease was dated 25 and 27 February 2004. Each was for a term of 20 years. Clause 6 of each of the leases made provision for rent review at five‑yearly intervals. The date of entry under each of the leases was 27 February 2004. Macrocom (743) Limited’s interest in the leases was subsequently acquired by Irish Life Assurance plc (“Irish Life”). On 7 March 2016 the defender acquired the landlord’s interest in the leases from Irish Life.
[2] In this commercial action the pursuer seeks declarator that the defender is not entitled to seek a rent review as at 27 February 2014. It maintains that the landlord waived its right to seek such a review. The matter came before me for a debate on the commercial roll.
The Terms of the Leases
[3] In terms of Clause 2.1 of each of the leases the tenant was obliged to pay the landlord a stipulated yearly rent “subject to variation as hereinafter provided for”. Clause 6 enabled the yearly rent to be reviewed every five years throughout the period of the lease, the Date of Review being five years after the date of entry and the expiration of each succeeding period of five years. The new rent was to the greater of the previous rent or the Revised Rent. The Revised Rent was the greater of (i) the open market rental value of the Premises on the Relevant Date of Review on the assumptions set out in Clause 6, and (ii) the sum which represented 85% of the open market value of the Premises at the Relevant Date of Review on certain further specified assumptions. Clause 6.3 provided:
“6.3 Decision on rental value
If the Landlord and Tenant shall be unable to agree on the amount of either or both of the rental values aforesaid by the date of three months after the Relevant Date of Review then at the election of the Landlord or the Tenant the matter shall be decided by a Chartered Surveyor … to be agreed upon by the parties hereto or in the event of failure to agree then the same shall be decided by a Surveyor (… the ‘Expert Surveyor’) to be nominated at any time at the request of the Landlord or the Tenant by the Chairman or senior office holder for the time being of the Scottish Branch of the Royal Institution of Chartered Surveyors … Within one month of the date upon which the Expert Surveyor is agreed upon or appointed … the Landlord and Tenant shall be entitled to submit to the Expert Surveyor written valuations, statements and other evidence … The Expert Surveyor shall, if so requested by written notice from one party … received within six weeks of the date the Expert Surveyor is agreed upon or appointed hold a hearing …”
Clause 6.5 provided:
“6.5 Payment after date of review
If by the Relevant Date of Review the amount of the Revised Rent has not been agreed between the parties or determined as aforesaid then in respect of the period of time (hereinafter called the “Interval”) beginning with the Relevant Date of Review and ending on the Quarter Day immediately following the date upon which the amount of the Revised Rent is agreed or determined as aforesaid (hereinafter called the ‘Relevant Date’) the Tenant shall continue to pay the rent provided for in Clause 2.1 to the Landlord in manner hereinbefore provided at the yearly rate payable immediately before the Relevant Date of Review; Provided that on the Relevant Date there shall be due as a debt payable by the Tenant to the Landlord (without any requirement for any demand therefor by the Landlord) an amount equal to the difference between the Revised Rent and the rent actually paid during the Interval and apportioned on a daily basis in respect of the Interval together with interest at four per cent below the Prescribed Rate on each component part on the said difference from the notional due date for payment of such component part (being the date the same would have fallen due had the Revised Rent been determined on the Relevant Date of Review) until the actual payment of such difference.”
Clause 5.8 provided:
“5.8 Demand for rent
… [No] demand for or acceptance of rent by the Landlord or its agent (whether before or after a date of review of rent) at a rate other than that to which the Landlord may be entitled following a review of rent in terms of These Presents shall be deemed to be a waiver of the right of the Landlord to require a review of the rent hereunder nor shall it personally bar the Landlord from requiring a review of the rent nor shall it personally bar the Landlord from requiring such a review in terms hereof.”
Uncontentious and Contentious Matters
[4] In terms of a Joint Minute (No 18 of Process) the parties agreed that the leases and other documents comprising productions 6/1 - 6/27 were what they bore to be and could be referred to and founded upon by either party at the debate without the necessity of having to be spoken to in evidence. An Agreed Chronology (No 19 of process) was also placed before the court. There were core matters in each party’s pleadings which were either admitted by the other party or were not disputed. I shall summarise the uncontentious matters first.
[5] The rents under each of the leases were reviewed with effect from the 2009 review date. On 5 November 2013, 6 January 2014, 9 April 2014 and 6 October 2014 Irish Life issued to the pursuer invoices for rent at the rate which had been applicable since the 2009 review (“the existing rate”). Those invoices stated “without prejudice to review on 26/02/14”. On 7 January 2015, 10 April 2015, 7 July 2015, 2 November 2015 and 18 January 2016 Irish Life issued to the pursuer invoices for rent at the existing rate, but those invoices did not make any reference to the 2014 Date of Review. The change in the wording in January 2015 coincided with a change in the formatting of invoices. In mid‑2015 Irish Life marketed Ocean Point 1 for sale. A sales brochure (6/19 of process) was produced by its agents (Jones Lang La Salle (“JLL”)). The Investment Summary on page 3 narrated that there were “excellent prospects for a rental uplift at the next rent review on 7th February 2019.” It also stated that annual rental income from the property was £1,343,041; that offers in excess of £15,330,000 were invited; and that a purchase at that level would provide an initial yield of 8.25% net of purchaser’s costs of 6.24%. On page 10 the brochure indicated that the rent in each of the pursuer’s leases was “subject to review at five yearly intervals, on an upward only basis, with the next review due on 27th February 2019.” It went on to list “the current passing rent” for each of the floors, and that the total of those rents was £1,343,041. After giving a very brief description of the terms of the rent review it continued:
“This is an attractive review provision that will provide an incoming purchaser with excellent prospects for reversion at the 2019 reviews off a relatively low base rent.”
The final page of the brochure (p 13) contained the following disclaimer:
“Disclaimer
JLL for themselves and for the vendors or lessors of this property whose agents they are, give notice that:- a. the particulars are set out as a general outline only for guidance and do not constitute, nor constitute part of, an offer or contract; b. all descriptions, dimensions, references to condition and necessary permissions for use and occupation, and other details are believed to be correct, but any intending purchasers, tenants or third parties should not rely on them as statements or representations of fact but satisfy themselves that they are correct by inspection or otherwise; c. no person in the employment of JLL has any authority to make or give any representation or warranty whatever in relation to the property; … e. this correspondence is expressly subject to completion of formal legal missives in accordance with Scots Law.”
On 8 and 14 January 2016 the pursuer and Irish Life entered into a Service Charge Agreement (6/37 of process) which resolved a dispute relating to chillers. On 29 April 2016 the defender gave the pursuer written notice that it required the rent for the eighth floor to be reviewed as at 27 February 2014. On 1 May 2016 the defender issued to the pursuer invoices for rent at the existing rate. Like the other invoices issued since January 2015, the invoices of 1 May 2016 did not contain the caveat which the earlier invoices had contained. On 23 June 2016 the defender applied to the chairman of the Scottish Branch of the RICS to appoint an Expert Surveyor in terms of Clause 6.3 in respect of review of the rent for the eighth floor. On 5 August 2016 the defender gave the pursuer written notice that it required the rents for the first to seventh floors to be reviewed as at 27 February 2014. On 11 August 2016 an Expert Surveyor was appointed to decide the reviewed rent for the eighth floor. The pursuer paid Irish Life the rent stated in each invoice which Irish Life had rendered and Irish Life accepted those payments. Similarly, the pursuer paid the defender the rent stated in the invoices of 1 May 2016 and the defender accepted those payments.
[6] The following averments in Condescendence 8 were contentious:
“The reasonable inference to be drawn from the removal of the without prejudice caveat from invoices for payment of rent from 7 January 2015 and from the reference in the sales brochure to the next rent review being 27 February 2019 is that the landlord had...
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