Bam Buchanan Limited V. Arcadia Group Limited
| Jurisdiction | Scotland |
| Judge | Lord Hodge |
| Neutral Citation | [2013] CSOH 107A |
| Date | 05 July 2013 |
| Docket Number | CA91/11 |
| Court | Court of Session |
| Published date | 05 July 2013 |
| OUTER HOUSE, COURT OF SESSION | |
| [2013] CSOH 107A | |
| CA91/11 | OPINION OF LORD HODGE in the cause BAM BUCHANAN LIMITED Pursuer; against ARCADIA GROUP LIMITED Defender: ________________ |
Pursuer: R. Dunlop QC; Dundas & Wilson LLP
Defender: M. Richardson; DWF Biggart Baillie
5 July 2013
[1] The pursuer ("the landlord") is the heritable proprietor of a building at 20/26 Buchanan Street, Glasgow comprising seven floors and a basement ("the building"). The defender was the tenant of parts of the basement, ground floor and first floor of the building ("the premises") under a lease which had a date of entry of 18 September 1984 and expired on 27 January 2009. The upper floors of the building were not occupied during most of the period of the lease, including at its termination.
[2] The landlord and the tenant are in dispute about sums which the landlord claims as a service charge under the lease and also in relation to dilapidations. In order to limit the expense of resolving their differences, the parties, after raising this action, agreed a remit to William Morrison, a chartered building surveyor and a director of Capita Symonds Limited, ("the reporter"). He was instructed to address the questions which they posed in relation to the tenant's liability for the service charge and the dilapidations. By interlocutor dated 17 August 2012 I ordered a remit to the reporter to investigate and report on the facts and circumstances in terms of the parties' remit.
[3] The parties in the remit directed the reporter to produce a draft report. Clause 11 of the remit provided that, if a party objected to the draft report on an issue of law, the reporter was to apply to the court for directions. I have heard counsel in a debate on the landlord's note of objections to the draft report and the tenant's answers thereto. I am invited to give directions to the reporter.
Scope of the court's jurisdiction
[4] There is no dispute as to the scope of the court's jurisdiction. As the parties had agreed to give Mr Morrison the remit of determining their factual disputes, they have excluded probation of the matters which his report covered. They have confined their right to challenge his report to issues of law. This is consistent with the general approach of the court which Lord Eassie set out in Allied Dunbar Assurance plc v Superglass Sections Ltd (unreported) 20 August 2004 at paras 23 and 24: where the parties have agreed a remit to a skilled person to determine a question and he has performed that remit, the court will not allow another mode of proof. See also Dixon v Monkland Canal Company (1825) 1 W & S 636, Lord Gifford at 655; and Lord Blantyre v Glasgow, Paisley and Greenock Railway Company (1851) 13 D 570, Lord President Boyle at 573. Absent a reservation in the remit of the right to have a further proof, which would defeat the cost-saving purpose, the reporter's decision governs questions of fact.
[5] The legal challenges available are familiar. As the reporter has received a contractual remit, any failure to implement the directions of his remit, including a failure to exhaust the remit, would ground a legal challenge. If the reporter misconstrued a legal document, such as the lease, in a material way, that would be an error of law which would invalidate his determination to the extent that the error affected his decision. So also would be a material misunderstanding of a non-legal document, although the court allows the decision-maker greater discretion in interpreting such documents and will not treat a tenable interpretation as an error of law (Findlay, Petitioner [2006] CSOH 188, at paras 31-33). Where there required to be a factual basis for a decision, the absence of such a basis would support a legal challenge to the decision. Taking into account an irrelevant matter or failing to take into account a relevant matter are familiar grounds of challenge (Wordie Property Co Ltd v Secretary of State for Scotland 1984 SLT 345, Lord President Emslie at 347). Another way of analysing those grounds is to say that the decision maker has acted on the basis of a mistaken view as to the facts. Mr Dunlop referred me to that formulation in The Learning Trust v MP and the Special Educational Needs and Disability Tribunal [2007] ELR 658, [2007] EWHC 1624 (Admin), Andrew Nicol QC sitting as a deputy judge of the High Court at para 29. Wednesbury unreasonableness is another ground of legal challenge (Wordie (above)). So also is the failure to give an adequate statement of reasons for a decision so that the informed reader and the court are left in no substantial doubt as to the reasons for the decision (Safeway Stores plc v National Appeal Panel 1996 SC 37, Lord Justice Clerk Ross at 40-41).
The service charge
[6] Clause 8(2) of the lease provides that any part of the service charge shall be payable to the landlord by the tenant on demand as and when the item of expenditure is incurred or the landlord becomes liable to pay it. The service charge is defined in clause 8(1) as follows:
"To pay to the Landlord in the manner mentioned in Sub-clause (2)of this Clause 8 a fair proportion of the expense incurred by the Landlord in supplying any services facilities or amenities whatsoever to the Premises or the Building and in cleaning, decorating, painting, plenishing, lighting, repairing, maintaining, renewing or rebuilding any part of the Common Parts...
...and of any expenses incurred by the Landlord in complying with any requirements of a competent authority relating to the Premises or the Building or any part thereof or any obligation thereanent under any superior lease and to provide for periodic items including repairs and redecoration (and that regardless of the age or state of repair or dilapidation of the Building and irrespective of the cause of the damage causing such repair, maintenance, renewal, rebuilding or others, and including any which may be rendered necessary by any defects, latent or patent, which may exist or subsequently become manifest in the Building) together with any outgoings and Value Added Tax which the Landlord may be liable to pay in respect of such services and matters or in respect of the Building..."
Clause 8(3) defines "fair proportion" for the purposes of clause 8(1) in relation to different parts of the building.
[7] Mr Dunlop submitted that the range of work covered by the service charge in clause 8(1) of the lease was very broad. It covered works which at common law would be classified as extraordinary repairs (House of Fraser plc v Prudential Assurance Co Ltd 1994 SLT 416, Lord Cullen 419D-J) and extended to rebuilding. He emphasised that the disregards in parentheses in clause 8(1) had the effect that the history or the cause of a state of fact was not relevant and he referred to Lowe v Quayle Munro Ltd 1997 SC 346, Lord Penrose at 350G-351A. Mr Richardson did not seriously challenge this analysis but submitted that it fell to be implied into the lease that the costs must be reasonably incurred. I consider that that is correct (Gordon District Council v Wimpey Home Holdings Ltd (No 2) 1989 SLT 142). Mr Dunlop did not suggest otherwise. Further, I observe that the parties have acted on that understanding by including in the remit a question in relation to each of the disputed items whether the costs incurred were reasonable. Similarly, the parties, recognising that the service charge did not cover the redevelopment of the upper floors, included in the remit a question whether each of the disputed works related to the (phase 3) redevelopment of the building.
[8] Between 2008 and 2010 BAM Construction Limited, a company associated with the landlord, carried out works on the premises and the building in three phases under the supervision of Gardiner & Theobald, quantity surveyors. The first phase comprised works on the front façade, envelope repairs and roof works. The phase 2 works involved repairs to the rear façade of buildings in Morrison Court, later known as buildings A and B, of which only building A was within the tenant's demise. Phase 3 related to retail and office development which amounted to a re-development of the building, including the refurbishment of the upper floors to bring them back into use. The landlord makes no claim for a service charge in relation to that phase. But the tenant has suggested that certain works in the earlier phases related to the redevelopment of the building and involved betterment. The tenant has also challenged certain works as unnecessary and certain charges as excessive.
[9] The reporter produced a draft report dated 21 December 2012. Thereafter, the landlord lodged a note of objections, which the tenant answered. In this opinion I deal in turn with each of the landlord's objections.
(a) Phase 1 Works (pp.1-9 of the reporter's schedule)
[10] The landlord challenged the reporter's reduction of the claim in application for payment no. 5 by Stirling Stone Limited dated 28 October 2008. The reporter considered that the rates which the sub-contractor charged in respect of certain items were excessive. Mr Dunlop submitted that the reporter had no jurisdiction to look behind the invoice which the sub-contractor submitted and the landlord had paid. Further he had failed to give comprehensible reasons for holding those rates to be excessive.
[11] I am satisfied that the reporter has not erred in law in this regard. Two of the questions on which he was asked to report in relation to the service charge were:
"(e) In so far as evidenced, are the costs incurred reasonable?
(f) In the event that it is considered that costs in respect of particular items that are not yet agreed between the parties in terms of the Response have been evidenced but were not reasonable, what costs would have been reasonable for such items?"
It is clear from this remit that the reporter was empowered to look behind the rates contained in an invoice submitted...
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