Ben Cleuch Estates Ltd v Scottish Enterprise
| Jurisdiction | Scotland |
| Judge | Lord Eassie,Lord Macfadyen,Lord Kingarth |
| Judgment Date | 04 January 2008 |
| Neutral Citation | [2008] CSIH 1 |
| Docket Number | No 20 |
| Date | 04 January 2008 |
| Published date | 04 January 2008 |
| Court | Court of Session (Inner House) |
EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
| Lord Macfadyen Lord Kingarth Lord Eassie | [2008] CSIH 1 CA38/05 |
| OPINION OF THE COURT delivered by LORD MACFADYEN in RECLAIMING MOTION in the cause BEN CLEUCH ESTATES LIMITED, Pursuers and Respondents; against SCOTTISH ENTERPRISE, Defenders and Reclaimers. _______ |
Act: Connal Q.C., Easton (May 2006), Ms Morton (November 2007), Solicitor Advocates; McGrigors
Alt: Martin Q.C., McIlvride; Anderson Fyfe.
4 January 2008
Introduction
[1] This commercial action concerns a dispute, between the pursuers, as landlords, and the defenders, as tenants, of commercial premises in Dundee known as Enterprise House ("the Premises"), as to whether the defenders have validly terminated the lease of the Premises ("the Lease") by exercising a break option, or alternatively whether the pursuers are personally barred from denying that the break option was validly exercised. The single substantive conclusion can be regarded as falling into three parts, and seeks declarator in the following terms:
(a) "that the defenders have not validly terminated the Lease of the
subjects known as and forming Enterprise House, 45 North Lindsay Street, Dundee by Faraday Properties Limited in favour of the Scottish Development Agency dated 26 February and 7 March 1991 and registered in the Books of Council and Session on 18 December 1991 by failing to provide to the pursuers as landlords of the defenders written notice to terminate the Lease";
(b) "that a letter from Shepherd and Wedderburn as agents for the
defenders to Bonnytoun Estates Limited of 6 January 2005 is not a valid notice in terms of Clause FOURTH (B) of the said Lease"; and
(c) "that the said Lease continues in full force and effect according to its
terms".
[2] A proof before answer was allowed, and took place between 10 and 19 January 2006, on which latter date the Lord Ordinary made avizandum. On 1 March 2006 the Lord Ordinary granted decree of declarator as concluded for.
[3] The defenders reclaimed against the interlocutor of 1 March 2006. The reclaiming motion was part heard in May 2006, when the submissions of Mr McIlvride, junior counsel for the defenders and reclaimers, and of Mr Easton, the junior solicitor advocate for the pursuers and respondents, were heard. The reclaiming motion was then continued to a date to be afterwards fixed for the purpose of hearing submissions from Mr Martin, senior counsel for the defenders and reclaimers, and Mr Connal, the senior solicitor advocate for the pursuers and respondents. There followed a delay caused by the unavailability through indisposition of one of the members of the court. It then became apparent that because of the indisposition of another member of the court it would not be practicable to resume the hearing of the reclaiming motion before the same bench. Arrangements were therefore made for written versions of the junior speeches to be submitted, and it was agreed that the hearing could proceed with the senior speeches only being presented orally to a differently constituted bench. We have now heard those further submissions.
The provisions of the Lease
[4] The Lease was originally entered into in 1991 between Faraday Properties Limited and the Scottish Development Agency ("SDA"). The tenant's interest was transferred to the defenders, who are a body corporate established under section 1 of the Enterprise and New Towns (Scotland) Act 1990 ("the 1990 Act"), by virtue of section 22(1)(a) of that Act. The defenders are referred to in some of the documentary productions as "SE". The pursuers (hereinafter referred to, when the context makes it convenient, as "Ben Cleuch") purchased the landlord's interest in the lease in October 2002.
[5] The term of the Lease is from 1 April 1991 to 2 February 2016 (Clause FOURTH (A)). The break option is contained in Clause FOURTH (B), which provides that:
"Notwithstanding the foregoing, the Tenants shall be entitled at any time prior to [2 February 2005] to give to the Landlords at least one year's written notice of termination of this lease, such notice to take effect on [2 February 2006] whereupon this Lease shall absolutely determine ..."
[6] The manner of giving the notice permitted by Clause FOURTH (B) is regulated by Clause SEVENTEENTH, which provides as follows:
"Any notice or document required or permitted to be given or served under this Lease may be given or served personally or by leaving the same or sending the same by first class recorded delivery post at or to the registered office of the party (where it is a company) for the time being, or (in the case of a firm or an individual) to its or his address as shown in the Preamble to this Lease, or at or to such other address as shall have been last notified to the other party for that purposes [sic]. Any notice or document given or received by post shall be deemed to have been duly given or served on the second business day after the letter containing the same was posted and in proving that any notice or document was so given or served it shall be necessary only to prove that the same was properly addressed and posted."
[7] Clause EIGHTH of the Lease provides as follows:
"The Landlords shall be entitled, but not bound, to appoint Management Agents from time to time, who shall (if appointed) collect the rents, insurance premiums, and all other payments due by the tenants in terms of this Lease".
Other provisions of the Lease contemplate that the landlord may authorise agents to perform other specified functions on its behalf, or, without express reference to agents, provide that acts may be performed "on behalf of" the landlord.
[8] The annual rent payable under the Lease is £210,700 (Clause FIFTH (A)), payable in advance without demand at four specified terms in the year (Clause FIFTH (B)). There is a rent review clause (Clause FIFTH (D)), but it appears not to have been exercised. The Lease prohibits assignation of the tenant's interest without the consent of the landlord, such consent not to be unreasonably withheld (Clause SIXTH (B)). There is an irritancy clause in conventional terms (Clause THIRTEENTH).
The facts
[9] The facts of the case, and the evidence by which they were established, are very fully set out by the Lord Ordinary in his Opinion at paragraphs 8 to 102. There was no real dispute about the Lord Ordinary's findings in fact, but in order to understand the submissions made on the parties' behalf, it is necessary to some extent to set out the facts that bear on the issues of law between the parties.
[10] Following the defenders' acquisition of the tenant's interest in the Lease, the Premises were occupied, as their head office, by Scottish Enterprise Tayside ("SET"), a local enterprise company, registered under the Companies Acts, wholly owned by the defenders, and carrying on activities under an operating contract with the defenders made in pursuance of section 19 of the 1990 Act. Such occupation is specifically contemplated and permitted by Clause SIXTH (B) (a) of the Lease.
[11] In 1996 the defenders were notified that Faraday Properties Limited had sold the landlord's interest in the Lease to Fiscal Estates Investments Limited.
[12] In 2001 a company, originally incorporated as Pacific Shelf 977 Limited, changed its name to Bonnytoun Estates Limited ("Bonnytoun"). Bonnytoun was a joint venture between three parties, namely Mr Scott Cairns ("Mr Cairns"), who owned 50% of the shares, the Bank of Scotland ("the Bank"), who owned 37·5%, and Gooch Webster Ltd ("Gooch Webster"), who owned the remainder. The object of the joint venture was to invest funds lent by the Bank in commercial properties. Some of the properties were acquired by Bonnytoun, and others were acquired by wholly-owned subsidiaries of Bonnytoun, each acquired as a vehicle for the particular purchase. In cases of the latter sort, Bonnytoun borrowed from the Bank the funds necessary to make the purchase, then lent those funds to the subsidiary. The subsidiary acquired the property and granted a security over it in favour of the Bank.
[13] The registered office of Bonnytoun was at all material times at 4th Floor, Pacific House, 70 Wellington Street, Glasgow, G2 6SB, the offices of their solicitors, McGrigors. Mr Cairns was a director, the chairman and the company secretary of Bonnytoun.
[14] On 27 May 2002 Bonnytoun entered into a contract, described as the Amended and Restated Servicing Agreement, with Scott Cairns Company Limited. Scott Cairns Company Limited subsequently changed its name to Lochcote Asset Management Limited, and is hereinafter referred to as "Lochcote". The effect of that agreement is set out by the Lord Ordinary in paragraph 10 of his Opinion, and may be summarised as being that Lochcote were to provide certain management services to Bonnytoun, including the subcontracting of certain property management services to Gooch Webster. Clause 2 of the agreement between Bonnytoun and Lochcote appointed Lochcote as sole manager of Bonnytoun's business, and Clause 3 required Lochcote to provide a variety of services in respect of "the Properties" as defined in Clause 3.5. Bonnytoun was required to notify Lochcote of all properties acquired by Bonnytoun or acquired or owned by any subsidiary of Bonnytoun so that they constituted Properties for the purposes of Clause 3. The effect of the agreement was thus that Lochcote was to provide management services in respect of the properties acquired by Bonnytoun's subsidiaries. They were entitled to do so, and did so, by subcontracting with Gooch Webster for performance of services by Gooch Webster under a Property Management Agreement.
[15] On 25 September 2002 Bonnytoun acquired a subsidiary then called Pacific Shelf 1145 Limited. On 14 October 2002 that company acquired the Premises. As at that date Bonnytoun itself had acquired three properties, and four properties had been acquired by subsidiaries, which were all...
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