Credential Bath Street Limited V. Venture Investment Placement Ltd
| Jurisdiction | Scotland |
| Judge | Lord Reed |
| Neutral Citation | [2007] CSOH 208 |
| Date | 31 December 2007 |
| Docket Number | CA33/07 |
| Published date | 31 December 2007 |
| Court | Court of Session |
| OUTER HOUSE, COURT OF SESSION [2007] CSOH 208 | |
| CA33/07 | OPINION OF LORD REED in the cause CREDENTIAL BATH STREET LIMITED Pursuers; against VENTURE INVESTMENT PLACEMENT LTD Defenders: ________________ |
Pursuers: Sellar, Q.C., Clark, Q.C.; Harper Macleod
Defenders: Reid, Q.C., J Brown; McClure Naismith
31 December 2007
Introduction
[1] These proceedings are concerned with a guarantee of the tenant's obligations under a commercial lease. The pursuers were at the material time the landlord of the let premises, and the defenders were the guarantor. Put briefly, the pursuers maintain that the defenders are liable under the guarantee to pay the cost of repairs which should have been carried out by the tenant. The defenders deny liability on the basis that the guarantee had expired before any demand was made upon them in accordance with the guarantee. The pursuers in addition seek damages in respect of an alleged breach of an implied term of the guarantee. The guarantee contained a "step in" obligation, under which the guarantor was obliged to accept a new lease, on the same terms as the existing lease, in the event that the tenant was wound up during the period of the guarantee. The pursuers attempted to have the tenant wound up, but did not succeed until after the guarantee had expired. They maintain that the defenders delayed the winding up proceedings, in breach of an implied term.
[2] The question whether the defenders are in breach of any obligation owed to the pursuers depends fundamentally on issues concerning the construction of the guarantee and certain other documents. It is agreed that those issues can be resolved on the basis of the relevant documents and the parties' submissions.
The factual background
[3] On 14 June 2001 Credential Charing Cross Ltd ("Charing Cross") as landlord, and Pertemps Callpoint Ltd as tenant, entered into a lease of an office building in Glasgow. The lease was for a period of 25 years, commencing on 15 June 2001, at a rent of £328,320 per annum. It imposed upon the tenant a number of repairing obligations, which are detailed below. Pertemps Callpoint Ltd subsequently assigned the tenant's interest in the lease to their wholly-owned subsidiary Callpoint Europe Ltd ("Callpoint Europe"), in terms of an assignation dated 1 and 4 October 2002. The assignation was expressed as taking effect from the commencement of the lease.
[4] Simultaneously with the assignation, Callpoint Europe entered into an agreement (referred to in later documents as "the amortised payment agreements") with Charing Cross, under which they agreed to pay Charing Cross £103,680 per annum over the period of the lease, in reimbursement of the cost of works which Charing Cross had carried out on the premises at their request. The rent under the lease, plus the payments under the amortised payment agreements, totalled £432,000 per annum, payable in quarterly instalments in February, May, August and November. Service charges of about £100,000 per annum were payable in addition.
[5] In 2003 the defenders (then named Pertemps Group Ltd) granted a guarantee to Charing Cross relating to the performance by Callpoint Europe of their obligations under the lease and the amortised payment agreements. The defenders were at that time the parent company of Callpoint Ltd (formerly named Pertemps Callpoint Ltd), which (as explained above) was in turn the parent company of Callpoint Europe. All three companies were under common control.
[6] The guarantee, dated 14 February and 2 May 2003, contained in clause 3 provisions imposing obligations upon the defenders as guarantor. Those provisions were prefaced by the words:
"In respect of the period from 1 January 2003 to 31 December 2004".
Clause 3.1 applied where the tenant had failed to perform its obligations under the lease or the amortised payment agreements, and required the defenders to perform the obligation in question "on demand". Clause 3.3 applied where certain events occurred, including the winding up of the tenant: if such an event occurred, the landlord was entitled to put an end to the lease and to require the defenders to accept a lease of the premises, on similar terms, for the unexpired period of the original lease, together with an agreement on similar terms to the amortised payment agreements. Clause 3.4 stated:
"The Guarantor shall be deemed to be released from its obligations under these presents on 1 January 2005 save in respect of any antecedent breach of the Guarantee occurring prior to 1 January 2005".
The relevant provisions of the guarantee are set out fully below.
[7] Later in 2003 Charing Cross assigned its rights under the lease, the amortised payment agreements and the guarantee to the pursuers, in terms of an assignation dated 7 October 2003. The assignation was expressed as taking effect from 30 September 2003.
[8] During 2004 a schedule of dilapidations was prepared on behalf of the pursuers. On 29 March 2004 copies were sent, with a covering letter, to Callpoint Europe, Callpoint Ltd and the defenders. The schedule was subsequently revised. On 30 April 2004 copies of the revised schedule were sent, with a covering letter in identical terms to the letter of 29 March, to Callpoint Europe, Callpoint Ltd and the defenders. No repairs were carried out. In July 2004 the pursuers presented an application for the winding up of Callpoint Europe. The application was opposed by that company. Following procedure which is described below, the application was eventually granted on 7 April 2005. The present proceedings were commenced in 2007.
[9] Against that background, the issues which the parties have agreed can be resolved by debate can be summarised as follows:
1. Whether the reference in clause 3.4 of the guarantee to "any antecedent breach of the Guarantee" should be construed as meaning "any antecedent breach by the Tenant for which the Guarantor is liable in terms of the Guarantee", or (expressing the same idea in fewer words) "any antecedent breach of the Lease or of the Amortised Payment Agreements". If so, it is accepted that the pursuers' claim that the tenant was, prior to 1 January 2005, in breach of its repairing obligation under the lease is relevant for inquiry into the facts. If not, it is accepted that the pursuers' claim under the guarantee in respect of the cost of repairs must fail, unless they can demonstrate that a breach of the guarantee occurred prior to 1 January 2005.
2. If the first issue is decided against the pursuers, the issue which then arises is whether the pursuers' averments that a breach of the guarantee occurred prior to 1 January 2005 are relevant for inquiry. That issue turns on the question whether the sending of the schedule of dilapidations to the defenders during 2004 amounted to a "demand" within the meaning of clause 3.1 of the guarantee. If so, it is accepted that the defenders did not comply with the demand. If not, it is accepted that the pursuers' claim under the guarantee in respect of the cost of repairs must fail.
3. Whether it was an implied term of the guarantee that the defenders would not cause Callpoint Europe to oppose any petition for their winding up when they knew or ought reasonably to have known that the opposition was unjustified either in law or in fact. If so, it appears to be accepted that the pursuers' averments that the defenders acted in breach of that implied term are relevant for inquiry. If not, it is accepted that the pursuers' claim for damages must fail.
[10] Before considering the arguments in relation to each issue, it is convenient at this point to set out more fully the material terms of the lease and the guarantee.
The lease
[11] Under clause 3 of the lease the tenant undertook a number of obligations "throughout the period of this lease". They included a general repairing obligation:
"To repair, maintain and renew:
3.7 At all times throughout the Period of this Lease at the Tenant's expense well and substantially to repair and maintain and when necessary where beyond repair and maintenance, renew, rebuild, and reinstate and generally in all respects keep in good and substantial condition the Premises .....".
There were in addition more specific obligations relating to the repair of plant, equipment and services (clauses 3.5.1 and 3.5.2) and to decoration (clauses 3.8 and 3.9). These were followed by obligations relating to the enforcement of the repairing obligations:
"To permit entry by the Landlord and others:
3.12 To permit the Landlord and its agents at all reasonable times with or without workmen on giving reasonable notice (except in emergency) to the Tenant to enter upon the Premises generally to inspect and examine the same to view the state of repair and condition thereof and to take a schedule of the Landlord's fixtures and of any wants of compliance by the Tenant with its obligations hereunder and to exercise the rights reserved to or conferred upon the Landlord by These Presents .....
To comply with notices to repair:
3.13 Well and substantially to make good all wants of compliance by the Tenant with its obligations hereunder of which notice in writing is given to the Tenant by the Landlord and that within such period which shall be specified in the notice being reasonable but shall not be less than two calendar months after the giving or leaving of such notice (or sooner if requisite in the case of emergency). If the Tenant fails to comply with any such notice it shall be lawful (but not obligatory) for the Landlord (without prejudice to the rights of irritancy hereinafter contained) to enter upon the Premises to make good the same at the cost of the Tenant which cost shall be repaid by the Tenant to the Landlord on demand together with all Solicitors' and Surveyor's charges and other expenses which may be incurred by the Landlord in connection therewith together with interest thereon at the Prescribed Rate in each case from the date of...
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