Dollar Land (Cumbernauld) Ltd (Original Appellants and Cross-Respondents) v C.I.N. Properties Ltd (Original Respondents and Cross-Appellants) (Scotland)
| Jurisdiction | Scotland |
| Judgment Date | 25 April 1996 |
| Date | 25 April 1996 |
| Docket Number | No 34 |
| Court | Court of Session (Inner House - Extra Division) |
EXTRA DIVISION
Lord Coulsfield
Practice—Preliminary pleas—Res judicata—Competent and omitted—Previous case with same parties in House of Lords on question of whether irritancy clause could be enforced—Subsequent action in Court of Session dealing with whether irritancy clause governed matters so as to exclude claim for unjustified enrichment—Whether Lord Ordinary erred in repelling pleas of res judicata and competent and omitted
Unjustified enrichment—Landlord and tenant—Lease between landlord and tenant where rent payable was greater affixed sum or agreed percentage of rents received by tenant from subtenants—Subjects of lease developed and operated by landlord and predecessors of tenant—Landlord enforcing irritancy clause for non-payment of rent—Whether landlord unjustifiably enriched—Whether tenant entitled to recompense
A development corporation entered into a contract with a company in 1979 for the development and operation of part of a town centre owned by the corporation. The arrangement included a head lease between the corporation and the company and a sublease back in favour of the corporation. Rent payable under the sublease by the corporation was the greater of a fixed amount or an agreed percentage of rent received by the corporation under further subleases. In 1987 the corporation disponed the property and assigned its interest as subtenant under the sublease to another company for substantial consideration. In 1988 the first company irritated the sublease on the ground of non-payment of rent, and this irritation was upheld by the House of Lords. The company duly enforced the irritancy with effect from 3 June 1992.
The assignee company raised an action against the first company, seeking declarator that the parties had been partners in a joint venture arising from the 1979 agreement, as varied, the head lease and sublease, and the assignation of the sublease to the pursuers. The pursuers also sought payment of a sum in respect of their capital contribution as at 3 June 1992 and an accounting in respect of rents received by the defenders since that date and alternatively, failing declarator, they sought payment of a sum in respect of unjust enrichment arising from the irritancy, based upon the capitalised value of 22.468 per cent of rents payable in future, the right to which was formerly the pursuers under the sublease. The Lord Ordinary held, inter alia, that no partnership had been made out, that the circumstances did not disclose any case based upon unjustified enrichment, and that the defenders' preliminary pleas in law relating to res judicata and competent and omitted should be repelled. He accordingly dismissed the action. The pursuers reclaimed on the decision relating to the unjustified enrichment case and argued that redress on the basis of unjustified enrichment was appropriate, as in this case, even when a party was in breach of contract where (a) the contract was at an end; (b) the other party was enriched in that there was an excess over any loss sustained by that party and no correlation between that excess and any obligation of which the party in breach was relieved; and (c) that equities favoured the grant of the remedy. The defenders argued, inter alia, that the Lord Ordinary had erred in repelling their pleas relating to res judicata and competent and omitted.
Held, (1) that, although the basic principle of recompense was that where one party had been put to expense or disadvantage by reason of which a benefit had been created to the other party, the first party was in equity entitled to be recompensed, if the benefit or windfall was created because of the operation of a contractual term, the terms of the contract overrode equitable considerations as it was assumed that when parties contracted in the terms which they did, they accepted that they had to be bound by the strict terms of the contract; (2) that that rule was applicable to cases of irritancy because an irritancy clause was considered to be a just and reasonable provision which would be enforced according to its terms unless there were grounds for refusing enforcement because of oppression or abuse so that once that clause was held to be enforceable, it applied with full rigour and if, as a result, there should be some windfall to the landlord the tenant could not be allowed to recover that windfall by the equitable remedy of recompense; (3) (Lord Rodgerdissenting) that the windfall which had accrued to the defenders was one which accrued as a result of the contractual entitlement under the irritancy clause and because the receipt of that windfall was part of a contractual entitlement it did not constitute enrichment as that word was understood in the phrase "unjustified enrichment"; and reclaiming motion refused.
Opinion that what was being litigated in the previous case was whether or not a declarator of irritancy could be enforced, the argument, in the context of trying to prevent the irritancy clause being enforced being that the normal principles of enforceability failed to apply where the operation of the irritancy would result in a substantial capital loss to the tenant and, although that argument failed, there was nothing in the arguments presented to the House of Lords or in their Lordships' speeches which indicated that there would be any necessary bar on the tenants endeavouring to obtain equitable relief after the irritancy clause had been enforced, which they had been endeavouring to do and which was a different subject-matter to the previous action so that the Lord Ordinary had been correct to repel the defenders' pleas ofres judicata and competent and omitted.
Opinion (per Lord Rodger, dissenting) (1) that the defenders' possession was to a limited but important extent not the same as it would have been if the lease had not been granted but was instead enhanced by the free enjoyment of the pursuers' investment, and as the pursuers' action was concerned with this different kind of possession and with the very element which made the possession different, it was not excluded by the wording of the clause; (2) that even if the action was not excluded by the terms of the irritancy clause, the question still remained as to whether it should nonetheless be dismissed and it would be wrong to approach that issue simply by looking at the terms of the head lease and sublease as their existence and terms were explicable only against the background of the original scheme for the development of the shopping centre embodied in the 1979 agreement; (3) that, whatever might be the case when the whole circumstances had been explored at a proof, it was not possible to say, without a proof before answer being heard, that it would necessarily be inequitable to grant decree of recompense.
Observed (per Lord Sutherland) that if it was thought that there was some injustice arising from situations such as in this case, that injustice could only be cured either by an alteration of the law relating to irritancy clauses or an alteration of the rule that clear contractual terms prevent any equitable consideration such as recompense, which change could not be achieved by the court in the light of the authorities.
Observed (per Lord Rodger) that the purpose of any decree of recompense would be to make the defenders relinquish any enrichment to which they were not entitled, while leaving them free to enjoy their interest under the head lease to the same extent as was envisaged when they entered into the 1979 agreement.
Authorities considered.
Dollar Land (Cumbernauld) Limited brought an action against CIN Properties Limited for declarator that there had been a joint venture between them which was dissolved on 3 June 1992, for payment of approximately £4m in respect of the pursuers' capital contribution to the joint venture, for an accounting for rents received by the defenders since the date of dissolution, and, alternatively, failing such declarator of partnership, for payment of approximately £4m on the ground of unjust enrichment.
The case came before the Lord Ordinary (Coulsfield) on procedure roll on 17 January 1995 and three ensuing days.
At advising, on 16 February 1995 the Lord Ordinary dismissedthe action. (SeeDollar Land (Cumbernauld) Ltd v CIN Properties Ltd 1996 SLT 186).
The pursuers reclaimed.
Cases referred to:
BP Exploration Co (Libya) Ltd v Hunt (No 2)WLR [1979] 1 WLR 783
Bidoulac v Sinclair's TrUNK (1889) 17 R 144
Campbell Discount Co v BridgeELR [1962] AC 600
Cantiere San Rocco v The Clyde Shipbuilding and Engineering Co Ltd 1923 SC (HL) 105
Cassels v LambUNK (1885) 12 R 722
Chalmers' Trustee v Dick's TrusteeENR 1909 SC 761
CIN Properties Ltd v Dollar Land (Cumbernauld) LtdSC1992 SC (HL) 104
Devros (NV) Gebroeder v Sunderland SportswearSC 1990 SC 291
Dies v British and International Mining Finance Corporation LtdELR [1939] 1 KB 724
Dorchester Studios (Glasgow) Ltd v StoneSC 1975 SC (HL) 56
Edinburgh and District Water Trs v Clippens Oil CoUNK(1899) 1 F 899
Eurocopy (Scotland) plc v Lothian Health Board 1995 SLT 1356
Galbraith v Mitchenall Estates LtdELR [1965] 2 QB 473
Glasgow Ship Owners' Association v Clyde Navigation TrsUNK (1885) 12 R 695
Graham & Co v United Turkey Red CoENR 1922 SC 533
Hain Steamship Co v Tate & LyleUNK [1936] 1 All ER 597
Hannan v HendersonUNK (1879) 7 R 380
Lucas's Exors v Demarco 1968 SLT 89
McDouall's Trs v MacLeodSC 1949 SC 593
Megget v Scoular (1833) 11 S 661
Moncreiff v HayUNK (1842) 5 D 249
Morgan Guaranty Trust Co v Lothian Regional CouncilSC1995 SC 151
Murray v Seath 1939 SLT 348
Perth (Earl of) v Willoughby De EresbyUNK (1875) 2 R 538
Ramsay & Son v BrandUNKSC (1898) 25 R 1212
Stewart v WatsonUNK (1864) 2 Macph 1414
Stockloser v JohnstonELR [1954] 1 QB 476
Walker's Trs v MansonUNK (1886) 13 R 1198
Watson & Co v ShanklandUNK (1871) 10 Macph 142
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