Kingston Communications (hull) Plc+stargas Nominees Limited+stargas Nominees Limited V. Stargas Nominees Limited+convergys Emea Limited+kingston Communications (hull) Limited
| Jurisdiction | Scotland |
| Judge | Sir David Edward,Lord President,Lord Marnoch |
| Date | 17 December 2004 |
| Docket Number | A1576/03 |
| Court | Court of Session |
| Published date | 17 December 2004 |
| FIRST DIVISION, INNER HOUSE, COURT OF SESSION | |
| Lord President Lord Marnoch Sir David Edward, Q.C.
| A1576/03 A1590/03 OPINION OF THE COURT delivered by TEMPORARY JUDGE SIR DAVID EDWARD in RECLAIMING MOTIONS in the cases of (1) KINGSTON COMMUNICATIONS (HULL) plc Pursuers and Reclaimers; against STARGAS NOMINEES LIMITED First Defenders and Respondents; and CONVERGYS EMEA LIMITED Second Defenders and Respondents; and (2) STARGAS NOMINEES LIMITED Pursuers and Respondents; against KINGSTON COMMUNICATIONS (HULL) plc Defenders and Reclaimers: _______ |
Act: Keen, Q.C., Weir; Maclay Murray & Spens (Kingston)
Alt: Martin, Q.C., Higgins; Fyfe Ireland (Stargas): Webster; Shepherd & Wedderburn (Convergys))
17 December 2004
The factual and procedural context
[1]These reclaiming motions concern two parallel actions. The first is at the instance of Kingston Communications (Hull) plc ("Kingston") against Stargas Nominees Ltd ("Stargas") and Convergys (EMEA) Ltd ("Convergys"). The second action, to which Convergys is not a party, is at the instance of Stargas against Kingston. The points at issue in the two actions are essentially the same.
[2]After debate the Lord Ordinary dismissed Kingston's action and, subject only to determination of quantum, granted decree de plano in favour of Stargas. Kingston has reclaimed in both actions.
[3]The debate in the Outer House and the reclaiming motions in the Inner House were conducted on the basis of the pleadings and a limited number of documents. Some of the facts - in particular, some important dates - are not known or at least not admitted. The salient facts, so far as available, are as follows.
[4]In 1997 Kingston granted a Guarantee in favour of Stargas in respect of a Lease by Stargas of office premises in Edinburgh to a subsidiary of Kingston, Kingston SCL Ltd ("KSCL").
[5]In 2000 a German company Telesens AG acquired the whole share capital of KSCL, whose name was then changed to Telesens KSCL Ltd. On 26 June 2002 Telesens KSCL Ltd went into receivership. On 12 July 2002 the joint receivers changed the company name to TK Realisations Ltd.
[6]At some time "in or about July or August 2002" the receivers sold the business of TK Realisations Ltd to Convergys who took occupation of the subjects of the Lease. It is not clear when Stargas first became aware that Convergys had taken occupation of the subjects, but it appears that agents for Stargas participated in discussions with Convergys and the receivers about the possibility of an assignation of the Lease to Convergys.
[7]On 14 October 2002 the joint receivers sent a letter to ATIS Real Weatheralls Ltd ("ATIS") in London, apparently (though it is not stated) as agents of Stargas:
"As you are aware, Convergys EMEA are currently occupying the property at 5 Lochside Avenue under a licence of occupation from the Joint Receivers of TK Realisations Limited.
As agreed with Convergys EMEA, please find enclosed a cheque in the sum of £398,548.84 representing rental payments for the period 28 May 2002 to 27 November 2002.
Please note that payment of this rent merely constitutes forwarding on payments received from Convergys EMEA and the Joint Receivers are not adopting the lease and are acting without personal responsibility."
[8]On 21 October 2002 solicitors for Stargas wrote to the receivers by recorded delivery:
"We act on behalf of [Stargas], the Landlords under the Lease between [Stargas] and Kingston SCL Limited (now TK Realisations Limited (in receivership)) ... ('the Lease').
Your letter dated 14th October ... has been passed to us. The Receivers' cheque in the sum of £398,548.84 is acknowledged and accepted as payment of rent due under the Lease for the period 28th May to 27th November 2002. Please note that there continue to be arrears under the Lease in respect of service charge and insurance as previously intimated.
We note that you are indicating that you are not adopting the Lease. Notwithstanding your statement, on behalf of our said clients, we hereby call upon you, as Joint Receivers of TK Realisations Limited, formally to adopt the Lease.
We also note your reference to the fact that Convergys EMEA are currently occupying the above property under a Licence from the Joint Receivers. Please note that our said clients have not granted any consent to such occupation and as such TK Realisations Limited (in Receivership) is currently in breach of the alienation provisions of the Lease."
[9]On 22 October 2002 a solicitor, apparently then acting for the receivers, replied by email:
"I assume that the reference to adopting the lease means accepting personal responsibility for all of the lease obligations, past, present and future (until an assignation). The receivers will not be doing so.
I will be making Convergys aware of the position of your clients regarding the occupation of the premises."
[10]On 6 December 2002, the receivers sent a letter to ATIS in the same terms as their letter of 6 October enclosing a cheque for £206,206.92 "representing rental payments for the period 28 November 2002 to 27 February 2003". The cheque was not cashed.
[11]It appears that, in the meanwhile, Stargas had taken up the matter of Kingston's liability under the Guarantee, and Kingston contended that the Guarantee had lapsed. On 16 December, new solicitors for the receivers wrote to Stargas' solicitors advancing a number of arguments in support of that proposition. (That letter is not produced.). On 10 January 2003, Stargas' solicitors sent a long letter replying to those arguments and calling on Kingston (1) to make payment of current arrears of rent, insurance, common expenditure charge and interest, and (2) to execute a new Lease in the same terms as the existing Lease.
[12]Kingston, in its action, concludes for declarator, first, that Stargas has granted a lease in favour of Convergys
"as evidenced by occupation by [Convergys] of the subjects of lease and acceptance by [Stargas] from [Convergys] of rent for the period 28th May 2002 to 27th November 2002";
second, that, by granting that lease, Stargas has renounced the lease in favour of Kingston; and third, that, by virtue of the lease in favour of Convergys, Kingston's obligations under the Guarantee have been extinguished. (The third conclusion was amended at the Bar at the end of the hearing in the Inner House.)
[13]Stargas, in its action, concludes, first, for declarator that Kingston is obliged to comply with the obligations in the Guarantee and, in particular, (i) to make payment to Stargas of all sums due in respect of rent, service charge, insurance premiums and interest due in terms of the Lease between Stargas and KSCL, and (ii) to accept a lease of the subjects "for a period commensurate with the residue of the duration of the Lease ... , the said new lease to take effect from 22 October 2002". Stargas concludes, second, for payment of a sum said to be due as arrears and, third, for decree ordaining Kingston to accept a lease of the subjects "to take effect from 22 October 2002".
[14]After debate, the Lord Ordinary dismissed Kingston's action and granted decree in favour of Stargas in terms of its first and third conclusions.
The terms of the Lease and Guarantee
[15]The Lease and the Guarantee are, generally speaking, in terms appropriate to a lease of commercial property to a subsidiary company with a guarantee by the parent company of the subsidiary's obligations as tenant. The arguments turn primarily on Clause 7 of the Lease and Clause 6 of the Guarantee.
[16]Clauses 4.28.1 and 4.28.2 of the Lease require the Tenants not to assign the Lease nor to part with or share possession or occupation except with the prior written consent of the Landlords.
[17]Clause 7 of the Lease is an irritancy clause and, so far as material, provides as follows:
"If the ... Tenants (being a corporation) shall ... have a receiver ... appointed ... then ... it shall be in the power of the Landlords by notice to bring this Lease to an end forthwith without any declarator or process of law to that effect and to remove the Tenants from possession of the Premises, and repossess and enjoy the same as if this Lease had not been granted and that without prejudice to any other remedy of the Landlords in respect of any antecedent breach of any of the Tenants' obligations hereunder, and under reservation of all rights and claims competent to the Landlords in terms of this Lease (including for rent, insurance premiums and other monies due to the date of such removal and termination), which irritancy is hereby declared to be pactional and not penal and shall not be purgeable at the bar.
Provided always, however, that in the case of a breach, non-observance or non-performance by the Tenants which is capable of being remedied, the Landlords shall not exercise any such option to irritate this Lease unless and until they shall first have given written notice to the Tenants and to any Guarantors and any chargeholder whose interest has been notified to the Landlords ... Notwithstanding the foregoing in the case of the Tenants ... suffering a receiver ... to be appointed, the Landlords shall allow a ... receiver ... a period of six months in which to dispose of the Tenants' interest in this Lease and shall only be entitled to terminate this Lease if the ... receiver ... shall have failed to dispose of the Tenants' interest at the end of the said period provided always that the ... receiver ... shall within twenty one days of his appointment personally undertake by probative writing to implement the full responsibility for payment of the rent (whether due in respect of a period occurring before or after the date of ... receivership ... ) and for the performance of all other obligations of the Tenants under this Lease from the date of ... receivership ... to the date of disposal or termination of this Lease including settlement of any arrears of the rents and the performance of any outstanding...
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