Regus (maxim) Limited V. Bank Of Scotland Plc
| Jurisdiction | Scotland |
| Judge | Lord Bonomy,Lord President,Lord Wheatley |
| Judgment Date | 28 February 2013 |
| Neutral Citation | [2013] CSIH 12 |
| Court | Court of Session |
| Published date | 28 February 2013 |
| Date | 28 February 2013 |
| Docket Number | CA14/11 |
| FIRST DIVISION, INNER HOUSE, COURT OF SESSION | |
| Lord President Lord Bonomy Lord Wheatley | [2013] CSIH 12 CA14/11 OPINION OF THE LORD PRESIDENT in the cause REGUS (MAXIM) LIMITED Pursuer and Reclaimer; against BANK OF SCOTLAND PLC Defender and Respondent: _______ |
Alt: Dunlop QC, O'Brien; Shepherd & Wedderburn LLP
28 February 2013
Introduction
[1] The pursuer sues for decree ordaining the defender to release to the pursuer the sum of £913,172 held by the defender on behalf of Tritax Eurocentral EZ Unit Trust (Tritax) and TAL CPT (Land Development Partnership) LLP (TAL CPT); and, alternatively, for payment by the defender of that sum. The sum in question represents fit-out costs that were incurred by the pursuer when it took a sub-lease of a building at Maxim Office Park at the Eurocentral site in North Lanarkshire. The pursuer avers that the landlord of the subjects made a commitment to meet this sum as an incentive to the pursuer to take the sub-lease. The issue is whether a letter by the defender dated 12 February 2010 created a legal obligation on the part of the defender to release the sum sued for from funds held by it to meet the landlord's commitment.
[2] This is a reclaiming motion by the pursuer against an interlocutor of Lord Menzies in the Commercial Court dated 11 August 2011 by which he dismissed the action as irrelevant.
The scheme of investment
[3] The Eurocentral site lies partly within the former Lanarkshire Enterprise Zone. Development within the Enterprise Zone was encouraged by tax incentives and by a simplified planning regime. The general scheme of investment in an Enterprise Zone is that a developer sells the land to a syndicate of investors or, as in this case, to a unit trust. The developer constructs and finds tenants for the buildings. The developer and the landlord agree on a headline rent for the development. The headline rent is payable by the developer whether or not the developer finds a tenant. To secure the landlord's position, the developer creates a guarantee fund representing a certain number of years' rental income from which the developer pays the headline rent. It is therefore in the interests of the developer to find a qualifying tenant, that is to say a tenant that can meet strict financial requirements and take on the lease at the headline rent. If an incentive is given to an incoming tenant, such as fit-out costs or a rent-free period, the cost of it comes out of the guarantee fund. Once the development is built and let, the developer may then uplift the rent guarantee fund, or what remains of it, as profit.
The development
[4] The original developers of Maxim Office Park sold the development to Tritax. Tritax funded its purchase in part with a loan from the defender. TAL CPT was employed as development manager, in effect fulfilling the role of developer. Rent and project cost guarantees were provided through TAL CPT to Tritax. Sums representing the guarantees were deposited with the defender.
[5] The operation of the guarantee accounts was governed by a Facility Agreement between Tritax and the defender. The defender had sole signing rights for the guarantee accounts. Payments could be made only with the defender's permission. The Facility Agreement specified certain events of default. These included insolvency or a failure to make payment when due. On the occurrence of an event of default on the part of Tritax, the defender was entitled inter alia to apply the funds in the guarantee account to payment of the sums owed to it by Tritax (cl 24.2.5).
The reclaimer and HUB
[6] The pursuer was incorporated to take a lease of part of the development. It was not a qualifying tenant in terms of the rent guarantee agreement between TAL CPT, Tritax and the defender. It was therefore arranged that TAL CPT HUB Company Limited (HUB) would be interposed as head-tenant, and that HUB would grant a sub-lease to the pursuer.
The capital contribution
[7] During negotiations, Tritax agreed to meet the pursuer's fit-out costs. The payment to the pursuer to meet these costs was referred to as "the capital contribution." TAL CPT, Tritax and the pursuer discussed a number of proposals regarding the timing of and the mechanism for the payment. The defender was involved in these negotiations.
[8] At this time Maclay Murray and Spens LLP (MMS) acted for Tritax, TAL CPT and HUB. On 21 April 2009, MMS e-mailed the pursuer's solicitors. MMS said that their clients' position was "dictated and much measured by their funders' requirements." Payment of the capital contribution could be made against invoices as this was acceptable to their funders in other lettings.
[9] There was a proposal for the capital contribution to be put in escrow or joint accounts with the defender. On 5 May 2009, in an e-mail to the chief executive of TAL CPT, Mr Norman Smith of MMS said that he would speak to Mr Matthew Reilly, an associate director of the defender, to firm up on what he would agree on the "escrow point." On 8 May 2009 in an e-mail to the pursuer's property agents, to MMS and to the property agents for Tritax and HUB, Karen Campbell of Tritax said:
" ... the bank would like to simplify matters and issue a letter of confirm (sic) that ... [the then amount of the capital contribution] is on deposit. They feel to (sic) that opening an account for a period of 8 weeks is not worthwhile."
[10] On 30 July 2009 in their note of "revised terms" the pursuer's solicitors still contemplated that a joint account would be set up. This was their proposal:
"The capital contribution ... will be placed on joint deposit account on the date of entry ...
The deposit account will be held in the names of ... [solicitors] for Regus [sc the pursuer] and MMS for TAL CPT."
[11] On the same day, TAL CPT said that the capital contribution structure appeared to be fine, as long as the defender was happy with the deposit account.
[12] However, on 3 August 2009, by e-mail to TAL CPT and the defender, among others, MMS said:
"We have made it clear that the deposit will not be separately held in joint names but will be dealt with by way of a letter from the Bank as in previous cases confirming that funds are available and following conclusion of missives can be drawn down during the fit-out period ... "
[13] On 5 August 2009, by e-mail to the pursuer's solicitors, MMS said:
"With regard to the fit-out contribution this is governed by the bank and they will grant a letter as previously outlined and as has been agreed with all other affected tenants".
[14] On 11 August 2009, MMS e-mailed the following redacted letter to the pursuer's solicitors. The letter had been used for another lease in the same development. It had been sent by Mr Reilly to MMS:
"20 October 2008
Dear Sirs,
TAP CPT Land Development Partnership LLP (TAL CPT)
We understand that Heads of Terms have been agreed with between (sic) TAL CPT and for the lease of the unit at Maxim.
It may assist the proposed tenant to have confirmation from us that, on behalf of the landlord (Tritax Eurocentral EZ Unit Trust) and TAL CPT, we hold the sum of £ to meet the landlord's commitment to fit-out costs. These funds will be released in accordance with the drawdown procedure agreed between the parties, whereby the proposed tenant's contractor will submit fortnightly certificates.
This is subject always to agreement of wider commercial terms with the incoming tenant ... "
[15] On 18 August 2009, Mr Douglas Smith of the property agents for Tritax and HUB e-mailed the property agents for the pursuer as follows:
"Have alook [sic] at the words below and let me know if this, together with a BoS letter will be sufficient ...
The entire purchase price is held by BoS in blocked accounts with an ability for funds to be drawn down for specified purposes only. These specified purposes include all agreed development cost [sic] which covers tenant incentives.
Thus, whilst Regus will be looking to TAL CPT ... to provide the incentives package, this is procured from the BoS accounts with the consent of [Tritax] ... "
[16] On 21 August 2009, the property agents for Tritax and HUB e-mailed Mr Reilly (tab 28). MMS, Tritax and TAL CPT were copied in. The e-mail said:
" ... There has been considerable discussion whether Regus required any further security in relation to the developers capital contribution. Further information has been provided to Regus to explain how the overall project is funded. We have also exhibited the style of letter which Matthew [sc Mr Reilly] has previously provided in support of other tenant proposals eg [sic] and suggested that we are willing to request that a similar letter be obtained in relation to the proposed Regus letting. They have confirmed that a letter in these terms will be satisfactory ... "
[17] On the same day, the pursuer's solicitors e-mailed, among others, the property agents for Tritax and HUB noting that:
"Just to highlight, Regus have confirmed that they are willing to accept that the contribution isn't held on joint deposit ... "
A new note of "revised terms" was attached. The provision that the deposit account for the capital contribution would be held in the names of the solicitors for the pursuer and the solicitors for TAL CPT was deleted. Instead, the note provided that:
"On the date of entry, a letter will be delivered from the Bank of Scotland substantially in terms of the letter attached."
This is obviously a reference to the redacted letter.
The agreements to lease and sub-lease
[18] On 23 September 2009, MMS e-mailed to the defender's solicitors a draft offer from HUB to sub-lease to the pursuer. On the date of entry, defined as being ten working days after certain building works (cl 1.15), HUB, as head tenant, was to "deliver the validly executed Bank Letter" (cl 16.9). The Bank Letter was defined as "a letter from Bank of Scotland plc in the form set out at Part 16 of the...
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