Scottish Property Investment Limited V. Scottish Provident Limited
| Jurisdiction | Scotland |
| Judge | Lord Mackay of Drumadoon |
| Date | 23 January 2004 |
| Docket Number | CA77/03 |
| Court | Court of Session |
| Published date | 23 January 2004 |
| OUTER HOUSE, COURT OF SESSION | |
| CA77/03
| OPINION OF LORD MACKAY OF DRUMADOON in the cause SCOTTISH PROPERTY INVESTMENT LIMITED Pursuer; against SCOTTISH PROVIDENT LIMITED Defender: ________________ |
Pursuer: Woolman, Q.C.; Burness, W.S.
Defender: Ross; Shepherd & Wedderburn
23 January 2004
[1]This action relates to subjects at 8 St Andrew's Square and 21 South St David Street, Edinburgh ("the Subjects"). The pursuer is the tenant of the Subjects by virtue of a lease in its favour. That lease was granted by the General Reversionary and Investment Company Limited and is dated 26 March and 1 April 1970. The landlord's interest in the lease is now owned by the defender.
[2]Clause SECOND of the lease is in the following terms:
"The subjects hereby let are let for the purpose only of banking and office premises in connection with the tenants' business of Bankers and Financiers and all matters necessary therefor or such purposes as the Landlords in their absolute discretion may from time to time approve and for no other purpose whatever unless with the consent in writing of the Landlords and the tenants shall not use or permit to be used the said subjects for any offensive, noisy, obnoxious trade, business, manufacture or occupation nor as a betting shop, hotel, club, billiards saloon, dance hall, funfair, amusement arcade, leisure centre nor for any purpose which may be or become a nuisance or annoyance or cause disturbance to the owners or occupiers of any adjoining or neighbouring properties nor to use or permit to be used the said subjects for any sale by action, exhibition, public meeting, or entertainment."
[3]Clause THIRD (22) of the lease is in the following terms:
"Not to assign transfer sub-let or part with or share the possession of the subjects or any part thereof without the previous consent in writing of the Landlords and in any event not to assign less than the lease of the whole of the leased premises PROVIDED that such consent shall not be unreasonably withheld in the case of a respectable and responsible sub-tenant or assignee AND to give notice in writing of any assignation transfer or sub-lease or devolution of the Tenants interest in the present lease and to produce the instrument of such assignation transfer or sub-lease or any grant of Confirmation Probate or Letters of Administration in any way relating to the subjects within one month after the execution or grant thereof to the Landlords and to pay a fee of three guineas for the registration thereof AND IT IS HEREBY AGREED that every permitted sub-lease of the leased premises or any part thereof shall contain obligations on the sub-tenants in the same form as those contained in this sub-clause with the substitution throughout of the words 'the superior landlords' for the words 'the landlords' and such additional and further obligations as the landlords may then require."
[4]The lease is for a period of 98 years ending on Whitsunday 2068.
[5]By letter dated 25 March 2003, solicitors, acting for the pursuer, sought the defender's consent to a sub-lease of the third and fourth floors of the Subjects (hereinafter referred to as 'the third and fourth floors') to the Scottish Human Services Trust. That letter was in the following terms:
"Dear Sir
MACDONALD ORR LIMITED
8 ST ANDREWS SQUARE, EDINBURGH
SCOTTISH PROVIDENT LIMITED
We act for Standard Property Investment Limited who are the tenants under the lease undernoted. Scottish Provident Limited are the Landlords.
Our clients have agreed terms with Scottish Human Services Trust to sub-let the third and fourth floors at 8 St Andrews Square, Edinburgh. We enclose the accounts for the period to 31 March 2002 incorporating the figures for the period to 31 March 2001. As you will appreciate the accounts to 31 March 2003 are not available.
We are also enclosing the form of draft sub-lease to be entered into in accordance with the heads of terms.
We understand that consent has already been requested based on less information than that contained in this letter.
However, we are of the view that the information contained in and submitted with, this letter is adequate for you to come to a decision.
We would highlight that Clause THIRD (Twenty two) of the Lease provides that your consent is not to be unreasonably withheld to such a sub-letting and we would point out that the other terms of the proposed sub-lease are all consistent with the terms of the head lease.
We can confirm that our clients will meet your reasonable legal and other expenses properly incurred whether or not the matter proceeds.
We have to advise you that our clients will suffer substantial loss if this transaction does not proceed and we therefore call upon you to consent to the proposed sub-letting within a period of 14 days from the date of this letter, failing which our clients will hold you in breach of contract. In the event that you do refuse consent, we would require detailed reasons with reference to the lease, for that refusal.
This letter will be founded on if necessary."
A copy of the form of draft sub-lease was enclosed with that letter.
[6]Clause 2 of the draft sub-lease provides that the pursuer should sub-let the third and fourth floors to the Scottish Human Services Trust ("the proposed sub-tenants") "subject to the same provisos, conditions and disclaimers in favour of the (pursuer) and where applicable the (defender), as are created in the Lease in favour of the (defender)". In terms of Clause 4 of the draft sub-lease, the proposed sub-tenants would be required to undertake:
".......
- not at any time to assign the sub-tenant's interest in the whole of the Premises without the consent of the (defender) and the (pursuer) (which consent of the (pursuer) shall not be unreasonably be withheld);
- not to use the Premises for any purposes other than as office premises."
[7]The defender's solicitors replied to the letter of 25 March 2003, by a letter of 31 March 2003. The letter of 31 March 2003 was addressed to the pursuer's solicitors and was in the following terms:
"Dear Sirs,
SCOTTISH PROVIDENT LIMITED
STANDARD PROPERTY INVESTMENT LIMITED
8 ST ANDREWS SQUARE, EDINBURGH
We act for Scottish Provident Limited. We confirm having received a copy of your letter of 25 March 2003 to our clients being formal application on behalf of your clients, Standard Property Investment Limited, for consent from our clients as landlords to sub-let part of the premises leased to your clients in terms of the Lease. Our clients have asked us to respond to your letter on their behalf.
We are aware of the terms of the alienation clause in the Lease which are as summarised by you in your letter. However, it is quite clear that the proposed use to which the part of the building to be sub-let to the sub-tenants would be put would amount to a departure from the use permitted by reference to Clause SECOND of the Lease in relation to which our clients have complete discretion. It is on this basis that our clients have instructed us to reject your clients' application amounting to a change of use of the premises.
It is, perhaps, also worth noting at this stage, that the requirement for landlord's consent to change of use of the premises to facilitate partial sub-letting was acknowledged by your clients in the context of the previous sub-lease granted by your clients to Environmental Resources Management Limited which was only granted under reservation of resolution of this and other matters to be resolved between our respective clients. Your clients also envisaged in the letter which they sent to Peter Coupe of Abbey National Investment Management on 15 November 2002 that they would require to obtain the consent of the landlord to the change of use of the premises to facilitate partial sub-letting.
Your clients' threat of legal proceedings is noted and it goes without saying that any such action will be strenuously defended."
[8]In the present proceedings the pursuer seeks declarator in the following terms:
"For declarator that (a) the defender, as the landlord under a lease granted by the General Reversionary & Investment Company Limited in favour of the pursuer and executed on 26th March and 1st April, 1970, unreasonably withheld consent to the pursuer's sub-letting part of the leased subjects to the Scottish Human Services Trust, in terms of the defender's agents' letter to the pursuer's agents of 31st March, 2003, and was thereby in material breach of sub-clause (22) of clause THIRD of the lease, and (b) the pursuer having by its agents' letter to the defender's agents of 13th May, 2003 exercised its right to rescind the lease on the ground of the defender's material breach, the lease is at an end."
[9]The case came before me for a debate, on the defender's first plea in law, a general plea to the relevancy and specification of the action. At the outset of his submissions, counsel for the defender moved me to sustain that plea-in-law and to dismiss the action. Counsel for the defender also submitted that if, contrary to that principal submission, I was minded to hold that the defender had acted unreasonably in withholding its consent to the proposed sub-lease, a proof would be required on the issue of the materiality of any such breach of contract. Counsel for the defender made clear that before any such proof could take place, the defender would wish to adjust its pleadings.
[10]As a further preliminary observation, counsel for the defender suggested that it would not be appropriate for any of the correspondence between the parties to be referred to during the debate. That observation was, however, difficult to reconcile with the provisions of Rule of Court 47.3, particularly in relation to the letters of 25 March 2003 and 31 March 2003, which I have quoted. Both of those letters are referred to in the pleadings of both parties. They are also included in the schedule of documents appended to the summons, in terms of...
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