Stv Central Limited Against Semple Fraser Llp (in Liquidation) And Cbre Limited
| Jurisdiction | Scotland |
| Judge | Lady Clark Of Calton,Lord Brodie,Lady Paton |
| Neutral Citation | [2015] CSIH 35 |
| Court | Court of Session |
| Published date | 12 May 2015 |
| Year | 2015 |
| Date | 12 May 2015 |
| Docket Number | CA151/12 |
EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
[2015] CSIH 35
CA151/12
Lady Paton
Lord Brodie
Lady Clark of Calton
OPINION OF LADY PATON
in the cause
STV CENTRAL LIMITED
Pursuer;
against
SEMPLE FRASER LLP (in liquidation)
Defender and reclaimer;
and
CBRE LIMITED
Third party and respondent:
Pursuer: Non-participating party
Defender and reclaimer: A Young QC, Gardiner; DWF LLP
Third party and respondent: Connal QC (sol adv); Pinsent Masons LLP
12 May 2015
Introduction
[1] The issue in this reclaiming motion is whether the defender has pled sufficient relevant and specific averments against the third party such that a proof before answer should be allowed. After a debate, the Lord Ordinary (Lord Woolman) decided that the defender had failed to do so, and dismissed the action so far as directed against the third party. The defender now reclaims.
Background
[2] The events leading to the present litigation are summarised by the Lord Ordinary as follows:
“[1] This case arises out of an error in a rent review clause in a lease. The defender has admitted liability for the error and paid a substantial sum to settle the pursuer’s claim. It now seeks a contribution from the third party. The issue came before me for discussion on the Procedure Roll. In seeking dismissal of the claim, the third party submitted that the defender had not made out a relevant claim under section 3(2) of the [Law Reform (Miscellaneous Provisions) (Scotland) Act 1940]. The defender maintained the contrary position. It invited me to allow a proof before answer.
[2] Between about 2003 and 2006 a consortium of companies carried out a commercial development at Pacific Quay, Glasgow. STV Central Ltd (‘STV’) decided to relocate there from its former premises at Cowcaddens. It instructed Semple Fraser, solicitors, and CBRE Ltd (formerly CB Richard Ellis Ltd), surveyors, to act on its behalf in securing a lease of new premises at Pacific Quay. Negotiations about the heads of terms commenced in 2003. The lease for the new premises was executed in May 2006.
[3] The landlord agreed to STV’s request to fit out the new premises to a higher specification than was normal for that type of building. The extra cost was reflected in the rent, which was split into two elements: (a) the initial rent, and (b) the enhanced rent. Clause 1.1.13 set out a formula to calculate the enhanced rent over the 20 year period of the lease:
‘subject to review and compounded (upwards only) at each successive anniversary (“the Relevant Date”) of the Date of Entry, according to the formula R = I x A/B where R is the Enhanced Rent payable from and after the Relevant Date, I is the Enhanced Rent payable prior to the Relevant Date, A is the RPI for the date two months before the Relevant Date … and B is the RPI for the date two months before the Date of Entry.’
[4] The effect of the RPI formula was to increase the sum payable in an exponential manner. If, for example, the retail prices index increased at the rate of 3 per cent each year, STV would have been liable to pay an annual rent of £100 million in 2025. It only became aware of the true effect of the RPI formula in November 2009. On the advice of senior counsel, it decided against raising an action for rectification. Instead it entered into negotiations with the landlord to attempt to resolve maters. Following mediation in March 2012, the landlord agreed to insert a new rent formula into the lease. In return, STV became liable to pay various sums to the landlord.
[5] STV raised the present action for professional negligence against the defender shortly before Christmas 2012. It sought compensation for the losses it had incurred on the basis of breach of contract and delict. In February 2013, the defender admitted liability. Subsequently it lodged a substantial tender, which STV accepted in July 2013. Accordingly the litigation is now between the defender and CBRE.”
Rent review clauses
[3] The first rent review clause, Clause 1.1.13, which deals with the enhancement of rent as a result of the higher specification of the finish of the premises, is quoted in paragraph [3] of the Lord Ordinary’s opinion (above). “RPI” is defined in Clause 1.1.41.
[4] The standard rent review clause (unconnected with the higher specification of the finish of the premises) is Clause 3, which extends to several pages. It begins as follows:
“3 RENT REVIEW PROVISIONS
3.1 Review date
The term ‘review date’ for the purposes of this Clause shall mean (subject to the provisions of Clause 3.8 hereof) 29 March in the years 2011, 2016 and 2021 and the expression ‘the relevant review date’ shall be construed accordingly”
What follows are detailed provisions governing the standard rent and rent review operating independently of the provisions for the enhanced rent.
The defender’s request to the third party for advice and assistance in relation to the RPI wording
[5] The defender requested the third party’s advice and assistance in relation to the wording and working of the RPI provision in Clause 1.1.13. Details of the exchange between the defender and the third party are contained in e-mails referred to and quoted in Answer 5 of the defences. The main parts of that exchange were as follows:
9 March 2004:
10.03 Simon Etchells (defender) asked Philip Reid (third party) “Can you comment on the RPI wording and the CAT A enhanced rent review point I make?”
11.38 Simon Etchells (defender) sent e-mails to both STV and Philip Reid (third party) saying “Enhanced rent – I think that the RPI provisions work but I ask that CBRE [third party] look at them”.
25 March 2004:
Keith Hutchison (third party) provided comments on the rent review provisions, focusing on Clause 3. He did not address the wording of the RPI provision.
30 March 2004:
Philip Reid (third party) sent a copy of Keith Hutchison’s comments by e-mail to Joanna Campbell-Smith (defender) adding “I am still waiting for one of my colleagues to let me know the new RPI wording, although most seem happy to use RPI”.
5 April 2004:
Joanna Campbell-Smith (defender) inquired of Virginia Beckett (third party) “… have your rent review colleagues yet signed off on the RPI wording in the lease?”
7 April 2004:
Virginia Beckett (third party) replied “RPI – we are happy in principle with the RPI wording.”
7 April 2004:
Joanna Campbell-Smith (defender) sent an e-mail to Virginia Beckett (third party) stating:
“On RPI, the real issue here is a commercial one, as to exactly how the RPI increase should work and be applied. There are various possible scenarios:-
- We have said that the RPI increase is only to be applied 5 yearly;PQ are resisting this;
- If it is to be applied annually, should the increase be calculated each year by reference to the base rent, or
- By reference to the rent as increased in the previous year?
My reading of [Shepherd & Wedderburn’s] drafting is that they are looking for the third option, but could you let me have your/your rent review colleague’s views on what we should be recommending to [STV]?”
It is thereafter averred in Answer 5 that “[o]ther than some further discussion on 5 May 2004 regarding whether the indexed increase would be applied annually or five yearly, CBRE provided no further advice to the defender on the working of the RPI provision within the Enhanced Rent definition”. Accordingly there appears, on the pleadings, to have been no direct response to that final question from the defender.
The defender’s pleadings
[6] In its defences to the action against it by STV (an action which has been settled, as set out in paragraph [5] of the Lord Ordinary’s opinion), the defender offers to prove inter alia that:
- “In about January 2003 the defender was instructed by [STV] in connection with securing a lease for premises at Pacific Quay.The third party was instructed by the pursuer to act as their surveyors in the same project.It is implicit when a professional team of advisers is instructed on such a development that they will co-operate with and respond to queries from other professional advisers within the team.In particular where chartered surveyors employ a specialist in rent reviews it is expected that legal advisers charged with drafting rent review provisions will seek assistance from such specialists.The defender and third party were instructed by [STV] to negotiate and finalise a lease with the Consortium …” (Answer 3).
- The defender did in fact seek the third party’s advice and assistance on the wording of the RPI clause, all as set out in the e-mail exchange noted in paragraph [5] above (Answer 5).
- The defender gave express intimation to STV that it (the defender) was seeking the third party’s advice and assistance about the wording of the RPI provision:see the e-mail of 11.38 of 9 March 2004, quoted in paragraph [5] above (Answer 5).
- The third party did not, on the defender’s averments, reject the request for advice and assistance, by, for example, sending both STV and the defender an e-mail pointing out that the wording and working of the rent review and the RPI provision were matters for lawyers.On the contrary, on the averments, by e-mail dated 25 March 2004, Philip Reid (third party) provided specific advice from the third party’s rent review specialist Keith Hutchison in relation to Clause 3.In that e-mail, Mr Reid added that he was “still waiting for one of [his] colleagues to let [him] know the new RPI wording, although most seem happy to use RPI”, thereby implicitly accepting that it was appropriate for the third party to advise and assist the defender and (indirectly) the client STV in relation to the working and wording of the RPI provision.(Answer 5).
- The last word from the third party to the defender in relation to the working and wording of the RPI provision was, on the averments, that the third party was “happy in principle with the RPI wording” (Answer 5).
- Thereafter the wording of the RPI...
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