The Advice Centre For Mortgages Ltd V. Frances Mcnicoll
| Jurisdiction | Scotland |
| Judge | Lord Drummond Young |
| Neutral Citation | [2006] CSOH 58 |
| Date | 06 April 2006 |
| Docket Number | CA162/04 |
| Court | Court of Session |
| Published date | 06 April 2006 |
| OUTER HOUSE, COURT OF SESSION [2006] CSOH 58 | |
| CA162/04 | OPINION OF LORD DRUMMOND YOUNG in the cause THE ADVICE CENTRE FOR MORTGAGES LIMITED Pursuers; against FRANCES McNICOLL Defender: ________________ |
Pursuers: Wallace; McKay Norwell W.S.
Defenders: Barne; Warners
6 April 2006
[1] The present action relates to heritable subjects consisting of a shop situated at 4/5 Crighton Place, Edinburgh. The defender is the heritable proprietor of those subjects; her title to the subjects was registered in the Land Register on 25 March 2004. The previous proprietor of the subjects was a company called Thomas H. Peck Limited.
[2] The pursuers contend that they are the tenants of the subjects, and further that they have an option to purchase the subjects, which they have validly exercised. Their claim to be tenants proceeds on two alternative bases. First, they seek a declarator that the terms of a valid contract of lease are set out in a formal offer dated 29 November 1999 from agents acting on behalf of Thomas H. Peck Limited to the pursuers' agents and a formal letter dated 22 May 2000 from the pursuers' agents to Thomas H. Peck Limited's agents (the offer and letter being together referred to as "the Missives"). Secondly, they seek a declarator that a valid contract of lease, containing an option to purchase the subjects, is found in an unsigned lease together with schedules and a draft offer to purchase (referred to collectively as "the Lease"), those documents having been agreed, it is said, between the pursuers and Thomas H. Peck Limited on 13 October 2000. On the basis of either of the first two declarators, the pursuers further seek declarator that they are tenants of the subjects in terms of the Missives or alternatively the Lease. Thereafter, they seek declarator that they have an option to purchase the subjects at the price of £145,000 adjusted according to the published retail price index, and decree ordaining the defender to implement that option.
[3] The pursuers' claims are based on the terms of the Missives or alternatively the Lease. The Missives are averred to be as follows. On 29 November 1999 the Lints Partnership, acting on behalf of Thomas H. Peck Limited, sent an offer to Golds, who acted for the pursuers, in the following terms:
"On behalf of our client, Thomas H Peck Limited ('the Landlords') we hereby offer to lease to your client, The Advice Centre for Mortgages Limited ('the Tenants') ALL and WHOLE the subjects comprising 4 & 5 Crighton Place, Edinburgh ('the Subjects') and that on the following terms and conditions.
1. The Lease will commence on the date of entry which shall be on 1 December 1999 ('the date of entry').
2. The Lease of the subjects will be for a period of 10 years from the date of entry.
3. The initial rent payable by the Tenants to the Landlords will be £12,000 (£12,000) STERLING together with Value Added Tax thereon (if requested by the Landlords) per annum payable quarterly in advance as specified in the said Lease.
4. The Tenants shall have the option to purchase the subjects at the end of five years from said date of entry upon the basis figure of ONE HUNDRED AND FORTY FIVE THOUSAND (£145,000) STERLING together with appropriate percentage increase at the relevant period of time in the retail price index, from date of entry hereunder until payment of the purchase price in terms of this Condition.
5. The rent will be reviewed every five years on an upward basis only and in terms of the rent review provisions contained in the Lease aftermentioned.
6. The Lease being granted by the Landlords to the Tenants of the subjects (said Lease being referred to in the missives as 'the Lease') will be on the terms, conditions and others and subject to the restrictions and provisions of the draft Lease annexed and signed as relative hereto subject to the completion by reference to the missives of the parts left blank.
...
9. From and after the date of entry until the Lease has been executed by the parties, the terms of the draft Lease will, subject to the other terms of the missives of which this offer is part, regulate the terms of the Lease of the subjects
...".
The draft lease referred to in that letter was not produced. I was informed that it had proved impossible to find either the principal or any copy of it.
[4] The reply to the foregoing letter, written by Golds on behalf of the pursuers on 22 May 2000, was in the following terms:
"On behalf of and as instructed by our clients The Advice Centre for Mortgages Limited we hereby accept the offer dated 29th November 1999 made by you on behalf of your client Thomas H Peck Limited to lease to our clients ALL and WHOLE the subjects comprising 4 and 5 Crighton Place, Edinburgh and that on the terms and conditions as stated in your said offer but subject to the following qualifications:-
1. With regard to Condition 4 of your said offer the option to purchase will be exercised by the tenants submitting to the Landlords on or within four weeks prior to the fifth anniversary of the date of entry an offer in self proving manner in terms of the draft offer forming Part IV of the Schedule to the Lease with any blanks therein completed as appropriate and the Landlords shall be bound to accept in self proving manner an offer in the foregoing terms within seven days of receipt of same.
2. With regard to Condition 6 of your said offer the Lease to be granted will be on the terms and conditions and others of the draft Lease annexed and docquetted as relative hereto with revisals thereon in red, blue and green ink and with the draft option offer inserted as Part IV of the Schedule to the Lease.
...".
The letter is a qualified acceptance and therefore constitutes, according to the standard legal analysis of such documents, a counter offer which is itself open for acceptance. Condition 2 of the qualified acceptance refers to a draft lease with revisals in red, blue and green ink. That document was not produced.
[5] The pursuers aver that on 13 October 2000 the Lints Partnership sent Golds an engrossed lease for execution; the lease is said to have included three schedules and a draft offer to purchase as a fourth schedule. Those documents as a whole are referred to in the pleadings as "the Lease". A copy of the Lease was produced; the pursuers aver that they have been unable to locate the principal lease that was sent to their agents for execution. It was not averred that that lease had ever been executed, and the pursuers appeared to accept that it had not in fact been executed. The pursuers further aver that, notwithstanding any informality in the constitution of the Lease, Thomas H. Peck Limited gave them entry and occupation of the subjects on 1 December 1999 on payment by the pursuers to Thomas H. Peck Limited of the sum of £3,000, that being the first quarter's rental payment in advance. The pursuers assert that on taking entry and actual occupation of the subjects on 1 December 1999 they acquired a real right of lease in terms of the Leases Act 1449. The result, it is said, was that the Missives or alternatively the Lease became binding on singular successors of Thomas H. Peck Limited.
[6] If the Leases Act 1449 is to apply, the relevant lease must be in writing. The writing founded on by the pursuers is the Missives or alternatively the Lease. At this point the pursuers confront two obvious problems. First, the Missives were not in fact concluded by an unqualified acceptance; they remained in the form of an offer and counter-offer. Secondly, the Lease was not subscribed by the granters in terms of section 2(1) of the Requirements of Writing (Scotland) Act 1995. The pursuers deal with the first of these problems by claiming that the essentials of a lease were agreed in the two letters that comprise the Missives; I discuss this argument below at paragraphs [9]-[14]. In relation to the second problem, they aver that, notwithstanding that the Missives were never concluded and the Lease was never subscribed by the granters in terms of section 2(1), there was nevertheless a valid contract of lease in terms of section 1(3) and (4) of the 1995 Act. Subsections (3) and (4) of section 1 require that a party in the position of the pursuers should have acted or refrained from acting in reliance on the document founded upon. To that end, the pursuers aver that on taking entry, in reliance on the Missives or alternatively the Lease, and with the knowledge and acquiescence of Thomas H. Peck Limited, they carried out improvements to the subjects. Those improvements included shop front decoration and signs and internal fixtures, fittings, furnishing and decoration. The pursuers further aver that they started trading as a mortgage advisory service and began to build up a business connection at Crighton Place. They invested in the goodwill of their business at Crighton Place and paid rent in terms of the Missives or alternatively the Lease. They aver that if the defender, who is of course a singular successor of Thomas H. Peck Limited, withdraws from her obligations under the terms of the Lease they will lose the goodwill that they have built up at Crighton Place and will lose the opportunity to purchase the subjects in terms of the option.
[7] For the defender it is averred that the option to purchase the subjects only involved a personal right that the pursuers had against Thomas H. Peck Limited; such a right would obviously not be effective against a singular successor of that company. In response to that contention the pursuers make the following averments:
"Explained and averred that even if the option to purchase was only a personal right between the pursuers and THP Ltd... it is nevertheless binding upon the defender as a result of her bad faith. ... [T]he defender's husband was a director of the pursuers. He dealt with the matter of the Missives and the Lease while purportedly discharging his duties as a director of the...
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Analysis
...breach calls to mind the so-called “offside goals rule” in property law.66See, most recently, Advice Centre for Mortgages v McNicoll [2006] CSOH 58, 2006 SLT 591 and Gibson v Royal Bank of Scotland [2009] CSOH 14. While the rule's rationale and certain detailed questions of application rema......
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Options for the Offside Goals Rule
...to an unexercised option has been the topic of some debate.2626Cf Davidson v Zani 1992 SCLR 1001; Advice Centre for Mortgages v McNicoll [2006] CSOH 58, 2006 SLT 591. The argument that options should not be protected by the offside goals rule is that the holder of an unexercised option is o......