Warren James (jewellers) Limited V. Overgate Gp Limited
| Jurisdiction | Scotland |
| Judge | Lord Drummond Young |
| Neutral Citation | [2005] CSOH 142 |
| Date | 09 November 2005 |
| Court | Court of Session |
| Published date | 09 November 2005 |
| OUTER HOUSE, COURT OF SESSION [2005] CSOH 142 | |
|
| OPINION OF LORD DRUMMOND YOUNG in the cause WARREN JAMES (JEWELLERS) LIMITED Pursuers; against OVERGATE GP LIMITED Defenders: ________________ |
Act: MacColl; Archibald Campbell & Harley, W.S.
Alt: Mackenzie, Solicitor; Pinsent Masons
9 November 2005
[1]The defenders are the general partner of and trustee for Lend Lease Overgate Partnership, a limited partnership. As such they are the heritable proprietors of the Overgate Shopping Centre in Dundee. The pursuers are the tenants of Unit L31 in the Centre by virtue of a lease between the parties dated 25 November and 18 December 2000 and registered in the Books of Council and Session on 17 January 2001. The pursuers trade as retailers of jewellery, giftware and accessories as defined in clause 3.13.1 of the Lease. The Lease is for 15 years from 29 September 2000.
[2]The pursuers have raised proceedings for declarator that the defenders are in breach of one of the terms of the Lease, clause 4.3, and for damages for the alleged breach of that clause. Clause 4.3 forms part of the Landlord's obligations under the Lease. The relevant provision is as follows:
"4.1 The Landlord binds and obliges itself as follows:-
...
4.3 Exclusivity - For so long as the said Warren James (Jewellers) Ltd. is the Tenant under this Lease, not in respect of any first letting (which means the first time the Landlord lets the Lettable Unit in question and not in respect of any subsequent lettings) of any Lettable Unit to lease any such Lettable Unit (other than the Premises and two other Lettable Units only) with its Permitted Use having specified as its principal trade or business the retail sale of jewellery".
The definitions clause in the Lease, clause 1.1, defines "Landlord" as including assignees and other successors in title, and defines "Lettable Unit" as any separate unit of accommodation within the Centre which is let or intended by the Landlord to be let.
[3]It was a matter of agreement between the parties that two other units within the Overgate Centre had been leased to other jewellery retailers, who continued to trade from the premises let to them. The pursuers aver that the reference in clause 4.3 to two other Lettable Units reflected the parties' discussions at about the date of the Lease that two other jewellery retailers would be permitted to trade from units within the Centre.
[4]The pursuers' averments relating to the circumstances giving rise to the present action are as follows. They began to trade at the premises let to them on 10 November 2000, and from November 2000 until approximately January 2002 they traded successfully from those premises. The pursuers operate a chain of 122 jewellery retail stores throughout the United Kingdom, and are the country's largest independent retail jeweller. One of their direct competitors is a company known as HPJ UK Ltd., who operate in the same segment of the retail jewellery market. On 9 January 2002 the pursuers' agents received confirmation from the defenders' agents that the defenders had leased a unit at the Overgate Centre to HPJ. That let, it is said, was contrary to the defenders' obligations under clause 4.3 of the Lease. HPJ began trading in about January 2002, and since then the pursuers had suffered loss and damage in consequence. There had been a downturn in turnover at the pursuers' premises in the Centre which, the pursuers claim, was caused solely by competition from HPJ.
[5]On the basis of the foregoing averments, the pursuers conclude for declarator that the defenders are in breach of the terms of clause 4.3 of the Lease. The terms of the declarator are not clearly expressed, largely because they largely follow the wording of clause 4.3, which is itself badly expressed. Nevertheless, the essence of the pursuers' contention is that in about January 2002 the defenders leased a Lettable Unit to a third party, that being a first letting in terms of clause 4.3 that was not permitted by the clause, where the permitted use under the new lease specified that the tenant's principal trade or business was the retail sale of jewellery. The pursuers further conclude for damages amounting to £400,000 in respect of the defenders' breach of contract, but the present opinion is not concerned with that part of their claim.
[6]The defenders admit, in effect, that a unit in the Overgate Centre has been leased to HPJ. They do not admit that that company is a direct competitor of the defenders, but it was made clear in the course of the debate that it was not disputed that, on the pursuers' construction of clause 4.3, the lease to HPJ was in contravention of that clause. The defenders do, however, dispute the pursuers' construction of the clause. I accordingly allowed parties a debate on the issues raised in their written notes of argument; those issues related to the construction of clause 4.3. The defenders have taken steps to convene their former agents as third parties, but it was a matter of agreement that the debate should proceed despite the existence of the third party proceedings
Arguments
[7]The argument for the defenders was that clause 4.3 was a form of clause typically found in a commercial lease of a unit in a modern shopping centre. It must accordingly be regarded as inter naturalia of such a lease, and thus was a real condition binding on singular successors of the landlord. Reference was made to the Stair Memorial Encyclopaedia, volume 13, paragraphs 239 and 240, Rankine on Leases, page 478, Davie v Stark, 1876, 3 R 1114, Optical Express (Gyle) Ltd v Marks & Spencer PLC, 2000 SLT 644, and Bisset v Magistrates of Aberdeen, 1898, 1 F 87. This had two consequences. First, because it was binding on singular successors, such a real condition required to be clear and unambiguous in order to be enforceable. If, therefore, two alternative interpretations of the clause could be advanced, it was invalid and unenforceable. Secondly, in construing a real condition affecting the use of land it was impermissible to have regard to extrinsic evidence. As authority for both of those propositions reliance was placed on the well-known decision of the House of Lords in Anderson v Dickie, 1915 SC (HL) 79, in particular statements of the law by Earl Loreburn at 80, Lord Kinnear at 82-83 and Lord Dunedin at 89. Clause 4.3 was open to two interpretations. The pursuers contended that it prohibited any first letting of a Lettable Unit to a person whose principal trade was the retail sale of jewellery other than the pursuers and two other, existing, lets. Nevertheless the critical part of the wording, "other than the Premises and two other Lettable Units only", could also mean that all that was prohibited was two further first lettings following the lease to the pursuers; thus five lets to jewellers were permitted, not three. The latter interpretation, it was submitted, was more probable, in that clause 4.3 formed part of the landlord's obligations, which looked to the future rather than the past, and its own wording also looked towards the future. Consequently only future lettings were affected, not lettings that had been granted in the past. On that basis that had been no breach of clause 4.3 as a result of the lease in favour of HPJ. At the very least, the meaning of the clause was ambiguous, and it was therefore unenforceable. Finally, the pursuers sought to rely on discussions at about the time when the Lease was granted, but reliance on such evidence was impermissible because clause 4.3 imposed a real condition that restricted the use of land. The pursuers' case was accordingly irrelevant, and the action should be dismissed.
[8]For the pursuers, it was argued that the meaning of clause 4.3 was clear on the ordinary construction of its terms. Its obvious meaning was that the landlord obliged itself not to let any units in the Centre as jewellery outlets other than the premises let to the pursuers and two other units. The present tense was used in the clause; the landlord's obligations under the Lease were introduced with the expression "The Landlord binds and obliges itself as follows". The natural meaning was accordingly to comprehend both past and future lettings. The court should not be assiduous to search for ambiguities: Melanesian Mission Trust Board v Australian Mutual Provident Society, [1997] 2 EGLR 128, per Lord Hope of Craighead at 129. It should rather than look at the wording used, according to its ordinary meaning, and consider whether that was sufficiently clear. If it was, that was an end of the matter, and it was not necessary to have regard to extrinsic evidence as an aid to construction: City Wall Properties (Scotland) Ltd v Pearl Assurance PLC, 2004 SC 214, at paragraphs [22]-[23]. If there were such an ambiguity, however, it was permissible to look to extrinsic evidence. That was so even though the clause formed part of a lease and restricted the use of property. The defenders' argument conflated the rules relating to real burdens in dispositions, feu contracts and other titles to land with those relating to real conditions in leases. In the latter case, it was permissible to have regard to extrinsic evidence if that were necessary to explain an ambiguity in the wording of the condition: Rankine, Leases, pages 98 and 109; Paton & Cameron, Landlord and Tenant, page 90; McBryde, Contract, 2nd...
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Warren James (jewellers) Limited V. Overgate Gp Limited
...of the defenders: see per Lord Drummond Young in Warren James (Jewellers) Ltd. v. Overgate GP Ltd. (unreported 9 November 2005, [2005] CSOH 142) at paras.[16]-[17]. The point was not referred to on appeal (unreported 15 February 2007, [2007] CSIH 14). That case involved the same parties and......
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