Whitbread Group Plc V. Goldapple Limited
| Jurisdiction | Scotland |
| Judge | Lord Drummond Young |
| Docket Number | CA167/01 |
| Date | 19 November 2004 |
| Court | Court of Session |
| Published date | 19 November 2004 |
| OUTER HOUSE, COURT OF SESSION | |
| CA167/01
| OPINION OF LORD DRUMMOND YOUNG in the cause WHITBREAD GROUP PLC Pursuers; against GOLDAPPLE LIMITED Defenders: ________________ |
Pursuers: Glennie, QC:, Mure; Semple Fraser
Defenders: Moynihan, QC, Webster; Balfour & Manson
19 November 2004
[1]In 1997 the defenders granted a lease of subjects at 30 Bread Street, Edinburgh, in favour of the pursuers, who were then known as Whitbread PLC. The lease was dated 28 April and 12 May 1997, and was registered in the Books of Council and Session on 28 July 1997. Its duration is 35 years from 10 February 1997. The rent due under the lease is £55,000 per annum, with increases from 10 February 2002 onwards. Rent is payable quarterly in advance on 10 February, 10 May, 10 August and 10 November in each year. The subjects at 30 Bread Street consist of a public house, which is known as the Hogshead. They form part of a much larger building known as the Point Hotel, the remainder of which is owned and occupied by a company associated with the defenders.
[2]The lease contained detailed provisions relating to the payment of rent; these are discussed below at paragraph [21]. The payment of rent due on 10 May 2001 was not paid timeously. The reason was that the pursuers were at that time involved in the transfer of the assets of their Pubs and Bars Division to a company known as Fairbar Limited (later the Laurel Pub Company Limited). The Hogshead was operated by the pursuers' Pubs and Bars Division. The tenant's interest under the lease could not be assigned to Fairbar because the landlord's consent was required for any such assignation, but certain arrangements were put in place to deal with the management of the Hogshead. The transfer arrangements between the pursuers and Fairbar included the transfer of accounting and payment functions and staff, so far as relevant to the Pubs and Bars Division. While the accounting and payment functions were being transferred, all payments were temporarily halted. The pursuers' failure to pay the rent due on 10 May 2001 was raised at a meeting between the parties' representatives and law agents on 18 May 2001. The pursuers undertook to look into the matter. On 27 May a cheque for the amount of rent due was issued by Fairbar in favour of the defenders. It was sent to the defenders' bankers, the Royal Bank of Scotland at their head office, for crediting to the defenders' account. That cheque was cashed by the Royal Bank; it entered the clearing system on 31 May and cleared on 3 June. The monies were credited to the defenders' account. On the defenders' instructions, however, the Royal Bank returned the payment to Fairbar, the repayment being received by Fairbar on 11 June. On 31 May the defenders' agents, Balfour & Manson, had telephoned the pursuers' agents, Semple Fraser, to inform them that the payment would be returned because it had been received from Fairbar rather than the pursuers. Thereafter certain discussions took place between the parties' agents. The result of those discussions was in my opinion an agreement that the Fairbar cheque should be returned by the defenders and that thereafter the pursuers should be given an opportunity to make payment of the rent by another means (see paragraphs [17] and [19] below).
[3]The pursuers accordingly made further attempts to pay the rent due on 10 May. On 4 June they sent a cheque for the amount of the rent written in favour of the defenders to the Royal Bank for crediting to the defenders' account. On 5 June the pursuers noticed that the earlier Fairbar cheque had been cashed and that the monies had not been returned. Consequently the cheque of 4 June was cancelled. On 12 June, following the repayment of those monies, the pursuers issued a further cheque in favour of the defenders for the amount of the rent. Once again this was sent to the Royal Bank for crediting to the defenders' account. The account number provided by the pursuers to the Royal Bank was, however, inaccurate in one digit, and the Royal Bank did not credit the cheque to the defenders' account and subsequently returned the cheque (see paragraphs [29] and [30] below). Meanwhile, on 11 June, Balfour & Manson served a pre-irritancy notice on the pursuers, in terms of section 4 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985. The notice stated that, unless the rent together with interest was paid within 14 days of service of the notice the defenders as landlords would be entitled to terminate the Lease. Following that notice Semple Fraser raised a number of queries with Balfour & Manson. No reply was received to these until 29 June. On 29 June an irritancy notice was sent to the pursuers by Balfour & Manson; that notice bore to terminate the Lease with immediate effect. That notice was received by the pursuers on 5 July. On 6 July the pursuers attempted once again to make payment of the rent. They arranged for their bankers to make a CHAPS payment, a form of telegraphic transfer, to the Royal Bank. That transfer was returned by the Royal Bank on the defenders' instructions. This was noticed by the pursuers on 9 July, and on that date a further CHAPS payment was made. Once again that payment was returned by the Royal Bank on the defenders' instructions. On both of these occasions the correct number was used to designate the defenders' account.
[4]On 6 July 2001 the present defenders raised an action in Edinburgh Sheriff Court against the present pursuers for declarator of irritancy and removing. In that action, the present defenders averred that the present pursuers had incurred an irritancy of the lease as a result of the non-payment of the rent due in May 2001. Defences were lodged to the action. Thereafter the present action was raised. In the present action, the pursuers conclude for reduction of the two irritancy notices dated 11 June 2001 and 29 June 2001. They further conclude for declarator that the lease between the parties of the subjects at 30 Bread Street remains in full force and effect.
[5]The pursuers assert that the two irritancy notices were invalid on four distinct grounds. First, they contend that the pre-irritancy notice of 11 June 2001 was invalid because it did not comply with the terms of clause SIXTH of the Lease. That clause required that an irritancy notice should intimate the actual intention of the landlord to irritate the lease, whereas the notice sent by the defenders on 11 June merely mentioned the entitlement of the landlord to do so. Secondly, the pursuers contend that the rent due on 10 May 2001 was paid by the Fairbar cheque of 27 May 2001. Even after the monies in question were returned to Fairbar in order that the pursuers could effect the payment, the rent did not thereby become unpaid, and the defenders were accordingly disabled from invoking the irritancy provisions of the lease on the ground of non-payment. The pursuers' obligation to make a substitute payment arose under a distinct agreement which could, if necessary, be enforced by the defenders. Thirdly, the pursuers contend that in any event the cheque issued by them on 12 June 2001 discharged the rent payment. The procedures adopted in respect of that cheque accorded with the practice that had been adopted by the parties regarding payment of rent, and consequently the cheque was an effective discharge of the pursuers' obligation. Fourthly, the pursuers contend that in the whole circumstances of the case the defenders acted oppressively in seeking to irritate the lease. I will deal with the first three of those contentions in turn. I have reached the conclusion that the defenders' position is correct on the first issue, but that the pursuers are correct on the second and third. Consequently, after dealing with those issues, I will consider the practical effect that they have on the irritancy notices. The question of oppression is not strictly necessary for my decision, but I will deal with it thereafter, together with the associated issue of whether Fairbar or the pursuers was in possession of the premises.
1. Validity of pre-irritancy notice of 11 June 2001
[6]Clause SIXTH of the Lease deals with irritancy in the following terms:
"If the said annual rent or any part thereof shall be unpaid for Fourteen days after any of the days appointed for payment thereof... the Tenants shall at the sole option of the Landlords forfeit all right and title under these presents... Provided that (a) in the case of a breach, non-observance or non-performance by the Tenants which is capable of being remedied, the Landlords shall not exercise such option of forfeiture unless and until they shall first have given written notice to the Tenants... requiring the same to be remedied and intimating intention to exercise such option of forfeiture in the event of the said breach, non-observance or non-performance not being remedied within such period as may be stated in the notice (being such reasonable period as the Landlords shall reasonably determine which in the case or (sc "of") rent and other monetary payments shall be a period of fourteen days only) and the Tenants... shall have failed to remedy the same within said period...".
The pre-irritancy notice served by the defenders' agents, that of 11 June 2001 (tab 57), provided as follows:
"We hereby give notice in terms of Clause SIXTH of the Lease that the rent of £13,750 due on 10 May 2001 is still unpaid and in these circumstances would advise you that unless the said sum together with interest thereon from the due date (10 May) to the date of payment at 8.25% (being 3% above the base rate of The Royal Bank of Scotland plc) is paid within fourteen days of service of this Notice then our clients, Goldapple Limited, as Landlords will be entitled to terminate the Lease without further recourse to you".
"This Notice is given in terms of Clause SIXTH of the Lease and also in terms of Section 4 of the Law Reform...
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