Scottish Court of Session Decisions

[1] This action concerns the defenders' occupancy of subjects known as Cobblecrook Dye Works, East Stirling Street, Alva, Clackmannanshire ("the subjects"). The case was appointed to debate on two issues focused in the defenders' Note of Argument (No. 16 of process). In the course of the debate, Mr Wallace, who appeared for the pursuers, moved for leave to amend the pursuers' pleadings in order to meet the defenders' submissions on the first issue, and I indicated that I would grant time for the lodging of a Minute of Amendment. The parties were, however, agreed in inviting me to determine the other issue. In these circumstances I shall merely identify what the first issue was, but shall deal fully with the second issue.

[2] The pursuers' first two conclusions are for declarator that the defenders' occupancy of the subjects is regulated by and their rights and obligations pertaining thereto contained within -

or alternatively -

The third conclusion is for payment by the defenders to the pursuers of the sum of £180,000, as arrears of rent. The fourth conclusion, which proceeds on the hypothesis that there is no contract of lease between the parties, is for payment by the defenders to the pursuers of the sum of £205,625, as recompense for the defenders' occupation of the subjects.

[3] The first issue formulated in the defenders' Note of Argument involved an attack on the relevancy of the averments in support of the second conclusion. In Article 2 of the Condescendence the pursuers aver:

The letters in question are (i) the pursuers' offer of 14 March 1997 (No. 6/3 of process), (ii) the defenders' solicitors' qualified acceptance of 24 March 1997 (No. 6/4 of process), (iii) the pursuers' qualified acceptance of 29 May 1997 (No. 6/5 of process) and (iv) the defenders' solicitors' acceptance of 30 May 1997 (No. 6/6 of process).

[4] Mr Hayhow, for the defenders, submitted that in terms of the missives founded on by the pursuers the contract was conditional on the head landlords' consent to the sub-lease (see condition (6) of No. 6/3 of process and qualification 3.2.1 of No. 6/4 of process), but the pursuers had failed to make relevant averments that such consent had been obtained. The case based upon the missives was therefore irrelevant. The pursuers sought to meet that point by relying on a sequence of correspondence between them and the head landlords on the subject of consent to the sub-lease (Nos. 6/19 to 6/22 of process). Mr Hayhow submitted, however, that that correspondence did not purify the condition requiring the head landlords' consent for two reasons. In the first place, the original letter of consent, No. 6/19 of process, (which was framed in such a way as to require the pursuers' formal acceptance of its terms) was sent under cover of another letter (No. 7/2 of process, pages 1 and 2) which contained the following passage:

The pursuers make no averment that the head landlords' solicitors ever gave such confirmation. Secondly, Clause 2 of No. 6/19 of process contained the following condition attached to the head landlords' consent:

The pursuers make no averment that the draft sub-lease was submitted to and approved by the head landlords' solicitors. For those two reasons the pursuers' reliance on Nos. 6/19-22 of process did not constitute a relevant averment that the conditions in the missives of let requiring the consent of the head landlords had been purified.

[5] Although Mr Wallace advanced various submissions in response to Mr Hayhow's submissions on this issue, he ultimately recognised the force at least of the second part of the argument. He therefore sought leave to amend to address the question of the head landlords' solicitors' approval of the draft sub-lease. Mr Hayhow did not oppose that motion, and I indicated that I would allow the pursuers time to lodge a Minute of Amendment. In these circumstances I express no concluded view on the question of the effect of the reference in the covering letter (No. 7/2 of process) to the letter of consent being held as undelivered, but perhaps Mr Wallace will take the opportunity of giving further consideration to that matter as well.

[6] The second issue raised in the defenders' Note of Argument proceeded on the hypothesis that the parties' relationship in respect of the subjects was regulated either by the unexecuted draft sub-lease (Conclusion 1) or by the missives of let (Conclusion 2). The attack was directed against the pursuers' averments as to the amount of rent payable by the defenders. Those averments are in the following terms:

[7] The provisions of the draft sub-lease (No. 6/7 of process) relative to rent begin in Clause THREE (1) which provides that:

Clause ONE contains the following definitions:

Clause FIVE (1)(b) provides as follows:

[8] The Minute of Alteration founded on by the pursuers was entered into between the head landlords and the pursuers in April and May 1998 and registered in the Books of Council and Session in June of that year. Its terms narrated that it had been agreed between them that the rent payable with effect from 1 June 1995 should be at the rate of £50,000 per annum, and the pursuers bound themselves to pay rent at that rate from that date.

[9] The pursuers also make the following averments:

[10] Mr Hayhow's submission was that in terms of the draft sub-lease the rent was to be £45,000 per annum; the defenders' obligation to accept a reviewed rent was subject to clause FIVE (1)(b)(iii) which prohibited the pursuers from agreeing a reviewed rent without their prior written consent; there was no averment that the defenders had given such consent to the revised rent mentioned in the Minute of Alteration; the averments alleging an obligation on the defenders to pay the pursuers a rent of £50,000 per annum were therefore irrelevant. The pursuers could not overcome the difficulty by relying on the averment that the revised rent was agreed before the missives were concluded, because that averment was inconsistent with the requirement set out in paragraph (6) of Part II of the Schedule to the head lease (No. 6/1 of process), which required a revised rent to be recorded in a memorandum on the lease or in a separate memorandum "[as] soon as the revised rent has been agreed".

[11] In response to that submission Mr Wallace pointed to condition (5) of the initial offer to grant the sub-lease (No. 6/3 of process). That condition was in the following terms:

That condition was not qualified in the subsequent missives, and accordingly formed part of the concluded bargain. Its acceptance constituted, Mr Wallace submitted, the defenders' "prior written consent" to the revised rent of £50,000, as required by Clause FIVE (1)(b)(iii).

[12] To that submission, Mr Hayhow responded that acceptance of an undertaking that the first revised rent would not exceed £50,000 per annum was not consent to a revised rent of £50,000 per annum.

[13] In my opinion if the matter depended solely upon construction of the draft sub-lease the defenders' submissions would be well founded. By Clause THREE (1) the defenders undertook an obligation to pay rent initially at the rate of £45,000 per annum, and thereafter, after each date of review (as defined), to pay the revised rent (as defined). The definition of "date of review" in Clause ONE is confined to head lease dates of review occurring "within the Period of the Sub-Lease", i.e. after the date of entry. Revised rent is defined as meaning the rent as increased at a date of review (as defined). It seems to me to follow that a revised rent taking effect from 31 May 1995 is not a revised rent within the meaning of the sub-lease, because it is an increase effective at a date which is not within the period of the sub-lease. The fact that the revised rent was not recorded in the Minute of Agreement until 1998 cannot, in my view, alter the fact that it was a review with effect from a date prior to the date of entry under the sub-lease. Equally, the fact, if it be the fact as the pursuers aver, that the revised rent was actually agreed before the date of entry is, on that analysis, of no assistance to the pursuers. On a strict analysis, therefore, of the terms of the draft sub-lease, I would hold that the agreed rent of £45,000 would continue to be the rent payable under the sub-lease unless and until increased with effect from the first date of review falling after the date of entry.

[14] It seems to me, however, that that analysis would be inconsistent with the terms of condition (5) of the offer No. 6/3 of process. That provision, which in the subsequent missives the defenders tacitly accepted, seems to me to make it clear that it was contemplated by the pursuers and accepted by the defenders that the amount of rent to be paid by the defenders under the sub-lease would be affected by the outcome of the outstanding review under the head lease in respect of the head lease review date of 31 May 1995. I do not consider that Clause FIVE (1)(b)(iii) of the sub-lease can be read back as affecting that review, since the whole of Clause FIVE (1)(b) seems to me to be concerned with dates of review within the period of the sub-lease. I am therefore of opinion that the absence of an averment that the defenders gave prior written consent to the revised rent of £50,000 is not a fatal flaw in the pursuers' averments. Although I accept Mr Hayhow's submission that the defenders' acceptance in the missives of the undertaking that the revised rent would not exceed £50,000 per annum is not per se acceptance that the rent would actually be £50,000 per annum, I take the view that that provision of the missives, when taken with the pursuers' averment that the defenders were aware before conclusion of the missives that the revised rent had already been agreed with the head landlords, is sufficient to entitle the pursuers to proof before answer in respect of the averments about a rent of £50,000 per annum.

[15] In these circumstances I am not prepared to accede to Mr Hayhow's motion that I sustain the defenders' first plea-in-law, dismiss the third conclusion, and exclude from probation the averments in support of the claim for arrears of rent. Even if I had accepted Mr Hayhow's submissions as to the irrelevancy of the averments based on a rent of £50,000 per annum, I would not have dismissed the third conclusion. I would, instead, have regarded it as fair to allow the pursuers the opportunity to amend to reduce the sum sued for and to make averments based on rent of £45,000 per annum in support of the reduced claim.

[16] In the circumstances I shall allow the pursuers to lodge a Minute of Amendment within four weeks from the date of the debate, allow the defenders to answer the Minute of Amendment, if so advised, within three weeks thereafter, and put the case out By Order shortly after the expiry of the latter period for the purpose of discussing further procedure. I shall reserve the question of the expenses of the debate.