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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Co-Operative Wholesale Society Ltd v Ravenseft Properties Ltd & Anor [2001] ScotCS 176 (4 July 2001)
URL: http://www.bailii.org/scot/cases/ScotCS/2001/176.html
Cite as: [2001] ScotCS 176
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OUTER HOUSE, COURT OF SESSION

CA41/14/00

 

 

 

 

 

 

 

 

 

 

OPINION OF LORD MACFADYEN

in the cause

CO-OPERATIVE WHOLESALE SOCIETY LIMITED

Pursuers;

against

(FIRST) RAVENSEFT PROPERTIES

LIMITED, and (SECOND) DOUGLAS SHELF SEVEN LIMITED

Defenders:

 

________________

 

 

Pursuers: Ferguson, Q.C.; Dundas & Wilson, C.S.

Defenders: Abercrombie, Q.C., Di Emidio; McClure Naismith

4 July 2001

Introduction

[1] In this action the pursuers seek rectification of a Minute of Variation and Agreement entered into between them and the first defenders in 1993, by which a sub-lease of a supermarket in Whitfield, Dundee, was varied. The contractual history is of some complexity, and it is convenient to begin by summarising it.

[2] The second defenders are the tenants of the shopping centre development in Whitfield of which the supermarket forms part. That development was built on land which was let by the Corporation of the City of Dundee to Score Property Developments Limited by Lease ("the Lease") dated and recorded in 1971 (No. 6/1 of process). The tenant's interest in the Lease was assigned by Score Property Developments Limited to the first defenders by Assignation dated later in 1971 (No. 6/2 of process), and then again assigned by the first defenders to the second defenders by Assignation dated in 1994 (No. 6/3 of process). The Lease has been varied on a number of occasions, but it is unnecessary for present purposes to set out the details of those variations.

[3] The first defenders sub-let the supermarket to Johnston's Stores Limited by Sub-Lease ("the Sub-Lease") dated 1 and 11 December 1972 (No. 6/8 of process). By Assignation dated in 1997 (No. 6/9 of process) Johnston's Stores Limited assigned their interest as sub-tenants to the pursuers. Prior to that assignation, the Sub-Lease had been varied on two occasions, but only the second variation is material for present purposes. That variation was effected by a Minute of Variation and Agreement ("the Minute of Variation") between the first defenders and the pursuers dated 14 July and 19 August 1993 and registered in the Books of Council and Session on 3 September 1993 (No. 6/11 of process).

[4] The position therefore is (a) that at the date of the Minute of Variation the first defenders were the tenants in the Lease and the landlords in the Sub-Lease, and the pursuers were the tenants in the Sub-Lease; and (b) that at present the second defenders are the tenants in the Lease and the landlords in the Sub-Lease, while the pursuers remain the tenants in the Sub-Lease.

[5] Clause (FIFTH) of the Sub-Lease provided that the premises were let "for use only for the retail trade or business of a supermarket primarily for the sale of food". Clause (SIXTH) was in inter alia the following terms:

"The Tenants shall take possession of and use and occupy the premises for the foregoing purpose from [29 June 1970] and shall within three months thereafter commence trade therefrom and shall continue to so use and occupy the premises and trade therefrom throughout the whole period of this Sub-Lease."

Clause (TENTH) provided inter alia as follows:

"The Tenants bind and oblige themselves:

...

(Sixteen) To keep the premises open for retail trade during the usual hours of business in the locality ... the shop display windows being kept dressed in a suitable manner and in keeping with a good class shopping centre".

[6] The Minute of Variation provided inter alia as follows:

"AND WHEREAS it has been further agreed between the Landlords and the Tenants that the provisions of Clause (SIXTH) shall no longer apply THEREFORE the Landlords and Tenants DO HEREBY DECLARE that Clause (Sixth) of the [Sub-Lease] shall be deleted and shall cease to have any force and effect."

[7] The pursuers conclude for rectification of the Minute of Variation by the insertion of the words "and Clause (TENTH) (Sixteen)" after the words "Clause (SIXTH)" where they appear in the passage in the Sub-Lease quoted in paragraph [6] above. The effect would be to delete (with effect from the date of the Minute of Variation) not only Clause (SIXTH), but also Clause (TENTH) (Sixteen) from the Sub-Lease.

[8] In support of their conclusion for rectification the pursuers make averments about the circumstances in which the Minute of Variation was entered into. They aver that in about May 1993 negotiations took place among them, the first defenders and Shoprite Limited ("Shoprite"), with a view to the pursuers further sub-letting the supermarket to Shoprite. (That further sub-letting was effected by Sub-Under-Lease in August 1993 (No. 6/12 of process), and Shoprite subsequently assigned their interest to Kwik Save Stores Limited in 1995 (No. 6/13 of process)). It is averred by the pursuers that Shoprite were not prepared to undertake the "keep open" obligations in the Sub-Lease; that it was agreed between the pursuers and the first defenders that the entire keep open obligations in the Sub-Lease would be deleted and would cease to have any force and effect; and that it was by oversight that the Minute of Variation failed to give effect to that common intention by referring only to Clause (SIXTH) instead of to both that clause and Clause (TENTH) (Sixteen).

[9] The first defenders have not entered this process. In their defences the second defenders dispute the pursuers' assertion that the Minute of Variation did not express and give effect to the common intention of the pursuers and the first defenders. In addition, they seek to rely on section 9 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 ("the Act"). The pursuers plead that the second defenders' averments in relation to section 9 are irrelevant. It was principally in respect of that issue that the case was appointed to debate.

The Legislation

[10] The principal provision conferring on the court power to order the rectification of documents is to be found in section 8 of the Act. For present purposes it is sufficient to quote section 8(1) which provides inter alia as follows:

 

"Subject to section 9 of this Act, where the court is satisfied, on an application made to it, that -

 

 

(a)

a document intended to express or to give effect to an agreement fails to express accurately the common intention of the parties to the agreement at the date when it was made; ...
 

it may order the document to be rectified in any manner that it may specify in order to give effect to that intention.

[11] Section 9 provides inter alia as follows:

 

"(1)

The court shall order a document to be rectified under section 8 of this Act only where it is satisfied -
   

(a)

that the interests of a person to whom this section applies would not be adversely affected to a material extent by the rectification; or
   

(b)

that that person has consented to the proposed rectification.
 

(2)

Subject to subsection (3) below, this section applies to a person (other than a party to the agreement ... ) who has acted or refrained from acting in reliance on the terms of the document or on the title sheet of an interest in land registered in the Land Register of Scotland being an interest to which the document relates, with the result that his position has been affected to a material extent."

For the purposes of the present case, it is unnecessary to refer to subsection (3).

The Pursuers' Submissions

[12] Mr Ferguson for the pursuers began his submissions by referring to the terms of sections 8 and 9. He invited me to note that section 8 conferred on the court a discretion to order rectification of the document in question if the test set by section 8(1) was passed. That discretion was, however, limited by section 9, which provided that rectification could only be ordered if the interests of a person of the limited class to which it applied would not be adversely affected to a material extent by the rectification, or if that person had consented to the proposed rectification. The second defenders did not consent to the proposed rectification in the present case. To succeed in resisting rectification on the basis of section 9, therefore, the second defenders required (i) to bring themselves within the class of persons to which section 9 applied, and (ii) to satisfy the court of the matter referred to in section 9(1)(a). It was, Mr Ferguson submitted, important to note that sections 9(1)(a) and 9(2) were concerned with different matters. Section 9(1)(a) directed attention to the consequences of the proposed rectification. It referred to the "interests" of the person to whom section 9 applied, but those interests could be past or future interests. It did not protect the interests of all persons who were not parties to the agreement on which the claim for rectification relied; its protection only extended to those to whom the section applied by virtue of subsection (2). Section 9(2), on the other hand, concentrated attention on the person's reliance (by acting or refraining to act), and that reliance had to be on the terms of the document which was sought to be rectified. It required the result of that reliance to be that the person's "position" (not "interests") be affected to a material extent. That result required to be a past event. With that preliminary analysis of the statutory provisions, Mr Ferguson turned to the seven submissions on which he primarily relied.

[13] Mr Ferguson's first submission was that the expression "document" used in section 9(2) was to be narrowly construed as the document which it was proposed should be rectified, and not any other document. Parliament's intention, as that was to be gathered from section 9, was that the protection afforded by the section was to be afforded only to the defined class of persons. The reference to reliance on "the document" was one element of that definition. The second defenders failed to bring themselves within this element of the definition, because they did not aver that they acted in reliance on the Minute of Variation. There were three aspects of their averments of reliance. (1) They said that they acquired their interest in the Lease on the basis that clause (TENTH) (Sixteen) formed part of the tenant's obligations under the Sub-Lease (i.e. in reliance on part of the terms of the Sub-Lease of which they became landlords). (2) They said that they relied on the terms of the Sub-Lease, and in particular on Clause (TENTH) (Sixteen), in bringing an action of damages for breach of contract against the pursuers. (3) They said that they relied on the terms of Clause (TENTH) (Sixteen) in the rent review arbitration which took place under the Sub-Lease in 1998. None of these were averments of reliance on the terms of the "document", i.e. the Minute of Variation. They were averments of reliance on the terms of the Sub-Lease, which was another matter. For want of averments of reliance on the Minute of Variation, the second defenders failed relevantly to bring themselves within the protection of section 9. Their attempt to rely on that section was therefore irrelevant.

[14] Secondly, Mr Ferguson submitted that there was a difference between a person's "position" being affected, which was what section 9(2) referred to, and his "interests" being affected, which was what section 9(1) referred to. The difference between section 9(2) and section 9(1) was therefore not merely the difference between "affected" and "adversely affected". As a simple matter of usage, Mr Ferguson submitted, it was difficult to see how the word "position" could be broader than the word "interests". "Position" in section 9(2) therefore required to be given a narrower meaning than "interests" in section 9(1). That interpretation was reinforced by the consideration that, in contrast, section 1(4) of the Requirements of Writing (Scotland) Act 1995 referred to "position" at both the reliance stage and the effect stage. "Position", Mr Ferguson submitted, referred to something akin to status; see the definition (II 9 a) in the Oxford English Dictionary - "the situation which one metaphorically occupies in relation to others, to facts or to circumstances". The second defenders could not be said to have changed their position by bringing the action of damages or by making certain submissions in the rent review arbitration.

[15] Thirdly, Mr Ferguson made submissions about the meaning of "material" in the phrase "to a material extent" in section 9(1) and (2). It meant, he submitted, "to a substantial or important degree". It did not mean merely more than de minimis. In that connection he referred to the Scottish Law Commission Memorandum No. 43, "Voluntary Obligations, Defective Expression and its Correction" (1979), paragraphs 96 to 99, and to the Scottish Law Commission Report No. 79, "Obligations - Report on Rectification of Contractual and Other Documents", paragraphs 6.1 to 6.4. He referred also to the definition (A 5 a, d and e) of "material" in the Oxford English Dictionary. Materiality, he submitted, was to be tested objectively. To be a person to whom section 9 applied, therefore, it was necessary that as a result of reliance on the document, the person's position had been affected to a substantial or important degree, testing the matter objectively.

[16] Fourthly, Mr Ferguson turned his attention to the first of three passages in the second defender's pleadings. The passage in question is in the following terms:

"The Second Defenders acquired the tenants' interest in the Lease from and after 30 September 1994 by virtue of said Assignation in their favour registered in the Books of [Council and] Session on 14 October 1994. At said date the Sub-Lease included the obligations specified in clause (TENTH) (Sixteen). The Minute of Variation ... made no mention of clause (TENTH) (Sixteen). When the Second Defenders acquired said interest, they acted in reliance, inter alia, in terms of Clause (TENTH) (Sixteen) being part of the tenants' obligations in the Sub-Lease. The Second Defenders then considered said Clause a valid keep open obligation incumbent upon the Pursuers as anchor Tenant in said shopping development. The onerous obligations placed upon the Pursuers by the keep open obligation was a valuable asset for the Second Defenders. The premises were the largest unit in the development. The presence of the Pursuers as trading anchor tenants would help to attract other tenants to occupy other units in the development and encourage existing tenants to remain. The Second Defenders would not have acquired said interest in said Lease if said Clause had not been part of the obligations in the Sub-Lease. The Second Defenders acquired the landlords' interest in the Sub-Lease for value on the basis that the anchor tenant was bound by a valid keep open obligation. The Second Defenders have been, and would be adversely, affected to a material extent by the proposed rectification."

Mr Ferguson submitted that in that passage the second defenders did not actually aver how their position has been affected, at all or to a material extent. It did not follow, from the fact that they would not have acquired the tenant's interest in the Lease (and thus the landlord's interest in the Sub-Lease) but for the keep open clause in the Sub-Lease, that their position has been affected to a material extent. The averments concentrated on the second defenders' subjective view of the keep open clause, rather than on whether reliance on its presence affected their position to a material extent.

[17] Mr Ferguson then turned to the next succeeding passage in the second defender's averments. He was in some doubt whether those averments were intended to make one single point, or two separate ones. He dealt with them in his fifth and sixth submissions, but it is convenient to quote the whole passage first. Leading on from the averment quoted in paragraph [16] above that the second defenders have been, and would be adversely, affected to a material extent by the proposed rectification, the averments continue:

"They have already [suffered] and will continue to suffer significant financial loss. The Pursuers' breach of the keep open obligation has resulted in, or at least contributed to the closure of other units. Said breach has made it more difficult to attract new tenants to the other units in the development. The capital value of the Second Defenders' interest in the development has been adversely affected by the Pursuers' said breach of the keep open obligation. The Second Defenders have also lost rental income as a result of the Pursuers' said breach. If the Pursuers had complied with their said obligation the Second Defenders would not have suffered said loss and damage. The Second Defenders have brought separate proceedings in this Court seeking reparation for the loss and damage occasioned to them by virtue of the Pursuers' said breach which resulted in the Pursuers bringing the present proceedings. The action at the instance of the Second Defenders is presently sisted to await the outcome of these proceedings. The adjusted Summons and Defences in the action at the instance of the Second Defenders are produced. The Second Defenders have acted in reliance on the terms of the said sub-lease and in particular Clause (TENTH) (Sixteen) thereof by bringing an action of damages for breach of contract against the Pursuers. ... If Decree for rectification was pronounced as concluded for, the Second Defenders would lose said claim for damages."

[18] Mr Ferguson's fifth submission related to the sixth and following sentences of that passage. The averments about the claim for damages, he submitted, were not relevant averments of reliance on the Minute of Variation. To bring legal proceedings did not amount to a change of position. The bringing of the action was not, at any rate, capable of changing the second defenders' position to a material extent. The averments conveyed nothing about the extent to which the second defenders' position had been affected. The last sentence of the passage was of no relevance to whether the second defenders qualified as a person protected by section 9 in terms of section 9(2). They might bear on whether the second defenders would be adversely affected to a material extent by the proposed rectification, as required by section 9(1), but that did not arise if the second defenders did not come within the scope of section 9(2). This passage, like other passages in the second defenders' submissions, suffered from a failure to distinguish between averments relevant for the purpose of section 9(2) and those relevant for the purpose of section 9(1).

[19] Mr Ferguson's sixth submission addressed the first five sentences of the passage quoted in paragraph [17] above on the assumption that they were intended to make a separate point from the remainder of the passage. On that hypothesis, he submitted, they were irrelevant to the section 9(2) issue, because they were not concerned with the consequences of reliance on the Minute of Variation, but with the consequences of an alleged breach of contract on the part of the pursuers.

[20] For his seventh submission, Mr Ferguson turned to the averments about the rent review arbitration. The averments are in the following terms:

"Furthermore, the Second Defenders acted in reliance on the terms of the said Clause (TENTH) (Sixteen) at the Rent Review Arbitration which took place in about ... 1998 in accordance with the sub-lease. In said arbitration the Second Defenders argued that said Clause (TENTH) (Sixteen) was valid and binding on the Pursuers. In his determination the Arbiter in said review accepted the Second Defenders' argument and fixed the rent on the basis that said Clause (TENTH) (Sixteen) was an onerous obligation on the Pursuers. A copy of the Arbiter's determination in said Rent Review Arbitration is produced. The Arbiter refused to increase the rent due for the premises inter alia on account of the existence of an onerous keep open obligation on the Pursuers as tenants. The rectification proposed by the Pursuers would enable it as Tenant to benefit from a lower rent while at the same time releasing it from its obligations to keep said premises open. On the other hand the proposed rectification would give the Second Defender a lower rent without the benefit of the Pursuers being obliged to keep open. Accordingly the Second Defenders have been, and would be adversely affected to a material extent by this action. If Decree of Rectification was pronounced the Pursuers would no longer be bound to comply with the obligations in Clause (TENTH) (Sixteen) of the sub-lease."

In so far as that passage contained averments of reliance, they were not of reliance on the Minute of Variation. The submissions made in the rent review arbitration did not affect the second defenders' position within the meaning of section 9(2). It could not be said that the lower rent awarded by the arbiter was the result of the submissions made by the second defenders about the keep open clause. It was necessary to be clear what the second defenders' submission to the arbiter on this subject had been. In that connection, Mr Ferguson referred to certain of the documents (No. 6/51 of process) stating the parties' positions in the arbitration. The second defenders had relied on Clause (TENTH) (Sixteen) as the foundation for an argument that the arbiter required to assume that the tenants had complied with their obligations, and that the depressing effect on rental value of the fact that, in breach of the keep open clause, the supermarket was not trading therefore required to be ignored. The pursuers, on the other hand, although they queried whether there was any extant keep open obligation, appear also to have argued that the existence of a keep open clause had a depressing effect on rental value. The arbiter appears to have held that the existence of the keep open provision would hold down the hypothetical tenant's bid. Mr Ferguson submitted that it was wrong to say that that decision had come about as a result of the second defenders' reliance on the clause, when their reference to it had been in connection with the proposition that any depressing effect on value should be disregarded. The averments about the rent review arbitration therefore did not support the proposition that the second defenders came within the scope of section 9(2).

[21] Mr Ferguson turned finally to his secondary submission, which was that the second defenders' third plea-in-law was not supported by relevant and specific averments. That plea is in the following terms:

"The Minute of Variation ... expressing and giving effect to the common intention of the Pursuers and the First Defenders at the date when it was made, should not be rectified as concluded for".

He submitted that that plea required to be supported by specific averments identifying the common intention which, according to the second defenders, was shared by the pursuers and the first defenders when they entered into the Minute of Variation and was expressed and given effect in it. The second defenders made no such averments.

The Second Defenders' Submissions

[22] In response to Mr Ferguson's first submission, Mr Abercrombie submitted that the second defenders' averments were averments of reliance on the Minute of Variation. Reliance on a document might be, as Mr Abercrombie put it, positive or negative. Positive reliance involved relying on what the document did. Negative reliance involved relying on what the document did not do. That was of particular importance where the document in question was one which amended another document. The averments that the second defenders relied on the continuing presence of Clause (TENTH)(Sixteen) in the Sub-Lease constituted averments of reliance on the fact that the Minute of Variation had not deleted that clause from the Sub-Lease, and thus negative reliance on the Minute of Variation. In dealing with the question of reliance, it was not appropriate to look at the Minute of Variation in isolation. Given its nature as a document the purpose of which was to amend another document, it was necessary, in order to understand its effect and the reliance that could be placed on it, to have regard to the terms of the document it sought to amend. That point was made by the terms of the conclusion, which contained in parenthesis a cross-reference to the Sub-Lease. What, in effect, the second defenders were saying was that they saw the Minute of Variation; saw that it altered the Sub-Lease; saw that it did not, however, delete Clause (TENTH) (Sixteen); and in reliance on the fact that that Clause remained part of the Sub-Lease took certain steps, including the acquisition of their interest in the Lease. The reasons why the fact that the Minute of Variation had not deleted Clause (TENTH)(Sixteen) from the Sub-Lease was important were set out in the averments quoted in paragraph [16] above. In the circumstances of the present case, the reference in section 9(2) to "the document" fell to be construed as a reference to the Minute of Variation and the Sub-Lease which it amended.

[23] There was, Mr Abercrombie submitted, no substance in the distinction that Mr Ferguson sought to draw between a person's "position" (as referred to in section 9(2)) and his "interests" (as referred to in section 9(1)). He referred to the Scottish Law Commission Memorandum No. 79, and sought to draw support for his submission from the terms of paragraphs 6.2 and 6.4.

[24] Mr Abercrombie did not dispute Mr Ferguson's submission as to the proper construction of the word "material" in section 9(1) and (2). He accepted that it meant substantial rather than merely more than de minimis. He submitted that the second defenders had averred both that their position had been affected to a "material" extent by reliance on the Minute of Variation, and that their interests would be adversely affected to a "material" extent by the rectification. The question of materiality could only properly be determined after proof.

[25] In relation to Mr Ferguson's submission that the second defenders' averments of how their position was affected by reliance on the document concentrated on their subjective view of the effect of the keep open clause rather than whether their position was objectively affected to a material extent, Mr Abercrombie accepted that the second defenders' view of the keep open clause was subjective, but submitted that the averments on that point went to support their assertion that they relied on the continued subsistence of the keep open clause rather than to support the averment that their position was affected to a material extent. The averred result of the second defenders' reliance on the continued subsistence of the keep open clause, in light of their subjective assessment of the significance of that fact, was that they altered their position to a material extent by purchasing their interest in the Lease.

[26] In relation to Mr Ferguson's fifth and sixth submissions, Mr Abercrombie confirmed that the whole of the passage quoted in paragraph [17] above was intended to be read together, although the averments bore both on section 9(2) and on section 9(1). The averments about the bringing of the action of damages were, he submitted, relevant averments of the second defenders' position being materially affected by reliance on the continued subsistence of the keep open clause. They were therefore relevant to the section 9(2) issue. The averments that the claim for damages would be lost if the rectification were granted were relevant averments that the second defenders' interests would be adversely affected to a material extent by the rectification, and so related to the section 9(1) issue.

[27] In relation to the rent review arbitration, Mr Abercrombie argued that in making the submissions that they did in it, the second defenders relied on Clause (TENTH)(Sixteen). Since the arbiter's decision turned in part on acceptance that that clause remained part of the Sub-Lease, it could be said that the second defenders' reliance on it had resulted in their position being affected. The materiality of the extent to which it was affected was a matter for proof. So far as section 9(1) was concerned, what was relevant was the averment that if the Minute of Variation were rectified, the tenant of the supermarket would have the benefit of the lower rent assessed on the basis that the keep open clause subsisted, while not in fact being subject to the keep open clause. In that way, the second defenders could relevantly say their interests had been adversely affected to a material extent.

[28] In relation to Mr Ferguson's secondary submission, Mr Abercrombie referred to Norwich Union Life Insurance Society v Tanap Investments VK Ltd 2000 SC 515, in which it was held that, aside from section 9, a party who claims that he would be adversely affected by rectification has title and interest to take issue with whether the pursuers have satisfied the section 8 test. The second defenders were therefore, he submitted, entitled to state their third plea-in-law. It did not require to be supported by averment.

 

Discussion

[29] In my opinion, a party who seeks to resist the rectification of a document on the ground set out in section 9 requires to address in specific averments two separate matters. Logically the first of these is whether he qualifies as a person to whom section 9 applies, and the second is whether the test set out in section 9(1)(a) is satisfied. So far as the first matter is concerned, the averments must cover the elements of qualification set out in section 9(2). In the circumstances of the present case, these are:

  1. that he is a person other than a party to the agreement mentioned in section 8(1)(a);
  2. that he has acted or refrained from acting in reliance on the terms of the document of which rectification is sought; and
  3. that as a result his position has been affected to a material extent.

So far as section 9(1)(a) is concerned, there must be averments that the interest of the person opposing rectification would be adversely affected to a material extent by the rectification. There is some overlap of language between sections 9(1) and 9(2) which tends to obscure the fact that they are concerned with separate matters. That in my view makes it desirable that the defender's averments should clearly address the various points arising under the two sub-sections. In the present case, Mr Ferguson complained that the second defenders had not clearly distinguished their averments addressing the requirements of section 9(2) from those addressing the section 9(1) test. In my view that complaint is justified. But the fact that the second defenders' pleadings are not set out in as clear a manner as would be desirable does not by itself afford sufficient ground for holding them to be irrelevant.

[30] In my opinion, Mr Ferguson was plainly right in his submission that the reference in section 9(2) to the "document" is a reference to the document of which rectification is sought. I do not consider that it is correct to approach the matter in the way in which Mr Abercrombie did at one stage in his submissions, by treating the reference to the "document" as encompassing not only the document of which rectification is sought, but also any other document amended by that document. That is not to say, however, that I consider that Mr Ferguson was right in his criticism of the second defenders' averments of reliance as being misdirected in their concentration on Clause (TENTH)(Sixteen) of the Sub-lease. I do not consider that Mr Abercrombie's analysis of reliance as falling into two categories, positive and negative reliance, is a very helpful way of putting the point, but there is in my view substance in the point which he sought to express in that way. In my opinion the document in question is the Minute of Variation. The second defenders, to bring themselves within section 9(2) and so pave the way for a section 9(1)(a) defence, must aver that they relied on the Minute of Variation. The question is whether they have done so. In my opinion they have. The Minute of Variation was a document by which the parties to the Sub-Lease amended the terms of the Sub-Lease. In the particular case of a document which amends the terms of another document, reliance on the amending document may, in my view, take the form of acting in a particular way because the original document has been altered in a specific way by the amending document. In my opinion, however, reliance on the amending document may also take the form of noting that it does not alter a particular provision of the original document, and acting in a particular way because that is so. In my opinion, acting in reliance on the continued subsistence, after the Minute of Variation had been executed, of Clause (TENTH)(Sixteen) of the Sub-Lease amounts to acting in reliance on the terms of the Minute of Variation. The matter can be tested, in my view, by asking whether the party placing reliance on the document would have acted in the same way as he actually did if the document had at that time been in the terms in which it would be expressed after rectification. If he would not, he can in my view be regarded as having acted in reliance on the un-rectified document.

[31] I do not consider that Mr Ferguson was correct in his submissions about the respective scope of the expressions "interests" and "position". On the other hand, I do not think that it is right that they are precisely synonymous. It does not seem to me, however, that for the purposes of this case it is necessary to describe precisely the difference between the two words. In section 9(2) the question is whether the person's position has been affected to a material extent by his reliance on the document. In section 9(1)(a) the question is whether the person's interests would be adversely affected by the rectification. I see no difficulty in simply asking and answering each of those questions according to its terms. I demur, however, to Mr Ferguson's suggestion that "position" requires to be construed more narrowly than "interests". I would be inclined to take the opposite view. It seems to me that it is possible for a person's position to be affected without his interests being affected, but less likely that his interests can be affected without his position being affected. As I have said, however, I do not follow why it is necessary to determine the respective scope of the two expressions for the purpose of applying sections 9(2) and 9(1)(a).

[32] I accept, as Mr Abercrombie did, Mr Ferguson's submission as to the meaning of "material". Whether a person's position or interests can be said to have been affected to a material extent is in my view plainly a matter of degree, and a matter better resolved after proof than at debate.

[33] Turning therefore to the first of the three passages in the second defenders' averments on which Mr Ferguson focused attention (see paragraph [16] above), I am of opinion that those are relevant averments that the second defenders relied on the terms of the Minute of Variation, in the sense of relying on the fact that it did not delete Clause (TENTH)(Sixteen) of the Sub-Lease, and the consequent fact that that clause remained part of the Sub-Lease. The averments about the importance of their being an anchor tenant subject to a keep open clause in my view go relevantly to support the averment of reliance. That those averments reflect a subjective view held by the second defenders does not make them irrelevant as support for the assertion of reliance. The averment that it was in reliance on that consideration that the second defenders acquired their interest in the Lease, and that they would not have done so if that consideration had been absent, seems to me to be a relevant averment that their position was materially affected by their acting in reliance on the document. Thus far, therefore, I am of opinion that the averments in question make a relevant case that the second defenders are a person to whom section 9 applies. The last two sentences of the passage, on the other hand, seem to me to be designed to support the section 9(1)(a) case. They make the point that the second defenders' interest in the lease was acquired for value on the basis that there was an anchor tenant bound by a keep open clause. That seems to me to support the following assertion that rectification (to the effect of removing the keep open clause) would adversely affect their position to a material extent. I therefore regard those averments as making a relevant section 9(1)(a) case.

[34] It is in my view doubtful whether the mere raising of the action of damages in reliance on the subsistence of the keep open clause can be said to have affected the second defenders' position to a material extent. I therefore doubt whether the averments quoted in paragraph [17] above afford relevant support to the claim that the second defenders are a person to whom section 9 applies. On the other hand, it seem to me to be clear that the averments about the action are relevant to the section 9(1)(a) issue. If, without the rectification, the second defenders would have had a substantial claim for damages against the pursuers (the conclusion in the damages action is for £700,000), and with the rectification that right of action disappears, that seems to me to be a relevant assertion that their interests would be adversely affected to a material extent by the rectification.

[35] So far as the rent review arbitration is concerned, it seems to me that there are relevant averments of reliance, but that the averment that as a result the second defenders' position was affected to a material extent is of doubtful relevancy, since the causal connection between the reliance and the result is obscure. I regard that as an issue best left to proof before answer. Given that the rent has apparently been set lower than it would otherwise have been because of the subsistence of the keep open clause, it seems to me that the averments that the second defenders' interests would in that respect be adversely affected by the rectification is also relevant to the section 9(1)(a) issue.

[36] There is in my view no merit in Mr Ferguson's subordinate submission. The second defenders are entitled to resist the claim for rectification by disputing whether the pursuers have satisfied the section 8(1)(a) test. That is the point which they express in their third plea-in-law. Since that plea is the direct negative of the pursuers' first plea-in-law, it does not in my view require to be supported by averment.

 

Result

[37] For these reasons I am of opinion that the pursuers' attack on the relevancy of the second defenders' averments in support of their section 9 defence cannot succeed at this stage. Given the form in which it is expressed, I am of opinion that the pursuers' second plea-in-law falls to be repelled. I am of opinion, however, that the appropriate form of inquiry is a proof before answer. I shall therefore pronounce an interlocutor to that effect. I shall in the meantime reserve the expenses of the debate.

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