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Cite as: [2004] ScotCS 255, 2005 SCLR 306

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Caterleisure Ltd v. Glasgow Prestwick International Airport LTd [2004] ScotCS 255 (25 November 2004)

OUTER HOUSE, COURT OF SESSION

CA91/03

OPINION OF LORD MACKAY OF DRUMADOON

in the cause

CATERLEISURE LIMITED

Pursuers;

against

GLASGOW PRESTWICK INTERNATIONAL AIRPORT LIMITED

Defenders:

________________

Act: Robertson; Henderson Boyd Jackson, W.S.

Alt : Delibegović-Broome; McClure Naismith

25 November 2004

Introduction
[1] The pursuers are a company whose business activities include the operation of licensed bar, catering and retail shop services for passengers using various airports in the United Kingdom. The defenders are a company that owns and operates Glasgow Prestwick International Airport.

[2] Between 1995 and 1999 the pursuers provided licensed bars, catering and retail shop services for passengers using Prestwick Airport. At that time Prestwick Airport was owned and operated by the British Airports Authority. Following upon the defenders' acquisition of Prestwick Airport, such services were provided by the defenders themselves. During 1999 and 2000, representatives of the pursuers and defenders undertook detailed discussions as to the possibility of the pursuers again taking over responsibility for the provision of such services for passengers using Prestwick Airport.

[3] It is clear from the parties' pleadings, and indeed from the productions that have been lodged in the present action, that there is a considerable measure of agreement between the parties as to the course those discussions followed. In particular it is agreed that (a) in a letter dated 29 August 2000, Stuart Peacock, the chairman of the pursuers, put forward revised proposals to Tom Wilson, the managing director of the defenders, and (b) at a meeting on 19 October 2000 Tom Wilson informed Stuart Peacock that those revised proposals were "largely acceptable" to the defenders. During the following weeks the discussions between the parties continued. By early December 2000, the parties were proceeding on the basis that the pursuers would commence providing services at Prestwick Airport on 8 January 2001. Indeed, following a meeting on 7 November 2001, the parties had instructed their respective solicitors to prepare a written contract, incorporating the terms of the agreement that the parties were in the process of finalising.

[4] In the event, the parties' solicitors prepared drafts of two documents, a Licence (which I shall refer to as "the draft Licence Agreement") and an Agreement (which I shall refer to as the "draft Management Agreement"). Successive drafts of those two documents were prepared. The productions that have been lodged illustrate how the revisal of those draft documents proceeded. For the purposes of this Opinion, it is unnecessary to detail the full history of that process. By e-mail timed at 14.32 hours on 6 January 2001, drafts of the two documents, which had been the subject of further revisal, were sent by the pursuers' solicitors to the defenders' Sheena Beckwith. That e-mail explained the reasons for the further revisals that had been made. Those further revisals dealt primarily with the notice and termination provisions in the two draft documents and the issue as to which party would have responsibility for any TUPE obligations relating to the pension entitlement of those employees of the defenders, who it was planned would become employees of the pursuers. Copies of the e-mail and the draft documents, which were annexed to it, are lodged as a production in the action (No. 6/23 of Process). It was agreed between the parties that those drafts were the last versions of the draft Licence Agreement and the draft Management Agreement that had been prepared. It was also agreed that I should have regard to the terms of those drafts, during the course of the debate before me.

[5] Stuart Peacock, the chairman of the pursuers, went to New Zealand towards the end of December 2000. Over the weekend of 6 and 7 January 2001, a number of telephone calls took place between representatives of the parties. During calls between Stuart Peacock and Tom Wilson, discussions took place about the further revisals to the provisions in the draft Licence Agreement and the draft Management Agreement, which had been intimated on 6 January 2001.

[6] On 2 January 2001, the pursuer had sent an "opening team" to Prestwick Airport. Members of that team had been charged with preparing for the pursuers to start trading at Prestwick Airport, as from 6 a.m. on 8 January 2001. The preparations that were required included the carrying out of a stock-taking, which began during 7 January 2001 and was completed by 4 a.m. the following day. That stock-taking related to the stock which the pursuers were to take over from the defenders. At 6 a.m. on 8 January 2001, the pursuers commenced trading at Prestwick Airport. This involved their commencing to provide licensed bar, catering and retail shop services for passengers using Prestwick Airport.

[7] At 3.40 p.m. on 8 January 2001, Tom Wilson, the managing director of the defenders, telephoned Stuart Peacock, who was still in New Zealand. Mr Wilson informed Mr Peacock that the ownership of the defenders had changed hands and that the new owners of the defenders did not wish the defenders to enter into a contract with the pursuers. Mr Wilson also informed Mr Peacock that the defenders required the pursuers to withdraw from Prestwick Airport. The pursuers aver that they were thus placed in a position in which they could no longer continue to supply services to passengers using Prestwick Airport. They accordingly withdrew from doing so.

The issues in the present action

[8] In the present action the pursuers conclude for an award of damages against the defenders. They contend that an oral contract between the parties was finally concluded on 7 January 2001. They contend that occurred during a telephone call that day, between Stuart Peacock and Tom Wilson, in which the two men had resolved the only issues that had remained outstanding between the parties, after the revised versions of the draft Licence Agreement and draft Management Agreement had been e-mailed by the pursuers' solicitors to the defenders on 6 January 2001. The pursuers contend that the contract entered into had two parts or 'elements' to it, a Licence Agreement and a Management Agreement. The terms of the Licence Agreement and the Management Agreement were as set out in the revised drafts attached to the e-mail dated 6 January 2001, as subsequently amended during the telephone call between Stuart Peacock and Tom Wilson on 7 January 2001. The case for the pursuers is that the contract having been concluded during 7 January 2001, the following day the defenders acted in material breach of that contract, when they required the pursuers to withdraw from Prestwick Airport.

[9] The sum concluded for in this action is £191,519. Although the defenders' sixth plea-in-law is directed at the relevancy of the pursuers' averments of loss, which seek to recover loss of profits and wasted expenditure, I was informed by counsel for the pursuers that the pursuers no longer insist in doing so. The pursuers have undertaken to amend their pleadings to take account of that concession. In these circumstances, it has not been necessary for me to deal with the issue raised by the defenders' sixth plea-in-law.

[10] The defenders' primary defence to the action is that no contract was ever concluded between the parties, whether orally or in writing. The defenders also contend that (i) the pursuers were aware that the defenders could not conclude a contract with them, without the approval of the owners of the defenders, who are a sole shareholder, (ii) the parties had negotiated with each other on the basis that they would only be bound once a written contract was executed and (iii) any contract between the parties would have required to comply with the Requirements of Writing (Scotland) Act 1995 (hereinafter referred to as the "1995 Act").

[11] Following a number of preliminary hearings, the action came before me for a debate, on certain of the pleas-in-law of both parties. Before I summarise the submissions I heard during that debate, I should set certain of the provisions of the drafts of the Licence Agreement and the Management Agreement that were attached to the e-mail of 6 January 2001. As I have already indicated, the pursuers offer to prove that it was agreed during a telephone call between Stuart Peacock and Tom Wilson on 7 January 2001 that certain of the provisions of those drafts would be altered and that a contract between the parties be entered into.

The draft Licensing Agreement
[12] The draft Licensing Agreement provided that the defenders would grant the pursuers a licence to use a defined "Licensed Area" within Prestwick Airport, to enable the pursuers to provide catering, bar and retail services. Clause 1, the Definitions Clause in the draft Licence Agreement, defined "the Commencement Date" as meaning 8 January 2001 or such other date as might be mutually agreed by the parties, "the Date of Entry" as meaning 8 January 2001 or such other date as might be mutually agreed between the parties, "the Licensed Area" as being the areas within Prestwick Airport more fully described in the Schedule and plans annexed to the Licence Agreement and "the Term" as meaning the period commencing on and including the Commencement Date and expiring on 7 January 2013. The draft Licence Agreement also included the following provisions:

"2. THE LICENCE

2.1 The Licensor (i.e. the defenders) hereby grants to the Licensee (i.e. the pursuers) a Licence from the Date of Entry for the Term to use the Licensed Area (subject to the exceptions and reservations as specified in the Schedule Part 2 and with the benefit of the Licensee's rights) for the purposes of the Business.

.....

5. PROVISIONS

It is agreed and declared that:-

5.1 if the Licence Fee hereby reserved or any part thereof is at any time in arrears for thirty days or if the Licensee at any time is in breach of or neglects to perform and observe any of the Licensee's obligations and conditions herein contained or if a receiver or manager or administrator is appointed in respect of the Business or the Licensee shall enter into liquidation whether voluntary or compulsory (except for the purposes of amalgamation or reconstruction) or the Licensee shall become apparently insolvent, or shall make any arrangement with creditors or shall suffer any diligence to be levied on the Licensed Area, then and in any such case the Licensor may at any time thereafter re-enter upon the Licensed Area or any part thereof in the name of the whole and resume possession;

.....

5. 4 this Licence will cease and determine (but without prejudice to the
rights of either party against the other in respect of any antecedent breach of obligation) at the expiration of not less than four months prior written notice given by the Licensor to the Licensee at any time. During said notice period, payment of the Licence Fee by the Licensee to the Licensor shall be suspended. Upon expiry of said notice period there shall be prepared by the Licensee, within Twenty One days, a statement of reconciliation showing the Licence Fee due for the notice period and the sums due (if any) by the Licensor under the terms of Clause 4.2 above. Any balance due to the Licensor will be paid by the Licensee within Twenty One days and any balance due by the Licensor to the Licensee will be reimbursed within Twenty One days, failing which interest will be due and payable on any sum outstanding to either party at the base lending rate of The Royal Bank of Scotland plc, from time to time.

.....

6. It is hereby agreed and declared that the Licensor does not intend to grant nor the Licensee intend to take a tenancy of the Licensed Area or any part or parts of the Airport."

The draft Management Agreement
[13] The provisions of the draft Management Agreement included the following:-

"WHEREAS:

(One) GPIA (i.e. the defenders) operates the subjects known as Glasgow Prestwick International Airport, Prestwick, Ayrshire (hereinafter called "the Airport"), and hereby warrants that it has full, right, title and power to enter into this Agreement;

(Two) GPIA has awarded and the Contractor (i.e. the pursuers) has accepted the contract to supply duty free and non duty free goods from those Shop premises situated within the Airport known as The Large Airside Shop (hereinafter called "the Shop") to all passengers able to use the Shop at the Airport; and

(Three) The parties are desirous of entering into this Agreement for the purpose of specifying the services to be provided by the Contractor and the terms and conditions on which the same will be provided;

NOW THEREFORE it is hereby AGREED between the parties as follows:-

(FIRST) Duration

Notwithstanding the date or dates hereof, this Agreement shall commence on 8^th January 2001 (hereinafter referred to as "the Commencement Date") and shall endure (subject to the remaining terms of this clause and to the terms of Clause SEVENTH hereof) until 7^th January 2013 (hereinafter referred to as "the Termination Date"). For the avoidance of doubt, should the Licensee for other areas within the Airport entered into between the parties hereto and dated of even date herewith terminate during the term of this Agreement then it shall be at the option of either party to terminate this Agreement by giving four months written notice to the other to that effect, in terms of Clause (EIGHTH) hereof.

SECOND Contract

(a) Subject as aftermentioned, the Contractor is hereby granted the

following rights:-

(i) to sell and/or supply such duty free and non duty free goods as the Contractor may from time to time specify to passengers passing through the Airport;

(ii) to use the furniture fittings and equipment belonging to GPIA within the Shop for the purposes of this Agreement.

(b) It is specifically declared that the rights granted are exclusive rights in respect of the Service, as defined in Clause (FOURTH) below.

(c) GPIA reserves a right of access to the Shop for inspection, maintenance and repair purposes at all times during the currency of this Agreement, subject to reasonable notice being given to the Contractor, except in the case of an emergency.

.....

SEVENTH The parties will review the continuation of this Agreement at 18 month intervals from the Commencement Date and either party will have the option to terminate this Agreement at each such review by giving the other four months notice in writing following said review in terms of Clause (EIGHTH) hereof.

EIGHTH This Agreement will cease and determine (but without prejudice to the rights of either party against the other in respect of any antecedent breach of obligation) at the expiration of any notice period specified in this Agreement during which notice period any sums payable to GPIA by the Contractor in terms of this Agreement shall be suspended: Upon expiry of the said notice period, there shall be prepared by the Contractor within Twenty One days a statement of reconciliation showing the Licence Fee due for the notice period. Any balance due to GPIA will be paid within Seven days and any reimbursement due by GPIA to the Contractor will be reimbursed within Seven days, ....."

[14] It should be noted that "The Large Airside Shop" referred to in Para. (Two) of the preamble to the draft Management Agreement is an area within Prestwick Airport, which did not fall within the Licensed Area, as defined in Clause 2 of the draft Licence Agreement. It should also be noted that the pursuers aver that it had been agreed during the course of the telephone call between Stuart Peacock and Tom Wilson on 7 January 2001 to alter the provisions of the notice and termination provisions in the two draft Agreements, Clause 5.4 in the draft Licence Agreement and Clause (SECOND) in the draft Management Agreement, by substituting a period of six months notice for one of four months.

[15] It should also be noted that there was no mention of a Management Agreement in the draft Licence Agreement. On the other hand the draft Management Agreement does mention the Licence Agreement. That reference is to be found in Clause SECOND of the draft Management Agreement.

[16] The pursuers' case accordingly proceeds on the basis that the pursuers offer to prove that the parties on 7 January 2001 entered into a contract which had two elements, a Licence Agreement and a Management Agreement, and which involved the terms of the draft Licence Agreement, as amended, and the draft Management Agreement, as amended, coming into effect on 8 January 2001, with the pursuers occupying the premises referred to in those two draft Agreements and commencing the provision of services for passengers at Prestwick Airport, as from that date. The pursuers also offer to prove that the terms of the contract were such that if, for whatever reason, the contractual arrangements set out in the draft Licence Agreement were subsequently terminated, then, on such a termination taking place, either party could have terminated the Management Agreement element of the contract by giving six months notice to the other party. On the other hand, if the contractual arrangements set out in the draft Management Agreement came to an end that did not alter the position of the Licence Agreement element of the contract. Such a termination did not give the pursuers the right to terminate the Licence Agreement element of the contract. Similarly the defenders' right to terminate the Licence Agreement element of the contract, as provided for in Clause 5.4, was not dependent upon an earlier termination of the Management Agreement element of the contract.

Issues arising in the debate
[17] As I have indicated, the parties were agreed that the action should proceed to a debate on certain of their pleas-in-law. The defenders moved that I should sustain their fourth and fifth pleas-in-law, which are in the following terms:

"4. Esto there was contract between the pursuers and the defenders, the

Licence Agreement related to the creation of an interest in land (as defined in section 1(7) of the Requirements of Writing (Scotland) Act 1995) and it, not being compliant with section 2 of the said Act, is invalid and the defenders should be assoilzied.

5. Separatim esto, there was a contract between the pursuers and the defenders, the Management Agreement contained the suspensive condition which has not been purified and the defenders should be assoilzied."

In the event that I was not prepared to sustain the defender's fourth and fifth pleas-in-law, the defenders moved that I dismiss the action on account of the lack of specification in the averments relating to the pursuers' claim for loss of profits. That motion was made under reference to the defenders' first plea-in-law, a general plea to relevancy and specification.

[18] The defenders recognised that their contentions (1) that the pursuers were aware that the defenders could not conclude a contract without the approval of their owners, (2) that the parties had negotiated on the basis that they would only be bound by a written contract and (3) that no contract had in fact been concluded were contentions that could only be determined after proof.

[19] The pursuers moved that I sustain their fourth plea-in-law, which sought to exclude from probation the defenders' averments relating to the Requirements of the Writing (Scotland) Act 1995. Under reference to their fifth plea-in-law, which is a general plea to relevancy and specification, I was also moved to exclude from probation certain of the defenders' averments which I will detail later in this Opinion. Otherwise the pursuers offered a proof before answer on all the other issues between the parties.

[20] In anticipation of the start of the debate both counsel prepared and exchanged written submissions. Prior to the second day of the debate, the written submissions on behalf of the pursuers were subsequently revised by counsel for the pursuers. The written submissions of both counsel were each very carefully prepared documents. I am greatly indebted to both counsel for the effort they put into the preparation of those written submissions. They proved to be invaluable during the debate itself and in preparation of this Opinion.

Submissions on behalf of defenders
[21] The submissions advanced on behalf of the defenders proceeded on the basis that the pursuers would be able to establish (after proof) that an oral contract had been entered into between the parties on 7 January 2001.

[22] The submissions relating to the defenders' fourth plea-in-law involved the provisions of sections (1) and (2) of the Requirements of Writing (Scotland) Act 1995. Those statutory provisions are in the following terms:-

"Writing required for certain contracts, obligations, trusts, conveyances and wills

1.-(1) Subject to subsection (2) below and any other enactment, writing shall not be required for the constitution of a contract, unilateral obligation or trust.

(2) Subject to subsection (3) below, a written document complying with section 2 of this Act shall be required for -

(a) the constitution of -

(i) a contract or unilateral obligation for the creation, transfer,

variation or extinction of an interest in land;

(ii) a gratuitous unilateral obligation except an obligation

undertaken in the course of business; and

(iii) a trust whereby a person declares himself to be sole trustee of
his own property or any property which he may acquire;

(b) the creation, transfer, variation or extinction of any interest in land
otherwise than by the operation of a court decree, enactment or rule of law; and

(3) Where a contract, obligation or trust mentioned in subsection (2)(a)

above is not constituted in a written document complying with section 2 of this Act, but one of the parties to the contract, a creditor in the obligation or a beneficiary under the trust ("the first person") has acted or refrained from acting in reliance on the contract, obligation or trust with the knowledge and acquiescence of the other party to the contract, the debtor in the obligation or the truster ("the second person") -

(a) the second person shall not be entitled to withdraw from the contract
obligations or trust; and

(b) the contract, obligation or trust shall not be regarded as invalid,

on the ground that it is not so constituted, if the condition set out in subsection (4) below is satisfied.

(4) The condition referred to in subsection (3) above is that the position of the first person -

(a) as a result of acting or refraining from acting as mentioned in that
subsection has been affected to a material extent; and

(b) as a result of such a withdrawal as is mentioned in that subsection would be adversely affected to a material extent.

(5) In relation to the constitution of any contract, obligation or trust mentioned in subsection (2)(a) above, subsections (3) and (4) above replace the rules of law known as rei interventus and homologation.

(6) This section shall apply to the variation of a contract, obligation or trust as it applies to the constitution thereof but as if in subsections (3) and (4) for the references to acting or refraining from acting in reliance on the contract, obligation or trust and withdrawing therefrom there were substituted respectively references to acting or refraining from acting in reliance on the variation of the contract, obligation or trust and withdrawing from the variation.

(7) In this section 'interest in land' means any estate, interest or right in or over land, including any right to occupy or to use land or to restrict the occupation or use of land, but does not include -

(a) a tenancy;

(b) a right to occupy or use land; or

if the tenancy or right is not granted for more than one year, unless the tenancy or right is for a recurring period or recurring periods and there is a gap of more than one year between the beginning of the first, and the end of the last, such period.

(8) For the purposes of subsection (7) above "land" does not include -

(a) growing crops; or

(b) a moveable building or other moveable structure."

[23] Counsel for the defenders submitted that the pursuers had pled their case on the basis that there was only one contract between the parties. The defenders' fourth plea-in-law was directed against that one contract. If, on the other hand the Court took the view that there had been two contracts between the parties, then the fourth plea-in-law should be considered as having been directed against the oral contract in the terms set out the draft Licence Agreement produced on 6 January 2001, as subsequently revised during the telephone call between Stuart Peacock and Tom Wilson on 7 January 2001.

[24] It was argued that the contract that the pursuers were seeking to found upon related to an "interest in land", as defined by section 1(7) of the 1995 Act. That arose on account of the defenders having granted the pursuers a licence to use the Licensed Area at Prestwick Airport. It was a matter of an admission, on behalf of the pursuers, that the provisions of the draft Licence Agreement related to the pursuers being granted the right to use land. Accordingly, the critical issue was the duration of the right to use land, which the pursuers had been granted by the defenders, by the contract that the pursuers aver has been concluded.

[25] Counsel for the defenders argued that, if there was a contract between the parties, the period for which the right to use land had been granted was one of more than one year in length. That followed from the definitions of the terms "Commencement Date" and "Term" in Clause 1. of the draft Licence Agreement. It was the period of grant of the right which was of importance, not the period of endurance of the right. The period of endurance could be shorter than the period of the grant and could indeed, in the circumstances of the present case, be less than one year, on account of the provisions of Clause 5.4. The period of grant had, however, been one of 12 years.

[26] Counsel for the defenders submitted that it was clear that the contract, which the pursuers sought to found upon, had not been committed to writing, because only a draft Licence Agreement had been prepared and no written Licence Agreement had been executed. That was a matter of admission by the pursuers. In these circumstances the contract relating to the use of the Licensed Area at Prestwick Airport, whether it be the only contract entered into between the parties or whether it be one of two contracts entered into between the parties, had not been constituted in a written document and did not comply with the provisions of section 2 of the 1995 Act. In these circumstances, the contract was invalid and the defenders had been entitled to withdraw from it.

[27] Anticipating that the pursuers' counsel would seek to rely on the provisions of section 1(3) and 1(4) of the 1995 Act, counsel for the defenders argued that it was open to me to hold, at debate, that those provisions had no applicability in the circumstances of the present case. It was stressed that the burden of proof in respect of those provisions rested on the pursuers.

[28] As far as any reliance by the pursuers on the contract was concerned, having regard to the terms of section 1(3) of the 1995 Act, that reliance could only have begun on the date when the contract had been entered into, which the pursuers averred was 7 January 2001. Accordingly, the actings of the pursuers prior to 7 January 2001, for example in relation to their having sent their opening team into Prestwick Airport on 2 January 2001, were not of relevance. The only potentially relevant acts were what had occurred during 7 January and 8 January 2001, including the stock-taking carried out on 7 and 8 January 2001, the installation and stocking of tills and other machines carried out on 7 January 2001, some job training carried out during 8 January 2001 and the provision of services to passengers at Prestwick Airport for a period from 6 a.m. to approximately 3.40 p.m. on 8 January 2001.

[29] It was argued that, having regard to the terms of the pursuers' averments, I could determine at debate (a) that the position of the pursuers had not been affected to a material extent as a result of their actings on 7 January and 8 January 2001 (cf. section 1(4)(a)) and (b) that the pursuers would not be adversely affected to a material extent, as a result of the defenders withdrawing from the contract around 3.40 p.m. on 8 January 2001 (cf. section 1(4)(b)). Counsel for the defenders argued that there was no need for such factual issues to go to proof. Taking the pursuers' averments at their highest, they did not entitle the pursuers to rely on the provisions of sections 1(3) and 1(4) of the 1995 Act. Reference was made to Tom Super Printing Supplies Limited & Another v South Lanarkshire Council (Unreported, OH, Lord Hamilton, 28 September 1999) and Co-operative Wholesale Society Limited v Ravenseft Properties Limited and Another (Unreported, OH, Lord Macfadyen, 4 July 2001).

[30] In relation to the defenders' fifth plea-in-law, counsel for the defenders submitted that I need only deal with this plea if I concluded that (a) the pursuers' case, even though pled on the basis of there having only been one contract alone, should nevertheless be looked as being based on two separate contracts and (b) I was prepared to uphold the defenders' fourth plea-in-law in respect of the Licence Agreement. This chapter of the submissions by counsel for the defenders included very careful consideration of the law relating to suspensive conditions and implied conditions and the contention that, if there were separate contracts between the parties, the Management Agreement would fall if the Licence Agreement fell. Against that background, the contention was that it was an implied term of the Management Agreement that a valid Licence Agreement had been entered into.

[31] For reasons I will explain in due course, I intend to repel the fourth plea-in-law on the part of the defenders. In such circumstances, and in view of the fact that I have reached the conclusion that the case for the pursuer proceeds on the basis that there was one contract between the parties, as opposed to two entirely separate and distinct contracts, it is unnecessary for me to deal with the pursuers' fifth plea-in-law. Accordingly, there is no need for me to detail the submissions I heard in relation to this chapter of the defenders' submissions.

[32] Under reference to the defenders' first plea-in-law, counsel for the defenders attacked the specification of the pursuers' claim for loss of profit, as that is pled in Article 8 of Condescendence. That attack was founded on the terms of certain of the productions that had been lodged, in particular, section 6 of a letter dated 29 August 2001, which Stuart Peacock had sent to Tom Wilson (No. 6/1 of Process), and the provisions of the Clause 3.2.3 of the draft Licence Agreement (No. 6/23 of Process). It was argued that those documents illustrated that, during the first six months of the contractual arrangements provided for in the draft Licence Agreement, the pursuers would have been required to carry out improvements to the Licensed Area. These would have involved the pursuers in capital investments that would have exceeded any profits that the pursuers could have made during that first six months period. It was argued that the averments for the pursuers took no account of those capital investments or of the costs of any funds that would be required to make those investments or of the disruption to the pursuers' turnover that such improvements would have caused. In these circumstances, the defenders had been left with no proper notice of a relevant basis upon which the pursuers were intending to prove their alleged loss.

Submissions for pursuers
[33] When counsel for the pursuers came to reply to the submissions on behalf of the defenders, he stressed that the case for the pursuers was that one contract had been entered into, a contract which had two elements, namely one provided for by the terms of the draft Licence Agreement, as amended, and the other by the terms of the draft Management Agreement, as amended. That indeed reflects the pursuers' averments on record, which in several places, for example in Article 6 and 7 of Condescendence, refer to "the contract". What the pursuers were, in effect, offering to prove, was that the parties had agreed that once the arrangements provided for under each of these two elements of the contract were up and running, the element based on the draft Licence Agreement would be regulated by its terms, as amended during the discussions on 7 January 2001. Likewise the element based on the draft Management Agreement would be regulated by its terms, as amended during the discussions on 7 January 2001. There was no dispute that those two sets of arrangements were put in place and that operations began at 6 a.m. on 8 January 2001. The pursuers contended that had occurred under the two elements of the one contract.

[34] Counsel for the pursuers argued that on a proper construction of the terms of the draft Licence Agreement, the duration of the grant by the defenders to the pursuers of a right to use the Licensed Area, was for less than one year. Accordingly the provisions of the 1995 Act had no application.

[35] In the alternative, it was argued that, if I was against that submission, and the Court considered that the grant of an interest in land in the Licensed Area was for a period longer than one year, then the pursuers had made relevant and specific averments of the matters referred to in sections 1(3) and 1(4) of the 1995 Act to entitle the pursuers to a proof on the issues involved. It was further argued that the provisions of the Management Agreement were not governed by sections 1 and 2 of the 1995 Act, since they did not relate to the creation of an interest in land. It was argued that the defenders' averments to the effect that a suspensive condition fell to be implied into the contract, to the effect that it was an implied condition of the Management Agreement that a valid Licence Agreement be entered into, were irrelevant et separatim lacking in specification and should not be admitted to probation.

[36] It was argued that the pursuers had made relevant and specific averments of loss of profit, as their position on record was that investment under the provisions of Clause 3.2.3 of the draft Licence Agreement would not, on the balance of probabilities, have occurred within the first six months following the commencement date. Counsel for the pursuer also attacked certain of the averments for the defenders as being irrelevant and lacking in specification. I will detail these in due course.

[37] Counsel for the pursuers submitted that it was common ground that there had been a protracted negotiation between the parties about the contractual arrangements under which the pursuers would supply services at Prestwick Airport. Parties were in issue as to whether the pursuers had been aware that the defenders could not enter into a contract without the ultimate approval of their sole shareholder and whether the parties had negotiated on the basis that only a written contract would be binding on them. Contrary to those contentions of the defenders, the pursuers offered to prove that Tom Wilson and Stuart Peacock had reached agreement on the terms of a contract between the parties, ahead of any written contract or agreements being executed and that on 7 January 2001 Sheena Beckwith of the defenders had agreed with Christine Thorpe of the pursuers that such a contract existed. Counsel for the pursuer recognised, however, that these were all issues of fact which could only be determined after a proof before answer.

[38] It was submitted, however, that the issue as to whether the 1995 Act was applicable to the dispute between the parties could be determined at debate. The pursuers did not dispute that the contractual arrangements set out in the draft Licence Agreement, as amended, would be subject to the provisions of the 1995 Act, in the event that the period for which they were granted use of the Licensed Area was for more that one year. The pursuers, for their part, had accepted that the contractual arrangements allowing them to use the Licensed Area would relate to "an interest in land", within the meaning of section 1(7) of the 1995 Act, if their right to use the Licensed Area was for longer than one year. It was submitted that the period of grant should turn on the question of what was the proper construction of the terms of the draft Licence Agreement, as amended. Those terms required to be considered as a whole. The pursuers recognised that it was somewhat unusual that the parties should provide for the possibility of a longer term, yet only contract for a definite duration of less than a year by the terms of their agreement. That, however, was what the parties had done. The terms of the draft Licence Agreement, as amended, were to be applied according to their terms. The Court could not be asked to either re-negotiate or re-write them. It was argued that the provisions of Clause 5.4, as subsequently amended during the discussions between Mr Wilson and Peacock, to require a period of six months' notice, had the effect of limiting the period for which a right to use land had been granted to one of six months. That was because it was only the grantors of the right, the defenders, who were able to give notice and because that could be done by them "at any time". No criteria required to be satisfied for the defenders to serve such a notice. That, in substance, limited the grant of the right to use the Licensed Area to a period of six months.

[39] On the basis that I was against the pursuers on this initial submission, counsel for the pursuers submitted that the pursuers had made sufficiently relevant and specific averments, on the matters set out in sections 1(3) and 1(4) of the 1995 Act, to entitle the pursuers to a proof before answer, prior to the Court deciding whether the defenders had been entitled to withdraw from the Licence Agreement element of the contract, because that its should be regarded as being invalid under the provisions of the 1995 Act.

[40] Counsel for the pursuers mounted criticisms of certain parts of the defenders' averments. I will detail these under the next heading of this Opinion.

Discussion
[41] In considering the submissions I heard, I proceed on the basis that the case for the pursuers is that one contract was entered into and that took place on 7 January 2001. For purposes of this debate, I also proceed on the assumption that whilst the parties may at one stage have intended to reduce their contract to writing, in two documents, namely a Licence Agreement and a Management Agreement, the parties had not negotiated on the basis that only a written contract would be binding on them. I must also assume that the pursuers will also be able to prove that the contract entered into on 7 January 2001 had two elements, a Licence Agreement and a Management Agreement, with the pursuers taking occupancy, on 8 January 2001 of the Licensed Area at Prestwick Airport, on the terms and conditions provided for in the draft Licence Agreement, as further amended in terms of the discussions between Tom Wilson and Stuart Peacock, and of the Shop, on the terms of the draft Management Agreement, as further amended by those discussions between Tom Wilson and Stuart Peacock. In my opinion, such an approach is entirely consistent with the facts that, prior to 8 January 2001, the pursuers took occupation of both the Licensed Area and the Shop at Prestwick Airport and then started trading from both those areas, on the morning of 8 January 2001.

[42] In considering the defenders' fourth plea-in-law, the critical issue is whether the parties agreed that the pursuers were to be granted an "interest in land", within the meaning of section 1(7) of the 1995 Act, for more than one year. The parties are agreed that there is no suggestion of the pursuers having been given an "interest in land" in respect of the Shop referred to in the draft Management Agreement. On the other hand, they are agreed that it was proposed (and according to the pursuers it was agreed) that the pursuers be given a licence to use the Licensed Area referred to in the draft Licence Agreement. Where they are in dispute is as to whether the Licence to use the Licensed Area was for more than one year.

[43] In my opinion, the pursuers were not granted such a right for more than one year. Whilst the provisions of Clause 2.1 of the draft Licence Agreement would on their own suggest that the pursuers' right was intended to last for more than one year, Clause 2.1 cannot be read in isolation. The provisions in Clause 2.1 require to be read together with all the other provisions of the draft Licence Agreement and in particular with Clause 5.4, as amended. In my opinion the provisions of Clause 5.4 were intended to give the defenders an unfettered right to terminate the Licence Agreement and to do so on the defenders giving a period of notice, which, it was agreed during the telephone call on 7 January 2001, would be a period of six months. It is clear that the provisions of Clause 5.4 would not require the defenders to show any cause for giving notice of termination of the Licence Agreement. Nor would service of a notice of termination require to be triggered by any act or omission on the part of the pursuers.

[44] In my opinion, it is quite obvious from the terms of Clauses (FIRST) and (SEVENTH) of the draft Management Agreement that the parties contemplated that the arrangements provided for by the Management Agreement could survive the termination of the Licence Agreement and that they would be bound to do so, for at least six months.

[45] In these circumstances, what the pursuers offer to prove was agreed upon by the parties, is different from that which might, for example, be agreed, in a lease for a fixed term of more than one year, whereby the lease could be terminated by the landlords within the first twelve months, on account of non-payment of rent by the tenants or breach by the tenants of one or more of the covenants upon them or the tenants being sequestrated or going into liquidation. In such a situation, some act or omission on the part of the tenants or some change in their legal position would be a prerequisite to the landlords serving notice to terminate the lease. In such circumstances, it could be said to be up to the tenants to take all the steps that were necessary to prevent the landlords being placed in a position in which they could terminate the lease. The tenants would thus be able to ensure that their tenancy would run its full course of over a year.

[46] It is, of course, possible to imagine that the draft Licence Agreement could have been framed in similar terms. Such terms could have been intended to guarantee that the pursuers would have the right to occupy the Licensed Area for twelve years, subject to the pursuers complying with all the other obligations upon them in terms of the Licence Agreement. Clause 5.1 of the draft Licence Agreement would have been part of such an agreement. Indeed, had the draft Licence Agreement not included Clause 5.4, the terms of the grant of the right to use the Licensed Area would have fallen into such a category.

[47] Whilst it was clearly possible that the defenders might never have served a notice of termination, under clause 5.4, and that the Licence Agreement the pursuers claim came into existence might have endured for 12 years, in my opinion the right granted to the pursuers to use the Licensed Area was not granted for more than one year. That is because, for whatever reason, it had been agreed between the parties, when the draft Licence Agreement was finally revised, that the defenders could terminate the Licence Agreement with effect from a date less than twelve months after 8 January 2001. In these circumstances, I do not consider that the provisions of the 1995 Act have any bearing upon the contract that the pursuers claim was concluded. Accordingly, I will repel the fourth plea-in-law for the defenders and sustain the fourth plea-in-law for the pursuers.

[48] Out of courtesy to the very full submissions I received from both counsel, I should add that even if I had taken the view that the provisions of the 1995 applied to the contract that the pursuers claim to have been concluded, I would not, at this stage, have been prepared to sustain the fourth plea-in-law for the defenders. That is because I have reached the view that the issues relating to section 1(3) and 1(4) of the 1995 Act are best decided after proof. In that regard I agree with the observations in para. [29] of the Opinion of Lord Macfadyen in Co-operative Wholesale Society Limited v Ravenseft Properties, to which I was referred. Even although the pursuers' reliance on the contract could only have been for a period less than 48 hours, I would not have been prepared to hold at debate that in acting over a period of time, in the manner the pursuers aver they did, the position of the pursuers had not been affected to a material extent. Nor would I have been prepared to hold that as a result of the defenders' withdrawal from the contract the pursuers have not been adversely affected to a material extent. In my opinion, the submissions made by counsel for the pursuers on these issues had considerable force. But it is sufficient if I indicate that I would have been minded to allow the issues to proceed to proof, had I reached the view that the contract between the parties had given rise to the granting to the pursuers of an "interest in land", in terms of section 1(7) of the 1995 Act.

[49] Having regard to the view I have reached in relation to the defenders' fourth plea-in-law, it is not necessary for me to deal with the defenders' fifth plea-in-law. That is because counsel for the defenders made clear that her submissions in relation to the defenders' fifth plea-in-law depended upon my being prepared to sustain the defenders' fourth plea-in-law as far as the Licence Agreement is concerned. Furthermore, her submissions in relation to the defenders' fifth plea-in-law proceeded on the basis that it was an implied condition of the Management Agreement that a Licence Agreement in accordance with the provisions of the 1995 Act had been entered into.

[50] Having regard to the fact that the pursuers' whole approach to this dispute is that there was one contract between the parties, I do not see how any question could arise of there being an implied condition in the Management Agreement element of the contract that a valid Licence Agreement be entered into, valid in the sense that it gave the pursuers a right to occupy the Licensed Area for 12 years. As I have already suggested, such a contention is inconsistent with the terms of Clause (FIRST) of the Management Agreement, which provides that either party can terminate the draft Management Agreement during the period of 12 years by giving six months notice, in the event that the Licence Agreement has been terminated.

[51] In my opinion the pursuers have given the defenders perfectly adequate notice of their claim for loss of profits. It is clear that claim for loss of profits will be open to challenge at any proof. It may well be that the points raised by counsel for the defenders during the course of the debate will be relevant to that challenge. It may prove to be the case that the defenders will wish to recover further documents from the pursuers in an effort to support that challenge. But, in my opinion, the pursuers' averments of loss of profit are sufficient. In that regard, it is important to bear in mind that spreadsheets providing further specification of the claimed loss of profits have been lodged as productions and incorporated into the pleadings. It is also important to bear in mind that this case is a commercial action, in which a summary statement of a claim for damages will normally be sufficient (see para. 3(1) of Practice Note 12 of 1994).

[52] Turning to the submissions for the pursuers, I intend to sustain the pursuers' fourth plea-in-law and exclude from probation the defenders' averments relating to the 1995 Act, which are contained in Answer 7 in the defences, in the four sentences beginning with the word 'esto'. I also intend to sustain the pursuers' fifth plea-in-law insofar as it relates to averments on the part of the defenders that a suspensive condition falls to be implied into the contract on a whole or the Management Agreement and to exclude from probation the averments referring to an implied condition, which are contained in the last two sentences of Answer 7 of the defences.

[53] The final branch of the submissions for the pursuer attacked certain averments in the defences. These averments are detailed in paragraphs 3.1, 3.2, 4.1 and 5 of the pursuers' Note of Argument, which was lodged prior to the debate being allowed. Those paragraphs are in the following terms:-

"3.1 The defenders' averments in Article 4 after 'Quoad ultra denied.'

(i) that 'The pursuers were therefore aware that no contract could be concluded between the parties without the ultimate approval of the defenders' shareholder.' and (ii) that 'Further, it was always the understanding between the pursuers and the defenders that a written contract would be entered into and would be required in order for a binding agreement to be entered in.' (emphasis supplied) are irrelevant et separatim lacking in specification. There are no relevant or specific supporting averments. A director is competent to bind a company without prior approval of his shareholder(s).

3.2 The pursuers contend that the averments that follow the general denial
in Answer 6 to similar effect are likewise irrelevant et separatim lacking in specification.

4.1 The defenders' averment that 'the substance of the commercial discussions between the parties was entering a licence agreement' is irrelevant in respect that the parties' averments also refer to the entering into a distinct agreement, namely the management agreement. Further, the averments that the management agreement 'was never intended to be a free-standing agreement' and in the sentences which follow in Answer 7 as adjusted are irrelevant et separatim lacking in specification. The defenders fail to aver a relevant or specific basis for the assertion quoted. The defenders do not identify any express term of the management contract which supports this. The parties contracted by way of two separate agreements for the deliberate purpose of dealing with the two subject matters separately.

.....

5. The defenders' averments in Answer 8 are irrelevant et separatim lacking in specification in respect that they are selective in detail of clause 3.2.3. The reference to other contracts in the pursuers' published accounts has absolutely no bearing on the present case."

[54] I am not minded to exclude from probation any of those averments on the part of the defenders. Here again, it is important to bear in mind that this is a commercial action. Some of the averments criticised may be lacking in a measure of specification, but in my opinion all the averments give the pursuers perfectly clear notice of the lines of defence that the defenders intend to advance.

[55] As far as the averments dealt with in Para. 3.1 of the Note of Argument are concerned, the averments complained of have to be read in the context of other of the averments in Answer 4, which refer to the contents of Tom Wilson's e-mails of 27 December and 29 December 2001 to Stuart Peacock. Likewise the averments criticised in Para. 3.2 fall to be read with the averments in Answer 4.

[56] Turning to the averments criticised in Para 4.1 of the Note of Arguments, these appear in Answer 7. Those averments relate to the negotiations that took place in the weeks and days leading up to 7 January 2001. Evidence relating to those negotiations will require to be led at the proof before answer, which both parties agree will be necessary, now that I have decided to repel the fourth plea-in-law for the defenders. In my opinion, the pursuers will not be prejudiced if these particular averments remain in the defences in their present form. The fact that the parties may have intended that there should be a Licence Agreement and a Management Agreement does not preclude the defenders from arguing the lines of defence they have outlined in Answer 7. Nor does it preclude the pursuers from founding on the terms of the draft Licence Agreement and the draft Management Agreement, when the action proceeds to proof.

[57] Finally I turn to the pursuers' criticisms of the averments in Answer 8. These criticisms are focused on Para. 5. of the Note of Argument. In my opinion, these criticisms fall to be rejected for the same reasons as I gave when dealing with the pursuers' criticisms of the terms of Answer 8. At the proof, questions will undoubtedly arise as to the capital investment that the pursuers might have been required to make, and might in fact have made, had they not been required to withdraw from Prestwick Airport. It is not necessary for either party to plead the detail of the evidence they may lead at the proof. In my opinion, both parties have given the other sufficient notice of the lines they intend to pursue on this aspect of the case.

[58] I will accordingly repel the fourth plea-in-law for the defenders, sustain the fourth plea-in-law for the pursuers and exclude from probation the averments of the defenders relating to the Requirements of Writing (Scotland) Act 1995 and to the need to imply a condition into the Management Agreement element of the contract. Otherwise, I shall allow parties a proof before answer on their averments. The case will be put out By Order to fix a diet for that proof and discuss the necessary arrangements for that proof.