Scottish Court of Session Decisions

Pursuers: Kean, Q.C., Fairley; MacRoberts

Defenders: C. M. Campbell Q.C., McBrearty; Dundas & Wilson, C.S.

12 May 2006

[1] I heard parties on the motion roll over two days in May 2006. By motion of 9 May the pursuers sought interim orders in terms of the third conclusion of the Summons. The Summons has not been served and the defenders have had about two days notice of the motion. Nonetheless I heard a full argument with some authorities canvassed though not fully cited to me. Each party indicated that they would seek leave to reclaim an adverse decision.

[2] The dispute, I was told, concerns the lease of a building in Bishopbriggs. It has four floors and is used by the defenders as a call centre. They are tenants of the pursuers on a lease due to expire this autumn. There are other tenants but they have not been convened. In reality the defenders are sub-tenants since the pursuers are tenants under a head lease to a company called, for short, Harper Collins who themselves have assigned their interest to a company called Futurestate. The head lease is No. 6/3 of Process and the sub-lease No. 6/1 of Process. The pursuers want access to the premises to carry out necessary repairs inside and outside. The costs are substantial. Some of these repairs involve heating, electrical works, mechanical works and air conditioning. I was told the lifts would be affected. The defenders do not want to give access. They say it would affect their business and cause disruption. The matter turns to a greater extent on the terms of the contracts.

[3] Mr Keen opened for the pursuers and pointed out that both parties were major commercial enterprises who could be expected to have the best legal advice when making contacts. The lease was not signed on the basis of a wholly uninterrupted enjoyment. Matters were done on the basis of entry when needed. The present proceedings could be no surprise to the defenders since the correspondence lodged showed the problem had been ongoing since 2005.

[4] Counsel pointed to the inter relation between the head lease and the sub-lease. The pursuers' obligations under the head lease were part of the sub-lease. The pursuers had determined that the repairs were necessary. If the defenders refused to allow them access to carry them out that would put the pursuers in breach of the Head Lease which would then be subject to irritancy at the instance of Futurestate. He took me to his clients' obligations in the Head Lease (Clause Second) and the penalty for failure (Clause Twenty-Third). The importing of these obligations into the sub-lease was achieved by clauses second, seventh and twenty eight in that lease. In summary the effect of this was twofold viz the pursuers were to be the judge of necessity of any repairs; and they had the "full" right to enter as often as may be necessary to carry them out.

[5] Counsel then referred me to the history of the matter and looked at a number of letters contained in Inventory No. 6. The matter had been ongoing since May 2005 when first the pursuers judged it necessary to get entry. He pointed to the extensive schedule of repairs (No. 6/6 of Process). Unless the defenders could say that the pursuers had not exercised a proper judgement or had an ulterior motive they were the sole judges of what was "necessary".

[6] The Court of Session Act 1988 sec. 47(2) was then looked at. The proper approach to interim possession was to be taken from Scottish Power Generation Ltd v British Energy Generation (UK) Ltd 2002 S.C. 517. He made detailed reference to Lord Reed's Opinion of the Court especially paragraphs 21, 22, 23 and 26. He said the present claim had a sound legal basis and the defenders were in clear breach of their obligations. The contracts were clear and should not be rewritten by the Court. If entry was not granted no work could be done during the lease and in September the premises would be unlettable. The defenders were aware they would have to suffer disruption. The balance of convenience favoured the pursuers.

[7] Mr Fairley, following and in his reply emphasised a number of other points viz.

[8] What he added was this. Both the pursuers and defenders had obligations to repair under the respective clauses. There was nothing in the provisions which the pursuers were not under obligations to repair. It depended on which contract you looked at. Where the right was clear it should not be denied. He referred me to Highland and Universal Properties v Safeway 2000 SC 297. Any damages which the pursuers recover were speculative, risky and hard to formulate. It was not a good surrogate for implement.

[9] As to the defenders' arguments he said that section 47 was the proper way for the tenant to be made to keep his obligations. The "Keep Open" cases were good examples of that. The primary obligations were in the Head Lease and were policed by clause 5. The pursuers had to be the judge of necessity otherwise the lease lacked content. The averments in the summons showed that the works were necessary. The extent of the works was a question of degree and it could not be said that no works were necessary. Any "peaceable occupation" was qualified on a "without prejudice" basis. The case of Gordon v Wimpey did not go so far as to suggest that all contracts were fenced with an implied "recommendations" clause. It could not be said that the order sought was vague against the commercial reality of an ongoing dialogue since 2005. He referred me to Oak Mall Greenock Ltd v McDonalds, 9 May 2003, Lord Drummond Young. The status quo was both factual and legal. There had been no historical difficulty about access for works and the defenders had been content to pay the service charges. The contracts were clear and unambiguous, and to refuse access would mean no work could be done at all.

[10] For the defenders Mr Campbell produced a summary argument of six points on all of which he elaborated to this effect.

[11] To grant entry would disrupt the defenders' business. They would have to erect portacabins and decant staff. The costs of all of this could be over one million pounds. The pursuers, who already received a substantial service charge from the defenders, would seek to recover the costs of these repairs from them. The estimate was over three million. In any event the building had not deteriorated to the extent claimed by the pursuers. Moving into his first argument, he said that conclusion 3 was not in fact an interim order but was final. Interim meant in the meanwhile. This was simply like summary decree. He referred me to Va Tech Wabag UK Ltd v Morgan 2002 S.L.T. 1290 at 1295 (a case of interim orders). Secondly he pointed out that the sub-lease contained an arbitration clause, and to grant the interim orders sought would effectively oust the jurisdiction of the arbiter. He referred me to Hamlyn & Co v Talisker Distillery (1894) 21R. (H.L.) 21 and the speech of Lord Watson at 24.

[12] The third argument revisited both leases. In summary what Mr Campbell said was this. The word "full" had no special significance. The only obligations were to do something which was "necessary". Clause 28 did not impose any obligations on the landlord at all in a question with the sub-tenant. His clients were entitled to rely on the Warrandice Clause and peaceable occupation. The pursuers were already in receipt of considerable service charges payments made on a percentage basis. The head landlord had not served any notice of disrepair and there was no objective evidence that any works were necessary now, and to be done at the expense of the defenders. The pursuers could not self certify their own obligations without some provable objective test of need. The head landlord had not threatened any irritancy on the head lease. He referred me to Gordon District Council v Wimpey Homes 1989 S.L.T. 141 at 142. The whole matter should await a proof, and there was at least a doubt about the strength of the pursuers' case.

[13] Counsel's fourth point was to liken the order sought to a request for interim interdict. Here the order was devoid of content. It was not said what works were to be done, when they would start and finish. More precision was needed. I was asked to look at Murdoch v Murdoch 1973 S.L.T. (notes) 13.

[14] Next was the balance of convenience. To maintain the status quo here was very important. There would be substantial costs and losses if the works went ahead. It would be easier to do the works when the property was empty and in any event the pursuers were protected by the remedy of damages. There was no urgency here and the status quo should be allowed to remain.

[15] In closing counsel said that this application was premature and the whole matter should await defences and the ensuing procedure. Up till now there had been no material disturbance on the site.

[16] At the conclusions of the hearing I gave the verbal decision now the subject of this reclaiming motion. I delivered a short ex tempore opinion, reserving the right to expand it into the present opinion. There was a tape of proceedings which parties may have had extended.

[17] My decision was as follows. I do not think that the action is premature. No prejudice has been demonstrated to me by any lack of a considered response. Indeed I was given a very full argument by the defenders and having regard to the correspondence produced, both parties are well aware of what the works are. Nor do I think the arbitration point is valid. That clause has to be read along with the whole provisions of the contract including the repairing provisions which I deal with below. It is not ousted by any order made by me. It is highly likely that disputes between these parties will continue to arise where the plea can be taken if it ever is taken. Hamlyn was a case involving mutual obligations over 10 years in relation to supply of grains to London merchants who undertook to supply machinery to the pursuer's distillery on Skye. There was an arbitration clause in English form. When a dispute arose the distillery sued in Scotland. The case turned on jurisdiction and whether the arbitration clause was governed by English law. The case is wholly different on its facts from the present and I do not regard it as in point.

[18] What of the argument that the order sought lacks any precision? I do not think that is a valid point here. Both parties to the contract must be taken to know what its terms means. The cases cited tend to stress the commercial realities of the situations and the correspondence which is ongoing shows that the defenders know what they are required to do. No. 6/6 of process clearly shows the many works said to be necessary. Here the order sought represents the terms of the contract. In my view Highland and Universal and Oak Mall (both "keep open" cases) confirm that that is the correct approach. I do not think that Murdoch compels me to take any different view.

[19] Does this interim order under section 47 make matters final? I do not think so. The comparison with Summary decree is inapt. Summary decree can only be granted once defences have been lodged. That is not this case. Also from the papers before me, and the timing of events, it is clear that only a limited amount of work could be done before the end of the lease. Many matters can still arise for decision once defences are lodged and in no sense can granting this order he said to be final.

[20] That leaves the issue of the contract and the status quo. I rely on the tests laid out by Lord Reed in Scottish Power and repeated by Lord Drummond Young in Va Tech. The tests are to identify the issues, to consider whether there is a prima facie case, to avoid innovating on contractual rights and, finally, to consider the balance of convenience.

[21] What then are the issues between the parties? In my opinion the issue here is the tenancy of the subjects and the rights and obligations of both parties under the contracts. This has to be set against the Section 47(2) interim orders sought, the business of the defenders and such evidence as I have of the attitude of parties.

[22] The second question is whether the pursuers have a prima facie case. They say they have a "full" right ... to enter to make repairs (No. 6/1 Clause 2, Declaration 3 (page 9)). The adjective full is not in any way qualified. Does it then impinge on the tenant's right to peaceful possession? In my opinion in this lease it does. The Warrandice in Clause 28(1) (page 72) is qualified on a "without prejudice" basis. Indeed Clause 28(2) which relates to the service charge suggests to me that the tenants who pay this would expect the landlord to enter and maintain the property.

[23] I think this view is further confirmed by the fact that in the Head Lease (6/3) failure by the present pursuers to maintain puts them at risk of irritancy. [These head lease obligations are expressly incorporated in the sub-lease (Clause 2 noted above and Clause 30 on page 74)]. The pursuers' obligations are subject to policing by their own landlords (see Clause 5 of 6/3 page 32). It is also of importance that in the sub-lease (6/1) the present defenders are themselves under maintenance obligations (Clause 8).

[24] Subject to the issue of necessity of repairs I am of the view that these inter related contracts do give the pursuers the right to enter which they claim. The defenders' attitude before me and in the correspondence is one of intransigence. They simply refuse access. It was jointly agreed that it would be better for the pursuers to wait for the end of the lease in the autumn and then do the repairs in an empty building. In my opinion such an argument shows why the pursuers have had to resort to Section 47. No doubt the timing is bad for the defenders but that is a risk of the tenancy and is no doubt factored into the rent, service charge and other terms of the lease. In any case, even when the defenders leave other tenants may remain.

[25] The last question in deciding whether there is a prima facie case is whether the pursuers are the sole judges of whether the repairs are necessary. There are no qualifying words in the leases suggesting that there is some overriding test of reasonableness. In my view, on these contracts alone there is no room for the view that there is anyone other than the pursuers who can decide what is necessary. What has to be looked at is the whole repairing obligations and they must judge that. There is no suggestion here that the pursuers are acting in bad faith. The case of Gordon District Council is in my view not in point. It did not purport to lay down any rule of law. The wording under consideration was quite different and, most importantly, the case was decided after proof.

[26] I consider also that were I to give effect to the defenders' arguments on this point I would be innovating on the contracts made by equal parties at arms length. I am not prepared to do that unless compelled by binding authority and none was cited to me.

[27] That leaves the balance of convenience. The status quo here is a tenancy where repairs have been done in the past and were are now deemed necessary. I have held the conditions of the contracts to be clear and the way any repairs would have to be paid for. Plainly in the time left not all the repairs can be finished or even started. I do not doubt that some of the contemplated repairs will cause a degree of disruption to the defenders although I doubt it could be as serious as they claim. For example it should be possible to repair the lifts in phases. On the other side, delay in the face of a clear right means the pursuers are in breach of their own obligations and when the defenders leave will not be able to relet until the works are done. They will not recover any costs from the defenders then and rental income is delayed. To say that they could simply sue the defenders later and allege breach of contract is not in my view satisfactory. Damages would be speculative and difficult to quantify.

[28] I took the view that what was right was action now. I cannot believe that some suitable short term compromise cannot be reached for the remainder of this lease.

[29] For these reasons I have granted the orders sought and expenses.