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OUTER HOUSE, COURT OF SESSION

[2007] CSOH 53

CA174/03

OPINION OF LORD REED

in the cause

DOUGLAS SHELF SEVEN LTD

Pursuers;

against

CO-OPERATIVE WHOLESALE SOCIETY LTD

Defenders;

And

KWIK SAVE GROUP PLC

Third Party:

________________

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

Defenders and Third Party: Renton, Solicitor Advocate; Dundas & Wilson, C.S.

9 March 2007

Introduction

[1] In this action the pursuers seek damages from the defenders for the breach of a keep-open clause in a lease of supermarket premises located in the Whitfield area of Dundee ("the Premises"). The Premises form the largest unit in a shopping centre ("the Centre"). The pursuers maintain that the closure of the Premises since 1995 has reduced the present capital value of the Centre, and has also resulted in a loss of income (in the form of rent and service charges) from the other units there. They seek separate awards of damages under each of those two heads of loss. The defenders accept that their lease contains a valid and enforceable keep-open clause and that the Premises have been vacant since January 1995. It emerged during the proof, however, that they nevertheless wished to argue that the clause did not impose on them an obligation to keep the Premises open, since the then landlord had consented to their granting a sub-lease. The defenders further maintain that the pursuers have not suffered any loss in consequence of any breach of the keep-open clause, and that the pursuers' losses are in any event less than the amounts claimed. They further seek to be indemnified by the third party, to whose subsidiary Kwik Save Stores Ltd ("Kwik Save") the Premises had been sub-let on terms which included a keep-open obligation and a guarantee by the third party. The third party similarly accepts that the lease contains a valid and enforceable keep-open clause, but maintains that the pursuers have not suffered any loss, or in any event that their losses are less than the amounts claimed. In its pleadings, the third party denies any obligation to indemnify the defenders. At the commencement of the proof, however, the court was informed that the defenders and the third party had resolved their differences extra-judicially, and that they would be jointly represented by the solicitor-advocate previously acting for the third party. At a later stage during the proof, it was explained that the defenders and the third party had entered into an extra-judicial agreement resolving the issues between them (in particular, as to the extent of the obligation to indemnify, given that the duration of Kwik Save's sub-lease was shorter than that of the defenders' lease), and that the solicitor advocate was instructed on behalf of both the defenders and the third party, by solicitors acting as agents for both parties [Mr Poulton, pp.159-163, 176].

[2 ] This litigation has a protracted history, which it may be helpful to explain at the outset. The present action was raised in the Sheriff Court in January 1999, and was remitted to this court in March of that year. In January 2000 it was sisted, pending proceedings at the instance of the present defenders (but in reality, I was informed, conducted by the present third party) for the rectification of a minute of variation of their lease. The objective of those proceedings was to have the keep-open clause removed from the lease. The present defenders were unsuccessful in those proceedings. The present litigation was then resumed in January 2004. In July 2004 the defenders and the third party each lodged a note accepting "that clause (Tenth) (Sixteen) (the keep-open clause) is a valid and enforceable Keep Open Clause". In August 2004 a proof before answer was allowed. A diet of 12 days duration was allowed, in accordance with parties' estimates. In the event, the proof occupied 63 days, and required to be heard over a number of diets during March, April, May, June, November and December 2005, and February and March 2006.

[3 ] At the proof, the following witnesses were led on behalf of the pursuers:

1. Mr Barrie Clapham, managing director of the pursuers, and of their parent company, Credential Holdings Ltd ("Credential Holdings").

2. Mr Robert Wallace, a resident of Whitfield since 1970, and chairman of the Whitfield Area Forum for Tenants and of the Murrayfield Area Residents' Association.

3. Mr Iain Luke MP, the Member of Parliament for Dundee East between 2001 and 2005. Mr Luke was a member of Dundee District Council and of its successor, Dundee City Council, between 1984 and 2001, Convenor of the Economic Development Committee between 1990 and 1996, Convenor of the Housing Committee between 1996 and 2001, leader of the administration between 1989 and 1992, and latterly a member of the Planning Committee.

4. Mr James Dallas, the community development worker employed by the Whitfield Inclusion Network Group since 2002.

5. Mrs Caroline Canter, a local resident since 1983, and a voluntary worker for the Whitfield Inclusion Network Group.

6. Mrs Margaret Neil, the manageress of Ladbrokes, 115 Whitfield Drive (one of the units in the Centre), since 2002.

7. Mrs Bonjekiola Majola, a local resident, a pharmacist, and the manageress of Moss Chemists (one of the units in the Centre) since 2003.

8. Mr Jonathan Reid, a chartered surveyor employed by the firm of J & E Shepherd, Chartered Surveyors, in Dundee.

9. Mr Craig Watt, a chartered surveyor employed by Edinburgh City Council, and formerly employed by J & E Shepherd in Dundee.

10. Mr John Thomson, a senior management surveyor employed by Land Securities plc, the parent company of Ravenseft Properties Ltd ("Ravenseft"), since about 1977.

11. Mr Gerard McCluskey, a chartered surveyor, and a partner in J & E Shepherd, Dundee.

12. Mr Paul Letley, a chartered surveyor, and a partner in J & E Shepherd, Dundee.

13. Mr Michael De Vos, a commercial property manager employed by J & E Shepherd, Dundee.

14. Ms Joanna Fawcett, managing director of George Street Research Ltd, Edinburgh.

15. Mr Roderick MacLean, a chartered town planner, and an associate director of DTZ Pieda Consulting, Edinburgh.

16. Mr Rushid Hussein, the postmaster at Whitfield Drive Post Office, 120 Whitfield Drive (one of the units in the Centre) since 1989, and formerly also the occupier of the newsagents at 121 Whitfield Drive (another of the units) between about 1989 and 1992.

17. Mr Andrew Oswald, a chartered surveyor, and a partner in Knight Frank, Glasgow.

18. Mr Andrew Lythgoe, a chartered surveyor, and an associate director of D B Richard Ellis Ltd, Glasgow.

19. Ms Jill Brash, a senior planning officer with Dundee City Council.

[4 ] The following witnesses were led on behalf of the defenders and third party:

1. Mr Mark Poulton, business director of property of Somerfield plc since 1998 (when it merged with the third party), and previously in a similar position with the third party since 1987.

2. Mr Eric Young, a chartered surveyor, and a director of Eric Young & Co, Chartered Surveyors.

3. Mr James Merry, a retired chartered surveyor, formerly the senior partner in Graham & Sibbald, Chartered Surveyors, Dundee.

4. Mrs Morag Meneer, a chartered surveyor employed by Colliers CRE, Glasgow.

5. Mr David Allison, a chartered surveyor, and the senior partner in Allison & Lightbody, Glasgow.

6. Mr Alexander Brown, a senior town planner employed by Dundee City Council.

7. Mr Alistair Todd, a chartered surveyor, and a partner in Graham & Sibbald, Dundee.

8. Mr George Nisbet, a chartered surveyor, and a partner in D M Hall, Edinburgh.

9. Mr Brian Hermiston, a chartered surveyor and chartered town planner, and a consultant with Montagu Evans, Edinburgh.

10. Mr Martin Robeson, a chartered surveyor and Fellow of the Royal Town Planning Institute, and a partner in Littman & Robeson, London.

[5 ] It may be helpful to say something at the outset about my assessment of the witnesses' evidence, although this is something which I shall discuss later in greater detail in relation to particular issues. In general terms, almost all the witnesses appeared to me to give their evidence honestly and to the best of their ability. One exception (so far as the latter aspect is concerned) was Mr Todd, who initially failed to attend court (despite receiving a citation), as he wished to attend a meeting with his partners instead. In consequence, the court was unable to sit. He failed to refresh his memory prior to giving evidence, and had a poor recollection of events. He also appeared to me to lack objectivity: he appeared to be endeavouring to undermine the position of the pursuers at every opportunity. It only emerged as a result of questioning during cross-examination that his firm was at the time he gave evidence acting as the defenders' managing agent in relation to the Premises. I did not consider his evidence to be reliable. Some of the other witnesses appeared to me to be more reliable than others. Mr Clapham appeared to me to give his evidence with sincerity, but did not have an entirely accurate recollection of events, and at times appeared to me to put a somewhat optimistic gloss on matters. I also have reservations about the reliability of some of the evidence given by Mr Poulton, for reasons which are explained below. Of the other lay witnesses, I found the evidence of Mrs Neil, Mrs Majola and Mr Hussein to be particularly careful, objective and well-informed. Of the chartered surveyors who were led as witnesses to fact, I found the evidence of Mr Reid, Mr Watt, Mr McCluskey, Mr Thomson, Mr Letley, Mr De Vos (who, although not qualified as a chartered surveyor, nevertheless belongs in this group) and Mrs Meneer to be straightforward and generally objective. I found the evidence of Mr Young and Mr Merry to be less persuasive, for reasons which are explained below. Of the other professional witnesses who were led as witnesses to fact, Ms Brash and Mr Brown appeared to me to be reliable. The evidence of the expert witnesses who were led to give evidence of opinion requires to be addressed in detail: I have neither accepted nor rejected the evidence of any of them in its entirety.

[6 ] In view of the amount of evidence led, it is not practicable in this Opinion to attempt to cover it in its entirety. I shall instead attempt to give a broad overall picture, and to focus in greater detail on those aspects which appear to me to be of particular importance. In relation to the expert evidence, in particular, although I shall focus only on the aspects which appear to me to be critical, I should not be taken to have disregarded the remainder of that evidence (which, so far as transcribed, extends over thousands of pages).

The contractual context
[7 ] The Centre was constructed on land owned by Dundee Corporation and let by them to Score Property Developments Ltd under a lease ("the Ground Lease") which was executed and recorded in 1971. The Ground Lease was for a period of just over 125 years, from 1 October 1969 until 28 November 2094 [67/10].

The tenant's interest in the Ground Lease was acquired from Score Property Developments Ltd by Ravenseft, by an assignation which was executed and recorded later in 1971 [67/11]. Ravenseft sub-let the various units in the Centre. In particular, the Premises were sub-let to Johnston's Stores Ltd, under a sub-lease ("the Sub-Lease") executed in December 1972 [67/17]. The Sub-Lease was for a period of 63 years, from 15 May 1970 to 15 May 2033. As explained in greater detail below, the defenders acquired the tenant's interest in the Sub-Lease from Johnston Stores Ltd by an assignation which was executed in 1977 [67/18B]. The defenders subsequently sub-let the Premises to Shoprite Ltd ("Shoprite"), by a sub-under-lease ("the Sub-Under-Lease") which was executed and registered in 1993 [67/33]. The Sub-Under-Lease was for a period of 20 years, from 11 June 1993 until 10 June 2013. The pursuers later acquired the tenant's interest in the Ground Lease from Ravenseft, by an assignation which was executed and registered in 1994 [67/12]. In 1995 Shoprite assigned their interest in the Sub-Under-Lease to Kwik Save, the performance of Kwik Save's obligations to the defenders being guaranteed by the third party. Both the Ground Lease and the Sub-Lease have been modified from time to time: so far as material, those modifications are explained below.

[8 ] In summary, therefore, the contractual position is that the pursuers are the tenant of the Centre under the Ground Lease, and are the landlord of the various units in the Centre under sub-leases. In particular, they are the landlord of the Premises under the Sub-Lease, and the defenders are their tenant. Kwik Save are the sub-tenant of the Premises, under the Sub-Under-Lease granted by the defenders.

[9 ] Clause (FIFTH) of the Sub-Lease provides:

"The premises are let for use only as and for the retail trade or business of a supermarket primarily for the sale of food and as ancillary thereto an off licence and for no other purpose whatever ...".

[10 ] Clause (TENTH) provides:

"The Tenants bind and oblige themselves:

...

(Sixteen) To keep the premises open for retail trade during the usual hours of business in the locality (subject to the Tenants having the right to fix such early closing day as may be in their best interests) the shop display windows being kept dressed in a suitable manner and in keeping with a good class shopping centre, and at all times to comply with all requirements of the Local Authority, Local Planning Authority and any other competent Authority and of any Statute order or regulation affecting or in connection with the use of the premises for the purpose of the business permitted to be carried on therein for the time being."

[11 ] Clause (FIFTEENTH) of the Sub-Lease provides:

"... the Landlords may make good any default of the Tenants and may recover from the Tenants in any way open to them payment of all sums due by the Tenants including the cost of making good any default and damages for loss and injury suffered by the Landlords as a result, direct or indirect, of any contravention of the obligations imposed on their Tenants under these presents or of any exercise by the Landlords of their rights hereunder."

[12 ] Clause 4(1) of the Sub-Under-Lease provides that the sub-tenant (i.e Kwik Save) undertakes to fulfil the obligations of a non-monetary nature undertaken by its landlord (i.e. the defenders) under the Sub-Lease. Clause 4(7) provides that the sub-tenant undertakes not to use the Premises except as a supermarket. Clause 4(9)(1) provides:

"the Sub-tenant confirms, undertakes and accepts that its obligations under the Sub-Lease and the whole burdens and conditions governing its rights of occupancy of the Premises shall be those incumbent upon the [defenders] under the [Sub-Lease], the terms of which are hereby treated brevitatis causa as repeated herein and forming part of these presents, the [defenders'] obligations under the [Sub-Lease] being obligations mutatis mutandis of the Sub-tenant under the [Sub-Under-Lease]."

The history of the Centre

[13 ] The Centre was constructed as part of a housing estate built by Dundee Corporation in the late 1960s and completed in about 1971. The estate was built on land which the Corporation owned at Whitfield, on the north-eastern edge of Dundee, to the east of an older estate of local authority housing at Fintry. It was planned to accommodate 12,000 people [67/49, 67/297, 67/400]. It contained approximately 4,400 dwellings, about half of which consisted of system-built deck-access maisonettes, arranged in giant honeycombs. To judge from photographs [e.g. 67/400], these houses, known as "Skarne", had a severely institutional appearance; and it emerged in evidence that their design was based on one used for barracks and prisons in Sweden. The estate also contained multi-storey flats and lower-level housing. The estate lay on the top of a hill, with open countryside behind. The only road into the estate, from the direction of the central part of Dundee, was (and remains) Longhaugh Road, which is steep and winding, and leads to a country lane. The estate was thus (and has remained) relatively isolated from the central areas of the city. Within the estate there were relatively few roads, the Skarne blocks in particular being arranged on grassland which was criss-crossed by a network of pedestrian paths. A group of communal facilities were constructed on adjacent sites on the western side of the new estate. They included a police station, a health centre, a number of churches, three primary schools, a nursery, a social services office, a Labour Club, the Centre, and (some years later) a public library. The Centre, in particular, was constructed on an area of ground lying between the main road through the estate, Whitfield Drive (which lies to the south of the Centre), and a cul-de-sac, Lothian Crescent (which lies to the west and north of the Centre). As originally constructed, the Centre comprised eleven small shop units and three larger units in a roughly U-shaped configuration, the open end of which faced southwards towards a large car park (with parking for 120 cars) and Whitfield Drive. The units were referred to during the proof by number, according to their address: for example, the Premises, at 116 Whitfield Drive, were referred to as unit 116. That convention is also followed in this Opinion.

[14 ] The small units (111 to 115, and 117 to 122) were each of about 1020 square feet. One of the larger units (107 - 110) was of about 4370 square feet, and was intended for use as a public house. The remaining two units (106 and 116, the latter being the Premises) were each of about 12,000 square feet, and were intended for use as supermarkets. The units were constructed in rendered brick, with flat roofs covered in felt. The central area of the Centre, around which most of the units were located, was open to the elements. Units 107 to 115 were (and are) located along the west side of the central area; the Premises were located along the north side, facing the car park and Whitfield Drive; units 117 to 122 were located along the east side; and unit 106 adjoined unit 107-110, on its west side. At the north-west corner of the Centre there was a gap between unit 115 and the Premises, where stairs led towards multi-storey housing blocks on Lothian Crescent. There was another gap at the south-east corner of the Centre, between unit 122 and the library. To the west of the Centre there was a site for a projected petrol station, which in the event was not constructed. To the south of the Centre there was an advertising hoarding. To the north of the Centre there was an electricity sub-station.

[15 ] The history of occupation of the Centre was the subject of a great deal of evidence, and extensive submissions, at the proof. While the case was at avizandum, the parties produced an agreed position paper covering much, but not all, of this subject [95]. The following account reflects that agreement, but also my own assessment of the evidence, in so far as matters were not agreed.

[16 ] Unit 106 was let to a supermarket operator: it traded at one time as Presto and at another time as Templeton. At some point after 1980 it closed [67/51]. Around the same time another operator, William Low, which owned Templeton, opened a supermarket at Pitkerro Road, about half a mile from the Centre [67/51]. Unit 106 was then excluded from the subjects let under the Ground Lease, as a result of a partial renunciation of the Ground Lease, executed by Ravenseft in 1986 [67/13]. The unit was thereafter used by Dundee District Council and its successor, Dundee City Council (both of which I shall refer to as "the Council") as a community centre, known as the Whitfield Activity Centre. One consequence was to reduce the retail floorspace in the Centre by about one third.

[18 ] Whitfield soon became an area with high unemployment, poor housing and environment, serious social problems and a bad reputation [67/400, p.3]. As a report prepared in 1993 observed,

"The large perimeter housing estate, densely populated but lacking to a greater or lesser extent in amenities, privacy and accessibility to central activities, created conditions recognised as synonymous with social deprivation almost from day one" [6/49].

The Centre had a problem with vandalism, and with graffiti in particular [Mr Thomson]. There were also problems with the clientele of the public house, but these had only a limited effect on the trading of the Centre, as they mostly occurred in the evening, when the shops were closed [Mr Thomson].

[19 ] The Centre nevertheless had a wide range of units trading in the mid 1980s (a public house, a hairdresser, a video rental shop, a chemist's, a bookmaker's, a supermarket, a launderette, a butcher's, a post office, a newsagent's and a baker's), and it was quite busy [Mr Thomson, Mr Wallace, Mrs Canter]. Rent reviews in respect of units 112, 113, 114, 117 and 118, as at November 1986 (in the case of unit 112) and May 1987 (in the case of each of the other units) resulted in increases, some of which were substantial [67/47, 67/48].

[20 ] In about 1986 the Centre was placed on the market by Webster & Co, chartered surveyors acting on behalf of Land Securities (the parent company of Ravenseft), as a result of that company's decision to focus on retail parks and large shopping malls and to dispose of all other types of property held in their portfolio [Mr Thomson]. All the units were let at that time [67/48, 67/47], although unit 117 was unoccupied. The total gross rent of the units in the Centre as at May 1987 was £65,150 per annum [67/48].

[21 ] In 1988 the Scottish Office published a White Paper, New Life for Urban Scotland, setting out a new approach to urban regeneration based on partnerships between interested public bodies, local residents and the local business community, led by the Scottish Office. Four such partnerships were to be formed: at Castlemilk in Glasgow, Ferguslie Park in Paisley, Wester Hailes in Edinburgh, and Whitfield in Dundee. These areas were selected to provide a wide spread of areas (in terms of geography, population size, types and ages of housing, and local authorities), rather than being chosen on a "worst-first basis" [67/400, p.2]. They were, nevertheless, all areas with severe social, economic and housing problems. The Whitfield Partnership was chaired by the senior planner at the Scottish Office, and included Mr Luke among its members. It was given a broad remit to secure the regeneration of the Whitfield housing estate. The area described as Whitfield for the purposes of the partnership was shown on a plan [67/400, p.7. This area is shown more clearly in 67/3, Plan 2: Mr Hermiston, pp.526, 528, 546.], and was essentially that of the local authority housing estate, with some private housing on the eastern edge. The state of Whitfield at that time was described as follows by the chairman of the Whitfield Partnership:

"The enormity and nature of the problems became apparent as soon as I entered Upper Whitfield which contained the infamous Skarne blocks. The classic signs of urban deprivation were all around. There were large numbers of empty houses, abandoned blocks, fire damaged flats ... The urban form was grimly institutional, totally regimented ... As a result the area provided a near perfect habitat for all kinds of illegal and anti-social activities" [67/400, p.4].

As at January 1989, the population of Whitfield was about 6,000. About a quarter of the housing stock was vacant. Unemployment was four times the Dundee average (itself above the national average) [67/400].

[22 ] In 1989 the rent of unit 120 (the post office) was reviewed, and increased significantly [67/47 and 67/50]. The Centre remained quite active at that time, and trading at the post office and the newsagents (units 120 and 121 respectively) was good [Mr Hussein].

[23 ] A report was commissioned by the Whitfield Partnership from Cousins Stephens Associates, a firm of economic development consultants [67/51, 89].

[24 ] At the time of the Cousins Stephens Associates study, in about 1990, all the units in the Centre were let, but three of the units were unoccupied, and the Premises were closed due to fire damage, as explained below. The report prepared by Cousins Stephens Associates was not produced in its entirety in the present case: only the executive summary was available [67/51]. It noted that the shops in Whitfield, including the Centre, had been adversely affected by the decline in the population of Whitfield, the development of the William Low supermarket at Pitkerro Road, developments in the city centre, and the general trend towards shopping in bigger stores (as Mr Thomson observed in evidence, however, the latter factor could be expected to have had somewhat less of an effect in Whitfield than in most other areas, given the relative poverty of the area and the low level of car ownership, and the consequent tendency, described by Mr Thomson, to do more shopping on foot, on a relatively frequent basis). The letting of vacant units had been difficult, and rental levels were depressed. Surveys showed that hooligans and drunks, lack of shops and poor environment deterred people from using the Centre. People using it did not like its dirty, run-down appearance, the lack of choice and the prices. Household surveys indicated that the Centre retained only 10 per cent of the convenience expenditure of households in the area studied, with a further 15 per cent being retained by five corner shops within Whitfield. The surveys also indicated that the Centre was used primarily by people living within 10 minutes' walk, and that main food shopping was done primarily at Lows. In considering these findings, it is necessary to bear in mind that the supermarket in the Centre was apparently closed due to fire damage at the time of the surveys. It is also necessary to bear in mind that, in the absence of the complete report, a critical assessment of these findings is not possible. Looking to the future, the report noted that the population of Whitfield was forecast to increase by 12 per cent, with a 60 per cent increase in the population in private housing on the east side of Whitfield. There was expected to be a substantial shift in housing tenure. Nevertheless, on the assumption that retention rates of convenience expenditure remained at about the same level as was then current, the report suggested that only 3000 to 4000 square feet of food shopping could be sustained at the Centre. It recommended that the quality of the Centre should be improved, but the amount of floorspace reduced, and that the Centre's role should expand to include more service functions (such as a hot food takeaway, video rental, a hairdresser or a launderette). It also recommended that the Council should acquire the Centre from Ravenseft [67/51].

[25 ] In his evidence, Mr Thomson disagreed with the suggestion in the report that only 3000 to 4000 square feet of food shopping could be sustained at the Centre. In that respect, Mr Thomson observed that Shoprite had been happy to move into the Premises (as explained below), with an area of 12,000 square feet, and he had been told by their manager that they were trading well. I note that the opinion expressed in the report was based on the premise that retention rates of convenience expenditure remained at their current level. That level appears to have been calculated at a time when the Premises were closed, and when its former customers were necessarily going elsewhere to do their food shopping. In those circumstances, it appears that the opinion expressed in the report did not reflect the situation which would then have existed if the supermarket at the Premises had been trading.

[26 ] In response to the Cousins Stephens Associates report, the Council decided against acquiring the Centre. The Whitfield Partnership however accepted that the Centre must be improved, given the major investments being made to improve the housing on the estate and to reduce unemployment, and indicated that public sector funds might be available to assist in its re-development [67/51]. The Partnership then employed Ironside Farrar Ltd to develop a refurbishment scheme. In view of what was described as the "resilient" nature of trading at the Centre at the time of their study, Ironside Farrar's recommendation was to refurbish the existing units and to improve security and access [67/50; 67/49]. This appears to have reflected the decision of a Steering Group, set up by residents to work with the Partnership, to reject any option involving the partial or total demolition of the Centre, and to propose a budget of £480,000 for its refurbishment [67/49; 67/400, p6].

[27 ] In 1990 the Premises (then occupied by Kismet Stores) were set on fire, causing extensive damage [67/51; 67/343; Mr Thomson]. The Premises were then closed for some six months [Mr Thomson, Mr Hussein]. It is a matter of agreement that they re-opened later in 1990 as a supermarket operated by A & T Stores Ltd (another sub-tenant of the defenders), trading as A & T Family Choice [Mr Wallace, Mrs Canter, Mr Hussein]. They sold groceries, fresh fruit and vegetables, pre-packed meat, and the other products usually stocked at that time by supermarkets [Mrs Canter]. During the period when the Premises were closed, business in the Centre generally declined. After A & T Stores commenced trading, business in the Centre picked up again [Mr Thomson, Mr Hussein]. A & T Stores did not however carry as much stock as Kismet Stores had done, and did not trade as successfully [Mr Thomson].

[28 ] In 1991 the leases of units 113, 114, 115, 118, 119, 121 and 122 expired. It is a matter of agreement that unit 113 continued to trade as a chemist's until the end of 1992, after which it was re-let as explained below. Unit 114 was re-let to the chemists on a 25 year lease, expiring in 2016, at a rent which was substantially higher than the previous rent [67/42]. Unit 115 was re-let to Ladbrokes, on similar terms, and with a similar increase in rent. Unit 118 appears to have been vacant for a time, then re-let as an adult education centre until June 1993 [67/50; 67/55]. Unit 119, which had seemingly been vacant for a time, was again let as a fish and chip shop, on a 20 year lease, expiring in 2011 (with an option to terminate in 2001), with a similar increase in rent [67/52, 67/53, 67/76]. Unit 121 was re-let as a newsagents to Mr Hussein on a 25 year lease, expiring in 2016, with a similar increase in rent. Unit 122 was unlet until it was re-let in January 1993, as explained below [67/76]. The lease of unit 107 (the public house) also underwent a rent review with effect from 1991, which resulted in a rental increase of 50 per cent from the 1984 figure.

[29 ] In 1992 the lease of unit 117 expired. It was then re-let as a Chinese takeaway, apparently until September 1993, at a rent which was substantially higher than the previous rent [67/49; 67/50].

[30 ] In September 1992 the supermarket operated at the Premises by A & T Stores closed, possibly as a consequence of persistent vandalism [Mr Wallace]. The managing agents acting on behalf of Land Securities reported to Mr Thomson on 22 September that:

"after a week-end of unrest the above premises is now vacant, and has been made as secure as the circumstances will allow, with Security Guards patrolling the area on a regular basis" [67/54].

In his evidence, Mr Thomson said that the purpose of this report was to inform him that the Premises were empty. Since a vacant property was at greater risk of vandalism and fire, there was a need to review the insurance cover. He could not recollect the nature of the "unrest" referred to. The Premises would have been "made as secure as the circumstances will allow" by making fast the doors, shutters and windows. Following the closure of the Premises, the Centre again became generally less busy [Mr Hussein].

[31 ] In November 1992 a report was commissioned by Scottish Enterprise Tayside ("SET") from Graham & Sibbald, chartered surveyors in Dundee, on the long-term economic viability of the Centre in its current form. Graham & Sibbald were also instructed to make recommendations for improving the Centre's performance. Their instructions described the state of the Centre at that time:

"The physical fabric of the shopping centre has now deteriorated to the point where major intervention is required. Shop frontages are severely degraded and most remain shuttered even during opening hours. The central area is completely empty and a deep canopy throws frontages into darkness for much of the day. Car parking areas are over-large and pedestrian access routes are badly orientated, poorly lit and of low quality. Graffiti pervades the entire area and anti-social behaviour is increasingly prevalent. The configuration of the shops is recognised as contributing to the problem as it offers poor views into the area and contains too many hidden corners."

[32 ] The supermarket operating in the Premises had ceased trading in September 1992, as already mentioned. The public house at unit 107 had been closed for some time. Three of the small units were unoccupied at the time the instructions were prepared (seemingly, units 113, 117 and 122, although the evidence is not entirely clear). As a result, although all the units were let, less than a third of the total floorspace was currently in use. The instructions to the consultants noted:

"The loss of the supermarket is particularly damaging as it acted as an anchor for the smaller shops and the longer term viability of future occupancy within the shopping centre is now the subject of considerable concern" [67/50].

[33 ] Mr Thomson, who dealt with the management of the Centre on behalf of Land Securities (and its subsidiary, Ravenseft) between about 1980 and 1994, expressed in evidence his agreement with the statement quoted in the preceding paragraph. He said that Land Securities considered the supermarket to be the anchor tenant: that is to say, the tenant, or the use, which was going to bring the most customers into the development. It was the supermarket which produced the most footfall, to the benefit of the Centre and of the other tenants. It attracted customers who also used other shops in the Centre. That was the position even when the supermarket was operated by a local trader such as A & T Stores. He considered that the catchment of the Centre included a large part of Fintry as well as Whitfield. During the periods when the Premises were closed, in the 1980s and 1990s, the other tenants asked him what was happening. They were concerned that there was no supermarket trading, and anxious that the Premises should be occupied. He inferred that their trade was being affected. Mr Thomson also commented that the fact that the supermarket was closed would have increased the difficulty of letting vacant units in the Centre. Mr Thomson impressed me as a credible and reliable witness, and I accept that evidence.

[34 ] Graham & Sibbald reported between about February and June 1993. The author of the report was James McLellan, who at the date of the proof was a property manager with First Bus [Mr Todd]. He was not called as a witness, although the defenders and third party sought to rely on his report. Instead, Mr Todd was called, having been consulted by Mr McLellan (his colleague at that time) in relation to aspects of the report. As I have indicated, Mr Todd was an unsatisfactory witness, and I attach little weight to his evidence. Nevertheless, the report is a significant document, as it contains the most detailed consideration of the Centre prior to the present proceedings. At the same time, it is necessary to bear in mind that circumstances in 1993 were materially different from those prevailing at the present day. The Centre itself has been altered and refurbished, as explained below; the Whitfield estate has been considerably improved; and the general economic situation has changed. In relation to the last point, it appears that the report was prepared at a time when the general outlook in the property market was pessimistic [Mr Lythgoe, p.548].

[35 ] The report [67/49] noted that the Centre had originally comprised eleven small shop units, two large anchor tenants (the defenders at the Premises, and Presto at unit 106), and a public house. The Presto unit had been sold to the Council and was used for community purposes. The public house remained closed, due (it was said) to the loss of its licence (which the authors understood to be due principally to the incidence of drug abuse) and the cost to the tenant (Bass Holdings) of "protection". Later documents (mentioned below) suggest that the public house had not in fact lost its licence, but had been closed for commercial reasons. The Premises were also closed. Ten of the eleven smaller units were however trading, the only unoccupied smaller unit being unit 113 [67/49, para 9:05], which was under offer. Slightly more than a third of the total floorspace was in use. A schedule of existing rentals, appended to the report, indicated that the gross rental (including the rental offered for unit 113) was £85,125 per annum: a 31 per cent increase from the figure as at May 1987.

[36 ] One theme of the Graham & Sibbald report was the contrast between the Centre and the remainder of the estate:

"1:05 It was an early and obvious conclusion of our report that whilst the majority of the housing stock within the Whitfield area had been vastly improved, notably by the use of joint venture projects, housing co-operatives etc. the absence of any improvements to the shopping facilities provides a stark reminder of the Whitfield that was and, not the 'new' Whitfield.

1:06 Given that Shopping serves not only a functional need but also a social one, the lack of provision of adequate facilities to serve this partially re-vamped and upgraded area of the city housing stock must be addressed.

1:07 A radical improvement of these facilities is required...

2:05 The social changes are very apparent and the improved housing amenity is commendable. The continuing success of the housing co-operatives and private house building appear to have given a new heart and sense of pride in the community ... We would, however, express some concern at this juncture that despite the improvements carried out the decision to retain the high rise flats to the rear of the shopping centre may have contributed to the continuance of indigenous problems within the immediate area.

2:06 Although a detailed consumer study has not been undertaken, from informal discussions with occupiers on the estate we understand that many will not shop at the centre despite its convenience. It is not hard to see the reasons why, the unwelcoming physical appearance of the shops and fear of intimidation or confrontation from groups of youths or drunks have created a restricted area and one that becomes a 'no go' area in the evenings."

[37 ] The effect of competition from the nearest superstores was noted:

"2:07 Note should also be made that the opening of the Wm Low Superstore at Pitkerro [Road] and, more recently, Asda [at Milton of Craigie Road] will have contributed towards the decrease in popularity of the centre. In particular the Wm Low store operates a bus service to the area which allows residents without the benefit of private transport to make their purchases under one roof."

The report warned that if the store at Pitkerro Road were to be acquired by a discount operator such as Kwik Save, as appeared to be a possibility, that would place even greater pressure on the Centre.

[38 ] It was noted that the Centre had suffered from neglect, and that Ravenseft's parent company, Land Securities Ltd, did not intend to invest in improvements:

"2:09 It is apparent that the centre has been neglected for many years in terms of maintenance, etc. concluding with the decision of the Co-op to close the supermarket some years ago.

2:10 Land Securities, the current Head Tenant, appear to have no wish to instigate any refurbishment/redevelopment proposals."

[39 ] It was also noted that there was considerable market interest in the Centre, but that the Council had been unwilling to consent to an assignation of Ravenseft's interest:

"2:11 From informal discussions with Land Securities we understand that their interest in the Shopping Centre has been for sale for some time now at an asking price three years ago of £300/£350,000 although this has now increased (we suspect to circa £400,000). A great deal of interest has been expressed in the investment, particularly by smaller property companies, however, Dundee District Council have not agreed to any assignation of the Head Lease.

2:12 Clause 11 of the original Head Lease between Dundee District Council and Score Property Developments Ltd. requires consent of the Landlords to any assignation; the Landlords' consent will not however be 'unreasonably withheld'. In practice we are advised by Land Securities that the District Council will only permit assignation to a property/investment company of similar covenant as existing. Given that Land Securities are one of the three largest UK quoted property companies, the possibility of the assignee matching their covenant is unlikely if not virtually impossible to envisage in relation to the Whitfield development."

[40 ] In the absence of a change in circumstances, the long-term prospects of the Centre were regarded as bleak. In that regard, particular emphasis was placed on the low occupancy rate:

"2:13 Whilst on paper the property is producing a high rental income and is virtually fully rented by 'dint' of non-expired principal sub-leases, in real terms the low occupancy rate contributes not only to the problems of vandalism, vagrancy etc. but also to a sense of apathy in the community, acting as a deterrent to both potential new shoppers and tenants and, equally, to prospective assignees of the Head Lease.

2:14 The property as an income producing asset to both the Landlords, Dundee District Council, and Head Lessees, Land Securities, is of limited life expectancy. In thirty years both the Co-op and Bass will be entitled to revoke their Leases, and it is a foregone conclusion that they will not renew under present circumstances. Approximately half of the rental income is obtained from vacant shop units including Bass Holdings and C.W.S. who are only paying rent to fulfill obligations under their leases. Once these leases expire in 30 years time, major rental voids will occur which we cannot envisage ever being replaced.

...

2:16 The Shopping Centre is now a wasting asset both in terms of rental income to the Landlords and Head Tenant as it equally is a wasting social and economic asset to the community."

[41 ] In making proposals for the future of the Centre, the author of the report noted that the Whitfield estate had originally been intended to have a population of 12,000. The population at the time of the report was estimated at 6,000, although the results of the most recent census were not available. In the absence of detailed demographic evidence, the author was unable to carry out a socio-economic study of supply and demand, and therefore relied on his local knowledge of the area and his previous experience of retail developments. It was recommended that a detailed study of supply and demand should be carried out before proceeding with any alteration to the existing shopping provision. The Centre was considered to be a local or neighbourhood centre, in terms of shopping centre theory (an assessment with which Mr Thomson expressed agreement in his evidence). Such centres were generally of 10,000 to 25,000 square feet in size, depending on the population. The catchment population was generally between 2,500 and 10,000. The report also stated: "The key tenant is generally a single supermarket in the smaller centre." Designs varied from strips of single shops to fully enclosed buildings: "The latter would serve a high population". The local function was often reinforced by the presence nearby, or occasionally within the centre, of local and public service facilities, such as a primary school, library and council agencies. A public house was frequently included in such a centre. Tenant turnover was often relatively high in these smaller centres.

[42 ] The report stated that the author had carried out site visits to several shopping centres which were thought to be located in comparable situations: Castlemilk, Pollok, Easterhouse and Drumchapel, in Glasgow; and Wester Hailes, Muirhouse and Craigmillar, in Edinburgh. All these locations had social and economic similarities to Whitfield, but none (with the possible exception of Craigmillar) had such poor shopping facilities. All those shopping centres were much larger, and served larger populations. It was noted that enclosed and covered centres offered a more secure shopping environment and appeared to be more successful economically. Undesirable elements were discouraged from entering such centres, although they might still gather outside. It was also noted that the principal design features of the Centre - that it was a flat-roofed, unenclosed U-shaped development - were typical of neighbourhood centres developed in the 1960s and early 1970s. It was further noted that there were large numbers of vacant shop units in the centres visited, particularly in areas affected by alterations in population and new retail developments.

[43 ] Against this background, the author of the report concluded that the most important developments affecting the Centre were:

"A. There has been a substantial decrease in population (12,000 persons to 6,000).

B. Comprehensive redevelopment of the area including change in population type.

C. The growth of supermarkets and change in national consumer habits. In particular the development of Wm Low at Pitkerro Road and Asda at Milton of Craigie Road."

In relation to point A, I note that there is no evidence that the population was ever 12,000: although that was the planned capacity of the estate, there is no evidence that that figure was ever reached, or indeed that there had been a "substantial decrease" in the population of the estate. I also note that the Centre was originally designed to have two supermarkets, presumably to serve the planned population of 12,000, but lost one of the supermarkets, and a third of its retail floorspace, when unit 106 became the community centre.

[44 ] The author noted that the Centre was experiencing rental growth, and that, although there was a high turnover of tenants, there was generally a quick take-up when the smaller units became available (as Mr Thomson confirmed in his evidence). Nevertheless, the author expressed the view that there was an over-supply of retail space at the Centre of possibly 13,000 to 14,000 square feet (out of a total at that time of 28,000 square feet). Although some of the surplus space might be used for non-retail purposes, the author warned against a straightforward refurbishment of the existing units, since there was

"such an over supply of existing floorspace in relation to demand for floorspace. Shops would therefore lie vacant, shuttered, prone to vandalism and, as is the nature of such things, the cycle of neglect and despair would be renewed."

[45 ] In these circumstances, the author stated:

"Given a 'clean sheet' Total demolition would be our recommendation: this is, however, thought to be an unlikely and unworkable option particularly from a financial viewpoint."

Bearing in mind the concerns and aspirations of the Steering Group, it was recommended that units 117-122 should be demolished, that the Premises should be reduced in size (seemingly by partial demolition) and occupied by a low cost food operator such as Shoprite with a complementary freezer shop such as Capital Foods, and that the former public house (units 107-110) should be split into three or four smaller units. The Centre would thus comprise eight or nine smaller units, each of 1020 square feet, with two "anchor tenant" units (as the author described them) formed out of the Premises, together occupying a maximum of 5000 square feet. The anchor tenants were envisaged as being a supermarket with a gross area of 3,000 square feet and a freezer shop with a gross area of 2,000 feet. This option would provide the optimum number of shop units, and would also improve the visibility of the shops from all directions (since they would no longer be screened on the west side by the public house, and they would be less completely screened on the east side by the library).

[46 ] The author of the report estimated the capital value of the Centre, in its current state, at £400,000 to £420,000. Its value, if the recommended works were to be carried out, was estimated at £550,000. The author considered that the works were unlikely to be carried out without the intervention of public bodies.

[47 ] By the time the report was issued, unit 113 had been let as a hairdresser's, on a five year lease from 1992 to 1997, at a rent which was substantially above the previous rental for that unit [67/76]. Unit 120 had also been sub-let by RS McColl to Mr Hussein [67/41]. Unit 122 had been let to a Mrs Griffen, as a freezer shop, at a rent which was substantially higher than the previous figure.

[48 ] No action was taken at the time in response to the Graham & Sibbald report, and the Centre remained in what the local Member of Parliament described in April 1993 as a "disgraceful state" [67/381]. That description is supported by photographs which were taken in April 1993 [67/343; 67/4]. They show the Centre to be covered in graffiti. It appears from the photographs that unit 112, which was apparently used for storage by the operator of the grocer's at unit 111 [Mr Thomson], kept its roller shutters down during the day. The adult education centre at unit 118, the post office at unit 120, and the newsagents at unit 121, also appear to have operated with their shutters wholly or partly down. Ladbrokes, at unit 115, also sometimes operated with their shutters down [Mr Letley]. The only units with all their shutters raised were the grocer's at unit 111, the hairdresser's at unit 113 and the chemist's at unit 114. Mr Thomson explained in evidence that units traded with their shutters down because plate glass windows had previously been broken by vandals. The Centre as a whole presented a depressed appearance. Nevertheless, with almost all the smaller units still trading, it appears that the Centre remained relatively busy, at least when compared with the present day [Mrs Canter].

[49 ] Mr Thomson accepted in evidence that during the early 1990s there developed in the Centre a higher rate of turnover of tenancies than previously, mainly involving local traders with a lesser quality of covenant overall than previously, and increasingly long voids. He said that the vacant units tended to encourage vandalism and attempted break-ins, and made the Centre less attractive to potential tenants.

[50 ] The lease of unit 111 (which had at some point been assigned to Mrs Mussrat Begum, whose family operated the unit as a licensed grocer's) expired in May 1993. The unit was then re-let to Mrs Mussrat Begum at a rent which was substantially above the previous figure [67/49, 67/67, 67/76].

[51 ] Shortly afterwards, the Premises were sub-let by the defenders to Shoprite, who took entry in June 1993 [67/33]. Under the Sub-Under-Lease, the rent payable by Shoprite was £20,000 per annum, which was the same as the rent payable by the defenders under the Sub-Lease following a rent review in 1984 [67/19].

[52 ] Shoprite had been established in about 1990 as a discount food operator, following the example which had been set by Kwik Save in England. This involved concentration on a relatively narrow range of goods, sold at discount prices from inexpensively fitted units, with strong marketing. Discount operators on this model could be distinguished from the mainstream supermarket operators of the period, such as the defenders, Safeway, Gateway (subsequently Somerfield), Tesco, Sainsbury and Asda. Kwik Save having traded successfully on this basis in England, the company was sold by the family who had established it. They then established Shoprite to carry on a similar trade in Scotland. Shoprite quickly built up a network of shops in Scotland. During this period, rents increased as developers and landlords took advantage of the pressures on Shoprite to meet their store-opening programme, in accordance with undertakings which they had given to the Stock Exchange [67/168].

[53 ] In February 1993 Kwik Save announced their intention to expand into Scotland. Shortly afterwards, Netto Foodstores Ltd also confirmed their intention to acquire stores in Scotland. Other discount food operators, such as Aldi and Lidl, followed suit. During the next eighteen months, the various operators competed for suitable stores and suitable sites. The rents agreed during this period reflected this competitive context, as some operators - notably Shoprite - attempted to acquire as many of the best sites as possible, so as to minimise their competitors' share of the market [67/168].

[54 ] After taking entry to the Premises, Shoprite carried out an extensive refurbishment at considerable expense [Mr Thomson]. They fitted out the Premises as a modern supermarket on the ground floor, with staff accommodation on the upper floor. There were concessions for a local greengrocer and a local butcher [Mr Poulton, p.82], occupying 837 square feet. The sales area of the remainder of the supermarket, occupied by Shoprite, was 7388 square feet. Provision was made for a limited number of trolleys, although it is possible that they were designed not to be removed from the shop [67/27]. Shoprite began trading from the Premises in about September 1993 [Mr Thomson]. They sold fruit and vegetables, tinned foods, packet foods, frozen foods, dairy products, butcher meat, bakery items, general groceries, wines and spirits, cleaning items, and generally the sort of goods one would expect to find in a supermarket [Mr Letley, Mr Hussein]. Their manager informed Mr Thomson that they were doing very well [Mr Thomson]. Although anti-social behaviour remained a problem for the Centre, Shoprite did not have any problems with people inside the supermarket [Mr Thomson]. The Centre became busier after Shoprite opened [Mr Thomson], and looked more attractive. Business in the Centre generally improved [Mr Hussein]. Shoprite's arrival was regarded by Land Securities as beneficial to the Centre as a whole. The Centre had been very quiet when the supermarket was empty, but that there were more people around after Shoprite opened [Mr Thomson].

[55 ] In June 1993, following the takeover of William Low by Tesco, Kwik Save acquired the former William Low store at Pitkerro Road, and divided it internally so as to create a store for themselves with a number of smaller adjacent units, one of which they let to Iceland, a frozen food operator. This group of shops was known as the Longhaugh Neighbourhood Centre. The Kwik Save store, together with the adjacent Iceland store, extended to 33,530 square feet (approximately three times the size of the Premises), and was about half a mile from the Premises [67/168, para.9.1]. The store began trading in October 1993 [Mr Poulton, p.49]. In about October 1994 Kwik Save took advantage of an opportunity to buy in their lease, so as to become heritable proprietors of the Longhaugh Neighbourhood Centre. Their formal date of entry, as owners, was in March 1995.

[56 ] At the time when the Sub-Under-Lease was granted to Shoprite, the Sub-Lease was varied by a minute of variation entered into between Ravenseft and the defenders [67/20]. The minute of variation deleted from the Sub-Lease clause (SIXTH), which provided:

"The Tenants shall take possession of and use and occupy the premises for the foregoing purpose [i.e. the purpose specified in clause (FIFTH), namely 'for use only as and for the retail trade or business of a supermarket...']... and shall continue to so use and occupy the premises and trade therefrom throughout the whole period of this Sub-Lease...".

The minute of variation did not delete clause (TENTH) (Sixteen) of the Sub-Lease. In the action of rectification mentioned in the introduction to this Opinion, the present defenders sought to have the minute of variation rectified so as to delete clause (TENTH) (Sixteen). As already mentioned, they were unsuccessful.

[57 ] It is relevant to note that the rent of £20,000 which Shoprite agreed to pay to the defenders was negotiated in market conditions where various operators were fighting for market share and were anxious to acquire premises. Even in that context, the agreed rent indicated no growth in the rental value of the Premises since 1984. Indeed, the Sub-Under-Lease to Shoprite was on less onerous terms than the Sub-Lease had contained in 1984, and might therefore have been expected, ceteris paribus, to attract a higher rent: its term was much shorter (20 years, compared with an unexpired term of 49 years on the Sub-Lease in 1984); clause (SIXTH) had been deleted from the Sub-Lease (and therefore did not impose any corresponding obligation under the Sub-Under-Lease, into which the obligations imposed by the Sub-Lease were incorporated); and the provisions governing assignation had also been relaxed to some extent by the minute of variation [67/168]. On the other hand, to the extent that the rent paid by Shoprite under the Sub-Under-Lease might exceed the rent paid by the defenders under the Sub-Lease, the former rent would be taken into account when the latter rent came to be reviewed, in 1998. There was no evidence as to how the rent payable by Shoprite came to be agreed.

[58 ] As at September 1993, it was noted that the public house at unit 107 was still not trading. The note, based on a conversation with Mr Thomson, states:

"Still not trading though the Brewer would not mind putting a Manager in. Nobody dares take the job!"

In relation to unit 111 (let to Mrs Mussrat Begum), the note states:

"Just continuing on a monthly basis. Suffering very badly with Shoprite and might go soon."

In relation to unit 112, the note states:

"Still sublet, but the tenant will be leaving in November 1993 and the unit will become vacant."

In relation to unit 113 (the hairdressers), the note states:

"Not doing well and likely to leave soon."

The lease of unit 114, previously held by a local chain of chemists, had been assigned to E Moss Ltd, a national chain of chemists [67/43]. Units 115 (Ladbrokes) and 116 (Shoprite) were trading. Unit 117 was unlet. Units 119, 120 and 121 were trading as before. The freezer store at unit 122 had recently closed following an accidental fire caused by an electrical fault, and did not re-open [67/57; Mr Thomson].

[59 ] The lease of unit 112 expired in November 1993, and the unit (at one time a video rental shop, and subsequently occupied by Mrs Mussrat Begum as storage ancillary to unit 111) subsequently became vacant. Unit 118 was re-let in March 2004, but with effect from June 1993, to the Secretary of State for Scotland, as a health information centre, on a seven year lease expiring in 2000 (with an option to terminate in 1997), at a rent (of £6000 per annum) which was substantially higher than the previous rent [67/49, 67/56, 67/59, 67/60, 67/67, 67/76].

[60 ] Knight Frank & Rutley carried out a valuation, as at 31 March each year, of all the freehold and leasehold properties owned by Land Securities plc and its subsidiaries, including Ravenseft. The Centre was one of the properties valued. The valuations were prepared for balance sheet purposes. As at 31 March 1992 and 31 March 1993, the Centre was valued at £350,000. As at 31 March 1994, it was valued at £400,000. That valuation appears to have been based on a "property yield" of 16 per cent [67/4, App.1]. The yield of 16 per cent appears to be the relationship between the net return (i.e. the passing rent less the ground rent) and the capital value (i.e. £74,100 minus £8336, divided by £400,000).

[61 ] By April 1994 Mr Clapham of Credential Holdings had become interested in the Centre as a potential investment. Credential Holdings is a commercial property investment, development and management company, established by Mr Clapham in 1982 and almost wholly owned by him. It has become one of Scotland's largest companies, and one of the fastest growing in the United Kingdom. It specialises in buying poor quality properties in poor locations where it perceives an opportunity to add value. In practice, such acquisitions may be made through the vehicle of wholly owned subsidiaries, so that the money borrowed to finance the acquisition can be secured by a floating charge without conflicting with floating charges granted by the parent company. One such acquisition had been another shopping centre in Dundee, at Weaver's Village, Lochee, of which the Council were again the ground landlords. The shopping centre was not trading successfully, but lay adjacent to Lochee High Street, where there were a number of national multiples trading (such as Boots, Woolworths, Superdrug and Farmfoods) [Mr Clapham, p.670]. It had been acquired by a subsidiary vehicle, Douglas Shelf Six Ltd, and covered and enclosed. Substantial improvement works had been carried out. The largest unit had then been let to Shoprite as a supermarket, and tenants had been attracted to the remaining units [Mr Clapham, pp.69-86]. Mr Clapham was also the chief executive of another property company, Allied London & Scottish Properties plc ("Allied London"). That company had recently acquired a large area of agricultural land on the north-eastern edge of Whitfield, where it carried out a substantial private housing development [Mr Clapham, pp.382-383].

[62 ] Particulars of the Centre were sent to Mr Clapham by the selling agents, J Trevor & Webster, on 29 April 1994. According to the particulars, there were at that time three unlet units (units 112, 117 and 122). The gross rent was £74,100 per annum (a decrease of 13 per cent since 1993, when the Graham & Sibbald report was prepared, reflecting the termination and non-renewal of the leases of units 112, 117 and 122) [67/61, 67/67]. In reality, unit 113 was also vacant: the tenants had vacated the unit in December 1993, and the outstanding rent had been written off [67/344; Mr De Vos]. The selling agents observed that "the shopping centre is much improved with the recent arrival of Shoprite" [67/61]. Mr Clapham visited the Centre, and considered it a suitable investment opportunity for his company. He noted that the surrounding area had already been improved and that further improvement works were underway. He also noted that Shoprite were trading from the Premises. Mr Clapham had regular meetings with Shoprite, as Credential Holdings were the principal developer in Scotland of supermarkets for Shoprite. At his next meeting with Shoprite, he enquired how the store at the Premises was performing. He was told that it was performing profitably, but that they had to employ three full-time security guards within the shop. Mr Clapham may have seen the Graham & Sibbald report, but did not study it [Mr Clapham, pp.199, 650]. He was in any event of the view that circumstances had materially changed since that report was prepared, in particular because Shoprite were trading successfully from the Premises, whereas the Premises had been closed at the time of the report [Mr Clapham, pp.204-208]. Mr Clapham also maintained in evidence that there had been a further change in circumstances, in that the William Low store at Pitkerro Road had closed; but it appears that that store had already been acquired by Kwik Save, as explained above. Mr Clapham considered that, by enclosing the Centre, vandalism and security problems could be reduced, and (as at Weaver's Village) the rental value of the units would be enhanced. He also considered that the rents passing for units in the Centre did not yet reflect the improved trading environment resulting from Shoprite's occupation of the Premises, and were likely to increase significantly. He concluded that the Centre would be an attractive investment [Mr Clapham, pp.94-102]. On 6 May 1994 Credential Holdings submitted a conditional offer of £481,500 [67/62-67/63].

[63 ] Mr Clapham then wrote to Dunbar Bank plc with a view to establishing the maximum loan which Credential Holdings would be able to obtain against the security of their interest in the Centre [67/67]. In his letter, Mr Clapham explained what he described as the critical points. There was secure long-term rental income in the form of the sub-leases to Bass Holdings, the defenders and Ladbrokes. Bass Holdings and the defenders, in particular, could not assign their sub-leases without the consent of the landlords (who were not obliged to act reasonably in that regard). Those sub-leases would continue for more than 30 years. In addition, the rents paid by Bass Holdings and the defenders were likely to rise in 1998, when they were due to be reviewed. The current rental level of the public house should, he considered, be about £20,000 per annum (compared with a passing rent of £15,000 per annum). The current rental level of the supermarket should be about £72,000 per annum (compared with a passing rent of £20,000 per annum), on the basis that most supermarkets were paying at least £6.75 per square foot, and the Premises comprised 12,000 square feet. Mr Clapham also explained the situation, as he saw it, in relation to the improvement of the Centre:

"As we are doing with Weavers Village, Lochee High Street, Dundee, there is enormous room for improvement by enclosing the Centre and by effecting other investments and improvements in the Centre, over a period of time. There are substantial grants available from the District Council and Scottish Enterprise Tayside, both of whom are keen to see improvements effected to the Centre over a period of time. Dundee District Council in particular have invested a very substantial sum of money in the Whitfield area and feel that the Centre needs a similar investment to reflect the improvements already effected to the surrounding areas.

Credential would make these improvements from its own cash flow over a period of time in conjunction with any grants that are received from Scottish Enterprise Tayside and Dundee District Council."

Mr Clapham was aware that Land Securities had received offers for the Centre in the past, but had been unable to obtain the Council's consent to any assignation, since none of the proposed assignees had the quality of covenant of Land Securities (which, as previously mentioned, was one of the largest property companies in the United Kingdom). As a result of the improvement works which Credential Holdings had carried out at Weavers Village, and the good relations they had consequently developed with the Council, Mr Clapham was confident that the Council would agree to an assignation to Credential Holdings. In that event, the interest acquired by Credential Holdings would be more readily realisable than it had been in the hands of Land Securities, since it would be more difficult for the Council reasonably to withhold consent to an assignation by Credential Holdings (a far smaller company than Land Securities, and therefore of a lower quality of covenant) [67/68].

[64 ] Mr Clapham's statement in the letter that Bass Holdings and the defenders could not assign their sub-leases without the consent of the landlords, who were not obliged to act reasonably in that regard, was not correct. The sub-tenants could not assign their sub-leases without the consent of the landlords (in particular, the defenders could not assign their interest in the Sub-Lease without the consent of Ravenseft, or subsequently the pursuers), but such consent could not be withheld unreasonably. Mr Clapham said in evidence that what he had said in the letter reflected an agreement he had reached with the Council as the landlord under the Ground Lease, which was subsequently given effect in a minute of agreement entered into between the pursuers and the Council in 1995 [67/15]. That minute of agreement is discussed below.

[65 ] The Council's consent to the proposed assignation by Ravenseft to Credential Holdings was sought and obtained in July 1994 [67/66]. Credential Holdings' offer was then accepted [67/70].

[66 ] In order to enable Dunbar Bank to hold a first ranking security over the Ground Lease, it was decided that it should be assigned to the pursuers, an off-the-shelf company acquired for that purpose, the pursuers' obligations being guaranteed by Credential Holdings [67/77]. Dunbar Bank instructed Mr Allison, then a partner in CRGP Robertson, chartered surveyors in Glasgow, to value the interest in the Centre which the pursuers were to acquire.

[67 ] Mr Allison inspected the Centre in August 1994. At that time the supermarket was occupied (by Shoprite), as were seven of the eleven small units. The public house was not trading, and three of the small units (units 112, 117 and 122) were unlet. Unit 113 (the former hairdresser's) was closed, but Mr Allison understood it to be let: as explained above, it had ceased trading several months earlier. In his evidence, Mr Allison said that the Centre had appeared to him to be a typical local authority area shopping centre, with quite a bit of vandalism, and a rather poor and downtrodden appearance.

[68 ] In his report to Dunbar Bank, submitted on 9 September 1994 [67/79], Mr Allison stated that in his opinion the current market value of the ground leasehold interest in the subjects, with the benefit of the current occupational sub-leasehold interests, would be fairly stated at £615,000. He added:

"In conclusion, from a security point of view, we have considered that whilst the centre may be situated and serving a secondary local authority housing area, the subjects do in our opinion offer an attractive investment opportunity, with approximately 74% of the current rental secured by quality covenants, with reversionary prospects. This being the case, and with the prospect of substantial Government funding being available for refurbishment of the centre, we consider the subjects to offer suitable security for loan purposes at the stated valuation."

By "reversionary prospects", Mr Allison meant the prospects of increased rents at rent reviews. In that connection, he stated:

"We would generally comment that the existing passing rents appear to be fair and in line with rents passing for similar neighbourhood shopping centres in similar locations. Whilst there is a limited prospect of rental growth in the single windowed shop units, there is considerable prospects for increasing the rental levels in respect of the public house and supermarket, both due for review in 1998."

Mr Allison estimated the current rental value of the public house at £17,500 per annum, and that of the Premises at £45,000 per annum. He added:

"The letting of the currently empty units would of course also increase the current rental income although realistically until the centre is refurbished, we do not consider the letting prospects for the empty units to be particularly high, bearing in mind the variety of uses offered by the current tenant mix."

In relation to refurbishment, Mr Allison narrated the history of improvement schemes in Whitfield, the absence of investment in the Centre, and the availability of financial assistance for its refurbishment. He continued:

"The opportunity and availability of funding for a centre refurbishment would be a considerable boost to its attractiveness both from a letting and investment value point of view."

[69 ] A number of sheets of calculations by Mr Allison provide further information about how he arrived at his valuation [67/80]. In relation to the period up to the 1998 rent reviews, the "hard core" rental (by which he meant the passing rent from good quality covenants) was calculated as £60,900 per annum gross. That figure comprised the rentals of the public house, Moss Chemists, Ladbrokes, the Premises, the fish and chip shop, the post office and the newsagent's. I note that two of these (the fish and chip shop at unit 119, and the newsagent's at unit 121) were tenanted by local traders, whereas the remainder were tenanted by national chains. That figure of £60,900 equated to £53,273 net of the ground rent payable by the landlord to the Council. On the basis that that net rent would be received for 4 years (up to the rent reviews), and applying a yield of 14 per cent, its capital value was £155,024. Mr Allison then assumed that, at the rent reviews, the rental of the public house would rise to £17,500 per annum (on the basis that the current rental value was £4 per square foot, the area being 4,370 square feet). He further assumed that the rental of the Premises would increase to £45,000 per annum. The total rental following the rent reviews was thus assumed to be £88,400 per annum gross, £77,266 net of ground rent. On the basis that that net rent would be received in perpetuity, after a deferral of 4 years (pending the rent reviews), and again applying a yield of 14 per cent, its capital value was £324, 835. The total capital value attributable to the "hard core" rent was thus £155,024 plus £324,835, i.e. £479,859 (which Mr Allison miscalculated as £481,859). A figure was then added in respect of the secondary and vacant shops (the former being units 111 and 113, and the latter being units 112, 117 and 122). Units 111 and 113 were taken at their passing rents, of £4,500 and £4,200 per annum respectively. Units 112, 117 and 122 were taken at £4,500, £5,000 and £5,000 per annum respectively. The total of these figures was £23,200 gross. On the basis that that rent would be received in perpetuity, disregarding the ground rent, and applying a yield of 20 per cent, its capital value was £116,000. That figure, added to £481,859, produced a total value of £597,859, which Mr Allison rounded to £600,000. Mr Allison's first version of his report to Dunbar Bank in fact stated the value at £600,000 [67/78]. When he gave evidence, Mr Allison was unable to recollect why his final valuation had been £615,000.

[70 ] Considerable weight was attached to this valuation in the closing submissions in the present case on behalf of the defenders and third party, on the basis that Mr Allison had valued the Centre in circumstances where a supermarket was trading from the Premises. It was suggested that the valuation was therefore of assistance in assessing the current value of the Centre on the hypothesis that the keep-open clause had been fulfilled. It was however apparent from the evidence of the expert valuation witnesses that changes in the economic situation since 1994, and in interest rates in particular, have tended (in general) to increase the value of commercial premises and to depress yields. None of the expert witnesses relied to any extent on this valuation, and I am satisfied that it is of little assistance, beyond suggesting that the current value of the Centre, if the keep-open clause had been fulfilled, could (ceteris paribus) be expected to have been in excess of Mr Allison's figure.

[71 ] The Ground Lease was assigned by Ravenseft to the pursuers for a consideration of £481,500. The date of entry was 30 September 1994 [67/12]. The pursuers granted a standard security over their interest in favour of Dunbar Bank [67/97]. At the time the pursuers acquired the Centre, they had not reached any agreement (even in principle) with the Council in relation to improvement works [Mr Clapham, p191].

[72 ] In his evidence, Mr Thomson said that he doubted whether Land Securities could have sold the Centre without Shoprite trading: without the largest unit trading, the Centre was not an attractive prospect. He could only assume that the pursuers would not have bought the Centre without the supermarket trading. That was also the evidence of Mr Clapham. The evidence was not challenged, and I accept it. I note that Mr Oswald was similarly of the opinion that, without a supermarket trading, the Centre would be unlikely in practice to find a buyer, although it could be valued on the assumption that there was a hypothetical purchaser.

[73 ] After taking entry, the pursuers instructed their managing agents to follow a "zero tolerance" policy towards anti-social behaviour in the Centre. As a consequence, graffiti was painted over as soon as it appeared [Mr Letley].

[74 ] By about August 1994 a confidential agreement had been concluded under which Kwik Save was to acquire the assets of Shoprite, including its entire portfolio of 117 stores. In about late August staff of Kwik Save were instructed to consider the likely trading performance of the Shoprite stores [Mr Poulton, pp.260-261]. One of the issues considered was the proximity of the Shoprite stores to existing Kwik Save stores [pp.265-268].

[75 ] In advance of the acquisition being made public (which occurred on 27 November 1994), Mr Young of Eric Young & Co was instructed (with others) by Kwik Save to consider the Shoprite stores which were to be acquired. Before noting Mr Young's evidence, it is necessary to say something about my assessment of him as a witness. Mr Young is an experienced and respected surveyor and valuer. He did not however give me the impression that he was an entirely objective witness in the present case. He disclosed that he acted on behalf of the third party in Scotland.

In terms of the witness summaries lodged in advance of the proof, he was supposed to be a witness to fact, speaking to his involvement in the closure of the supermarket at the Premises, the 1998 rent review and the dispute over service charges [77]. It emerged however during the evidence of Mr Nisbet, Mr Hermiston and Mr Robeson, after Mr Young had completed his evidence, that he had attended at least one consultation with the solicitor advocate instructed on behalf of the defenders and third party, attended also by Mr Poulton, Mr Nisbet, Mr Hermiston and Mr Robeson, at which the case had been discussed. Mr Young had contributed to the discussion. One such consultation had been held during the course of the proof, before Mr Young gave evidence [Mr Robeson, p.245].

[76 ] Mr Young said in evidence that the team who had been instructed by Kwik Save reported on each of the properties, and gave an assessment in terms of the time they thought the property would take to market and the incentives that would have to be offered. They advised, prior to 27 November 1994, that the Premises would be a difficult disposal, and that a significant incentive would have to be offered, in terms of a rent-free period or a capital contribution. Since the Premises were located in an area with social problems, the team did not think it would be easy to find a mainstream retailer willing to take an assignation. The layout of the Centre, with the supermarket located some distance from the car park, did not help. The fact that the Centre was not on a main thoroughfare was a further difficulty. The most likely occupier of the Premises would be a local operator. Mr Young's assessment of the situation at the date of the proof was much the same. Changes in the market since 1995 had not in Mr Young's view altered the situation. Nor had the improvement works carried out in the Centre in about 1998.

[77 ] In late November 1994 Kwik Save's acquisition of the assets and liabilities of Shoprite was announced to the Stock Exchange and became public knowledge. Shoprite then ceased to trade. Shoprite remained in existence as a non-trading company, and continued to be the sub-tenant of the Premises. In reality, however, the Premises were occupied by Kwik Save, trading under the Shoprite name and logo. As explained below, Shoprite subsequently executed a formal assignation of their interest in the Sub-Under-Lease to Kwik Save, the date of entry being 27 November 1994. By that time, Netto and Lidl had less interest in new premises. Aldi were concentrating on new purpose-built accommodation. Kwik Save's elimination of Shoprite as a competitor consequently resulted in a downturn in demand for premises for discount foodstores. Kwik Save themselves became more selective in terms of the location, specification, layout and size of their stores. The Premises were of no interest to Kwik Save, as the location and specification did not meet their acquisition criteria [67/168].

[78 ] Credential Holdings were the principal developer in Scotland of supermarkets for Kwik Save. In that connection, Mr Clapham had regular meetings with Kwik Save's property manager in Scotland, Eileen Molloy [Mr Clapham; Mr Poulton, pp.46-47]. After Kwik Save acquired the Premises, Mr Clapham continued to have regular meetings with Ms Molloy. He was concerned that Kwik Save would decide not to keep the Premises trading in competition with their nearby store at Pitkerro Road. He drew to Ms Molloy's attention the fact that Shoprite's Sub-Under-Lease contained a keep-open clause, and emphasised that Kwik Save should therefore not consider closing the Premises [Mr Clapham, p.455]. He understood from her response that Kwik Save disputed that there was a keep-open clause, but intended in any event to continue to trade from the Premises [Mr Clapham, pp.462, 466, 468].

[79 ] The pursuers and their agents took steps to find tenants for the vacant units in the Centre (units 112, 113, 117 and 122). In early December 1994 Mr Colin Crichton of the pursuers' letting agents, J Trevor & Webster, had discussions with Mr John McNab, the property manager of Capital Foods, a chain of freezer stores, concerning units 112 and 113. It was normal for frozen food operators, such as Capital Foods or Iceland, to trade beside supermarkets [Mr Clapham, pp.293-294]. Mr Clapham had dealt with Capital Foods previously, when they took a lease of premises within another shopping centre developed by Allied London. Mr Crichton reported to Mr Clapham that Mr McNab had visited the Centre, and had indicated that Capital Foods were prepared to look very seriously at taking both units, on the basis that the pursuers would carry out the necessary works to combine the units. Capital Foods had also raised a number of other matters (including protection against there being other frozen food operators within the Centre, information as to the timescale of refurbishment works, and information as to the effect of the refurbishment on service charges and common charges). Mr Crichton expressed his belief that a deal could be arranged. One other matter had however been raised by Mr McNab:

"He has also asked what the latest position regarding the Shoprite unit is, and indeed whether you know if Kwik Save are likely to trade from this unit themselves" [67/98].

Mr Clapham responded by writing to the pursuers' solicitors to instruct them to proceed with the drafting of missives and of a lease, confirming his willingness to agree to the points which Capital Foods had raised concerning the combination of the units, protection against competition within the Centre, and the refurbishment works [67/99]. Later in December 1994, however, Mr McNab wrote to the pursuers' solicitors:

"I have received very little information on what is proposed at Whitfield Drive. I have not even left home base from the point of view of discussing Heads of Terms .... Naturally, the whole thing will hinge upon the terms that your clients put forward" [67/100].

[80 ] The combination of units 112 and 113, as suggested by Capital Foods, involved fairly substantial works (in particular, because the two units had different floor levels), and necessitated the instruction of architects and civil engineers. Mr Clapham was satisfied that the prospects of completing a deal with Capital Foods were sufficiently good to justify taking those steps. On 4 January 1995 he instructed architects to prepare drawings of the units to be combined. By then, he had also arranged that Mr Crichton would speak to the discount food operators Lidl and Aldi regarding the Premises, in view of the danger that Kwik Save might decide to close the Premises [67/101]. No agreement had at this stage been reached with Capital Foods [67/100], but they were regarded as a prospective letting [67/101].

[81 ] On 4 January 1995 Mr Letley of J & E Shepherd, the pursuers' managing agents, reported to Mr Clapham that the architects had measured units 112 and 113 that day. He also reported that he had shown a Mr Ashad, a prospective tenant, around unit 122, and that Mr Ashad was very interested in the use of the unit as a take-away and was ready to discuss terms. Mr Ashad had retained the keys to the unit in order to have plans prepared for the purpose of applying for planning permission. Mr Letley further reported that there had been a series of break-ins during the previous week at units 111 and 116 (the Premises):

"The premises were being broken into every night and Police were virtually on duty throughout the night patrolling the centre one evening."

Finally, Mr Letley reported:

"I have heard from 2 independent sources a rumour that Shoprite is to cease trading this Friday [6 January], although from an inspection of the premises there is no obvious indication of this" [67/102].

In evidence, Mr Letley said that he had heard this rumour from the tenants of other units, during a routine inspection of the Centre. Mr Clapham contacted Kwik Save the same day, and was told that they had no intention of closing the Premises and that there was no truth in the rumour.

[82 ] On 5 January 1995 Mr Crichton reported to Mr Clapham that Capital Foods were "keen to take their interest forward". A meeting was to be arranged once they had the architects' plans. Civil engineers had also been instructed on behalf of the pursuers to report on the proposed alterations [67/105; Mr Clapham, pp.290-291]. Global Video were to visit the Centre shortly, with a view to considering whether to take one of the other vacant units. Victoria Wine (trading as Haddows) had also been approached [67/103]. Lidl had also confirmed their interest. Mr Clapham was confident that, if Kwik Save continued trading from the Premises, Capital Foods and Victoria Wine would also move into the Centre, and the rental value of the remaining units would rise as the Centre became an increasingly successful trading location [Mr Clapham, pp.331-332].

[83 ] In relation to the pursuers' instruction of the architects and engineers, Mr Clapham said in evidence that he would not have instructed them if he had not been satisfied from his own conversations with Mr McNab that a deal was going to be done [Mr Clapham, pp.291, 471]. That evidence is consistent with the impression I formed of Mr Clapham as an astute businessman, and with Mr Letley's evidence (which I accept) that the instruction of the architects was unlikely to be undertaken unless the level of interest by the potential tenant was very serious.

[84 ] On 5 January 1995 agents acting on behalf of the defenders wrote to J & E Shepherd in relation to the Premises, stating:

"CWS no longer have long term plans for these premises and are thus seeking to surrender their interest. I would be pleased if you could discuss with your client relinquishing CWS from the Head Lease" [67/46].

[85 ] Immediately before the Premises closed on 7 January 1995, the situation in the Centre could be summarised as follows. The public house had been let since 1970, but had been unoccupied continuously, or almost continuously, since before 1992. Unit 111 had a history of more or less continuous lettings and occupation, and was currently let to a local trader as a licensed grocer's. Unit 112 had been let to a local trader until November 1993, and had been unlet since then. Unit 113 had been let to local traders until December 1993, and had been unoccupied since then. Unit 114 had been continuously let and occupied as a chemists, initially by a local trader and subsequently by a national trader. Unit 115 had been continuously let and occupied as a bookmaker's, by a national trader. The Premises had been let to Johnston Stores between 1970 and 1976, and to the defenders since 1976. They had been occupied more or less continuously, by a variety of operators, mostly local but including the defenders themselves, until September 1992. They were then vacant until they were acquired by Shoprite in June 1993. They were occupied by Shoprite, and then by Kwik Save trading as Shoprite, until January 1995. Unit 117 had been unlet since September 1993. Unit 118 had a history of more or less continuous lettings and occupation, and was currently let to the Secretary of State as a health information centre. Unit 119 had a history of more or less continuous lettings and occupation, and was currently let to a local trader as a fish and chip shop. Unit 120 had a history of continuous letting to a national trader, and of sub-letting to a local trader as a post office. Unit 121 had a history of continuous letting and occupation as a newsagent's, and was currently let to local traders [67/67, 67/76]. Unit 122 had been let to a national trader until 1991, then unlet until 1992, then let for a short time to a local trader, and had been vacant since September 1993.

[86 ] The Centre had thus been fully let for most of its history until 1993, with only relatively short intervals between lettings. It had also been fully, or almost fully, occupied throughout the 1970s and 1980s (unit 117 being the only unit to remain unoccupied for a prolonged period, from about 1985 onwards). The Centre had not, on the other hand, been fully occupied during most of the period since 1990. The Premises had been closed for part of that time: for about 18 to 24 months, out of four years. The public house had also been closed for part (and possibly most) of that time. The number of smaller units unoccupied had varied between one and four, and the number trading had accordingly varied between seven and ten.

[87 ] One feature of this history is only a slight diminution in the number of units let to national traders (units 117, 121 and 122 had all at one time been let to national traders but were no longer so let; a trend offset by units 114 and 118). A second feature is the existence of relatively short periods of time (measured in months rather than years) during which units might be vacant pending a re-letting (e.g. units 113, 118 and 119). A number of the smaller units had however lain empty for substantial periods of time (units 112, 113, 117 and 122, each of which had been unlet since 1993). A third feature is the absence of any clear link between the periods of closure of the Premises and vacancies in other units: the periods during which the Premises were closed were however relatively short (the longest being about 12 months), so that the absence of such a clear link is unsurprising. A fourth feature is that, as at the date of closure of the Premises, four units were unlet (units 112, 113, 117 and 122), and the public house remained closed, notwithstanding the fact that Shoprite (or latterly Kwik Save) had been trading from the Premises for about 16 months. In that regard, both Mr Thomson and Mr Clapham said that it would take about a year for a newly-opened supermarket to build up its trade and to create increased interest in nearby units which could benefit from the resultant footfall; Mr Lythgoe considered that it usually took 6 to 18 months to produce lettings [p.739]. Mr Clapham pointed to the interest expressed by Capital Foods, Victoria Wine and Mr Ashad in late 1994 and early 1995 as being consistent with that pattern.

[88 ] On 13 January 1995 Kwik Save's estates manager wrote to the defenders in relation to the Premises:

"Further to Kwik Save's acquisition of the above property, I write to inform you that we have unfortunately had to close the premises and cease trading with effect from 7 January 1995.

This decision was forced upon us due to the excessive violence and intimidation suffered by our staff and suppliers, which reached such a level that we feared for their safety" [67/382].

[89 ] In evidence, Mr Poulton said that Kwik Save's regional retail director in Scotland had expressed concern to the group retail director about the security of the staff working at the Premises: there was serious concern that personal harm could come to the staff, in view of the nature of the area where the store was located [p.51]. Mr Poulton had heard about this from the group property director. He did not know whether the concern had been prompted by any incidents at the Premises [p.313]. According to Mr Poulton, the concern followed the murder of a Kwik Save store manager in West Didsbury, in the Manchester area, which he said had occurred in 1993: the manager had been shot dead after he refused to reveal the code of the safe. There had also been an experience at the Moss Side shopping centre in Manchester, when there had been a fear of staff being assaulted. As a result of these experiences, the board's view had greatly changed: it felt that it could no longer take responsibility for situations where staff might lose their lives. Mr Poulton was certain that the regional retail director's concern about Whitfield had arisen after the West Didsbury shooting [p.322]. That expression of concern led to the Premises being closed. The decision was taken by the group retail director between 27 and 30 December 1994 [pp.305, 311]. Once the decision was taken, the normal stock ordering systems were turned off, and certain deliveries were suspended, leaving the store with less stock than normal [p.304]. Ms Molloy was informed of the decision [p.309]. The defenders were not; neither, of course, were the pursuers: on the contrary, as explained earlier, they were told that Kwik Save had no intention of closing the Premises and that there was no truth in the rumour of imminent closure. Asked whether that was because, if Kwik Save had divulged their intentions, they might have faced a court order requiring them to comply with their keep-open obligation, Mr Poulton replied that "That's more than a distinct possibility" [p.310]. Mr Poulton accepted that the closure constituted a breach of Kwik Save's contractual obligations [p.117], and that Kwik Save remained in breach of their obligations as at the date of the proof [p.131]. The defenders were also in breach of their obligations [p.494]. The defenders had not taken any steps to compel Kwik Save to comply with their obligations [pp.136-137]. They had subsequently taken advantage of the keep-open clause as a factor reducing the rental value (in the 1998 rent review, discussed below), but had failed to implement it [p.494].

[90 ] Mr Poulton explained that other closure decisions were based on commercial considerations: the closure at Whitfield was the only one based on the risk to staff [p.54]. The main criterion, in other cases, was whether the store made a profit on an "operating contribution" basis, i.e. after certain fixed costs, such as head office costs, distribution costs and delivery costs, had been taken into account. Provided a store was a positive generator of revenue, when assessed on that basis, it would remain open [p.94]. As far as Mr Poulton could recall, no financial assessment of the Whitfield store had been carried out prior to its closure.

[91 ] Mr Poulton's evidence about the reasons for the closure of the Premises raises a number of difficulties. In the first place, Mr Poulton accepted in cross-examination that the West Didsbury murder occurred on 3 February 1995, about six weeks after the decision had been taken to close the Premises [p.325]. The decision to close the Premises cannot have been influenced by a change in attitude towards security issues resulting from the West Didsbury murder. Mr Poulton's evidence about these events cannot therefore be regarded as reliable. Secondly, the murder did not result even in the closure of the store where it occurred: that store remained open at the date of the proof, over ten years later. Thirdly, so far as Moss Side is concerned, Mr Poulton said in cross-examination that the store there closed "I suspect because again it had traded for a while and there was some specific detail as to its profitability" [p.530]. Fourthly, the issue of security at Whitfield is not raised in the defenders' or third party's pleadings (unlike issues relating to the commercial viability of a store at the Centre), as one might have expected if that had been the reason for closure. Fifthly, Kwik Save did not close other stores which they acquired from Shoprite and which also traded in locations which were, in Mr Poulton's words, "very challenging in security issue terms": for example, in Easterhouse, Cranhill, Dennistoun and (until 1997) Sighthill, all in Glasgow [pp.76, 78, 222]. Sixthly, I accept the evidence of Mrs Neil, Mrs Majola and Mr Hussein (infra, paras.227, 229 and 232) that, although there were problems of vandalism, and of youths congregating in the Centre, prior to its refurbishment, there was not a concern among shop staff about their personal safety. I also accept Mr Thomson's evidence that Shoprite did not, to his knowledge, have any security problems in the supermarket. Seventhly, I accept evidence given by Mr Letley that he visited the Premises once a week while Kwik Save were trading there, in order to deal with any management issues, that he was unaware of any concern about violence either in the Premises or in the rest of the Centre, and that he would have expected to have been made aware of any such concern. Mr Letley clearly did not regard the Centre as having a particular security problem: he remarked that he could think of a dozen other neighbourhood centres in Dundee where youths congregated at night and petty vandalism occurred. Mr Poulton acknowledged that Mr Letley's evidence that he had not been made aware of any concern about violence was surprising, if his own evidence was correct [p.333]. Mr Young said that he also would have expected, if the occupier of the supermarket had concerns about security, that those concerns would have been discussed with the landlord's agent (i.e. Mr Letley). Eighthly, although Kwik Save told the defenders (as previously explained) that the closure of the Premises was due to "violence and intimidation" (supra, para.88), their agents, Eric Young & Co., later wrote to the pursuers' parent company stating that Kwik Save did not wish to trade from the Premises because "it does not conform to [their] size and locational requirements" (infra, para.110). Mr Young said in evidence that he understood that the marketing of the Premises was started because the Premises were surplus to Kwik Save's requirements. He had been instructed to market the Premises following a discussion of the relative merits of a number of properties. He could not recall any mention of security concerns at any of the meetings concerning the Centre which he had attended. In the light of this evidence, and other evidence indicating how retail operators behave (e.g. supra, para.81; infra, para.137), I do not take it for granted that the explanation given to the defenders (supra, para.88) was accurate, or even that it was given in good faith.

[92 ] In the circumstances, I have come to the conclusion that I cannot accept Mr Poulton's evidence as to the reason for the closure, and that the reason stated in Kwik Save's letter to the defenders was not correct. Having rejected that explanation, the inference to be drawn from Mr Poulton's evidence is that it must have been closed for commercial reasons: an inference which is consistent with the terms of Eric Young & Co's letter (infra, para.110), and with Mr Young's evidence that Kwik Save were envisaging the disposal of the Premises from November 1994. In that regard, one unique feature of Whitfield stands out: the store there was the only Shoprite store acquired by Kwik Save which was trading in close proximity to an existing Kwik Save store, namely the one at the Longhaugh Neighbourhood Centre, about half a mile away.

[93 ] Reference was made, on behalf of the defenders and third party, to a document [67/324] which bore to state the sales of the Shoprite supermarket at the Premises, during the period when it was trading under the ownership of Kwik Save, and to analyse those sales in comparison with those of other Kwik Save stores in Dundee, and in comparison with the average achieved on a national basis by Kwik Save and by other supermarket operators. The document had been prepared for the purposes of the present litigation. The author of the document was not a witness, and the records on which the document was based were not produced. The document raises numerous difficulties. Even assuming that the figure stated as being Kwik Save's total sales from the Premises is accurate, the average weekly sales are then calculated on the basis that Kwik Save traded there for seven weeks: in fact, Kwik, Save traded there for just under six weeks. The effect of that mistake is to understate the average weekly sales. The figure for average weekly sales per square foot at the Premises is then calculated by dividing the average weekly sales by the gross area of the ground floor of the Premises (10,200 square feet) rather than by the sales area used by Kwik Save (apparently 7388 square feet [67/27]). The effect is further to understate the sales figure. If these two distortions were to be eliminated, the figure for average weekly sales per square foot at the Premises would still be lower than the figure stated for the other Kwik Save stores in Dundee, but not much below that for the store at Lochee High Street. The figures for the other stores are however stated to be averages for the years from 1994 to 1999, whereas that for the Premises relates to a six week period immediately after Kwik Save had acquired the store. Mr Poulton also explained that the store had a run down period of about two weeks prior to its closure [pp.53-54], the effect of which was to depress stock levels. When the store closed, for example, its stock was valued at less than £2,000 [p.176]. It appears to me to be difficult under these circumstances to draw any relevant conclusions from the comparison, even assuming that all the figures for the other stores are accurate and have been prepared on the same basis as the figure for the Premises; an assumption which it might be optimistic to make, given the difficulties with the figures stated for the Premises. It is equally difficult to draw any conclusion from the figures given as overall national averages for Kwik Save and other operators: the source of the figures for sales (including the year in question) is not explained; and the nature of the figures given for store size (whether gross or sales area) is not stated. All that one can say is that, on the face of the figures, virtually all the Kwik Save stores in Dundee appear to perform below the national average, to varying degrees.

[94 ] Reference was also made to a document [67/327] in which an attempt was made to calculate the profitability of "Store 1155". Again, the author of the document was not a witness, and the data on which it was based were not produced. The document was put to witnesses, on behalf of the defenders and third party, on the assumption that Store 1155 was the supermarket operated by Kwik Save at the Premises. The first problem is that that supermarket is identified in the documents discussed in the preceding paragraph as Store 1150. It appears likely, however, that the discrepancy is a mistake, and that the same store is meant. The next problem is that the estimate takes as its starting point annual sales of £676,000, stated to be based on the assumption that "£14k pa over Christmas equates to £13k per average over year". The sales figure stated in the document discussed in the preceding paragraph (£96,520), assuming that it is accurate, produces an average of £16,087 per week, not £14,000 per week. The annual sales figure is therefore understated. A proportion of that annual figure (net of VAT) is then taken to be the gross margin: the proportion (19.1 per cent) is described as "rate as average of similar stores": no further information is provided. Deductions are then made in respect of "total shrinkage" and "total labour", again described as "rate as average of similar stores". Further deductions in respect of service charges, rent and rates are described as actual, and appear to be correct. A large deduction is then made in respect of "other expenses": the figure is described as "average of similar stores". An addition is then made in respect of "retail partners": it is described as "rate as average of similar stores". The resultant figure is said to be an estimate of the annual profit: a deficit of £70,865.

[95 ] An attempt was made during the proof to re-calculate these figures on the assumption that the weekly sales were £16,087 rather than £13,000 [67/327A]. Similar calculations were carried out in respect of the Kwik Save store at Pitkerro Road, using the same assumptions. They appeared to show that that store also produced a deficit in most of the years between 1994 and 1999 [67/401A, 67/401B, 67/402]. Given that that store was described by Mr Poulton as performing exceptionally well [p.189], the methodology would appear to be questionable. Similar calculations, in respect of the Kwik Save store at Lochee High Street, Dundee, produced in every year from 1996 to 1999 a larger deficit than the figure for "Store 1155" [67/401C, 67/403].

[96 ] It appears to me to be impossible to draw any reliable conclusions from these figures (on which most of Mr Poulton's evidence was based). It is a matter of concern that these documents produced by the third party contain a number of patent mistakes, leading one to question whether there may be other mistakes which the court is not in a position to detect, the underlying materials not having been produced, and the author not having been led as a witness. It is also a matter of concern that all the mistakes detected by the court have favoured the third party's case, by understating the sales or profitability of the supermarket operated at the Premises.

[97 ] The immediate effects of the closure of the Premises were described in evidence by Mr Letley, who appeared to me to be an entirely credible witness. The fact that the shutters of the Premises were lowered gave the impression that a large section of the Centre was closed (as was indeed the case). The Centre had a depressed air about it. There was a clear reduction in the number of people visiting the Centre. It was apparent when he visited that there were fewer people in the Centre, and fewer cars in the car park. I accept that evidence.

[98 ] Following the closure of the Premises, Mr Clapham continued to have regular meetings with Ms Molloy, at which the possibility of Kwik Save's re-commencing trading was discussed. Mr Clapham formed the impression from these discussions that there was a realistic possibility that Kwik Save might re-open their store, and that the prospects of their doing so would be improved if the Centre were to be re-furbished [Mr Clapham, pp.305, 354, 553; 67/110].

[99 ] Ms Molloy informed Mr Poulton of these discussions. In evidence, Mr Poulton said that the re-opening of the store at that stage was very unlikely, the decision having recently been taken to close it [p.130]. Re-opening would require the approval of the board, and such approval had never been sought. It would have required the preparation of a financial assessment, which the regional retail director would have had to authorise [Mr Poulton, pp.100-101]. Asked why the store had not been re-opened, Mr Poulton responded that "it is not attractive enough in a financial sense to re-open the store, in terms of it will at that point fail to pass the financial hurdles required for a new store opening."

[100 ] Later in January 1995, at the request of the pursuers, the pursuers and the Council entered into a minute of agreement [67/15] varying the terms of the Ground Lease in a manner which was apparently intended to prevent Shoprite or their successors (or, possibly, the defenders) from assigning their interest under the Sub-Under-Lease (or the Sub-Lease, as the case might be) without the pursuers' agreement [Mr Clapham, pp.111-133]. The minute of agreement purported to vary the Ground Lease so as to require that the consent of the Council would be required for any assignation of the Sub-Lease of the Premises. It further provided that the pursuers could insist that the Council refuse such consent. Mr Clapham had explained to the Council in November 1994, when proposing the variation:

"You do appreciate of course that to enable us to invest monies in Whitfield, we do need the absolute security of resource/income flow from the two 'magnet' tenants that will be provided as a result of this amendment to the existing documentation" [67/84].

It would appear that the minute of agreement cannot have had the legal consequences which were intended, since the rights and obligations of Shoprite under the Sub-Under-Lease (or of the defenders under the Sub-Lease) could not be altered by a deed to which they were not party.

[101 ] Returning to the subject of Capital Food's interest in units 112 and 113, Mr Clapham explained in evidence (as previously mentioned) that frozen food operators normally trade in close proximity to a supermarket, offering a range which is complementary (particularly to that of a discount supermarket operator). He was therefore concerned that, if the Premises remained unoccupied, Capital Foods would discontinue their interest, as he indicated in a letter dated 26 January 1995 to Mr Crichton:

"I am pleased to confirm that we are progressing matters regarding the design of Capital Foods integrated shop. Obviously however this could all prove to be somewhat academic if we cannot find a magnet store Operator" [67/106; also 67/110].

By this time Lidl had indicated that they were not interested in the Premises, as the frontage of the unit was too narrow to accommodate their standard footprint, and a non-standard unit would not be acceptable at that location, given the strength of the competition in the vicinity from Kwik Save at Pitkerro Road [67/107].

[102 ] On 27 March 1995 Mr Crichton informed Mr Clapham that he had now heard from Mr McNab of Capital Foods:

"[W]ith a significant proportion of the development unoccupied, i.e. Shoprite, the centre has fallen on the list of priorities at this stage."

Mr Crichton continued:

"As far as the Shoprite unit is concerned, the property is now being openly marketed and I will keep in touch with the agents concerned as it is obviously imperative that a new tenant can be found. If a suitable occupier is established in the former Shoprite unit, then I believe that there is a reasonably good chance of being able to secure tenants for effectively three shop units ..." [67/115].

The "three shop units" in question comprised the two units in which Capital Foods had previously shown interest, and a unit which might be of interest to Victoria Wine, whose property manager and acquisitions surveyor were to visit the Centre at the end of March.

[103 ] On 7 April 1995 Mr Crichton advised Mr Clapham that his firm had approached seven supermarket operators (in addition to Aldi and Lidl) in relation to the Premises: Botterills, Dhillon and Dhillon, C J Lang & Sons Ltd, Somerfield, Watson & Philip Ltd (trading as Alldays), Spar and V G Ltd. Only Watson & Philip had replied, and their reply indicated that they had no interest in the Premises [67/118]. Around the same time, Mr Crichton also advised the pursuers that the refurbishment of the Centre would assist in achieving lettings [67/117].

[104 ] Mr Clapham had previously written to J Trevor & Webster asking them:

"to confirm ... subject to the Shoprite Unit being 'usefully' occupied and trading, that there is sufficient demand from the Retail Sector to take up the balance of vacant space that currently exists at Whitfield."

He explained that he wished to submit such a letter to SET [67/110]. In evidence, Mr Clapham explained that the pursuers had applied to SET for funding in connection with the refurbishment works, and SET had expressed concern that, without Shoprite trading, there might not be sufficient demand to occupy the additional units which were envisaged [Mr Clapham, p.307]. Mr Crichton responded on 28 April 1995:

"[I]n our view, if the envisaged refurbishment programme goes ahead and if the former Shoprite is occupied by a recognised supermarket retailer then there may well be enough retail demand to occupy the shop units which are currently vacant.

As you are aware, we have been in discussion on a speculative basis with Capital Foods and Victoria Wine, both of whom have indicated that they will give the matter further consideration when the above steps have been implemented, and we would certainly like to think that further interest can be generated, although one has to bear in mind the variety of covenant strengths that may be encountered" [67/119, 67/120].

Mr Crichton reiterated the position in a letter to the pursuers, dated 10 May 1995, which Mr Clapham forwarded to SET:

"As you are aware from approaches to a limited number of retailers we have already managed to establish the tentative interest of Capital and Victoria Wine, trading as Haddows. We believe that we could take negotiations forward, but without environmental improvements to the scheme there is little or no prospect of lettings to these or any other tenants. If, however, the improvements discussed were carried out and if the former Shoprite were to re-open as a convenience store operated by a regional or national multiple, then subject to agreement on satisfactory terms and of course formal missives and lease terms, we are relatively confident that lettings could be achieved" [67/120, 67/121].

Mr Clapham's impression, from the advice he received from Mr Crichton, was that the prospects of achieving lettings would be hopeless unless the improvements to the Centre were carried out [pp.493-494].

[105 ] In the event, no further interest was shown in the Centre by Capital Foods, Victoria Wine or the other traders with whom Mr Crichton had been in contact.

[106 ] In considering the evidence relating to the interest shown by Capital Foods and Victoria Wine (and the other traders with whom Mr Crichton had been in contact), I bear in mind that Mr Crichton was not led as a witness. There is no evidence before the court as to whether or not he could have been led. Nor was any witness led from Capital Foods or Victoria Wine. There was however evidence, in relation to Capital Foods, that the person involved, Mr McNab, had died by the date of the proof. Capital Foods itself had been wound up by the date of the proof, all their units being taken over by either Farmfoods or Iceland. According to Mr Clapham's evidence, which was uncontradicted, Farmfoods took over all the other premises which Capital Foods leased from Credential Holdings or its associated companies, and were still trading there [this passage has been omitted from the transcript of Mr Clapham's evidence: it should appear between pp.456 and 457].

[107 ] In May and August 1995 an assignation of the tenant's interest under the Sub-Under-Lease was granted by Shoprite to Kwik Save, the date of entry being 27 November 1994 [67/38]. The assignation incorporated a guarantee by the third party of Kwik Save's obligations under the Sub-Under-Lease to the defenders. The defenders were not party to the assignation, but no point arising from that has been taken in the present proceedings. The pursuers consented to the assignation. Mr Clapham said in evidence that they had no practical alternative but to do so, Shoprite being by that stage merely a shell company.

[108 ] In May 1995 the Scottish Office ended its involvement in the Whitfield Partnership, three years earlier than had originally been envisaged, apparently as a result of the changes which had by then occurred in Whitfield [67/299]. Some 2,000 deck-access houses (i.e. Skarne blocks) had been demolished since the beginning of 1989. 1,400 other houses had been improved, and 600 new houses had been completed or were under construction. The new housing included private housing developments. Housing associations had been formed. The number of owner-occupied houses had doubled. The number of vacant houses was less than a quarter of the 1989 figure. The population had risen from an estimated 6,000 in 1989 to 6,400 in 1994. Unemployment had been reduced from 48 per cent to 29 per cent, but remained above the Dundee average of 9 per cent. Crime had diminished [67/400]. An evaluation by the University of Glasgow found that Whitfield's position in respect of jobs, crime and housing had improved relative to other deprived areas [67/298]. It concluded:

"The final conclusion of this evaluation is that the Whitfield Urban Partnership has been a convincing success ... [I]t has changed a run-down Council estate into a mostly attractive residential area, and significantly improved many aspects of the quality of life for the people who live there" [67/400, p.11].

[109 ] One consequence of the demolitions, and in particular of the demolition of the Skarne blocks, was to leave a large area of open grassland to the north of the Centre [67/400]. The only remaining housing in the immediate vicinity of the Centre consisted of multi-storey blocks immediately to the rear. They were subsequently demolished from the late 1990s onwards, the last multi-storey block being demolished in April 2004 [67/303; Mr Luke]. A proportion of the tenants of the buildings scheduled for demolition were relocated to new houses built to the south of Whitfield Drive, close to the Centre. Most of the houses in that area were by then owner-occupied.

[110 ] On 2 October 1995 Eric Young & Co wrote to Credential Holdings, on behalf of Kwik Save, in relation to the Premises. They stated:

"Kwik Save acquired the lease of the premises following the purchase of the Shoprite portfolio in November 1994. Kwik Save has decided that they do not wish to trade this particular property as it does not conform to [their] size or locational requirements" [67/168, Appendix 9; Mr Poulton, p.258].

A reverse premium of £20,000 was offered for an immediate surrender of Kwik Save's interest. The letter was however addressed not to Kwik Save's landlord (the defenders), but to their landlord's landlord (the pursuers), possibly under the misapprehension that Kwik Save held a lease directly from the head tenant (the pursuers), rather than a sub-lease from the defenders. The letter is significant in identifying the reason for Kwik Save's failure to trade as being purely commercial rather than based on concerns about the safety of their staff.

[111 ] Kwik Save's offer was declined. An increased offer of £50,000, in February 1996, again addressed by Kwik Save to the pursuers, was likewise declined [67/168, Appendix 9].

[112 ] The rent of unit 120 (the post-office, let to RS McColl and sub-let to Mr Hussein) was reviewed with effect from September 1994, the review clause (like that of all the other units in the Centre) being upward only. After discussions [67/219-238], the reviewed rent was agreed at £5,250 per annum, an increase of 50 per cent from the 1989 rent. One of the factors relied on by the chartered surveyors acting for Mr Hussein was the closure of the Premises. They wrote:

"[T]his shop ... is located in a pretty desperate development. The whole place is covered with graffiti and many shops are closed, including the main supermarket which would have been the anchor to the development" [67/230].

[113 ] The rent of unit 121 (the newsagents, let to Mr Mohammed and Mr Ahmed since October 1996) [67/357] was reviewed with effect from May 1996. The reviewed rent was agreed at £5,500 per annum, an increase of 10 per cent from the 1991 rent [67/252-258].

[114 ] The rent of unit 114 (the chemists) was reviewed with effect from June 1996. The reviewed rent was agreed at the current level, i.e. £5,000 [67/182-187]. In the course of the correspondence, the chartered surveyors acting for Moss Chemists observed that "it would be helpful to know which supermarket will occupy [the Premises] and when" [67/183].

[115 ] The rent of unit 115 (the bookmaker's, let to Ladbrokes) was also reviewed with effect from June 1996. The reviewed rent was similarly agreed at the current level, i.e. £5,000 [67/194-203]. One of the factors relied on by Ladbrokes was the closure of the Premises. They stated:

"[T]he centre is in a terminal state of decline. There are numerous vacant units including the anchor Shoprite store" [67/197].

"At the relevant date of review the anchor discount supermarket, the public house and four of the eleven units were vacant. There have been no new lettings in recent years and it is fair to say that there is no demand for units" [67/199].

[116 ] The rent of unit 119 (the fish and chip shop) was also reviewed with effect from June 1996. The reviewed rent was similarly agreed at the current level, i.e. £5,000 [67/264-265; 67/90].

[117 ] In about April 1997 J Trevor & Webster prepared a report on the Premises for Kwik Save [67/316]. Their report stated:

"Frankly, the condition of this unit internally is appalling having been effectively vandalised from top to bottom."

Photographs attached to the report bear out that statement. The report advised Kwik Save:

"[T]he best way forward is to negotiate a surrender deal with the Co-op who may be under some pressure from the landlords to re-open in view of the Keep-Open clause contained within the Head Lease.

Although one can look at leisure operators, community uses etc, I think that it is highly unlikely that there will be any form of demand until such time as improvement works are carried out to the Centre."

Kwik Save were advised by their agents that an appropriate reverse premium would be £250,000, exclusive of any liability in respect of dilapidations [Mr Poulton, pp.360-361].

[118 ] In August 1997 the back door of the Premises was broken. The door was secured by the police in order to prevent vandalism [67/308]. The Premises were broken into again on an occasion during September 1997 [67/309].

[119 ] By late 1997 the pursuers had reached agreement with the Council in relation to the refurbishment of the Centre (the Council's agreement being required under clause SEVENTH (d) of the Ground Lease). It was agreed that the Centre would be extended by constructing two additional units, units 123 and 124, at its south-east corner, thereby closing the gap between unit 122 and the library. Most of the units would be enclosed, by erecting a brick-faced screen, with glazed entrance doors, across the southern edge of the central courtyard (between units 112 and 121), and a similar screen, with entrance doors, between unit 115 and the Premises (thereby closing the gap between those units). A roof of pre-formed metal panels with perspex skylights, supported on steel columns, would be built over the enclosed part of the Centre, and the central courtyard would be resurfaced. The units would be provided with new shop fronts and CCTV would be installed. The Centre would thus be turned into something resembling a modern shopping mall, albeit the central area would be wider than in a purpose-built mall, the finishes would be of a relatively basic nature, and some of the units would remain outside the covered and enclosed area. It was intended that the enclosure of much of the Centre would improve the security of the units, minimising escape routes for shoplifters and enabling security to be provided by security guards engaged to patrol the enclosed area as a whole. The works were expected to cost £400,000, of which £200,000 was to be paid by public authorities, partly out of funds granted by the European Regional Development Fund (ERDF), and the balance by the pursuers. In addition, the Council was to spend a further £500,000 of ERDF and other funds on improvements in the immediate vicinity of the Centre, including improvements to the car parking area, which was to be extended into the area between unit 107 (the former public house) and the library, in front of the entrance doors [67/88, 67/90, 67/283-286].

[120 ] Mr Allison of CRGP Robertson carried out a further valuation of the Centre on behalf of Dunbar Bank, in connection with the pursuers' application to the bank for additional loan facilities in order to carry out the improvements [67/87]. In his report, dated 12 December 1997, Mr Allison noted that four of the smaller units were unlet: one more than he had been aware of when he had carried out his earlier valuation, in 1994. Unit 112 had been unlet since November 1993; unit 113 had been effectively unlet since December 1993; unit 117 had been unlet since September 1993; and unit 122 had been vacant since September 1993 (Mr Ashad, who had shown a strong interest immediately prior to the closure of the Premises, not having subsequently pursued that interest). The public house had been unoccupied since before 1992. The Premises had been unoccupied since being vacated by Kwik Save in January 1995. Mr Allison commented that "it has obviously not been beneficial to the centre as a whole that this unit lies empty". About three-quarters of the floorspace in the Centre was thus unoccupied. The current gross rent was £72,150 per annum: a decrease of 3 per cent since 1994. The tenants of the let units remained almost exactly the same as in 1994 (only the identity of the tenant of the newsagent's had changed). Mr Allison observed:

"In physical terms, the centre still has a relatively poor appearance with the remaining occupiers carrying out minimal improvements and maintenance" [67/90].

[121 ] In his report [67/90], Mr Allison stated that in his opinion the current market value of the ground leasehold interest in the subjects, with the benefit of the current occupational sub-leasehold interests, would be fairly stated at £655,000. In that regard, Mr Allison noted that rent reviews in respect of the public house and the Premises were due in May 1998. He anticipated an increase in the rent of the public house to £17,500 per annum. In relation to the Premises, Mr Allison stated:

"In our original report we indicated that in our opinion the full market rental value at that time was around £45,000 per annum. It must be stated, however, that the discount food market has changed significantly downwards since that time, and excluding the effect of the proposed improvements, we would only estimate a nominal increase in the current passing rent from £20,000-£25,000 per annum at the review date."

[122 ] Mr Allison further stated that, on completion of the proposed improvement works, he would estimate the market value of the ground leasehold interest in the subjects at £800,000. In that regard, he considered that, in relation to the Premises,

"there is a prospect that the existing rent could be increased to the previously reported figure of £45,000 pa at the review date."

In relation to the two new units to be constructed, he estimated "a potential income ... of at least £10,000 pa". In relation to the currently vacant units, he considered that,

"the provision of new shop fronts and the other proposed works will ... significantly enhance the letting prospects."

[123 ] A number of sheets of calculations by Mr Allison provide further information about how he arrived at these valuations [67/91]. In relation to the "as is" valuation, Mr Allison's starting point was the current gross rent of £72,150 per annum. He then assumed that the rent of the public house would be reviewed upwards to £17,500 per annum, and that the rent of the Premises would be reviewed upwards to £25,000. The good covenant rent (taken as comprising the public house, the chemists, Ladbrokes, the Premises, the health information centre and the post office) was on that basis taken to be £63,750 per annum gross, £60,563 net of ground rent. Applying a yield of 12.5 per cent, its capital value was £484,504. A figure was then added in respect of the secondary and vacant shops. The former were taken at their passing rents (totalling £15,900 per annum), and the latter at a figure of £5,000 per annum each (totalling £20,000 per annum), producing a total of £35,900 per annum gross, £34,105 net of ground rent (which Mr Allison mistakenly calculated as £34,205). Applying a yield of 20 per cent, the capital value of £34,205 per annum was £171,025. That figure, added to £484,504, produced a total of £655,529, which Mr Allison rounded to £655,000.

[124 ] In relation to the value in the event that the proposed improvements were completed, Mr Allison took the good covenant rent to be £83,750 per annum gross, on the assumption that the rent of the public house would be reviewed upwards to £17,500 per annum and that of the Premises to £45,000 per annum. Mr Allison mistakenly calculated the net equivalent, after deduction of ground rent at 5 per cent, to be £69,063: the arithmetically correct figure would have been £79,563. Applying a yield of 12.5 per cent to £69,063, its capital value was calculated to be £552,504 (the arithmetically correct figure would have been £636,504). A figure was then added in respect of the secondary and vacant shops, and those yet to be constructed. The secondary shops were taken at their passing rents (totalling £15,900 per annum), and the shops which were vacant or yet to be constructed were taken at £5,000 per annum each (totalling £30,000 per annum), providing a total of £45,950 per annum gross, £43,653 net (which Mr Allison mistakenly calculated as £43,153). Applying a yield of 18.18 per cent, the capital value of £43,153 per annum was £237,341. That figure, added to £552,504, produced a total of £789,845, rounded to £800,000.

[125 ] I was invited, in the submissions on behalf of the defenders and third party, to attach considerable significance to this valuation, on the basis that it had been carried out when the supermarket was closed. It appears to me however to be of little assistance in assessing the current value of the Centre. None of the expert witnesses treated it as a reliable guide to the current value; and it was not carried out on the basis that the supermarket would remain closed for the foreseeable future. Given the weight sought to be attached to it, I have also to say that some of the assumptions made by Mr Allison were in my view questionable (e.g. that the rent of the Premises would rise to £45,000 per annum, and that all the vacant units, and the units yet to be constructed, would be let), and, taken together with the errors in Mr Allison's calculations, did not inspire me with confidence in the valuation.

[126 ] The lease of unit 118 terminated in December 1997, the Secretary of State for Scotland having exercised the break option. Unit 119 also became vacant at some point between May 1997 and May 1998 [67/168 para. 7.6, 67/215, 67/269].

[127 ] The improvement works commenced in January 1998 [67/282]. Practical completion of the improvement works was achieved on 15 May 1998 [67/163, Appendix 1]. The works included the installation of structural supports in several of the units (including the Premises), in order for the roof to be supported. Mr Clapham's evidence that all the tenants were in favour of the works was not challenged in cross-examination; and Mr Poulton confirmed that consent had been given so far as the Premises were concerned.

[128 ] In connection with the carrying out of the improvement works, the Ground Lease was varied by agreement between the pursuers and the Council. One consequence of the variation was to extend the period of the Ground Lease, with effect from the date of issue of the practical completion certificate in respect of the improvement works, until 28 November 2121. A further consequence was to alter the existing provisions governing the amount payable by the pursuers to the Council as ground rent. These provisions are of some complexity. Read short, the variation restricted the ground rent, previously 12.75 per cent of the rents payable to the pursuers by their sub-tenants, to 5 per cent of those rents for the year commencing one year after the date of issue of the practical completion certificate, and thereafter to 7.5 per cent of those rents [67/16].

[129 ] It is unclear whether the two additional units, units 123 and 124, were constructed entirely within the subjects of the Ground Lease. It appears to be difficult to establish the precise boundaries of the subjects of the Ground Lease, because of the difficulty of finding fixed points on the ground to which the measurements shown on the plan attached to the Ground Lease can be applied [Mr De Vos]. This appears to have been noticed for the first time during the course of the present proof. The Council, the pursuers and Dunbar Bank then entered into a minute of agreement, executed and registered in April 2005 [67/388], which narrated:

"The parties hereto have agreed that due to development at [the subjects let under the Ground Lease] and changes in the environs of [those subjects] since the [Ground] Lease was first entered into and also due to the partial renunciations ... which have occurred in connection with the [Ground] Lease there are now difficulties in interpreting the plan attached to the [Ground] Lease, and accordingly it is now appropriate, in order to reconfirm the demise of the [subjects] and for the purposes of clarity, that there should now be substituted a new lease plan."

The minute of agreement continued by stating the parties' agreement that:

"the whole extent of the [subjects let under the Ground Lease] is as shown ... on the plan annexed and executed as relative hereto".

The subjects shown on the plan include the entire Centre as it now exists, including units 123 and 124.

[130 ] As explained below, it was argued at the proof in the present case, on behalf of the defenders and third party, that the improvement works had reduced the value of the Centre, as they had made units there more difficult to let. I have already noted a body of evidence which would tend to suggest the contrary. It includes the Cousins Stephens Associates study, reporting in 1990 that the poor environment and appearance of the Centre were a deterrent to shoppers, and recommending that the Centre should be improved (supra, para.24); the acceptance by the Whitfield Partnership, in response to that report, that the Centre must be re-developed and improved (supra, para.26); the recommendation by Ironside Farrar Ltd that the Centre should be refurbished, and security improved (ibid); the statement by SET, in 1992, that the physical fabric of the Centre required major intervention (supra, para.31); the recommendation by Graham & Sibbald in 1993 that the Centre must be improved, and that its physical appearance was a deterrent to shoppers (supra, para.36); their finding that enclosed and covered centres offered a more secure shopping environment and appeared to be more successful economically (supra, para.42); the view formed in 1994 by Mr Clapham, an experienced and successful investor and developer of commercial properties with experience of covering and enclosing a shopping centre, that rental values would be increased if the Centre were enclosed (supra, paras.62-63); the opinion expressed by Mr Allison in 1994 that "until the centre is refurbished, we do not consider the letting prospects for the empty units to be particularly high", and that the refurbishment of the Centre "would be a considerable boost to its attractiveness both from a letting and investment value point of view" (supra, para.68); the impression formed by Mr Clapham, from his discussions with Kwik Save in 1995, that there was a realistic prospect that they would re-open the Premises if the Centre were to be re-furbished (supra, para.98); the advice given to Mr Clapham in 1995 by Mr Crichton, of J Trevor & Webster, that the refurbishment of the Centre would assist in achieving lettings - indeed, that "without environmental improvements ... there is little or no prospect of lettings" (supra, para.104); the advice given to Kwik Save in 1997 by their own agents, J Trevor & Webster, that "it is highly unlikely that there will be any form of demand until such time as improvement works are carried out to the Centre" (supra, para.117); the opinion of Mr Allison in 1997 that "the provision of new shop fronts and the other proposed works will ... significantly enhance the letting prospects": an opinion reflected in his estimates of the rental and capital value of the units, and of the Centre as a whole, in their existing condition, and on the hypothesis that the proposed works were carried out (supra, para.122); the opinion of Mr Lythgoe, in a report prepared for Dunbar Bank in 2003, that the refurbishment works had resulted in an improvement of the Centre (infra, para.190); and the evidence of the pursuers' expert valuation witnesses at the present proof. Mr Oswald, in particular, explained that the conversion of an open precinct, exposed to the Dundee weather, to an enclosed environment made it more attractive to shoppers, and also improved security in the Centre. He appeared to consider that there might be some improvement in rentals and yield, although he was cautious in that regard [pp.769, 774-775]. Mr Lythgoe said that the works would certainly be seen as an improvement by the market [p.509]. Mrs Meneer in her evidence referred to the works as an "upgrade".

[131 ] This body of evidence, considered as a whole, appears to me to be substantial and convincing. The contrary evidence does not appear to me to be compelling. It relies essentially on two arguments. The first is that the enclosure of the Centre rendered the shops less "visible". Although I accept that the enclosure of the Centre had an adverse effect on the "visibility" of individual shops, I am not convinced that that factor has had as great an impact on value as was argued on behalf of the defenders and third party. In the first place, I accept the evidence of the pursuers' valuation experts (and also Mr Hermiston) [p.514] that "visibility" is generally less important for a local or neighbourhood centre, such as that at Whitfield, than for larger shopping centres, for which passing trade is of greater importance. It was apparent from the evidence that it is common for local shopping centres to be covered and enclosed, and for the individual shops therefore not to be visible to the passer-by; and similar works appear to have been carried out to numerous other shopping centres of a similar vintage throughout Scotland. Mr Poulton, for example, acknowledged that Somerfield stores in other covered centres, such as that at Easterhouse, are not visible from outside the centre. Secondly, it is apparent from the photographs that the enclosed centre is a clearly visible shopping centre, even though the shops inside are not visible from the exterior. In these circumstances, I am satisfied that any effect of the refurbishment on the "visibility" of the Centre has had relatively little impact on its value: relative, that is to say, to the impact of providing a sheltered and more secure environment for shoppers and traders. The second argument is that the effect of the refurbishment has been to increase service charges to such an extent as to make units less attractive overall to tenants, notwithstanding the improvement in the appearance of the units. One difficulty with this argument is that it was not put to the shopkeepers who gave evidence, and who were in the best position to respond to it. Mr Letley was asked whether there had been an adverse reaction from tenants to the increased service charges, but he responded that it had been Mr De Vos, rather than himself, who dealt with tenants. The matter was not raised with Mr De Vos. A second difficulty is that no evidence was produced of how service charges had altered as a result of the refurbishment, and of how large any increase might have been relative to the other costs of tenancy, such as rent, rates, repairs and maintenance. In that connection, I note that Mr Merry, in his determination of the 1998 rent review, observed of the enclosure of the Centre and the provision of security guards:

"[I]t is anticipated that this will result in less need for regular repair and maintenance than hitherto, which was caused to a large extent by vandalism" [67/170].

The expectation that there would be less vandalism appears to have been fulfilled: with the exception of the rear of the Premises (which have effectively been abandoned by the defenders and Kwik Save), it appears from the evidence, including the photographs, that the serious problems of vandalism which existed prior to the refurbishment have been moderated to a considerable degree (infra, para.199). The only additional maintenance costs suggested by Mr Poulton were in respect of the maintenance of smoke vents in the central area, and the maintenance of the doors; and he observed that there would at some point in the future be a need to maintain parts of the new structure which were exposed to the weather, although no such maintenance had been required to date. There are also the costs of employing one or two security guards, although it has to be borne in mind that three were previously employed in the supermarket alone. In the circumstances, and having regard to the substantial body of evidence to the contrary effect, I find the argument that the refurbishment was, on balance, disadvantageous to the Centre to be unconvincing.

[132 ] A further point made on behalf of the defenders and third party in their closing submissions was that the enlargement of the Centre, by the provision of two additional units, was unnecessary and unreasonable in the light of the vacancies existing prior to the refurbishment, and also in the light of the advice in the Graham & Sibbald report that the amount of retail space in the Centre was excessive. This argument is considered below. I note however Mr Clapham's evidence that, as well as being advised by Mr Crichton that it was essential to carry out the improvement works in order to attract tenants, he was also being told by Ms Molloy that there was still a prospect that Kwik Save might re-occupy the Premises. He felt that he had to make the Centre as secure and attractive as possible in order to encourage Kwik Save to fulfil their obligations and in order to attract other tenants. He realised that to invest more money in the Centre was a high risk strategy, but, as he put it, "It is something I would really like not to have had to do, but I found myself in a very difficult position, and I did what I thought was right" [pp.553-554]. He described himself as acting in extremis [p.598]. He also explained, in relation to the construction of the two additional units, that while he believed that there was a demand, the units in any event served a dual purpose in closing off an avenue of escape, thereby improving the security of the Centre. The alternative would have been to build a wall, which would have been unattractive [p.596].

[133 ] Eric Young and Co had been instructed by Kwik Save on 31 January 1995 to market the Premises. They proceeded to do so. From April 1997 until January 2003 the marketing was carried on by Gooch Webster (formerly J Trevor & Webster). From 2003 it was carried on again by Eric Young & Co. There was a suggestion in the evidence in the present proceedings that the marketing was less than enthusiastic, if not indeed a sham, carried out so that, in the context of rent reviews or negotiations over the surrender of a lease (or in the context of the present proceedings), it could be represented that the Premises were of no interest in the market and were therefore of minimal market value, and also in order to secure exemption from the payment of rates. In reality, it was suggested, Kwik Save were content to keep the Premises vacant in order to protect their store at Pitkerro Road from competition. Given Kwik Save's clear defiance of their contractual obligations under the Sub-Under-Lease, which Mr Poulton acknowledged, and other evidence indicating what might be regarded as cynical behaviour in the retailing industry, I have no reason to doubt that Kwik Save might behave in the manner suggested if they calculated that it was in their commercial interests to do so. Nevertheless, I am satisfied, in particular on the evidence of Mrs Meneer of Colliers CRE (formerly Gooch Webster), that the marketing of the Premises by Kwik Save's agents was genuine. At the same time, I am also satisfied that it was compromised by the state into which the Premises were allowed to fall, as a consequence of the defenders' and Kwik Save's breaches of their repairing obligations.

[134 ] Eric Young & Co did not receive any offer for the Premises between January 1995 and April 1997. The only expressions of interest were in the acquisition of part only of the Premises (around 5,000 square feet) [67/168]. Gooch Webster did not receive any expression of interest until January 1998, when a company named Riverdale Properties (Aberdeen) Ltd ("Riverdale") expressed interest in taking an assignation or sub-lease of the Premises, subject to receiving inter alia a rent free period and a reverse premium in excess of £150,000 [67/163, Appendix 3, p.3]. Gooch Webster responded that an assignation of Kwik Save's interest to Riverdale was unlikely to be acceptable to Kwik Save's landlord, given the relative covenant strengths of Kwik Save and Riverdale. If, instead of an assignation, Kwik Save were to grant a sub-lease to Riverdale, they would remain liable for the payment of the rent for the duration of their tenancy. In the circumstances, they could not advance a substantial payment to Riverdale without some form of security [67/163, Appendix 3, p.7]. In subsequent correspondence during March 1998, Riverdale sought to negotiate a reverse premium on the basis that the rent of the Premises following the forthcoming rent review (effective from May 1998) would be around £80,000 to £100,000 per annum [67/163, Appendix 3, p.12]. In May 1998, Riverdale's solicitors offered a sub-rent of up to £70,000 per annum in return for a one year rent free period and a "substantial" reverse premium [67/168, Appendix EMY-10]. Gooch Webster responded that they were unable to offer a substantial reverse premium to be paid as a cash sum up front, but could offer a substantial rent free period. They invited further proposals, on the basis of the passing rent of £20,000 per annum [67/168, Appendix EMY-10]. Riverdale did not respond to this invitation. Gooch Webster obtained a report on Riverdale from Dun & Bradstreet Ltd which indicated a poor credit rating. Riverdale was reported to be a dormant company with one director and share capital of £100 [67/168, Appendix EMY-11]. It was apparent from Mrs Meneer's evidence that Riverdale's interest in the Premises was regarded with a degree of wariness, particularly in view of its timing and Riverdale's apparent readiness to agree a rent far in excess of the passing rent. Gooch Webster were mindful of the danger that such an expression of interest might be a sham, possibly inspired by the pursuers in order to have evidence available for use in the rent review. Mrs Meneer explained in evidence that offers of that kind are sometimes received when a rent review is pending. Gooch Webster's caution appears to me to be understandable, and to have been vindicated by Riverdale's failure to maintain their interest once Gooch Webster made clear Kwik Save's unwillingness to provide a reverse premium which consisted of cash up front rather than a rent free period. As Mr Young observed:

"The offer has all the landmarks of being designed to generate a large reverse premium with no intention of trading the unit" [67/168].

Finally, in relation to this matter, I note that Mr Clapham wrote to Riverdale, during the course of the rent review, to enquire why they had not pursued their interest further. Riverdale's reply complained about their treatment by Gooch Webster, asserted that the suggested rent of £20,000 per annum was "not a realistic rent" and that there would be "an enormous review", and insinuated that Gooch Webster, "for reasons of their own ... were not interested in pursuing a deal" [67/163, Appendix 3, p.27]. I am satisfied, on the evidence of Mrs Meneer, that that insinuation is without substance.

[135 ] A further expression of interest in the Premises was received in March 1998 from Roseacre (Ormesby) Ltd ("Roseacre"), a company based in Great Yarmouth and involved in the leisure industry. On 18 March 1998 Roseacre wrote directly to Mr Clapham, offering to pay a rent of £90,000 per annum for the Premises subject to the grant of planning permission for a change of use to a leisure complex, and subject also to the payment by Kwik Save of a reverse premium of £150,000 [67/168, Appendix EMY-10]. Mr Clapham forwarded Roseacre's letter to Kwik Save and the defenders, stating that the pursuers would consent to the proposed change of use, subject to agreement on the forthcoming rent review [67/163, Appendix 3, p.9]. A formal offer was thereafter made by Roseacre's solicitors to take a sub-lease of the Premises from Kwik Save at a rent of £90,000 per annum, subject to planning permission and the grant of a liquor licence, and to a one year rent-free period [67/163, Appendix 3, p.14]. Gooch Webster responded by informing Roseacre's solicitors that the passing rent was £20,000 per annum and by inviting Roseacre to re-consider their proposal: it was suggested that Roseacre might wish to offer a rent of £20,000 per annum, without any rent-free period [67/163, Appendix 3, p.17]. Roseacre's solicitors then offered a rent of £20,000 per annum, subject to a one year rent-free period [67/163, Appendix 3, p.19]. It appeared to Gooch Webster from the correspondence that Roseacre's solicitors were aware of the rent review clause in the Sub-Lease (although they had not received a copy of the Sub-Lease from Gooch Webster), and were under the impression that it was the interest under that lease, rather than the interest under the Sub-Under-Lease, which was being marketed. The subsequent dealings between Roseacre and Kwik Save or their agents were not apparent from the evidence. The offer was not however accepted by Kwik Save. It appeared from Mrs Meneer's evidence that Gooch Webster viewed the interest of Roseacre with a degree of scepticism, given its timing relative to the rent review, its being addressed initially to Mr Clapham, the level of rent offered relative to the passing rent, and the fact that the proposal appeared to be based on a lease which was not the lease being marketed, and which had not been received from the marketing agents. Gooch Webster's wariness appears to me to be understandable in the circumstances.

[136 ] Mr Young said that, in more recent times, his firm had received about 20 requests for details of the Premises. No progress had however been made.

[137 ] While I am satisfied that the marketing of the Premises by Kwik Save's agents was genuine, I also accept that it will have been hampered by the fact that the Premises were closed, and more especially by the appalling state of disrepair into which they have been allowed to fall, as described below. In that regard, I note Mr Poulton's evidence that it was exceptional for Kwik Save to allow premises tenanted by them to fall into such a state, and his acceptance that the marketing of the Premises would be assisted if their appearance was improved [pp.399, 405, 409-410]. Mr Young also gave evidence that it was generally more difficult to find a tenant if the property had been vandalised, and that a property was easier to market if it had been fully repaired. He said that it had never been suggested that the Premises should be put back into a good state of repair as part of the marketing exercise. Mr Oswald commented that the property was in such a "disgraceful" condition that anyone who went to view it would walk away [p.463]. It seems to me to be reasonable to conclude, given that the disrepair reflects the defenders' and Kwik Save's breach of their repairing obligations (under the Sub-Lease and the Sub-Under-Lease respectively), that they are not especially concerned to dispose of the Premises. The likeliest explanation of that attitude, so far as Kwik Save is concerned, is (as was suggested by Mr Lythgoe, Mr Oswald and Mr McCluskey, amongst others) that it may be to their commercial advantage to have the Premises lying vacant, at a very modest rent (the lowest of any of the Somerfield group's 1300 stores): as discussed in the evidence, a disposal of the third party's interest would be likely to involve the payment of a substantial reverse premium (particularly having regard to dilapidations), and might conceivably result in the Premises being occupied by a competitor to their Longhaugh store. The defenders would not appear to have any need to dispose of their interest so long as the rent is being paid by Kwik Save, particularly when there might be a substantial reverse premium involved.

[138 ] The rent payable by the defenders in respect of the Premises was due to be reviewed with effect from May 1998 under clause (THIRD) of the Sub-Lease, which provided that the reviewed rent was to be

"the higher of (a) the annual rent payable in the immediately preceding period and (b) such rate as shall represent the fair yearly rent for the premises ... having regard to the rental values then current for similar property ... the fair yearly rent as aforesaid being agreed between the parties or determined by arbitration ..."

[139 ] On 4 March 1998 Eric Young & Co, on behalf of the defenders, opened correspondence on this issue by offering to settle the rent review at a nil uplift, and by informing the pursuers that the defenders had already applied to the RICS for the appointment of an arbiter. Eric Young & Co simultaneously offered the pursuers £80,000, on behalf of the defenders, to surrender their lease and substitute a direct lease to Kwik Save (on unspecified terms). This offer appears, not least in view of its timing and its direct link to the rent review, to have been made for tactical reasons in connection with the rent review (in which it was in due course relied on, as explained below) [see e.g. Mr Poulton, pp.140-141]. Letters from the pursuers' agents to Eric Young & Co thereafter went unanswered and unacknowledged. On 30 April 1998 Mr Merry informed the pursuers' agents that he had agreed to act as arbiter. The pursuers' agents then sought a sist of the proceedings for negotiations to take place, but the defenders were unwilling to agree to a sist. On 13 July 1998 the defenders increased their offer of a reverse premium to surrender the Sub-Lease to £120,000, on the basis that the Sub-Under-Lease to Kwik Save would (notwithstanding the termination of the Sub-Lease) continue in force (or, possibly - the offer is far from clear - on the basis that there would be a new Sub-Lease entered into between the pursuers and Kwik Save). The letter containing the offer made clear the connection between the offer and the rent review:

"I believe your opinion of the market rent for these subjects is grossly exaggerated and without substance. If however you genuinely believe your own rhetoric regarding occupier demand for these subjects, you will not hesitate in accepting the Society's proposal. This will leave you free to negotiate a similar surrender with Kwik Save and then put your conviction to the test" [67/168, Appendix 9].

[140 ] The offer was not accepted. In the light of the valuation evidence (e.g. that of Mr Lythgoe [pp.844-850] and Mr Oswald [pp.722-725, 799-806, 814-817], it appears that the amount being offered fell far short of the amount by which the termination of the Sub-Lease would have reduced the value of the pursuers' interest: they would have lost the defenders' excellent covenant for the remaining 35 years of the Sub-Lease, and would have been left (at best, if suitable arrangements could be entered into) with the third party's weaker covenant for a period of only 15 years. The £120,000 which was offered also made no allowance for the defenders' liabilities for their breaches of their keep-open and repairing obligations: it might be compared with the figure of £250,000 (exclusive of dilapidations) [Mr Lythgoe, p.866, Mr Oswald, p.822, Mr Poulton, p.360-361] which Kwik Save had been advised in 1997 would be appropriate in respect of the surrender of their interest under the Sub-Sub-Lease (which then had 16 years still to run: supra, para.117).

[141 ] In his submission to Mr Merry, dated 6 August 1998 [67/162], the pursuers' agent, Mr McCluskey of J & E Shepherd, referred to eleven comparisons, all situated in Dundee or in the neighbouring areas of Broughty Ferry and Monifieth. He relied particularly on a supermarket occupied by Kwik Save at the Campfield Square Shopping Centre, Broughty Ferry; on the supermarket owned and occupied by Kwik Save at Pitkerro Road: on a supermarket occupied by Kwik Save at Camperdown Road, Dundee; and on the supermarket occupied by Kwik Save at Weavers Village, Lochee. Having regard to those comparisons (all let, or in the case of Pitkerro Road formerly let, at rents of £5.97-£7 per square foot), he proposed a rate of £7 per square foot, producing a rental for the Premises of £93,000 per annum. Mr McCluskey noted that the assessment was complicated by the defenders' breach of their keep-open and repairing obligations. In relation to the former, he stated:

"Anchor units in a Centre of this nature are very important to the vitality and success of such Centres acting as the main draw for shoppers who are then, in turn, serviced by the other shop traders.

Non-occupation by the Tenants/Sub-Tenants has created a 'cold spot' and this in turn has had a depressing effect on the remainder of the Centre ...".

In relation to these statements, Mr McCluskey said in evidence that the layout of the Centre (with the Premises furthest from the car park and the street) meant that the Premises were designed to act as a draw, bringing people through the Centre to its far end, and enabling the tenants of the smaller units to benefit from the passing flow of pedestrians. Mr McCluskey also commented that the visual impact of the closed shutters of the Premises, across the end of the Centre, would affect the number of people going in. Each of these points appears to me to be reasonable. Mr McCluskey also said that the closure of the Premises had had an effect on security in the Centre. There had in the past been problems, similar to those experienced in some other shopping centres in Dundee, which had improved following the refurbishment. Problems had however re-emerged after the Premises had been vacant for some time, which Mr McCluskey attributed to the closure. In relation to the defenders' repairing obligations, Mr McCluskey described the Premises, in his submission to Mr Merry, as being "in a terrible/disgusting state". He noted that the pursuers had brought legal proceedings against the defenders to enforce their repairing obligation.

[142 ] In his counter-submission to Mr Merry on behalf of the defenders [67/168], Mr Young explained how demand for premises from discount food operators had diminished following Kwik Save's acquisition of the assets of Shoprite, resulting in downward pressure on rents. He also explained how competition from mainstream operators had increased, with the opening (in Dundee, as elsewhere) of superstores operated by Asda, Tesco, Sainsbury and Safeway, where a wider range of items was provided. This had placed trading pressure on discount food operators. Kwik Save and Iceland had in consequence suffered a drop in profits between 1994 and 1998: something which was confirmed by Mr Poulton in his evidence. Mr Young noted that the Premises were in a state of disrepair, but did not seek to rely upon that as a factor which would reduce the tenant's rental bid, since their disrepair was due to the defenders' breach of their repairing obligations. Mr Young noted that the public house had been marketed on behalf of Bass Taverns for over a year.

[143 ] A factor on which Mr Young placed some emphasis was the low rate of occupancy of the Centre at the date of review. The argument, so far as this factor is concerned, appears to have been that the low rate of occupancy of the Centre reduced the rental value of the Premises.

[144 ] Mr Young argued that the Premises would not be of any interest to any tenant. They were not of any interest to the defenders:

"[I]t is abundantly clear that CWS have no interest in trading from the subject premises at any rent. In fact CWS have made repeated attempts to surrender their interests in the property as have Kwik Save" (emphasis in the original).

In support of that contention, Mr Young referred to the correspondence between March and July 1998 in which the defenders and Kwik Save had offered to surrender their interests in the Premises. The Premises were too small for the leading supermarket operators, such as Sainsbury and Safeway. They were too large for many of the convenience retailers, such as Alldays and Spar. Discount operators such as Kwik Save and Presto were not acquiring property at the review date. The only possible occupiers were independent retailers, but the property was too large for their requirements and the lease requirements were too onerous.

[145 ] Mr Young argued that the improvement works to the Centre had not improved the lettability of the Premises: the creation of the covered mall had reduced the already limited visibility of the Premises, and the Centre remained an unpleasant and unsafe location with "extremely limited critical mass and pulling power".

[146 ] In relation to the rental value of the Premises, Mr Young relied on the rent of £20,000 agreed between the defenders and Shoprite in 1993, and on the absence of serious interest in the Premises since they were first marketed in January 1995. Tenant demand was nil, and the rent should therefore remain at the current level.

[147 ] In his response to Mr Young's counter-submission, dated 2 October 1998, Mr McCluskey stated that a supermarket trading from the Premises "would derive most of its business from 'basket trade'". He also commented that it was little wonder that the Premises had been on the market for some time, given their "appalling state". He also maintained that the defenders had been "in turmoil" at the time of the sub-letting in 1993 and had sought merely to cover their costs [67/163].

[148 ] In further observations, Mr Young again drew attention to the vacancy rate in the Centre [67/169]. Mr Merry's decision is discussed below.

[149 ] In about October 1998 Richard Ellis, chartered surveyors in Glasgow, were instructed by Dunbar Bank to provide an opinion of the open market value of the Centre. The report was signed by their regional director, Andrew Lythgoe, but was prepared by a member of his staff. The report, dated 10 November 1998 [67/94], is a substantial document, setting out a more sophisticated valuation exercise than Mr Allison's earlier calculations. The valuer inspected the Centre. He noted that the Premises were currently under refurbishment: this was the consequence of the pursuers' serving a schedule of dilapidations upon the defenders [67/163, p.11]. There was some evidence of vandalism at the Centre, particularly in unit 113. That apart, the Centre was in a reasonable condition. A Child and Family Centre (in other words, the local premises of the Social Work Department) had been constructed adjacent to the Centre, beside the health centre. Another relevant change which was noted was the introduction of a change to rates upon vacant commercial property: under recently introduced legislation, the owner of such property was liable to pay 50 per cent of the rates which would have been payable if the property were occupied.

[150 ] Eight out of the 13 smaller units were unlet at the time of the valuer's inspection: units 112 (unlet since November 1993), 113 (unlet since December 1993), 117 (unlet since May 1993), 118 (unlet since December 1997), 119 (unlet for some months), 122 (unlet since 1993), 123 and 124 (both unlet since their construction earlier in 1998). The public house and the supermarket were let but unoccupied. Negotiations for lettings of units 118, 119 and 124 were under way, with rents agreed at £7,500, £7,500 and £8,500 per annum respectively.

[151 ] The method of valuation adopted was to calculate the present value of the future income stream which the holders of the pursuers' interest would receive from the tenants of the units, less certain costs. The starting point in the calculation under this method is the future income stream, i.e. the rents. In relation to each let unit there was a passing rent, i.e. the rent currently payable under the lease. In the case of the public house, the valuer was told, incorrectly, that the passing rent had increased to £25,000 per annum at the 1998 rent review: in fact, the passing rent remained £15,000 per annum. In the case of the Premises, the valuer was told that the rent was expected to be fixed at £70,000 to £90,000 per annum at the 1998 rent review. He assumed a revised rent for the Premises of £67,386, which he treated as a passing rent (since the revised rent would take effect from a date prior to that of his valuation). The next element, under this method of valuation, is the estimated rental value (ERV) of each unit, i.e. its current market value: this is the figure which it is to be assumed will be the rent received when the next opportunity arises for the market value to be paid, i.e. on a re-letting or on a rent review. In the case of the smaller units, the valuer based his ERVs on a Zone A rate of £10 per square foot per annum (Zone A being the first 30 feet of floor space behind the shop frontage, the other parts being valued at a proportion of the Zone A rate). That resulted, for the let units, in ERVs in the region of £7,000, compared with passing rents of between £4,500 and £5,500. The ERVs of the units currently under negotiation, on the other hand, were below the agreed rentals. The next element in the calculation is the period of time during which any given level of income will be received. In the case of the let units, the valuer's calculation assumed that the passing rent would be received in perpetuity, and that the additional amount representing the difference between the passing rent and the ERV would be received from the date of the next rent review in perpetuity. In the case of the three unlet units which were currently under negotiation, the valuer allowed a rental income void period of six months for the negotiations to be concluded and for rent to begin to be paid, i.e. he assumed that nothing would be received for six months, and that the ERV would thereafter be received in perpetuity. In the case of the remaining unlet units, the valuer allowed a two year rental void period before a tenant was found, i.e. he assumed that nothing would be received for two years, and that the ERV would thereafter be received in perpetuity.

[152 ] The next element in the calculation is the yield. It will be recalled that Mr Allison, in carrying out his valuations, had adopted different yields for different units, depending on the quality of the tenant's covenant: in his 1994 valuation, he had adopted a yield of 14 per cent for the good covenants, and 20 per cent for the remainder; and in his 1997 valuation he had adopted yields of 12.5 per cent and 18.18 per cent respectively. The Richard Ellis valuer on the other hand adopted an overall or "all risks" yield of 16.25 per cent. That figure represented an "equivalent yield", i.e. an average yield over the lifetime of the investment as a whole (as distinct from the "initial yield", i.e. the current net income at the date of the valuation expressed as a percentage of the cost of acquiring the investment at that date). In arriving at that equivalent yield, the valuer will have been influenced by the extent to which the income stream was derived from tenants possessing what he regarded as good quality covenants (Bass, the defenders and Ladbrokes), and by the unexpired duration of the leases to those tenants.

[153 ] Applying the foregoing assumptions as to passing rents, ERVs, voids and equivalent yield, the valuer calculated the capital value of each unit (plus the petrol station site). The total of those figures was £1,033,071. He then deducted the present value of the ground rent payable out of those future rents. He next deducted the costs of purchasing the Centre: stamp duty, agents' costs and legal fees. The net value, after these deductions were made, was £904,650, which he rounded to £900,000.

[154 ] In his evidence, Mr Lythgoe explained that that valuation replicated inaccurate information about the outcome, or anticipated outcome, of the rent reviews in respect of the public house and the Premises. He also explained that he would now adopt lower ERVs for the smaller units, in the light of his current knowledge of the Centre. I am satisfied that the valuation of £900,000 was excessive even in 1998, and offers no guidance as to the current value of the Centre.

[155 ] Unit 119 was let with effect from February 1999 to the Misses Minns as a café, at a rent of £7,500 per annum, subject (as is common in practice [Mr Watt]) to a rent-free period of six months while the unit was fitted out and commenced trading, with a break option exercisable as at February 2000 [67/44].

[156 ] Unit 118 was let with effect from March 1999 to a Ms Walker as a hairdresser's, at a rent of £7,500 per annum, subject to a rent-free period of two months while the unit was fitted out, with a break option exercisable as at March 2001. Interest had also been expressed by a Mr Mohammed in taking a lease of unit 122 as a hot food unit, but nothing came of it [67/125].

[157 ] Around the same time, interest was expressed in unit 123 by a Mr Brown, for possible use as a video rental shop [67/132]. A local market trader, a Mr Robertson, also expressed interest in taking a lease of unit 123 as a clothing outlet, subject to securing finance [67/140, 67/142, 67/147]. It was noted that this trader appeared to be genuinely interested [67/142], but that shop fitting costs might prove to be prohibitive [67/145]. Strong interest was expressed by a Mrs Qureshi in taking a lease of unit 124 as a hot food outlet [67/125]. Interest was also expressed by a Mr Wong in opening a Chinese takeaway in the Centre [67/133]. This would presumably have been in either unit 123 or unit 124 (i.e. one of the unoccupied units outside the enclosed part of the Centre), so that the unit could operate in the evenings (when the enclosed part of the Centre would be closed). A local doctor, Dr Raj, expressed interest in relocating his practice to unit 113, subject to obtaining funding from the local health board [67/140, 67/147; Mr Watt]. A Mr Ashraf expressed an interest in trading from the Premises as an independent supermarket retailer [67/142]. Nothing came of any of these expressions of interest, all of which were from independent operators.

[158 ] In January 1999 the present action was commenced. Similar proceedings were brought against Bass in relation to their tenancy of the public house.

[159 ] From 1995 onwards there had been occasions when the defenders had been slow in paying invoices submitted by the pursuers in respect of common charges, notably the cleaning of common parts [e.g. 67/266, 67/347]. The improvement works resulted in an increase in service charges, principally as a consequence of the employment of two security guards. From 1999 the defenders failed to pay invoices for the cleaning of common parts, the provision of security services and some other common charges for a period of about two years [e.g. 67/275, 67/366-67/369]. On two occasions, matters reached the stage of the defenders' being threatened with a petition for winding up, before invoices were met. They have refused to pay security charges since 2002 [Mr De Vos; 67/380], on the basis that they deny any liability for the costs of security under the Sub-Lease. In his evidence, Mr De Vos also said that, since the end of 1998, when works were carried out on the Premises in response to the service of a schedule of dilapidations, the defenders had again persistently failed to fulfil their repairing obligations. The Premises had been broken into and damaged internally. Every window at first floor level had been broken. External doors had been damaged by fire. The loading bay of the Premises, and the adjoining yard, were used for fly tipping. There had been a number of fires started in that area. The damage was left unrepaired and the rubbish was left uncleared, despite numerous requests to the defenders to attend to it.

[160 ] By May 1999 the number of security guards on duty in the Centre had been reduced from two to one, apparently in response to the defenders' failure to pay the invoices submitted by the pursuers in respect of service charges. Some concern about the adequacy of security was thereafter expressed by other tenants. There were some problems with vandalism, notably in respect of damage to the entrance doors to the Centre [67/145].

[161 ] In June 1999 interest was expressed by another local trader, a Mr Beattie, in taking a lease of unit 124 for use as a bakery [67/148, 67/153, 67/154]. Nothing came of this expression of interest.

[162 ] Interest was also expressed in June 1999 by agents acting on behalf of a national multiple retailer of clothing and other non-food items, Your More Store. They stated that Your More Store had visited the Centre and might be interested in units 122, 123 and 124, as they required a unit of about 3,000 square feet [67/152]. In August 1999 the pursuers were however informed by Mr Reid of their managing agents, J & E Shepherd, that Your More Stores had

"indicated that they would be unwilling to enter into a Lease, at this stage, unless a supermarket was to commence trading within the Mall" [67/157].

In his evidence, Mr Reid confirmed that he had been told by Your More Stores' agents that, without a supermarket trading, they could not consider entering into a lease. Mr Reid said that this would have been an important letting for the Centre. In the event, Your More Store took a unit in the Longhaugh Neighbourhood Centre in Pitkerro Road.

[163 ] Mr Watt of J & E Shepherd, who was the person principally involved in the marketing of units in the Centre during 1998 and 1999 (and was then succeeded in that function by Mr Reid), and dealt with most of the expressions of interest mentioned above, was asked why, despite marketing, only two units (118 and 119) had been let. He responded that the issue which came up almost all the time, from every prospective tenant he dealt with, was the supermarket unit. Questions were always asked about why it was closed, and whether it was going to re-open. There had always been a fairly high level of interest in units in the Centre, and he had conducted lots of viewings, but the only lettings he had been able to conclude had been those with Ms Walker and the Misses Minns. Everyone was very aware of the impact on the Centre if the supermarket re-opened. The fact that the Premises - the anchor tenant - had their roller shutters closed all the time, presenting a blank wall, created a poor impression. People he dealt with felt that if the supermarket were to re-open, it would have a positive effect on the footfall, and therefore on their own trading prospects. The biggest factor putting people off was the fact that the supermarket was shut. If it had been open, that in his opinion would very possibly have led to more units being let. Mr Watt acknowledged that there were other factors which might discourage potential tenants: in particular, there were some problems with youths in the area. The main point that came across, however, was the supermarket. There was a feeling that, if it were open, the other problems would lessen as a result. The Centre was unattractive because the supermarket was closed. If it were open, that would make a big difference to the attractiveness of the Centre. It would attract people into the Centre, which in turn would have an effect on the other problems experienced there. The fact that the Centre was not on a main arterial road was not a problem for the type of traders who expressed an interest in locating there. Nor were they put off by the opening of larger supermarkets elsewhere in Dundee: they were mostly small-scale local traders. The main point for them was that the supermarket in the Centre was shut. The public house might have been mentioned, but it was not of enormous relevance. Mr Watt no longer had any connection with either J & E Shepherd or the pursuers, and appeared to me to be a fair-minded and reliable witness. I am satisfied that the evidence I have just narrated reflected his honest opinion.

[164 ] Mr Watt was asked, on behalf of the defenders and third party, what the effect would be if a supermarket were "sham trading", paying merely lip-service to the keep-open obligation. He responded that the effect on potential tenants would be a lot better if a supermarket were trading normally.

[165 ] Mr McCluskey, who was the partner in J & E Shepherd to whom Mr Watt reported, gave evidence to the same effect as Mr Watt's, although he accepted that his own involvement had been less than that of Mr Watt. Mr McCluskey considered that the supermarket's being vacant was likely to affect the lettability of the remaining units and the rents which they achieved. It was therefore in his opinion likely to have what he described as "a fair impact" on the capital value of the Centre. A prospective purchaser of the Centre would prefer to have the anchor tenant (i.e. a supermarket operator, leasing the Premises) trading, with the Centre bright and active, and would therefore be much more likely to try to acquire the Centre if the anchor tenant was trading than if it was not.

[166 ] Mr Letley, who had been the partner in J & E Shepherd responsible for the management of the Centre, and whom I found to be an impressive witness, gave evidence to similar effect. Once the supermarket closed, the number of people visiting the Centre was clearly less. There were fewer cars in the car park, and fewer people going in and out of the Centre. There was an air of depression about the Centre. The changes were obvious. He considered that, if the supermarket at the Premises had remained open and trading, the Centre would have had a much more lively and vibrant feel. A trading supermarket would have attracted more people into the Centre, with spin-off benefits for the traders in the other units. As matters were, the Centre felt closed down, with nothing happening and no-one there. The tenants were forever asking when the supermarket would re-open, as this might be the salvation of their business. The negative outlook of the Centre had also caused problems in relation to the collection of rent from the smaller tenants. Normally, the managing agents would enforce the lease against a tenant who defaulted on rent, and get them out. In this instance, the pursuers had not wanted their agents to push the smaller tenants over the brink, because of the difficulty of replacing them. The vacancy of the Premises had also resulted in an increase in insurance premiums for the Centre, because of the increased risk of fire and vandalism consequential upon non-occupation [67/313]. That evidence was consistent with Mr De Vos's evidence that the fires which had occurred around the loading bay of the Premises were a typical problem of vacant units in a neighbourhood of that kind. The problem did not arise when units were occupied.

[167 ] In September 1999 Mr Merry issued his decision as arbiter in the rent review of the Premises. He decided that the fair yearly rent of the Premises as at 28 May 1998 was £20,000 per annum. There was therefore no increase in the passing rent. As an issue emerged in the present proceedings as to whether Mr Merry's decision was a reliable guide to the rental value which the Premises would now have if the keep-open clause had been complied with, it is necessary to consider his decision in some detail. I should perhaps make it clear that I am not undertaking a judicial review of Mr Merry's decision as to the rental value which the Premises possessed (on certain assumptions) as at 28 May 1998: he decided that matter on the basis of the evidence and submissions before him and the legal advice which he received from his clerk, and in the exercise of his own expertise and experience as a valuer. Any challenge to his decision would require to be made in different proceedings, and in a different form of process. I am, rather, considering, in the light of the evidence led in the present case, what weight should be given to Mr Merry's assessment of the fair yearly rent as at 1998 for the purpose of estimating the current rental value of the Premises or the capital value of the Centre as a whole, as they would have stood if the keep-open obligation had been fulfilled. The evidence which I have to consider includes that of Mr Merry himself.

[168 ] In the reasons which he gave for his decision, Mr Merry began by considering certain terms of the Sub-Lease which might have an effect upon rental value. First, the unexpired term of the Sub-Lease, as at the review date, was 35 years. Mr Merry found that that was a longer period than average, and that such a lengthy period would, ceteris paribus, have an adverse effect on rental value. The balance of the evidence in the present proceedings is consistent with that finding. Mr Merry also considered the user clause in the Sub-Lease (clause (FIFTH)) to be more than usually restrictive; and that was another factor which he considered would tend to have an adverse effect on rental value. I note that in connection with the user clause, he stated:

"It is accepted that this is a neighbourhood shopping development and the disappearance from its curtilage of an 'anchor' food tenant would be detrimental to the viability of the scheme as a whole."

He also noted that certain of the comparisons had less restrictive user clauses, "despite their similarity in terms of being 'anchor' stores for shopping centres". In his evidence, Mr Merry confirmed that the supermarket at the Premises was in his view an anchor store.

[169 ] Mr Merry noted that in respect of the user clause, the unexpired term of the Sub-Lease, and in relation also to the treatment of expenses in the arbitration clause (under which the expenses of arbitration were always to be met by the tenant), the Sub-Lease differed from the leases of certain of the subjects on which J &E Shepherd relied as comparisons. Mr Merry also noted that none of the comparison subjects had a keep-open clause:

"I feel sure the existence of this condition ... would materially affect the hypothetical tenant's bid. Particularly I consider this to be the case at Whitfield where such a history of unsuccessful marketing of the vacant unit since 1995 exists."

[170 ] Mr Merry found that none of the comparison subjects on which Mr McCluskey relied was located in an area of social deprivation comparable to Whitfield, apart possibly from the Kwik Save in Pitkerro Road, which was on the edge of Whitfield.

[171 ] He considered that it was also necessary to bear in mind that most of the comparison rentals dated from 1995:

"No one who was in the market at that time as an agent can deny the frantic activity of these retailers [Shoprite, Kwik Save, Netto, Aldi and Lidl] to acquire a market share and the consequential increase in rental levels that this activity created. As at the rent review date of the subjects, this activity had ceased. Shoprite, one of the main creators of the mini-boom in this sector of the market, no longer exists, and the principal supermarket retailers have, to a large extent, 'plugged' what was obviously a market gap at that time ... [T]here is no longer a healthy demand in the marketplace for units for this purpose."

[172 ] Mr Merry discounted five of Mr McCluskey's comparisons as being much larger than the Premises: these included the Kwik Save at Pitkerro Road. Of the remainder, he considered that the Kwik Save at Perth Road, Dundee was in a superior catchment area to that of the Premises, and was not subject to any immediate competition (unlike the Premises, which were subject to competition from Pitkerro Road in particular). The user clause and alienation clause were less restrictive, and there was no keep-open clause. The duration of the lease was shorter than that of the Premises. The Kwik Save in the Campfield Square Shopping Centre, Broughty Ferry was in a much superior location. The Kwik Save at Camperdown Road resembled the Premises insofar as it had disadvantages in terms of parking and visibility. It was on the other hand next to a fully let neighbourhood shopping centre fronting a main arterial road. It was therefore in a more visible trading location. The Kwik Save at Weavers Village was in close proximity to a variety of other units occupied either by national multiples or by quality local traders. There were very few voids close by, and the whole trading neighbourhood was anchored by a very large Somerfield supermarket. The lease was for a period of 25 years. The Kwik Save at Reform Street, Monifieth (let at the lowest rent of the comparisons, at £5.68 per square foot) was vacant, following the construction of a new supermarket next door. It was located in an area which was vastly superior to Whitfield, but there was little prospect of its being re-let, by reason of the adjacent store. There was no keep-open clause in the lease, and the alienation clause was less restrictive.

[173 ] Mr Merry also noted the rental of the Premises agreed with Shoprite in 1993, for a term of 20 years. He observed that the defenders had been represented by professional agents, who would in his view have held out for a higher rent if there had been a possibility of securing it.

[174 ] Mr Merry also referred to the lack of success of the marketing of the Premises, commenting that "the marketing campaign and the evidence which [Mr Young] has led has a significant bearing on the result at the end of the day".

[175 ] Mr Merry concluded:

"In essence, therefore, I do consider that the cumulo effect of the length of lease term, the possible implementation of the 'keep open' provisions of the Lease, the evidence of a market transaction in 1993, together with the unsuccessful marketing campaign over a considerable period of time, leads me to the conclusion that the hypothetical tenant ... would not be prepared to bid more than the passing rental of £20,000."

[176 ] It is to be noted that Mr Merry referred a number of times in his decision to the high number of voids in the Centre ("The development has not proved popular in latter years and has, to a large extent, had a significant percentage of unlet space, or at least unoccupied ... there are still a significant proportion of voids within the Centre and this hardly shows corroboration of Mr McCluskey's opinion [that the refurbishment works would lead to rental growth] ... regrettably the unit still remains void ..."). He contrasted the Premises with the comparisons on the basis that the latter were set in centres or groups of shops where there were few if any voids:

"All the comparable evidence units are located in centres which are well supported by other trading units, the vast majority of which were (and remain) trading at the rent review date whereas at Whitfield a substantial proportion of the units were, and remain, void".

Mr Merry confirmed in his evidence that he considered the level of voids to be important. If, however, the number of voids in the Centre was partly a consequence of the defenders' breach of their keep-open obligation, - as, to anticipate a matter discussed later in this Opinion, I have concluded - a question would then arise as to whether Mr Merry's conclusion could be regarded as a reliable guide to the rental value which the Premises would have had if the defenders had complied with their obligations. Similarly, it is apparent from Mr Merry's conclusions, quoted in the preceding paragraph, that he regarded as material the lack of success of the marketing of the Premises since 1995. In his evidence, he confirmed that he regarded the marketing evidence as the most important factor affecting his decision [p.32, 72]. If that lack of success may have been partly a consequence of the defenders' breach of their keep-open obligation or of their repairing obligation - as I have concluded - then the same question would arise whether Mr Merry's conclusion was a reliable guide to the rental value which the Premises would have had if the defenders had complied with their obligations.

[177 ] It also appears from Mr Merry's evidence that he regarded the defenders' non-compliance with the keep-open clause as being of little importance, on the basis that, even if the keep-open clause had been complied with, the state of the Centre and of the Premises would have been the same, and the occupier of the Premises would only have been trading to pay lip-service to its obligations under the lease [pp.29, 74-76, 94]. He also assumed that the number of voids in the Centre would have been the same if the supermarket had been trading [p.90]. I found unconvincing Mr Merry's later attempt to explain the earlier references in his evidence to lip-service as meaning merely that he was envisaging trading in order to comply with the terms of the lease [pp.101-102], not least in view of his comment, in relation to Mr Poulton's evidence that there would be no question of his company's engaging in sham trading, that that was Mr Poulton's opinion [p.99]. Mr Merry's apparent expectation that any operator of the supermarket would merely have been paying lip-service to the keep-open obligation was however contradicted by the evidence of Mr Poulton, as explained below. That evidence, which I accept, appears to me to undermine Mr Merry's conclusion that whether the keep-open clause had been implemented or not would have made little difference to the situation. In cross-examination, Mr Merry accepted that the state of the Premises would have been completely different if the keep-open clause had been complied with [pp.96,98]. My confidence in Mr Merry's reasoning was further weakened by the inconsistency of his evidence as to whether he reached his decision on the basis that the Premises were unoccupied or on the basis of an assumption that the Premises were occupied and trading [pp.81-82, 85].

[178 ] I also note that Mr Merry appears, from the terms of his decision, to have been influenced by the offers made by the defenders and Kwik Save to surrender the Sub-Lease and the Sub-Under-Lease respectively. In that regard, he observed that, at one of the comparison subjects "as well", "significant reverse premiums have been offered" and declined. On the basis of the evidence in the present case, I am satisfied that the amounts offered fell far short of a realistic valuation, and I would not draw any adverse inference, as to the rental value of the Premises, from the fact that they were declined.

[179 ] In the circumstances, Mr Merry's decision does not appear to me to be a reliable guide to what the rental value of the Premises would have been if the defenders had complied with their contractual obligations.

[180 ] The rent of unit 120 (the post office, let to RS McColl) was due to be reviewed with effect from September 1999. After discussion [67/239-251], the reviewed rent was agreed at £6,000 per annum, an increase of 14 per cent from the 1994 rent. One of the points made on behalf of the tenant was that, although the refurbishment of the Centre had improved its appearance, there had been no increase in the business of the post office. On the other hand, the tenant now had to pay higher service charges [67/246].

[181 ] The rental of the public house was also due to be reviewed with effect from May 1998. After some discussion, and following Mr Merry's decision, the reviewed rent was agreed at £15,000 per annum, i.e. at a nil uplift [67/178-180].

[182 ] Units 111 and 112 were jointly let from December 1999 to Mrs Mussrat Begum, the existing tenant of the grocer's at unit 111 [67/45]. Under the lease, the tenant had the option to terminate the lease in respect of unit 112 at any time until December 2004. Provision was made for such an option to be exercisable within that period, in the event that any party commenced or recommenced trading as a grocer from the Premises. The rent for the double unit was £11,500 per annum, which was to be reduced, in the event of the break option being exercised, to £5,500 per annum (an increase from the passing rent of £4,500, fixed in 1993) or open market value, whichever was the greater. In the event, the rent actually paid remained unchanged at £4,500, by informal agreement. Mr De Vos explained that the rent of £11,500 had been agreed in the expectation that units 111 and 112 would be converted into a single, larger, shop. In the event, the tenant had not proceeded with those plans, because of a lack of trade, and had used unit 112 only for storage.

[183 ] The licence of the public house had been renewed in January 1997, but the public house remained closed thereafter [67/90; 67/163, para. 7.8; 67/94]. It re-opened in July 1999, following refurbishment. It closed again a short time afterwards, apparently because Bass decided that it was not commercially viable to operate it. Bass then agreed to sub-let the public house to a local company, subject to the transfer of the licence and the consent of the pursuers [67/181]. There were however objections to the renewal of the licence in January 2000. The Whitfield Steering Group alleged that the public house had in the past been a centre for drug dealing and trafficking in stolen goods; that a murder had been committed on the premises; and that persons using the Centre, or the community centre next door to the public house, had been harassed and intimidated by drunks, drug dealers and dealers in stolen goods [67/330, 67/331]. The police did not object to the application, and observed that much of the contents of the objection related to the period prior to 1997. They also observed, however, that since the public house had re-opened there had been a number of calls relating to disturbances. The licensing board decided to refuse to renew the licence, on the ground that the use of the premises for the sale of alcoholic liquor would be likely to cause undue public nuisance [67/329].

[184 ] In about June 2000 interest was expressed by a Mr Ng in taking a lease of unit 124 for use as a Chinese takeaway. Interest was also expressed in the same unit, around the same time, by a Mr Gani, who wished to operate a fish and chip shop [67/149]. In the event, the unit was let to Mr Ng with effect from October 2000 at a rent of £6,500 per annum, [67/367], with a rent-free period while the unit was fitted out [Mr Reid].

[185 ] The rent of unit 114 (Moss Chemists) was subject to review with effect from June 2001. After discussion, the reviewed rent was agreed at £5,250 per annum, an increase of 5 per cent from the rent agreed in 1996 [67/188-67/193].

[186 ] The rent of unit 115 (Ladbrokes) was also subject to review with effect from June 2001. The reviewed rent was agreed at £5,250 per annum, an increase of 5 per cent from the rent agreed in 1996 [67/204-67/212].

[187 ] The rent of unit 121 (the newsagents) was also subject to review with effect from June 2001. The reviewed rent was agreed at £6,000 per annum, an increase of 9 per cent from the rent agreed in 1996 [67/259-67/261].

[188 ] In relation to these rent reviews, Mr Reid, who acted on behalf of the pursuers, said that the £250 increase accepted by Moss Chemists and Ladbrokes had been a token increase to conclude the matter and avoid the expense of going to arbitration. The difficulty he had had in putting forward a case for an increase in rent was the lack of success of the marketing campaign to secure new tenants, and the consequent lack of market evidence within the Centre to support an increase.

[189 ] In October 2001, interest in renting a unit was expressed by a youth organisation [67/159]. In the event, nothing came of it.

[190 ] In January 2003 Richard Ellis were instructed by Dunbar Bank to prepare an up-to-date valuation of the Centre. The report was prepared by Mr Lythgoe, following an inspection. He noted that there had been a recent improvement of the Centre, by reason of the refurbishment works. He also noted that the doors to the enclosed section of the Centre required overhaul, that an infestation of pigeons should be eradicated, and that intensive cleaning of the covered areas would then be required. (I note that this problem had also been mentioned at the meeting in September 1998 discussed below: in evidence, Mr Lythgoe said that problems of this nature were quite common [p.512]). Mr Lythgoe also noted that only five units were open for trade at the time of his inspection: these would appear to have been unit 111 (the grocer's), unit 114 (the chemist), unit 115 (Ladbrokes), unit 120 (the post office) and unit 121 (the newsagent). Unit 124 (the Chinese takeaway) will also have been occupied at that time, but had different trading hours from the other units. It would appear that Ms Walker may by then have vacated unit 118, where she had been carrying on business as a hairdresser (although the evidence as to when she vacated the unit is not clear). She closed because she was not getting enough business [Mrs Majola; Mr De Vos]. She had accrued large arrears of rent [67/374-67/375, 67/377]. The Misses Minns had ceased trading from unit 119, where they had had a café, in 2002, although their lease was not terminated until 2004 [Mr De Vos]. They had very little trade, and accrued large arrears of rent [67/372, 67/377]. Mr Letley said in evidence that he had felt at the time that the continued closure of the Premises was a factor in the café's lack of success: the absence of a supermarket had reduced the number of people visiting the Centre, and therefore the number of people making use of the café. Mr De Vos said in evidence that both Ms Walker and the Misses Minns attributed their lack of business to the absence from the Centre of a trading anchor store. That evidence was not challenged in cross examination.

[191 ] Mr Lythgoe noted that all the units, other than those which were open at the time, were secured by metal roller-shutters. This precaution was presumably intended to discourage break-ins or the breaking of shop windows. Four units were unlet: unit 113 (unlet since about 1995), unit 117 (unlet since 1993), unit 122 (unlet since 1993) and unit 123 (unlet since it was constructed in 1998). The total rental receivable was £84,400 per annum.

[192 ] Mr Lythgoe was aware, on the occasion of this valuation, that the passing rent for the public house was £15,000 per annum, and he treated that figure as a rack rent i.e. as an ERV. He similarly treated the passing rent of the Premises, of £20,000 per annum, as an ERV. In the case of the smaller units, he adopted ERVs based on a Zone A rate of £10 per square foot per annum. This rate could be compared with the rent reviews as at June 2001, which reflected Zone A rates of £7.50 for units 114 and 115, and £8.90 for unit 121 (the tenant of the latter not having been professionally advised, so far as appears). The rentals to Ms Walker, the Misses Minns and Mr Ng had reflected higher Zone A rates, on a "headline" basis (i.e. ignoring rent free periods and other concessions), ranging from £10.81 to £11.45, but only Mr Ng had paid his rent and remained in occupation. In the case of the let units (including, apparently, the units let to Ms Walker and the Misses Minns), Mr Lythgoe appears to have adopted a valuation methodology which assumed that the passing rent would be received in perpetuity, and that the additional amount (if any) representing the difference between the passing rent and the ERV would be received from the date of the next rent review in perpetuity. In the case of the unlet units, Mr Lythgoe appears to have assumed a two year void, followed by the receipt of the ERV in perpetuity.

[193 ] In the form in which Mr Lythgoe's report was produced to the court (which was incomplete and with the pages out of order, as was also the case with several other productions), it is not possible to tell what yield was adopted; nor were the calculations produced. He valued the Centre at £700,000. That figure reflected shorter voids than Mr Lythgoe considered to be realistic as at the date of the proof (by which time the unlet units had been unlet for two years longer), and was, primarily for that reason, higher than his subsequent valuation [Mr Lythgoe, pp.517, 525].

[194 ] Later in 2003 the rent payable under the Sub-Under-Lease was due to be reviewed. The defenders and Kwik Save agreed that the rent should remain unchanged. The present proceedings were by then in dependence.

[195 ] In February 2004 Tayside Police carried out an analysis of all reported crime occurring between 1 January and 17 February 2004 within approximately a one-quarter mile radius of the Centre. During that period, 105 crimes had been reported within that area. A plan showing the location of all the reported crimes appears to show only one such crime at the Centre itself: an offence of vandalism, when a youth threw stones at the entrance doors and broke two glass panels. There do not appear to have been any other reported crimes, during the period studied, either within the Centre or in its immediate vicinity. The study also reported that vandalism had been the most prominent type of crime within close proximity of the Centre during 2002 and 2003. It mainly involved youths throwing stones at cars and shop windows [67/320].

[196 ] In November 2004 Mrs Mussrat Begum exercised her option to terminate the lease of unit 112. The unit lay vacant from 17 November 2004. The rent of unit 111 increased to £5,500 in consequence of the exercise of the break option [Mr De Vos].

[197 ] It will be recollected that, when the Premises closed on 7 January 1995, four units (units 112, 113, 117 and 122) had been unlet since 1993, and the public house had been closed since 1992. There was interest at that time in the vacant units, but it was not pursued after the Premises closed. The position during the period since January 1995 can be summarised as follows. The four units which were unlet in January 1995 have remained effectively unlet (there was a lease of unit 112 as part of a double unit with unit 111, but it was never implemented, and the unit was in reality occupied on an informal basis, free of rent). Unit 118 was also unlet between December 1997 and March 1999, and has again been unlet (in reality) since about January 2003. Unit 119 was also unlet between about the beginning of 1998 and February 1999, and has again been unlet (in reality) since 2002. Unit 123 has been unlet since it was completed in 1998. Unit 124 was unlet between 1998 and 2000, but has been let since then. The overall number of unlet units was thus (in broad terms) four between 1995 and 1997; eight in 1998, when two leases expired and two additional units were constructed; five or six between 1999 and 2002; and seven since 2003. Although there have been numerous expressions of interest in the smaller units (about fifteen being mentioned in evidence), only three (Ms Walker, the Misses Minns and Mr Ng) resulted in lettings, and two of those lettings came to a premature end.

[198 ] The defenders have repeatedly made it clear to the pursuers that they will never trade from the Premises. They told the pursuers that in 1998 and on several subsequent occasions, most recently a few weeks prior to the proof [Mr Clapham, p.703]. Asked in evidence whether the third party (or its associated companies) might ever trade from the Premises, Mr Poulton responded that pigs might fly [I have not noticed this remark in the transcript of his evidence, but I recollect it being said; and it was referred to in the closing submissions]. A second schedule of dilapidations has been served by the pursuers. As previously mentioned, Mr Poulton was unaware of any steps taken by the defenders to force Kwik Save to comply with their keep-open obligation under the Sub-Under-Lease. On the evidence, there appears to be no realistic prospect that the supermarket will re-open prior to the expiry of the Sub-Lease.

Whitfield today
[199 ] Photographs taken of the Centre and its surroundings in late 2001 [67/3], June 2004 [67/5, 67/8a] and January 2005 [67/342] show their condition at those dates. The general external appearance of the Centre is far better than in 1993 (when the photographs discussed earlier were taken), with minimal graffiti. The interior of the Centre is functional. The side of the interior which faces the entrance is taken up by the Premises: they present a series of closed roller-shutters. The roller shutters of the vacant units (118 and 119) are also lowered. In the most recent photographs, the newsagent at unit 121 appears to have been closed at the time, and its shutters also are lowered. The overall effect, judging from the photographs, is to give the interior of the Centre a dark and rather depressing appearance. Among the external units, only unit 111 is open during the day and has its shutters raised. The housing to the south of the Centre has been modernised and has an attractive appearance. There is also new housing to the rear of the Centre. It appears to be separated from the Centre by extensive grassed areas or vacant ground. That aspect of the Centre is dominated by the rear of the Premises, which is much more affected by graffiti and vandalism than the front of the Centre. The external windows of the Premises are broken, as described by Mr De Vos, and the walls are covered in graffiti. The loading bay is full of rubbish. A wall at the top of the loading bay has been knocked down.

[200 ] Further house-building is continuing in Whitfield. Construction of a development to the rear of the Centre started in March 2005 [Mr Wallace].

[201 ] Proposals for further housing were explained by Mr Luke, who was at the time he gave evidence the local Member of Parliament. Mr Luke's extensive experience in local government was described earlier [para.3]. The Finalised Local Plan zoned the open area to the rear of the Centre, and stretching eastwards, for residential development. A total of 700 new houses were envisaged for Whitfield. A planning application had been received for a further development of 59 homes to the rear of the Centre. After Mr Luke had given his evidence, the Local Plan was adopted. I was not informed of any material departure from the provisions of the Finalised Local Plan relating to housing.

[202 ] Further information about this matter was given by Mr Dallas. Part of the area to the rear of the Centre, shown as vacant on the maps produced at the proof, had been developed for housing in 2004. There was pressure from housing associations for further house-building in that area, but there was a problem at present over road access (there being, as already mentioned, few roads in the part of the estate which was formerly occupied by the Skarne blocks). There were also major private housing developments proposed to the north-east of Whitfield. Houses there would lie within the catchment of the schools and health centre adjacent to the Centre. The Centre would be their closest shopping facility. Mr Dallas's Group was endeavouring to integrate the community in that area into the life of Whitfield.

[203 ] Ms Brash explained that some of the housing built in Whitfield since 1991 had been sold outright by developers to private buyers; some had been built by housing associations and let to tenants; and some had been let by housing associations under "rent to buy" arrangements. Different sectors of the housing market were represented. The houses built in recent years to the south of the Centre were mostly rented, and housed people most of whom had lived previously in the multi-storey flats. The new houses to the rear of the Centre were a mix of privately owned and rented. Altogether there had been about 250 new houses built in the area between June 2001 and June 2004. Some of these, to the rear of the Centre, were to re-house existing residents of Whitfield; the others were mostly on a new estate of private housing. More houses had been demolished since 2001 than had been built. The multi-storey flats would however have been virtually empty for some time before they were demolished. Looking to the future, there was a masterplan for housing developments in Whitfield. There was a large number of sites, some of which were currently effective, but others of which were not. "Effective" sites were those which were free from restrictions and were expected to be completed within the next 5 years. The masterplan envisaged at least 500 houses, most of which were intended to replace housing dating from the 1960s and 1970s, but some of which were additional. The areas currently being developed included areas to the rear of the Centre. Whether the number of new houses envisaged is "at least 500", as Ms Brash stated, or 700, as Mr Luke said, it is in either case a substantial number.

Other retail facilities in the Whitfield area
[204] Evidence was led on behalf of the defenders and third party concerning other retail facilities in Whitfield and Fintry. It can be summarised as follows.

[205 ] Within Whitfield, there are a number of small shops which are not in the Centre. In the area of private housing to the north of the Centre, where Skarne blocks were once located, there is a general store known as Pricecracker. It has a gross area of about 1500 square feet [Mr Wallace]. Towards the eastern edge of the Whitfield estate there is a sub post-office and general store known as Kellyfield Post Office, of about 1000 square feet [Mr Lythgoe, p.727]. There are two other small shops in the southern part of Whitfield [Mrs Canter].

[206 ] In Fintry (to the west of Whitfield), there is a small "Costcutter" convenience shop of about 1000 square feet on Fintry Road, in about the centre of the estate. There are other small shops nearby. Further up the same street, to the north, there is another small convenience store trading as "Countdown Stores" and (further up the same street) a parade of three or four small shops including another small convenience shop, possibly known as Pricecracker. On Fintry Drive, on the western side of the estate, there is a convenience shop of about 1500 square feet trading as "One Stop to Shop" [Mr Lythgoe, pp.299-300, 722; Mr Robeson, p.54], beside a hairdressers and a take-away. It is more than fifteen minutes walk away from the Centre. The other shops mentioned are about fifteen minutes walk from the Centre [Mr Lythgoe, p.778]. There are other small shops on the western and northern edges of the estate. Altogether there are about 16 to 20 small shops in Fintry. They are generally successful. They have existed since at least the late 1980s [Mr Hussein]. Some of them pre-date the development of Whitfield [Mr Todd]. They were trading during the period when the supermarket at the Premises was open.

[207 ] There are larger supermarkets and superstores further afield, some of which have already been mentioned. Many others, existing or planned, were discussed in the course of the evidence. Evidence relating to the use made of these facilities was given by a number of witnesses, including Mr Wallace, Mr Dallas and Mrs Canter, and is discussed below.

The size and characteristics of the population of Whitfield
[208] In relation to the size and characteristics of the population of Whitfield, reference was made to census data published by the Government Statistical Service and produced by the defenders and third party as an appendix to Mr Robeson's report [67/9, Appendix 1]. The introduction to the data explains that the statistics relate to local government electoral wards as existing on the date of the relevant census. It also explains that ward boundaries are re-drawn from time to time. When one looks at the statistics for Whitfield, it is apparent that the area of the ward in 1981 and 1991 was 111 hectares, whereas in 2001 the area of the ward was 142 hectares. It is thus obvious, on the face of the statistics, that the ward boundaries changed significantly between 1991 and 2001, and that no direct comparison of the statistics at those dates is therefore possible. The ward boundaries had in fact been re-drawn in 1998. This point was not however apparently noticed either by Mr Robeson (who had based part of his report on such a comparison), or by those instructed on behalf of the defenders and third party. The problem was compounded by the production of a map, as part of the same appendix to Mr Robeson's report, which was described in his report as "a plan of Whitfield Ward". It eventually emerged that the map did not in fact show the boundaries of the ward, either as they were prior to 1998, or as they were subsequently. It appears that Mr Robeson's map was probably produced by computer software which was designed to show the area within the 1998 ward boundaries where households were known to be located as at some (unspecified) date, excluding areas which were then occupied by non-residential developments or were unbuilt on. It therefore excluded parts of the ward where housing had been built in recent years. Eventually, on the twenty-eighth day of evidence, the pursuers produced maps showing the true boundaries [67/386C and 67/386D], and led Ms Brash to speak to their correctness. Ms Brash also explained the correct position in relation to the census figures, and gave population figures for the various maps produced by the expert witnesses (including the CACI plan and Knight Frank plan produced by Mr Oswald, discussed below, and the 5 minute walk-in plan produced by Mr Robeson).

[209 ] Ms Brash worked in the research and information section of the Council's planning department, specialising in population and housing statistics. Her evidence in relation to housing has already been discussed. In relation to matters relating to population, she explained that the ward boundaries had been the same in 1981 and 1991, and the census figures as at those dates were therefore comparable. The Centre had however lain outside the Whitfield ward as at those dates: it had been in the Longhaugh ward. The re-drawn boundaries in 1998 were completely different: the Centre, for example, was included in the re-drawn Whitfield ward. The census data for 2001 could not be compared with the data for the wards with the same names as at earlier dates, partly because the boundaries were different, and partly because of changes in the methodology used to calculate the population.

[210 ] As explained earlier, the Whitfield housing estate was originally intended to house 12,000 people. As at 1989, the population of the area falling within the ambit of the Whitfield Partnership (in broad terms, the Whitfield estate) [Mr Hermiston, p.21] was estimated by the Partnership at 6000, on the basis of a study carried out on their behalf. As at 1994, the population was estimated at 6400 [67/400]. According to the census data, the population of the Whitfield ward was 4486 as at 1981, and 3115 as at 1991. The Whitfield ward boundaries, as at those dates, were however markedly different from the boundaries of the area covered by the Whitfield Partnership: the ward excluded the southern and western half of the Partnership area (including, as I have mentioned, the Centre itself), but included an area of private housing beyond the Partnership area to the east. These census statistics do not appear to me to be useful in the present case, as the ward boundaries prior to 1998 bear no relation to the boundaries of the housing estate where the Centre is located. So far as the latter area is concerned, the Partnership's estimates of population are a more reliable guide.

[211 ] In 1998 the ward boundaries were re-drawn, as I have explained, so as to exclude a large area of private housing to the east and an area of private housing to the north-west, and also so as to include the Centre and the surrounding area of housing. The effect was to bring the ward boundaries more closely into alignment with the boundaries of the Partnership area, although there remained differences: in particular, the Partnership area included two areas of housing (one to the east, and one to the north-west) which were excluded from the ward.

[212 ] According to the 2001 census data, the population of the ward as at that date was 3605. According to Ms Brash, the 2005 figure would be slightly higher. It is impossible to make any exact comparison with the earlier estimates produced by the Partnership, bearing in mind the different boundaries involved (and also bearing in mind that the estimates cannot be expected to be wholly reliable): I reject Mr Robeson's evidence that such a comparison could be made with "reasonable statistical accuracy" [p.17], in the absence of information about the population of the parts of the Partnership area falling outside the ward boundaries. The figures tend however to suggest that the population of the estate dropped between 1994 and 2001. Bearing in mind the extent to which high-density housing has been demolished, to be replaced by low-density housing, that conclusion would not be surprising.

[213 ] Attempts were made by Mr Robeson in his report, and by the solicitor advocate for the defenders and third party in cross-examination of witnesses, to compare the census statistics in 1981, 1991 and 2001 in relation to such matters as car ownership, employment and social class, so as to derive conclusions as to the way in which Whitfield was evolving, and to assess the implications for the Centre. Unsurprisingly, since the boundary changes meant that the ward lost its more prosperous areas and gained poorer areas, the comparison appeared to show a decline in prosperity. These attempts were however invalidated, as Mr Robeson acknowledged in evidence, by the changes in the ward boundaries: like was not being compared with like. Attempts were also made to use the census data for 2001 in order to compare the Whitfield ward with Dundee as a whole, and with Scotland as a whole. The latter exercise is not in principle objectionable, but it is necessary to bear in mind that the exclusion from the ward of much of the private housing to the north of the Centre (where the Skarne blocks were formerly located) has the effect of skewing the results: there are in fact more people who are relatively affluent, and who are living relatively close to the Centre, than the results of this exercise would suggest. For what it is worth, the comparison shows that the age structure of the population of the ward in 2001 corresponded broadly to that of Dundee as a whole, and to that of Scotland as a whole; that the ward had a relatively low proportion of professionals and middle managers (7.7 per cent of those aged 16-74, compared with 15.4 per cent for Dundee, and 19.0 per cent for Scotland), and a relatively high proportion of semi-skilled and unskilled workers (28.5 per cent, compared with 20.6 per cent and 17.5 per cent respectively); a relatively high level of unemployment (9.6 per cent, compared with 5.4 per cent and 4.0 per cent respectively); a relatively high proportion of single parent households (13.3 per cent, compared with 8.8 per cent and 6.9 per cent respectively); and a relatively low level of car ownership (45.7 per cent of households, compared with 54.5 per cent and 65.8 per cent respectively).

[214 ] I am not persuaded by the argument, advanced by Mr Robeson, that the nature of the population of Whitfield jeopardised the viability of the Centre as a location for a supermarket, or for retailing more generally, in so far as that argument was based on the socio-economic characteristics of that population, as distinct from its size. As was pointed out by Mr MacLean, there are many examples of deprived areas in Scotland's cities where local shopping centres have a viable supermarket presence. The examples which he mentioned were Drumchapel, Possilpark and Springburn, all in Glasgow. The same point was made in the 1993 Graham & Sibbald report, discussed earlier, in relation to Castlemilk, Pollok, Easterhouse and Drumchapel, in Glasgow, and Wester Hailes, Muirhouse and Craigmillar, in Edinburgh. It was also apparent from Mr Poulton's evidence that supermarkets trade successfully in deprived areas. At the same time, Mr MacLean acknowledged that the areas in Glasgow which he had mentioned had larger populations than Whitfield. In that connection, I note Mr Nisbet's evidence that the Drumchapel shopping centre served a catchment population of about 10,000-12,000 people [p.731], and Mr Robeson's evidence that some of the locations mentioned had catchment populations of up to 10,000 [p.108]. The size and significance of the catchment population of the Centre is discussed below.

The attitudes and behaviour of local residents
[215 ] The absence of a supermarket trading in the Premises has been a matter of concern to local residents, and their political representatives, for several years. In July 1998 Mr Wallace wrote to the pursuers, in his capacity as chairman of the Murrayfield Area Residents' Association (Murrayfield being an area within Whitfield), expressing the concerns of local residents:

"The supermarket ... is the focal point of the development. To have this unit open and in operational status would be an important factor in the total success of the shopping complex. It would also assist the neighbouring smaller units. The residents of Whitfield are extremely concerned that they definitely have a supermarket in the area. These concerns are expressed to me almost on a daily basis" [67/288].

[216 ] During the same month, the local councillor took the matter up with the council, with the result that the valuation officer who dealt with the Centre wrote to the pursuers:

"I think we all recognise the pivotal and key nature the presence of a Supermarket operator would mean for the refurbished Shopping Centre at Whitfield. I am quite prepared to write to CWS on behalf of the Council" [67/289].

[217 ] The matter was then discussed at a meeting in September 1998, attended by representatives of numerous local residents' associations and community groups, the local councillor and Member of Parliament, a representative of Moss Chemists, representatives of the pursuers, and others [67/291]. The community representatives made it clear that their priority was to have a supermarket to service the area. From the note of the meeting, it appears that there had been a problem with pigeons inside the Centre, as a result of the entrance doors not working properly. Other issues raised included people drinking outside the shops, the dropping of litter in the Centre, and drug addicts causing problems while waiting for the chemist's to open in the morning. The local Member of Parliament agreed to take up with the defenders the non-occupation of the Premises.

[218 ] The absence of any supermarket trading from the Premises was taken up again in March 2000 by the local Member of the Scottish Parliament [67/292-67/293]. The matter was also raised in April 2000 by the Whitfield Partnership, which reported that the vacant supermarket was an issue causing concern to most local residents [67/294].

[219 ] Further evidence concerning the attitudes and behaviour of local residents was given by a number of witnesses. Mr Wallace was 65 years old, and lived in an area of housing close to the Centre, where most of the inhabitants were over 50 years of age. He did not own a car. He said that, during the periods in the past when a supermarket was trading in the Centre, the Centre was very much busier than when a supermarket was not trading there. That evidence was not challenged in cross-examination. He and his neighbours currently used some of the shops in the Centre, such as the grocer's and the newsagent's, for daily purchases. He used to do his larger shopping at the Longhaugh Neighbourhood Centre on Pitkerro Road. The Longhaugh Centre could be accessed conveniently by bus, but it was necessary to take a taxi back up the hill to Whitfield, if laden with shopping. The Kwik Save there had however recently become a Somerfield, which was much more expensive, and was not popular with Whitfield residents. Asda at Milton of Craigie Road was cheaper, and had a better selection. There was a free bus from Whitfield to Asda. Some of the return journeys by the free bus were at an inconvenient time. He normally returned from Asda by taxi. Of the other shops in the Centre, the chemist's was sometimes busy and sometimes not. The post office was very busy on days when state benefits were paid. Mr Wallace accepted that the Centre had been affected by the demolition of the multi-storey blocks to the rear: they had housed a lot of people at one time. Mr Wallace also accepted that the new housing in Whitfield was mostly occupied by younger and more "upwardly mobile" people than the older housing.

[220 ] Mr Wallace accepted that a small number of drunks or drug addicts sometimes hung around the Centre, but said that they did not bother people much. Most of the drug addicts using the Centre went there to collect their methadone prescriptions from the chemist's. If they caused trouble they were banned from using the chemist's afterwards. This problem applied to all the supermarkets in the area: Asda, at Milton of Craigie Road, had security staff to deal with people of that sort. Whitfield had no worse a problem than the neighbouring areas of Fintry and Douglas. He had heard of one occasion when a trader had said that they could not open a shop at the Centre because of drug addicts. No details of this occasion were given.

[221 ] Evidence was also given by Mr Luke. He had known Whitfield and its shopping facilities well since the estate was first built, as he did shopping for a family member who lived there. He used to walk from her house to the Centre: other evidence established that that would have been a walk of more than 5 minutes. He agreed with the suggestion put to him, by the solicitor advocate for the defenders and third party, that the Centre served an area lying within a walking distance of up to 10 minutes. He had been a member of the Whitfield Partnership. As a Member of Parliament, he held surgeries in the library and the community centre, adjacent to the Centre, and went into the Centre regularly. He remarked that it was very dark inside the Centre, because of all the shutters being down: the shutters of the Premises in particular. At the time Shoprite closed, the Centre had been brighter and reasonably busy. He was certain that local people would use a supermarket at the Premises, if it re-opened.

[222 ] In relation to anti-social behaviour, Mr Luke said that Whitfield had a bad reputation, but that the problem was widespread throughout his constituency of Dundee East, and seemed to be worst in the neighbouring area of Douglas. It was not an issue often raised by constituents.

[223 ] Mr Dallas said that Whitfield should not be considered in isolation from the adjacent estates (to the west) of Fintry and Mill o'Mains. The three estates formed a continuous community, isolated from the rest of Dundee by geography and roads. They were treated together as the "North East Cluster" or, more colloquially, as the settlement on top of the hill. The remit of his group was to serve all three estates, and the group received funding on that basis. Fintry and Mill o'Mains had no housing office, library or activity complex. Their residents went to the housing office at Whitfield, across the road from the Centre, to pay their rent.

[224 ] Mr Dallas said that he used the Centre every day. It was not dangerous or frequented by large numbers of drunks or drug addicts. There might be a problem with a small number of people. The security staff dealt with that. It was no worse than in other areas of Dundee. As far as he was aware, representations had never been made to his organisation (the Whitfield Inclusion Network Group, a local advisory and campaigning group) concerning security in the Centre.

[225 ] The inadequacy of the existing shopping provision within Whitfield, and the regeneration of the Centre, had been the priority issues for the Group since he had joined it in 2002. The general view within the Group, which he shared, was that a trading supermarket in the Centre would give the Centre the kick start it needed, encouraging other local businesses to take up units. Whitfield needed an affordable supermarket, such as the Co-op. Mr Dallas also said that the Whitfield ward was the sixteenth most deprived ward in Scotland, according to statistics of multiple deprivation published by the Scottish Executive. Bus fares of £2 were a major issue for many local residents, and taxis were unaffordable. Many people walked to do their shopping. Most people used Asda, many of them walking there (a distance of approximately 1 to 11/2 miles, depending on the point from which the measurement is taken), because the bus timetable was inconvenient. The Somerfield store at Pitkerro Road was much closer, but was regarded as too expensive, and it was in addition difficult to walk back from there, due to the gradient of Longhaugh Road.

[226 ] Mrs Canter had lived at a number of addresses in Whitfield, ranging from a 5 minute walk from the Centre to a 15 minute walk. These walking times may have reflected the fact that she had young children: Mr Hermiston estimated the walking times between the addresses in question and the Centre at about 6 to 10 minutes [pp.572, 575]. At each address, she had shopped at the Centre, walking there and back. She did not have a car. Her impression was that the Centre had always been fairly busy until Shoprite closed: people could obtain most of their requirements there. After Shoprite closed, there seemed to her to be a lot fewer people using the Centre, and more people hanging about. As fewer people went, shops started closing, so there was less that could be bought there. She shopped for groceries at Asda, travelling there by taxi because of the inconvenient timings of the buses. The Somerfield store at Pitkerro Road was too expensive and did not have as wide a range of goods. The other Dundee superstores, such as the Tesco on Kingsway, or the Sainsbury at Claypotts, were awkward to get to unless one had a car.

[227 ] Mrs Neil, the manageress of the bookmaker's at unit 115, had worked for Ladbrokes for 25 years at various shops in different areas of Dundee. She had worked at unit 115 from time to time during that period, before becoming the manageress in 2002. She said that the shop was mostly used by people living in Whitfield and on the eastern side of Fintry (i.e. the side closer to Whitfield). The Fintry people had easy access to the Centre. She had had no problems with security in the Centre. From the point of view of security, the shop was the same as the other shops where she had worked in Dundee. The Centre was open from 6am until 6pm (or 7.30pm on Saturdays).

[228 ] Mrs Majola, a particularly impressive witness, had been the full-time manageress of Moss Chemists at unit 114 since 2003, and had previously worked in the shop from time to time since 2001. She also lived in Whitfield. The main business of the shop was dispensing prescriptions. It also sold cosmetics, toiletries and baby goods, and supplied photographic processing services. Most of the customers came from Whitfield, some from Fintry, and a few from further afield. Deliveries were made to the same areas. The majority of her customers walked to the Centre or took a bus; some took a taxi. The shop was the worst performing of the twelve shops operated by Moss Chemists in Dundee. It had at one time occupied two units (units 113 and 114), but one of those had to be shut, as there were too few customers to sustain the business. Currently the shop did not get much trade. The Centre did not look very presentable: too many units were shuttered down. Customers did not like to come to a place which looked like that. She had been told that by customers when she had asked why they did not come to the shop any more.

[229 ] Asked about drug addicts and anti-social behaviour, Mrs Majola said that the pharmacy was required by the health board to provide a methadone prescription service. There was a quota, set by Moss Chemists, for the number of patients accepted. Patients who were accepted had to sign a contract covering their behaviour: if they broke the contract, they would no longer be served in any branch of Moss Chemists. Some patients had to be supervised in the pharmacy. The security situation was no different from that at other branches. Other branches also supplied methadone. She had had no incidents in the shop. In 2004 there had been a problem with people (not the methadone patients) loitering inside the Centre. She had reported it to the landlord and security had been tightened. The problem had disappeared. She had never been threatened, or felt threatened.

[230 ] Mr Hussein had been the postmaster at unit 122 since 1989, and had also been the tenant of the newsagent's at unit 121 between about 1989 and 1992. Like Mrs Majola, he was a careful and measured witness whom I found impressive.

[231 ] In relation to the catchment of the Centre, Mr Hussein explained that his customers' pension books and benefit payments gave details of their addresses. His customers came from all parts of the Whitfield estate (including the new housing built where the Skarne blocks had formerly been), apart from the eastern edge (where the Kellyfield Post Office was situated). They also came from the Fintry estate, particularly on its eastern side (i.e. the side adjacent to Whitfield). The catchment area described by Mr Hussein appeared to be an ellipse, stretching about 3/4 mile from the Centre to the east and to the west, and about ⅓ mile from the Centre to the north and to the south. About 95 per cent of his customers came on foot.

[232 ] In relation to anti-social behaviour, Mr Hussein said that his staff had never been threatened.

[233 ] In relation to the attitude of local residents towards the Centre, and the possible consequences of a supermarket's re-opening at the Premises, evidence was also given concerning two pieces of research. The first was a questionnaire survey of 21 people aged over 50, carried out for the Whitfield Inclusion Network Group during the first half of 2004 by a first year student of community education at a local college [67/306]. No information was available as to how the 21 people were selected or where they lived, other than that they were all over 50, and 8 of them were interviewed at sheltered housing in the Murrayfield area of Whitfield. In the circumstances, it is difficult to draw any significant conclusions from the findings.

[234 ] The second piece of research was carried out in November 2002, on behalf of the pursuers, by George Street Research Ltd [67/304 and 67/305]. Members of the public were interviewed, during working hours on weekdays, in close proximity to the Centre: Ms Fawcett, the managing director of George Street Research Ltd, said in evidence that they were "looking to interview people who would have visited the Centre". Those who had never visited the Centre were excluded from further consideration. Their number was not recorded. The resultant group, of 241 people, was not representative of the local population in terms of gender, age, employment status or car ownership: women, the elderly, the unemployed and those not owning cars were over-represented. The respondents may also not have been representative of the local population in that they consisted solely of people who had visited the Centre. The 241 respondents were asked, if there was a supermarket open and trading within the Centre, how often they thought they would shop in the supermarket. 90 per cent said that they would shop there at least once a week. At the same time, 93 per cent said that they had visited the Centre within the last week, suggesting that over 90 per cent of the respondents might already use the Centre at least once a week. The survey did not contain any more detailed comparison of the current frequency of visits to the Centre with the anticipated frequency in the event that a supermarket was trading. The respondents who had said that they would use a supermarket in the Centre were then asked how likely they would be, when shopping in the supermarket, to visit other shops or businesses in the Centre. 47 per cent said that they would be very likely to do so, and a further 38 per cent said that they would be quite likely to do so. It is difficult to draw any inference from these responses as to the impact of a trading supermarket upon the other businesses in the Centre, since there is no way of knowing, from the data provided, whether the anticipated visits to such businesses would be additional to visits which currently take place, or whether current visits would simply be combined with a visit to the supermarket. Finally, the respondents who had said that they would use a supermarket in the Centre were asked what effect such a supermarket would have on the likelihood of their visiting the Centre. 46 per cent said that they would be much more likely to visit the Centre. I find it difficult to take much from this response, when 93 per cent of the larger group of respondents (i.e. including those who said they would not use a supermarket in the Centre) were known to have visited the Centre at least once within the last week, without there being a supermarket there. It also seems to me to be difficult to attach much weight to these responses, when the respondents had been given no information about the supermarket envisaged (e.g. whether it was operated by a national multiple or by a local independent operator; or whether it was selling at comparable prices to the nearest Kwik Save or Asda, or at higher prices), and when the respondents were not a representative sample of households in the local catchment. In these various respects I agree with Mr Robeson's criticisms of the research [pp.68-82].

[235 ] The research did however provide some information relevant to establishing the catchment of the Centre. 77 per cent of the respondents lived within a 10 minute walk of the Centre; 16 per cent lived between 10 and 20 minutes walk away; and the remaining 7 per cent lived further afield, but within a 10 to 15 minute drive or bus journey. Information as to the respondents' postcode details indicated that the great majority of them (81 per cent) came from the DD4 O area, which includes virtually the whole of the Whitfield estate (apart from two streets close to the Centre). 13 per cent came from the DD4 9 area, which includes the whole of Fintry, and also the two streets just mentioned. The remaining 6 per cent came from further afield. This evidence gave rise to a dispute as to the boundaries of the postcode districts, which was complicated by the lodging of maps by each party [67/389, 67/392, 67/393] which conflicted with one another. The dispute was eventually resolved by the evidence of Ms Brash.

The effects of a trading supermarket in the Centre
[236] Some evidence bearing on the likely effects of a trading supermarket in the Centre has already been noted, including that relating to the concerns expressed by the local residents' association, the Council and others (supra, paras.215-218), that of Mr Luke (supra, para.221), that of Mr Dallas (supra, para.225), and that relating to the research carried out for the Whitfield Inclusion Network Group and the research carried out by George Street Research Ltd (supra, paras.233-234).

[237 ] Mr Wallace maintained that, if there was a supermarket trading in the Centre, local people would not need to use Asda or Somerfield, but would do their main grocery shopping at the Centre. He said that what he was envisaging at the Centre was a good quality foodstore at reasonable prices, similar to Kwik Save. If the prices were not affordable, the supermarket would not be used as much. Local people would decide where to shop on the basis of a comparison of prices. This evidence was consistent with that of some other witnesses to the effect that shopping at this level of society is highly price-sensitive, and that shoppers will travel relatively long distances in order to shop more cheaply [e.g. Mr Clapham, p.109]. In the light of other evidence discussed below, however, this factor appears to be more important in relation to bulk shopping (i.e. the "main grocery shopping" to which Mr Wallace referred) than to what was described as convenience shopping.

[238 ] Mrs Majola said that the Centre needed to have more units open. It needed a supermarket running, from what she had heard from staff who had been there longer than herself. If the supermarket were open, the Centre would be a more attractive location to Moss Chemists: more customers would come to the chemist's, after going to the supermarket. That was what she had witnessed in other branches located next to supermarkets in shopping centres, such as the branch located next to Somerfield at Pitkerro Road, or the branch next to Kwik Save at McAlpine Road. The Moss Chemists at Pitkerro Road got far more trade than unit 114. I regard this as a significant piece of evidence: the shop at Pitkerro Road is much less conveniently located for walk-in customers than unit 114, but it is adjacent to a Somerfield supermarket and other shops; and if, as I accept, it has much more trade than unit 114, it is reasonable to infer that it must obtain spin-off trade from customers who go to the Longhaugh Neighbourhood Centre primarily to buy groceries. Mrs Majola said that people would not take a bus to the Centre to buy a toothbrush in her shop, but they would come to the shop if they had other things to buy in the Centre. Other businesses would benefit in a similar way: other units, such as a hairdresser, would probably open. When it was put to Mrs Majola that a supermarket would compete with her shop, she responded that that was not her experience. At Lochee, for example, there were three pharmacies and a supermarket in close proximity, yet that branch of Moss Chemists was doing much better than unit 114. In her words, "more feet coming into the area mean more feet in your shop".

[239 ] She had heard a lot of her patients say that if there was a supermarket in the Centre they would go to the Centre. She was envisaging a supermarket which was bigger than a corner shop, stocking fresh fruit and vegetables (which were not available at the grocery at unit 111 [Mr Dallas]) and other groceries, where the prices were better than in a corner shop. A supermarket of that kind would bring customers into the Centre, and her shop's business would do much better. A Co-op type of supermarket would do very well in the Centre. Even if the prices were not as competitive as in the bigger supermarkets such as Somerfield or Asda, people would be attracted by the convenience of a supermarket in the Centre: customers on foot, in particular, would not have to carry their bags as far. Mrs Majola's evidence about these matters appeared to me to be based on experience and local knowledge, and to make sense.

[240 ] According to the evidence of Mr Hussein, there was a relationship during the 1980s and 1990s between, on the one hand, whether there was or was not a supermarket trading at the Premises, and, on the other hand, the level of activity in the Centre generally, and the level of business enjoyed by his premises, in particular. His evidence was to the effect that business declined when Kismet Stores closed, revived when A & T Stores opened, declined again when A & T Stores closed, revived again when Shoprite opened, and declined again when Shoprite closed. I accept that evidence, and note that it is broadly consistent with evidence from other witnesses (e.g. Mr Thomson) and from other sources [e.g. 67/50; 67/49, para 2:13]. Mr Hussein attributed this relationship to a tendency of people to do their shopping in one area: if people went to another area to do grocery shopping, they would tend to do other shopping in that area also. Mr Hussein did not however exaggerate the effect on his own post office business. He explained that he was paid a salary as a sub-postmaster, which was related to the number of his customers. His salary had been reduced, following the closure of the Shoprite, by £4,000 per annum, reflecting a reduction in his customers of about 10 per cent. He explained that his core business was the payment of pensions and child benefits: recipients had at that time (prior to February 2005) to change their designated post office in order to be paid their benefits elsewhere. He thought that he might get half of those customers back if a supermarket re-opened in the Centre. This evidence appears to me to be significant. One might expect that the closure of a supermarket would have a more limited effect on the business of a post office than on most other types of retail outlet, if the post office's core business was the payment of pensions and benefits, and the recipients had to go through a formal procedure in order to change their designated post office. If the effect on the post office's turnover was 10 per cent, one could expect the effect on businesses with a more mobile customer base to be greater than that.

[241 ] Mr Hussein did not accept that the re-opening of a supermarket would have an adverse effect on the business of the post office: they were not in competition with each other. Nor did he accept that a supermarket would adversely affect the newsagent's: although the previous supermarkets at the Premises had sold confectionery and tobacco, like the newsagent's, the presence of a supermarket had nevertheless been beneficial. He accepted, on the other hand, that the operator of the grocer's at unit 111 would not be happy if a supermarket opened in the Centre. At the same time, the grocer's had been there when a supermarket had been trading in the past, and had managed to compete, partly by having longer opening hours.

[242 ] Mr Hussein said that most of the customers he had lost had transferred their business to the post office on Fintry Road, in the centre of the Fintry estate. There was a small supermarket next door, and a parade of shops further up the same street. The customers Mr Hussein thought would be attracted back to his post office, in the event that a supermarket re-opened in the Centre, were those who lived on the east side of Fintry. This evidence is significant in suggesting that the catchment of the Premises, when a supermarket was operating there, included part of Fintry.

[243 ] Mr Hussein acknowledged that there was a high level of car ownership in the area of private housing in Whitfield, and that residents there were likely to drive to a large supermarket such as Sainsbury in order to do their shopping. He considered however that some other residents would do their weekly shopping at a supermarket in the Centre, and not only incidental "basket shopping", provided the prices were sufficiently attractive.

[244 ] I also have to note the evidence of a number of professional witnesses, other than the parties' expert witnesses, as to the likely use of the Premises, and of the Centre, if a supermarket were trading from the Premises. I have already summarised the evidence relating to this issue which was given by Mr Watt and Mr Letley (supra, paras.163 and 166).

[245 ] Mr Reid's view was that the lack of footfall within the Centre made it infeasible for traders to open within the Centre. In his opinion, a trading supermarket would have increased the footfall within the Centre and made it a feasible location for potential tenants. One of the key issues for a potential tenant looking at a shopping centre was the footfall. A trading supermarket could only help with that. This evidence was supported by Mr Reid's experience of managing the Centre (supra, para.162), and was consistent with that of other credible witnesses, including Mr Watt, Mr Letley and Mr Lythgoe. I accept it. At the same time, Mr Reid accepted that the absence of a trading supermarket might not have been the only matter which discouraged some potential tenants. Nevertheless, he regarded Whitfield as a typical local authority estate, which could be expected to be attractive to some retailers.

[246 ] Mr McCluskey considered that a supermarket in the Centre would be used for day-to-day shopping: large shopping expeditions would continue to be made to superstores. A supermarket in the Centre would be competing in a different market from the superstores, offering a facility for daily needs rather than the main weekly shopping. There were however residents of Whitfield, without a car, who would prefer to make regular trips on foot to the Centre rather than undertake an expedition, involving the expense of a taxi fare, to a superstore. A realistic catchment area for the Centre would cover the Whitfield estate and the eastern edge of Fintry.

[247 ] Evidence in relation to the use of the Centre was also given by Mr De Vos, who had been responsible for its management since about 1999, in succession to Mr Letley. Mr De Vos was a careful witness, and his evidence appeared to me to be credible and reliable. His impression was that the Centre was on a downward trend. Looking at the volume of people using it, it was not doing as well as formerly. The problem for the tenants of the smaller units was the lack of people coming to the Centre. The tenants who had been there longest (Mrs Mussrat Begum at unit 111, Mr Hussein, and Mr Mohammed at unit 121) all said to him that trade had been drastically affected by the closure of the supermarket. If the number of people coming to the Centre could be increased, he would expect to see an increase in the level of trade of the existing retailers, and also to see some new businesses moving into vacant units. In his opinion, it was obvious that if a supermarket resumed trading at the Premises, that would increase the number of people coming into the Centre and support additional shops.

[248 ] Mr Brown considered that if there was a supermarket trading from the Premises, it would operate as a magnet store, i.e. as the "attractor" which pulls people into the Centre and so benefits other shops there by providing spin-off sales. In view of Mr Brown's experience and seniority as a retail planner, and my assessment that he was a credible and reliable witness, I regard that evidence as significant.

[249 ] Mr Poulton was asked to express views about Whitfield, the Centre, and the Premises, in relation to such matters as the catchment, the potential "magnet" effect of a supermarket, and competition in the locality. He made it clear that he had been to the Centre on only a "very limited" number of occasions and had not looked around the area [pp.105-106, 116]. He said that he was not qualified to express a view about the catchment of the Centre [p.109]. His evidence was based primarily on the documents bearing to be analyses of the trading results of the Kwik Save store at the Premises, which I have found to be unreliable (supra, paras.93-96). In the circumstances, I attach less weight to Mr Poulton's evidence about these matters than to that of other witnesses who knew the area better. Mr Poulton's assessment of the Centre however appeared to me to be realistic when he observed that it "lends itself to ... a basket type situation based on people who are quite close at hand, and probably lends itself more to convenience"; and that, since convenience shopping tends to involve higher prices than other formats (such as Asda superstores), the principal challenge facing a supermarket operator at Whitfield would probably lie in balancing price against convenience [p.118].

[250 ] Mr Poulton said that, despite marketing the Premises since 1995, Kwik Save (and later Somerfield) had been unable to dispose of them. There had been expressions of interest, but no firm offers [pp.229-230]. That was also the evidence of Mr Young, whose firm had dealt with the marketing since 2003 on behalf of Somerfield (the date which he gave was 2002, but Mrs Meneer gave the date as 2003, and I would expect her to be accurate). It was the longest outstanding disposal in their portfolio of properties. He presumed that there must be a lack of confidence that there would be sufficient business there to support the level of investment which would be required to open and maintain a profitable store in that location [p.563]. He was of the view that the ERV of the Premises was below the passing rent of £20,000 per annum. As was noted earlier, however (supra, para.137), Mr Poulton also acknowledged that the marketing of the Premises had been hampered by their appalling state, attributable to Kwik Save's and the defenders' persistent breach of their repairing obligations [p.497].

[251 ] It is also relevant in this connection to note the evidence of Mr Poulton that, from the perspective of potential tenants of the smaller units,

"a store [i.e. an occupier of the Premises] that looks as though it's open and trading, whatever that store is, will be far more beneficial than something that is closed and empty and perhaps looks uncared for" [p.294].

He also observed that, even if a supermarket did not generate much footfall, some smaller traders would nevertheless see it as being of potential benefit [p.292].

The supermarket industry
[252 ] Evidence about the supermarket industry was given by Mr Poulton. As I have already indicated, in relation for example to the reasons for the closure of the Premises, Mr Poulton's evidence did not appear to me to be wholly reliable. His evidence as to the workings of the supermarket industry however appeared to me to be straightforward.

[253 ] Mr Poulton said that Kwik Save and Somerfield competed with large supermarket chains, such as Asda and Tesco, with "limited assortment discounters" such as Aldi and Lidl, with the larger independent retailers, and with convenience retailers, such as Spar, the defenders (in one of their "formats"), and independent retailers. Convenience retailers did not compete on price: the determinant was availability and convenience, rather than price. Kwik Save had been competitive with Asda on price until their merger with Somerfield in 1998. Since then, they had moved up-market. Like the defenders, Somerfield were moving increasingly into convenience retailing, due to the strength of competition from the larger supermarket chains [p.39]. Somerfield's mid-range supermarkets were between 10,000 and 15,000 square feet. The defenders were increasingly operating from smaller stores, of about 3,000 square feet. Discounters typically traded from stores of between 8,000 and 15,000 square feet.

[254 ] The appropriate size of store primarily reflected the demographics of the location. In assessing potential locations, Somerfield used population statistics and demographic data obtained from consultancies such as CACI, discussed below [p.22], data from customer loyalty cards, and data on propensity to spend, work patterns and travel patterns, to form a view as to how a particular size and format of store would trade in a particular location. They would usually also visit the location, and might do a footfall count. That was a common approach in the industry. The principal aim was to obtain a forecast of turnover. They could then decide how much could be invested in a site, in terms of rent and other costs, and determine whether a store at that location could be expected to trade profitably.

[255 ] Mr Poulton described the different trading formats adopted by operators in different types of location. In particular, he described the type of supermarket operated by the defenders, Kwik Save and other operators in neighbourhood centres, including supermarkets in peripheral housing schemes in Scotland. It was apparent that the defenders, Kwik Save and other operators trade in a variety of formats aimed at differing sectors of the market, including economically disadvantaged areas.

[256 ] One relevant point which emerged from Mr Poulton's evidence about these matters was the dynamic nature of the food retailing industry. Shopping trends changed over time; so did trading formats; so did the areas around stores. The stores themselves were improved and updated. The type of location which an operator might desire (for example, town centre or out of town; in a mall, or in a petrol station), the size of store, the diversity of products on offer, the pricing policy, and other aspects of the operation, were all subject to perpetual and rapid change, as operators sought to respond to changes in social conditions, in customer preferences, and in the regulatory framework (e.g. of planning and competition policy).

[257 ] In relation to this matter, I note that similar evidence was give by Mr Hermiston. He accepted that retailers would expect premises to change over a long period of time; that they would expect the market to change; and that they would expect the catchment population to come and go.

[258 ] Another point which emerged from Mr Poulton's evidence was the difference between an operator's approach to the assessment of a potential store location, as he described it, and the approach to the valuation of stores or shopping centres adopted by the expert valuation witnesses, and by other valuation witnesses such as Mr Allison and Mr Merry.

[259 ] Mr Poulton was asked about sham trading: in other words, trading so as to pay lip-service to a keep-open obligation. He said that that was not something which Kwik Save would so. In the first place, management systems were not sufficiently sophisticated, at least in 1995, to enable a store to be operated in that way. Secondly, sham trading might have adverse consequences for the brand, at least locally; and any negative public relations towards the brand would be guarded against [pp.198-199]. There would be no question, if a keep-open clause were enforced, of Kwik Save trading in a half-hearted manner: for example, trading with most of the shelves empty, or trading for only a few hours each day. He knew, he said, what operating a supermarket meant. I note that Mr Robeson also gave evidence to the effect that protection of brand name was an important matter for operators of supermarkets, citing the behaviour of Morrison's as an example.

[260 ] Mr Poulton said that Kwik Save would, on the other hand, trade to meet the needs of the catchment. If there were low sales, and a high wastage of perishable items, the stocks held of perishables would be reduced, and the number of different products available might also be reduced, so as to match sales better. The store would operate fully, and the appearance of the shelves would not be very different, but the range of products would be restricted to those in demand and those with a long shelf life, and the products would not be stacked as deeply into the shelves [pp.200-201, 567-569].

[261 ] In relation to the issue of catchment, Mr Poulton said that the Competition Commission adopted a standard catchment, for stores of between 2,800 and 14,900 square feet, of a 5 minute drive time (except in rural areas) [p.84].

Planning policy
[262 ] Evidence was given concerning the planning history and status of the Centre, and the evolution of planning policies at national and local levels. This evidence appeared to me to be of limited significance. It was clear from the evidence of the valuation witnesses that the concepts used in planning are different from those used in valuation, and that planning policies (except insofar as they may affect value) are of little interest to them: as Mr Lythgoe put it, "in valuation terms I am simply concerned with what I see ... Planning guidelines ... [are] not a material factor in me deciding how I look at something" [pp.19-20; also at pp.569-570].

[263 ] It appears that the Centre was categorised as a district centre in the 1993 Dundee Local Plan [67/75]. In the 1998 Dundee Local Plan, it was one of the seven district shopping centres identified [67/390, para. 2.1]. The relevant parts of those plans were not produced in full; but it appears from the evidence of Mr Brown that there were no defined criteria for the designation of a district centre. In the 2005 Local Plan, on the other hand, the Centre was not one of the five locations categorised as a district shopping centre [67/408]. It is said in the 2005 Local Plan of the district shopping centres that they meet "day to day shopping and related requirements" and "help define and reinforce the identities of these communities by providing shared facilities, local meeting places and opportunities for social interaction" [para. 45.1]. They "provide local shopping, personal services and leisure opportunities which are valued by these communities and help make them convenient places to live"; they are "well geared to shopping and other trips on foot", and "most of them are either on or close to major bus routes"; in general, "they remain fairly healthy in terms of their range and quality of shops and services and the overall occupancy levels of shop premises" [para. 45.2]. The plan distinguishes between the core areas of such centres, which "may include the shopping centre's main food outlets, newsagents, post offices, chemists and banks" [para. 46.1], and the remaining area, which "could include non-retail services such as banks, other financial services, betting shops, estate agents, doctors and dentists' surgeries" [para. 47.1].

[264 ] It appears that the Centre is categorised in the 2005 Local Plan, by implication, as a local shopping centre. In relation to such centres, the plan states:

"Dundee's main shopping centres and out of centre superstores and retail warehouses are supported by a network of local shopping centres, shopping parades, corner shops and petrol filling station shops. They mainly operate as a source of 'top-up' grocery purchases and of routine items like cigarettes, newspapers and magazines. However for older and less mobile members of the community they may be the main source of their food and other day to day shopping requirements. Local shops may include services like sub post offices, hairdressers and launderettes and be linked with leisure provision in the form of amusement centres, betting offices and video hire" [para. 49.1].

[265 ] The distinction drawn in the plan between district and local shopping centres appears to be similar to that drawn in national planning policy between district centres and neighbourhood centres [67/391]. District centres are defined as

"Shopping centres or groups of shops, separate from the town centre, usually containing at least one food supermarket or superstore and non-retail services, such as banks, building societies and restaurants serving suburban areas or smaller settlements".

Neighbourhood centres are defined as

"Small groups of shops, typically comprising a newsagent, small supermarket/general grocery store, sub-post office and other small shops of a local nature".

"Supermarkets" are defined as having a trading floorspace of between about 500 and 2500 square metres, i.e. 5382 to 26,910 square feet [Mr Oswald, p.489]. The Premises have a trading floorspace of about 7,000 square feet.

[266 ] As previously explained, it appears that the Centre, as originally designed (with two supermarkets), was intended to act as a shopping and services centre for a community of around 12,000 people. That may explain its categorisation as a district centre in the 1993 Local Plan. By the time of the Graham & Sibbald report of 1993, however, the Centre was regarded as falling within the category of "a local or neighbourhood centre", i.e. a centre, typically of 10,000 to 25,000 square feet gross, serving a population of 2,500 to 10,000 people, whose selling point is convenience [67/49, para. 4.04].

[267 ] It was suggested in evidence by Mr MacLean that the downgrading of the Centre to a local shopping centre was connected with the closure of the supermarket there. That suggestion was denied by Mr Brown, whose evidence I accept.

Expert evidence on matters other than valuation

1. Mr MacLean
[268] Mr MacLean was led as a witness on behalf of the pursuers. I have already discussed some aspects of his evidence, which was concerned with planning and retailing issues. In particular, I have discussed his evidence relating to the connection (or, rather, the lack of any clear connection) between the socio-economic status of the catchment population and the viability of a supermarket, and his evidence relating to the planning history of the Centre.

[269 ] I can deal relatively briefly with the other aspects of his evidence. It was avowedly designed as a corrective to Mr Robeson's evidence [67/390, para.1.1], and did not appear to me to be presented from an entirely objective standpoint. It was however professional, clear and straightforward.

[270 ] Mr MacLean had considerable experience of retail planning. I note in particular that his experience included advising on retail provision (including shopping centres) in a number of depressed urban areas in Scotland, some of which (e.g. Possilpark in Glasgow) had more serious problems than Whitfield. In his experience there was usually a supermarket presence in such centres, such as a discount operator, or the defenders. His experience also included supermarkets serving relatively small communities, such as Blantyre.

[271 ] Mr MacLean explained that the retail market was highly "dynamic": retailers had to keep the premises and the "offering" competitive. A retailer entering into a long lease could foresee at the outset that the commercial environment in which it operated might change during the term of the lease. This evidence was consistent with that of Mr Poulton, Mr Oswald and other witnesses.

[272 ] Although I have accepted Mr MacLean's argument that the success of supermarkets in deprived areas elsewhere in Scotland demonstrates that the relative poverty of a population is no bar to the viability of a supermarket, he merely noted that the other areas which he mentioned had larger populations, and did not address the implications of that distinction. He acknowledged that the population of Whitfield had declined, but observed that population decline had been experienced in many urban areas in Scotland, and that the supermarket sector nevertheless remained vigorous.

[273 ] Mr MacLean was one of several witnesses who described the "retail hierarchy". It was generally accepted that local or neighbourhood centres had a sustainable function, operating (broadly speaking) at a level between large supermarkets of the Asda type (or town or district centres), and corner shops. In broad terms, local or neighbourhood centres provided more convenient (but more restricted, and more expensive) facilities than the largest supermarkets, for a local catchment; and they provided a significantly greater range of choice than corner shops. That broad categorisation was accepted by Mr Poulton and by the expert witnesses, and is reflected in the planning policies discussed above. Mr Robeson argued however that the catchment population of the Centre was too small to enable it to operate as a neighbourhood centre in that sense. That argument is considered below.

[274 ] Mr MacLean observed that the Centre was particularly convenient to the elderly, the infirm and those without a car, who comprised a relatively high proportion of the population of the Whitfield area, and that shopping at larger stores elsewhere involved bus or taxi fares which many Whitfield residents could ill afford. That evidence is consistent with that of the local people who gave evidence. He observed that the poorer segment of the population constituted a market sector which could be profitable and successful. He concluded that "the re-opening of a supermarket at Whitfield would attract shoppers and compete with the surrounding supermarkets for a share of the main food shopping". He had no doubt, on the basis of his experience of retailing, that the closure of the supermarket would have affected the lettings of the smaller units in the Centre. They needed the supermarket. If the supermarket was open, the footfall would increase. That opinion was based on his experience of supermarket developments of all sizes in a variety of locations.

[275 ] Mr MacLean considered, on the basis of visiting the Centre and driving around the area, that the catchment of the Centre was an ellipse, with the Centre at its heart, comprising Whitfield and much of Fintry. He would regard Fintry as an important part of the catchment. I note that such an ellipse would be similar to the ellipse described by Mr Lythgoe, created by compressing a circle with a radius of 900m, with the Centre at its heart. Mr MacLean's evidence about this matter was also consistent, in broad terms, with that of Mr Thomson, Mr Hussein and Mr McCluskey (supra, paras.33, 231 and 246). On the basis that the 2001 census figures for the Whitfield and Longhaugh wards (the latter being essentially the Fintry area) totalled 9500, Mr MacLean said that the catchment population could be estimated at about that figure. Mr MacLean was not cross-examined on this evidence in any detail, but it was put to him by the solicitor advocate for the defenders and third party that the catchment population was around 3000: a figure which Mr MacLean did not accept. That figure is itself much larger than the figures put forward by Mr Robeson, Mr Nisbet and Mr Hermiston. The passage in the Cousins Stephens Associates report, stating that the Centre was used primarily by people living within 10 minutes' walk, was also put to Mr MacLean. He responded that, in view of the higher level of car ownership compared with 1990 or so (when that report was prepared), he would expect the Centre now to be used also by people living beyond a 10 minute walk. That evidence is supported by the findings made by George Street Research Ltd (supra, para.235). Mr MacLean observed that there was a bus service running through Whitfield and Fintry which stopped outside the Centre. In his view, the catchment population and available expenditure were large enough to support the Centre.

2. Mr Robeson
[276 ] Mr Robeson was led as a witness on behalf of the defenders and third party. He was qualified as a chartered surveyor, but had never practised as a valuation surveyor. He was also a chartered planner, and his experience, so far as explained in evidence, related to the latter occupation. He had at one time been Director of Town Planning in Sainsbury's Development Division. Since then, he had worked in private practice, providing town planning and related advice in respect of retail development proposals. In particular, he regularly prepared retail impact studies and retail assessments.

[277 ] Mr Robeson was instructed on behalf of the third party in relation to six areas of evidence, one of which was "the extent to which available local expenditure can support the existing floorspace in the Whitfield Shopping Centre" [67/9, para.6]. In that connection, Mr Robeson prepared a retail assessment: in other words, a calculation of the convenience retailing floorspace required to support the convenience expenditure available to a supermarket at the Premises, having regard to the catchment population, the per capita available expenditure on convenience goods, the extent to which the resultant total available convenience expenditure would be spent locally, the average turnover per square foot of a typical discount supermarket, the floor area of the Premises, and the typical ratio of sales area to gross floor area. The calculation was supported by statistical and other factual material. This exercise created a difficulty at the proof. Since it became apparent during the proof that the way in which the court dealt with this matter was liable to be the subject of a ground of appeal, it is necessary to explain it.

[278 ] As previously explained, the action was raised in January 1999, but was sisted for several years while the rectification action proceeded. After the sist was recalled, the defenders and third party were on 26 April 2004 ordered to lodge within 6 weeks any expert reports on which they sought to rely (the pursuers having previously lodged a report by Mr Oswald), and the parties were on the same date ordered to lodge lists of their witnesses within 8 weeks. The third party then lodged a report by Mr Hermiston. The defenders eventually lodged a report by Mr Nisbet. Mr Nisbet and Mr Hermiston were included in the lists of witnesses lodged by the defenders and the third party respectively. On 3 August 2004 the court allowed a proof, and fixed a diet of 12 days (mistakenly stated in the interlocutor to be 15 days, Mondays having been included in error in that calculation), to commence on 8 March 2005 and finish on 25 March 2005. The court also ordered that the parties' expert witnesses were to hold discussions, in order to identify matters on which they were agreed and to clarify the differences between them, by 19 January 2005. Such discussions thereafter took place between Mr Oswald, Mr Lythgoe (who provided an additional report for the pursuers in December 2004), Mr Nisbet and Mr Hermiston.

[279 ] On 21 January 2005 the solicitors acting for the third party informed the pursuers that they intended to cite Mr Robeson as an expert witness. They said that he would speak to "the effect of demographics, the change in shopping trends, crime statistics and census information on the valuation" [77]. The pursuers' solicitors responded by asking for a copy of Mr Robeson's report by return, so that they could consider as a matter of urgency what steps they required to take, and whether they needed to consult a similarly qualified expert of their own. The third party's solicitors responded that Mr Robeson had only recently been instructed, and had been asked to provide his report by 14 February 2005. The pursuers had decided by that stage not to call Mr Lythgoe as an expert witness, because of his previous involvement in valuing the Centre, unless the other parties intended to found on his earlier reports. The pursuers were informed by the solicitors acting for the third party that Mr Lythgoe was to be cited. They therefore decided to call him as an expert witness.

[280 ] On 8 February 2005 the court allowed Mr Lythgoe to be added to the pursuers' list of witnesses, ordered all parties to finalise and lodge by 1 pm on 16 February 2005 any expert report on which they intended to rely, together with a joint minute from the parties' expert witnesses on the matters agreed between them and the matters which remained outstanding, and added a further 4 days to the diet of proof, from 12 to 15 April 2005. The court was addressed on behalf of the pursuers in relation to their concerns about Mr Robeson, but decided to make no order in that regard until Mr Robeson's report had been seen and considered. A document was subsequently lodged, recording the position reached by Mr Oswald, Mr Lythgoe, Mr Nisbet and Mr Hermiston in their discussions. Updated reports by Mr Oswald, Mr Lythgoe, Mr Nisbet and Mr Hermiston were exchanged.

[281 ] On 16 February 2005 Mr Robeson's report was lodged on behalf of the third party. A complete copy was provided to the pursuers on 18 February, an incomplete copy having been sent on 16 February.

[282 ] On 18 February 2005 the action called in court By Order, in order to check that parties were ready to proceed to proof. A number of applications were made, including a motion on behalf of the third party for leave to add Mr Robeson to their list of witnesses and to lodge his report. The motion was opposed. On behalf of the third party, it was submitted that the third party's pleadings contained averments relating to economic matters, and that Mr Robeson's report considered such matters in greater detail than the valuers had done. It was accepted that Mr Robeson's approach to these matters was of a different nature. On behalf of the pursuers, it was submitted that the report (which had only been received in full that morning) should not be received, and that Mr Robeson should not be allowed to be added as a witness. Alternatively, the diet of proof would have to be discharged in order to allow the pursuers an opportunity to meet this new material. It came too late, and in breach of the court's requirements in relation to the lodging of reports, the exchanging of lists of witnesses and the holding of meetings between expert witnesses. Early disclosure was a central element of commercial procedure. The proof was due to commence just over two weeks later. Mr Robeson's report was different in nature from the reports by the valuation surveyors, in considering economic matters, shopping trends and population trends in detail, and carrying out a retail assessment calculation of the kind one might expect at a planning inquiry. The pursuers would be materially prejudiced if the report were admitted at such a late stage. The pursuers had identified a potential academic witness who could give evidence about shopping trends, but had been unable to contact him since receiving Mr Robeson's report, as it was the academic mid-term. That potential witness would not in any event be able to address the retail assessment, as it lay outside his expertise. In response, the solicitor advocate for the third party said that the third party wished to avoid a discharge of the proof, and considered that there was sufficient time for the pursuers to instruct a suitable expert of their own.

[283 ] I said at the time that there had been a failure by the third party to comply with the court's orders so far as Mr Robeson and his report were concerned. An important aspect of commercial procedure, reflected in the court's orders, was that the parties should lay their cards on the table at an early stage. Although there had been a degree of slippage from the court's timetable by all parties, the third party was now seeking to introduce a new type of evidence, which had not been a matter of clear prior notice (the averments in the pleadings being more general than Mr Robeson's assertion that the level of expenditure on food and convenience goods available in the local catchment was insufficient to support a supermarket of the scale of the Premises at average trading levels), at a very late stage. It appeared to me however that the pursuers should investigate whether they could instruct a suitable witness for the proof, before the court decided whether to exclude Mr Robeson's evidence (in whole or in part) or to discharge the proof. The motion was therefore continued until 25 February.

[284 ] On 25 February 2005 I was informed that the pursuers' agents had approached seven potential expert witnesses since the previous hearing, including three suggested by the third party. None was in a position to prepare a report in time for the proof. Counsel for the pursuers renewed his opposition to the motion on behalf of the third party. The proof should proceed: the action had been raised in 1999, and the proof diet had been fixed in August 2004. The pursuers would be prejudiced if Mr Robeson's evidence were to be admitted: a new area of expertise was being introduced. In response, the solicitor advocate for the third party submitted that many of the matters dealt with in Mr Robeson's report were also dealt with in the reports by Mr Oswald and Mr Lythgoe, and in the report by George Street Research Ltd. It was accepted that Mr Robeson's calculations relating to available expenditure, and the material supporting those calculations, were new, and that the methodology was different from that of the valuation surveyors or George Street Research Ltd. The third party did not wish the proof diet to be discharged. If Mr Robeson's evidence was regarded as being objectionable in part, on the grounds of lateness, it would be helpful if the court were to lay down in advance the parameters as to the leading of evidence.

[285 ] I observed at the time that parts of Mr Robeson's report could hardly have taken the pursuers by surprise, and dealt with matters which were also covered by the reports prepared by Mr Oswald and Mr Lythgoe, or by George Street Research Ltd. The retail assessment calculations, and the supporting material, were however of understandable concern to the pursuers. This was new material, which came so late that it would be prejudicial to the pursuers to allow it to be admitted. No party suggested that the proof diet should be discharged. In the circumstances, I allowed Mr Robeson to be added to the third party's list of witnesses, and I allowed his report to be received, as the interlocutor records, "on the basis that evidence will not be led in relation to matters discussed in Appendix 4 to that report or in relation to the conclusions based upon aforesaid appendix as mentioned in paragraphs 39-40, 43-44 and 50-51". The passages specified in the interlocutor were those relating to the retail assessment calculation.

[286 ] On 8 March 2005, at the commencement of the proof, counsel for the pursuers sought leave to add Mr MacLean to the pursuers' list of witnesses, Mr MacLean's report having been completed the previous day and intimated to the defenders and third party. Counsel explained that it was intended that Mr MacLean would address issues relating to planning, socio-economic matters and shopping trends, in response to the sections of Mr Robeson's report which the court had allowed to be admitted in evidence. The motion was opposed, on the basis that those acting for the defenders and third party had received Mr MacLean's report only the previous day, and would require to obtain Mr Robeson's comments on it. The motion was continued. The motion was subsequently granted, without opposition, and Mr MacLean's report was also allowed to be lodged, again without opposition.

[287 ] This matter was not referred to again for several months. On 8 March 2005 the proof began, as I have mentioned, with seven days in May 2005 being added. On 28 March a further five days, in June 2005, were added. On 19 April a further four days in June 2005 were added. On 9 June a further 16 days, in November and December 2005, were added. A further six days in December 2005 were subsequently added. On 21 December 2005 a further 12 days, in February and March 2006, were added. In the event, the proof proceeded on 8-11, 22-24 and 29-31 March 2005; 1 and 12-15 April 2005; 16-18 and 24-27 May 2005; 6-10 and 14-17 June 2005; 15-18, 22-25 and 29-30 November 2005; 1, 6-9, 13-16, 20-21 December 2005; 21-24 and 28 February 2006; and 1-3 and 8-10 March 2006. There were accordingly substantial periods when the proof was adjourned, notably between June and November 2005, and between December 2005 and February 2006. I was not however invited to allow the excluded parts of Mr Robeson's report to be admitted, on the basis that it would be possible for the pursuers to instruct a suitable expert in relation to the excluded matters during such a period.

[288 ] During the evidence of Mr Hermiston, counsel for the pursuers offered to agree to the admission of the excluded parts of the report (and other evidence, apparently of a similar nature, which Mr Hermiston had indicated he was in a position to give), subject to an adjournment to obtain suitable evidence on behalf of the pursuers, and subject to the agreement of the defenders and third party to such evidence being admitted (the pursuers having by then closed their case) [p.598]. The solicitor advocate for the third party did not however move to have the evidence admitted [pp.603, 716]. In that regard, the solicitor advocate for the third party indicated that there might be a ground of appeal available to the third party on the basis that counsel for the pursuers had misrepresented the position at the hearing on 18 February 2005. He (the solicitor advocate) understood that the potential witness whom counsel for the pursuers had referred to, at that hearing, had been Mr MacLean. According to Mr Hermiston, Mr MacLean would have been able to give evidence about retail assessment, contrary to the information which counsel had given to the court at that hearing. The evidence concerning Mr Robeson's calculations had therefore been excluded on a false premise [pp.713-718]. In that regard, Mr Hermiston expressed the view that it would have been likely to take Mr MacLean two to four weeks to address the matter [p.719]. He did not know whether Mr MacLean had been available at the material time [p.723]. The solicitor advocate for the defenders and third party subsequently informed the court, following a discussion with counsel for the pursuers, that it was accepted that the potential witness referred to at the hearing on 18 February 2005 had not been Mr MacLean.

[289 ] Before Mr Robeson gave evidence, the solicitor advocate for the defenders and third party offered to delete from Mr Robeson's report the passages which he would not invite Mr Robeson to speak to, on the basis that they appeared to be dependent on the exercise contained in Appendix 4 (i.e. the retail assessment calculations). I said at the time that that was a matter for the solicitor advocate for the defenders and third party (the report being lodged as a production for the defenders and third party, and there being no objection on behalf of the pursuers). I also said that I wished to make it clear that the witness was not prevented from expressing opinions on the basis of his professional experience and expertise, in the same way as other witnesses had done: for example, as to whether the catchment was sufficient to enable a supermarket to trade at a level which would act as a magnet or anchor, or whether such a supermarket would jeopardise other tenancies. The only objection was to the introduction of Appendix 4 to the report, because it was produced late, in circumstances where its admission would either have resulted in the adjournment of the proof diet or prejudice to the pursuers.

[290 ] Returning to the evidence of Mr Robeson, it is necessary to say something about my assessment of him as a witness. He gave evidence over the course of three days. He was very experienced in his field. His evidence did not however always inspire as much confidence as might have been expected. I have already noted the errors he made in dealing with census information (supra, para.208), which appeared to me, if I may say so, to be readily apparent. As a result, the relevant section of Mr Robeson's report had to be substantially revised when he came to give evidence. The plan which he produced, purporting to show the Whitfield ward, was also inaccurate, as previously explained (ibid). Other errors emerged during his evidence [e.g. pp.77-78]. He appeared to me to be a somewhat loquacious witness. Unless firmly controlled by the questioner [e.g. pp.262, 272, 281-282, 377-378], he gave lengthy answers [e.g. pp.123-129], which sometimes introduced material of which no prior notice had been given, which had not been raised with any previous witness, and of which even those instructing him had apparently not been informed [p.217]. Asked why the court should accept his view on a particular matter, he answered, "Because I am the expert"; an answer which called to mind an observation of Lord President Cooper, in Davie v Magistrates of Edinburgh 1953 S.C. 34 at page 40, concerning expert evidence (in that case, the evidence of a scientist):

"[T]he bare ipse dixit of a scientist, however eminent, upon the issue in controversy, will normally carry little weight, for it cannot be tested by cross-examination nor independently appraised, and the parties have invoked the decision of a judicial tribunal and not an oracular pronouncement by an expert."

My confidence in Mr Robeson's evidence was further diminished by the importance he attached to an Asda store at Kirkton, in explaining the shopping habits of Whitfield residents. The store had not been mentioned in his report, or mentioned to the solicitor advocate who was leading him. Understandably in the circumstances, it had not been raised by the solicitor advocate in cross-examination of any of the pursuers' witnesses, but emerged for the first time on the fifty-first day of the proof. The fact that the store was not mentioned by the local people who gave evidence, when they were discussing the shopping habits of local residents, appears to me to suggest that, despite his expertise, Mr Robeson did not have an entirely accurate understanding of the local situation. In a similar vein, Mr Robeson placed great emphasis in his evidence on the competition which a supermarket in the Centre would face from some of the smaller shops in Fintry, although those shops had not been mentioned in his report, and the issue had not been raised with the local residents who gave evidence, or with Mr MacLean.

[291 ] In relation to the catchment of the Centre, Mr Robeson considered that the Whitfield ward (as defined by the 1998 boundaries) provided a realistic catchment area on which to study the Centre: in other words, an area within which people were more likely to use the Centre than not to use it [p.29]. I note that the population of that area was 3605 in 2001, according to the census data, and would be slightly higher in 2005 (supra, para.212). I also note that the Centre is located on the western side of the ward, and is closer to the eastern part of the neighbouring (and more densely populated) Longhaugh ward (i.e. Fintry) than to parts of the Whitfield ward itself. Mr Robeson however also considered that the core catchment of the Centre, without a trading supermarket, was defined by a 5 minute walk. By the expression "core catchment", Mr Robeson meant the area defined by a boundary line where inflow was equivalent to outflow: in other words, a line drawn where there was an equilibrium between people inside the line who did not use the Centre, and people outside the line who did [pp.40-41]. He considered that the catchment would be the same even if there were a trading supermarket, bearing in mind the effect of the Somerfield and Iceland stores at the Longhaugh Neighbourhood Centre, and the smaller shops in Fintry and Whitfield. His 5 minute walk excluded Fintry. The resultant catchment, which was identical to Mr Hermiston's (although their understandings of the concept of a "core catchment" appeared to be different, as explained below), had a population of 1324. Ms Brash's figure for the same area, as at 2001, was 1138: her evidence was not challenged, and I accept it. Mr Robeson considered that the population living more than 5 minutes walk away was not within walking distance, and was therefore car-borne; and the Centre was not in his opinion particularly easy to access by car, since it was not on a trunk road [p.58].

[292 ] For reasons which are explained below, I am satisfied that the catchment is not as restricted as Mr Robeson maintained. I therefore reject the premise on which the remainder of his evidence, as to the effects of a supermarket trading at the Centre, was based. I note that Mr Robeson's retail assessment calculation, which was excluded from evidence as previously explained, was based on the same premise. Mr Robeson accepted in his evidence that if the catchment were more appropriately defined by a 10 minute walk (as I have concluded), then the population would be much larger. He could not remember the resultant figure, but said that it would be "over 5000".

[293 ] Much of Mr Robeson's evidence was concerned with changes in shopping habits and shopping facilities since the Centre was constructed, both generally and in Dundee in particular. Whereas, when the Centre was built, it would have been the principal shopping facility for the local population, bulk shopping was now done in superstores. That nevertheless left a considerable amount of shopping which had to be done every day, or every two or three days: for example, milk, bread, pet food, tea, frozen meals and other groceries, cleaning materials, newspapers, magazines and greetings cards. The Centre could also be expected to meet the needs of the local catchment for other daily items, such as would be provided by a post office, a chemist's, a launderette, a takeaway, an off-licence and a book-maker's (two of which - a launderette and an off-licence - are currently absent from the Centre). On that basis, the catchment of the Centre, as he assessed it, would support a store of about 3000 square feet sales area, but not a store of the size of the Premises (with a sales area of about 7000 square feet). On that basis, a supermarket at the Premises would not in his view generate additional footfall for the rest of the Centre, partly because the people who lived in the immediate vicinity would already be using the chemist's, the post office and the other shops there, and partly because the supermarket would (he assumed) be trading purely because it was compelled to do so by the keep-open clause, and would therefore (he assumed) be trading in a half-hearted manner which would not attract customers [p.140]. Mr Robeson was envisaging a supermarket which was open for the absolute minimum number of hours necessary, and which would not sell any fresh, chilled or other perishable goods [p.152-153]: in other words, a supermarket which would trade in a very restricted way, rather than in the way that a supermarket might normally be expected to trade [p.332]. That evidence might be contrasted with Mr Poulton's evidence that a supermarket operated by Kwik Save at the Premises would not trade in a half-hearted manner but would operate fully, although the stocks of perishable items would be reduced if there was a high level of wastage [supra, para.259]. I also note the evidence that the One-Stop-to-Shop in Fintry, which was much smaller than the Premises, nevertheless sold fresh bakery products, fresh fruit and vegetables and fresh flowers [Mr Robeson, p.341], and the evidence that, until the Premises closed in 1995, Shoprite and the previous operators offered a normal range of groceries and other goods [supra, paras.17, 27 and 54]. In the light of the evidence, and also bearing in mind the nature of the obligation imposed by the keep-open clause as discussed below, Mr Robeson's evidence appears to me to proceed again on a mistaken premise.

[294 ] Mr Robeson's evidence is also difficult to reconcile with the body of evidence to the effect that the closure of the supermarket remained a matter of considerable concern to local residents. Mr Robeson acknowledged that he was surprised by that evidence [pp.397-398]. He maintained that a trading supermarket would have an adverse effect on other traders in the Centre. A similar view was expressed by some of the other witnesses led on behalf of the defenders and third party, such as Mr Hermiston. In the light of the other evidence in the case, however, including the evidence of Mrs Majola and Mr Hussein which was summarised above, I do not accept that contention. It may be that the grocer's would experience difficulty, although it appears to have continued to trade in the past in competition with the supermarket; but the evidence does not suggest that other traders would suffer: quite the contrary. Even if a particular trader found the level of competition from a supermarket off-putting, the increase in footfall anticipated by numerous witnesses whose evidence I accept (including lay witnesses such as Mrs Majola, professional witnesses such as Mr Brown, and expert witnesses such as Mr Lythgoe) could be expected to attract other tenants to the Centre.

[295 ] Although Mr Robeson did not accept that a trading supermarket would act as an anchor, he accepted that potential tenants of the smaller units would be put off by the fact that the Premises were vacant. An incoming tenant would worry about the dereliction and vandalism that were attracted to a vacant unit; he would be looking at the security and visual quality of the area around his shop. The empty Premises created a poor impression and encouraged anti-social behaviour. Lenders would be less willing to advance loans in relation to a half-empty centre. That would be a problem for a smaller entrepreneur needing to borrow to pay for fitting-out and other start-up costs. Investor confidence would be affected if they saw the principal unit with its shutters down [pp.407-408, 411-413]. Mr Robeson considered the unattractive condition of the Centre, and the vandalism problem, to be due partly, but not entirely, to the fact that the supermarket was not trading; and he attributed the low level of demand for tenancies in the Centre partly, but not entirely, to its physical condition [pp.437-438]. He considered that the Centre was never going to be fully let, because it was too large for its current function, but its condition might have put off some tenants who would otherwise have gone in [p.441].

The method of valuation
[296] The various expert valuation witnesses adopted different methods in order to estimate the capital value of the Centre, both in its existing state ("as is") and on the hypothetical basis that a supermarket had continued to trade from the Premises ("supermarket trading"). In broad terms, the valuation method which they all employed was to place a present value on the anticipated future stream of rental income. Such a valuation requires a calculation involving a number of elements, including the number of units which are let and the number which are unlet; the length of the periods during which unlet units remain unlet; and the rents at which the let units are let. It also involves the adoption of a yield, that is to say, the arithmetic relationship between income and capital value. In very broad terms, the yield is the rate of return on the investment, i.e. the income received from the investment expressed as a percentage of the cost of the investment. It reflects the security of the anticipated cash flow and the prospects of a growth in income [Mr Lythgoe, p.426]. The yield is adopted on the basis of evidence about comparable subjects which have been sold (comparable, that is to say, in respect of security of income and prospects of growth [Mr Lythgoe, pp.427-429]), and in respect of which the yield is known. Subject to appropriate adjustments to reflect differences between the comparison subjects, and the circumstances under which they were sold, and the subjects being valued, the yield evidence derived from the comparison subjects can be used as a basis for estimating the yield which should be adopted.

[297 ] Valuers refer to a variety of different yields. The evidence about the comparison subjects related almost entirely to the initial yield: in broad terms, the rate of return on the date of the sale, i.e. the rent divided by the cost. As explained below, the position is somewhat more complex than that, but that explanation conveys the general idea. In a few cases, there was also some evidence about the reversionary yield: in broad terms, the anticipated rate of return at some point in the future, after rental income has changed (for example, as a result of rent reviews or re-lettings).

[298 ] The method used to calculate the yields in respect of the various comparison subjects was not explained in detail by any witness, but can in some cases be inferred from the figures. Mr Lythgoe explained that, in principle, the initial yield is the net income at the date of valuation divided by the gross investment value (i.e. the purchase price plus the cost of purchase: typically, Stamp Duty, solicitors' fees and agents' fees) [pp.434-444]. That was also the explanation given by Mr Nisbet, and I accept it. In relation to the comparison subjects, however, it does not appear that all the yields have been calculated following that approach.

[299 ] It appears that a number of different methods have been used in relation to different subjects. In some cases, it is not possible to determine the method used as there is an absence of information as to rent or net annual values, or discrepancies between the figures (for purchase prices, or for yields) given by different witnesses. There appear however to have been at least four methods employed. The first, and simplest, was to divide the passing rent by the purchase price. That method appears to have been used in calculating the yields of the comparison subjects at Shawlands Arcade, Camperdown Road, Maggieswood Loan, and Calderwood Square. A second method was to divide the net annual value by the purchase price. That method appears to have been used in the case of the Muirhead comparison. The potential impact of using net annual values rather than actual rents can be gauged from the fact that the yield of Shawlands Arcade, calculated in the same way, would have been 9.1 per cent rather than 8.1 per cent. A third method was to divide the passing rent by the total acquisition cost, including fees and stamp duty. That method appears to have been used in calculating the yield of the comparisons at Preston Links and Craigshill Shopping Centre. A fourth method was to divide the net rent (i.e. the passing rent less ground rent and other reductions from the landlord's return) by the purchase price. That method appears to have been used in calculating the yield of Orleans Place and Pollock Lane.

[300 ] If the correct method in principle (and subject to the requisite information being available) is to divide the net income by the gross investment value, the use of other methods will tend to distort the result. The use of the passing rent rather than the net income increases the numerator in the calculation, and therefore tends to increase the yield. The use of the purchase price, without taking account of the additional costs of purchase, reduces the denominator in the calculation, and therefore also tends to increase the yield.

[301 ] In their valuations of the pursuers' interest in the Centre, the valuation witnesses referred to a variety of yields, including the initial yield, the running yield, the reversionary yield, the capitalisation yield, the average yield and the equivalent yield. Unfortunately, they did not use terminology consistently. In broad terms, the comparison evidence was used in the first place to arrive at what Mr Oswald described as the capitalisation yield, and Mr Lythgoe sometimes described as the equivalent yield (an expression which Mr Oswald used in a different sense and which Mr Lythgoe also used at times in a different sense) or the average yield. The capitalisation yield (if I may call it that) is, in broad terms, a yield applied to all rental income received over the remaining duration of the lease, in order to place a capital value upon the right to receive that income. For example, if £50,000 per annum were to be received in rent from the date of the valuation in perpetuity, and the capitalisation yield were 12.5 per cent, the capital value would be approximately £400,000 (since 50,000 divided by 12.5 per cent equals 400,000). If that rental stream were to begin in 10 years time, the capital value would of course be much less, but would still be based on a yield of 12.5 per cent, discounted to reflect the 10 year deferral.

[302 ] It is also necessary to explain that, in relation to subjects such as the Centre, comprising a number of units let to tenants of varying covenant strength, the capitalisation yield can be calculated for the subjects as a whole - a "blended" or "all risks" yield - or different yields can be calculated for the different categories of tenant. Some valuers adopted the former approach, and others adopted the latter.

[303 ] By using the capitalisation yield to place a capital value on each element in the rental stream (e.g. the anticipated rent of each unit in the Centre), and then adding those separate values together, the valuers can arrive at a cumulative value for the Centre. An initial yield can then be calculated, as the net income at the date of valuation divided by the capital value (inclusive of costs of purchase). That initial yield can be compared with the initial yield in respect of the comparison subjects, in order to check that the valuation has produced a capital value which is realistic.

[304 ] The running yield (referred to by Mr Lythgoe as an annual or quarterly yield) can also be calculated. In broad terms, the running yield represents the return on the investment at any particular point in time: initially, it is the same as the initial yield, but it changes over time as the rental income changes. Some valuers, such as Mr Oswald, check the running yield over the life of the investment in order to see whether it is sufficient to cover the cost of the borrowing which may be required to purchase the asset being valued. If the running yield is too low, it may be raised by increasing the capitalisation yield (and the initial yield), in particular by decreasing the valuation.

[305 ] The reversionary yield can also be calculated. In broad terms the reversionary yield represents the return at some point in the future, once rent reviews or re-lettings have taken place. Valuers generally consider the reversionary yield, in order to assess whether the asset represents an attractive investment at the price. If the reversionary yield is too low, one way of raising it may be to decrease the valuation (thereby also increasing the capitalisation yield and the initial yield).

[306 ] All these various yields were relevant to some or all of the valuations carried out by the expert witnesses. If the value of property is a reflection of how much rent it generates, how fast that income is likely to grow and the cost of the money which is borrowed to buy it, the initial yield relates to the first of these, the reversionary yield relates to the second, and the running yield is relevant to the third. A valuer such as Mr Oswald or Mr Lythgoe proceeded by a process of trial and error, refining his assumptions until he arrived at a "yield profile" in which the various yields all appeared to him to be realistic [see e.g. Mr Lythgoe, pp.70-77, 223, 326-327, 683-686]. The starting point was however the adoption of a capitalisation yield for each unit in the Centre, based on the initial yields calculated for the comparison subjects but adjusted to reflect relevant differences between the comparison subjects and the Centre (so far as known). None of the valuers gave a complete explanation of how he had arrived at the yields in his calculations from the calculated yields of the comparison subjects. It was impossible to carry out the comparisons with mathematical precision, since some of the relevant information about the comparison subjects was not generally available. The use of judgement and experience was therefore unavoidable, and was a common feature of the evidence of all the valuation experts. As the same time, each of the valuers was able to explain the respects in which, to his knowledge, the comparison subjects resembled or differed from the Centre. It was possible for the court to assess that evidence, and therefore to assess the reliability of the opinions expressed, as to appropriate yields at the Centre, which were said to be derived from the comparison subjects.

[307 ] Most of the valuers regarded the initial yield produced by their valuation as the most important of the various yields calculated in respect of the subjects being valued. In my discussion of the comparison subjects, I shall therefore focus on the initial yields; and in my discussion of the valuations of the Centre, I shall focus on the capitalisation yields derived from the comparison subjects, and on the initial yield produced by each valuation. I have not however overlooked the evidence concerning the various other yields.

[308 ] In trying to arrive at an appropriate yield for the purpose of valuing the Centre as at 2005, none of the valuers made use of the yields adopted in the earlier valuations of the Centre. It was explained that capital values had generally risen (and yields had therefore fallen) since the early 1990s, due primarily to a fall in interest rates [Mr Oswald, pp.271-272, 510].

[309 ] In assessing the comparability of the various subjects, it is necessary to take account of a number of factors, including the number of voids, the quality of the tenant covenants, the length of the leases, the catchment and the location (Mr Oswald, pp.198-199].

Comparison subjects

1. Capital value of the Centre
[310] Reference was made by the expert valuation witnesses to numerous comparison subjects in order to estimate the capital value of the Centre. In most cases, the comparisons were shopping centres which had been sold. The evidence about the comparison subjects was very extensive, but can be summarised, so far as relating to the most important comparisons, as follows.

1. Bargarran Shopping Centre, Erskine
[311 ] This is a small neighbourhood shopping centre extending to 20,000 square feet and functioning effectively as the town centre for Erskine [Mr Lythgoe, p.139]. It has a similar tenant line-up to the Centre, but has a larger and more affluent catchment. It includes a Spar convenience store of 2,000 square feet. The centre was sold in January 2003 for £2.34m, representing an initial yield (i.e. passing rents as at the date of acquisition, expressed as a percentage of the price paid plus stamp duty and other acquisition costs) of 7.87 per cent, and a reversionary yield (i.e. the anticipated rental income at a future point in time, following rent reviews, expressed as a percentage of the price paid plus stamp duty and other acquisition costs) of 8.15 per cent. It is agreed to be a better quality investment than the Centre. It does not appear to me to be a particularly useful comparison.

2. Arran Mall, Ayr
[312 ] This is an uncovered secondary mall extending to 40,000 square feet, dating from the 1960s or 1970s. It is in the town centre, but not on the prime retail parade. It is "anchored" by a large furniture store. It is better located than the Centre. The tenant line-up is poorer than the Centre. It was sold in January 2003 for £4.15m, representing an initial yield of 8.70 per cent. The sale took place under special circumstances, in that the purchaser was a joint venture between the owner of the centre and the owner of an adjoining centre, established with a view to combining the two centres and then placing the combined centre on the market. This again does not appear to me to be a particularly useful comparison.

[313 ] Reference was also made to the sale of the combined centre (the Kyle Centre) in June 2004 for £37m, representing a yield of 5.60 per cent. This is a large and relatively modern shopping centre in the centre of a prosperous town, and does not appear to me to be comparable to the Centre at Whitfield.

3. Shawlands Arcade, Glasgow
[314 ] The subjects form part of a covered shopping centre situated on one of Glasgow's best traditional shopping streets. The tenants are Woolworths and Superdrug, both of which are national multiples. The subjects were sold in July 2001 for £2.8m, representing an initial yield of 8.10 per cent, and again in October 2002 for £3.3m, representing an initial yield of 7.55 per cent. At the time of the former sale, the passing rent appears to have been £227,000 per annum [67/3]. It appears that the price was depressed (and the yield was therefore increased) by reason of the fact that the subjects comprised only part of the centre [Mr Oswald, pp.104-105]. These subjects are a more secure investment than the Centre. The yield for the Centre should therefore be higher. Beyond that observation, this does not appear to me to be a useful comparison.

4. 90 Camperdown Road, Dundee
[315 ] The subjects form a stand-alone retail warehouse of 11,270 square feet, located a short distance from Kingsway, Dundee's outer ring road. They are located immediately behind the McAlpine Road Shopping Centre. The catchment is below average, but better than Whitfield. The subjects were let to Kwik Save at a rent of £61,500 per annum, with 14 years unexpired. It was a matter of agreement between the expert valuers [67/2a, Appendix VI] that the subjects were purchased at auction by Kwik Save in May 2002 for £640,000, representing an initial yield of 9.61 per cent. Contrary evidence was given by Mr Poulton as to the date and circumstances of the purchase, under reservation of an objection as to its competency and relevancy [Mr Poulton, p.220], but it was apparent from the closing submissions on behalf of the defenders and third party [Appendix 3, p.3] that that evidence was not being founded on. As the objection was insisted in, and was not opposed, I shall sustain it.

[316 ] As mentioned earlier (supra, para.141 and 172), these subjects were founded on as a comparison by Mr McCluskey in the context of the 1998 rent review. At that time, Mr Merry considered that the subjects resembled the Premises in certain respects, but were in a more visible trading location. In the closing submissions on behalf of the defenders and the third party, it was suggested that the subjects were "comparable" to the Premises and gave an indication of yield.

[317 ] It appears to me that these subjects are comparable to the Premises in size and character. They are situated in a location which is better than that of the Premises, but not much better. At the time of the sale of the subjects, they were tenanted by a company with a similar quality of covenant to the defenders.

[318 ] The value of this comparison is however diminished by the fact that the purchaser was the existing tenant of the subjects. In these circumstances, the yield figure has to be treated with caution [Mr Oswald, p.103]. Nevertheless, the yield of 9.61 per cent gives an indication of what an investor might be expected to pay for that quality of covenant in that type of location in Dundee, although one would expect the yield in Whitfield to be higher (but not much higher) to reflect the less desirable nature of the location. One would also expect the yield for the Centre as a whole to be higher in order to reflect the mixed quality of the tenant covenants, and the number of vacant units.

5. Preston Links, South Centre, Prestonpans
[319 ] The subjects are a small retail parade extending to 15,587 square feet, situated on the main street in Prestonpans, in the vicinity of numerous other shops. They comprise a Somerfield supermarket (of 12,500 square feet) and four smaller units (two of which are rented by national multiples). The subjects are fully let. The tenant line-up is not dissimilar to Whitfield. The catchment is somewhat better, and the location also appears to be better. The subjects were sold in April 2002 for £1.54m, representing an initial yield of 8 per cent. The passing rent was said to be £126,900 per annum [67/3].

6. Sighthill Shopping Centre, Glasgow
[320 ] This centre is located in a local authority housing scheme with a high level of deprivation. The catchment is poorer than that at Whitfield, and comprises the residents of three tower blocks (many of whom are asylum seekers). The social problems include graffiti, vandalism and public drinking, and appear to be worse than at Whitfield. The centre consists of retail units on the ground floor of local authority housing. It comprises a supermarket of a similar size to the Premises, which has not traded since it was closed by Kwik Save in 1997, and 15 smaller units, all of which are let, but six of which were unoccupied at the time of the sale. There is also a public house. The tenant line-up is similar to that of the Centre. There are much larger and more modern supermarkets in close proximity. The supermarket in the centre did not trade successfully and had security problems [Mr Poulton].

[321 ] The Centre was sold in May 2004 for £1.2m, representing an initial yield of 11.38 per cent. This yield must however be treated with caution. Mr Oswald, whose firm acted for the vendor, said that the price was slightly inflated (and the yield therefore slightly depressed) as the purchaser was the ground landlord, Glasgow City Council, which wanted to re-develop the area. Mr Lythgoe did not, for this reason, regard the centre as a useful comparison. Mr Nisbet similarly considered that it was difficult to place a great deal of reliance on this comparison, partly for the reason just explained, and party because the price might also have reflected the Council's liability for dilapidations in respect of a part of the centre which it had sublet. The latter point was not however raised with Mr Oswald at any stage (notwithstanding the orders made by the court to ensure discussion between the expert witnesses prior to the proof).

[322 ] Notwithstanding the special circumstances of the sale, I accept the submission on behalf of the defenders and the third party (supported in particular by the evidence of Mr Oswald [67/2A, p.16] and Mr Hermiston [67/3, paras.5.04-5.05]) that Sighthill is the closest comparable to the Centre for the "as is" situation with a supermarket not trading. I also accept their submission that the price was "slightly inflated" by reason of the circumstances of the sale. I therefore conclude that the yield of 11.38 per cent gives an indication of the likely yield at the Centre in the "as is" situation, although one would expect the Whitfield yield to be slightly higher to reflect the absence of marriage value. Like the comparison subjects at Camperdown Road (supra, paras.315-318), this comparison has to be treated with caution; but the two comparisons appear to me to point towards consistent conclusions.

7. Hallhill Road, Barlanark, Glasgow
[323 ] The subjects comprise a modern shopping parade of retail units, located in a run-down area of local authority housing. The catchment is lower-spending than Whitfield. The location is better than that of the Centre, in that the frontage of the parade is on a main road. The parade was at the material time fully let, mostly to local traders. It was sold in April 2001 for £850,000, representing an initial yield of 11.13 per cent. The poorer nature of the location at Whitfield would point towards a higher yield, ceteris paribus. Adjustments would also have to be made to reflect the different tenant mix, and the number of vacant or unlet units. This comparison appears to me to be of some assistance and to point broadly towards the same conclusion as the comparison subjects at Camperdown Road and Sighthill.

8. Campfield Square, Broughty Ferry
[324 ] The subjects comprise a small neighbourhood shopping centre in an affluent suburb of Dundee. They are substantially better than the Centre in terms of the appearance of the premises, the quality of tenant, the location and the catchment. They are a securer investment. They were sold in November 2004 for £4.01m, representing an initial yield of 6.11 per cent. These subjects were relied on by Mr McCluskey in the context of the 1998 rent review (supra, paras.141 and 172), but were found by Mr Merry to be in a much superior location and therefore not comparable. I am of the same opinion.

9. Orleans Place, Menzieshill, Dundee
[325 ] These subjects comprise a local neighbourhood shopping centre of ten small retail units, dating from the same period as the Centre, and situated in a large local authority housing scheme in Dundee. All but one of the units were occupied at the material time. The tenants were predominantly local traders. The passing rent was £90,475, and the net rent was £79,033. A supermarket and a public house were located in close proximity to the subjects. The subjects were sold in 2002 for £485,000, representing an initial yield of 16.29 per cent (calculated using the net rent). That yield was heavily influenced by the fact that the ground rent from 2005 onwards was to be 50 per cent of rents receivable (compared with 7.5 per cent at the Centre): that level of ground rent would greatly reduce the net rent received, and have a major impact on the yield. Expressed relative to the net rent received from 2005 onwards, the yield would be 9.33 per cent (i.e. 90475 x 0.5 ÷ 485000). If acquisition costs were taken into account (as they should be), the corresponding yields would be slightly lower.

10. Craigshill Shopping Centre, Livingston
[326 ] The comparison subjects are a large, modern supermarket unit let to Kwik Save, adjacent to the Craigshill Shopping Centre, which is a neighbourhood shopping centre. It is located in one of the poorer parts of Livingston, with the majority of the housing in the area being in public ownership. The supermarket unit was sold in 2003 (when the lease had 14 years to run) for £852,500, representing an initial yield of 8.45 per cent. Taking acquisition costs into account, the yield would be 7.99 per cent. That is a lower yield than that calculated for the Kwik Save at Camperdown Road (where the yield was 9.61 per cent). This may reflect the fact, as it appeared to me on the evidence, that the location in Livingston is slightly superior to that in Dundee, and the premises themselves are of better quality. There would also appear to have been a prospect of reversionary rental at Craigshill [Mr Nisbet, p.448].

[327 ] Evidence was also given about Craigshill Shopping Centre itself. It consists of 20 small units on a mall. The tenant profile is mixed. Four of the units are vacant. The rent at the material time was £151,200. The centre was sold in 2005 for £1.7m, representing an initial yield of 8.44 per cent.

11. Maggieswood Loan, Falkirk
[328 ] The subjects are a small neighbourhood shopping centre, comprising a convenience store (let to the defenders), a public house and six smaller units. The centre is situated in a local authority housing scheme. It is well located in respect of road access and visibility. There is a large hospital adjacent. The tenant profile is mixed. The rent at the material time was £76,123 per annum. The centre is fully occupied. It was sold in 2003 for £940,000, representing an initial yield of 8.10 per cent. The reversionary yield was calculated as 9.28 per cent. Taking acquisition costs into account, the corresponding figures would be slightly lower.

12. Calderwood Shopping Centre, East Kilbride
[329 ] The subjects are a large neighbourhood shopping centre, comprising a convenience store, 15 smaller units and upper floor offices. The centre is situated in an area of former local authority housing. There were some voids at the time of the sale, but the great majority of the units were let. The tenant profile is mixed. It was apparent from the evidence that this is a much better property than the Centre, located in a better catchment. The rent at the material time was £161,950 per annum. The centre was sold in 2004 for £2.1m, representing an initial yield of 7.71 per cent. The reversionary yield was calculated at 10 per cent. Taking acquisition costs into account, the corresponding figures would be slightly lower.

[330 ] Some evidence was also given by Mr Nisbet about a modern annex to the centre (Pollock Lane, Calderwood Shopping Centre), which was said to have been sold in 2003 for £1.3m, which was said to represent an initial yield of 8.47 per cent. The rent was £110,000 per annum. If the costs of purchase were taken into account (on the usual assumption that the purchaser's costs, for a purchase of that amount, would be 5.75 per cent of the price), the initial yield would be 8 per cent (as was estimated by the selling agents) [67/7].

13. Main Street, Barrhead
[331 ] The subjects are a parade of 16 retail units and first floor offices, situated on the busy trunk road which passes through Barrhead. They form the principal shopping facility in Barrhead. The units are almost entirely let, and the tenants are predominantly national retailers. The subjects were said to have been sold in November 2002 for £5m, representing an initial yield of 7.75 per cent. The subjects do not appear to be comparable to the Centre at Whitfield.

14. Cumbernauld Road, Muirhead
[332 ] The subjects are a parade of shops, with a public house at first floor level, situated on a local high street, in a significantly better catchment than Whitfield. There are numerous other shops in close proximity. The subjects are fully let, the tenants all being local traders. The subjects were sold in February 2002 for £900,000, representing an initial yield of 10.05 per cent. The net annual value was £94,454 [67/3].

15. St Leonards Shopping Centre, East Kilbride
[333 ] The subjects comprise a supermarket with four unit shops within an enclosed mall. They are almost fully let, the tenants being predominantly national traders. The subjects are located in a middle market catchment in proximity to other shops. They were sold in October 2000 for £2m, representing an initial yield of 9.91 per cent. Yields have however generally dropped significantly since 2000 [Mr Oswald, p.510]. In the circumstances, I do not attach weight to this comparison.

16. Postings Shopping Centre, Kirkcaldy
[334 ] The subjects are the main shopping centre in Kirkcaldy. They comprise a large Tesco store and 19 other units. Most of the income comes from national traders. The subjects were sold in July 2003 for £10.375m, representing an initial yield of 7.69 per cent.

17. Loreburn Shopping Centre, Dumfries
[335 ] The subjects are the main shopping centre in Dumfries, comprising 39 units. They were sold in October 2003 for £23.5m, representing an initial yield of 4.43 per cent.

18. Greenhills Shopping Centre, East Kilbride
[336 ] The subjects are a neighbourhood shopping centre in East Kilbride. They were sold in November 2003 for £5.125m, representing an initial yield of 6.8 per cent.

19. Piazza Shopping Centre, Paisley
[337 ] The subjects are in the centre of Paisley. They were built in 1968 as an open precinct, and were re-developed in 1994 to form a covered scheme. To that extent, their history resembles that of the Centre at Whitfield. There are 37 tenants, including Safeway. The subjects were sold in September 2004 for £35.1m, representing an initial yield of 6.06 per cent.

20. Regent Court, Kirkintilloch
[338 ] The subjects were built in 1992 with three anchor tenants (Tesco, Woolworths and Boots) and 13 unit shops. As at December 2004, they were being marketed at a price of £13.5m, representing an initial yield of 6.7 per cent. These subjects would appear to be a much securer investment than the Centre at Whitfield, in terms of their modernity, their location and their tenant profile.

21. Reform Street, Monifieth
[339] This shopping centre comprises 14 unit shops and a vacant supermarket of 12,000 square feet. It is adjacent to a new Tesco store of 30,000 square feet, which was built as a replacement for the supermarket inside the centre. The centre is a 1970s development, situated in a middle class suburb of Dundee. Only one of the unit shops is vacant. This comparison was relied on, by the defenders and third party, as demonstrating that a shopping centre can trade successfully without an anchor: indeed, with a supermarket lying vacant. The comparison with Whitfield appears to me to be invalidated by the presence of the Tesco store adjacent to the Reform Street centre: I accept the evidence of Mr Lythgoe that the Tesco acts as a "magnet" or "anchor" for the centre.

2. Rental value of the Premises

[340 ] Reference was made to evidence concerning rent reviews of small supermarkets, in order to estimate the rental value of the Premises.

1. Iceland, West Granton, Edinburgh
[341 ] This freezer store of 7,139 square feet is smaller than the Premises. The rent was fixed with effect from March 2000 at a rate of £8.50 per square foot.

2. Kwiksave, Castlemilk, Glasgow
[342 ] This supermarket of 18,454 square feet is larger than the Premises. It is located in a poor housing scheme. It is in a shopping centre with shared parking. The rent was fixed with effect from November 2000 at a rate of £8 per square foot. The previous rent was £6 per square foot.

3. Lidl, Wester Hailes, Edinburgh
[343 ] This supermarket of 13,500 square feet is of similar size to the Premises. The rent was fixed with effect from January 2001 at a rate of £9 per square foot. The lease allowed a 12 month rent free period, but a minimum uplift to £10.50 per square foot at the first rent review.

4. Somerfield, Drumchapel, Glasgow
[344 ] This supermarket of 39,284 square feet is much larger than the Premises. Part of the accommodation is on an upper floor. The rent was fixed with effect from March 2001 at a rate of £8 per square foot. That reflected a deduction of 8 per cent for a keep-open clause; of 7.5 per cent for a restriction on alienation; and of 2 per cent for a 25 year term. These features are also present in the lease of the Premises. The previous rent was about £7 per square foot.

5. Kwik Save, Wester Hailes, Edinburgh
[345 ] This supermarket of 13,500 square feet is similar in size to the Premises. The rent was fixed with effect from March 2001 at a rate of £9 per square foot.

6. Kwik Save, Airdrie
[346 ] This supermarket of 10,330 square feet is similar in size to the Premises. The rent was fixed with effect from November 2001 at a rate of £6.75 per square foot. The previous rent was £6 per square foot.

7. Kwik Save, Bathgate
[347 ] This supermarket of 12,213 square feet is similar in size to the Premises. The rent was fixed with effect from August 2002 at a rate of £5.50 per square foot. It is poorly located, with a high degree of competition. It has poor loading access and poor car parking.

8. Newtongrange
[348 ] This supermarket of 13,000 square feet is similar in size to the Premises. The rent was fixed with effect from November 2002 at a rate of £7.50 square foot. The previous rent was £6.75 per square foot.

9. Safeway, St Leonards Shopping Centre, East Kilbride
[349 ] This supermarket of 14,592 feet is similar in size to the Premises. The rent was fixed with effect from February 2003 at a rate of £8.75 per square foot. The previous rent was £6.51 per square foot.

10. Kwik Save, Neilston Road, Paisley
[350 ] This supermarket of 6,800 square feet is smaller than the Premises. The rent was fixed with effect from March 2003 at a rate of £8.31 per square foot.

11. Kwik Save, Linlithgow
[351 ] This supermarket of 12,540 square feet is similar in size to the Premises. The rent was fixed with effect from October 2003 at a rate of £7 per square foot.

3. Rental value of the smaller units
[352 ] Reference was also made to comparison subjects in order to estimate the rental value of the smaller units within the Centre on the assumption that there had continued to be a supermarket trading at the Premises.

1. Weaver's Village, High Street, Lochee, Dundee
[353 ] The comparison subjects are unit shops of about 700-800 square feet, located in the Weaver's Village centre. This centre was mentioned earlier in connection with the background to Mr Clapham's decision to acquire the Centre (supra, para.61). The supermarket then occupied there by Kwik Save was also relied on as a comparison by Mr McCluskey in the 1998 rent review, but was considered by Mr Merry to be in a better trading neighbourhood (supra, paras.141 and 172). Current lettings of units were said to be at rents of around £8,500 per annum.

2. Highgate Shopping Centre, Lochee, Dundee
[354 ] The comparison subjects are unit shops of about 750 square feet, located in a covered mall in a fairly busy inner city location. Current rentals are said to be around £10,000 per annum. These are more attractive units than those in the Centre.

3. 110 High Street, Lochee, Dundee
[355 ] The comparison subjects are a shop of 869 square feet located on the High Street, close to the Highgate Shopping Centre. A rent of £11,100 per annum was agreed in 2002.

Expert evidence on valuation

1. Mr Oswald
[356] Mr Oswald was led as a witness on behalf of the pursuers. He is a highly experienced valuer, who has carried out valuations for commercial purposes of numerous shopping centres, both prime and secondary. His experience was however challenged, so far as concerned his valuation of the Centre on the hypothesis that the Premises had continued trading as a supermarket. It was suggested that he lacked the expertise to assess what would have happened to the Centre if the supermarket had continued trading, and therefore was not qualified to express an opinion as to its value on that hypothesis. The same suggestion was also made in respect of Mr Lythgoe, and could equally have been made in respect of Mr Nisbet, who was one of the valuation experts led on behalf of the defenders and third party. It was argued that although Mr Oswald (like Mr Lythgoe) was qualified to place a value on an existing retail development, he was not qualified to assess what its value would have been under different circumstances, since to do so involved making judgements which he had neither the qualifications nor the experience to make. It was argued that, of the valuers, only Mr Hermiston was adequately qualified, since he had a qualification and experience in town planning as well as in valuation, and had substantial experience of planning proposals in respect of retail developments, and of the retail impact studies and other retail analyses carried out in connection with such proposals.

[357 ] I do not accept that criticism. It was apparent from the evidence of Mr Oswald [e.g. at pp.637-638, 664-673 and 732-736], and of the other valuation experts, that it is a regular part of a valuer's work to value hypothetical developments, and for that purpose to make an assessment of the likely rentals, tenant covenants, voids and other relevant aspects (whereas some other aspects, such as the appropriate size of the development, the appropriate size of units within it, and the appropriate mix of retailers, are likely to be assessed by retailing consultants). Mr Allison's 1997 valuation of the Centre on the hypothesis that it was to be re-developed is one example in the present case; Graham & Sibbald's 1993 valuation of the Centre on the hypothesis that the works recommended in their report were to be carried out is another. Indeed, it is apparent that even a valuation of an existing development involves an assessment of its future prospects, and to that extent is based on hypotheses. I accept that a specialist retailing consultant, such as Mr Robeson, might be better placed than a valuer to assess the future trading prospects of a retail development (whether actual or hypothetical), and might well carry out a more elaborate assessment of the catchment (including footfall surveys, calculations of available expenditure within isochrones, retail impact assessments and so forth); but that does not imply that, if Mr Robeson's view were different from that of the valuers, it would follow that the valuations should be rejected. It is apparent from the evidence that sales and lending transactions in the commercial property market are generally based on valuations, and that the valuers do not normally consult retailing consultants. As Mr Oswald expressed it, "What a valuer reflects is ... how the market behaves and how a hypothetical purchaser would look at this" [p.665]. That is a different exercise from the one carried out by a supermarket operator, or a retailing consultant, when analysing a prospective trading location. The valuer is interested in the capital value of the subjects in the market where such subjects are sold; the retailing consultant is interested in the trading prospects of a store operating from the subjects. There is, no doubt, a connection between these two exercises; but they are not the same exercise. In principle, therefore, valuations may be a reliable guide to market value, notwithstanding that someone such as Mr Robeson might disagree with the assumptions on which they were based (even, indeed, if he were correct in so disagreeing). If, on the other hand, different valuers in reaching their valuations have been influenced by differing assumptions as to the retailing prospects of the subjects in question, the opinion of a retailing expert may be of assistance in deciding which valuation may better reflect the likely view of the market, and therefore be the better guide to market value: indeed, Mr Oswald had spoken to retail analysts in his firm as a cross-check on his own assessment [pp.670-671]. The specialist expertise in retailing of someone such as Mr Robeson does not, therefore, render valuers such as Mr Oswald incompetent to give expert evidence of value where the valuation involves an assessment of retailing prospects, although the opinion of such a retailing specialist may be of assistance when assessing the weight to be attached to the opinions expressed by the valuation experts.

[358 ] I also note that, at the meetings and in the discussions between the expert witnesses which took place prior to the commencement of the proof, under the direction of the court, there was no suggestion made that there was any lack of expertise on the part of Mr Oswald, Mr Lythgoe or Mr Nisbet. Nor did Mr Hermiston suggest at the proof that the other valuers lacked the necessary competence, although he suggested that his greater experience of retail planning conferred an advantage upon him. Indeed, when Mr Hermiston was asked whether, if assumptions had to be made about tenants, rental values and so forth, a valuer was the person who would provide that information, or whether it should be provided by someone else, he responded that it was normal for a valuer to make that assessment [p.701]. None of the valuers had based his valuation upon a retail assessment (although Mr Hermiston had carried one out after preparing his valuation); nor did Mr Allison in 1997.

[359 ] Mr Oswald gave evidence over the course of seven days. He appeared to me to be a straightforward witness. His report [67/2a] unfortunately contained a number of inaccuracies, which resulted in his evidence having to be adjourned for the production of revised calculations [67/398].

[360 ] For the purposes of the present case, Mr Oswald carried out a valuation of the Centre as at 20 May 2005. In broad terms, his approach to valuation was to calculate the present value of the future income flow which the pursuers could expect to receive from the Centre, based on the current tenancies. He also valued the Centre on the hypothesis that the Premises had not closed in 1995 but had continued trading, making assumptions as to the likely tenants under those circumstances. The difference between those two valuations represented the capital loss resulting from the defenders' breach of the keep-open clause. Mr Oswald also calculated the loss of revenue (in respect of rent and service charges) which had resulted from the breach of the keep-open clause, on the basis of the same assumptions as to tenancies.

Date of valuation
[361 ] A separate matter which was raised with Mr Oswald, on behalf of the defenders and third party, was whether any loss attributable to the breach of the keep-open obligation should be established by carrying out valuations on the "supermarket closed" and "supermarket open" bases as at the date when the supermarket closed, in January 1995. In response, Mr Oswald explained that, in order to carry out in 2005 a valuation as at January 1995, the valuer would have to attempt to imagine what expectations the market would have held at that time as to what was going to happen at Whitfield and what was going to happen in the retail market, closing his eyes to his knowledge of what had actually happened. He would need to come to a view, for example, as to how long the market might have envisaged that the supermarket would remain closed. As in any valuation, it would be necessary to reflect a view as to demographic change, change in the population of Whitfield, the effects of competition from other supermarkets, and so forth. This was a very difficult exercise, not least because the valuer knew what had actually happened since 1995. Mr Oswald also observed that the date of the breach of contract was 2005 just as much as it was 1995: the defenders continued to break their contract every day.

[362 ] Pressed to give a figure for the value of the Centre immediately after the closure of the Premises, Mr Oswald said that, if he had no information as to how long the Premises would remain closed, the value could be as low as £180,000 or as high as £300,000. Asked to assume that the Premises would remain closed for 10 years from 1995, he said that he would not advise anyone to buy the Centre, and that the value would be less than £180,000. If the Premises were to remain closed until 2003, the figure might be £150,000 or more. That evidence was not challenged in cross-examination. Mr Oswald considered (as did the other valuers) that the purchase price paid by the pursuers, of £481,500, was the best evidence of the value of the Centre in 1994, prior to the closure of the Premises [pp.233-237].

[363 ] In response to the suggestion that a valuation as at 2005 would reflect changes which had occurred since 1995 and which were not attributable to the closure of the supermarket (such as a general rise in the retail property market, and the physical changes to the Centre resulting from its refurbishment), Mr Oswald observed that, at the time when the Sub-Lease was entered into (in 1972), it would have been anticipated, when signing a 63 year lease, that there would be changes over the period of the lease in response to changes in the market [pp.648-649]. Anyone entering into the Sub-Lease would not expect the Premises or the surrounding units to remain the same over the course of the lease:

"I think that most experienced retailers expect change. They sign up, particularly in this instance, for a very long period of time with a commitment to the location. They are the anchor store and they would expect change ...".

It would not be usual for centres constructed in the 1960s and 1970s to remain as they were: they adapted and changed over a period of time. There were numerous examples in Scotland, for example, of 1970s centres, built as open precincts, being roofed over. The type of re-development which had been carried out at the Centre in 1998 was foreseeable from the point of view of a supermarket operator with a tenancy of the Premises [p.196]. At Whitfield, as elsewhere, the roof could not have been constructed without the consent of the tenants, and of the defenders in particular [pp.769-771]. A tenant would envisage changes not only in the let premises and in the shopping centre of which they formed part, but also in market trends, shopping habits and the surrounding catchment. The shopping centre would evolve in response to those changes. These matters would have been in the contemplation of a supermarket operator from the 1970s onwards [pp.55-56]. The evidence of other witnesses, such as Mr MacLean and Mr Poulton, was consistent with that evidence, and I accept it.

[364 ] Mr Oswald also explained that, in valuing as at 2005, he valued the Centre as it was, and as it would be if a supermarket were trading there: changes to the Centre, or to the market, which had occurred since 1995 were common to both scenarios [p.690]. His final figures were based on a valuation as at 20 May 2005 [67/398].

Catchment
[365 ] In carrying out these valuations, Mr Oswald proceeded upon a certain view of the local catchment. In his evidence, he explained that the catchment was an important factor in valuation, although not the most important consideration. It was within the expertise of a valuer to make an assessment of a catchment for the purposes of a valuation. It was not something which a valuer would analyse in detail. Purchasers were influenced by what they saw on the ground. Their primary concern however related to the return on their investment, and therefore to such matters as the initial rent, the prospects of rental growth, the length of the lease and the tenant covenant [Mr Oswald, pp.306-306, 313].

[366 ] Consistently with this approach, Mr Oswald did not consider the catchment in any detail in his initial report [67/1]. In the second and third versions of his report [67/2 and 67/2A], however, although his valuations scarcely changed, he discussed the catchment in much greater detail, on the basis of statistical information obtained from CACI Limited, a reputable source of information of that nature, but not one which would ordinarily be used by valuers: it is used, rather, by operators and developers [supra, para.254; Mr Hermiston, p.175]. In analysing the catchment at that level of detail, Mr Oswald stepped outside his own area of experience, and ventured on to a terrain with which the defenders' and third party's expert on retailing, Mr Robeson, was more familiar. Predictably, this became one of the principal areas of contention at the proof, as the defenders and third party sought to demonstrate that the information provided by CACI was wrong, that Mr Oswald's valuation was consequently based on a misunderstanding of the catchment, and that his evidence was therefore fatally flawed.

[368 ] In considering this topic, it appears to me to be necessary to bear in mind that valuers do not normally analyse catchments in such detail, and that the valuations in the present case (including those carried out by Mr Nisbet and Mr Hermiston on behalf of the defenders and third party) were not founded on an analysis of that nature. Any valuation carried out on the comparative method requires a view to be taken of the location of the subjects; and, in the case of a shopping centre, the presence or absence of a suitable catchment is a relevant aspect of the location. Nevertheless, it is clear from the evidence that neither a valuer nor an investor would ordinarily obtain information from firms such as CACI or Mapinfo (particularly in the case of relatively low-value subjects, such as the Centre): a view of the catchment, and of other relevant aspects of the location, would normally be formed on a more impressionistic basis, relying on experience and on walking or driving around the area in question [see e.g. Mr Nisbet, p.154]. As Mr Hermiston said, a typical valuation of a shopping centre, based on the amount of floor space, the number of vacancies, the tenant covenants and the rents, implicitly reflects the catchment, in that the catchment lies behind the factors on which the valuer is basing his valuation; but most valuers would not go any further, because they are not valuing the catchment itself [pp.176-177]. Although Mr Hermiston considered it desirable to analyse the catchment at Whitfield in more detail, because of the difficulties being experienced by the Centre at present, it was clear that the other valuation witnesses, and the valuers who had previously valued the Centre (and Mr Hermiston himself), had all produced valuations in the ordinary way, without carrying out any detailed assessment of the catchment. In these circumstances, it appears to me that the defenders' and third party's approach to this topic exaggerated the importance of establishing precisely where catchment boundaries should be drawn and what the population resident within those boundaries might be. That said, I accept that, if it were established that a valuation had been based on a serious misunderstanding of relevant aspects of the location, including the catchment, then that would undermine its reliability, and might lead one to prefer other valuations which reflected a better understanding of the location. Indeed, to anticipate the later discussion, it is partly on that basis that I have rejected Mr Nisbet's and Mr Hermiston's approach to the valuation of the Centre on the "supermarket trading" hypothesis: their approach is premised on what appears to me to be a serious underestimate of the catchment of the Centre, and therefore of its trading prospects.

[369 ] In the third and final version of his report, Mr Oswald took the local catchment to be the population living within one minute's drive from the Centre. On the basis of the report obtained from CACI, he understood that the total resident population within a one minute drive time of postcode DD4 ODX (the address of the Centre) was 7,560 as at 2001. That figure was based on the 2001 Census Area Statistics [67/2a, para. 5.2.4 and App.V]. By a one minute drive time was meant the distance (measured from the front door of a house to the car park at the Centre) which could on average (over a 24 hour period) be driven in one minute, respecting the speed limit [Mr Oswald, pp.69-73].

[370 ] In the second version of his report [67/2], Mr Oswald had produced the whole of the report which he had obtained from CACI, containing the population statistics (including the 7,560 figure), and also a plan subsequently produced by CACI ("the CACI plan") which purported to show the geographical area defined by the one minute drive time. In the third version of his report, to which he spoke in evidence [67/2a], Mr Oswald omitted the CACI plan, and inserted instead a plan produced by his firm ("the Knight Frank plan"). He explained in evidence that, having visited Whitfield, it appeared to him that the CACI plan did not accurately represent a one minute drive time: it included, for example, areas where there were no roads. He therefore had the Knight Frank plan prepared by Knight Frank's information services staff, using information provided by CACI [Mr Oswald, pp.80-81]. Although the area shown by the Knight Frank plan as falling within the one minute drive time was different from the area shown on the CACI plan, the population figure remained the same.

[371 ] According to Ms Brash's evidence, which I accept, the correct figure for the population living within the area shown in the CACI plan as at 2001 was 3,042; and the correct figure for the Knight Frank plan as at 2001 was 4,314. I would observe that an area in which there are 4,314 people living within one minute's drive of the Centre does not appear to me to be as sparsely populated as the evidence of Mr Robeson, in particular, tended to suggest.

[372 ] Mr Oswald said in evidence that he adhered to the figure of 7,500 for the local catchment. It was his view that the CACI plan was inaccurate, rather than the population figures. In his opinion the figure of 7,500 was supported by two other pieces of evidence. First, a calculation had been made of the population living within a 900m radius of the Centre. 900m was the distance travelled in one minute by a car moving at 30mph. It was also in his opinion a reasonable walking distance. He accepted that a circle of 900m radius, drawn as the crow flies, was a very broad measure, and extended beyond the immediate catchment of the Centre [Mr Oswald, pp.288, 299]. The resultant population figure, as calculated by Mapinfo on the basis of the 2001 census, was 9,320 [67/394]. Secondly, the combined populations of the Whitfield and Longhaugh wards (the latter ward being effectively the eastern and central parts of the Fintry estate), as at the date of the 2001 census, was about 9,500.

[373 ] I have reservations about aspects of this evidence. Mr Oswald was unable to explain convincingly how he could retain CACI's population figure while discarding their plan, beyond saying that the plan was produced independently of the population figure, and that the latter figure was supported by the 900m radius figure and the census figures for the wards. So far as he was able to explain how CACI produced their plan and their population figure, it was not clear to me that they were in fact independent of each other: CACI had census-derived information as to the number of people living in specified locations, and they seemingly combined that information with drive-time information derived from the Automobile Association in order to produce their results [Mr Oswald, pp.295-296]. The 900m radius circle covers a larger area than the Knight Frank plan. The combined Whitfield and Longhaugh wards cover a still larger area.

[374 ] In his report, Mr Oswald stated:

"The catchment beyond one minute's drive time from the centre is not an appropriate consideration for a small centre such as this with a small, low spending catchment population. A centre with this catchment will provide daily convenience, as 'basket' shopping only, with the larger weekly shop and durable shopping travelling to the larger superstores on Kingsway, or to the city centre" [67/2a, para. 5.2.4.1].

In his evidence, Mr Oswald accepted that the majority of shoppers using the Centre would go there on foot. He rejected the suggestion however that the appropriate catchment would be defined by a 5 minute walk. He pointed out that there are numerous facilities adjacent to the Centre, including schools, a health centre and a library. The catchment of the schools, for example, would be much larger than a 5 minute walk, and the children, and parents taking or collecting them, were potential customers of the shops in the Centre [Mr Oswald, pp.301-304]. As the location of the principal local facilities of a community, rather than simply a group of shops, the Centre would have a catchment extending beyond a five minute walk [pp.661-662]. That evidence appears to me to make sense: parents will go to the primary schools to deliver and collect their children, and teachers and other staff will work in those schools; doctors, nurses and other staff will work at the health centre, and patients will go there; the community centre will attract people who wish to take part in activities there; the Labour Club will attract people who wish to socialise there; the library will attract people who wish to borrow or consult books, or to use its internet facilities; the churches and their ancillary buildings will attract people who take part in the various activities held there; tenants will go to the housing office to pay their rent and to request the carrying out of repairs; and the social work department offices, the police station, the chemist's, the post office and the bookmaker's can also be expected, in their different ways, to attract people from beyond the immediate vicinity, both as staff and as users of the facilities offered.

[375 ] Under cross-examination, Mr Oswald's considered position was that the most useful of the plans was the one showing the 900m radius circle: that represented a walking distance of 10 to 15 minutes [pp.753, 888], which was realistic. Given that that plan produced a population figure of 9,320 as at 2001, and the population of the two relevant wards was about 9,500 as at the same date, he considered that his original estimate of a catchment population of 7,500 remained realistic. I note that Mr Hermiston's evidence was that a 5 minute walk equated to a distance of about 440 yards [67/4A, para.2.04], which would confirm that 900m represented a walking distance of slightly over 10 minutes.

[376 ] In assessing the catchment, Mr Oswald had regard to the competing facilities at the Longhaugh Neighbourhood Centre (including the Somerfield supermarket there) and at Asda in Milton of Craigie Road. He did not mention in his report the smaller shops in Whitfield and Fintry: in his evidence, he explained that he would not regard shops of that kind as competing with a supermarket in a small shopping centre [Mr Oswald, p.354]. Although he accepted that someone wishing to buy a newspaper would go to a corner shop if it were closer than the Centre, he considered that anyone doing a convenience shop would be more likely to go to a supermarket because of the wider range of goods on offer. In his opinion, a supermarket at the Centre would occupy a position in the market somewhere between the corner shop on the one hand and Asda on the other [Mr Oswald, p.359]. The defenders operated supermarkets of the kind Mr Oswald was envisaging at similar locations elsewhere in Scotland [pp.656, 763-764, 772-773].

[377 ] Mr Oswald's evidence as to the size of the catchment is supported by the evidence of shopkeepers in the Centre (Mrs Neil, supra, para.227; Mrs Majola, supra, para.228; and Mr Hussein, supra, paras.231 and 242), by that of Mr Dallas (supra, para.223) and by that of Mrs Canter, a local resident (supra, para.226). I therefore accept that the catchment of the Centre, even without a trading supermarket, extends beyond a 5 minute walk. Both the Cousins Stephens Associates report in 1990 (supra, para.24) and the George Street Research Ltd report in 2002 (supra, para.235), provide some support for the view that a 10 minute walk might be regarded as a realistic catchment for the Centre. That view is given clearer and stronger support by the evidence of the shopkeepers (supra, paras.227, 228, 231 and 242), Mr Thomson (supra, para.33), Mr Luke (supra, para.221: as previously mentioned, he was cross-examined by the solicitor advocate for the defenders and third party on the basis that the Centre served an area defined by a 10 minute walk), Mrs Canter (supra, para.226), Mr McCluskey (supra, para.246) and Mr MacLean (supra, para.275). It also appears to me to be consistent with the relatively low level of car ownership, and the consequent willingness of local residents to walk relatively long distances (e.g. as described by Mr Thomson, supra, para.24; and by Mr Dallas, supra, para.225) in order to do shopping. The resultant population figure can only be estimated, on the evidence: it is "over 5,000" (according to Mr Robeson), but less than 9,500 (i.e. the combined populations of the Whitfield and Longhaugh wards). Mr Oswald's estimate of 7,500 appears to me to be not unreasonable: it does not, in any event, appear to be so far out as to undermine his valuation, bearing in mind that a valuation does not depend on a precise knowledge of the catchment population. In that regard, I note that the only question put to Mr Oswald in cross-examination was as to how his valuation would be affected if the population was not 7,500 but closer to 3,000; Mr Oswald's response being that he would have to give that some thought [pp.663-664]. I note that the Graham & Sibbald report stated that the catchment of a neighbourhood centre was generally between 2,500 and 10,000 (supra, para.41), and that Mr Lythgoe gave evidence that a neighbourhood centre typically served a catchment of 2,000 to 3,000 or above [p.17]. There is nothing in the evidence which implies that where the population might lie within a range between "over 5,000" and 9,500 would be of critical importance.

"As is" valuation
[378 ] The starting point of Mr Oswald's "as is" valuation was the passing rents, which he assumed would continue at their current level until the expiry of the lease in question. Although in each case there would be a rent review prior to the expiry of the lease, he assumed that the rent would not change. That was because the reviews were upward only; and, in his opinion, there was no basis for an increase in the rent. For reasons which are discussed below, I am doubtful whether that approach, so far as the Premises are concerned, is consistent with Mr Oswald's approach to valuation on the hypothesis that the supermarket had continued trading.

[379 ] On the expiry of the existing leases, Mr Oswald assumed that the units in question would be unlet for a period of 36 months, and would then let at their ERV. He assumed ERVs which, in each case other than that of the Esso site (where his ERV was the same as the passing rent, i.e. £900 per annum), were less than the passing rent: in some cases, much less. For example, he assumed that the public house (with a passing rent of £15,000 per annum) would not re-let, and that its ERV was therefore nil; that the units currently let to Mrs Mussrat Begum, Moss Chemists, Ladbrokes and Mr Ng would each re-let at an ERV of £3,000 per annum, substantially below the passing rents of between £5,250 and £6,500 per annum; and that the Premises would re-let at an ERV of £15,000 per annum, compared with the passing rent of £20,000 per annum. In the light of the evidence (including the evidence of the other expert valuation witnesses, which I discuss below), some of these assumptions appear to me to be arguably pessimistic. I accept Mr Oswald's general point that the hypothetical purchaser, particularly in circumstances where the supermarket was not trading, would adopt a cautious approach to valuation. Nevertheless, the evidence does not in my opinion establish that the existing tenants of the smaller units are unlikely to renew their leases: in that regard, the evidence of Mr Nisbet [p.137] appears to me to be more likely to be correct, having regard to the history of the Centre. Nor does the evidence, including the correspondence relating to the rent reviews of the units in question, appear to me to establish that the ERVs of those units are substantially below the passing rents: again, Mr Nisbet's evidence [p.178] appears to me to be more likely to be correct. For reasons which are discussed below, I am not convinced that the public house has an ERV of nil, or that that assumption is consistent with Mr Oswald's treatment of the public house in his "supermarket trading" valuation. I agree in that respect with Mr Nisbet [pp.176-177] and Mr Hermiston [67/3, para.5.16]. That assumption however makes only a minor difference to the overall valuation, as the nil ERV does not affect the rent assumed to be received until 2036, and receipts so far in the future are heavily discounted in the calculation of value. Similarly, although the assumption that the Premises would re-let after three years appears to me, as to Mr Hermiston [pp.210-211], to be possibly optimistic, it makes little difference to the valuation, the income stream being so far in the future that it is heavily discounted.

[380 ] In relation to the seven units which are currently unlet, Mr Oswald assumed that five of them would remain permanently void, and that the remaining two would be let after 36 months (from the date of the valuation, i.e. 20 May 2005) at ERVs of £5,000 per annum. That assumption appears to me to be arguably optimistic, given that there have been seven unlet units since 2003, and given also that there appears from the evidence to be no prospect of their letting in the foreseeable future.

[381 ] Considering the rental assumptions in the round, however, they appear to me to be realistic. On the one hand, the assumption that two of the current voids will be let from 2008 at rents totalling £10,000 is in my view optimistic, for the reasons I have explained. That assumption adds £39,014 to the gross valuation, if all other figures remain unchanged [67/398, pp.6-7: instead of each unit having the negative value of £13,795 which it would have if it were to be void in perpetuity, it has a positive value of £5,712. The effect on the value is therefore £19,507 in respect of each unit]. On the other hand, the assumption that the six small units currently let, at rents totalling £34,500 per annum, will lie empty for three years (the void periods occurring at different times between 2009 and 2022) and will then re-let for a total of £22,000 per annum, is in my view pessimistic, as I have explained. I agree in that respect with Mr Nisbet [pp.161, 181]. That assumption reduces the gross valuation by £33,324 if all other figures remain unchanged [67/398, pp.5-7: £2,556 for unit 111 (i.e. £26,008 - £23,452: the former figure is the value of £5,500 per annum in perpetuity, at a yield of 16 per cent; the latter figure is the result of making deductions in respect of the three year void and the re-letting at £3,000 per annum), £5,368 for unit 114 (by a similar process of reasoning), £5,368 for unit 115, £10,596 for unit 120, £3,362 for unit 121 and £6,074 for unit 124]. The assumption that the public house will never re-let also appears to me to be somewhat pessimistic, notwithstanding that it has been unoccupied for virtually the whole of the period since 1992 and does not have a licence. That assumption reduces the gross valuation by £2,738, assuming all other figures remain unchanged [67/398, p.5]. The assumption that the Premises will remain unlet for three years on the expiry of the current lease and will then be let at a low rent, designed to attract a tenant, appears to me to be not unrealistic: the income stream on re-letting is in any event so far in the future as to be of relatively little significance to the valuation. The re-letting adds £1,846 to the valuation, assuming all other figures remain unchanged [67/398, p.6]. Overall, therefore, insofar as these assumptions made by Mr Oswald might be disputed, they largely cancel one another out.

[382 ] In relation to yields, Mr Oswald distinguished between the good covenants (Bass, Moss Chemists, Ladbrokes, the defenders, Martin Retail and Esso) and the local covenants (the remaining tenants). He applied a capitalisation yield of 14 per cent to the former, and 16 per cent to the latter. In arriving at these yields, he took the view that the only directly comparable subjects were Sighthill Shopping Centre in Glasgow. He adjusted the 11 per cent yield of Sighthill to reflect the fact that the Centre was in his view "over-rented": in other words, the passing rents were above the ERVs. As I have explained, I am not convinced that the ERVs were as far below the passing rents (£50,900, compared with £70,400) as Mr Oswald maintained. He adjusted the yields of the other comparison subjects which he took into account (Bargarran Shopping Centre, Erskine; Arran Mall, Ayr; Camperdown Road, Dundee; Preston Links, Prestonpans; Barlanark; Campfield Square, Broughty Ferry; Orleans Place, Dundee; Craigshill Shopping Centre, Livingston; Maggieswood Loan, Falkirk; and Calderwood Shopping Centre, East Kilbride) to a greater extent, to reflect the greater risk involved in acquiring an investment without a trading anchor store. He also adjusted the yields slightly to reflect the management problems and costs (e.g. in respect of vandalism) resulting from the defenders' failure to pay security charges.

[383 ] Mr Oswald then used the "hard core" method of valuation [Mr Oswald, p.155] to calculate the value of the Centre, on the basis of the assumptions just discussed in respect of rentals, voids and yields. Although the details of Mr Oswald's method were somewhat different, this is essentially a similar method to that used by Richard Ellis and by Mr Lythgoe for their valuations in 1998 and 2003, discussed earlier (supra, paras.149-154 and 190-193). In general terms, it involves calculating the present value of the future income stream, on the assumption that the passing rents continue to be received until the interest being valued comes to an end, and then making adjustments to reflect changes in the income stream during that period.

[384 ] Following that approach, Mr Oswald calculated the capital value of the "good covenant" units as a whole at £262,504 (a figure effectively produced by dividing a current net rent of £40,494 by 14 per cent, and making relatively minor adjustments to reflect future changes in rental), and the capital value of the "local covenant" units at £81,289 (a figure effectively produced by dividing a current net rent of £8,706 by 16 per cent, and again making adjustments to reflect future changes in rental), producing a total of £343,793. He then deducted the stamp duty, legal fees and agents' fees which would be payable on a sale at that figure, in order to arrive at a net value of £328,203, which he rounded to £330,000.

[385 ] That figure might be expected to be on the low side, if the capitalisation yields adopted by Mr Oswald were excessively high, as they appear to me to be. That can be illustrated by the initial yield produced by Mr Oswald's valuation. This was calculated by Mr Oswald at 14.24 per cent, on the basis that that was the figure produced by calculating the net rent as a percentage of a deemed purchase at a total cost of £345,590 (i.e. £330,000 plus costs of purchase). Such a yield is significantly higher than those of the closest comparisons (e.g. Camperdown Road, Sighthill and Barlanark), particularly when account is taken of the extent to which the rental income of the Centre comes from good covenant leases with long unexpired terms. Mr Oswald's explanation, that the Centre is over-rented by a factor of 38 per cent (the factor by which the passing rents exceed his ERVs), does not appear to me to be convincing: almost all the passing rents have been fixed either by arbitration (in the case of the Premises) or by negotiation with professional advisers (in the case of Moss, Ladbrokes and Martin Retail), or are broadly in line with rents so fixed (in the case of Mrs Mussrat Begum, Mr Mohammed and Mr Ahmed); and I am particularly doubtful whether the rent fixed by Mr Merry was in excess of the rental value, for reasons I have explained, although I accept that the ERV in 2033 might be lower. The fact that the yield is significantly above that of the closest comparisons, and that the difference has not in my view been convincingly explained, suggests that the valuation is too low. In that regard, I note that the rough calculation in the preceding paragraph (£40,494 divided by 14 per cent, plus £8,706 divided by 16 per cent) provides a figure of £343,656, which is almost exactly Mr Oswald's figure before purchaser's costs are deducted. If one performed the same calculation, using yields of 12 and 14 per cent (which would be closer to the Sighthill figure), the resultant figure would be £399,636, or £380,653 after the deduction of purchaser's costs at 4.75 per cent [Mr Nisbet, p.303]. That is simply a calculation, not a valuation: but it gives one some idea of how a reduction in the capitalisation yields would affect the figures. I also note that if one made similar assumptions about the ERV of the Premises during the currency of the Sub-Lease as under the "supermarket trading" scenario (as appears to me to be correct in principle, for the reasons discussed below), and left all the other assumptions unchanged, then the valuation would increase substantially.

[351 ] My own conclusion as to value, based on an assessment of the evidence as a whole, is discussed below.

"Supermarket trading" valuation
[386 ] In his "supermarket trading" valuation, Mr Oswald proceeded on the view that the closure of the supermarket at the Premises had severely blighted the investment value of the Centre: it had in his opinion resulted in shops not being let, rent reviews not being secured at the levels they might have been, and the likelihood that the bulk of the Centre was now unlettable unless the Premises were to become occupied again. This opinion was based partly on the documentary evidence about the marketing of units at the Centre, and rent reviews, since the Premises closed. I accept that that evidence, and the oral evidence of those involved (notably Mr Clapham, Mr Letley, Mr Watt, Mr Reid, Mr De Vos and Mr McCluskey), together with the evidence to which I shall refer shortly, relating to the "anchor" role of the supermarket at the Premises, supports Mr Oswald's view, although a judgment has to be made about the extent of the effect of the closure of the Premises on lettings, rent reviews and capital value. In other words, I accept that the closure has resulted in shops not being let, but there remains a difficult question: how many? I accept that rent reviews have not been secured at the levels that could otherwise have been expected; but there remains the question, what would that level have been? I accept that the investment value of the Centre has therefore been blighted; but it remains difficult to put a figure on the extent of the blight.

[387 ] Mr Oswald's opinion was also based partly on the view that a shopping centre, whether an enclosed mall or a local neighbourhood centre such as the Centre, generally requires a trading anchor store in order to operate successfully. A great deal of evidence was directed to the question whether that was a correct proposition; and whether, in particular, certain of the comparison subjects had anchor stores. It is clear that it is not a universal truth. Leaving purpose-built shopping centres aside for a moment, there is no doubt that shopping parades and high streets can function successfully without any identifiable anchor store, as Mr Oswald and Mr Lythgoe [pp.376-377] readily accepted: the congregation of a large number of small shops in a traditional shopping location in itself acts as an attraction to shoppers. The comparison subjects which traded successfully without having any large anchor store within the subjects or in close proximity, but with only a convenience store equivalent to a double unit in the Centre (e.g. the Bargarran Shopping Centre in Erskine, the Hallhill Road parade in Barlanark, and the Maggieswood Loan Centre in Falkirk), presumably depend also on the co-location of numerous small shops to act in itself as an attraction. In their particular locations (in Erskine, an affluent residential area with a high level of car ownership; in Barlanark, a main road through a housing scheme; in Falkirk, a site on a main road in a large residential area, next to a large hospital), these centres operate successfully without a large anchor store. To judge from the comparisons, however, that is not the usual situation: most of the shopping centres include relatively large supermarkets (or, in the case of the Arran Mall in Ayr, a large furniture store), or have large supermarkets in close proximity.

[388 ] It is readily understandable that the importance of an anchor store may depend on the circumstances; and, in a relatively difficult trading location, such as Whitfield, the importance of an anchor store trading may be greater than in a location where trading is easier. It is also readily understandable that, where a shopping centre has been designed with a very large unit (relative to the size of the centre as a whole), intended for occupation by a single trader, the non-occupation of that unit will affect the appearance and atmosphere of the centre, and hence its attractiveness to shoppers and to other traders (as Mr Oswald and Mr Nisbet in particular explained), to a much greater extent than the non-occupation of one of the smaller units.

[389 ] I also note in this connection Mr Robeson's evidence that, as a matter of economic theory, co-location of retailers, by concentrating them in one location, attracts more consumers than the retailers would individually attract, unless the attraction of the concentration of retailers is outweighed by the cost of travelling to the location in question [pp.123-124]. As Mr Robeson observed, markets have operated on that basis since at least the Middle Ages. Such co-location was critical to comparison goods retailers, and their location was usually anchored by a department store. Food stores could also act as anchors. Mr Robeson however rejected the possibility that a supermarket could have an anchor role in the context of Whitfield, on the basis that customers would not be attracted to a location by the concentration of retailers who sold day-to-day necessities of a standard nature [p.129]. I had some difficulty understanding the logic of Mr Robeson's position. Even in the case of day-to-day necessities, one might have thought that the co-location of a supermarket, a chemist's, an off-licence, a bookmaker's, a supermarket, a newsagent's, a post office, a take-away, and perhaps a hairdresser's and a launderette (to use two other examples given by Mr Robeson) [p.134], together with other local services (which Mr Robeson acknowledged were important) [p.144] such as schools, the health centre and the library, would act as an attraction to customers on the basis of convenience. Indeed, the evidence of the comparisons suggests that shopping parades and small shopping centres commonly operate on that basis.

[390 ] In my opinion, the evidence demonstrates that the Premises were always intended to act as the anchor of the Centre, and that they have in fact acted in that way whenever a supermarket has been trading there. It is apparent from the evidence of the valuation experts, such as Mr Oswald and Mr Lythgoe, that the reason for having a keep-open clause in the Sub-Lease will have been to ensure that the Premises traded as a supermarket and thereby "anchored" the Centre as a whole, providing the footfall which would support other traders there, and thereby underpinning the rental value of the Centre. It is also apparent from the evidence of the same witnesses that the tenant of the Premises could expect to pay a lower rent, as a quid pro quo; and Mr Merry's determination of the 1998 rent review proceeded on the basis that the presence of the keep-open clause was a factor tending to reduce the rental value of the Premises. A body of evidence supports the view that, in the past, business in the Centre generally declined when the Premises were closed, but picked up again when the Premises re-opened (supra, paras.27, 33, 54, 97, 166, 219, 226 and 240). SET in 1992 described the supermarket at the Premises as "an anchor for the smaller shops", and its loss as "particularly damaging" (supra, para.32). Mr Thomson, whose evidence I accept, said that Land Securities considered the supermarket to be the anchor tenant: its closure caused concern to the other tenants, and would have increased the difficulty of letting vacant units (supra, para.33). Graham & Sibbald in 1993, in what might be regarded as a somewhat jaundiced report on the Centre, envisaged that it should be anchored by a supermarket and a freezer shop formed out of the Premises (supra, para.45). In 1994, the agents selling the Centre considered it to be much improved with the opening of Shoprite (supra, para.62). Mr Clapham, an experienced and successful investor in commercial properties, considered in 1994 that Shoprite's trading would improve the trading prospects of other units and increase their rental values (supra, para.62). The importance, to the tenants and potential tenants of the smaller units, of the presence of a trading supermarket at the Premises appears to me to be clear from the significance attached to that factor by Capital Foods (supra, paras.79 and 102), by Mr Crichton of J Trevor & Webster (supra, paras.102 and 104), seemingly by SET (supra, para.104), and by Your More Stores (supra, para.162). It is also clear from the evidence of Mr Watt (supra, para.163), Mr McCluskey (supra, para.165), Mr Letley (supra, paras.166 and 190), Mr Reid (supra, para.245) and Mr De Vos (supra, paras.190 and 247). It is also reflected in the significance attached to the closure of the Premises by the existing tenants of the smaller units in their rent review negotiations (supra, paras.112, 114 and 115), and by the shopkeepers in their evidence (supra, paras.238-240). Local residents and their representatives appear also to regard a supermarket as vital to the success of the Centre (supra, paras.215-218, 225). Mr Allison, an entirely independent valuer reporting in 1997, similarly commented that "it has obviously not been beneficial to the centre as a whole that this unit lies empty" (supra, para.120). The same view was expressed by Mr McCluskey in 1998 (supra, para.141). Mr Merry, in his determination of the 1998 rent review, stated that it was accepted that "this is a neighbourhood shopping development and the disappearance from its curtilage of an 'anchor' food tenant would be detrimental to the viability of the scheme as a whole" (supra, para.168). In the context in which that statement was made, it appears that the proposition was "accepted" by Mr Young, an experienced valuer who was then acting for the defenders. It also appears that Mr Merry agreed with the description of the Premises as an "anchor" store, since he referred to their similarity to certain comparisons "in terms of being 'anchor' stores for shopping centres" (ibid). Mr Brown, who was an entirely independent witness, and was the Council official with primary responsibility for retail planning policy, also gave evidence that if a supermarket were trading at the Centre, it would operate as a "magnet" store, i.e. as one which would benefit the other shops within the Centre by providing spin-off sales (supra, para.248). I accept that evidence.

[391 ] I also note that, apart from the significance of an anchor tenant in what might be described as shopping theory, there is a convincing body of evidence in the present case to the effect that the Premises occupy such a dominant position in the Centre, by reason of their size and their location facing the entrance, that their closure has in any event had a severely depressing effect on the attractiveness of the Centre to tenants and shoppers; and it would be reasonable to expect that that depressing effect would be reflected in footfall numbers, trading levels and rentals. I refer, for example, to the evidence of Mr Letley (supra, para.97), Mr McCluskey (supra, para.141), Mr Watt (supra, para.163) and Mrs Majola (supra, para.228). Mr McCluskey also explained that the layout of the Centre as a whole was designed to take advantage of the "magnet" effect of the Premises (supra, para.141).

[392 ] My finding that the supermarket at the Centre is the anchor store in the development, and as such is essential to the successful operation of the Centre, attracting footfall to the Centre for the benefit of the traders occupying the other unit shops there, is fundamental to my assessment of the evidence of the expert valuation witnesses, and to my assessment of damages. It is in large measure because Mr Oswald's and Mr Lythgoe's "supermarket trading" valuations proceed on that basis, and Mr Nesbit's and Mr Hermiston's do not, that I accept the general thrust of the former (although there remain questions of degree), and reject that of the latter; and, in addition, because Mr Oswald's and Mr Lythgoe's valuations appear to me to be based on a broadly accurate understanding of the catchment, whereas Mr Nisbet's and Mr Hermiston's do not (as explained previously: supra, para.377). This conclusion is based on my acceptance of a substantial body of factual evidence given by witnesses with experience of the Centre from a variety of perspectives over a long period of time, including the local community support officer, local traders, present and former personnel of the managing agents, the property manager of the pursuers' predecessors in title, the chartered surveyor who represented the pursuers in the 1998 rent review, the local authority's senior retail planning officer, and the agent who marketed the unit shops on behalf of the pursuers. That evidence, together with the documentary productions, appears to me to establish that the supermarket functioned as an anchor store during those periods of time when it was open and trading in compliance with the keep-open obligation; that as a result of the footfall generated by the anchor, there was a beneficial effect on the other shops; and that, in consequence of the closure of the supermarket, the Centre has become quieter and the number of vacancies has increased. The connection between the presence of an open and trading supermarket and interest from prospective tenants in the vacant unit shops also appears to demonstrate the anchor effect in operation. The evidence of Mr Nisbet, Mr Hermiston and Mr Robeson as to the lack of any anchor effect, and the consequent irrelevance, or virtual irrelevance, of the supermarket to the value of the remainder of the Centre, is inconsistent with that body of factual evidence, and therefore proceeds on a premise which I am satisfied is incorrect.

[393 ] In his "supermarket trading" valuation, Mr Oswald therefore proceeded on the view that if a supermarket had continued trading from the Premises, more units would have been let, and higher rents would generally have been received. In the case of the public house, he assumed that the passing rent and ERV, if the supermarket had been trading, would have been £17,500 per annum. In the case of the Premises, he assumed that the passing rent would have been the same as the actual passing rent, i.e. £20,000 per annum, but that that figure would have increased to an ERV of £46,000 at the next rent review. In that regard, Mr Oswald said that the bulk of the defenders' argument before Mr Merry had centred on their unsuccessful attempts to market the unit:

"Without that supporting evidence, it is my view that an Arbiter, even taking a cautious approach, will have arrived at a figure of no less than £46,000 per annum. This is after all only £5.00 per sq ft, and probably the lowest level in the country. It is derived from rental evidence of other discount supermarkets" [67/2a, para 6.2.1].

In the case of the Esso site, Mr Oswald assumed that the passing rent and the ERV would have been the same as the actual passing rent.

[394 ] In the case of the smaller units, Mr Oswald assumed that there would have been two permanent voids, and that two units would have been occupied as a double unit. He assumed that the passing rents of the let units, and the ERVs, would have been £8,000 per annum, with the exception of the double unit: in relation to the latter, he assumed a passing rent of £5,500 per annum, and an ERV of £14,000 per annum. The £8,000 figure was said to be based on the rental evidence (i.e. the rental comparisons mentioned supra, at paras.352-355), and evidence from the Centre itself [pp.23, 29, 116-117].

[395 ] Finally, in the case of all units (other than the two which were assumed to have been permanent voids), Mr Oswald assumed 36 month voids on the expiry of leases (the same assumption as he had made in carrying out the "as is" valuation).

[396 ] So far as the Premises are concerned, I accept that Mr Merry, in fixing the reviewed rent in 1998 at £20,000 per annum, was influenced by the number of voids, and that that was to some extent a reflection of the fact that the Premises had been closed for some years. I am also satisfied that he was primarily influenced by the lack of success of the marketing of the Premises; and I accept, particularly on the basis of the evidence of Mr Oswald [e.g. at pp.574-575] and Mr Lythgoe [e.g. at pp.887-888], that the defenders' breach of their obligations made the marketing of the Premises more difficult than it would have been if the supermarket had remained open and trading (essentially because the supermarket, lying empty in breach of the keep-open clause, was vandalised to such an extent as to be reduced to what both Mr Merry and Mr Oswald described as a shocking state, and it was then left unrepaired in breach of repairing obligations). Mr Merry also appears to have attached a significance to the surrender offers which the evidence in the present case would not support. It is also far from clear whether he was envisaging that a supermarket trading in compliance with the keep-open obligation would be operating as a supermarket normally does. I therefore accept that a rental figure in excess of £20,000 per annum might have been achieved if the supermarket had actually continued trading, notwithstanding that Mr Merry bore to have made his determination on that hypothesis; and I do not find his determination of much assistance in deciding what, on the assumption that the supermarket had continued trading, its rental value would have been.

[397 ] Looking at the matter afresh, on the basis that there had not been any breach of the keep-open clause, Mr Oswald's adopted rate of £5 per square foot would produce a rental value of £60,000 per annum. Mr Oswald discounted that figure to £46,000 to take account of the fact that part of the accommodation (the offices) was on an upper floor; to take account of the length of the lease, which was longer than would nowadays be customary; and to take account of the keep-open clause, which would have a depressing effect on the rent [pp.24, 173, 595, 759]. Mr Oswald explained that the £5 rate was very low, given that the current level of supermarket rents averaged £10 to £12 per square foot [p.461].

[398 ] Mr Oswald's starting point of £5 per square foot appears to me to be supported by the comparisons listed earlier (supra, paras.340-351). The Kwik Save in Castlemilk, for example, had a rental value in 2000 of £8 per square foot, but was half as large again as the Premises; and the Kwik Save in Airdrie, of similar size to the Premises, had a rental value in 2001 of £6.75 per square foot. The closest comparison would appear to have been the Kwik Save in Bathgate, which was poorly located, with a high degree of competition, and had poor loading access and poor car parking. Its rent was fixed with effect from August 2002 at £5.50 per square foot. The factors which Mr Oswald took into account, in discounting the rent from £60,000 to £46,000, appear to be appropriate (e.g. in the light of Mr Merry's evidence as to the effect on rental value of the length of the lease and the keep-open clause); and the extent of the discount (23 per cent) is substantial. In the circumstances, I am satisfied that Mr Oswald's figure is a reasonable estimate.

[399 ] That conclusion is also supported by the evidence of Mr Lythgoe (whom I found to be an impressive witness, as explained below) that in his opinion the rental value of the Premises in 1998, and as at the date of the proof, would have been considerably higher than £20,000 per annum [e.g. p.886]: as explained below, his estimate of the rental value, on the hypothesis that there had been no breach of the keep-open clause, was higher than Mr Oswald's.

[400 ] There appears to me however to be a difficulty involved in the adoption of dramatically different rents for the Premises, during the currency of the present lease, for the "as is" and "supermarket trading" valuations: in particular, an assumption for the former valuation that the rent remains at £20,000 per annum until the expiry of the Sub-Lease in 2033, compared with an assumption under the latter valuation that the rent would have increased to £46,000 per annum with effect from the 2012 rent review. At a rent review, the rent is to be determined (by arbitration, if need be) on the basis that the tenant has complied with his contractual obligations: in the present case, therefore, on the basis that the supermarket had contained to trade. If the rental value of the Premises in 2012 would have been £46,000 if the supermarket had continued trading in compliance with the keep-open clause, then in principle that should be the rental value of the Premises at that date as determined in accordance with the lease, even if the tenant has failed to comply with the keep-open clause. If a figure of £46,000 is to be adopted for the purposes of the "supermarket trading" valuation, therefore, it appears to me that a similar figure should in principle also be adopted for the "as is" valuation from the date of the next rent review. I acknowledge that, as a practical matter, it may be unrealistic to expect that an arbiter will be able to close his eyes to the reality of a depressed Centre with an empty and vandalised supermarket, and visualise the different state of affairs which would have existed if the supermarket had remained open and trading since 1995: Mr Merry's decision might be regarded as demonstrating as much. Nevertheless, the court cannot in my opinion assess damages on the assumption that the rent will not be reviewed in accordance with the terms of the lease.

[401 ] The implication is that, if it is assumed on the "supermarket trading" hypothesis that the rent of the Premises between 2012 and 2033 would have been £46,000 per annum, the same assumption should also be made in the "as is" valuation. The effect of making that assumption can be estimated by noting that, in the "as is" valuation of unit 120, an increase in rent received from September 2012 in perpetuity, at a yield of 14 per cent, is valued at 2.7216 years' purchase [67/398, p.7]. The number of years' purchase from April 2012 (when the rent of the Premises is due to be reviewed) would not be exactly the same, but would not be greatly different. The figure for an increase of £26,000 per annum (i.e. from £20,000 to £46,000) in perpetuity, valued at 2.7216 years' purchase, would be £70,762. From that figure it would be necessary to deduct the additional drop in rental of £26,000 from 2033 until 2036 (i.e. the three year void), which at Mr Oswald's figure of 0.1825 years' purchase would produce a figure of £4,745. The resultant increase in value, assuming all other figures remained unchanged, would be £66,017. In other words, the figures in Mr Oswald's "as is" valuation, in relation to the Premises [67/398, p.6], would be altered so as to look something like this:

Date	Gross income	Net income	Increase	Cap. Rate (%)	YP	Value
Current	20,000	13,361	13,361	14.00	7.1215	95,151
Apr 2012	46,000	39,361	26,000	14.00	2.7216	70,762
Apr 2033	0	-6,639	-46,000	14.00	0.1825	-8,395
Apr 2036	15,000	8,361	15,000	14.00	0.1231	1,846
						159,364

I should emphasise that this is not an exact calculation: for example, the net income, if the gross income were £46,000, might not be the figure used in the calculation (which I have derived by adding £26,000 to £13,361, the latter being Mr Oswald's figure for the net income derived from a gross income of £20,000); and the figure of 2.7216 years' purchase is, as I have explained, approximate. The only purpose of the calculation is to provide a rough idea of the difference which it would make to the "as is" valuation if the rent of the Premises were assumed to increase to £46,000 at the next rent review.

[402 ] So far as the public house is concerned, I am not satisfied that whether a supermarket was trading or not would have made such an impact on the public house as to increase its ERV from nil (i.e. an assumption that it is unlettable and therefore worthless) to £17,500 per annum. I agree in that respect with Mr Hermiston [67/3, para.5.16]. For a public house in a Scottish city (even in a peripheral housing scheme) to lie empty for many years is an unusual situation; and the history of the public house suggests serious operating problems (supra, paras.18, 35, 58 and 183), which have no direct connection with the absence of a supermarket from the Premises. The difference between Mr Oswald's valuations of the public house in the two scenarios (£104,084 compared with £166,747) results however principally from the adoption of a lower yield in the "supermarket trading" scenario, and a passing rent of £17,500 per annum rather than £15,000 per annum. The aspect which appears to me to be questionable - the difference in the assumption as to rental value after 2033 - appears to make little difference to the valuation, because the income lies so far in the future that it is heavily discounted.

[403 ] The assumption that eleven out of the thirteen smaller units would have been let, if the supermarket had continued trading, also appears to me to be optimistic. I am satisfied that, if the supermarket had continued trading, there would have been fewer than the number of voids which have actually existed (ranging from four to eight, with seven voids since 2003: supra, para.197). That conclusion is supported by a number of strands in the evidence, including the evidence of the level of interest in units at the time the supermarket closed, and the disappearance of that interest after the closure and apparently as a result of the closure; the evidence of numerous subsequent expressions of interest which were not followed through, and of the difficulties which the closed supermarket would cause to prospective tenants seeking financial support; the evidence of the connection in the past between the open or closed state of the Premises and footfall in the Centre; the evidence of current tenants of the smaller units as to the impact of the closure of the Premises on trade; and the evidence of witnesses such as Mr Oswald [as at pp.600-601] as to their experience of other shopping centres in other housing schemes, and the apparent impact of supermarkets there on footfall. It is also supported by the evidence that a supermarket at the Premises would "anchor" the Centre, which was summarised previously (supra, paras.390-392). I also accept the evidence of Mr Robeson and Mr Nisbet as to the off-putting effect which the closed state of the supermarket would have on prospective tenants and investors, and on those to whom they would look for financial support (supra, para.295; infra, para.501). I am acutely aware of the fact that the pursuers did not lead evidence from any tenant who had left the Centre, or from any prospective tenant who had decided against taking a tenancy of a unit in the Centre (neither did the defenders and third party; but the onus of proof lies on the pursuers). In those circumstances, I have considered with care whether the evidence led justifies a finding that the closure of the supermarket has resulted in an increased number of voids. I have come to the conclusion that it does: the evidence to that effect, considered as a whole, appears to me to be substantial and reliable. I refer in that regard to the evidence just mentioned, and to the evidence discussed below.

[404 ] I am not however satisfied that an additional five units would have been permanently let: I am persuaded by the evidence of Mr Nisbet, Mr Hermiston and Mr Robeson that the degree to which the Centre is larger than the catchment can reasonably be expected to support is greater than Mr Oswald had allowed, although not as great as Mr Nisbet, Mr Hermiston and Mr Robeson claimed.

[405 ] The evidence about the interest of Capital Foods in two units at the time of the closure of the supermarket (supra, paras.79-83), and the disappearance of that interest after the closure and apparently as a consequence of the closure (supra, paras.101-102 and 105), appears to me, on a balance of probabilities, to justify an inference that, but for the closure, an additional two units (units 112 and 113) would probably have been let during 1995. In that regard, I bear in mind the non-committal tone of Mr McNab's letter in December 2004 (supra, para.79), and the absence of evidence from anyone directly involved, other than Mr Clapham (although at least one of the two other people principally involved had died: supra, para.106). It appears however that the points on which Capital Foods wished to be satisfied - other than the continued trading of the supermarket - would all have been satisfied (supra, para.79), and that they were keen to proceed (supra, para.82). It is also clear that the pursuers were convinced that there were good prospects of the units being taken (supra, paras.80 and 83). The serious interest expressed at that time in unit 122 by Mr Ashad (supra, para.81), and the interest of Global Video (supra, para.82) and Victoria Wine (supra, paras.82 and 104), strengthen my conclusion that an assumption that an additional two units would have been let during 1995 and would have been paying rent by the end of that year is reasonable. It also appears to be reasonable to conclude, on the basis of the evidence concerning Capital Foods trading elsewhere, and the taking over of their units by Farmfoods and Iceland (supra, para.106), that those two units would probably have remained let.

[406 ] Interest was expressed in about 1999 by the Misses Minns (in unit 119, as a cafe), Ms Walker (in unit 118, as a hairdresser's), Mr Mohammed (in unit 122, as a hot food outlet), Mr Brown (in unit 123, as a video rental shop), Mr Robertson (in unit 123, as a clothing outlet), Mrs Qureshi (in unit 124, as a hot food outlet), Mr Wong (in operating a Chinese takeaway), Dr Raj (in unit 113, as a medical practice), Mr Beattie (in unit 124, as a bakery), Your More Store (in units 122, 123 and 124, as a clothing store). Other interests were expressed later (supra, paras.155-157, 161-163, 184 and 189). In the event, only units 118, 119 and 124 were in fact let, and the first two of those failed to trade successfully. I accept, on the evidence, that this lack of success was probably attributable to the effects of the continued closure of the Premises on footfall and on the appearance of the Centre. I am therefore prepared to accept that, but for the closure, those units would probably have remained let as at the date of valuation. That conclusion is fortified by the level of interest shown in units for other uses not requiring exceptional trading hours, by Mr Robertson, Dr Raj, Mr Beattie and Your More Store. I also accept, on the basis of the evidence of Mr Letley in particular (supra, para.166), that if the supermarket had continued trading and the Centre had consequently been more attractive to potential tenants, the pursuers would have enforced leases against tenants who defaulted on rent. I also accept, on the basis of the evidence as to the effect of a trading supermarket on the Centre, that if the supermarket had continued trading, void periods on the expiry of leases would have been likely to have been shorter than they sometimes were.

[407 ] Beyond that, however, I am not satisfied that the continued trading of the supermarket would, on a balance of probabilities, have resulted in the letting of additional units. In particular, I am not persuaded that the letting of a unit as a hot food outlet or a video rental shop is closely connected to the trading or otherwise of a supermarket. Those traders who were interested in operating a hot food outlet or a video rental shop all expressed interest in units outside the covered part of the Centre, where the trading hours would not be restricted by the opening hours of the Centre. Such outlets can expect to do a large part of their business in the evenings, when all but the largest or busiest supermarkets will be closed. I accept in that respect the evidence of Mr Nisbet [p.184]. A letting to an operation of that kind was not achieved until 2000, when unit 124 was let to Mr Ng (Mr Gani having expressed interest in the same unit at about the same time for a similar use: supra, para.184). I am not convinced that such a letting, or more such lettings, would have been achieved earlier if the supermarket had been trading.

[408 ] My conclusion that there would probably have been two unlet units throughout the period from some point in 1995 until the refurbishment works, then four unlet units from 1998 (when the two additional units were built) until 2001 (when Mr Ng began paying rent), and three permanently unlet units thereafter (which can be taken to be units 117, 122 and 123), if the supermarket had continued trading, is not reached with anything approaching scientific certainty. It is a matter of overall impression on the evidence, bearing in mind that the onus of proof lies on the pursuers and that the standard of proof is on the balance of probabilities. I have been particularly influenced, in reaching this conclusion, by the evidence of Mr Watt (supra, para.163), Mr Reid (supra, paras.162 and 245), Mr Letley (supra, para.166), Mr De Vos (supra, para.247) and Mr McCluskey (supra, para.165). The effect of assuming a third unlet unit would be to reduce Mr Oswald's figure by about £75,000 (taking unit 122 to be the extra unlet unit) [67/398, p.20], on the assumption that all other figures remained unchanged.

[409 ] The ERV figure of £8,000 per annum for the smaller units as at 2005 (on the hypothesis that the supermarket had continued trading) appears to me to be not unrealistic. It is substantially below the rents of the comparison subjects at Highgate Shopping Centre and High Street, Lochee, and somewhat below the rents at Weaver's Village (supra, paras.353-355), all of which were smaller subjects, although located in what were (to varying degrees) superior locations. The £8,000 figure also appears to me to be supported by rental evidence from the Centre itself: in particular, the rents agreed in 1999 by Ms Walker and the Misses Minns (of £7,500 per annum) and in 2000 by Mr Ng (of £6,500 per annum, for a smaller unit), in a context where the supermarket was closed, but in which the tenants presumably expected their businesses to trade successfully. Those figures however also suggest that the passing rent of units let before 2005 was unlikely to be as high as £8,000: £7,000 per annum would appear to me to be a more realistic typical figure. The arguably optimistic nature of the assumptions as to the passing rent of the smaller units, as it appears to me, is however counter-balanced by Mr Oswald's treating units 111 and 112 as having a passing rent of £5,500 per annum in total until 2019, and an ERV of £14,000 per annum from 2022.

[410 ] In relation to yields, Mr Oswald distinguished between three categories of covenant: A1 (Bass, Ladbrokes, the defenders and Esso), good (Moss Chemists and Martin Retail), and local (the remaining tenants). He began by applying different yields to the different covenants, but then adjusted the resultant valuation downwards, as it appeared to him to be too high. The consequent valuation was equivalent to the application of a "blended yield" of 10.11 per cent to all the covenants. In assessing the yield, he had had regard to three of the comparisons in particular: Bargarran Shopping Centre, Erskine (7.87 per cent); Camperdown Road, Dundee (9.61 per cent); and Campfield Square, Broughty Ferry (6.11 per cent). Mr Oswald acknowledged that Bargarran Shopping Centre had a larger and more affluent catchment. Camperdown Road is a better comparison, so far as the A1 or good covenants are concerned (the subjects at Camperdown Road being a stand-alone retail warehouse tenanted by Kwik Save). As explained earlier (supra, para.318), this comparison has to be treated with caution; but, subject to that caveat, it would be reasonable to expect the yield for the A1 or good covenants at the Centre to be higher, to reflect the slightly poorer location. It would be reasonable to expect a "blended yield" to be higher again, to reflect the mixed quality of the tenant covenants. Campfield Square does not appear to me to be a useful comparison, for the reasons explained earlier (supra, para.324).

[411 ] In the light of the evidence regarding Camperdown Road, Mr Oswald's blended yield of 10.11 per cent appears to me to be on the low side (with the consequence that his capital value will be on the high side). The comparison evidence concerning Sighthill (11.38 per cent, for broadly comparable subjects, but with "marriage value" tending to depress the yield: supra, paras.320-321) and Barlanark (11.13 per cent, in a better location but with a lower-spending catchment, with more modern subjects fully let to local traders: supra, para.323), appears to me to support that conclusion. I note that my view that the yield was too low was shared by Mr Nisbet [pp.139, 141]. I am inclined to agree with his suggestion that 11 per cent would be more realistic.

[412 ] Mr Oswald applied his blended yield to the net rent. On the "supermarket trading" hypothesis, the net rent was slightly greater than the passing rent, which appears curious at first sight, but was explained by Mr Oswald [pp.872-873].

[413 ] Following the "hard core" approach, Mr Oswald calculated the capital value of the A1 covenants at £563,497 [67/398, p.10] (effectively, the result of dividing a net rent of £46,125 by 10.11 per cent, and adding about £126,000 in respect of the assumed increase in the rent of the Premises at the next rent review [67/398, p.17], with relatively minor adjustments to reflect other future changes in rental); the capital value of the good covenants at £135,748 [67/398, p.11] (effectively, the result of dividing a net rent of £15,756 by 10.11 per cent, and making some adjustments in respect of future changes in rental); and the capital value of the local covenants at £484,746 [67/398, p.12] (effectively, the result of dividing a net rent of £52,826 by 10.11 per cent and making adjustments to reflect future changes in rental). The total of these figures was calculated as £1,183,990. Mr Oswald then adjusted that figure to £1,111,990 to allow for future capital payments by the landlord which would not be recovered from the tenants. He then deducted the stamp duty, legal fees and agents' fees which would be payable on a sale at that figure, in order to arrive at a net value of £1,051,528, which he rounded to £1,050,000 [67/398, pp.12-13].

[414 ] For the reasons which I have explained (and in the light also of the other expert valuation evidence), that figure appears to me to be on the high side, reflecting the cumulative effect of a yield which is too low, and an optimistic assumption as to voids. I also note that the figure produces an initial yield of 10.33 per cent [67/398, p.14], which appears to me to be low relative to the comparisons, again suggesting that the valuation is too high. The figure is highly sensitive to changes in the assumptions concerning passing rents. The figure would be significantly reduced if one assumed three voids among the smaller units, rather than the two assumed by Mr Oswald, and if one adopted a yield of 11 per cent.

[415 ] I note that, reasoning a posteriori, if one were to apply an initial yield of 11 per cent to a net income of £106,830 (Mr Oswald's figure of £114,708, less the net income of £7,878 assumed for unit 122, in order to allow for an additional void) [67/398, pp.20 and 23], the resultant figure (arithmetically) would be £971,182 [i.e. £106,830 ÷ 0.11]. After allowing for acquisition costs at 5.75 per cent [Mr Nisbet, pp.300 and 302-303], the net figure would be £915, 339.

[416 ] Approaching the figures in a different way, if one were to adjust Mr Oswald's gross value of £1,183,990 to £1,109, 234 by deducting the value of £74,756 attributed to unit 122 [67/398, p.21], and were then to adjust that figure to assume a capitalisation yield of 11 per cent rather than 10.11 per cent, on the assumption that the value is inversely proportionate to the capitalisation yield (i.e. multiplying the figure by 10.11 and dividing by 11), the resultant figure would be £1,019,487. If one were then to make the same capital adjustments as Mr Oswald (by deducting £72,000) [67/398, p.13] and to deduct buyer's costs at 5.75 per cent (i.e. £54,481), the resultant net value would be £893,006.

[417 ] These calculations are not valuations, but merely arithmetic exercises: valuation involves an exercise of judgement, and is therefore inherently imprecise; and it also requires expertise, which the court does not possess. Nevertheless, the calculations are of some assistance to me in estimating what lower figure might be appropriate if Mr Oswald's valuation appeared to me, as it does, to proceed to some extent on overly optimistic assumptions. In particular, the calculations suggest that, if one were to take Mr Oswald's valuation as a starting point, but were to assume an additional void and a slightly higher yield, the resultant figure could be expected to be broadly in the region of £900,000.

Capital loss
[418 ] On the basis of his "as is" and "supermarket trading" valuations, Mr Oswald calculated the capital loss resulting from the closure of the supermarket as at 2005 as the difference between his two figures, i.e. £730,000 (£1,160,000 minus £330,000). For the reasons I have explained, that figure appears to me to be too high.

[419 ] Mr Oswald was asked in re-examination what difference it would have made to his figures if the refurbishment works had not been carried out. He responded that he would need to give the matter careful consideration. The "as is" and "supermarket trading" valuations would both have been somewhat lower, as the rents might have been lower and the yield might have been slightly weaker. He suspected that the difference between the two valuations would have been a similar amount to the difference between the figures for the refurbished Centre [pp.773-775].

Loss of rental income
[420 ] Mr Oswald calculated the losses which had accrued during the period between the date of closure of the Premises (i.e. 7 January 1995) and 1 January 2005 [67/2a, pp.21-23]. The first of these was the loss of rental income, resulting first from units being unlet, which would have been let if the supermarket had continued trading, and secondly from rent reviews being settled at a lower level than would have occurred if the supermarket had continued trading.

[421 ] In relation to the first of these heads, Mr Oswald noted that four units had been unlet at the date of closure of the supermarket. He assumed that, but for the closure, two of those units would have been let at £7,000 per annum within six months of the date of closure. On the basis that it would be usual for the leases to provide for a rent review after five years, and that such a review would have resulted in an uplift to £8,000 per annum, he calculated the loss under this head at £142,500 (of which £9,500 was attributable to the assumed uplift).

[422 ] I am satisfied that the assumption that an additional two units would have been let during 1995 if the supermarket had continued to trade, and would have remained let thereafter, is not unreasonable, for the reasons explained above. The assumption that the rent of those units would have been paid by July 1995 may however be optimistic, given the common practice (established in the evidence) of allowing rent holidays of several months to attract tenants, particularly where fitting-out is required. As assumption that the units would be producing rent after twelve months, rather than six, would in my view be more securely based.

[423 ] A rent of £6,000 per annum was agreed for unit 118 by a public authority, presumably with access to professional advice, early in 1994, after Shoprite had commenced trading (supra, para.59). The rent of unit 120 was agreed at £5,250 per annum with effect from September 1994, but it has to be borne in mind that the agreement was not reached until November 1996, when the Premises had lain empty for almost two years (supra, para.112). In the light of this evidence, it appears to me that if two units had been let in July 1995 on the basis that rent would be payable from January 1996, the rental value of each unit at that time would probably have been in the region of £6,000 per annum. If there had been a rent review five years later (in accordance with what appears to be the usual pattern), there would have been likely to have been some increase, in view of the refurbishment of the Centre (and bearing in mind that, even with the supermarket closed, there were in fact increases at rent reviews). An increase at the rent review to £7,000 per annum would be consistent with the rents agreed by Ms Walker, the Misses Minns and Mr Ng, as mentioned above (para.409).

[424 ] I note that, if one were to re-calculate Mr Oswald's figures, on the basis of a rental of £6,000 per annum rather than £7,000 per annum, and allowing for a twelve month interval rather than six months, but retaining his other assumptions (including an increase of £1,000 at the rent review), the resultant figure under this head would be £116,000 [i.e. (9 x 2 x 6000) + (4 x 2 x 1000)]. That would appear to me to be more securely based than Mr Oswald's figure.

[425 ] In relation to the second head of loss of rental income - the shortfall on rent reviews - Mr Oswald assumed that, if the supermarket had continued trading, all the small units which had rent reviews during the period when the supermarket was closed would have had their rents increased to £8,000 per annum. In particular, he assumed that the rent of unit 114 (Moss Chemists) would have been reviewed at June 2001 to £8,000 rather than £5,250 per annum; that the rent of unit 115 (Ladbrokes) would have been reviewed to the same level at the same date; that the rent of unit 120 (Martin Retail) would have been reviewed at September 1999 to £8,000 rather than £6,000 per annum; and that the rent of unit 121 (the newsagents) would have been reviewed at May 2001 (actually June 2001) to £8,000 rather than £6,000 per annum. Mr Oswald similarly assumed that the lettings of units 118, 119 and 124 (to Ms Walker, the Misses Minns and Mr Ng respectively) would have been at rentals of £8,000 per annum rather than the actual rentals, and that the uplift would have continued to be paid until April 2005 (rather than, as actually happened, units 118 and 119 ceasing to trade prior to that date). These calculations produced a total figure of £51,996. On the evidence, I am prepared to accept on a balance of probabilities that, if there had been no breach of the keep-open clause, the units in question would have continued to trade and to generate rent. Mr Oswald's figure nevertheless appears to me to be too high, since I am not persuaded that a rental figure of £8,000 per annum, as at 1999 or 2001, is realistic. If one were to assume instead a figure of £7,000 (or the actual rent, if above that figure), and re-calculate Mr Oswald's figures [67/2a, p.22] on that basis, the resultant total would be £24,665 [£6,562 for unit 114; £6,562 for unit 115; nil for unit 118; nil for unit 119; £5,500 for unit 120; £3,833 for unit 121; and £2,208 for unit 124].

Shortfall in recovery of costs
[426] The final head of loss calculated by Mr Oswald was the shortfall in recovery of service charges between January 1995 and January 2005. The pursuers incurred costs in managing the Centre, relating to such matters as external repairs, insurance, cleaning and security. These costs were in principle recoverable from the tenants of the units as service charges, on a pro rata basis. Insofar as units were unlet, the relevant service charges could not be recovered.

[427 ] Mr Oswald calculated this head of loss on the basis of the service charges actually incurred and the actual shortfall in their recovery from tenants. He then calculated, for each year, the fraction of that loss which was attributable to voids which would not have existed if the supermarket had continued trading. The numerator of that fraction he took as being the actual number of voids, minus the two which he assumed would have existed in any event. The denominator was the actual number of voids. From the resultant figure, he then deducted the proportion which would not in reality constitute a loss, because of a provision in the Ground Lease permitting the costs of void units to be deducted when calculating the ground rent. The resultant figure was calculated by Mr Oswald as £38,244 [67/2a, pp.24, 63].

[428 ] Mr Oswald's methodology was not criticised by any witness; and I do not take issue with it. His calculation of the number of actual voids is however different from my own: as explained earlier, there appear to me to have been (broadly speaking) 4 in 1995-1997, 8 in 1998, 6 in 1999-2000, 5 in 2001, 6 in 2002 and 7 in 2003-2004. These figures are different from Mr Oswald's. His view that there would have been only two voids, if the supermarket had continued trading, is also different from my own conclusion, explained above (paras.405-408), that there would have been (broadly speaking) 2 in 1995-1997, 4 in 1998-2000, and 3 in subsequent years. Re-calculating Mr Oswald's figures on that basis, and making allowance for ground rent, the resultant figure is £31,212 [e.g. for 1998, Mr Oswald's calculation was:

6-2

6

£8,579 x x 0.95 = £5,433.

8-4

8

My calculation is:

£8,579 x x 0.95 = £4,075.

The figures for each year, calculated using that method, are: £1,539 in 1996, £3,311 in 1997, £4,075 in 1998, £4,317 in 1999, £1,582 in 2000, £1,574 in 2001, £4,512 in 2002, £5,122 in 2003 and £5,180 in 2004].

Summary of losses

[429 ] Mr Oswald assessed the total losses suffered by the pursuers at £1,097,740, comprising:

Loss in capital value £ 865,000

Accrued losses

Loss of rental income 194,496

Shortfall in recovery of costs 38,244 232,740

£1,097,740

2. Mr Lythgoe
[430] Mr Lythgoe was also led as a witness on behalf of the pursuers. He is another experienced and respected valuer with experience, in particular, of valuing shopping centres for commercial purposes. He gave evidence over the course of four days. He appeared to me to be an impressive witness, notable for his clarity of thought and for the careful expression of his evidence. I was also impressed by his knowledge of the Centre and of the surrounding locality [pp.722-727, 759].

[431 ] As with Mr Oswald, Mr Lythgoe's competence was challenged on the basis that he was not an expert in retail planning: it was suggested that he could not even assess whether other subjects were comparable with the Centre or not. As with Mr Oswald, I reject that contention. Mr Lythgoe accepted that he was not qualified to give advice on planning policy relating to the development of shopping centres, or to carry out the type of analysis of available expenditure required in order to give advice on the appropriate size of such a development. He maintained however that he was qualified to carry out valuations of actual and projected supermarket or superstore developments, and had considerable experience of doing so [pp.13, 304-307, 329-330]. I accept that evidence.

[432 ] Mr Lythgoe's objectivity was also challenged on the basis of a conflict of interest. His report disclosed, at the outset, that his firm had previously provided valuation reports in respect of the Centre, in 1998 and 2003, to Dunbar Bank plc for the purpose of secured lending, and that Dunbar Bank had no objection to his acting as an expert witness in the present proceedings. Those reports were discussed earlier (supra, paras.149-154 and 190-193). Mr Lythgoe's previous involvement had been disclosed to those acting for the defenders and third party, prior to the lodging of his report. In cross-examination, it was suggested to Mr Lythgoe that he (or his firm) had an interest in the pursuers' succeeding in the present action: otherwise, it was suggested, Dunbar Bank might have recourse against Mr Lythgoe's firm in the event that the pursuers were to default on their borrowing obligations, if the security which Dunbar Bank had obtained over the Centre in reliance on the 1998 and 2003 valuations then proved to be inadequate to cover the pursuers' borrowings.

[433 ] There appeared to me to be no indication in Mr Lythgoe's evidence that his valuation had been influenced by the earlier valuations, or by a desire to minimise a risk that his firm might incur a liability to Dunbar Bank: the fact that his current "as is" valuation was well below the previous valuations would tend to suggest that he was not influenced by a desire to support the earlier valuations. Most importantly, Mr Lythgoe impressed me as a witness of complete integrity. Although I acknowledge the possibility, in theory, that Mr Lythgoe might have been influenced by a conflict of interest, I am satisfied that his evidence was not in fact so influenced.

[434 ] In relation to this matter, Mr Clapham explained that he had informed Dunbar Bank about the valuation produced by Mr Lythgoe for the purposes of the present action, which at £487,000 (on the "as is" basis) was well below the earlier valuations on which the Bank had acted in advancing loans to the pursuers. As a result of the reduction in the valuation, the pursuers' borrowings had been reduced from their previous level of about £727,000 to a current level of about £494,000 [67/396]. The Bank held a personal guarantee from Mr Clapham a well as a standard security over the Premises, a floating charge over the pursuers' undertaking, and a guarantee from Credential Holdings Limited.

[435 ] In his closing submissions, the solicitor advocate for the defenders and third party conceded that Mr Lythgoe was "obviously trying to do his best", and said that he did not wish to make too much of this point. He argued, however, that there was a "perception" issue: an expert witness had to be seen to be free of any influence which might compromise his independence. I do not accept that that is a correct approach. An expert witness is not a judge. It is desirable that there should be no question as to his independence. But where such a question arises, the court has to take it into account in making its assessment of the witness's evidence, as it would in the case of any other witness. Ironically, perhaps, Mr Lythgoe appeared to me to display greater objectivity than some other witnesses whose independence from the parties was unquestioned.

Date of valuation
[436 ] Mr Lythgoe valued the Centre as at 18 April 2005. It was suggested to him, as it had been to Mr Oswald, that the loss attributable to the breach of the keep-open obligation should be established by carrying out valuations as at the date of the initial breach, in January 1995.

[437 ] Mr Lythgoe made a number of points in response. One was that the breach was a continuing one: every day, the breach remained current. A second point was that the longer the closure persisted, the more serious its effects were liable to be. It would be impossible to know the effect of the closure on the date when the Premises were first closed. Shortly after the closure, the same tenancies would be in place as shortly before the closure, and the tenants would not realise how long the closure was destined to last, and how serious its effects might therefore be. Taking the value as at January 1995 with the supermarket trading as £481,500, on the basis that the price paid by the pursuers was the best evidence of market value at about that time, the value without the supermarket could be anywhere between £180,000 and £300,000, depending on how pessimistic an assumption one made about the prospects of the supermarket re-opening [pp.25-26, 246-251].

[438 ] Mr Lythgoe also observed that any tenant taking a lease of a supermarket in a shopping centre would not expect the centre to remain as it was, but would expect it to change in response to changes in the market [pp.880-882].

Catchment
[439] According to Mr Lythgoe's evidence, a neighbourhood centre would typically serve a catchment population of 2,000-3,000 or above [p.17].

[440 ] Mr Lythgoe considered that the catchment of the Centre, with a trading supermarket, would comprise the Whitfield and Fintry estates: effectively the Whitfield and Longhaugh wards (as at 2001). That view was based on an expectation that the supermarket would be offering goods at relatively low prices. The population of those wards (which excluded the western part of Fintry) was slightly under 10,000: equivalent to many of Scotland's towns, such as Stranraer [pp.756-757]. He considered that, without a trading supermarket, the catchment would be smaller [p.555]. As a broad measure, he obtained information as to the population resident within a 900m radius of the Centre, based on the 2001 census [pp.256-260]. That figure was 9,320 [67/394]. The area falling within the circle of 900m radius comprised most of the Whitfield estate (the eastern portion being excluded), the eastern part of the Fintry estate, and another small area of housing to the south. Having regard to topography, it would be more realistic to compress the circle so as to produce an ellipse. The circle however gave an approximate idea of the relevant population. He noted that there were three primary schools adjacent to the Centre, one being the non-denominational primary school for a large part of the Fintry estate, a second being the non-denominational primary school for a large part of the Whitfield estate, and the third being the Catholic primary school for the two estates.

[441 ] I note that various indications were given in the evidence of the walking time to which the 900m radius corresponded. These were inevitably imprecise, since the walking speed varied with the topography and with the age and fitness of the walker. In broad terms, it appears that the 900m radius was equivalent to a walking distance of about 10 to 15 minutes, the time to walk from the south (uphill, up Longhaugh Road) being longer than the time to walk from other directions [Mr Oswald, p.753; Mr Lythgoe, pp.771-772]. In practice, the housing lying 900m or so to the south is outside the catchment, as Mr Lythgoe acknowledged.

[442 ] For the reasons discussed earlier in the context of Mr Oswald's evidence, I accept that a 10 minute walk provides a realistic idea of the catchment of the Centre, and that the equivalent population is somewhere between 5,000 and 9,500. I do not consider that Mr Lythgoe's "broad measure" is so far out as to undermine his valuation: as I have indicated, a valuation does not depend on a precise knowledge of the catchment population.

"As is" valuation
[443] In his "as is" valuation (as at 18 April 2005), Mr Lythgoe assumed that the Premises would remain unoccupied for a substantial period, equivalent to about the unexpired term of the Sub-Lease: beyond that horizon, their occupation or non-occupation would have only a limited impact on value [pp.870-871]. On that basis, he assumed that the six smaller units which were currently let would remain let until the expiry of the current leases, and would then be vacant for six years before being re-let. He assumed that the seven smaller units which were currently unlet would remain vacant for six years, but would thereafter be let. The assumption in respect of the let units appears to me to be conservative, but that in respect of the unlet units optimistic (as Mr Lythgoe acknowledged in evidence) [p.516]. Overall, however, these assumptions do not appear to me to be seriously unbalanced, particularly when the high yield applied to the currently unlet units, discussed below, is also taken into account.

[444 ] In relation to the rental of units currently let, Mr Lythgoe assumed that the passing rents would continue to be received until the next rent review, or a re-letting, when ERVs would be received. In relation to the units currently unlet, he assumed that the ERVs would be received from the date of the next letting. So far as the public house was concerned, he assumed that the passing rent was the same as the ERV, i.e. that it was rack-rented. So far as the Premises were concerned, he was of the opinion that the ERV was £56,155 per annum, based on a rate of £5 per square foot. So far as the smaller units were concerned, he adapted ERVs ranging between about £5,000 and £6,500, based on a Zone A rate of £9 per square foot. He discounted however the rent of one unit by £6,000 per annum, to reflect the likelihood of persistent arrears by one tenant: in effect, in other words, he assumed one permanent void, as well as six year voids on the expiry of all leases (and until currently unlet units were let). Mr Lythgoe also made allowance for non-recoverable charges which the landlord would bear as a consequence of units being unlet (e.g. in respect of rates and security), and for the fees payable on re-lettings, to arrive at a net rent.

[445 ] The ERV of £56,155 per annum assumed in respect of the Premises is well above the £46,000 assumed by Mr Oswald. That said, however, Mr Lythgoe's adoption of a relatively high ERV for the Premises in his "as is" valuation has only a modest effect on his overall assessment of the loss of capital value attributable to the breach of the keep-open clause, since he assumes the same ERV in his "supermarket trading" valuation. That approach appears to me to be correct in principle, for the reasons discussed earlier in relation to Mr Oswald's valuations. Since the same ERV has been adopted for both valuations, the effect of adopting a relatively high ERV is to increase both valuations; but the "supermarket trading" valuation is increased to a greater extent than the "as is" valuation, since the former applies a lower yield to the ERV than the latter: 10 per cent compared with 12 per cent, with effect from 2012. When the seven year deferral until 2012 is taken into account, the difference between the number of years' purchase adopting a yield of 10 per cent, rather than 12 per cent, when applied to an increase in the ERV of £10,155 (relative to Mr Oswald's figure), can have only a modest effect on the loss in capital value.

[446 ] The Zone A rate of £9 per square foot assumed for the smaller units reflected the 1999 lettings to Ms Walker and the Misses Minns (at £11.45 and £10.81 per square foot Zone A, respectively), the 2000 letting to Mr Ng (at £11.07 per square foot Zone A), the 1999 rent review of the post office (at £8.87 per square foot Zone A), and the 2001 rent reviews of the Moss Chemist's unit, the Ladbrokes unit and the newsagent's (at £7.50, £7.50 and £8.88 per square foot Zone A, respectively). Mr Lythgoe based his rate particularly on the latter rent reviews: he considered that the rentals agreed by Ms Walker, the Misses Minns and Mr Ng had been above the rate which was generally sustainable at the time, bearing in mind the later rent review evidence and also the fact that Ms Walker and the Misses Minns had ceased trading. The £9 rate appears to me to be broadly supported by the evidence relied on, and in particular by the rent reviews of the post office and the newsagent's, and I would not regard it as being seriously amiss. I agree however with Mr Hermiston's evidence [p.402] that it is slightly optimistic, as Mr Lythgoe himself acknowledged was possible [67/8a, p.11].

[447 ] Subject, therefore, to the slight caveat regarding the ERV of the Premises, Mr Lythgoe's assumptions in respect of lettings and rentals appear to me to be not unreasonable or unbalanced.

[448 ] Mr Lythgoe then applied one of four yields to the rental streams from the various units, depending on the quality of the tenant covenant and the unexpired term of the lease. Long leases to good covenants (i.e. Bass Holdings, the defenders and Esso) were taken at 12 per cent. Shorter leases to good covenants (i.e. Moss Chemists, Ladbrokes and Martin Retail) were taken at 13 per cent. The remaining leases (to local traders) were taken at 20 per cent. The currently unlet units were taken at 30 per cent.

[449 ] These yields, so far as relating to the good covenants, appear to me to be supported by the comparison evidence. The yields of 20 and 30 per cent, considered in isolation, might be thought to be conservative. When account is taken of the assumption that all units will be let (subject to six year voids) - which, looked at in isolation, appears to me to be optimistic - the overall approach is however more balanced. Mr Lythgoe explained that the yields were intended to reflect the risk that the voids might be longer than he had assumed [Mr Lythgoe, p.134]. I am also inclined to accept Mr Lythgoe's explanation that some of the investors who might be interested in the Centre would be attracted by the long leases to good covenants and would heavily discount all other aspects of the proposition [Mr Lythgoe, p.124]. That approach is supported by other evidence (e.g. that of Mr Nisbet), and appears to me to be realistic.

[450 ] On the basis of these assumptions, and using the "hard core" method of valuation, Mr Lythgoe calculated the capital value of the Centre as a whole at £509,882. He then deducted the stamp duty, agents' fees and legal fees payable on a sale at that figure, in order to arrive at a net value of £486,689, which he rounded to £487,000.

[451 ] The valuation produces an initial yield of 9.01 per cent, which is well below Mr Oswald's initial yield of 14.24 per cent. When assessed relative to the initial yields of the comparison subjects, Mr Lythgoe's yield figure appears to me to be on the low side (as Mr Lygthoe acknowledged) [p.324]. That suggests at first sight that the valuation may be too high. I note however that if the assumed increase in the rent of the Premises were left out of account, the calculation would be reduced by about £105,317 (if Mr Lythgoe's figure for the Premises of £260,228 [67/8a, p.39] is compared with Mr Hermiston's figure, based on otherwise similar assumptions, of £154,911 [67/3, p.79]), producing (arithmetically) a cumulative value of £404,565, a net value of £385,348 after the deduction of acquisition costs at 4.75 per cent, and a yield of about 11.5-12 per cent, which would be more closely in line with the comparisons. This suggests that the low initial yield produced by Mr Lythgoe's valuation reflects the fact that the valuation assumes a large increase in the rent of the Premises at the next review: an assumption which may not be realistic in practice, but which nevertheless appears to be appropriate in principle, for the reasons I have explained (supra, para.400).

"Supermarket trading" valuation
[452 ] Mr Lythgoe considered that shopping centres generally, and secondary and suburban ones in particular, normally depend to a significant degree for their success upon the presence of at least one anchor tenant to attract shoppers [p.377]. A supermarket was a common example of such an anchor. Other unit shop operators were attracted to the shopping centre because of the prospect of benefiting from passing trade generated by the anchor tenant. In situations where the anchor tenant withdrew, the unit shop operators traded less successfully and any unlet space became less attractive in the market [67/9a, p.10].

[453 ] Mr Lythgoe considered that the strength of the "magnet" effect of a given shop depended on the catchment which it served. A relatively weak "magnet" could be sufficient to attract a local catchment [pp.22-23, 146-147, 376-377, 392]. His experience of valuing commercial properties, and retail investments in particular, suggested that small discount supermarkets acted as magnets for adjacent shops in shopping developments or parades [pp.148-149, 395].

[454 ] That evidence was consistent with that of Mr Oswald, and was supported by Mr Lythgoe's experience of valuation and of shopping developments. The evidence makes sense. For the reasons already discussed in the context of Mr Oswald's evidence (supra, paras.390-392), I accept it.

[455 ] In his "supermarket trading" valuation, Mr Lythgoe therefore proceeded on the basis that the continued presence of a supermarket trading from the Premises would have created a significant increase in footfall in the Centre (compared with the "as is" position) and would have generated additional expenditure there [pp.388-391, 453], which would in turn have generated higher rentals and fewer voids. In forming that view, Mr Lythgoe had regard to the nature of the locality, which he considered had improved materially since about 1990, and to the level of interest in units immediately before the supermarket at the Premises ceased trading in 1995 [pp.738-739], as well as relying on his extensive experience of valuing other properties of a broadly similar nature. He considered, in particular, that there would have been sufficient support from the local catchment for the continued presence of a supermarket to affect significantly the performance of the Centre. He was envisaging a small supermarket pitched at the level of Kwik Save, Lidl or Aldi, occupying a position in the retail hierarchy between corner shops and superstores such as Asda [pp.577-578]. I accept that that is a realistic approach to adopt. As explained earlier (supra, paras.390-392), the expectation of an increased footfall and expenditure is supported by the evidence of numerous witnesses who appeared to me to be reliable, speaking on the basis of their personal experience of the Centre as well as, in many cases, wider professional experience: for example, Mr Thomson, Mr Watt, Mr Letley, Mr Reid and Mr De Vos amongst the professional witnesses, and Mr Hussein and Mrs Majola amongst the lay witnesses. The expectation that an increased footfall - and, in addition, other consequences of the trading of a supermarket at the Premises (notably in respect of the appearance of the Centre, and its attractiveness to shoppers, traders and lenders) - would have resulted in higher rents and fewer voids is also supported by the evidence of the witnesses already mentioned, and by that of Mr McCluskey (supra, paras.141 and 165).

[456 ] Mr Lythgoe assumed that, if there were a supermarket trading, then on the expiry of the leases of the six small units currently let, five leases would be renewed, while the sixth unit (which he took to be the newsagent's) would remain unlet for two years. In relation to the seven small units currently unlet, he assumed that five would be let immediately, and the remaining two would remain unlet for two years [p.86]. For the reasons discussed earlier, the last of these assumptions appears to me to be optimistic: it would in my opinion be more realistic, in the light of the evidence, to assume three permanent voids, rather than to assume that all units would be let after a period of two years.

[457 ] Mr Lythgoe calculated rentals and ERVs for the smaller units on the assumption of a Zone A rate of £11.50 per square foot, resulting in a typical ERV of about £8,000. That rate was adopted to reflect the highest value achieved under recent lettings. For the reasons discussed in the context of Mr Oswald's calculation, that appears to me to be a realistic ERV, but an optimistic estimate of typical passing rents, some of which would have been fixed several years earlier.

[458 ] So far as the Premises are concerned, Mr Lythgoe adopted a rate of £5 per square foot, as in his "as is" valuation. In the case of the public house, he assumed an ERV of £19,900 per annum. In that regard, he explained that, although the problems experienced in operating the public house were not directly related to the presence or absence of a supermarket from the Centre, the ERV of the public house would nevertheless be influenced by rental levels within the Centre, and would therefore be affected by any general increase resulting from the operation of a supermarket [pp.538-539]. I accept that analysis in principle. At the same time, I am not convinced that its ERV would increase beyond the figure of £17,500 per annum assumed by Mr Oswald.

[459 ] In relation to yields, Mr Lythgoe again distinguished between four categories of lease, depending on the covenant and the term, and adopted yields of 10 per cent (for Bass Holdings, the defenders and Esso), 11 per cent (for Moss Chemists, Ladbrokes and Martin Retail), 12.5 per cent (for the remaining leases) and 15 per cent (for the units taken as being unlet at the date of valuation).

[460 ] On the basis of these assumptions, Mr Lythgoe calculated the capital value of the Centre as a whole at £1,185,982. He then deducted the stamp duty and fees payable on a sale at that figure, in order to arrive at a net value of £1,121,442, which he rounded to £1,120,000.

[461 ] The valuation produces an initial yield of 8.91 per cent, which is below Mr Oswald's initial yield of 10.33 per cent. Both these figures appear to me to be slightly low, relative to the closest comparisons on a supermarket-trading hypothesis (e.g. Camperdown Road and Barlanark).

[462 ] I note that, if one were to assume three permanent voids (at units 117, 122 and 123), that would reduce Mr Lythgoe's gross valuation substantially. The adoption of a lower ERV for the public house, and the adoption of a typical passing rent for the smaller units of £7,000 per annum (or the actual rent, if lower) would reduce the valuation further.

[463 ] I note that units 117, 122 and 123 contribute £109,472 to Mr Lythgoe's valuation [67/8a, p.48]: the yields adopted being 12.5 per cent, 15 per cent and 15 per cent respectively. In Mr Hermiston's valuation, which adopts a similar method but a yield of 14 per cent, three permanent voids would contribute - £32,142 to the valuation [67/3, pp.76, 80, 85]. That suggests that the assumption of three permanent voids would reduce Mr Lythgoe's gross value by approximately £141,614.

[464 ] The adoption of an ERV of £17,500 rather than £19,000 for the public house would reduce the gross value by an amount which, again, I cannot calculate precisely. Assuming that the value is directly proportionate to the ERV, the gross value of the public house would be reduced from £186,459 [67/8a, p.48] to £163,971 [£186,459 x 17,500 ÷ 19,000], i.e. a reduction of £22,488.

[465 ] The effect of adopting lower passing rents for the eight smaller units assumed to be let at rents above £7,000 per annum (excluding unit 117, which I am taking to be vacant) can again only be estimated. The current rent of those units, as assumed by Mr Lythgoe, would be reduced by a total of £7,325 per annum [i.e. the current rents of units 112-115 and 118-121, as stated in 67/8a p.48, less 8 x £7,000]. The period before the next rent review or lease expiry would vary between one year and 4 years 5 months, the average being slightly under three years. The deduction could be roughly estimated by using a multiplier of 2.5 (to allow for the deferral of part of the income), producing a figure of £18,313.

[466 ] Making these various deductions would reduce Mr Lythgoe's figure for the gross value from £1,185,982 to £1,003,567. Deducting buyers' costs at 5.75 per cent would produce a net value of £945,862. That is not a valuation, but merely the result of an arithmetic calculation; but it serves to provide a rough idea of how Mr Lythgoe's valuation might be affected if some of the assumptions were to be altered.

Capital loss
[467 ] On the basis of his "as is" and "supermarket trading" valuations, Mr Lythgoe calculated the capital loss resulting from the closure of the supermarket as at 18 April 2005 as the difference between the two figures, i.e. £633,000 (£1,120,000 minus £487,000).

Loss of rental income
[468 ] Mr Lythgoe calculated the losses which had accrued between the date of closure of the Premises and the beginning of 2005 [67/395A]. Like Mr Oswald, he took as the first of these losses the loss of rental income resulting first from units being unlet which would otherwise have been let, and secondly from rent reviews being settled at a lower level than would otherwise have occurred [p.233].

[469 ] In relation to the first of these heads, Mr Lythgoe noted that the number of unlet units had risen between January 1995 (when the Premises closed) and January 2005 (shortly prior to the beginning of the proof) from four (units 112, 113, 117 and 122) to seven (units 112, 113, 117, 118, 119, 122 and 123). He assumed that, even if the supermarket had continued trading, there would have been two permanent voids throughout that period (which, in his calculations, he took to be units 112 and 113). He assumed that, of the five remaining units, two would have been let for eight out of the ten years in question, two would have been let for seven years, and one (unit 123) would have been let for five years.

[470 ] The assumption that two of the vacant units in January 1995 would have been permanent voids appears to me to be realistic, for the reasons which I have explained when considering Mr Oswald's evidence. As previously explained, it appears to me that there would probably have been a third permanent void (unit 123) once the refurbishment works were completed. I am therefore not persuaded that Mr Lythgoe's assumption that unit 123 would have been let for five years is appropriate. The remaining assumptions as to voids appear to me however to be broadly reasonable.

[480 ] I accept that, if the supermarket had remained open, two of the four units which were unlet in January 1995 would probably have been let within two years: I refer in that connection to what was said earlier in relation to Mr Oswald's assessment. Mr Lythgoe's assumption that the two units would let after two years is more conservative than Mr Oswald's assumption of a six month period prior to letting. The assumption that two other units would have been let within three years of the closure of the supermarket, and would have remained let thereafter, appears to me to be equally reasonable: it is the corollary of an assessment that there would have been two permanent voids in the unimproved Centre, rising to three once the refurbishment was carried out.

[481 ] The rents assumed by Mr Lythgoe (of £5,895 per annum, based on a Zone A rate of £9 per square foot) are more conservative than those assumed by Mr Oswald (of £7,000 per annum), and appear to me to be realistic.

[482 ] Mr Lythgoe calculated the rent which should have been received from the five units in question, on these assumptions, as £205,362 [67/395A]. I would exclude from that figure the rent assumed to be received for unit 123, which was £23,897.

[483 ] The second head of loss relates to rent reviews which settled at a lower level than would otherwise have occurred. In that regard, Mr Lythgoe assumed that all the smaller units (apart from the two which he assumed to be permanently void, and units 123 and 124) would, if the supermarket had been trading, have seen increases during the period between 1999 and 2003 based on a Zone A rate of £11.50 per square foot, resulting in rents of around £8,000 per annum. As I have indicated, I am not satisfied that rents at that level would have been achieved as early as Mr Lythgoe has assumed. Mr Lythgoe's figure under this head is £64,855 [67/395A: £17,240 plus £47,615]. If one were to reduce the assumed rent increases by assuming a typical figure in the region of £7,000 per annum rather than £8,000 per annum, the figure would be reduced by £30,750 [i.e. by £5,000 for unit 111, £3,500 for unit 114, £3,500 for unit 115, £3,000 for unit 117, £3,000 for unit 118, £2,000 for unit 119, £5,250 for unit 120, £2,000 for unit 122 and £3,500 for unit 124], to £34,105.

[484 ] Mr Lythgoe calculated the total loss of rental, on the foregoing basis, at £270,217 (i.e. £205,362 plus £64,855). After deduction of ground rent at 7.5 per cent, his net figure was £249,951. Mr Lythgoe then deducted the rent actually received for the units in question, which was £80,916, to arrive at a final figure of £169,035. In doing so, he assumed that, in so far as rent was due but was not paid (by Ms Walker in respect of unit 118, and by Mr Barile and the Misses Minns in respect of unit 119), such defaults in payment would not have occurred if the supermarket had continued trading. In broad terms, that assumption appears to me to be borne out by the evidence, which suggested both that the failure of Ms Walker's and the Misses Minns' businesses were related to the absence of the supermarket and the consequent lack of footfall, and (perhaps more importantly) that arrears of rent were tolerated by the pursuers only because of the difficulty of attracting alternative tenants to the Centre. In so far as the assumption that rent would have been paid in full may go too far, it is counter-balanced by the assumption that no rent would have been received in two out of ten years (in respect of units 117 and 118) or in three out of ten years (in respect of units 119 and 122): assumptions which, considered in isolation, could be regarded as conservative. If Mr Lythgoe's figures were to be adjusted in the ways I have suggested, the gross figure would be £215,570 (i.e. £270,217 - £23,897 - £30,750). After deduction of ground rent at 7.5 per cent, the net figure would be £199,402. After deduction of the rent received, the final figure would be £118,486.

Shortfall in recovery of costs
[485] Mr Lythgoe's final head of loss related to expenditure which the pursuers would not have incurred, or would have recovered from tenants, if the supermarket had been trading. Mr Lythgoe took the cost of managing property as being typically 28 per cent of market rental value, on the basis of an analysis by his firm of their costs in managing properties throughout the United Kingdom [pp.172, 185, 192; 67/395A]. This appears to me to be a less reliable methodology than Mr Oswald's, which (as I have explained) was based on the service charges actually incurred at the Centre and the actual shortfall in their recovery from tenants. Mr Lythgoe accordingly calculated the non-recoverable expenditure as being 28 per cent of the ERV of the five units which he assumed to be unlet as a consequence of the supermarket being closed. As I have indicated, I do not accept that as many as five units were unlet during the period in question as a consequence of the supermarket being closed, nor that rentals would have achieved the ERV level of £11.50 per square foot as early as Mr Lythgoe assumed. I therefore consider Mr Lythgoe's figure for the loss under this head, of £65,223 [67/395A], to be too high. Excluding Mr Lythgoe's figure for unit 123 results in a deduction of £7,826. Restricting the assumed ERV increases by £1,000 per annum would result in a further deduction of £280 per annum [i.e. 28 per cent of £1,000] in respect of each vacant unit whose ERV was assumed to have increased to £11.50 per square foot: a total deduction of £2,800 [i.e. £840 for each of units 117 and 118, and £560 for each of units 119 and 122]. Those deductions would reduce Mr Lythgoe's figure to £54,597.

Summary of losses
[486] Mr Lythgoe assessed the losses suffered by the pursuers at £867,258, comprising:

Loss in capital value £ 633,000

Accrued losses

Loss of rental income 169,035

Shortfall in recovery of costs 65,223 234,258

£867,258

3. Mr Nisbet
[487] Mr Nisbet was led as a witness on behalf of the defenders and third party. He is another experienced and respected valuer with experience of valuing commercial properties, including shopping centres in Dundee. He gave evidence over the course of five days. He appeared to me to be a straightforward witness, who generally expressed himself with care and moderation. He appeared to have visited the area less often than Mr Oswald and Mr Lythgoe, and had carried out only a cursory examination of the Centre. He did not appear to me to have as good a knowledge of the area as the other expert valuation witnesses. His report also contained a number of factual and arithmetical mistakes (as did that of Mr Oswald). In the submissions on behalf of the pursuers, I was invited to attach little weight to Mr Nisbet's valuations, on the basis that he did not use, and frankly admitted that he did not even understand [p.234], the computer valuation programmes used by Mr Oswald, Mr Lythgoe and Mr Hermiston, but instead used a simpler and more old-fashioned method. It was submitted that all but the simplest of investments could not be properly appraised without the use of valuation software. This criticism was based on the evidence of Mr Lythgoe in particular. In his view, where (as in the present case) a valuation was based upon cash flows, and the property in question had numerous cash flows with a variety of issues affecting each cash flow over time (such as rent reviews, the termination of leases, vacant rates and other charges related to voids), a robust valuation required a detailed consideration of the cash flows; and that exercise was impractical without the use of computer software [pp.56-57]. Mr Oswald [p.703] and Mr Hermiston [pp.141-144], on the other hand, were less critical of a more traditional and less sophisticated approach. They regarded the computer-based methods of valuation as being essentially designed to produce more information about the return on the investment over time, such information being desired nowadays by some investor clients.

[488 ] In principle, I find Mr Lythgoe's point persuasive. Mr Nisbet did not attempt (and could not have attempted, using his method) a detailed consideration of the cash flows being valued. His method provided far less information about the return on the investment over time. I accept Mr Lythgoe's point that one would expect, ceteris paribus, that a cash-flow based valuation of a complex subject is likely to be more robust if there is a detailed and transparent analysis of the cash flows. At the same time, the detailed exercise carried out by Mr Lythgoe depends, as much as the more old-fashioned exercise carried out by Mr Nisbet, on the exercise of judgement by the valuer. Mr Nisbet is, as I have said, an experienced and respected valuer, regularly carrying out valuations of commercial property. As will appear, his "as is" valuation sits reasonably well with the figures produced by Mr Oswald, Mr Lythgoe and Mr Hermiston, if allowance is made for differences in the assumptions which they made. In the circumstances, I do not reject Mr Nisbet's valuation: on the contrary, its closeness to the figures produced by the other valuers, once allowance is made for differences in their assumptions, strengthens my confidence as to where a realistic figure lies.

[489 ] Much of Mr Nisbet's evidence was concerned with his comments on the opinions of Mr Oswald and Mr Lythgoe. I have taken that evidence into account in my consideration of Mr Oswald's and Mr Lythgoe's valuations. At this point I have to consider Mr Nisbet's own valuations.

Date of valuation
[490 ] Mr Nisbet carried out his valuations as at June 2004 [67/5]. He subsequently updated those valuations to 1 April 2005 [67/5A]. He was also instructed to provide valuations as at January 1995, immediately before and immediately after the supermarket closed. In summary, in June 2004 he valued the Centre "as is" at £485,000, and on a "supermarket trading" hypothesis at £600,000. As at 1 April 2005, he valued the Centre "as is" at £400,000, and on a "supermarket trading" hypothesis at £500,000. As at January 1995, he considered that the closure of the supermarket would have made no immediate difference to the value of the Centre.

[491 ] Mr Nisbet professed to believe that the most pertinent valuation was as at January 1995, because a valuation as at that date did not involve any element of conjecture. Immediately before and after the supermarket closed, the Centre generated the same income stream and was physically identical. In 2005, it was known that the supermarket had remained vacant for ten years. In 1995, that would not have been foreseen by a prospective purchaser. It if had been foreseen, that would have adversely affected the valuation [pp.213-214]. Mr Nisbet accepted however that the closure of the supermarket for ten years was not conjecture, but a fact, and that a valuation made on that basis reflected a fact which experience had demonstrated [p.215]. Mr Nisbet listed a number of factors relevant to valuation which had changed between 1995 and 2005 [67/5A, p.9]. At a general level, they included changes in the general economy, changes in the commercial property market, changes in retailing and the introduction of vacant rates (i.e. a liability to rates in respect of vacant premises). At a more local level, they included changes in shopping provision in Dundee, and changes in the housing and population of Whitfield. At the level of the Centre itself, they included the re-development of the Centre, an amendment of the terms of the Ground Lease affecting the ground rent, and variations in rental income from time to time (e.g. by reason of the arrival, and subsequent departure, of Ms Walker and the Misses Minns). Mr Nisbet accepted that it would be in the contemplation of a tenant taking an assignation of a long lease of any unit in the Centre that the retail market would fluctuate from time to time [pp.674-675].

[492 ] In the discussion of Mr Nisbet's valuations below, I shall consider the valuations as at 1 April 2005.

Catchment
[493] Mr Nisbet's valuations proceeded on the basis that the Centre's catchment comprised only a small area of housing [67/404]. He excluded from consideration the housing to the north of the Centre, principally because of the absence of direct access to the Centre by road, and partly because the housing there was privately owned. He excluded the residential area to the west, because it formed part of a different housing scheme (namely Fintry). He included an area to the south, extending a few hundred yards to the east [p.22].

[494 ] Although Mr Nisbet denied that, if his view of the catchment was mistaken, that would affect his valuation, it was apparent that his valuation evidence on the "supermarket trading" hypothesis was premised on the opinion that the catchment was so small that there was insufficient demand to support any more units than were currently trading at the Centre [pp.556, 559-561].

[495 ] In the light of the evidence in relation to catchment which I have already discussed, including the evidence of the shopkeepers in the Centre as to where their customers came from, I am satisfied that Mr Nisbet under-estimated significantly the size of the catchment and of the consequent potential demand.

"As is" valuation
[496] Mr Nisbet's general approach to the "as is" valuation was to apply a blended or all-risk yield to an ERV of the Centre as a whole, that ERV comprising the sum of the ERVs of the individual units. He took the ERV as being equal to the net passing rents (net, that is to say, of ground rent and other charges), on the basis that prospective purchasers were likely to regard the net passing rents as being the level of rent which could be expected on a sustainable basis [67/5, p.18]. The resultant figure for the ERV was £49,880 per annum. That conclusion reflected his view that the ERV of the Premises was £20,000 per annum, that being the rent fixed by the arbiter, Mr Merry, at the last rent review. He considered that the ERV of each of the smaller units was £5,000 per annum [p.83]. His calculation of the total ERV also appears to have assumed two permanent voids, since his figure lies midway between the figure which he would have adopted if there were four permanent voids and the figure which he would have adopted if the Centre were assumed to be fully let [pp.82-84]. He did not expect the type of purchaser he was envisaging for the Centre (a small local property company, borrowing to buy the Centre) to make any allowance for the possibility of rental increases [p.81].

[497 ] In selecting a yield, Mr Nisbet was influenced by his impression that the Centre had an air of neglect, a high proportion of non-trading units and a particularly limited footfall [67/5, p.19]. He maintained that the Orleans Place Shopping Centre was of a broadly comparable nature [67/5, p.20], although he also described it as an exceptionally attractive investment [p.95]. His other principal comparisons were Campfield Square in Broughty Ferry, Sighthill, Maggiesloan, Calderwood Shopping Centre in East Kilbride and Barlanark [p.242]. He concluded that an appropriate all-risk yield would be about 12 or 13 per cent. I note that in calculating the initial yields of some of his comparisons, Mr Nisbet failed to take any account of acquisition costs, contrary to normal practice. The effect of that omission was slightly to increase the yields, and hence (if those yields were then used for comparison purposes) to reduce capital value, to a relatively modest extent.

[498 ] Applying a yield of 12 per cent to the ERV of £49,880 produced a figure of £415,667, or £403,197 after a 3 per cent deduction in respect of the costs of purchase. Applying a yield of 13 per cent, the corresponding figures were £383,692 and £372,182. In the light of these figures, Mr Nisbet arrived at a valuation of £400,000.

[499 ] In cross-examination of Mr Nisbet, it was established that the correct deduction for costs would have been 4.75 per cent: he had allowed only for stamp duty land tax, and had left out of account legal costs, acquiring agents' and survey costs, conventionally taken at 1.75 per cent. On that basis, the above figures (applying yields of 12 per cent and 13 per cent respectively) would have been £395,923 and £365,467, producing an average of £380,695. Mr Nisbet nevertheless adhered to his figure of £400,000 as a more realistic valuation.

[500 ] Although a number of shortcomings in Mr Nisbet's calculations were identified in cross-examination, his general approach to the "as is" valuation, although simpler and more "broad brush" than those of the other valuation witnesses, appeared to me to be realistic. His net rental income of £49,880 per annum, relative to a total acquisition cost of £419,000 (i.e. £400,000 plus 4.75 per cent), represents an initial yield of 11.9 per cent, which appears to me to reflect the comparisons (notably Sighthill).

"Supermarket trading" valuation
[501] Mr Nisbet was of the view that, even if the supermarket had continued trading, there was likely to be a very limited, if any, demand from tenants other than those already represented in the Centre [p.48]. That view appears to have reflected his opinion of the catchment: evidence relating to shopping centres in housing schemes elsewhere in Scotland indicated that there were numerous common types of user which were not present in the Centre (e.g. a video rental shop, an off-licence, a launderette, a tanning salon and a hairdresser's). Since I do not accept the premise as to the size of the catchment, for the reasons explained above, it follows that I equally do not accept Mr Nisbet's conclusion. In fairness to Mr Nisbet, it should be said that he acknowledged that he would have liked to know about the evidence of relevant witnesses to fact, such as Mr Thomson, before expressing a view about the effects of the closure of the supermarket [p.511]. He also acknowledged that he could not contradict the evidence of the many witnesses, such as Mrs Majola and Mr Hussein, who attached importance to the presence of a trading supermarket in the Centre and attributed the lack of footfall in the Centre to the closure of the supermarket [e.g. pp.512-518]. Mr Nisbet accepted that the fact that the supermarket was closed would have some effect on the value of the Centre as a whole, since it could discourage prospective tenants of other units from completing a transaction [pp.61, 64-65]. He said that he had "no doubt that the closure may well have some impact upon occupancy levels" [67/5, p.21], although he did not consider it to be the main factor which had led to the current level of voids: the main factor, in his view, being that the Centre had more units than the catchment required. He therefore concluded that "the closure of the supermarket at the Whitfield Shopping Centre has contributed to its poor performance and accordingly has been influential in leading to a diminution in the value of the head tenant's interest" [67/5, p.20]. In short, the "marketability and value of this particular investment are adversely affected by the fact that the supermarket unit is not trading" [67/5, p.17]

[502 ] In relation to ERVs on a "supermarket trading" hypothesis, Mr Nisbet said that he "inclined to the opinion that had the [supermarket] unit been open for trade, the rental would have been slightly higher" than the rental passing of £20,000 per annum [67/5, p.21]. Mr Nisbet nevertheless carried out his valuation on the basis of the same ERV for the Centre as under his "as is" valuation, i.e. a figure of £49,880. The only change, to reflect the assumption that the supermarket had not ceased trading, was the adoption of a lower yield, of 9 or 10 per cent.

[503 ] Applying a 10 per cent yield to £49,880 produced a figure of £498,800. After the deduction of acquisition costs at 3 per cent, the resultant figure was £483,836 (these figures are wrongly stated in Mr Nisbet's report [67/5A, p.13], as a result of arithmetic mistakes). Applying a 9 per cent yield, and deducting costs at 5 per cent (because a different stamp duty band would apply), the corresponding figures were £554,222 and £526,511. In the light of these figures, Mr Nisbet arrived at a valuation of £500,000.

[504 ] Mr Nisbet's deductions in respect of costs were again too low. Applying the correct deductions (of 4.75 per cent and 5.75 per cent respectively) [Mr Nisbet, pp.295-303], the 10 per cent yield figure would have been £475,115, and the 9 per cent yield figure would have been £522,354, producing an average of £498,735.

[505 ] Since I do not accept Mr Nisbet's view that the closure of the supermarket had no impact on voids and rents received, it follows that I do not accept his ERV of £49,880 per annum (which, as mentioned above, is the same as in his "as is" valuation), and therefore do not accept his valuation.

Loss of rental income
[506] In his report, Mr Nisbet said that he did not accept that the "principal" or "main" cause of voids and rental levels was the closure of the supermarket [67/5, p.24]. In his evidence, on the other hand, Mr Nisbet went further, and expressed the view that the closure of the supermarket had not been "a material factor" in the level of voids and rental levels [p.111]. This evidence is difficult to reconcile with the evidence given by Mr Nisbet about the effects of the closure of the supermarket, which I have already mentioned, as well as with the evidence of other witnesses. I do not accept it.

Shortfall in recovery of costs
[507] Mr Nisbet expressed no opinion in relation to non-recoverables, other than that he found it difficult to support the pursuers' contention.

4. Mr Hermiston
[508] Mr Hermiston was also led as a witness on behalf of the defenders and third party. He differed from Mr Oswald, Mr Lythgoe and Mr Nisbet in having a qualification and experience in town planning as well as in valuation. He had, in particular, experience of providing town planning advice in relation to retail developments. In that context, he had experience of carrying out retail assessments: that is to say, establishing the catchment population relative to a proposed retail development (using the type of information derived from CACI or Mapinfo), then determining the available convenience expenditure based on that population (by applying a figure for expenditure per head to the catchment population), then determining how much of that expenditure would be available for the development in question (after taking account of the leakage of expenditure to competing facilities), then translating that expenditure into a floor area (on the basis of information as to turnover per square foot). This process was similar to the approach described by Mr Poulton. No witness however suggested that it was an approach which would ordinarily be followed by a valuer, and it was apparent from the evidence that valuers do not normally undertake such an exercise, but assess the location on the basis of their general impression of it.

[509 ] Although it appeared from his evidence that Mr Hermiston had carried out a retail assessment of the Centre, seemingly after the proof had commenced, he was advised on behalf of the defenders and third party not to include it in any of his reports, on the basis that it came too late [pp.559-561]. Mr Hermiston was accordingly not invited to give evidence relating to his retail assessment. These decisions will have reflected the ruling which I made shortly before the proof in relation to the evidence of Mr Robeson, which was discussed earlier (supra, para.285). I should add that no notice of such evidence had been given in the defenders' or third party's pleadings, in any of the three reports by Mr Hermiston which had been lodged, or in any of the discussions which had taken place, as directed by the court, between Mr Hermiston and the expert witnesses instructed on behalf of the pursuers.

[510 ] As explained above, in the context of Mr Robeson's evidence, the pursuers' offer to allow such evidence to be admitted, subject to an adjournment, was not accepted [Mr Hermiston, pp.598-600].

[511 ] Mr Hermiston gave evidence over the course of four days. I found his evidence about the technicalities of valuation particularly helpful, as he was able to give a straightforward explanation of the concepts and methodologies involved. I did not on the other hand find his expressions of opinion about the Centre, and the neighbouring area, as persuasive as those of Mr Oswald and Mr Lythgoe, essentially because they were less compatible with other evidence in the case which I have accepted, notably the evidence of the shopkeepers, surveyors and other witnesses who had experience of the Centre.

Date of valuation
[512] Mr Hermiston initially provided a valuation as at November 2003 [67/3], which was when the valuation was carried out [p.126]. He later provided a valuation as at the date of closure of the Premises, i.e. 7 January 1995 [67/4]. He professed to regard the latter as the more appropriate, on two grounds. First, that valuation would reflect the market's assessment of any anticipated change in rental income which might result from the closure. Secondly, the use of a later date of valuation made it difficult, if not impossible, to distinguish between the effects of the closure and the effects of changes in the market, and changes to the Centre itself [67/4, para. 4.02]. Mr Hermiston accepted that, when he produced his initial valuation, it had not been in his mind that the Centre could only be valued as at the date of closure. His subsequent valuation as at that date had followed his being instructed that that was the appropriate date [pp.456-457].

[513 ] In connection with the changes which had occurred since 1995, Mr Hermiston accepted that the retail market operated in a constantly changing environment, where markets changed, populations changed, catchment areas came and went, and the premises in which operators carried on their business changed [p.468].

[514 ] On the basis that the appropriate date of valuation was 7 January 1995, Mr Hermiston did not consider it necessary to carry out a valuation as at that date, since the best guide to value was the price of £481,500 paid by the pursuers in October 1994. Since there was no material change in the property market between October 1994 and January 1995, that price was the market value as at the latter date. The closure of the supermarket would have had no effect on that value [67/4, paras.2.04-2.06].

Catchment
[515] In his first report, Mr Hermiston stated [67/3, para.2.06]:

"Although the Shopping Centre is relatively central to Whitfield ... it is not well located to serve a wider catchment and thus the potential trade is restricted to Whitfield (Plan 2)."

Plan 2 showed the Whitfield housing estate. In his third report, on the other hand, produced after discussion with Mr Robeson and after the production of Mr Robeson's report [67/9], in which a 5 minute walk was adopted as the appropriate measure, Mr Hermiston similarly stated that the appropriate core catchment was defined by a 5 minute walk. By the expression "core catchment" Mr Hermiston meant the area from which the Centre would expect to derive the majority of its expenditure [p.585]. Mr Hermiston explained that Mr Oswald's introduction of a reference to a one minute drive time, in his second report, had prompted those acting for the third party to look at the issue of the catchment from a different perspective: what had started off as "a valuation exercise ... developed ... in terms of looking at it from more a planning point of view, a retail assessment point of view" [p.552]. Mr Oswald and Mr Lythgoe were "looking at it as valuers", whereas he was able to use his experience of retail assessment in the planning context [pp.565-566].

[516 ] Mr Hermiston took a 5 minute walk to be a distance of 440 yards [67/4A, para.2.04]. Although parts of Fintry lay within a 5 minute walk [p.43], he discounted Fintry as a source of business, in view particularly of the presence of shops there [p.31]. The resultant catchment was larger than Mr Nisbet's, but much smaller than those estimated by Mr Oswald and Mr Lythgoe, with a population of about 1,300 as at 2001 [p.183]. In that regard, Mr Hermiston referred to Mr Robeson's plan as delineating the area in question. According to Ms Brash, whose evidence I accept, the population of that area in 2001 was 1,138. Like Mr Nisbet, Mr Hermiston inferred from the size of the catchment, as he assessed it, that there was not a large enough population to provide sufficient demand to support the Centre, leading to relatively low rents and a relatively high incidence of voids, and therefore to a relatively low value [pp.68-69], regardless of whether a supermarket was trading there or not.

[517 ] For the reasons already discussed, I have come to the conclusion that the catchment is in reality larger than Mr Hermiston had estimated, and that a 10 minute walk would provide a more realistic estimate. Although the additional distance is modest - about 440 yards - the resultant increase in population is substantial, reflecting the fact that, although the Centre is located in a housing estate, much of the land in its immediate vicinity has been cleared of housing and, although zoned for residential development, currently remains unbuilt on.

"As is" valuation
[518] In his valuation of the Centre as at November 2003, Mr Hermiston was influenced by his assessment of the catchment, and by what he described as a number of deficiencies. These included an alleged lack of visibility (a matter which I have already discussed), a car park without a clear "search pattern", and the presence of roofing over the central area, which was said to be a disadvantage as it provided shelter for loiterers [67/3, para.3.11]. The consequence was said to be that the supermarket was not attractive to car-borne shoppers. Mr Hermiston appeared to be envisaging the possibility of people shopping by car for large quantities of food at a time, and assessing the disadvantages for that type of shopping [p.57]. Mr Oswald and Mr Lythgoe on the other hand were not anticipating that the Premises would attract that type of shopping. That appears to me to be a realistic assessment, given the nature of the location, the relatively low level of car ownership, and the presence of large supermarkets within a few miles.

[519 ] Mr Hermiston used a method of valuation similar to that used by Mr Lythgoe. He adopted ERVs of nil for the public house and the Premises (on the basis that they would not re-let): the ERVs were therefore applied only from the expiry of the current leases, in 2033, making little difference to the valuation); nil for the seven units which he regarded as surplus to requirements; and £6,000 per annum for each of the six remaining smaller units. He adopted a yield of 12 per cent for the good quality covenants, and 14 per cent for the poorer quality covenants. The resultant gross valuation was £606,586. After deducting acquisition costs, the net valuation was £573,451, which Mr Hermiston rounded to £575,000 [67/3, p.72].

[520 ] Mr Hermiston acknowledged [p.396] that that figure made no allowance for the loss of rent from unit 112 from November 2004, or for non-recoverable service charges, or for ground rent, and was therefore too high. It also assumed that Ms Walker and the Misses Minns remained in occupation of their units and paying rent. Since the valuation had been carried out as at November 2003, it also included the value of the passing rent which had been received during the period between that date and the dates of the other valuations (in April or May 2005) [p.401]. Mr Hermiston considered that, if he were to re-calculate his valuation, his figure would be very close to Mr Lythgoe's valuation, if the supermarket rent were left out of account [pp.406-409]. I note in that regard that the difference between Mr Lythgoe's figure for the supermarket and Mr Hermiston's was £105,317 [67/8a, p.39; 67/3, p.79]. If Mr Lythgoe's cumulative value of £509,882 were adjusted by that amount (to £404,565), the resultant figure, after allowing for acquisition costs, would be £385,348, as previously explained (supra, para.451). Mr Hermiston however expressed the view that his corrected figure would probably be between £450,000 and £500,000. That statement was not supported by any calculation, and is difficult to reconcile with his evidence that his valuation would be close to Mr Lythgoe's if the supermarket rent were left out of account (Mr Lythgoe having assumed a far higher ERV for the supermarket than Mr Hermiston). Leaving the supermarket out of account, Mr Lythgoe's gross figure would be £249,654 [£509,882-£260,228: 67/8a, p.39]. Mr Hermiston's addition in respect of the supermarket could not be more than the figure of £154,911 which appeared in his November 2003 valuation (and would in reality be less than that, once ground rent, service charges and the shorter unexpired term from 2005 were taken into account), producing (as I have explained) a gross figure of £404,565, equivalent to £385,348 after acquisition costs are taken into account.

"Supermarket trading" valuation
[521] Mr Hermiston expressed the view that a food store was unlikely under any circumstances to act as an anchor to any significant extent, as food shopping was a completely separate activity from non-food shopping [pp.203-206]. On the basis of his view that the Centre was too large for the demand generated by the catchment (and also bearing in mind that the Centre was not in his view well designed), Mr Hermiston considered that, even if the supermarket was an "anchor" tenant, it would not attract many shoppers [pp.84-86; 67/3, para.5.19]. He considered that this view was supported by the lack of success of the marketing of the Premises [67/3, [para.5.11]. He therefore considered that the closure of the Premises had had no effect on the value of the Centre [para.5.12]. This view was shared by no other expert valuation witness. For reasons already explained, I do not accept that the closure of the supermarket has had no effect on the value of the Centre.

Loss of rental income and shortfall in recovery of costs
[522] Since Mr Hermiston did not consider that the closure of the Premises had affected the trading of the Centre or the rental income, he did not consider that there was any loss under these headings. He accepted the methodology adopted by Mr Oswald in calculating the past losses, in the event that the court accepted that there were such losses.

The parties' submissions
[523 ] The parties' written submissions occupied several hundred pages, besides appendices and other material, and were developed further in oral argument. I shall not attempt to summarise them all. Most of the submissions were concerned with the assessment of the evidence, and have been taken into account (even if they have not been expressly discussed) in the drafting of the preceding sections of this Opinion. Some of the submissions on legal matters appear to me to have been superseded by my findings in relation to the evidence. I shall consider here the legal submissions which appear to me to be material.

[524 ] It is convenient to begin by summarising the submissions on behalf of the defenders and third party.

Submissions for the defenders and third party
[525] On behalf of the defenders and third party, it was accepted that clause (TENTH) (Sixteen) of the Sub-Lease ("the keep-open clause") imposed a valid and enforceable obligation, and that that obligation was not complied with from 7 January 1995 to date. Nevertheless, it was submitted that the action should be dismissed. That was on the basis that the pursuers' claim was against the defenders alone, and was based on a breach of the keep-open clause by the defenders.

[526 ] The contractual arrangements under the Sub-Under-Lease constituted a delegation (which might also be described as an assignation or a novation) of the performance of the obligations imposed by the Sub-Lease, with the consent of the pursuers' predecessors as landlords. The defenders' obligation to occupy the Premises had in consequence been discharged. The Sub-Under-Lease contained no provision requiring the defenders to enforce the keep-open obligation against their sub-tenant. The defenders could not be liable for a failure to comply with the obligation to keep open, when the landlords had consented to the occupation of the Premises by a third party, under a Sub-Under-Lease which required the third party to meet the obligations of the defenders in terms of the Sub-Lease, and where the third party had a right to occupy the Premises. The action should therefore be dismissed. Reference was made to W J Harte Construction Ltd v Scottish Homes 1992 S.C. 99, Britel Fund Trustees Ltd v Scottish & Southern Energy plc 2002 S.L.T. 233 and MRS Distribution Ltd v D S Smith (UK) Ltd 2004 SLT 631. It was acknowledged that this issue had not been raised prior to the proof, and that it could have been debated. It was acknowledged that, if the point were well taken, it followed that the proof had been unnecessary. It was submitted however that an issue of law could be raised at any time: Caledonia North Sea Ltd v London Bridge Engineering Ltd, 10 December 1997 (an unreported opinion of Lord Caplan concerned with expenses). The point in time at which the issue was raised was relevant only in relation to the treatment of expenses.

[527] In the course of the argument, it was conceded that the situation did not involve delegation or novation, but it was nevertheless argued to be comparable, in that one contracting party had consented to the performance of the second contracting party's obligation by a third party, resulting in the discharge of the second party's obligation to perform the obligation in question. It was a necessary implication of the pursuers' predecessors' consent to the Sub-Under-Lease that, for its duration, the defenders were discharged from the performance of an obligation which could only be performed by their sub-tenant.

[528 ] It was in addition critical to the pursuers' case that the keep-open clause be fulfilled by a discount supermarket, acting as an anchor store, stocking an attractive range of products which it sold at a more attractive price than other competing facilities. None of these obligations arose under the contract: there was no contractual obligation to trade in a way which would attract people to shop at the Centre. In short, the pursuers' case proceeded on an assumption that the keep-open clause imposed an obligation to trade in the manner and format in which the defenders (or the third party) would ordinarily trade. It did not. Damages had to be assessed on the basis that the contractual obligation was performed in the least onerous manner which was reasonable in the circumstances. On this ground also, the action should be dismissed. Reference was made to Abrahams v Herbert Reiach Ltd [1922] 1 K.B. 477, Costain Property Developments Ltd v Finlay & Co Ltd [1989] 57 P.&C.R. 345, Transworld Land Co Ltd v J Sainsbury plc [1990] 2 E.G.L.R. 255, Morran v Glasgow Council of Tenants Association 1997 S.C. 279 and Mulvenna v Royal Bank of Scotland plc [2003] EWCA Civ 1112.

[529] Furthermore, the expansion of the Centre in 1998 had been an unreasonable act by the pursuers. It was accepted that it was foreseeable that alterations might be effected to the Centre from time to time during the period of a long lease. It was accepted, in particular, that the Sub-Lease specifically contemplated that the Centre might be extended. The decision to enlarge the Centre in 1998, in the circumstances then prevailing, was however commercially unreasonable. It therefore could not have been foreseen by the defenders, and had broken the chain of causation. The decision to expand the Centre had ignored the recommendations of the Graham & Sibbald report of 1993, the fact that the supermarket had been trading intermittently since 1985, and the fact that a number of units had been continuously unoccupied since about 1990. The re-development scheme proposed in the Graham & Sibbald report was available for consideration by the pursuers, and a renunciation of the supermarket lease was on offer.

[530 ] The solicitor advocate for the defenders and third party initially argued that the commencement of the refurbishment works therefore constituted a novus actus interveniens. Reference was made to The "Flying Fish" (1865) 34 L.J.Adm. 113, The "Glendinning" [1943] 76 Ll.L.Rep. 86, The "Fritz Thyssen" [1967] 2 Ll.L.R. 199 and McKew v Holland & Hannen & Cubitts (Scotland) Ltd 1970 S.C.(H.L.) 20.

[531 ] If the period over which any loss might be attributed to the defenders' breach of contract was limited to the period between the closure of the supermarket in January 1995 and the commencement of the refurbishment works in January 1998, there was no evidence before the court which would enable that loss to be quantified, and therefore no basis for an award of damages. The action should therefore be dismissed.

[532 ] In the course of the argument, the solicitor advocate for the defenders and third party departed from the contention that the refurbishment works constituted a novus actus interveniens, and submitted that the issue could instead be approached as one of mitigation of damage, or of remoteness. Even if the enlargement of the Centre did not constitute a novus actus interveniens, the pursuers had in any event failed in that respect to mitigate their loss. Any loss attributable to the construction of the two additional units was therefore not recoverable. Reference was made to Clippens Oil Co Ltd v Edinburgh and District Water Trustees 1907 S.C. (H.L.) 9. Alternatively, losses consequent upon the refurbishment were too remote to be recoverable. The unreasonable actings of the pursuers in undertaking the refurbishment in a manner which ignored relevant advice was not within the reasonable contemplation of the defenders. Reference was made to Hadley v Baxendale (1849) 9 Ex. 341, and to the decision of the Court of Appeal in Jackson v Royal Bank of Scotland plc [2005] U.K.H.L. 3, [2005] 1 W.L.R. 377. If these arguments were accepted, damages should be assessed as if the refurbishment had not taken place.

[533 ] Fair notice of the arguments had been given by the averment by the third party that "the re-development of the Centre carried out by the pursuers has had a negative impact on the viability of the Centre". Evidence in support of that averment had been admitted without objection.

[534 ] In response to a contention on behalf of the pursuers that the defenders had consented to the refurbishment works, it was accepted that their agreement had been required, and had been given, for the works carried out on the Premises. That amounted to the erection of columns to support the roof. That did not affect the position in relation to damages.

[535 ] In relation to causation, the court had to be satisfied that the closure of the supermarket was not merely a "but for" cause of the losses claimed, but was the effective cause of those losses. Reference was made to the decision of the Court of Appeal in Banque Braxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] A.C. 191, and to Thames Water Utilities Ltd v London Regional Transport [2004] EWHC 2021 (TCC). The approach of Mr Oswald and Mr Lythgoe, based on their "as is" and "supermarket trading" valuations, was a "but for" approach: they sought to establish what the position would have been in the Centre but for the closure of the supermarket. They accepted that there were a number of other factors which had also influenced the position in the Centre over the relevant period, such as changes in demographics and in shopping habits. The balance of the evidence suggested that it was the latter factors which were the cause of the decline of the Centre, and that whether the supermarket was open or closed was not an effective cause of loss: it had had no effect on the value of the Centre (other than possibly a minor effect related to perceptions of the Centre).

[536] In relation to the quantification of damages, it was submitted that damages should be assessed as at the date of closure, for the reasons put forward by Mr Nisbet and Mr Hermiston. The resultant loss was nil. It was further submitted that the calculations carried out by Mr Oswald and Mr Lythgoe made no allowance for the possibility that the supermarket might re-open in the period before the Sub-Lease expired (i.e. before 2033).

[537 ] Further, it was submitted that the court's ability to deal with the issue of quantification was severely hampered by the expert witnesses' use of computer programming to generate figures. There was no formula before the court which would enable it to calculate its own figure, once the relevant factors - such as rental values, voids and yields - had been determined.

[538 ] The court should however reject the proposal, made by counsel for the pursuers, that the court should make findings in relation to those factors and then put the case out for a further hearing for the purpose of directing that the appropriate computations should be carried out. The various expert witnesses had used different computer programmes. It was clear that the experts would arrive at different valuations even if the relevant factors were determined by the court. The court was not in any event in a position, on the evidence, to make precise findings as to the relevant factors. The court might be able to replicate the manual calculations carried out by Mr Nisbet and Mr Robeson, and the calculations carried out by Mr Hermiston using a computer but disclosed in his report; but the court should not be required to do so. The pursuers' case had in any event closed. To re-open the pursuers' case, to enable a re-calculation to be carried out on the basis of the court's directions, would involve the admission of further evidence. That should not be allowed, except with the consent of all parties. The defenders and third party did not consent. If the court was unable to arrive at a figure for damages on the basis of the evidence led, then the pursuers' case failed. The court could however award damages using a broad axe, as in Martin v Bell Ingram 1986 S.L.T. 575. Reference was also made to Duncan v Gumleys 1987 S.L.T. 729.

[539 ] Finally, the court was invited to have the case put out By Order for the question of interest to be discussed, once damages (if any) had been assessed.

Submissions for the pursuers
[540] On behalf of the pursuers, it was submitted that the court should not entertain the first argument advanced on behalf of the defenders and third party, namely that the effect of the pursuers' consenting to the Sub-Under-Lease had been to discharge the defenders of their obligation to comply with the keep-open clause. No notice had been given of the argument, and it had no basis in the pleadings. It was inconsistent with the position previously adopted on behalf of the defenders and third party, notably in the minutes which they had lodged prior to the proof, in which they had conceded that the keep-open obligation was valid and enforceable. Reference was made to the reasons which I had given on 31 March 2005 (recorded in a Note of that date), when ruling on an objection by the pursuers to a line of evidence sought to be adduced on behalf of the defenders and third party which had been directed towards the same argument. Following that ruling, the defenders and third party had decided against seeking to amend their pleadings so as to introduce the point. If fair notice had been given of the argument, it would have been possible for the pursuers to investigate the facts and circumstances surrounding the creation of the Sub-Under-Lease and to consider leading evidence about those matters. The issue had not however been raised at the proper time. It would be prejudicial to the pursuers if the argument were now to be considered.

[541 ] As to the merits of the argument, it was based on a misunderstanding of the law relating to the variation or novation of contracts. Delegation, in the sense of novation, related to the creation of a new contract. That had not happened, if for no other reason than that the Sub-Lease remained in force for a longer period than the Sub-Under-Lease. Any suggestion that the defenders were no longer party to the Sub-Lease flew in the face of the defenders' and third party's pleadings. The contract between the pursuers and the defenders constituted by the Sub-Lease was not altered by the defenders' grant of the Sub-Under-Lease. If there was any substance to the contrary argument, it would subvert the whole of the law relating to the effect of the creation of a sub-tenancy. All that had happened was that the third party had undertaken to the defenders to perform the obligations of the defenders for a given period of time. The obligations under the principal lease remained on foot, and the pursuers remained entitled to sue the defenders for breach of the keep-open obligation.

[542 ] The decision in the Britel case was distinguishable in two respects. First, the terms of the lease in that case were materially different, and contemplated the consequences of a sub-lease. Secondly, the remedy sought was not damages but specific performance. In the absence of provision to the contrary, a person who had undertaken an obligation ad factum praestandum remained liable in damages for the non-performance of that obligation notwithstanding that he had entered into a sub-contract for the performance of that obligation by a third party, with the consent of the person to whom the obligation was owed. A landlord's consent to a sub-tenancy (where consent was required) bore on the identity of the person by whom the obligation to occupy could be performed. It had the result that performance by the sub-tenant would satisfy the requirements of the principal lease. It did not imply that non-performance by the sub-tenant would affect the landlord's rights against the principal tenant. Reference was made to Trotter v Dennis (1770) Mor.15282, Law v Knowles (1796) Mor.13873, Ronaldson, Petitioner, 18 December 1812, F.C., Skene v Greenhill (1825) 5 S. 26, British Waggon Co v Lea & Co (1879) 5 Q.B.D. 149, Hornby v Cardwell (1881) 8 Q.B.D. 329, Nokes v Doncaster Amalgamated Collieries Ltd [1940] A.C. 1014, Salaried Staff London Loan Co v Swears & Wells Ltd 1985 S.C. 189, Retail Parks Investments Ltd v The Royal Bank of Scotland plc (No.2) 1996 S.C. 227 and Highland & Universal Properties Ltd v Safeway Properties Ltd 2000 S.C. 297.

[543 ] In relation to the argument that the Sub-Lease imposed no obligation to trade as an anchor store or as a discount supermarket, or to sell an attractive range of products at prices which would be attractive to local residents, the pursuers' case did not depend on the court accepting that the defenders were required to do things which they were not required to do. The commercial realities which formed the background to the undertaking of the keep-open obligation had to be taken into account. It was not being suggested that the keep-open clause imposed an obligation to trade as an anchor store, but rather that, if the supermarket was open, it would in fact act as an anchor store. It was not being suggested that the clause imposed an obligation to adopt a specified form of trading, but rather that any reasonable manner of operating a supermarket in that location would involve an offer which was appropriate to the area. The Sub-Lease related to particular premises in a particular location. It would not make sense to construe the keep-open obligation as permitting a form of trading which made no commercial sense as an attraction to customers in that context. The evidence (e.g. of Mr Poulton) was that supermarket operators such as the defenders and Kwik Save regularly traded in "challenged" areas, in a manner which made commercial sense in locations of that kind. The evidence (e.g. of the local residents) was that a supermarket operated in that way would attract customers in Whitfield. The evidence also demonstrated that convenience was more important than price for a store in a neighbourhood centre. It was not difficult to understand what an obligation to trade as a supermarket involved. The acceptance by the defenders and third party that the obligation was valid and enforceable implied that the obligation was not lacking in certainty and that it was capable of being enforced by an order for specific performance. It was fanciful to imagine that a supermarket operator trading from the Premises would choose to stock goods which were unattractive to the local catchment, or would choose to charge unrealistic prices. It was clear from Mr Poulton's evidence that it was unrealistic to imagine an operator doing the bare minimum necessary to keep the store open. Although there was no precise template which must be followed, it was not difficult to understand what the operation of a supermarket in a commercially realistic manner, in an area like Whitfield, would involve. The keep-open clause required the defenders to trade from the Premises in such a manner. Reference was made to Paula Lee Ltd v Robert Zehil & Co Ltd [1983] 2 All.E.R. 390.

[544 ] The contentions that the refurbishment of the Centre constituted a novus actus interveniens, or a failure by the pursuers to mitigate their loss, or that the consequent losses were too remote to be recoverable, were equally contentions of which no notice had been given. The underlying proposition, that the refurbishment was an unreasonable act in commercial terms on the part of the pursuers, had not been focused in the pleadings, and had not been put in those terms to the witnesses. Although legitimate lines of cross-examination had been pursued concerned with the effect of increasing the number of units on the number of vacancies, and the effect of the refurbishment on service charges and hence on the attractiveness of the Centre to prospective tenants, those lines were directed towards the assessment of damages. If fair notice had been given that there was an issue as to whether the decision to carry out the refurbishment had been commercially reasonable, the pursuers would have approached the leading of evidence differently, so as to focus on that issue. For example, the requirements of the Council (whose consent to the refurbishment was required, as ground landlords), and the conditions of grant finance, would have had to be considered. The expert witnesses might have been asked whether it would have been advisable to adopt a different means of blocking the escape route between the Centre and the library. There might have been planning issues, if (for example) a high wall had been proposed as an alternative to additional units. The pursuers would be prejudiced if these arguments were now allowed to be pursued. The position had been different in the Caledonia North Sea case, where the issues raised at the end of the case had been purely legal points. In the present case, the issue depended on an assessment of the reasonableness of the pursuers' conduct. In order for the pursuers to have been afforded a proper opportunity to address that issue, it ought to have been properly focused and put to witnesses directly.

[545 ] In so far as some evidence bearing on this issue had been elicited indirectly, without the question of unreasonable behaviour being raised overtly, the evidence did not support the contention that it had been unreasonable to carry out the refurbishment works in the way they were done. There was no doubt that from the point of view of security - one of the objectives of constructing the two additional units - the improvement works had been successful. If they had not been carried out, the defenders would doubtless be arguing that the failure to carry them out had been unreasonable, having regard to the advice given to the pursuers at the time.

[546 ] The contention that the refurbishment works constituted a supervening event in any event assumed that the breach of contract pre-dated the refurbishment, rather than continuing afterwards. The contention that the pursuers had failed to mitigate their loss depended on the same assumption. The onus of establishing a failure to mitigate would also lie on the defenders and third party, who had no pleadings relating to the issue, and had failed to discharge the onus. In so far as the argument about mitigation of loss was based on the Graham & Sibbald report, that report had proceeded on the basis that no supermarket was trading (or was envisaged to be trading). The re-opening of a newly fitted-out supermarket by Shoprite, some months later, had changed the position. It should also be borne in mind that the author of the report, although available, had not been called as a witness on behalf of the defenders and third party.

[547 ] In relation to the contention relating to remoteness, it was submitted that the defenders' breach of the keep-open clause was the proximate cause of the losses suffered by the pursuers. The losses claimed were the direct consequence of the breach. If the pursuers were wrong about that, the losses were in any event indirectly due to the defenders' breach on contract. Under clause (FIFTEENTH) of the Sub-Lease, the defenders were liable for:

"all loss and injury suffered by the Landlords as a result, direct or indirect, of any contravention of the obligations imposed on the Tenants".

The tenants under the Sub-Lease had thus agreed to a potentially wide-ranging liability for losses flowing from any breach on their part: the inclusion of the term "indirect" imposed liability on the tenants for all losses caused by the breach of their obligations, whether the causal connection was direct and proximate or not. Reference was made to Graham v Stevenson, February 21, 1792, Hume's Decisions, Bell v Greer (1891) 8 Sh.Ct.Rep. 215, Wiseman v Alley (1891) 9 Sh.Ct.Rep. 254, Smith v Henderson (1897) 24 R. 1102, Mickel v McCoard 1913 S.C. 896 and Blair Trust Co v Gilbert 1940 S.L.T. 322.

[548 ] So far as the argument concerning remoteness founded on the effect of increases in property values since the first date when the keep-open clause was breached, the obligation to keep open had applied every day during the currency of the Sub-Lease. The breach had been deliberately persisted in every day since it first occurred. It was not to be expected that property values would remain static. If the result was that the extent of the landlord's loss was increased by a rise in property values during the period of the breach of contract, that was a risk that the tenant had assumed. The tenant could avoid that risk by opening the premises in compliance with his obligation.

[549 ] So far as the argument founded on the improvements to the Centre, it was within the reasonable contemplation of the parties to the Sub-Lease that the layout of the Centre might undergo change during its 63 year duration. That was also the position when variations of the Sub-Lease were agreed in 1993 [67/20].

[550 ] Moreover, the Sub-Lease expressly contemplated the possibility that the Centre might be extended. Clause (FIRST) defined the expression "whole subjects" as meaning the area of ground let to the pursuers' predecessors under the Ground Lease "together with the whole buildings and others erected or to be erected thereon". The defenders' obligations under clause (EIGHTH) in relation to common charges were defined by reference to the "whole subjects". Furthermore, clause (EIGHTH), after referring to "the whole subjects and the shopping development contained therein and thereon", contained a declaration applicable

"in the event of the Landlords deciding to extend the said Shopping Development at Whitfield, Dundee, by erecting on other subjects adjacent to and situated to the east of the whole subjects other shop units ... and another Supermarket ... and ... extending or enlarging the service yard".

In the event, the two additional units constructed in 1998 had been built entirely, or almost entirely, within the area let under the Ground Lease. The provisions referred to made it clear that the parties to the Sub-Lease envisaged that the shopping centre might be extended, and that the surroundings of the Premises were therefore not necessarily static.

[551 ] Clause (ELEVENTH) (Three) of the Sub-Lease permitted the landlords

"to use, erect, re-build or alter any land or buildings adjoining above or beneath or under or near to the premises".

The Sub-Lease therefore contemplated that the Centre might be re-furbished and improved. The defenders had in any event consented to the refurbishment works (which had involved the erection of roof supports inside the Premises), and had continued afterwards to breach their contractual obligations. This might amount to personal bar in relation to the argument now advanced on their behalf.

[552 ] So far as the argument founded on the dynamic nature of the retail market, the evidence established that that was in the contemplation of the tenants. Whether one looked at the position as at the commencement of the Sub-Lease, or as at the date of the assignation to the defenders, there was ample evidence that the tenant would have been aware that there might be times when the development did very well, and also times when it might be in decline. It was clear that any retail food tenant would be aware, when entering into a long lease, that circumstances would inevitably change during the term of the lease. They entered such leases with their eyes open. They ought not to escape their obligations simply because the market changed in such a way that the performance of their obligations was no longer in their commercial interests. Reference was made to Balfour Beatty Construction (Scotland) Ltd v Scottish Power plc 1994 SC (HL) 20.

[553] Finally, in relation to these matters, there was in any event evidence on the basis of which the court could assess damages down to the date of refurbishment.

[554 ] In relation to causation, it was submitted that issues of causation in a contractual context fell to be answered by the application of judicial common sense: Galoo v Bright Grahame Murray [1994] 1 WLR 1360. The approach adopted by the pursuers in the present case was similar to that adopted in the Costain and Transworld cases. On the evidence, the supermarket at the Premises was intended to be, and did act as, an anchor store for the development. The keep-open obligation was intended to secure that effect. If the supermarket was trading, it would have a sufficient catchment to cause the anchor effect for which the pursuers contended. The continued breach of the keep-open clause had therefore caused the pursuers to suffer the losses of income claimed in respect of the past, and a diminution in the present capital value of the investment.

[555] In relation to quantification, it was submitted that the court's general approach should be to award the pursuers such compensation as would put them in the position in which they would have been but for the defenders' breach of contract: A/B Karlshamns Oljefabriker v Monarch Steamship Co Ltd 1949 SC (HL) 1. The argument that the supermarket might re-open in the period to 2033 was another argument which had been raised by the solicitor advocate for the defenders and third party for the first time in closing submissions. There was no basis for the argument in the pleadings. The possibility had not been raised in the discussions between the expert witnesses. If the point had been focused before the proof, the pursuers would have approached the leading of evidence differently. The line had not been pursued in cross-examination of the pursuers' witnesses. The matter was in any event one lying peculiarly within the knowledge of the defenders. They had not asserted in their pleadings or in evidence that they would re-occupy. Mr Poulton's evidence had been that "pigs might fly" before the third party would re-occupy the Premises. Mr Clapham's evidence was that the defenders had repeatedly made it clear that they would never trade from the Premises. There was no evidence to suggest the contrary. On the evidence, there was no prospect of the supermarket re-opening during the currency of the Sub-Lease.

[556] It was further submitted that, if the court considered it necessary for additional computer calculations to be carried out in order to arrive at a precise sum based on the court's findings as to relevant assumptions (as to yields, voids and so forth), the case could be put out for a hearing By Order, so that the experts could re-cast their figures in accordance with the court's directions. Commercial court procedure was sufficiently flexible to allow that to be done: reference was made in that regard to Rule of Court 47.15.

[557 ] In relation to interest, it was submitted that the damages under the first conclusion (for the loss in capital value) should bear interest at the judicial rate from the date as at which they were assessed: in other words, the date of the valuations on the basis of which the diminution in capital value was assessed, and the date as at which the historical loses in revenue were calculated. In relation to the historical losses, interest should also be awarded in respect of the period over which those losses had occurred, at half the judicial rate. Interest could be awarded on that basis under section 1(1) of the Interest on Damages (Scotland) Act 1971.

Discussion
[558 ] In this section I shall consider the legal points raised in the foregoing summary of the parties' legal submissions.

Discharge of the defenders' obligations under the keep-open clause
[559 ] In considering the submission that the defenders' obligation under Clause TENTH (Sixteen) of the Sub-Lease "to keep the premises open" was discharged as a result of the grant of the Sub-Under-Lease, with the consent of the pursuers' predecessors (discharged, that is to say, for the duration of the Sub-Under-Lease), the first question is whether the argument is one which it is open to the defenders and third party to advance.

[560 ] In that regard, it is necessary to bear in mind that this is a commercial action. In an ordinary action, although it is necessary to give fair notice of issues of fact, it is not customary under our practice to plead matters of law beyond the terms of the pleas-in-law. Although specific pleas are necessary to give notice of certain legal issues, such as pleas of prescription, limitation, contribution and contributory negligence, a plea to the relevancy of the pursuers' averments is in practice usually so general as to give no real indication of the issue to be raised. The position is however different in some respects in a commercial action, where, although technicalities of pleading are avoided (cf Laing Management (Scotland) Ltd v John Doyle Construction Ltd [2004] BLR 295 at paragraph 20), one of the principal objectives of the procedure is the disclosure of the parties' positions and the clarification at an early stage of the issues in the case, including the issues of law. Although these matters need not be addressed solely by the summons and defences, since other means may be more appropriate, the Rules of Court governing commercial procedure, and the relevant practice notes in force from time to time, are intended to ensure that the issues, including issues of law, are identified by one means or another.

[561] The present case began as an ordinary action. When it was transferred to the commercial roll, no statement of issues was lodged. The case was however appointed to a preliminary hearing (of which there were six continuations), to which paragraph 11(1) of Practice Note No.12 of 1994 (which was in effect at that time, but has since been revoked and replaced) was applicable:

"It is intended that there should be a serious discussion of the issues in the cause and the steps necessary to resolve them, and counsel or solicitors appearing at the hearing will be expected to be aware of the issues and the principal contentions on each side and to be in a position to inform the court of them ... The court will expect to be informed of the position in that respect".

The pleadings had undergone some adjustment prior to the transfer of the case to the commercial roll. Further adjustment was then allowed during October and November 1999, and again between January and July 2004. In relation to the pleadings, both the relevant Rules of Court (eg Rules 47.3(2) and 47.6(1)) and the Practice Note (eg paragraphs 3(1) and 6(1)) make clear that it is important that the legal grounds on which it is intended to rely should be identified.

[562 ] In the defences in the present case, as adjusted, the defenders make averments in Answer 2 which set out the basis of their case against the third party:

"In terms of Clause 4(1) of the Sub-Under-Lease, Shoprite agreed to fulfil the obligations of a non-monetary nature undertaken by the defenders in terms of the Sub-Lease. Further, in terms of Clause 9(1) of the Sub-Under-Lease, Shoprite accepted that its obligations under the Sub-Under-Lease, including the burdens and conditions governing its right of occupancy of the Subjects were the same as those incumbent upon the Defenders under the Sub-Lease ... Shoprite Limited assigned their interest in the subjects to Kwik Save Stores Limited ... On or about January 1995 Kwik Save Stores vacated the subjects ... They remain obliged as tenants of the subjects to perform the obligation incumbent upon them, contained in both the Sub-Lease and the Sub-Under-Lease."

It is averred in Answer 3:

"Explained further and averred that esto the defenders are in material breach of their obligations, which is denied, then Kwik Save Stores Limited are similarly in breach of their obligations in terms of Clause (TENTH) (Sixteen) of the Sub-Lease ... Accordingly, esto the defenders are in material breach of contract with the pursuers and are liable for any loss and damage suffered by them, which is denied, the defenders are entitled to be indemnified therefor by the Third Party".

These averments do not suggest, and do not on their face appear to be consistent with the suggestion, that the defenders had no means of compelling their sub-tenants to comply with the keep-open clause. In any event, that suggestion is not made anywhere in the defences.

[563 ] In Answer 3, it is admitted that in the Sub-Lease the expression "the tenants" refers to the defenders. Nothing is made of its also referring to sub-tenants. One issue is raised concerning the construction of the Sub-Lease:

"Explained and averred that on a proper analysis and construction of the provisions of the Sub-Lease, there is no obligation on the defenders to keep the subjects open for retail trade. In the course of negotiating missives for the Sub-Under-Lease, Shoprite sought deletion of Clause SIXTH of the Sub-Lease ... This Clause provided that, inter alia:

'The Tenants shall take possession of and use and occupy the subjects for the foregoing purpose (i.e., a supermarket) from [the date of entry] and shall within three months thereafter commence trading therefrom and shall continue to so use and occupy the subjects and trade therefrom throughout the whole period of this Sub-Lease'.

The then Landlords of the development, Ravenseft, agreed to delete this Clause ... Clause (SIXTH) was deleted from the Sub-Lease ... In the absence of Clause (SIXTH), Clause (TENTH) (Sixteen) imposes no positive obligation on the defenders to trade from the subjects."

The point made there is that, because of the deletion of clause SIXTH, clause TENTH (Sixteen), on a correct construction of the Sub-Lease, imposes no obligation on the defenders to trade from the subjects. That is an entirely different argument from the argument that the landlord's consent to the grant of the Sub-Under-Lease had the effect of discharging the defenders from the obligation imposed by Clause TENTH (Sixteen) for the duration of the Sub-Under-Lease (or, perhaps, excusing the defenders from performance of that obligation). The effect of the agreement to remove Clause (SIXTH) was considered in the rectification action: the principal argument in that action was that Clause (TENTH) (Sixteen) ought also to have been removed. No argument based on the absence of Clause (SIXTH) was advanced in the closing submissions in the present case. The defences accordingly give no notice of the argument now sought to be advanced.

[564 ] Nor is any such notice given by the answers for the third party. They contain nothing bearing on the issue, other than an admission that the third party is obliged to comply with clauses 4(1) and 4(9)(1) (mistakenly referred to as 9(1)): there is no clause 9(1)) of the Sub-Under-Lease): the former provision requires the sub-tenant (i.e. Kwik Save) to fulfil the obligations of a non-monetary nature undertaken by its landlord (i.e. the defenders) under the Sub-Lease, while the latter provision incorporates the terms of the Sub-Lease into the Sub-Under-Lease and requires the sub-tenant to comply with all the obligations imposed by the Sub-Lease.

[565 ] An important stage in commercial procedure is the procedural hearing. In relation to such hearings, Rule 47.12(1) provides:

"Not less than three days before the date fixed ... for a procedural hearing, each party shall -

(a) lodge a written statement of his proposals for further procedure which shall, inter alia, state -

...

(iii) what the issues are which he considers should be sent to debate or proof."

The Practice Note stated, in paragraph 12(1):

"The procedural hearing is also a serious hearing at which parties will be expected to be in a position to discuss realistically the issues involved in the action and the method of disposing of them".

In the present case, Lord Clarke fixed a procedural hearing to take place on 29 June 2004, and appointed parties to lodge the documents prescribed in Rule 47.12(1). The third party did not comply with that requirement: it lodged a note of proposals for further procedure which merely stated: "The third party seeks a proof before answer in respect that there are matters of fact and opinion on which the court should hear evidence" [25].

[566 ] The note of proposals lodged on behalf of the defenders [24] was more informative. The first part of it was headed, "Main issues of fact and law in the action", and stated:

"1. The parties are agreed as to the documents setting out the terms of the Sub-Lease between the pursuers and the defenders and the terms of the Sub-Under-Let by the defenders to the third party.

2. It is accepted by all parties that the subjects of the Sub-Lease and Sub-Under-Lease are not trading as a supermarket during the usual hours of business.

3. The parties are in dispute over whether the terms of the Sub-Lease reflect the parties intentions in contracting for the lease.

4. Parties are in dispute over whether there is a valid obligation for the defenders (and thereby the third party) to keep trading from the premises.

5. The parties are in dispute over the effects of closure of the premises and the causal link between the closure and the losses claimed by the pursuer. The defenders and the third party aver that the failure to let units in the development is due to fundamental problems with the design of the development, its location, competition from other developments in the vicinity and the composition of potential customers rather than the closure of the supermarket.

6. Similarly the defenders and the third party argue that the level of rent chargeable for units within the development which are let is primarily determined by the factors listed in the preceding paragraphs.

7. The defenders aver that the pursuer has not suffered any actual loss due to the claimed diminution in the nominal level of capital value of its interest in the Sub-Lease.

8. The parties are in dispute over the value of any loss to the pursuer."

[567 ] I note that paragraph 4 asserted that there was a dispute over whether there was a valid obligation on the defenders "(and thereby the third party)" to keep trading. The argument now advanced does not appear anywhere in the document, except insofar as it might lie behind what was stated in paragraph 4. The connection made there between the existence of an obligation lying on the defenders and a similar obligation lying on the third party implies however that the author of the document must have had a different argument in mind.

[568 ] In response, the pursuers lodged a note [40] which narrated that it had been the pursuers' understanding, following the conclusion of the rectification action, that it was accepted by the defenders and the third party that clause (TENTH) (Sixteen) contained a valid keep-open obligation. The note continued:

"1. The pursuers' preference is that the court should fix a proof before answer in respect of the quantum of damages arising from the closure of the premises in breach of the terms of clause (TENTH) (Sixteen) of the Sub-Lease but upon receipt of the respective notes of proposals for the defenders and the third party there has arisen an issue which it is considered appropriate to draw to the attention of the court.

...

4. Despite the failure of the attempt at rectification, both the defenders and the third party continue to maintain in their pleadings in this action that the Sub-Lease does not contain a valid keep open obligation.

...

6. In the circumstances the pursuers respectfully submit that, unless the defenders and the third party now concede that the keep open obligation in clause (TENTH) (Sixteen) is valid and that the defenders are in breach thereof, that it would be appropriate that the court fix a hearing on procedure roll to discuss whether or not clause (TENTH) (Sixteen) does contain a valid keep open obligation. If the court concludes that there is no such valid obligation, this would avoid the expense of a proof on quantum of damages."

[569 ] At the procedural hearing, on 29 June 2004, Lord Clarke made an order in the following terms:

"Ordains the Defenders and Third Party to lodge in process not later than 4:00pm on Wednesday 28 July 2004 a written statement as to whether or not they accept that clause (tenth) (sixteen) of the Sub-lease is valid and enforceable."

Lord Clarke continued the procedural hearing for that to be done. The defenders then lodged a note in the following terms:

"The defenders accept that clause (TENTH) (Sixteen) is a valid and enforceable keep open clause" [44].

The third party lodged a note in similar terms [43].

[570 ] Against the background which I have described, a note in such unqualified terms could only reasonably be construed as a judicial admission conceding the point which had been raised in Answer 3 of the defences ("[T]here is no obligation on the defenders to keep the subjects open for retail trade ... Clause (TENTH) (Sixteen) imposes no positive obligation on the defenders to trade from the subjects") and in paragraph 4 of their note of proposals. There therefore remained no issue as to the validity or enforceability of the keep-open clause. At the continued procedural hearing, on 3 August 2004, Lord Clarke accordingly allowed parties a proof before answer rather than appointing a debate.

[571 ] When the case was transferred to myself shortly prior to the proof, and came before me for a pre-proof hearing on 18 February 2005, my initial enquiry was as to the issues at the proof, and in particular whether the sole issue remaining was the quantification of the loss, if any, suffered by the pursuers. Although my own note of that initial part of the hearing is limited, it records the solicitor advocate who then appeared for the defenders as confirming that the only issue, as between the pursuers and the defenders, was the quantification of damages. I was subsequently provided with a fuller note taken by the solicitor for the pursuers, the accuracy of which has not been disputed. It records counsel for the pursuers as stating that this was a proof on quantum, and the solicitor advocate for the defenders as responding that, although the proof had not so far been labelled a proof on quantum, as there were issues of causation that had been raised, there was no dispute that there was a breach of contract, and the issue was whether there was any loss arising from the breach, and if so, what it was. The solicitor advocate for the third party did not take issue with that explanation. The only issue of law arising from the relationship between the Sub-Lease and the Sub-Under-Lease, as explained to me at the hearing, concerned the extent of the third party's liability to indemnify the defenders, given the difference between the duration of the Sub-Lease and that of the Sub-Under-Lease: a point which is no longer live.

[572 ] Finally, for the sake of completeness, I should mention that something was said about the issues in the case by the solicitor advocate for the defenders and third party during the evidence of Mr Clapham. Correcting a statement which he had made the previous day that the only issue between the parties was the date of valuation, he said that there were "issues of causation and remoteness ... as well as interpretative points on the lease" [pp.575-576]. There was no suggestion that an issue arose as to whether the obligation imposed by the keep-open clause had been discharged.

[573 ] The argument now advanced emerged for the first time on the ninth day of the proof, when objection was taken to a question put to Mr Thomson by the solicitor advocate for the defenders and third party. He replied to the objection on the basis that the question was relevant to the argument now advanced. I upheld the objection, for reasons which I explained in a Note dated 31 March 2005. In short, I concluded that, against the background which I have narrated, no issue had been raised to which the question to which objection had been taken, or the line of evidence, was relevant. I made it clear that the only question arising at that stage was as to the admissibility of evidence: the court was not at that stage taking any decision as to whether it would be open to the solicitor advocate for the defenders and third party to advance the same argument, as to the effect of the Sub-Lease and the Sub-Under-Lease, at the conclusion of the proof.

[574 ] Following my ruling on the objection, the solicitor advocate for the defenders and third party said that he would consider with his clients whether to seek leave to amend the pleadings so as to introduce the issue. Counsel for the pursuers responded that, if such an amendment were to be allowed, he would be willing to agree to a debate on the issue, so as to avoid the expense of further proof, if the defenders' and third party's argument were to be accepted by the court. After taking instructions, the solicitor advocate for the defenders and third party informed the court on 1 April 2005 that he would not be seeking to amend the pleadings.

[575 ] Considering the submissions now presented on behalf of the defenders and third party against the background which I have described, it appears to me that the problem is not merely that the court, and the pursuers, were entitled to expect that the point now raised would have been identified at an earlier stage. If that had been done, it is clear that the pursuers would then have moved the court to fix a debate, rather than incurring the expense of a long and, if the argument is well-founded, unnecessary proof. It appears to me that the court would almost certainly have acceded to such a motion. If, however, the only prejudice to the pursuers occasioned by the lateness of the issue being raised were financial - in other words, the expense of the proof - such prejudice could in principle be remedied by an award of expenses. If that were the only objection to the court's now entertaining the argument, I would not regard it as conclusive: in the absence of any overriding consideration requiring it to do otherwise, it is desirable that the court should proceed on a correct view of the legal position, even if the correct analysis is advanced late in the day. In my view, however, the present case raises a more serious problem. As I have explained, the notes lodged on behalf of the defenders and third party, accepting that the keep-open clause was valid and enforceable, were unqualified judicial admissions. In their context in the proceedings, and having regard to the purpose for which they were ordered - namely, to enable the court to know whether there was any issue of law which could appropriately be determined in advance of a general proof of the pursuers' claim for damages - they cannot be restrictively construed so as to preserve any contention which, in that context, could not properly or realistically have remained undisclosed. In particular, the submission that the defenders' obligation to comply with the keep-open clause by occupying the Premises had been discharged is not in my opinion consistent with an unqualified admission to the court that the keep-open clause was valid and enforceable.

[576 ] In these circumstances, I conclude that it is not open to the defenders and third party to advance this argument.

[577 ] In any event, I consider that the argument is mistaken. In general, and subject to any agreement to the contrary effect, the grant of a sub-lease does not release the principal tenant from his obligations. The distinction, in that respect, between a sub-lease and an assignation was made clear in Skene v Greenhill, and is explained in Rankine, Leases (3^rd edition), at pages 171 and 193 to 199. As Rankine states, at page 195:

"A sublease has not the effect of discharging the lessee from liability to the lessor, nor the lessor from liability to the lessee, since the original contract continues in full force, and cannot be altered by the operation of the sublease."

The point is illustrated by the case of Hornby v Cardwell, cited by Rankine, which concerned the lease of a house by the plaintiff to the defendant on terms which included a repairing covenant, and a sub-lease by the defendant to the third party which was subject to all the terms of the principal lease. There having been a failure to comply with the repairing covenant, the plaintiff recovered damages from the defendant, who was in turn indemnified by the third party. Brett LJ observed (at page 336) that the plaintiff could not sue the third party directly, as there was no privity of contract between them (as would also be the position under Scots law, unless the terms of the sub-lease were such as to confer on the landlord under the principal lease a ius tertii). It was not, and could not have been, suggested that the effect of the sub-lease was to release the principal tenant and to leave the plaintiff without any remedy. On the contrary, where a lease imposes obligations on the tenant the performance of which requires possession of the premises, the possibility of a sub-lease depends on the view that the tenant's contractual obligations can be duly performed by the sub-tenant. In other words, adapting the language used by Viscount Simon LC in Nokes v Doncaster Amalgamated Collieries Ltd at page 1019, the lease binds the tenant to produce a result, not necessarily by its own efforts, but, if it prefers, by vicarious performance through a sub-tenant.

[578 ] That general position is not affected by whether the grant of a sub-lease is conditional upon the consent of the landlord. Where such consent is required, performance of the tenant's obligations plainly cannot be effected vicariously by a sub-tenant, unless consent is granted; but, where consent is granted and a sub-lease is entered into, that is no reason why the principal tenant should be released from his obligations to the landlord, any more than in the case where consent was not required. On the contrary, as is stated in Paton & Cameron, Landlord and Tenant, at page 167:

"[T]he granter of a sublease remains the tenant of his landlord, and their relationship is unchanged."

[579 ] There is in my opinion nothing in W J Harte Construction Ltd v Scottish Homes or MRS Distribution Ltd v D S Smith (UK) Ltd which is inconsistent with the foregoing discussion. Those cases are concerned with the novation or delegation of contracts, not with the effect of sub-contracts. As the solicitor advocate for the defenders and third party conceded during the argument, there is no question of novation in the present case, or of delegation (in the sense of a substitution of one obligee for another).

[580 ] The authority on which the solicitor advocate for the defenders and third party principally relied was the decision of Lord Macfadyen in Britel Fund Trustees Ltd v Scottish & Southern Energy plc. The case concerned the breach of a keep-open obligation. The tenant had re-opened following the grant of an interim order compelling it to do so. The question before Lord Macfadyen was whether a final order for specific performance, requiring the tenant to keep open, should include a proviso that on a lawful subletting the order would cease to apply. Lord Macfadyen considered that such a proviso, restricted to the period of the subletting, would be appropriate. In that regard, his Lordship said, at page 227:

"I accept without hesitation counsel for the pursuers' submission that the granting of a sublease does not bring the contract of lease to an end, or sever the contractual relationship between the landlord and the tenant. That simply reflects the fundamental distinction between subletting and assignation of the tenant's interest in the lease. But it does not seem to me to exclude the possibility that, on a sound construction of an obligation imposed on the tenant by the lease, the content of the obligation varies according to whether, on the one hand, the tenant is in actual occupation or, on the other hand, there is a subtenancy in subsistence."

That respectfully appears to me to be correct: although in general, as Rankine said, the original lease continues in full force, and cannot be altered by the operation of a sublease, it is possible that the original lease may contain provisions which are to apply in the event that a sublease is granted, and that the sublease may therefore, under the terms of the lease itself, have an effect on the obligations of the parties to it.

[581 ] Lord Macfadyen continued (ibid):

"The point may be illustrated by reference to the tenant's obligation to occupy the subjects of let. In the lease in the present case that obligation is to be found in cl 5 of part IV of the schedule. It is not expressly qualified in any way in relation to any period during which the leased premises are lawfully sublet. Yet it seems to me to be inescapable that during the subsistence of the sublease the subtenant will occupy the leased premises to the exclusion of the tenant. It would, in my view, make no sense to say that, by virtue of allowing his subtenant to succeed him for the time being in the occupation of the leased subjects, the tenant was failing to obtemper his obligation under cl 5. On the contrary, occupation by the subtenant rather than the tenant is what the landlord, in consenting to the sublease, must have had in contemplation. There is thus, it seems to me, an implied qualification of the express obligation to occupy, and it would in my view be wrong to pronounce a court order compelling the tenant to occupy the subjects of let for the duration of the lease, without expressing a qualification excusing occupation during the subsistence of a lawful sublease."

The terms of the clause which Lord Macfadyen was considering in that passage are not apparent from the report. Those terms may have been important, since Lord Macfadyen approached the issue as one of construction. In general, however, I would not regard an obligation to occupy as being qualified by an implied exception so long as there is a lawful sublease in subsistence. I agree that it would make no sense to say that, by virtue of occupation by a sub-tenant, the tenant was in breach of his obligation to occupy; but, in my view, that would not ordinarily be because of an implied qualification of the obligation to occupy, but rather because qui facit per alium facit per se. A tenant's obligation to enter into and retain possession of the subjects does not necessarily (or ordinarily) require his personal occupation of them: Rankine, page 234; Paton & Cameron, page 136. If vicarious performance is permitted - as, for example, where there is a lawful sublease - then such performance will meet the requirements of the obligation. The point can be tested by contemplating the situation where a sublease is granted and the sub-tenant fails to occupy the subjects. If the grant of the sublease had the effect of excusing the principal tenant from his obligation to occupy for the duration of the sublease, then the landlord would have no remedy against the tenant (unless there happened to be some other obligation incumbent upon the tenant in the circumstances - as there was in the case before Lord Macfadyen), since he would not be in breach of his obligations, and would ordinarily have no remedy against the sub-tenant either, in the absence of privity of contract between them. That cannot in my opinion be right.

[582 ] Lord Macfadyen continued (ibid):

"In my opinion the same reasoning applies to the keep open clause. So long as a subtenant is in occupation of the leased premises in pursuance of a lawful sublease, it seems to me that the tenant cannot be personally obliged to obtemper the keep open clause. Only the party in actual occupation can keep the premises open for trade. That point seems to me to be recognised in the terms of the lease. The keep open clause is contained in the regulations (reg 5). It is not expressed as something that the tenant must do, but rather in the abstract as something that must be done. Obligatory force is given to the regulations by cl 28 of part IV of the schedule to the lease. Clause 28 does not simply impose on the tenant an obligation to comply with the regulations. It is expressed in a more complicated form: 'To observe, perform and abide by and procure observance by the Tenant's employees, agents and any sub-tenants and assignees, of the Regulations' (emphasis added).

It therefore seems to me to contemplate two possibilities, namely (i) a situation in which the obligation is on the tenant to observe the requirements of the regulations, and (ii) a situation in which the tenant's obligation is the indirect one of procuring observation of the regulations by his subtenant. It seems to me that it is in further recognition of the same point that the lease contains provisions obliging the tenant (a) to include a corresponding keep open clause in the sublease (cl 30(b)(i) of part IV of the schedule), and (b) to enforce the terms of any sublease (cl 30(g) ... The provision of those indirect means enabling the landlord to ensure that a subtenant adheres to the substance of the keep open clause seems to me to reinforce the conclusion that the effect of cl 28 and reg 5, read together, is not to place on the tenant an unqualified obligation to keep the shop open at all times and in all circumstances throughout the duration of the lease, but rather to require the tenant to do so only so long as he is (or ought to be) in actual occupation."

[583 ] The conclusion reached by Lord Macfadyen in that passage was a conclusion as to the construction of the lease in question, and was based on the presence of the particular provisions to which his Lordship referred. No attempt was made by the solicitor advocate for the defenders and third party in the present case to carry out a comparable analysis of the Sub-Lease. In the present case, unlike Lord Macfadyen's case, the keep-open clause is expressed as something that the tenant must do:

"(TENTH) The Tenants bind and oblige themselves:

...

(Sixteen) to keep the premises open ..."

Although the expression "Tenants" is defined as referring to Johnston's Stores Ltd "with any permitted assignees and sub-tenants where the context so admits", the context of clause (TENTH) (Sixteen) does not admit sub-tenants, since the sub-tenants, not being party to the contract, and not being assignees, cannot "bind and oblige themselves" by that clause. In the present case, moreover, there is no provision in the Sub-Lease requiring the tenants to procure the observance of obligations by sub-tenants; nor is there any provision obliging the tenants to include corresponding obligations in any sub-lease, or to enforce the terms of any sub-lease. In so far as Lord Macfadyen regarded the presence of such provisions as material, the present case is materially different.

[584 ] I note that the Sub-Under-Lease, to which the pursuers' predecessors were party, also contains a declaration (in clause 5(b) that "nothing contained in the Sub-lease [i.e. the Sub-Under-Lease] ...will alter the obligations incumbent upon the Mid-landlord [i.e. the defenders] as tenants under the Head Lease [i.e. the Sub-Lease]".

[585 ] It is also necessary to bear in mind that the remedy sought in the Britel case was an order for specific performance. A party will not be ordered to do that which is outwith his power (Highland and Universal Properties Ltd v Safeway Properties Ltd per Lord President Rodger at page 299). If an obligation could be performed only by the person in natural possession of the subjects, then a difficulty might lie in the way of ordering performance by a tenant who had ceded possession to a sub-tenant, so long at least as the sub-tenant retained possession of the subjects. That difficulty does not arise in the present case, where the remedy sought is the payment of damages.

[586 ] In the present case, notwithstanding the absence from the Sub-Lease of provisions of the kind which Lord Macfadyen treated as material in the Britel case, it was nevertheless argued that the sub-tenant's obligations under the Sub-Under-Lease discharged the tenant from the obligation imposed by the keep-open clause in the Sub-Lease. It was submitted, indeed, that there was no party under an obligation to the pursuers to keep open, during the subsistence of the Sub-Under-Lease. It was said to be a necessary implication of the landlord's consent to the Sub-Under-Lease that, so long as it was in subsistence, the tenant (i.e. the defenders) was discharged from an obligation which could only be performed by the sub-tenant (i.e. Kwik Save). I reject that submission. For the reasons I have explained, I do not accept that the existence of a sublease ordinarily qualifies the obligations in the principal lease, including obligations to occupy and to keep open: the landlord's consent to the sublease signifies that vicarious performance by the subtenant will be acceptable, but does not release the principal tenant from his obligations. It appears to me that Lord Macfadyen's opinion in the Britel case reflected a construction of the provisions of a lease which was in materially different terms from the lease with which the present case is concerned.

The nature of the defenders' obligation
[587 ] It was submitted on behalf of the defenders and third party that the pursuers had mistakenly assumed that the keep-open clause imposed an obligation to trade as a discount supermarket, acting as an anchor store, stocking an attractive range of products and selling them at a more attractive price than competing facilities. In my opinion that is an over-simplified, and in some respects inaccurate, account of the pursuers' position.

[588 ] The parties' submissions in relation to this issue proceeded on the basis that the obligation imposed by the keep-open clause was comparable, for the purposes of the argument, to the obligation to publish a book, without any specification as to the form or price of the book or the number of copies, with which the Court of Appeal was concerned in Abrahams v Herbert Reiach Ltd: in each case, what exactly was to be done was left to the judgment of the party subject to the obligation. In the Abrahams case, Bankes LJ, with whom Scrutton LJ expressed his agreement, said at page 480:

"The general rule is that stated by Parke B in Robinson v Harman (1848) 1 Ex 850, 855: 'Where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.' Mr Jowitt contended that this was one of those contracts which may be performed in one of several ways and was analogous to those contracts which provide for alternative methods of performance. If this were so the party complaining of a breach must be content to have the damages assessed by the standard which is the least onerous to the defendant. But in my opinion this is not a contract of that kind. In the cases to which we have been referred the contracts provide on the face of them for alternative methods of performance. This contract imposes only one obligation upon the appellants - namely, to publish. The question is what will satisfy that obligation? The appellants have a wide discretion; the time of publication, the number of copies to be printed, the price at which they are to be offered, and the form the book is to take are all left to their judgment. That however does not dispose of the case, because they have repudiated their obligation altogether, and the difficult question we have to decide is in what position the respondents would have stood if the appellants had performed their obligation. To answer this question the Court must come to some conclusion on ... how the appellants would have exercised their discretion; what number of copies they would have published; how many editions would be reasonable."

Atkin LJ similarly observed, at page 483, that it was not a case where there were alternative obligations:

"[T]o adjust the rights of the parties the only method is to form a reasonable estimate of the amount the respondents would be in pocket if the appellant had kept his promise ... An analogous calculation has to be made when a man having engaged to take another into his service for a time and to pay him a share in the profit of his business, refuses to employ him at all. In assessing the damages for the breach of this contract the question is not how the employer could carry on his business so as to make the least possible profit and so involve himself in the least possible obligation towards the plaintiff ... The proper method of assessment is quite different; it is to make a reasonable computation of the amount the respondents would have received had the contract been fulfilled."

Scrutton LJ rejected the contention that the publication of one copy of the book would have sufficed, stating, at pages 481-482:

"I think the appellants were bound to make such a publication as could be considered reasonable in the circumstances. Having done that they are not bound to do anything further ... [A] defendant is not liable in damages for not doing that which he is not bound to do. In assessing the damages in this case I try first to ascertain what edition of the book would have been a performance of this contract".

[589 ] A question which these judgments do not clearly resolve is whether damages are to be assessed on the basis of what would in fact have happened, in the court's opinion, if the defender had not repudiated the contract, or whether damages can be limited where that hypothetical performance by the defender would have gone beyond what was required as a matter of contractual obligation. Scrutton LJ appears to have favoured the latter position; but he, like Atkin LJ, made it clear that unreasonable behaviour, such as publishing one copy of a commercially attractive book, or running a business so as to minimise its profits, would not constitute performance of the contract.

[590 ] This question came before the Court of Appeal in a number of subsequent cases, including Lavarack v Woods of Colchester Ltd [1967] 1 QB 278. For the purposes of the present case, however, there is what appears to me to be a particularly helpful discussion in Paula Lee Ltd v Robert Zehil & Co Ltd. The issue in the case was whether damages for the repudiation of a contract to distribute dresses were to be assessed on the basis that the defendants would have ordered 32,000 of the plaintiff's cheapest dresses, or on the basis that they would have ordered 32,000 dresses of varying styles, prices and quality from throughout the plaintiff's range, the contract itself being silent as to the basis on which the dresses were to be selected.

[591] Mustill J noted (at page 393) that the relevant principles were not clearly established, and that the ratio of Abrahams v Herbert Reiach Ltd itself was unclear. His Lordship distinguished a number of different types of situation in which the defendant had some freedom of choice as to the manner of performance, including the situation where his obligation was expressed in an indefinite way. His Lordship continued, at page 394:

"A duty of the latter kind may often be construed as an obligation to act reasonably, and the damages will be addressed on the basis of what would have been reasonable ... But what of the case where there is more than one reasonable method, or a whole range of reasonable methods, shading into one another? One possible view is that the court should try to forecast how the defendant would have performed but for the repudiation. In my opinion this approach is inconsistent with principle, since the defendant may in the event have done no more than was necessary to qualify as reasonable, and to assess damages on any other basis would be to penalise him for failing to do something which he was not obliged to do. The answer must, in my judgment, be that the court is to look at the range of reasonable methods, and select the one which is least unfavourable to the defendant, bearing in mind, of course, that in deciding what methods qualify as reasonable the question must be approached with the interests of both parties in mind. This is, I believe, the way to account not only for the decision in Abrahams v Herbert Reiach Ltd, but also for the divergencies of approach which might seem to exist between the various judgments, and within the individual judgments, delivered in that case."

On that basis, his Lordship concluded (at page 396) that the selection of dresses was subject to an implied term that the choice must be made in a manner which was reasonable in all the circumstances, and that, following Abrahams v Herbert Reiach Ltd, damages were to be assessed by selecting from those methods of performance which could be regarded as reasonable, on whatever basis yielded the result least unfavourable to the defendants. His Lordship placed at the forefront of his analysis (at page 393) the fundamental principle that the assessment of damages involves a comparison between the plaintiff's actual position in face of the breach, and the position which he would have occupied if the contract had been performed. On that assumption of performance there was, his Lordship said (at page 397)

"no justification for distorting what would otherwise be a businesslike interpretation of the agreement, by assuming that the defendants would want, and should be allowed, to carry out that performance in a way which would do nothing but harm to the joint interests of the parties, and which would serve only the self-contradictory purpose of minimising damages which in a case of full performance would never fall due."

I respectfully agree with that approach.

[592 ] In the present case, the keep-open clause requires the defenders 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. It is also material to note the terms of the user clause, clause (FIFTH), which states (read short) that the Premises are let for use only as a supermarket primarily for the sale of food, and as an ancillary off-licence. Decisions as to such matters as the selection of foodstuffs and other goods to be offered for sale, and the prices of the goods, are left to the judgment of the defenders. That is not however an unrestricted discretion. An obligation to trade as a supermarket imposes certain constraints upon the defenders' discretion in respect of such matters as the range of stock, the sales format and the sales area. Further requirements may arise, in particular circumstances, as a matter of implication, in the light of the commercial realities of the situation. I note in that respect what was said in Retail Parks Investments Ltd v The Royal Bank of Scotland plc (No.2) (e.g. at pages 242-243, per Lord McCluskey, at page 248, per Lord Cullen, and at pages 253-254, per Lord Kirkwood). In particular, the type of area in which the supermarket is located imposes constraints on what could be regarded as a reasonable manner of trading: to operate a shop modelled on Harrods' Food Hall, for example, would make no commercial sense in an area like Whitfield. Evidence was given by Mr Poulton (and other witnesses) as to the trading formats which supermarket operators, including the defenders and Kwik Save, operate in comparable areas. There was also evidence as to the trading formats which had been adopted by the various occupiers of the Premises. Mr Poulton also gave evidence about the importance to a supermarket operator of trading in a normal manner, in order to protect the reputation of the brand name (a matter about which Mr Robeson also gave evidence), and about the ways in which an operator would respond to a low level of turnover (if the catchment did not, in the event, support a normal level of turnover) by "dressing" the shelves so as to disguise lower than normal stock levels, and by altering the relative proportions of fresh and other foodstuffs, without rendering the display unattractive. He and other witnesses also gave evidence, which I accept, to the effect that a supermarket at Whitfield would achieve its sales primarily on the basis of convenience to local shoppers, and that such a store, selling on that basis, would not require to match superstores on price in order to trade successfully. As against that body of evidence, no evidence was led from the defenders as to any form of trading which they would adopt. Although evidence was given by Mr Robeson about the minimalist approach which would be adopted, in his opinion, if the catchment were as small as he believed, I have rejected the premise on which that evidence was based.

[593 ] In the circumstances, the general approach adopted by the pursuers appears to me to be correct. Their approach does not involve any contention that the keep-open clause imposes an obligation to trade as an anchor store or to adopt a specific trading format: rather, their contention is that the keep-open clause, read with the user clause, imposes an express obligation to trade as a supermarket, and an implied obligation to do so in a manner which is reasonable in all the circumstances. That contention is in my view correct: cf. the Paula Lee case at pages 396-397. Approaching matters on that basis, their contention is that, on the evidence, a supermarket operated in a reasonable manner would attract customers to the Centre and would create spin-off benefits for the other shops there. On the evidence, I accept that contention. There remain, of course, questions of degree; and as I have already indicated, I am not persuaded on the evidence that the degree of benefit to the Centre as a whole would be as great as Mr Oswald and Mr Lythgoe considered.

Novus actus interveniens, failure to mitigate loss, and remoteness: the enlargement of the Centre
[594 ] The submissions of the solicitor advocate for the defenders and third party to the effect that the chain of causation had been interrupted by the refurbishment of the Centre, or that in carrying out the refurbishment the pursuers had failed to mitigate their loss, or that losses consequent on the refurbishment were too remote a consequence of the defenders' breach of contract to be recoverable in damages, all depended on a contention that the enlargement of the Centre had been an unreasonable act. Since it was unreasonable, it could not have been foreseen by the defenders, and therefore broke the chain of causation; since the pursuers had behaved unreasonably in carrying out the refurbishment, they had failed to mitigate their loss; and since the refurbishment had been an unreasonable act, losses consequent upon it had not been within the reasonable contemplation of the defenders or their predecessors, and were therefore too remote to be recoverable.

[595 ] The contention that the refurbishment of the Centre was an unreasonable act appears nowhere in the pleadings on behalf of the defenders and the third party: the averment on which their solicitor advocate relied, that "the redevelopment ... has had a negative impact on the viability of the Centre", does not suggest that the refurbishment was not only unfortunate in hindsight, but was an unreasonable act at the time. Nor do the issues of novus actus interveniens, mitigation of loss or remoteness feature in the other documents lodged prior to the proof in order to give notice of the parties' positions, including in particular the statement of issues lodged on behalf of the defenders, which I have already quoted. In short, no notice was given prior to the proof that these were matters in issue. During the proof itself, the contention that the decision to proceed with the refurbishment had been commercially unreasonable was not put to Mr Clapham, or indeed to any other witness led on behalf of the pursuers. A line was pursued that the effect of the refurbishment had been to increase the number of units, and also to render the Centre less attractive to tenants because of the effect on the visibility of the shops and on service charges, and that in consequence the level of lettings and rentals, if the supermarket had remained open, would not have been as high as the pursuers claimed. The contention with which I am concerned at present, however, rests on a different factual proposition, as I have explained: that the refurbishment not only had unfortunate consequences, but was at the time a commercially unreasonable course of action on the part of the pursuers.

[596 ] I accept the submission on behalf of the pursuers that to allow that contention to be advanced for the first time in closing submissions would be unfair. I accept that, if those acting for the pursuers had had notice of the contention, they would have approached the leading of evidence differently, so as to focus on the issue of the reasonableness of the decision: in particular, the reasonableness of the decision to construct two additional units. It is apparent from the evidence that the nature of the refurbishment depended on at least five factors: the need to obtain the consent of the Council, as ground landlords; the conditions on which grant finance was available from the various grant-issuing authorities; the need to obtain loan finance from Dunbar Bank; the need to obtain planning permission; and the commercial judgment of the pursuers, and of Mr Clapham in particular. None of those matters, apart from the valuation obtained by Dunbar Bank, was explored in evidence. I cannot speculate as to what the evidence might have been, if they had been explored.

[597 ] For the reasons I have explained, it appears to me that the contention comes too late to be given effect, even if it appeared to be well-founded on the evidence as it stood. In any event, however, the contention is not in my opinion established by the evidence. In that regard, I note Mr Allison's advice, prior to the refurbishment being carried out, that the effect of carrying out the refurbishment would be to increase the value of the Centre from £655,000 to £800,000: an increase which was not greatly below the £200,000 which the works were to cost the pursuers. Mr Allison's valuation also proceeded, as I have explained, on the basis that the two additional units would each have an ERV of £5,000 per annum and a yield of 18.18 per cent: the same ERV as the currently vacant units in the unimproved Centre, and a firmer yield, reflecting his view that the works would "significantly enhance the letting prospects". Mr Lythgoe similarly reported in 2003 that the refurbishment had brought about an improvement of the Centre (supra, para.190). I also note that, while the works cost the pursuers £200,000, a further £700,000 was being spent on improvements to the Centre and its immediate vicinity out of public funds. I accept Mr Clapham's evidence that it was important to minimise escape routes in order to discourage shoplifters, and that that was one of the reasons for providing the additional units. I also accept his evidence that he had been placed by the defenders and third party in a position in which it was difficult to decide on the best course of action (supra, para.132). Finally, I accept his evidence that the Graham & Sibbald report, on which the solicitor advocate for the defenders and third party primarily based his contention (since it had recommended the partial demolition of the Centre, in order to reduce the amount of retail space), had been prepared under materially different circumstances, in particular because it dated from a time when there was no prospect of a supermarket operator trading from the Centre, whereas at the time of the refurbishment Mr Clapham was being told by Kwik Save that they might re-occupy, as they were indeed obliged to do.

Causation and remoteness: other issues
[598 ] As I have explained, the solicitor advocate for the defenders and third party raised a number of other issues under the rubric of causation, including changes in the local population over time, and changes in shopping habits, and submitted that those matters, rather than the breach of the keep-open clause, were the true cause of the decline in the value of the Centre. It does not appear to me that the approach adopted on behalf of the pursuers overlooked the effects of those changes. The comparison made by Mr Oswald and Mr Lythgoe between the value of the Centre as it stood in April or May 2005, and the value which it would have had at that date if the keep-open clause had been complied with, treated the size of the local population, their shopping habits, competition from other shops and supermarkets, and other relevant circumstances, as factors which were common to both valuations. Although there is an issue as to whether they were correct in their assessment of the difference which the performance of the keep-open clause would have made to the value of the Centre, standing the surrounding social and economic circumstances - an issue which I have considered when discussing their evidence, and that of the other expert witnesses - they did not fall into the error of attributing the Centre's decline since 1995 entirely to the breach of the keep-open clause, without having regard to other material factors.

[599 ] Underlying this submission on behalf of the defenders and third party, however, there appeared to be a concern about the way in which events distinct from the breach of the keep-open clause, such as changes in the local population, might affect the assessment of damages: a concern which was possibly reflected in the citation of the Banque Bruxelles Lambert case, which was concerned with how the scope of a duty of care is related to the damages recoverable for its breach, rather than with causation. Counsel for the pursuers addressed these matters under the rubric of remoteness; and I am content to do the same. There are often different possible ways of rationalising restrictions on liability: lines can be drawn in terms of the scope of the obligation, or causation, or remoteness. The central problem is usually deciding where to draw the lines, rather than which conceptual route to follow. As Lord Hobhouse observed in Platform Home Loans Ltd v Oyston Shipways Ltd [2000] 2 AC 190 at page 208,

"[T]here is a close relationship between the application of such concepts as remoteness, contributory negligence and causation (and, for that matter, duty of care). The same result can often be justified or formulated in any of these three ways".

The correct approach to remoteness of damage in contract was reviewed by the House of Lords in Jackson v Royal Bank of Scotland plc. I note, in particular, Lord Walker of Gestingthorpe's analysis at pages 390-391 of the two limbs of the so-called rule in Hadley v Baxendale. His Lordship cited in that connection the speech of Lord Reid in C Czarnikow Ltd v Koufos [1969] 1 AC 350 at page 385:

"The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation."

The final words of that dictum have to be borne in mind. In Balfour Beatty Construction (Scotland) Ltd v Scottish Power plc Lord Jauncey of Tullichettle, in a speech with which the other members of the Committee expressed agreement, cited at page 28, without criticism, the statement by the Lord Ordinary in that case, Lord Clyde, that the quantification of the damages was

"limited to the loss which the defenders might reasonably have contemplated at the time of the contract, subject to the explanation that it is sufficient that the loss be of a type which might have been so contemplated. That it was actually of an unforeseen scale is not relevant".

In the present case, it appears to me to be clear on the evidence that when the Sub-Lease was entered into, in 1972, it was envisaged that the Premises would be occupied by the defenders' predecessors, and their successors, as an anchor store, attracting customers to the Centre as a whole, and rendering the other units there attractive to tenants and therefore valuable. On the evidence (e.g. of Mr Oswald) [pp.595-597], that is the commercial rationale of a keep-open clause: it is the reason why a landlord inserts such a clause, despite the fact that the presence of such a clause reduces the rental value of the subjects to which it applies (as Mr Merry's decision in the 1998 rent review illustrates). The anticipated "anchoring" function of the Premises is consistent with their size relative to the Centre as a whole, and with the vital function, particularly in the social conditions of the period when the Sub-Lease was entered into, of a supermarket of that size located at what was designed to be the social and commercial centre of a large peripheral housing estate.

[600] The Sub-Lease was entered into for a period of 63 years. It must have been (or in any event it must reasonably be taken to have been) within the contemplation of the parties that there would be major social and economic changes over such a long period of time, which would affect the trading and profitability of a supermarket operated at the Premises. One has only to consider the changes which had occurred over the 63 years prior to the conclusion of the Sub-Lease, between 1909 and 1972: the Depression of the 1930s, food rationing during the 1940s and 1950s, the development of the motor car and the refrigerator, and the invention of the supermarket itself, to mention only a few. It was also clear from the evidence (e.g. of Mr Poulton and Mr Robeson) that the food retailing industry is particularly subject to change, and that any supermarket operator entering into a long lease would not expect market conditions to remain static over the period of the lease, but on the contrary would expect constant change in response to social and economic developments and competitive pressures. The keep-open obligation was to remain in force well into the twenty-first century, whatever changes might occur. One matter specifically contemplated by the Sub-Lease was that the Centre might be refurbished and enlarged: I have already quoted clauses (EIGHTH) and (ELEVENTH) (Three). That was indeed conceded on behalf of the defenders and third party.

[601 ] Accordingly, a reduction in the value of the Centre as a whole, as the result of the closure of the supermarket at the Premises, is not in principle a loss of a kind which would be outside the reasonable contemplation of the tenant of the Premises. Equally, a loss of rent from vacant units, and related losses in the form of a non-recovery of service charges and the payment of outlays, would not be outside the tenant's reasonable contemplation. The scale of those losses would vary from time to time depending on market conditions, but, as I have explained under reference to the Balfour Beatty case, it is the type of loss which is relevant to questions of remoteness, rather than its scale. In any case, as I have explained, the possibility of changes in market conditions would be within the reasonable contemplation of the tenant of the Premises, given the length of the lease and the nature of the food retailing industry. It has also to be said that this is not a case where the pursuers have engineered matters so that their loss would be assessed when the market was at its height: as I have explained, the action was raised in 1999, but was sisted for four years while other proceedings at the instance of the defenders, but conducted by the third party, were dealt with.

[602 ] Although I consider that the pursuers' approach to causation is appropriate in the present case, and that the losses for which damages are sought are not too remote to be recoverable, I readily accept that the Centre has a number of problems, as an investment, besides the defenders' failure to comply with the keep-open obligation. I need not list them all, as they have already been mentioned many times: it suffices to say that the Centre suffers, by current standards, from design defects; it is poorly located relative to the roads network; and it is in a relatively poor location. These matters are relevant to the assessment of damages, since they bear on the capital and rental value of the Centre and its constituent units. They do not however have the consequence that the court cannot be satisfied, on a balance of probabilities, that the closure of the Premises had an adverse effect on value. On the contrary, as I have explained, I am satisfied that the closure of the Premises has caused a substantial reduction in the capital value of the Centre, besides revenue losses over the period since 1995.

Date as at which damages should be assessed
[603 ] The argument that damages should be assessed as at the date when the breach of contract began - i.e. 7 January 1995 - appears to me to be unpersuasive. The unrealistic nature of such an assessment is reflected in the fact that Mr Nisbet and Mr Hermiston assessed the damages as at the date of closure in 1995 at a figure of nil, on the basis that the property market would not have anticipated on that date that the Premises would remain closed for a prolonged period. Damages are intended to place the pursuers in the position they would have been in, if the defenders had fulfilled their obligation; and the basic measure of damages is therefore a comparison between what the pursuers' position would have been if the defenders had fulfilled their obligation, and the pursuers' actual position. Where the defenders have persistently failed to fulfil their obligation for more than ten years, that comparison is likely to be best made as at the most recent date practicable, not as at the date when the failure began, since the former date is likely to be the point in time at which it is most practical to assess what loss has actually been suffered. I respectfully agree in that respect with the approach followed in Transworld Land Co Ltd v J Sainsbury plc at pages 263-264, and in particular with what was said by Knox J at page 264:

"[T]he conclusion ... that the date of the hearing is the appropriate date to take, will in general be valid because that will usually be the best point in time to look back and see what loss has already been suffered and assess whether the damage is in fact still being felt ...

... [I]t seems to me preferable to look back and assess accrued short-term losses which are quantifiable in the sense that they depend on past actual events and rely only on valuation evidence of capital value for the future. [Counsel] submitted that such a postponement would let in a variety of external events for which neither party might be responsible and I accept that this could lead to difficulties of proof in some circumstances, but those difficulties do not outweigh the advantage of assessing loss of income on the basis of what has happened rather than by arriving at a retrospective capital evaluation with a view to compensating for loss of income. The capital valuation in principle covers two facets, future income loss and future loss on a resale."

The assessment of damages
[604 ] For the reasons that I have explained, and in the light of the arguments advanced, I proceed on the basis that the pursuers' general approach to the assessment of damages, based upon a comparison of the capital value of the Centre as it is and as it would have been if the keep-open clause had been performed, together with accrued revenue losses, is a reasonable approach. I note that a similar approach was adopted in Transworld Land Co Ltd v J Sainsbury plc and, in relation to capital value, in Costain Property Developments Ltd v Finlay & Co Ltd.

[605 ] The difficulty of the exercise involved, particularly in relation to capital value, was also made clear in those cases. In the Costain case, Mr R H Bernstein, Q.C., sitting as a deputy judge, observed (at page 356) that, although he was entitled to substitute an intermediate figure for those proposed by the expert witnesses, the nature of the damage was such that precise calculation was impossible. His Lordship continued:

"I accept that, as Atkinson J said in Aerial Advertising Co v Batchelor Peas Ltd [1938] 2 All ER 788 at p.796:

'Difficulty of proof does not dispense with the necessity of proof.'

That dictum is wholly consistent with the dictum of Vaughan Williams LJ in Chaplin v Hicks [1911] 2 KB 786 at p.792:

'The fact that damages cannot be assessed with certainty does not relieve the wrongdoer of the necessity of paying damages for his breach of contract.'

Immediately before that passage, the learned Lord Justice said, with reference to a claim for damages for non-delivery of goods for which there was no market:

'In such a case the jury must do the best they can and it may be that the amount of their verdict will really be a matter of guesswork.'

The elimination of the jury from civil trials in England has not diminished the right of a successful plaintiff to damages in cases where the amount is difficult to assess."

Those observations appear to me to be equally apposite to the present case, as too does Lord Loreburn L.C.'s remark in the Clippens Oil case, at page 10, that "the amount of damages, so far from admitting of precise calculation, depends upon a series of conjectures" as to what would have happened if the defenders had fulfilled their contractual obligations. Nevertheless, the court has to assess the damages as accurately and fairly as it can. As Stair wrote in his Institutions, I. xvii.16, in a phrase which was adopted by Lord President Clyde in Portland v Wood's Trustees 1926 S.C. 640 at page 652,

"It is rather in the arbitrament of the Judge to ponder all circumstances."

[606] It is not in my view possible for the court to determine the values of the various factors - ERVs, non-recoverable expenditure, number and length of voids, yield profile and so forth - and then carry out its own calculation, or have a calculation carried out by the parties. Although it is possible for the court to make an assessment, in the light of the evidence, of how realistic or otherwise certain of the assumptions made by the expert witnesses may have been (e.g. as to the catchment, as to the levels of occupancy, and as to ERVs), and although the court can also form a view as to whether the relationship between a valuation and the net rentals assumed in that valuation - in other words, the initial yield - appears to be realistic in the light of the evidence concerning the comparison subjects and their yields, the court lacks the expertise in valuation necessary to fix values in respect of every element in a calculation of that kind. For example, although I have formed the view that the ERV assumed by Mr Lythgoe in respect of his "as is" valuation of the Premises is excessively high, and I can calculate what, arithmetically, the effect on Mr Lythgoe's figures would be if (for example) the ERV were taken to be the same as the passing rent (by deducting the increase in capital value related to the increase in the rent at the next rent review), there appears from the evidence to be a relationship between rent and yield, so that, if the ERV were to be altered, the yield might also have to be altered; but I cannot say by how much.

[607 ] Thus, even if there were an equation before the court which would enable it to calculate its own figure, the court would not be able to determine the values of all the variables in the equation. In the event, there is no such equation before the court. The suggestion, made on behalf of the pursuers, that if the court were to determine the values of the variables, the parties could then carry out the calculation, appears to me to be impractical, given the court's inability to determine precisely the values of all the variables. I am in any event doubtful whether it would be proper to follow that course without the agreement of both parties, since it would involve the admission of further evidence after the proof had closed. The court's inability to replicate the exercises carried out by the expert witnesses does not however prevent it from assessing damages, as I have explained. As Lord President Clyde observed in Portland v Wood's Trustees at page 651:

"The measures employed to estimate the money value of anything (including the damage flowing from a breach of contract) are not to be confounded with the value which it is sought to estimate".

The alternative is, as the solicitor advocate for the defenders and third party submitted, to assess damages on a broad basis; and that is what I shall do.

Loss of capital value
[608 ] The first head of loss which has to be assessed is the loss in capital value as at the date of the proof, calculated in broad terms as the difference between the value of the Centre in its existing state and the value which it would have had if the defenders had complied with their contractual obligations. Since the capital value of subjects such as the Centre reflects the anticipated revenue to be derived from them in the future, to award damages in respect of that loss of value compensates the pursuers in respect of all future revenue losses as well as in respect of the current diminution in the value of their asset.

[609 ] It appears to me that the evidence as to the "as is" value of the Centre, when considered as a whole, enables that value to be estimated with a reasonable degree of confidence. As I have explained, Mr Oswald's figure of £330,000 appears to me to be too low, essentially because the capitalisation yields adopted appear to be high relative to the comparisons. I am not able to say what Mr Oswald's valuation would have been if he had adopted different assumptions as to the yield; but, as previously explained (supra, para.350), an admittedly rough calculation suggests that a figure of the order of £380,000 might be more realistic. In addition, if the valuation were to be carried out on the basis that the ERV of the Premises should be determined on the hypothesis that the defenders had complied with their obligations, then the valuation would be increased further: another rough calculation suggested that the addition might be of the order of £66,000 (supra, para.401), producing a figure in the region of £446,000.

[610 ] Mr Lythgoe's figure of £487,000 was calculated on the hypothesis mentioned in the last paragraph. It might be expected to be slightly high, given that the ERV which he adopted for the Premises was in my opinion optimistic. If the assumed increase in the rent of the Premises were left entirely out of account, the figure might be expected to be in the region of £385,000, as previously explained (supra, para.451). That figure of £385,000 is close to the figure of £380,000 which Mr Oswald's valuation might lead one to expect; just as Mr Lythgoe's figure of £487,000, if discounted to some extent, would not be far from the figure of £446,000 which I extrapolated from Mr Oswald's valuation.

[611 ] Mr Nisbet's valuation of the Centre as it stands, on the assumption that the ERV of the Premises was the same as the passing rent, produced a figure of £400,000. When allowance was made for acquisition costs (which, as explained above, Mr Nisbet had not dealt with correctly in his calculation), the corrected figure produced by the calculation was just over £380,000 (supra, para.499). That figure is consistent with the figures of £380,000 derived from Mr Oswald's valuation, and with the figure of £385,000 derived from Mr Lythgoe's.

[612 ] Mr Hermiston produced a valuation of £575,000 as at November 2003, but acknowledged that that figure made no allowance for the loss of rent from unit 112 from November 2004, and assumed that Ms Walker and the Misses Minns would remain in occupation of their units: it thus assumed that three units were occupied, which were in fact voids as at the date of the other valuations. Mr Hermiston's valuation also made no allowance for non-recoverable service charges, or for ground rent. It also attached a value to the anticipated receipt of rents, in respect of the period between November 2003 and the dates of the later valuations (April or May 2005), which were not taken into account in the latter valuations. For all these reasons, Mr Hermiston's valuation was too high, as he acknowledged. As I have mentioned, Mr Hermiston said in evidence that, if he were to re-calculate his valuation, his figure would be very close to Mr Lythgoe's valuation, if the supermarket rent were left out of account. Leaving the supermarket out of account, that would produce a figure of £249,564, as previously explained (supra, para.520). The appropriate addition for the supermarket, if the ERV of the Premises had to be assessed on the hypothesis that the defenders had complied with their obligations, and if the effect of their doing so would be to create a reasonably attractive and successful store (as I have accepted, for reasons explained earlier), would be considerably greater than the value of £154,911 which Mr Hermiston had placed on the Premises in November 2003 [67/3, p.79] (since an appropriate ERV would be well above the £20,000 per annum which he assumed), but in my opinion somewhat less than the value of £260,228 which Mr Lythgoe placed on the Premises [67/8a, p.39] (since an appropriate ERV would not be as much as the figure of £56,155 per annum which Mr Lythgoe adopted). The adoption of the former value would, as a matter of arithmetic, produce a value for the Centre of £385,000, as previously explained (supra, para.520); the latter, Mr Lythgoe's valuation of £487,000. Adopting Mr Oswald's ERV of £46,000 per annum, which seems to me to be a reasonable figure for the reasons explained earlier, the valuation would be much closer to £487,000 than to £385,000.

[613 ] Notwithstanding the differences between the methods adopted by the valuers, their valuations appear to me to sit fairly well together, if allowance is made for the differences between the assumptions on which they are based. The figures which I have mentioned all appear to me to point towards a conclusion that the Centre in its existing state would have a value in the region of £380,000 if the rent of the Premises were to remain at £20,000 per annum until the expiry of the Sub-Lease, and a value in the region of £450,000 if the rent were assumed to increase at the next rent review, on the hypothesis that it had to be fixed as if the defenders had complied with their obligations. That assumption is in my view appropriate, for the reasons which I have explained. I shall therefore adopt the figure of £450,000 as the "as is" valuation.

[614 ] In relation to the valuation of the Centre on the hypothesis that the defenders had complied with their obligations, I have explained that Mr Oswald's valuation of £1,050,000 is in my opinion too high. I have explained that, if one attempts to assess the effect of allowing for an additional void and a slightly higher yield, rough calculations suggest that a figure in the region of £900,000 could be expected to be more realistic (supra, paras.416-417).

[615 ] Mr Lythgoe's valuation of £1,120,000 also appears to me to be too high, for reasons I have explained. I have also explained that, if one attempts to assess the effect of allowing for three permanent voids, a lower ERV for the public house, and lower passing rents for the smaller units, rough calculations suggest that a figure in the region of £945,000 might be expected (supra, paras.463-466).

[616 ] Mr Nisbet's valuation of the Centre on a "supermarket trading" hypothesis did not allow for any "anchor" effect, and proceeded on the basis that compliance with the keep-open clause would have made no different to rents or ERVs. Since I have rejected that contention, Mr Nisbet's valuation is of no assistance to me. I have however considered his criticisms of the valuations produced by Mr Oswald and Mr Lythgoe, and, as I have explained, have accepted some of the points made. The same is true of the evidence of Mr Hermiston, who produced no separate valuation of the Centre on the hypothesis that the defenders had complied with their obligations.

[617 ] Doing the best I can to exercise my judgment on the evidence, and in the light of the figures which I have derived from Mr Oswald's and Mr Lythgoe's valuations, it appears to me that the value of the Centre, if the defenders had complied with their obligations, would be likely to be not less than £900,000. It is not possible to determine a precise figure, and I acknowledge that the figure of £900,000 may be conservative, in the light of the possible alternative figure of £945,000. It appears to me however that I should adopt the lower figure, since the pursuers have not satisfied me that a figure above £900,000 would be appropriate. I am however satisfied, on a balance of probabilities, that £900,000 would be a realistic figure.

[618 ] In these circumstances, the diminution in the value of the Centre, as at 20 May 2005 (the date of Mr Oswald's valuation), can be estimated as being the difference between £450,000 and £900,000, i.e. £450,000. That is the principal sum to be awarded under the first conclusion.

Accrued revenue losses
[619 ] Only Mr Oswald and Mr Lythgoe attempted to calculate the pursuers' accrued losses. Their method was not criticised. In so far as their assumptions were questioned, I have explained the extent to which I have accepted the points which were made.

[620 ] The calculation of the accrued losses is essentially a matter of arithmetic, once a given method has been decided upon, and the effect of adopting different assumptions can therefore be calculated more easily than in the case of the valuations.

[621 ] Mr Oswald's figure for the loss of rental income was £194,496. If different assumptions were adopted, to reflect my conclusions on the evidence, the same method of calculation would produce a figure of £140,665 (i.e. £116,000 plus £24,665), as previously explained (supra, paras.424-425).

[622 ] Mr Lythgoe's figure for the loss of rental income was £169,035. If different assumptions were adopted, to reflect my conclusions on the evidence, the same method of calculation would produce a figure of £118,486 (supra, paras.482-484). I shall adopt that figure, rather than the figure of £142,165, as I am satisfied that the extent of the loss is at least £118,486, but I am not satisfied (given that that is the figure produced by Mr Lythgoe's method) that a higher award would be justified.

[623 ] In relation to the shortfall in the recovery of costs, Mr Oswald's figure was £38,244, and Mr Lythgoe's was £65,223. Adopting different assumptions to reflect my conclusions on the evidence, the corresponding figures were £31,212 and £54,597 (supra, paras.428 and 485). I am satisfied that the former figure, produced by using Mr Oswald's method, is the more reliable, as it is based on the actual shortfall in the recovery of costs, and apportions that figure between the voids attributable to the defenders' breach of contract and the voids which would have existed in any event, whereas Mr Lythgoe's method was based on an assumption that costs could be taken to be 28 per cent of rental value.

[624 ] The total figure for the accrued revenue losses is therefore £149,698 (i.e. £118,486 plus £31,212). That is the principal sum to be awarded under the second conclusion.

Interest

[625 ] The award of interest in the present case raises questions on which it would be desirable for the court to hear parties' submissions. In that regard, I note that the first conclusion does not seek interest from any earlier date than the date of decree (cf. Orr v Metcalfe 1973 S.C. 57 per Lord Cameron at pages 61-62). Although the second conclusion seeks interest from 1 January 1995, there may be room for argument as to how the court should exercise its discretion under section 1(1) of the 1958 Act (cf. Boots the Chemists Ltd v GA Estates Ltd 1993 S.L.T. 136). The case will therefore be put out for a hearing By Order.