Scottish Court of Session Decisions

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URL: http://www.bailii.org/scot/cases/ScotCS/2008/CSOH_129.html
Cite as: 2008 SLT 1111, [2008] CSOH 129, 2008 GWD 37-548, [2008] ScotCS CSOH_129, 2008 Hous LR 71

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OUTER HOUSE, COURT OF SESSION

[2008] CSOH 129

OPINION OF LORD GLENNIE

in the cause

CATHAY LOON FUNG LIMITED

Pursuers;

against

PUREWAL ENTERPRISES LIMITED

Defenders:

________________

Pursuers: Thomson; Burness LLP

Defenders: Hawkes, Dawson; Shepherd and Wedderburn

5 September 2008

[1] The pursuers carry on a restaurant and takeaway business at premises (the "Restaurant Premises") in Sauchiehall Street, Glasgow, of which they are tenants in terms of a lease originally between Cathay (Scotland) Limited and New Loon Fung Limited dated 30 August 2005. The defenders are the heritable proprietors of the premises and have acquired the landlord's interest in the lease.

[2] On or about 20 May 2008 the defenders served on the pursuers a pre-irritancy notice giving the pursuers notice that the lease might be terminated by them if rent and other charges allegedly due in terms of the lease were not paid within a period of 14 days. It is averred in the summons that that pre-irritancy notice was defective and that accordingly the letter was invalid as a pre-irritancy notice. It was further averred in the summons that on 4 June 2008 the defenders forcibly entered the premises and remained wrongly in possession thereof.

[3] The summons concluded for declarator that the pursuers were entitled to use and occupy the premises and for interdict prohibiting the defenders or anyone on their behalf from performing any act interfering with the pursuers right to use and occupy the premises. On 11 June 2008 interim interdict was granted by the Temporary Lord Ordinary in terms of the second conclusion to the summons. The relevant part of the interlocutor reads as follows:

"ad interim interdicts the defenders or anyone else on their behalf from performing any act which interferes with the pursuers' right to use and occupy the premises known as [the Restaurant Premises] for the permitted purposes specified in the lease ..."

The order was duly served on the defenders.

[4] On 18 June 2008 the defenders presented a petition to wind up the pursuers (in that petition referred to as the Company) on the ground that the Company was unable to pay its debts. The debt said to be due was in respect of rent and other charges due under the lease. On that day I granted a first order in the petition and also made an order for the appointment of a provisional liquidator. The provisional liquidator duly took control of the premises and the affairs of the Company. The Company has moved the court to dismiss the petition. Having heard argument I acceded to that motion and dismissed the petition. These matters are the subject of a separate Opinion delivered on 4 September 2008 ([2008] CSOH127)

[5] On 1 July 2008 the defenders' agents served an irritancy notice on the Company purporting to terminate the lease of the Restaurant Premises. The notice was founded upon the failure to pay the sums referred to in the pre-irritancy notice and also upon the apparent insolvency of the Company as evidenced by the appointment of a provisional liquidator. The provisional liquidator took the view that the grounds of irritancy relied upon by the defenders in the notice could not be purged and returned the keys to the premises to the defenders. The notice was therefore effective.

[6] A minute has been lodged in these proceedings ostensibly on behalf of the pursuers craving the court to ordain an office holder of the defenders to appear personally at the bar of the court to explain the defenders' breach of interdict; and thereafter to inflict upon the defenders such punishment as the court should think fit in all the circumstances. Since this minute was intimately bound up with the disputes which were the subject of the petition to wind up the Company, I agreed to hear it at the same time as dealing with those disputes. In the event, I have dealt with the two matters sequentially.

[7] The minute was instructed by Mr Liu (a director of the pursuers) at the time when their affairs were in the hands of a provisional liquidator. Mr Thomson, who appeared for the defenders, took the point that Mr Liu had no right to give instructions on behalf of the pursuers and, accordingly, that the minute was issued and lodged without the authority of the pursuers. He submitted that it should peremptorily be dismissed. I rejected that argument. It is, of course, correct that once a provisional liquidator has been appointed, the directors of the company have no power to act on its behalf or in its name (save for any application for recall of the appointment). In particular, they have no power to instruct either the commencement of proceedings or the taking of a step in existing proceedings. In such a case the other party may move, as they have done here, to sist or dismiss the action or motion as the case may be. That would not have been the appropriate course in the present case. At the time the minute was lodged, it was apparent that the directors of the company were seeking to have the appointment of the provisional liquidator recalled and the petition dismissed. I have ruled in their favour on that point and dismissed the petition. Thereafter, the directors of the company were once again able to act on its behalf. They were entitled to ratify steps taken purportedly on behalf of the company but without its authority. This is clear from the decision of the House of Lords in Alexander Ward & Co Limited v Samyang Navigation Co Limited 1975 SC(HL) 26 approving the decision of the Court of Appeal in Danish Mercantile Co Limited v Beaumont [1951] Ch 680. Mr Thomson accepted this as a correct statement of the law. The company, acting again through Mr Liu, made it clear by counsel, after I pronounced my order dismissing the petition and recalling the appointment of the provisional liquidator, that it wished to ratify the issue and lodging of the minute. The minute was therefore to be treated as having been issued and lodged with the authority of the company.

[8] The next point taken by Mr Thomson concerned the procedure to be adopted. He said that he wanted to lodge answers, and that thereafter there ought to be a debate or a proof. He referred me to the annotations in the Parliament House Book to Rule of Court 60.3, in particular note 60.3.3 on p.C485 under the heading (2) Procedure by minute. My attention was not directed to any Rule of Court specifically dealing with this. Answers may be appropriate in many, indeed most, cases, where there is a dispute of fact about whether or not the party alleged to be in breach has committed the acts of which complaint is made. But in the present Mr Thomson candidly and expressly admitted that the interdict had been pronounced in terms restraining his clients from performing any act which interferes with the pursuers' right to use and occupy the premises. He admits that the interdict was properly served on his clients before they sent the irritancy notice. And he admits that the irritancy notice was sent in the terms of the copy lodged in process. What he does not admit is that the pursuers lost possession of the premises as a result of service of the notice. I can see that there might be things to be said about that; but that is not an essential part of the case that the defenders were in breach of interdict. It goes to the consequence of their breach, if breach is established. On the basis of what is admitted I see no reason to make the resolution of this matter unduly protracted. It serves neither the parties nor the interests of justice for me to order or allow the lodging answers to the minute and then adjustments to the minute and answers.

[9] Mr Thomson then asked for time to consider the ruling and to prepare his submissions. I took the view that he had had enough time already and I refused him more. At earlier hearings he had outlined the nature of his contention that service of the irritancy notice was not a breach of interdict. I have to assume that that outline of his submissions was informed by the appropriate research. He has had ample notice that the hearing on the minute was to be heard after I made an order on the motion to dismiss the winding up petition. Although he may have hoped that I would allow some written process before he was required to make submissions, he had no basis for expecting that to be the case. I had already on previous occasions sought to extract from him what his answer was to the charge of breach of interdict. He ought to have been aware that I would, or at least might, expect to be addressed on it on this occasion.

[10] Part of the background to his submission that I should not proceed immediately to hear submissions on whether or not his clients were in breach of interdict was the fact that they wished to reclaim my dismissal of the petitions. Upon doing so, I was told, the effect of my order would be suspended and the provisional liquidator would resume or continue in office until the reclaiming motion was disposed of. He no doubt hoped that the provisional liquidator would not wish to proceed with the minute alleging breach of interdict. I have no idea what attitude the provisional liquidator will take to the minutes. He is an officer of the court and will take his own view, which may or may not be that which the defenders in this action want him to take. If I had thought that any prejudice was occasioned to the defenders by continuing to hear argument on the question of breach I would, of course, have adopted some other course. However, it seemed to me that all the defenders were after was delay until the reclaiming motion in the petition action was marked and the provisional liquidator was back in place. That did not seem to me to be a proper reason for not proceeding to hear the argument.

[11] Mr Thomson's argument that the service of the irritancy notice on 1 July 2008 was not a breach of the interim interdict proceeded, as I understand it, by reference to the fact that the defenders were interdicted only from "performing any act which interferes with the pursuers' right to use and occupy the premises". Service of an irritancy notice does not interfere with any right on the part of the pursuers to use and occupy the premises. The pursuers were in default and had rendered themselves liable to have the lease terminated. They therefore had no right to continue to use and occupy the premises. Nor, if the notice was invalid, was their possession interfered with by virtue of service of the notice - in such services it was the voluntary act of the provisional liquidator in response to the notice which brought the tenancy to an end. I reject those arguments. Unless and until a valid irritancy notice is served, the pursuers have all the rights given to them under the lease. They remain in possession as of right, notwithstanding any failure on their part to pay. That right can be brought to an end by the service of a valid irritancy notice. Ex hypothesi, therefore, service of a valid irritancy notice interferes with that right. Service of an invalid notice also interferes with the right to use and occupy the premises, since it puts the tenant to the trouble and expense of vindicating that right, if he is minded to do so, or precipates a decision as to whether he ought to avoid a fight and surrender the lease. On either basis, therefore, service of the irritancy notice interferes with the tenant's right. Secondly, and in any event, the interim interdict was granted in circumstances where there was a dispute about the validity of the pre-irritancy notice. It is quite clear that the interim interdict was intended to prevent the defenders taking any further action on the basis of that notice, and its wording makes this clear. It does not leave it open to the defenders simply to proceed in the hope of justifying the validity of the pre-irritancy notice. Otherwise the grant of interim interdict in this or a similar form, which is often done in a wide range of disputes in order to hold the position pending a resolution of the underlying merits, would be wholly nugatory.

[12] I should add that the fact that the irritancy notice is in part based on the apparent insolvency of the pursuers does not assist the defenders: it remains an act which interferes with the pursuers' right to use and occupy the premises. It may be that the petition to wind up should be seen as part of a scheme to entitle the defenders to serve the irritancy notice, in which case there might be an argument that bringing that petition was itself in breach of interdict. But this was not relied on by the pursuers and I did not need to consider it further.

[13] In these circumstances it seems to me that the defenders' action in serving an irritancy notice was plainly in breach of the interim interdict granted on 11 June 2008 and I so held. I therefore made the order sought. I pronounced an interlocutor ordaining an office holder of the defenders to appear personally at the bar of the court on a date to be afterwards fixed to explain the defenders' breach of interdict. It is of course open to the defenders to take steps to purge their contempt and any such steps will be taken into account in the future disposal of this matter.

[14] I pronounced my decision orally after retiring for a few minutes, at about 10.43 a.m. on 4 September 2008. I was asked by Mr Thomson to note this time in my Opinion. I was told by Mr Thomson that by then a reclaiming motion in the petition to wind up the Company had been marked. The relevance of this was that the provisional liquidator resumed his position and Mr Liu had no power to give instructions on behalf of the pursuers in respect of the minute. I had no reason to expect the reclaiming motion to be marked so quickly, since in the course of his submissions to me Mr Thomson, having at one time said that it was in the course of being marked, corrected himself to say that his agents were awaiting a signed interlocutor before proceeding to mark the reclaiming motion. In any case, the reclaiming motion is not a reclaiming motion in this action. Its effect on this action is less direct. It means that the provisional liquidator is the person who may give instructions on behalf of the company from the moment the reclaiming motion is marked. I heard the argument before that time, and I received (and have still received) no information that the provisional liquidator wished me to stop the hearing on the minute. It is a matter for him. I do not see, therefore, that the marking of a reclaiming motion in the petition action in any way deprived me of my power to make the decision to which I have come in this action.