|
OUTER HOUSE, COURT OF SESSION
[2008] CSOH 149
|
|
P1683/08
|
OPINION OF LADY
SMITH
in the Petition of
STYLE MENSWEAR LIMITED
Petitioners;
For
Suspension of a
charge for payment and for interdict and for suspension and interdict ad interim
ญญญญญญญญญญญญญญญญญ________________
|
Petitioners: McIlvride; Anderson Fyfe
Respondents: Bowen; McGrigors
9 October
2008
[1] The
petitioners are tenants of Unit 25, St Enoch Centre, Glasgow. St Enoch Trustee Company Limited are
their landlords, all under and in terms of a lease between the Church
Commissioners for England and CS Property Glasgow Limited, and British Shoe
Corporation Limited dated 4 and 18 September and 18 October 1990 and registered in the Books
of Council and Session on 6 February
1991. Although the landlord
company has not yet lodged answers I will, for convenience, refer to them as
respondents.
[2] The
petitioners and respondents are successors to the original parties to the
lease. The petitioners are retailers
who trade through retail outlets elsewhere in the UK
in addition to Unit 25 of the St Enoch Centre. The respondents have sought to execute
diligence against the petitioners in respect of two quarters unpaid rent. The current annual rent is ฃ169,141.24. A charge was served on 23 September 2008. On 7 October
2008 the petitioners sought and obtained an order suspending the
charge ad interim. They now seek, in addition to that, an order
for interim interdict to prevent the
respondents and all others acting on their instructions from doing further
diligence or raising any other legal proceedings on the basis of what is
referred to as "the pretended certificate" of sums allegedly due by them.
Background
[3] St Enoch
Centre ("the Centre") is a shopping centre in Glasgow
constructed on the site of the old St Enoch Station. It can be accessed by entrances from St Enoch
Square, Argyle Street,
Dunlop Street and Howard
Street and via three other entrances that lead directly
into two large stores, which in turn have accesses into the common parts of the
Centre. In January 2008 the respondents
began works on the common parts of the Centre with a view to refurbishing and upgrading
them. It is expected that the works
will take another nine months or so to complete. At some unspecified point since January 2008,
the Argyle Street and Dunlop
Street accesses were closed and they remain
closed. Also at some unspecified point
since then, the St Enoch Square
access was altered so as to reduce its width.
Hoardings have been erected in its vicinity which bear large signs
stating, under reference to the Centre, "You're getting warmer" and there are
arrows pointing to the entrance. The
alteration to the St Enoch Square
access is shown on photographs which were produced at the hearing on the parties'
motions. The alterations to that access
remain in place. The petitioners'
averments include,
"As a
consequence of the works and of the restricted access to the Centre which
shoppers are now able to obtain, there has been a material decrease in the
number of shoppers visiting the Centre.
The petitioners' turnover has been reduced by around 40%."
[4] The
petitioners rely, in support of that averment, on 6/5 of process. It is a single sheet headed "Comparison of
year on year turnover for the Envy St Enoch store". It shows the turnover figures for the
52 weeks of the year 2007, broken down into what is referred to as "Own
buy" and "Concessions" and the turnover for weeks 1 to 35 of 2008 with,
again, the turnover broken down into "Own buy" and "Concessions". Negative movements in turnover are
calculated in percentage terms in two right-hand columns, both under reference
to a downturn in total turnover and a downturn in "Own buy" turnover. The author of that document is not
identified. The document is not
authenticated. I was advised by
Mr McIlvride, who appeared on behalf of the petitioners, that it had been
printed-off by the manager of the Unit.
It does not give any indication of profit levels over the periods
covered, whilst a significant diminution in the turnover of what is referred to
as "Concessions" is readily identifiable.
The same cannot, in every case, be said of what is referred to as "Own
buy". I was advised that the columns
headed "Concessions" refer to sales of other brands, whereas "Own buy" refers
to the petitioners' own brands. No
document has been lodged to indicate what has been the performance during the
same periods of comparable shops from which the petitioners trade which are
situated in the locations where there are not ongoing building works. No document or averment indicates the date
or dates at which the accesses referred to were closed and modified.
The Lease
[5] I
turn to the lease. The particular parts
of the lease that are relevant are as follows.
Clause 1
"1. The Property is:
ALL and WHOLE
that part of the St. Enoch Centre, Glasgow, known as Unit 25 and Holding
Area 4 and particularly described in Part I of the Schedule annexed
and executed as relative hereto."
Clause 1.10
"1.10 "the Centre" means all and every part of the
shopping and leisure development."
Clause 3.1
"3.1 To pay rent
To pay to the
Landlords the rent made payable hereunder on the days and in manner aforesaid
without any deduction, set-off or counterclaim (except as required by law)."
Clause 4.1
"4. ... The Landlords hereby bind and oblige
themselves as follows:
4.1 Quiet Enjoyment
That the Tenants
shall and may peaceably and quietly possess and enjoy the Property during the
Period."
Clause 6
"6. Jurisdiction
The Lease shall
be interpreted in accordance with the Law of Scotland and any dispute,
difference or question of any kind that may arise between the parties or out of
the terms here shall (unless otherwise provided herein) be determined in
accordance with the Law of Scotland."
Schedule Part 1
"(The Property)
ALL and WHOLE
that part of the Centre known as Unit Number 25 comprising a retail unit
and Holding Area Number 4 comprising a storage area on the ground and
basement levels respectively all as shown outlined in red and numbered accordingly
on the plans numbers 3 and 2 respectively including..."
Schedule Part III
"Full right and
liberty at any time and from time to time during the Period without obtaining
any consent from or paying any compensation to the Tenants or to any subtenants,
to erect or attach buildings, erections, signage, structures, plant or
equipment in or upon or alter or rebuild any such buildings, erections,
structures, plant or equipment from time to time erected or attached in or on
or comprising of other parts of the Centre (including the common parts of the
Centre) or any other adjoining, opposite or neighbouring land or premises
belonging to the Landlords to any extent and in any manner notwithstanding that
the access of light and air to the Property or any part thereof may be thereby
obstructed, diminished or interfered with but so that the person carrying out
such works shall cause as little damage and inconvenience as is reasonably
practicable and shall make good all damage thereby caused to the Property."
The Petitioners' Case
[6] Turning
to the petitioners' case in support of the motion for interim interdict, the petitioners' submission was that there is a prima facie case that the respondents
were in breach of the lease and that that breach has caused and continues to
cause them to suffer loss. It was
submitted further that the balance of convenience favours the granting of interim interdict.
[7] Mr McIlvride
submitted that the petitioners have a prima
facie that they have suffered and continue to suffer loss. He relied solely on 6/5 of process in
support of that submission. Mr McIlvride
also submitted that there is a prima
facie case that the respondents are in breach of their obligations. There were two aspects to that
submission. Firstly, it was said they
have gone beyond their rights as contained in Schedule Part III,
paragraph 1. Secondly, it was said
that they had gone beyond their rights because Clause 4.1 should be
interpreted in accordance with English law and, when that is done, it can shown
that the respondents are in breach of it.
As regards the reference to English law, at Article 6 of the
petition there are the following averments:
"6. That the Church Commissioners for
England who, with Sears Property Glasgow Limited, entered into the contract of
lease of the premises as landlords have their head office in London. At the time they entered into the contract
of lease they had for many years let numerous properties in England. British Shoe Corporation Limited, who
entered into the contract of lease as tenants, had their registered office in
Leicester. At the material time they
had numerous shops in England. It is
believed and averred that many of those shops were leased. The phrase 'quiet enjoyment' in the context
of a lease has a well known and judicially defined meaning in English law. It is believed and averred that meaning was
well known to the original parties to the lease. Properly construed, clause 4.1 of the
lease obliges the respondents to provide the petitioners with the right of
quiet enjoyment of the premises as would be enjoyed by a tenant under English
law, subject to the rights conferred on the respondents by Part III of the
schedule to the lease. In having the
works carried out in such a manner that they have obstructed to a material
extent access to the premises the respondents have breached their obligation to
allow the petitioners such quiet enjoyment of the premises. It would have been reasonably practicable
for the respondents to arrange and phase the works so as not to restrict access
to the premises to a material extent.
The respondents are in material breach of the contract of lease between
the parties."
[8] The
averments do not actually contain any explanation of what the relevant English
law, rule or principle is or as to the manner in which it differs from any
relevant Scots law rule or principle.
[9] Mr McIlvride
explained that the petitioners were concerned that the closure of two access
points and the temporary modifications to the St Enoch Square access had
brought about a reduction in passing trade.
He said that the petitioners were offering to prove that that reduction
had brought about at least a 40% diminution in turnover. Turning to the provisions of the lease, he
submitted that they demonstrated that where the respondent landlords chose to
carry out works in such a way as interferes to a material extent with the
volume of business available to the petitioners, that amounted to a material
breach of contract and entitled the tenant petitioners to retain rent, so long
as the landlord remained in breach. In
doing so they were, he said, carrying out a deduction which was envisaged by
clause 3.1 of the lease. He
submitted that clause 3.1 showed that the petitioners were required to pay
the rent in full, unless by operation of law they were entitled to set it off
or retain it.
[10] I note that, judging by the averments, what the tenants
envisage is not a wholesale cessation of works by the landlords; that is not surprising given that they are
liable to benefit in the longer term from an upgrading of the Centre, an
upgrading which seems to be being carried out by the respondents at their
expense without contribution from the tenants.
Rather the petitioners seem to be looking for phasing of the works so as
to allow what they refer to as "reasonable access" to the Centre whilst the
works are being carried out. No
specification is given though of what restrictions to access they would accept
in that context. It does, however, seem
to be indicated that they would accept that some restriction, short of the
current restrictions, would not be objectionable.
[11] Mr McIlvride referred to and relied on two of the clauses
in the lease. Firstly he relied on
Schedule Part III, paragraph 1.
Under reference to it, Mr McIlvride said that the petitioners
accepted that the works currently being carried out by the landlords fell
within the category of works described in that paragraph. He sought to make it clear however that the
petitioners were not saying that the respondents couldn't carry out any
works. The problem was that in this
case they had not kept to causing only such damage and inconvenience as could
not, in terms of reasonable practicability, be avoided, as was demonstrated by
the diminution in turnover figures. The
respondents were accordingly in breach.
[12] The second clause on which Mr McIlvride particularly
relied was clause 4.1. He
acknowledged that the lease was governed by the law of Scotland. He submitted, however, that the petitioners
were seeking to persuade that it was appropriate to construe clause 4.1
against a matrix of fact which formed the background against which the original
parties to the lease contracted. They
must, given their English connections, have intended to confer on the tenant
the right to quiet possession and enjoyment of the subjects of let, which would
have been conferred on the tenant entitled to quiet enjoyment under the law of
England. He founded, in particular, on
the fact that the original tenant was an English company, that, as he put it,
the landlords were English - in fact
only one of them was English, as is to be observed from the instance in the original
lease - and that, according to his submission, the specific words used are
common in English commercial leases. He
was not, however, seeking to suggest that such wording was not used in Scottish
leases. Mr McIlvride developed
that submission. Although not reflected
in any averment in the petition, it seemed that the petitioners' submission was
that under English law, the works being carried on at the Centre would, on
account of the access closure at Argyle Street and the modifications to the
St Enoch Square entrance, amount to a breach of the provisions of
clause 4.1. For that submission he
relied not on any reference to any English authority but on an old Scottish
case, Huber v Ross 1912 S.C. 898. It
refers to an English decision of 1894, the case of Aldin v Latimer Clark
Muirhead & Company [1894] 2 Ch 437 where Mr Justice Buckley observed
that a landlord in England was bound to refrain from doing anything on property
retained by him which would render the lease premises unfit for carrying on
business in the way in which it has ordinarily carried on. That is, the obligation would exist even if
the landlord's works had no physical effect on the premises leased.
[13] I would, at this point, observe that it is not suggested by the
petitioners in this case that Unit 25 (or its storage facilities) has been
rendered unfit for carrying on business as retailers. Their complaint is a different one, namely
that the retail trading that they have carried on and are carrying on has
suffered a loss of turnover since the beginning of 2008. Under reference to the case of Bank of East Asia v Scottish Enterprise 1997 S.L.T. 1213, Mr McIlvride also
submitted that rent was the counterpart of the landlord's obligation to provide
quiet enjoyment and the petitioners were accordingly entitled to retain it in
the meantime. He also referred to the
case of The Highland Council, Petitioners, unreported dated 23 January 2004. The rent withheld thus far has not, I note,
been consigned nor was any offer made to consign it or to place the money on,
for instance, joint deposit receipt.
[14] Mr McIlvride submitted that the balance of convenience
favoured the grant of interim
interdict.
The Respondents' Case
[15] Turning to the respondents' case, for the respondents Mr Bowen
submitted that the petitioners had not made out a prima facie case. He moved
that the order of 7 October suspending the charge should be recalled. He questioned whether the demonstration of
loss of turnover in 6/5 of process was indicative of the loss of profit. He submitted it could not be assumed the
loss of turnover was attributable to the building works when regard was had to
the economic circumstances of 2008 thus far.
No explanation was given on the difference between the down-turn in "Own
buy" as opposed to "Concessions".
Further, the respondents had made efforts to keep the St Enoch
Square entrance obvious through the use of the signs shown in the
photographs. The petitioners were not
entitled to withhold rent and there was no basis in terms of the lease for
their doing so.
[16] Turning to balance of convenience, Mr Bowen submitted that
consideration required to be given not only to the effect on the respondents if
the petitioners were able to retain rent, but the risk of other tenants doing
likewise.
Decision
[17] The petitioners seek interim
interdict and to maintain in place the suspension of the current charge. It is accordingly for the petitioners to
show that they have a prima facie
case and that the balance of convenience favours the grant of these interim orders. I have given careful consideration to the
averments in the petition, the productions, the authorities referred to and the
submissions made but I am not persuaded that the petitioners have shown that
have a prima facie case. That being so, it is not necessary to
consider balance of convenience but if it were necessary to do so I would be
satisfied that the balance of convenience in the circumstances here favours the
respondents.
[18] Turning to the question of whether or not the petitioners have
made out a prima facie case, I look
firstly at the matter of loss. I do not
see that a prima facie case has been
made out of the petitioners suffering loss caused by the building works. Firstly, I note that the turnover figures show
the first 35 weeks of 2008 but no indication is given of when it was that
the two accesses were closed and the St Enoch Square entrance was
modified. Secondly, I note that the
figures are turnover figures only and no indication is given of the way in
which profits have altered, if at all.
Thirdly, I note that 6/5 is an informal document, its author is
unidentified, and it is not authenticated or verified in any way. No other documents in support of this key
part of the petitioners' case are lodged.
Fourthly, I note that the petitioners do not advance, for instance, any
information regarding their trading results from shops in other locations where
building works are not being carried on.
Fifthly, it is within judicial knowledge that 2008 has been a difficult
year for the retail sector, with many high street stores experiencing a
down-turn in sales. Mr McIlvride
did not demur from Mr Bowen's submission that that was the case. Sixthly, whilst two accesses have been
closed, others remain open and, so far as the St Enoch Square access is
concerned, much seems to have been done to keep the access not only open but
obvious.
[19] Turning then to the petitioners' case that they have
demonstrated a prima facie case of
breach by the landlord of the landlord's obligations under this lease, I am not
satisfied that a prima facie breach of
Schedule Part III, paragraph 1 has been shown. The obligation incumbent upon the landlord
to restrict a carrying out of works so as to cause as little damage as is
reasonably practicable relates only to physical damage to the subjects as let. The clause clearly refers to "the property"
and "the property" is defined in terms of the lease (clause 1) as being
the physical property tenanted by the tenant.
There is no question of the property tenanted by the petitioners having
been or being likely to be subject to physical damage.
[20] Turning to the petitioners' case that there is a prima facie case of breach of
clause 4.1, I note firstly that it is plain in terms of the lease itself
that it is to be governed according to Scots law. Secondly, there are no averments as to how
English law would in fact produce a different conclusion than the conclusion
one would reach by interpreting clause 4.1 according to Scots law. Even if the relevant English law is as
indicated by the Aldin case referred
to in Huber, it does not in fact seem
to support the proposition that a tenant in the petitioners' position would
have a good claim for loss of profits.
As I have already indicated, the petitioners are not saying here that Unit 25
has become unfit for use as a retail shop.
They can use it. Their complaint
is one of a diminution in returns from trading. That is a different matter. As against that, the terms of the lease are
clear. Irrespective of the provenance
of some of the original parties, they agreed it should be governed by Scots
law. That means that there is no room
for implication of any terms such as would be implied by English law. Further, it is clear from Huber that, under Scots law, where a
landlord carries out works to neighbouring property retained by him, he is only
liable to the tenant at common law in respect of the consequences of physical
damage to the subjects let. Further,
turning to the precise terms of clause 4.1 in this lease, I note that it
relates to "quiet enjoyment" and possession of "the property". Again, that is a reference to the physical
property tenanted by the petitioners in this case and there is no question of
the peaceable and quiet possession of that property having been interfered with
in any way on account of the works being carried out by the landlords. There is no question of them not being able
to quietly possess and enjoy the property let.
[21] I turn then to the matter of right of retention. I accept that it is a right that exists at
common law and, as in the Highland
Council case, if it exists then at interim
stage the equities may well be in favour of sanctioning retention in the
meantime. However, the petitioners'
problem here is, again, the terms of the contract on which they rely as the
source of their right to retain. I have
already referred to Mr McIlvride's submission regarding the meaning of
clause 3.1. He says that entitles
the tenant to retain the rent under the common law right of retention if the
landlord is in breach. However, that submission
ignores the actual wording of clause 3.1.
In terms of that clause the tenant obliges himself to pay the rent
without any deduction except as "required" by law. Even if Mr McIlvride was right that the
present circumstances entitled the tenant, as a matter of principle, to retain
rent as the counterpart of the landlord's obligation to afford quiet enjoyment,
it cannot be said that the law requires that to happen. His problem then is that the tenant here has
in fact contracted out of the common law entitlement to retain. In all these circumstances, whilst
recognising that this is an interim
stage and the test is one of whether the petitioners have made out a prima facie or arguable case, I cannot
be satisfied that they have.
[22] Dealing then very briefly with the matter of balance of
convenience, were I to have granted the orders sought by the petitioners, they
would be able to retain the rent which had been outstanding for many months and
refrain from making further payments until the works are completed in the
circumstances where no indication was given of any preparedness to secure that
rent in the meantime whether by consignation or putting the money on deposit
receipt or otherwise. The loss of income
stream to the respondents from their investment vehicle in the meantime would
have been substantial. Other tenants
might have followed suit. If the orders
are not granted, the tenant will still have available to them all and any
claims for breach of contract by the respondents which they consider they are
properly in a position to advance. They
would not accordingly be prejudiced by my refusing to grant the orders
sought. In these circumstances I refuse
the motion made by the petitioners to grant interim
interdict and I grant the motion made by the respondents which is to recall the
suspension of the charge that was issued on 7 October.
