Act:  Logan;  Campbell Smth WS

Alt:  Weatherston, solicitor advocate;  TC Young LLP

10 July 2014

Background

[1]        This action relates to the lease to the respondents of industrial premises constituting part of one unit within a very much larger industrial complex, namely part 1.1 of Unit 1 of Centrelink 5, Shotts. The premises constitute a very small part of the overall estate, most of which is currently unoccupied. The reclaimers purchased the subjects in 2012 and thus became successors to the original landlords under the lease.  In terms of the lease the description of the premises included:

"...all necessary rights of pedestrian and vehicular access (as may be designated from time to time by the Landlords acting reasonably) thereto and egress therefrom over and across all access routes (as may be designated from time to time by the Landlords acting reasonably) within the larger building of which the Premises form part and the Estate."

The pertinents are defined as follows, in clause 1.10:

“(i) the right in common with the Landlords and all the other persons authorised by the Landlords to the roadways shown for the purposes of identification only, coloured pink on the Plan 2 annexed hereto as are available for access; (ii) the right in common with all other persons entitled thereto and so far as the Landlords have power to grant the same to use all service media serving the premises”

As to the provision of electricity, the lease provided:

“(b) ELECTRICITY AND WATER

a fair and equitable proportion (as reasonably determined by the landlords acting reasonably) of all expenditure properly and reasonably incurred by the Landlords in providing electricity (excluding lighting) and water supplies to the Premises together with any Value Added Tax properly payable on these costs…

(f) SERVICE CHARGE

a fair and equitable proportion (as reasonably determined by the landlords acting reasonably but capped at a sum equivalent to £1.00 per square foot per annum) of the costs properly and reasonably incurred by the Landlords incidental to providing all or any of the Services to the Premises together with any Value Added Tax payable on these costs, expenses and outgoings and including any costs incurred by the Landlords in appointing a Surveyor or managing agent.”

The reclaimers raised an action seeking payment of (a) certain sums relating to the provision of electricity which they averred were due and resting owing; and (b) outstanding rent.  They averred that the total monthly costs for provision of electricity to the complex was about £20,000 per month, of which the respondents’ use accounted for about two thirds, based on calculations of an independent consultant.  It is averred that invoices reflecting these figures were sent to the respondents, who failed either to pay or make proposals to settle the debt. Accordingly, on 9 December 2013 the reclaimers cut off the supply of electricity to the premises, from which date the overall bill for consumption of electricity has fallen to £7,000 per month, consistent with the calculations of the consultant. From that date, the respondents have also failed to pay rent, which is the second sum sued for.

[2]        The respondents disputed that the sums claimed in respect of electricity were due, averring that sums paid by them to the reclaimers in respect of their monthly consumption of electricity had not been passed on to the electricity supplier, and that they had not been provided with satisfactory documentary evidence to show that the sums were indeed due. They averred that by terminating the electricity supply the reclaimers have damaged their business and sought to make continued occupation of the subjects untenable. They have required to use costly and unsatisfactory generating equipment to continue their operations.

[3]        Apart from this primary dispute between the parties, a further dispute arose relating to access to the premises. The respondents averred that since 24 February 2014 the reclaimers had restricted all vehicular access to the subjects by securing the gates to the estate road at the rear of the unit, and by locking certain roller doors which permit heavy goods, plant and equipment to be manoeuvred to and from the subjects.  Only pedestrian access was being allowed, which they averred disrupted their business to the extent that they could not continue trading from the premises. In particular they averred that the reclaimers had prevented them from using certain loading bays and the vehicular access thereto, which they claimed to have been accustomed to use. The reclaimers maintained that there remained available to the respondents both pedestrian access and vehicular access, precise details of which were averred.  They further averred that the right of access was not an unqualified one, but was to be that designated by the landlords, acting reasonably.  Although it seemed that the respondents had used an alternative vehicular access by means of an estate road to the North, and by use of the roller doors at the loading bays at the rear of the main unit they had no right to do so, neither of those routes having ever been the subject of nomination or authorisation by the landlord.  During December 2013 and January 2014 the complex, most of which is unoccupied, was targeted by thieves who removed valuable copper wiring, a task which would have required heavy tools and vehicular access via the estate road, causing damage to the complex and resulting in a loss in the region of several hundred thousand pounds.  In consultation with the police it was decided that access to the service road should be restricted, and parts of the building fenced off.  Gates, secured by padlock, were installed on the service road.  A security guard was employed at night.  Even if this route had ever been a nominated access route, it was reasonable in the circumstances for the landlords to restrict access in this way, alternative means of access being available.

[4]        It should be noted that on all the issues in this case, some of which have not been noted above, there is a stark dispute of fact between the parties.

[5]        In March of this year the respondents sought interim interdict against the reclaimers to prevent them from obstructing access to the premises in a way so as to defeat or impede the respondents’ rights under the lease. The reclaimers having given an undertaking to the court, the respondents were allowed to drop their motion for interim interdict at the bar.  The terms of the undertaking were as follows:

“Logan for the pursuers, without prejudice to their whole rights, pleas and laws undertakes that on three hours’ notice between the hours of 6pm and 6am access to and egress from the subjects of let will be given along the road coloured green and the roller door marked ‘Alba back door (alternative)' through the passageway shown in photograph 3, both of which are attached to the affidavit by Stuart Robertson number 13 of process.

In respect that the defenders have undertaken to pay the cost of providing a security guard on site (the said payment to be made fourteen days in advance) between the hours of 6am and 6pm access will be given on the same terms and conditions between these hours.

For the avoidance of doubt the said access is for the purpose of deliveries to or collections from the subjects of let and vehicles are not to be parked in said areas other than for that purpose.”

Subsequently, the respondents, maintaining that the reclaimers had failed to obtemper that undertaking, returned to court seeking decree in terms of sections 46 and 47(2) of the Court of Session Act 1988  (the 1988 Act) by ordaining the reclaimers to unlock all padlocks, or other impediments prohibiting access through

“the roller door to the rear of the subjects let; the roller door, passageway and road referred to in the undertaking….; and the remaining clear loading bay, roller doors and passageway for its use at the rear of Unit 1”

all for a minimum period of between 0800 and 1600 each weekday for a period of the earlier of (a) 14 working days from service of any interlocutor or (b) the date by which the respondents have removed their plant and equipment, granting warrant to break open lockfast places for that purpose.

[6]        They argued that as a result of the reclaimers’ failure to grant access they were unable to carry on their business, that they had found other premises and wished to vacate the unit in question, but were unable to move their heavy plant and machinery therefrom without access to the loading bay doors referred to.  The reclaimers argued that under the lease the respondents had no right of access to inter alia the loading bay or the doors thereof, and that the order sought should not be granted.  The respondents’ published accounts suggested that they were insolvent, and it was frankly acknowledged by counsel that a concern of the reclaimers was the removal of the plant and machinery would preclude the operation of the landlord’s hypothec.

[7]        The motion was granted, but the interlocutor was suspended pending this reclaiming motion.

[8]        Sections 46 and 47 of the Act provide as follows:

“46. Specific relief may be granted in interdict proceedings.

Where a respondent in any application or proceedings in the Court, whether before or after the institution of such proceedings or application, has done any act which the Court might have prohibited by interdict, the Court may ordain the respondent to perform any act which may be necessary for reinstating the petitioner in his possessory right, or for granting specific relief against the illegal act complained of.

47.— Interim interdict and other interim orders.

(1) In any cause containing a conclusion or a crave for interdict or liberation, the Division of the Inner House or the Lord Ordinary (as the case may be) may, on the motion of any party to the cause, grant interim interdict or liberation; and it shall be competent for the Division of the Inner House or the Lord Ordinary before whom any cause in which interim interdict has been granted is pending to deal with any breach of the interim interdict without the presentation of a petition and complaint.

(2) In any cause in dependence before the Court, the Court may, on the motion of any party to the cause, make such order regarding the interim possession of any property to which the cause relates, or regarding the subject matter of the cause, as the Court may think fit.

(3) Every interim act, warrant and decree granted during the dependence of a cause in the Court shall, unless the Court otherwise directs, be extractable ad interim.”

Before the Lord Ordinary, there was substantial agreement on the law to be applied to a motion under these sections, the Lord Ordinary recording that:

“Parties were in agreement that the case of Scottish Power Generation Ltd v British Energy Generation Ltd 2002 SC 517 set out the requirements under section 47(2) of the Act.  There were four requirements, as follows:

(a)        The court should identify the issue and identify the legal basis on which any right was asserted;

(b)        The court should consider whether there is a prima facie case that an obligation exists and that there is a continuing or threatened breach of that obligation which the order will address;

(c)        The court should avoid innovating significantly on the parties’ contractual rights and obligations;  and

(d)        The court should consider the balance of convenience, bearing in mind the harm to either side and the relative strength of their cases.”

The Lord Ordinary was satisfied: that the respondents had a prima facie case that they had the right of access in question; that such an obligation existed; and that there was a continued threat thereto which the order would address. She concluded that granting the order would not innovate significantly on the parties’ contractual rights and obligations. As to the balance of convenience, she considered that the harm to the respondents, a manufacturing company which was being prevented from manufacturing, was extreme.  On the other hand, the reclaimers had legitimate concerns about their ability to recover any sums ultimately found due to them by the respondents.  From the ultimate decision, the Lord Ordinary clearly decided that the balance of convenience lay with the respondents, since she granted their motion in full.

[9]        Before we proceed to address the issues which were raised in the reclaiming motion we shall attempt the somewhat difficult task to explain the layout of the premises and the possible access routes thereto. The general outline of the whole estate is that of a large rectangle, within which there are 5 substantial separate units. Unit 1, of which the subjects of lease form considerably less than half, is the most Southerly unit.  That part of the unit occupied under the lease is the area extending across the South eastern corner of the perimeter of the estate, in other words, the bottom left of the rectangle.  We need not trouble with explaining the nature of the access to the front of the building. At the immediate rear of the subjects is a door, referred to as the “inner shutter door”, wide enough to permit access by fork lift truck.  That is part of the access to which the undertaking related.  Some distance beyond that, at the very rear of Unit 1, in the South West corner, there are several doors. The two most westerly doors are those associated with which there are two loading bays. The undertaking did not cover access via this route, which we shall refer to as the “loading bay doors”. These are roller shutter doors which lead into loading bays within the most westerly section of unit 1, in other words, the top left corner.  They are situated at a distance behind, and to the left of, the subjects. Immediately to the right of these (looking at the rectangle) is the remaining part of the access to which the undertaking related. This is a door referred to as the “rear shutter door” which is clearly a vehicular access, to which entry is gained by driving round the estate road to the rear of the whole estate.  A substantial corridor leads from this access route to the inner shutter doors of the subjects, and by this means, using a fork lift truck, goods may be loaded, unloaded and delivered or dispatched from the premises (we shall refer to this as the “fork lift route”).  Unlike the loading bay access, this route runs in a direct line from the immediate rear of the subjects to the service road.

Submissions

[10]      Counsel for the reclaimers argued that the Lord Ordinary erred in concluding that the respondents had established a prima facie legal right to access using the loading bay doors. The respondents’ claimed a right to use the loading bays but it was clear that these fell outwith the terms of the lease.  The respondents did not aver that there was ever any nomination or authorisation by the landlord in respect of access by this route.  It was accepted that there had not been a positive nomination of the access route prior to the undertaking.  Although the undertaking was conditional upon the reclaimers paying for the security guard to operate the gates on the service road, which they have failed to do, counsel recognised that the Lord Ordinary would have been entitled to be satisfied that a prima facie right to access by the means therein envisaged had been established. In granting the order sought the Lord Ordinary innovated upon the parties’ contractual arrangements. The fundamental point was that the loading bays did not form part of the subjects.  The respondents' accounts showed them to be absolutely insolvent. The reclaimers sought payment of substantial sums in respect of services and rent. It was clear that it was now the respondents' intention to remove from the premises, taking with them all items of plant and machinery, thus defeating any opportunity for the reclaimers to exercise the landlord’s hypothec. In considering the balance of convenience, the Lord Ordinary came to view that this was a manufacturing company which was prevented from manufacturing but that was not the case.  The respondents continued to operate and to trade from the premises, and the undertaking had offered an access route for that purpose.

[11]      For the respondents it was submitted that the right of access contended for by them had been enjoyed by all tenants of Unit 1, of which, by now they were the only tenants.  It was not argued that the loading bay route was covered by the lease or had ever been nominated by the landlords, rather that the right to use it it had been established by use. It was conceded that the fork lift route would suffice for the carrying out of the respondents’ business, and for the delivery of goods to and from the premises. It would not enable them to remove their plant and vacate the premises. It was submitted that the loading bays were part of the common parts to which the respondents were entitled. This was an access route to Unit 1 which all tenants thereof were entitled to use.  Reference was made to Thomson v Glasgow Corporation 1962 SC (HL) 36 and Batley Pet Products Ltd v North Lanarkshire Council [2014] UKSC 27.

Discussion and decision

[12]      As noted above, the general principles applicable when considering an application such as this were not in dispute. Nevertheless, it is worth examining more closely the opinion of the court in Scottish Power Generation Ltd, in particular the following passages:

“[22] In like manner, we do not consider that sec 47(2) of the 1988 Act gives the court a wholly unfettered discretion to determine whether or not to grant an interim order. In a series of cases involving sec 47(2) directed to 'keep open' obligations in commercial leases, beginning with Church Commissioners for England v Abbey National pic, the court has recognised that it is competent to grant an interim order to reinstate a person in his possessory right or to grant specific relief against an illegal act. But it is clear from the opinions in Church Commissioners for England that in order to justify such an interim order, the petitioner must establish a prima facie case that an obligation exists, that there is a continuing or threatened breach of that obligation and, further, that the balance of convenience favours the making of the order sought.

[23] In subsequent cases in which orders have been sought under sec: 47(2) of the 1988 Act, the court has generally followed the approach we have set out above. That is to say, the court has determined, first, whether the applicant for the order has established a prima facie case in relation to the alleged breach of an obligation incumbent on the other party, whether contractual or otherwise, and, second, if so, whether the balance of convenience favours the grant or refusal of the interim order sought. ……. In the Retail Parks Investments case Lord Penrose quoted a passage from Burn Murdoch, Interdict at p 2 as follows: 'Distinct considerations are involved according as the interdict to be granted is final and perpetual, or merely ad interim. In the latter case the leading principle is generally the preservation of the status quo, more especially if matters are already the subject of an action: 'The principle is pendente lite nihil innovandum, particularly if the innovation is a practical decision of the case."' Lord Penrose went on to observe at p 1161: 'Where one is concerned with orders for the protection or enforcement of contractual provisions the measure of the court's power must take account of and generally be qualified by what the parties have agreed in their contract. It is not for the court to make the parties' bargain, and certainly not to supply deficiencies in that contract.'

[24] Similarly, the court has declined to make interim orders in the nature of consignation except in relation to sums admittedly or certainly due. In other words, the power to intervene ad interim has been held to arise only in respect of established rights, since by going further the court would run the risk of becoming involved in rewriting contractual arrangements, or at least innovating on the rights and obligations of parties.”

[13]      It follows from this that the first, critical, step in considering an application such as this, is to identify exactly the right which is said to justify the order.  In the present case, it is clear that the respondents maintain that they have a right, not merely to access using the service road, and the fork lift truck route, which is admittedly sufficient for the conduct of their business, but the right, not only to gain access from the loading bays, but the right to use the loading bays. There is nothing in the documentation before the court to suggest that the respondents have any such right. The loading bays are clearly not part of the subjects let are not contiguous with the subjects, and access to them is not necessary for the conduct of the respondents’ undertaking.  The respondents argued that they had a right of access through the roller doors which necessarily involved a right to use of the bays.  However, we are satisfied that matters should properly be viewed the other way round.  Loading bays are plainly a valued facility.  The doors are properly to be seen as a necessary aspect of use of the loading bays rather than an independent means of access to the building.  The fact that there was nothing in this detailed lease giving any hint of a right to use the loading bays supports the view that the respondent had no absolute right to use these doors.  They might have been allowed to do so if that were convenient but, on any view, this was subject to the landlords' power to designate a different route.  The effect of the undertaking was that the route it described was the route to the rear of the building as designated by the landlords.  The respondents accepted that such a route was adequate for their normal business purposes of getting raw material in and their finished product out.  We are satisfied in restricting any right of access to that route it cannot be said that the landlords were acting unreasonably.  They have no right entitling them either to use of or access to the loading bays.  We accept therefore entirely that the respondents are entitled to the use of the service road, and to gain access to the subjects via the fork lift truck route. Such access is necessary for the proper use of the subjects and they could not use the fork lift truck route without free access to the service road. In any event, the service road appears to be covered by the definition of pertinents in clause 1.10 (i).  It was suggested by counsel for the reclaimers that in the absence of any plan showing the area shaded pink (which, surprisingly, neither party seems to have) it could not be said that the service road was included. We disagree.  It is obvious that the roads in question must be private roads within the estate and the service road appears to be the primary, if not the only such road.  It cannot be said however, that the loading bays come within the definition of pertinents, either in clause 1.10(i) or in clause 1.10(ii) which relates only to the subjects of the lease and not the whole unit.

[14]      The Lord Ordinary concluded that the prima facie right established by the respondents was a right “to access to the service road through the roller doors”.  It is clear that by this she meant all the roller doors at the rear of Unit 1, rather than only that giving access to the fork lift truck route in a direct line from the subjects.  Had the order made related only to the fork lift truck route there would have been no difficulty.  To the extent that the order exceeds this it goes beyond the rights held by the respondents and innovates upon the parties’ contract.  It was not seriously disputed – it hardly could be – that, if the matter were restricted to the fork lift truck route, the balance of convenience lay with the respondents.  Counsel for the reclaimers suggested that the right to use the access road should be conditional upon payment in respect of the services of the security guard during daylight hours.  Again we disagree. There is no basis for such a contention.  If the reclaimers wish to take steps to secure the service road, they may do so, but only in a way which allows the respondents unhindered access to the service road.  They may do so either by providing a security guard during the working day also, or by providing the respondents with a key to, or the combination of, any padlock used, but they must do so.  In the event that they are willing to provide the latter, a simple order to allow access via the fork lift truck route would suffice.  Otherwise, a more detailed order would be required.  We will put the case out by order for discussion of the exact terms which the revised order should take.