Scottish Court of Session Decisions

SECOND DIVISION, INNER HOUSE, COURT OF SESSION

[2016] CSIH 19

CA190/13

 

Lady Paton

Lady Smith

Lord McGhie

OPINION OF THE COURT

delivered by LADY PATON

in the cause

GYLE SHOPPING CENTRE GENERAL PARTNERS LIMITED

Pursuers and Respondents;

against

MARKS AND SPENCER PLC

Defenders and Reclaimers:

Pursuers and Respondents:  Lindsay QC;  HBJ Gateley

Defenders and Reclaimers:  Murphy QC, E Robertson;  DWF LLP

16 March 2016

Shopping centre:  dispute over the proper construction of a commercial lease

[1]        The owners of the Gyle Shopping Centre (the pursuers) wished to lease premises to a new retail tenant, namely Primark Stores Ltd (“Primark”).  It was proposed that Primark should occupy not only several retail units in the central building, but also a new extension which would be built projecting beyond the straight-line frontage of the shopping centre such that part of it would be built on car-parking and pedestrianised areas.  The shopping centre management committee, including one representative from the defenders (“M&S”) approved the proposal.  The committee considered that Primark would bring more custom to the area, and would be beneficial to the centre.

[2]        The pursuers sought the consent of the two anchor tenants, namely M&S and Morrisons plc, formerly ASDA (“Morrisons”).  Each refused their consent.  The pursuers raised the current action in the Court of Session.

 

Debate and opinion dated 25 March 2014
[3]        A debate took place concerning inter alia the status and powers of the management committee.  The pursuers were unsuccessful in arguing that M&S had already, via the management committee, given unqualified written consent to the project (Lord Tyre’s opinion dated 25 March 2014, [2014] CSOH 59).  However in that opinion, the Lord Ordinary made the following obiter observation:

“[37] Although I was not specifically addressed on it, it seems to me that an appropriate procedure may be found in Clause 24, which applies to ‘works within the Mall or Shared Parts’ that are not carried out by the Management Committee under Clause 77.  Provision is made by Clause 24.2 for the giving of consent – or of written confirmation that they do not object – by the Represented Parties [M&S, Morrisons, and the pursuers].  At paragraph 13 above, I set out the terms of Clause 24.10.  I mention this sub-clause in particular because it appears to me to make clear that the parties intend Clause 24 to be capable of applying inter alia to works which effect a permanent alteration to the layout of the shopping centre.”

 

While disagreeing with that approach, M&S did not appeal the decision, as they had been successful.  The obiter remark accordingly stood unchallenged. 

 

Pursuers’ use of Clause 24.2 by letter dated 5 June 2014
[4]        Clause 24.2, referred to by the Lord Ordinary, provides:

“24.2 Except in case of emergency or where such works are carried out by the Management Committee pursuant to the duties of the Management Committee under Clause 77 hereof, such works shall not be carried out unless all of the Represented Parties [including inter alios M&S] either previously consent that they respectively accept that such works will not render the Mall or the Shared Parts materially less adequate, materially less commodious or materially less convenient to them respectively than the Mall and the Shared Parts as existing immediately prior to the commencement of such works (which consents shall not be unreasonably withheld) or previously confirm in writing that they do not object to such works.”

 

[5]        The pursuers decided to adopt a Clause 24.2 approach.  They sent M&S a letter dated 5 June 2014 in inter alia the following terms:

“ … Clause 24 of the Lease applies in respect of any works within the Mall or the Shared Parts all as defined within the Lease.  As has previously been outlined in correspondence with your solicitors, it is our clients’ primary position that you have already provided their unqualified written consent to the construction of a new building to be leased to Primark Stores Limited, and to the works associated with this development.

 

In the event that you have not already confirmed that you do not object to this proposed development, we now, on behalf of and as instructed by the Gyle, seek your consent in accordance with Clause 24.2 of the Lease …

 

As you will be aware, Clause 24.2 provides as follows:-

 

[The Clause is then quoted.]

 

In relation to the proposed works, please find enclosed the Planning Decision Notice … together with the accompanying drawings … The scope of the proposed works has not altered.

 

Without prejudice to any consent which may be found to have already been provided, please now advise by return whether you accept that the proposed works will not render either the Mall or the Shared Parts materially less adequate, materially less commodious, or materially less convenient to them than they are prior to said works taking place …

 

In order to allow you to consider this request, it may also be of assistance to have regard to the Witness Statement by Kenneth Williamson lodged by the Gyle as part of the ongoing court action.  This provides an independent analysis by a qualified architect on the impact of the proposed works …

 

You will of course be aware that the consent being sought in terms of Clause 24.2 shall not be unreasonably withheld, all in accordance with the Lease.  As such, in the absence of a substantive response now being received without delay, the Gyle will have no option but to conclude that said consent is being refused, which refusal shall be unreasonable and therefore in breach of the Lease …”

 

[6]        M&S did not consent.

 

Proof before answer in December 2014 and opinion dated 12 February 2015
[7]        The pursuers then adjusted and amended their pleadings to include the following declarator:

“1.4 Esto the defender has not already confirmed that it does not object to the Primark Development (which is denied), any refusal by it to consent to that development, all as shown on the plans produced as production 6.19 of Process, for the purposes of clause 24.2 would amount to an unreasonable withholding of consent.”

 

[8]        A proof before answer took place in December 2014.  Witnesses for the pursuers were their Gyle manager (Andrew Cronie), and an architect (Kenneth Williamson).  Each gave evidence about the effect which the Primark project would have on the centre.

[9]        The Lord Ordinary issued his judgment on 12 February 2015.  In paragraph [2], he noted that in his earlier judgment dated 25 March 2014 he had decided inter alia that probative writing was required for any agreement that had the effect of altering the area allocated to car parking, roads, and/or pedestrian routes.  In paragraph [4] he stated that:

“ … [the evidence of Mr Cronie and Mr Williamson] was to the effect that the Primark development would be beneficial to the Gyle Shopping Centre as a whole, and that the loss of car parking spaces which the development would entail would not render the shopping mall or the shared areas materially less adequate, commodious or convenient to the defender than they are at present.  This evidence was largely unchallenged;  the defender’s position, at the close of the proof, was that it was irrelevant because the provision of the lease concerning unreasonable withholding of consent (clause 24) did not apply to works which would effect a permanent alteration of the real rights granted to the respective parties in terms of the lease.”

 

[10]      In paragraph [5], the Lord Ordinary focused the issues for determination as follows:

“ … (i) Does clause 24 apply to works which would have the effect of permanently removing an area of land from the Shared Areas in which the defender’s real right subsists?

(ii) If so, is the defender unreasonably withholding consent to works consisting of the proposed Primark development?”

 

[11]      Thereafter reference was made to other clauses in the lease.  It was noted inter alia that:

“the Shared Parts” meant “the Shared Services, the Shared Areas and the Common Internal Parts” (Clause 1.53);

“the Shared Areas” consisted of “the Car Parking Areas, the Roads, and the Pedestrian Routes, together with the landscaped ground within the Site” (Clause 1.52 and paragraph [8] of the opinion).

[12]      In paragraph [9], the Lord Ordinary held that:

“ … the defender’s interest in the Shared Areas was properly characterised as a pertinent of the lease, conferring a real right which was enforceable against the pursuer as successor in title to EDC as owners of the subjects”.

 

[13]      In paragraph [10] he noted that the Primark extension constructed on car parking areas and pedestrian routes would:

“effect the permanent removal from the Shared Areas of an area of land in which the defender, along with the pursuers and Morrisons, has a real right under the lease”.

 

[14]      Paragraph [11] of the opinion summarised the pursuers’ submissions.  It was contended that it was in accordance with business common sense to construe Clause 24 as being sufficiently wide as to apply to works which effected a permanent alteration to the extent of the Shared Areas.  The lease was long (127 years) and parties must have contemplated some redevelopment and expansion, with an appropriate mechanism in the lease, to avoid any one party exercising a veto.  Protection was given by the caveat of “not … materially less adequate, commodious or convenient”.  “Any works” in Clause 24 should be interpreted broadly.  Clause 24.10 made it clear that the clause extended to permanent change.  The definitions in the lease of the car parking areas, the roads, and the pedestrian routes also demonstrated that changes were envisaged.  Probative writing was simply the way in which consent under Clause 24.2 was to be recorded.

[15]      Paragraph [12] of the opinion summarised M&S’s contentions.  It was submitted that Clause 24 did not apply to works which would interfere with M&S’s heritable rights in the shared areas.  For such interference or alteration, the lease required agreement and probative writing:  to construe Clause 24 in the way suggested would undermine those provisions.  Clauses 22 to 25, properly construed, did not provide a mechanism whereby the legal status of any area could be altered, but were concerned with works to areas which were and would remain common parts.  Clause 24 would cover, for example, the installation of bicycle racks or benches within the mall or shared areas.  The pursuers’ interpretation permitted expropriation of M&S’s heritable property, which was absurd.

[16]      In paragraphs [13] to [18], the Lord Ordinary, for the reasons he gave, preferred the pursuers’ argument.  In particular, it was more consistent with business common sense to construe Clause 24 as having the broader of the two possible applications (paragraphs [16] and [18]).  There was no absurdity or conflict with business sense in construing Clause 24 as encompassing works which effected a variation of the parties’ respective property rights (paragraph [17]).  Works such as the installation of bicycle racks in the shared areas fell within the scope of the management committee’s responsibility under Clause 77.9 and would appear to fall within the exclusion at the beginning of Clause 24.2.

[17]      The Lord Ordinary then considered whether M&S were unreasonably withholding their consent.  He referred inter alia to the evidence of Mr Cronie and Mr Williamson (paragraph [19]) and concluded that consent was being unreasonably withheld.  He granted an interlocutor in the following terms:

“ … 3.  finds and declares in terms of conclusion 1.4 of the summons as amended, that any refusal by the [defenders] to consent to the Primark Development, all as shown on the plans produced as production 6.19 of process, would amount to an unreasonable withholding of consent in terms of clause 24.2 of the [lease] …”

 

[18]      M&S appealed by reclaiming motion.  At the outset of the hearing, senior counsel explained that the Primark project was no longer proceeding.  However both counsel requested the court to deal with the reclaiming motion, as a similar problem was likely to arise in the future.

 

A brief history of the lease with M&S
[19]      The lease between the pursuers and M&S is a long lease.  Its history is as follows.

[20]      In the 1990s, Edinburgh District Council (EDC) owned land at the Gyle.  They wished to develop it.  EDC approached M&S and ASDA and invited them to be the anchor tenants in the development of a substantial shopping mall.  M&S and ASDA were each to enter into identical non‑standard 127‑year leases with a rent of £1 per annum if asked.  They were to construct their own substantial building at either end of the shopping mall;  be given a 1/3 pro indiviso share of a lease of the shared parts (including “shared areas” such as car-parking spaces, roads, and pedestrian walkways on the ground surrounding the shopping mall);  pay rent of £1 per annum if asked;  and each have a representative on the management committee (while EDC would have two representatives), known as “the represented parties”.  The structure of the lease meant that the anchor tenants had an interest in the overall development, and in particular the overall value of the development.

[21]      The development duly took place.  The shopping centre comprised a long building called the Multiple Occupancy Building (MOB) abutted at either end by the ASDA unit and the M&S unit.  The building was situated within landscaped car-parking spaces, pedestrian walkways, roads and access points.  In 1992, M&S duly entered into the 127‑year lease, described by the Lord Ordinary as “an intricate document drafted with meticulous care and attention to detail”:  paragraphs [6] and [14] of his opinion dated 12 February 2015.  The lease was executed on 24, 26, and 27 February 1992, and was recorded in the Register of Sasines on 23 March 1992 (paragraph [6] of that opinion).

[22]      In the MOB, smaller units were let out to other retailers, and were accessed by the long covered mall connecting ASDA and M&S.  The tenants of those units had standard repairing and insuring leases of shorter length (for example, 25 years) with no share in the lease of the shared areas, and no facility to extend into expansion areas.  They paid a market rent, and had no representative on the management committee.

[23]      ASDA was replaced by Morrisons.  The pursuers purchased the whole development from EDC and became the landlords.

 

The plan
[24]      A plan is attached and referred to in the M&S lease.  That plan shows the precise area of ground leased to M&S (blue); the precise area of ground leased to ASDA/Morrisons (green);  the ground on which the MOB was constructed (yellow);  and the shared parts including car‑parking and pedestrian paths (purple and orange).  The plan also shows the outline of a long shopping mall connecting the blue unit to the green unit (two horizontal lines drawn in the yellow area).  Thus anyone examining the title can, with a degree of precision, ascertain the nature and extent of any party’s real right in the area in question.  Further the plan shows a hatched green area adjacent to the ASDA/Morrisons retail unit as an “expansion area” on which ASDA/Morrisons are entitled to build an extension to their unit;  and a hatched blue area adjacent to the M&S retail unit as an “expansion area” on which M&S are entitled build an extension to their unit (see too Clauses 1(c), 1.6, 1.21 and 6).

 

The relevant clauses
[25]      The clauses in the lease of particular relevance in the current dispute include inter alia Clauses 22, 23, 24, 77 and 105.

[26]      Clause 22 (indexed in the lease as “Redevelopment rights”) permits inter alios the anchor tenants to “redevelop, rebuild or modernise (or … extend or alter) their units.”

[27]      Clause 23 (indexed as “Restraints on works affecting other parties”) provides parameters within which works can be carried out:  for example, the works must be in conformity with the design criteria (23.1);  not prejudice the centre’s structural stability (23.2);  minimise adverse effects on trading (23.3);  be preceded by advance notice to others, with any loss or damage resulting in indemnification (23.5).

[28]      Clause 24 (indexed as “Special restraints on works affecting the Mall and Shared Parts”) contains provisions which are to apply to “any works within the Mall or the Shared Parts”.  The provisions do not attempt to define the scope of the “works”.  There are provisions about time periods for works (24.1);  preservation of the services (24.3 and 24.4);  a workmanlike standard (24.5);  reasonable notice (24.6);  compliance with the plan (24.7);  structural stability (24.8);  minimisation of any adverse effects on trading (24.9);  preservation of the visibility of and access to units (24.10 and 24.11).  In particular, Clause 24 (already quoted to some extent in paragraph [4] above) provides:

“The following provisions shall apply to any works within the Mall or the Shared Parts (and any arbitration relating to any matter under this Clause shall be conducted in accordance with Clause 102 hereof):-

 

24.1 Such works shall be carried out within the minimum period reasonably necessary for the conduct of such works.

24.2 Except in case of emergency or where such works are carried out by the Management Committee pursuant to the duties of the Management Committee under Clause 77 hereof, such works shall not be carried out unless all of the Represented Parties [including inter alios M&S] either previously consent that they respectively accept that such works will not render the Mall or the Shared Parts materially less adequate, materially less commodious or materially less convenient to them respectively than the Mall and the Shared Parts as existing immediately prior to the commencement of such works (which consents shall not be unreasonably withheld) or previously confirm in writing that they do not object to such works.

 

24.3 Except in so far as the Represented Parties shall otherwise agree, services not materially less adequate, not substantially less commodious and not substantially less convenient to the Represented Parties than those afforded by the Mall and the Shared Parts shall be provided and maintained by the party or parties responsible for carrying out the works, during the conduct of such works … “

[29]      Clause 77 provides inter alia:

 

“Subject to Clause 78 hereof, each of the Represented Parties (by acting through its representative on the Management Committee) shall use its best endeavours to procure that the Management Committee implements well and properly during the Letting Currency the following duties which are hereby agreed to be imposed under this Clause 77 on the Management Committee as agents for the Represented Parties jointly …

 

77.1  To maintain and keep the Mall and the Shared Parts in good and substantial repair and in a condition (including without prejudice to the generality state of decoration) consistent with the Centre General Standard and (when necessary for the purposes of maintaining and keeping the Mall and the Shared Parts in such repair and condition) to renew or reinstate the Mall and/or the Shared Parts and to apply towards the cost of implementing its duties under this sub-clause any monies received from the insurers in respect of the insurance of the Mall under Clause 17 hereof …”

 

[30]      Clause 105 provides:

“Neither the M&S lease nor the ASDA lease nor any part of these presents shall be varied except in accordance with the provisions of these presents or by agreement (recorded in the Register of Sasines, Land Register of Scotland or other successor Register) among M&S, ASDA and all parties comprised in the definition of ‘EDC’at the time of the variation.  For the avoidance of doubt M&S, ASDA and EDC undertake to enter into any Minutes of Alteration of the M&S lease and the ASDA lease which may be required pursuant to Clause 6 of the M&S lease and Clause 6 of the ASDA lease respectively.”

 

 

Provision in the M&S lease for future changes
[31]      The M&S lease makes provision for future changes.  For example, each anchor tenant is given the right to expand their retail unit:  vertically, by Clause 22;  horizontally, by Clauses 1(c), 1.21 and 6 (together with the hatched areas on the plan).  Furthermore, the management committee is empowered to take decisions about, and execute “works” on, the shared areas.  In terms of Clause 77 they have power inter alia to maintain and keep the mall and the shared parts in good and substantial repair;  to keep the shared services in good working order;  to clean, light, and heat the mall; to dispose of refuse;  to provide, repair, and replace flags, signs, shrubs, plants, lights, garden areas, water features, street furniture, crèche and other amenity items;  to provide a traffic control system;  to provide security and a public address system;  and so on.  In terms of Clause 24, if there is an emergency, or if the represented parties agree, the management committee has power to carry out their duties in terms of Clause 77 by “works within the mall or the shared parts”.  The agreement must be in writing, and constitute a confirmation that the represented party (i.e. the pursuers, or M&S, or Morrisons) did not object to such works, or “that they accept that such works will not render the Mall or the Shared Parts materially less adequate, materially less commodious, or materially less convenient to them respectively than the Mall and the Shared Parts as existing immediately prior to the commencement of such works (which consents shall not be unreasonably withheld)”.  Thus a degree of flexibility is built into the management of the shared areas.  Using their powers, the management committee could, for example, change the lay-out of the car parking spaces;  construct self‑standing covered shopping‑trolley‑storage units;  and plant trees and shrubs.

 

Submissions in the reclaiming motion
Submissions for the defenders
Proper construction
[32]      Senior counsel for the defenders submitted that, on a proper construction, Clause 24 was not applicable to a new development such as the Primark project.  The “works” referred to in Clause 24 encompassed works of redevelopment, modernisation, refurbishment, replacement and renewal, but not a new development.  Other clauses made specific provision for expansion of a retail unit within a tenant’s existing footprint:  for example, Clause 22 permitted further floors to be added within the green or blue areas (vertical expansion);  Clauses 1(c), 1.21, and 6 (together with the hatched areas on the plan) allowed for extensions into the “expansion areas” (horizontal expansion).

[33]      In particular, Clause 24 did not permit expropriation of property which had been allocated in the lease on a particular basis (for example, a one third pro indiviso share of the lease of the shared parts).  The clause did not permit the piecemeal erosion of real property rights without formal minutes of alteration and changes to the plans, duly recorded in the Land Register or registered in the Books of Council and Session.  While Clause 24 permitted works which resulted in certain “permanent” alterations to the layout of the shopping centre (such as a roofed store for shopping trolleys), the clause did not permit any encroachment on or detraction from land to which M&S had a real right.

[34]      If the pursuers and the Lord Ordinary were correct, M&S’s lease and the site on which M&S had their retail unit could be dismantled on a piecemeal basis.  There could be multiple expansions into the shared areas, using Clause 24.  The nature and extent of the M&S lease would not be easily ascertainable by searching the Land Register, and there would be uncertainty and confusion about the state of the titles.  In relation to the proposed Primark building, prospective tenants would be faced with a building part of which was constructed on ground contained in someone else’s lease.  In other words, part of the proposed new Primark building would be constructed on land already leased to others:  where did that leave payments of rent, and other related matters?

[35]      The lease was a carefully-prepared, meticulous document which made specific provision for future changes and developments.  There was an in-built facility to adapt the shopping centre to meet current prevailing needs during the term of 127 years.  Construing the lease as a whole, Clause 24.2 could not and should not be given the wide meaning contended for by the pursuers.

[36]      There was no ambiguity, and no need to resort to “business common sense” (Arnold v Britton [2015] 2 WLR 1593).  Even if there was a rival interpretation, the construction advocated by M&S should be preferred as a matter of commercial common sense.

 

Whether consent unreasonably withheld
[37]      Even if the court were to hold (contrary to the above) that Clause 24 applied to a new development such as the Primark project, then the loss of 5% of the car-parking spaces did indeed render the shared parts “materially less adequate” in terms of Clause 24.  It was not the case that M&S had not sought to challenge the pursuers’ evidence on that matter.  Contrary to the Lord Ordinary’s observations in paragraph [20] of his opinion, Mr Williamson had been cross‑examined and his opinion challenged.  Reference was made to the transcript.  M&S had not acted unreasonably in withholding consent.

 

Conclusion
[38]      The reclaiming motion should be allowed;  the Lord Ordinary’s interlocutor of 12 February 2015 recalled;  the first plea-in-law for M&S sustained;  and the action dismissed as irrelevant.

 

Submissions for the pursuers
[39]      Senior counsel accepted that the court must apply the natural meaning of the words in the lease, even if the commercial outcome might seem improbable (Arnold v Britton cit sup, Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900, and L Batley Pet Products Ltd v North Lanarkshire Council 2014 SC (UKSC) 174).  It was not the court’s task to re‑draft a contract in order to save one party from an unfortunate outcome. 

[40]      That said, senior counsel submitted that there were two possible constructions of Clause 24.  The narrower construction of Clause 24.2 could be summarised as “process, not outcome”, while the wider construction was a comparison of the outcome of the works (a “before and after” comparison).  As for Clause 24.10, while the narrower interpretation concerned potted palms and signboards, the Lord Ordinary was correct to point out that Clause 24.10 envisaged permanent changes.  As there was ambiguity, the Lord Ordinary had not erred in having regard to business common sense.  Similarly, if this court accepted that there were two possible interpretations of Clause 24, then one turned to “business common sense”, and the Lord Ordinary had not erred in so doing.

[41]      When considering business common sense, the Lord Ordinary had the benefit of the evidence of Mr Cronie and Mr Williamson.  They had explained that the Primark project would be beneficial for the centre.  Tenants in the MOB were concerned about decreasing footfall, and were keen to have Primark.  If there was a deadlock amongst the pursuers, M&S, and Morrisons, one would expect a mechanism in the lease for resolving such a deadlock.  Otherwise desired developments might not be able to take place, and the shopping centre would not thrive and prosper.  Accordingly the application of business common sense pointed to the wider interpretation of Clause 24.  The Lord Ordinary had not erred in law in adopting that approach.

[42]      In this case, the consequences for M&S would be being deprived of 2½% of the shared areas (5% of car-parking, but 2.5% of the shared areas:  paragraph [19] of the Lord Ordinary’s opinion dated 12 February 2015, second bullet point.)  The Primark development was not proposed for the M&S end of the shopping centre, but at the Morrisons end.  There was no problem with car-parking, even at Christmas.  Accordingly M& S would not suffer from the loss of a small proportion of the shared areas.  The opposition from M&S had never been founded on any alleged problem with parking.

[43]      It was of note that a filling station (coloured brown on the plan) had already been constructed on the shared areas, and also a Frankie and Benny (there being agreement amongst the parties in respect of both).

[44]      It was accepted that the issue of Clause 24 had arisen late in the day.  The seeking of the consents of M&S and Morrisons had not been carried out in the context of Clause 24.  Only when the Lord Ordinary made the obiter observation quoted in paragraph [3] above had Clause 24 become an issue.

 

Discussion
[45]      The issue in this reclaiming motion is the proper construction of the M&S lease, and in particular Clause 24.

[46]      The lease must be construed as a whole.  In order to ascertain the proper meaning and effect of Clause 24, it is necessary to consider the whole structure and provisions of the lease and to do so in the context of well-established principles of Scottish land law.

[47]      Scots law governing land tenure and leases is based upon written titles registered either in the Land Register (formerly the Register of Sasines), or in the Books of Council and Session, or in both.  A duly recorded title relating to land is a real right which can be defended against the world.  It is not a mere personal right binding only the granter and grantee.  The real right runs with the land, and is passed to successors in title.  Alterations in title generally require a written deed duly registered or, following the introduction of digitalisation, an alteration in the electronic land register.

[48]      One important aspect of the system of land tenure and leases is its availability for public inspection.  If a transaction involving land is being considered, a search of the registers should reveal an accurate record of the current state of affairs in relation to that land.

[49]      A written lease duly recorded in the Land Register or registered in the Books of Council and Session confers a real right (cf Professor Rennie, Leases, ch 6, and the Lord Ordinary’s comments in his opinion dated 25 March 2014, paragraph [29], and his opinion dated 12 February 2015, paragraphs [2] and [5]).  In general therefore, any changes in or alterations to such a lease require a formal written (or electronic) deed, such as a minute of variation, duly recorded or registered.  In this way clarity, certainty, and accessibility for the public is achieved, in that anyone searching the registers ‑ for example, a potential purchaser, or a potential assignee of a lease ‑ is able to ascertain the precise nature and extent of the lease.  Questions relating to the authenticity of the granter’s title, the area of land leased (including boundaries), the parties to the lease, and the term of the lease, are certain, clear, and publicly available.

[50]      A long lease is almost invariably so recorded or registered, as was the long lease in this case.

[51]      Against that background, any intention by contracting parties to dispense with the well‑settled and accepted conveyancing requirements relating to real rights in land would, in our opinion, require to be very clearly expressed.  Moreover any such approach would generally be regarded as ill-advised, as the resultant informal approach to title alterations would be likely to lead to confusion and doubt about the nature and extent of a party’s title to and/or interest in the land.

[52]      Following the recent guidance in Arnold v Britton [2015] 2 WLR 1593 (particularly paragraphs 66, 71, 76, and 77) we consider that a court seeking to construe Clause 24 in the context of the M&S lease as a whole, must focus primo loco on what the lease actually says.  Only if there is ambiguity may it be necessary to resort to “business common sense”.  In that event, evidence may be required to assist the court on that matter.

[53]      Looking, then, at what the lease actually says, we note the following:

1. Nowhere in the lease do the contracting parties give any indication that they intend that normal land tenure and lease legal practices and principles are to be departed from, such that the boundaries of the area(s) of ground leased to any tenant may be altered informally without a formal written document such as a minute of alteration with plan attached (such plan showing clearly the altered boundaries, including any altered boundaries of shared areas in which each anchor tenant had a 1/3 pro indiviso share:cf Clauses 1.8 and 6.1 of the lease).In our opinion, therefore, it must be assumed that the contracting parties intended to apply Scots law relating to land tenure and leases.Clause 105 emphasises that approach.
2. Nowhere in the lease do the contracting parties state clearly that the shared areas (being part of the “shared parts”:Clause 1.53 of the lease) may be used to provide ground upon which a tenant in the MOB may be further accommodated by a building attached to and extending from the relevant MOB retail unit, such that the area of the shared areas (car-parking, pedestrian walkways etc) would be diminished, and new boundaries would emerge (although not shown on the plan attached to the lease).
3. No provision or definition in the lease makes clear that “the works” referred to in Clause 24 may be construed as extending to a building such as is referred to in (ii) above, or may be construed in a way which might alter the footprint of the shared areas.
4. Clause 77 gives an indication of the sorts of changes envisaged for the shared areas.

[54]      Clause 24 is not expressed as an enabling provision conferring power to carry out works.  It appears to proceed on an assumption that works are authorised, and to impose certain specific restrictions.  It appears in the context of a set of provisions about works in clauses 22 to 25.  Put shortly, we are satisfied that in the context of the elaborate provisions of the lease, it is appropriate to give the term “works” in the context of Clause 24 a narrow construction.

[55]      If the respondents’ construction was accepted, a search of the public registers (whether the Register of Sasines, the Land Register, or the Books of Council and Session) would no longer reveal the extent of a party’s entitlement.  Contrary to the principles about landownership and leasing in Scotland, a building constructed by A would have been erected upon ground leased to A, B and C (each with a pro indiviso interest), resulting in confusion and contradictions between boundaries in plans and the physical state of the ground, and questionable titles to those buildings (or parts of buildings) encroaching upon shared areas.  The lack of formal conveyancing deeds such as minutes of alteration (with plans, if necessary) would, in our view, undermine the long-established law relating to heritable ownership and leases.

[56]      A study of the contract discloses nothing suggestive of an intention to change well‑established law:  on the contrary, it discloses a careful consideration of the detail of parties’ rights.  The contract not only contains the specific detailed provisions set out above, but also makes provision for a Development Agreement, including specific “Development Disputes Procedure”.  Proposals for any significant development of the site would be expected to be covered by such an agreement.  Counsel for the respondents accepted that there was such an agreement in place, although it was not produced.  He had to accept that his argument involved the proposition that if a party simply chose to call any specific development by the name “works”, that party would be free of the restrictions of the Development Disputes Procedure and the specific provisions of the lease governing extensions of their buildings.  We are unable to accept that the parties intended Clause 24 to have such a wide effect.

[57]      Against that background, it is our opinion that Clause 24, properly construed, refers to “works” such as roof repairs, road surface repairs, pavement repairs, alteration of the car‑parking layout, works with piping and other equipment supplying services, bicycle racks, roofed trolley racks, and other similar works.  Clearly, some of these works may result in something which is a permanent construction on the shared areas:  for example, a trolley‑storing outhouse, a service unit, bollards, signs, gates, lights, and so on.  But not, in our view, a building such as that referred to in (ii) above, which would, in the Lord Ordinary’s words in paragraph [10] of his opinion:

 “effect the permanent removal from the Shared Areas of an area of land in which the [defenders] along with the pursuers and Morrisons [have] a real right under the lease”.

 

[58]      It will be seen, in other words, that we have found nothing in the language, provisions, or structure of the lease, construed as a whole, which would permit the interpretation of the lease contended for by the pursuers, namely that “works” in Clause 24 extend to buildings such as are referred to in (ii) above, with the consequence inter alia that real rights are eroded and boundaries altered, although not shown on the plan attached to the lease. 

 

Esto it is necessary to resort to business common sense
[59]      Esto (contrary to our opinion above) it is necessary to invoke the concept of “business common sense”, that, in our view, supports the conclusion reached above.  It appears to us that the lease shows a careful and balanced allocation of property rights in a tripartite arrangement, and that any power to interfere with these rights by implication must have been intended to be of narrow and modest scope.  That would be business common sense.  As we have noted, Clause 24 is not an explicitly enabling power.  It plainly envisages that some types of works will be carried out in the Shared Parts, but the right to do this is not limited to the pursuers.  Any of the three parties might decide to carry out “works” within the Shared Parts.  It was not disputed that the clause was in terms similar to that in the ASDA/Morrisons lease.  If the clause was given a wide meaning, any of the three parties to the different leases could use it to extend their interest on a scale similar to that proposed by the Primark project.  The Lord Ordinary suggested that the tenants would be unlikely to do so, as any expanded building would eventually revert to the pursuers.  But this would not usually be seen as a deterrent in the case of a lease with over 100 years to run.

 

Decision
[60]      For the reasons given above, we shall allow the reclaiming motion;  recall the interlocutor of the Lord Ordinary dated 12 February 2015;  sustain the first plea‑in‑law for M&S;  and dismiss the action.  Meantime we shall continue the question of expenses.