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You are here: BAILII >> Databases >> Scottish Sheriff Court Decisions >> Ehtel Austin Properties Holdings Ltd v. D & A Factors (Dundee) Ltd [2005] ScotSC 32 (21 June 2005)
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Cite as: [2005] ScotSC 32
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Ehtel Austin Properties Holdings Ltd v. D & A Factors (Dundee) Ltd [2005] ScotSC 32 (21 June 2005
SHERIFFDOM OF TAYSIDE, CENTRAL AND FIFE AT KIRKCALDY
Court Ref: A1466/04
J U D G E M E N T
in the cause
ETHEL AUSTIN PROPERTIES HOLDINGS LIMITED, a Company incorporated under the Companies Acts (Company Number 02303540) and having its Registered Office at North House, 17 North John Street, Liverpool, Merseyside, L2 5EA
PURSUERS
against
D & A FACTORS (DUNDEE) LIMITED, a Company incorporated under the Companies Acts (Company Number SC065706) and having its Registered Office at Moatmill Farm, Tealing, Dundee, DD4 OQL
DEFENDERS
-------------------------
Kirkcaldy 21 June 2005
The Sheriff, having resumed consideration of the cause, finds that the Pursuers' averments are irrelevant; therefore sustains the Defenders' first plea-in-law and dismisses the action; finds the Defenders entitled to the expenses of the cause as taxed; and sanctions the certification of Senior Counsel for the purposes of the debate conducted on 14th June 2005.
NOTE:
This is an ordinary action in which the Pursuers seek declarator that the Defenders have incurred irritancy of a lease of subjects at Glenrothes and further seek the removal of the Defenders from the premises. The lease formed No. 5/3 of Process, being a lease dated 20th and 21st April 1998 and registered in the Books of Council and Session on 27th May 1998. The case called before the Court for debate on 14th June 2005. Senior Counsel for the Pursuers and Junior Counsel for the Defenders were at one that there were no issues of fact to be reserved for proof and that the sole issue for resolution by the Court was limited to construction of two purported Notices of Irritancy (Nos. 5/9 and 5.10 respectively of Process) in the context of the said lease (No. 5/3) against a largely agreed factual and legal background. The Pursuers at debate accordingly sought decree in terms of their craves and the Defenders sought dismissal of the action.
The Defenders' Submissions
In moving the Court to dismiss the action, Mr Sandison, Advocate, for the Defenders, referred to Section 4 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 which set out the statutory requirements for the valid irritation of leases by landlords. It was common ground between the parties that a landlord could not irritate a lease unless Section 4(2) applied, and that Section 4(2) did apply in the present case. It was further common ground between the parties that Section 4(3(a) applied, which is to the effect that the period to be specified in a Notice (of Irritancy) "shall be not less than (a) a period of fourteen days immediately following the service of the Notice". It was further agreed that Section 4(4) applied to the effect that any statutory notice required to be sent by record delivery. Parties were at one that this mode of service was mandatory. Accordingly, the requirements for service in terms of Section 4 of the 1985 Act required recorded delivery service and that a period of fourteen days immediately following the service of the Notice must be specified in any such Notice (of Irritancy). Counsel further submitted that in the lease (5/3) Clause 16 (the further pactional requirement) set out that in the case of a monetary breach (applicable in the present case) a period of not less than fourteen days notice to the tenants would be required. Mr Sandison further drew attention to Clause 19 which provided: "Any Notice sent by recorded delivery post shall be deemed duly served at the expiry of forty eight hours after the date and time of posting". He pointed out that the statutory and pactional requirements were not mutually exclusive by observing that a single recorded delivery notice could cover both sets of requirements, seeking payment within fourteen days of service, which notice would be deemed duly served at the expiry of forty eight hours after the date and time of posting. Had the Pursuers thus notified the Defenders, Mr Sandison accepted that the irritancy would have been validly performed. He submitted, however, that the Pursuers did not serve such an omnibus notice; instead, they served the same notice on the Defenders in two different ways as set out in Nos. 5/9 and 5/10 of Process. By 5/9 of Process the Pursuers posted a recorded delivery letter to the Defenders on 9th November 2004, the said letter bearing only one date, that is 9th November 2004, which was referred to in paragraph 1 at line 3 as "today's date". Further, a second notice was served by Sheriff Officers' service (5/10) which bore the date 9th November 2004 but which was served (per the certificate of service) on 10th November 2004. Mr Sandison observed that no reference was made in either notice to Section 4 of the 1985 Act and while reference was made in each notice to Clause 16 of the lease, neither notice bore to be in terms of the Act or lease. Mr Sandison submitted that these notices were not adequate performance of the requirements of the Act and/or lease.
It was common ground between the parties that the relevant document for the purposes of service in terms of mandatory requirements of the 1985 Act was 5/9 on the basis that recorded delivery service was mandatory in terms of Section 4. As Section 4 had no provisions deeming when the recorded delivery notice was taken to be served, Clause 19 additionally applied and accordingly the parties were at one that the recorded delivery notice (5/9), in terms of Clause 19 of the lease (5/3) must be taken to be deemed to have been served 48 hours after posting, i.e. to have been served on 11th November 2004. Parties were further agreed, accordingly, that as in law the notice was served on 11th November 2004, payment by the Defenders could validly have been made at any time up to midnight on 25th November 2004, i.e. fourteen clear days after deemed service. Mr Sandison's submission for the Defenders was that the recorded delivery notice 5/9 did not adequately convey to the Defenders that the Defenders had up to midnight on 25th November 2004 to make payment. He submitted that if under proper construction it did not convey that message, it was therefore invalid as a stepping stone towards irritancy of the lease. The issue between the parties was therefore focussed, standing the common ground between them, on what was the proper approach to construction of the notice 5/9 in the context of the speeches of their Lordships in the leading House of Lords case of Mannai Investment Co. Limited -v- Eagle Star Life Assurance Co. Limited 1997 AC 749. In that case the question arose as to whether a notice had adequately conveyed the requisite message from a tenant to a landlord in terms of a "break clause". Counsel examined the speeches of their Lordships with great care and skill, beginning with the observations of Lord Goff of Chieveley at 753E-754A. The context was that there had been a dating error in the notice (of a single day). Nevertheless his Lordship stated: "The simple fact is that the tenant has failed to use the right key which alone is capable of turning the lock." (754A). In taking me through Lord Goff's analysis at 754-756, Counsel highlighted his Lordship's primary position that the intent of the notice server, and the knowledge of the notice recipient, were together irrelevant; instead, put simply, the key required to fit the lock. (756A-B). Lord Jauncey of Tullichettle expressed a similar view at 762C: "Notices terminating a tenancy or technical documents because they are effective without the consent of the receiver. It is therefore essential that they conform to the statutory or contractual provisions under which they are given". In endorsing the advantage of certainty in the system and finding that the notice was ineffective, Lord Jauncey amplified his position at 765E-766B, stating at 766B that he was "in entire agreement" with the reasoning of Lord Goff.
Mr Sandison then turned to the key speech in the case of Mannai, namely that given by Lord Steyn, who differed from Lords Goff and Jauncey in applying (with Lords Hoffman and Clyde) an approach referred to as the "reasonable recipient" approach. Mr Sandison submitted eloquently, however, that Lord Steyn specifically indicated that the use of this approach was to be limited in scope and that his Lordship's first proposition at 767D-E itself enabled the present case to be distinguished from Mannai. In this first proposition at 767D, Lord Steyn stated that: "This is not a case of a contractual right to determine which prescribes as an indispensable condition for its effective exercise that the notice must contain specific information". Accordingly, Mr Sandison posed the question whether the notice 5/9 required to contain indispensable information and submitted that indeed it did, in terms of Section 4(2) and (3), namely that the period of fourteen days within which money required to be paid itself required to be specified in the notice. He submitted that it was indispensable that this this information be contained in the notice 5/9 so that the Defenders would know that they had fourteen days following service of the notice within which to pay. Therefore, although Lord Steyn, in Mannai sided with the majority in the decision, on examination of his reasoning, the careful reader of the speeches of their Lordships finds that Lord Steyn at the outset disavows his comments on the particular facts of Mannai as applicable where indispensable requirements apply. In any event, Mr Sandison submitted, Lord Steyn did not countenance an "anything goes" approach to the "reasonable recipient test"; instead, the "test postulates that the reasonable recipient is left in no doubt that the right reserved is being exercised" (768G-H). Although counsel accepted that Lords Hoffman and Clyde took a different approach, he emphasised in the speech of Lord Hoffman at 773G-H, that such notices must comply strictly with the terms of the lease, and in the speech of Lord Clyde at 782A-C that the test of the "reasonable recipient" is a demanding one.
Mr Sandison's submission on Mannai, in application to the instant case was that there was no support amongst Lords Goff, Jauncey and Steyn for the application of the "reasonable recipient" test to a situation where a right to end the lease required the issue of a notice containing specific information as an indispensable condition for its effective exercise. He submitted that no matter what a tenant appreciates subjectively, or is deemed to, if a landlord has not provided such information, the landlord has not used the correct key. He submitted that 5/9 did not contain the requisite information. The only date on 5/9 was 9th November 2004, referred to in paragraph 1 thereof as "today's date". He submitted that this plainly did not adequately convey on its own terms that the recipient of the notice (the Defenders) had until midnight on 25th November 2004 to pay. He submitted that the notice understated by forty eight hours the time that the Defenders had to pay and that the key did not fit the lock. Thus, on the traditional approach to construction favoured by Lords Goff and Jauncey, the notice was plainly inadequate. On the "reasonable recipient" approach in Mannai, Mr Sandison submitted that this was not an unstructured test and invited the Court to consider whether the recipient would be left in "no doubt whatsoever" or "no doubt" in respect of the operation of the notice. Parties were agreed that the "reasonable recipient" would know the terms of the lease and accordingly could look beyond the four corners of the notice to look at the lease, including Clause 19 thereof. Mr Sandison submitted, however, that the "reasonable recipient" would also know that he received the second notice 5/10 on 10th November 2004, served by Sheriff Officers. He would know the lease and accordingly would know that 5/9 was deemed to have been served on 11th November 2004 (in terms of Clause 19). He would know that he had two identical notices calling on him to make payment within fourteen days, and the only date on the notices respectively was 9th November 2004. He submitted that there was ample scope for confusion, therefore, on the part of the Defenders even on the "reasonable recipient" approach, as to what was being demanded of him. In submitting that the notices served did not meet the requirements of the 1985 Act at least, and probably also of the lease, Mr Sandison for the Defenders moved me to sustain his first plea-in-law and dismissed the action.
The Pursuers' Submissions
Mr Mitchell, Q.C., for the Pursuers courteously endorsed the points of common ground highlighted by Mr Sandison and in particular confirmed that 5/9 was the relevant notice for the purposes of the action which in terms of Clause 19 of the lease would give the Defenders until the last moment of 25th November 2004 to pay any sums due. He submitted that the date given on the notice by the typist was irrelevant and postulated that if the notice had been typed on 1st November and not signed until 9th November, the operation of Clause19 would still mean that the giving of notice would require to begin on 11th November; it was the date of posting that was important. He further submitted that "today's date" in para. 1 of 5/9 referred to the amount outstanding. He submitted that there was no whisper of a suggestion that the tenant was actually misled or that anyone was doing anything that they were not entitled to do. It was common ground that the Defenders were entitled to make payment up until the last moment of 25th November 2004 and that if they did not do so, the Pursuers would be entitled to use their right of termination. It was further common ground that the Defenders did not pay anything within the legal period and that it was only after the Pursuers exercised their right of termination that partial payment was tendered. He characterised the submission for the Defenders as one to the effect that the tenants might have been misled in a hypothetical world. It was not appropriate to deconstruct the clear three to two majority of the speeches in Mannai; further, esto such as distinction existed as outlined in the Defenders' submissions, Mr Mitchell submitted that there would surely be some recognition of this distinction found in the five speeches and indeed there was none. He referred to Garston and Others -v- Scottish Widows Fund & Life Assurance Society [1998] 1 WLR 1583 in which the Court of Appeal had followed the approach in Mannai. In particular Mr Mitchell referred me to the decision of Nourse LJ at 1585H, 1587C-D and H and 1588C-G. He submitted that the approach in the Court of Appeal to Mannai was that Mannai had effectively "changed the law" and applied to cases where a wrong date was given in a notice. Mr Mitchell invited me to look at the effective majority in Mannai as representing the current law, and to read the speeches as a whole. In respect of Lord Steyn's observations at 767E (proposition one) Mr Mitchell submitted that all a notice such as 5/9 required to achieve was to tell the tenant how long he had to make payment; no terms of art were implied. If a period of fourteen days notice is given in the notice, one would require to construe the notice taking into account the context. Mr Mitchell submitted that 5/9 unambiguously advised the Defenders that they were in arrears; that they required to make payment of the arrears; and that they had fourteen days within which to make payment of the arrears; and that if the arrears were not paid, they were at risk of the lease being terminated. The "reasonable recipient" in the context of the present case would know that they (i.e. the Defenders) had fourteen days from 11th November 2004 within which to make payment, and it was not significant what the typed date or the postal arrangements may have been. Mr Mitchell took me through all of Lord Steyn's propositions at 767E-769A. Mr Mitchell highlighted the passage at 772C-D: "Like Lord Hoffman I would hold that the correct test for the validity of a notice is that posed by Goulding J in Carradine Properties Limited -v- Aslam [1976] 1 WLR 442, 444: "Is the notice quite clear to a reasonable tenant reading it? Is it plain that he cannot be misled by it?"
Turning to Lord Hoffman's speech, Mr Mitchell referred to 774D-775A and in Lord Clyde's speech to 781F and 782C-D, where Lord Clyde emphasised that the "standard of reference is that of the reasonable man exercising his common sense in the context and in the circumstances of the particular case". Mr Mitchell submitted that it was not enough for the Defenders to say hypothetically that someone may have noticed an ambiguity, and that in this case the Defenders were unable to meet the critical test which was whether a reasonable recipient could be misled. Mr Mitchell concluded his submissions by referring me to Project Fishing International -v- SEPO Limited 2002 SC 534 and in particular to paras. 18 and 19 thereof. Mr Mitchell took from these references that the case of Mannai determined Scots law. In any event, he submitted that it was not suggested by the Defenders that they they complied on any basis with the notice; nor was it suggested for the Defenders that there was any other defence than the point now taken at debate. Accordingly Mr Mitchell moved the Court to sustain his third plea-in-law and of necessity his remaining pleas-in-law and to repel the Defenders' first and second pleas-in-law.
The Defenders' reply
In a brief reply Mr Sandison argued that there was ample room for ambiguity in respect that the Defenders had two contradictory demands (5/9 and 5/10) in their hands and that the criterion of no reasonable doubt was not met. In any event he submitted that the case of Garston was identical on the facts with Mannai but that the present case could be distinguished from both on the basis that Section 4 of the 1985 Act provides for prescribed information to be contained in the notice. If the Defenders were deemed to know all along what their rights were, he submitted that this would render otiose the requirement in the statute that certain information required to be contained in the notice. Addressing the Project Fishing, case, Mr Sandison submitted that this did not follow Mannai in any helpful sense for the purposes of the present case. The Inner House did not state that Mannai was universally applicable to all contract cases; it was a notice case in any event and the reference in Project Fishing to Mannai was very limited.
On the question of expenses, counsel were agreed that expenses would follow success. There was common ground that certification of Junior Counsel for the purposes of debate was appropriate and Mr Sandison was content to leave the question of the certification of Senior Counsel as a matter for the Court. I was satisfied that the debate was suitable for the certification of Senior Counsel, standing the complexities arising and I have reflected this view in the attached Interlocutor. Needless to say, the submissions from both Counsel were of the highest quality and were of the greatest assistance to the Court.
Decision
Turning to the decision in the present case, without rehearsing the statutory background or terms of the lease (5/3) or notices (5/9 and 5/10 respectively), and taking as read the substantial common ground between the parties already set out above, the starting point requires to be Section 4 of the 1985 Act which make provision in mandatory terms for specific information in any Notice of Irritancy to be served by a landlord. In particular, in terms of Section 4(3) the period required to be specified in any notice requires to be not less than fourteen days immediately following service of the notice. The very fact that as a matter of law a notice requires to contain specific information as an indispensable condition for its effective service (Lord Steyn at 767E in Mannai) permits the Court to view the present cause as distinguishable from the determination of the House of Lords in Mannai in respect of the applicability of the "reasonable recipient" test. In that event, the correct analysis is that no matter what the tenant may appreciate subjectively, or be deemed to appreciate, if the landlord has not provided specified and mandatorily required information, the landlord has not used the correct key (Lord Goff in Mannai at 754A and 756A-B). The notice is accordingly invalid as a basis for effective irritancy of the lease on the part of the Pursuers. At the heart of the difficulty for the Pursuers in this case is their service of two identical notices by different modes in differing time frames, as outlined above. The only potentially effective notice (where there has been recorded delivery) is 5/9, and I have came to the view that this did not adequately convey in its own terms that the recipient of the notice had until midnight on 25th November to pay. Even if this case was indistinguishable from Mannai, I agree that the "reasonable recipient" test is a high one and standing the said varying modes of service and timescales related to service of 5/9 and 5/10, I am of the view that it could not be said the "reasonable recipient" would be left in no doubt, or indeed in no reasonable doubt, as to the meaning of the notice. Applying the test endorsed by Lords Steyn and Hoffman (Lord Steyn at 772C-D and Lord Hoffman at 780D-F) set out by Goulding J in Carradine Properties Limited, namely "Is that notice quite clear to a reasonable tenant reading it? Is it plain that he cannot be misled by it?", the varying modes of service and timescale applicable to 5/9 and 5/10 in my view require the Court to answer these two judicial questions in the negative. Indeed, in my view there is not only ample room for ambiguity under the natural construction of the documents, but even the "reasonable recipient" would have 5/9, deemed by Clause19 to be served on him on 11th November 2004, giving him until the last moment of 25th November 204 to make payment, and with that the contradictory message of 5/10 (dated also 9th November 2004) served by Sheriff Officers on 10th November 2004, giving him until 24th November 2004 to make payment. The admitted fact that the tenant had two contradictory demands in their hands although apparently in the same terms, renders it in my view plain that the tenant could well be misled. The criterion of no reasonable doubt, or no doubt at all, not being met, even on this approach in my view the Notice of Irritancy 5/9 is invalid. For the record, I agree with Mr Sandison that the case of Garston is in exactly the same compass as Mannai, and further that the reference in the Project Fishing case to Mannai arose in the context of a contract case rather than a case where construction of a Notice of Irritancy case arose per se and so I did not consider Project Fishing to be directly of assistance in determination of the issue in this case. In all the circumstances, it will be clear that I accordingly favour the position of the Defenders in this case and accordingly the action will be dismissed in terms of the Defenders' first plea-in-law on the ground of relevancy. The parties having agreed that expenses should follow success, the Defenders will be entitled to the expenses of the cause as taxed.
SHERIFFDOM OF TAYSIDE, CENTRAL AND FIFE
AT KIRKCALDY
Court Ref: A1466/04
J U D G E M E N T
in the cause
ETHEL AUSTIN PROPERTIES HOLDINGS LIMITED
PURSUERS
against
D & A FACTORS
(DUNDEE) LIMITED
DEFENDERS
-------------------------
2005