Scottish Sheriff Court Decisions

SHERIFFDOM OF LOTHIAN AND BORDERS AT EDINBURGH

 

A5517/07

JUDGMENT   of   SHERIFF G.W.M. LIDDLE, Sheriff of Lothian and Borders at Edinburgh   in causa   GEOFFREY (TAILOR) HIGHLAND CRAFTS LIMITED   Pursuers;   against   G.L. ATTRACTIONS LIMITED Defenders:   __________

 

 

Act: McLean;

Alt: Gillies;

 

 

 

Edinburgh, 6 January, 2010

 

The sheriff, having resumed consideration of the cause:-

Finds in fact that:-

1. The pursuers are Geoffrey (Tailor) Highland Crafts Limited, a company incorporated under the Companies Act and having their registered office at 57-59 High Street, Edinburgh. The present directors of the pursuers are Geoffrey Nicholsby and Mrs Lorna Marion Nicholsby, both having been appointed on 25 November 1988. The present secretary of the pursuers is Geoffrey Nicholsby.

 

2. The defenders are G.L. Attractions Limited, a company incorporated under the Companies Acts. The defenders previously had their registered office at 555 Castlehill, Royal Mile, Edinburgh. They now have their registered office at 232-242 High Street, Kirkcaldy. The defenders still have a place of business at 555 Castlehill, Royal Mile, Edinburgh. The defenders were incorporated on 20 July 1993. William Duncan, Geoffrey Nicholsby and Lorna Marion Nicholsby had an interest. Geoffrey Nicholsby and Lorna Marion Nicholsby were directors. An agreement was entered into whereby Geoffrey Nicholsby and Lorna Marion Nicholsby disposed of their interest to William Duncan and gave up directorships. The pursuers received inter alia leases over parts of the subjects at 555 Castlehill, Royal Mile, Edinburgh, amounting to about 75% of the entire subjects. William Duncan continued to trade in his own right from other retained parts of the subjects as well as letting out other small parts to others.

 

3. The pursuers are now the tenants, and the defenders are the landlords, of the leased subjects forming part of 555 Castlehill, Royal Mile, Edinburgh. The entire subjects are also known as the Old Town Weaving Centre. The leased subjects are described in Schedule, Part II to Leases 1,2 and 3 (as hereinafter referred to). The entire subjects used to be a reservoir. They were converted for retail use in the 1990s. When the entire subjects were a reservoir they consisted of a large void with a walkway at ground level round the perimeter. In carrying out the conversion for retail use, the subjects were put on four levels. Three of the levels are below ground level. Levels 1 (the sub-sub-basement) and 2 (the sub-basement) cover the whole footprint of the building. Levels 3 (the basement) and 4 (the ground level) do not cover the whole footprint of the building. Levels 3 and 4 have, in effect, a large void in the middle through which, at certain points, can be seen Level 2. Level 1 is a working mill.

 

4. The pursuers have three leases over the subjects. The leases were prepared by Messrs. Tods Murray WS on behalf of the pursuers and by Messrs, W & Burness on behalf of the defenders. All three leases were signed together on 7 November 1997. They were signed on behalf of the pursuers by Geoffrey Nicholsby and Lorna Marion Niclolsby. They were also signed on behalf of the defenders by Geoffrey Nicholsby and Lorna Marion Nicholsby. At the times of negotiation and signing of the leases Mr Nicholsby was a controlling mind of the pursuers and both Mr Nicholsby and Mr Duncan were controlling minds of the defenders. The only signatory to the leases to give evidence in relation to what was in the minds of the pursuers and defenders at the time of signing the leases was Mr Nicholsby.

 

5. Lease 1 is a lease of the retail unit on Level 4 (5/1 of Process). Number 5/1 of Process is a copy. Parties agreed it could be treated as a principal. It was executed on 7 November 1997. The subjects occupied by the pursuers by virtue of Lease 1 are set out in Schedule, Part 1 to Lease 1 on page 17. Those subjects are shown outlined in red on drawing number 9301.L204, which is produced along with Lease 1.

 

6. Lease 2 is a lease of Level 2 (the sub-basement) and parts of Levels 3 and 4 (5/2 of Process). Number 5/2 of Process is a copy. It was executed on 7 November 1997. Parties agreed it could be treated as a true copy. The subjects occupied by the pursuers. By virtue of Lease 2 are set out in Schedule, Part 1 to Lease 2 on page 17. Those subjects are shown outlined in red on drawing numbers 9301.L202 (showing the area on Level 2 which is subject to Lease 2), 9301.L203 (showing the area on Level 3 which is subject to Lease 2) and 9301.L204 (showing the area on Level 4 which is subject to Lease 2) Those plans are referred to respectively as plan numbers 1, 2 and 3.

 

7. Lease 3 is a lease of Level 1. It was executed on 7 November 1997. The subjects occupied by the pursuers by virtue of Lease 3 are set out in Schedule, Pat 1 to Lease 3 on page 17. Those subjects are shown outlined in red on drawing number 9301.L201.

 

8. Prior to the three leases mentioned above being set up, Mr Geoffrey Nicholsby, Mrs Lorna Nicholsby (his wife) and William Duncan had a mutual interest in the defenders. The leases were entered into for commercial reasons. Previously, occupation of the shop on Level 4 and the mill beneath had been relatively informal with occupation regulated by a one page lease. The new leases formalised occupation of that area and the other areas which the pursuers were to occupy. The leases were set up on a commercial basis with rent reviews and other normal commercial clauses. It was envisaged that there might be some point in the future at which the leases might be assigned. The leases made provision for assignation.

 

9. The pursuers trade in Scottish giftware produce from the shop on Level 4, from part of Level 3 and from the whole of Level 2. Level 1 is a working mill. At present customers come into the building from the street through an entrance foyer and generally go through the pursuers' shop on that level (Level 4). Customers then proceed through fire doors ( D 407 on drawing 9301.L204) past the 'Control Office' (R 405 on said drawing) and along the walkway in a clockwise direction taking stairs down to lower levels. There is nothing legally to stop the pursuers altering the pattern of circulation and asking customers to circulate in an anti-clockwise direction. At present that is not convenient for the pursuers.

 

10. William Duncan transferred his interest in the defender company to those presently running the defender company (the Gold brothers) in about May 2007.

 

11. At the time Lease 1 was entered into in 1997 the controlling minds of the pursuers and defenders were aware that two other leases between the parties were also to be entered into in respect of other parts of the building. All three leases were signed at the same time. The parties were also aware that those three leases were for the same length of time and on substantially the same terms. They were aware that the 'Control Office' would effectively be "landlocked" because, in the absence of a reserved right, the landlords would have no automatic right of access across either the shop or the walkway on Level 4, both of which were to be let to the pursuers. They put their minds to addressing that issue.

 

12. After the leases were executed the defenders (landlords) were to retain and still retained management functions in relation to the building because certain parts of the building were not under the control of the tenants. Further, the landlords had certain responsibilities in relation to the building and also required to ensure that the tenants adhered to their own responsibilities. When the defenders granted the pursuers the three leases they reserved to themselves the 'Control Office' at the rear of the subjects on Level 4. In discussion with Mr Nicholsby, Mr Duncan indicated that he wanted to retain this as his office. That reservation was made in Lease 1. The 'Control Office' is referred to in Lease 1 as "The Landlords' administrative office". In each drawing relating to the leases it is referred to as the "Control Office". It is one and the same.

 

13. The 'Control Office' is rectangular in shape with a length of approximately 4 metres and a length of approximately 2.4 metres. It overhangs the void. It has two windows which overlook the void, one on the south wall and one on the east wall. It has a door that opens onto the walkway on Level 4 and a window which overlooks the walkway on Level 4. The west and north walls are internal walls. From the entrance to the building it can be accessed directly by passing through the pursuers' shop on Level 4 or, indirectly, by the walkway. It cannot be accessed without passing through subjects let to the pursuers.

 

14. The 'Control Office' had certain characteristics by virtue of which it was the most suitable part of the building from which to conduct administrative matters. In particular:

(i) it was the only location in the building from which it was possible to observe what was happening on all levels;

(ii) it had been fitted out with equipment such as CCTV and a sound system able to reach all parts of the building;

(iii) it is in a relatively obscure location within the building;

(iv) it is compact, thus lending itself to office as opposed to retail purposes;

(v) it had been used as an administrative/control office for some months prior to execution of the leases in November 1997 such that its value for that purpose was evident.

 

15. In around November 2006 the then managing director of the defenders, William Duncan, began to trade from the 'Control Office'. In preparation for this he had, unbeknown to the pursuers, undertaken a very basic re-fit of the 'Control Office'. As soon as the pursuers discovered that Mr Duncan had commenced trading from the 'Control Office', they challenged him. When challenged, he said his purpose in trading was to get rid of excess stock. Trading from the 'Control Office' took place for, at most, a few weeks and possibly only hours. Shortly after challenge from the pursuers the trading ceased.

.

16. In around May 2007 those presently running the defenders acquired the company from Mr Duncan. On or around 2 November 2007 the defenders began trading from the 'Control Office'. The defenders sold, inter alia, cashmere scarves, gloves, and other items of Scottish memorabilia from the 'Control Office'. In trading from the 'Control Office' the defenders interfered with the pursuers' business premises in a number of respects including taking stock through premises leased and standing in the corridor trying to persuade customers who were passing through the leased subjects into the 'Control Office'.

 

17. The pursuers took a number of steps to prevent the defenders from trading, or successfully trading, from the 'Control Office'. They put strips of tartan across the door. They fixed lights facing out from the window. They threatened to place boards over the windows although they did not actually do so having taken advice that that might amount to a breach of the lease. The defenders responded by cutting down the tartan strips and smashing the lights. The pursuers reasonably considered that any steps they took would be met with opposition and harm to their property or representatives. In the face of that the pursuers raised the present proceedings and subsequently sought and obtained interdict ad interim.

 

18. But for interdict ad interim being granted the defenders would have continued and would still continue to trade from the 'Control Office'.

 

Finds in Fact and Law that:-

The terms of Lease 1 granted by the defenders in favour of the pursuers restrict the landlords' retained access to the 'Control Office' to access for the purpose of using the 'Control Office' for administrative and office purposes only.

 

Therefore:

Finds the pursuers entitled to decree interdicting the defenders, for the duration of the lease between the parties wherein the "landlords' administrative office" ('Control Office') is referred to, and entered into between the parties on 7 November 1997, from using the 'Control Office' located towards the rear of Level 4 (ground level) of which forms part of the subjects at 555 Castlehill, Royal Mile, Edinburgh, and formerly known as Castlehill Reservoir, for other than administrative and office purposes only; Continues the cause on the question of expenses.

 

 

 

NOTE

Introduction

[1] These interdict proceedings are concerned with a lease, for retail use, of subjects forming part of 555 Castlehill, Royal Mile, Edinburgh. The pursuers are the tenants. The whole subjects are set out on four levels, from street level down. The defenders (landlords) retain parts of the subjects for their own use including retail use. Both the pursuer and the defenders are involved in the competitive retail of similar merchandise. On the ground (level 4) of the premises, accessed from a corridor walkway, there is a small unit or room (hereinafter referred to as the 'Control Office') with one entrance through a door. The 'Control Office' extends out over a void on beams that support it. The dispute in this action concerns the use to which, in terms of Lease 1, that the defenders may put the 'Control Office'. The defenders want to use it for retail purposes. The pursuers do not want them to do so. The pursuers contend that, in terms of Lease 1, the defenders are prevented from doing so because the use is restricted.

 

Background

[2] A great deal of the facts are not in dispute and were agreed in Joint Minute (No.23 of process). Evidence was led for the pursuers from Geoffrey Nicholsby and Andrew Archibald Taylor. Evidence for the defenders was led from Jo Evans, Richard Gordon and Dildar Singh-Gold. There followed lengthy submissions over several days. Both parties lodged, and referred to, written submissions and supplementary written submissions. These are annexed to this judgment.

 

Evidence

[3] Geoffrey Nicholsby was the first to give evidence. He said he was the managing director of the pursuers and traded from Castlehill. His company was behind the conversion of the reservoir into the retail premises it now is. He was involved in the design of those premises. His company successfully competed with others to produce an acceptable design for the development of the reservoir. The development cost over £1m to complete. His wife, Lorna Nicholsby, was also a director of the pursuers'. Hitherto Mr and Mrs Nicholsby, were involved in the defender company along with Mr William Duncan. Mr Duncan wanted exclusive ownership. For undisclosed business reasons, Mr and Mrs Nicholsby wanted to sell to him and to continue to operate retail premises under leases as opposed to ownership.

 

[4] Mr Nicholsby described the developed building. The subjects used to be a reservoir. They were converted for retail use in the 1990s. When the subjects were a reservoir they consisted of a large void with a walkway at ground level round the perimeter. In carrying out the conversion for retail use, the subjects were put on four levels. Three of the levels are below ground level. Levels 1 (the sub-sub-basement) and 2 (the sub-basement) cover the whole footprint of the building. Levels 3 (the basement) and 4 (the ground level) do not cover the whole footprint of the building. Levels 3 and 4 have, in effect, a large void in the middle through which, at certain points, can be seen Level 2. A particular feature of the internal layout was the creation of a control /administrative office, the 'Control Office', that extended out over the void on Level 4. The 'Control Office' is rectangular in shape with a length of approximately 4 metres and a length of approximately 2.4 metres. It overhangs the void. It has two windows which overlook the void, one on the south wall and one on the east wall. It has a door that opens onto the walkway on Level 4 and a window which overlooks the walkway on Level 4. The west and north walls are internal walls. From the entrance to the building it can be accessed directly by passing through the pursuers' shop on Level 4 or, indirectly, by the walkway. It cannot be accessed without passing through subjects let to the pursuers. The 'Control Office' had certain characteristics by virtue of which it was considered to be the most suitable part of the building from which to conduct administrative matters. In particular, it was the only location in the building from which it was possible to observe what was happening on all levels. It was in a relatively obscure location within the building. It was compact. It was fitted out with equipment such as a CCTV system and a sound system. It was used for administrative or control purposes. Mr Nicholsby said that it was never envisaged at any time that it would be used for any purpose other than such an office. It did not lend itself to use for retail purposes.

 

[5] The start of the landlord/tenant relationship between the pursuers and the defenders was informal. Mr Nicholsby and his wife were directors of both companies. At that time the 'Control Office' was being used for administrative/control purposes. A one page lease was drawn up. Mr Duncan's father became interested in acquiring the landlord interest for his son Billy Duncan. There was a desire to formalise the lease arrangements. Amicable negotiation took place. According to Mr Nicholsby, Billy Duncan was concerned to ensure that he could continue to use the 'Control Office' as an office. Access difficulties were identified. The 'Control Office' could only be reached by the landlords passing through areas to be leased to the pursuers. It was agreed that the access difficulties could be overcome by the insertion of an appropriate clause in the lease allowing for access for that purpose. Mr Nicholsby had no objection to that current use continuing. Mr Nicholsby had never entertained the idea of the 'Control Office' being used for retail purposes and was content to have Mr Duncan continue to use the 'Control Office' for administrative/control purposes. Had it been suggested to him that the 'Control Office' be used for retail purposes he would not have agreed. It was not even a question of the level of rent. He would not have entered into leases that permitted the use of the 'Control Office' for retail purposes.

 

[6] Following the informal negotiations referred to above, three leases over the subjects were granted by the defenders in favour of the pursuers. The leases were prepared by Messrs. Tods Murray WS on behalf of the pursuers and by Messrs, W & J Burness on behalf of the defenders. All three leases were signed together on 7 November 1997. They were signed on behalf of the pursuers by Geoffrey Nicholsby and Lorna Marion Niclolsby. They were also signed on behalf of the defenders by Geoffrey Nicholsby and Lorna Marion Nicholsby. The only signatory to the leases to give evidence in relation to what was and would have been in the mind of the pursuers and defenders at the time of signing the leases was Geoffrey Nicholsby.

 

[7] Lease 1 is a lease of the pursuers' retail unit on Level 4 (5/1 of Process). 5/1 of Process is a copy. Parties agreed it could be treated as a principal. It was executed on 7 November 1997. The subjects occupied by the pursuers by virtue of Lease 1 are set out in Schedule, Part 1 to Lease 1 on page 17. Those subjects are shown outlined in red on drawing number 9301.L204, which is produced along with Lease 1.

 

[8] Lease 2 is a lease of Level 2 (the sub-basement) and parts of Levels 3 and 4 (5/2 of Process). 5/2 of Process is a copy. It was executed on 7 November 1997. Parties agreed it could be treated as a true copy. The subjects occupied by the pursuers. By virtue of Lease 2 are set out in Schedule, Part 1 to Lease 2 on page 17. Those subjects are shown outlined in red on drawing numbers 9301.L202 (showing the area on Level 2 which is subject to Lease 2), 9301.L203 (showing the area on Level 3 which is subject to Lease 2) and 9301.L204 (showing the area on Level 4 which is subject to Lease 2). Those plans are referred to respectively as plan numbers 1, 2 and 3.

 

[9] Lease 3 is a lease of Level 1. It was executed on 7 November 1997. The subjects occupied by the pursuers by virtue of Lease 3 are set out in Schedule, Part 1 to Lease 3 on page 17. No copy lease was produced. Those subjects are shown outlined in red on drawing number 9301.L201.

 

[10] The leases formalised occupation of the Level 4 retail area and the other areas which the pursuers were to occupy. The leases were set up on a commercial basis with rent reviews and other normal commercial clauses. It was envisaged that there might be some point in the future at which the leases might be assigned. The leases made provision for assignation.

 

[11] The leases contained provisions relating to landlords' reserved rights of access. Schedule, Part IV Clause 2.5 in Lease 2 is in general terms and provides:-

"Rights of Access

a right of pedestrian access through and over such parts of the Leased Premises as the Landlords may require for access to the Common Parts or those areas owned by the Landlords and not forming part of the Leased Premises subject to causing the minimum inconvenience reasonably practicable to the Tenants and making good any damage caused to the Leased Premises to the reasonable satisfaction to the Tenants"

 

[12] Schedule, Part IV Clause 2.5 in Lease 1 is partly in identical general terms but has specific additional terms and reads as follows:-

"at all times whilst the Leased Premises are open for trading a right of pedestrian access through and over the Leased Premises to the Landlords' administrative office located at the rear of the Leased Premises and over such other parts of the Leased Premises as the Landlords may require for access to the Common Parts or those areas owned by the Landlords not forming part of the Leased Premises subject to causing the minimum inconvenience reasonably practicable to the Tenants and making good any damage caused to the Leased Premises to the reasonable satisfaction to the Tenants"

 

[13] Mr Nicholsby was referred to the plans associated with Leases 1 and 2. He pointed out that the 'Control Office', although referred to as the administrative office in Lease 1, was referred to as the "Control Office" in the associated plans. It was one and the same unit. He described what it had been used for. It was used for observation. It had contained the CCTV system and the personal address system. From there music could be played throughout the premises and announcements could be made. It had contained a safe, desk and filing cabinet for office use. The 'Control Office' had certain characteristics by virtue of which it was considered to be the most suitable part of the building from which to conduct administrative matters. In particular:

(i) It was the only location in the building from which it was possible to observe what was happening on all levels;

(ii) It had been fitted out with equipment such as CCTV and a sound system able to reach all parts of the building;

(iii) It was in a relatively obscure location within the building;

(iv) It was compact, thus lending itself to office as opposed to retail purposes;

(v) It had been used as an administrative/control office for some time and in the months prior to execution of the leases in November 1997 such that its value for that purpose was evident.

In terms of the leases the pursuers paid a service charge that included a charge for the facilities operated from the Control Office'. 'Subsequently Mr Duncan set up an office elsewhere in the building that did not have all of these features. The new office did not have CCTV or a public address system.

 

 

[14] He said that the pursuers traded from the shop on Level 4, from part of Level 3 and from the whole of Level 2. Level 1 is a working mill. At present customers come into the building from the street through an entrance foyer and generally go through the pursuers' shop on that level (Level 4). Customers then proceed through fire doors (D407on drawing 9301.L204) past the 'Control Office' (R 405 on said drawing) and along the walkway in a clockwise direction taking stairs down to lower levels. There is nothing legally to stop the pursuers altering the pattern of circulation and asking customers to circulate in an anti-clockwise direction. According to Mr Nicholsby, at present that would not be convenient for the pursuers.

 

[15] In around November 2006 the then managing director of the defenders, William Duncan, began to trade from the 'Control Office'. In preparation for this he had, unbeknown to the pursuers, undertaken a very basic re-fit of the 'Control Office'. As soon as the pursuers discovered that Mr Duncan had begun to trade from the 'Control Office', they challenged him. Mr Nicholsby thought the trading only took place for a few hours. Had it been longer he thought that he would have known about it. When challenged, Mr Duncan said that his purpose in trading was to get rid of excess stock. Mr Duncan consulted his mother, who had some interest in the business, and his solicitor. Shortly after challenge from the pursuers the trading ceased. Although not falling within the retained use of the 'Control Office', Mr Nicholsby knew that stock was then stored there and he tolerated that.

 

[16] In around May 2007 those presently running the defenders acquired the company from Mr Duncan. The present defenders prefer to maximise trade themselves from the premises rather than letting out units to third parties. They traded from the foyer area, which after dispute between the parties, had been tolerated by Mr Nicholsby despite it being a common area. On or around 2 November 2007 the defenders began trading from the 'Control Office'. The defenders sold, inter alia, cashmere scarves, gloves, and other items of Scottish memorabilia from the 'Control Office'. These were items that the pursuers also sold. In trading from the 'Control Office' the defenders interfered with the pursuers' business premises in a number of respects including taking stock through leased subjects and standing in the corridor trying to persuade customers who were passing through the leased subjects into the 'Control Office'.

 

[17] The pursuers took a number of steps to prevent the defenders from trading, or successfully trading, from the 'Control Office'. They put strips of tartan across the door. They fixed lights facing out from the window. They threatened to place boards over the windows although they did not actually do so having taken advice that that might amount to a breach of the lease. The defenders responded by cutting down the tartan strips and smashing the lights. The pursuers reasonably considered that any steps they took would be met with opposition and harm to their property or representatives. In the face of that the pursuers raised the present proceedings and subsequently sought and obtained interdict ad interim.

 

[18] Mr Nicholsby thought that, but for interdict ad interim being granted, the defenders would have continued and would still continue to trade from the 'Control Office'.

 

[19] Andrew Archibald Taylor was next to give evidence. He was the pursuers' company hire and logistics manager. He recollected the time Mr Nicholsby learned that Mr Duncan was trading from the 'Control Office'. It had started or was about to start that day. Mr Nicholsby was very unhappy. Hi recollection was that Mr Nicholsby threatened legal process and that Mr Duncan, having taken some advice, backed down. He was adamant that the 'Control Office' had not been open for trade over a period of one year, as averred by the defenders. He thought it might have been open for trade for 30 minutes at the most.

 

[20] Mr Taylor recollected when those presently in control of the defenders began trading from the 'Control Office'. The only way they could have got stock to the 'Control Office' was over property leased to the pursuers. They were selling like for like with the pursuers. He discussed this development with Mr Nicholsby. His belief was that the defenders were not entitled to trade from the 'Control Office' and he said so to Mr Nicholsby. The defenders were asked to stop and declined. The pursuers erected tartan strips over the entrance to the 'Control Office' in an attempt to discourage business. The defenders cut them down within a few minutes. The pursuers then fixed spotlights to the external facings of the 'Control Office'. Servants of the defenders smashed them with a hammer. Servants of the defenders took to standing in the corridor leased by the pursuers trying to usher customers into the 'Control Office'. In December 2007 the pursuers raised proceedings and subsequently obtained interim interdict against the defenders trading from the 'Control Office'. The question having been raised in cross-examination, Mr Taylor said that Mr Nicholsby had been, at one time, assaulted by Malap Singh, a person associated with the defenders.

 

[21] Joanne Evans was the first witness for the defenders. She was the defenders' property manager. She had been employed by the defenders since 2000 when it was owned by the Duncan family and Billy Duncan was her boss. When those presently controlling the defenders (the Gold brothers) the Gold brothers took over the business in 2007 she remained the property manager. The pursuers were the main tenants in the building and rented about 75% of the building. Over the years there had been changes in small tenants in the building but the defenders now preferred to retain lets and trade themselves. They considered they could make more money in retail than renting out space. They traded from the foyer entrance to the property. Like the pursuers, they are involved in Scottish giftware products.

 

[22] Miss Evans said she was familiar with the layout of the building. She said the 'Control Office' was off a corridor linking two retail areas. She initially said it was halfway along the corridor although it was plain from the plan she was referred to that it was not so positioned but was adjacent to the pursuers' retail premises. She said that between 2000 and about 2005 she and Billy Duncan used the 'Control Office' as a property management office. They did their paperwork there. It was their main office. The office computers, phone system and CCTV were there. In 2005 the defenders took over more retail space on Level 3. They decided to move the office there. From sometime in 2005 the 'Control Office' was no longer being used as an office. It was used sporadically for storage. Her office was now on Level 3. It contained the CCTV for the building and performed other functions performed from the 'Control Office'. The pursuers paid a service charge, according to her not for the 'Control Office' but, for maintenance of the building. She said it went some way towards the property management fees which paid her wages for keeping an eye on the building on behalf of the landlords. Pressed further, she said that the charge included the provision of CCTV but did not include anything that had not been in place when the pursuers took the leases.

 

[23] Miss Evans said that at the end of November or beginning of December 2006 Mr Duncan decided to open up the 'Control Office' as a small retail shop selling scarves and woollens that were excess stock. Referred to the defenders' pleadings to the effect there had been trading for 12 months, she said it was a matter of two or three months. She then said she calculated it to be between 6 and 8 weeks, from sometime in December until January. She said there was a member of staff employed there. There had been objections from Mr Nicholsby on a number of bases. Before trading a very basic refit had taken place. A till, credit card machine and a telephone had been installed. She thought that the refit had taken place out of trading hours. She said that trading had ceased because business was quiet and staff had resigned. Another factor was the trouble from Mr Nicholsby. She said Mr Duncan had always intended to open up again at Easter when business seasonally picked up.

 

[24] Miss Evans said that, while Mr Duncan was still involved, the pursuers hung strips of tartan over the door. Questioned further, she maintained that it was during the time of Mr Duncan's involvement and said that was what her colleague had told her. She said that by Easter 2007 Mr Duncan was already in talks with the Gold brothers and so stock buying and re-opening of the 'Control Office' was postponed. It never opened up again under Mr Duncan's control.

 

[25] According to Miss Evans, on 19 November 2007, the Gold brothers decided to open up the 'Control Office' for retail. It had a duplication of stock already available on Level 3. Mr Nicholsby complained and the defenders continued trading until prevented from doing so by interim interdict in February 2008. There had been threats from the pursuers that they would board up the windows but that never happened.

 

[26] In cross-examination, Miss Evans confirmed that although Mr Duncan ran the building it was his mother who owned it. It was put to her that Mr Duncan had consulted with his mother and they had decided, after complaints from Mr Nicholsby about entitlement so to do, to discontinue trading. She protested that that was not the main reason but then accepted that she was not in a position to say since she played no part in the discussions. When asked if she accepted that she could not contradict Mr Nicholsby, she replied that Mr Duncan would have to answer that question. She subsequently insisted that there had been a retail employee in the 'Control Office' during Mr Duncan time for at least a month.

 

[27] Richard Robert Gordon was property manager for the defenders and had been so for eight and a half years. He said that the 'Control Office' had initially been used as a property management office. It had a computer, filing cabinets, CCTV and a safe. General clerical duties were performed there. It was used for trading from time to time. The previous owners opened it for trading in December 2006. The trading ceased in January 2007. It was then used for storage. The new owners took over in May 2007. Another period of trading commenced in November 2007. At one point tartan fabric was put up over the door by the pursuers. There was now a property management office on Level 3. It is convenient because there are other staff on Level 3. He said that the trading from the 'Control Office' by Mr Duncan lasted for three to four weeks. He said that Level 3 apart from one remaining tenant, was now operated as retail by the defenders.

 

[28] Dildar Singh was the final witness for the defenders. He was a director of the defenders. He said that at the time of purchase of the defenders business the 'Control Office' was seen to be fitted out as a shop. After the new owners re-vamped more important parts of the building they began to trade from the 'Control Office' in November 2007. He spoke to the strips of tartan being put up over the doorway and being removed by the defenders. He said that he could not remember Mr Nicholsby ever telling him he was in fear of assault from anybody. He said that trading continued until February 2008. In cross-examination, asked whether he was aware that Malap Singh had been charged with assaulting Mr Nicholsby, he said "I'm not" then "I think" and finally "yes". He then said he wasn't sure if he'd been charged but he knew there was something going on about that.

 

Submissions

[29] Agents for both parties agreed that there were only a few areas of dispute on the evidence.

 

Pursuer' submissions

[30] I was referred to Webster v Lord Advocate 1985 SC 173; Bank of Scotland v Dunedin Property Investment Co Ltd 1998 SC 657; Credential Bath Street Ltd v Venture Investment Placement Ltd [2007] CSOH 208; The Moorcock (1889) LR 14 PD 64; William Morton & Company v Muir Brothers& Company 1907 SC 1211; Reigate v Union Manufacturing Company (Ramsbottom) Ltd and Ellon Cop Dyeing Co Ltd [1918] KB 529; Shirlaw v Southern Foundries (1926) Ltd [1939] KB 206; John McWhirter v John Longmuir 1948 SC 577; Leonard William Lothian v Jenolite Ltd 1969 SC 111; BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of Shire of Hastings (1977) 180 CLR 266; Crawford v Bruce 1992 SLT 524; Rockcliffe Estates plc v Co-operative Wholesale Society Ltd 1994 SLT 592; Craig v Millar (1888) 15 R 1005; Scottish Power plc v Kvaerner Construction Regions) Ltd 1999 SLT 721 and McBryde, The Law of Contract in Scotland, third edition.

 

[31] The pursuers' solicitor, Mr McLean, referred me to the test for perpetual interdict, namely that there has been a wrong committed and it might be repeated if interdict were not granted. The wrong was that the defenders had traded from the 'Control Office' and it was clear they would have continued to do so but for the interim interdict.

 

[32] I was invited to find that, on a true construction, set within the context of the so called "factual matrix", the provision in Lease 1 relating to access by the landlords, to the Landlords administrative office (Control Office in the plan) fell to be construed as providing certain access but limiting the access to the 'Control Office' for its use as a control/administrative office. Such limitation would exclude use for retail purposes. All three leases were entered into at the same time. Accordingly, when construing one lease, the other leases must form part of the factual matrix. I was referred to McBryde (supra) at paragraph 8-19.

 

[33] The nature of the exercise was to find what, objectively ascertained from the words used and the surrounding circumstances, the parties intended when they entered into the leases. The factual matrix had to be considered at the time the leases were entered into.

 

[34] In the written summary lodged by Mr McLean it was argued that whether the case was analysed as a contract with an express term or a contract with an implied term, the crucial question was "what was the intention of the parties when they entered into this lease?" The pursuers contended that the answer to that question is that it was obviously the intention of the parties that the 'Control Office' at the rear of the shop on Level 4 would be retained by the landlords for use for administrative purposes only and that the landlords would not trade from it so long as the lease remained in place.

 

[35] It was submitted that Lease 1 expressly prohibited the use of the 'Control Office' as a retail unit.

Schedule, Part IV to Lease 1 provides inter alia:

"PART IV

RESERVED RIGHTS

1 There are reserved to the Landlords their servants, agents and workmen and all other persons authorised by them including the tenants and occupiers of other parts of the Building and any other person having an interest therein:

1.1 Passage of utilities

......

1.2 Support

......

2. There are reserved to the Landlords, their servants, agents and workmen and all other persons authorised by them:

2.1 Entry for repair

......

2.5 Rights of Access

at all times whilst the Leased Premises are open for trading a right of pedestrian access through and over the Leased Premises to the Landlords' administrative office located at the rear of the Leased Premises and over such other parts of the Leased Premises as the Landlords may require for access to the Common Parts or those areas owned by the Landlords not forming part of the Leased Premises subject to causing the minimum inconvenience reasonably practicable to the Tenants and making good any damage caused to the Leased Premises to the reasonable satisfaction to the Tenants..."

 

 

[36] The court ought to be slow to conclude that any terms used in Lease 1 were used accidentally or without thought having gone into them. Clause 2.5 of Schedule, Part IV refers to the "Landlords' administrative office". It could quite easily have referred to the unit in some other way. For example, it could have referred simply to the Landlords' "unit" or "retained subjects" or any number of other words or phrases. It did not do so because the intention of the parties as revealed by the wording of the lease itself and by the factual matrix was that the 'Control Office' would be used for administrative functions only. It was not surprising that the term was not defined in the lease. It was only used once and so any definition would have been otiose.

 

[37] Lease 2, which includes the walkway on Level 4, contains a right of access in identical terms except for the part relating to the Landlords' administrative office. There is simply a reference to "those areas owned by the Landlords not forming part of the Leased Premises". That wording would allow access to the 'Control Office' but by a very convoluted route. It was relevant to understanding the intention of parties that the landlords wished to ensure that direct access was expressly available to the 'Control Office' from Level 4.

 

[38] The opening words of Schedule, Part IV of Lease 1 ought to be construed eusdem generis. The opening words form a list with four specific groups (the Landlords, their servants, agents and workmen) and that list is followed by the general words "all other persons authorised by them".

 

[39] The categories of "servants", "agents" and "workmen" all have in common that they are engaged with the Landlords on some sort of commercial basis and that they are rewarded by the Landlords for the work they do. Accordingly the words "all other persons authorised by them" were restricted to people who were similarly acting for the Landlords on some sort of commercial basis. The three categories listed are probably sufficient to cover most eventualities but other categories might include "contractors", "sub-contractors" and perhaps people with statutory functions to carry out such as representatives of the council.

 

[40] In contrast with the other landlords' retained rights in Lease 1to the leased subjects for maintenance or repair or through and over for access, only access to the 'Control Room' is a right which can be exercised "at all times whilst the Leased Premises are open for trading". Open customer access to a possibly competing unit within leased subjects is a potentially significant interference with the tenants' rights. It is extremely doubtful that a tenant would have agreed to that. On the other hand, if the 'Control Office' was to be used for administrative functions associated with the leased premises then it was natural that the access would be required at all times the premises were open for trading and without notice.

 

[41] Any argument that it was unnecessary to include customers in the categories who might have access because they already had access was flawed because it would have been open to the pursuers, if they so wished, to prevent customers walking along the walkway on Level 4 and instead require them to enter the rest of the leased premises by one of the other routes, namely the stairs from the foyer on Level 4 or the walkway accessed from the foyer. Had it been the intention of the parties for the 'Control Office' to be used for retail purposes then the flow of customers would have been expected to be guaranteed by the lease.

 

[42] When the leases were entered into the business plan for the defenders was to lease out premises to tenants. At that time there were a number of tenants in addition to the pursuers who occupied the building. Since then the number of tenants has reduced in line with the defenders' business model of running premises themselves. That change of business model cannot affect what the parties' expectations and intentions were as at the date the leases were signed.

 

[43] If it had been the intention of the parties that Mr Duncan could do what he liked with the 'Control Office' after November 1997 then one would expect to see wording which would have allowed him to follow his usual business plan and let the unit out to a third party. However, if a third party took the 'Control Office' on as a retail unit they would require a right of access. The landlords would not be able to give third party any better right of access to the 'Control Office' that it had retained in the lease. The extent of that right of access would be insufficient to allow a third party to trade from the 'Control Office'.

 

[44] The clause is contained in the "Reserved Rights" section of Lease 1. By the lease the landlords have given to the pursuers a right of exclusive occupation of the premises. Any derogation from that right of exclusive occupation ought to be clear and it was submitted that the consideration led again to the conclusion that what parties intended when they used the words they did in the clause was to limit the use of the 'Control Office' to administrative and office purposes.

 

[45] The true meaning can also be gleaned from the fact that the walls of the 'Control Office' are internal walls with the result that the landlords are effectively prohibited from advertising what they are doing in there. That would hardly matter if the 'Control Office' was simply being used for administrative and office purposes but would potentially be very significant if it was to be used for retail purposes.

 

[46] When the contract is considered as a whole, and in the light of the factual circumstances prevailing at the time it was entered into, the words used in the contract, and in particular the words used in Schedule, Part IV to Lease 1, made it plain that the intention of the parties was that the defenders would retain the office at the rear of the shop on Level 4 (the 'Control Office') for use for administrative and control functions and not for retail purposes. The meaning of the words used, and the use of the term "administrative office", was no quirk of draftmanship.

 

[47] With reference to the test for interpolating words into contracts summarised by Lord Reed in Credential Bath Street Ltd v Venture Investment Placements Ltd (supra) at paragraphs [26] to [28], the words "(which office is to be used for administrative and office purposes only)" should be interpolated after the words "Leased Premises" so that the relevant part of Clause 2.5 of Schedule, Part IV reads:-

"2.5 Rights of Access

at all times whilst the Leased Premises are open for trading a right of pedestrian access through and over the Leased Premises to the Landlords' administrative office located at the rear of the Leased Premises (which office is to be used for administrative and office purposes only) and over such other parts of the Leased Premises as the Landlords may require for access to the Common Parts or those areas owned by the Landlords not forming part of the Leased Premises..."

 

[48] Esto the meaning of the words were not as contended for above, it was submitted that a term to the effect that the 'Control Office' was to be used by the landlords for administrative and office purposes only required to be implied into Lease 1.

 

[49] The reasons that the term required to be implied into lease were:-

(i) The factual matrix gave a clear indication that the objectively assessed presumed intention of the parties was that the control office was, for the reasons set out above, to be used for administrative purposes only.

(ii) The implied term contended for was in accordance with the express intentions of the parties and was reasonable and equitable. It was necessary in order to give effect to what the parties intended.

(iii) Had a third party is suggested an express provision to the pursuers and defenders in line with the implied term contended for at the time they were contracting, then they pursuers and defenders would have replied that "of course that is our agreement".

(iv) At the time of contracting the tenants (pursuers) would have asked for this term and no reasonable person in the position of the landlords would have refused it.

(v) The term is to be implied by reference to the particular contract between the parties as opposed to a class of contract.

(vi) It was accepted that this was a written contract but in the circumstances the term ought to be implied.

I was referred to Shirlaw (supra) where, at page 227, what has come to be know as the officious bystander test was set out by MacKinnon LJ as follows:-

"Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying; so that, if, while the parties were making their bargain, an officious bystander were to express some express provision for it in their agreement, they would testily suppress him with a common 'oh, of course'"

In the application of the test set out, MacKinnon LJ went on to say:-

"Applying that in this case, I ask myself what would have happened if, when this contract had been drafted and was awaiting signature, a third party reading the draft had said: would it not be well to put in a provision that the company shall not exercise or create any right to remove Mr. Shirlaw from his directorship, and he have no right to resign his directorship?" I am satisfied that they would both have assented to this as implied already, and agreed to its expression for greater certainty."

 

[50] It was submitted that each of the five tests set out in BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hasting (supra) were met in the case. There, it was said at page 282:-

"their Lordships do not think it necessary to review exhaustively the authorities on the implication of a term in a contract which parties have not thought fit to express. In their view, for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that "it goes without saying"; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract."

 

[51] In their pleadings at Answer 3 on page 5 of the Closed Record (as amended) the defenders addressed the implied term argument in the following way:

"Explained and averred that the contract is effective without such a term. The absence of such an implied term does not give rise to any commercially absurd result."

The defenders' argument was misconceived because it did not qualify the idea of "effectiveness" by reference to the presumed intentions of the parties. Similarly, in relation to the "commercial absurdity" point, the defenders did not recognise that the implication of a term is about giving effect to the intention of the parties. Whether the contract is not absurd without this term is not the point. The question is: was the result the result that was intended by the parties when they contracted?

 

[52] Mr Nicholsby's evidence given in cross-examination on 26 January 2009 was instructive in relation to the officious bystander test. He said something to the effect that the notion that anyone would trade from the control office was "too ridiculous" and it was simply not discussed with Mr Duncan at the time. Perhaps, it was submitted, that was because Mister Duncan's business model involved letting units to third parties. It was further submitted that Mr Nicholsby's evidence of the discussions indicated that had an officious bystander asked whether the landlords were prohibited from using the control office the response would have been "of course".

 

[53] In anticipation of the defenders relying upon the case of Craig v Millar (supra) to the effect that implication of the terms was prevented, it was submitted that that case was concerned with whether a term was implied into contracts of lease, as a matter of law, preventing a landlord competing with his tenant. It was accepted that such a term is not implied as a matter of law. It was not what was sought here. Competition was envisaged. There were other areas of the property let. The question was whether in the particular circumstances pertaining to this contract use of the 'Control Office' was confined to administrative and office purposes and therefore excluded use for retail purposes.

 

[54] In conclusion, it was submitted, whether looked at as a case of construction of the existing terms or implication of a term, the evidence supports the pursuers' contentions. This interdict action called before Sheriff Horsburgh QC on 18 January for consideration, inter alia, of the granting of an interim interdict. He heard certain arguments and the hearing was continued to 8 February when it was concluded with Sheriff Horsburgh making avizandum. Judgment was issued by Sheriff Horsburgh on 18 February 2008 when he ad interim interdicted the defenders, their agents, employees, contractors, sub-contractors or anyone acting on their behalf or on their instructions from using for retail purposes 'Control Office' located towards the rear of Level 4 (ground level) of, and which forms part of, the subjects at 555 Castlehill, Royal Mile, Edinburgh and formerly known as Castlehill Reservoir. I was told that Sheriff Horsburgh had heard detailed submissions and that was apparent from both the time taken up and the detailed judgment issued. Given the benefits of detailed submissions, Sheriff Horsburgh was in a position carefully to consider and evaluate the facts constituting the prima facie case. In his judgment, Sheriff Horsburgh said this of the prima facie case:-

"In my opinion, while the retail use is not expressly prohibited, there are very strong indications that the parties to the leases intended the administrative office to be used only for administrative and office purposes. That may be inferred from the descriptions of it given in the leases and the relevant plans, to which I have already made reference. It may also be inferred from the nature of the right of access over the pursuers' retail unit reserved to the landlords. It is for them, and those in a contractual relationship with them, such as their servants, agents and workmen. That is inconsistent with potential-customer usage. The administrative office's relatively obscure location also supports the inference that retail use was not intended. Further, while the directors of the pursuers and the original landlords were one and the same, and signed the leases, it was intended that the ownership of the building should be disposed of to third parties. It is therefore very unlikely that the pursuers would have agreed to third party landlords being able to trade in direct competition to them. In my opinion these circumstances in combination amount to a prima facie case for interim interdict.

I felt unable to attach weight to Mr Gillies' counter arguments. I did not accept his proposition that it is only in case of ambiguity that it is necessary to look at what the parties to a contract intended. The parties' expressed intention must always be considered. The cases cited by Mr McLean support that. The fact that an activity is not expressly prohibited does not prevent the drawing of an inference that it is prohibited. The circumstances referred to above support an inference that that was clearly the intention of the parties to the lease. The plans suggest the public's most obvious route to the administrative office is from the entrance foyer and through the pursuers' retail unit, not by the back stairs. I did not think that significance could be given to the fact that the defenders already operate two retail stalls in the entrance foyer outside the door to the pursuers' retail unit. That is because Mr Gillies had very frankly volunteered that these sell low-value tourist souvenirs, not more expensive items like cashmere, and that in any event the parties had been in dispute about them. The defenders' retail operation in the administrative office appears to be of a very different nature. I do not consider that the defenders' notice at the entrance to the administrative office is sufficient to provide protection against confusion between the pursuers' and the defenders' stock in the minds of the public. It is seven lines long, and occupies about one-third of an A4 sheet. The temporary use of the administrative office for retail purposes in 2006 I did not regard as significant, due to the shortness of its duration, lack of information about the merchandise on offer, and the fact that it had not occurred without protest upon the pursuers' part."

I was invited not to differ from Sheriff Horsburgh.

 

[55] Mr Gilles, the defenders' solicitor, referred me to Credential Bath Street Ltd v Venture Investment Placement Ltd (supra); Melanesian Mission Trust Board v Australian Provident Society (1997) P & CR 297; Craig v Millar (supra); Huber v Ross 1912 SC 898; Little Cumbrae Estates Ltd v Island of Little Cumbrae Ltd 2007 SC 525; Mars Pension Trustee Developments Ltd v County Properties and Devlopments Ltd 1999 SC 267; BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of Shire of Hasting (supra); Crawford v Bruce(supra); Trollope and Colls Ltd v North West Metropolitan regional Hospital Board [1973] WLR 601; Philips Electronique Grand Public SA v British Sky Broadcasting Ltd [1995] EMLR 472; McBryde (supra); and Gloag on Contract.

 

[56] He referred me to his lengthy and detailed written submissions. For the sake of brevity I have included his written submission and supplementary written submission in an appendix to this Judgment.

[57] In connection with the evidence, it was submitted that Lease 1, along with the other leases, was negotiated at arms length and with the benefit of legal advice. The result was a series of lengthy and formal contracts. In such circumstances it ought to be presumed that the parties included everything they intended to be included. It was submitted that the negotiations were on the instruction of Mr Nicholsby for the pursuers on the one hand and Mr Duncan for the defenders on the other hand.

 

[58] It was submitted that there had been no objection to the principal of the Landlords being entitled to trade competitively from the foyer area of the premises.

 

[59] It was submitted that there had been trading from the 'Control Office' at the behest of Mr Duncan for a short while in the face of complaints from the pursuers.

 

[60] It was submitted that Mr Nicholsby was aware that there was stock stored in the 'Control Office' from time to time and he thought that was reasonable.

 

[61] In summary, Mr Gillies' legal submissions were divided between a common law bar against a landlord's use of his retained land being restricted within a lease of other land, the absence of an express condition restricting the use of the 'Control Office' and, alternatively, the inappropriateness of a term restricting the use of the 'Control Office' being implied into the contract.

 

[62] With reference principally to Craig v Millar (supra), the defenders argued that a landlord's right to use retained neighbouring property as he pleased, was only subject to any express restrictions in the lease agreed between the parties. There were no express terms which could be read in such a manner as providing that the 'Control Office' was only to be used as a control office for the duration of the lease and could not be used for any other purpose. In the circumstances, it was argued, that the pursuers' approach was fundamentally flawed.

 

[63] Esto the material parts of Lease 1 were open to interpretation, words to the effect that the defenders could not use the 'Control Office' for other than Control/Administrative/office functions, taking account of the factual matrix, could not properly be read into the lease.

 

[64] Alternatively, for there to be such words implied into Lease 1 it had to be on the basis of business efficacy. The term sought to be implied failed to meet established criteria which were necessary before a term could be implied on the basis of business efficacy.

 

[65] It was submitted that Clause 2.5 of Schedule, Part IV of Lease 1 merely provided, along with the general right of access also to be found in Lease 2, that there would be access to the 'Control Office' for a certain class of individuals. It did not provide that there could be no retail use.

 

[66] The factual matrix and the express terms of Lease 1 as a whole, along with the other two leases entered into at the same time, did not support the pursuers' contention. The contracts were written and negotiated at arms length with the benefit of legal advice. An obligation could more readily be implied into a verbal contract than in a written and formal one.

 

Decision

(Facts)

[67] As mentioned above, there was little dispute on the evidence. There was some difference between the parties on what I should make of some of the evidence and some focusing on parts of it. I considered both Mr Nicholsby and Mr Taylor to have given their evidence in a reasonably straightforward manner although I had some concern that Mr Nicholsby was being, to an extent, led. On the whole I considered Mr Nicholsby and Mr Taylor to be credible and reliable. I was less impressed with Miss Evans and Mr Singh. Miss Evans was hesitant in her evidence. I gained the impression she was thinking through the consequences of each question before answering. She altered her position more than once on the question of how long Mr Duncan had traded for from the 'Control Office'. Contrary to all the other evidence, she said that the tartan strips put up by the pursuers were put there during Mr Duncan's trading period. Pressed on the matter, she said a colleague had told her that. It was not said when. Mr Singh altered his position more than once when asked about an assault alleged to have taken place against Mr Nicholsby by another associated with the defenders.

 

[68] Where there were differences, I preferred the pursuers' evidence. On the question of the period Mr Duncan traded for, I took the view that Miss Evans was least reliable. Mr Gordon was probably closer to the truth. In any event, I accepted the proposition that, however long Mr Duncan traded for, it was not long. More importantly, I accepted the proposition that as soon as Mr Nicholsby became aware of it he took steps to stop it. I accepted his evidence that Billy Duncan came back to him and told him that following discussion with his lawyer and his mother, he did not want to fall out with Mr Nicholsby and had decided to cease trading from the 'Control Office'. There was no question of acquiescence on the part of Mr Nicholsby.

 

(Law)

[69] Is the pursuers' case fundamentally flawed because of a common law principle that provides that, in the absence of express conditions with the contract with a tenant, a landlord can do what he likes with his other property, even if that means competing directly with the business of his tenant? Both parties addressed me on Craig v Millar (supra). That was an action for damages by a tenant of certain premises used as a lodging house arising out of his landlord indirectly setting up in competition. Lord President Inglis at page 1030 said:-

"There is no express condition in the pursuer's lease that the defender shall be restrained or shall abstain during the pursuer's lease from so occupying the adjacent premises; nor is there expression, so far as I can see, in the pursuer's lease, from which the remotest inference such a restraint can be shewn to have been in the contemplation of the contracting parties.

But such a condition is said to be implied from the purpose for which the premises were let, and from the whole circumstances surrounding the transaction.....

"Such an implied condition is in my opinion inconsistent with the free exercise of proprietary rights, would be altogether intolerable in practise, and has no foundation in legal principle."

In my opinion all that emerges from this case, said to turn on its own facts, was that there was no common law principle to the effect that by virtue of the nature of the use of the let a landlord was precluded from competing with his tenant. That is not what the pursuers are claiming to be the case. Within the whole subjects it is and always was envisaged that there would be retail competition. There were other specific units of let. There is no provision within any of the leases that prevents any sort of trading from these other lets. What the pursuers are saying is that the terms of Lease 1, when considered against the factual matrix, either by way of interpretation or implication, provide for a restriction in the use of the 'Control Office' and only the 'Control Office. That is sufficient to dispose of this question.

 

[70] There was no real dispute between the parties as to what was included within the, so called, factual matrix although there were differences as to what was to be made of it or parts of it. I take into account all of the elements referred to in the pursuers' submissions.

 

Construction

[71] What, as a matter of true construction, when considered against the relevant factual matrix, do the provisions of Clause 2.5 of Schedule Part VI to Lease 1 mean? In Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 898 at 912-913 Lord Hoffman summarised the modern approach as follows:-

"(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

(2) The background was famously referred to by Lord Wilberforce as "the matrix of fact," but this phrase is, if anything, an understated description of what he background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by the reasonable man.

(3) The law excludes from the admissible background the previous negotiations of the parties and their declaration of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear......

(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of its words is a matter of dictionaries and grammars; the meaning the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mannai Investments Co. Ltd. v. Eagle Star Life Assurance Co. Ltd. [1997] AC 749.

(5) The "rule" that words should be given their "natural and ordinary meaning" reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made the point when he said in Antaios Compania Naviera S.A. v. Salen Rederierna A.B. [1985] A.C. 191, 201:

"if detailed semantic and syntactic analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense."

Scots law relating to construction of, and the implication of terms into, contracts has recently been considered by Lord Reed in the Outer House case of Credential Bath Street Limited v Venture Investment Placement Limited (supra) . In his analysis of the relevant law and authorities relative to construction of documents, Lord Reed, at paragraph [22] said:-

"When the court construes a document as if it contained words which are not to be found there, it is performing the same exercise as is involved in any other aspect of the construction of a document."

At paragraph [27], reviewing an English Court of Appeal decision, Lord Reed said:-

"In Scots law, also, it appears to me that it is sufficient to know the substance of the missing words."

I respectfully agree with and adopt the views expressed by Lord Reed.

 

[72] There is evidence that the use to which the 'Control Office' was expected to be put was in contemplation as early as the design and construction stage. It was created and constructed so as to protrude out over the void on beams. That positioning provided a vantage point from where a view of the whole subjects could be had. From the outset it contained CCTV, public address and office equipment. By contrast, it was accessed of a narrow corridor and had no external walls. It was relatively small. Looked at objectively, I am of the view that it lent itself to being an office from which administrative or control functions could best conveniently be performed. At the time the informal lease was entered into the evidence is that the 'Control Office' was still being used for what I accept was the original purpose.

 

[73] Next came the decision to formalise the lease situation. Mr Nicholsby and Mr Duncan, along with their respective solicitors were involved in negotiations. It is, of course, peculiar to this particular set of circumstances that Mr Nicholsby was effectively the controlling mind of the pursuers and, along with Mr Duncan, a controlling mind of the defenders. Mr Duncan did not give evidence. In effect, Mr Nicholsby gave evidence in relation to what was in each party's controlling mind. That does not mean that the position between the parties was whatever Mr Nicholsby says it was. It merely means that he is the sole source of certain of the information.

 

[74] For the purposes of construction of the contract, what, in fact, were the negotiations between the parties is irrelevant. The parties did enter into the three contracts. It appears clear that the starting point in each was the general landlord's retained rights of access provisions. These were of the sort to facilitate maintenance and repair and to be found in any formal lease. Lease 1 contained extra words which provided for additional and specific access to the "Landlords' administrative office located at the rear of the Leased Premises" ('Control Office'). Lease 1 is a lease of the pursuers' retail shop premises only. The subjects leased in terms of that lease stop at the beginning of the corridor on which the 'Control Office' is situated. The corridor itself is also leased to the pursuers but through another lease, Lease 2, that does not contain the additional rights of landlords' access. Access then, in terms of the contract, was to be taken through and over the pursuers' retail premises. I observe, in passing, that the Lease 1 subjects end at the beginning of the corridor and, therefore, before the entrance to the 'Control Office' is reached. I was not addressed on the point, but it might be the case that, in terms of the leases, the 'Control Office' is effectively landlocked.

 

[75] The reserved rights in Lease 1 (and the others) were restricted to a class of people. The commencement of Schedule, Part VI provides:- "There are reserved to the Landlords their servants, agents and workmen and all other persons authorised by them including the tenants and occupiers of other parts of the Building and any other person having an interest therein.....2.5 at all times...". The terms should be construed eusdem generis. It would not appear naturally from the wording of the provision that "customers" fell within the class of people to be afforded access over and through the leased subjects. However, were that the intention of parties, it would have been a relatively simple matter to say so.

 

[76] The Lease 1 access to the 'Control Office' is a right which can be exercised "at all times whilst the Leased Premises are open for trading". It is hardly likely that the parties would have intended potentially significant interference with the tenants' rights which might be caused by having a possibly competing unit situated within their own leased subjects. However, if the 'Control Office' was to be used for administrative functions then it was natural that the access would be required at all times the premises were open for trading and without notice. Furthermore, given that a landlord cannot confer any greater right on a tenant that he has to give, It seems to me unlikely that the right of access to the 'Control Office' would be expressed as it is had the possibility of a tenancy for retail trade been envisaged at the time of contracting.

 

[77] On the evidence, when the leases were entered into the business plan for the defenders was, at least partly, to let out premises to tenants. At that time there were a number of tenants in addition to the pursuers who occupied the building. Since then the number of tenants has reduced in line with the defenders' business model of running premises themselves. That change of business model cannot affect what the parties' expectations and intentions were as at the date the leases were signed.

 

[78] Clause 2.5 is contained in the "Reserved Rights" section of Lease 1. By the lease the landlords have given to the pursuers a right of exclusive occupation of the leased subjects. Any derogation from that right of exclusive occupation ought to be clear and, as was submitted, that consideration leads again to the conclusion that what parties intended when they used the words they did in the clause was to limit the use of the 'Control Office' to administrative and office purposes.

 

[79] In my opinion the true meaning can also be gleaned from the fact that the walls of the 'Control Office' are internal walls with the result that the landlords are effectively prohibited from advertising what they are doing in there. That would hardly matter if the 'Control Office' was simply being used for administrative and office purposes but might potentially be very significant if it was to be used for retail purposes.

 

[80] Following the signing of the formal contracts the 'Control Office' continued to be used, as it had been, for administration/control office purposes. It was only some time later, and subsequent to the signing of the leases, that Mr Duncan decided, for his own convenience, to move his office closer to where he had retail business. What subsequently suited Mr Duncan because of changes cannot weigh in considering what was in the minds of the parties at the time of contracting. What happened next is also of relevance. The setting up of retail from the 'Control Office' was not acquiesced in. Mr Nicholsby complained on the basis that it was not what was agreed in the leases. Mr Duncan, on the face of it, accepted Mr Nicholsby's position as correct.

 

[81] It would have been easy for the 'Control Office' to simply have been called a unit, retained subjects or even given the room number 9R405) it had on the plans associated with the leases. That might have been expected were it to be neutral in its intended use. Alternatively, were it planned that it would be used for retail purposes it might conveniently have been described as a retail unit. It was described as neither. In the lease it was described as the "Landlords' administrative office". In the plan it was described as the "Control Office".

 

[82] In my opinion, use of the expressions, "administration office" and "Control Office", though there might have been a degree of carelessness, was not accidental. These words severally describe what the room was to be used for. It seems unlikely that it was intended for there to be one expression used in the lease and another in the plan. However, each one separately provides more or less the same description. Although the mechanism by which the two descriptions came about is unknown I think that the language used raises the inference that the use to which the 'Control Office' was intended to be put was clearly in mind. Nothing points to the use of these expressions being accidental or without thought having gone into them.

 

[83] Looking objectively at all the surrounding facts and circumstances at the time of the leases being signed I am of the opinion that the 'Control Office' was intended to be restricted in its use. The words used describe the use it is restricted to. As observed above, it is not necessary for there to be a precise formulation of words and, accordingly, I see no reason to reject those suggested by the pursuers. In my opinion the relevant part of Schedule, Part IV of Lease 1, to be properly understood, has to be read as though it said:-

"2.5 Rights of Access

at all times whilst the Leased Premises are open for trading a right of pedestrian access through and over the Leased Premises to the Landlords' administrative office located at the rear of the Leased Premises (which office is to be used for administrative and office purposes only) and over such other parts of the Leased Premises as the Landlords may require for access to the Common Parts or those areas owned by the Landlords not forming part of the Leased Premises subject to causing the minimum inconvenience reasonably practicable to the Tenants and making good any damage caused to the Leased Premises to the reasonable satisfaction to (sic) the Tenants..".

The emphasis is mine for illustrative purposes only. I recognise that the effect of this wording will be to exclude storage albeit that has been acquiesced in already by the pursuers. Be that as it may, the evidence is that Mr Nicholsby, correctly in my view, did not think that the defenders were entitled to use the 'Control Office' for storage but he did not strongly object to that particular illegitimate use.

Implication of terms

[84] The pursuers argued on an esto basis that if the words contended for did not fall to be included by was of construction then they should be implied into the lease. Notwithstanding that I have already found in favour of the pursuers, I think it right to go on and consider the implication argument lest this action should end up elsewhere. The pursuers' submissions and the appropriate test are as set out in paragraphs [49] to [52] above.

 

[85] The factual matrix, as I have already discussed above, applies also to this question. In my opinion, on the whole evidence, had an officious bystander seen the draft Lease 1 and suggested the insertion of terms identical, or similar, to those contended for, he would have been met with "oh, of course". I am satisfied that both Mr Nicholsby and Mr Duncan would both have assented to this as implied already, and agreed to its expression for greater certainty. It would reflect the objectively determined intentions of the parties at the time they contracted. I am satisfied that, looking at all the relevant factual circumstances, no reasonable person in the landlords' position would have refused the insertion of the terms.

 

[86] It was argued by the defenders that this was a written contract negotiated at arms length and with the involvement of solicitors. As such, it should be taken to reflect the whole intentions of the parties. Whilst it is true that the leases are the product of negotiations and professional involvement, in my opinion closer scrutiny is merited. The factual background is of a formalisation of a pre-existing relatively informal arrangement. Included in that arrangement was the use, by the landlords, of the 'Control Office' for administrative and office purposes already discussed. The landlords wanted there to be provision in the leases for that continued use of the 'Control Office'. In negotiations, which appeared to be very informal, Mr Nicholsby and Mr Duncan agreed on provisions being put in the leases to that effect. The provision, to afford access to the landlords, for the purpose of such continued use ended up in Lease 1. How that came to be expressed requires to be considered. As already discussed, the expression "Landlords' administrative office" found its way into Lease 1, while the expression "Control Office" found its way into the plans. In my opinion, while it is clear that thought went into the issue of access to the 'Control Office' for the purposes of administrative and office use, perhaps less care went into how best to fully express the wishes of the parties. Had that happened, then one might at least have expected precisely the same terms to have been used in the lease and the plan associated with it. It does not end there. At the end of clause 2.5 are the words:- "...making good any damage caused to the Leased Premises to the reasonable satisfaction to the Tenants...". The emphasis is mine. One might reasonably suppose that the word ought to have been "of". If so, then that might be another example of some lack of care on the part of the draftsman. The error, if it is such, is repeated at least in leases 1 and 2. The terms of Clause 2.5 in Lease 1 have the appearance of being modified terms based on the Lease 2 template. Accordingly, although it is true that this was a written contract, it might not necessarily be the case that it can be assumed to have reflected the wishes of the parties with absolute precision. In my opinion, the circumstances here lend themselves particularly to the need for terms to be implied so as to more accurately express the agreement between the parties.

 

[87] Accordingly I grant to the pursuers decree of interdict.

 

[88] Both parties asked me to reserve the question of expenses, and I so do.

APPENDIX

 

Defenders written submissions and supplementary submissions.