Outer House case concerning arbitration proceedings in respect of a lease over Pentlandfield business park at Roslin in Midlothian. Midlothian Innovation let the premises from Robert W Ferguson & Co.

The lease was for 5 years and included an option to purchase as at 1 July 2007. The parties had also signed a minute of agreement. Both of the documents stipulated that, if the option were exercised, Robert W Ferguson would grant a renunciation of the lease.  Midlothian exercised the option on 1 December 2006 and a renunciation was signed on 2 July 2007. However, on 16 August 2007 both parties signed a joint application form seeking the appointment of an arbitrator in respect of a dispute over compliance with the repairing obligations in the lease. The arbitration proceeded slowly but in 2011 Robert Ferguson (the surviving partner of the firm of Robert W Ferguson & Co) changed his position and argued that, given the granting of the renunciation, the arbitrator had no power to make an award.

Lord Woolman rejected that argument. Although the acceptance of a renunciation by a landlord implies a discharge of all claims against the tenant, the renunciation is potentially subject to any further agreement made by the parties. The parties had freedom of contract and were entitled to agree not only that they had a dispute arising out of the lease, but also that they wished to resolve it by arbitration. The signing of the joint application form demonstrated the parties’ intention to have the dispute referred to arbitration and Mr Ferguson’s participation in the proceedings until 2011 implied that he consented to the arbitration. Lord Woolman found that the arbitrator had jurisdiction and the proceedings should proceed to a conclusion.

The full judgement is available from Scottish Courts here.

(See also related decision here).

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