Inner House case concerning an occupancy agreement between Falkirk Council and Mr Gillies. Mr Gillies failed to pay rent and the Council gave notice bringing the occupancy to an end.

The notice given by the Council did not comply with the statutory provisions relating to the termination of Scottish secure tenancies. However, the Council argued that the provisions did not apply as the agreement was governed by separate provisions relating to temporary agreements in terms of paragraph 5 of Schedule 1 of the Housing (Scotland) 2001 Act:

“A tenancy is not a Scottish secure tenancy if the house is being let to the tenant expressly on a temporary basis, for a term of less than 6 months, in fulfilment of a duty imposed on a local authority by Part II (homeless persons) of the [Housing (Scotland) Act 1987]“.

The agreement in question provided:

 “1.4     The Occupancy Agreement will take effect from 9 December 2009 and will continue on a fortnightly basis until the Council has carried out a full investigation of your housing circumstances and, depending on the outcome of that investigation has provided you with an offer of secure permanent accommodation or given you a reasonable opportunity to secure alternative accommodation. You will be given 28 days notice when the Occupancy Agreement is being terminated as set out in part 5 of this agreement.”

The Council contended that this clause made express provision that the agreement was for a term of less than 6 months. In particular, they argued that that the phrase “on a fortnightly basis” was equivalent to an express reference to the agreement being for a term of two weeks.  They also referred a clause which provided: “The total charge for this accommodation is £304.12 per fortnight, payable in arrears, on the last day of each rental period” and argued that the words “rental period” were synonymous with “term” or “duration” and that specifying that the rent was “£304.12 per fortnight”, payable on the last day of “each rental period”, indicated that the rental period or term was a fortnight.

The court rejected the Council’s arguments and allowed an appeal. The most obvious meaning of the expression “on a fortnightly basis” was not that the agreement had a term of a single fortnight but that the right to occupancy would continue indefinitely from fortnight to fortnight. As to the words “rental period” the court took the view that, in their everyday use and in the context in which they had been used in the agreement, the words related to the period in respect of which instalments of rent were due and were not synonymous with “term” or “duration”.

The full judgement is available from Scottish Courts here.

This is a Sheriff court case considering the enforcement of standard securities (in security for loans of over £1.8m) held over 6 properties in Edinburgh.

Background
The facilities lasted for 5 years and, when they expired, Promontoria[1] demanded payment, the debtors defaulted and Promontoria called up the securities. The debtors did not challenge the calling up procedure. However, they argued that, when the loans were being negotiated, a representative of the Bank had promised that their loan facility would be extended beyond 5 years and that the securities would not be enforced at the end of the 5 year term.

The debtors referred to a meeting during the negotiations at which they had indicated to the Bank’s representative that they were not happy with the proposed 5 year term and that the term of the facility should instead be 20 years. They said that they had been told that the 5 year term was a standard clause in the contract, but that the clause would not be enforced at the end of the term and that the facility would be renewed. The debtors also said that the Bank’s representative had said:

 “Imagine the public outcry if Clydesdale Bank ever pulled in its business loans, it will never happen”.

As such the debtors argued that the Bank had made a binding promise to extend the facility at the end of the 5 year term.

Decision
The Sheriff rejected the debtors’ arguments. After considering previous authorities[2] and noting that a binding promise can only be created by clear and unambiguous words, he found that the debtors had failed to demonstrate the bank’s unambiguous intention to be legally bound or that a reasonable observer in the context would have understood that the Bank had made a binding promise.

In the first place, although the debtors had asserted that they had been told that the facility would be extended beyond 5 years and that the securities would not be enforced at the end of the 5 year term, they had been unable to provide evidence of the precise words used: those words were critical as the court had to consider the words used in the context and determine objectively whether a binding promise had been made.

In the second place, although the debtors had provided evidence of the words used in relation to the representative’s comments on the public outcry that would arise if the Bank pulled in its business loans the sheriff said the following:

“I considered it inherently unlikely that the Bank’s representative would make a promise which destroyed the legal efficacy of the Bank’s securities. Notwithstanding that observation however, in my opinion, the words pled do not indicate a clear and unambiguous intention on the part of the Bank to extend the specific loan facilities beyond 5 years and not to enforce its 6 securities, nor do I consider a reasonable recipient considering the meaning conveyed by the words, who was in the process of executing formal legally binding standard securities over property, in a commercial context, would reasonably believe so. At most, I would characterise the language used and the sentiments conveyed in the words to be no more than an invitation to speculate about public opinion allied to a strong feeling of confidence and optimism, on the part of the maker in June 2007, that the Bank’s then practice in relation to business loans would not alter.”

The full judgement is available from Scottish Courts here.

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[1] The securities were originally granted in favour the Clydesdale Bank and subsequently assigned to Promontoria.

^[2] In particular, Regus (Maxim) Ltd v. Bank of Scotland plc [2013] CSIH 12, 2013 SC 331.

Outer House case concerning a lease of premises in Strathclyde Business Park in Bellshill.

The lease came to an end in September 2013 and the landlord argued that, in terms of the lease, the tenant was obliged to pay a sum equal to the cost of putting the premises into good and substantial condition.

The relevant clause provided that, at the end of the lease, if the premises were not in good and substantial repair and condition, the landlord had the option either to require the tenant to carry out repairs to put it into that condition or to demand a sum certified by the landlord as being equivalent to the cost of carrying out such work:

“Provided always that (a) if at such expiration or sooner determination the Premises shall not be in such good and substantial repair and condition then at the option of the Landlord either (i) the Tenant shall carry out at its entire cost the works necessary to put the Premises into such repair and condition or (ii) the Tenant shall pay to the Landlord the sum certified by the Landlord as being equal to the cost of carrying out such work..”

The landlord sought over £395k from the tenant in respect of the dilapidations said to exist at the end of the lease. The tenant argued that nothing was due in terms of the lease because the landlord had no intention or need to carry out the works listed in the schedule and the relevant clause in the lease did not entitle the landlord to a windfall profit. The tenant argued that the clause was neither a payment clause nor a liquidated damages clause but instead should have been read as clarifying and confirming the landlord’s common law right to damages (meaning that the landlord was only entitled to the loss actually suffered as a result of the tenant’s breach of its repairing obligations)[1].

Lord Doherty rejected those arguments. Following the approach taken in @SIPP (Pension Trustees) Limited v. Insight Travel Services Limited, Lord Doherty found that the ordinary and natural meaning of the clause provided the landlord with the option of certifying a sum equal to the cost of the works necessary to put the premises into the condition in which they would have been in at the end of the lease if the tenant had complied with its repairing obligations. The tenant’s contention that the clause should be interpreted as only allowing common law damages was found not to be a possible interpretation of the clause.

The full judgement is available from Scottish Courts here.

 All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

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[1] The tenant referred to Mapeley Acquisition Co (3) Ltd (In Receivership) v City of Edinburgh Council and Grove Investments Limited v. Cape Building Products Limited in support of its arguments.

This is an Inner House case concerning the validity of a break option served by a tenant to a landlord in respect of premises in the Glover Pavilion at Aberdeen Science and Technology Park.

Background
The lease was originally of units 3 and 4 in the pavilion and was for a period of 10 years ending in February 2014 and contained a break option exercisable after 5 years. However, in October/November 2011 the parties entered a minute of variation, which amended the lease to include additional premises (unit 1), extended the term of the lease until August 2021 and included a new break option exercisable by the tenant 5 years after the “effective date” provided in the minute of variation (on providing 6 months’ prior notice).

Arguments
The tenant served a notice exercising the break option in January 2016. However, the landlord argued that the notice was invalid as the heading of the letter containing the notice referred only to units 3 and 4 (followed by the term “the Premises” in parenthesis) and not to unit 1. The landlord argued that this created confusion by attributing a new meaning to a defined term (i.e. arguing that the premises had been redefined in the letter as being units 3 and 4 without unit 1). In addition, it was argued that, when this was error was taken with the first paragraph of the letter which referred only to the lease and not to the minute of variation (although the tenant had referred to the minute of variation in the second paragraph of the letter), it had the effect that the notice applied only to the original lease and not the lease as varied by the minute of variation.

Decision
In the Outer House Lord Tyre rejected those arguments and granted declarator that the notice had been validly served.  The test to be applied was how a reasonable recipient with knowledge of the terms of the lease would have understood the notice[1] and Lord Tyre found that, when the notice was read as a whole, a reasonable recipient with knowledge of the lease would have understood the notice to refer to the lease as it had been at the date of the notice (i.e. as varied.).

The Inner House agreed with Lord Tyre’s findings and refused an appeal. Deciding the issue was a matter of assessing the impression immediately made on a reasonable recipient of the notice with knowledge of the relevant background and context. After considering the factors which were known by the Landlord in this case[2], the court said the following:

“Against that background, what would the reasonable landlord have understood as being the meaning of the letter received?  We accept that (s)he would, no doubt, observe that the heading of the letter – not the notice itself (which is contained in paragraph 2 of the letter) – refers to only two of the leased units.  But on proceeding to read the whole letter, it would be clear that the heading was simply incomplete; what the tenant plainly intended was to intimate that the right to terminate conferred in clause 4.2 was being exercised.  That was, for the purpose of the landlord/tenant relationship, the operative part of the letter.  It was not as if any part of the letter sought to open negotiation for the termination of Tyco’s tenancy of only two units and retention of a tenancy of unit 1.  We can accept that (s)he might have paused in respect of the definition of “the Lease” in paragraph one.  However, that pause would, we consider, have been a brief one.  We agree with the Lord Ordinary that, on reading the letter as a whole, there would have been no real doubt.  It was simply too improbable that Tyco were serving notice under a lease which had expired, particularly given the specific reference to the then current break option clause in paragraph 4.2 of the Minute of Variation.”

The full judgement is available from Scottish Courts here.

 All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

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[1] Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 as recently applied in Scotland in West Dunbartonshire Council v William Thompson and Son (Dumbarton) Ltd  2016 SLT 12.

[2] Which the court noted as follows:

• “that, by 11 January 2016, the date for the expiry of the lease entered into in 2004 was long since passed and by that time, parties’ contractual rights and obligations were contained in the whole terms of the 2004 and 2011 documents read together (the original lease read together with the Minute of Variation);
• that Tyco were tenants of units 1, 3 and 4 under contractual terms which were unitary in relation to those premises;
• that Tyco had never had any right to terminate their tenancy in relation to individual units;
• that clause 4.2 of the Minute of Variation provided only for termination of Tyco’s whole tenancy;
• that, to exercise the clause 4.2 right, Tyco required to provide written notice at least six months prior to 31 August 2016 but the notice did not need to be in any particular form;
• if Tyco were going to exercise the break option, it would be sensible to service the clause 4.2 notice well in advance of the end of February 2016 – notice in the course of January 2016 would not be at all surprising; and
• that if Tyco were, after 31 August 2016, to be tenants of unit 1 only, parties would require to enter into a new agreement as the terms of their existing agreement were not divisible and made no allowance for partial severance of the tenancy.”

Outer House case considering the repairing obligations contained in a lease and sub-lease of 3 floors of Riverside House at Riverside Drive in Aberdeen.

The lease and sublease referred to common parts which included a car park. Defects were found in the concrete decking of the car park and remedial works had to be carried out. The question for the court was whether, in terms of the lease and sublease, the cost of the works was to be met by the sub-tenant or by the landlord.

The lease (between the landlord and tenant) was a full repairing and insuring lease under which the tenant was obliged to pay a service charge which was defined by reference to “Service Expenditure” which was incurred by the landlord in carrying out “Landlord Services” (which included repairs). An express exception from the Service Expenditure was “expenditure incurred in respect of or pertaining to the initial construction of the Building or the Service Systems”.

In terms of the sub-lease, the sub-tenant was obliged to pay to the tenant the sums which the tenant was obliged to pay to the landlord by way of the service charge under the lease.

The tenant paid the costs of remedial works to the car park as part of the service charge and sought to recover those from the sub-tenant. However, the sub-tenant argued that in terms of the exception from Service Expenditure, latent defects (such as the defects in the car park) “pertained to” the initial construction of the building and could not be recovered by way of the service charge.

Lord Tyre rejected the sub-tenants argument finding that it was appropriate to place emphasis[1] on the fact that the lease was a full repairing and insuring lease under which it was intended that the tenant would relieve the landlord of the cost of repair and rebuilding even in relation to inherent or latent defects.

 In Lord Tyre’s view, a reasonable person having all the background knowledge available to the parties would have understood the phrase “in respect of or pertaining to the initial construction of the Building” extended only to works carried out during the construction phase and any related snagging. The sub- tenants interpretation placed too much weight upon the words “or pertaining to”.  Lord Tyre found that those words could be seen as a reference to costs such as professional fees associated with the construction of the building, which were not strictly costs of construction.

The full judgement is available from Scottish Courts here.

 All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

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[1] Per the approach in @SIPP Pension Trustees v Insight Travel Services Ltd 2016 SLT 131

Outer House case concerning the validity of a break option served by a tenant to a landlord in respect of premises in the Glover Pavilion at Aberdeen Science and Technology Park.

Background
The lease was originally of units 3 and 4 in the pavilion and was for a period of 10 years ending in February 2014 and contained a break option exercisable after 5 years. However, in October/November 2011 the parties entered a minute of variation, which amended the lease to include additional premises (unit 1), extended the term of the lease until August 2021 and included a new break option exercisable by the tenant 5 years after the “effective date” provided in the minute of variation (on providing 6 months’ prior notice).

Arguments
The tenant served a notice exercising the break option in January 2016. However, the landlord argued that the notice was invalid as the heading of the letter containing the notice referred only to units 3 and 4 (followed by the term “the Premises” in parenthesis) and not to unit 1. The landlord argued that this created confusion by attributing a new meaning to a defined term (i.e. arguing that the premises had been redefined in the letter as being units 3 and 4 without unit 1). In addition, it was argued that, when this was error was taken with the first paragraph of the letter which referred only to the lease and not to the minute of variation (although the tenant had referred to the minute of variation in the second paragraph of the letter), it had the effect that the notice applied only to the original lease and not the lease as varied by the minute of variation.

Decision
Lord Tyre rejected those arguments and granted declarator that the notice had been validly served.

The test to be applied was how a reasonable recipient with knowledge of the terms of the lease would have understood the notice[1]. Lord Tyre began by rejecting the landlord’s argument that the reference in the first paragraph of the letter to “the Lease” was to the lease prior to it being varied by the minute of variation.  The notice required to be read as a whole and it was readily apparent from the notice that the sender was fully aware of the existence of the variation and of its terms. A reasonable recipient of the notice with knowledge of the lease would have understood the notice to refer to the lease as it had been at the date of the notice (i.e. as varied.). Lord Tyre took the view there was no ambiguity.

With regard to the omission of unit 1 in the heading in the letter, Lord Tyre, despite noting that careless drafting was to be discouraged, said the following:

“…in my opinion no reasonable recipient would be misled into interpreting the notice [so as to redefine the definition of “the Premises” in the contract] or even of being left in any reasonable doubt that [there had simply been a clerical error]… I am satisfied that the reasonable recipient would not have been perplexed in any way by the error in the letter heading.  The operative element of the notice is sufficiently clear and unambiguous to avoid any such perplexity, and the fact that the ingenuity of lawyers can suggest theoretical ambiguities is not to the point.”

The full judgement is available from Scottish Courts here.

[1] Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 as recently applied in Scotland in West Dunbartonshire Council v William Thompson and Son (Dumbarton) Ltd  2016 SLT 12.

Background
Inner House case concerning an alleged contract relating to the purchase of a local authority flat at Partick Bridge Street in Glasgow in 1989.

Mr Khosrowpour claimed that he had loaned £8k to Mrs Mackay for the purchase of her flat and that the parties had entered a contract by which Mrs Mackay would remain in the property for the rest of her life without repaying the loan but that Mrs Mackay would make a will transferring it to Mr Khosrowpour on her death. Mrs Mackay also granted a standard security (securing all sums due and which may become due) in favour of Mr Khosrowpour in 1991.

Although Mr Khosrowpour said that Mrs Mackay had originally granted a will passing the property to him, she later executed a new will directing that her executors pay the sale proceeds of the flat to her children (who included Mr Khosrowpour’s former wife).

Mr Khosrowpour sought damages for breach of contract from Mrs Mackay’s executor

In the Outer House it was found that the contract related to heritage and, as such, required formal writing for its constitution. However, Mr Khosrowpour argued that, because of his payment of the funds and Mrs Mackay’s execution of the first will, Mrs Mackay was personally barred from relying on the lack of formalities to resile from the agreement. As such Lord Turnbull found that Mr Khosrowpour had set out a stateable case regarding personal bar and allowed a proof (an evidential hearing) to consider whether it could be established. The executor appealed to the Inner House.

Arguments
The pursuer argued that the rule of rei interventus (where there are important actings by the party seeking to rely on the agreement which are known to and permitted by the other party and which are unequivocally referable to the purported contract) applied. However, in the Inner House the court observed that the actings of the party who relies upon the invalidity of the bargain to escape from it fall under the rule of homologation, not rei interventus and that was the rule that applied to this case.

The consequence of this is that, unlike the rule of rei interventus, there is authority to the effect that homologation does not apply unless actings (in this case accepting the funds and writing the first will) took place at a time when the alleged homologator (in this case, Mrs Mackay) was aware of the right to resile. As such Mrs Mackay’s executor argued that Mr Khosrowpour had produced no evidence that the first will was executed at a time when the deceased knew that it was within her power to resile from the verbal agreement (meaning she could not be personally barred from changing her will). There then followed some discussion as to whether there is a rebuttable presumption that parties are aware of their rights with the onus of proving the opposite resting on the party contradicting the proposition (i.e. whether it should be presumed that Mrs Mackay was aware that the verbal agreement was not binding). However, in the view of the court, there is no presumption albeit that, in certain cases, depending upon the particular circumstances, the courts will not allow a party to rely upon alleged ignorance in the absence of clear proof.

Decision
The Inner House allowed an appeal. The circumstances in this case did not entitle Mr Khosrowpour to the benefit of any presumption that, when executing the first will, Mrs Mackay was to be taken as having been aware that she knew of her right to withdraw from the arrangement. Moreover, the court was not persuaded that Mrs Mackay should have borne responsibility for any ignorance on her part in that regard.  As to the suggestion that Mrs Mackey could have obtained legal advice, the court found:

“As a proposition no doubt that is true, and in a different context might well be significant.  However, this was a family matter, and when a formal legal document was prepared and executed, it directly contradicted the alleged oral bargain.”

The full judgement is available from Scottish Courts here.

Inner House case concerning the interpretation of a minute of agreement between the owners of a development site in Ayr (the trustees) and Dickie & Moore.

The Trustees and Dickie & Moore had concluded missives for the sale of the site but later Dickie & Moore resiled from the missives (after paying an abortion fee). Dickie & Moore had been attempting to obtain planning permission for the site. When they resiled from the missives, the parties agreed that Dickie & Moore would continue to seek planning permission and the parties entered the minute of agreement by which the trustees would reimburse Dickie & Moore for professional costs if the trustees were to agree unconditional missives (i.e. missives which were not conditional on the obtaining of planning consent) with a third party.

The trustees entered unconditional missives to sell the site to a third party and, despite the fact that they had not succeeded in obtaining planning permission, they sought recovery of their professional costs from the trustees.

The minute of agreement provided:

“AND WHEREAS it has been agreed between the parties that in the event of the Sellers concluding unconditional (that is not subject or no longer subject to a suspensive condition) missives with a third party for the sale of the said subjects extending to 6.293 hectares or a substantial part thereof during the shorter of the period when the Planning Consent obtained or to be obtained by DMH for the development of the said subjects remains extant and the period of five years from the date of these presents, as the case shall be, the Sellers will reimburse DMH the full amount of the said professional fees together with any further vouched professional fees (up to a maximum of TEN THOUSAND POUNDS (£10,000) STERLING) incurred by DMH in obtaining such Planning Consent”

The question for the court was whether, in terms of the agreement, Dickie & Moore were entitled to recover their professional costs incurred in pursing the planning permission when the trustees concluded unconditional missives with the third party despite the fact that Dickie & Moore had not obtained planning permission.

The Inner House (allowing an appeal) took the view that the whole structure and purpose of the agreement was predicated on Dickie & Moore successfully pursuing their outstanding planning application. The Court did not consider that the parties had agreed to a situation whereby Dickie & Moore could achieve nothing in respect of planning consent but, provided that there was a sale within five years of the date of the minute of agreement, would be entitled to payment of the fees they had already incurred. Lady Clark made the following comments as regards the commercial sense of the possible interpretations:

“It is very difficult to understand why it would make any commercial common sense for the [the trustees] to pay substantial fees, for which they were not liable, in circumstances where [Dickie & Moore] were not obliged to achieve anything in relation to future planning consent but became entitled to repayment merely in the event of a sale to a third party within five years of the minute of agreement.”

The full judgement is available from Scottish Courts here.

Outer House case in which a property developer (Mr Barr) sought reduction of a personal guarantee executed by him in favour of Dunbar Bank in 2008.

Background
In 2006 Mr Barr and his business partner sought to acquire land near Tain for a development. To do so they established a limited partnership (Edenroc) registered in the Isle of Man which was to purchase the property with funding from Dunbar Bank.

Extensive negotiations took place between the bank and Edenroc during which 6 facility letters (each of which superseded the previous letter and only the last of which was executed) constituting offers of loan were sent to Edenroc by the bank. The first four of the letters made reference to the requirement for a joint and several guarantee to be granted by Mr Barr and his business partner. However, this requirement was not included in the last two letters which made reference (as had the fourth letter) to a requirement for “[a]ny other security as we [the bank] may, at our absolute discretion, require.” The fifth facility letter had been sent with a further separate letter addressed to Edenroc confirming that there was to be a joint and several guarantee granted by Mr Barr and his business partner. That letter also included an annexed form which Mr Barr and his business partner had signed as evidence of their agreement to the proposal.

The formalities of the loan transaction were executed 5 days after the final (sixth) facility letter and Mr Barr attended at Edenroc’s solicitors’ office to sign the personal guarantee. The document he signed was an individual guarantee by him (including a cover page indicating that it was an individual guarantee) and not a joint and several guarantee granted with his business partner.

The development failed in 2011 and the bank sought to enforce the individual guarantee against Mr Barr who sought reduction of the guarantee on the basis that he had been induced into entering it by misrepresentations by the bank.

Arguments
In particular he claimed that the prior facility letters (referring to the joint and several guarantee) were misrepresentations and that one of the bank’s employees (who was said by Mr Barr to have informed him that the bank never called up guarantees). Although Mr Barr accepted that he had signed the guarantee freely, he said he had signed the document without reading it and was unaware of the content and did not think it was necessary to obtain legal advice (although he had signed it in the presence of a friend who was usually his solicitor but in this case was acting for Edenroc).

Decision
Lord Armstrong rejected those arguments, holding that no misrepresentations were made to Mr Barr and that he had not been induced by the bank to sign the guarantee.

Lord Armstrong concluded that no express representation had been made by the bank in terms of the final facility letter that a joint and several guarantee would be required from Mr Barr. As each of the facility letters superseded the last, and only the final letter was executed, it was that letter which governed the documentation required at completion of the loan transaction. (The letters prior to the final letter merely represented ongoing negotiations and the signed form which had been sent with the fifth letter simply indicated Mr Barr’s (and his business partner’s) willingness to provide a joint and several guarantee if the funds had been advanced in terms of that letter (i.e. if the fifth letter had been the final letter)).

Moreover, there was no basis for inferring from the relevant documentation, however implicitly, that the guarantee required would be joint and several. In particular, Lord Armstrong noted that Mr Barr had not been a party to the facility letters (which had been between the Bank and Edenroc- a separate legal entity Mr Barr had gone to some trouble to set up).

Lord Armstrong also found that he did not believe Mr Barr’s evidence (taking account of his previous experience as a developer) that he had not read the document, did not appreciate the significance of what he was doing and, in particular, that he would not have signed the document without the bank’s alleged representations.

In coming to his conclusions Lord Armstrong noted:

“In the context of cautionary obligations it is well settled that as a general rule the cautioner is expected to look after his own interests and to make such enquiries as he considers necessary or appropriate.”

The full judgement is available from Scottish Courts here.

Background
Inner House case concerning the interpretation of a lease of premises at the Gyle Shopping Centre in Edinburgh under which Gyle was the landlord and Marks & Spencer, the tenant.

Gyle entered an agreement with Primark for the erection of a new store on land which included part of a car park. However, M&S’s premises were let together with a one-third pro indiviso share of shared areas which included the car park. In two previous decisions Lord Tyre found (1) that M&S had not consented to the building of the Primark Store and that the building of the store without consent would be a breach of the lease[1] and (2) that M&S was not personally barred from preventing Gyle from erecting the store on the car park[2].

Gyle then wrote to M&S and requested consent but did not receive it. In this case Gyle sought declarator that a refusal of consent to the Primark development by M&S amounted to an unreasonable withholding of consent. In the Outer House Lord Tyre granted the declarator[3]. M&S then appealed that decision.

The relevant clause in the lease provided that certain works could be carried out to the shared areas by a shopping centre management committee (which included a representative from M&S) where the parties (including M&S) consented that they accepted that the works would not render the mall or shared areas materially less adequate, commodious or convenient to them. The clause also provided that the consent could not be unreasonably withheld.

Arguments
M&S argued that the clause permitted works of redevelopment, modernisation, refurbishment, replacement and renewal, but not a new development such as the new Primark store. In particular they argued that the clause did not permit removal of the shared areas from M&S’s lease and that it did not permit the piecemeal erosion of M&S’s real property rights without formal documentation recorded in the appropriate register.

Decision
The Inner House allowed the appeal. In doing so, the court noted that it is necessary to consider the structure and provisions of the lease in the context of well-established principles of Scottish land law. As to which, the court said:

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

 And, having noted the benefits of clarity, certainty, and accessibility for the public which arise from the principles, the Court went on to say:

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

Then, looking at the particular wording in the lease, the Inner House concluded that there was nothing in the provisions of the lease which would permit an interpretation altering M&S’s real rights and boundaries and allowing the building of the Primark Store.

 The full judgement is available from Scottish Courts here.

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[1] Gyle Shopping Centre General Partners Ltd as Trustee for and General Partner of Gyle Shopping Centre Limited Partnership v. Marks and Spencer Plc, 25 March 2014. See summary here.
[2] Gyle Shopping Centre General Partners Ltd as Trustee for and General Partner of Gyle Shopping Centre Limited Partnership v. Marks and Spencer Plc, 6 August 2014. See summary here.
[3] Gyle Shopping Centre General Partners Ltd as Trustee for and General Partner of Gyle Shopping Centre Limited Partnership v. Marks and Spencer Plc, 12 February 2015. See summary here.