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OUTER HOUSE, COURT OF SESSION [2006] CSOH 35 |
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CA38/05 |
OPINION OF LORD REED in the cause BEN CLEUCH ESTATES LIMITED Pursuers; against SCOTTISH Defenders: ннннннннннннннннн________________ |
Pursuers: Connal, Q.C.,
Solicitor Advocate; Easton, Solicitor Advocate;
McGrigors
Defenders: The Dean of Faculty (Martin, Q.C.), McIlvride;
Introduction
[1] The issue in this case is whether a break option in a lease of premises known as Enterprise House, 45 North Lindsay Street, Dundee ("the Premises") was validly exercised by the defenders, the tenant of the Premises; or whether in any event the pursuers ("Ben Cleuch"), the landlord of the Premises, are barred from denying that the option was validly exercised. The proceedings in which the issue arises take the form of an action for declarator that the defenders have not validly terminated the lease of the Premises; that a letter dated 6 January 2005 sent by Shepherd and Wedderburn, solicitors, as agents for the defenders to Bonnytoun Estates Ltd was not a valid notice in terms of clause FOURTH (B) of the lease; and that the lease continues in full force and effect.
The lease provisions
[2] Ben
Cleuch and the defenders hold the landlord's and
tenant's interests respectively in a lease of the Premises. The lease was originally entered into in 1991
between Faraday Properties Ltd and the Scottish Development Agency
("SDA"). The tenant's interest was
transferred to the defenders by virtue of section 22(1)(a)
of the
[3] Clause
FOURTH (A) of the lease provides that the term of the lease is from
"Notwithstanding the foregoing, the Tenants shall be entitled at any time prior to [2 February 2005] to give to the Landlords at least one year's written notice of termination of this lease, such notice to take effect on [2 February 2006] whereupon this Lease shall absolutely determine ......"
[4] Clause SEVENTEENTH provides:
"Any notice or document required or permitted to be given or served under this Lease may be given or served personally or by leaving the same or sending the same by first class recorded delivery post at or to the registered office of the party (where it is a company) for the time being, or (in the case of a firm or an individual) to its or his address as shown in the Preamble to this Lease, or at or to such other address as shall have been last notified to the other party for that purposes (sic). Any notice or document given or received by post shall be deemed to have been duly given or served on the second business day after the letter containing the same was posted and in proving that any notice or document was so given or served it shall be necessary only to prove that the same was properly addressed and posted".
[5] Under the lease, there are a number of notices and other documents which may require to be served, besides break notices under clause FOURTH. Some such notices and documents are to be served by the landlord upon the tenant, and others by the tenant upon the landlord. They include notices and documents served under rent review provisions, notices served under provisions relating to the maintenance and repair of the Premises, and notices served under irritancy provisions.
[6] Clause EIGHTH of the lease provides for the appointment by the landlord of management agents:
"The Landlords shall be entitled, but not bound, to appoint Management Agents from time to time, who shall (if appointed) collect the rents, insurance premiums, and all other payments due by the Tenants in terms of this Lease".
Other provisions of the lease envisage that the landlord may authorise agents to perform other specified functions on its behalf, in addition to the collection of payments: for example, to exercise the landlord's right of access to the Premises, to approve fire fighting appliances, and to receive notification of damage to the Premises. Other provisions, although making no explicit reference to agents, provide that acts may be performed "on behalf of" the landlord: for example, the granting of consent, approval or authorisation where that is required under the lease.
[7] Finally, in relation to the terms of the lease, it is relevant to note, as part of the background to this litigation, that the lease prohibits the tenant from assigning its interest without the consent of the landlord, such consent not to be unreasonably withheld. Since the defenders are a tenant of the highest quality of covenant, it can be anticipated that the landlord would be reluctant to consent to an assignation to any prospective tenant of a lesser quality of covenant. The annual rent is г210,700.
The factual circumstances
[8] As mentioned above, the Premises were let in 1991 by Faraday Properties Ltd to the SDA. The defenders subsequently acquired the tenant's interest as statutory successors to the SDA. The Premises were occupied, as their head office, by Scottish Enterprise Tayside ("SET"), a local enterprise company established under the Companies Act 1985, wholly owned by the defenders, and carrying on its activities under an operating contract with the defenders made in pursuance of section 19 of the 1990 Act. In 1996 the defenders were notified by solicitors acting on behalf of Faraday Properties Ltd that they had sold the landlord's interest to Fiscal Estates Investments Ltd.
[9] In
2001 a company named Bonnytoun Estates Ltd ("Bonnytoun") was established as a joint venture between Mr
Scott Cairns, Bank of Scotland and Gooch Webster Ltd ("Gooch Webster"). Mr Cairns owned 50 per cent of the
shares, Bank of Scotland owned 37.5 per cent and Gooch Webster owned the
remainder. Bonnytoun
had originally been incorporated under the name Pacific Shelf 977 Ltd, and had
subsequently changed its name. The
object of the joint venture was to invest funds lent by the Bank of Scotland in
commercial properties. In practice, some
of the properties were acquired directly by Bonnytoun
itself. Other properties were acquired
by wholly-owned subsidiaries of Bonnytoun, each such
subsidiary being acquired off the shelf as a vehicle for the particular
purchase in question. In cases of the
latter kind, Bonnytoun borrowed from Bank of Scotland
the funds required for the purchase, then itself lent
the funds to the subsidiary. The
subsidiary then acquired the property in question and granted a security over
the property in favour of Bank of Scotland.
The registered office of Bonnytoun was at all
material times at 4th Floor, Pacific House,
[10] On
[11] Clause 2 of the Amended and Restated Servicing Agreement provided that Bonnytoun appointed Lochcote in 2001 to act as sole manager of Bonnytoun's business in accordance with the terms of that agreement and any additional authority delegated by Bonnytoun to Lochcote from time to time. Under clause 3, Lochcote was required to provide a variety of services in respect of the Properties (as defined). Those services included ensuring the proper and efficient management of the Properties, Lochcote being entitled to subcontract to Gooch Webster those services to be performed by Gooch Webster in terms of the Property Management Agreement. The expression "the Properties" was defined as meaning the properties notified to Lochcote by Bonnytoun in terms of clause 3.5 during the continuance of the agreement. Under clause 3.5, Bonnytoun was required to
"notify [Lochcote] of all properties acquired by [Bonnytoun] or owned or acquired by any subsidiary of [Bonnytoun] so that the same shall constitute Properties for the purposes hereof".
The agreement thus provided for Lochcote to provide, under its contract with Bonnytoun, management services in respect of properties acquired by Bonnytoun's subsidiaries.
[12] As explained above, the agreement envisaged that Lochcote would subcontract certain property management services to Gooch Webster in terms of a Property Management Agreement, that Bonnytoun would enter into a contract (the Engagement Letter) with Gooch Webster in relation to other property services, and that the services to be provided by Lochcote to Bonnytoun under the agreement were to include the giving of instructions on behalf of Bonnytoun to Gooch Webster under the Engagement Letter. The Property Management Agreement and Engagement Letter then entered into were not produced in the present proceedings, although a subsequent version of the Property Management Agreement, entered into in 2003, was produced and is discussed below.
[13] On
[14] On
[15] The way in which Gooch Webster dealt with the properties owned by Bonnytoun and its subsidiaries was described in evidence by Mr Douglas McPhail, who was at the time of the proof the head of the Asset and Property Management Department of Colliers CRE ("Colliers"), chartered surveyors, and had previously worked for Gooch Webster (Colliers having acquired Gooch Webster in early 2003). Mr McPhail said that "the Bonnytoun Estates portfolio" (as he described it) was dealt with by Gordon Kellie, an associate in the Asset and Property Management Department. He was assisted by another chartered surveyor in the same department, Miss Ann Forrester.
[16] Miss Forrester also gave evidence. She said that Gooch Webster were appointed to act as managing agents on behalf of Bonnytoun. Their duties were to manage the portfolio, including any properties purchased after October 2001. Those duties concerned the management of all the properties in the Bonnytoun portfolio, and covered such matters as the collection of service charges, the issuing of rent invoices and the payment of contractors. She was aware that some of the properties were purchased in the name of companies other than Bonnytoun itself. She was aware, in particular, that the Premises had been purchased by Pacific Shelf 1145 Ltd and that that company changed its name soon afterwards to Ben Cleuch. She regarded her client, so far as the Premises were concerned, as being Bonnytoun. Gordon Kellie was responsible for the agency within Gooch Webster, and reported to Mr Cairns. If communications addressed to her firm concerning the Premises bore the heading "Bonnytoun Estates Ltd", that did not cause any difficulty in dealing with the matter or in obtaining instructions.
[17] Mr Cairns, in his evidence, said that when he gave instructions to Miss Forrester he was acting as the asset manager, Lochcote. In relation to the Premises, Gooch Webster (and their successors, Colliers) were the managing agents on behalf of Ben Cleuch, appointed in terms of clause EIGHTH of the lease.
[18] On
[19] Gooch Webster had also acted for several years as the managing
agents of the defenders' investment portfolio.
They collected the rental and other payments due to the defenders by the
tenants of the properties of which the defenders were the landlord, and
submitted monthly management reports to the defenders. The Gooch Webster staff
principally involved in this work were Sandra Capanni
and Louise McGowan, who were employed as accounts clerks in the same department
as handled the Bonnytoun portfolio. The more senior staff involved were Mr Ian Boxall and Mr McPhail. Mr McPhail
attended monthly management meetings with the defenders. His principal contact there was Mr John Fish,
a chartered surveyor working in the same department as Mr Dunion. In practice,
Miss Capanni and Miss McGowan worked full-time
on behalf of the defenders, and were located in the defenders' offices. They reported to Mr Fish. Miss McGowan also maintained the defenders'
computerised database of information on properties, known as Skyline. The information stored on Skyline related
both to properties of which the defenders were the landlord, and also
properties of which the defenders were the tenant. Skyline was used to generate the management
reports. Mr Dunion
passed the copy notice of
[20] On
"Issued on behalf of the landlord above named".
Above that statement appeared the words:
"Acting as Agents for Bonnytoun Estates Ltd".
The invoice bore, below the word "Tenant", the words:
"Scottish
Whole property
Ben Cleuch Estates"
followed by the address of the Premises. The invoice also bore, below the word "Property", the words:
"Whole Property
Ben Cleuch Estates"
followed by the address of the Premises.
[21] Mr McPhail explained in evidence that the format of the invoices was discussed at a meeting, when Gooch Webster were first instructed, and a decision was taken to present matters in this way. The property management system which Gooch Webster used at that time to produce management reports and invoices was not capable of producing a single management report in respect of a number of different properties where Gooch Webster were recorded in the system as managing the properties on behalf of different clients. All the properties in the Bonnytoun portfolio were entered in the system on the basis that Bonnytoun was the client: in that way, a single report could be produced in respect of the entire portfolio. The invoices therefore stated that they were issued on behalf of Bonnytoun. The individual holding companies, such as Ben Cleuch, were mentioned on the invoices in the only places where that was possible. Mr McPhail had not been aware of those arrangements at the time, but he subsequently understood that that was what had happened. Miss Forrester gave evidence to similar effect.
[22] Mr Cairns confirmed in his evidence that the words "Acting as Agents for Bonnytoun Estates Ltd" appeared because Gooch Webster's systems could not accommodate the use of the names of Bonnytoun's subsidiaries in that part of the invoice. The words were not correct. So far as the Premises were concerned, Gooch Webster were acting as agents for Ben Cleuch. Mr Cairns accepted that anyone reading the invoice might well think that Bonnytoun was the landlord of the Premises. He suggested however that a reader might also question what the words "Ben Cleuch Estates" referred to. As far as he was aware, no enquiry had been made. He was aware at the time of the way in which the invoices were laid out: that had been the subject of discussion with Gooch Webster. Copies of all invoices were sent to him on a quarterly basis.
[23] The invoice was received by Mrs Claire Meechan, a clerkess employed in the defenders' finance department. Mrs Meechan gave evidence, and was a credible and reliable witness. She said that she did not pay attention to the words "Acting as Agents for Bonnytoun Estates Ltd", or to the words "Ben Cleuch Estates". She was aware of the portfolio of properties of which the defenders were tenant, including the Premises, and of the rental and other charges payable. She checked that the invoice was in the correct amount, and forwarded it to the defenders' account department, authorised for payment. The rent was then paid to Gooch Webster, as requested in the invoice, by bank transfer.
[24] Invoices were thereafter received from Gooch Webster every quarter. They differed from the first invoice in one respect: below the word "Tenant" appeared the defenders' name and address, without any mention of Ben Cleuch. The invoices were otherwise identical in all material respects to the first invoice.
[25] In about December 2002 Mr Kellie left Gooch Webster. Miss Forrester then took over day to day responsibility for the Bonnytoun portfolio. Mr McPhail took over responsibility above her, as the head of the department. He had however no strategic role in relation to the portfolio, as Mr Cairns acted as the asset manager, and Miss Forrester reported directly to Mr Cairns. Mr McPhail attended management meetings with Mr Cairns and Miss Forrester, as a matter of courtesy. Matters relating to the Premises were not however discussed in his presence, because of his role on behalf of the defenders. Miss Forrester had more frequent meetings and discussions with Mr Cairns.
[26] Mr McPhail was not aware that some of the properties were owned not by Bonnytoun itself but by subsidiaries of that company. He was not aware of a chart, provided annually by Mr Cairns to Miss Forrester from 2003 onwards, which explained the structure of the Bonnytoun group and the interests of the different companies in different properties, and showed in particular that the Premises were owned by Ben Cleuch. He presumed that Bonnytoun (and only Bonnytoun) was the client.
[27] Miss Forrester gave further evidence in relation to these matters. She was in communication with Bonnytoun daily. She had meetings with Mr Cairns every eight weeks. The Premises were discussed at those meetings. She received instructions in respect of the Premises from Mr Cairns.
[28] As explained earlier, Gooch Webster were taken over in 2003 by Colliers. An Amended and Restated Property Management Agreement was then entered into by Bonnytoun, Lochcote, Gooch Webster and Colliers. This agreement was put to Mr Cairns when he gave evidence, but none of its specific terms was introduced into the evidence or mentioned in the parties' submissions. The preamble to the agreement narrated that Lochcote and Gooch Webster had agreed in terms of the Original Property Management Agreement that Gooch Webster would provide management services to Lochcote in respect of the properties acquired and to be acquired by Bonnytoun and notified to Gooch Webster; that the business of Gooch Webster had been transferred to Colliers; and that the parties had agreed to amend and restate the terms of the Original Property Management Agreement.
[29] Clause 1 of the agreement provided that Lochcote, with the consent of Bonnytoun and Gooch Webster, had appointed Colliers to manage the Properties. Under clause 3, Colliers were to deal with the day to day property and financial management of the Properties. Under clause 6, Colliers were to invoice tenants for rent and other sums due under the leases, to credit payments from the tenants into a client account for Bonnytoun, and to pay all monies to Bonnytoun. Clause 6.16 provided:
"The Obligations and others undertaken by [Colliers] in terms of this Clause 6.0 are undertaken directly in favour of [Bonnytoun] who shall be entitled to enforce the same in questions with [Colliers]".
Under clause 18, Colliers were to report to Lochcote quarterly on property and financial matters, and to attend meetings with Lochcote as necessary. Clause 24.1 provided:
"Where [Colliers] receives notices from tenants ...these shall be forwarded to:-
FAO James Scott
Scott Cairns Co Limited
Linlithgow
EH49 7JZ".
Clause 25 provided that, in relation to matters referred to in the agreement, Colliers had the power to bind Bonnytoun; and clause 26 provided that Bonnytoun would ratify all things done by Colliers in connection with the management of the Properties in accordance with the agreement. Clause 30, and the schedule to the agreement, made it clear that the Properties included the Premises. Under clause 32, certain of Colliers' fees were to be paid by Lochcote, and the remainder by Bonnytoun.
[30] It appears from clause 2 of the Amended and Restated Property Management Agreement that Bonnytoun and Colliers also entered into an Amended and Restated Engagement Letter, under which additional services were to be performed by Colliers for Bonnytoun. No evidence was led concerning that letter.
[31] A supplemental agreement was also entered into between Bonnytoun and Lochcote, relating to the Amended and Restated Servicing Agreement, amending the latter agreement so that references to the Property Management Agreement and Engagement Letter entered into with Gooch Webster were replaced by references to the Amended and Restated Property Management Agreement and Engagement Letter entered into with Colliers.
[32] Rent invoices were issued by Colliers in respect of the Premises. They were in a similar form to the invoices previously issued by Gooch Webster. The first such invoice stated, below the name "Colliers":
"Acting as Agents for Bonnytoun Estates Ltd".
Under the word "Property" appeared the words:
"Whole Property
Ben Cleuch Estates"
followed by the address of the Premises. The invoice was processed and paid in the same way as those previously issued by Gooch Webster.
[33] Early in 2003 the defenders instructed a communications
company, Networks by Wireless Ltd ("Networks"), with a view to having some form
of television antenna installed at the Premises. Under the lease, it was necessary to obtain
the landlord's consent before the installation could be carried out. Networks wrote to Colliers, seeking such
consent. Miss Forrester obtained
instructions from Mr Cairns that consent could be granted, and replied to
Networks by letter dated
"BONNYTOUN ESTATES LTD
ISM PROJECT FOR SCOTTISH
The letter stated:
"I can confirm that our clients are happy for these works to proceed and confirm landlords consent to do so".
In evidence, Miss Forrester said that by "our clients" she meant Bonnytoun. She had been informed that Ben Cleuch was the legal landlord, but she did not regard the accurate identification of the landlord as a matter of importance in the context of correspondence of this nature. Mr Cairns said in evidence that he granted consent as Lochcote, under the agreement with Bonnytoun, on behalf of Ben Cleuch.
[34] By May 2003 SET and the defenders had been considering for
several months two alternative courses of action in relation to the
Premises. One was to carry out a
refurbishment of the Premises, and for SET to remain there until the expiry of
the lease in 2016. The other was to
exercise the break option in the lease and for SET then to relocate to new
offices elsewhere. Within SET these
matters were dealt with by Mrs Katie Farmer, a chartered surveyor employed
by SET, who reported to Mr Nick Day, the head of SET's
property department. Mrs Farmer's
function was initially to identify alternative locations: in the event, the preferred location was a
site owned by the defenders at Discovery Quay,
[35] On
"Ultimately and in due course, once we have signed a contract for new offices, we would ask them also to serve the notice to break.
Obviously this is one area of risk that we need to identify".
Mr Gunn responded that he had already given SET an opinion on the break clause some time previously, when the idea of relocating was first considered. He also made it clear that if any instructions in relation to the lease were to be given to Shepherd and Wedderburn, they had to be given by the defenders and not by SET. Mrs Farmer replied, the same day:
"[The Office of Government
Commerce] mentioned that there has been a few cases,
in
This warning was to prove prophetic.
[36] Advice was thereafter sought by Mrs Farmer from Shepherd and
Wedderburn, who were provided with a copy of the
lease. By letter dated
"We can confirm that Scottish
Enterprise has the option to terminate the lease on
In order to terminate the lease
at that date, Scottish Enterprise must serve written notice on the Landlords by
First Class Recorded Delivery Post no later than
...[We] would strongly recommend that notice is served well in advance of the latest date and although there is no specific need in terms of the lease, this notice is acknowledged by the landlords".
[37] Mrs Farmer gave evidence. She was careful and objective, and impressed me as a credible and reliable witness. She said that she was under the impression that Bonnytoun was the landlord of the Premises. The information that Bonnytoun was the landlord, and that Colliers were its agents, must have been given to her by the defenders' finance department. As explained earlier, that department received and processed the rent invoices issued by Colliers and their predecessors, which bore to be issued "as agents on behalf of Bonnytoun Estates Ltd". According to Mr Day's evidence, he also was under the impression that Bonnytoun was the landlord. He thought that he had probably been told that by Mrs Farmer.
[38] On
"
SCOTTISH
Mrs Farmer requested that any response be sent to Mr Scott McCrindle, a colleague of Mr Limb, at James Barr. Miss Forrester forwarded the letter to Mr Cairns.
[39] On
"Scott Cairns, Chairman
Bonnytoun Estates Limited"
followed by the PO Box address in Linlithgow. Mr Cairns said in evidence that that signature was appended automatically to all e-mails which he sent. He accepted that it would have been reasonable to infer that in making the proposal he was acting as chairman of Bonnytoun.
[40] On
"Attach BEL's [Bonnytoun Estates Ltd's] proposals to SE".
The proposals were also sent to Mr McCrindle by fax, the cover sheet bearing the name "Bonnytoun Estates" and the address of the PO Box in Linlithgow. The proposals themselves were set out in a letter written on Bonnytoun's headed notepaper, with the same PO Box address, and was signed by Mr Cairns. The letter was addressed to Mr McCrindle, and stated:
"I write to confirm that Bonnytoun Estates Limited ('BEL'), through its subsidiary Ben Cleuch Estates Ltd ('BCEL') the Landlord, is prepared to make the following proposals to your clients Scottish Enterprise ('SE'). These proposals have been approved by the Board of BEL.
SE hold the property from BCEL on a full repairing and insuring lease until 2 February 2016 at a current rent of г210,700 per annum with a tenants break option ('TBO') at 2 February 2006 on giving a minimum of 12 months notice. There are further rent reviews at 2 February in 2006 and 2011.
|
A |
Proposal |
In return for SE removing the TBO from the lease BCEL will make a payment of г105,350 (One hundred and five thousand, three hundred and fifty pounds ) to SE. |
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Or |
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B |
Proposal |
In return for SE removing the TBO from the lease,
extending the lease to expire at |
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Other conditions |
Common to both A or B above |
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1. |
Schedule of Dilapidations |
BCEL undertake not to serve a Schedule of Dilapidations on
SE until after |
......
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2 |
Suspensive Conditions |
Conclusion of missives by no later than |
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3 |
Timescale for Response |
These proposals remain open for a response until close of
business on |
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4. |
Payment Date |
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5. |
Legal Representation |
Bonnytoun Estates Limited will
be represented by McGrigor Donald (Russell Munro),
Princes Exchange, |
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6. |
Funding |
Bonnytoun Estates Limited is a Joint Venture involving Scott Cairns and Bank of Scotland which has г40 million of funding of which г25 million is already committed. Funding for this proposal is immediately available from existing cash resources. Please also see attached press release and June 2003 update on BEL. |
I look forward to hearing whether either of the foregoing proposals are acceptable to SE, whereupon solicitors can be instructed to formalise matters.
The terms of this letter are not to have any contractual effect, nor are they to impose or create any legally binding obligation or liability".
Enclosed with the letter was a
press release issued by the board of Bonnytoun dated
[41] Mr Cairns maintained in evidence that the proposals contained in the letter were being made by Ben Cleuch: it was Ben Cleuch that was undertaking to make the payments, and undertaking not to serve a schedule of dilapidations. Bonnytoun was merely providing the necessary funds. If the proposals had been accepted, and a contract entered into, that contract would have been made between the defenders and Ben Cleuch. Although the letter appears to me to be less than clear as to the identity of the company making the offer, I note that it was not intended to have any contractual effect, as appears from the concluding paragraphs.
[42] So far as the identity of the landlord is concerned, the first paragraph of the letter referred to Ben Cleuch as the landlord, and the second paragraph said in terms:
"SE hold the property from BCEL on a full repairing and insuring lease ...".
Mr Cairns said in evidence that he thought at the time that that set out the position clearly. He assumed that the proposal would find its way to the personnel within the defenders' organisation who would have to make a decision on the break notice. I note that it is apparent from the letter that Mr Cairns understood that Mr McCrindle was acting on behalf of the defenders, and that the proposals were expressed as being made to the defenders.
[43] The proposals were forwarded by Mr McCrindle
to Mr Day of SET by an e-mail on
[44] In evidence, Mr Day, Mrs Farmer and Mr Limb were all asked
about their consideration of the proposals, in particular because the letter of
23 June 2003 was the only document issued on behalf of Bonnytoun
or Ben Cleuch to anyone concerned with the
defenders, prior to the emergence of the present dispute, which stated that
Ben Cleuch was the landlord of the
Premises. Mr Day, Mrs Farmer
and Mr Limb all appeared to me to be credible and reliable witnesses. Mr Day said in evidence that his
interest in the letter of
"Bonnytoun Estates Limited ('BEL'), through its subsidiary Ben Cleuch Estates Ltd ('BCEL') the landlord ....."
The focus of his attention was the figures, because that was the only information relevant to the report which he was preparing. In cross-examination, he accepted that he should have noticed that Ben Cleuch was said to be the landlord, and should have remembered that subsequently when the break notice was served.
[45] Mrs Farmer's evidence was that she was interested in the financial proposals, for the purpose of calculating comparative costs. She did not notice the reference to Ben Cleuch. She accepted that the statement
"SE hold the property from BCEL"
was clear. In practice, however, she continued to think of Bonnytoun as the landlord.
[46] Mr Limb's evidence was to similar effect. The important information in the letter, at the time, concerned the incentives which Bonnytoun was offering to the defenders in return for their remaining in the Premises. He did not pay particular attention to the reference to Ben Cleuch, or to the letters "BCEL".
[47] The question whether the break option should be exercised and
SET should relocate to new offices was considered by the board of SET on
[48] As I have explained, the letter of
[49] As he had not received a response to his letter of
[50] As explained earlier, Gooch Webster (and subsequently Colliers) had for many years acted on behalf of the defenders in collecting rental and other payments due in respect of properties of which the defenders were the landlords. Latterly, the Colliers staff involved (Miss Capanni and Miss McGowan) worked in the defenders' head office. In about September 2003 the defenders decided to instruct Colliers also to act on their behalf in paying rent and other sums due in respect of properties occupied by local enterprise companies (such as SET), of which the defenders were the tenants. As explained earlier, such payments had previously been dealt with by the defenders' finance department.
[51] This matter was discussed at a meeting held on
[52] At the meeting, Mr McPhail informed Mr Dunion that, so far as the Premises were concerned, Colliers already acted as managing agents for Bonnytoun, which (he said) was the landlord of the Premises. Mr McPhail asked if that gave rise to any difficulty. Mr Dunion confirmed that the defenders were content for Colliers also to act on their behalf in making payments due in respect of the Premises. It was agreed that Mr Boxall would be responsible for approving invoices for payment.
[53] Following the meeting, Miss McGowan notified the landlords of the properties in question of the change in arrangements. She obtained the necessary information from the copy invoices which Mr Dunion had provided at the meeting. In relation to the Premises, she notified Colliers as the managing agents: specifically, she notified Brenda Mosson, the accounts manager at Colliers who dealt with the issuing of invoices in respect of the Premises.
[54] Miss McGowan also updated the information in Skyline concerning the properties in question, as agreed at the meeting. In relation to the Premises, the information on Skyline, which showed the landlord as Pacific Shelf 1145 Ltd, was amended to show the landlord as Bonnytoun. In consequence, the monthly management reports which were thereafter prepared by the Colliers staff, using Skyline, and submitted to the defenders, stated that the landlord of the Premises was Bonnytoun. The member of the defenders' staff who dealt with the management reports was Mr Fish. The information which Miss McGowan entered into Skyline was taken from forms which were provided to her. She said in evidence that the forms were completed by "the surveyors" (it was not clear whether she meant the defenders' surveyors or Colliers') and "signed off" by the defenders. Mr Dunion said that a schedule of properties, with information as to the landlords, was provided by Mrs Meechan of the defenders' finance department. Whoever prepared the forms, the source of the information that Bonnytoun was the landlord would appear to have been either the invoices which Colliers sent to the defenders, or the management system which Colliers used to prepare those invoices; and the most likely basis on which the defenders would have "signed off" forms containing information to that effect would appear to be that it was consistent with the rent invoices.
[55] Following the change in arrangements, Mr McPhail's monthly management meetings with Mr Fish covered the properties of which the defenders were the tenant, as well as the properties of which they were the landlord. Efforts were made to avoid involving Mr McPhail in discussions relating to the Premises, since his firm also acted for the landlord.
[56] The first invoice dealt with by Colliers under the new arrangements had been prepared before the arrangements were entered into. As before, it stated, below Colliers' name:
"Acting as Agents for Bonnytoun Estates Ltd".
Below those words, it stated:
"Issued on behalf of the landlord named above".
Under the word "Tenant" appeared the defenders' name and address. Under the word "Property" appeared, as previously, the words:
"Whole Property
Ben Cleuch Estates"
followed by the address of the Premises. The next invoice was in the same form.
[57] These invoices were issued by Brenda Mosson and were thereafter processed on behalf of the defenders by other staff of Colliers. They went first to Mr Boxall for approval, then to Miss McGowan for the issuing of a cheque. Miss McGowan explained in her evidence that, so far as the Premises were concerned, she understood that the landlord was Bonnytoun. She never enquired why the words "Ben Cleuch Estates" appeared on the invoices in the description of the property. The cheques issued by Miss McGowan went to Mr Boxall or Mr McPhail for signing. Those relating to the Premises were then passed to Brenda Mosson for banking. The Colliers staff working for the defenders periodically requested money from them. Mr Fish and Mr Dunion explained this aspect of the procedure in greater detail. Colliers drew down a "float" from the defenders periodically, covering the amount which they anticipated having to spend. Periodically they had to account for the money they had in fact spent. Details were provided of each property in question, the landlord and the amount. The landlord of the Premises was stated to be Bonnytoun. The rent invoices were submitted to the defenders' finance department to vouch that the expenditure was in order.
[58] Mr Dunion also explained in evidence
the position in relation to the insurance of the Premises. Clause TENTH of the lease required that the
Premises be insured by the landlord in the name of the landlord, and that the
policy be exhibited to the tenant on request.
According to Mr Dunion's evidence, which
I have no reason to doubt, the Premises were insured in the name of Bonnytoun, and there was no note of any additional
interest. Mr Dunion
also said that, in view of the terms of the invoices issued by Gooch Webster
and Colliers, the statement made by Mr McPhail
at the meeting held on
[59] By
"Now that you are committed to the new Lease, it might be sensible to issue the notice sooner rather than later, to avoid the risk of it being overlooked".
Mr Gunn replied on
[60] During October 2003 Mrs Farmer went on maternity leave. Her responsibilities in relation to the
relocation were taken over by another of SET's
chartered surveyors, Mr Douglas Davidson.
On
"As Scott
In relation to the last point, Mr Day said in evidence that he called Mr Cairns as a courtesy, since the lease for the new offices had been concluded. He told Mr Cairns that SET would be exercising the break option and vacating the property, but, as the local enterprise company, would be trying to find another occupier. He said that SET already knew of a tentative expression of interest in the building. Mr Cairns's evidence was slightly different: that Mr Day had told him that the defenders had concluded an agreement with the preferred bidder for the alternative site, and that it was likely that they would exercise the break option, but that they might have some other uses for the building. I accept Mr Day's evidence on this point: he appeared to me to be a reliable witness, and his recollection is consistent with the e-mail he sent at the time. At the same time, I accept that Mr Cairns's evidence reflected his recollection of what he had been told.
[61] On 15 January 2004, Charles Brown, an employee of SET who worked as a contracts manager in their projects team (a different department from Mrs Farmer and Mr Davidson), sent an e-mail to Mr Fish of the defenders, which was copied to Mr Day and Mr Davidson. It was in the following terms:
"Can you please confirm who the current landlords are for the existing SE Tayside offices. There seems to have been a number of changes over the period that we have been here and as you are aware, given our proposed relocation (albeit some two years away), we need to ensure that we hold accurate details on the landlords and their agents.
The immediate need however is to provide a contact for Dundee City Council who wish to undertake some essential maintenance works to adjacent property which will necessitate access and use of part of our car park, both of which will require landlord's consent.
The most recent correspondence held here would suggest that the property is now owned by Bonnytoun Estates Limited, through its subsidiary Ben Cleuch Estates Limited. I don't however have an address for this company nor details of their managing agents. Can you help?
I would be grateful if you could provide the information required as soon as possible".
Shortly after Mr Charles's e-mail had been sent to Mr Fish, Mr Fish forwarded it by e-mail to Miss McGowan, with the message:
"Can you confirm an address for our landlords? Am I write (sic) in saying that [Colliers] are the managing agents? If yes who is the contact?".
[62] On
"Ian Boxall said that you are the contact at
CCRE for this property. I know that Bonnytoun Estates are the landlord. Would you be able to confirm their address
for John".
In evidence, Miss McGowan said that her statement that
Bonnytoun was the landlord was based on the sources
of information to that effect which she had already mentioned in her evidence
(namely, the rent invoices submitted by Colliers, and possibly also the forms
which she had used in updating Skyline).
A few minutes later Miss Forrester responded:
"All correspondence for the above should be addressed to Bonnytoun Estates, c/o Colliers CRE,
In relation to Miss Forrester's reference to "the
above", all the e-mails in this sequence bore a heading which identified the
subject as the Premises.
Miss Forrester's reply incorporated all the preceding e-mails in
the sequence, back to Mr Brown's original enquiry. After receiving Miss Forrester's reply,
Miss McGowan forwarded it to Mr Fish, with the message:
"Confirmation of correspondence address
below. Ann Forrester is the contact at [Colliers]".
[63] In her
evidence, Miss Forrester denied that she had seen Mr Brown's original
enquiry. She initially suggested that it
might not have been sent to her with Miss McGowan's e-mail of
[64] In
about June 2004 the Colliers staff who had until then been located in the
defenders' offices returned to work in Colliers' own offices. The rent invoice in respect of the Premises
for the quarter starting in May 2004 was accordingly addressed to the
"Tenant" in the following terms:
"Scottish
FAO Ian Boxall
Colliers CRE"
followed by Colliers' address. It was otherwise in the same form as the
earlier invoices.
[65] SET were aware that, on the termination of the lease, an obligation
would arise in respect of dilapidations.
On about 30 June 2004 James Barr was instructed by SET to assist in
establishing the extent of the works required and in having them carried out in
time. The instructions were dealt with
by Mr Murray Watson.
[66] On
"As you know
Can you advise who is the current landlord of these
offices and contact details so we may advise James Barr who are acting
for us on this".
On
"The landlords are Bonnytoun Estates
Ltd. Their managing agents are Colliers
CRE. The contact at Colliers is Anne
Forrester".
That information was passed on to Mr Watson.
[67] In
evidence, Mr Fish said that, in stating that the landlord was Bonnytoun, he relied on the e-mails which passed between
the defenders and Colliers on 15 and
[68] At
about this time Colliers altered slightly the format of the rent invoices
issued in respect of the Premises. They
continued to state, below the name Colliers, the words:
"Acting as
agents for Bonnytoun Estates Ltd".
The words "Issued on behalf of the landlord named
above" did not appear. There was on the
other hand a notice in respect of the Defective Premises Act 1972, which
referred to Colliers as "Managing Agents on behalf of your Landlords".
[69] On
"43, 45 & 47
LANDLORDS - BONNYTOUN ESTATES
TENANTS - SCOTTISH
Consent for the works in question was not required
under the lease, but was requested because the works were of a major nature.
[70] In
evidence, Miss Forrester said that she did not regard the reference to Bonnytoun in the heading of the letter as being
significant. The precise identity of the
landlord was not an important matter in this context. Mr Watson had not stated accurately the
identity of either the tenant or the landlord.
On receipt of the letter, she copied it to Mr Cairns and obtained
his instructions. He was content for the
tenant to proceed. Mr Cairns, in
his evidence, said that the error in the heading of the letter, as to the
identity of the landlord, did not strike him at the time. I accept that evidence. He regarded himself as giving consent, as Lochcote, on behalf of Ben Cleuch.
[71] On
"I refer to our conversation of today and can confirm that we are happy
for you to proceed with the proposed works as detailed on your letter of
[72] On
"You will recall that we corresponded last year about the timing of the
break notice to be served in respect of SE's existing offices at
For the record, notice should be served prior to
If you wish us to deal with the notice, we will need confirmation of
the identity and address of the landlord - is it still Faraday Properties
Limited".
[73] Following
the receipt of that letter, Mr Davidson sent an e-mail to Mr Gunn on
"To give you an update I would advise that being aware we shall face
dilapidations costs on removal from 45 N Lindsay St we have developed a removal
strategy (along with advisors Barrs Surveyor to
minimise delap costs which will require to be agreed
with the Landlord. The process is as
follows:
1. Request Landlords
consent to undertake repair works.
Landlords agents (Colliers Gre - contact Ann
Forrester) has granted consent.
1 Undertaking the early
repair works now....... These works will be
completed end Nov 2004.
2 Following this Barrs will contact Landlords agent to discuss the delaps requirement formally which will involve joint
inspection (the building having the benefit of the early repairs)
3 Scheduled time for
serving of Notice early January 2005 (prior to the required notice date of
As regards the name of the landlord the last listed name we have from
John Fish at SE (advised 23rd July 2004) was Bonnytoun
Estates Ltd and their management agents were Colliers CRE (contact Ann Forester
.....)
Can you schedule in the serving of the Notice for the second week in
January 2005 and liaise with SE prior to serving of the Notice".
On receiving the e-mail, Mr Gunn printed it and
wrote on the hard copy:
"Landlord Bonnytoun Estates Ltd
Address ?
Address of Registered Office for service of Notice ?"
So far as the name of the landlord was concerned, I
note that Mr Davidson was merely passing on to Mr Gunn the
information he had been given by a chartered surveyor, Mr Fish, in an e-mail
several months earlier.
[74] Mr Davidson's
e-mail was copied to Mr Day. In
relation to the statement in the penultimate paragraph concerning the name of
the landlord, Mr Day said that it did not occur to him at the time that
that was different from what had been said in Mr Cairns's
letter of
[75] On
"[A]s you may know, SE require to service
Notice to Quit on their Landlords before
In evidence, Mr Fish said that he had no reason to
query the reference to Bonnytoun as the owners: it was the name he saw every month on the
management reports.
[76] On
"Do you have details on the registered office for the owners of the
above property, Bonnytoun Estates Ltd?".
Miss McGowan, who by this time had returned to working
in Colliers' own offices (but continued to work on the defenders' behalf),
spoke to Brenda Mosson, then
replied to Mr Fish the same day:
"Brenda has provided me with the address for Bonnytoun
Estates, as below:
Scott Cairns, Esq.,
Bonnytoun Estates Ltd
Linlithgow
EH49 7JZ
Hope this helps."
Miss McGowan was uncertain, in
her evidence, whether she had forwarded Mr Fish's
e-mail to Brenda Mosson. Mr Cairns
confirmed in evidence that the address provided by Brenda Mosson
was the correspondence address of Bonnytoun, and that
a letter sent to that address would reach his home address the following day.
[77] Mr Fish shortly afterwards forwarded
this sequence of e-mails to Mr Gunn, with the
covering message "For info".
[78] On
"I thank you for your
letter of
1. Bonnytoun
Estates Limited,
WH49 7JZ. For the
attention of Scott Cairns
2. Colliers CRE, Surveyors,
As is evident from the terms
of the letter, Shepherd and Wedderburn were not
requested to make any enquiries into the identities or addresses of the persons
on whom the notice should be served. Mr Gunn himself had undertaken no enquiries into the
identity of the landlord: he appears to
have taken the name of Bonnytoun from Mr Davidson's e-mail of
[79] Mr Davidson had indicated in his
e-mail of
"[F]urther to my letter to you dated 29th November,
please see the attached e-mail from Douglas Davidson confirming that the Notice
to Quit should not be served on the Landlords before
[80] On
"43, 45 & 47
Landlords - Bonnytoun Estates
Tenants - Scottish
....
SE fully intend to serve a Notice to Quit to Bonnytoun
Estates and Colliers CRE in advance of the required date in February 2005. The lease expires in February 2006 and
SE fully acknowledge their dilapidations liability and
intend to tender the works required early next year and action these during the
best available time window to SE.
......
I am keen now to progress to discuss the potential dilapidations requirements
.....
Ideally I would wish
to meet with one of your building surveyors on site in order to discuss the
generalities of our client's liability".
Like Mr Watson's
earlier letter of
"the Notice requires to be served on the
Landlords by
This statement puzzled
Shepherd and Wedderburn: the deadline for service was
[81] Miss Forrester said in evidence that the reference in Mr Watson's letter to Bonnytoun
Estates, as the company on which the defenders intended to serve the break
notice, did not strike her as significant at the time. She said that she sent a copy of the letter
to Mr Cairns by fax.
She did not remember whether she was instructed to reply to it.
[82] Mr Cairns said in evidence that
the error in the letter as to the name of the landlord was not something which
particularly concerned him at the time.
He did not think it necessary to correct it. Anyone wanting to serve a break notice would
have to go back to the source documents.
He discussed the matter raised in the letter with Miss Forrester,
and decided that they would leave it until after New Year.
[83] On
[84] On the same date, Shepherd and Wedderburn
checked the address of Bonnytoun's registered office
by carrying out an on-line search on the Companies House website. The search results contained the information
that Bonnytoun had previously been named Pacific
Shelf 977 Ltd. That information was not
of any significance to Shepherd and Wedderburn: they had no knowledge of the letter of
[85] Letters, each enclosing two copies of the break notice, were
sent by Shepherd and Wedderburn on
"Scottish
We act on behalf of
Scottish Enterprise and have been instructed to serve notice exercising the
break option relative to the lease of the above premises, with effect from
The enclosed notices were
similarly addressed, and stated:
"
We refer to the Lease
of the Property between Faraday Properties Limited and Scottish Development
Agency dated 26th February and 7th March and registered
in the Books of Council and Session on 18th December 1991 ('the
Lease') in respect of which you are the current landlords, and our clients,
Scottish Enterprise established under the Enterprise and New Towns (Scotland)
Act 1990 and having their principal place of business at 150 Broomielaw, Atlantic Quay, Glasgow, G2 8LU ('SE') are the
current tenants.
In terms of the
Lease, and on behalf of SE, we hereby give notice in terms of Clause FOURTH (B)
of the Lease terminating the Lease with effect from
Please acknowledge
receipt of this Notice by signing the duplicate of this letter and returning it
to us".
At the end of each notice was
a docquet for signature, with the words:
"I/we hereby
acknowledge receipt of the Notice of which the foregoing is a copy.
........................................
Director/Company
Secretary
Of Bonnytoun Estates Limited"
[86] A second letter was addressed to Bonnytoun
at the address which Mr Gunn had given Shepherd
and Wedderburn in his letter of
[87] A copy of each letter, and of each notice, was also sent to
Colliers, addressed to Miss Forrester.
Copies were also sent to Mr Gunn of the
defenders, and to Mr Day of SET.
[88] Miss Forrester said in evidence that she did not receive the
copy notices sent to Colliers. She said
that the notices had been received by Colliers at the offices where she worked,
but did not come to her attention. She
knew nothing about them until after
[89] Mr Cairns said in evidence that he saw a copy of the letter and
notice sent to Bonnytoun's registered office (which
was the office of their solicitors, McGrigors)
shortly after
[90] Mr Cairns did not sign the docquet on the notices or return them to Shepherd and Wedderburn. He said in evidence that he did so because, having consulted Ben Cleuch's solicitors, he had been advised that the notices were invalid, since they were addressed to the wrong company. He did not think it would be correct to sign a notice in which Bonnytoun was said to be the landlord. He accepted that the notices would have been valid if they had been addressed to Ben Cleuch rather than to Bonnytoun. He had not been misled by the notices as to what the defenders wanted to do. He was aware of the defenders' intention to exercise the break option. He accepted counsel's suggestion that he was founding on the narrowest of technicalities. His focus was on the interests of Ben Cleuch.
[91] Mr Cairns candidly accepted that the error in the notices was not pointed out to the defenders, or those acting on their behalf, until after the period for service of such a notice had expired, because Ben Cleuch wanted to take advantage of it. He said that Ben Cleuch and the defenders were in a commercial relationship. There was no obligation on the landlord to point out the tenant's mistake.
[92] Shepherd and Wedderburn received no response or acknowledgement following the service of the break notices. After about two weeks had passed (i.e. on about 20 January, or perhaps some days later), Shepherd and Wedderburn sent reminders. They again received no response.
[93] In the meantime, Miss Forrester had not responded to
Mr Watson's letter of 22 December, concerning the dilapidations. On
"I have a meeting with my client next week and should receive instructions then. I will let you know who will be dealing with this".
[94] Mr Cairns had a meeting with Miss Forrester in the last week of January 2005. At the time of the meeting, he was still awaiting final advice from McGrigors as to the validity of the notices. He told Miss Forrester that he might well instruct a local manager to deal with the dilapidations. In evidence, he said that he felt by then that there might well be a conflict of interests emerging for Colliers.
[95] Mr Watson did not hear from Miss Forrester, and left a
telephone message for her. She called
him back on
"I have now spoken with Ann Forrester at Colliers.
They still do not have instructions from the landlords. She had the feeling last week that the landlords may well instruct a local surveyor for the dilaps exercise, however, as soon as she knows she will inform me who their building surveyor will be if in fact Colliers are instructed".
[96] At some point during January 2005 - whether before or after the
service of the break notice is unclear on the evidence - the Colliers staff
working on the Bonnytoun portfolio issued to the
Colliers staff working on behalf of the defenders the rent invoice in respect
of the quarter starting on
"Acting as agents for: Bonnytoun Estates Ltd".
[97] On
[98] A search in the valuation roll would at all material times have shown that the Premises were entered in the roll as being owned by Pacific Shelf 1145 Ltd. A search in respect of the Land Register via the online service provided by the Keeper, Registers Direct, would have shown that the last application for registration was by Pacific Shelf 1145 Ltd, in respect of a disposition granted by Fieldmore Holdings Ltd, and a standard security in favour of Bank of Scotland.
[99] In evidence, Mr Gunn said that, prior to McGrigor's
letter of
[100] This evidence might be contrasted with
that of a number of other witnesses.
Mr Fish said that if there had been a change in the landlord, the
defenders would expect to receive formal notification. Such notifications were sent to the
defenders' legal department, and copied to Mr Fish's department (but not
to Mr Fish personally). I note that
that is what happened in relation to the letter of
[101] Miss Forrester said that she had never expected that the various communications between herself and the defenders, or their agents or contractors, referring to Bonnytoun, would be relied on for the purpose of serving formal notices. It had never been suggested to her that they would be relied on for that purpose. They formed part of general day-to-day correspondence. She would not rely on communications of that kind in order to get the details right in formal notices.
[102] Mr Cairns said that anyone diligently looking at this property would carry out a search at Companies House under the name Pacific Shelf 1145 Ltd, when it would become apparent that it had changed its name to Ben Cleuch. Anyone wanting to serve a formal notice would have to go back to the source documents.
The submissions for the defenders
[103] The principal submissions on behalf of the defenders can be summarised as follows.
[104] It was argued in the first place that
the lease had been validly terminated. This
argument was advanced on three bases. First,
the notice sent by Shepherd and Wedderburn, properly
construed, gave notice to Ben Cleuch that the
defenders had exercised their entitlement to terminate the lease in accordance
with clause FOURTH (B). The
lease merely required that the notice, where served by post, should be sent to
the landlord's registered office (or to another address notified for the
purpose). In the present case, the
notice had indeed been sent to the landlord's registered office. It had also been sent to the address notified
by Miss McGowan's e-mail to Mr Fish of
[105] Secondly, the notice was in any event sent to the registered office of Ben Cleuch and came into the hands of Mr Cairns in his capacity as Ben Cleuch's managing director and secretary. He understood that the defenders were giving notice that they were exercising the break option. He was not misled by the mistaken reference to Bonnytoun. He was the directing mind and will of Ben Cleuch. In the circumstances, the notice having been received by Mr Cairns, it was also received by Ben Cleuch. Reference was made in that regard to Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 A.C.500; El Ajon v Dollar Land Holdings plc [1994] 2 All.E.R.685 and Transco plc v HM Advocate 2004 J.C.29.
[106] Thirdly, the lease had in any event been validly terminated by serving the notice on Bonnytoun, since it was reasonable to infer from the evidence that Bonnytoun was Ben Cleuch's agent for all purposes relating to the Premises. Bonnytoun must have been acting as Ben Cleuch's agent in entering into management contracts with Lochcote and with Colliers in respect of properties which included the Premises; the proposals contained in the letter of 23 June 2003 had been made by Bonnytoun as agent for Ben Cleuch; Colliers regarded Bonnytoun as their client so far as the entire portfolio of properties, including the Premises, was concerned; and Lochcote issued instructions to Colliers, under its contract with Bonnytoun, in respect of the entire properties, including the Premises.
[107] It was argued in the second place that Ben Cleuch was in any event barred from denying that the break option had been validly exercised. This argument was advanced on four bases. First, it was argued that Colliers (and their predecessors, Gooch Webster), acting as agents on behalf of Ben Cleuch, had led the defenders to believe that Bonnytoun was the landlord. The defenders had relied upon that information to their prejudice. Ben Cleuch was therefore personally barred from asserting that the notice was invalid.
[108] Secondly, Ben Cleuch, by its agents Colliers (and Gooch Webster) had acquiesced in the defenders' treating Bonnytoun as the landlord of the Premises. Ben Cleuch was therefore barred by acquiescence from denying that the notice was properly served.
[109] Thirdly, Ben Cleuch, by its agents Colliers (and Gooch Webster) had engendered the defenders' belief that Bonnytoun was the landlord. The defenders having relied on that belief in the service of the notice, Ben Cleuch had waived the right to insist that the notice had not been properly served.
[110] Each of these arguments was based on actings (those of Colliers or Gooch Webster, in particular)
prior to the service of the notice: it
was made clear that no reliance was placed on the failure to respond to the
notice. The defenders had been misled as
to the identity of the landlord by the rent invoices, which implied that the
landlord was Bonnytoun; by the correspondence in March 2003 with
Networks, and in October and December 2004 with Mr Watson, in which the
landlord's consent was given to works proposed to be carried out on the
Premises, and which again implied that the landlord was Bonnytoun; by Mr McPhail's
statement at the meeting on 9 September 2003 that Bonnytoun
was the landlord; and by
Miss Forrester's e-mail of 19 January 2004, which (in its context) implied
that the landlord was Bonnytoun. Although Mr Cairns's
letter of
[111] I note that the defenders' submissions in relation to personal bar focussed on the actings of Mr Gunn: he was described as the employee of the defenders responsible for instructing the service of the break notice. So far as Mr Fish was concerned, the defenders' position was that he had no involvement in the steps taken by the defenders to serve a break notice.
[112] Fourthly, Mr Cairns having received the notice and become aware of its contents, as managing director of Ben Cleuch, Ben Cleuch was personally barred from insisting that the notice was not a valid notice which had been received by the landlord. In the event, this argument was not developed: insofar as I can understand it, it appears to be merely a different way of formulating the argument that Mr Cairns was the "directing mind and will" of Ben Cleuch, and that the fact of the notice coming to his attention was therefore sufficient.
[113] In support of these submissions, reference was made to Armia Ltd v Daejan Developments Ltd 1979 S.C.(H.L.)56 and to William Grant & Sons Ltd v Glen Catrine Bonded Warehouse Ltd 2001 S.C.901.
The submissions for the pursuers
[114] The principal submissions on behalf of the pursuers can be summarised as follows. In relation to the validity of the notice, clause FOURTH of the lease required that notice be given in writing to the landlord. That was an essential condition of the operation of the break clause. Under clause SEVENTEENTH, such notice, in the case of a company, must be left at the company's registered office, or sent there by post. The sending of a notice addressed to Bonnytoun did not meet the requirements of clause FOURTH. There was not merely a clerical error in the drafting of the notice: it was addressed to someone other than the landlord. The decision in Mannai Investment did not assist the defenders in this case. Mannai Investment affirmed that the conditions governing the giving of notice must be adhered to. It was concerned with a minor inaccuracy. Lay v Ackerman was concerned with a statutory requirement. Reference was also made to Capital Land Holdings Ltd v Secretary of State for the Environment 1997 S.C.109, Lemmerbell Ltd v Britannia LAS Direct Ltd [1999] L & TR 102 and Speedwell Estates Ltd v Dalziel [2001] EWCA Civ 1277, [2002] L & TR 12.
[115] If the contract required that notice be given to the landlord, it was not sufficient if the notice, albeit addressed to someone else, came to the attention of the landlord's director. The "controlling mind" test was not relevant in this context.
[116] There was no suggestion that the notice had been served on Bonnytoun as an agent, nor that Bonnytoun had authority as an agent to accept the service of such a notice; nor would service on an agent meet the requirements of the lease.
[117] In relation to issues of personal bar, the defenders' case in
their pleadings was that they had reasonably inferred that Pacific Shelf 1145
Ltd had changed its name to Bonnytoun. On the evidence, however, Mr Gunn did
not act on that basis. Mr Gunn did
not in any event act reasonably or justifiably.
He paid no regard to the letter of
[118] Mr Gunn was not in any event misled by the invoices, which he did
not see: most of the invoices simply
passed from one Colliers employee to another.
There was no evidence that any of the defenders' staff saw the letter to
Networks. The correspondence with Mr
Watson was not directed to the question of service of notices; and only the letter of
[119] So far as the pleadings were concerned, the defenders averred that they "reasonably inferred that Pacific Shelf 1145 Limited had by change of name become Bonnytoun Estates Limited". In response, the pursuers denied that averment, and averred that the correct identity of any company believed to have changed its name could be ascertained by an on-line or other check at Companies House. The cross-examination of Mr Gunn had been directed to the only issue raised in the pleadings.
[120] The defenders had failed to prove either that they had inferred that the landlord had changed its name, or that it was reasonable to draw such an inference, and to act upon it, without checking the records at Companies House. It was for the defenders to satisfy the court that Mr Gunn had acted reasonably. Reference was made to Style Financial Services Ltd v Bank of Scotland (No.2) 1998 S.L.T.851, Presslie v Cochrane McGregor Group Ltd 1996 S.C.289, James Howden & Co Ltd v Taylor Woodrow Property Co Ltd 1998 S.C.853, Moodiesburn House Hotel Ltd v Norwich Union Insurance Ltd 2002 S.L.T.1069 and Millar v Dickson [2001] UKPC D 4, 2002 S.C.(P.C.)30.
Discussion
1. Whether the break
option was validly exercised
[121] At first sight it may seem unreasonable to question whether the break option was validly exercised: the notice found its way to the landlord, and it must have been obvious to the landlord that the tenant was trying to give an effective notice under the lease. It is tempting therefore to view the tenant's mistake as to the identity of the landlord as a mere technicality. The difficulty in the way of adopting that approach is that it is inconsistent with the agreement of the parties as expressed in the lease.
[122] Clause FOURTH (B) confers on the tenant of the Premises an option unilaterally to determine the lease before the expiry of the term fixed by clause FOURTH (A). Under clause FOURTH (B)
"the Tenants shall be entitled at any time prior to [2 February 2005] to give to the Landlords at least one year's written notice of termination of this lease, such notice to take effect on [2 February 2006]".
The clause thus contains a number
of conditions or requirements: in
particular, notice must be given by the tenant; it must be given to the landlord; it must be given in writing; it must be given prior to
"the initial inquiry is whether the event, which under the unilateral contract gives rise to obligations on the part of the promisor, has occurred. To that inquiry the answer can only be a simple 'Yes' or 'No'. The event must be identified by its description in the unilateral contract; but if what has occurred does not comply with that description, there is an end of the matter. It is not for the court to ascribe any different consequences to non-compliance with one part of the description of the event than to any other part if the parties by their contract have not done so. See the cases about options ...."
Diplock LJ added that, while for simplicity he had spoken of unilateral contracts, the same analysis applied to unilateral obligations contained in a bilateral contract, as where a lease contained an option for renewal. In the United Scientific Holdings case, a break option was treated as being in pari casu. That approach was followed, in relation to break notices, in the leading case of Mannai Investment. Lord Hoffmann, for example, said at page 773:
"such notices, operating, as they do, unilaterally to alter the rights of the parties, must comply strictly with the terms of the lease".
[123] Following that approach, clause FOURTH (B) of the lease with which the present case is concerned draws no distinction between the various requirements which it prescribes: the fulfilment of each of them is equally essential. The clause must therefore be interpreted as requiring, as a condition precedent to the exercise of the break option, that the tenant give notice to the landlord.
[124] Clause SEVENTEENTH makes provision for the manner in which notice is to be given:
"Any notice or document required or permitted to be given or served under this lease may be given or served personally or by leaving the same or sending the same by first class recorded delivery post at or to the registered office of the party (where it is a company) for the time being, or (in the case of a firm or an individual) to its or his address as shown in the Preamble to this Lease, or at or to such other address as shall have been last notified to the other party for that purposes. Any notice or document given or served by post shall be deemed to have been duly given or served on the second business day after the letter containing the same was posted and in proving that any notice or document was so given or served it shall be necessary only to prove that the same was properly addressed and posted".
[125] This clause is not as clearly expressed as it might be. The provision for the giving of notice to a firm or an individual at the address shown in the Preamble is inept: the addresses in the Preamble are not those of any firm or individual, the parties to the lease being a company incorporated under the Companies Acts and a body corporate established by statute. The clause contains no provision which is clearly apt to regulate the giving of notice to the defenders: since they are not a company with a registered office, nor a firm or individual, the only phrase which might apply is that permitting notice to be given or served "at or to such other address as shall have been last notified"; but the word "other" might suggest, at first sight, that the latter phrase is intended to apply where there is, under the preceding provisions, some alternative address at which service could be effected. Those issues do not however require to be considered further in the present case. It was common ground, first, that the provisions of clause SEVENTEENTH were exhaustive (in other words, that "may" means "must": the approach which was also adopted, in the context of a similar provision, in Mannai Investment); and, secondly, that the only provisions in the first sentence of clause SEVENTEENTH which required to be considered for the purposes of the present case were, first, that permitting notice to be sent by post to a company's registered office, and possibly also, secondly, that permitting notice to be sent by post to such other address as shall have been last notified for that purpose.
[126] It is convenient to deal at this point with the defenders' submission that the effect of Miss McGowan's e-mail of 8 November 2004 was to notify to the defenders an alternative address to which notices might be sent, namely the PO Box address of Bonnytoun. As I understood the submission, the defenders were seeking to argue that the e-mail constituted the notification, on behalf of the landlord, of another address at which notices could be served, as envisaged by clause SEVENTEENTH. I am unable to accept that contention. On the evidence, Miss McGowan was acting at all material times as the agent of the defenders, not of the pursuers. Insofar as she was passing on what had been said to her by Miss Mosson, there is no evidence that Miss Mosson intended to communicate to the defenders an address for the giving of notice in terms of clause SEVENTEENTH: on the evidence, she appears to have been asked merely for an address for Bonnytoun. Most importantly, there is nothing in the e-mail itself which indicates that it is intended to notify the defenders, on behalf of the landlord, of an address for the giving of formal notices, as an alternative to the landlord's registered office. On the contrary: insofar as anything might be taken from the sequence of e-mails on that date which was provided to Mr Gunn, it would appear to contain information as to the registered office of Bonnytoun (something which Mr Gunn could have checked in a matter of seconds by an online search at Companies House, rather than relying on information obtained informally by one clerkess at Colliers from another).
[127] It was also argued that Miss Forrester's
e-mail to Miss McGowan on
"There is no doubt that even if
the act of an agent is not authorised, the principal may nonetheless incur
liability if he has acted in such a way as to be barred from maintaining that
the apparent or ostensible authority was not the actual authority (Gloag on Contract, Second Edition page 147). In English law the same result is arrived at
on the basis of the operation of an estoppel. In the leading case of Freeman & Lockyer v
'An "apparent" or "ostensible" authority, on the other hand, is a legal relationship between the principal and the contractor created by a representation, made by the principal to the contractor, intended to be and in fact acted upon by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the "apparent" authority, so as to render the principal liable to perform any obligations imposed upon him by such contract. To the relationship so created the agent is a stranger. He need not be (although he generally is) aware of the existence of the representation but he must not purpose to make the agreement as principal himself. The representation, when acted upon by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal from asserting that he is not bound by the contract. It is irrelevant whether the agent had actual authority to enter into the contract'.
While this statement of the law is directed to the situation [in] which a contract is made, there is no doubt that the same principle applies more generally to any situation [in] which it is claimed that the legal position of the principal has been affected by the conduct of the agent in his dealings with a third party. Accordingly, it applies when considering whether for the purposes of a provision such as the phrase in Clause 7 of the present lease [requiring notices to be served on the landlord at its registered office, unless the landlord requested that they be served on an agent] Mr Barlas [an agent of the landlord] falls to be treated as the [landlord]".
[128] Reading clauses FOURTH (B) and SEVENTEENTH together, it appears to me in the first place that nothing in clause SEVENTEENTH relaxes the condition in clause FOURTH (B) that notice must be given by the tenant to the landlord. Clause SEVENTEENTH then specifies the various means by which notice may be "given", the only one which is relevant for present purposes being "sending the same by first class recorded delivery post ... to the registered office of the party". The giving of notice by post involves addressing the letter or envelope containing the notice. In my opinion it is implicit that the letter or envelope must be addressed to the landlord. A number of considerations point towards that conclusion.
[129] First, it is common in practice for numerous companies to have their registered office at the same address, typically that of a professional adviser. In the present case, in particular, it is apparent that numerous companies have their registered office at the same address as the pursuers. In such a situation, if it were competent under the lease for the tenant to give notice by sending the notice to the registered office, addressed to a third party or not addressed to anyone at all, the landlord would have to have arrangements in place to receive and deal with such notices. I find it difficult to conceive of such arrangements, and impossible to believe that that could have been intended by the parties to the lease.
[130] Secondly, the second sentence of clause SEVENTEENTH, in making provision for the effect of service by post (namely, that any notice given or served by post shall be deemed to have been duly given or served two business days after posting), clearly envisages that the notice in question is correctly addressed: in order to prove that any notice was given or served by post, it is "necessary ....to prove that the same was properly addressed".
[131] Thirdly, simply construing the words of clause FOURTH (B) and SEVENTEENTH, a tenant could not in my opinion be said to give notice to his landlord by sending to the landlord's registered office a notice which was addressed to, and intended for, a third party.
[132] Reading clause SEVENTEENTH (so far as material) with clause FOURTH (B), therefore, the tenant is entitled to give notice to the landlord by sending the notice to the landlord's registered office (or to another address notified for the purpose: a possibility which I need not consider further, since in my opinion it does not arise on the evidence, for reasons which I have already explained), addressed to the landlord. If the tenant has not done that (or given notice by one of the other means permitted by clause SEVENTEENTH), then it has not fulfilled the condition on which alone it can put an end to the lease (cf. Hogg v Brooks (1885) 15 QBD 256).
[133] Insofar as the defenders' argument relied on the decision of the
House of Lords in Mannai Investment, I note in the first place that
the latter case was concerned with the contents of a notice rather than with
its service: the issue was whether the
words used in the notice conveyed the meaning which a valid break notice
required to convey, namely an intention to terminate the lease on a given date. It is apparent that an issue of that kind may
involve a question of construction; and,
in such a case, it may be that a notice which contains an error in its drafting
may nevertheless, when properly construed, convey the requisite meaning. In deciding that the construction of such a
notice had to be approached objectively, according to the meaning which would
be conveyed to a reasonable recipient with knowledge of the context, the House
of Lords applied to such notices the same principles of construction as apply
to contracts. The
present case, however, is not concerned with the construction of the contents
of a notice, but with the question whether the notice was served on the
landlord: more specifically, with the
question whether the notice was addressed to the landlord. I can accept that the latter question may in
some circumstances involve what might be described as an issue of
construction: if, for example, there had
been a mistake in the spelling of "Ben Cleuch Estates Ltd", a court might
conclude that the notice was nevertheless addressed to the landlord within the
meaning of clause SEVENTEENTH, provided it was clear that Ben Cleuch was the intended addressee: falsa demonstratio non nocet. In the present case, however, the notice was
not addressed to Ben Cleuch, but to a different company; and it was, moreover, intended to be given to
the latter company, and not to Ben Cleuch.
The defect in the notice is not capable of being cured by a technique of
interpretation. I note that in Mannai Investment Lord Hoffmann contrasted (at
page 776) a defect in the expression of the meaning which the notice
required to communicate, which would not be fatal if the requisite meaning
would nevertheless be clear to any reasonable recipient, with a failure to
comply with a condition of a different nature:
"If the clause had said that the notice had to be on blue paper, it
would have been no good serving a notice on pink paper, however clear it might
have been that the tenant wanted to terminate the lease. But the condition [in the case under
consideration] related solely to the meaning which the notice had to
communicate to the landlord..."
As that passage makes clear, the decision in Mannai Investment gives no support to the idea
that anything less than full compliance with the terms of a contractual break
clause will be sufficient to effect the break:
the decision was merely that, on the true construction of the break notice,
it communicated the information which the clause required, and therefore
complied with the contract. In the
present case, the failure to serve the notice on the landlord, when service on
the landlord was required, is as fatal to the effectiveness of the notice as
failure to serve it on blue paper would have been in Mannai Investment, if service on blue paper had been required.
[134] Of the
authorities which were founded on in relation to this branch of the defenders'
argument, Mannai Investment is distinguishable, on the
basis I have indicated: it does not
relax to any extent the principle that the conditions under which notices of this
kind may be served must be strictly observed.
That principle is well illustrated by the decision of the Inner House in
the
[135] The case of Lay v Ackerman also appears to me to be
distinguishable. As Neuberger LJ,
delivering the leading judgment, noted at paragraphs 26 and 27, the case
was concerned with the validity of a notice served by a landlord under a
statutory provision, where there was no prescribed form of notice and no
requirement that the landlord should be identified. The only relevant requirement was that the notice
must be served with the authority of the landlord. In those circumstances, a notice which was
served with the authority of the landlord was held to be effective
notwithstanding that it contained an erroneous statement as to the identity of
the landlord. I do not find that
decision of assistance in the circumstances of the present case. As Neuberger LJ observed (at
paragraph 56),
"the question of whether a particular notice
is valid depends on the contractual or statutory provision pursuant to which it
is served";
and the contractual provisions
in the present case bear no resemblance to the statutory provisions with which Lay v Ackerman was concerned.
[136] The
defenders' second argument, that since the notice came into the hands of
Mr Cairns, who was the "directing mind" of Ben Cleuch, it was therefore
served on Ben Cleuch, appears to me to be untenable. If I am correct in my opinion that the notice
had to be served on the landlord, and that it would not be enough that a notice
addressed to a third party found its way into the hands of the landlord, then
it would equally not be enough that such a notice found its way into the hands
of an individual who might, for other purposes (e.g. those of the criminal law),
be described as the "directing mind" of the landlord company.
[137] The
defenders' third argument was that, since notice was given to Bonnytoun, and it
was acting as agent for Ben Cleuch for all purposes relating to the Premises,
notice was therefore validly given. I
have come to the conclusion that this contention must be rejected for a number
of reasons. Clause FOURTH (B) requires
that notice be given to the landlord. If
no more were said, then it seems to me to be at least arguable that notice
might effectively be "given to the landlord" by giving it to the landlord's
agent, authorised for the purpose. It
also appears to me to be arguable that an inference might be drawn from the
evidence in the present case that Bonnytoun had
implied authority to accept service of notices on behalf of Ben Cleuch (although I would not wish to express a concluded
view on that point without a fuller citation of authority than I received in
parties' submissions). Clause
SEVENTEENTH however requires that, where notice is given by post, it must be
sent "to the registered office of the party... or... to such other address as shall
have been last notified to the other party for that purpose". In a case where notice is to be given to the
landlord, "the registered office of the party" must, in my view, be the
registered office of the landlord, rather than that of its agent: the agent is not party to the lease; and the only agents
contemplated by the lease itself have limited functions, as explained earlier,
which would not extend to the service or receipt of break notices. It is on the other hand arguable that the
words "such other address as should have been... notified... for the purposes" are
capable of including the address of an agent authorised to accept service of
such a notice, provided that that address has been notified to the tenant for
the purposes of clause SEVENTEENTH.
The principal difficulty with the argument for the defenders, however,
is that, even if it were inferred that Bonnytoun had
implied authority to accept service of a break notice as the landlord's agent,
there is no evidence that Bonnytoun's address was notified to the defenders for
that purpose, as required by clause SEVENTEENTH. I have explained earlier why Miss Forrester's
e-mail to Miss McGowan on
[138] For these reasons, I am satisfied that the break notice was
not validly served. This result may be thought to confer an adventitious bonus
on the pursuers, enabling them to take unmeritorious advantage of the
defenders' error when they realised perfectly well that the defenders intended
to exercise their entitlement under the break clause. This criticism however misses the point that
the parties have agreed, as it were, on the key which is to be capable of
turning the lock: if the tenant has not
used the right key, then the lock will not turn. The absence of confusion or prejudice on the
part of the landlord is irrelevant. If
the parties had intended that the break clause should require no more than that
the tenant should evince a clear intention to terminate the lease, which should
come to the attention of the landlord, then they could have said so in their
contract. They did not; and it is not for the court to
re-write their contract for them.
[139] In this
connection I would respectfully adopt certain observations which were made, in
a similar context, by the Lord Ordinary, Lord Penrose, in his Opinion in Capital Land (unreported, 16 May
1995):
"I consider that the general approach to construction in Lord Prosser's
opinion in Muir Construction Ltd v Hambly Ltd 1990 S.L.T. 830 is helpful. There can be little doubt on a reading of
that opinion that the Lord Ordinary was less than enthusiastic for the result
at which he felt compelled to arrive but at page 833 he makes observations
with which I find myself in agreement and which are important in this
case. He says:
'...I have no doubt that the contract must be construed in a commonsense
business way. I am not however satisfied
that there is anything contrary to commonsense, or anything inconsistent with a
business approach, in concluding that precise words in a carefully structured
provision are intended by the parties to have a precise effect in a carefully
structured procedure...'.
One might identify points at which the present deed lacks indicia of
precision in its construction and expression.
However that is of little significance in a context in which one is
dealing, clearly, with a formal document negotiated between parties with a view
to defining the respective rights and obligations towards each other in the
course of a significant relationship such as arises under a commercial
lease... Lord Prosser has in my opinion
correctly warned against excessive confidence that a judge's view or feeling as
to what might be sensible necessarily coincides with the views of those
actually involved in commercial contracts.
What is consistent with business requirements in a commercial context is
primarily a matter for business men."
Personal bar
[140] The remaining
question - which appears to me to be more difficult - is whether the pursuers
are nevertheless barred from disputing the effectiveness of the notice.
[141] The
classic formulation of a plea of personal bar is that of Lord Birkenhead LC
in Gatty v Maclaine 1921 S.C. (H..L.) 1 at
page 7:
"The learned counsel cited various authorities in which these doctrines
have been discussed, but the rule of estoppel or bar, as I have always
understood it, is capable of extremely simple statement. Where A has by his words or conduct justified
B in believing that a certain state of facts exists, and B has acted upon such
belief to his prejudice, A is not permitted to affirm against B that a
different state of facts existed at the same time. Whether one reads the case of Pickard v Sears (1837) 6 A&E 469, or the later classic authorities which
have illustrated this topic, one will not, I think, greatly vary or extend this
simple definition of the doctrine."
As was noted by Lord President Rodger in William Grant & Sons Ltd v Glen Catrine
Bonded Warehouse Ltd at page 914, the plea described by the Lord
Chancellor in that passage corresponds, in broad terms at least, to estoppel by
representation in English law.
[142] Considering
the evidence in the present case, the rent invoices sent by Colliers and their
predecessors to the defenders between October 2002, when Ben Cleuch acquired
the Premises, and February 2005, when the period for service of the notice
expired, contained an unambiguous representation that Bonnytoun was the
landlord: that was the clear implication
of the words "Acting as Agents for Bonnytoun Estates Ltd", particularly read in
conjunction with the words "Issued on behalf of the landlord above named" (in
the earlier invoices), or with the description of Colliers as "Managing Agents
on behalf of your Landlords" (in the later invoices). The fact that the words "Ben Cleuch Estates"
also appeared on the invoices, in the description of the property (and also,
initially, in the description of the tenant), does not appear to me to be
significant, since it did not prevent a reasonable inference being drawn from
the invoices that Bonnytoun was the landlord.
[143] In issuing the invoices, Colliers and their predecessors
were in my opinion acting as the agents (ultimately) of Ben Cleuch (as
Mr Cairns accepted in his evidence), albeit under contracts entered into
with Bonnytoun and with Lochcote (which in turn was acting under a contract
with Bonnytoun).
There is no clear evidence of Ben Cleuch's actual arrangements with
Bonnytoun: no minutes of board meetings,
for example, have been produced, and it is not apparent whether Ben Cleuch ever
formally appointed Bonnytoun as its agent.
An agency can however arise from the course of conduct by the principal
and the agent, as a matter of implied agreement, where each has conducted
itself towards the other in such a way that it is reasonable for the other to
infer from that conduct consent to the agency.
It appears to me that such an agency can be inferred from the circumstances
of the present case. Bonnytoun
contracted with Lochcote, and with Colliers and their predecessors, for the
provision of management services in relation to the Premises: Bonnytoun could
only be party to such arrangements, in relation to the Premises, as the agent
of Ben Cleuch. Without in any way
ignoring the different legal personalities of Ben Cleuch, Bonnytoun and
Lochcote, the only realistic conclusion that can be drawn from the evidence is
that Ben Cleuch was content to leave the day-to-day management of the Premises
in the hands of Bonnytoun;
and Bonnytoun, in turn, delegated the management of the Premises
to Lochcote and Colliers. The terms of
the invoices were known to Mr Cairns, and were not objected to. Given that he was in charge of the day-to-day
management of Ben Cleuch, Bonnytoun and Lochcote, Ben Cleuch is in my view
precluded from asserting that it has no responsibility for the representation
contained in the invoices.
[144] The representation in the invoices was acted on by the defenders,
and by the Colliers staff acting on their behalf, in a number of ways. It appears that the defenders' finance
department provided information as to the identity of the landlord to
Mrs Farmer and Mr Day of SET, in late 2002 or early 2003, on the basis
of the invoices which they processed.
The information that Bonnytoun was the landlord was entered into the
defenders' management system, Skyline, apparently on the basis either of the
invoices or of the management system used by Colliers to produce the invoices. The Skyline system was then used to generate
the management reports received by Mr Fish.
[145] The exchange of e-mails in January 2004 has to be seen
against the background of the belief engendered, directly or indirectly, by the
invoices. Mr Fish and
Miss McGowan were both already under the impression that Bonnytoun was the landlord; and the e-mail from
Miss Forrester appeared to be consistent with that belief. Mr Fish's e-mail of 23 July 2004 in
turn relied on the January 2004 e-mails, and on the monthly management reports
which he received from Colliers (and which themselves, as explained above,
appear to have been prepared in reliance on the invoices, or the related
management system, as a source of information as to the identity of the landlord).
[146] Mr Davidson's
e-mail to Mr Gunn of 4 November 2004 in turn referred to
Mr Fish's e-mail of 23 July 2004 as the source of information as to
the name of the landlord. When
Mr Gunn in turn e-mailed Mr Fish on
[147] The other communications founded on by the defenders appear
to me to be generally of less significance.
There is no evidence that the defenders saw the letter sent by
Miss Forrester to Networks in 2003.
Mr McPhail's statement at the meeting on 9 September 2003, as
to the identity of the landlord, was not made on behalf of Ben Cleuch or any of
its associated companies: he wished, on
behalf of his firm, to notify the defenders of a potential conflict of interest
relevant to the instructions which the defenders proposed to give to his
firm. The terms of the insurance policy in
respect of the Premises do not appear to have come to the attention of those
who were involved in the issue of the break notice. In relation to the remaining correspondence,
the most that can be said is that Colliers, sometimes with the knowledge of
Mr Cairns, failed to correct mistaken references to Bonnytoun
as the landlord, in contexts where the precise identity of the landlord was not
important, or at least did not appear to be important, and was therefore not
the subject of attention.
[148] It remains to consider whether the consequences of the
representation contained, primarily, in the invoices are such as to bar Ben
Cleuch from denying that service of a notice on Bonnytoun was service on the
landlord. It is clear from the
authorities that the fact that a representation has been made, and that the
representee has acted in reliance on the representation, does not necessarily
give rise to personal bar. Lord
Birkenhead LC, in the dictum from Gatty v
Maclaine quoted above, required that
"A has by his words or conduct justified
B in believing that a certain state of facts exists, and B has acted upon such
belief to his prejudice" (emphasis added).
The Lord Chancellor was summarising the effect of
earlier authorities, including in particular Pickard v Sears, where it
was said by Denman CJ at page 474:
"The rule of law is clear that, where one by his words or conduct
wilfully causes another to believe the existence of a certain state of things,
and induces him to act on that belief, so as to alter his own previous
position, the former is concluded from averring against the latter a different
state of things as existing at the same time."
The term "wilfully" had been explained in the later
judgments, such as that of Parke B in Freeman
v Cooke (1848) 2 Ex 654 at page
663:
"By the term 'wilfully', however, in that rule, one must understand, if
not that the party represents that to be true which he knows to be untrue, at
least that he means his
representation to be acted upon and that it is acted upon accordingly; and if, whatever a man's real intention may
be, he so conducts himself that a reasonable man would take the representation
to be true and believe that it was meant that he should act upon it and did act
upon it as true, the party making the representation would be equally precluded
from contesting its truth" (emphasis in original).
[149] The test
of actual or presumed intention is repeated in numerous later authorities cited
in Rankine on Personal Bar at pages 2 to 4, and in
more modern authorities, such as Sidney
Bolsom Investment Trust Ltd v E
Karmios & Co (London) Ltd [1956] 1 Q.B. 529 at pages 540-541 per Denning LJ:
"in order to work as an estoppel, the
representation must be clear and unequivocal, it must be intended to be acted
on, and in fact acted on. And when I say
it must be 'intended to be acted upon', I would add that a man must be taken to
intend what a reasonable person would understand him to intend. In short, the representation must be made in
such circumstances as to convey an invitation to act on it."
Although these various formulations differ in the
precise language used, the central idea is the same. Without intending to add another formulation,
that central idea might be said to be that, absent an actual intention to
induce reliance, the language or conduct of the representor must have been such
as to induce a reasonable person in the circumstances of the particular case to
act as the representee acted.
[150] In the present case, there is no suggestion that Colliers or
their principals intended that the representation in the invoices (or in any of
the communications founded on), that Bonnytoun was the landlord, should be
acted on by the defenders in deciding on whom a break notice should be
served. The question is therefore
whether the representation was such as to induce a reasonable person, in the
circumstances of the defenders, to act as the defenders did.
[151] In my judgment that question must be answered in the
negative. It appears to me, for a number
of reasons, that a reasonable person in the position
of the defenders, in the circumstances of the present case, would not have been
expected to rely on the invoices and other communications in deciding on whom
the notice should be served.
[152] The service of the break notice was, as was to be expected,
the responsibility of a solicitor, Mr Gunn. It was plainly an important matter: the purpose of the notice was to terminate a
lease which would otherwise continue for a further ten years at an annual rent
of at least г210,700. Mr Gunn
however took little care, as it seems to me, to ensure that the notice was
served correctly. He did not check the
files of his department, which contained a formal notification, received and
acknowledged by him slightly more than two years earlier, that the landlord was
Pacific Shelf 1145 Ltd. As he said in
evidence, that did not enter his head.
He took the name of the landlord from an e-mail sent to him by
Mr Davidson, a surveyor employed by SET, which stated that SET had been
given that name by another surveyor several months earlier. He did not check the matter any further. Similarly, it did not apparently occur to him
to check the registered office of Bonnytoun (on the assumption that Bonnytoun
was the landlord): he asked a surveyor,
Mr Fish, for that information and then took at face value the address
provided to Mr Fish by Miss McGowan, a clerkess at Colliers. The latter error was corrected by Shepherd
and Wedderburn, but they had no instructions to check whether the name they had
been given for the landlord was also erroneous.
[153] One
difficulty for the defenders, in this situation, is that Mr Gunn was not a
direct representee of the representation as to the identity of the landlord
contained in the invoices and other documents:
it came to his notice only in the sense that he was given information by
Mr Davidson of SET which was ultimately derived from the invoices. That is a point which might perhaps be
addressed in more than one way; but the different approaches which
might be adopted all, it seems to me, lead to the same result. The approach which appears to me to be
correct in principle is to view the representee as the defenders, rather than
their individual employees. A
representee can of course receive a representation via an agent, but must then,
if he is to establish a bar against the representor, show that he was, himself or via his agent, actually or presumptively
intended to act on it as he did. In its
application to the defenders (who, as a body corporate, can only receive
representations, and can only act on them, through the agency of their
employees or other agents), in the circumstances of the present case, that
means that, in order to establish their plea of personal bar, they have to
establish in the first place that the representation as to the identity of the
landlord which was made to them via various employees and agents was intended
(actually or presumptively) to come to Mr Gunn's notice, or at least to
the notice of the person or persons within the defenders' organisation who were
responsible for the service of the break notice. Such an intention might be inferred if it was
reasonably to be expected that the representation would come to Mr Gunn's
notice: if, for example, that was
something which would happen in the ordinary course of business. In addition, the defenders have to establish
that it was reasonable for Mr Gunn to rely on the representation (as
indirectly communicated to him) in deciding on whom the break notice should be
served; or, adopting the language used by
Parke B in Freeman
v Cooke, that Ben Cleuch and those acting on its behalf had so conducted
themselves that a reasonable man in Mr Gunn's position, in deciding on
whom to serve the break notice, would take the representation to be true,
believe that it was meant that he should act upon it, and proceed to act upon
it as true. In considering the latter points, Mr Gunn's access to the
notice in his files (that Pacific Shelf 1145 Ltd had become the landlord), his
failure to check his files, and his decision to rely instead on information
from surveyors and clerkesses, are relevant factors.
[154] In
relation to these matters, it seems to me that it was not reasonably to be
expected that Mr Gunn would disregard the records kept in his files, and
in particular would fail to check the last notification he had received of a
change of landlord. If he had checked,
he would have discovered the notice informing him that Pacific Shelf 1145 Ltd
had become the landlords;
and, if the break notice had been addressed to a company of that
name, it would have been difficult for Ben Cleuch to contest
its validity, given their failure to inform the defenders of their change of
name. If Mr Gunn had checked his
files and discovered the notice, and if the name of Bonnytoun had also been
given to him by SET, he could then have considered whether Pacific Shelf 1145
Ltd had changed its name to Bonnytoun (something which could be readily checked
by a search of the records at Companies House relating to either company) or
whether Pacific Shelf 1145 Ltd had disposed of its interest to Bonnytoun. The defenders' case on their pleadings,
indeed, is that they were misled into believing that Pacific Shelf 1145 Ltd had
changed its name to Bonnytoun; but that contention was completely refuted
by Mr Gunn's evidence. He did not
give any thought whatever to the question as to how Bonnytoun
had come to be the landlord. That Mr
Gunn's behaviour was not reasonably to be expected by Ben Cleuch and its agents
is consistent with the evidence of Mr Fish that, if there had been a
change in the landlord, he would have expected Mr Gunn's department to
have received formal notification; with
the evidence of Miss Forrester that she would not rely on informal
communications as a source of information for the purpose of serving formal
notices; and with the evidence of
Mr Cairns that he would have expected anyone wanting to serve a formal
notice to go to primary sources such as the records at Companies House.
[155] In reaching this conclusion, I do not attach particular
weight to the letter of
[156] The
difficulties with the defenders' plea of personal bar apply equally to the
related plea of acquiescence, which is similarly based on a representation
(implied, in this case) which induces a reasonable belief on which the
representee then relies (Cairncross v
Lorimer (1860) 3 Macq 827 at page 830
per Lord Campbell LC; see also William
Grant & Sons Ltd v Glen Catrine Bonded Warehouse Ltd at page 922 per Lord President Rodger, and Ruddy v PF (Perth) [2006] UK PC D 2 at para.7 per Lord Hope of Craighead). That
plea appears to me to be in any event inept:
there is no question in the present case of any prior breach of the
lease, concerning the identity of the landlord, to which Ben Cleuch had
impliedly consented.
[157] So far
as waiver is concerned, that question depends on whether Ben Cleuch is to be
taken as having abandoned its right to insist upon the defenders' complying
with the formalities of clause SEVENTEENTH of the lease as to the service of
the notice at its registered office; and whether the defenders acted on the
basis that that right had been abandoned (Armia
Ltd v Daejan Developments Ltd at
page 69 per Lord Fraser of
Tullybelton). In my view, neither Ben
Cleuch nor those acting on its behalf acted in such a way as to evince an
intention to abandon any right: in
particular, Colliers did not purport to innovate on the requirements of clause SEVENTEENTH. Moreover, this is not a case in which the
defenders acted in reliance on any such abandonment: they served the notice at what they thought
was the registered office of their landlord, in what they believed to be
compliance with their obligation under the lease.
[158] In the circumstances, it follows that I must grant the
declarator sought.