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GYLE SHOPPING CENTRE GENERAL PARTNERS LTD AS TRUSTEE FOR AND GENERAL PARTNER OF GYLE SHOPPING CENTRE LIMITED PARTNERSHIP

 

OUTER HOUSE, COURT OF SESSION

[2015] CSOH 14

 

CA190/13

OPINION OF LORD TYRE

In the cause

GYLE SHOPPING CENTRE GENERAL PARTNERS LTD as trustee for and general partner of GYLE SHOPPING CENTRE LIMITED PARTNERSHIP

Pursuer;

against

MARKS & SPENCER PLC

Defender:

Pursuer:  Lindsay QC, Walker Sol Adv;  Gateley (Scotland) LLP

Defender:  Murphy QC, Robertson;  DWF Biggart Baillie LLP

12 February 2015

Introduction
[1]        The pursuer is the owner of the Gyle Shopping Centre, Edinburgh.  The defender is the tenant of subjects in the shopping centre which were leased to it in 1992 by the City of Edinburgh District Council (“EDC”), a predecessor in title of the pursuer.  The pursuer has entered into an agreement with Primark Stores Ltd for the construction and leasing of a new retail store building which would abut the existing shopping centre and would be constructed partly on currently unbuilt‑upon land including part of the car parking area.  The defender contends that it has not given its agreement in probative writing to the construction of such a building, and accordingly that the pursuer is not entitled to commence construction or to grant a lease of it to Primark.

[2]        I have previously issued two opinions in this action.  In the first of these, dated 25 March 2014 (published with the reference [2014] CSOH 59),  I held, after a debate, that the pursuer was not entitled to declarator that the defender had given its unqualified written consent to the use by the pursuer of areas currently forming part of the Shared Areas and car parking areas of the shopping centre for construction of a new building to be leased to Primark.  The basis of the pursuer’s argument was that the Management Committee established in accordance with the defender’s lease had had power to agree, and had agreed, to a variation of the lease to the effect of permitting the construction of the new building on part of the Shared Areas, including the car parking area.  I held that variation of the lease was not within the power of the Management Committee.  I also expressed the view that the effect of certain clauses in the defender’s lease was that probative writing was required for any agreement that had the effect of altering the area within the site allocated to car parking, roads, and/or pedestrian routes.

[3]        In my second opinion, dated 6 August 2014 (published with the reference [2014] CSOH 122), I held, after a proof, that the defender was not personally barred by its actings from taking action to prevent the pursuer from carrying out the construction of the proposed new building or proceeding to lease the resulting building to Primark.

[4]        The pursuers now seek a declarator, in terms of conclusion 1.4 of the summons, that any refusal by the defender to consent to the Primark development, as shown on the plans produced, would amount to an unreasonable withholding of consent.  On 18 December 2014 I heard a proof on this matter at which evidence was given by Mr Andrew Cronie, the centre manager for the Gyle Shopping Centre, and by Mr Kenneth Williamson, architect, a partner in the Hurd Rolland Partnership.  Their evidence was to the effect that the Primark development would be beneficial to the Gyle Shopping Centre as a whole, and that the loss of car parking spaces which the development would entail would not render the shopping mall or the shared areas materially less adequate, commodious or convenient to the defender than they are at present.  This evidence was largely unchallenged; the defender’s position, at the close of the proof, was that it was irrelevant because the provision of the lease concerning unreasonable withholding of consent (clause 24) did not apply to works which would effect a permanent alteration of the real rights granted to the respective parties in terms of the lease.

[5]        The issues for determination in this opinion are accordingly:

(i)         Does clause 24 apply to works which would have the effect of permanently removing an area of land from the Shared Areas in which the defender’s real right subsists?

(ii)        If so, is the defender unreasonably withholding consent to works consisting of the proposed Primark development?

 

The defender's lease
[6]        The lease by EDC in favour of the defender (who is referred to therein as "M & S") is for a period of 127 years from 1 October 1990.  It was executed on 24, 26 and 27 February 1992 and recorded in the Register of Sasines on 23 March 1992, at a time when the site was still in course of development.  As I observed in an earlier opinion, it is an intricate document drafted with meticulous care and attention to detail.  This opinion is primarily concerned with clause 24; I will narrate the terms of that clause and of such other provisions as are essential to its understanding.  Various other clauses of the lease were set out in my first opinion and again as an appendix to my second opinion; for the sake of brevity I will not repeat them here.

[7]        Clause 24 provides as follows:

“The following provisions shall apply to any works within the Mall or the Shared Part (and any arbitration relating to any matter under this Clause shall be conducted in accordance with Clause 102 hereof):-

 

24.1     Such works shall be carried out within the minimum period reasonably necessary for the conduct of such works.

 

24.2     Except in case of emergency or where such works are carried out by the Management Committee pursuant to the duties of the Management Committee under Clause 77 hereof, such works shall not be carried out unless all of the Represented Parties either previously consent that they respectively accept that such works will not render the Mall or the Shared Parts materially less adequate, materially less commodious or materially less convenient to them respectively than the Mall and Shared Parts as existing immediately prior to the commencement of such works (which consents shall not be unreasonably withheld) or previously confirm in writing that they do not object to such works.

 

24.3     Except in so far as the Represented Parties shall otherwise agree, services not materially less adequate, not substantially less commodious and not substantially less convenient to the Represented Parties than those afforded by the Mall and the Shared Parts shall be provided and maintained by the party or parties responsible for carrying out the works, during the conduct of such works.

 

24.4     The services to be provided pursuant to Clause 24.3 hereof shall be in accordance with details previously approved in writing by the Represented Parties, each of whose approvals shall not be unreasonably withheld.

 

24.5     All such works shall be carried out in a proper and workmanlike manner and in accordance with good trade practice at the time.

 

24.6     Reasonable notice of all such works shall be given to the Represented Parties except in the case of emergency.

 

24.7     Such works shall be carried out in such manner as to conduct of works, and in accordance with such plans, elevations and specifications, and with such materials and finishes, as shall all previously have been approved by the Represented Parties (which approvals shall not be unreasonably withheld or delayed).

 

24.8     No such works shall be carried out which would prejudice the structural stability of the Shopping Centre or any part thereof.

 

24.9     Such works shall be so carried out as to minimise so far as practicable any adverse effect resulting from such works on the trading from, visibility of and access to the Stores and the Net Multiple Occupancy Building (including their respective Specific Pop-Out Front(s)) to the reasonable satisfaction of the Represented Parties.

 

24.10   Except to the extent any of the Represented Parties previously agree in writing to the contrary, the visibility of and access to the property to which such party has right shall be no less after the completion of any works under this Clause 24 than before the commencement of such works.

 

24.11   Such works shall be so conducted that access to and from the Stores and the Net Multiple Occupancy Building (including their respective Specific Pop-Out Front(s)) and the respective emergency egresses therefrom shall at all times be preserved to the reasonable satisfaction of the Represented Parties.”

 

[8]        Clause 1 contains the defined terms of the lease.  These include:

  • “the Represented Parties” means the parties from time to time entitled to appoint a representative to the Management Committee.Those parties are presently (i) the pursuers, (ii) the defender, and (iii) Safeway Stores Limited, trading as Morrisons, the successors in title to the subjects described in the lease as the Asda Subjects.

     

  • “the Shared Parts” means the Shared Services, the Shared Areas and the Common Internal Parts.

     

  • “the Shared Areas” means the Site and the buildings and structures from time to time thereon, under exception of the M & S Subjects, the Asda Subjects, the Filling Station Subjects and the EDC Subjects.The Shared Areas accordingly consist of the Car Parking Areas, the Roads, and the Pedestrian Routes, together with the landscaped ground within the Site.The “Shared Services” means machinery, plant, pipes, wires etc within the Shared Areas and/or within the Multiple Occupancy Building which are agreed to be appropriate for shared use.

     

  • the “Car Parking Areas" means the areas shown coloured purple on the Boundary Plan or such other areas within the Shared Areas as shall from time to time be agreed in probative writing among the Represented Parties to be the parts of the Shared Areas on which car parking shall be permitted.

     

  • "the Roads" means the roads to be constructed on areas shown coloured orange and unhatched on the Boundary Plan or such other roads within the Shared Areas as shall from time to time be agreed in probative writing among the Represented Parties to be available for use among M & S, Asda and the M.O.B. tenants.

     

  • There is a similar definition mutatis mutandis of "the Pedestrian Routes", referring to such other routes as shall from time to time be agreed in probative writing among the Represented Parties.

     

  • “the Multiple Occupancy Building” (M.O.B.) means the building between and directly adjoining the M & S and Asda (now Morrisons) Stores including the Mall.The “Net Multiple Occupancy Building” means the M.O.B. under exclusion of the Mall and the Common Internal Parts.

 

[9]        So far as material, clause 2 states as follows:

"EDC hereby lets to M & S ALL and WHOLE the said subjects shown coloured blue on the Boundary Plan together with (a) the building(s) and structure(s) (or part(s) of building(s) and structure(s)) to be constructed thereon from time to time and (b) a one-third pro indiviso share of and in the Shared Areas…”

 

In my first opinion, I held that the defender’s interest in the Shared Areas was properly characterised as a pertinent of the lease, conferring a real right which was enforceable against the pursuer as successor in title to EDC as owner of the subjects.

 

The proposed development
[10]      The proposed development consists of a new two‑storey building of around 60,000 square feet to be constructed towards the end of the shopping centre where Morrisons’ store is situated.  It would comprise existing retail units 33, 34, 35 and 36 of the M.O.B. plus a new extension constructed on land presently consisting of Car Parking Areas and Pedestrian Routes.  For present purposes, the point of significance is that it would effect the permanent removal from the Shared Areas of an area of land in which the defender, along with the pursuers and Morrisons, has a real right under the lease.

 

Issue 1:  Does clause 24 apply to the proposed development?
Argument for the pursuers
[11]      On behalf of the pursuers, it was submitted that it was in accordance with business common sense to construe clause 24 as being sufficiently wide as to apply to works which effected a permanent alteration to the extent of the Shared Areas.  The lease was for a period of 127 years.  Parties must have contemplated that there could be redevelopment and expansion of the shopping centre during such a long period.  Business common sense required a mechanism to be provided for such expansion, so that none of the Represented Parties could exercise a veto over development that was in the interests of the Centre and its other tenants.  The parties were given appropriate protection by the requirement in clause 24.2 that the works must not render the Mall or the Shared Parts materially less adequate, commodious or convenient to them respectively.  Expressions such as “any works” in clause 24 indicated that it ought to be interpreted broadly.  The terms of clause 24.10 made clear that the clause was intended to apply to permanent change.  The definitions of the Car Parking Areas, the Roads, and the Pedestrian Routes also demonstrated that changes were envisaged.  The reference to probative writing was simply the way in which consent under clause 24.2 was to be recorded.

 

Argument for the defender
[12]      On behalf of the defender, it was submitted that clause 24 did not apply to works which would interfere with the defender’s heritable rights in the Shared Areas.  If the clause was apt to encompass a variation of the parties’ property rights, then it would undermine the requirement for agreement among the Represented Parties to such variation, and the need for probative writing.  That would be an absurdity.  Clause 24 required to be read in the context in which it appeared in the lease.  It was located among a group of clauses described in clause 14 as “the Individual Clauses”, i.e. clauses which used expressions such as “the Affected Party” or “Interested Party” to refer to the pursuers, the defender or Morrisons.  Although clause 24 did not contain any of these expressions, and was not therefore an “Individual Clause”, it was a modifier of certain Individual Clauses in the sense that it made provision for works to be carried out within the Mall or Shared Parts by an “Affected Party”.  Clauses 22 and 23 were concerned with redevelopment and expansion within the envelope of each “Affected Property”, i.e. the M & S store, the Morrisons store, or the Net Multiple Occupancy Building.  Clause 25 conferred rights upon each Affected Party to enter the Shared Areas and other Affected Properties in order to carry out repairs, maintenance, rebuilding etc within the Affected Property, subject to making good all damage caused by the exercise of such rights.  This supported a construction of clauses 22‑25 as being restricted to the carrying out of physical works and not a mechanism whereby the legal status of any area could be altered.  If that had been the intention, there would have been provision for compensation.  Clause 24 was entitled “Special restraints on works affecting the Mall and Shared Parts”.  Its purpose was to permit works within common areas which, when completed, would remain within the common areas.  The requirement in clause 24.1 that works were to be carried out within the minimum period reasonably necessary, and the need for consent of the other Interested Parties, which requirements had no counterpart in clauses 22 and 23, clearly indicated that the clause was concerned with works to areas which were and would remain common parts.  An example of the operation of clause 24 as a stand‑alone provision would be works to install bicycle racks or benches “within” the Mall or the Shared Areas.  If the pursuers’ interpretation were correct, this would mean that either the defender or Morrisons could extend into the car park and, if it had a de minimis effect on car parking, effectively appropriate land from the Shared Areas, which was absurd.

 

Decision
[13]      I am conscious that the pursuers’ conclusion based upon clause 24 may have been prompted, at least in part, by the obiter view expressed at paragraph 37 of my first opinion that clause 24 was capable of applying to works which effected a permanent alteration to the layout of the shopping centre.  I have now heard full argument on the proper construction of clause 24 and have considered the matter afresh.  In my opinion the argument on behalf of the pursuers is to be preferred.

[14]      I observed in my first opinion that the lease is an intricate document drafted with meticulous care and attention to detail, providing much by way of context for any interpretation issue that may arise.  The lease must, of course, be read as a whole.  In carrying out my duty of ascertaining what a person with all the background knowledge reasonably available to the parties at the time of the contract would have understood them to mean by the language they used (Rainy Sky SA v Kookmin Bank Co Ltd [2011] 1 WLR 2900, Lord Clarke of Stone‑cum‑Ebony at para 21), I consider that the draughtsmanship of this lease ought to be treated with respect.  I bear in mind also that where a contract has two possible constructions, I am entitled, according to Rainy Sky, as applied by the Supreme Court in L Batley Pet Products Ltd v North Lanarkshire Council 2014 SC (UKSC) 174 at para 18, to prefer the construction which is consistent with business common sense and to reject the other.

[15]      Clause 24 is capable, on its terms, of being construed either in the broad sense contended for by the pursuers, i.e. as encompassing works which have the effect of permanently altering the Mall or Shared Parts, or, more narrowly, in one of the two senses contended for by the defender, i.e. as a “stand‑alone” provision for works within the Mall or Shared Parts which, when complete, remain within common use.  I reject, however, the defender’s contention that clause 24 is intended to apply where, in the course of a redevelopment, rebuilding or modernising of an “Affected Property” (i.e. the defender’s store, Morrisons’ store or the net Multiple Occupancy Building), ancillary works have to take place within the Mall or Shared Areas.  That situation is dealt with by clause 23.5 so far as the Mall is concerned (the pursuers being, in this context, the “Interested Party”) and by clause 25.3 so far as the Shared Areas are concerned.

[16]      In my opinion, it is more consistent with business common sense to construe clause 24 as having the broader of the two possible applications.  I did not understand it to be contended by the defender that the parties to the lease ought reasonably be taken to have envisaged that the configuration of the Site would remain entirely unaltered throughout its 127 year duration.  The defender maintained, however, that any alteration in the configuration could only take place by consent of the three Represented Parties, so that each would have, in effect, a right of veto over any reduction or expansion of the extent of the Shared Areas.  Such a construction would not, in my view, be consistent with the terms of clause 105 which precludes variation of inter alia the M & S Lease or the Asda Lease “except in accordance with the provisions of these presents or by agreement among M & S, Asda and all parties comprised in the definition of ‘EDC’ at the time of the variation”.  (Emphasis added.)  In other words, the lease itself expressly envisages its variation otherwise than by agreement.  That, in my opinion, accords with business common sense, permitting the parties, and in particular the pursuers as proprietors, to make alterations to the layout of the Site in response to changes in circumstances which may have been unforeseeable at the time when the lease was granted.

[17]      I see no absurdity or conflict with business sense in construing clause 24 as encompassing works which effect a variation of the parties’ respective property rights.  In the first place, I consider that the defender’s emphasis on the significance of interference with its property rights is overstated.  Clause 24 applies only to the Mall and Shared Parts, including the Shared Areas, i.e. to the pertinents of the defender’s lease, and not to the M & S subjects themselves.  Any potential adverse impact upon the defender caused by the removal of an area of land from the Mall or Shared Areas is, in my view, carefully and entirely adequately addressed by clause 24.2, which entitles the defender to withhold consent if it considers that the works will render the Mall or the Shared Parts materially less adequate, commodious or convenient to it than as existing immediately prior to commencement.  It is equally consistent with business common sense to provide that such consent shall not be unreasonably withheld; otherwise, the effective right of veto would be restored and could be exploited by a Represented Party by, for example, demanding payment in exchange for consent to a development which in fact had no material adverse impact upon it.  If works which effect the removal of an area of land from the Mall or Shared Areas have no material adverse impact on adequacy, commodiousness or convenience to a Represented Party, I see no reason why any question of compensation ought to arise.  Nor, in my opinion, is it absurd or contrary to business common sense to contend that clause 24 would permit works extending beyond its Expansion Space by a Represented Party other than the pursuers, although in reality it may be less likely that such a Represented Party would take advantage of this facility, given that ownership of the resultant building would vest by accretion in the pursuers as heritable proprietors, subject always to the Represented Party’s lease.

[18]      On the other hand, I consider that as a matter of business common sense the defender’s construction attributes too narrow a scope to clause 24.  The examples suggested by the defender of the clause’s operation as a stand-alone provision, namely to facilitate the provision of bicycle racks in the Shared Areas or benches in the Mall, seem to me to be works of a minor nature falling within the scope of the management committee’s responsibility under clause 77.9 to provide and maintain a variety of amenity items including street furniture, and thus falling within the exclusion at the beginning of clause 24.2.  To construe the clause in this way would, in my view, deprive it of any substantive application.  Neither the use of the word “within” at the beginning of clause 24 nor the location of the clause among other clauses collectively defined as the “Individual Clauses” compels the attribution of such an unlikely intention to the parties at the time when the lease was entered into.

 

Issue 2:  Is consent being unreasonably withheld?
[19]      The pursuers made detailed submissions as to why it was unreasonable for the defender to withhold consent to the Primark development.  These fell broadly into two categories: (i) the perceived benefit of the Primark development to the shopping centre as a whole; and (ii) the absence of any adverse impact on the defender.  Having regard to the terms of clause 24.2, attention must, however, focus specifically upon whether the proposed development would render the Shared Areas materially less adequate, commodious or convenient to the defender.  If any of these criteria were met, then it would not matter how much benefit the development was expected by the pursuers to bring to the shopping centre: the defender would be entitled to withhold consent.  I find the following to be established on the basis of the evidence of Mr Cronie and Mr Williamson:

  • The only material changes to the Site if the Primark development were to proceed would be in relation to existing car parking and the M.O.B. service yard.Safety and operation of the M.O.B. service yard would be improved, with consequent benefit regarding pedestrian access to the shopping centre.
  • The development would result in the loss of about 144 spaces, representing a 5% reduction in the overall parking provision and a 2.5% reduction in the land area of the Shared Areas.Approximately 2,700 spaces would remain, which would fall within Scottish Planning Policy maximum parking standards and exceeds the maximum parking standards of the City of Edinburgh Council.All existing disabled and parent and child spaces would be retained.
  • The shopping centre is never short of available car parking spaces and, even at peak times such as before Christmas, the car park has not been occupied close to capacity;
  • The Mall would be able to serve its function without difficulty or obstruction in the event that an anticipated 14% increase in footfall materialised.
  • Regarding ease of access to and use of the defender’s store, the physical alterations to the M.O.B. building are sufficiently remote not to have a significant impact on its servicing and usage.The defender’s store has a separate allocated service area.

On the basis of inter alia the foregoing, Mr Williamson expressed the opinion that it would be unreasonable to conclude that the development would render the Mall or the Shared Parts materially less adequate, commodious or convenient to the defender.

[20]      The defender did not seek to challenge any of the foregoing evidence or, indeed, Mr Williamson’s opinion.  Instead, the defender submitted (i) that the proposed “works” were too unspecific; (ii) that loss of ownership rights in relation to the Shared Areas was sufficient of itself to render them less adequate; and (iii) that as the present litigation to determine the parties’ respective rights had been unresolved at the time when the pursuers sought the defender’s consent, it could not be said that the defender acted unreasonably in withholding consent.

[21]      In my opinion none of these submissions is of any substance.  Firstly, the proposed development is detailed in plans with which the defender had been provided prior to refusal of consent, and in respect of which planning permission was granted on 6 June 2012.  Secondly, loss of the defender’s pro indiviso interest in the Shared Areas qua tenant under a long lease is not of itself an event that renders them materially less adequate; the criteria of adequacy, commodiousness and convenience are concerned with practical consequences rather than technicalities of characterisation of the defender’s right under the lease.  Thirdly, the defender’s entitlement in terms of clause 24.2 reasonably to withhold consent is not unrestricted:  it must relate to the three specified criteria.  The fact that there was subsisting litigation was not a relevant matter at the time when consent was refused.  In any event I did not understand the defender’s position to have changed to reflect the fact that this opinion addresses the last of the live issues in the litigation.

[22]      I should mention that among the documents lodged for proof were letters from agents for Safeway Stores Ltd (i.e. Morrisons) indicating that their clients did not consent to the proposed development.  It was common ground that my decision in the present action would not render any issue res judicata so far as Morrisons were concerned.  Equally, however, I do not regard Morrisons’ refusal of consent as relevant to the question to be determined under clause 24.2 so far as the defender is concerned.

 

Disposal
[23]      For these reasons I shall sustain the pursuers’ second plea‑in‑law, repel the defender’s second plea‑in‑law, and grant decree of declarator in terms of conclusion 1.4 of the summons.  Questions of expenses are reserved.