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TYCO FIRE & INTEGRATED SOLUTIONS (UK) LIMITED AGAINST REGENT QUAY DEVELOPMENT COMPANY LIMITED


OUTER HOUSE, COURT OF SESSION

[2016] CSOH 97

 

CA50/16

OPINION OF LORD TYRE

In the cause

TYCO FIRE & INTEGRATED SOLUTIONS (UK) LIMITED

Pursuer;

against

REGENT QUAY DEVELOPMENT COMPANY LIMITED

Defender:

Pursuer:  Thomson;  Eversheds LLP

Defender:  McBrearty QC;  Burness Paull LLP

9 June 2016

Introduction

[1]        The defender is the owner of commercial premises known as the Glover Pavilion, Aberdeen Science and Technology Park, Aberdeen.  By lease dated 24 February and 9 March 2004, the defender granted a lease of Units 3 and 4 in the Glover Pavilion to the pursuer, whose name at that time was Wormald Ansul (UK) Limited.  The lease was for a period of ten years, expiring on 5 February 2014.  By a minute of variation of lease dated 27 October and 8 November 2011, the parties agreed to vary the terms of the lease.  The effect of the variation was that the subjects let were amended to include Unit 1 in addition to Units 3 and 4, and the term of the lease was extended to 30 August 2021, but with an option to the pursuer to terminate it on 31 August 2016.

[2]        On 11 January 2016, agents for the pursuer served a notice on the defender for the purpose of exercising the break option.  The heading of the letter containing the notice erroneously referred only to Units 3 and 4 and not to Unit 1.  The issue between the parties is whether the notice was an effective exercise of the pursuer’s option.  The pursuer seeks declarator that the option has been validly exercised.  The defender asserts that the notice was invalid and that the lease will accordingly not terminate on 31 August 2016. 

 

The original terms of the lease

 [3]       Clause 1.1 of the lease as originally agreed contained definitions.  “Premises” was defined as the subjects described in Part 1(A) of a Schedule annexed to the lease.  In terms of that schedule, “The Premises” meant

“ALL and WHOLE those first floor premises comprising Unit 3 and Unit 4 extending to 3,660 square feet or thereby within the Building together with the use of the Car Parking Spaces being the whole subjects outlined in red on the plan annexed and executed as relative hereto”. 

 

Under Clause 2.1, the Premises were leased to the pursuer for the period from 6 February 2004 (the date of entry) until 5 February 2014.  Clause 2.2 entitled the pursuer to terminate the lease on the fifth anniversary of the date of entry on giving at least six months’ prior written notice to the defender.

 

The minute of variation of lease

[4]        The minute of variation of lease also contained definitions, in clause 1.1.  These included a definition of “Additional Premises” which were defined as

 “ALL and WHOLE the ground floor premises comprising Unit 1 extending to 2,617 square feet or thereby, being the subjects shown shaded orange on the Plan…”

 

together with certain ancillary rights.  “Lease” was defined as

“the lease between the Landlord and the Tenant  dated 24 February and 9 March and registered in the Books of Council and Session on 31 March, all months in 2004 and all documents and agreements supplemental thereto, as varied by these presents”.

 

The “Effective Date” was defined as 31 August 2011.

[5]        Clauses 3 and 4 of the minute of variation provided as follows:

“3.       PREMISES

From the Effective Date the Premises under the Lease shall mean the Premises and the Additional Premises.

4.         EXTENSION OF LEASE

4.1  The Period of the Lease shall be extended for a period of ten years from the Effective Date to 30 August 2021 and Clause 2.1 of the Lease shall be varied to this  extent.

4.2  The Tenant shall have the option to terminate the Lease on the fifth anniversary of the Effective Date on giving not less than six months prior notice to the Landlord (time being of the essence) provided that the Tenant has complied with all financial obligations under the Lease and is not in material breach of any other obligation under the Lease and Clause 2.2 of the Lease shall be varied to this extent.”

 

The pursuer’s notice

[6]        On 11 January 2016 the pursuer’s agents wrote a letter to the defender containing the following heading:

“Tyco Fire and Integrated Solutions (UK) Limited

Units 3 & 4, The Glover Pavilion, Aberdeen Science and Technology Park, Aberdeen (‘the Premises’)”

 

It is necessary to set out the terms of the letter in full:

“We act for Tyco Fire & Integrated Solutions (UK) Limited (Company Number 01952517) of Tyco Park, Grimshaw Lane, Newton Heath, Manchester M40 2WL, formerly known as Wormald Ansul (UK) Limited, its name having been changed conform to Certificate of Incorporation on Change of Name dated 29 December 2005, hereinafter referred to as the Tenant of the Premises, subject to (1) lease between Regent Quay Development Company Limited and Wormald Ansul (UK) Limited dated 24 February and 9 March and registered in the Books of Council and Session on 31 March, all months in 2004 (“the Lease”); and (2) minute of variation of lease between Regent Quay Development Company Limited, Tyco Fire and Integrated Solutions (UK) Limited and Wormald Ansul (UK) Limited dated 27 October and 8 November, both dates in 2011, and registered in the Books of Council and Session on 28 June 2012 (‘the Minute of Variation of Lease’).

 

Pursuant to clause 4.2 of the Minute of Variation of Lease, on behalf of and as instructed by the Tenant, we HEREBY GIVE YOU NOTICE to terminate the Lease over the Premises on the fifth anniversary of the Effective Date on giving not less than six months prior written notice of termination.  Without prejudice we consider that date will be 31 August 2016 and that the lease will terminate on that date but please confirm that you agree.

 

We also act for all group companies of the Tenant and to the extent that this notice is required to be served by any one or more of such companies in addition to or in substitution for the Tenant, you should consider this notice served for and on behalf of such company or companies.

 

Please sign and date the endorsement on the accompanying copy of this notice and return to us by way of receipt.”

 

[7]        On 4 March agents on behalf of the defender wrote to the pursuer’s agents intimating that the defender considered the notice to be ineffective and that the lease, as varied by the minute of variation, would continue to the ish.

 

Argument for the defender

[8]        It was accepted by the defender that no question arose in the present case with regard to the formal validity of the letter containing the pursuer’s notice, and that the issue was one of interpretation.  The test to be applied was objective and remained as enunciated by the House of Lords in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, namely how a reasonable recipient with knowledge of the terms of the lease would have understood the notice.  Reference was made in particular to the speech of Lord Steyn at page 768F, where it was said, under reference to a dictum of Slade LJ in Delta Vale Properties Ltd v Mills [1990] 1 WLR 445 at 454, that

“…even if such notices under contractual rights reserved contain errors they may be valid if they are 'sufficiently clear and unambiguous to leave a reasonable recipient in no reasonable doubt as to how and when they are intended to operate’.”

 

The reasonable recipient should not be “perplexed in any way” by the error (Lord Steyn at 769A).  As Lord Hoffmann had put it at 780D, quoting Goulding J in Carradine Properties Ltd. v Aslam [1976] 1 W.L.R. 442 at 444:  Is the notice quite clear to a reasonable [landlord] reading it?  Is it plain that he cannot be misled by it?

[9]        It was submitted that the notice in the present case, which had been drafted by solicitors, contained two errors.  The first was the reference in the heading to Units 3 and 4 only, which were defined for the purposes of the notice as “the Premises”, thereby creating confusion by attributing a new meaning to a defined term.  The second error, to be found in the first paragraph of the letter, lay in defining “the Lease” by reference to the original lease only, as opposed to the original lease as varied by the minute of variation.  The cumulative effect of those errors was that the notice given by the pursuer in the second paragraph of the letter applied to the Lease (as re-defined, for the purpose only of the notice, to mean the original lease) over the Premises (as re-defined, for the purposes only of the notice, to mean only Units 3 and 4).  As there was no provision in the Lease for exercise of the break clause in respect of part only of the subjects let, the notice purported to do something that the pursuer was not entitled to do, and was therefore invalid.  Applying the Mannai test, there was at the very least real and substantial doubt as to how the notice was to be interpreted.  Confusion on the part of a reasonable recipient was sufficient to invalidate the notice.  The possibility that the pursuer and/or its advisers had misunderstood the extent of their power under clause 4.2 of the minute of variation could not simply be dismissed as improbable.  This was not an error that could be corrected by interpretation.

 

Argument for the pursuer

[10]      On behalf of the pursuer it was accepted that the heading contained an error in that it referred only to Units 3 and 4, but it was not accepted that there was a second error.  When the letter was read as a whole, including the power under which the notice was served, the reference to the Lease was sufficiently clear.  It was agreed that the test in Mannai fell to be applied.  For his part, counsel for the pursuer drew attention to the observation of Lord Clyde in Mannai at 782C that it was not absolute clarity or an absolute absence of any possible ambiguity that was desiderated: the evident intention of a notice should not be rejected in preference for a technical precision.  It was to be noted that Lord Clyde had attached weight to the fact that the notices were expressed to be “pursuant to” a particular clause; the position was the same here.  Clause 4.2 permitted termination of the lease as varied; that was the clause that had been invoked.  The alternative explanation – that the pursuer had misunderstood its power under the clause – was speculative and not reasonable having regard to the terms of the letter.  Functionally, the error in the letter was the same as the error in Mannai.

 

Decision

[11]      At the conclusion of the hearing, I delivered an ex tempore opinion in favour of the pursuer.  I understand that the defender has now enrolled a reclaiming motion and seeks early disposal.

[12]      As I have already noted, parties were in agreement that the applicable law was as stated by the House of Lords in Mannai, recently applied in Scotland in West Dunbartonshire Council v William Thompson and Son (Dumbarton) Ltd 2016 SLT 125.  It was also common ground that the reasonable recipient should be taken to have the terms of the lease (using that word generally) in mind.  I accept the pursuer’s submission that content has to be given to the word “sufficiently” in Lord Steyn’s observation in Mannai: absolute freedom from ambiguity is not necessary.  One might presume that any case that requires judicial determination will involve at least some actual or asserted ambiguity.  I also, however, accept the defender’s submission that the test as enunciated by Lord Hoffmann requires consideration of the likelihood of there being an alternative explanation for the terms of the notice as received which might leave the reasonable recipient in reasonable doubt as to its meaning.

[13]      Applying the test to the circumstances of this case, I begin by rejecting the defender’s submission that the letter contains a second error in respect that the reference in the first paragraph to “the Lease” is to the lease prior to being varied by the Minute of Variation of Lease.  The notice requires to be read as a whole, and it is readily apparent that the sender of the notice was fully aware of the existence of the variation and of its terms.  The contract that was entered into by the parties in 2004 did not cease to be “the Lease” merely by virtue of being varied in 2011.  It remained “the Lease”, albeit that, by virtue of clause 1.1 of the minute of variation, the meaning thereafter to be attributed to that expression was the original lease as varied by the minute of variation.  In accordance with the Mannai test, the parties are taken to have been aware of this.  The question therefore becomes whether the reasonable recipient of the letter would construe the reference to the lease in paragraph 1 as (a) a reference to the lease as varied and as constituting the existing contract between the parties, or (b) to the lease prior to variation which no longer contained the terms of the parties’ contract.  The latter alternative is in my view sufficiently far-fetched to be disregarded as a reasonable interpretation, or even as one capable of creating confusion in the mind of the reasonable recipient.  Contrary to the defender’s submission, the letter contains no re-definition of “the Lease” as meaning the lease as unamended, which would make no sense at all, but refers instead to the contract between the parties as at the date of service of the notice: in other words to the Lease as varied.

[14]      I do not regard this interpretation as cast into doubt by the fact that express reference was also made in the second paragraph of the notice to the minute of variation of lease.  There was an obvious purpose in referring separately to the minute, in respect that it is a clause in that document (as opposed to any provision of the Lease) which contains the break option that was being exercised.

[15]      When one turns to the second paragraph – which, importantly, is the operative part of the notice – the reference to clause 4.2 makes entirely clear, in my view, that the intention is to exercise the right granted by that clause.  There is a clear analogy here with the clause in Mannai upon which Lord Clyde placed emphasis.  The right conferred by clause 4.2 relates to the Lease – ie to the lease as varied – and to the Premises – ie to the Premises as defined in the Lease as varied.  The notice bears to exercise a power which in terms of the Lease as varied applies to the Premises as a whole.  Read on its own, the operative paragraph of the notice not only contains no material ambiguity: it contains no ambiguity at all.

[16]      A difficulty only arises because of the reference in the letter heading to Units 3 & 4, when read along with the words “the Premises” which appear there in parenthesis.  The question is whether this rendered the notice insufficiently clear and unambiguous to leave a reasonable recipient in no doubt that the right conferred upon the pursuer by clause 4.2 was the right being exercised.  If one asks the questions posed by Lord Hoffmann in Mannai (above) and considers alternative interpretations, one possibility is that it was indeed the right conferred by clause 4.2 that was being exercised, and that the heading contained a clerical error in respect that the number 1, presumably followed by a comma, was carelessly omitted.  The alternative suggested by the defender is that, despite the pursuer’s express reference to the terms of clause 4.2 and the parties’ mutual awareness of the terms of the Lease (as varied), the notice may be read as re-defining the expression “the Premises”, for the purposes only of the notice, in line with its original meaning, and then purporting for whatever reason to exercise a power not conferred upon the pursuer by the clause expressly relied upon.  As Lord Clyde observed in Mannai at 782D, careless drafting is to be discouraged.  Nevertheless, in my opinion no reasonable recipient would be misled into interpreting the notice in accordance with the latter alternative or even of being left in any reasonable doubt that the former interpretation was correct.  Adopting the phraseology of Lord Steyn, I am satisfied that the reasonable recipient would not have been perplexed in any way by the error in the letter heading.  The operative element of the notice is sufficiently clear and unambiguous to avoid any such perplexity, and the fact that the ingenuity of lawyers can suggest theoretical ambiguities is not to the point.

 

Disposal

[17]      For these reasons I shall sustain the pursuer’s pleas in law, including the general plea to relevancy added by way of amendment, and grant decree of declarator in terms of the first conclusion of the summons.