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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Ben Cleuch Estates Ltd v Scottish Enterprise [2006] ScotCS CSOH_35 (01 March 2006)
URL: http://www.bailii.org/scot/cases/ScotCS/2006/CSOH_35.html
Cite as: [2006] CSOH 35, [2006] ScotCS CSOH_35

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OUTER HOUSE, COURT OF SESSION

 

[2006] CSOH 35

 

CA38/05

 

 

 

 

 

 

 

 

 

 

 

OPINION OF LORD REED

 

in the cause

 

BEN CLEUCH ESTATES LIMITED

 

Pursuers;

 

against

 

SCOTTISH ENTERPRISE

 

Defenders:

 

 

ннннннннннннннннн________________

 

 

 

Pursuers: Connal, Q.C., Solicitor Advocate; Easton, Solicitor Advocate; McGrigors

Defenders: The Dean of Faculty (Martin, Q.C.), McIlvride; Anderson Fyfe

 

 

1 March 2006

 

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 Enterprise and New Towns (Scotland) Act 1990. The defenders are a body corporate established under section 1 of that Act. Ben Cleuch purchased the landlord's interest in October 2002, as explained below.

[3] Clause FOURTH (A) of the lease provides that the term of the lease is from 1 April 1991 until 2 February 2016. Clause FOURTH (B) however provides:

"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, 70 Wellington Street, Glasgow, G2 6SB: that address being the offices of Bonnytoun's solicitors, McGrigors. Bonnytoun had four directors: Mr Cairns, a Mr Anderson, a Mr Cummings and Andrew McFarlane of Gooch Webster. Mr Cairns was also the chairman of the company and the company secretary.

[10] On 27 May 2002 Bonnytoun entered into a contract, described as the Amended and Restated Servicing Agreement, with Scott Cairns Co Ltd. Scott Cairns Co Ltd subsequently changed its name to Lochcote Asset Management Ltd, and I shall refer to it as "Lochcote" in order to avoid confusion with Mr Cairns as an individual. The preamble to the agreement narrated that Bonnytoun carried on business which involved inter alia the letting of property; that Bonnytoun and Lochcote had agreed, in an earlier contract (described as the First Servicing Agreement), that Lochcote was to provide such management services to Bonnytoun as were required to ensure the efficient operation of Bonnytoun's business: that Gooch Webster was Bonnytoun's preferred supplier of property services in relation to "the Properties" (as defined); that Lochcote had entered into or was about to enter into a contract (the Property Management Agreement) subcontracting certain property management services to Gooch Webster; that Bonnytoun had entered into or was about to enter into a contract (the Engagement Letter) with Gooch Webster in relation to other property services; that the management services to be provided by Lochcote to Bonnytoun were to include the giving of instructions on behalf of Bonnytoun to Gooch Webster under the Engagement Letter; and that the parties had agreed to amend and restate the terms of the First Servicing Agreement upon the terms subsequently set out.

[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 25 September 2002 Bonnytoun acquired a subsidiary, named Pacific Shelf 1145 Ltd, from company formation agents. On 14 October 2002 Pacific Shelf 1145 Ltd acquired the Premises. As at that date, Bonnytoun had acquired three properties in its own name; one property had been acquired by Bonnytoun's subsidiary Inverdownie Estates Ltd (formerly Pacific Shelf 1103 Ltd); one property had been acquired by Bonnytoun's subsidiary Whitewisp Estates Ltd (formerly Pacific Shelf 1104 Ltd); one property had been acquired by Bonnytoun's subsidiary Tarmangie Estates Ltd (formerly Pacific Shelf 1105 Ltd); one property had been acquired by Bonnytoun's subsidiary Kings Seat Estates Ltd (formerly Pacific Shelf 1115 Ltd); and the Premises had been acquired (on that date) by Bonnytoun's subsidiary Pacific Shelf 1145 Ltd.

[14] On 18 October 2002 Pacific Shelf 1145 Ltd changed its name to Ben Cleuch Estates Ltd. The registered office of Ben Cleuch was at all material times the same as that of Bonnytoun. Ben Cleuch had two directors: Mr Cairns and Mr Anderson. Mr Cairns was also the company secretary. He instructed the preparation of the company's annual report and accounts, and chaired meetings of the board of directors. Ben Cleuch had issued one share, which was held by Bonnytoun. The Premises were Ben Cleuch's only asset, and the rental of the Premises was Ben Cleuch's only income. It had no employees, and did not incur any staff costs or directors' remuneration.

[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 14 October 2002 solicitors acting on behalf of Fieldmore Holdings Ltd sent to the defenders, by recorded delivery, written notice that, as at that date, they had sold their interest in the Premises to Pacific Shelf 1145 Ltd, Pacific House, 70 Wellington Street, Glasgow. The notice stated that future rent demands would be issued by or on behalf of Pacific Shelf 1145 Ltd, and that Gooch Webster would be acting as managing agents and would be responsible for all management matters, the contact being Mr Gordon Kellie. The notice was received by Mr Cameron Gunn, a senior solicitor in the defenders' legal department. He in turn copied the notice to Mr Kenneth Dunion, an accountant employed in the defenders' property and finance department who dealt with financial matters (including the payment of rent) in respect of properties of which the defenders were either the landlord or the tenant. On 7 November 2002 Mr Gunn signed a copy of the notice and returned it, as requested, to the solicitors acting for Pacific Shelf 1145 Ltd, McGrigor Donald, to acknowledge receipt. Mr Cairns was informed that the notice had been sent, and that its receipt had been acknowledged. The defenders were not informed of the subsequent change of name of Pacific Shelf 1145 Ltd. Mr Cairns said in evidence that there was no particular reason for the failure to inform the defenders of the change of name, and certainly nothing sinister about it. Mr Cairns appeared to me to be a credible and reliable witness, and I accept that evidence.

[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 14 October 2002 to Miss McGowan, so that Skyline would be updated. On Skyline, the name of the landlord of the Premises was entered as Pacific Shelf 1145 Ltd.

[20] On 21 October 2002 the defenders received an invoice from Gooch Webster in respect of the rent due for the next quarter under the lease of the Premises. The invoice stated:

"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 Enterprise

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 Cairns

Scott Cairns Co Limited

PO Box 14

Linlithgow

West Lothian

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 20 March 2003. Colliers' letter was headed:

"BONNYTOUN ESTATES LTD

ISM PROJECT FOR SCOTTISH ENTERPRISE TAYSIDE

ENTERPRISE HOUSE, 45 NORTH LINDSAY STREET, DUNDEE".

 

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, Dundee, where new offices could be constructed. Mrs Farmer's function thereafter was to cost the alternative options. James Barr & Son Ltd ("James Barr"), chartered surveyors, were also instructed to assist SET in relation to these matters. The director of James Barr who dealt with the instructions was Mr Gregory Limb.

[35] On 12 May 2003 Mrs Farmer e-mailed Mr Gunn of the defenders, asking that Shepherd and Wedderburn be instructed to report on the break clause. She continued:

"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 England, I think where the tenant has been prohibited from enforcing the break due to a technicality. Obviously this would be a major disaster if this happened to us, AFTER we had signed up for the new building. We thought therefore it would be a good idea to have S & W's PI [Shepherd & Wedderburn's professional indemnity insurance] on the line by having them firstly advise us and secondly serve the notice!".

 

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 3 June 2003, addressed to SET and copied to Mr Gunn, Shepherd and Wedderburn wrote:

"We can confirm that Scottish Enterprise has the option to terminate the lease on the 2nd February 2006.

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 2nd February 2005. The notice must be addressed to the Landlords Registered Office....

...[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 11 June 2003 Mrs Farmer wrote to Miss Forrester at Colliers, explaining the options being considered by SET and the defenders, and seeking the landlord's proposals. She wanted to know what the landlord was prepared to offer in return for the break option not being exercised, so that she and Mr Day could finalise their report to the boards of SET and the defenders. The letter was headed:

 

"ENTERPRISE HOUSE, 45 NORTH LINDSAY STREET, DUNDEE

SCOTTISH ENTERPRISE TAYSIDE, BONNYTOWNE ESTATES".

 

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 19 June 2003 Mr Cairns e-mailed Mr McCrindle, stating that he anticipated making a proposal for the defenders on 23 June 2003. The e-mail was "signed" as follows:

"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 23 June 2003 Mr Cairns e-mailed Mr McCrindle again, stating:-

"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.

 

Or

 

B

Proposal

In return for SE removing the TBO from the lease, extending the lease to expire at 2 February 2019 and inserting an additional rent review at 2 February 2016 BCEL will make a payment of г210,700 (Two hundred and ten thousand, seven hundred pounds) to SE

 

Other conditions

Common to both A or B above

1.

Schedule of Dilapidations

BCEL undertake not to serve a Schedule of Dilapidations on SE until after 2 February 2006.

......

2

Suspensive Conditions

Conclusion of missives by no later than Friday 18 July 2003

3

Timescale for Response

These proposals remain open for a response until close of business on Friday 4 July 2003.

4.

Payment Date

Friday 1 August 2003

5.

Legal Representation

Bonnytoun Estates Limited will be represented by McGrigor Donald (Russell Munro), Princes Exchange, 1 Earl Grey Street, Edinburgh, EH3 9AQ

 

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 12 February 2001, and a marketing circular dated June 2003, describing the activities of Bonnytoun. Neither document contained any reference to Bonnytoun's having subsidiaries. The 2003 document stated that Bonnytoun had increased its funding to г40m, and that г25m had so far been spent on nine properties. The nine properties were listed. One of them was the Premises.

[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 23 June 2003. Mr Day discussed the proposals with Mrs Farmer and with Mr Limb. They calculated the monetary value of each of the alternative proposals made, and how those values compared with their own assessment of the value of the defenders' not exercising the break option. They concluded that the net cost of refurbishment of the Premises would be greater than the cost of moving to new premises, and that the refurbishment would leave SET in a building with operational limitations. Mr Day e-mailed Ms Cormack, the chief executive of SET, and Mr McIntyre, who was the head of the defenders' property department, later that day, explaining the financial issues, and stating his recommendation in favour of the new build option. He attached a copy of the proposals.

[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 23 June 2003 was in its financial aspects. He saw that it came from Bonnytoun, and that was consistent with his understanding that Bonnytoun was the landlord. He did not pay attention to the distinction between "BEL" and "BCEL", or to the phrase

"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 2 July 2003, and by the defenders' board on 4 July 2003. A decision was taken in favour of exercising the break option and moving to new offices at Discovery Quay, subject to the conclusion of a satisfactory agreement with the developer.

[48] As I have explained, the letter of 23 June 2003 set out proposals to the defenders, and was sent to agents whom Mr Cairns understood to be acting on behalf of the defenders. The proposals were copied to Mr McIntyre, the head of the defenders' property department. The question whether to accept the proposals, or to exercise the break option, was considered, and determined, by the defenders' board. Although there is no direct evidence that the letter of 23 June 2003 was read by those involved in taking that decision, it appears to me to be reasonable to infer from the foregoing circumstances that it probably was. In any event, it appears to me that it was reasonable for Mr Cairns to anticipate, as he did, that it would be read by the persons within the defenders' organisation who were involved in taking that decision.

[49] As he had not received a response to his letter of 23 June 2003, Mr Cairns telephoned Mr Day in mid to late July 2003. Mr Day informed him that the defenders had entered into further negotiations with a preferred bidder for an alternative site. Mr Cairns understood that a move to an alternative site, if the negotiations were successful, would involve the exercise of the break option.

[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 9 September 2003, attended by Mr Dunion of the defenders, and by Mr McPhail, Miss Capanni and Miss McGowan of Colliers. It was agreed that Colliers would take over responsibility for the payment of rent and other recurring charges in respect of the offices occupied by local enterprise companies; that they would advise the landlords of the properties in question, so that invoices would thereafter be sent to Colliers rather than to the defenders; that they would check the leases of the properties in question and update Skyline; and that, using Skyline, they would prepare monthly management reports in respect of the properties in question and submit them to the defenders. As a source of relevant information, Mr Dunion provided the Colliers' representatives with copies of the most recent rent invoices in respect of the properties in question.

[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 9 September 2003, the terms of the payment requests submitted by Colliers following that meeting, and the insurance position, he believed that the landlord of the Premises was Bonnytoun. It never occurred to him that the appearance of the words "Ben Cleuch Estates" on the invoices, in the property description, was of any materiality.

[59] By 17 October 2003 a development agreement, and an agreement on a new lease, had been concluded in respect of SET's new offices. On that date, Mr John Murray, a partner in Shepherd and Wedderburn, wrote to Mrs Farmer, with a copy to Mr Gunn of the defenders, reminding them of the need to give timeous notice that the break option was being exercised, and advising:

"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 22 October 2003, agreeing with Mr Murray's suggestion.

[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 31 October 2003 Mr Day e-mailed Mr McIntyre, with a copy to Mr Davidson, informing them that an agreement had been signed with the developer to lease the new offices. In the e-mail, Mr Day also recorded:

"As Scott Cairns - our current landlord - had contacted you, I have phoned him to let him know we will be breaking our lease at February 2006".

 

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 19 January 2004 Miss McGowan forwarded Mr Fish's e-mail to Miss Forrester, with the message:

"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, 45 West Nile Street, Glasgow".

 

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 19 January 2004. It appears however from Miss McGowan's e-mail that she had forwarded (and therefore incorporated in her communication) Mr Fish's e-mail of 15 January 2004, and it is also apparent that the latter e-mail itself forwarded (and therefore incorporated) Mr Brown's enquiry. Miss Forrester accepted the suggestion put to her on behalf of the pursuers that she might have failed to scroll down the entirety of Miss McGowan's e-mail, and might therefore have omitted to read Mr Brown's enquiry. She appeared in her evidence to be a generally credible and reliable witness. I am prepared to accept that she did not read the entire sequence of messages back to Mr Brown's original enquiry, especially as all that Miss McGowan had asked for was an address for Bonnytoun. Miss Forrester also said that the statement in Miss McGowan's e-mail, that "I know that Bonnytoun Estates are the landlord", did not cause her to react, because she and her colleagues referred to Bonnytoun as being their client. It did not occur to her that it was necessary to consider carefully the name used for the landlord in Miss McGowan's message.

[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 Enterprise

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 21 July 2004 Mr Fish of the defenders received an e-mail from Mr Davidson of SET, stating:

"As you know SE Tayside is relocating to new offices in 2006 and we are going through an exercise of establishing our dilaps [dilapidations] costs of removing from our existing offices at 45 North Lindsay St, Dundee.

 

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 23 July 2004 Mr Fish replied:

"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 19 January 2004, and on the monthly management reports which he received from Colliers. He did not bear in mind that Mr Brown's e-mail of 15 January 2004 had described the Premises as being "owned by Bonnytoun Estates Limited, through its subsidiary Ben Cleuch Estates Limited".

[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 8 October 2004 Mr Watson wrote to Miss Forrester, requesting the landlord's consent to certain repair works to be carried out on the Premises. His letter was headed:

"43, 45 & 47 North Lindsay Street, Dundee, DD1 1HT

LANDLORDS - BONNYTOUN ESTATES

TENANTS - SCOTTISH ENTERPRISE TAYSIDE".

 

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 13 October 2004 Miss Forrester spoke to Mr Watson by telephone. She told him that the landlord's consent was not required, but that it was in any event content for SET to carry on. She confirmed that by an e-mail of the same date:

"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 8 October 2004" .

 

[72] On 2 November 2004 Mr Murray of Shepherd and Wedderburn wrote to Mr Gunn of the defenders, copying his letter to Mr Davidson of SET:

"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 45 North Lindsay Street, in anticipation of their move to the new offices.

 

For the record, notice should be served prior to 2nd February 2005 in order to terminate the lease as at 2nd February 2006. I assume that there is no reason not to serve the notice sooner rather than later and perhaps you (or Douglas Davidson, to whom I will copy this letter), could confirm whether this will be dealt with by SE direct or whether you wish us to give notice.

 

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 4 November 2004:

"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 2nd February 2005)

 

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 23 June 2003.

[75] On 5 November 2004 Mr Gunn sent an e-mail to Mr Fish of the defenders, copying it to Mr Davidson and Mr Day of SET:

"[A]s you may know, SE require to service Notice to Quit on their Landlords before 2nd February 2005 in order to terminate the lease of the above offices at 2nd February 2006. I understand that the present owners are Bonnytoun Estates Ltd but I have no details of their Registered Office or the address of their solicitors/agents upon whom the formal Notice has to be served. Please could you send me these details".

 

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 8 November 2004 Mr Fish sent an e-mail to Miss McGowan, specifying the subject as the Premises:

"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

PO Box 14

Linlithgow

West Lothian

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 29 November 2004 Mr Gunn wrote to Mr Murray of Shepherd and Wedderburn, copying the letter to Mr Davidson of SET:

"I thank you for your letter of 2 November 2004 and would be pleased if you would serve, prior to 2 February 2005, a Break Notice in respect of SE's lease of the above subjects. This Notice should be served on:

 

1. Bonnytoun Estates Limited, PO Box 14, Linlithgow, West Lothian,

WH49 7JZ. For the attention of Scott Cairns

2. Colliers CRE, Surveyors, 45 West Nile Street, Glasgow, G1 2PJ. For the attention of Anne Forrester."

 

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 4 November 2004. His only enquiry into the address of Bonnytoun's registered office was to ask one of the defenders' chartered surveyors, who in turn asked a clerkess at Colliers, who in turn obtained an address from another clerkess there.

[79] Mr Davidson had indicated in his e-mail of 4 November 2004 that the removal strategy SET had devised with James Barr involved the break notice being served in January 2005, after dilapidations had been discussed with the landlord. On receiving his copy of Mr Gunn's letter to Shepherd and Wedderburn, Mr Davidson e-mailed Mr Gunn on 30 November 2004, reminding him that the notices "should not be sent until the first week of January". Mr Gunn then forwarded that e-mail to Shepherd and Wedderburn, with the covering message:

"[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 7th January 2005".

 

[80] On 22 December 2004 Mr Watson of James Barr wrote to Miss Forrester in relation to dilapidations:

"43, 45 & 47 North Lindsay Street, Dundee, DD1 1HT

Landlords - Bonnytoun Estates

Tenants - Scottish Enterprise Tayside

....

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 8 October 2004, this letter was inaccurate as to the identities of both the landlord and the tenant of the Premises. The letter was copied to Mr Gunn of the defenders, and to Mr Day of SET. Mr Day said in evidence that he again did not notice at the time that the description of Bonnytoun as the landlord was inconsistent with Bonnytoun's letter of 23 June 2003. He still thought of Bonnytoun as the landlord. Mr Gunn also copied the letter to Shepherd and Wedderburn for their information on 23 December 2004, stating:

"the Notice requires to be served on the Landlords by 10 January 2005".

This statement puzzled Shepherd and Wedderburn: the deadline for service was 2 February 2005, as they had previously advised Mr Gunn in June 2003 and again in November 2004.

[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 6 January 2005 the defenders agreed with SET that an appropriate time had been reached for the service of the break notice. Mr Gunn then informed Shepherd and Wedderburn, and agreed with them that the notice would be served that day.

[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 14 October 2002 notifying the defenders that the Premises had been acquired by Pacific Shelf 1145 Ltd.

[85] Letters, each enclosing two copies of the break notice, were sent by Shepherd and Wedderburn on 6 January 2005, by first class recorded delivery post. One such letter was addressed to Bonnytoun at its registered office. The covering letter, so addressed, stated:

"Scottish Enterprise

45 North Lindsay Street, Dundee

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 2 February 2006. We therefore enclose the notice in duplicate and would be grateful if you could acknowledge receipt by signing and returning the duplicate to us."

 

The enclosed notices were similarly addressed, and stated:

"45 North Lindsay Street, Dundee ('The Property')

 

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 2nd February 2006.

 

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 29 November 2004, and marked "YOUR REF Scott Cairns". The letter was otherwise in identical terms to the letter quoted above. The enclosed notices were similarly addressed, but were otherwise in identical terms to the notice quoted above.

[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 2 February 2005, when she was informed about them either by Mr Cairns or by McGrigors. The evidence of Miss Forrester is somewhat surprising, but I have no reason to disbelieve it. Mr McPhail also said in evidence that he did not see the notices, and knew nothing about them until March 2005, when he learned from Mr Fish that the effectiveness of the notices was being disputed.

[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 6 January 2005. The letter and notice sent to the PO Box also found their way to his home address, and he saw them at about the same time. As a result of receiving the notices, Mr Cairns sought advice from McGrigors. He initially said in evidence that he instructed McGrigors as Lochcote, but that McGrigors were acting on behalf of Ben Cleuch, and that their instructions to act on behalf of Ben Cleuch came from him. He later accepted counsel's suggestion that, as a result of receiving the notices, he gave instructions to McGrigors in the capacity of a director of Ben Cleuch.

[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 20 January 2005 Mr Watson sent her a reminder by e-mail. The following day she replied by e-mail:

"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 2 February 2005. Mr Watson noted what she had said in an e-mail which he sent later that day to SET:

"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 2 February 2005. As before, the invoice bore the words:

"Acting as agents for: Bonnytoun Estates Ltd".

[97] On 1 March 2005 McGrigors wrote to Scottish Enterprise, stating that they were "instructed by Ben Cleuch Estates Limited who are the Landlords of the above property". They enclosed a copy of the letter of 14 October 2002 and stated that their clients were "then named Pacific Shelf 1145 Limited". They stated that, since the break notices had not been addressed to the landlord, they were invalid and the lease would accordingly continue until 2016. Mr Cairns, as a director of Ben Cleuch, thereafter instructed the commencement of the present proceedings.

[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 1 March 2005, he had never heard of Ben Cleuch. I accept that evidence. In cross-examination, he accepted that he had been advised by Shepherd and Wedderburn that the break notice should be served on the landlord at its registered office. He accepted that he could have checked the address of Bonnytoun's registered office by searching the records held at Companies House, and that he had not done so. He accepted that, if Pacific Shelf 1145 Ltd had changed its name, that also would be recorded in the records held at Companies House. He accepted that it would have been open to him to check. He said that the defenders did not check because no-one was in any doubt that Bonnytoun was the landlord. The defenders had been receiving rent invoices in the name of Bonnytoun for over two years (although he personally had not seen them). His own understanding that Bonnytoun was the landlord was based on the exchange of e-mails on 4, 5 and 8 November 2005. At the time when he instructed the service of the break notice, the letter of 14 October 2002 (notifying the defenders that Pacific Shelf 1145 Ltd had become the landlord) never entered his mind. Mr Fish, Mr Davidson and Mr Day had seen his reference to Bonnytoun (in the e-mail of 5 November 2004, and, in the case of Mr Davidson, also in the letter of 29 November 2004), and had not corrected it.

[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 14 October 2002. Mr  Fish said that if there had been a change in the landlord subsequent to 14 October 2002, he would expect the defenders to have received notification.

[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 8 November 2004 (i.e. the PO Box address of Bonnytoun). It had in addition been sent to Colliers, whose address had been notified in Miss Forrester's e-mail to Miss McGowan of 19 January 2004. Any reasonable landlord would have understood, in the circumstances, that the defenders had given such notice to it, notwithstanding the notice having erroneously been addressed to Bonnytoun. Reference was made in that regard to Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] A.C.749; Lay v Ackerman [2004] EWCA Civ.184, [2004] L & TR 29; and Prudential Assurance Co Ltd v Smiths Foods 1995 S.L.T.369. Applying that approach, the question was whether a reasonable landlord would, in the circumstances, have been misled into thinking that the break notice was intended for someone other than itself.

[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 23 June 2003 had identified Ben Cleuch as the landlord, the letters sent by Mr Watson in October and December 2004 made it clear to those acting for Ben Cleuch that that was not understood. Although it might be suggested that Mr Gunn, as the person responsible for the service of the notice, should have done more to check, for example by searching the records held in Companies House, the pursuers' case was not pleaded on that basis, and that matter had not been adequately explored in cross-examination of Mr Gunn or Mr Murray.

[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 14 October 2002. He did not check the records at Companies House to find out either the current name of Pacific Shelf 1145 Ltd or the previous name of Bonnytoun. He relied on informal communications which had taken place in circumstances where the identity of the landlord was not material. He did so in a context where accurate identification of the landlord was of critical importance.

[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 8 October 2004 in any event pre-dated Mr Gunn's instruction to Shepherd and Wedderburn to serve the notice on Bonnytoun. At the meeting on 9 September 2003 (of which, again, Mr Gunn had been unaware) Mr McPhail had been acting for the defenders. Nothing he said at the meeting could be attributed to Ben Cleuch. The identity of the landlord was stated in the letter of 23 June 2003, which was intimately connected with the defenders' consideration of the break option, and had been seen by those instructing Mr Gunn.

[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 2 February 2005; and it must give notice of termination of the lease on 2 February 2006. The conditions to which the exercise of an option is made subject are generally construed as conditions precedent, which must be complied with if the option is to be validly exercised. Thus, for example, if the requisite notice is to be in writing, oral notice will not generally suffice (Legg d Scot v Benion (1738) Willes 43); and if the notice is to be given within a specific period, then a late notice will not generally be effective (United Scientific Holdings Ltd v Burnley Borough Council [1978] A.C.904). The reason why the law insists on strict conformity with the conditions governing the exercise of an option was explained in the United Scientific Holdings case, approving the earlier judgments of Lord Denning MR and Diplock LJ in United Dominions Trust (Commercial) Ltd v Eagle Sovereign Services Ltd [1968] 1 W.L.R.76 at pages 81 and 83-84 respectively. In the latter case, Diplock LJ in particular explained at page 84 that in the case of a unilateral contract (e.g. an option to purchase),

"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 19 January 2004 ("All correspondence for the above should be addressed to Bonnytoun Estates, c/o Colliers CRE") constituted the notification of a further address for the service of notices. I reject that contention also. First, Miss Forrester was responding to a request for Bonnytoun's address: the sequence of e-mails was not concerned with the service of notices. Secondly, there is no evidence that Miss Forrester (or her employers, Colliers) had authority (either express or implied), as agents acting indirectly on behalf of Ben Cleuch, to alter the requirement as to the service of notices which prima facie was imposed by clause SEVENTEENTH: namely, that notices be served on the landlord at its registered office. Nor did they have ostensible authority to do so. Their authority, as far as the defenders were aware, derived from clause EIGHTH of the lease, which conferred no powers or responsibilities on managing agents in respect of the service of notices. They had no more wide-ranging ostensible authority, since such authority would have to derive from a representation made by the principal, Ben Cleuch, to the defenders; and no such representation was made. In relation to this matter, I would respectfully adopt what was said by Lord Cullen in his Opinion as Lord Ordinary in Capital Land Holdings Ltd v Secretary of State for the Environment (unreported, 28 July 1995), where a similar question arose:

"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 Buckhurst Park Properties (Mangal) (Ltd) [1964] 2 QB 480 Diplock LJ at page 503 analysed the position in English law as follows:

 

'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 Capital Land case. The lease in question in that case required that a break notice should be sent to the landlord's registered office. The notice was sent instead to the landlord's place of business. The notice was held to be ineffective. The earlier case of Prudential Assurance Co Ltd v Smiths Foods was distinguished, as it can be distinguished also from the present case, on the basis that it was not concerned with a mandatory provision.

[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 19 January 2004, and Miss McGowan's e-mail to Mr Fish on 8 November 2004, cannot be regarded as constituting such notification.

[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 5 November 2004, naming Bonnytoun as the landlord, and requesting its address, that information was consistent with Mr Fish's understanding; and similarly when, on 8 November 2004, Mr Fish e-mailed Miss McGowan. It thus appears that the belief, on the part of the defenders' employees and others acting on their behalf, that Bonnytoun was the landlord, can generally be connected, directly or indirectly, to the invoices.

[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 23 June 2003, notwithstanding that it clearly stated that Ben Cleuch was the landlord of the Premises. I accept that, unlike the invoices (which those acting on behalf of Ben Cleuch could reasonably expect to be read by those of the defenders' employees and agents who dealt with the payment of rent), the letter could reasonably be expected to come to the attention of persons within the defenders' organisation who would be involved in deciding whether the break option should be exercised. Nevertheless, the purpose of the letter was not to notify the defenders of the name of their landlord; and it was not reasonably to be expected that the letter, any more than the invoices or the various other communications referred to in the submissions of counsel for the defenders, would come to the attention of the person responsible for the service of the break notice, and be relied on by that person when identifying the company on which the notice required to be served.

[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.


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