Ben Cleuch Estates Ltd v Scottish Enterprise [2008] ScotCS CSIH

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION

Lord Macfadyen

Lord Kingarth

Lord Eassie

[2008] CSIH 1

CA38/05

OPINION OF THE COURT

delivered by LORD MACFADYEN

RECLAIMING MOTION

in the cause

BEN CLEUCH ESTATES LIMITED,

Pursuers and Respondents;

against

SCOTTISH ENTERPRISE,

Defenders and Reclaimers.

_______

Act: Connal Q.C., Easton (May 2006), Ms Morton (November 2007), Solicitor Advocates; McGrigors

Alt: Martin Q.C., McIlvride; Anderson Fyfe.

4 January 2008

Introduction

[1] This commercial action concerns a dispute, between the pursuers, as landlords, and the defenders, as tenants, of commercial premises in Dundee known as Enterprise House ("the Premises"), as to whether the defenders have validly terminated the lease of the Premises ("the Lease") by exercising a break option, or alternatively whether the pursuers are personally barred from denying that the break option was validly exercised. The single substantive conclusion can be regarded as falling into three parts, and seeks declarator in the following terms:

(a) "that the defenders have not validly terminated the Lease of the

subjects known as and forming Enterprise House, 45 North Lindsay Street, Dundee by Faraday Properties Limited in favour of the Scottish Development Agency dated 26 February and 7 March 1991 and registered in the Books of Council and Session on 18 December 1991 by failing to provide to the pursuers as landlords of the defenders written notice to terminate the Lease";

(b) "that a letter from Shepherd and Wedderburn as agents for the

defenders to Bonnytoun Estates Limited of 6 January 2005 is not a valid notice in terms of Clause FOURTH (B) of the said Lease"; and

terms".

[2 ] A proof before answer was allowed, and took place between 10 and 19 January 2006, on which latter date the Lord Ordinary made avizandum. On 1 March 2006 the Lord Ordinary granted decree of declarator as concluded for.

[3 ] The defenders reclaimed against the interlocutor of 1 March 2006. The reclaiming motion was part heard in May 2006, when the submissions of Mr McIlvride, junior counsel for the defenders and reclaimers, and of Mr Easton, the junior solicitor advocate for the pursuers and respondents, were heard. The reclaiming motion was then continued to a date to be afterwards fixed for the purpose of hearing submissions from Mr Martin, senior counsel for the defenders and reclaimers, and Mr Connal, the senior solicitor advocate for the pursuers and respondents. There followed a delay caused by the unavailability through indisposition of one of the members of the court. It then became apparent that because of the indisposition of another member of the court it would not be practicable to resume the hearing of the reclaiming motion before the same bench. Arrangements were therefore made for written versions of the junior speeches to be submitted, and it was agreed that the hearing could proceed with the senior speeches only being presented orally to a differently constituted bench. We have now heard those further submissions.

The provisions of the Lease

[4 ] The Lease was originally entered into in 1991 between Faraday Properties Limited and the Scottish Development Agency ("SDA"). The tenant's interest was transferred to the defenders, who are a body corporate established under section 1 of the Enterprise and New Towns (Scotland) Act 1990 ("the 1990 Act"), by virtue of section 22(1)(a) of that Act. The defenders are referred to in some of the documentary productions as "SE". The pursuers (hereinafter referred to, when the context makes it convenient, as "Ben Cleuch") purchased the landlord's interest in the lease in October 2002.

[5 ] The term of the Lease is from 1 April 1991 to 2 February 2016 (Clause FOURTH (A)). The break option is contained in Clause FOURTH (B), which provides that:

"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 ..."

[6 ] The manner of giving the notice permitted by Clause FOURTH (B) is regulated by Clause SEVENTEENTH, which provides as follows:

"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."

[7 ] Clause EIGHTH of the Lease provides as follows:

"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 contemplate that the landlord may authorise agents to perform other specified functions on its behalf, or, without express reference to agents, provide that acts may be performed "on behalf of" the landlord.

[8 ] The annual rent payable under the Lease is £210,700 (Clause FIFTH (A)), payable in advance without demand at four specified terms in the year (Clause FIFTH (B)). There is a rent review clause (Clause FIFTH (D)), but it appears not to have been exercised. The Lease prohibits assignation of the tenant's interest without the consent of the landlord, such consent not to be unreasonably withheld (Clause SIXTH (B)). There is an irritancy clause in conventional terms (Clause THIRTEENTH).

The facts

[9 ] The facts of the case, and the evidence by which they were established, are very fully set out by the Lord Ordinary in his Opinion at paragraphs 8 to 102. There was no real dispute about the Lord Ordinary's findings in fact, but in order to understand the submissions made on the parties' behalf, it is necessary to some extent to set out the facts that bear on the issues of law between the parties.

[10 ] Following the defenders' acquisition of the tenant's interest in the Lease, the Premises were occupied, as their head office, by Scottish Enterprise Tayside ("SET"), a local enterprise company, registered under the Companies Acts, wholly owned by the defenders, and carrying on activities under an operating contract with the defenders made in pursuance of section 19 of the 1990 Act. Such occupation is specifically contemplated and permitted by Clause SIXTH (B) (a) of the Lease.

[11 ] In 1996 the defenders were notified that Faraday Properties Limited had sold the landlord's interest in the Lease to Fiscal Estates Investments Limited.

[12 ] In 2001 a company, originally incorporated as Pacific Shelf 977 Limited, changed its name to Bonnytoun Estates Limited ("Bonnytoun"). Bonnytoun was a joint venture between three parties, namely Mr Scott Cairns ("Mr Cairns"), who owned 50% of the shares, the Bank of Scotland ("the Bank"), who owned 37·5%, and Gooch Webster Ltd ("Gooch Webster"), who owned the remainder. The object of the joint venture was to invest funds lent by the Bank in commercial properties. Some of the properties were acquired by Bonnytoun, and others were acquired by wholly-owned subsidiaries of Bonnytoun, each acquired as a vehicle for the particular purchase. In cases of the latter sort, Bonnytoun borrowed from the Bank the funds necessary to make the purchase, then lent those funds to the subsidiary. The subsidiary acquired the property and granted a security over it in favour of the Bank.

[13 ] The registered office of Bonnytoun was at all material times at 4^th Floor, Pacific House, 70 Wellington Street, Glasgow, G2 6SB, the offices of their solicitors, McGrigors. Mr Cairns was a director, the chairman and the company secretary of Bonnytoun.

[14 ] On 27 May 2002 Bonnytoun entered into a contract, described as the Amended and Restated Servicing Agreement, with Scott Cairns Company Limited. Scott Cairns Company Limited subsequently changed its name to Lochcote Asset Management Limited, and is hereinafter referred to as "Lochcote". The effect of that agreement is set out by the Lord Ordinary in paragraph 10 of his Opinion, and may be summarised as being that Lochcote were to provide certain management services to Bonnytoun, including the subcontracting of certain property management services to Gooch Webster. Clause 2 of the agreement between Bonnytoun and Lochcote appointed Lochcote as sole manager of Bonnytoun's business, and Clause 3 required Lochcote to provide a variety of services in respect of "the Properties" as defined in Clause 3.5. Bonnytoun was required to notify Lochcote of all properties acquired by Bonnytoun or acquired or owned by any subsidiary of Bonnytoun so that they constituted Properties for the purposes of Clause 3. The effect of the agreement was thus that Lochcote was to provide management services in respect of the properties acquired by Bonnytoun's subsidiaries. They were entitled to do so, and did so, by subcontracting with Gooch Webster for performance of services by Gooch Webster under a Property Management Agreement.

[15 ] On 25 September 2002 Bonnytoun acquired a subsidiary then called Pacific Shelf 1145 Limited. On 14 October 2002 that company acquired the Premises. As at that date Bonnytoun itself had acquired three properties, and four properties had been acquired by subsidiaries, which were all originally "Pacific Shelf" companies but had changed their names.

[16 ] On 18 October 2002 Pacific Shelf 1145 Limited changed its name to Ben Cleuch Estates Limited. The registered office of Ben Cleuch was at all material times at the same address as that of Bonnytoun. Mr Cairns was a director and the company secretary of Ben Cleuch. He instructed the preparation of the company's annual report and accounts and chaired meetings of its board of directors. Ben Cleuch had issued only one share, which was held by Bonnytoun. The Premises were Ben Cleuch's only asset, and the rent of the Premises was Ben Cleuch's only income. Ben Cleuch had no employees and incurred no staff costs or directors' remuneration.

[17 ] Mr Cairns's evidence was that when giving instructions to Gooch Webster (and their successors after early 2003, Colliers CRE ("Colliers")) he was acting as the asset manager, Lochcote. Gooch Webster (and thereafter Colliers) were the management agents on behalf of Ben Cleuch, appointed in terms of Clause EIGHTH of the Lease. When acting in that capacity Gooch Webster treated the properties owned by Bonnytoun and its subsidiaries as "the Bonnytoun Estates portfolio". That portfolio was dealt with by two chartered surveyors in Gooch Webster's Assett and Property Management Department, namely Gordon Kelly and Ann Forrester. Miss Forrester was aware that some of the properties in the portfolio were purchased by companies other than Bonnytoun itself. She was aware, in particular, that the Premises had been purchased by Pacific Shelf 1145 Limited and that that company had changed its name to Ben Cleuch. She regarded the client, so far as the Premises were concerned, as being Bonnytoun. Gordon Kelly was responsible for the Bonnytoun Estates portfolio within Gooch Webster and reported to Mr Cairns. If communications concerning the Premises addressed to Gooch Webster bore the heading "Bonnytoun Estates Limited", that caused no difficulty, according to Miss Forrester, in dealing with the matter or obtaining instructions.

[18 ] On 14 October 2002 (i.e. a few days before Pacific Shelf 1145 Limited changed its name to Ben Cleuch) solicitors acting for Fieldmore Holdings Limited (presumably the successors of Fiscal Estates Investments Limited as landlords of the Premises) sent to the defenders by recorded delivery post a notice that, as at that date, they had sold their interest in the Premises to Pacific Shelf 1145 Limited, Pacific House, 70 Wellington Street, Glasgow. The notice stated that future demands for rent would be issued by or on behalf of Pacific Shelf 1145 Limited, and that Gooch Webster would be acting as managing agents, the contact being Gordon Kelly. The notice was received by Mr Cameron Gunn, a senior solicitor in the defenders' legal department. He copied it to Mr Kenneth Dunnion, an accountant 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 landlord or tenant. On 7 November Mr Dunnion signed a copy of the notice, and returned it, as requested, to McGrigor Donald as the solicitors acting for Pacific Shelf 1145 Limited, as acknowledgement of receipt. Mr Cairns was informed that the notice had been sent and that receipt had been acknowledged. The defenders were not informed of the change of name to Ben Cleuch. The Lord Ordinary accepted Mr Cairns's evidence that there was no particular reason for that omission, and that there was nothing sinister about it.

[19 ] Gooch Webster also acted as managing agents of the defenders' investment portfolio. In that capacity they maintained a computerised database of information on properties of which the defenders were landlord or tenant. The database was called Skyline, and was used to generate management reports. Mr Dunnion passed a copy of the notice of 14 October 2002 to Miss Louise McGowan, the employee of Gooch Webster responsible for maintaining Skyline. She entered the name of the landlord of the Premises on Skyline as Pacific Shelf 1145 Limited. Miss McGowan worked full-time on the defenders' behalf, and was located in their offices.

[20 ] On 21 October 2002 the defenders received an invoice from Gooch Webster in respect of the next quarter's rent under the Lease. The invoice stated: "Issued on behalf of the landlord named above". Above that statement appeared the words: "Acting as agents of 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 ] The form of the invoice had been discussed at a meeting when Gooch Webster were first instructed as management agents, and a decision had been taken to present the matter in that way. Their property management system, used to produce reports and invoices, was not capable of producing a single report covering properties which were managed for different clients. All the properties were therefore entered in the system on the basis that Bonnytoun was the client. That enabled the system to produce a single report for the whole Bonnytoun portfolio. That resulted in the invoices stating that they were issued on behalf of Bonnytoun. The individual property-owning companies, such as Ben Cleuch, were mentioned in the only places where that was possible, i.e. below the word "Tenant" and below the word "Property". Mr Cairns was aware of the way the invoice was laid out and why it was so laid out. In so far as Bonnytoun was identified as the landlord, that was not correct; and he accepted that anyone reading the invoice might think Bonnytoun was the landlord.

[22 ] In the defenders' finance department, the invoice was processed by Mrs Claire Meechan, who was aware that the defenders were the tenant of the Premises. She paid no particular attention to the references to Bonnytoun and Ben Cleuch. She checked that the invoice was for the correct amount, and made the payment, as requested in the invoice, to Gooch Webster by bank transfer.

[23 ] Thereafter invoices were received from Gooch Webster every quarter. Except that there was no mention of Ben Cleuch below the word "Tenant", the form of the subsequent invoices was identical to that of the first one. After Mr Kelly left Gooch Webster in about December 2002, Miss Forrester took over day-to-day responsibility for the Bonnytoun portfolio. Mr McPhail was her head of department, but Miss Forrester reported directly to Mr Cairns. Miss Forrester was provided annually from 2003 onwards with a chart which explained the structure of the Bonnytoun group, and the interests of different companies in different properties, and showed, in particular, that the Premises were owned by Ben Cleuch. Mr McPhail was not aware of these charts.

[24 ] In connection with the take-over of Gooch Webster by Colliers, an Amended and Restated Property Management Agreement was entered into, Clause 24.1 of which provided that notices received by Colliers from tenants were to be forwarded, addressed "FAO James Scott Cairns" to Scott Cairns Co. Ltd (i.e. Lochcote) at a PO Box address in Linlithgow ("the Linlithgow address"). Various other alterations were made to the arrangements, but it is unnecessary to record them here.

[25 ] After the take-over, rent invoices were issued by Colliers in respect of the Premises. The first such invoice stated, under the name "Colliers", "Acting as Agents for Bonnytoun Estates Ltd". Under the word "Property" there continued to appear the words "Whole Property", "Ben Cleuch Estates" and the address of the Premises. The invoices were processed and paid on the defenders' behalf in the same way as before.

[26 ] In early 2003 contractors acting on the defenders' instructions sought and obtained from Colliers the landlord's consent, required under the Lease, to the erection of a television antenna at the Premises. Colliers' letter bearing to grant the landlord's consent was headed inter alia "BONNYTOUN ESTATES LTD", and stated, "I can confirm that our clients are happy for these works to proceed and confirm landlords [sic] consent to do so." The author of the letter, Miss Forrester, was aware that Ben Cleuch was the landlord, but did not regard it as important in the context to identify the landlord accurately. Mr Cairns, who gave instructions to grant the consent, said that he did so as Lochcote, under the agreement with Bonnytoun, on behalf of Ben Cleuch.

[27 ] By May 2003 the defenders and SET were considering alternative courses of action in relation to the Premises. One was to refurbish them, and for SET to continue in occupation of them until 2016. The other was to exercise the break option and for SET to relocate. In that connection, Mrs Katie Farmer, a chartered surveyor employed by SET, e-mailed Mr Gunn asking that Shepherd + Wedderburn be instructed to report on the break clause. She indicated that ultimately they would be asked to serve the break notice, and added, "Obviously this is one area of risk that we need to identify". In further correspondence she added reference to cases where the tenant had been prohibited from enforcing a break due to a technicality, said that it would be a "major disaster" if that were to happen to SET, and referred to the desirability of having Shepherd + Wedderburn's professional indemnity insurance "on the line". On 3 June 2003 Shepherd + Wedderburn advised that in order to terminate the Lease written notice required to be served on the landlords and addressed to their registered office. Both Mrs Farmer, and her superior, Mr Day, the head of SET's property department, gave evidence, which the Lord Ordinary accepted, that they understood that Bonnytoun was the landlord.

[28 ] On 11 June 2003 Mrs Farmer wrote to Colliers seeking the landlord's proposals as to what they would offer in return for the break option not being exercised. The heading of her letter referred to the Premises, to SET and to "Bonnytowne [sic] Estates". On 19 June 2003 Mr Cairns responded, as requested by Mrs Farmer, to Mr Scott McCrindle of James Barr, the firm of chartered surveyors acting for SET, indicating that he anticipated making a proposal on 23 June. The e-mail was "signed" as follows: "Scott Cairns, Chairman, Bonnytoun Estates Ltd", followed by the Linlithgow address. That "signature" was appended automatically to all Mr Cairns's e-mails, but he accepted that it would have been reasonable for the inference to be drawn that in making the proposal he was acting as chairman of Bonnytoun. On 23 June Mr Cairns sent his proposal to Mr McCrindle by e-mail and fax. The e-mail indicated that there was attached "BEL's [i.e. Bonnytoun Estates Limited's] proposals to SE". The fax cover sheet bore the name Bonnytoun Estates and the Linlithgow address. The proposals themselves were on Bonnytoun's letterhead, with the Linlithgow address and signed by Mr Cairns. The proposals stated inter alia the following:

"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 ..."

There then followed alternative proposals A and B, each of which involved that in return for "SE removing the TBO from the lease", certain payments would be made by "BCEL" to SE. There was an undertaking that "BCEL" would not serve a schedule of dilapidations until 2 February 2006. It was indicated that "Bonnytoun Estates Limited" would be represented by McGrigor Donald. There was a provision headed "Funding" which indicated that Bonnytoun Estates Limited was a joint venture between Mr Cairns and the Bank. The proposal ended with a statement that the terms of the letter were not to have any contractual effect or give rise to any legally binding obligation or liability. There were enclosed with the proposal two documents issued by Bonnytoun, which made no mention of subsidiaries, and said that Bonnytoun had spent £25m on nine properties, one of which was the Premises.

[29 ] Mr McCrindle forwarded the proposal by e-mail to Mr Day on 23 June. Mr Day discussed it with Mrs Farmer and Mr Limb of James Barr. Mr Day also sent copies of the proposal to Ms Cormack, the chief executive of SET, and to Mr McIntyre, the head of the defenders' property department. Mrs Farmer, Mr Day, and Mr Limb all gave evidence about their understanding of the proposal. Mr Day was concerned with its financial aspects, did not pay attention to the distinction made between "BEL" and "BCEL", or to the reference to BCEL as the landlord, but accepted that he should have noticed the last point and remembered it when the break notice was being served. Mrs Farmer was concerned with the comparative costs of the alternative proposals, did not notice the reference to Ben Cleuch, and continued to think of Bonnytoun as the landlords. Mr Limb's evidence was to similar effect. He did not pay particular attention to the references to Ben Cleuch and BCEL.

[30 ] The decision to exercise the break option was taken by the board of SET on 2 July 2003 and by the defenders' board on 4 July 2003. The Lord Ordinary inferred, in the absence of direct evidence on the point, that the letter of 23 June containing the proposal was probably seen by those who took the decisions. He also found that it was reasonable for Mr Cairns to anticipate that it would be read by those so involved (Opinion, paragraph 48).

[31 ] In about September 2003 the defenders decided to instruct Colliers, who had (in succession to Gooch Webster) been acting on their behalf in collecting rent and other payments due in respect of properties of which the defenders were landlords, also to act on their behalf in making rental and other payments due in respect of properties tenanted by them and occupied by local enterprise companies such as SET. At a meeting on 9 September 2003 between representatives of the defenders and of Colliers, it was agreed that Colliers would advise the landlords of the properties in question, so that invoices would be sent to Colliers rather than the defenders, and would check the leases in question and update Skyline. Mr Dunnion of the defenders provided the Colliers representatives with copies of the most recent rent invoices in respect of the properties in question. In implement of that arrangement, Miss McGowan updated Skyline in respect of the Premises by substituting, for the reference to Pacific Shelf 1145 Limited as the landlords, a reference to Bonnytoun. The source of the information used in updating Skyline appears to have been either the invoices sent by Colliers to the defenders or the management system that Colliers used to prepare these invoices. The consequence of the changes made to Skyline was that thereafter Colliers' monthly management reports to the defenders stated that the landlord of the Premises was Bonnytoun.

[32 ] The first invoice dealt with by Colliers under the new arrangement was prepared before that arrangement was entered into. As before, it stated that Colliers were "Acting as Agents for Bonnytoun Estates Ltd", and bore to be "Issued on behalf of the landlord named above". Under the word "Property" there appeared, as before, the words "Whole Property Ben Cleuch Estates" followed by the address of the Premises. The next invoice was in the same form. Miss McGowan of Colliers, who was responsible for issuing the cheques in payment of these invoices, understood that Bonnytoun was the landlord, and did not inquire why the words "Ben Cleuch Estates" appeared on the invoices. The funds used to make these payments were taken from a "float" provided from time to time by the defenders to Colliers. Periodically, Colliers accounted to the defenders for the money spent from the float. In doing so, they showed the landlord of the Premises as Bonnytoun.

[33 ] Clause TENTH of the Lease required the Premises to be insured by the landlord in name of the landlord, and provided that the policy be exhibited to the tenant on request. The Premises were insured in name of Bonnytoun, with no other interest noted. The insurance position contributed to the understanding of Mr Dunion of the defenders, that Bonnytoun was the landlord.

[34 ] At the end of October 2003 Mr Day telephoned Mr Cairns and, according to his evidence, told him that the defenders would be exercising the break option. Mr Cairns said that he was told that it was likely that the break option would be exercised. The Lord Ordinary preferred Mr Day's evidence, but accepted that Mr Cairns's evidence reflected his recollection.

[35 ] On 15 January 2004 Charles Brown, an employee of SET in their project team sent an e-mail to Mr Fish of the defenders which was in inter alia the following terms:

"Can you please confirm who the current landlords are of the existing SE Tayside offices. ... [We] need to ensure that we hold accurate details on the landlords and their agents.

...

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?"

Mr Fish forwarded that e-mail to Miss McGowan, asking inter alia, "Can you confirm an address for our landlords?" On 19 January Miss McGowan forwarded Mr Fish's e-mail to Miss Forrester with the message, "Ian Boxall said that you are the contact at [Colliers] for this property. I know that Bonnytoun Estates are the landlord. Would you be able to confirm their address ..." Miss Forrester responded, "All correspondence for the above [i.e. the Premises, which were identified in the heading of all the e-mails] should be addressed to Bonnytoun Estates, c/o Colliers CRE, 45 West Nile Street, Glasgow." Miss Forrester denied seeing Mr Brown's original e-mail, although it was included in what was forwarded to her. The Lord Ordinary accepted that she did not read the entire sequence of e-mails back to Mr Brown's original inquiry. Miss Forrester did not contradict Miss McGowan's statement that she knew that Bonnytoun was the landlord, because she regarded Bonnytoun as her client.

[36 ] In connection with the obligation which would arise in connection with dilapidations on termination of the lease, Mr Davidson of SET asked Mr Fish of the defenders by e-mail sent on 21 July 2004, "Can you advise who is the current landlord of these offices ..." On 23 July Mr Fish replied, "The landlords are Bonnytoun Estates Ltd."

[37 ] At about this time the form of the rent invoices was altered slightly. The words "Acting as Agents for Bonnytoun Estates Ltd" continued to appear below the name "Colliers", but the words "Issued on behalf of the landlord named above" no longer appeared.

[38 ] On 8 October 2004 Mr Watson of James Barr wrote to Miss Forrester requesting the landlord's consent to some repair work to be carried out at the Premises. Such consent was not required under the Lease, but was requested because the works were of a major nature. The heading of this letter identified the Premises and included the words "Landlords - Bonnytoun Estates; Tenants - Scottish Enterprise Tayside". The letter was copied to Mr Cairns for his instructions. He gave consent, regarding himself as doing so, as Lochcote, on behalf of Ben Cleuch. Miss Forrester did not regard the identification of the landlord as significant in the context of the particular request, and the error as to the identity of the landlord did not strike Mr Cairns at the time.

[39 ] On 2 November 2004 Mr Murray of Shepherd + Wedderburn wrote to Mr Gunn of the defenders (copying his letter to Mr Davidson of SET) and advised inter alia that the break notice should be served prior to 2 February 2005 in order to terminate the lease as at 2 February 2006. He said, "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?" On 4 November 2004 Mr Davidson sent an e-mail to Mr Gunn in which he said inter alia, "As regards the name of the landlord the last listed name we have from John Fish at SE (advised 23 July 2004) was Bonnytoun Estates Ltd..." Mr Davidson's e-mail was copied to Mr Day, but it did not occur to him that the reference to Bonnytoun as the landlord differed from what had been said in Mr Cairns's letter of 23 June 2003. On 5 November 2004 Mr Gunn sent an e-mail to Mr Fish of the defenders, copying it to Mr Davidson and Mr Day. In it, he referred to the need to serve the break notice before 2 February 2005, and said, "I understand that the present owners are Bonnytoun Estates Ltd", and asked for details of their registered office or agents on whom the notice had to be served. On 8 November, Mr Fish, who had no reason to query the reference to Bonnytoun, since that was the name he saw on the monthly management reports, sent an e-mail to Miss McGowan, referring to the Premises, and asking, "Do you have details on the Registered Office for the owners of the above property, Bonnytoun Estates Ltd?" Miss McGowan spoke to Brenda Mosson, the accounts manager at Colliers who dealt with the issuing of invoices in respect of the Premises, then replied to Mr Fish, saying:

"Brenda has provided me with the address for Bonnytoun Estates, as below:

Scott Cairns, Esq.,

Bonnytoun Estates Ltd

[followed by the Linlithgow address].

Hope this helps."

That was the correct correspondence address for Bonnytoun, and a letter sent there would reach Mr Cairns's home address the following day. The sequence of e-mails was forwarded to Mr Gunn. On 29 November, he wrote to Mr Murray instructing him to serve the break notice, and stating:

"This Notice should be served on:

1. Bonnytoun Estates Limited [at the Linlithgow address]. For the attention of Scott Cairns.

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

[40 ] On 22 December 2004 Mr Watson of James Barr wrote to Miss Forrester in relation to dilapidations. The heading of his letter identified the landlords as Bonnytoun and the tenants as SET. In the letter he stated inter alia:

"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 error as to the identity of the landlord went unremarked by Miss Forrester or by those to whom that letter was copied, including Mr Gunn and Mr Day. The letter was also copied by Miss Forrester to Mr Cairns. He said in evidence that the error as to the identity of the landlord did not particularly concern 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".

[41 ] On 6 January 2005 Shepherd + Wedderburn sent out by first class recorded delivery post two letters, each enclosing two copies of the break notice. The first letter was addressed to Bonnytoun at its registered office (i.e. the offices of McGrigors). The second was addressed to Bonnytoun at the Linlithgow address and marked "YOUR REF Scott Cairns". Each break notice referred to the Lease "in respect of which you are the current landlords". Each notice had appended to it a docquet for acknowledgement of receipt, for signature by "Director/Company Secretary Of Bonnytoun Estates Limited". A copy of each letter and each notice was sent to Colliers, addressed to Miss Forrester, and also to Mr Gunn of the defenders and Mr Day of SET.

[42 ] Miss Forrester gave evidence, which the Lord Ordinary accepted, that she did not see the notices until after 2 February 2005. Mr Cairns saw the letter and notices sent to Bonnytoun's registered office shortly after 6 January 2005. The letter and notice sent to the Linlithgow address found their way to his home address, where he saw them at about the same time.

[43 ] Mr Cairns did not sign the docquet on the notices or return them to Shepherd + Wedderburn. He refrained from doing so because he had been advised that the notices were invalid because they had been addressed to the wrong company. He accepted that the notices would have been valid if addressed to Ben Cleuch rather than Bonnytoun. He had not been misled by the notices as to what the defenders wished to do. He was aware that it was their intention to exercise the break option. He accepted a suggestion put to him that he was founding on the narrowest of technicalities. He accepted that the reason for the error not being pointed out to the defenders, or those acting for them, until after the period for service of the notice expired was that Ben Cleuch wanted to take advantage of it.

[44 ] At some point in January 2005 (it not being established whether it was before or after the break notice was served) Colliers issued the invoice for the rent for the quarter beginning 2 February 2005. As usual, it bore the words, "Acting as agents for Bonnytoun Estates Ltd".

[45 ] On 1 March 2005 McGrigors wrote to the defenders. They stated that they were "instructed by Ben Cleuch Estates Limited who are the Landlords of the [Premises]". 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 notice had not been addressed to the landlord, it was invalid and the lease would accordingly continue until 2016.

[46 ] At all material times the valuation roll showed that the Premises were owned by Pacific Shelf 1145 Limited. An online search of the Land Register would have shown that the last application for registration was by that company in respect of a disposition granted by Fieldmore Holdings Limited.

[47 ] Mr Gunn gave evidence, which the Lord Ordinary accepted, that prior to seeing McGrigors' letter of 1 March 2005 he had never heard of Ben Cleuch. He accepted that if Pacific Shelf 1145 Limited had changed its name, that would be recorded in records at Companies House which he could have checked.

[48 ] Following the letter of 11 March 2005, Mr Cairns, as a director of Ben Cleuch, instructed the commencement of this action.

The issues in the reclaiming motion

[49 ] Before the Lord Ordinary, two principal issues were discussed. The first was the soundness of the pursuers' contention that, because the break notice was sent to Bonnytoun at various addresses, it was not given to the landlord as required by the Lease, and was therefore invalid. The second was whether, if the pursuers were correct in that contention, they were nevertheless personally barred in the circumstances from denying that the break option had been validly exercised. The Lord Ordinary found in the pursuers' favour on both issues, holding first that the break notice had not been validly exercised, and secondly that the defenders' case of personal bar had not been made out.

[50 ] Both of the principal issues were reopened in the course of the reclaiming motion. It is convenient to note at this stage, however, that counsel for the defenders departed from certain submissions that had been advanced before the Lord Ordinary. They did not maintain the argument (rejected by the Lord Ordinary at paragraph 137 of his Opinion) that the break notice, if given to Bonnytoun, was given to them as agent for Ben Cleuch, and was therefore validly given to Ben Cleuch. Nor did they maintain the pleas of acquiescence and waiver (rejected by the Lord Ordinary at paragraphs 156 and 157).

The validity of the break notice sent to Pacific House

(a) The defenders' submissions

[51 ] In opening his submissions on the issue of the validity of the break notice, Mr Martin (who adopted and, in essence restated the submissions made by Mr McIlvride) drew our attention to the opening words of the Lease, which are as follows:

"IT IS CONTRACTED AND AGREED between FARADAY PROPERTIES LIMITED, incorporated under the Companies Acts and having our Registered Office at G.P.O. Box 94, Baird Avenue, Dryburgh Industrial Estate (hereinafter referred to as "the Landlords" which expression shall wherever the context so admits, include their successors in title to the interest of the Landlords herein) OF THE FIRST PART and SCOTTISH DEVELOPMENT AGENCY, established by Scottish Development Agency Act 1975 and having its principal office at 120 Bothwell Street, Glasgow (hereinafter referred to as "the Tenants" which expression shall, wherever the context so admits, include their permitted assignees, or sub-tenants and in the case of an individual means his personal representatives) OF THE SECOND PART as follows:- ...."

[52 ] The effect of these words, Mr Martin submitted, was to introduce into the Lease conventional meanings for the expressions "the Landlords" and "the Tenants", namely respectively Faraday Properties Limited and their successors in title to the Landlords' interest in the Lease, and the Scottish Development Agency and their permitted assignees or sub-tenants. It followed, he submitted, that in the Lease the expression "the Landlord" in particular had a conventional meaning independent of the name of the party who at any given time held the landlords' interest in the Lease. When account was taken of that point, it could be seen that Clause FOURTH (B), when it entitled the Tenants "to give to the Landlords" a break notice, required such a notice to be given "to the Landlords", not to the party who at the material date happened to be the landlords. It was thus immaterial whether the party who happened to be the landlord at the date of giving the break notice was named in the notice. It would be sufficient for the notice to be directed to "The landlord of the premises known as 45 North Lindsay Street, Dundee".

[53 ] Clause SEVENTEENTH was concerned, Mr Martin submitted, with the manner of giving a notice permitted to be given under the Lease. It fell into two parts. He accepted that the first part was mandatory. It laid down the various ways in which a permitted notice might validly be given. Leaving aside for the time being the question of whether the option of giving notice to an address notified to the other party for the purpose applied in the case of giving notice to a limited company, Clause SEVENTEENTH permitted the giving of notice (a) personally, or (b) by leaving it at the registered office of the party, or (c) by sending it by first class recorded delivery post to the registered office of the party. The second part (the second sentence) of Clause SEVENTEENTH was merely a "deeming" provision which, in the case of a notice given by post, relieved the party giving such notice of the burden of proving receipt, it being necessary for that party only to prove that the notice was "properly addressed and posted". The break notice sent in the present case to Pacific House, 70 Wellington Street, Glasgow, complied with the mandatory requirements of Clause SEVENTEENTH, in respect that the address to which it was sent by first class recorded delivery post was the registered office of the landlord, Ben Cleuch.

[54 ] In support of his submissions on this issue, Mr Martin cited a number of cases, namely Muir Construction Limited v Hambly Limited 1990 SLT 830 per Lord Prosser at 833J-834A; Capital Land Holdings Limited v Secretary of State for the Environment 1997 SC 109 at 114G-115D; Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, per Lord Steyn at 767D-769A and 771A-D, Lord Hoffmann at 774D-775A and 780C-G, and Lord Clyde at 782C-D; Lemmerbell Limited v Britannia L.A.S. Direct Limited [1999] L & TR 102 per Peter Gibson LJ at 115; Speedwell Estates Ltd v Dalziel [2002] HLR 43 813; and Lay v Ackerman [2004] L & TR 29 per Neuberger LJ at paragraphs 37 to 40 and 62, and Arden LJ at paragraph 91.

[55] Mr Martin accepted from Muir Construction at 833J and 834A, Capital Land at 115A, Mannai per Lord Hoffmann at 776A and Lord Clyde at 782C-D, and Speedwell Estates at paragraph 25 that a notice served under a lease required to comply with the formal requirements of the lease upon which the parties had agreed and for which they had stipulated in their contract. He suggested, however, that the test was not whether there had been "strict" or "full" compliance, but whether there had been "sufficient" compliance. The submission recorded in paragraph [52] above enabled him to say that a notice could be said to be given to the landlord if it was sent to the landlord's registered office, without necessarily naming the landlord, and could thus constitute sufficient compliance with Clauses FOURTH (B) and SEVENTEENTH. The issue then came to be one of construction of the notice. In considering that issue, Mr Martin submitted that the question that had to be addressed was: what would the reasonable recipient of the notice, with knowledge of the terms of the lease, and applying a commercially sensible construction to the notice (Mannai, per Lord Steyn at 771A-B), make of it; would he understand it or be misled by it? (Mannai, per Lord Steyn at 768H-769A, Lord Hoffmann at 774H-775A and 780D; Lay v Ackerman per Neuberger LJ at paragraph 40 and Arden LJ at paragraph 91). Mr Martin accepted that the mere fact that the landlord (in the person of Mr Cairns) ultimately received the break notice was not sufficient by itself to establish compliance with the requirements of the lease, but submitted that in the whole circumstances of the present case notice had been given to Ben Cleuch. The notice was sent to Ben Cleuch's registered office as contemplated in Clause SEVENTEENTH; as a matter of construction of the notice it was addressed to the landlord of the Premises ("in respect of which you are the current landlords" (Appendix, item 55)) and as a matter of fact it reached Mr Cairns, so it was "given" to the landlord in the sense discussed above; and there could be no doubt that Mr Cairns understood the purpose of the notice and was not misled by it (Lord Ordinary's Opinion, paragraph 90).

[56 ] Mr Martin sought to identify the points at which he maintained that the Lord Ordinary, in finding for the pursuers on this issue, had fallen into error. He submitted that the Lord Ordinary had been wrong to conclude (at paragraph 128 of his Opinion) that it was implicit in the requirements of Clauses FOURTH (B) and SEVENTEENTH, read together, that the letter or envelope had to be addressed to the landlord by name. The Lord Ordinary was wrong to test the matter by considering (at paragraph 129) the common practice of many companies having their registered office at the same address. Similarly the Lord Ordinary's view, expressed at paragraph 131 of his Opinion, that on a simple construction of Clauses FOURTH (B) and SEVENTEENTH a tenant could not be said to give notice to his landlord by sending a notice to the landlord's registered office addressed to, and intended for, a third party, was erroneous. Intention had nothing to do with the matter. The presence of the name of another party on the notice did not preclude its being a notice given to the landlord, if it was sent to the landlord's registered office and, properly construed, was addressed to the landlord, albeit not by name. Finally, Mr Martin submitted that the Lord Ordinary had erred in concluding (at paragraph 133) that the defect in the break notice could not be cured by a technique of interpretation of the notice.

(b) The pursuers' submissions

[57 ] On this issue Mr Connal's submissions were brief. They could be encompassed in the following propositions: (1) it was a mandatory requirement of the Lease that a break notice, to be effective, had to be "given to the Landlords" (Clause FOURTH (B)); (2) the Landlords were Ben Cleuch; (3) the break notice was in fact given not to Ben Cleuch, but to Bonnytoun; and (4) the break notice therefore did not comply with the agreed requirements stipulated for in the Lease, and accordingly was invalid.

[58 ] The pursuers' submissions depended essentially on Clause FOURTH (B), and in particular the requirement for notice to be "given to the Landlords". In so far as any question of construction had to be addressed, it was a matter of construction of Clause FOURTH (B), not construction of the notice. To be valid, a notice required to comply with the requirements of Clause FOURTH (B). Nothing said in Mannai about construction of the notice detracted from the need for compliance with the stipulation in the Lease for a notice to be given to the Landlords (see also Scrabster Harbour Trust v Mowlem plc, 2006 SLT 250 per Sir David Edward, Q.C. at paragraphs 46 and 47) . On the facts of the case, that raised the question whether a notice could be said to be "given" to the landlord if it was addressed to another party. That question fell to be answered in the negative, and that was the end of the matter. A communication addressed to no named party, but merely to "the landlord" of the subjects, did not comply with Clause FOURTH (B). For the Clause SEVENTEENTH procedure of giving notice by registered post to operate, a name was an essential part of an address. For notice to be given to a company's registered office, it had to be addressed to the company by name, given in particular that it was commonplace for many companies to have their registered offices at the same address. It was irrelevant to inquire whether the notice ultimately found its way into the hands of the landlord. Capital Land was a clear example of non-compliance with the requirements of the lease, in which the fact that the notice reached the landlord by non-compliant routes was of no avail to save it from invalidity.

(c) Discussion

[59 ] In our opinion the Lord Ordinary reached the correct conclusion on this aspect of the case: the break notice sent to Bonnytoun at its registered office was not given to the Landlords of the Premises, and was therefore ineffective.

[60 ] The matter turns, in our opinion, on the proper application of Clause FOURTH (B). That Clause confers on the Tenants an option to bring the Lease to a premature end after fourteen instead of twenty five years. It provides that, in order to exercise that option, the Tenants must "give to the Landlords" at least one year's written notice of termination. It was accepted on the defenders' behalf, rightly in our opinion, that for a break notice to be effective, it required to comply with that requirement (Muir Construction; Capital Land; Scrabster Harbour Trustees: we note that, in Mannai, at 781B-C, Lord Clyde identified the requirement in that case that the notice had to be served on the landlord or its solicitors as part of the substance of the power to serve the break notice). The dispute was as to whether what occurred constituted such compliance. In our opinion, that dispute can be resolved very shortly: a notice addressed to a party other than the landlord and sent to the registered office of that other party cannot be regarded as a notice given to the landlord.

[61 ] We see no merit in Mr Martin's submission that the terms of the introductory words of the Lease make a distinction between, on the one hand, the Landlord and, on the other hand, the party who happens at any given time to be the landlord. These words seem to us to serve no other purpose than to make it unnecessary in the text of the Lease constantly to repeat reference to the landlords' successors in title and the tenants' assignees and sub-tenants. They do not elide the need for a break notice to identify the party to whom it is given. We do not need to decide that there are no circumstances in which a break notice under the Lease would be valid without naming the Landlord. In the course of argument it was suggested that a break notice hand delivered to a landlord who was a natural person would be valid, even if it bore no name, and was addressed "Dear Landlord". That may be so, but, where the notice falls to be given to a limited company, and the manner of giving notice adopted by the tenant is recorded delivery post to the registered office of the company, that approach cannot operate, for a number of practical reasons. These include that recorded delivery post requires a named addressee; and that, since there may be more than one company with its registered office at a given address (a possibility which, as Mr Martin rightly said, cannot be assumed, but equally cannot be ignored), a communication cannot necessarily be identified as sent to a particular company at its registered office unless the name of the company is included in the address.

[62 ] Further, Mr Martin's argument based on the opening words of the Lease breaks down when consideration is given to the language of the break notice. Mr Martin suggested that the notice could be regarded as addressing the landlord, whoever that might be, independently of the identity of the named party to whom the notice bore to be addressed. That is not, in our view, a tenable argument. The notice was addressed to Bonnytoun. The reference in the text of the notice (Appendix, item 55) was in these terms: "We refer to the Lease ... in respect of which you are the current landlords". That must be read as an assertion that Bonnytoun are the current landlords, rather than as an observation addressed to whichever party was the current landlords, whether Bonnytoun or some other party.

[63 ] That the break notice sent to Pacific House ultimately found its way into the hands of Mr Cairns is in our view of no assistance to the defenders. Clause FOURTH concentrates on the party to whom the notice is given, not the party who may ultimately receive it. The notice was addressed to Bonnytoun. It was sent to Bonnytoun's registered office. It was received there, and in due course seen by Mr Cairns in his capacity as a director of Bonnytoun. That he happened also to be a director of Ben Cleuch, and thus acquired knowledge of the notice, and was able to react to it, in that capacity does not, in our opinion, convert a notice given to Bonnytoun into a notice given to Ben Cleuch.

[64 ] Nothing turns in this case on the construction of the notice. It was invalid because it was not given to the Landlord, but to a third party. The stage of considering how the notice would be understood by the recipient is not reached. Mr Cairns's candid admission that he was not misled by the terms of the notice is therefore of no avail to the defenders. None of the cases cited which turned on construction of the notice was concerned with the situation in the present case, where the notice was given to the wrong party. They concerned the different question of how a notice, given to the correct party but containing erroneous information on other matters, would be understood by the correct recipient.

[65 ] We therefore conclude that the break notice sent by the defenders to Bonnytoun at Pacific House was not given to the Landlords under the lease, but to a third party, and for that simple reason was ineffective to terminate the lease.

The validity of the break notice sent to the Linlithgow address

(a) The defenders' submissions

[66 ] In support of the contention that the break notice had been validly given to the landlord, the defenders advanced an alternative submission that the notice sent to the Linlithgow address, or alternatively the one sent to Colliers, satisfied that requirement. The submission depended on that part of Clause SEVENTEENTH which provided for the leaving or sending of notice "at or to such other address as shall have been last notified to the other party for that [purpose]".t That provision fell to be construed, it was submitted, as applicable both to companies and to firms or individuals. The submission was (a) that the information provided by Mrs Mosson of Colliers and passed on by Miss McGowan in her e-mail of 8 November 2004 to Mr Fish of the defenders (see paragraph 39 above, and Appendix, item 46) and (b) similarly that Miss Forrester's e-mail of 19 January 2004 passed on by Miss McGowan to Mr Fish (see paragraph 35 above, and Appendix, item 34) constituted notification in accordance with that provision of addresses for the purpose of the giving of notice. Mr Fish's request in January 2004 had been for "an address for our landlords", and his request in November 2004 had been for the "registered office of the owners of the [Premises]", in other words for the registered office of the landlords. The replies amounted to notification, for the purpose of the Lease generally, of the address for communication with the owners of the Premises, in other words, the Landlord. The address for the Landlord had thus been notified in January 2004 as "Bonnytoun Estates, c/o Colliers CRE, 45 West Nile Street, Glasgow", and in October 2004 as "Scott Cairns Esq, Bonnytoun Estates Limited" at the Linlithgow address. The notices sent to Colliers and to the Linlithgow address were thus given to the landlord, as required by Clause FOURTH (B).

(b) The pursuers' submissions

[67 ] The first response for the pursuers to the contention based on the notification of an alternative address was that it was not advanced in the defenders' pleadings (Answer 4). Leaving that aside, on a sound construction of Clause SEVENTEENTH, the possibility of giving notice to a party to the Lease at an address notified for the purpose was available only in respect of a party who was a firm or an individual. What Clause SEVENTEENTH contemplated was the giving of notice (1) where the party was a company, to its registered office, and (2) where the party was a firm or an individual, either (a) to the address shown in the preamble to the Lease, or (b) to such other address as had been last notified for that purpose. The Clause thus did not contemplate the notification of an alternative address in the case of a company.

[68 ] In any event, neither the address provided by Miss Forrester in January 2004 nor the one provided by Ms Mosson in October 2004 could be construed as giving an alternative address for the Landlord for the purpose of Clause SEVENTEENTH. What they were each doing was giving an address for Bonnytoun. They could not be regarded as giving an address for the Landlord, Ben Cleuch. The fact that Bonnytoun was referred to earlier in each sequence of e-mails as the landlord could not convert the statements about Bonnytoun's address into a statement, still less formal notice, about the proper address for the Landlord, Ben Cleuch. There was no evidence that the providers of the addresses were authorised to give notification on behalf of Ben Cleuch under Clause SEVENTEENTH.

(c) Discussion

[69 ] In our opinion this argument cannot be rejected simply on the basis that it was not focused in the defenders' pleadings. It was canvassed before the Lord Ordinary, and we think it right to consider it on its merits.

[70 ] On the construction of Clause SEVENTEENTH, we prefer the submissions for the defenders. That Clause is ill-drafted. As was remarked upon in the course of argument, the reference (in the case of a firm or individual) to the address shown in the preamble to the Lease is inept, since neither of the original parties was a firm or an individual. Moreover, the defenders, and their predecessors as tenant, were not a limited company, nor a firm, nor an individual. Neither of the primary provisions of Clause SEVENTEENTH could therefore apply to them. In that situation, we are of opinion that some latitude must be allowed in construing the Clause. We are of opinion that, properly construed, the possibility of identifying an address for giving notice by notifying the other party of an address for that purpose, must be taken to apply to any party, irrespective of the nature of that party's personality in juristic terms.

[71 ] It is necessary to consider the two possible sources of notification of an alternative address in chronological order, because Clause SEVENTEENTH refers to the address "last" notified. We are satisfied, however, that neither of the alternative addresses can be regarded as notification on behalf of Ben Cleuch of an address for Ben Cleuch in accordance with Clause SEVENTEENTH. The e-mails must be read as part of the sequences of correspondence to which they belonged. Each began as, or became, a request for an address for Bonnytoun. We cannot accept that what was ultimately said can be treated as if the words used had been, "On behalf of and as authorised by the Landlords, Ben Cleuch Estates Limited, I hereby notify you in terms of Clause SEVENTEENTH of the Lease that henceforth their address for the purposes of that Clause is 'Bonnytoun Estates, c/o Colliers CRE, 45 West Nile Street, Glasgow' (or, as the case may be, 'Scott Cairns Esq, Bonnytoun Estates Limited, [at the Linlithgow address]')."

[72 ] In the result, therefore, the break notices sent to Bonnytoun, c/o Colliers, and to Bonnytoun at the Linlithgow address, were given to Bonnytoun, not to the Landlords, Ben Cleuch. They were therefore invalid for the same reason as the break notice given to Bonnytoun at Pacific House.

Personal Bar

(a) The defenders' submissions

[73 ] The defenders' alternative submission (which proceeded on the hypothesis, which we have held to be well-founded, that the break notices were invalid because they did not constitute notice given to the Landlords, as required by Clause FOURTH (B) of the Lease) was that the pursuers were personally barred, by representations conveyed by their actings, from disputing the validity of the break notices. That submission was considered by the Lord Ordinary at paragraphs 140 to 155 of his Opinion, and rejected by him. Before this court the defenders submitted that the Lord Ordinary erred in so rejecting that submission.

[74 ] The submission for the defenders was that Ben Cleuch had, by the representations contained in particular in the rent invoices, justified the defenders in the belief that Bonnytoun were the landlords; that the defenders had acted in reliance on that belief to their prejudice by giving the break notice to Bonnytoun; and that it followed, without more, that Ben Cleuch was personally barred from disputing the validity of the break notice. The Lord Ordinary had erred, in particular, in holding that, despite their justified belief, induced by Ben Cleuch's representations, that Bonnytoun were the Landlords, the defenders were not entitled, without further inquiry, to rely on that belief for the purpose of giving a break notice.

[75 ] Mr McIlvride relied on what the Lord Ordinary described as the "classic formulation of a plea of personal bar", contained in the speech of Lord Birkenhead LC in Gatty v Maclaine 1921 SC (HL) 1 at 7:

"... 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."

He also made reference to Pickard v Sears (1837) 6 A&E 469, per Lord Denman CJ at 474; Freeman v Cook (1848) 2 Exch 654; Sidney Bolsom Investment Trust Ltd v E. Karmios & Co. (London) Ltd [1956] 1 QB 529, per Denning LJ at 540; and William Grant & Sons Ltd v Glen Catrine Bonded Warehouse Ltd 2001 SC 901.

[76] The Lord Ordinary began his consideration of the factual foundation for the case of personal bar by making the following finding (in paragraph 142 of his Opinion):

"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."

In paragraph 143, he continued:

"In issuing the invoices, Colliers and their predecessors were in my opinion acting as the agents (ultimately) of Ben Cleuch ... [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 representations contained in the invoices."

In paragraphs 144 to 146 of his Opinion, the Lord Ordinary discussed various ways in which the defenders acted upon the representation contained in the invoices, and concluded:

"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."

The context of the representation that Bonnytoun was the landlord was thus the demands for performance by the defenders of their primary obligation as the Tenants under the Lease, namely payment of rent to the Landlords.

[77 ] On the basis of these findings in fact, the Lord Ordinary went on to formulate a further question which he held required to be answered before the issue of personal bar could be determined. At paragraph 148 of his Opinion he said:

"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."

After referring to various of the authorities cited above, he continued (in paragraph 149):

"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."

In paragraph 150, he continued:

"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."

[78 ] On the defenders' behalf, it was submitted that the Lord Ordinary had erred in two respects in formulating the question in that way. In the first place, he had placed too much weight on the subjective intention or expectation of the representor. What he ought to have done was to consider, first, whether the defenders were in fact induced by the words and conduct of Ben Cleuch and their agents to believe that Bonnytoun were the Landlord. Having concluded that that was the case, he ought then to have considered whether it was reasonable for the defenders to have formed that belief in the light of the representations made to them. If he concluded that it was, it then followed that the intention to induce such a belief fell to be imputed to Ben Cleuch. What mattered was not what the representor intended to convey, but what a reasonable person receiving the representation would have understood it to convey.

[79 ] In the second place, the Lord Ordinary had fallen into error by proceeding on the basis that the defenders' belief that Bonnytoun were the Landlords was in some way divisible. He accepted that they were justified in believing the representations that Bonnytoun were the Landlords made, in the context of the invoices and their obligation to pay rent to the Landlords, in the invoices, but went on to consider, as if it were a separate question, whether they were justified in relying on their belief in the same representations of fact for the purpose of service of a break notice. He held, in effect, that a tenant, who was entitled to believe a representation as to the identity of his landlord made in the context of demands for payment of rent, was required nevertheless to shed that belief when he came to consider serving a break notice, and to take steps to inquire whether his belief was well founded. Belief in the identity of the landlord was not divisible in that way. There could only be one landlord. If the defenders believed, and because of Ben Cleuch's representations were entitled to believe and rely on the belief, that Bonnytoun were the landlords, there was no occasion for them to inquire as to the identity of the landlord before serving the break notice. In so far, therefore, as the Lord Ordinary, at paragraphs 152 to 154, gave consideration to whether it was reasonable for Mr Gunn to rely on the representations that Bonnytoun were the landlords when considering on whom to serve the break notice, the Lord Ordinary addressed a question that did not properly arise. Such consideration would have been required only if there had been evidence that something had occurred, after the justified belief that Bonnytoun was the landlord had been engendered, to render that belief no longer justified. There was no question in the circumstances of this case of any such event having occurred.

[80 ] The Lord Ordinary considered the effect of the letter of 23 June 2003 (paragraph 28 above) in the context of his consideration of whether it was reasonable for the defenders to rely, for the purpose of the break notice, on the representation that Bonnytoun were the Landlords. On the approach submitted by the defenders to be correct, that point did not arise. Looked at in the context of the broader question of whether the defenders were justified in believing that Bonnytoun were the Landlords, however, it was right to give little weight to the letter, the terms of which were confusing and equivocal.

[81 ] On the whole question of personal bar, the Lord Ordinary's findings in fact, as expressed up to paragraph 146 of his Opinion, warranted the conclusion that the representations made by or on behalf of Ben Cleuch justified the defenders in their belief that Bonnytoun was the landlord under the Lease. Once it was established that they held that justified belief, no more was needed as a foundation for their plea of personal bar. In giving the break notice to Bonnytoun, they acted on that justified belief. Once the belief was held to exist and to be justified, no separate question arose as to whether it was unreasonable for the defenders to act upon it for any particular purpose under the lease. The plea of personal bar should therefore have been sustained.

(b) The pursuers' submissions

[82 ] In making his submissions on the issue of personal bar, Mr Connal began with some observations about matters of fact. He referred to the letter of 23 June 2003 (paragraph 28 above). He submitted that it gave clear information as to the identity of the landlord - "Bonnytoun Estates Ltd ..., through its subsidiary Ben Cleuch Estates Ltd ... the Landlord, is prepared to make the following proposals ... SE hold the property from BCEL on a full repairing and insuring lease ...". The proposed financial obligations in options A and B were to be undertaken by Ben Cleuch. Ben Cleuch gave the undertaking about dilapidations. The context of the letter was the exploration of whether the break option would be exercised. The proposal was widely circulated, and was passed in particular to the chief executive of SET and the head of the defenders' property department (see paragraph 29 above; Lord Ordinary's Opinion, paragraph 43). The Lord Ordinary held that it was reasonable to infer that the letter was probably seen by those who decided that the break option should be exercised, and that it was reasonable for Mr Cairns to anticipate that that would be so (Opinion, paragraph 48). As a subsidiary point, Mr Connal referred to the e-mail from Mr Brown of SET to Mr Fish dated 15 January 2004 in which he mentioned that the most recent information he had was that "the property is now owned by Bonnytoun Estates Limited, through its subsidiary Ben Cleuch Estates Limited". Mr Connal also mentioned, although he recognised that it was a weak point, that the name "Ben Cleuch" appeared on the invoices, albeit not identified as the Landlord. All these circumstances should have been taken into account and in particular the letter of 23 June 2003 should have been given more weight than it was by the Lord Ordinary. Nothing could be taken from the fact that the rent was paid and accepted in response to the invoices, because the payments were made not to Bonnytoun, but, as requested, to Colliers' or their predecessors' client account.

[83 ] As to the law of personal bar, Mr Connal accepted as correct the formulation adopted by the Lord Ordinary (in paragraph 149 of his Opinion; see also paragraphs 150 and 151), namely:

"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".

That was correctly derived from the Lord Ordinary's discussion, in paragraphs 148 and 149 of his Opinion, of Pickard v Sears, Freeman v Cooke and Sidney Bolsom. Mr Connal also referred to Reid and Blackie, Personal Bar, paragraphs 4-07 to 4-09, and page 25, note 99. From the Lord Ordinary's general proposition, Mr Connal sought to derive a number of subsidiary propositions. These were: (1) If the question was what a reasonable person would have done, it was impossible to lay down in advance definite rules as to how the doctrine would be applied. (2) In considering what must have been intended by the representor, or what a reasonable person would have done, all relevant communications required to be taken into account. (3) In deciding what to do in light of the representation, it was relevant for the representee to bear in mind not only the content but also the context of the representation; if the communication was clear, the fact that it was not carefully recorded, or that the representee subjectively retained a different impression, may not matter. (4) It may be relevant, particularly in a corporate context, to bear in mind the level within the organisations at which the communication took place or was received. (5) It may be relevant, in judging what a reasonable person would do, to consider whether the topic of the representation is capable of definitive ascertainment. (6) The test is not whether the representee acted carelessly. (7) In deciding how a reasonable person would have acted in particular circumstances, the decision-maker may gain assistance from consideration of how persons with experience in the particular field would have regarded the representation.

[84 ] Mr Connal submitted that the Lord Ordinary, having heard and seen the witnesses, had the best opportunity to assess the evidence. He concluded that a reasonable person would not rely, for the purpose of giving a break notice, on a belief as to the identity of the Landlords derived from rent invoices. That was sufficient to conclude the issue of personal bar in the pursuers' favour. But that result was further reinforced by taking proper account of the letter of 23 June 2003. It was clear in its terms, and linked to the issue of exercise of the break option. The reiteration of the representation that Bonnytoun were the Landlords in the subsequent invoices was insufficient to overcome that clear information.

(c) Discussion

[85 ] The circumstances in which a plea of personal bar will be sustained were formulated by Lord Birkenhead LC in Gatty v Maclaine (at 7), in the following familiar terms:

"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."

It seems to us that the most important word in that dictum is "justified". There must be a representation made by A, whether by words or by conduct, as to the existence of a certain state of fact. B must believe the representation, and must act in reliance upon it to his prejudice. But that is not sufficient. The belief in that state of fact must be justified by the representation. It is necessary to examine that aspect of the matter more closely.

[86 ] In Pickard v Sears, Denman CJ stated (at 474) that the rule applies:

"where one by his words or conduct wilfully causes another to believe the existence of a certain state of things" (emphasis added).

In Freeman v Cooke (at 663) Parke B explained the word "wilfully" in that dictum by saying:

"By the term 'wilfully' ... one must understand ... at least that [the party making the representation] 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" (original emphasis).

The same point was expressed by Denning LJ in Sidney Bolsom (at 540-541) in the following terms:

"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."

[88 ] The question which arises in the present case, once it has been held as a matter of fact that Ben Cleuch represented, by means of the statements contained in the rent invoices, that Bonnytoun were the Landlords, is therefore whether a reasonable person in the position of the defenders would have regarded those statements as intended to be accepted as a statement of the factual position and acted upon, and would have believed them. If that question is answered in the affirmative, the defenders were "justified" in believing that Bonnytoun were the Landlords. If they were justified in that belief, and acted upon it to their prejudice, Ben Cleuch are personally barred from denying that Bonnytoun were the landlord. That is so whatever the context may be in which the induced belief that Bonnytoun was the landlord was acted upon by the defenders.

[89 ] We do not accept the defenders' submission that the Lord Ordinary erred in approaching the question of the intention of the maker of the representation subjectively. The contrary appears from paragraphs 149 to 151 of his Opinion. The point at which, in our opinion, the Lord Ordinary did fall into error was in separating the question of whether the representation justified belief in its truth from the question of the purposes for which a reasonable man might rely upon it. In our opinion, once it is held that in all the circumstances, including the circumstances in which it was made, a reasonable man would regard the representation as one which he was intended to believe and act upon, he is justified in acting on it as being the state of facts. The representor cannot then assert that the true state of facts was otherwise. No separate question arises, in our opinion as to whether the person in whom the belief is induced is entitled to rely on that belief in any particular set of circumstances, or for any particular purpose. That proposition may perhaps be subject to exception where, for example, the representation is so qualified in its terms as to convey to the reasonable man that it is not to be relied on for certain purposes, or where the circumstances of reliance are utterly remote from the circumstances with reference to which the representation was made; but the generalisation is in our opinion sound, and applicable in the present case. Where the unqualified representation is that a particular party is the present landlord under a lease, the tenant who is justified in believing that representation is, in our opinion, entitled to rely on it for all purposes of the lease.

[90 ] Turning to the circumstances of the representations that Bonnytoun was the landlord, it is in our opinion relevant to note that the defenders were formally advised on 14 October 2002 that the landlord under the lease was now Pacific Shelf 1145 Limited; that was obviously the name of a shelf company, and the defenders would therefore readily gain the impression, when the first invoice arrived a week later stating that the landlord was Bonnytoun, that Bonnytoun was the new name of Pacific Shelf 1145 Ltd. There was thus nothing at that stage to cause the defenders to doubt the representation that Bonnytoun was the landlord. That representation was deliberately made for the internal purposes of the group of companies operated by Mr Cairns, and he recognised that anyone reading the invoices might think that Bonnytoun was the landlord (see paragraph 21 above). The opportunity to clarify the position, either by intimating the actual change of name of Pacific Shelf 1145 Ltd, or by explaining to the defenders the practical reasons why the invoices represented Bonnytoun as the landlord, was not taken. The representation was repeated, quarter after quarter, and was still being repeated at the time when the break notice was given. Although the contexts other than invoices are less important, in those other contexts too no attempt was made to correct the impression that Bonnytoun was the landlord. Thus, although Mr Barr's letter to Miss Forrester of 22 December 2004 intimating an intention "to serve a Notice to Quit to Bonnytoun Estates" came to Mr Cairns's attention he did not think it of concern, or something which it was necessary to correct.

[91 ] It is no doubt correct that, in considering how a reasonable man would understand the representation contained in the invoices, consideration requires to be given also to the other apparent representations made by the defenders. We have already mentioned the circumstances in which they would readily understand that Bonnytoun was the new name of Pacific Shelf 1145 Ltd, which they had been formally advised was the new landlord. We accept that consideration must also be given to the letter of 23 June 2003. We do not regard it, however, as clear or unequivocal. It was signed by Mr Cairns as chairman of Bonnytoun. The proposals which it contained were identified in the covering e-mail as "BEL's proposals". The proposal was identified as being made by Bonnytoun (albeit "through its subsidiary, Ben Cleuch Estates Ltd, ... the Landlord"). It was Bonnytoun whose legal representatives were identified. It was Bonnytoun whose source of funding was explained. The enclosed documents identified Bonnytoun as having acquired the Premises. All these considerations have to be set alongside the statement that "SE hold the property from BCEL on a full repairing and insuring lease". While in a sense the proposal came in the context of discussion of the break option, what was then under consideration was whether or not it was commercially desirable to exercise the break option, not what the formal mechanics of doing so would be. The representations in the invoices continued to be repeated for several quarters after the letter had been sent and considered. In all these circumstances, we do not consider it would be right to regard the terms of that letter as precluding the conclusion that a reasonable man receiving the representations contained in the invoices would regard them as intended to state the true position as to the identity of the landlord.

[92 ] In our opinion the Lord Ordinary's conclusion that the reasonable inference from the invoices, in all the circumstances, was that Bonnytoun was the landlord was well founded. There is nothing in the circumstances which would, in our view, lead to the conclusion that a reasonable man was not entitled to regard the representations in the invoice as seriously made and intended to be accepted. Applying the appropriate objective test, therefore, we are of opinion that the proper conclusion is that the defenders were justified in believing the representation that Bonnytoun were the Landlords. Having induced that justified belief, Ben Cleuch is personally bared from maintaining that the facts were otherwise.

[93 ] We do not consider that it was appropriate for the Lord Ordinary to address the question whether it was reasonable for the defenders to rely on that belief for the particular purpose of giving the break notice. The defenders justifiedly believed that Bonnytoun was the landlord. One consequence of that justified belief was that they were entitled to think that the break notice should be given to Bonnytoun. It is beside the point that, if they had not been justified by the representations in believing that Bonnytoun was the landlord, various steps could appropriately have been taken to ascertain who the landlord was, and those steps would have disclosed that the landlord was Ben Cleuch. There was no occasion for them to take such steps so long as they were justified in their belief that the facts were as represented to them in the invoices. Nothing occurred to undermine their justified belief. Further inquiry was therefore not called for.

[94 ] In all these circumstances, we are of opinion that the defender's plea of personal bar should be sustained.

Result

[95 ] We therefore allow the reclaiming motion, recall the Lord Ordinary's interlocutor of 1 March 2006, sustain the defenders' fifth plea-in-law, repel the pursuers' pleas-in-law, and assoilzie the defenders from the first conclusion of the summons.

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	Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Ben Cleuch Estates Ltd v Scottish Enterprise [2008] ScotCS CSIH_1 (04 January 2008) URL: http://www.bailii.org/scot/cases/ScotCS/2008/CSIH_1.html Cite as: [2008] ScotCS CSIH_1, 2008 SC 252, [2008] CSIH 1, 2008 GWD 7-135

Scottish Court of Session Decisions