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Scottish Court of Session Decisions


You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Warren James (Jewellers) Ltd v Overgate GP Ltd [2007] ScotCS CSIH_14 (15 February 2007)
URL: http://www.bailii.org/scot/cases/ScotCS/2007/CSIH_14.html
Cite as: [2007] CSIH 14, [2007] ScotCS CSIH_14

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EXTRA DIVISION, INNER HOUSE, COURT OF SESSION

 

Lord Johnston

Lord Philip

Lord Carloway

 

 

 

 

 

 

[2007] CSIH 14

CA150/04

 

OPINION OF THE COURT

 

delivered by LORD JOHNSTON

 

in

 

RECLAIMING MOTION

 

in the cause

 

WARREN JAMES (JEWELLERS) LIMITED

Pursuers and Respondents;

 

against

 

OVERGATE GP LIMITED

Defenders and Reclaimers:

 

_______

 

 

 

Act: McColl; Archibald Campbell & Harley, W.S. (Pursuer and Respondent)

Alt: McKenzie, Solicitor Advocate; Pinsent Masons (Defender and Reclaimer)

 

15 February 2007

 

[1] This is a dispute between landlord and tenant in relation to a retail unit in the Overgate Development in Dundee relating to the construction of a clause in the relevant lease.

[2] That clause, which is concerned with the obligations incumbent upon the landlord, is in the following terms:

"4.3 Exclusivity - For so long as the said Warren James (Jewellers) Limited

is the Tenant under this Lease, not in respect of any first letting (which means the first time the Landlord let the Lettable Unit in question and not in respect of any subsequent lettings) of any Lettable Unit to lease any such Lettable Unit (other than the Premises and two other Lettable Units only) with its Permitted Use having specified as its principal trade or business the retail sale of jewellery."

[3] The pursuers, who are the tenant seek a declarator in the following terms:

"For declarator that the defenders are in breach of terms 4.3 of a lease between the pursuers and the defenders dated 25 November and 18 December 2000 and registered in the Books of Council and Session on 17 January 2001 in respect that they leased to third party in about January 2002 a first letting of a Lettable Unit (as defined in the said clause 4.3) not being a letting permitted by said clause 4.3 within its permitted use (as so defined) having specified as in its principal trade or business the retail sale of jewellery and are thereby in breach of contract".

[4] The pursuers also have a conclusion for damages which was not in issue before the Lord Ordinary.

[5] The Lord Ordinary dismissed the defences in respect of the declarator conclusion which he granted de plano and continued the case for a proof on quantum. It is against that decision that the reclaimers now appeal.

[6] The facts were not in dispute both in relation to the creation of the lease and its dates and also the fact that there were in existence at the time of the entering of the lease two other jewellery units within the development and it is also agreed that the defenders have subsequently issued a lease to permit a third jewellery unit in addition to that of the pursuers and the two existing ones. It is that action which is said to be in breach of the lease and in particular clause 4.3.

[7] The decision of the Lord Ordinary on the relevant issue is in the following terms:

"[9] The proper approach to the construction of any contractual term is to start with the words used by the parties. If those are ordinary words, they should be given their ordinary meaning, and if that meaning is sufficiently clear it must be given effect. That meaning must obviously be determined in the context of the contract as a whole. Sometimes, of course, the words used are ambiguous, either in themselves or when considered in the contractual context. In that event a number of rules of contractual interpretation may help in resolving the ambiguity. These include the use of extrinsic evidence regarding the circumstances in which the contract came to be concluded and its commercial objectives. Nevertheless, the court should not seek out ambiguities; nor should it use the rules that exist to resolve ambiguities in such a way as to create an ambiguity: Melanesian Mission Trust Board v Australian Mutual Provident Society, supra, at [1997] 2 EGLR 129, per Lord Hope of Craighead. Those principles apply in my opinion to leases in exactly the same way as other categories of contract. I must now consider their application to clause 4.3.

[10] Clause 4.3 is written in extremely poor English. Nevertheless I am of opinion that when it is broken down into its constituent parts its meaning is reasonably clear. In effect it contains a condition, a definition, an obligation and a proviso. The condition is that the pursuers should remain the Tenant under the Lease. The definition relates to the expression "first letting". This is defined as meaning "the first time the Landlord let (sic) the Lettable Unit in question and not in respect of (sic) any subsequent lettings". In spite of the faulty syntax, it is fairly clear that the intended meaning is the first occasion when any Lettable Unit in the Centre is let, as against any letting following the first. The obligation on the Landlord (including successors and assignees) is as follows: the Landlord is not to grant a first letting of any Lettable Unit where the Permitted Use in the lease of that Unit specifies the tenant's principal trade or business as the retail sale of jewellery. The proviso is that the obligation does not apply to the pursuers' premises "and two other Lettable Units only"; the Landlord's obligation is restricted to that extent.

[11] When clause 4.3 is analyzed in this way, it is clear in my opinion that the proviso is designed to state comprehensively the restriction on the Landlord's obligation. That appears to me to be the obvious meaning of the wording used, "other than the Premises and two other Lettable Units only". That wording is not qualified, and appears comprehensive in its import. Moreover, the wording used in the clause, and indeed in clause 4.1, which introduces the Landlord's obligations, is not in terms restricted to the future; in the absence of such a qualification it is difficult to see why it should apply only to future lettings rather than all lettings. The argument for the defenders proceeded in large part on the proposition that the wording of clause 4.3 looked forward, towards the future, in that it contained an obligation not to grant leases. Moreover, it formed part of the Landlord's obligations, and those too looked forward. In my opinion that is not a natural reading of the actual wording used in clause 4.3. Neither in clause 4.1 nor in clause 4.3 can it be said that a future tense is used. No doubt the obligation itself, like nearly all contractual obligations, is directed to the future conduct of the party who is bound, but the primary verb (found in clause 4.1) is in the present tense, and the provision taken as a whole does not appear to have any definite time reference. Perhaps most importantly, the wording of the proviso contains no time reference, and is accordingly equally capable of applying to past lettings and future lettings. I accordingly conclude that the pursuers' construction of clause 4.3 is correct, and that the prohibition in the clause extends to any first letting of a Lettable Unit for, broadly speaking, the retail sale of jewellery other than the Lease to the pursuers and two other lets, whenever granted. On that basis I am of opinion that the pursuers are entitled to declarator that the defenders are in breach of the terms of clause 4.3 of the Lease.

[12] The foregoing analysis proceeds entirely on the wording of clauses 4.1 and 4.3 of the Lease. When those provisions are considered in the context of a lease of a retail unit within a shopping centre, however, I am of opinion that further support can be found for the same result. The essential purpose that underlies clause 4.3 is the number of jewellers' shops that are to be permitted in the Centre during the period when the pursuers are the Tenant. The time when the lease of any such shop is granted is not obviously important to that issue. It is accordingly hardly surprising that clause 4.3 as a whole, and the proviso in particular, do not contain any time reference."

[8] The parties were not in dispute as to the essential principles to be applied in construing a clause of this type in a lease, most clearly enunciated in the House of Lords in Melanesian Mission Trust Board v Australian Mutual Provident Society 1997 2 EGLR 128. They were that words in a commercial contract shall be given their ordinary meaning and an ambiguity should not be sought. If such should arise naturally, it can be dealt with by parole evidence, but such is not necessary if there is a clear construction available on the words disclosing the common intention of the parties. Reference was also made to Coyle v City of Glasgow Council 1997 S.C. 370.

[9] Against that background the issue between the parties before us concentrated entirely on the question of construction.

[10] Mr. McKenzie submitted that the Lord Ordinary had erred in his construction of the clause, although he did not differ from the basic categorisation that the Lord Ordinary has given to the various parts of it. What in essence he said was that by reference to the opening part of the clause (the condition) the clause was looking to the future and, properly understood, was legislating for a total of five retail units, that is to say the three existing at the time of the lease, including that of the pursuers, plus two more and that given that approach the defenders were not in breach of the lease by entering into a contract with a further third jeweller, making the total in fact four. We trust we do not do disservice to the argument but as we understand it that was its essence when reduced to essentials. By way of a supplementary position Mr. McKenzie said there should be a Proof before Answer because the construction of the clause was ambiguous, to enable parole evidence to be led as to the intention of the parties as between a total of three or a total of five units being contemplated.

[11] Mr. McColl's position was essentially in total support of that adopted by the Lord Ordinary, but in particular he emphasised that if Mr. McKenzie's contention for a total of five units was correct, the word "other" contained in part of the brackets on the fourth line of the clause should be construed as meaning "additional". This he submitted strained the wording which had a perfectly clear meaning to the effect that, given the existence of three leases, including that of the pursuers at the time that their lease was entered into, that was to be the limit and the landlord was accordingly prohibited from entering into any further leases in respect of other units for jewellery purposes on a first letting basis unless there were less than three units in existence for jewellery purposes at the time of such a transaction. This was not the case in the present case and, accordingly, the landlord was in breach of the lease.

[12] We have no hesitation in supporting the position adopted by the Lord Ordinary in this case as endorsed by Mr. McColl. We consider that dividing the clause up in precisely the same way as did the Lord Ordinary the condition applies to the period in question, namely the duration of the current lease, and the prohibition is against any further letts for the retail sale of jewellery involving first letts unless there is less than three units for that purpose in existence at the time. We accept that the Lord Ordinary's approach, albeit he criticises quite correctly the language and syntax of the clause, reflects what the parties intended. This was an anti competition clause in favour of the tenants principally who would hardly be likely to wish to agree to an additional two units beyond their let being achieved. We accept that the word "other" permits that and it should not be construed as meaning additional. Therefore in the competition between the parties as between three units and five we are entirely satisfied that the appropriate figure should be three at any one time.

[13] In these circumstances the landlords are in breach of the lease. The Lord Ordinary came to the correct conclusion, and we will therefore refuse this reclaiming motion and adhere to his interlocutor.

 


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