Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2012] CSOH 125
A334/11	OPINION OF LORD WOOLMAN in the cause (1) MICHAEL JOHN MORRIS; (2) VERONICA RAINEY; (3) DAVID ARCHER RORIE Pursuers; against (1) SCOTT EASON; (2) SUSAN MURRAY; (3) SARAH‑JANE BALDWIN; (4) IAN GOURLAY; (5) TERRA NOVA MEDICAL GROUP; (6) DEREK KEITH RITCHIE; (7) MEDICAL CENTRES SCOTLAND LTD Defenders: ________________

Pursuer: MacColl; Davidson Chalmers, LLP

Defender: Davie; Burness, LLP

26 July 2012

Introduction
[1] The Terra Nova Medical Centre is located at 43 Dura Street, Dundee ('the Centre'). It is a general practice surgery. The pursuers are doctors who formerly worked at the Centre. They retired from there in 2009.

[2] There is currently one GP practice based at the Centre. It is called the Terra Nova Group Practice. The first to fourth defenders are the individual partners of the Practice. The fifth defender is the partnership itself.

[3] In this action the pursuers seek orders for declarator and removing. They maintain that they are the tenants of the Centre and that the first to fifth defenders have no right or title to occupy the subjects. That is the central issue which came before me for discussion on the Procedure Roll. The defenders also mounted a separate argument querying the pursuers' title to sue.

Background

[4] In March 1993 the City of Dundee District Council granted a disposition of the Centre to five general medical practitioners. The purchasers were Dr David Rorie, Dr Derek Ritchie, Dr Joseph Magro, Dr John Hulbert and Dr Subha Das. Subsequently two GP partnerships operated from the Centre. Their composition changed from time to time over the following years.

[5] In 2006 the partners in the first partnership were Dr Veronica Rainey and Dr David Rorie (the second and third pursuers) and Dr Derek Ritchie (the sixth defender). The partners in the second partnership were Dr Michael Morris (the first pursuer) and Dr Subha Das.

[6] They decided that it would be financially prudent to enter into a sale and lease-back arrangement in respect of the Centre with MPIF Holdings Limited ('MPIF'). After the purchase by MPIF, it leased the Centre back to the same five GPs by lease dated 15, 22 and 29 May and 2 June 2006 ('the Lease').

[7] Subsequently, there were further changes at the Centre:

a. In 2006 Dr Eason was assumed as a partner in the first partnership.

b. On 31 March 2008 Dr Das retired. The landlord released her from ongoing liabilities under the Lease. On the same date, Dr Susan Murray was assumed as a partner in her place.

c. On 1 May 2008, the two partnerships combined into a single partnership - the Terra Nova Group Practice.

d. Medical Centres Scotland Limited acquired the landlord's interest from MPIF in January 2009.

e. Between January and April 2009, the three pursuers retired from practice.

f. In April 2009, Dr Sarah‑Jane Baldwin and Dr Ian Gourlay became partners in the Terra Nova Group Practice.

[8] I understand that the other tenant under the Lease, Dr Derek Ritchie, continues in practice at the Centre. He is not a pursuer in this action. He was called as a defender for any interest he might have in this dispute. He has chosen not to enter appearance or lodge defences. Medical Centres Scotland Limited has adopted a similar position. For the avoidance of doubt, I use the term "the defenders" in the course of this opinion to refer to the first to fifth defenders.

The Lease
[9] The period of the Lease is 21 years. Unless terminated earlier, it will expire on 29 June 2027. It bears many of the hallmarks of a standard commercial lease. For example it imposes repairing obligations on the tenants. But it also contains provisions tailored to suit the fact that it concerned a GP surgery. Clause 3.15 governs the succession to the tenancy. Its key parts read as follows:

"3.15 Assignation or Subletting

(a) unless permitted by an approval under this clause the Tenant shall not assign, sublet, charge, part with or share possession or occupation of all or any part of the Premises nor hold the Premises on trust for any other person

(b) if the requirements of clause 3.15(c) are fulfilled a Tenant in partnership practising as general medical practitioners may with without [sic] Landlord's approval assign the whole of the Premises freely to and from Partners

(c) the requirements referred to in clause 3.15(b) are:

(i) the assignation is required to give effect to bona fide changes in the constitution of the Tenant's practice

(ii) following completion of the assignation:

(A) the Tenant must comprise not less than 3 Partners each entitled to Rental Reimbursement and

(B) the Tenant's practices must comprise not less than 3 Partners and

(C) the events referred to in clause 5 must not have occurred in relation to any Partner in the Tenant's practice

(iii) the Tenant is still to comply with clause 3.15(i)

...

(h) (i) within 14 days after any dealing with or transmission or devolution of the Premises or any interest in the Premises (whether or not referred to in this clause 3.15) the Tenant shall give to the Landlord's solicitors at that time notice in duplicate specifying particulars of the matter in question and at the same time supply a certified copy of any instrument making or evidencing it and pay those solicitors a registration fee of £25 or such higher sum as shall be properly incurred and reasonable at the time ..."

[10] The pursuers accept that sub‑clause (b) should be read as "without Landlord's approval". Such a clause is relatively unusual in a commercial lease. It is reasonable to infer that the Lease sought to reflect that from time to time there would be partnership changes at the Centre. Some GPs would leave or retire and others would join. In Mr MacColl's words, the Lease envisaged a continuous cycle of change. The landlord would not be unduly concerned with such changes. Any new GPs would in all likelihood be able to meet their tenancy obligations.

[11] It is in that context that the Lease was framed. But the fact that Clause 3.15 allows tenancy rights and obligations to be transferred with minimum formality should not obscure an important point. The conditions in the clause have to be met. The landlord has retained the general prohibition against any form of transfer or shared occupancy.

[12] Clause 1 of the Lease reinforces that construction. It defines "the Tenant" to include "in substitution ... the tenant's successors in title and assignees". No mention is made of any other occupancy right. Only the Tenant has the right and title to occupy the Centre.

[13] In my view, the requirement to assign is an important one. An assignation clarifies the legal position. Outgoing partners are divested of continuing obligations under the Lease. Incoming partners acquire rights and obligations. The notification requirement is equally important. The landlord is entitled to know that a transfer has taken place and to be informed of the identity of the new person.

Failure to Assign

[14] This dispute arises because during the currency of the let, no assignation has been granted. That means that the defenders are not parties to the Lease. Conversely, it means that the pursuers remain the tenants. That has important legal consequences. The pursuers and Dr Ritchie retain the tenancy obligations. If the Terra Nova Group Practice ceases to pay the rent, the landlord's claim would lie against the Tenants, not the defenders.

[15] I am not clear how this curious situation arose. It is expressly admitted in the pleadings that the pursuers called upon the first to fourth defenders to accept an assignation of the Lease, but they declined to do so. I was not informed why this happened, other than that the offer was made comparatively recently.

The Defenders' Position

[16] The defenders set out their position on the title at two parts of the written pleadings. Answer 4 states:

"Explained and averred that the Lease is granted in favour of the pursuers and Derek Ritchie as individuals. The Lease was originally granted to and has since remained with individuals as tenants. During the whole period of the Lease the Premises have been occupied by a partnership, rather than by individuals. The first to fourth defenders have never occupied the premises as individuals."

[17] That passage links with Answer 6, which states:

"[the Terra Nova Practice] has a right and title to occupy the premises. The first to fourth defenders have never occupied the Premises as individuals. The tenants in terms of the Lease allowed occupation of the Premises by the original general practice partnerships and then by the Terra Nova Group Practice. The Terra Nova Group Practice has occupied the Premises with the express permission of the tenants under the Lease. Payments of rental for such occupation have been made by standing order from the partnership bank account. The landlord in terms of the Lease is aware that the Premises have been occupied by a partnership under agreement with the tenants under the Lease. Such right of occupancy subsidiary to the Lease has been created by the tenants under the Lease and acquiesced in by the landlord."

[18] There are two preliminary points. First, the defenders do not found on any variation of the Lease. Secondly, they do not direct a plea of personal bar against the pursuers. Instead the defenders focus on the following facts. The Terra Nova Practice operates from the Centre and pays the rent. Both the tenants and the landlord are aware of the position. The landlord tacitly accepts the Practice's right to be there. It can be inferred that the tenants have given it permission to occupy the Centre.

[19] What is the nature of the proposed right of occupation? In my view that is the key question. If no such right exists, then the defences are irrelevant. I asked Miss Davie to clarify what was meant by the phrase "right of occupancy subsidiary to the Lease". She supplied a number of answers. Initially she referred to the defenders having a licence, a right to occupy, or a form of tenancy. She expressed a reluctance to place the right in any of the recognised categories, but toward the end of her submissions she indicated a preference for a licence. That term does not figure in the pleadings.

[20] There are in my opinion major difficulties with the defenders' analysis. The transfer of a real right, which includes "a right to occupy or use land", requires to be in writing: Requirements of Writing (Scotland) Act 1995 s. 1(2) and 1(7). The defenders do not point to any document in support of their claim.

[21] Even if such an agreement could be established by actings, many questions would arise about the contours of the agreement. Who are the parties? When was it made? What is its duration? Was a new agreement made each time a new partner was assumed? Can the permission be withdrawn and if so by whom - the landlord or the pursuers or both?

[22] The complete absence of specification on these points is in my view unsurprising. It demonstrates that there was no such agreement. It is also unclear how this private arrangement would fit with the Lease. I cannot see how an agreement arose which is in some way derivative of the lease, yet contradicts its terms.

[23] Accordingly, I hold that the first to fifth defenders have no right or title to occupy the Centre. The defenders failed to follow that simple mechanism for transferring the tenancy. Indeed not only did they fail to take an assignation, they declined to do so.

Title to Sue
[24] The defenders maintain a separate argument based upon title to sue. It is encapsulated in their second plea in law, which states:

"The pursuers not having averred a relevant title to sue in circumstances where their interest in the property is joint and several and not all interested parties are pursuers to the action, the action should be dismissed."

[25] The argument centres on the position of Dr Ritchie. The defenders submit that his absence as a pursuer denies the others a title to sue. Four authorities were cited in respect of this submission. I shall consider them in turn.

[26] Professor Rankine's views justly enjoy high authority in this area of the law. In relation to common proprietors, he states:

"The leading rule is that common property being a right of ownership vested pro indiviso in two or more persons, all of whom are equally entitled to enjoyment, the consent of all is requisite in the management or disposal of the subject. ... All must concur in the granting of a lease ... and in removings. Thus a removing could not go on without the consent of all the proprietors ..."

Law of Leases in Scotland (3^rd ed.) page 82

[27] But that rule is modified in an important respect. In a challenge made on this basis: "The defence would not be listened to if tendered by a mere squatter, occupying without semblance of right." (ibid) A similar rule applies where a lease is held in common: page 83. As I hold that the defenders occupy without a right, Rankine supports the proposition that they are not entitled to query the pursuers' title to sue.

[28] In Dryborough v Weir 1938 SLT (Sh Ct) 8, a man left the tenancy of a farm to Mrs Dryburgh (his widow) and Mr Dryburgh (his grandson). The farmhouse had been occupied for a great many years by Mrs Dryburgh. She was over eighty years of age and in poor health. She was looked after in the farmhouse by her daughter, who also lived there with her husband. Their names were Mr and Mrs Weir. Mr Dryburgh raised an action of summary ejection against the couple. Mrs Dryburgh did not enter appearance in the action.

[29] Both the sheriff‑substitute and the sheriff held that action should fail. In my view, that decision is readily understandable on its facts. It was conceded that Mrs Dryburgh did not wish her daughter to be evicted. Mrs Weir herself had lived in the farmhouse for some fifty years. What distinguishes the present case from Dryburgh is that we are here concerned with a commercial lease regulating the occupancy of the subjects.

[30] In any event, the sheriff's approach to the law was the same as that of Professor Rankine. He noted the general rule that "if the action were one for the removing of a tenant the pursuer could not sue without the concurrence of his co‑lessee." (page 9). But he continued:

"The rule is general and not universal, and it may well be that the Court would hold that the rule could not be pleaded by a mere intruder without any vestige of right or title. In my opinion [Mr Weir] cannot be regarded as a mere intruder. He has been in occupation of the premises for many years and has paid rent annually in respect of that occupation."

(ibid)

[31] Guidance is also provided by the decision of the First Division in Warrand v Watson (1905) 8F 253. Captain Warrand and the Burgh of Inverness were co‑proprietors of certain salmon fishings in the Water of Ness. Captain Warrand alone sought interdict against various inhabitants of Inverness. He claimed they were trespassing upon the fishings. One ground of defence related to the extent of the pursuer's title. The court queried the defender's right to take this line. Lord President Dunedin stated (at page 261):

"Now, as regards the competency of the action, it is quite clear that any pro indiviso proprietor is entitled to have a possessory action against an outsider who is troubling him in the possession of the pro indiviso property; and therefore that the action of the pursuer is a competent action seems to be absolutely clear. Let us then see if the defence of the defenders makes any difference. They first of all table certain views of the title which are inconsistent with what has been already decided; but I do not need to go into that, because the question really is whether the defenders are persons who are in titulo to table any views of the title at all. Of course the other pro indiviso proprietor might table views as to the title, but he does not choose to do so, and the defender here is therefore in no better position than this, that he merely says-'I am a person who lives in Inverness, and who, as I propose to shew, with the permission, or at least without the hindrance, of the town of Inverness, proposes to exercise the right which the town of Inverness has'; but then, if the agreement is standing, those rights do not go to fishing on anything except the eighth day."

[32] Lord Kinnear put the matter in this way (at page 263):

"Although the question of legal right as between the two pro indiviso proprietors cannot be effectually determined in this action, I have no doubt that the pursuer, as one of them, is entitled to protect the fishing, which they hold in common, from encroachment."

[33] The final authority is to similar effect: Clydesdale Bank plc v Davidson 1998 SC (HL) 51. Lord Clyde delivered the leading speech. Under reference to Erskine, he affirmed "the necessity for all [co‑proprietors] to co-operate in the removal of a tenant." (page 60E). But he also commented that "it is certainly correct that one co‑proprietor may establish a title and interest to defend the common property against encroachment by a third party" (page 61C).

[34] Following these authorities, I conclude that the pursuers do have a title to bring this action. In my view it is not open to the defenders to query the pursuers' title in this case. I wish to add an observation. It is difficult to see what else the pursuers could have done in the circumstances. They convened Dr Ritchie as a defender in the action. He has declined the opportunity to enter appearance. I cannot draw the inference that he opposes the motion for decree.

Miscellaneous Matters

[35] The instance refers to the fifth defenders as "the Terra Nova Medical Group". However both Article 1 and Answer 1 refer to "the Terra Nova Group Practice". The correct position should be ascertained.

[36] Toward the end of the debate, I granted Miss Davie's motion to amend Answer 6 by deleting the words "have occupied" in line 6 and to substitute "occupies". In my view nothing turned on the amendment, but I was keen not to decide the issue on any technical pleading point.

[37] I was informed that various attempts to resolve the dispute have taken place, including mediation. No motion to sist the cause for mediation, however, has been made.

Conclusion
[38] In the light of the discussion above, I am prepared to sustain the pursuers' pleas‑in‑law and to repel the defenders' pleas‑in‑law. It is most unfortunate that the parties have been unable to resolve matters by means of agreement. Having regard to the possible consequences of this decision, I shall put the case out By Order so that I can be addressed on further procedure. I shall not grant decree in terms of the conclusions until after that hearing.