Scottish Sheriff Court Decisions

SHERIFFDOM OF LOTHIAN & BORDERS   Case Number: A862/10
	Judgment by   SHERIFF PRINCIPAL MHAIRI M STEPHEN   In the cause   EDINBURGH TOURS LIMITED Pursuers & Appellants   against   Mr DIAMAN SINGH Defender & Respondent     _______________________

 

 

 

Act: Nisbet, solicitor

Alt: Walker, solicitor

 

 

EDINBURGH, 15 December 2011

The Sheriff Principal, having resumed consideration of the cause, refuses the appeal adheres to the sheriff's interlocutor of 17 December 2010; remits the cause to the sheriff to proceed as accords; finds the pursuers and appellants liable to the defender and respondent in the expenses of the appeal all same may be taxed by the Auditor of Court.

(signed) Mhairi M Stephen

NOTE:

1.                  The appellants are Edinburgh Tours Limited. The appellants were originally tenants of the subjects at 133 to 135 Canongate, Edinburgh. In 2004 the appellants sub-let their interest in the premises to Geraldine Elliott who later assigned the sub-lease to the defender and respondent in 2007. The defender is Mr Diaman Singh. The annual rent of the subjects was £13,375 payable by quarterly payments in advance. Although that is the rent stipulated in the sub-lease, the parties agreed that rent would in practice be payable monthly in advance. The monthly rent is £1,115. The respondent accepts that he failed to pay rent due on 1 March and 1 April and subsequently also on 1 May 2010. In terms of the sub-lease the respondent was liable to reimburse the appellants their expenses including solicitor's fees. In May 2009 the appellants required payment in the sum of £1,038.20 from the respondent who admits he has failed to reimburse these expenses but states that refusal is on account of the appellant's agents charges being excessive.

 

2.                  On 28 April 2010 the appellants' agents wrote to the respondent, in terms of Clause 7 of the sub-lease and section 4 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 (hereinafter referred to as "the Act") advising the respondent that he was in breach of his monetary obligations as a sub-tenant; advising that the notice is sent by recorded delivery post and in terms of Clause 14 of the sub-lease is deemed duly served at the expiry of two business days after the date of posting (ie 30 April 2010); requiring payment of the arrears of rent together with interest due under clause 3.4.4 of the sub-lease within 14 days of service of the notice and warning that if payment is not made within the period specified the landlord will have the right under Clause 7 (irritancy clause) of the sub-lease to terminate the lease. The appellants aver that the respondent failed to make payment within the period provided for in the notice and subsequently by further notice of 18 May 2010 which was served on the respondent by sheriff officers the appellant purported to terminate the parties lease (sub-lease).

 

3.                  The current action is for declarator of irritancy terminating the sub-lease; to ordain the respondent to remove from the premises and for decree for payment of the sums due together with interest. The appellants also seek expenses.

 

4.                  The defender and respondent in answer pleads that the sub-lease has not been validly terminated. In Answer 5 he states "explained and averred the notice dated 28 April 2010 was not served upon the defenders. A letter from Royal Mail PLC dated 28 May 2010 confirming same is produced herewith, referred to for its terms and is incorporated herein brevitatis causa. Having failed to serve an irritancy notice upon the defender, the pursuers' notice dated 18 May 2010 purporting to terminate the parties' lease was of no legal effect".

 

5.                  The appellants sought debate on their first preliminary plea which is a plea to the relevancy of the defender's averments. The appellants seek decree de plano alternatively they argue that the averments in Answer 4 should be excluded from probation and a proof before answer allowed. Following debate on 25 November 2010 the sheriff repelled the preliminary plea for the appellants and allowed parties a proof on the pleadings set out in the record (No 9 of process).

 

Appellants' Submissions

6.                  The appellants seek recall of the sheriff's interlocutor in respect that he erred in his application of the law to the statutory and contractual provisions on which the case rests. The relevant clauses of the sub-lease are Clause 7 (irritancy) and Clause 14 (notices). Clause 7 can only operate subject to the provisions of section 4 of the Act. Clause 14 relates to notices sent in terms of the sub-lease. That clause states that any notice requires to be in writing and any notice to the tenants shall be "sufficiently served" if sent by recorded delivery post to the last known address and concludes with the sentence which has caused the controversy - "any notice sent by recorded delivery post in accordance with the foregoing provisions shall be deemed duly served at the expiry of two business days after the date of posting unless the contrary can be proved".

 

7.                  However, the pre-irritancy warning notice which is the subject of debate (pursuers' letter of 28 April 2010) must be construed in accordance with section 4 of the Act which regulates such notices and the requirements of such notices. The section deals with irritancy arising from monetary breaches of a lease, as here, and sub-section 4 states:

"4(4) Any notice served under sub-section (2) above shall be sent by recorded delivery and shall be sufficiently served if it is sent to the tenant's last business or residential address in the United Kingdom known to the landlord or to the last address in the United Kingdom provided to the landlord by the tenant for the purpose of such service"

8.                  The critical term, according to the appellants, "sufficiently served" means that the sender of the notice, here the landlord under the sub-lease, must comply with the statutory requirements of service and if he does the validity of the notice quoad service cannot be challenged. Mr Nisbet for the appellants referred to Blythswood Investments (Scotland) Limited v Clydesdale Electrical Stores Limited (in Receivership) 1995 SLT 150 as authority for this proposition. Lord Cullen at page 153 states:

"Even if Clause (9^th) were held to apply to the necessary intimation by the landlord to the tenant of the exercise of the option to irritate the least it merely provides for a method by which the sufficiency of the service can be put beyond question. It does not provide an exclusive prescription as to methods by which sufficient service can be achieved."

The defenders in Blythswood had averred that the notice was not valid as the registered office had moved to the Glasgow address of the Receivers and argued that as the notices had not been sent to the tenants' registered office by recorded delivery they had failed to comply with the terms of the clause. The defenders' averments challenging the validity of the notices were excluded from probation.

 

9.                  Mr Nisbet further developed the argument for the appellants to the effect that delivery or receipt of the notice was an irrelevant consideration and relied upon the English authority of C A Webber (Transport) Limited v Rail Track PLC. That case relates to a notice purported to be sent under section 25 of the Landlord and Tenant Act 1954 by a method authorised by section 23 of the Landlord and Tenant Act 1927. It was held that provided the notice was served by a method authorised such as recorded delivery it was irrebuttably deemed to have been served. The risk of non-receipt was cast on the recipient and it mattered not whether it had actually been received. Webber considers a line of English authorities dealing with the statutory notice procedure under the Landlord and Tenant Acts. Gibson, LJ in dismissing the appeal referred to the dicta of the Court of Appeal in a number of cases including Blunden v Frogmore Investments Limited [2002] 2EGLR 29; Beanby Estates Limited v Egg Stores (Stamfordhill) Limited [2003] 1WLR 2064; Chiswell v Griffin Land and Estates Limited [1975] 1 WLR 1181 and Galinski v McHugh (1988) 57 P&CR 359. Neuberger J in Beanby said that the actual receipt of the notice played no part in the role of service of the notice under section 23 according to the earlier authorities. He said that if the vital action was posting the notice actual receipt of the notice is irrelevant. Weight was also placed on the dicta of Megaw LJ in Chiswell who stated:

"Section 23 of the Landlord and Tenant Act 1927 lays down the manner in which service of a notice can be effected. It is provided, as what I may call at any rate the primary means of effecting service, that it is to be done either by 'personal' service or by leaving the notice at the last-known place or abode, or by sending it through the post in a registered letter or (as now applies) in a recorded delivery letter. If any of those methods are adopted, they being the primary methods laid down, and in the event of dispute, it is proved that one of those methods has been adopted, then sufficient service is proved. Thus, if it is proved, in the event of dispute, that a notice was sent by recorded delivery, it does not matter that a recorded delivery letter may not have been received by the intended recipient. It does not matter, even it were to be clearly established that it had gone astray in the post."

 

10.              Turning to the purpose of section 4 of the 1985 Act the appellants state that the section stipulated certain requirements of notice. The stipulation with regard to service is perfectly clear from the terms of sub-section 4 (set out above) namely that the notice will be sufficiently served if certain requirements are met and if these are met there is no requirement for the notice to be received.

 

11. In essence the appellants' arguments suggest that Clause 14 of the lease relating to notices had no relevance to the pre-irritancy warning notice served on the respondent and therefore the sheriff erred in his interpretation of the clause and indeed in the need to interpret the clause at all in connection with service of the statutory notice. The notice sent on 28 April 2010 was a notice sent in terms of the statute not under the lease and therefore Clause 14 of the lease has no application.

 

12.              The appellants' esto position referring to Clause 14 was to the effect that the clause, if it had relevance at all in the context of the pre-irritancy warning notice could only have relevance with regard to the timing of service of the notice. The notice is deemed sufficiently served if sent by recorded delivery post to the tenant's last known address both in terms of section 4(4) of the Act and Clause 14 of the sub-lease. The final sentence of Clause 14 relates to when the notice shall be deemed duly served rather than whether the notice is served at all. The final sentence of the clause is separate and distinct from the question of service or delivery given that delivery is an irrelevant consideration. The only purpose of the phrase "unless the contrary can be proved" is the effect it may have on the date when the sufficiently served notice can be deemed duly served.

 

Respondent's Submissions

13.              The respondent accepted that there was outstanding rent due to the appellants in April/May 2010 in terms of the sub-lease (Production 3 of the appellants' First Inventory). He likewise accepted that the notice (Production 6 of the appellants' First Inventory) complied with section 4 of the Act in terms of form and content. The only fact in dispute is "whether the notice being a pre-irritancy warning notice was effectively served?" The respondent in his answers offers to prove non-service of the notice and seeks to rely on Clause 14 of the sub-lease.

 

14.              In terms of the Act irritancy must be a two stage process governed by the terms of the Act (section 4) and the parties contract (the sublease). Irritancy can only follow if a pre-irritancy warning notice is served effectively and the tenant (or sub-tenant) fails to comply with the requirement to pay the rent in arrears within the stipulated time period.

 

15.              Miss Walker, for the respondent, put forward three propositions arising from the legal and factual context:-

 

1.                  Clause 14 of the sub-lease permits evidence to be led to contradict the appellants' averments. In Article 5 of Condescendence the pursuers aver "in terms of Clause 14 of the sub-lease, the notice was deemed served on the defender at the subjects at the expiry of two business days after posting" therefore, the defence is relevant and ought to be remitted to probation.

2.                  There is no provision in the lease which allows for "deemed service" to have taken place.

3.                  Esto the respondent's position is wrong on the first two propositions the respondent is entitled to put the appellants to proof of posting the notice relied upon.

 

16.              Miss Walker, for the respondents, set out the legal context which was in effect the contractual provisions which the parties had agreed in the form of the sub-lease. The irritancy clause of the sub-lease was subject to the provisions of section 4 of the Act. The lease is the document which governs the parties' rights and obligations. Section 4 of the Act provides the minimum standards or requirements of the pre-irritancy warning notice which must be complied with before the landlord can irritate the lease. Clearly the parties in their contractual arrangements can provide for different or more generous provisions provided the minimum requirements are met. In this regard I was referred to an excerpt from the Stair Memorial Encyclopaedia Vol 13 on Irritancy.

 

17.              Miss Walker pointed out that the facts and legal context of this case differed significantly from that of Blythwood Investments Limited. That case had involved notice being given to the directors of a company in receivership. Section 4 had no application in the Blythswood case. Section 4 deals with a warning given to the tenant to comply with his monetary obligations otherwise irritancy may occur. The situation in Blyswood related to insolvency and the purpose of the notice was to give notice of a breach however the breach was not one which was capable of being remedied or rectified. The decision of the court in Blythswood had to be considered in that context and not in the context of section 4(4) of the Act.

 

18.              It was further argued on behalf of the respondent that section 4(4) of the Act is not a provision which deems service to be effected. It merely narrates sufficiency of service. There was no authority on section 4 sub-section (4) far less any authority which establishes that the sub-section is intended to provide certainty of service.

 

19.              Furthermore, the respondent's solicitor sought to distinguish the English approach from the Scottish approach. The case of C A Webber v Rail Track deal with statutory interpretation of the English Landlord and Tenant Acts. The English Acts are of some antiquity and seem to have had different a purpose and effect to the Scottish Act with which we are concerned. Furthermore, Scottish rules with regard to postal service differ from that of England. Miss Walker also sought to distinguish Kodak from the circumstances of the current case. Kodak essentially dealt with statutory interpretation of section 4(4) in so far as the mode of sending the notice was the issue in that case. It is not authority for the proposition that mere posting is sufficient to deem service.

 

20.              The principal submission on behalf of the respondent related to the correlation between the lease and the provisions of section 4 of the Act. The Act set down minimum requirements to protect the tenant. The parties were at liberty in the lease to go beyond the statutory provisions but could not derogate from the minimum requirements of the legislation. Accordingly providing the statutory provisions were met the lease should be given full effect as this represented the parties' agreement. The final sentence of Clause 14 should be given its straightforward meaning. The sentence related to service not just the date of service and it would be absurd to suggest that the sentence related only to the timing or dating of service and not to the question of whether service had actually taken place. Furthermore, the reference to any notice in Clause 14 was a reference to all notices served in terms of the lease. Commercial purpose did not greatly assist. It was open to the parties of the lease to deal with the import of Clause 7 in a different manner for example they could have simply omitted the words "unless contrary can be proved" and could have allowed the statutory provisions to prevail.

 

21.              The second or alternative proposition put forward on behalf of the respondent related to the implications of the appellants' submission that Clause 14 does not apply to the pre-irritancy warning notice. If that were to be correct then the consequence for the appellant would be that he would be required to lead evidence of service. This follows as section 4(4) in itself is not a deeming provision and evidence of service would be required as opposed to evidence of posting.

 

22.              Finally, the respondent's fall back position was that the respondent was entitled to put the appellant to proof of posting and evidence of that posting would be required.

 

Decision

23. The parties' rights and obligations flow from the lease agreed between them. The lease sets out the matters agreed between the parties which include rent, termination of the lease or contract and also notices. The contract of lease sets out the parties' respective rights and obligations. Therefore the parties in the main derive their rights and obligations from the lease. The lease, however, is not the sole source of their rights and obligations. In particular the right of the appellants to bring the sub-lease to an end in the case of non-payment of rent is subject to (1) the requirement to give notice to the tenant in terms of Clause 7 and (2) the provisions of section 4 of the Act. The "Act" imposes additional requirements of notice pre-irritancy. The statutory provisions do not operate in order to prejudice tenants but instead the notice provisions of the Act set out in section 4 (in respect of monetary breaches) are designed to provide an ultimatum or compulsitor to the tenant (or in this case the sub-tenant) so that they may remedy a breach of their obligations to make monetary payments in order to avoid the consequences which may be termination of the lease due to irritancy. The notice procedure set out in section4 is designed to provide the tenant with protection against the harsh realities of irritancy.

 

24. The Scottish Law Commission was given a remit to consider how the harshness of irritancy procedure might be ameliorated following the House of Lords decision in Dorchester Studios (Glasgow) Limited v Stone 1975 SC (HL) 56. The Law Commission recommended the "notice" procedure and the recommendation in respect of notices regarding monetary breaches became section 4 of the Act. Thus the notice procedure in section 4 sets down the minimum requirements of notice which must be given before the landlord (or the tenant in the sub-lease) can avail himself of the right to terminate the lease by way of irritancy. Given the purpose of the notice procedure it is neither logical nor reasonable to suggest that the statutory requirement to give notice should trump the parties' own wishes relating to notice where that agreement has provided both parties to the lease with an opportunity of challenging what may be regarded as "deemed service" in terms of Clause 14 of the lease. It is inconceivable that the statutory notice provisions should be construed in a way which operates to the disadvantage of the recipient of the notice when set against the parties' contractual rights.

 

25. It is my view that the statutory provisions and the contractual provisions must be read together and the question of service of the notice construed against the statutory and contractual context.

 

26. The Act (section 4) sets out the minimum requirements which the giver of the notice must adhere to before he can invoke the irritancy clause of the lease. There would be no need for a pre-irritancy warning notice if the lease itself did not allow the lease to be terminated on grounds of irritancy. The pre-irritancy warning notice (Production 6 of the First Inventory for the pursuers) is sufficiently served in terms of the statute and indeed is sufficiently served in terms of Clause 14 of the lease.

 

27. However, the defender avers that the notice was not served upon him and thus the irritancy notice of 18 May 2010 has no legal effect. The defender and respondent thus offers to prove that the notice should not be deemed duly served. He does so in accordance with the provisions of Clause 14 of the lease and therefore if he proves that service was not effected he subverts the deeming provision and therefore there being no service of the pre-irritancy warning notice the appellants are not entitled to irritate the lease.

 

28. Accordingly, set against the legislative background and the terms of the lease the English authority relied upon by the appellant seems out of step with the Scottish legislation and its purpose. If the purpose of section 4 of the Act is to provide protection to the tenant from the harsh consequences of irritancy and to provide a warning and indeed compulsitor for the remedying of the monetary breach therefore the English decisions on notices under their legislation seem incompatible with the purpose of the Scottish legislation. Placing the risk of non-delivery of a notice on the tenant, as the authorities referred to in Webber suggest, is inconsistent with giving proper notice to the tenant of the deadline to remedy the monetary breach or face irritancy. In any event the English case and other English authorities mentioned can be distinguished as they deal with the interpretation of English statutes relating to landlord and tenant; statutes that have no application to the law of Scotland.

 

29. Indeed, the Scottish authorities provide little assistance in the present case. Blythswood is a case concerned with an insolvent company to which a receiver had been appointed. The notice procedure in respect of an insolvent company has a different purpose to the notice procedure under section 4 of the Act which is specifically designed to give an opportunity to the tenant to remedy the breach by paying the rent. Section 4 has no application in the circumstances which prevailed in Blythswood, namely that of an insolvent company. The Kodak case deals solely with statutory interpretation and determines the mode of sending the notice as stipulated in section 4(4) of the Act. Kodak is not authority for the proposition that having dealt with the appropriate mode of sending or posting that the very act of posting is sufficient for service to be effected. Sufficiency of service was not the issue in the Kodak case.

 

30. The question for the sheriff in the present case appeared to be the interpretation of Clause 14 of the sub-lease and in particular the import of the last sentence of the clause which concluded with the words "unless the contrary can be proved". It is not clear whether the appellants argued before the sheriff that Clause 14 had no effect in the context of service of a pre-irritancy warning notice and that section 4 of the Act governed that notice. However, the sheriff on page 3 of his judgment states:

"There was however an issue which became the central argument at debate and which arose as a consequence of the terms of Clause 14 of the sub-lease and accordingly I simply observe in passing that while there is no authority known to the parties or to me in relation to the interpretation of section 4 of the 1985 Act I am perfectly satisfied that this is because the Act is entirely clear in its terms and import and because the point has not been thought strong enough to be raised in the appellate forum. I am therefore absolutely clear that in terms of that section, sending a document by the post office recorded delivery system in the appropriate form and to the correct address is lawful and sufficient service of the notice and would entitle the landlord to move to further procedures on the basis that he "has served a notice on the tenant"."

It appears to me therefore that the sheriff took the view that it was necessary to look at the meaning of Clause 14 which had application in the present case. The sheriff observes that the last sentence of Clause 14 has been crafted in a deliberate fashion and not by oversight or mistake. The sheriff considered the need to apply business or commercial sense to the interpretation of the clause however properly observes that the clause exists due to the agreement of the parties. He rejects the appellant's contention that the words should be disregarded or that they should not relate to the question of service but rather of timing.

 

31. It is my view that the sheriff properly took the view that this agreement between the parties should be given effect to. He observes that the particular clause, Clause 14, applies to both parties and deals with all types of notices. I would further observe that the qualification stipulated in Clause 14 "unless the contrary can be proved" must be read along with the rest of the clause and the rest of the sentence. There is nothing to support the appellant's contention that the qualification relates solely to the timing of service. Had the parties wished to crystallise the timing of deemed service at the expiry of two business days then they would have simply omitted the words which qualify the deeming provision. If they had wished to leave open the question of the date or timing of service then it could easily have been expressed by words such as "or such later date as may be proved". It is inconceivable that the parties would have contemplated a date earlier than two business days after posting given the usual effect of posting by recorded delivery but if the date or time of deemed service was to be crucial then the words I have suggested might have been appropriate. However, the use of the word "contrary" given its ordinary meaning would appear to me plainly to indicate that either party to the lease or sub-lease could prove or contradict "service" or the date of service.

 

32. The appeal falls to be refused. The consequence of this is that I support and adhere to the sheriff's interlocutor allowing proof and I will remit the cause back to the sheriff to proceed as accords. The expenses of the appeal should follow success and accordingly I find the appellants liable to the respondents in the expenses of the appeal all as the same may be taxed.