CIN Properties Ltd v Dollar Land (Cumbernauld) Ltd

A conventional irritancy in a Scottish lease for non-payment of rent is a reasonable and lawful stipulation. Once incurred, it cannot be purged by late payment unless the landlord is enforcing it oppressively.

This rule applies to long commercial leases even where termination causes the tenant a substantial capital loss and gives the landlord a corresponding benefit. Law Reform (Miscellaneous Provisions) (Scotland) Act 1985, section 4, modified the common law only by requiring notice and an opportunity to pay. Parliament did not subject monetary irritancies to the wider fair-and-reasonable-landlord standard applicable to non-monetary breaches. The courts should not create a broader exception for investment leases after that legislative choice.

The appellants held a valuable 99-year sub-lease of a shopping centre. The lease provided that non-payment of rent for 21 days, followed by failure to pay within 14 days after written notice, would produce a non-purgeable conventional irritancy. The appellants failed to pay a quarterly instalment. Payment tendered after the notice deadline was rejected, and the respondents sought declarator of irritancy and removal.

The Lord Ordinary granted decree de plano: 1990 S.C. 351. The Second Division refused the appellants' reclaiming motion. Before the House, the appellants advanced new arguments based on the unusual commercial structure, the severity of their capital loss, the allegedly penal character of the clause, a claimed right to purge, and the continuing head-lease relationship.

The central issue was whether those features took the sub-lease outside the established rule that a conventional monetary irritancy is lawful and cannot be purged in the absence of oppression.

1. Appeal dismissed unanimously. Lord Jauncey of Tullichettle delivered the leading speech. Lord Keith of Kinkel, Lord Goff of Chieveley, Lord Browne-Wilkinson and Lord Mustill agreed that the appeal must be dismissed.

2. Per Lord Jauncey, Scots law has long treated a conventional irritancy in a lease for non-payment of rent as lawful, reasonable and non-purgeable unless it is enforced oppressively. That rule was established by Stewart v Watson (1864) 2 Macph. 1414 and confirmed by Dorchester Studios (Glasgow) Ltd v Stone 1975 S.C. (H.L.) 56. The appellants did not challenge the established principles but argued that substantial capital loss distinguished a long investment lease from an ordinary lease.

3. That distinction could not be adopted after Parliament's limited intervention. The Scottish Law Commission had considered the serious commercial imbalance that monetary irritancy could cause. Parliament nevertheless enacted section 4 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 for all leases without distinction. It required notice and an opportunity to remedy non-payment. Unlike section 5 for non-monetary breaches, section 4 introduced no fair-and-reasonable-landlord standard. It was therefore inappropriate for the House to develop a special rule for long investment leases.

4. The clause was not invalid merely because its operation was penal or confiscatory in effect. Conventional monetary irritancies were already established as reasonable and lawful. An analogy with feu irritancies did not assist: even a purgeable feu irritancy remained enforceable if it was not purged, despite potentially comparable loss.

5. Lord Shand's dictum in Hannan v Henderson (1879) 7 R. 380, suggesting that conditions might be attached where a conventional irritancy caused loss of large vested property rights, did not alter the law governing leases. That subject was controlled by Dorchester Studios and section 4.

6. An irritancy terminates the contractual relationship created by the contract containing it. The continuing relationship under the separate head lease did not prevent irritation of the sub-lease.

7. Lord Keith regarded the result as unsatisfactory and Lord Jauncey shared concern about its severity. Those concerns supported further legislative consideration but did not permit a different legal result.

1. House of Lords: The appeal was dismissed unanimously. The House affirmed the refusal of the reclaiming motion.

2. Second Division of the Court of Session: By interlocutor dated 29 May 1991, the court refused the reclaiming motion and adhered to the Lord Ordinary's interlocutor.

3. Lord Ordinary: By interlocutor dated 19 June 1990, Lord Morton of Shuna held the appellants' averments irrelevant and granted decree de plano on the first conclusion: 1990 S.C. 351.