CIN Properties Ltd v Dollar Land (Cumbernauld) Ltd

The House of Lords held that a conventional irritancy clause for non-payment of rent in a lease is enforceable and not purgeable unless the landlord's exercise of the irritancy can be characterised as oppressive or a misuse or abuse of power. Section 4 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 modifies the common law by requiring a minimum statutory notice procedure for monetary breaches, but Parliament did not extend that reform to allow broader equitable intervention in monetary irritancies. The court required that any defence of oppression must aver impropriety of conduct on the part of the landlord; mere harsh consequences to the tenant, prior indulgence by the landlord, or isolated misunderstandings by the tenant do not, without more, establish oppression.

This case concerned a sub-lease containing a conventional irritancy clause which entitled the landlord to terminate the lease for non-payment of rent if specified notice requirements were satisfied. The tenant failed to pay a large quarterly instalment due on 11 November 1988. The landlord served the statutory and contractual notice on 15 December 1988 under section 4 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985, requiring payment by 4 January 1989, and thereafter purported to exercise the irritancy.

The action before the courts included a declarator that an irritancy had been incurred and orders for removal. The tenant averred, among other pleas, that the notice did not comply with the statutory requirements and that the landlord had acted oppressively in exercising the irritancy. Procedurally the Lord Ordinary granted decree de plano on the declarator and allowed proof before answer on certain monetary claims; the tenant reclaimed and the reclaiming motion was refused by the Second Division. The tenant appealed to the House of Lords.

Nature of the claim/application: declarator of irritancy and removal; monetary claims for occupation after alleged irritancy.

Issues framed:

• whether the statutory and contractual notice requirements (section 4(2) of the 1985 Act and the lease provisions) were met, and
• whether the defenders' averments were sufficient to establish an equitable defence of oppressive or abusive exercise of the irritancy by the landlord.

Court’s reasoning and disposition: the Lords analysed the common-law authorities on irritancy, the Scottish Law Commission report and the 1985 Act. They confirmed that monetary irritancies remain subject to the common-law equitable jurisdiction to restrain oppressive or abusive exercise, but that such intervention requires an objective, pointed averment of impropriety by the landlord. The House found the notice objectively adequate and that the tenant’s pleading failed to aver conduct by the landlord which could properly be regarded as oppressive: past indulgence by the landlord and an asserted misunderstanding by the tenant’s staff were held insufficient. The appeal was dismissed.

The court also commented, with varying degrees of reluctance, on the harsh commercial consequences of strict enforceability in long building leases and observed that any broader reform lies with Parliament.

Appeal dismissed. The House held that a conventional monetary irritancy is enforceable unless the landlord has acted oppressively or abusively; the defenders’ pleadings did not aver any impropriety by the landlords and the statutory and contractual notice was objectively adequate. Accordingly the interlocutor of the Lord Ordinary sustaining the pursuers' pleas was correct.

Lord Ordinary: interlocutor of 19 June 1990 sustaining pursuers' preliminary pleas and granting decree de plano in respect of declarator (reported 1990 S.C. 351). Second Division: reclaiming motion refused (interlocutor 29 May 1991). House of Lords: appeal heard 30 March–1 April 1992; judgment delivered 21 May 1992 ([1992] UKHL 14; 1992 SC (HL) 104).