Axiom Advocates News

Latest guidance from the Inner House in relation to contractual construction

Back to News Listing

Latest guidance from the Inner House in relation to contractual construction


23 January 2020

The Opinion of an Extra Division of the Inner House has just been released in the case of Ashtead Plant Hire Company Limited v Granton Central Developments Limited [2020] CSIH 2. A copy of the Opinion can be found here (https://www.scotcourts.gov.uk/docs/default-source/cos-general-docs/pdf-docs-for-opinions/2020csih002.pdf?sfvrsn=0).

The case concerned a dispute as to the proper construction of a rent review clause of a long lease of commercial/industrial premises at Granton Harbour. In particular, one of the specified disregards, for the purpose of the calculation of the review rent, was stated to be:

    "(4) the effect on any rent of the value of any buildings or other constructions erected on and any improvements carried out to the subjects of lease."

The Pursuer and Respondent had successfully argued before the Commercial Judge that these were plain and unambiguous words, to which effect must be given. The effect of that was to "de-rentalise" the buildings on the premises, even if they had been constructed and paid for by the landlord.

The Inner House, however, was persuaded to arrive at a different conclusion, as follows:

    "[34] In these circumstances it cannot be said that the fourth disregard, objectively construed in the context of the lease as a whole, is clear in its effect. It must accordingly be construed in accordance with the fundamental purpose of clause THIRD and, importantly, with commercial common sense. When that is done, the only sensible conclusion is in our opinion that the fourth disregard was intended, on an objective basis, to relate only to improvements undertaken or buildings constructed by the tenant at its cost, or by the landlord after the date of entry under the lease. Unless it is construed in that way, the rent review provision in the lease flouts commercial common sense."

The principles of contractual construction are of course very well known. The Opinion of the Court in this case, however, provides an interesting and insightful analysis of the importance of context and purpose as part of the iterative process of construction.

David M Thomson QC, of Axiom Advocates, appeared on behalf of the successful Defender and Reclaimer.