Tyco Fire & Integrated Solutions (UK) Limited v. Regent Quay Development Company Limited, 9 June 2016 – Validity of notice exercising break option in lease

Outer House case concerning the validity of a break option served by a tenant to a landlord in respect of premises in the Glover Pavilion at Aberdeen Science and Technology Park.

The lease was originally of units 3 and 4 in the pavilion and was for a period of 10 years ending in February 2014 and contained a break option exercisable after 5 years. However, in October/November 2011 the parties entered a minute of variation, which amended the lease to include additional premises (unit 1), extended the term of the lease until August 2021 and included a new break option exercisable by the tenant 5 years after the “effective date” provided in the minute of variation (on providing 6 months’ prior notice).

The tenant served a notice exercising the break option in January 2016. However, the landlord argued that the notice was invalid as the heading of the letter containing the notice referred only to units 3 and 4 (followed by the term “the Premises” in parenthesis) and not to unit 1. The landlord argued that this created confusion by attributing a new meaning to a defined term (i.e. arguing that the premises had been redefined in the letter as being units 3 and 4 without unit 1). In addition, it was argued that, when this was error was taken with the first paragraph of the letter which referred only to the lease and not to the minute of variation (although the tenant had referred to the minute of variation in the second paragraph of the letter), it had the effect that the notice applied only to the original lease and not the lease as varied by the minute of variation.

Lord Tyre rejected those arguments and granted declarator that the notice had been validly served.

The test to be applied was how a reasonable recipient with knowledge of the terms of the lease would have understood the notice[1]. Lord Tyre began by rejecting the landlord’s argument that the reference in the first paragraph of the letter to “the Lease” was to the lease prior to it being varied by the minute of variation.  The notice required to be read as a whole and it was readily apparent from the notice that the sender was fully aware of the existence of the variation and of its terms. A reasonable recipient of the notice with knowledge of the lease would have understood the notice to refer to the lease as it had been at the date of the notice (i.e. as varied.). Lord Tyre took the view there was no ambiguity.

With regard to the omission of unit 1 in the heading in the letter, Lord Tyre, despite noting that careless drafting was to be discouraged, said the following:

“…in my opinion no reasonable recipient would be misled into interpreting the notice [so as to redefine the definition of “the Premises” in the contract] or even of being left in any reasonable doubt that [there had simply been a clerical error]… I am satisfied that the reasonable recipient would not have been perplexed in any way by the error in the letter heading.  The operative element of the notice is sufficiently clear and unambiguous to avoid any such perplexity, and the fact that the ingenuity of lawyers can suggest theoretical ambiguities is not to the point.”

The full judgement is available from Scottish Courts here.



[1] Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 as recently applied in Scotland in West Dunbartonshire Council v William Thompson and Son (Dumbarton) Ltd  2016 SLT 12.

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