Outer House case concerning a GP practice operating at the Terra Nova Medical Centre on Dura Street, Dundee. Michael John Morris and others (the pursuers) were doctors who had retired from the practice. They argued that they were the current tenants of the centre and that (following a number of changes in the composition of the practice) all bar one of the current partners and the partnership practising at the centre had no right or title to occupy the premises. One of the original partners (and tenant under the lease), Dr Ritchie remained in the practice but chose neither to pursue the action nor raise defences to it.
The pursuers had bought the centre from the Dundee City Council in 1993 then entered a sale and leaseback transaction with MPIF Holdings Ltd in 2006. The lease contained a general prohibition on assignation and subletting but allowed assignations between partners in the practice without the landlord’s consent whilst requiring notification of assignations to the landlord. Despite the pursuers’ retirement from the practice, there had been no assignation of the lease to the new partners. Indeed the new partners had refused to accept an assignation of the lease from the pursuers. As a consequence, the pursuers and Dr Ritchie retained the tenancy obligations meaning that if the partnership failed to pay the rent, MPIF’s claim would be against the pursuers and Dr Ritchie rather than the partnership.
The new partners and partnership contended that none of the pursuers had occupied the premises as individuals and argued that the partnership paid the rent and occupied the centre with knowledge of the landlord and the agreement of the tenants (i.e. the pursuers and Dr Ritchie). As such, a right of occupancy subsidiary to the lease (possibly similar to a licence) had been created.
Lord Woolman rejected these arguments:
“The transfer of a real right, which includes “a right to occupy or use land”, requires to be in writing: Requirements of Writing (Scotland) Act 1995 s. 1(2) and 1(7). The defenders do not point to any document in support of their claim. Even if such an agreement could be established by actings, many questions would arise about the contours of the agreement. Who are the parties? When was it made? What is its duration? Was a new agreement made each time a new partner was assumed? Can the permission be withdrawn and if so by whom – the landlord or the pursuers or both? The complete absence of specification on these points is in my view unsurprising. It demonstrates that there was no such agreement. It is also unclear how this private arrangement would fit with the Lease. I cannot see how an agreement arose which is in some way derivative of the lease, yet contradicts its terms.”
Consequently, it was held that the new partners and partnership had no right or title to occupy the centre.
Lord Woolman also rejected an argument by the new partners that the pursuers had no title to sue due to the absence of Dr Ritchie from the action. This argument was based on the rule of common property that the consent of all common owners must be obtained in decisions relating to the management of the property (including in the granting of a lease and in a removing). However, after reviewing the authorities, Lord Woolman noted a modification of the rule to the effect that a mere squatter would not be entitled to a defence based on the rule. As it had been held that the new partners and partnership were in occupation without a right, they were therefore not entitled to query the pursuers’ title to sue.
The full judgement is available from Scottish Courts here.
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