Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2009] CSOH 141
A214/04	OPINION OF LORD GLENNIE in the cause THE LEGAL SERVICES CENTRE LIMITED Pursuers; against MILLER SAMUEL LLP, PETER MICHAEL SAMUEL, DENIS ALEXANDER RODIE, ROBERT PETER KERR, GRAHAM CHARLES EDEN, IAIN ARTHUR DORAN and SIMON JOHN BLACK HUTCHISON Defenders: ­­­­­­­­­­­­­­­­­________________

Pursuers: Haddow QC, Davies; Harper Macleod LLP

Defenders: McNeill QC, Dunlop; Brechin Tindall Oatts

27 October 2009

Introduction

[1] The pursuers are a subsidiary of Credential Holdings Limited ("CHL"), a company involved in the acquisition, development, letting and sale of commercial and residential property. The principal behind the pursuers is Barrie Clapham, the chairman and chief executive of CHL and the holder of a controlling interest therein. In late 1986 the pursuers instructed the defenders, a firm of solicitors experienced in drafting and negotiating commercial leases, to advise in relation to the negotiation and drafting of certain leases pertaining to a site at Ballater Street/Gorbals Street, Glasgow ("the site"), and, in particular, a proposed occupational sub-lease between the pursuers and the Secretary of State for the Environment ("the Secretary of State"). That occupational sub-lease was to include a rent review clause. In this action of professional negligence, the pursuers contend that the defenders failed to comply with their instructions as to the terms of the rent review clause.

Background

[2] The context in which the relevant events took place was not seriously dispute. In early 1986, the Crown Office wished to build new offices for the Procurator Fiscal at the site, close to the (then new) Sheriff Court building. The Property Services Agency ("PSA"), acting on behalf of the Secretary of State, invited tenders for the development of the site. The pursuers' tender was accepted in mid-1986. The tender panel consisted of an official Glasgow District Council ("the Council"), who owned the site, an official of the SDA, and William Fleming, the then head of PSA Scotland West. At that stage, and during the early stages of the negotiations which followed, it was envisaged that the building would be smaller than, and of an inferior specification to, that which was eventually built.

[3] Mr Clapham had been aware of the potential development at Ballater Street from as early as 1984 and had for some time been engaged in discussions about it. Once their tender had been accepted, the pursuers entered into negotiations with representatives of the PSA. For reasons which I need not go into, but which involved the provision of funding by the Scottish Development Agency ("SDA"), it was proposed that the Council, as owners, would lease the site to the SDA, who would sub-lease it to the pursuers. As a condition of the sub-lease, the pursuers were required to develop the site according to a specification agreed with the PSA, and then to let the offices (or at least the major part of them) under an occupational sub-lease to the Secretary of State for use by the Procurator Fiscal.

[4] In November 1986, the pursuers instructed the first defenders to advise them in relation to the sub-leases from the SDA and to the Secretary of State. The individual who undertook the work was Mr Rodie, a solicitor experienced in negotiating and drafting commercial leases. He is the third defender. In addition, the pursuers had already instructed and were working closely with Mungo Tulloch and Campbell Hart, both of Webster & Co. (as it was then called), a firm of chartered surveyors, to advise them on the evaluation and financing of the project. Mr Tulloch had specific responsibility for the evaluation, financing and investment appraisal of the project and prepared the Development Appraisal (6/18 of Process), which was an attempt to assess the viability of the proposed development.

[5] The dispute between the parties to this litigation involves the negotiation and drafting of the rent review clause in occupational sub-lease between the pursuers and the Secretary of State. Those negotiations were part of the negotiation of the occupational sub-lease as a whole. They were carried on between the pursuers (and their professional advisers) and the PSA, though the SDA had an interest in relation to the scheme as a whole. The main individuals at the PSA concerned in the matter were Eric Gadsbey, Bill Fleming and David Watson. Mr Gadsbey was, at the material time, a Senior Surveyor with the PSA. He reported to Mr Fleming, the Principal Surveyor, who reported in turn to Mr Watson, the Superintending Surveyor. Mr Watson took very little part in the negotiations with the pursuers, which were largely carried out by Mr Gadsbey and Mr Fleming. The solicitor for the PSA principally involved in the negotiations and matters of drafting was Fiona Bevan.

[6] It was proposed that the duration of the occupational sub-lease to the Secretary of State would be for a period of 60 years, that being the anticipated life of the Sheriff Court building. However, the site was located in an area in which, when the lease came to an end, there were unlikely to be any alternative tenants or purchasers for office accommodation of the size and quality proposed. The offices were, therefore, expected to have little or no value at the end of the lease. Accordingly, for the development to be commercially viable, the rent over the lifetime of the occupational sub-lease to the Secretary of State had to be sufficient to enable the pursuers, by that means alone, to recover their entire development costs (including finance costs) and to achieve a reasonable return on their investment. To this aim the rent review clause was critical. To ensure that the rental income to the pursuers would be sufficient over the lifetime of the lease and that the development would be attractive to institutional investors, a special rent review clause was required which would take into account not only the unusual length of the lease but also the fact that, because of the location of the site, there would be no relevant comparators for rental levels. It is Mr Rodie's role in framing the rent review clause which was ultimately agreed which is under scrutiny in this case.

[6] The negotiations between the pursuers and the PSA dragged on for many months. Agreement was finally reached on the terms of the occupational sub-lease in early October 1987. Certain amendments were agreed by exchange of missives on 20 and 26 October 1987. The occupational sub-lease was formally executed only on 21 December 1989, but nothing turns on this.

[7] The rent review provisions, as finally agreed, are to be found in Part 6 of the Schedule to the executed occupational sub-lease. Only paragraphs 1 and 2 of the provisions are of any importance for present purposes, the remaining paragraphs being concerned with arbitration and other ancillary matters. Paragraphs 1 and 2 are in the following terms:

"1. As from each Review Date the yearly rent hereinbefore provided for shall be increased to an amount (hereinafter "the Revised Rent") equal to the full market rental value of the Subjects at the Relevant Review Date.

2. The full market rent of the Subjects at each Review Date shall be such an amount as may be agreed between the Landlords and the Tenants, or determined in accordance with paragraph 3 of this Part of the Schedule, and shall be calculated by multiplying the total floor area of the Building, in square feet, as specified in Part 1(A) of the Schedule, by the prime office rental value per square foot within Glasgow City Centre, at the Relevant Review Date, together with, in addition, the rent per car parking space equivalent to that obtainable per car parking space within Glasgow City Centre, at the Relevant Review Date, multiplied by the total number of car parking spaces (that is to say, 40) leased to the Tenants. The prime office rental value per square foot and the rent per car parking space within Glasgow City Centre is to be determined on the basis of open market value at the Relevant Review Date, with vacant possession between a willing landlord and a willing tenant, without payment of grassum or premium and upon the supposition (if not a fact):-

(a) that all parts of the Subjects are then available for use for the purposes herein permitted, and

(b) that the Tenants have complied with all the obligations imposed on them by this Lease (but without prejudice to any rights of the Landlords in regard thereto)

and taking no account of:-

(i) any goodwill attributable to the Subjects by reason of any trade or business carried on therein by the Tenants;

(ii) any effect of any improvements to the Subjects (to which the Landlords shall have given written consent) carried out by the Tenants otherwise than in pursuance of an obligation to the Landlords;

(iii) the destruction of or damage to the Subjects or the Common Parts or any part thereof by the Insured Risks or otherwise in any manner of way whatever;

(iv) any effect on rent of the fact that the Tenants may have been in occupation of the Subjects; and

(v) all fittings and fixtures affixed to the Subjects carried out with the approval of the Landlords either by the Tenants or a permitted sub-tenant;

and in all other respects on the terms and conditions of this Lease."

[8] The pursuers complain that the clause as drafted was ineffective to achieve its purpose. The problem is said to arise from the inclusion at the end of paragraph 2 of suppositions (a) and (b), disregards (i)-(v) and the same terms reference ("and in all other respects on the terms and conditions of this Lease"). I have italicised the parts of which complaint is made. Without the suppositions (regards) and disregards and the same terms reference, it is said that the clause would have operated in such a way that the revised rent would be calculated simply by multiplying the (contractually assumed) square footage of the total floor area of the building by the prime office rental value within Glasgow city centre at the date of review, without any reference to such matters as the age of the building, its size and specification, its location or the length of the lease. The pursuers say that, as drafted, the clause allowed such matters to be taken into account in a manner adverse to their interests.

The issues
[9] The pursuers' case is simple. The defenders, and particularly Mr Rodie, failed to follow their instructions. That has caused them a loss of rental income over the period of the lease to date and will continue to cause them a loss of rental income for the duration of the lease. The defenders' case is equally simple. What he did was done with the approval of the pursuers. Esto what he did or some of it did not have the approval of the pursuers, his actions caused the pursuers no loss. And it any event, the pursuers have brought their case too late: it has prescribed.

[10] The issues arising from these respective positions can be broken down under the following heads. I list them in the order put forward by the defenders:

(1) Liability - was there a failure to follow instructions?

(2) Prescription - has the pursuers' case prescribed?

(3) Causation - did any failure to comply with instructions cause the defenders any loss? and

(4) Quantum - what is the correct measure of loss and is the sum sued for by the pursuers excessive?

I propose to deal with each of these heads in turn.

Liability

[11] In Article 3 of Condescendence, the pursuers aver that Mr Rodie was instructed by them in or about November 1996; that he was told the nature of the project and instructed to prepare a draft Lease incorporating "appropriate rent review provisions"; and that he produced a draft lease which was submitted by the pursuers to the solicitor for the Secretary of State for consideration. They go on to say that after Mr Rodie was first instructed in November 1996, a draft Lease was negotiated between Mr Rodie (acting on their behalf) and the solicitor acting on behalf of the Secretary of State. In including in the rent review provisions the various suppositions and disregards and the same terms reference, Mr Rodie failed to carry out his instructions. Although the pursuers put their case on the basis that the defenders (and Mr Rodie) were in breach of a duty of care to them in respect of the drafting of the lease, there is no need to look too closely at the ambit of any duty of care owed in this case. The defenders accept that if the lease was not drafted in accordance with the instructions given to them, then they are liable.

[12] The case therefore hinges on the instructions given by the pursuers to the defenders. But that question is not as one-dimensional as might at first glance appear. The issue is not only what Mr Rodie was told to do by Mr Clapham but also what responsibility was undertaken by Mr Rodie, Mr Clapham and Messrs Tulloch and Hart of Webster & Co, the pursuers' other professional advisers. This involves an assessment not only of the dialogue between Mr Clapham and Mr Rodie, but also of that between Mr Clapham and Messrs Tulloch and Hart and between Mr Rodie and Messrs Tulloch and Hart. For this reason it is necessary to examine, rather laboriously, the relevant meetings and exchanges by reference to the correspondence and other documents.

The evidence

[13] One problem in attempting to reconstruct exactly what took place is that the events with which this action is concerned occurred over 20 years ago. Some of those who might otherwise have given evidence were no longer alive and other witnesses, though able to be called, had a necessarily imperfect recollection of events. In such circumstances I found it difficult, in general, to place much reliance on the recollection of witnesses when unsupported by the documentation. A further difficulty was that it was not always possible to work out precisely when and in what sequence some of the documents in the bundles before the court came into being. In one area of the case -concerning which drafts were in circulation at which times - the difficulty to which this gave rise was serious. Apart from that, however, it was generally possible to piece together the events as they unfolded from the letters, memos and notes of meetings and telephone conversations as supplemented and explained by the oral evidence. Parties helpfully provided the court for the purposes of the proof with agreed (almost) chronological bundles of documents, the authenticity of which was agreed in a joint minute. Since the contemporaneous documents assumed a greater than usual importance in this case, I am particularly grateful to parties and their agents for their efforts in this regard.

[14] The main evidence for the pursuers on issues relating to liability came from Mr Clapham. He gave evidence in chief by reference to a witness statement prepared for the purpose of this action and was cross-examined on that and other matters. The witness statement was made more than 20 years after the events in issue and his oral evidence was given significantly after that. I formed the view that he was an honest and careful witness but that, inevitably, his recollection of events was often imperfect. He was frequently unable to recollect what had been discussed at meetings. Further, where he did express his recollection of certain matters with certainty - and this was almost exclusively in the province of what instructions he had given to Mr Rodie - this was, in my opinion, a certainty which was, at least in part a result of his own reflection on and reconstruction of events in light of the problems that had subsequently arisen. As a result, I considered that I had to be careful about accepting parts of his evidence which were not supported by the documents.

[15] The pursuers led evidence also from Mr Rodie, Mr Hart and Mr Tulloch. Mr Rodie had also produced a witness statement for the purposes of the proof, more than 20 years after the relevant events. In addition, he had given a precognition to Mr McKenzie and Mr Hunter, solicitors with Harper Macleod, in December 2002 and January 2003, in connection with an action between the pursuers and the Lord Advocate at the time of one of the rent reviews under the occupational sub-lease. He was cross-examined under reference to that precognition, and Mr McKenzie gave evidence as to the circumstances surrounding the taking of it. Mr Rodie was, perhaps understandably, somewhat hesitant and defensive in the way in which he gave evidence, but I formed the view that he too was endeavouring to assist the court, though his ability to do so was hampered by the passage of time since the events about which he was asked to give evidence. Mr Hart gave evidence under reference to his witness statement and was able to assist on reconstructing what had probably taken place at one or two meetings. He was a willing and truthful witness but laboured under the same disadvantage as others in trying to remember events which had occurred more than 20 years ago. Mr Tulloch, by contrast, at first gave his evidence with great reluctance until it transpired that he was not at risk of being sued in connection with this matter - he was made a third party but subsequently decree of absolvitor was made in his favour. After that I am satisfied that he did his best to assist on the matters put to him but he often made it clear that he could not remember and his evidence cast little light on what had gone on.

[16] Finally, on this part of the case, the pursuers called Mr Gadsbey. He was the only representative of the PSA side called to give evidence, since Mr Fleming and Mrs Bevan were no longer alive and Mr Watson had retired. Mr Gadsbey had sworn an affidavit in 2000 in connection with the litigation between the pursuers and the Lord Advocate to which I have referred, and he gave a witness statement for the purpose of this action confirming the contents of that affidavit and dealing with an additional point which had arisen since then. He, too, did his best to assist on matters in which he was involved but he frequently volunteered that his recollection was vague ("it rings a vague bell", "I have a vague recollection", "I recall vaguely", etc.). Overall I did not consider that his evidence, vague as it was and given from the PSA side of the table, was of much assistance in the task of unravelling the communications between Messrs. Clapham, Tulloch, Hart and Rodie on which the question of liability in this action hinges.

[17] Because the documentary evidence was of particular importance in this case, I have thought it appropriate to set it out in some detail in this Opinion. I do not propose to refer in detail to the evidence given in respect of every document to which I refer. I have, however, endeavoured to take account of all the evidence given in relation to the documents and have reached my conclusions in light of my assessment of that evidence.

The facts in detail

[18] I can pick up the story by referring to Mr Tulloch's note of a telephone conversation (6/15) between himself and Mr Clapham on the morning of 10 June 1986, discussing an anticipated yield for the investment. It appears that Mr Clapham's thinking at that stage was that the rent at review would be indexed to buildings then (i.e. in June 1986) let at £7 per square foot. Mr Tulloch was unhappy with this. According to his note, Mr Tulloch commented that:

"it was absolutely essential that it should be geared to around 90% of prime office rentals as it would then be assumed that the specification was prime at each review. There should therefore be excellent rental growth. In fact, the buildings currently let at £7 per square foot are of relatively poor specification and one does not want to be tied with them."

Mr Tulloch told Mr Clapham that it was essential that it should be assumed on review that the building was fully finished to the normal specification, with all services completed, cabling in and all fully finished, including carpeting, otherwise, if the building was not finished, there would not be any comparable for the purpose of the review.

[19] There was a meeting with the SDA on 10 June 1986 (see 6/18(a)) at which the SDA agreed to a number of proposals, including one that the Procurator Fiscal's office be leased back to him at an initial rent of £245,000 per annum on a long lease with five year reviews index linked to 85% of prime Glasgow office market levels for a period of 60 years.

[20] On 1 September 1986 Mr Tulloch wrote to Mr Clapham (6/19) about the proposed development, commenting that it was extremely difficult to value it. His reasons were as follows:

"the investment must be considered 'odd ball'. The location is probably one of the most important factors in determining value, and in this instance the office development is to be located in the Gorbals some distance from the city centre. The Gorbals is, unfortunately, still deemed to suffer from severe social problems and the use of the building is unfortunately associated with 'the criminal classes'.

The prospect of future rental growth is of course the other major factor in determining value, and in this instance it has been decided to gear rental value at review to 85% of new prime office buildings rentals in the city centre at the date of the review. There is no doubt that gearing is very much preferable to no gearing at all, as there is very little likelihood that there would be any comparable to draw upon for evidence when negotiating rent reviews. Fund managers, however, treat such artificial arrangements with trepidation, as they lead to disputes at the time of rent review, and do not actually reflect market value. There will be additional concern due to the fact that the investment will be leasehold."

[21] In a "Note for File" dated 22 October 1986 (6/20(a)), under the heading "Lease - Some Points to Remember", Mr Tulloch noted that gearing of the entire building was to be 85% of the rent for new prime office buildings in the city centre at the time of review.

[22] It is clear, therefore, that by October 1986 the pursuers were anticipating that at each rent review the revised rent would be geared to the rent for Glasgow city centre prime office buildings. The percentage was not yet finalised, nor had there been any discussion either within the pursuers' team or with the PSA of the wording of the rent review clause to be adopted.

Mr Rodie first instructed

[23] The defenders, and Mr Rodie, first became involved in this matter in late November 1986. According to Mr Clapham the defenders were introduced by a Mr Forbes of Vico Properties Scotland. Mr Tulloch wrote to Mr Rodie (6/22) and arranged that he should attend a meeting at the offices of Webster & Co on Monday, 24 November 1986 to be introduced to "my client", Barrie Clapham of Credential Holdings. He noted that if the development were to proceed, "much legal work will be required and I will be able to give you a preliminary outline at the meeting".

[24] At that meeting the outline of the project, and Mr Rodie's involvement in it, were discussed. Mr Rodie's handwritten notes of the meeting (at 6/23 of Process) include the following:

"PFs lease - PRE-LET

27500 net office

9,000 net secure storage

not less than 40 spaces - exclusive to the building

£245,000 p.a.

F.R.I. occupational sub-lease

60 yrs

5 yr RRs - no comparable

__________________________

RR clause:- (a) 85%: GEARING FACTOR of prime Glasgow city centre

office rents at the relevant R.D. = hypothesis = prime

(b) office = x

storage = % of x

= y"

The figures 27500 and 9,000 refer to the square footage then proposed for the building. PF stands for Procurator Fiscal, RR for rent review and FRI for full repairing and insuring. The note does not contain any reference to Mr Rodie being told that the clause was to exclude any reference to the age of the building or the terms of the lease.

[25] According to Mr Clapham, Mr Tulloch's letter of 1 September 1986 (6/19) formed the basis of the discussions at the meeting. He said in evidence that he told Mr Rodie that he and Mr Tulloch had developed the principles by which rent would be reviewed but he needed a solicitor to give effect to this. According to his statement (para. 24) he explained to Mr Rodie on this and subsequent occasions that:

"the rent determined at review must have no relation to the building to be let or any factor related to the building to be let or to the terms of the lease of the building to be let, but rather must be derived by reference to a factor other than the building to be let or a factor relevant to the building to be let."

In cross-examination he insisted that although he could not "stand here and say I remember the conversation", he did remember talking Mr Rodie through the principles and objectives, and was confident that this was what he had told Mr Rodie; and, further, that he had emphasised the need for the rent review provisions to be artificial. I have some doubts as to how precise Mr Clapham could have been at this stage, given that these matters had not yet been agreed, or possibly even discussed in any detail, with the PSA. It seems to me that this is an instance of Mr Clapham, having persuaded himself as to the correctness of his position, allowing his recollection of events to be expressed with more certainty than is in fact justified.

[26] It was agreed that Mr Rodie would prepare a draft occupational sub-lease as well as a draft ground lease.

[27] In a letter to Mr Rodie dated 29 November 1986 (6/24), referring to the meeting, Mr Clapham said this:

"I trust you will now be able to proceed to set forth a draft lease for the P.S.A. on the terms which we discussed but covering the more delicate areas such as storage in the basement and indexation linking of that facility as well as of course indexation linking of the offices on the upper floors. To clarify one important point, please do keep in mind that we are not providing a purpose built building for the P.S.A. but an office building of size and dimension which they will be able to usefully employ. Similarly we are not fitting out the building under the same contract or deal, although we do expect to be given the Contract of completing the building for their occupation under a separate Contract. Under that heading I would expect to include such items as provision of partitions and internal doorways, finished lighting, finishing ceilings, finishing floors, etc., although basic services, plumbing, heating, and outer frame work and floor finishes would be included in the initial building/ lease."

If it was clear, as Mr Clapham maintained in evidence, that the rent at review was to be fixed without reference to any characteristic of the building or the terms of the sub-lease, it is difficult to see the relevance of these points about the specification or fit out of the building in the context of the rent review provisions. This is a recurrent theme of the early stages of discussion.

[28] In response to Mr Clapham's letter of 29 November 1986, Mr Rodie wrote on 1 December 1986 (6/25), stating that he was currently preparing first drafts of the ground lease and the occupational sub-lease and that he was waiting to hear from Mr Tulloch "who, you will recall, is to fill in some of the blanks regarding rent reviews, index linking, etc".

[29] There is a note on file (6/26) suggesting that Mr Tulloch telephoned Mr Rodie with the basics of the rent review clause. The note reads:

"85% of prime at date of review. Town Centre prime = best. No grassum/ premium."

That is consistent with Mr Rodie's note of what he was told at the meeting, but is no more than an outline indication of the main feature of the proposal.

[30] On 17 December 1986 Mr Clapham wrote to Mr Rodie (6/27) stating that he had had a meeting with the SDA and promised them that he would have a draft lease available for consideration by them and the PSA by Friday 19 December. He said this:

"I know you are meeting Mungo [Tulloch] on Wednesday with a view to discussing the rent review clause and understand that basically the rest of the lease is straight forward, in order and available now.

Can you please therefore, finalise something, albeit in draft form and telephone my office in order that we can collect not less than four copies by Friday as I wish to distribute them to the S.D.A. and the P.S.A. on Friday in order that they can consider the matter prior to a meeting which is to be held between the S.D.A. and the P.S.A. on Monday of next week."

[31] Mr Rodie replied on the same day (6/28) to say that he was in fact meeting Mr Tulloch at 3 pm "with a view to finalising the rent review clause to be inserted in the draft Occupational Sub-lease". In anticipation that the wording of the rent review clause could be adjusted quickly, he enclosed with that letter inter alia copies of a draft occupational sub-lease, noting that the documentation had been prepared in considerable haste and should be treated as a first drafts which would be the subject of negotiation and possible amendment as a result of Mr Clapham's discussions with the SDA and PSA the following Monday.

The first draft

[32] There is a difficulty in identifying all the drafts of the occupational sub-lease, and particularly the rent review clause, through to the time at which it was entered into. That is a matter of some significance and the difficulty is one to which I shall revert later. There is, however, no doubt that the draft sent by Mr Rodie under cover of his letter of 17 December 1986 (6/28) was that which is found in the productions at 6/30 and, in a revised form, at 6/36. That draft was clearly based upon a style used by Mr Rodie's firm and bears the typewritten date of 18 December 1986. It runs to some 38 pages of typed clauses. The copy at 6/36 is heavily revised in manuscript and has written on it, along the top of the first page, the words:

"ORIGINAL TRANSMISSION DRAFT.

Now superseded as at 22/7/87".

It is not clear from the documents alone which, if any, of the manuscript amendments were on the draft as sent by Mr Rodie on 17 December 1986 and which were added on one or more occasions between then and 22 July 1987. Mr Clapham identifies the clean copy at 6/30 as being the draft sent to him on 17 December. External evidence - for example, Mrs Bevan's comments in her letter of 12 May 1987 (6/38) about their policy being to require arbitration rather expert determination in the event of dispute, which appears to be a response to having been sent the typewritten draft proposing expert determination - supports this.

[33] On this draft (i.e. the draft at 6/30 without any of the manuscript alterations), the rent review provisions appear in Schedule Part 4 which begins on p. 29 of the sub-lease. The relevant part of these rent review provisions reads as follows:

"Rent Review

1. As from each review date the yearly rent hereinbefore provided for shall be increased to an amount (hereinafter 'the revised rent') calculated in accordance with the provisions of paragraph 2 of this part of the Schedule as at the relevant review date.

2. The revised rent payable for the subjects at each review date shall be such an amount as may be agreed between the Landlords and the Tenants or determined in accordance with paragraph 3 of this Part of the Schedule as representing the revised rent of the subjects computed according to the following formula:-

(a) in the case of the subjects, (exclusive of car parking spaces),

= X x area of subjects, (expressed in square feet),

(exclusive of car parking spaces) x 85

100

Where X is the highest rent per square foot at the relevant review date obtained for any office premises (but not necessarily of the same floor area as the subjects) occupying a prime location in the City of Glasgow, but disregarding any grassum or premium paid by either party to the other, and,

(b) ..."

Sub-para. (b) sets out a similar formula for the car parking spaces. Para. 3 provides that if the full market rental value cannot be agreed the matter is to be referred to an independent Chartered Surveyor acting as an expert and not as an arbiter, but in the version at 6/36 there is a note in the margin saying that this should be reconsidered, subject to instructions. Apart from helping to identify the state of the draft when it was sent to Mrs Bevan, nothing turns on this aspect of the clause.

[34] The origin of this draft occupational sub-lease can be traced to certain other documents in the productions. At 6/17 is a style of lease emanating from the defenders dated 18 June 1986, identified at the top left-hand corner of the title page as:

"Standard Lease

Doc. Name: Lease 11

Location: Disc D".

The rent review clause in that document, also at Schedule Part 4, has been heavily revised in manuscript to introduce the wording which is later to be found in typescript in the draft sub-lease (6/30) sent by Mr Rodie on 17 December 1986. The relevant amendment to the rent review clause in 6/17 is contained in a Paper Apart, which is a typed page with revisals in Mr Rodie's handwriting. The Paper Apart in effect completely re-writes the rent review clause in the typed document so as to delete altogether the suppositions, disregards and same terms provision which were in the original typed form. Other manuscript alterations to the typed document at 6/17 also find their way into the typescript of the draft sub-lease at 6/30. On the first page of the document at 6/17 there is an instruction to the typists from Mr Rodie, asking them urgently to retype the document and make five copies of it. It is clear, therefore, that Mr Rodie based his first draft of the proposed occupational sub-lease on one of the styles kept by his firm; and that the draft which he sent to Mr Clapham on 17 December 1986 was a version of that style revised to reflect both his own consideration of what changes were needed and, in respect of the rent review clause, the input of Mr Tulloch.

[35] It is not in dispute that Mr Tulloch had some involvement in the drafting of the rent review clause. A question which has to be addressed in considering how matters developed is: how much involvement and with what effect? At 6/29 there is a copy of the typed page, which, with manuscript revisals, formed the draft rent review clause in the Paper Apart at 6/17. That page contains certain handwritten revisals which are different from those put on by Mr Rodie. It also contains a note at the top of the page referring to a meeting with Mr Rodie at 3 pm on 17 December 1986. It is apparent, although I do not think the point was put to him, that that handwriting must be Mr Tulloch's. The second page of 6/29 is a Note for File dated 17 December 1986 bearing Mr Tulloch's initials, which refers to a rent review clause relating to some other offices in Stornoway. That clause, at the top of which Mr Tulloch has written "from one of our old files", contains a formula for the calculation of rent at rent review dates which bears a resemblance to, and may have provided the inspiration for, the draft rent review clause for the Ballater Street project at 6/29 and 6/17, which was incorporated into the draft occupational sub-lease (6/30) sent to Mr Clapham on 17 December 1986. In other words, although the draft occupational sub-lease as a whole was based on a style used by the defenders previously, the rent review clause may have had its origin in a style previously used by Mr Tulloch.

[36] The meeting fixed for Monday, 22 December 1986 took place at 10 am at the offices of the SDA. It was attended by Mr Clapham (for part of the time) and Mr Tulloch, by Mr Morris representing the SDA and by Mr Gadsbey representing the PSA. Mr Rodie was not present. Both Mr Morris and Mr Gadsbey were accompanied by legal advisers, the legal adviser for the PSA being Mrs Bevan. A note of the meeting taken by Mr Tulloch (6/31) records that, after Mr Clapham had left, there was a discussion about the draft lease. Mr Gadsbey had not had a chance to look through it, but the rent review clause was discussed - it is to be inferred that it was in the form found at 6/30 or 6/36 - and Mrs Bevan suggested an alternative formula. According to the note:

"Mr Tulloch explained why the proposed rent review clause was necessary from an investment point of view, as even if rents were geared to Glasgow city centre, the building was still located in the Gorbals and the investment had to be written off over a period of 60 years."

Mr Gadsbey indicated that he would come back with an alternative. The note goes on to record that:

"After the meeting, Mr Tulloch had another word with Colin Morris. He emphasised that it was absolutely essential that the rent review clause be agreed as the project would not be feasible unless the rent review clause favoured the landlord due to the location of the property. We should therefore stick in our heels and the rent must be reviewed to the highest rental values achieved, not relating to a building the same age as the subject property."

This was the first specific reference in discussions with the PSA, or indeed even within the pursuers' team, to a requirement that the age of the building should be disregarded at review. No mention is made at this point of disregarding the length of the lease.

[37] On the same day, Mr Tulloch wrote to Mr Clapham (6/32) referring to the discussions about the rent review clause after he (Mr Clapham) had left the meeting. He noted that the PSA would agree to the 85% gearing but that they were "going to stick in their heels on the matter of the purported age of the building at the date of review". He said that the PSA were going to get back to them with a proposal but commented that:

"if the development is to be feasible, we cannot agree to their proposal as it stands - i.e. at the 20th year the rent to be geared to 85% of the rental value of similar buildings of similar age in the city centre."

[38] Further, it is clear from Mr Tulloch's note and his letter to Mr Clapham that there was as yet no agreement with the PSA that the age of the building was to be disregarded. There had been no discussion with them about other suppositions or disregards. As between the pursuers and the PSA, therefore, the parameters of the rent review process were still at large.

[39] It must be stressed that Mr Rodie was not present at the meeting and there was no evidence that either Mr Tulloch's note of the meeting or his letter to Mr Clapham were ever passed on to him. On the 23 December 1986, Mr Clapham wrote to Mr Rodie (6/32(a)), having already spoken to him on the telephone, referring to various difficulties which had arisen and which he was working to overcome. The letter did not contain any reference at all to the discussions about the draft rent review provisions between Mr Tulloch and others at the meeting of the previous day.

[40] Matters went quiet for a while, no doubt due to Mr Tulloch's reiteration, in his letter of 22 January 1987 (6/33) to Mr Clapham, of his view that the rent review gearing would have to be agreed satisfactorily with the PSA "to ensure that the proposed scheme is acceptable to a purchaser". He thought that before they broached the subject further with the PSA, they should wait until such time as the PSA was more committed. He would therefore avoid any further response to the PSA/ SDA until receiving Mr Clapham's instructions.

[41] Between the end of 1986 and mid-1987, consideration began to be given to the detailed requirements for the Procurator Fiscal's office and it became apparent that an enhanced specification was required, which would inevitably add to the cost of the development.

[42] Mr Tulloch met Mr Clapham on 8 April 1987 and wrote to him on the following day (6/34) saying that it was "absolutely essential that we now endeavour to get an overall office rental for the entire property and there should not be different rates allocated to the office and storage accommodation". He went on to discuss the question of the specification within the building in the context of rent reviews. He said this:

"After the meeting, you still indicated that you hold the view that the PSA should be provided with a building completed to shell specification only. Both Campbell [Hart] and I hold the view (and strongly) that they should be provided with a finish similar to a standard specification. Otherwise, there will be problems at rent reviews, as we are endeavouring to compare the building to schemes in the city centre which will be completed to standard specification. With respect, your proposal will only lead to dispute at rent review and any prospective purchaser of the investment would anticipate this when reading the lease which is complicated enough already."

One is tempted once again (see para.[27] supra) to ask why, if it was clear that the rent at review was to be fixed without reference to any characteristic of the building, questions of specification should be of any relevance. I am aware, of course, that the pursuers were anxious to overcome the doubt which investors or prospective purchasers might entertain as to whether an artificial rent review clause would work, and for that purpose might wish to take steps to re-assure them, but Mr Tulloch's concern appears to be about the effect questions of specification would have at rent review itself. This passage, to my mind, shows once again the lack of clarity on the pursuers' side about how precisely they wanted the rent review provisions to operate.

[43] On 11 May 1987 (6/37), Mrs Bevan, the solicitor representing the interests of the PSA, sent Mr Rodie a copy of the draft lease with revisals which she had discussed with Mr Gadsbey marked in red. This probably refers not to the occupational sub-lease but to the draft head lease. The letter anticipated a meeting the following Thursday.

[44] On the next day, 12 May 1987, Mrs Bevan wrote (6/38) with revisals to and comments on the occupational sub-lease. Under reference to the rent review provisions in Schedule Part 4, however, she said that she had not received final confirmation that the rent review provisions had been agreed and she had accordingly left the provisions in Mr Rodie's draft untouched. There was obviously no agreement as yet from the PSA on the proposed rent review provisions.

[45] The meeting at the offices of the PSA on the morning of 13 May 1987 was attended by, amongst others, Messrs Clapham, Tulloch and Hart, and Messrs Fleming and Gadsbey of the PSA. A note of the meeting (6/39) was kept by Mr Tulloch. The meeting was to discuss the rent review clause, the initial rent and the gearing. As regards gearing, Mr Tulloch records making the point that "due to the fact that the building was substantially larger than first anticipated", they would require a higher gearing element, i.e. a higher percentage of prime office rents, since there would be less investor interest in such a large building. As regards the rent review clause, he noted that the PSA did not want the rent review clause to relate to prime locations but to the city centre as a whole. More importantly, the PSA were adamant that the rent "should be reviewed to buildings of similar specification and age at the time of review". According to the note, Mr Tulloch was likewise adamant that the whole project was "unfundable" on that basis. At best, he said, he might be prepared to recommend that it be reviewed to buildings up to five years old at the date of review. He explained that investors had to be offered a carrot, as the building itself was located in the Gorbals. He went on:

"There was a suggestion by us that the clause should read something like 'new buildings, or buildings not more than five years old, occupying prime office locations in Glasgow City Centre, completed to a standard specification affording a floor area in the region of 20,000 sq. ft. on the assumption that the building is let on a 25 year lease with five yearly rental reviews'."

There was discussion about the fact that the initial brochure submitted to the SDA stated that reviews would be related to 85% of Glasgow prime office rental values at the time of review. It was suggested that a variance from this was therefore a concession to the PSA. It was left that the PSA would come back with their proposal.

[46] Again, Mr Rodie was not present. He said in evidence that he was not made aware of the PSA's views as expressed at the meeting.

[47] Despite both sides being adamant in their views as to the content of the rent review clause, Mr Clapham said that he knew that Mr Fleming wanted the building and that there would ultimately be no problem in concluding the sub-lease. He said that the compromise mentioned in the passage quoted above was not put forward as a firm proposal. Nonetheless, the note shows that a number of questions - including whether to take account at review of the age and specification of the building, the size and location of any comparator, as well as the length of the lease, were all still up for discussion at this stage.

[48] I should note that, in addition to the draft of the rent review clause on which Mr Rodie had worked, the documents before the court include another draft in a different form (7/14 p. 88). Mr Rodie said that it was not one of the defenders' drafts. There was a suggestion that it originated from Mr Tulloch, but Mr Tulloch denied that it was his. Mr Clapham said that he had never seen the document before and that Mr Tulloch's job was to advise on what was needed to make the sub-lease more acceptable to institutional investors, not to draft it. It is not clear whether this draft was ever discussed. The only relevance of this document, if it was discussed, and I can make no finding as to that, is that it contained suppositions and regards and a same terms reference of the type complained of in the occupational sub-lease as finally executed.

[49] Mr Rodie and Mr Clapham met on 14 and 15 May 1987 (see 6/44). The productions contain no note of those meetings. However, by letter of 15 May 1987 (6/40), Mr Clapham wrote to Mr Rodie with a brief summary of one of the meetings and his understanding of what was to happen from then on. Most of the specific points are of no direct relevance to the present dispute. However, it is to be noted that towards the end of the letter Mr Clapham writes this:

"Unfortunately, there is not, in front of me at the present time, a copy of the occupational sub-lease, but I do recall that in the latter parts there were a number of points that you wished to change and, on reflection, I would not disagree with you."

Mr Clapham said in evidence that he did not recall what these points were. His letter continued:

"Please accept my apologies for allowing insufficient time for you to pursue the various points in the Leases as you would wish and I can assure you I will leave all day the next time. On reflection you were quite right in pursuing these points and I would not wish to deflect you in any way.

Please therefore accept my apologies and indeed my thanks for your tenacity in that respect; I am sure it will serve us well."

There was no explanation from Mr Rodie as to what points he was pursuing.

[50] On 18 May 1987 (6/41), Mr Rodie wrote to Mrs Bevan enclosing, amongst other documents, the up-to-date travelling draft of the occupational sub-lease "bearing further revisals made by my firm following upon our meeting". This was probably the draft at 6/36 (see above).

[51] Mr Rodie copied that letter to Mr Tulloch (6/42), asking him for comments inter alia in relation to the rent review provisions. On the same day, he wrote to Mr Clapham (6/42(a)) enclosing copies of those letters and the up-to-date travelling draft of the occupational self-lease (i.e. the draft at 6/36).

[52] It is apparent from Mr Rodie's letter to Mr Clapham of 11 June 1987 (6/45) that, up to this time, Mr Rodie had been involved in some 15 separate meetings relating to this proposed transaction since November of the previous year. A file note prepared by Mr Rodie (6/44) shows four such meetings since 15 May 1987. In addition Mr Clapham confirmed that there would have been many telephone calls.

[53] On 12 June 1987, Mrs Bevan wrote to Mr Rodie (6/46) enclosing a clean draft offer and referring to the proposed occupational sub-lease (or "sub-under-lease" as it was referred to in that letter). Again, this would have been 6/36 or a variant thereof. She indicated that she had not been able to discuss the terms of the draft with Eric Gadsbey before he went off on leave and therefore she preferred to leave any further negotiations on the terms until his return. In the last paragraph of that letter she said this:

"I understand that the only main outstanding matter in relation to the draft lease is the rent review provision. Mr Clapham, I gather, is moving away from his original third option of a specified comparison of rental values. I think on balance, if there is to be a change in direction, it might be best if you were to let me have a revised rent review provision to take account of your clients present thinking and I could then consider this with the estates surveyor."

Mr Clapham said in evidence that he did not have two or three options. It may be that Mrs Bevan had in mind that there was originally a proposal emanating from Mr Clapham - though whether it crossed the divide to the PSA I do not know - that the rent at review be index-linked to offices then being let for £7 per square foot.

[54] A memo of 17 June 1987 (6/47), which appears to have been typed at the dictation of Mr Clapham, showed that amongst the "outstanding points re P.S.A." was "Finalisation of review and gearing".

[55] On 18 June 1987, Mr Clapham wrote to Mr Rodie (6/48) about other aspects of the proposed deal, but concluded with a "PS" in the following terms:

"P.S. The outstanding points with the P.S.A., namely - Legal Fees, Rent review clause, rent, specification, assignation of rights and assignation Clause will be dealt with and hopefully resolved in considerable substance in the course of the next week between myself, Mungo [Tulloch], Campbell [Hart] and the P.S.A. Thank you."

[56] Mr Rodie replied on 22 June 1987 (6/48(a)), again referring to a number of matters. However, in the context of a proposal from the PSA that the agreement should be reached and that leases should follow in terms "to be agreed between the parties", which Mr Rodie regarded as unsatisfactory and likely to be unenforceable, Mr Rodie referred to the parties being

"... relatively far down the line with the draft Occupational Sub-lease to P.S.A. subject to yourself, Mungo [Tulloch] and Campbell [Hart] sorting out the matters referred to in your post script ...".

[56] This exchange suggests that Mr Clapham, Mr Tulloch and Mr Hart were all very much involved in the finalisation of the rent review clause. Mr Clapham acknowledged this, but sought to emphasise that their role was to deal with the commercial aspects of it. When finished, they would instruct a lawyer, such as Mr Rodie, to put it into legal form. In principle that should cause no difficulty. I was not persuaded that it was as straightforward as that in practice.

[57] On 23 June 1987, there was a meeting between the PSA (represented by Mr Fleming) and Mr Clapham, Mr Hart, and "our Design Team" (as Mr Clapham referred to them in a letter at 6/49). There is a note of that meeting, prepared by Mr Hart, at 6/51. Mr Rodie was not present. It appears from his fax of later the same day (at 6/50) that he was invited to attend but that he did not receive notification in time to enable him do so. Nor was Mr Tulloch present. Mr Hart's note (6/51) says this about the relevant parts of the draft occupational sub-lease:

"Gearing - MFT [Mr Tulloch] to write to Bill Fleming justifying cases for uplift to 90~95~100%. Comparisons essential.

Rent Review Clause - as Brief.

85% (or whatever) of prime Glasgow City centre rents at the review date.

Tenants Improvements etc ignored at review. This is now okay as the new space is improved."

"As Brief" is a reference to a brochure of 13 May 1986. The words "Tenants Improvements etc ignored at review" suggest that it as intended to include within the rent review clause a specific disregard of tenants' improvements and possibly other matters. If this is a correct understanding of the note, it again suggests a lack of clarity in thinking on the pursuers' side (and possibly within the PSA also) since, as I have already noted (see paras.[27] and [42] above), there is no need for any disregards at all if all that is meant to be done at review is to multiply the agreed floor area of the building by the prime office rental per square foot in Glasgow city centre at the review date.

[58] There is an undated memo from Mr Hart to Mr Tulloch (out of sequence in the bundle of documents at 6/14(b)) which appears to relate to this meeting. In that memo, Mr Hart refers to a "very useful meeting" with Mr Clapham and Mr Fleming. There is discussion of the detailed specification for the building, the specification now being "at a high enough level to facilitate funding at a later date". He noted that Mr Clapham has now taken on board the advice that raised flooring is "really essential from the point of view of funding and indeed rent reviews". He went on to make these comments on the rent review clause:

"As far as the rent review clause is concerned, this will be drafted in terms of the brief, in other words, 'the revised rental value will be 85% of prime Glasgow city centre office rents at the date of review'. There is no restriction as to size of buildings to be taken into consideration for comparative purposes, which I think is fair from both parties points of view, indeed the more one tries to 'bolt onto' the review clause, the more blurred it becomes at the edges. I am quite happy with what is proposed but it would be helpful if you would confirm that all is in order from the funding point of view."

He went on to say that although they were still at 85% of prime rents, Bill Fleming was prepared to consider an adjustment if they were to write to him setting out grounds for achieving an improvement on that. It should be noted again that there was a concern that the pursuers might find it difficult to attract potential investors (or, in due course, purchasers) on the strength of an artificial rent review clause, at least until the clause had been tested and found to achieve the desired result. Mr Hart suggested that, even if the PSA was not able to offer a significant improvement in terms of gearing (i.e. the percentage applied to prime Glasgow city centre office rents at the date of review), they might instead be prepared to sign the lease earlier "which would enable us to test the review clause at an earlier date". However, the PSA thought it was very unlikely that this would happen.

[59] Mr Clapham wrote to Mr Rodie that afternoon, Tuesday 23 June 1987 (6/49), informing him about the meeting and what had been discussed. He said this about the rent review clause in the draft occupational sub-lease:

"Rent Review Clause was discussed and we have agreed to leave it very simple, and for Campbell and myself to liaise with you in putting forward our final proposals for the wording of this and also for the gearing of the Rent Review."

Having mentioned the assignation clause, Mr Clapham continued as follows:

"Therefore the wording of this Clause, Rent Review Clause, Rent Review Gearing, Assignation of Rights against Professional Team, and the question of payment of Legal Fees have all now to be re-drafted between yourself, myself and Campbell Hart to revert back to the P.S.A. for finalisation with them and Fiona Bevan as urgently as possible. ..."

Because of holidays looming, he suggested a meeting on the Thursday following (25 June 1987).

[60] It was put to Mr Clapham that this letter (in contrast to previous letters) showed that he saw himself and Messrs Tulloch and Hart as interested not only in the commercial aspects of the deal but as part also of the team drafting the rent review clause. Despite Mr Clapham's denial, I consider that that fairly reflects his position at the time.

[61] By a letter on the same afternoon (6/50), Mr Rodie confirmed his availability for a meeting on the Thursday, but intimated that he would be abroad from the following day, Friday, until 17 July 1987. He continued:

"That being the case, therefore, I should be obliged if you would ask Campbell [Hart] and/or Mungo [Tulloch] to let me have the draft Lease back with their detailed proposals marked up on the draft (albeit in layman's language) by no later than 12 noon tomorrow [i.e. Wednesday 24 June] in order to give us, as you put it, 'a real chance' to get the revisions back into the court of Fiona Bevan on Thursday. That request should not really be too difficult for Mungo/Campbell since the entire draft documentation was sent to Mungo Tulloch on 18^th May (a copy of my letter enclosed) on which date I asked Webster & Co to let me have their specific comments.

If, therefore, Webster & Co can get the principles of the wording jotted down on a piece of paper or marked up on the draft Occupational Sub-lease already in their possession by noon tomorrow, I will be in a position to firm up on the drafting and place revised wording before Fiona Bevan for her consideration on Thursday."

The reference to having sent the entire draft documentation to Mr Tulloch on 18 May was a reference to his letter to Mr Tulloch at 6/42. Mr Clapham, in his statement, said that he understood that Mr Rodie was asking Messrs Tulloch and Hart to comment on the commercial principles rather than the legal drafting of the document. To my mind, in light of the previous exchanges, it went further than that. Of course, Mr Rodie as the lawyer would be responsible for the final wording; but Messrs Tulloch and Hart were known to be involved with Mr Clapham in discussing what was to go into the clause and Mr Rodie clearly expected them to let him have their detailed proposals.

[62] There is no document in the material before the curt showing what response was forthcoming from either Mr Tulloch or Mr Hart.

[63] The meeting on Thursday, 25 June 1987, duly took place at the offices of Webster & Co and was attended by Mr Hart, Mr Tulloch, Mr Clapham and Mr Rodie. Mr Rodie's note of the meeting is at 6/53. It records that the size of the building was now to be about 57,900 square feet. Mr Rodie noted that there was to be "no discount on rent" (meaning that they were now looking to achieve 100% of rental values for prime city centre office space) and, at the rent review, there was to be no reduction in rent for storage spaces. So far is concerned the formula for the rent review provisions, he noted the following:

"RR - for prime Glasgow City Centre office

accommodation at the date of RR.

open market rental value

[a marginal note reads: 'prime G1 city centre office rents']

willing landlord & willing T

prime city centre office rents

comparisons

equivalent per sq. ft. of prime Glasgow City Centres

(on a new standard FRI lease)?"

On a separate sheet, but as part of the note taken at the meeting, Mr Rodie sketched out the basis of the rent review clause to be included within the occupational sub-lease. That note is in the following terms:

"ROUGH DRAFT

as representing the equivalent of Glasgow City Centre prime office rental values per square foot at the relevant review date together with a rental per car parking space equivalent to that obtained for car parking spaces in Glasgow City Centre at the relevant review date

+ the assumption of compliance with all obligs [i.e. obligations] (whether a fact or not)".

[64] Mr Clapham said in evidence (see para. 51 of his statement) that he regarded this as a very important meeting. Its principal purposes were to finalise their position on the structure of the rent review mechanism, to instruct Mr Rodie on the drafting required and to agree on the commercial position they would adopt in discussions with the PSA about the gearing to city centre prime office rental values. The position which they all agreed upon at the meeting comprised his instructions to Messrs Tulloch, Hart and Rodie going into the final stages of the negotiations with the PSA on the terms of the occupational sub-lease. He added that, as matters transpired, the PSA subsequently "agreed the terms which were settled upon at this meeting and they ought to have been unambiguously incorporated into the sub-lease by Mr Rodie." He repeated in para. 54 of his statement:

"The terms of the sub-lease set out in the note of this meeting are those which Denis Rodie was instructed to achieve in the drafting and agreement of the rent review provisions in the sub-lease. These terms did not alter subsequent to this meeting. I did not have any discussion at this meeting, or at any other time prior to early October 1987, with Denis Rodie concerning the insertion into the rent review provisions of a general set of regards and/or disregards and/or a same terms provision or the like. ..."

Again, in para. 78 of his statement he said that there was no discussion with Mr Rodie about the need for suppositions and disregards.

[65] I shall, of course, have to assess this account of the meeting in light of all the evidence and documentation. Two points may, however, be made at this stage. First, there clearly was some reference at the meeting to suppositions (if not disregards) being included in the rent review clause, since Mr Rodie's draft prepared at the meeting ends with the note "+ the assumption of compliance with all obligs (whether a fact or not)". It appears to have been accepted that that supposition at least should be included. Second, and this is a point I have made before (see paras.[14] and [24] above), it seems to me that Mr Clapham overstates, for perhaps understandable reasons given the length of time he has lived with the case, the certainty that existed at the time and the certainty of any instructions which he gave. The pursuers were attempting to finalise their negotiations with the PSA. If Mr Clapham had an understanding with Mr Fleming on the strength of which he was certain that he was going to get what he wanted, this was never communicated to Mr Rodie. As far as Mr Rodie was concerned, while he was responsible for drafting the clause, he was doing so with detailed input and from Mr Clapham and Mr Tulloch and his drafts were subject to constant review suggestion by them. I am satisfied that this was not a case, typical of many instances where lawyers are instructed to draft a document, of Mr Rodie being told what was to be achieved and then being told to go away and draft a clause which achieved that objective. The instructions, and the circumstances in which they were given, were much less clear then that.

[66] After that meeting of 25 June 1987, Mr Hart wrote to Mr Clapham (6/52), expressing his pleasure with the new specification, which included raised flooring throughout the building and suspended ceilings incorporating integrated light fittings. He considered that having a high-class specification would be "vital for the purposes of future rent reviews". He said this:

"We have therefore now what is essentially a specification which would compare to a standard spec. built office development in the city centre which will assist in funding and will be vital for the purposes of future rent reviews.

The fact that the tenants will now be presented with an essentially fully fitted building will avoid any dispute at review, in the context that the tenants would wish to exclude tenants improvements."

He concluded by referring to steps to be taken by Mr Tulloch to produce appropriate comparisons to justify the increase in gearing towards 90 or 95% or ideally 100%.

[67] At risk of labouring the obvious, if the clause was to work as the pursuers say that Mr Rodie was instructed to make it work, the specification would be irrelevant at review.

The second draft

[68] Mr Rodie's "Rough Draft" sketched out at the meeting of 25 June 1987 was converted into a more formal typed draft dated 26 June 1987. This typed draft is at 6/54 of process. I refer to it as the second draft because it represents a wholesale re-writing of the rent review clause, replacing the arithmetical format in 6/30 with a more conventional textual description of the mechanics and parameters of the rent review. The handwritten changes are shown at 6/54(a). Like its predecessor, the draft at 6/54 is on a page headed "SCHEDULE Part 4". The relevant part of the rent review clause in that draft is in the following terms:

"Rent Review

1. As from each review date the yearly rent hereinbefore provided for shall be increased to an amount (hereinafter 'the revised rent') equal to the full market rental value of the subjects at the relevant review date.

2. The full market rental value of the subjects at each review date shall be such an amount as may be agreed between the Landlords and the Tenants or determined in accordance with paragraph 3 of this Part of the Schedule as representing a rental value per square foot equivalent to prime office rental values per square foot within Glasgow City Centre at the relevant review date together with, in addition, a rental per car parking space equivalent to that obtainable for car parking spaces within Glasgow City Centre at the relevant review date, without payment of a grassum or premium with vacant possession and upon the supposition (if not a fact) (a) that all parts of the Subjects are then available for use for the purposes herein permitted, and (b) that the Tenants have complied with all the obligations imposed on them by this Lease (but without prejudice to any rights of the Landlords in regard thereto) and disregarding the destruction of or damage to the Subjects or any part thereof by the Insured risks or otherwise in any manner of way whatever."

It is to be noted that there was no mention of the actual or agreed floor area to be valued in this way. This omission of "the multiplicand" was pointed out by Mr Clapham by telephone and was made good later.

[69] Mr Clapham gave evidence that he looked at the rent review clause carefully and that, apart from the omission of the multiplicand, "the draft seemed to achieve what I had instructed Denis Rodie to achieve by his drafting at the 25 June 1987 meeting". This in itself is of some interest. He was checking what his lawyer had done and would, it can fairly be assumed, have got back to him if he thought that any aspect of the clause was not ho he wanted it. He said in evidence that the draft did not include "a set of general disregards or a same terms provision". This is only in part correct. It is true that there was no same terms reference. But the draft clause included suppositions (a) and (b) and a disregard relating to destruction and damage. These would have been unnecessary, indeed superfluous, in the clause which Mr Clapham maintains that he wanted. In cross-examination he accepted that there were these suppositions and disregard and that he did not take them up with Mr Rodie. He explained that omission by saying that he thought they were there for the avoidance of doubt. For whatever reason, it is beyond doubt that Mr Clapham saw that certain suppositions and a disregard were included and did not have any objection to their inclusion.

[70] Mr Rodie said in his statement that Messrs Hart and Tulloch advised him to include the suppositions in his draft. I do not think that either of them was asked whether or not this was correct. In his oral evidence he said that he was not an expert rent review surveyor and was not instructed as to the impact that the length of the lease could have at rent review. However, he accepted that it could possibly have an effect. He thought that a large number of regards (suppositions) and disregards had become part of the current thinking in June or July. He gave careful consideration to them and thought that they applied to the building which was the subject of the lease. When it was put to him that the intention was to get the prime rent irrespective of age, specification and the duration of the lease, he accepted that that was arguable. His understanding, however, was that they were looking for prime rent but not irrespective of age and duration. He received little or no help from Messrs Hart and Clapham, but they certainly did not tell him that the rent at review should be without reference to age or specification.

[71] Mr Rodie sent Mr Clapham a copy of the revised draft (6/54) on the same day (6/55). He described the draft as:

"a clean draft of the rent review clause for your approval and to enable you to continue your discussions with Fiona Bevan/Mr Fleming/Mr Gadsbey of the PSA during my absence from the office".

He noted that he had also sent a copy to Mr Tulloch "for his comments (if any)". In his letter to Mr Tulloch (6/56), he pointed out that he would be away on holiday over the following two and a half weeks and asked him to let certain others within the defenders know if he had any comments during that period.

[72] On 2 July 1987, while Mr Rodie was away on holiday, there was a meeting between Mrs Bevan, Mr Gadsbey, Mr Clapham and a "representative of Websters" (presumably either Mr Tulloch or Mr Hart). The meeting is referred to in a letter dated 9 July 1987 (6/59) from Mrs Bevan to Mr Eden of Miller Samuel, who was looking after the transaction in Mr Rodie's absence. I was not told anything about this meeting. The day before the meeting, and presumably so that it could be discussed at it, Mr Clapham had sent Mr Rodie's revised draft (6/54) to Mrs Bevan without any alteration (see 6/57). Mrs Bevan told Mr Eden that they "spent most of our time discussing the terms of the rent review provision ...". Mr Clapham said that he did not remember what was discussed at the meeting. This absence of recollection is in marked contrast with his certainty as to what he told Mr Rodie on certain occasions. Be that as it may, it is clear that discussion of the draft rent review clause proceeded in Mr Rodie's absence. It is difficult to see what they could have been discussing if by that stage Mr Clapham had given Mr Rodie clear instructions as to the content of the clause and was leaving the drafting of it to him.

[73] At the same time as the rent review clause was being considered, Mr Tulloch was in the process of trying to negotiate with the PSA regarding the "gearing" of the rent for the new offices in relation to prime market rents in Glasgow city centre. On 8 July 1987, he wrote to Mr Gadsbey (6/58) explaining the need to increase the gearing but also commenting upon the role that he, and Webster & Co., were playing in the project. It may be helpful to set out certain parts of this letter in some detail. The letter begins by commenting that it "is appropriate that we first identify Webster and Co's role in the above project". It goes on in the following terms:

"It is not the intention of our clients to dispose of their interest in the foreseeable future. However, it is the role of Webster & Co as the developers' surveyors to ensure that, on completion of the project, our clients hold an investment which is marketable. Not only must we ensure that our clients receive a return commensurate with the risk associated with this type of project, but the end product must meet all investment criteria, i.e. location, standard of construction and future potential for refurbishment, tenant covenant, prospects of rental growth and size of investment package.

As requested, we provide you with some recent investment sales which relate to modern office buildings occupying secondary locations, let to tenants of excellent covenant. The level of yields achieved proves that location is the most important factor in determining price.

...

Our initial agreement to 85% gearing gave cognizance to the poor locational aspect of the property.

Albeit, despite the gearing, the investment will still command a high yield, as purchasing investors are adverse to such artificial arrangements and will still discount price. Furthermore, our clients do not own the heritable interest and the investment will have to be 'written off' over 60 years, which is the proposed duration of the sub-lease.

...

As regards the subject property, the original brief provided for a building of approximately 36,500 sq.ft. I do not wish to enter into the subject of building costs, etc, but I am sure that costs of construction, together with fees and finance, would have exceeded £3 million. Given the size of the development, we advised the developers that there would be a limited demand for the investment but given the 85% gearing, they were still prepared to proceed on the agreed basis.

The position is now entirely different. The Procurator Fiscal's latest requirement is for a building of approximately 58,000 sq.ft. net.

We are sure that you will agree that it is not only a requirement, but also a necessity, that the developers be compensated for their substantially higher cash injection and for the additional risk now associated with this project. If we were ever instructed to dispose of the investment, there would be very few buyers in the market place for reasons given above. In order to encourage interest, a higher return would have to be offered to prospective purchasers and this can be arranged by one of two ways:

Either raise initial rental to £10 per square foot with the gearing remaining the same at 85%.

Or increase the gearing to 100% but keep the initial rental at the same level as currently being negotiated.

At this office, we believe that there would be resistance from the Procurator Fiscal to paying such a substantial initial rent, and there would be a preference for the second proposal, as it will not come into effect for five years after the date of entry, or from around seven years from today's date.

In summary, whilst we initially agreed to 85% gearing, the position is now entirely different due to the changed requirement by the Procurator Fiscal, which was not of our volition at all! We trust therefore that you can now understand the reasons for our request for the increased gearing and furthermore, that you will be able to recommend acceptance, so that we can conclude our negotiations."

[74] This line of argument was followed up in a number of meetings held in late July 1987 between Mr Clapham and Mr Tulloch and Mr Gadsbey, Mr Fleming and Mr Watson of the PSA: see 6/60 and 6/62. Mr Watson ultimately agreed to support the request for gearing to be at 100% of Glasgow city centre prime office rental.

The second draft revised

[75] There was a long meeting between Mr Rodie and the PSA on the afternoon of 3 August 1987 at which a number of points were discussed. On the following day, 4 August 1987, Mr Clapham wrote to Mr Rodie (6/65(a)) raising certain matters including the question of assignation and, in point 3, the rent review clause. As to this he said:

"3. Mungo can see no reason why the tenants should not exclude their fixtures and fittings in an assessment at the rent review time but suggests that this be double checked with Campbell Hart before inclusion in the final Lease."

[76] In his letter in reply later that same day (6/65) reporting on the meeting of 3 August 1987, Mr Rodie noted that the PSA has taken a very tough line on certain matters including those in the numbered paragraphs of Mr Clapham's letter (6/65(a)). So far as concerns point 3 of Mr Clapham's letter, Mr Rodie commented:

"3. By fixtures and fittings, they explained that they mean the works of fitting out (the occupational services) and they wish these to be disregarded in any rent review. Please confirm, after discussion with Mungo, that this is acceptable."

[77] I refer to this exchange because it helps to identify what draft of the rent review clause was in circulation at that time. It is clear that at this stage Mr Clapham, Mr Rodie and the PSA were all working on the basis of a version of what I have called "the second draft", i.e. the draft set out at 6/54 of process. But it is equally clear that it must have been a revised version of that second draft. The reference to tenants' fixtures and fittings makes no sense in relation to the second draft as set out at 6/54. That phrase is not used in 6/54. However, at 6/64 - also at 6/54(b) and again at 6/88 - there is a revised version of that draft. This contains revisions made by Mrs Bevan sometime between 26 June 1987 (the date that 6/54 came into being) and mid-August 1987 and specifically refers to tenants' fittings. It reads as follows, with Mrs Bevan's amendments marked in bold in italics:

"Rent Review

1. As from each review date the yearly rent hereinbefore provided for shall be increased to an amount (hereinafter 'the revised rent') equal to the full market rental value of the subjects at the relevant review date.

2. The full market rental value of the subjects at each review date shall be such an amount as may be agreed between the Landlords and the Tenants or determined in accordance with paragraph 3 of this Part of the Schedule as representing a rental value per square foot equivalent to prime office rental values per square foot within Glasgow City Centre at the relevant review date together with, in addition, a rental per car parking space equivalent to that obtainable for car parking spaces within Glasgow City Centre at the relevant review date, without payment of a grassum all premium with vacant possession and upon the supposition (if not a fact) (a) that all parts of the Subjects are then available for use for the purposes here in permitted, and (b) that they kept tenants have complied with all the obligations imposed on them by this Lease (but without prejudice to any rights of the Landlords in regard thereto) and disregarding (i) all fittings and fixtures affixed to the subjects carried out with the approval of the landlords either by the Tenants or a permitted sub-tenant; (ii) occupation by the Tenants or permitted sub-tenant; (iii) goodwill (iv) any effect on the rent of any permitted alterations or improvements carried out by the Tenants or a permitted sub-tenant - the destruction of or damage to the Subjects or any part thereof by the Insured risks or otherwise in any manner of way whatever."

[78] Some of Mrs Bevan's revisals may have come into being after the exchanges to which I have referred. It seems probable that the version of the second draft at 6/64 came into being at around this time.

[79] Mr Gadsbey said under reference to this document that Mrs Bevan would normally alter a clause on his instructions or recommendation (or that of Mr Fleming or Mr Watson). He accepted that Mrs Bevan's revisals inserted the disregards normally to be found in a standard rent review clause. But he could not explain how they came to be inserted, standing the terms of Mr Fleming's letter of 10 September 1987 (6/82) to which I shall refer.

[80] It is also clear that this revised second draft, including the suppositions and disregards, both as originally there (i.e. in the version at 6/54) and as later inserted by Mrs Bevan, were the subject of detailed consideration by Mr Clapham and Mr Tulloch.

[81] Indeed, the disregard concerning tenants' fixtures and fittings was the subject of direct discussion between Mr Clapham and Mr Gadsbey of the PSA. On 6 August 1987 (7/13 p. 161) Mr Clapham faxed Mr Tulloch referring to a meeting that he had set up with Mr Gadsbey for the Monday, 10 August 1987 to discuss various points. He asked Mr Tulloch urgently (before the meeting) to let him have his written comments on the assignation clause and the rent review clause.

[82] After the meeting, on 11 August 1987, Mr Clapham wrote to Mr Rodie (6/67), confirming an earlier telephone conversation with him, and noting, under reference to point 3 of his previous letter (about tenants' fixtures), that he had agreed with Eric Gadsbey:

"to insert the word 'approved' prior to the words 'tenants fixtures and fittings' in the Rent Review Clause."

He asked Mr Rodie to set up a meeting with Mrs Bevan to conclude all documentation.

[83] Mr Clapham also sought Mr Tulloch's advice on the matter. On 12 August (6/69(a) Mr Clapham again wrote to Mr Rodie noting that:

"Mungo is quite satisfied with the exclusion of tenants fixtures and fittings provided the word 'approved' is added."

[84] On 13 August 1987 Mrs Bevan telephoned and left a message for Mr Rodie that she had confirmed with Eric Gadsbey that he had reached agreement with Mr Clapham on outstanding points and that no meeting was necessary (see 6/70). There is no contemporaneous note of the discussions between Mr Gadsbey and Mr Clapham but it is to be assumed that it covered all the outstanding points, including the question of tenants' fixtures and fittings and the rent review clause as a whole.

[85] On Monday 17 August 1987 Mrs Bevan faxed Mr Rodie (6/71) to tell him that she was meeting Mr Gadsbey on Wednesday afternoon, after which she should be able to let Mr Rodie have the revised drafts. She envisaged no difficulties on the revisions which they (she and Mr Rodie) had discussed.

[86] Evidence that the matter was being taken forward by the PSA is to be found in an internal memo, within the PSA, dated 18 August 1987 (6/73) prepared by Eric Gadsbey and addressed to Mr Fleming and Mr Watson. It may have been prepared in anticipation of the meeting proposed for the Wednesday to which Mrs Bevan made reference, but this does not matter. Paragraph 5 of the note is in these terms:

"5. Although rental gearing at review dates was originally intended, this proviso has been deleted in favour of a general review clause related to the Glasgow City Centre. At present, modern office accommodation in the central area commands upwards of £7.50 per sq ft (car park spaces £750 pa each) and given inflationary and real growth between now and the projected completion date for the PF Offices, the proposed rental should compare most favourably with new schemes or modern offices in the City Centre."

At the top of the note, Mr Fleming has written:

"I have discussed with Eric Gadsbey, the rent is competitive ... and the return reasonable given the location. I would recommend acceptance as Crown Office has agreed the figures."

Attached to the note was a submission under ESS Code 206 which, as I understand it, was designed to summarise the main terms of the proposed occupational sub-lease. At paragraph 7 of that submission, it was noted that:

"A Standard Open Market Rent Review Clause related to Glasgow City Centre is envisaged".

[87] Mr Gadsbey in his evidence in chief suggested that this was intended to reflect the fact that the rent would be reviewed by reference to prime rents in Glasgow city centre. In cross-examination he said that the rent review clause was really a matter for Mr Fleming, but he adhered generally to this answer. I did not find this helpful, since it does not address the distinction between a "standard" rent review clause and the artificial clause which Mr Gadsbey said in his evidence was intended. It may be that there was some confusion as to what was meant by "standard" in this context. Mr Gadsbey may have had in mind the sort of clause resulting from Mrs Bevan's revisions which he and Mrs Bevan had no doubt been discussing.

[88] On 24 August 1987 Mr Clapham wrote to Mr Tulloch with a copy to Mr Rodie. The letter is at 6/73(b), with a better copy at 7/13 p. 162. In that letter he told Mr Tulloch that he had recently concluded another lease which "has some interesting items" and asks Mr Tulloch to consider these for inclusion in the occupational sub-lease with the PSA and to advise if he considered these to be beneficial. The particular points concern the assignation clause and the reference of disputes to an arbiter rather than an expert. He asked Mr Tulloch for his "urgent and considered views of the above" and asked him to liaise directly with Mr Rodie "to let him have your views to discuss matters with him as we are approaching the finalisation of the documentation very soon".

[89] On 25 August 1987 Mr Rodie wrote to Mr Clapham (6/75), referring to Mr Clapham's letter to Mr Tulloch, of which he had been sent a copy. In the second paragraph of the letter he says this:

"Although matters have been agreed verbally between yourself and Eric Gadsbey regarding the agreed up-to-date current revisions which should be made to both the draft offer and the draft Occupational Sub-sub-lease and those amendments have been agreed, in principle, again verbally, between Fiona Bevan and myself, despite some pressure being applied by me, as you know, I have yet to hear from Fiona with the revised documentation.

Until I have the revised documentation before me I see little point in discussing your proposed possible further amendments. There is a world of difference in agreeing matters verbally and actually agreeing a form of wording. Having said that, I do not anticipate any serious problems but, of course, I cannot comment until I see the detailed wording of Fiona Bevan."

It seems probable that the "revised documentation" was the whole new version of the occupational sub-lease, including the third draft of the rent review clause.

[90] On 27 August 1987 Mr Rodie again wrote to Mr Clapham (6/76) saying that before attempting to negotiate any further changes in the documentation, he would prefer to have all the documentation available for discussion. As at that date, he had only received a draft offer from Mrs Bevan and was still awaiting receipt from her of the draft occupational sub-lease "duly revised (and hopefully in its final form)".

[91] Mr Clapham was away on holiday for about two weeks in early September 1987. During this period there were further exchanges and meetings between the parties concerning the terms of the offer as well as the occupational sub-lease.

The third draft

[92] At this point in the narrative there is some uncertainty as to which draft rent review clause was under discussion between the parties. At some point before 14 September 1987, and possibly as early as 21 August 1987, a new draft of the whole of the occupational sub-lease was prepared. This draft is at 6/85. On its first page it bears a typed date of 21 August 1987. I take this to be the date when it was first put together as a typed draft. Across the top of the copy in process, which is heavily revised in manuscript, Mr Gadsbey has written: "Draft Lease referred to in Minute of 14/9/87 from Mrs Bevan". Mr Rodie gave evidence that this version was put into circulation in early September 1987, and this is supported by the terms of his letter to Mrs Bevan dated 2 September 1987 (6/78) in the course of which he said that he enclosed "a suitable draft Development Lease along with the original transmission draft Lease previously revised by you". The draft Development Lease was in fact a version of the occupational sub-lease, and I shall continue to call it that. The transmission draft was the second draft as revised by the parties. Mr Rodie said that he had attempted to put all the revisals onto the new draft and he asked Mrs Bevan to check. He noted certain changes made to the rent review clause.

[93] It seems likely, therefore, that this new typed draft of the sub-lease was in circulation from about the beginning of September 1987, with some or all of the manuscript revisals (which, of course, may not have been made all at once) appearing for the first time on 14 September 1987. The significance of this is that the draft sub-lease which, by about the end of August 1987 formed the basis of discussions at the various meetings concerning inter alia the rent review clause, is likely to have been a version of 6/85, though possibly without some or all of the manuscript revisals.

[94] The only previous draft of the whole of the sub-lease in the papers before the court was that at 6/30. The revisals at 6/54 (the second draft) had been limited to the rent review clause. This revisal of the whole occupational sub-lease shows many changes from that at 6/30. Many are noted in manuscript on the typed form. Further, there are additional schedules, so that the rent review provisions appear in this draft at SCHEDULE Part 6 (starting on p. 39), not SCHEDULE Part 4 (starting on p. 29) as previously. But the changes to the rent review provisions are important. I shall refer to the new draft rent review provisions as the third draft.

[95] The third draft of the rent review clause showed significant alterations from which had previously been in circulation. In its typed form, presumably the version in circulation in late August 1987, it read as follows:

"1. As from each Review Date the yearly rent hereinbefore provided for shall be increased to an amount (hereinafter 'the Revised Rent') equal to the full market rental value of the Subjects at the Relevant Review Date.

2. The full market rental value of the Subjects at each Review Date shall be such an amount as may be agreed between the Landlords and the Tenants or determined in accordance with paragraph 3 of this Part of the Schedule as representing the rental value of the Subjects for a period of 25 years on the open market as between a willing landlord and a willing tenant without payment of grassum or premium with vacant possession and upon the supposition (if not a fact)

(a) that all parts of the Subjects are then available for use for the purposes here in permitted, and

(b) that the Tenants have complied with all the obligations imposed on them by this Lease (but without prejudice to any rights of the Landlords in regard thereto)

and taking no account of:-

(i) any goodwill attributable to the Subjects by reason of any trade or business carried on therein by the Tenants;

(ii) any effect of any improvements to the Subjects (to which the Landlords shall have given written consent) carried out by the Tenants otherwise than in pursuance of an obligation to the Landlords;

(iii) the destruction of or damage to the Subjects or the Common Parts or any part thereof by the Insured Risks or otherwise in any manner of way whatever;

and

(iv) any effect on rent of the fact that the Tenants may have been in occupation of the Subjects;

and in all other respects on the terms and conditions of this Lease."

It will be seen that the clause, even in its original typed form and before any revisals, contains not only various suppositions and disregards (although the disregard of tenants' fixtures and fittings was omitted) but also, for the first time, a same terms reference.

[96] Mr Rodie accepted, as I understood it, that the change of form originated from him. The disregards and same terms reference were put in because they were normal, rather than because they were instructed by Mr Clapham. However, the suppositions and disregards broadly followed what had been included in the previous draft as a result of Mrs Bevan's revisals to that second draft (see para.[77]).

[97] As revised by Mr Rodie, but probably before any revisals by Mrs Bevan, the rent review provisions read as follows (with Mr Rodie's manuscript revisals shown in italics):

"1. As from each Review Date the yearly rent hereinbefore provided for shall be increased to an amount (hereinafter 'the Revised Rent') equal to the full market rental value of the Subjects at the Relevant Review Date.

2. The full market rental value of the Subjects at each Review Date shall be such an amount as may be agreed between the Landlords and the Tenants or determined in accordance with paragraph 3 of this Part of the Schedule as representing the rental value [deleted] per square foot of the Subjects equivalent to prime office rental values per square foot within Glasgow City Centre at the Relevant Review Date, multiplied by the total area of the Subjects, in square feet, as specified in Part 1(A) of the Schedule, together with, in addition, a rental per car parking space equivalent to that obtainable for car parking spaces within Glasgow City Centre, at the Relevant Review Date, multiplied by the total number of car parking spaces (that is to say, forty) leased to the Tenants without payment of grassum or premium with vacant possession and upon the supposition (if not a fact)

(a) that all parts of the Subjects are then available for use for the purposes here in permitted, and

(b) that the Tenants have complied with all the obligations imposed on them by this Lease (but without prejudice to any rights of the Landlords in regard thereto)

and taking no account of:-

(i) any goodwill attributable to the Subjects by reason of any trade or business carried on therein by the Tenants;

(ii) any effect of any improvements to the Subjects (to which the Landlords shall have given written consent) carried out by the Tenants otherwise than in pursuance of an obligation to the Landlords;

(iii) the destruction of or damage to the Subjects or the Common Parts or any part thereof by the Insured Risks or otherwise in any manner of way whatever;

(iv) any effect on rent of the fact that the Tenants may have been in occupation of the Subjects; and

(v) all fittings and fixtures affixed to the Subjects carried out with the approval of the Landlords either by the Tenants or a permitted sub-tenant;

and in all other respects on the terms and conditions of this Lease."

The main changes from the typed version are first, the separating out of office accommodation and car park spaces and, second, the re-introduction of the disregard of approved tenants' fixtures and fittings.

[98] On 10 September 1987, Mr Fleming wrote to Mr Clapham (6/82) in the following terms. This letter is not the subject of any admission, but its authenticity was not ultimately challenged. I have no reason to doubt that it was sent. The circumstances in which it came to be written are obscure. Mr Gadsbey, who might have been expected to know about it, did not mention it in his affidavit sworn in 2000; and, in his witness statement prepared for the purpose of the proof, he could say nothing about the circumstances in which it was sent, confirming only that it accurately reflected what he understood to be the agreed terms of the rent review arrangements that would apply to the occupational sub-lease. It is of importance and it was relied upon heavily by Mr Clapham. In those circumstances I should set it out in full:

"Dear Mr Clapham

PROCURATOR FISCAL'S OFFICE GORBALS GLASGOW

I thank you for your telephone call and can now confirm that I have received approval from my client dept that we can now proceed to conclude that lease including specifically the provision for the rent review. Therefore, the rent at review will be calculated by multiplying the net lettable square feet of the subjects of let by the prime rent per square foot in Glasgow City Centre at the review date. As we have agreed the sole determinant in Glasgow City Centre at each review date, will be the prime rental value then prevailing in Glasgow City Centre and there will be no effect on the rent from such factors as

1. The length of the lease or building specification.

2. Any added rental value created by our occupation.

3. Any other variables such as alterations we effect with your approval.

We will instruct our Solicitors accordingly.

Yours sincerely

W.G. Fleming"

[99] There are a number of curiosities about this letter. It is the only letter passing between the two sides to the negotiation and appears to by-pass altogether the established negotiating process, and in particular the detailed review of the drafting being carried out by Mrs Bevan. Its provenance is unexplained. According to Mr Clapham the factors to be taken into account at rent review had long been established (i.e. it was to be a straight application to the floor space of the new building of prime Glasgow city centre rental values), yet that was only now being confirmed by Mr Fleming. It was not shown to Mr Rodie who was supposed to be liaising with Mrs Bevan about the drafting of the clause. And indeed it was apparently lost altogether for many years. It could not be found when needed at the time of the rent review dispute with the Lord Advocate in 2000, and only emerged in the documentation lodged in process in the present litigation, nearly 20 years later.

[100] I should emphasise that Mr Clapham did not suggest that he passed a copy of this letter to Mr Rodie or to anyone else on his team.

[101] On 14 September 1987 Mrs Bevan wrote to Mr Rodie (6/84) setting out her comments on the draft occupational sub-lease sent to her on 2 September 1987. She returned a copy of that which had been sent to her previously, revised by her in red. This revised version is that 6/85. Her revisals were to the whole of the new draft of the occupational sub-lease. Those to the rent review clause were few, but so far as relevant to this issue they are worth noting. I set them out in bold below:

"1. As from each Review Date the yearly rent hereinbefore provided for shall be increased to an amount (hereinafter "the Revised Rent") equal to the full market rental value of the Subjects at the Relevant Review Date.

2. The full market rental value of the Subjects at each Review Date shall be such an amount as may be agreed between the Landlords and the Tenants or determined in accordance with paragraph 3 of this Part of the Schedule as representing the rental value per square foot of the Building erected on the Subjects equivalent to prime office rental values per square foot without payment of grassum or premium with vacant possession within Glasgow City Centre at the Relevant Review Date, multiplied by the total floor area of the Building erected on the Subjects, in square feet, as specified in Part 1(A) of the Schedule, together with, in addition, a rental per car parking space equivalent to that obtainable for car parking spaces within Glasgow City Centre, at the Relevant Review Date, multiplied by the total number of car parking spaces (that is to say, forty) leased to the Tenants [deleted] and upon the supposition (if not a fact)

(a) that all parts of the Subjects are then available for use for the purposes here in permitted, and

(b) that the Tenants have complied with all the obligations imposed on them by this Lease (but without prejudice to any rights of the Landlords in regard thereto)

and taking no account of:-

(i) any goodwill attributable to the Subjects by reason of any trade or business carried on therein by the Tenants;

(ii) any effect of any improvements to the Subjects (to which the Landlords shall have given written consent) carried out by the Tenants otherwise than in pursuance of an obligation to the Landlords;

(iii) the destruction of or damage to the Subjects or the Common Parts or any part thereof by the Insured Risks or otherwise in any manner of way whatever;

(iv) any effect on rent of the fact that the Tenants may have been in occupation of the Subjects; and

(v) all fittings and fixtures affixed to the Subjects carried out with the approval of the Landlords either by the Tenants or a permitted sub-tenant;

and in all other respects on the terms and conditions of this Lease."

[102] In her letter accompanying the revised draft, she made the following comment on the rent review clause:

"23. I have required to refer the additions to the rent review provisions in Paragraph 2 of Part 6 of the Schedule to the Property Services Agency for their confirmation that the terms are acceptable."

It seems likely, though there was no evidence specifically on the point, that "the additions" which she needed to refer to the PSA were the various disregards and the same terms reference.

[103] On 16 September 1987 (6/86), Mr Rodie sent a copy of Mrs Bevan's letter (6/84) to Mr Clapham. He did not, as he made clear, send him the revised pages of the draft occupational sub-lease, but if my analysis of the sequence of events is correct Mr Clapham would already have seen the new version of lease, including the third draft of the rent review clause, albeit without Mrs Bevan's revisals, since late August. He asked Mr Clapham to let him have any comments and instructions in relation to the points raised by Mrs Bevan in her letter as soon as possible, points which covered all aspects of the draft sub-lease, not just the rent review clause; but he saw little point in having a meeting until he and Mr Clapham had had a proper opportunity to consider all of Mrs Bevan's comments.

[104] At 6/86(a) of process there is an internal PSA note from Mr Fleming to Mrs Bevan dated 16 September. The note refers to the minute from Mrs Bevan of 14 September 1987 under cover of which she had sent the revisals to the sub-lease (the minute itself was not in evidence), and also made certain comments about Mrs Bevan's letter to Mr Rodie (6/84). So far as concerns the rent review provisions, Mr Fleming said this, under reference to paragraph 23 of Mrs Bevan's letter:

"23. I am extremely uneasy about the additions to the rent review provisions in paragraph 2 of Part 6 of the Schedule. It has the look of a good old 3 card trick and I think has to be rejected. I shall need a lot of convincing that our position is not being prejudiced by this revision."

It is not clear what his particular concern was, but again it seems reasonable to infer that it related to the various disregards and the same terms reference recently included in the third draft of the clause.

[105] On 17 September 1987 Mr Rodie sent two faxes to Mr Clapham. The first (6/87), timed at 10.08 am, enclosed "copy page 39 from draft Lease as requested".

Attached to it was the first page only (page 39) of the third draft of the rent review clause as revised by Mr Rodie in manuscript, but before any revisals by Mrs Bevan (as set out at para.[93] above). That page contained the clause down to and including the second disregard, i.e. "(ii) any effect of any improvements ...", but did not contain disregards (iii) - (v) or the same terms reference, all of which were on the following page. The second fax enclosed "copy page 29 (Schedule Part 4) as requested". Attached to that was the first page only of the second draft of the rent review clause as amended by Mrs Bevan sometime after 26 June 1987 (as set out at para.[77] above).

[106] This sequence of faxes, in which two different versions of the rent review clause were sent to Mr Clapham, requires some explanation. Mr Clapham's explanation in his witness statement is at paras. 61-64 and is as follows:

"61. On 17 September 1987 Denis Rodie sent me a fax timed at 10.10 am attaching a copy of page 39 of a draft of the sub-lease, that being the first page of a draft rent review clause, production 6/87. I think I may have asked him to send me a copy of the draft of the rent review provision because I wanted to check that the multiplicand had been inserted in the clause. This page 39 appears to have been extracted from a draft of the lease dated 21 August 1987, production 6/85, and is heavily revised in handwriting. The handwriting, amongst other things, inserts the multiplicand.

62. On the same day, 17 September 1987, Denis Rodie sent me another fax timed at 14.15 attaching a copy of the first page of a different version of the rent review clause, numbered page 29, production 6/88. This second version appears to have been from the earlier draft of the lease dated 26 June 1987, production 6/54. I cannot now recall why I requested or even if I requested, to have another draft sent to me. I may have asked to have sight of a draft which did not have handwritten notes on it, as I would have been irritated that I had been provided with a draft containing handwritten notes of revisals. I have never liked working from drafts with handwritten notes because I find it difficult to read the handwriting of others, particularly on top of typescript. However I cannot now say with any certainty that this was the reason. The page 29 faxed to me at 14.15 pm on 17 September 1987 does contain fewer handwritten notes but it does not contain the multiplicand. It appears to have been taken from the draft of the sub-lease which was in existence as at 26 June 1987.

63. I do not understand why Denis Rodie would have sent me one page only from each of the two drafts of the rent review provisions, one of which did not include the multiplicand. Whatever was his reason, I see now that Denis Rodie had decided to use a new basis of sub-lease, production 6/85, which he annotated and then faxed only one page of to me in the first fax on that date.

64. Reviewing the Miller Samuel file now, which I of course did not see in 1987, I understand that's Denis Rodie effectively discarded the form of sub-lease which he then revised by hand to produce a document which is production 6/85. It seems to be with the substitution of that new template that the full set of regards and disregards and the same terms provision first appears in his drafting. By this process he effectively re-introduced a full set of regards and disregards and a same terms provision which he had deleted in December 1986. One consequence of this change is that the rent review provisions in the sub-lease moved to Schedule 6 from Schedule 4. However, when he chose to send me only the first page of Schedule 6 with his first fax of 17 September 1987, he did not send me a copy of all of the regards and disregards or the same terms provision which had, it appears, only just been included by Denis Rodie when he switched to this new template lease."

I have some difficulty in accepting this in its entirety. I do not find the explanation in para. 62 about wanting to see a draft without manuscript revisals convincing. The more likely explanation is that Mr Clapham wanted to see how the new draft compared with the old. As to paras. 63 and 64, it is correct that the introduction of the new template brought in the full set of regards and disregards and the same terms reference. But it seems likely that Mr Clapham, possibly before he went on holiday but certainly after he came back, would have been working on the new draft of the sub-lease, including the third draft of the rent review clause. This is apparent not least from Mr Rodie's letter to him of 16 September 1987 (6/86), in which he says he is not copying him in with "the numerous revised pages of the draft document" received back from Mrs Bevan. This can only have been because Mrs Bevan's comments on the draft in her letter which he was forwarding to him would have been intelligible to Mr Clapham because he already had a copy of the new draft of the sub-lease, albeit not with Mrs Bevan's revisals. It seems clear, therefore, that as from early to mid-September 1987, Mr Clapham had a copy of the third draft rent review clause in one form or another. Had he looked at it, he would have seen the changes and, in particular, the inclusion of the disregards and the same terms reference. Accordingly, I do not accept Mr Clapham's implicit suggestion in para. 64 that because, on 17 September 1987, he was only sent the first page of the rent review clause, he was not made aware of the disregards and same terms reference which by then had been added. I am satisfied that he already had a copy by then. In any event, even if he did not see the disregards and same terms reference then, he had ample opportunity to see them in the weeks that followed, when the sub-lease and, in particular, the rent review clause, came under further scrutiny.

[107] On 18 September 1987 Mr Clapham wrote to Mr Rodie (6/88(a) of Process) telling him that he had had a word with Mr Tulloch and that Messrs Tulloch and Hart:

"would like to peruse final Drafts if possible over the week-end in case any comments are necessary before we meet P.S.A. next Wednesday."

The meeting with the PSA was to be on Wednesday 23 September 1987, followed the next day by a meeting with the SDA. He asked Mr Rodie to give them a copy urgently. It is not clear from this letter whether Mr Clapham was asking Mr Rodie to send the whole draft occupational sub-lease or only the rent review clause. On any view, whatever was sent to Messrs Tulloch and Hart would have been the most recent version of the sub-lease and/or the rent review clause.

[108] On 21 September 1987 (6/90) Mr Rodie replied to Mrs Bevan's letter of 14 September (6/84). In response to her point 23 (see para.[102] above) he commented:

"23. Noted, but the wording is purely intended to clarify the existing wording and I cannot see that it is in any way contentious."

He ended by saying that he hoped all outstanding points would be resolved at the next meeting to take place on Wednesday 23 September.

[109] The meeting with the PSA duly took place on 23 September 1987. Mr Rodie and Mr Tulloch were both there. It is possible - indeed, from the language of Mr Tulloch's letter quoted below, it seems likely - that Mr Clapham was also there. There is no contemporaneous note of the meeting but the subject matter of the meeting can be identified from the subsequent correspondence.

[110] Thus, the next day (24 September), Mr Tulloch wrote to Mr Clapham (6/90(a)), with a copy to Mr Rodie, noting that he thought the meeting had gone fairly well and that there were now only some minor points outstanding. He had noted all the amendments which he had proposed and "you will remember that, in the end, they agreed to most of them". It was essential, therefore, he said, that before there was any final agreement he should see the amended draft lease. It is unclear what amendments Mr Tulloch had proposed and which were agreed, but there is some assistance from Mr Rodie's letter to Mrs Bevan on the day following the meeting (see below).

[111] Mr Rodie wrote to Mrs Bevan (6/91) on the day after the meeting enclosing, amongst other documents, the "transmission draft Sub-lease duly counter-revised by me in blue ink to reflect what I think was agreed at [the meeting of 23 September]". The draft sub-lease sent under cover of that letter appears to have been the version at 6/85, possibly with further revisions - this ties in with Mr Rodie's comment in the letter at sub-para. (j) in relation to the "interlineation" of certain words in the arbitration provisions linked to the rent review clause. Mr Rodie makes the following comments about his amendments to the rent review clause on page 39 of Schedule Part 6 (i.e. to para. 2 of the clause):

"(i) On page 39 I believe, but should be obliged if you would confirm, that I have made the agreed amendments".

It is not clear what amendments he is referring to here - presumably they were amendments proposed by Mr Tulloch and agreed to at the meeting as referred to in Mr Tulloch's letter to Mr Clapham (6/90(a) - but the important point is that these were amendments to para. 2 of the third draft rent review clause, the terms of which had been discussed at the meeting of 23 September 1987 attended by Mr Tulloch (and possibly Mr Clapham). Mr Rodie's comment on page 40 of Schedule Part 6 in sub-para. (j) of his letter concerns the interlineation of the words in the arbitration provision (para. 3 of the rent review clause). The words added do not matter, but it is clear from what Mr Rodie says that the suggestion had come from Mr Tulloch.

[112] Mr Clapham was asked in cross-examination why it was that Mr Tulloch was so concerned with the drafting of the rent review clause. In answer he said that he now realised that Mr Tulloch had more interest in it than he had appreciated at the time, but he was on a fixed fee, "so if he wanted to get involved I was not going to stop him".

[113] Mr Rodie's letter concluded by looking forward to hearing from Mrs Bevan as a matter of urgency in view of the "very tight timetable" and Mr Clapham's impending departure abroad on about 7 October.

[114] On 29 September 1987 Mr Clapham wrote to Mr Rodie (6/92) asking him to send him a clean copy of "the final rent review and assignation Clauses" for the purpose of discussions with his bankers and surveyors later in the week. A copy of that letter marked up in handwriting (possibly by Mr Rodie) suggests that Mr Rodie asked his secretary to copy for this purpose the whole of the third draft rent review clause in Schedule 6.

[114] Mr Rodie's fax to Mr Clapham (6/93) sending the "clean copy of the final rent review and assignation clauses" is detached in the bundle of documents from the 9 additional pages which were faxed with it, but Mr Clapham in his evidence (witness statement para. 68) accepts that he was sent what I have called the third draft rent review clause - though he sought to explain that he would have been focusing on the issue of the 100% gearing, and the assignation provisions, rather than on the other parts of the document.

[115] On 1 October 1987, having received the redrafted clauses, Mr Clapham wrote to Mr Rodie in the following terms:

"As far as the Rent Review Clause is concerned, I had understood that something like the following was to be used in the wording for the car parking spaces:-

'A rental per car parking space equivalent to that best obtainable for car parking spaces within Glasgow City Centre'.

I have no wish, desire or intention to disrupt things now and so would be grateful if you would merely check your drafts and have a word with Mungo and advise me accordingly.

I certainly do not wish to delay matters or indeed open any debate whatsoever with Fiona [Bevan] or the P.S.A. regarding either of these Clauses as they are simply too sensitive and would not withstand further debate and discussion."

[116] Mr Rodie replied (6/95) to the effect that they had tried some such expressions but the PSA "simply wouldn't wear it!" The current draft had been agreed for some time now.

[117] On 5 October 1987 Mr Clapham wrote to Mr Rodie (6/96), referring to a proposed meeting with the PSA the following Tuesday on matters unrelated to the rent review clause. He continued in this way:

"In the meantime I hope you have kept the old Drafts which have been revised - I urgently need to see a copy of the old Drafts (going back to mid July) on the rent review Clause first page only dealing with car parking etc. I have no intention of upsetting any applecart but urgently need to see these myself - will explain when I get a chance to speak to you.

In the meantime can you fax me what old, and subsequently redrafted, copies of the first page of the rent review Clause that you have?"

Mr Clapham confirmed in his witness statement (para. 71) that all he wanted to see was the first page of each draft so as to see how the discussion about rental for car parking spaces had developed.

[118] Mr Rodie faxed Mr Clapham by return on the same day (5 October) attaching copies of various drafts of the rent review clause. In each case he faxed the first two pages of the draft, so that the whole of paragraphs 1 and 2 of each draft were sent. The fax is out of sequence in the bundle at 6/89 and again, in its proper place, at 6/97. The cover sheet said:

"Enclosed - rent review clauses as requested."

The fax attached two almost identical versions of the last revisions to the second draft of the clause (as at 6/88), the latest version of the third draft (with the manuscript revisals as at 6/85) and a typed up version of that third draft as revised. For the avoidance of doubt, that typed version of the latest version of the third draft rent review clause read as follows:

"1. As from each Review Date the yearly rent hereinbefore provided for shall be increased to an amount (hereinafter 'the Revised Rent') equal to the full market rental value of the Subjects at the Relevant Review Date.

2. The full market rental value of the Subjects at each Review Date shall be such an amount as may be agreed between the Landlords and the Tenants or determined in accordance with paragraph 3 of this Part of the Schedule as representing the rental value per square foot of the Building erected on the Subjects equivalent to prime office rental value per square foot, without payment of grassum or premium with vacant possession, within Glasgow City Centre at the Relevant Review date, multiplied by the total floor area of the Building erected on the Subjects, in square feet, as specified in Part 1(A) of the Schedule, together with, in addition, a rental per car parking space equivalent to that obtainable for car parking spaces within Glasgow City Centre, at the Relevant Review Date, multiplied by the total number of car parking spaces (that is to say, forty) leased to the Tenants without payment of grassum or premium with vacant possession and upon the supposition (if not a fact)

(a) that all parts of the Subjects are then available for use for the purposes here in permitted, and

(b) that the Tenants have complied with all the obligations imposed on them by this Lease (but without prejudice to any rights of the Landlords in regard to)

and taking no account of:-

(i) any goodwill attributable to the Subjects by reason of any trade or business carried on therein by the Tenants;

(ii) any effect of any improvements to the Subjects (to which the Landlords shall have given written consent) carried out by the Tenants otherwise than in pursuance of an obligation to the Landlords;

(iii) the destruction of or damage to the Subjects or the Common Parts or any part thereof by the Insured Risks or otherwise in any manner of way whatever;

[deleted]

(iv) any effect on rent of the fact that the Tenants may have been in occupation of the Subjects; and

(v) all fittings and fixtures affixed to the Subjects carried out with the approval of the Landlords either by the Tenants or a permitted sub-tenant

and in all other respects on the terms and conditions of this Lease."

[119] On 7 October (6/99), Mrs Bevan wrote to the defenders with a formal offer to sub-lease the building from the pursuers. There was a minor amendment to that offer the next day (6/101).

[120] On 8 October 1987, Mr Clapham sent Mr Tulloch a fax (6/100) enclosing "Most up-to-date papers". They included all the pages of the typed up copy of the latest version of the third but not the other drafts. Mr Clapham said that he thought he wanted Mr Tulloch to check them in general. It is clear that Mr Tulloch considered the draft with some care. By the concluding words "and in all other respects on the terms and conditions of this Lease" he wrote in the margin the word "check". Mr Clapham was asked what he thought might come of asking Mr Tulloch to review the rent review clause at this stage, given that at about the same time (see below) he asked Mr Rodie formally to accept the PSA's offer. His answer was that if Mr Tulloch had thought there was a major problem he would have told Mr Rodie and Mr Fleming to correct it.

[121] Acting on Mr Clapham's instructions given over the telephone, Mr Rodie formally accepted the PSA's offer to sub-lease the building on 9 October 1987 (see 6/103).

[122] Notwithstanding the conclusion of the bargain between the pursuers and the PSA, it seems that Mr Tulloch came back to Mr Rodie having considered the pages which Mr Clapham had sent him. He proposed certain changes to the rent review clause. Mr Rodie's note dated 12 October 1987 (6/106) reveals some exasperation on his part:

"The rent review clause has changed again and it is now the gospel according to Mungo Tulloch. See Moira's clean draft entitled M053.DOC".

The proposed changes were to the main body of para. 2 of the clause. In the form in which they appear in the bundle of documents, the redrafted clause has been tidied up by Mr Rodie, but it reflects, as I understand it, the changes proposed by Mr Tulloch. I note Mr Tulloch's proposed changes in italics:

"1. As from each Review Date the yearly rent hereinbefore provided for shall be increased to an amount (hereinafter 'the Revised Rent') equal to the full market rental value of the Subjects at the Relevant Review Date.

2. The full market rent of the Subjects at each Review Date shall be such an amount as may be agreed between the Landlords and the Tenants or determined in accordance with paragraph 3 of this Part of the Schedule and shall be calculated by multiplying the total floor area of the Building [deleted], in square feet, as specified in Part 1(A) of the Schedule, by the prime office rental value per square foot [deleted] within Glasgow City Centre, at the Relevant Review date [deleted] together with, in addition, the rent [deleted] per car parking space equivalent to that obtainable per car parking space within Glasgow City Centre, at the Relevant Review Date, multiplied by the total number of car parking spaces (that is to say, 40) leased to the Tenants. The prime office rental value per square foot and the rent per car parking space within Glasgow City Centre is to be determined on the basis of open market value at the Relevant Review Date, with vacant possession between a willing landlord and a willing tenant, without payment of grassum or premium [deleted] and upon the supposition (if not a fact):-

(a) ..."

It is clear from the page numbers referred to in a Note at the bottom of the page that Mr Tulloch's revisals were made to the third draft rent review clause sent by Mr Rodie to Mr Clapham and passed on by Mr Clapham to Mr Tulloch. Despite having written "check" against it in the margin previously, Mr Tulloch did not suggest any revisals to or the deletion of the same terms reference.

[123] On the same day, Mr Rodie faxed Mrs Bevan a letter (6/107) enclosing a copy of the changes to the rent review clause proposed by Mr Tulloch and explaining it in this way:

"Unfortunately, Barrie's [Barry Clapham's] funders are insisting upon a few cosmetic changes to the Schedule Part 6 (page 39) [i.e. to the first page of the rent review clause]. I appreciate that missives have been concluded and that no alteration is, therefore, permissible without your clients' consent. As far as I am concerned the changes to the rent review clause (paragraphs 1 and 2) which are being sought are clearly of form rather than substance but my clients' funders obviously feel more comfortable with their revised wording.

I enclose a fresh page 39 showing the revisions which we seek - I should be obliged if you would confirm that they are agreed as soon as possible. ..."

Mr Rodie explained that it was not in fact the funders who had requested the change. He in fact sent two versions of the fresh page 39 to Mrs Bevan, one (6/107) as received from Mr Clapham and one (6/108) with small revisals made by him to Mr Clapham's wording. The differences do not matter.

[124] On the same day Mr Tulloch faxed Mr Clapham (6/109) with a copy of what he had sent to Mr Rodie "after I conversed with you". Mr Clapham could not be sure whether the changes proposed by Mr Tulloch reflected his views or those of Mr Tulloch.

[125] Mrs Bevan's response to Mr Rodie (6/110) expressed a willingness to accept the amendment provided that the pursuers in turn accepted some other small amendments. Mr Clapham was anxious that the amendments which he and Mr Tulloch had suggested be formally agreed as urgently as possible (6/110(a)) but Mrs Bevan preferred to wait until all the various loose ends had become apparent before embarking on the formal amendment process (6/112).

[126] There was further correspondence between Mr Clapham (who was at this time in America, but had access to a fax machine) and Mr Rodie about the precise wording of the changes proposed to the rent review clause (see e.g. 6/113), with Mr Clapham emphasising that he wanted the final proposal faxed to him for consideration before it was finally agreed. Mr Clapham confirmed in evidence that he would have had the full final version of the rent review clause sent to him.

[127] After further discussion, the amendments were formally agreed by exchange of missives dated 20 and 26 October 1987 (6/114 and 6/119). As I have already noted, the occupational sub-lease was formally executed only on 21 December 1989, though nothing turns upon this delay. I need not refer to the intervening correspondence and discussions between the parties.

Discussion

[128] The pursuers contend that the evidence establishes that Mr Rodie was instructed to provide a rent review clause appropriate to review being established by Glasgow city centre prime office rental values at each review over the course of the 60 year lease. I reject that contention. To my mind the evidence falls far short of that.

[129] The key word in the pursuers' contentions thus summarised is the word "provide". They say that Mr Rodie was instructed "to provide" a rent review clause appropriate to review being established at each review by Glasgow city centre prime office rental values. However, it is apparent from an examination of the communications between the various parties that Mr Rodie was never given clear instructions as to what he was required to achieve, nor was the drafting of the clause left to him alone. The picture which emerges from the correspondence and the evidence contains two particular strands. First, it is clear that Mr Rodie was not present at a number of important discussions, and it is on many occasions not apparent that he was informed of the result of such discussions. Secondly, subject to certain gaps in the evidence, it is clear both Mr Clapham and Mr Tulloch constantly attended to the drafting of the clause and insisted on having an input into it; and were at all (or almost all) relevant times aware of and content with what was proposed. There are, it is true, certain gaps in the documentation which leaves some doubt as to when certain drafts came into being and were circulated amongst interested parties, including Mr Clapham and Mr Tulloch - but this does not detract from the general picture.

[130] These points are readily apparent from my summary of the correspondence in the preceding paragraphs, but I shall attempt briefly to identify the main features of that correspondence so far as relevant to this issue.

[131] Discussions as to the project as a whole, and the rent review provisions in particular, had been going on for some time before Mr Rodie was first involved. However a number of the important elements had not yet been agreed. Thus, it had not yet been agreed that the gearing was to be at 100% of city centre prime office rentals. Nor was there clear agreement that the storage areas would be treated in the same way as the office space. Nonetheless, by the time Mr Rodie was first instructed in late November 1986, the basic shape of the deal had been identified. His meeting notes reflect this (see para.[24]). But I do not accept Mr Clapham's evidence (to which I refer in para.[25]) that by that time he and Mr Tulloch had developed the principles by which rent would be reviewed and that all that was needed from the solicitor was to give effect to this. Nor do I accept Mr Clapham's evidence that he explained to Mr Rodie on this and subsequent occasions that the rent at review must have no relation to the building to be let or to any factor related to the building to be let or the terms of the lease of the building to be let. It is apparent from the subsequent correspondence both between Mr Clapham and Mr Rodie and between Mr Clapham and Mr Tulloch that the pursuers' thoughts on this question were far from crystallised. On a number of occasions Mr Clapham and Mr Tulloch sought to bring into the question of rent review points about specification and fit out of the building which were quite irrelevant to a clause of the type which, according to Mr Clapham's evidence, had already been settled upon: see, for example, paras.[27] and [42]. Equally, it is apparent that at the time Mr Rodie was first instructed there was no firm agreement between the pursuers and the PSA as to the criteria by which rent was to be assessed at the review dates. Thus, for example, in December 1986 there were discussions with the PSA in which the PSA were still insisting that they rent out a review should take account of the age of the building: see e.g. paras.[36]-[38]. The evidence does not show that the requirement to disregard the length of the lease had even been raised with the PSA at this time. Mr Rodie was not party to those discussions between the pursuers and the PSA and there was no evidence that he was kept fully informed. But what it does show, to my mind, is that, at the time Mr Rodie was first instructed and indeed until at least the end of 1986, neither Mr Clapham nor Mr Tulloch had any clear and precise idea of the rent review provisions which they wanted Mr Rodie to put into legal form, still less was there any agreement with the PSA as to the matters which could and could not be taken into account at rent review. Insofar as the pursuers' case, therefore, is founded upon instructions given to Mr Rodie when he was first approached in late November 1986, that case must fail.

[132] The first draft of the rent review provision was produced by Mr Rodie late in December 1986. The terms are set out at para.[33]. It may be that even at this early stage Mr Tulloch had some involvement in the drafting. Certainly it was Mr Tulloch rather than Mr Rodie who was involved in negotiations with the PSA about the proposed lease and the rent review clause. He, rather than Mr Rodie, attended the meeting of 22 December 1986 (para.[36]); and it appears to have been he who, along with Mr Clapham, liaised with the PSA about the terms of the lease and the rent review clause. On 12 May 1987 Mrs Bevan sent Mr Rodie her comments on the occupational sub-lease but told him that since she had not received final confirmation that they rent review provisions had been agreed she had left that part of the draft untouched. Clearly, so far as she was concerned, the terms of the rent review clause were still to be agreed between principals. At the meeting of 13 May 1987 there was detailed discussion about the terms of the rent review clause between Messrs Clapham, Tulloch and Hart under half of the pursuers and Messrs Fleming and Gadsbey of the PSA. Clearly there was as yet no agreement between the pursuers and the PSA about what was to be included in the clause. The discussions at that meeting were not just at the general level - they included some discussion about how the clause should read. Mr Rodie was not part of those discussions and I accept his evidence that he was not told about the detail of what was discussed. It seems that quite apart from the detailed discussions, there was some understanding between Mr Clapham and Mr Fleming which gave Mr Clapham confidence that they would ultimately be no problems in concluding the sub-lease on appropriate terms with. Even at this stage Mr Rodie was not left to get on with the drafting of the rent review clause. Mr Clapham and Mr Tulloch both had their views on it and Mr Rodie appears to have taken the view that, having sent a revised travelling draft to Mrs Bevan on 18 May 1987, he should send it to Mr Tulloch for his comments: see paras.[50] and [51]. On 12 June 1987 Mrs Bevan reverted to Mr Rodie in terms which showed that as far as she was concerned with the details of the rent review clause were being discussed between principals rather than left to be negotiated at the solicitor level: see para.[53]. The correspondence in June 1987 referred to in paras.[55]-[57] further illustrates the point that, as far as Mr Rodie was concerned, he was being told that the details of the rent review clause were being discussed and resolved by Mr Clapham, Mr Tulloch and Mr Hart. Even at this stage Mr Hart and Mr Tulloch were concerned about the need for a high-level specification because of the impact that it might have in the context of rent reviews. Far from the pursuers having given Mr Rodie clear instructions as to what they wanted the clause to achieve, this illustrates the confusion that still obtained on the pursuers' side as to what was or was not to be taken into account. At the end of June 1987 (para.[59]) Mr Clapham was telling Mr Rodie that he and Mr Hart would leave it to him to put forward their proposals for the final wording of the rent review clause. It was in that context that, just before going off on holiday, Mr Rodie asked Mr Clapham to get Mr Hart and Mr Tulloch to let him have their detailed proposals marked up on the draft lease so that he could firm up the drafting and send it back to Mrs Bevan: see para.[61]. This was followed by a meeting on 25 June 1987 (see para.[63]), attended by Mr Hart, Mr Tulloch, Mr Clapham and Mr Rodie, at which the rent review formula was discussed. By now the pursuers were looking for 100% of prime city centre rental values without any reduction for storage spaces. A rough draft of a revised rent review clause was sketched out by Mr Rodie at the meeting, no doubt with input from the others present. Even this rough draft, which I understood Mr Clapham to be happy with, contained an "assumption of compliance" with all obligations, whether a fact or not, which would be entirely unnecessary if the review was simply to be carried out by reference to the prime city centre rates without reference to the age or condition of the building.

[133] The pursuers' case, as developed by Mr Clapham in his evidence, is that the instructions given to Mr Rodie at this meeting represented the instructions which Mr Rodie was to carry out in drafting the rent review provision. As I have already indicated in para.[65], this seems to me to overstate the certainty with which matters were viewed at that time. It may well be that Mr Clapham and Mr Fleming had an understanding, but this was not communicated to Mr Rodie and can form no part of any consideration of what happened at the meeting of 25 June 1987. It may well be that some of the uncertainty had by this time been cleared away, such as whether the gearing was to be 85% or 100% and what gearing was to be applied to the storage spaces, though even here it should be noted that the 100% gearing was only agreed by the PSA much later: see para.[74]. And there had not yet been firm agreement with the PSA as to the principles to be applied at rent review; and even on the pursuers' side there was still some confusion about the relevance of the specification to the question of rent review, Mr Hart reiterating to Mr Clapham after the meeting that having a high-class specification would be "vital" for the purpose of future rent reviews: see para.[66]. I do not accept Mr Clapham's evidence that, as from the meeting of 25 June 1987, the instructions to Mr Rodie were clear and that Mr Rodie should by then have been in no doubt as to what was to be achieved in the rent review clause.

[134] The new rent review clause ("the second draft"), based on the rough draft sketched out at the meeting of 25 June 1987, was put into circulation shortly after the meeting. The terms of the second draft rent review clause are set out at para.[68]. Mr Clapham was, it seems, content with the clause as drafted, subject to a question about the omission of the multiplicand. Yet this second draft included a number of suppositions and disregards which were inconsistent with the straightforward review by reference to the city centre prime office rentals which, according to Mr Clapham, Mr Rodie had been instructed to achieve. It is not clear whether the inclusion of the suppositions and the disregard was prompted by remarks made to Mr Rodie by Messrs Hart and Tulloch, as he said in evidence (see para.[70]). It does appear, however, that Mr Rodie regarded Mr Tulloch has an expert rent review surveyor who would have a greater understanding of the effect of including such terms. Given the circumstances in which Mr Rodie was being asked to draft while only being kept partly in the loop concerning discussions with the PSA, this does not surprise me. Mr Rodie said that the inclusion of a number of regards and disregards was by June or July 1987 part of the current thinking. I accept that. It seems to me to be consistent with the approach of Messrs Hart and Tulloch and their concern about the effect that an inadequate specification might have at rent review. At all events, on producing the second draft Mr Rodie again sent it to Mr Clapham for his approval and to enable him to carry on his discussions with the PSA in his absence: see para.[71]. He clearly regarded the second draft rent review clause as part of an ongoing negotiation, rather than something which was designed to capture the terms of a concluded agreement between the pursuers and the PSA.

[135] In August 1987 there was still discussion between Mr Tulloch and Mr Clapham about whether tenants fixtures and fittings should be excluded from the rent review assessment (see paras.[75]-[76]), a discussion which makes no sense if by then Mr Tulloch and Mr Clapham had had a proper understanding of the rent review scheme which Mr Clapham now says Mr Rodie was instructed to draft. Those matters were also clearly discussed with the PSA, since the draft came back revised by Mrs Bevan with the amendments to add various other disregards: see para.[77]. It seems probable - indeed I can think of no other credible explanation - that Mrs Bevan made these amendments on the instructions of Mr Gadsbey and that they reflected what had been discussed between the pursuers and the PSA. There was further discussion about these additions, in particular as to the insertion of the word "approved" before the reference to tenants' fixtures and fittings: see paras.[82]-[83]. These insertions proposed by Mrs Bevan to reflect what had been agreed between the pursuers and the PSA were the type of suppositions and disregards typically found in any standard rent review clause and work, as I have said, inconsistent with the type of clause which Mr Clapham contends that Mr Rodie was instructed to achieve. Yet they seem to have been agreed by Mr Clapham and, presumably, Mr Tulloch. Indeed a PSA internal memo of 18 August 1987 suggests that by that stage the PSA had in mind that the rent review clause would be a standard open market rent review clause related to Glasgow city centre rates. Quite what was meant by this is unclear, but it suggests that, so far as the PSA were concerned, the reference to Glasgow city centre rates would be in some way qualified by many of the usual suppositions and disregards. So far as Mr Rodie was concerned, it appears from his letter of 25 August 1987, that rather than taking the initiative in drafting he was in the position of waiting to receive the latest draft from Mrs Bevan on the basis of the agreement is reached between principals.

[136] From about the beginning of September 1987 a new draft of the occupational sub-lease was in circulation. This included a new draft of the rent review provisions, which I have called the "third draft". The terms of this third draft are set out at para.[95] and, with some revisals, at para.[97]. It seems likely that this new draft of the occupational sub-lease was prepared by Mr Rodie to attempt to give effect to all the changes that, as he understood it, had been agreed between the parties. It must be remembered that the discussions between the parties had been concerned not only with the rent review provision that some of the other details of the sub-lease. However, for present purposes, I am only concerned with the third draft of the rent review clause. The third draft incorporates most of the suppositions and disregards which had already been the subject of agreement in the second draft, as reflected by Mrs Bevan's additions. The only additional matter of significance was the inclusion at the end of the suppositions and disregards of the same terms reference ("and in all other respects on the terms and conditions of this Lease"). This appeared for the first time in this third draft of the rent review clause. In sending back her proposed revisals to this third draft, Mrs Bevan did not question the same terms reference. Although I did not hear from Mrs Bevan, it is apparent from her correspondence and from the evidence of Mr Gadsbey that she was careful and conscientious. I have no doubt that she would have checked carefully the draft sent to her by Mr Rodie and would have taken care to ensure that it reflected her understanding of what had been agreed between the pursuers and the PSA. It is to be inferred that she did not consider the same terms reference to be a departure from what the parties intended to be incorporated in the rent review clause. There is a curious note from Mr Fleming to Mrs Bevan dated 16 September 1987 (see para.[104]), in which Mr Fleming expresses uneasiness about the revisions to the rent review clause, but I do not think it can be taken from this that he thought that the same terms reference was in some way a departure from the agreement he had reached with the pursuers. Nor did anyone on the part of the pursuers take any issue with the same terms reference. The revised draft was circulated to Mr Clapham and to Mr Tulloch before final agreement was reached and it is clear from later correspondence that Mr Clapham and Mr Tulloch gave careful consideration to the terms of the rent review provision: see e.g. paras.[110]-[118]. Even after the sub-lease was concluded by Mr Rodie's formal acceptance on 9 October 1987 (see para.[121]), Mr Tulloch gave further consideration to the rent review clause and proposed a number of detailed changes. Mr Tulloch clearly noted the same terms reference, since he wrote the word "check" in the margin beside them: see para.[120]. He did not suggest that the inclusion of the same terms reference was inappropriate. The detailed changes proposed by Mr Tulloch were subsequently accepted and the sub-lease was amended accordingly.

[137] Throughout the whole period extending from November 1986 to October 1987, it is clear, in my opinion, not only that the rent review provisions were the subject of continual negotiation between principals but also that the detailed drafting of the clause was the subject of careful consideration and discussion between Mr Clapham and Mr Tulloch (and to some extent Mr Hart). The picture sought to be presented by the pursuers of Mr Rodie having been given a clear brief to produce a clause which achieved a certain result, and having been given that brief either in November 1986 or by, at latest, the end of June 1987, is simply not borne out by the evidence. At no time, so it seems to me, was Mr Rodie ever given such a brief. At no time was he instructed simply to provide a rent review clause appropriate to review being established by Glasgow city centre prime office rental value is at its review date. On the contrary, his brief was to attempt, with Mrs Bevan, to put into legal form the agreement as to rent review agreed between the pursuers and the PSA. Instructions as to what had been agreed between the principals were given to Mrs Bevan and passed to Mr Rodie, and in some cases were given to Mr Rodie; on the pursuers' side of the line, the drafts were always circulated amongst Mr Clapham and Mr Tulloch (and sometimes Mr Hart) and were carefully considered by them. Mr Clapham and Mr Tulloch would give their own suggestions as to what the clause should include and, in general, Mr Rodie's task was to ensure that those suggestions were put into legal terminology. Even that was not enough since, even at the eleventh hour (or after the twelfth hour), Mr Tulloch insisted on making further revisals to the rent review clause. Despite clearly being aware of the same terms reference and having given it some thought, he did not suggest that it be changed, although he made substantial changes to other parts of the clause.

[138] In this summary I have not referred to the letter of 10 September 1987 from Mr Fleming to Mr Clapham (see para.[98]). Mr Clapham relied on this as showing that agreement had been reached between the pursuers and the PSA as to the intended rent review provision. It is clear that Mr Clapham and Mr Fleming had some private discussions, sufficient to give Mr Clapham confidence that the deal would be agreed in terms satisfactory to the pursuers' interests. It may be that the letter of 10 September 1987 was intended to be an assurance from Mr Fleming to Mr Clapham as to the shape of the rent review clause within the proposed deal. Mr Clapham never showed that letter to Mr Rodie and therefore it can have no direct relevance to any question relating to the instructions given to Mr Rodie. It does not appear that Mr Gadsbey was aware of it either. This is not to suggest that it was not sent, simply that it was sent by Mr Fleming to Mr Clapham and not shown to anyone else. Even if it had been shown to Mr Rodie, however, I do not think that it would have altered the picture significantly. Although the letter talks about agreement having been reached that the "sole determinant" at rent review would be prime rental values in Glasgow city centre, the letter goes on to mention three express disregards which, as I have already indicated, do not fit happily with such a clause. Had Mr Rodie seen this letter - and he did not - he would probably have continued to believe that there was no problem in including various suppositions and disregards in the rent review clause and he would not have been put on notice that the same terms reference was on no account to be included.

[139] For these reasons I am satisfied that the pursuers' case on liability fails. The defenders were never given clear instructions as to what was to be achieved by the clause. Mr Rodie's drafting seems to me to have been largely responsive to decisions taken at meetings at which he was often not a party and to suggestions made both by Mrs Bevan and by Messrs Clapham and Tulloch (and possibly Mr Hart). In other words, his role was to put into legal form that which he understood to have been agreed between the parties. He was not "driving" the transaction, nor was he given any clear indication that his role was to produce a clause which would achieve a certain result. But even if I am wrong about this, it is clear that the suppositions and disregards in the clause as finally agreed on were the subject of discussion and assent between principals. So also, in my opinion, was the same terms reference which, although introduced by Mr Rodie in the third draft, was in circulation for some time and was the subject of particular consideration by Mr Tulloch at a late stage. During the course of submissions, the argument was put on behalf of the pursuers that any consent given by the pursuers to the inclusion of such parts of the clause was not "informed consent", in that they were not told that the inclusion of those terms would prevent the clause having the desired effect. That does not arise for decision in view of my finding that there was no clear instruction of the type contended for. I would simply observe that the concept of "informed consent", in the context where contributions to the content and drafting of the clause were being made by many different parties with considerable experience of commercial leases (including Mr Clapham and Mr Tulloch), appears to me to be highly artificial. To my mind it highlights the difficulty, in the present case, of the pursuers' contention that clear instructions were given to Mr Rodie to draft a clause which would achieve a particular result.

[140] I should add that in the course of his submissions Mr McNeill QC or submitted that the case put forward by the pursuers was unusual, in the sense that they were suggesting that the defenders, and Mr Rodie in particular, had accepted instructions not just to exercise all reasonable skill and care but to draft a clause which would achieve a particular result. He submitted that there ought to be particularly clear, cogent and precise evidence before the court could find such a case proved. He referred me to a number of cases in support of that general principle, namely: Mullan v. Anderson 1993 SLT 835, 840E, 842E-F, 846K-847B and 851E-G; Rehman v. Ahmad 1993 SLT 741, 745F-746C; First Indian Cavalry Club 1998 SC 126, 138; and Jugnauth v. Ringadoo (unreported, 2008 UKPC 50) at paras. 15-19. I have no difficulty in accepting that there is such a principle, but I have some doubts as to whether it would apply to a case such as the present. In the event I do not need to decide this point.

[141] In light of this conclusion it is strictly unnecessary for me to consider the other issues in the case. However I shall do so, though more briefly, in case the pursuers decide to take the matter further. The discussion that follows proceeds on the basis, contrary to my findings above, that the defenders were in breach of duty in the manner alleged.

Prescription

[142] The defenders contend that any right of action has prescribed. The summons passed the signet on 24 March 2004 and was served shortly after that date. The matter having been the subject of argument and decision before Lady Dorrian at Procedure Roll in December 2006, it is accepted by the pursuers before me, though they reserve their right to argue to the contrary should the case go further, that the concurrence of iniuria and damnum occurred when the defective title (assuming it was defective, which is the basis upon which the prescription argument proceeds) was effected. The defective title was effected at the date of execution of the lease, late in 1987. That is prima facie when the quinquennium commences: Beard v. Beveridge, Herd & Sandilands 1990 SLT 609. On that basis, and without more, the pursuers' right of action prescribed late in 1992.

The relevant statutory provisions

[143] The pursuers rely on ss. 6(4)(a)(ii) and 11(3) of the Prescription and Limitation (Scotland) Act 1973 to avoid this result. Section 6 provides, so far as relevant, as follows:

"6(1) If, after the appropriate date, an obligation to which this section applies has subsisted for a continuous period of five years -

...

then as from the expiration of that period the obligation shall be extinguished;

...

(3) In subsection (1) above the reference to the appropriate date ... is a reference to the date when the obligation became enforceable.

(4) In the computation of a prescriptive period in relation to any obligation for the purposes of this section -

(a) any period during which by reason of -

...

(ii) error induced by words or conduct of the debtor or any person acting on his behalf,

the creditor was induced to refrain from making a relevant claim in relation to the obligation, and

(b) ...

shall not be reckoned as, or as part of, the prescriptive period:

Provided that any period such as is mentioned in paragraph (a) of this subsection shall not include any time occurring after the creditor could with reasonable diligence have discovered the fraud or error, as the case may be, referred to in that paragraph."

Section 11(1) of the Act provides as follows:

"11(1) Subject to subsections (2) and (3) below, any obligation (whether arising from any enactment, or from any rule of law or from, or by reason of any breach of, a contract or promise) to make reparation for loss, injury or damage caused by an act, neglect or default shall be regarded for the purposes of section 6 of this Act as having become enforceable on the date when the loss, injury or damage occurred."

For present purposes I proceed on the basis that that date is the date of execution of the lease. I need not quote subsection (2). Section 11(3) of the Act is in the following terms:

"11(3) In relation to a case where on the date referred to in subsection (1) above ... the creditor was not aware, and could not with reasonable diligence have been aware, that loss, injury or damage caused as aforesaid had occurred, the said subsection (1) shall have effect as if for the reference therein to that date there were substituted a reference to the date when the creditor first became, or could with reasonable diligence have become, so aware."

It is not necessary to refer to other sub-sections.

The legal test

[144] There was no significant dispute between the parties as to the application of these statutory provisions. It is for the pursuers to bring themselves within one or other of the relevant sub-sections. The burden in each case is on them. So far as concerns s. 6(4), the pursuers do not need to establish that the defenders deliberately, or even negligently, misled them. It is sufficient that the pursuers were in error, that that error was induced by something said or done by the defenders, and that it induced them to refrain from making a claim against the defenders. In such circumstances, if proved, then, provided that the pursuers could not with reasonable diligence have discovered the error, the period during which they were so induced to refrain from making the claim does not count as part of the prescriptive period. I was referred in this connection to BP Exploration Operating Co Ltd v. Chevron Transport (Scotland) 2001 SC (HL) 19 and to the recent decision of Lord Emslie in ANM Group Limited v. Gilcomston North Limited 2009 SLT 835 (wrongly reported under the name AMN Group ...). The question of reasonable diligence will be addressed in much the same way as under s. 11(3) (see below).

[145] As to s. 11(3), it was held in Glasper v. Rodger 1996 SLT 44 that the awareness referred to in that sub-section was an awareness not only of the fact of loss having occurred but also of the fact that it was a loss caused by negligence. Parties were agreed that that distinction was not relevant here. Once the pursuers were aware that the clause did not achieve what they wanted it to achieve then, at that moment, they were aware that they had suffered loss. In the particular circumstances of this case, where the pursuers' case is that the defenders undertook not just to exercise reasonable skill and care but undertook to achieve a result, no separate question arises in respect of negligence. The reasonable diligence test in s. 11(3) was explained by Lord Penrose in Adams v. Thorntons 2005 1 SC 30 at para.[23]:

"reasonable diligence requires the taking of those steps that a person of ordinary prudence would have taken if placed in the circumstances in which the pursuer found himself".

He went on at para.[24] to make it clear that:

"prescription will not run against a creditor who does not know that he has suffered loss if he establishes that a person of ordinary prudence in his position would have had no reason to exercise reasonable diligence in order to discover whether a loss had occurred".

Conversely, applying the test to the facts of this case, once the pursuers had become aware that there was some uncertainty as to whether the clause achieved what they wanted it to achieve, then they might reasonably have been expected to take steps to satisfy themselves one way or the other.

[146] In the present case, the pursuers aver that until 2000 they were not aware that any loss had occurred, i.e. that the clause was not effective to achieve the intended result, or even that there was any question as to its effectiveness. Further, they say that their lack of awareness was compounded not only by their reliance on Mr Rodie to draft a clause which would achieve the desired result but also by advice from Mr McQuillan of the defenders in 1994 to the effect that the clause did achieve this. They therefore rely both on s. 6(4) and on s. 11(3). On the pursuers' averments in this case, the two sections can be considered together. The question for decision is whether, at some stage before the end of March 1999 (that being five years before proceedings were comments) the pursuers either became aware or ought with reasonable diligence to have become aware that the clause was ineffective to produce the intended effect.

Parties' contentions

[147] The pursuers contend that until in or about early 2000 they were not aware, and could not with reasonable diligence have become aware, that the rent review clause as drafted by Mr Rodie did not achieve the required result and that they would suffer loss as a result. They say that until 2000 they were entitled to assume that the rent review clause drafted by Mr Rodie was drafted in accordance with the instructions given to him by them and was effective to achieve the result that the rent would be increased at each rent review date in accordance with the prime office rental value in Glasgow city centre. They go on to say that at the first rent review, due in November 1994 but in fact commenced in December 1993 at the pursuers' instance, all parties agreed that the revised rent should be based upon prime office rental values in Glasgow city centre and the revised rent ultimately negotiated was based upon prime office rental values then obtaining in Glasgow city centre. They received advice from Mr McQuillan of the defenders that the rent review clause worked in the manner intended. Nothing that occurred in the course of agreeing the 1994 rent review caused them to have any reason to doubt the efficacy of the rent review clause in the sub-lease; and indeed they were led to believe that the clause worked. It was only in early 2000 that they were advised by representatives of the Lord Advocate, on behalf of the tenants, that they did not accept that that was the meaning of the rent review clause. That led to legal proceedings being started and eventually compromised. Therefore only in 2000, they say - the precise date in 2000 does not matter - did the quinquennium begin to run.

[148] The defenders join issue with this. They point to a number of occasions, after the execution of the lease but well before 1999, on which it did or should have become clear to the pursuers that the clause did not achieve the result which he wanted. They rely in particular upon an Opinion from counsel obtained in December 1991 and the conduct of the first rent review under the sub-lease in 1994.

The facts

[149] It is necessary at this stage to set out the relevant facts. An important part of the background is the recognition on the pursuers' side, to which I have already referred (see e.g. paras.[20] and [58]), that an artificial rent review clause of the type which they were seeking - and which, on this hypothesis, they thought they had achieved - would be treated with suspicion by investors until it was proved to work at the first rent review. This view was repeated after the sub-lease was executed. For example, on 5 December 1990 Mr Tulloch wrote to Mr Clapham (6/170), in the context of discussions about whether the time was now right for the pursuers to sell their interest in the property, advising him against selling then. His advice was that it would be better to sell after the first rent review, because until the clause had been proved to work people would find it difficult to believe that any tenant could have agreed to such a clause.

[150] In July 1991 the pursuers asked the defenders to give them a note of the main terms of the occupational sub-lease of the Ballater Street premises. In a letter to the pursuers dated 29 July 1991 (6/172) the defenders summarised the principal terms of the sub-lease. They summarised the rent review clause in this way:

"Every five years during the currency of the Lease. The rent is to be calculated by multiplying the total floor area of the building in square feet by the prime office rental value per square foot within Glasgow city centre [at] the relevant review date, together with the rent per car parking space equivalent to that obtainable per car parking space within Glasgow city centre, at the relevant review date multiplied by the total number of car parking spaces".

On 16 September 1991 Mr Clapham wrote to Mr McQuillan of the defenders (6/173) raising issues about the sub-lease in the context of negotiations, which were then on-going, to sell the pursuers' interest in the property. The main concern expressed in that letter is not relevant here. However, at the same time Mr Clapham asked Mr McQuillan to seek the Opinion of pre-eminent senior counsel on the question whether, if rentals were to fall between then and the next review, the rent at review would be ascertained (a) by reference to the (ex hypothesi lower) rent then currently being agreed or (b) by reference to the highest rentals then being paid, even if they had been agreed some considerable time before the rent review. Mr Clapham explained in evidence that, at the beginning of the 1990s, office rentals in Glasgow had reached a new high which he did not think would be sustained over the following years. It was in these circumstances that he wondered whether it would be possible to argue that the rent at review in 1994 could be fixed by reference to all rentals currently in force at the review date (which would include some rentals fixed in the early 1990s) rather than only by reference to rentals fixed at about the review date. Mr McQuillan responded (6/174) with a summary of how the clause operated, saying that it:

"contains provision for a mathematical calculation based on the multiplication of the area of the subjects (defined as 57,904 square feet) by the prime office rental value per square foot within Glasgow city centre at the relevant review date".

He went on to say that it was the rent passing at the review date that was important from the point of view of the rent review clause. The question for the Opinion of counsel was clarified (6/175) and Mr McQuillan was instructed specifically to ask:

"... if a higher rent is established in between review dates, but rentals drop generally at or near the review date, will it still be the prime or best rent paid in the period that will be employed?"

An Opinion was obtained from Brian Gill QC (6/184). It dealt with the points raised in the Memorial, including the question of whether the assessment of city centre prime rents should use the "headline rents" or the net rent payable, making adjustment for grassum, rent holidays, reverse premiums and other matters. On this point the answer given was as follows:

"In cases where the comparable transaction consists of a combination of rent and premium ... it is contrary to principle to extract the rent element only and derive the reviewed rent from it. The whole transaction must be taken into account. In such cases, the 'true' rent is that which would have been agreed if there had been no grassum reverse premium or the like. The same principle applies where the provisions of the lease in the comparable transaction differ materially from those of the lease which is being considered in the rent review ...".

The question about rental values falling in the period leading up to the rent review was answered in this way:

"In my opinion, the reviewed rent will be based on the rental value, as defined in paragraph 2 of Part 6 of the Schedule, at the review date and not on prime rents actually being paid at that date where those rents were struck at an earlier date. In other words, if rental values have fallen between the date at which an existing rent was struck and the date at which the revised rent falls to be assessed, the current value alone applies.

Part 6 of the Schedule provides that the revised rent shall be 'equal to the full market rent of the subjects at the relevant review date'. This implies, in my view, that the revised rent is to be based on the rental value of the subjects as at the review date only. For the purposes of the Lease, it is to be assumed that the subjects are worth a prime city centre rent but the value of that rent is to be based on an assumed letting at a prime rate at the review date.

It follows, in my view, that if the assessment of the prime rental value has to be derived from comparable transactions struck at an earlier date and if there is evidence of a subsequent change in the tone of the market, the rents in the comparable transactions must be adjusted appropriately for the purposes of Part 6."

[151] The rent review fell due in November 1994. However, discussions began in December 1993. Mr Clapham explained in his evidence that he started the rent review process early in part because of his concern about the likely fall in Glasgow city centre prime office rentals. In his letter to Mr Campbell of 6 December 1993 (6/179) explaining that he wanted to enter into negotiations early to pre-determine the rent payable from 17 November 1994, Mr Clapham suggested that if the tenants were willing to enter into such an agreement, the pursuers would be prepared to pay the tenants a premium to reflect some of the fees saved by reason of such a direct negotation. I was told that no premium was agreed or paid.

[152] I heard evidence about the rent review negotiations from Mr Clapham and from Colin Campbell, a chartered surveyor then with Montagu Evans who was appointed through Peter Stewart of Property Holdings Scotland to act on behalf of the tenants (at that stage the Secretary of State for the Environent) in respect of the 1994 rent review.

[153] According to Mr Campbell, at the beginning Mr Clapham had been seeking a figure of £1.117 million (based on £19 per square foot for the office space and £1,750 for the car parking spaces). Mr Clapham did not, I think, accept this, but that figure is reflected in Mr Campbell's Report of January 1994 to which I refer below and I consider that Mr Campbell's evidence on this is likely to be correct. Mr Clapham came down fairly quickly to £932,500 (based on £15 per square foot for the office space and £1,600 for the car parking spaces). This too is supported by the relevant correspondence. Thus, as early as 30 December 1993, Mr Clapham indicated in a letter to Mr Campbell (6/180) that the pursuers would not accept less than £15 per square foot for the office space and £1,600 per car parking space. On 24 January 1994 (6/182) he suggested that these figures were not only the minimum they would accept but also that they represented a very reasonable settlement. Neither side resorted to arbitration and agreement was eventually reached in mid-November 1994 on a figure of £850,000 a year. The agreed figure was recorded in a Minute of Agreement dated 8 December 1994 (6/191). Mr Clapham's letter of 14 November 1994 (6/190) to Mr Campbell stated that the agreed rent reflected current prime rents of approximately £14.60 per square foot for the offices and £1,500 for each car parking space. In fact this is incorrect; as Mr Clapham recognised in his evidence; the agreed rent represented only £13.64 per square foot.

[154] Mr Campbell said that shortly after he received his initial instruction he became aware from talking to Peter Stewart that there was a discussion between the landlords and the tenants as to the interpretation of the rent review clause. He dealt directly with Mr Clapham. According to him, Mr Clapham was of the view that "one simply had to find the the absolute highest rent per square foot in Glasgow city centre (even, for example, the rent for a very small suite of offices, where cost per square foot would be high, or the rent for a one-off unique type of building) and multiply that by the square footage of the building at Ballater Street", with a similar approach to car parking spaces. Mr Clapham showed him a letter of advice from Mr McQuillan of Miller Samuel supporting this approach. For his part, Mr Campbell thought the clause was unclear and asked his clients for evidence of what the parties had intended. One interpretation that occurred to him was that the clause required one to imagine that the bulding was transposed to the centre of Glasgow (an approach which I shall call the "hypothetical transposition" approach). He said that he would definitely have told Mr Clapham of his view that the clause was unclear. He also considered that if Mr Clapham was correct in his approach, the various suppositions and disregards and the same terms reference need not have been included in the clause - their inclusion did not make sense. He said that he would almost certainly have mentioned this point to Mr Clapham. He recalls Mr Clapham himself being unable to understand why they had been included. In the course of a number of meetings and conversations with Mr Clapham in connection with the rent review, he would have discussed with Mr Clapham the fact that certain suppositions and disregards and the same terms reference required to be taken into account and that therefore it was not just a straight multiplication exercise.

[155] These matters were mentioned in Mr Campbell's formal Report to Property Holdings Scotland dated January 1994. The Report is at 6/181. At p. 8, Mr Campbell gave certain comments on the lease. He said that the landlord (the pursuers) would argue for a straight multiplication of the agreed floor area by the prime rental per square foot for Glasgow city centre. He said that, on behalf of the tenant, he would make a number of points. I set them out below:

"(a) We would argue that the prime rental rate was the prime rental rate for this building on the basis that it was in Glasgow City Centre.

(b) We would argue strongly and with conviction that the final paragraph ... is important i.e. 'and in all other respects on the terms and conditions of this lease'.

(c) We would therefore argue that an arbiter would have to reflect that the rate per sq ft had to reflect the appropriate rate for a 60 year lease.

(d) We would argue that very few people would enter into a 60 year repairing commitment.

(e) We would argue why it was relevant for the rent review clause to state that Tenant's improvements should be ignored.

(f) We would point out that the raised floors are a Tenant's improvement to the building.

(g) The Tenant would argue that the correct net area is 56,120 sq ft as this area was agreed for the initial rent. The figure of 57,904 sq ft remains in the rent review clause.

In summary, it would be the Tenant's argument that the review was to be carried out on the hypothesis that the actual building was in the City Centre and that the prime rent to be applied would reflect the fact that the lease was for 60 years, the building did not have raised access floors and that the rent review clause was difficult to interpret. In fact the Tenant would argue that in this climate nobody would enter into a lease such as this".

Mr Campbell considered that if the matter went to arbitration, and if the tenant was correct in all its arguments, the appropriate valuation would be £845,680 per annum, representing £14 per square foot for the office space and £1,500 per car parking space. But he pointed out that parties were seldom 100% successful in their arguments. He thought that there was evidence of market rates of £15 (and even as high as £18) per square foot. He thought that rates were likely to harden over the next nine months, so that there was an opportunity to settle the rent review at a favourable figure of £900,000 a year, reflecting a rental of £15 per square foot.

[156] Mr Clapham's evidence was at variance with some aspects of this. He said that when he first considered the forthcoming rent review discussions he sought advice from Mr McQuillan of the defenders on precisely how the rent review mechanism should work. He regarded the first rent review as critical since it would establish whether the clause operated as intended. Mr Tulloch had warned that there might be a challenge to the interpretation of the clause. Advice was received from Mr McQuillan on 25 January 1994 (6/183). The relevant paragraph reads as follows:

"... all that the respective surveyors will have to do is agree the prime office rental value per square foot within Glasgow city centre at the relevant review date and the relevant rent per car parking space equivalent to that obtainable per car parking space within Glasgow centre at the relevant review date and multiply each of these figures by the appropriatre number. In the case of the rent this will be the rent per square foot times 57,904 and for the car parking spaces, the rate per space times 40. These two figures should then be added and that will give the rent payable."

Mr McQuillan's explanation in that letter of how the clause was to operate was consistent with what the pursuers had intended. His advice did not suggest that the inclusion of the various suppositions and disregards and the same terms reference would in any way compromise the principle that the rent would be geared 100% to prime office rental values in Glasgow city centre at each review date. Mr Clapham copied this letter to Mr Campbell. Mr Campbell never told him that there was a fundamental problem with the rent review clause or the way it operated. If he had done so, Mr Clapham would have taken legal advice as he later did when points were raised by Colin Whyte in 1999. Referring to the points in Mr Campbell's Report, Mr Clapham was adamant that the hypothetical transposition approach was not suggested to him. Nor did Mr Campbell suggest that the comparison should be with buildings of similar age and specification. Mr Campbell did put some of the other points, such as the length of the lease, but he regarded this as simply a case of Mr Campbell doing his best, on behalf of the tenant, to try to keep the rent down. Mr Campbell, he said, would have raised "the usual sorts of arguments that you get from surveyors".

[157] Mr Clapham said that he approached the question of value on the basis of the Opinion given in 1991 by Mr Gill QC, that is to say on the basis that it was relevant to look only at rents being fixed around the time of the rent review. Mr Campbell, on the other hand, to his surprise, thought that all rentals fixed over the previous five years should be looked at. This would have suggested a higher prime rate than Mr Clapham was looking at. Mr Clapham said that he first proposed £15 per square foot and £1,600 for car parking spaces. He said that he thought £15 was too high. Mr Campbell first proposed £10. Mr Clapham's take on the negotiations in his evidence was that Mr Campbell thought he was securing a significant discount on prime rental value because of the various points listed in his Report; whereas he, Mr Clapham, had secured a rent review at what was the upper end of the range of prime rental values for Glasgow city centre in 1994. Because of the falling market, Mr Clapham did not want to go to arbitration if agreement could be reached.

[158] In mid 1994, before agreement was reached, Mr Clapham was informed that a Mr Bankier, a partner with McGrigor Donald (who may have been acting for a potential purchaser), had questioned whether the clause was so nebulous as to be void. This point had not been made by Mr Campbell. Mr Clapham sought advice from Mr McQuillan. On 5 July 1994 Mr McQuillan faxed Mr Clapham (6/184) to say that he had looked at Mr Gill's Opinion from 1991 and, although it was not on exactly on that point, it seemed to confirm that the rent would be ascertained by multiplying 57,904 square feet by the prime city centre rent at the review date. Mr McQuillan again advised by fax of 6 July 1994 (6/185) and by letter of 8 July 1994 (6/188) that the clause worked in the way intended.

[159] Discussions in relation to the rent review due for 17 November 1999 commenced late 1999 and continued into 2000. Mr Campbell was only involved at the beginning. He then handed over to Colin Whyte. On 19 January 2000 Mr Whyte wrote (6/193) suggesting a nil uplift on the rent at the 1999 review. It became clear that the tenants were relying on "legal issues" in their approach. As it was explained to Mr Clapham, the interpretation being put forward for the tenants was that the inclusion of the various suppositions and disregards and the same terms reference had the effect of making the rent review clause one which involved a hypothetical transposition of the building into Glasgow city centre, a comparison with buildings of the same age and specification, and a discount because of the length of the lease.

[160] In light of this Mr Clapham sought legal advice, this time from Mr Rod McKenzie of Harper Macleod. It was this that led to a consideration of the possibility of a claim against the defenders if the clause was found not to work as intended.

[161] Negotiations with the tenants proved difficult. Legal proceedings were commenced, in which declarator was sought as to the proper interpretation of the rent review clause. Eventually these proceedings were compromised and a negotiated settlement was agreed in terms of which by a Minute of Variation the rent review clause was replaced by a different provision. This reduced the gearing for the floor area of the building to 90% of prime Glasgow city centre market rent for Grade A specification office space (i.e. best quality, new or refurbished) at or around the review date, with a similar adjustment for the car parking spaces. The parameters for determining the prime city centre rentals were laid down with greater precision. Importantly, however, there was also a provision that for the rent review of 17 November 2009, and for all subsequent rent reviews, there would be a minimum uplift of 7.73% on the rent payable immediately prior to the rent review.

Discussion

[162] The first matter upon which the defenders rely is the opinion obtained from Mr Gill QC in December 1991. They rely particularly upon the last sentence of the passage which I have quoted which deals with the question about whether at review the prime rental values in Glasgow city centre should be ascertained by reference to the "headline" rents, or whether those "headline" rents should be adjusted for the effect of grassum, reverse premiums, etc. That sentence reads:

"The same principle applies where the provisions of the lease in the comparable transaction differ materially from those of the lease which is being considered in the rent review ...".

The defenders argue that that sentence made it clear to the pursuers that the terms of the lease had to be taken into account in ascertaining the comparable Glasgow city centre prime rent. So it did, up to a point. Clearly some adjustment has to be made to a "headline" rent if the terms of the city centre lease attracting that rent are particularly favourable to the tenant. I would have expected the pursuers to understand this from the Opinion. However, this sentence was part of an answer to a question which had nothing to do with the complaint upon which this action is founded. I would have expected the pursuers to have considered the terms of the answer given by counsel in his Opinion in relation to the question which they had asked. I would not have expected them to have taken part of that answer and applied it to a very different question, namely whether the terms of the rent review clause were effective to achieve a rent review process which involved no more than the multiplication of the given square footage of the building by city centre prime rents per square foot. The Opinion was not addressed to that point; and the general tenor of the Opinion would, to my mind, if anything, have reassured the pursuers that the clause worked as they intended.

[163] The next matter upon which the defenders rely is the rent review negotiation in 1994. They say that in the negotiations Mr Campbell specifically mentioned to Mr Clapham the points set out in his Report. Indeed, Mr Clapham accepted that some of the points were made. However, one must take account of the fact that they were made in the context of an adversarial negotiation, in which Mr Clapham was putting his best case and Mr Campbell was putting forward the tenants' best case. In such a context, Mr Clapham was, in my view, entitled to take the view which he did take, namely that the points being put forward by Mr Campbell were typical of the range of points likely to be put forward on behalf of tenants in such negotiations. He had been forewarned that the clause would be tested, and he would therefore have been expecting a number of points to be put challenging the effectiveness of the clause. It does not seem to me that he can properly be criticised if, in circumstances where he had been led to assume that the clause worked as he intended it to work, he did not see any need to take further advice.

[164] I emphasise the context. It seems to me that the defenders' criticism of Mr Clapham fails to take proper account of the fact that Mr Clapham had, on the hypothesis upon which this part of the case proceeds, been given clear advice by Mr Rodie that the clause was effective to achieve the result that he was looking for; and had also been given advice by Mr McQuillan on three separate occasions as to the effect of the clause. Further, Mr McQuillan's fax of 5 July 1994 sought to rely upon the Opinion of counsel given in 1991. Points were taken by the defenders as to the precise terms of the various communications from Mr McQuillan, the suggestion being that had Mr Clapham pay particular attention to a few words in one of those letters, and half a sentence in another, he would have appreciated that there were serious doubts as to the effectiveness of the clause. I do not think that there is anything in those points. They are made with hindsight, in the knowledge of the problems that subsequently arose, and are based upon a minute textual analysis of correspondence which Mr Clapham, who is a businessman and not a lawyer, was entitled to take as confirming the efficacy of the clause. In those circumstances it was not unreasonable for Mr Clapham to rely upon the advice which he had received notwithstanding the arguments raised both by Mr Campbell and by Mr Bankier and others.

[165] Some point was made in relation to the rent finally agreed. It was suggested that Mr Clapham settled for a rent significantly below prime city centre rentals because he must have appreciated that there were problems with the clause of the type pointed out by Mr Campbell. I do not consider that that inference can be drawn. Mr Clapham said that he was concerned that rents were falling. He was also aware that the clause would be tested in any arbitration and that in arbitration success could never be guaranteed. Better, therefore, to compromise; and the the figure ultimately agreed was within the range of acceptable figures. I accept that. His agreement to that figure does not persuade me that he took Mr Campbell's points so seriously that he ought to have sought further legal advice of the efficacy of the clause.

[166] Other points were also taken about the effectiveness of the clause at about this time. Mr Bankier raised a question about whether it was enforceable at all. Although I did not hear evidence from him, I heard evidence relating to this point from Don Young and was shown, by agreement, a statement by Mr Balnave on this point. I do not consider that these points add anything of substance. Ultimately the complaint is not that the clause was unenforceable; and Mr Bankier's concerns were, in the event, irrelevant to the issue with which this action is concerned. If the argument is simply that the raising of this point should have caused Mr Clapham to take advice, and that, had he taken advice, then he might well have become aware of the real problems with the clause, that argument seems to me to go far beyond the proper scope of ss. 6(4) and 11(3) of the Act as applied in the cases. But, in any case, he did take advice from Mr McQuillan when he was made aware of Mr Bankier's concerns. That advice re-assured him that the clause worked. He was entitled to rely upon it.

[167] For those reasons, had I been in favour of the pursuers on the merits of the action, I would have repelled the defender's plea of prescription. Mr Clapham was induced by Mr Rodie's and Mr McQuillan's advice to believe that the clause worked as intended and, because of this, the pursuers "refrained" from bringing proceedings. Put simply, they did not make a claim because they had no reason to believe there was a claim to be made. I am also satisfied that until 2000 Mr Clapham was not aware, and could not with reasonable diligence have become aware, that the clause was ineffective and therefore that the pursuers had suffered a loss. I consider that the pursuers are entitled to rely upon both s. 6(4) and s. 11(3) of the Act until early 2000 when, in the context of the 1999 rent review, they were put on notice of the problems with the rent review clause which form the subject matter of the present action. It was then incumbent upon them to seek further advice, and they did that. The present proceedings were commenced within five years of that time.

Causation
[168] The defenders raise an argument on causation. They argue that in the event of a failure to follow instructions, which is the case put forward by the pursuers, it is necessary for the pursuers to prove that that failure caused the loss which is claimed. They must prove what would probably have happened had the defenders not failed to follow those instructions. In this connection I was referred to Allied Maples v. Simmons & Simmons [1995] 1WLR 1602 at 1610D-1611B and 1614C and Boateng v. Hughmans (a Firm) [2002] PLNR 40 at paras.[34]-[35]. In the passage first referred to in Allied Maples, Stuart-Smith LJ summarised the position as follows:

"(2) If the defendant's negligence consists of an omission, for example to provide proper equipment, given proper instructions or advice, causation depends, not upon a question of historical fact, but on the answer to the hypothetical question, what would the plaintiff have done if the equipment had been provided or the instruction or advice given? This can only be a matter of inference to be determined from all the circumstances. The plaintiff's own evidence that he would have acted to obtain the benefit or avoid the risk, while important, may not be believed by the judge, especially if there is compelling evidence that he would not. In the ordinary way, where the action required of the plaintiff is clearly for his benefit, the court has little difficulty in concluding that he would have taken it. ...

Although the question is a hypothetical one, it is well established that the plaintiff must prove on balance of probability that he would have taken action to obtain the benefit or avoid the risk. But again, if he does establish that, there is no discount because the balance is only just tipped in his favour. In the present case the plaintiffs had to prove that if they had been given the right advice, they would have sought to negotiate with Gillow to obtain protection. The judge held that they would have done so. ...

(3) In many cases the plaintiff's loss depends on the hypothetical action of a third party, either in addition to action by the plaintiff, as in this case, or independently of it. In such a case, does the plaintiff have to prove on balance of probability, as Mr. Jackson submits, that the third party would have acted so as to confer the benefit or avoid the risk to the plaintiff, or can the plaintiff succeed provided he shows that he had a substantial chance rather than a speculative one, the evaluation of the substantial chance being a question of quantification of damages?

Although there is not a great deal of authority, and none in the Court of Appeal, relating to solicitors failing to give advice which is directly in point, I have no doubt that Mr. Jackson's submission is wrong and the second alternative is correct."

Here it is necessary to look at the likely actions of both the pursuers and the third party, the PSA.

[169] As to the probable actions of the pursuer, it is necessary to look at the claim in a little more detail. The pursuers were aware of the terms of the rent review clause before the sub-lease was executed. Their complaint is that, unknown to them at that time, the rent review clause as drafted did not have the desired effect. The defenders argue that the pursuers' claim must proceed on the basis that, had they been made aware of that, they would have done something to enable the deal to go ahead with a re-drafted rent review clause sufficient to achieve the desired purpose. The pursuers' case cannot be based upon the notion that, because they did not know of the true effect of the clause, they were locked into a deal on unfavourable terms. Their case is not that the defenders were instructed to achieve a particular result; it is that the defenders were instructed to draft a clause which, if agreed by the PSA, would form part of the sub-lease and achieve that result. A clause satisfactory to the pursuers required the agreement of the PSA. On any view, the sub-lease was profitable, not loss-making. It does not avail the pursuers to say that they would not have entered into the sub-lease if they had appreciated that the clause did not achieve the intended result, because in a case such as the present, where the sub-lease was profitable rather than loss-making, to prove that the transaction would not have happened is to defeat the claim. In those circumstances, for loss of profit to be recovered, it would have to be shown to the requisite standard that had the problem been explained by the defenders before the sub-lease was executed, something would have been done about it, which would have enabled the deal to go forward on terms satisfactory to the pursuers. The defenders submit, therefore, that it is necessary for the pursuers to show, on balance of probabilities, (a) that they would not have given "informed consent" to the clause in its final form had such consent been sought by the defenders, and (b) what they would have done if they had refused to give such consent. The pursuers had also have to show (c) that, had they approached the PSA with a revised clause which was effective to achieve the desired result, there was "a substantial chance" that the PSA would have agreed to proceed with the sub-lease on the basis of that revised clause.

[170] Given the findings of fact which I have made in this case, this argument requires to be addressed upon one or more different hypotheses. It has to be addressed on the basis that the pursuers gave clear instructions to the defenders as to what was to be achieved by the clause. And it has to be addressed on the basis that the defenders knew that the clause drafted by them did not achieve that purpose, explained that to the pursuers and sought their further instructions. This is wholly unrealistic because the defenders were unaware that the clause did not achieve what, on this hypothesis, they were instructed it was to achieve. But even assuming that the court must suspend its disbelief and proceed on that basis, it is difficult in the extreme to see what the pursuers would have done. Most of the disregards which were inserted in the rent review clause came either from the pursuers (through Mr Clapham and/or Mr Tulloch) or from Mrs Bevan at the PSA, passing on the wishes of her clients on all matters which had been agreed between her clients and the pursuers. It is, to my mind, fanciful to imagine that the pursuers and the PSA would have wished to take out all of these disregards. Nor, had the pursuers pressed to have the disregards omitted, is it likely, to my mind, that the PSA would have agreed. It was they who had introduced many of them. And the suppositions, although first introduced by Mr Rodie, were treated by both sides as obviously appropriate. I do not, of course, have to decide whether the PSA would probably have accepted a revised clause. The question is simply: is there a substantial chance that they would have done? On the evidence before me I cannot find that there was a substantial chance that they would have accepted a revised clause.

[171] The position with the same terms reference may be slightly different. The same terms reference was, as I have found, introduced by Mr Rodie of his own initiative at a late stage. It was clearly acceptable to Mrs Bevan and, presumably, to the PSA. Mr Clapham was aware that it had been included in the clause, and it was specifically considered by Mr Tulloch before the sub-lease was executed. Nonetheless, neither the PSA nor the pursuers appear to have insisted upon it. Accordingly, I can accept the possibility, indeed even the likelihood, that, had it been perceived as a problem, the pursuers would have suggested that it be removed; and I consider that there was at least a substantial chance that the PSA would have accepted its removal.

[172] This does not, however, solve the problem. At the rent review in November 1999, and in the related action for declarator and/or rectification, the tenants did not only found upon the same terms reference. They relied also upon the existence of the suppositions and disregards. It was the combination of these factors which, they contended, supported their argument that the clause pointed to a hypothetical transposition approach at review. Expert evidence led for the pursuers from Mr Donald Reid of Mitchells Roberton, solicitors and estate agents, was to the effect, as I understand it, that all of the suppositions and disregards and the same terms reference were inappropriate and contibuted to the problem. It is impossible to say whether the rent review clause without the same terms reference, but with all the other suppositions and disregards, would have passed unchallenged. Nor is the task of the court made easier by the fact that the pursuers, in their pleadings in this action, have complained compendiously that the rent review clause was defective because it included the suppositions and disregards and the same terms reference. No case is made on Record that the clause would have been effective to achieve the desired result if the same terms reference had been removed but the suppositions and disregards had remained. Nor was any evidence directed towards this. In so far as the pursuers require a finding that it was the same terms reference alone which caused the clause to fail to achieve the desired result, I decline to make such a finding.

[173] In those circumstances, if it were to be held, contrary to my findings earlier in this Opinion, that Mr Rodie's drafting of the clause was defective because of his inclusion of the same terms reference without any informed consent by the pursuers, but that the inclusion of the suppositions and disregards (although contributing to the problem and to the dispute which occurred in 1999, and being contributory factors in the settlement which was reached with the tenants) did have the informed consent of the pursuers, then there would be no material upon which the court could find that the breach of duty caused the losses claimed by the pursuers.

Quantum

[174] I approach the question of quantum on the basis that the defenders were instructed but failed to draft a rent review clause which would achieve the result desired by the pursuers and that such a clause would have been accepted by the PSA. On this basis, the pursuers' claim falls under two heads. The first is for recovery of the expenses reasonably incurred by them in connection with the proceedings raised against the Lord Advocate in connection with the 1999 rent review. There is no issue as to this head. Parties have entered into a Joint Minute, in paragraph 5 of which they have agreed that the amount of expenses reasonably so incurred was £89,030.54. If I had been in favour of the pursuers, that sum would be recoverable.

[175] The second head arises out of the settlement of the action against the Lord Advocate. I have already referred in part to the terms of the settlement. The settlement was by Minute of Variation. So far as is relevant, it was to this effect: that the reviewed rent was to be £1,225,000 a year as from 17 November 1999 until 16 November 2003, £1,240,000 a year from 17 November 2003 until 27 May 2005 and, in the absence of other agreement, £1,340,000 a year from 28 May 2005 until 17 November 2009; and thereafter, subject to a minimum increase at each rent review date of 7.73% on the previous rent, was to be a figure representing 90% of prime Glasgow city vcentre open market rental rate (as more precisely defined in the Minute of Variation) per square foot multiplied by 57,904. The figure of 7.73% represents an increase of 1.5% per annum compounded over the five year period between rent reviews. The pusuers claim by reference to the loss to which this new provision gives rise over the life of the sub-lease by comparison with the rent that would have been payable in terms of the rent review clause had it been drafted and agreed so as to achieve the intended result.

[176] Both parties adduced expert evidence, the pursuers from Mr Andrew Lythgoe, a chartered surveyor and property consultant, and the defenders from Mr Harry Reith, a director of Reith Lambert, a firm of commercial property advisers. Both produced reports which they spoke to in evidence. They also met before the proof and were able to reach agreement or at least to identify areas of disagreement and the basis for such disagreement. The results of their meeting were set out in a Joint Report (No.76 of Process). This exercise was of great assistance to the court.

[177] The Joint Report dealt with two separate aspects of the damages claim. The first aspect concerned the quantification of losses, if any, incurred up to and including 16 November 2014, that being the date up to which rent would be paid at the rate fixed at the rent review of November 2009 (as to which there was sufficient information for the experts to attempt to assess the likely rent). That quantification is based on a comparison of the rent which would have been fixed and paid, had the rent review provisions been effective to achieve the result intended by the pursuer, and that which was in fact fixed and paid under the clause as it was in fact and, from November 1999, under the Minute of Variation. Nothing turns on the November 1994 rent review, since I have found, on the evidence, that the negotiations for the revised rent payable with effect from November 1994 did not turn on any problems in the drafting of the rent review clause - had such matters affected the result, my decision on prescription would necessarily have been different. The experts agreed figures for revised rental payments, under the clause as it should have been (according to the pursuers' case), for the period up to and including 16 November 2009. A comparison of these figures with those fixed in terms of the Minute of Variation showed no loss to the pursuers up to this date. For the period from 17 November 2009 to 16 November 2014 there is a small difference between the parties. The experts' assessment of the rent which would have been fixed under the rent review clause (as it should have been) in November 2009 differed by some £58,000. I propose to take a figure midway between their estimates of £1,457,094 a year. They are also in dispute as to the rent likely to result from the rent review provisions in the Minute of Variation. Mr Lythgoe estimates the result of that exercise as £1,340,726 a year. Mr Reith's estimate is £1,431,792 a year. In both cases the minimum uplift of 7.73% (£1,443,582) would apply. On this basis the total loss for the period up to 16 November 2014 is £13,512 a year for five years, or £67,560.

[178] The main issues between the parties and their experts, however, is as to how to assess "future loss", i.e. the loss from 17 November 2014 until the expiry of the sub-lease. On this point there is a difference of approach between Mr Lythgoe and Mr Reith. This difference is recorded in the Joint Report as follows:

"Mr Reith considers loss should be measured by the difference between present capital values of (a) the Pursuer's interest based on rent review provisions as instructed by them and (b) the Pursuer's interest based on the rent review provisions of the executed lease as varied by the Minute of Variation dated 17 and 19 April 2003. Mr Lythgoe considers an explicit discounted cash flow methodology is most appropriate, with loss based upon the difference between the rent is determined by each manner of assessment."

Each expert in his Reports produced calculations based upon his own approach.

[179] Parties were agreed that there was no one rule for the assessment of damages. I was referred in this context to Duke of Portland v. Wood's Trustees 1926 SC 640 at 649, 651 and 652, and 1927 SC(HL) 1; Haberstich v. McCormick & Nicholson 1975 SC 1, 9; Rieley v. Kingslaw Riding Stables 1975 SC 28, 40, Malmesbury v. Strutt & Parker [2007] EWHC 2641, at paras.167-193, Oates v. Pitman [1998] PNLR 683 and Watts v. Bell & Scott 2007 SLT 108 at paras.72-82. In the present case I am satisfied that the best approach to take is that based on the difference between the present capital values on the pursuers' interest in the lease. There are two main reasons for this. The first is that I am satisfied that the pursuers saw this project as an investment which had a value in terms of it being an asset to be sold at an appropriate time. There had been consideration to selling the pursuers' interest on a number of occasions. I have little doubt that, had the rent review clause been demonstrated to work in the manner intended by them, the pursuers would have sought to cash it in at an appropriate moment. Secondly, the alternative discounted cash flow basis over the duration of the lease is fraught with uncertainty. Assessments of likely rents at review over 20, 30, 40 or 50 years until the expiry of the sub-lease are difficult at the best of times. The court can do its best on the basis of expert reports, but the better judge is the market. An assessment of loss based on the difference in capital value puts that assessment in the hands of the market, via the expert evidence, and does not require the court to make an assessment over decades of how the market might move.

[180] Having reached that conclusion, I also had little difficulty in accepting Mr Reith's evidence that the market would prefer the certainty of a guaranteed minimum rental growth of 1.5% growth per annum, compounded every five years, over the uncertainty of the rent being linked to Glasgow city centre prime rents. In those circumstances, although it may not have seemed so at the time, I am persuaded that the guaranteed minimum rent under the Minute of Variation, with the possibility of a higher rent based on 90% of city centre prime rents, put the pursuers in a better position than they would have been in had the rent continued to be assessed by reference to the artificial rent review clause which they wanted.

[181] Accordingly, had I found in favour of the pursuers, I would have awarded them damages in the sums of £89,030.54 and £67,560.00 to which I have referred, but they would have recovered nothing in respect of future loss.

Disposal

[182] I shall grant decree of absolvitor.