As published in Property Law Journal, September 2014.
In Grove Investments Limited v. Cape Building Products Limited  CSIH 43, Grove (the landlords) and Cape (the tenants) were in dispute as to the construction of the dilapidations provisions of a commercial lease regarding industrial premises, following the termination of that lease. The Inner House (the part of the Court of Session which acts as a court of appeal for cases from the lower Scottish Courts and certain Tribunals) was of the view that it was not permitted to correct ‘a bad bargain’, and that, where a contractual provision is capable of more than one meaning, it should adopt the meaning that best accords with commercial common sense.
It is a familiar line of judicial reasoning that will resonate comfortably with those involved in advising on lease interpretation. In arriving at its decision, the Inner House’s suggested that, with many judges have considerable experience of commercial leases, the court is in a position to discern what is commercially sensible, and that it would favour a construction which accords with the common law at the time the lease was entered into over a construction which would result in one party gaining an excessive or disproportionate benefit.
This is a line of reasoning that is not without controversy. [If the court is going to rely upon its understanding of what commercial common sense looks like, what certainty is there for a party who has negotiated a favourable provision which may, when viewed objectively by the court, appear not to accord with commercial common sense or the common law rules? Before exploring these questions, it is necessary to briefly consider Scottish commercial leases and the terms of the judgement.
This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.