Oban/Glenforsa News

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The legal decision 2002

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION

Lord Coulsfield
Lord Johnston
Lord McCluskey

XA74/01

OPINION OF THE COURT


delivered by LORD JOHNSTON


in


APPEAL


From the Sheriffdom of North Strathclyde at Oban


in the cause


TOTAL LOGISTICS CONCEPTS LIMITED

Pursuers and Appellants;

against


ARGYLL AND BUTE COUNCIL

Defenders and Respondents:

_______

Act: Campbell, Q.C., Forsyth; Russel & Aitken, W.S.


Alt: Ellis; Balfour & Manson, S.S.C.

17 September 2002
[1] This appeal is concerned with a lease granted by the defenders' predecessors to the pursuers and appellants relating to the occupancy and use of an area of land near Oban known as Connel Airfield. In the action raised in the Sheriff Court a number of issues were focused but the matter comes before us purely in relation to the proper construction to be put on clause FOURTH of the lease.
[2] That clause is in the following terms:
"The said area of land shall be used by the Tenant for the purpose of the development thereon of a fuel store for the sale of aviation fuel for the users of the Airfield and for such other purposes reasonably ancillary thereto and for no other purpose whatsoever without the consent in writing of the Landlord (which consent shall not be unreasonably withheld). The Tenant shall have the exclusive right to be the sole supplier of aviation fuel at Connel Airfield for a period of Twelve years from the said date of entry hereinafter."
[3] The sheriff in an interlocutor dated 20 July 1999 inter alia found in favour of the pursuers in respect of the construction of this clause, determining that it effectively created a monopoly in favour of the pursuers with regard to the supply of aviation fuel to aircraft using the airfield. The matter was appealed to the sheriff principal who, in an interlocutor dated 31 January 2001, over a year after the hearing before him, sustained the appeal determining in favour of the defenders that the terms of the lease did not preclude them from permitting or allowing such users of the airfield, if they wished to do so, to bring their own fuel to service their own aircraft. In the pleadings, there is reference to pre-contract communication between the parties, and the possibility that a proof might be necessary was discussed in the debates before the sheriff and the sheriff principal. Before us, however, neither party suggested that a proof might be required. This focuses the dispute before us, as a pure question of construction of the contract terms.
[4] Senior counsel for the appellants maintained that, on a proper construction of the clause, an exclusive right to supply fuel to any user of the airfield was created in favour of the pursuers in terms of the clause in the lease which meant that the defenders were obliged to prevent any person, and we understood that there were at least two such agencies, the Ministry of Defence and a quarrying company, from servicing their aircraft on the field with their own fuel, not supplied by the pursuers.
[5] The defenders' position was that the terms of the lease were such that while there was a grant in favour of the pursuers to supply fuel this was only when such was demanded and did not prevent users of the airfield from bringing their own fuel to it. Thus, while the pursuers, it was submitted, had a right to supply it was not exclusive in the sense that the conduct apparently at the time being carried out by both the relevant users of the airfield was permissible, namely bringing their own fuel to service their own aircraft.
[6] Little assistance was gained from authority, although we were referred to two cases with regard to the supply of, respectively, water and electricity, namely West Surrey Water Company v. Chertsey 1894 3 Ch. 513 and Attorney General v. Southport Corporation 1924 A.C. 909. It is worth observing that in this latter case, in the speech of Lord Atkinson at page 923, there is support for the view that the word "supply" is broad enough in its terms to cover movement of materials between agencies controlled by the same person, thus casting doubt on the view of the sheriff principal that it is essential for the notion of supply that there be a transfer from one person to another of the relevant commodity.
[7] The essential point on which the sheriff principal's decision turned is that, in his view, the word "supply" is not an appropriate word to describe the provision of some goods or services by one branch or department of an organisation to another branch of the same organisation. The sheriff principal also observed that the expression "self-supply", which had been used in the debate before him, seemed inherently contradictory. In our view, the sheriff principal applied rather too absolute an interpretation to the word "supply" in these respects. While it is very often the case that "supply" involves provision or transfer of something to another, it can also be used more widely. There does not appear to us to be anything necessarily contradictory involved in saying that a person "supplied himself" with something: and as we have already noted, there is authoritative support for a broader interpretation of the word "supply". It follows, in our opinion, that the question of the proper meaning of this contract has to be looked at as one of the proper construction of the clause as a whole.
[8] At the end of the day, we consider that the proper construction to be put on this clause is very much a matter of impression, albeit against the background of trying to ascertain what was the original intention of the parties. In this respect the composition of the clause is important. It is to be noted that in the first part a duty is imposed upon the tenant to carry out capital works creating the fuel storage area. The second half thereafter conveys a right and that right must be looked at, in our opinion, against the background of the initial obligation to which we have referred. The exclusive right to supply fuel is obviously conferred on the tenant in consideration of his undertaking the capital expenditure necessary to create a fuel store. The value of that right would be much diminished if a user of the airfield could obtain supplies from a source outside, possibly just outside, its limits and bring them on to the airfield for use by his aircraft. If the question is viewed in this way, having regard to the word "exclusive", we consider that the better view is that what has been created is a monopoly in favour of the tenants to be the sole supplier in the sense of provider, of fuel to any aircraft requiring fuel in the airfield, thus obliging the defenders to refuse to allow any particular aircraft owner or user to bring his own fuel. It is also significant to note that while the term of the lease is 25 years, the term of this particular right is restricted to 12 years which, again, to our mind, points to the fact that a monopoly is being created to justify the capital expenditure contemplated in the first half of the clause but only for a limited period, nevertheless insofar to provide an incentive for the tenant to carry out the relevant works.
[8] In these circumstances we are of the view the over the relevant period, i.e. 12 years, the defenders, as owners of the airfield, must take relevant steps to prohibit any aircraft user bringing his own fuel to the airfield. Thus we consider that the sheriff, rather than the sheriff principal, reached the correct decision.
[9] It was suggested to us by senior counsel for the pursuers that if we were in his favour we should grant declarator as stated in the first crave of writ. However, we are not inclined to do this since it does not, in itself, indicate our view as to the construction of the clause. We therefore propose to put the case out By Order in order that parties may address us as to the appropriate form of declarator to be issued against the background of this opinion.