Petition Arbitration Application No 2 of 2026 (Court of Session)

Factual and Procedural Background

The Petitioner (landlord successor) and the Respondent (tenant) were parties to a 15-year lease of office premises in The City, expiring in October 2024. Disputes arose at the expiry concerning the condition of the premises, including whether the Respondent should remove certain works it had carried out on the third floor and reinstate that part of the premises. Clause 6.19 of the lease contained the relevant contractual provisions concerning landlord consent, tenants' alterations and the landlords' option to require reinstatement by expiry.

On 16 February 2024 the Petitioner, through its solicitors, sent a written notice accompanied by a schedule of dilapidations which, among other things, required reinstatement of the third floor. The Respondent replied on 14 March 2024 disputing the relevance of clauses 6.19.2 and 6.19.3 except in relation to minor third-floor works.

The dispute over the validity and meaning of the 16 February 2024 letter was referred to arbitration. Following a debate on 12 November 2025, the arbitrator issued a determination on 3 February 2026 dismissing the contention that the letter was a valid notice under clause 6.19.2 and that a reasonable recipient would have understood it to invoke clause 6.19.2. The Petitioner applied to the Outer House under rules 69 and 70 of the Scottish Arbitration Rules for leave to appeal the alleged legal error; the Respondent did not consent. The application was considered on the papers and determined without a hearing by Judge Sandison.

Legal Issues Presented

1. Whether the letter of 16 February 2024 was a valid notice under clause 6.19.2 of the lease requiring removal of the Respondent's works on the third floor and reinstatement by the expiry of the lease.
2. Whether a reasonable recipient of that letter would have understood the Petitioner to be invoking the specific provisions of clause 6.19.2.

Arguments of the Parties

Petitioner’s Arguments

• The 16 February 2024 letter plainly met the requirements of clause 6.19.2: it was written and served more than six months before the lease expiry and the accompanying schedule required reinstatement of the third floor.
• The arbitrator wrongly required the letter to refer expressly to clause 6.19.1 as a precondition to validity under clause 6.19.2.
• The reference to carrying out works "within a reasonable period" should be read as meaning by the contractual expiry date; the arbitrator was wrong to treat that as fatal.
• The arbitrator erred in treating the letter as a claim for damages rather than an exercise of the option in clause 6.19; the tenant in any event read the letter as invoking clause 6.19.2.
• Accordingly, the arbitrator's decision was legally wrong and leave to appeal should be granted so that the substantive arbitration claims may proceed.

Respondent’s Arguments

• The arbitrator's determination followed full analysis of authorities on contractual interpretation and notices and was not obviously wrong.
• The matter concerned interpretation of a bespoke lease and did not raise a point of general importance; even if it did, the arbitrator's conclusion was not open to serious doubt.
• Accordingly, leave to appeal under rule 70 should be refused.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began from the restrictive policy governing non-consensual legal-error appeals under rules 69 and 70 and set out the high threshold for "obvious" error: something amounting to a major intellectual aberration or a result for which there was no reasonable explanation. The court observed that contractual construction in Scots law is a mixed question of fact and law and that where factual elements are clear and undisputed, a court may more readily assess correctness but still must be confident before finding an obvious legal error.

The court analysed the arbitrator's determination and the 16 February 2024 letter. Although the formal and technical notice requirements (writing and six-month minimum period) were satisfied, the arbitrator identified four substantive defects that together made the letter unclear as an exercise of the option in clause 6.19:

• the letter wrongly founded on clause 6.19.2 for repair obligations (where clause 6.19.1 contained the primary repairing/reinstatement obligations) and made no reference to clause 6.19.1;
• internal inconsistency — the letter assumed the landlord had already carried out works in one part yet purported to require the tenant to carry out the same works "within a reasonable period", a timetable not aligned to clause 6.19's requirement that reinstatement be by lease expiry;
• the letter in substance sought payment/damages for remedial work rather than the specific implement (reinstatement) that clause 6.19 provides; and
• the schedule encompassed extensive works beyond the third floor, whereas clause 6.19 (as framed) related only to tenants' alterations such as those on the third floor, making the notice's ambit unclear.

Applying the reasonable recipient test (objective construction in context), the court agreed with the arbitrator that a reasonable recipient exercising common sense in the relevant context would not have been left without doubt that the letter was invoking the options in clause 6.19.1/6.19.2. The court held that the arbitrator's detailed reasoning provided a reasonable explanation for his conclusion and did not amount to any major intellectual aberration. The court further considered and rejected the Petitioner’s contention that the matter raised a point of general importance open to serious doubt, noting the clause's clarity and that the problem arose from the particular letter's deficiencies rather than the clause as such.

Holding and Implications

Leave to appeal is refused.

Implications: The Petitioner is not permitted to pursue a legal-error appeal from the arbitrator's determination. The decision ends the proposed route of judicial review under rule 70 in respect of the arbitrator's findings on the validity and meaning of the 16 February 2024 letter. The opinion does not purport to establish a new broadly applicable precedent beyond reaffirming the established standards for legal-error appeals and the application of the reasonable recipient test to contractual notices; the court treated the question as specific to the facts and wording before it.