THE ROGANO COURT CASE

Those of us who know Glasgow well were deeply saddened by its closure. This guest post by Ewan Kennedy explores the aftermath and its consequences.

The Rogano Court Case

EWAN KENNEDY

MAY 14

I have to start this piece by declaring an interest. For thirty years my office was located in Royal Exchange Square, just along from the Rogano, and my staff and I had a very enjoyable time there. This image shows my long term secretary, Anne Kennedy (the other one, not my wife) having her daily hing, some volumes of the Session Cases carefully positioned to prevent a workplace accident.

It was a great privilege to look after part of Glasgow’s heritage, although quite expensive at times. When our windows needed to be replaced, I applied for the required listed building consent and got permission subject to the new ones being made exactly to the original pattern from 1838, with astragals, as you can see. In due course our office was sold to one of the Mortimer companies, and one of the first things they did on taking entry was to reglaze them with single panels. These days the building has rather a sad appearance and appeared to be closed when I last walked past. Ah well, the ways of the World!Pledge your support

Since leaving Royal Exchange Square twenty years ago, I’ve been following developments, and it’s clear that a number of buildings along the South side have been acquired by one or another of the companies originally operated by the Mortimer family, mainly by the celebrated veteran entrepreneur James Mortimer and his daughter Lynn. While in the early years of this century the plans included a lap dancing club, which Glasgow’s old Labour councillors on the planning committee actually supported, more recently the signs suggest something more ambitious, perhaps even an eventual hotel, which could be a welcome facility in the city centre.

As is very normal nowadays, operations are conducted via a network of companies and, whether by design or otherwise, it’s impossible to know what’s going on and who’s ultimately in charge. This is actually at root of the main issue that will be discussed next week. A trawl through Companies House online, starting with Forthwell Limited, soon leads to a network of Ediston companies, including the fascinating MML (RES) Limited, which was named Ediston (RES) Limited until 23 December 2025. That was a significant period for several connected companies. Accounting periods were shortened from 31 to 21 December, Lynn Mortimer resigned from her directorship of Forthwell Limited on the 22nd and the next day the share capital of that company went up from £1 to £1.4 million. Currently two long term figures in the story, Gary McCulloch and Kevin Martin, are directors of thirty and twenty six companies respectively. The ultimate control and ownership are not clear, but it’s clear that Ediston Properties, working out of 44 Charlotte Square in the heart of Edinburgh have a major interest. Whether that extends to the Rogano is a mystery to outsiders.

Turning to the actual case, there were originally two distinct issues, but one, concerning insurance law, has been resolved and we can leave it aside except insofar as it relates to the second, concerning the lease between the landlord Pontegadea, which according to a recent article in Glasgow World is “owned by Zara clothing chain founder Amancio Ortega, estimated to be worth £90 billion” and Forthwell, which the same article describes as the “owner” of the Rogano, although they are of course the tenants.

We’re not treated to copies of the actual lease, but from reading the case reports on scotcourts.gov.uk, it’s clear that neither Pontegadea nor Forthwell was an original party to it; it was entered into between two entirely different companies in 1996. The Glasgow World article states that “Lynn and James Mortimer have operated Rogano since 2006 when they bought the restaurant for £6 million through Forthwell Ltd”. It seems that at that time the tenant’s interest was already held by another Mortimer company, Lynnet Leisure (Properties) Limited, until 20 August 2013, when it assigned its interest to Forthwell. (Lynnet Leisure Properties was controlled by Lynn Mortimer until (surprise) 22 December 2025.) By that date the Spanish gentleman must have bought the property; had Forthwell owned both interests at the same time the lease would have collapsed, you can’t lease your property to yourself. Thus Forthwell moved from being the landlord to being the tenant, after ownership passed from them to Pontegadea.

One can guess that the amount of the rental would have been rather enticing, although Mr Ortega probably won’t have been enjoying it since March 2020, when Covid struck. This raises another puzzle. It seems to be agreed that the restaurant was badly damaged by several floods between December 2020 and January 2021. The cause(s) are unknown, but we know that Storm Bella caused a lot of damage in Glasgow on 26/27 December. However, to date no steps have been taken to repair the damage, despite insurance being in place to cover the cost. The responsibility falls on Mr Ortega’s company as owners, although the Mortimer one could have done the work with his consent. No explanation for this failure can be found in the court papers, as far as I can see. While it’s quite normal to insure against loss of rent, this is normally limited to, say, one year; no insurance company would continue to pay out on a claim indefinitely, in this case for over five years, while nothing was done.

Whatever the reason for the ongoing failure to repair the restaurant may be, the inability of Forthwell to operate from it gives them, on the face of things, the right to recover damages for Pontegadea’s admitted failure. But, say the latter, Forthwell’s only loss is £1 per year, because without their landlord’s formal consent they have delegated the operation to another company, Lynnet Leisure (Rogano) Limited, in terms of a document termed a “Licence to Occupy”. (Lynnet Leisure Rogano was controlled by Lynn Mortimer until (surprise) 22 December 2025.)

We are told that the principal lease contains a prohibition on a sublease without the landlord’s consent. The concept of a licence is interesting, and it’s worth taking a few lines to look into how it differs from a lease, or a sublease. The essential components of both a lease and a sublease in Scots law are exclusive possession of a piece of heritable property for a defined term of years at a specified rent, (or a formula such as a percentage of profits that enables it to be defined). A licence means something short of those elements, typically a lack of exclusive possession. The title given to a document isn’t definitive, and it would be interesting to know which of these elements is missing in the current case.

Thanks to Lord Carloway, we know that the licence contains the following:

“4.2.13 [The Licensee] acknowledges that the Licensor shall at no time become liable to the Licensee for (i) any loss, injury or damage which the Licensee may sustain from a deficiency in any part of the Licence Subjects except in the event of act, omission, default or negligence on the part of the Licensor or those for whom the Licensor is responsible in law or (ii) … or for damage to any property or for any losses … …

8 Licensor not liable for repairs The Licensee acknowledges and accepts that the Licensee cannot oblige the Licensor to carry out any repairs or other works to the Licence Subjects, and that the Licensor shall at no time become liable to the Licensee for any loss, injury or damage which the Licensee may sustain from any deficiency in any part of the Licence Subjects”.

To summarise Pontegadea’s position, presently supported by the majority of the Inner House, while the building stands unrepaired, Pontegadea are getting no rent, Forthwell are missing out on £1 per year, and Lynnet Leisure Rogano are not only unable to trade and make hundreds of thousands of pounds of profit, but they have no claim against anyone.

Forthwell are asking the Supreme Court to recognise the reality of the practice that we’re told is common in the restaurant trade, whereby the tenant of premises delegates the operation to another company that it controls. At the start of their argument they present a cosy set up as follows:

1. Alf runs a profitable seafood restaurant in Glasgow. He rents the premises from Bert, on terms that provide they are to be used as a restaurant. Bert neglects to perform his obligations under the Lease to look after the roof. The restaurant is flooded in a storm. Alf sues Bert for the lost profits he suffers whilst Bert repairs the roof and reinstates the restaurant, as he is obliged to do so under the terms of the lease. Bert is not at all shocked to be sued for such losses, these being the unsurprising result of his failure to look after the roof of the premises.

2. What if Alf rents the same premises from Bert, for the same purposes, but Alf’s wife Claire is actually the one operating the restaurant, purchasing the stock, paying the wages and putting the profits into her bank account? Bert breaches his contract with Alf in exactly the same way, with exactly the same consequences for the operation of the hitherto profitable restaurant. Alf and Claire are devastated; their hitherto profitable restaurant being closed for the medium to long term. Again, Bert is not at all surprised by the losses w hich have arisen, these being the unsurprising result of his failure to look after the roof of the premises that he knew was going to be used as a restaurant.

3. Does Bert, in the second example, escape any liability for Claire’s lost profits? That is the question raised by this appeal. It requires consideration of the circumstances in Scots law in which a party to a contract can recover damages for a breach of that contract in respect of losses that were sustained, not by the contracting party itself, but by a closely related party.

Dare I suggest that the situation might look rather different if, for example, Claire accidentally set fire to the restaurant, and Bert wanted to make Alf pay up, or if Claire had bought in a load of dodgy salmon and customers wanted to sue her husband. Limited companies don’t tend to marry each other, control and ownership can be complex and can change from time to time without the public becoming aware of what’s going on. (I stress that no accusation of any wrongdoing in the present case is to be implied.) There are all sorts of reasons why it’s quite normal to minimise commercial risks; if there weren’t, why bother with an extra corporate entity?

Next week we can expect to hear arguments on the differences between the Scottish and English approaches to concepts such as the sanctity of contracts and “lifting the veil of incorporation” to look at the reality behind limited companies. The history of the concept of a corporation would require a complete volume, but I’ll just note that they developed very differently in the Scottish and English legal systems. In Scotland, partly because we were a trading nation, partnerships had a separate legal persona from the earliest days, whereas in England a charter from the Crown was required. It was as late as 1878, when the City of Glasgow Bank crashed, that Scots discovered that a body without formal incorporation under the Companies Acts exposed the shareholders to unlimited personal liability.

Finally, I’ll mention that the case most beloved of all Scots lawyers, Donoghue v Stevenson, the snail in the ginger beer bottle case referenced in my last post, has already surfaced in the reasoning of the judges. No good litigation is complete without reference to it, and we’ll pass briefly over the fact that it was the English judge, Lord Atkin, who spoke the immortal words “who, in law, is my neighbour?”