Shirley Wyles

From 1935 to the first Covid-19 lockdown in 2020, the Rogano restaurant traded in Glasgow, often frequented by world-famous actors, singers, politicians and sports stars. Keira Knightley ate scrambled eggs and smoked salmon there every night for two weeks when filming nearby. Sir Alex Ferguson always ordered the same meal when there, grilled lemon sole with spinach and new potatoes.

In late 2020 and early 2021, the restaurant suffered substantial water damage. Subsequent litigation between the tenant and landlord settled very shortly before the United Kingdom Supreme Court (UKSC) was to hear the case in Glasgow in May 2026. Nonetheless, UKSC heard the case anyway because of the importance of the legal issues involved. The judgment will be handed down in due course, probably around late summer or early autumn 2026. In the meantime, this article considers the key legal issues involved, in the context of outlining consequences if certain of the tenant’s arguments prevail.

An important point is that the tenant did not run the restaurant. A subsidiary company of the tenant did that, under a £1-a-year licence to occupy. So, the tenant did not suffer any significant loss of profits from the water-related closure of the restaurant, but the subsidiary company did. The latter could not sue the landlord, though, because there was no contract between them. So, in their litigation against the landlord, the tenant included their subsidiary company’s loss of profits claim, arguing that the loss could be considered as transferred to them in law, subject to them later accounting to their subsidiary for money recovered.

With all individual companies having their own distinct legal personality, regardless of any subsidiary relationship, two of the three Scottish appeal judges who heard this case before it reached UKSC decided that the tenant could not succeed in claiming for their subsidiary’s loss of profits because those losses were the subsidiary’s alone rather than the tenant’s. There was also no established legal principle in Scots law for the transfer of loss in the circumstances of the case.

One of the three Scottish appeal judges who heard this case before it reached UKSC would have allowed the tenant’s transferred loss claim to proceed. In that judge’s view, the claim should succeed if it was subsequently established that the landlord had breached its contract with the tenant and could reasonably have foreseen the resulting loss to the subsidiary company. However, as the Scottish appeal court dismissed the claim by a 2:1 majority, the tenant appealed to UKSC, the final court of appeal in Scottish civil cases.

Part of the tenant’s argument is that if they are not allowed to recover their subsidiary’s loss of profits then that loss would fall into an unsatisfactory legal “black hole”, with no recovery possible. The tenant also argues that allowing them to recover their subsidiary’s loss would not “open the floodgates” to suing for others’ losses because there would remain requirements to prove that a certain breach caused a certain loss and that it was reasonably foreseeable that the loss would be incurred.

While it is true that control mechanisms around causation and foreseeability would limit the wider impact of a decision in the tenant’s favour, such a decision would mean an increase in the scope of claims in relevant cases. So, many people are now awaiting UKSC’s judgment with interest.

Shirley Wyles is a partner with Clyde & Co. This article first appeared in The Scotsman.