Legal Knowledge Scotland Property and conveyancing casebook …€¦ · Petition of William Grant &...

Legal Knowledge Scotland Property and conveyancing casebook May 2011 to March 2013

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Contents BOUNDARY DISPUTES ......................................................................................................................... 9

David Barclay Smith v James Crombie and Mrs Rita Crombie, 21 March 2012 – a boundary dispute, habile titles and the operation of prescription .............................................................. 9

Morston Whitecross Limited v. Falkirk Council, 8 June 2012 – ransom strip, extent of road ............................................................................................................................................................ 9

Sir Charles Christian Nicholson and others (The Trustees of Niall Calthorpe’s 1959 Discretionary Settlement) v G Hamilton (Tullochgribban Mains) Limited and the Keeper of the Registers of Scotland, 24 August 2012 - habile titles and prescription ........................... 10

BUILDING ACTS .................................................................................................................................. 11

K2 Restaurants v Glasgow City Council and others, 18 October 2011 – council liable when demolition works result in damage to neighbouring property ................................................. 11

CHURCH PROPERTY ........................................................................................................................... 12

Moderator of the General Assembly of the Free Church of Scotland and others v The Reverend John Morrison and others, 12 August 2011 – split in church and division of property between competing factions ......................................................................................... 12

COMMON GOOD LAND ...................................................................................................................... 13

Portobello Park Action Group Association for Judicial Review of a decision of the City of Edinburgh Council, 7 March 2012 – local authority appropriation of inalienable common good land ......................................................................................................................................... 13

Portobello Park Action Group Association v The City of Edinburgh Council, 12 September 2012 – local authority appropriation of inalienable common good land ................................ 14

COMMON PROPERTY ......................................................................................................................... 15

Mrs Elsie Black v. Frank Duncan and Mrs Duncan, 17 May 2011 - acceptable use of common property ........................................................................................................................... 15

COMMUNITY RIGHT TO BUY ............................................................................................................ 15

Pairc Crofters v The Scottish Ministers, 19 December 2012 – Crofting community right to buy, compliance with Convention on Human Rights ................................................................. 15

COMPULSORY PURCHASE ................................................................................................................. 16

Edward Gardner Fox and others v (1) The Scottish Ministers and (2) Glasgow City Council, 27 March 2012 – withdrawing a compulsory purchase order .................................................. 16

CONTRACT (See also MISSIVES) ..................................................................................................... 17

Thomas Barr v James Wilson Gilchrist and others, 5 May 2011 - fiduciary duties and joint ventures ........................................................................................................................................... 17

Stewart Hill and another v Stewart Milne Group, 3 August 2011 – whether contract is unenforceable penalty ................................................................................................................... 18

East Dunbartonshire Council v Bett Homes Limited formerly Gladedale (Northern) Division Limited, 6 January 2012 – contract, whether time of essence for date of entry.................. 18

EDI Central Limited v. National Car Parks Limited, 20 January 2012 – extent of obligation to use all reasonable endeavours................................................................................................. 19

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Mountwest 838 Limited v Backmuir Trading Limited, 15 August 2012 - wind farm agreement, construction of termination and notice provisions ............................................... 20

DILIGENCE AND INSOLVENCY ......................................................................................................... 21

Ewen Ross Alexander as the Trustee on the sequestrated estates of David George Pocock v Skene Investments (Aberdeen) Ltd and Others, 1 September 2011 – effect of bankrupt’s fraud on trustee in bankruptcy ..................................................................................................... 21

Joint Building Society Special Administrators for Dunfermline Building Society v FM Front Door Limited, 21 October 2011 – did building society’s reminder emails prevent debtor being in default? ............................................................................................................................. 22

Mathew Purdon Henderson v Foxworth Investments Limited and Nova Scotia Limited, 12 April 2011 – whether rights under security acquired in good faith and for value/form of security ............................................................................................................................................. 24

Playfair Investments Limited v Anielka Karus or McElvogue and others, 11 September 2012 – effect of inhibition on prior contract ............................................................................... 25

Matthew Purdon Henderson v. Foxworth Investments Limited and 3052775 Nova Scotia Limited 1 March 2013 - reduction of security following gratuitous alienation ..................... 25

GUARANTEE ........................................................................................................................................ 26

Robert Holden v Royal Bank of Scotland and Douglas Cowan v Royal Bank of Scotland, 17 May 2011- guarantors fail to avoid liability under guarantees ................................................ 26

David Kipling v Dunbar Bank, 6 March 2012 – factors to be considered on suspension of interim interdict ............................................................................................................................... 27

LEASES ................................................................................................................................................. 27

Co-operative Insurance Society Limited v. Fife Council, 11 May 2011 - dilapidations, renewal and extraordinary repairs ............................................................................................... 27

Crewpace Limited v Mark Robert French and Mrs Rohaise French, 12 August 2011 – landlords interest existing separate from ownership? .............................................................. 28

Crieff Highland Gathering Ltd v. Perth and Kinross Council, 12 May 2011 - termination of Lease (without irritancy clause) for breach of contract ............................................................ 29

Landmore Limited v. Shanks Dumfries and Galloway Limited ,16 June 2011 - meaning of “inert waste” .................................................................................................................................... 31

Ralph Lauren London Limited v The Mayor and Burgesses of the London Burgh of Southwark as Trustee of the London Burgh of Southwark Pension Fund, 17 June 2011 – interpretation of back letter .......................................................................................................... 32

Regus (Maxim) Limited v The Bank of Scotland plc, 11 August 2011– dispute as to payment for fit out costs at Maxim park ..................................................................................... 33

L. Batley Pet Products Ltd v. North Lanarkshire Council, 20 December 2011 – application of notice provisions in lease to agreement relating to sub-tenants works ............................ 34

PCE Investors Ltd v Cancer Research UK, 4 April 2012 – payment of rent prior to exercise of break option ................................................................................................................................ 35

Robert Prow and Others v. Argyll and Bute Council, 9 May 2012 – rent review notices and counter notices................................................................................................................................ 35

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Kathleen Kirkham v. Link Housing Group Limited, 4 July 2012 – Landlord liability for uneven path (See OCCUPIER’S LIABILITY) ................................................................................ 36

Midlothian Innovation & Technology Trust v Robert William Ferguson, 6 July 2012 -arbiter’s jurisdiction, lease and option to purchase ................................................................... 36

Michael John Morris and others v Scott Eason and others, 26 July 2012 – Right of practice to occupy health centre where no assignation of lease from former partners in practice .. 36

Batley Pet Products v. North Lanarkshire Council, 7 November 2012 – written notice required for re-instatement following tenants works ................................................................ 38

Midlothian Innovation and Technology Trust v. Robert William Ferguson, 14 December 2012 -effect of renunciation on arbitration resulting from lease ............................................ 39

RPS RE II A LLP v. CBS Outdoor Ltd, 16 January 2013 – interpretation of break clause in lease ................................................................................................................................................. 39

Gillian Dorothy McMillan and others v. William Hill (Scotland) Act Limited, 1 February 2013 – interpretation of repairing obligations in lease ....................................................................... 40

Regus (Maxim) Limited v The Bank of Scotland plc, 28 February 2013 – dispute as to payment for fit out costs at Maxim park ..................................................................................... 41

LICENSING ........................................................................................................................................... 42

Brightcrew Limited v The City of Glasgow Licensing Board, 12 July 2011 – licensing, adult entertainment and the sale of alcohol ......................................................................................... 42

Bapu Properties Limited v City of Glasgow Licensing Board, 22 February 2012 – variation of premises licence ......................................................................................................................... 42

MISSIVES ............................................................................................................................................. 43

William Stuart Fullerton v Frank Anson Smith and Margaret Smith, 25 July 2011 – supersession of missives and time bar ........................................................................................ 43

Persimmon Homes Limited v. Bellway Homes Limited, 9 September 2011– interpretation of contract ....................................................................................................................................... 44

Port of Leith Housing Association v Mohammed Akram and another, 19 October 2011 – interpretation of missives and service of notice ........................................................................ 45

Aberdeen City Council v Stewart Milne Group Limited, 7 December 2011 – construction of missives and application of price uplift to sale to group company ......................................... 46

George Wimpey West Scotland Limited V Alan Henderson, 11 October 2011- Builder barred from enforcing missives following ‘gentleman’s agreement’ with purchaser ............ 48

Pinecraven Construction (Guernsey) Limited v. Dominic Donato Taddei and Claire Susanne Taddei, 26 January 2012 - conclusion of missives, effect of time limit.................................. 50

Persimmon Homes Limited v Bellway Homes Limited, 3 April 2012 - construction of missives and rescinding from contact ......................................................................................... 50

Louise Richal v. Michael Seed and Andrea Seed, 20 November 2012 – interpretation of missives, Aberdeen and Aberdeenshire standard clauses ........................................................ 51

OCCUPIER’S LIABILITY ...................................................................................................................... 52

John Dawson v. Ruth Page, 29 February 2012 – occupier not liable for wet plank which was obviously slippery ................................................................................................................... 52

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Moira Brown v. Lakeland Ltd, 22 June 2012 - occupiers’ liability, lack of handrail and/or sign post ........................................................................................................................................... 52

Kathleen Kirkham v. Link Housing Group Limited, 4 July 2012 – landlord liability for uneven path .................................................................................................................................... 53

PLANNING ............................................................................................................................................ 54

Hallam Land Management Limited v Edinburgh City Council, Scottish Courts, 6 May 2011 - Edinburgh Local Plan quashed for Newcraighall sites after successful appeal by Hallam ... 54

Dulce Packard and others for Judicial Review, 27 May 2011 – no bias in permission for Borders wind farm .......................................................................................................................... 54

Paul Bova and Carol Christie v The Highland Council, 19 August 2011 – judicial review, planning and flood risk .................................................................................................................. 55

Penny Uprichard v. The Scottish Ministers and Fife Council, 7 September 2011 - planning, Fife Structure Plan .......................................................................................................................... 56

Marco McGinty v The Scottish Ministers, 4 October 2011 – challenge to National Planning Framework re new Hunterston plant ........................................................................................... 57

Dawn Developments for Judicial Review of a decision of Lanarkshire Council, 18 October 2011 – planning and application of sequential test ................................................................... 59

Greenland Developments (UK) Limited v. The Scottish Ministers, 20 January 2012 – planning, procedure and reasons for Reporter’s decision ........................................................ 60

Tesco Stores Limited v Dundee City Council and Asda Stores, 21 March 2012 - sequential test and planning authority’s discretion ...................................................................................... 62

Petition of William Grant & Sons Distillers Limited for Judicial Review, 13 June 2012- wind farm planning permission .............................................................................................................. 62

North Lanarkshire Council against a decision of H M Begg and E D K Thomas, 18 September 2012 – planning, national waste policy and local planning considerations ....... 63

Appeal under section 238 of The Town and Country Planning (Scotland) Act 1997 by the Cairngorms Campaign and others, 21 September 2012- planning, adoption of local plan . 64

Tesco Stores Ltd v Aberdeen City Council, 11 October 2012 – planning, local development plan and reporter modifications ................................................................................................... 64

Walton (Appellant) v The Scottish Ministers (Respondent) (Scotland), 17 October 2012 – challenge to validity of schemes and orders allowing Aberdeen bypass ............................... 65

City of Edinburgh Council against a decision of The Scottish Ministers, 29 November 2012 – planning, listed building and special circumstances............................................................... 67

Bagmoor Wind Limited v. The Scottish Ministers, 7 December 2012 – planning, effect of wind farm on Special Protection Area for golden eagles .......................................................... 67

PRESCRIPTION ................................................................................................................................... 69

David Barclay Smith v James Crombie and Mrs Rita Crombie, 21 March 2012 – a boundary dispute, habile titles and the operation of prescription (See BOUNDARY DISPUTES) ......... 69

Sir Charles Christian Nicholson and others (The Trustees of Niall Calthorpe’s 1959 Discretionary Settlement) v G Hamilton (Tullochgribban Mains) Limited and the Keeper of the Registers of Scotland, 24 August 2012 -habile titles and prescription (See BOUNDARY DISPUTES) ....................................................................................................................................... 69

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REAL BURDENS ................................................................................................................................... 69

Propinvest Paisley LP against a decision of the Lands Tribunal, 29 June 2011– jurisdiction of Lands Tribunal to vary lease conditions ................................................................................. 69

Russel Properties (Europe) Limited v. Dundas Heritable Limited, 14 November 2012 – enforceability of title condition under s53 Title Conditions (Scotland) Act 2003 .................. 70

RECTIFICATION .................................................................................................................................. 70

John Nicholas Andrew Lubbock and Robert Cheyne Turcan as Trustees of the Elliot of Harwood Trust v. Robin Feakins and the Keeper of the Registers of Scotland, 17 February 2012 – attempted rectification following conveyancing error .................................................. 70

REGISTRATION OF TITLE ................................................................................................................. 71

Orkney Housing Association Limited v Moira Atkinson and Thomas Atkinson, 14 July 2011 – rectification of access rights in land certificate ....................................................................... 71

SERVITUDES........................................................................................................................................ 73

Compugraphics International Ltd v. Colin Nikolic , 20 May 2011 - servitude rights to overhanging and encroaching air conditioning apparatus ....................................................... 73

Roger Jones and Katherine Jones v. William Henderson Gray and Edna Drummond Ross or Gray, 13 December 2011 – evidence for creation of servitude by prescription .................... 73

Harton Homes Limited v. Mrs Anne Durk, 3 July 2012 – servitude by implication and availability of alternative routes ................................................................................................... 74

Niall Jervis Coll Livingstone or Bachuil v Yorick Paine and another, 12 October 2012 -servitude, res judicata, personal bar and tenant’s title ............................................................ 75

Gary Alexander Garden and Camelia Julia Garden v. Edmond John Arrowsmith and Jane Christine Arrowsmith, 14 January 2013 – whether right of access to unbuilt garage binding on successors .................................................................................................................................. 76

SOLICITORS AND PROFESSIONAL NEGLIGENCE .......................................................................... 76

Cheshire Mortgage Corporation Limited and Blemain Finance Limited v Morna Grandison and Balfour & Manson, 23 September 2011 – solicitors’ implied warranty of authority ..... 76

Kirkton Investments Limited v. VMH LLP, 8 December 2011 – solicitors’ negligence and liability for diminution in value following property slump ......................................................... 78

Cheshire Mortgage Corporation Limited and Blemain Finance Limited v Morna Grandison and Balfour & Manson, 5 September 2012 – solicitors’ implied warranty of authority ........ 79

Karl Phimister v D.M. Hall LLP, 26 October 2012 – whether surveyor negligent in respect of error as to area in mortgage valuation ................................................................................... 80

Santander UK Plc v. Keeper of the Registers of Scotland, 8 February 2013 – liability of Keeper for registering fraudulent discharge ............................................................................... 81

John Grimes Partnership Ltd v Gubbins, 5 February 2013 – engineer liable for loss in value of developer’s property following breach of contract................................................................ 81

STANDARD SECURITIES .................................................................................................................... 82

Mathew Purdon Henderson v Foxworth Investments Limited and Nova Scotia Limited, 12 April 2011 (See DILIGENCE AND INSOLVENCY) ....................................................................... 82

Santander v David Gallagher, 26 July 2011- service of calling up notice by Sheriff Officers through letterbox is incompetent ................................................................................................. 82

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Gary Taylor and others as Trustees of the 2004/2005 Eurocentral Hotel Syndicate v. Hadrian S.A.R.L, 30 March 2012 -interim interdict refused for alleged improprieties in sale of security subjects......................................................................................................................... 83

Accord Mortgages Limited v Stephen Edwards (as representative of the late Miss Donna Edwards), 25 June 2012 – standard security and pre-action requirements where debtor deceased .......................................................................................................................................... 84

Bank of Scotland v William John Stevenson, 2 August 2012 – service of calling up notice by sheriff officer .............................................................................................................................. 85

Northern Rock (Asset Management) Plc v Stuart Douglas Fowlie, 25 September 2012 – creditor’s powers of sale where property unoccupied .............................................................. 85

TENEMENTS ........................................................................................................................................ 85

Mr John Hunter v Mrs Helen Tindale, 22 July 2011 – pend is part of tenement and owner liable for common repairs .............................................................................................................. 86

TITLE .................................................................................................................................................... 86

Drumpellier and Mount Vernon Estates Limited v Mark Peter Meehan and others, 26 September 2012 – whether title relates to dominium directum or dominium utile ............. 86

TAX AND RATES.................................................................................................................................. 87

Gateshead Talmudical College v HMRC, 15 April 2011 – VAT Capital Goods Scheme......... 87

Dundee City Council v Dundee Valuation Committee and Flemming Hansen, 23 November 2011 – whether landlord liable for council tax where lease in place but property unoccupied....................................................................................................................................... 88

Cosmopolitan Bellshill Limited and Almondvale Investments (Jersey) Limited v North Lanarkshire Council, 31 August 2012 – rates on new and unoccupied building ................... 89

VALUATION FOR RATING.................................................................................................................. 90

Glasgow City Assessor v Monti Marino (Glasgow) Limited, 26 June 2012 -valuation of café .......................................................................................................................................................... 90

Rolls Royce and others v Assessor for Renfrewshire Valuation Joint Board, 27 June 2012 – valuation where lack of comparables .......................................................................................... 90

The Assessor for Tayside Valuation Joint Board v Land Securities Plc and others, 6 September 2012 – non domestic rates, court refuses to allow revaluation of properties to take account of recession .............................................................................................................. 91

MISCELLANEOUS ................................................................................................................................ 92

Peter McSorley v David Drennan and Mrs Tracy Drennan, 10 July 2012 – remedy when land sold in error............................................................................................................................. 92

Ewan Alexander v Skene Investments (Aberdeen) Limited and others, 3 August 2012 – proving tenor of pre-page switch disposition, mora and the adoption of forgery principle 93

Scottish Water v Dunne Building and Civil Engineering Ltd, 8 August 2012 - negligence for damage caused by road works and the balance of proof ........................................................ 94

Grant Estates Limited v The Royal Bank of Scotland Plc, 21 August 2012 – alleged mis-sale of interest rate hedging products ........................................................................................ 94

Amey AG Limited v. The Scottish Ministers, 27 November 2012 – procurement, roads services contracts ........................................................................................................................... 95

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BOUNDARY DISPUTES

David Barclay Smith v James Crombie and Mrs Rita Crombie, 21 March 2012 – a boundary dispute, habile titles and the operation of prescription Outer House case concerning a boundary dispute relating to two properties on Sixth Street in Newtongrange. Mr Smith (the owner of no. 77) claimed that Mr and Mrs Crombie (the owners of no.

75) had removed a fence which divided the two rear gardens and replaced it with an extension and

another fence encroaching onto Mr Smith’s land. He sought removal of the extension and fence and their replacement with a new fence.

The fence had originally been erected to replace a boundary hedge in 1986 following an agreement

between Mr Smith and the previous owners of no. 75. However, on the evidence, Lord Matthew found that the original fence had encroached onto no. 75. Although Mr Smith had possessed the

property bounded by the original fence for at least the prescriptive period, the fence was clearly

outwith the boundary shown on Mr Smith’s title. As there was insufficient ambiguity, prescription could not run.

Lord Mathew also indicated that, if he had found in favour of Mr Smith, he would not have ordered

demolition of the extension as, to do so, would have been disproportionate given the very limited

nature of the encroachment. However, he would have ordered demolition of the new fence.

The full judgement is available from Scottish Courts here: http://www.scotcourts.gov.uk/opinions/2012CSOH52.html

Morston Whitecross Limited v. Falkirk Council, 8 June 2012 – ransom strip, extent of road

Outer House case concerning the extent of a public road (the A801) at Whitecross near Linlithgow.

The question for the court was whether an embankment to the east of the road formed part of the public road or was the private property of the Council.

Morston argued that the public road extended all the way from the fence at one side of the road to the fence at the other side and included the embankment. If this were the case it would allow them

to take access to the road from a proposed development on the east side of the road without making a ransom payment to the Council.

After noting that much could be said for both sides of the argument, Lord Malcolm came to the

conclusion that the embankment did not form part of the public road. In deciding whether the land

formed part of the road, the question to be resolved was whether the disputed ground had been ‘dedicated to public passage’. This would depend on the particular facts and circumstances.

When the local authority acquired the land (in the 1960’s) the part on which the embankment was

situated would have allowed the addition of a second carriageway to the road. Lord Malcolm noted

attractions in the argument that, having built a widened embankment for the purpose of holding the land in reserve for possible future use as a highway, the roads authority had dedicated that land for

public passage. He noted also that the widened embankment was held in the Council’s roads account. However, prior authorities indicated that the matter should be tested by the use, character and

function of the land at the time not by future intentions. At no time had the embankment been put to

use as a highway, or as part of a highway.

The full judgement is available from Scottish Courts here: http://www.legalknowledgescotland.com/?page_id=32&paged=7

http://www.scotcourts.gov.uk/opinions/2012CSOH52.html

http://www.legalknowledgescotland.com/?page_id=32&paged=7

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Sir Charles Christian Nicholson and others (The Trustees of Niall Calthorpe’s 1959 Discretionary Settlement) v G Hamilton (Tullochgribban Mains) Limited and the Keeper of

the Registers of Scotland, 24 August 2012 - habile titles and prescription Outer House case concerning the title to land near Tullochgribban Quarry (situated close to

Grantown-on-Spey). The Trustees sought declarator that they owned the disputed land. They argued that a disposition in 1991 in their favour formed a habile title which had been fortified by prescription.

As such, they contended that a 2008 disposition in favour of G Hamilton (Tullochgribban Mains)

Limited (the quarry owners) was a competing title and should be reduced. The question for the court was whether the Trustees title was habile and therefore capable of founding the prescriptive

possession claimed by the Trustees.

What is a habile title? After some strongly worded comments about the quality of the pleadings, Lady Clark considered what

was necessary to constitute a habile title drawing in particular from Auld v Hay (1880) in which the

Lord Justice Clerk stated:

”A habile title does not mean a charter followed by sasine, which bears to convey the property in dispute, but one which is conceived in terms capable of being so construed. The

terms of the grant may be ambiguous, or indefinite, or general, so that it may remain

doubtful whether the particular subject is or is not conveyed, or, if conveyed, what is the extent of it. But, if the instrument be conceived in terms consistent with and susceptible of a

construction which would embrace such a conveyance, that is enough, and 40 years1 possession following on it will constitute the right to the extent possessed.”

And Lord Deas said:

”It is not necessary, in my opinion, that a party who pleads prescription should produce a title which ex facie comprehends everything he claims under it. If its terms be such as may

comprehend the whole, and prescriptive possession of the whole has followed, that is sufficient. … Of course if the disputed subjects cannot be claimed without contradicting the

terms of the prescriptive deed, as in the base of a bounding charter, no length of possession

can establish that claim.”

The Trustees title In this case, the 1991 disposition conveyed the lands both described in and shown on a plan attached

to a disposition in 1977. The 1977 disposition in turn described the subjects conveyed by it, not only by reference to the plan attached to it, but also stated that the subjects were “PART AND PORTION”

of subjects shown on a plan attached to a disposition in 1968. However, the plan attached to the

1968 disposition clearly did not include the disputed land. The 1977 disposition therefore made reference to two contradictory plans and Lady Carlton took the view that it was not possible to

interpret it as referring only to the plan attached to it2. As, in Lady Carlton’s opinion, it was not possible to interpret the description in the 1977 disposition3 as including the disputed land, the

trustees did not have a habile title on which to found their prescription possession4.

On the other hand, the 2008 disposition in favour of the Quarry Owners did convey the disputed land

and gave them valid title to it.

1 The relevant prescriptive period at the time of the case (1880). 2 Lady Carlton noted that if it had been possible to interpret the 1977 disposition as referring only to the plan attached to it (and not to that attached to the 1968 disposition) then it would have been possible to found the prescriptive possession on the 1991 disposition. 3 Nor, consequently, the description in the 1991 disposition which referring to it. 4 Lady Carlton also noted that if the 1991 disposition had referred only to the plan attached to the 1977 disposition (but not the description in that document referring to the plan attached to the 1968 disposition) there would have been no contradiction and her decision would have been different.

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BUILDING ACTS

K2 Restaurants v Glasgow City Council and others, 18 October 2011 – council liable when demolition works result in damage to neighbouring property Outer House case concerning damage to an Indian restaurant in Glasgow following the demolition of

the floors above by Glasgow City Council.

The Council demolished the first, second and third floors of a tenement on North Street in Glasgow in the autumn of 1996 after serving notice (under s13 of the Building Scotland Act 1959) on the owners.

However, on 6 November part of the gable wall and chimney (exposed after the demolition) collapsed

in high winds and fell through the roof of the Koh I Noor restaurant which formed the ground floor of the tenement.

The owners of the restaurant sought damages from the Council claiming that the Council knew or

ought to have known that, after completing the works, they had left the former mutual dividing wall

in a condition which presented a foreseeable danger to people and the adjacent property in the event of high winds.

Morag Wise QC (sitting as a temporary judge) found that it was a clear case of common law breach

of duty. Whilst the Council had initially acted under the 1959 Act, after it had made the decision to demolish part of the building, a relationship was created between them and the neighbouring

proprietors that gave rise to a common law duty of care.

The decision to demolish had been taken by a director of Building Control at the Council. However, he

also decided to delete tying works (reducing the contract sum by about £12,000) to the exposed wall from the contract despite having received a survey report indicating that it would not be safe to

leave the wall without tying or other stabilisation works. Morag Wise QC came to the conclusion that

the Council knew that without carrying out gable stabilisation works there was a material risk of harm to people or property in the vicinity of the wall.

The Council’s argument that they should be free of responsibility for the collapse as they had written

to the restaurant owners indicating that future maintenance of the structure would be their responsibility was rejected. There was no evidence of the restaurant owners having been advised that

the exposed wall lacked stability and had not been tied. The restaurant owners were entitled to

assume that the Council had carried out the work in a manner that did not create a new structural instability.

The Council’s further contention that any liability had been extinguished by limitation in terms of the

Prescription and Limitation (Scotland) Act 1973 was also rejected. The Council were relying on the

fact that the limitation period began on the date they completed the works and left the site knowing the wall lacked stability. However, the court found that in this case the loss and damage occurred

when the masonry fell through the roof of the restaurant on 6 November. Before that no relevant proceedings could have been taken.




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CHURCH PROPERTY

Moderator of the General Assembly of the Free Church of Scotland and others v The

Reverend John Morrison and others, 12 August 2011 – split in church and division of property between competing factions The facts

Inner House case considering a property dispute over Broadford Church and Manse on Skye between

two factions of the Free Church of Scotland. A Feu Charter in 1869 set out the terms of the trust in favour of Trustees for the “Congregation of the Body of Christians called the Free Church of Scotland

in the Parish of Strath, Skye”.

In 2000 a split occurred when a substantial minority of the Church (the break aways) separated themselves from the rest of the Church (the majority) taking themselves outside the system of church

government (although there was no difference between the factions on religious doctrine). The

congregation at Broadford was divided and the majority brought an action for declarator that (amongst other things) the church and manse belonged to the majority rather than the break aways.

They also sought a conclusion preventing the break aways from trespassing on and carrying out renovations to the manse.

The decision An extra division of the Inner House found in favour of the majority. It was clear from the trust deed

that membership of and participation in the institutional structures of the Free Church was an essential feature of the trust. Whilst the break aways claimed that, following the division in 2000,

they continued to adhere to the law and practice of the Free Church, they did not claim to maintain the continuity of the Church government system nor did they seek to argue that they remained part

of the system of church courts. Participation in and membership of the system of church courts was

the decisive principle on which the Broadford property was held on trust and the arguments put forward by the break aways were consistent only with the view that they had withdrawn from the

system of church courts existing prior to the division.

Some general principles

After reviewing the authorities, Lord Drummond Young highlighted a number of principles and factors which would be taken into account when considering property disputes within churches. He noted

that property rights will always be dependent on the circumstances of the individual case and in particular the terms of the trust agreement under which the property is held but also considered the

following:

Majority rule

The principle of majority rule (i.e. that property should simply go to the majority of the money contributors on any division) was prevalent in older decisions but was rejected in the judgement of

Lord Eldon in the House of Lords in Craigdaillie v Aikman (1813). Lord Drummond Young also took the view majority rule is unsatisfactory:

“In the first place, it is not clear who the majority are: are they the majority of the congregation, or the majority of the members (as against adherents) among that

congregation, or the majority of the elders, or a majority of the money contributors? If the last of these, how are the contributions of the various contributors to be assessed? In the

second place, and more importantly, the principle of majority rule would permit a bare

majority of the congregation to effect a fundamental change in the doctrines taught in the church or the religious practices followed there.”

The distinction between church property and congregational property

There is an important distinction to be made between property which is to be held for the general governing body or ecclesiastical judiciary of the church in question (especially from the funds of

parties other than the parties in the congregation) and property which is to be held in trust for a

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congregation and its members. Church property must be used for the benefit of those whom the Church acknowledge as part of the church. Congregational property is the property of the

congregation alone and the governing body has no interest or power over the property.

Adherence to fundamental doctrine

The court must scrupulously respect the religious opinions of the parties involved in the litigation especially the differences of opinion which the parties consider important. Those who adhere to the

principles on which the congregation was united will not forfeit the property merely because a

majority has decided otherwise. In the event of a division, the property held for a congregation will go to the part of the congregation which adheres to the fundamental principles of the church as

identified in the churches original documents. Those fundamental principles:

“may take a number of forms. Particular doctrines may be important, but so too may be a system of church government, and so may adherence to specific structures of church

government.”

Unsurprisingly, however, it seems that the most important principle is that the trust deed rules.

The full judgement is available from Scottish Courts here: http://www.scotcourts.gov.uk/opinions/2011CSIH52.html

COMMON GOOD LAND

Portobello Park Action Group Association for Judicial Review of a decision of the City of

Edinburgh Council, 7 March 2012 – local authority appropriation of inalienable common good land Case in which the Portobello Park Action Group Association sought Judicial Review of the City of Edinburgh Council’s decision to appropriate part of Portobello Park in order to site a new Portobello

High School. The action group argued that it was unlawful for the Council to appropriate the park, which is common good land, and even if they were, they were not entitled to do so without the

permission of the court.

Although it was unclear exactly when the decision to appropriate the park had been reached, Lady

Dorrian found that “at the very latest” the decision had been made in March 2010. As the action group did not bring the case until July 2011, there had been considerable delay which was indicative

of taciturnity and acquiescence and Lady Dorrian dismissed the petition on the basis that a plea of mora had been established.

Although the successful plea of mora meant that it was not necessary to reach a judgement on the Council’s decision, Lady Dorrian indicated that if she had been required to do so, she would have

found that the Council does have the power to appropriate inalienable common good land. The Council’s powers in relation to appropriation and disposal of land are contained in sections 73 to 75 of

the Local Government (Scotland) Act 1973. Lady Dorrian observed:

“Section 73 of the 1973 Act gives a local authority the widest powers to appropriate for the

purpose of any function land vested in them for the purpose of any other function5… An equally wide general power of disposal is given under section 74, subject to a requirement to

obtain the best price. Section 75 of the 1973 Act does two things. By subsection (1) it makes

it clear that the provisions regarding appropriation or disposal of land apply to common good land where there is no question arising as to the right to alienate. Where such a question

arises, under subsection (2) the power of disposal is limited, in that a local authority may only

5 Noting that the only restriction on appropriation is that a local authority may not appropriate land held for allotments without the consent of the Secretary of State. And also that, whilst section 24 of the Town and Country Planning (Scotland) Act 1959 requires a local authority to give public notification of any proposed appropriation and to consider objections made as a result, it not restrict the general power of appropriation.

http://www.scotcourts.gov.uk/opinions/2011CSIH52.html

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dispose of such land with the authority of, and subject to any conditions imposed by, the court. The power to appropriate such land remains unfettered.”


(Appeal below)

Portobello Park Action Group Association v The City of Edinburgh Council, 12 September

2012 – local authority appropriation of inalienable common good land

Judicial Review of the City of Edinburgh Council’s decision to appropriate part of Portobello Park to build a new Portobello High School.

In the Outer House Lady Dorrian had dismissed a petition for Judicial Review by the Portobello Park Action Group Association. The Action Group argued that it was unlawful for the Council to appropriate

the park land which is common good land. Lady Dorrian dismissed the petition on the basis it was barred by mora, taciturnity and acquiescence (i.e. the Action Group had delayed their action, failed to

speak out and impliedly accepted the position.) As the petition had been barred, Lady Dorrian did not

have to decide on the lawfulness of the Council’s decision, however, she indicated that, if she had been required to do so, she would have found in favour of the Council. Her reasoning was that, whilst

the Council’s power to alienate common good land is limited, its power to appropriate such land is unfettered, meaning that its Children and Families Department could appropriate the park land from

its Services for the Community department.

The Inner House has now allowed an appeal of the Outer House decision.

Mora, taciturnity and acquiescence

Lady Dorrian had found that (although it was unclear exactly when the decision to appropriate the park had been reached) “at the very latest” the decision had been made in March 2010. As the Action

Group did not bring the case until July 2011 there had been considerable delay which was indicative

of taciturnity and acquiescence. On the other hand, the Inner House held that the Action Group was, at the very least, entitled to wait until planning permission had been granted (which occurred in

February 2011) before resorting to litigation. It was observed that, if planning permission had been refused, the dispute would have been at best premature and at worst academic and pointless. The

Inner House also considered the Action Group’s behaviour, noting:

“The regular statements over the years of the Association’s reasons for their opposition can

scarcely be characterised as “taciturnity”. Moreover, bearing in mind the conduct, letters, e-mails, and deputations noted in the chronology in paragraph above, we are unable to accept

that there were circumstances entitling the reasonable observer to draw any inference that the Association had at any stage acquiesced in the Council’s proposed intention to construct a

new school on Portobello Park. On the contrary …there was a steady and unwavering

opposition for the clearly articulated reason that the ground in question was inalienable common good land.”

Appropriation and alienation

After considering the Council’s powers of appropriation and disposal of land contained in sections 73

to 75 of the Local Government (Scotland) Act 1973, the Inner House found:

“..we are, with great respect, unable to support the Lord Ordinary’s reasoning and conclusions in this area. To our mind there is no question of a local authority’s right to

appropriate inalienable common good land (such as the southern section of Portobello Park) being unfettered. On the contrary, the true position would appear to be that, for so long as

inalienable common good land remains within the ownership of a local authority, Parliament


15

must be taken to have intended all pre-existing fiduciary obligations, and corresponding community rights, to remain extant and enforceable. It would indeed be an extraordinary

situation if, by the mere expedient of appropriating inalienable common good land to some

function other than parks and recreation, a local authority could at a stroke free itself from all common law restraints and, having done so, perhaps also facilitate onward disposal without

any need to obtain the sanction of the court under section 75(2). In the absence of clear authority requiring us to affirm such an apparently unreasonable state of affairs, we are not

persuaded that we should go down that line. We therefore hold that, for present purposes,

the Council can lay claim to no statutory power of appropriation under the 1973 Act.”


COMMON PROPERTY

Mrs Elsie Black v. Frank Duncan and Mrs Duncan, 17 May 2011 - acceptable use of common property

Sheriff Court case considering use of a common drying green on which Mr and Mrs Duncan erected a

fence and created an area for exercising and toileting their dogs. The sheriff had little difficulty in coming to the view that that was an extraordinary and unacceptable use of common property and

granted orders requiring the Duncans to remove the fence and also interdicting them from allowing their dogs to exercise, defecate or urinate on the drying green.

The full judgement is available from Scottish Courts here:

http://www.scotcourts.gov.uk/opinions/A958_09.html

COMMUNITY RIGHT TO BUY

Pairc Crofters v The Scottish Ministers, 19 December 2012 – Crofting community right to buy, compliance with Convention on Human Rights Inner House case concerning an application to exercise a right to buy croft land at the Pairc Estate in

South East Lewis. Pairc Crofters Limited was the owner of the land and had leased it to Pairc Renewables Limited. The Pairc Trust is the crofting community body which sought to exercise the

right to buy. It sought purchase both the interest of Pairc Crofters as owner and the interest of Pairc Renewables as tenant.

The Scottish Ministers granted the trust’s application. Pairc Crofters and Pairc Renewables appealed to the sheriff. The sheriff referred the devolution issues arising from the appeal to the Inner House.

The court required to consider whether Part 3 of the Land Reform (Scotland) Act 2003 (which contains the crofting right to buy) is incompatible with the European Convention on Human Rights.

Specifically the landowners and their tenants claimed that Part 3 contravened Article 6(1) (right to a

fair trial) and/or Article 1 of Protocol 1 (right to protection of property) of the Convention. If Part 3 had been incompatible with the Convention rights, the making of the 2003 Act would as a

consequence have been outwith the legislative competence of the Scottish Parliament (in terms of the Human Rights Act 1998 and the Scotland Act 1998).

The landowner argued that Part 3 does not provide sufficient safeguards for landowner’s rights. Although A1P1 makes no mention of procedural requirements, the landowner contended that the

procedure employed must give the proprietor a reasonable opportunity of putting its case to the decision maker. And, in the landowner’s view, Part 3 did not do that.

The court took the view that the landowner’s case depended on the proposition that the safeguards

for a landowner’s rights required to have been explicitly spelled out in the 2003 Act. However, this is



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not the case. The question of competence depends on how the legislation operates in practice and not on how any specific provision may appear if looked at in isolation. (It may be that proper

interpretation of the Act, the terms of other legislation, or the principles of the common law may

restrict the impact of the Act so that it cannot be said to be incompatible with Convention rights.)

As regards Part 3 of the 2003 Act:

1) The provisions requiring the crofting community’s approval (to exercise of the right to buy) by

ballot were compatible with article 6 (the right to a fair trial). Regulation 2 of the Crofting Community Right to Buy (Ballot) (Scotland) Regulations 2004 requires that the ballot be

carried out in a “fair and reasonable manner”. In the event that the landowner considers the ballot to be unfair, it had a judicial remedy under the same regulation.

2) The exercising of the right to buy is at the discretion of the Scottish Ministers. Section 74(1)(n) of the 2003 Act requires that the applicant must in every case satisfy the Ministers

that the proposed purchase is in the public interest. In making a judgment as to the public

interest, the Ministers must act compatibly with A1P1 (right to protection of property). In assessing the broad overall consideration of the public interest, the Ministers must take

account of the interests of persons who may be adversely affected by the decision, such as the landowner. When the Ministers decide where the overall public interest lies, the central

consideration will be that of balancing the harm to the landowner against the benefit of the

proposal to the wider public. 3) The 2003 Act gives the landowner adequate means to put forward his case. On receipt of the

community body’s application, the Ministers are obliged to invite a number of interested parties, including the landowner, to submit their views in writing on the application (s

73(8)(a)). The Ministers are then under an express obligation, when considering whether to grant the application, to have regard to all views that have been received (s73(12), (13)). In

addition to the statutory procedure the Ministers also have a duty at common law to observe

such additional procedural safeguards as are necessary to attain fairness. 4) Lastly, the legislation provides for an adequate level of scrutiny of the factual issues that an

application to exercise the right to buy may raise. It does so in three separate ways: a) in the requirement of the details that the crofting community body must provide in

the prescribed form of application;

b) in the requirement that the Ministers must invite views on the proposal from interested parties, including the landlord, and from the public; and

c) from the right given to any interested party, again including the landlord, to refer any question relating to the application to the Land Court.

The Inner House found that, when considered as a whole, the legislative provisions and principles of

administrative law offer a level of protection “equal to or surpassing that” which is required by the

European Convention on Human Rights.

The full judgement is available from Scottish Courts here: http://www.legalknowledgescotland.com/?p=1006

COMPULSORY PURCHASE

Edward Gardner Fox and others v (1) The Scottish Ministers and (2) Glasgow City

Council, 27 March 2012 – withdrawing a compulsory purchase order Inner House case concerning a compulsory purchase order (CPO) made in relation to property on

Argyle Street/Robertson Street in Glasgow. The owners of the properties which were subject to the CPO raised an appeal in which they sought to quash the decision of the Scottish Ministers to confirm

the CPO. The CPO had been issued as part of a back-to-back scheme between the Council and a developer for the conversion of the property into, amongst other things, a hotel and apartment

complex.

http://www.legalknowledgescotland.com/?p=1006

17

However, the scheme had fallen through when the developer became insolvent and the Irish

Government’s National Asset Management Agency failed to re-instate a guarantee by Anglo Irish

Bank.

Although all of the parties were then agreed that the CPO should not take effect, there were two practical difficulties:

1) there is no statutory procedure by which the Ministers can rescind a decision made by them to confirm a CPO; and

2) there is no statutory procedure by which an acquiring authority can withdraw a confirmed

CPO.

This meant that the CPO would remain valid until it expired by the passage of time (on 7 September

2013) adversely affecting the interest of property owners (and that of their heritable creditors) in the property.

The Council therefore granted an undertaking which extended to successors in title confirming that it

would take no further steps to acquire the land subject to the CPO. The court took the view that, in

this case, that was the best means by which the Council could give effect to its intention not to implement the CPO. After considering the authorities and noting that it is possible for a local authority

to abandon its rights under a CPO by its conduct, the court found that, all the more so, it was possible for it to abandon its rights by express words.



CONTRACT (See also MISSIVES)

Thomas Barr v James Wilson Gilchrist and others, 5 May 2011 - fiduciary duties and joint ventures

Case considering duties owed by the parties to a joint venture to each other. Thomas Barr entered into a joint venture with Hawkhill to purchase and resell Omne House (an office building at Riverside

Park in Irvine). Hawkhill, which was controlled by a Mr Gilchrist, sold Omne house to Fearann of which Mr Gilchrist was a director along with his wife (who also owned all of the shares). Fearann was

not a party to the joint venture.

In response to Mr Barr’s claims for payment of half of the sale proceeds, Mr Gilchrist argued that

Hawkhill had various outstanding claims for payment in respect of other developments (which were the subject of separate court proceedings) and the property had been transferred in an attempt to

improve its position in respect of these outstanding claims.

In granting summary decree (for payment of half of the sale proceeds), Lord Hodge found that

Hawkhill had acted in breach of trust. He confirmed that a joint venture is a species of partnership and that the sale of the property to Fearann in order to improve its position in relation to the other

outstanding claims amounted to a breach of fiduciary duty.





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Stewart Hill and another v Stewart Milne Group, 3 August 2011 – whether contract is unenforceable penalty Inner House case considering whether a contractual clause constituted a penalty and was therefore unenforceable.

The clause in question was contained in an agreement between Stewart Milne Group, Bett Limited and Stewart and Robert Hill which related to the development of two sites in Wishaw. Basically, the

agreement provided that Stewart Milne and Bett would install sewerage and surface water drainage systems at the site they were developing which the Hills would be able to connect their site to the

systems at no cost. If the drainage systems were not completed by the 28 March 2008 the Hills were entitled to receive payment from Bett and Stewart Milne of a penalty of £5,000 per calendar month

until the systems were completed.

The works were not completed by 28 March 2008 and payments were made to the Hills until

December 2008 but then stopped leading to the court action being raised by the Hills.

The temporary sheriff principal held that the clause imposed a liability to make payment on the

occurrence of what was a breach of contract. Whilst it was for the party seeking to show that the clause is a penalty to raise the issue, it was then for the party relying on the clause to demonstrate

that it was a genuine pre-estimate of losses and damage caused by the breach. In this case Stewart Milne and Bett had raised the issue and the Hills had put themselves in a position to show that the

provision was a genuine pre-estimate of their loss. However, as the Hills had not shown that, but for the failure to complete the system by 28 March, they would have been able to complete their site, sell

it and realise the return, they could not succeed.

However, an Extra Division of the Inner House agreed with the submissions made on behalf of the

Hills to the effect that it was for Stewart Milne and Bett as the parties claiming that the provision was an unenforceable penalty clause to show that this was the case and they had failed to do so.

In coming to his decision, the key question the sheriff principal had failed to consider was whether Stewart Milne and Bett had provided any argument in support of their contention that the provision

was an unenforceable penalty. It appeared from the sheriff principal’s decision that he considered that it was not only for the Hills to show that the provision was a genuine pre-estimate of damages

but also that the supposed breach of contract had given risen to a loss of the sort that the pre-estimate had been directed at quantifying. There was no such requirement. The whole purpose of a

provision such as the one used in this case is to avoid the need for proof; not only proof as to

quantification of the loss but also proof that the loss had occurred.

The Inner House therefore allowed the appeal against the sheriff principal’s decision.



East Dunbartonshire Council v Bett Homes Limited formerly Gladedale (Northern)

Division Limited, 6 January 2012 – contract, whether time of essence for date of entry Inner House case concerning tripartite agreement between East Dunbartonshire Council, Bett Homes

and Glasgow University. The agreement allowed the Council to sell the Bearsden Academy site to Bett for development and relocate the school to a site at St Andrews College in Bearsden which it was

purchasing from the University of Glasgow.


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The Council sought declarator that Bett was bound to fulfil its side of the bargain and pay the final instalment of the purchase price for Academy site. The dispute centred on whether the time was of

the essence regarding the entry date on which vacant possession was to have been given to Bett.

Bett argued that it was of the essence and, the Council having been unable to give vacant possession on the agreed date, it had been in material breach of contract and Bett had validly rescinded the

contract. The Inner House upheld Lord Glennie’s decision finding that time was not of the essence and the contract remained live for performance.


EDI Central Limited v. National Car Parks Limited, 20 January 2012 – extent of obligation to use all reasonable endeavours

Inner House case considering an agreement between NCP and EDI for a development at Castle Terrace car park in Edinburgh. The agreement involved EDI being interposed into a lease of the

subjects between the City of Edinburgh Council and NCP in return for a capital payment of £5m and then using its close links with the City of Edinburgh Council (EDI being wholly owned by the Council)

to deliver the development.

In terms of the agreement, EDI were obliged to “use all reasonable endeavours” expected of “a

normal experienced prudent developer in the circumstances” to pursue the development. However, the development did not take place and, as it was entitled to do under the agreement, EDI served

notice on NCP requiring NCP to buy back the tenant’s interest under the lease. NCP failed to do so contending that they were not obliged to serve the appropriate notice6 as EDI were in material breach

of the agreement having failed to comply with their obligation to use all reasonable endeavours. NCP

argued that EDI had approached the project as if they merely had an option to pursue the development rather than an obligation compelling them to undertake it. The question for the court

was whether EDI had met the required standard.

The Inner House upheld Lord Glennie’s judgement that EDI had met the standard and found that the

work they carried out and the assessment they reached were not significantly different from those to be expected of a normal experienced prudent developer in the circumstances. In particular, EDI could

not be criticised for failing to pursue further steps in relation to any of four alternative sites since (on the evidence heard by Lord Glennie) such further steps would have been futile. It was clear from the

papers available to the court that the problem of finding alternative car parking space was critical to unlocking the development and it had not been possible to identify alternative provision for car

parking.

The Court also said the following on the standard of effort required from the Council:

“In our opinion it is clear that the obligation to pursue a project or seek a planning consent

with all reasonable endeavours is one that requires the court to consider whether there were

reasonable steps which the obligant could have taken but did not. For that reason it is a higher or more onerous obligation than one restricted to using “reasonable endeavours”.

However, whether the phrase used is “all reasonable endeavours… or “reasonable endeavours” we agree with the view expressed by Lord Hodge in MacTaggart & Mickel

Homes Ltd v Hunter… that an obligation in either terms does not require the obligant to

disregard its own commercial interests. Where the balance between the obligation to use reasonable endeavours and countervailing commercial considerations falls to be struck

depends on the wording of the obligation in question. In considering what steps would be reasonable, the court also has to consider whether any further steps would have been

6 The buy back procedure involved a complex notice procedure which depended on NCP serving a “Re-Assignation Clearance Notice” when required by EDI.


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successful. We agree with Lord Hodge… that if an obligant can show that it would have been useless for it to have taken a particular step (or steps), because it would not have been

sufficient to achieve success, that would provide an answer to any claim that the obligant had

acted in breach of contract… Equally if there was an insuperable obstacle, it is irrelevant that there may have been other obstacles which could have been overcome, or at any rate in

respect of which the obligant had not yet done all that could reasonably be expected of it to try to overcome.”


Mountwest 838 Limited v Backmuir Trading Limited, 15 August 2012 - wind farm agreement, construction of termination and notice provisions Outer House case concerning the termination of a wind farm agreement relating to property in Aberdeenshire. In terms of the agreement, Backmuir granted an option to Mountwest to develop a

wind farm on the property. The option period was ten years (with a right to extend for a further five years). Mountwest was entitled to apply for planning permission and other consents but Backmuir

had a right to see and make representations about the proposed application before its submission to

the planning authority. If Mountwest obtained the necessary permissions, it could choose to exercise the option in which case Backmuir required to grant a twenty five year lease of the property to

Mountwest. The agreement also contained a termination provision in the following terms:

“[Backmuir] may determine this Agreement by written notice to [Mountwest] if:-

[Mountwest] materially fails to perform or observe any of its obligations in this Agreement

and such failure or event is incapable of remedy or it is capable of remedy and [Backmuir] have [sic] served on [Mountwest] written notice specifying the failure or event and requiring

it to be remedied within a reasonable time (to be specified in the notice and taking into account the nature of the obligation in question) and [Mountwest] has failed to do so;”

In June 2011 Mountwest lodged a planning application but failed to send a copy to Backmuir in advance. When it learned of this, Backmuir wrote to Mountwest advising them that they had

breached the agreement and requiring them to remedy the breach “if it was capable of being remedied”. The letter also required Mountwest to provide the documentation required by the

agreement within 21 days. Mountwest then wrote to Backmuir enclosing a copy of the application and asking for comments. However, Backmuir’s solicitors replied purporting to terminate the

agreement on the basis that Mountwest had failed to remedy the breach of the agreement. The

issue for the court was whether the agreement had been validly terminated. Three questions required to be answered.

1) Was there a material failure by Mountwest?

2) If so, was it remediable?

3) Did Backmuir serve a valid notice of termination?

Material failure? On a commercial construction of the contract Lord Woolman found that there had been a material

failure by Mountwest. The purpose of the contract was to facilitate Mountwest’s wish to develop a

wind farm at the property. But it contained built in checks drawn in Backmuir’s favour of which the right to make representations about the planning application was the most important. The parties had

not intended that right to be illusory. Rather, they provided a mechanism which allowed Backmuir to influence the planning at a critical stage in the procedure.

Remediable?


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Lord Woolman found that Mountwest’s failure to send the planning application to Backmuir was plainly capable of remedy; the application being at an early stage and local planning committee not

yet having considered it.

Valid termination?

The clause allowing termination of the agreement had been a bespoke irritancy clause. The potency of the clause suggested that Backmuir would have to adhere to its precise requirements (it required

Backmuir to serve written notice on Mountwest specifying the failure and requiring it to be remedied

within a reasonable time). However, Backmuir’s initial letter notifying the breach had not been clear. It had both expressed doubt as to whether the breach was remediable and had required Mountwest

to provide the documentation within 21 days. Lord Woolman found that the reasonable recipient of the letter would read it as requiring delivery of the documentation within 21 days and, if it were done,

that would comply with the terms of the agreement.

Another approach was to ask whether the mischief created by Mountwest’s omission had been cured.

Lord Woolman concluded that it had. Backmuir had asked for the documents. Mountwest had supplied them in return. If Backmuir had wished to insist on Mountwest withdrawing its application

and beginning the process again, that would have been a simple message to convey and could have been easily and clearly set out in its letter.

The purported termination was therefore invalid.


DILIGENCE AND INSOLVENCY

Ewen Ross Alexander as the Trustee on the sequestrated estates of David George Pocock

v Skene Investments (Aberdeen) Ltd and Others, 1 September 2011 – effect of bankrupt’s fraud on trustee in bankruptcy

The facts Outer House case in which a trustee in bankruptcy sought declarators and reductions relating to a

series of conveyancing transactions which followed an alleged fraud on the part of a bankrupt (Mr Pocock).

The transactions related to the sale of a property at Queen’s Gardens in Aberdeen. The trustee

discovered that a disposition of the property by Skene Investments in favour of Mr Pocock had not

been registered and that a second disposition in favour of Howemoss Properties Limited had been lodged with the Keeper. Various transactions had then taken place in reliance on the Howemoss

disposition. However, the trustee contended that Skene had not executed the Howemoss disposition and believed it to be an unauthorised alteration of the original disposition, the price and purchaser

having been altered without Skene’s consent. (Although he did not know the purpose of the

alteration, the trustee believed that it may have been altered to avoid payment of stamp duty.) The Trustee sought declarator that the Howemoss disposition and various dispositions and standard

securities based on it were a non domino (i.e. by someone who is not the owner). He also sought declarator of the tenor of the first disposition which be believed to have been lost or destroyed.

Proving the tenor of the original disposition It was argued by the parties who transacted on the strength of the Howemoss disposition (the third

parties) that it was not open to the trustee to prove the tenor of the first disposition as, rather like tearing up a will, the act of destroying the deed meant the rights created by it were lost and the

trustee was in no better a position than Mr Pocock. That argument was rejected by Lord Uist who found that, in such circumstances, whether a person was precluded from proving the tenor of a deed

would depend on, the nature of the deed, by whom it was destroyed and for what purpose. In this


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case Lord Uist saw no reason why there should be any legal bar to the trustee proving the tenor of a disposition in favour of Mr Pocock. Mr Pocock had paid a purchase price of £207,125 and the trustee

claimed Mr Pocock had deliberately destroyed the deed order to conceal the fact that he had

purchased the property. It would be a denial of justice if the trustee were not allowed to prove the tenor of the original disposition.

The tantum et tale principle

The third parties also argued that, as a result of the tantum et tale principle, the trustee took Mr

Pocock’s estate exactly as it stood in Mr Pocock’s hands at the time of the sequestration. Thus, if Mr Pocock were unable to prove the tenor of the original disposition or reduce the subsequent writs (as a

result of personal bar or by the effect of his own fraud), then so too would the trustee.

However, after considering the terms of the Bankruptcy (Scotland) Act 1985 and Burnett’s Trustee v Grainger (2004), Lord Uist found that the tantum et tale argument has been discredited. Applying

Burnett’s Trustee to the present case:

“the relevant picture is not of the permanent trustee stepping into the shoes of the bankrupt,

but of the bankrupt’s estate being taken from him and placed in the hands of a completely different individual, the trustee for the bankrupt’s creditors, which suggests that in so far as

the bankrupt himself may be subject to personal obligations, those obligations do not affect

this new person, the permanent trustee.”

And with regard to fraud:

“the cases show that a trustee in bankruptcy cannot benefit from the fraud of the debtor which enlarges the estate for distribution, but that is patently not the case here. If anything,

it is the contrary: the trustee’s position is that Mr Pocock fraudulently alienated part of his

estate and he now seeks to reclaim, for the benefit of the whole body of creditors, the property so alienated. What the trustee is seeking to do is to annul a fraud which has

wrongfully diminished the bankrupt’s estate, not benefit from the bankrupt’s fraud in order to enlarge the estate.”


Joint Building Society Special Administrators for Dunfermline Building Society v FM Front Door Limited, 21 October 2011 – did building society’s reminder emails prevent debtor being in default? Application for an administration order in respect of FM Front Door Ltd. The application followed FM’s

failure to make payments under a loan from the Dunfermline Building Society obtained to assist with the purchase of flats at the Skyline development on Finniestoun Street in Glasgow. The loan was

secured by a floating charge and standard securities over each of the flats. FM’s parent company FM

Developments also granted a guarantee for the loan.

Clause 13 of the loan agreement provided that the grounds for default included:

1) failure to pay sums due under the loan agreement;

2) inability to pay debts as they fall due (or deemed inability in terms of the Insolvency Act 1986); and

3) circumstances arising, which in the opinion of the building society, had a materially adverse effect on the ability of FM to perform it’s obligations under the agreement or on the value,

validity and enforcement of the security or the security documents.


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In terms of the loan agreement, FM were to make quarterly payments to the building society. They failed to do so timeously (in respect of payments due in July and October 2010 also January and April

2011) but on each occasion paid after they were sent reminders by the building society which noted

the sum due and the bank account to which it was to be paid. However, when FM again failed to pay the sum due in July 2011, the building society wrote to FM indicating that they were in default and

demanding payment of the principle sum with interest.

The defaults on which the building society sought to rely were the late payment of the July

instalment, a reduction in the value of the property which in its opinion constituted a materially adverse effect on both FM’s ability to perform its obligations under the loan agreement and also on

the value of the securities. It also took the view that the administration of the guarantor, FM Development materially affected the value of the guarantee.

FM argued that it was not in default contending that the parties had varied their contract so that FM

did not have to pay the quarterly instalments of interest until the building society had informed it of

the sum due and the bank account into which the sum should be paid. Further, FM claimed that the building society had acquiesced in late payment and was personally barred from founding on the

delayed payment in July.

Lord Hodge rejected these arguments and granted the administration order sought by the building

society.

In terms of the Insolvency Act 1986, before a court can grant an administration order, it must be satisfied that:

1) the company is or is likely to become unable to pay its debts; and

2) the administration order is reasonably likely to achieve the purpose of the administration.

Default

Variation of the contract Lord Hodge was not persuaded that the email correspondence vouched for any variation of contract.

It was consistent with the building society politely reminding its borrower that sums were overdue

and pressing for payment. It did not establish the agreed practice claimed by FM. Also there was no suggestion that, before the default, anything occurred to cause uncertainty as to the amount due for

quarterly payment. On the contrary, the sum due in each quarter remained the same and the bank account into which it was to be paid did not change.

The loan agreement also contained a “no waiver” clause to the effect that failure or delay on the part

of the building society to exercise powers or rights under the agreement did not preclude further

exercise of the powers or rights. Whilst there is some uncertainty as to the boundaries of the efficacy of “no waiver” clauses, the effect of the clause was that FM could not found on a failure by the

building society to assert a default when there had been a delay in making a quarterly payment in order to argue that the building society could not give notice of a default on the occurrence of a

further failure to make a payment. Personal bar seeks to prevent unfairness caused by inconsistent

behaviour. But in this case FM had to be taken to have been aware of the clause and thus to have known that a failure by the building society to exercise a right or remedy did not amount to an

abandonment of that right on a later non-performance.

FM was therefore in default when it failed to make the payment on 1 July 2011.

Materially adverse effects under clause 13

Lord Hodge was also satisfied that the building society has established a default under clause 13. The insolvency of FM’s guarantor, FM Developments was likely to have had a material adverse effect on

the value of its guarantee. Further, the building society was entitled to take the view that the fall in value of the flats which FM acquired was likely to have a material adverse effect on the value of its

standard securities and on FM’s ability to repay the advances. Whilst both parties relied on different

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valuations, whichever valuation was taken, it was clear that there has been a material fall in the value of the properties and that the outstanding balance of the loan exceeded their value. That was a

position which was materially adverse to the circumstance in 2007 when the building society

stipulated that the maximum that it would lend was 85% of the market value of the properties.

The administration order Inability to pay debts

Having found that the building society was entitled to treat FM as being in default, Lord Hodge was

satisfied that FM was unable to pay its debts as they fell due. FM’s failure to repay the principal sum in response to the building society’s demand and the evidence of the current value of its property

portfolio demonstrated that inability.

The effect of the administration order As to whether an administration order was likely to achieve the purpose of the administration, one of

the two purposes which the intended administrators advanced was to make a distribution to the

building society as a secured creditor. There is no suggestion that they would not be in a position to do so and Lord Hodge was satisfied that it was likely that that purpose would be achieved.



Mathew Purdon Henderson v Foxworth Investments Limited and Nova Scotia Limited, 12 April 2011 – whether rights under security acquired in good faith and for value/form of security

Complicated case in which the Liquidator of the Letham Grange Development Company sought

reduction of a security over the Letham Grange resort near Arbroath. The case involves a number of companies all controlled by a Mr Liu and his family.

The grounds for challenge

The Liquidator argued that the holder of the security (Foxworth) had (1) not acquired the rights

under the security in good faith and for value and (2) the security was void as it was not in the correct form.

Good faith and value

Prior to this case the Liquidator had challenged a disposition by Letham Grange in favour of Nova Scotia Limited on the basis that it was a gratuitous alienation, an unfair preference (both in terms of

the Insolvency Act 1976) and a fraudulent preference at common law. The subjects which had been

purchased by Letham Grange for £2,105,000 were sold to Nova Scotia for only £248,100. The Liquidator had previously obtained a decree reducing the disposition (effectively by default when

Nova Scotia failed to appear at a proof).

However, in the present proceedings Mr Liu argued that the price contained in the disposition was not

the full consideration for the subjects as the price had been reduced to take account of loans which Mr Liu and his family had made to Letham Grange in order to finance the purchase. Foxworth then

assumed liability to repay the loans to the family and Nova Scotia granted the standard security over the property in favour of Foxworth.

After consideration of the evidence and an assessment of the credibility of the witnesses, Lord Glennie found that the sale had been for adequate consideration and there had not been a gratuitous

alienation. There had been loans by the family in favour of Letham to finance the original purchase and, although Foxworth had imputed knowledge of the facts pertaining to the sale to Nova Scotia

(through Mr Liu who was in control of both companies), it did not have knowledge of any fact rendering the grant of the standard security by Nova Scotia a breach of an obligation on it affecting

the property.


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Form of the Security

The Liquidator argued that the security, which had been drafted by Mr Liu himself, was not valid

pointing to the fact that although the deed referred to a separate personal bond (per a Form B security under the Conveyancing and Feudal Reform (Scotland) Act 1970) it failed to specify the date

of the personal bond and did not include anything allowing the personal bond to be identified. Also, although the deed contained the rate of interest to be applied (per a Form A security under the 1970

Act), the personal bond did not.

However, Lord Glennie agreed with the argument that it was acceptable to rely on extraneous

evidence to identify the personal bond approving the arguments put on behalf of Mr Liu to the effect that, although a standard security must comply with one of the statutory forms contained in the 1970

Act, it is sufficient compliance that the deed complies “as closely as may be” and some latitude may be allowed.

Lord Glennie noted that in effect the security had been a hybrid between Form A and Form B but found there was no difficulty in a security granted in hybrid form.



Playfair Investments Limited v Anielka Karus or McElvogue and others, 11 September 2012 – effect of inhibition on prior contract Outer House case considering a motion for recall of inhibitions served on Cordelt Limited and Mako

Property Limited by Playfair Limited. Mako and Cordelt argued that the inhibitions prevented them

showing clear searches to purchasers in implement of contracts to sell properties in Edinburgh.

An important issue for the court was whether s160 of the Bankruptcy and Diligence (Scotland) Act 2007 changed the law regarding the effect of an inhibition on a pre-existing contract to convey

property. Under the prior law it was clear that an inhibition did not prevent the transfer of property in

implementation of a contract that pre-dated the inhibition. After detailed consideration of the 2007 Act and Scottish Law Commission’s Report on Diligence, Lord Hodge found that the law had not

changed in this respect. He also noted that if (and he doubted that it had) advice from Registers of Scotland had indicated otherwise then he would respectfully disagree with that advice. Although s160

defines a breach of the inhibition as occurring when a debtor delivers a deed conveying property over which the inhibition has effect, it does not strike at a deed in implement of a pre-existing obligation.

“I conclude that an inhibition does not strike at a transaction which the inhibited person is bound to carry out as a result of a pre-inhibition obligation. The reforms of the 2007 Act did

not create a statutory code which excluded that common law characteristic of the diligence. Had the 2007 Act had that effect it would have created a diligence which forced the inhibited

person either to breach the inhibition or break his contract. That would not have been good

law reform”


Matthew Purdon Henderson v. Foxworth Investments Limited and 3052775 Nova Scotia Limited 1 March 2013 - reduction of security following gratuitous alienation

Inner House case of some complexity in which the Liquidator of the Letham Grange Development

Company sought reduction of a security over the Letham Grange resort near Arbroath. The case involves a number of companies all controlled by a Mr Liu and his family.



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The Liquidator argued that the holder of the security, Foxworth (a company controlled by Mr Liu),

had not acquired the rights under the security in good faith and for value. The Liquidator had

previously successfully challenged a disposition by Letham Grange in favour of Nova Scotia Limited

(also a company controlled by Mr Liu) on the basis that it was a gratuitous alienation. (The property which had been purchased by Letham Grange for £2,105,000 was sold to Nova Scotia for only

£248,100.)

In the Outer House Lord Glennie found that there had not been a gratuitous alienation accepting Mr

Lui’s evidence that the price had been reduced as there had been loans made by Mr Liu’s family in

favour of Letham to finance the original purchase and that Foxworth (having assumed liability) was obliged to repay those loans to the family.

The Inner House have allowed an appeal finding that, to avoid a gratuitous alienation, the

consideration given in exchange for the granting of the disposition of the resort to Nova Scotia

required to be enforceable at the time when the disposition was granted. However, at that date, there was no enforceable obligation binding Nova Scotia to repay the loans to the family. Even if that

had not been the case, taking account of all of circumstances, the Inner House found that the various transactions surrounding Letham Grange had been intended to defeat the claims of the lawful

creditors. For those reasons a decree granting reduction of the standard security was granted.



GUARANTEE

Robert Holden v Royal Bank of Scotland and Douglas Cowan v Royal Bank of Scotland, 17 May 2011- guarantors fail to avoid liability under guarantees Two related cases in which guarantors under personal guarantees sought to avoid liability under the

guarantees and also to avoid sequestration as a result of the guarantees being called up. The Royal

Bank of Scotland was the creditor in both cases.

The guarantors applied for an interim interdict to prevent the Bank obtaining sequestration. The Royal Bank had loaned sums to two companies of which the guarantors were directors. The

guarantors claimed that a Bank employee had made representations to them to the effect that the

bank could not exercise the guarantees until it had first pursued all steps against the companies.

Lord Brodie refused to grant the interim interdict finding that the guarantors had failed to make a prima face case. And even that decision was wrong and they had managed to make a prima face

case, the guarantors delay in bringing the case had been too long.

The error the bank’s employee was said to have induced was one as to the meaning of a formal legal

document. The guarantors knew that they were entering binding legal documents and they were only in error as to the circumstances in which the guarantee would be enforceable. Any award of reduction

would have been dependant on restitutio being possible (i.e. the Bank being paid). The issue was not solely between the companies and the bank as the loans had been advanced on the strength of the

guarantees.

Full reports of the decisions are available from Scottish Courts here:

http://www.scotcourts.gov.uk/opinions/2011CSOH84.html and here: http://www.scotcourts.gov.uk/opinions/2011CSOH85.html

http://www.legalknowledgescotland.com/?p=72




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David Kipling v Dunbar Bank, 6 March 2012 – factors to be considered on suspension of interim interdict

Outer House case relating to a personal guarantee granted by Mr Kipling to Dunbar Bank. The bank issued a charge for the payment of over £1m on Mr Kipling on the basis of the guarantee.

Mr Kipling argued amongst other things that he was not liable to pay as the bank had agreed to

waive its right to recover under the guarantee.

Lord Pentland granted an interim suspension and interdict preventing the bank from taking diligence

against Mr Kipling following on from the charge.

Subsequent to the granting of the interim interdict, Mr Kipling made amendments to his pleadings which led the bank to enrol a motion to recall the interim interdict, arguing that, given the

amendments, the interim interdict was obtained in circumstances where Mr Kipling had failed to make

full and frank disclosure on all matters material to his application for the interim orders and also that, following the amendments, the pleadings no longer disclosed a prima face case.

Lord Drummond Young refused the motion to recall the interim interdict. Five general matters are

relevant when considering the application for, or suspension of, such an order:

the court’s decision on an interim order is not a conclusive determination of the parties’

dispute;

the orders under consideration are merely temporary orders;

the court must give consideration to the balance of convenience. I.e. the prejudice that may

occur to each of the parties in the event that an interim order is made or recalled (which requires a judgment as to both the likelihood and the seriousness of such prejudice);

the relative strength of the cases put forward by the parties;

the relative strength of the case that is said to justify an interim order must always be

weighed with balance of convenience in the sense of likely prejudice.

As regards the matter before him, Lord Drummond Young found that, although the relative strengths

of the cases tended to favour the bank (Mr Kipling’s case relied on the bank having given up its guarantee for no obvious return), given that, if the interim order were withdrawn, the bank could

proceed with diligence and ultimately sequestration against Mr Kipling, Mr Kipling’s case on the balance of convenience outweighed the relative strength of the bank’s case.

The full judgement is available from Scottish Courts here. http://www.scotcourts.gov.uk/opinions/2012CSOH40.html

LEASES

Co-operative Insurance Society Limited v. Fife Council, 11 May 2011 - dilapidations, renewal and extraordinary repairs

Case considering a tenant’s liability for extraordinary repairs under a lease. Co-operative Insurance were the landlords and Fife Council were the tenants under a 25 year lease of the Unicorn house at

the Kingdom Centre in Glenrothes. The Co-op claimed that the Council had breached their repairing

obligations under the lease and sought damages of more than £1.3m. The matter for the court to decide was the relevancy of the Council’s argument that they were not liable for “extraordinary

repairs” under the lease.

The repairing clause contained the following:


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“At their own cost and expense to repair and keep in good and substantial repair and maintained, renewed and cleansed in every respect all to the satisfaction of the Landlords the

leased subjects”

The Co-op accepted that at common law a tenant is only liable for “ordinary repairs” and the

responsibility for “extraordinary repairs” (such as the rebuilding or renewal of the subjects and making them wind and watertight) is normally that of the landlord. To make it the responsibility of

the tenant would require clear stipulation or necessary inference. However, they argued that in this

case the lease did make it clear that the tenant was liable for extraordinary repairs. The Co-op relied on the extent of the subjects included in the lease (which comprised the whole of the external walls

and roof) and the fact that the repairing clause included an obligation to “renew” as well as to “repair”.

On the other hand, the Council contended that many of the repairs identified by the Co-op arose as a

result of the impending expiry of lifespan of component parts of the property and both parties would

have been aware that the lifespan of the parts in question was not much greater than the length of the lease. If it had been intended that the Council were to replace all such parts at the end of the

lease it would have been made unambiguously clear.

Lord Glennie was not persuaded that the lease imposed liability on the tenants for extraordinary

repairs. Indeed the clause did not go beyond the common law position. To argue that use of the word “renewed” meant that the tenants had assumed responsibility for “extraordinary repairs” put too

much emphasis on the word renewed. As part of an obligation to repair the tenant may be obliged to renew certain elements in the structure but that is part of the repairing obligation.

If the Co-op’s arguments had been correct the lease would also have obliged the Council to give the

property back at the end of the lease in as good condition as it had been 25 years earlier. They would

have been obliged to renew parts even though they were not in need of repair. Whilst Lord Glennie agreed that it was possible to impose such an obligation, the intention would have to be made clear.

Although there were provisions in the lease which appeared to place responsibility on the tenants for structure that did not alter Lord Glennie’s opinion that the lease did not make the tenant liable for

“extraordinary repairs”.



Crewpace Limited v Mark Robert French and Mrs Rohaise French, 12 August 2011 –

landlords interest existing separate from ownership? Outer House case considering an agricultural lease of Rockside Farm at Bruichladdich on Islay. The

tenants were Rockside Farming Company (of which Mr and Mrs French were directors). The farm had been owned by one owner but, following the grant of the lease, part of the farm (776.5ha) was sold

to Crewpace. The remaining part (14.5ha) was sold to Mr and Mrs French with the result that both

Crewpace and Mr and Mrs French became landlords under a single lease.

Mr and Mrs French let part of the land to which they had title to a distillery and sold two further parts. Crewpace argued that Mr and Mrs French should have sought their consent before doing so. They

therefore sought declarator that the Frenchs had unlawfully interfered with their interest as “joint

landlords”, payment of recompense (for unjustified enrichment) and an interdict preventing Mr and Mrs French from resuming or selling any further parts of the leased subjects without their consent.

Essentially Crewpace’s argument was that their interest in the lease was “common property” and held by them and Mr and Mrs French as “joint landlords”. As such Crewpace claimed to have an interest in

the whole subjects similar to that of a pro indiviso owner with regard to management, control and disposal of the land.


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Temporary Judge Morag Wise QC preferred Mr and Mrs French’s arguments to the effect that there is no landlord’s interest separate from the right of ownership finding that a landlord’s right is

inextricably linked with its title and dismissed the action.



Crieff Highland Gathering Ltd v. Perth and Kinross Council, 12 May 2011 - termination of Lease (without irritancy clause) for breach of contract Case considering a landlord’s right to terminate a lease for breach of the maintenance obligations

under the lease. Crieff Highland Gathering are the landlords and Perth Council, the tenants of an area of ground known as Market Park in Crieff. The subjects are used by the Council as a pubic park and

sub-let back to Crieff Highland every year for the holding of the Crieff Highland Gathering. The lease

is for 60 years and began in 1983. The rent is £100 per year and was not subject to review (although it appears that the rent was never demanded or paid). Importantly, the lease contained no irritancy

clause.

Background

The Council wished to retain the park as public open space. However, Crieff Highland wanted to sell the park for development as a site for a Sainsbury’s supermarket. They had entered option

agreements with developers which would allow for the sale of the park and development of an improved sports ground at an alternative site. They had also been granted outline planning

permission for the two developments.

Crieff Highland had also been dissatisfied and frustrated by what they considered to be slow and

inadequate maintenance of the park particularly in relation to the boundary walls. In November 2007 (when it became clear that the Council was unwilling to relinquish the tenancy of the park) Crieff

Highland served a notice on the Council intimating “numerous wants of repair within the subjects which fall within the tenant’s responsibility in terms of the lease” and an Interim Schedule of

Dilapidations. The notice purported to require that the wants of repair be remedied within 3 calendar

months and warned that if the Council failed to comply the lease might be terminated.

The Council did not carry out the repairs which it did not consider to be urgent. On 22 January 2009 Crieff Highland served a further notice on the Council purporting to terminate the lease on the basis

of the Council’s breaches of the lease. The Council then arranged an independent inspection of the premises and carried out repairs between July and September 2009. Crieff Highland was not satisfied

with this and began court proceedings against the Council.

The issues

The main legal issues for the court were as follows:

1) Was the Council in breach of its obligations as tenant under the lease?

2) Was Crieff Highland entitled to terminate the lease?

The decision Lord Pentland found that the Council was in breach of its obligations under the lease but concluded

that the breaches were not material and therefore Crieff Highland were not entitled to terminate the

lease.

Breach of the obligations There was debate as to whether the tenant’s obligations under the lease extended to extraordinary

repairs as well as ordinary repairs. The relevant clause said:


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“The Tenants shall, during the currency of this lease, relieve the Landlords of their whole responsibility for the maintenance of the boundary fences, walls and others enclosing the

ground leased.”

The Council argued that use of the word “maintenance” meant something other than extraordinary

repairs. However, Lord Pentland rejected those arguments taking the view that, when read in the context of the lease as a whole, the clause was referring to the liability which would otherwise be

incumbent on the landlord for maintaining the boundaries and that would include liability for carrying

out extraordinary repairs. On the evidence, the Council had breached its repairing obligations under the lease.

Materiality of the breach

With regard to the materiality of the breaches, Lord Pentland noted that it was primarily a question of fact and degree. In coming to the conclusion that the various breaches were not material Lord

Pentland took account of the following:

1) The fact that both parties were able to make full and uninterrupted use of the park which did

not have to be closed to the public as a result of the condition of the property. 2) The shortcomings were not of such fundamental gravity to touch on the very existence of the

contract. There was no evidence that Crieff Highland considered carrying out the works

themselves with a view to recovering the costs from the Council or of taking an action for specific implement to force the Council to carry out the works nor even did Crieff Highland

take steps to call a formal meeting (which it could have done under a procedure contained in the lease).

3) The lease was a long one with over 30 years left to run. The tenant had carried out repairs, had co-operated well with Crieff Highland in preparing for the Highland Gathering in 2010

and had expressed its intention to continue to run the park as a public facility and fulfil its

obligations under the lease. (Indications of the Council’s future intentions are of importance because the courts have traditionally been reluctant to allow a rural lease without an irritancy

clause to be brought to an end in circumstances where the tenant has made it clear that it intends to perform its side of the contract during the remaining period of the lease- see

below.)

4) Taking a step back from the detailed evidence and trying to take a “realistic” view of matters, Lord Pentland’s impression was that the problems were not particularly serious in the overall

scheme of things. He took into account that the cost of the repairs amounted to just over £9,000 and that the overall condition of the subjects seemed to be adequate for them to be

used without significant difficulty (he was not persuaded that the deficiencies detracted in any substantial sense from the value and utility of the subjects.)

The following issues were also considered:

The relevance of the Council’s willingness to perform in the future Lord Pentland contrasted the right to rescind for material breach with the right to irritate. Whereas

the right to irritate applies to a right to terminate for a past breach (and derives from the lease or by

law for failure to pay rent), the right to rescind applies to a right to terminate for a refusal by the tenant to perform in the future (and derives from the common law).

The landlord can only rescind for material breach when the following conditions are satisfied:

a. The tenant has committed a material breach; b. The landlord has given fair and reasonable opportunity to fulfil the obligations; and

c. The tenant has indicated that it will not perform in the future.

It had been established that Crieff Highland had failed on a) and c). However Lord Penrose also went on to consider whether Crieff Highland had given fair and reasonable opportunity to fulfil the

obligations.

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The adequacy of the termination procedure adopted by Crieff Highland

Lord Pentland said that the notice must give both reasonable notice of the grounds for the

termination and also an adequate opportunity to put it right. The notice given by Crieff Highland was deemed to have given reasonable notice of the grounds but Lord Pentland found that the 3 month

period was not sufficient. In that time the Council had to carry out an inspection, take legal advice, consult Historic Scotland, identify a contractor (who would have to inspect and prepare a programme

of works. Evidence was heard to the effect that the works could not be done in the 3 months

following the notice due to difficulties in repairing lime mortar in the winter.

Would a fair and reasonable landlord have terminated the lease in the circumstances? If Crieff Highland had been in material breach the next question would have been whether a fair and

reasonable landlord would have terminated the lease. This requirement arises from s 5(1) (b) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985. Although he did not require to decide on

it, Lord Pentland found that in this case a fair and reasonable landlord would not have terminated the

lease because:

1) The ultimatum of 3 months was too short 2) The repairs were not sufficiently serious to justify termination (especially in view of the 30

year term)

3) A fair and reasonable landlord will not opt for termination where there are other remedies available which would not deprive the tenant of its interest but nevertheless adequately

protect the landlord’s interest. In this case Crieff Highland could have considered carrying out the works themselves and recovering the expenses from the Council or it could have followed

a formal meeting procedure provided for in the lease.

Looking at the circumstances as a whole Lord Pentland found that it was reasonable to infer that

Crieff Highland’s reason for terminating the lease was that it wanted to proceed with the arrangements it had entered with Sainsbury’s rather than having a pressing concern over the

condition of the property.



Landmore Limited v. Shanks Dumfries and Galloway Limited ,16 June 2011 - meaning of “inert waste”

Case considering the meaning of “waste” in terms of the lease of a landfill site near Stranraer. The

lease provided that the tenants (Shanks) were to make royalty payments to the landlords (Landmore) for “inert waste” entering the site.

The question for the court was whether soil which had been brought on to the site for the purpose of

capping cells of waste deposited at the site was also “inert waste” and therefore subject to the royalty

payment.

Lord Menzies found that the soil was “inert waste”. In coming to that conclusion, he noted that the exercise was one of construction of a private commercial contact and thus differed from cases in

which the courts were construing EU directives or regulations (albeit he noted in passing that the

decision he reached was in line with authorities concerned with the interpretation of the EU regime).

The soil came from a construction site on which houses were being built. It was discarded by the developer who paid haulage contractors to take it away and was an unwanted by product caused by

the need to provide flat foundations for the houses. Nothing was done to it before it entered the landfill site. As such, Lord Menzies took the view that the soil fell within the ordinary and natural

meaning of “waste”. Although it was useful to Shanks, Lord Menzies did not consider that it was


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appropriate when considering the parties intentions objectively to view the situation from the perspective of the potential user of the material pointing out that anything –or almost anything –can

be put to use by someone.

“Having consumed all the meat from a roast leg of lamb, I may discard it into my household

rubbish. It is useless to me. My dog may have a different view of its usefulness, and may retrieve it for his own purposes – but despite its usefulness to him, it remains waste.”


Ralph Lauren London Limited v The Mayor and Burgesses of the London Burgh of Southwark as Trustee of the London Burgh of Southwark Pension Fund, 17 June 2011 –

interpretation of back letter Outer House case in which a tenant (Ralph Lauren) of premises on Ingram Street in Glasgow sought

to prevent the landlord (the pension fund) from letting a neighbouring unit (Unit 6) to a hairdressing salon on the basis of an obligation contained in a back letter.

The back letter granted by the pension fund provided:

“We shall not grant first lettings of that one of the Commercial Units (as defined in the Lease) known as Unit 6, situated to the north of that one of the Commercial Units let as at the date

hereof to All Saints Retail Ltd, to retailers other than high quality fashion retailers as are approved by you (such approval not to be unreasonably withheld or delayed).”

Ralph Lauren sought an interim interdict on the basis that the hairdressing salon was not a high quality fashion retailer. On the other hand, the pension fund argued that, in terms of the back letter,

as the hairdressing salon was not a retailer, Ralph Lauren’s permission was not required.

Ralph Lauren contended that the pension fund’s interpretation would permit the landlord to let the

premises to anyone who did not sell goods which they argued was an absurd consequence given the context in which the undertaking had been given. As a result, they urged that back letter should be

construed in a commercially sensible, rather than a purely literal, way.

However, Lord Glennie agreed with the pension fund’s arguments and found that the letter did not restrict the pension fund with regard to lettings to non-retailers (noting that it was “nigh impossible”

to describe a hairdresser as a retailer). Whilst it was “permissible to do some slight violence to the

language of a clause in a contract where a literal construction would defeat what is objectively the intention of the parties to it”, there was no basis for applying that approach in this case. There was

nothing to suggest that the parties had intended a restriction on all lettings other than high quality fashion retailers. There was no evidence to suggest that a high quality fashion retailer such as Ralph

Lauren would consider themselves to be prejudiced by the letting of a neighbouring unit to, for

example, a restaurant or a cafe. If they had wished to prevent such a letting it would have been easy to address it in the undertaking.

Lord Glennie came to the conclusion that Ralph Lauren had not shown that they had a prima face

case and refused the motion for interim interdict although leave to reclaim was granted.





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Regus (Maxim) Limited v The Bank of Scotland plc, 11 August 2011– dispute as to payment for fit out costs at Maxim park

Outer House case relating to an agreement for lease of subjects at the Maxim office park in North Lanarkshire. Tritax were owners of the development and Regus were to take a lease of part of the

development. Monies were to be made available to Regus in respect of its fit out costs as an incentive. Regus did not meet qualifying criteria for type of tenant to whom parts of the development

could be let imposed by the sale agreement and so HUB (a company created to run the restaurant

and other facilities at the development) was interposed to sub-let to Regus.

In terms of the agreement for lease, HUB was to deliver a letter to Regus from the Bank of Scotland relating to sums which the Bank held on deposit in respect of the fit out costs. This letter formed the

crux of the case and was in the following terms:

“We understand that Heads of Terms have been agreed between TAL CPT and Regus

(Maxim) Limited for the lease of the first floor of Building 1 at Maxim.

It may assist the proposed tenant to have confirmation from us that, on behalf of the landlord (Tritax Eurocentral EZ Unit Trust) and TAL CPT, we hold the sum of £913,172 to

meet the landlord’s commitment to fit-out costs. These funds will be released in accordance

with the drawdown procedure agreed between the parties, whereby the proposed tenant’s contractors will issue monthly certificates.

This is subject always to agreement of wider commercial terms with the incoming tenant.”

Regus carried out the fitting out works and issued invoices to HUB who confirmed that the costs were

properly incurred and that the contribution should be paid to Regus. However, the bank refused to

release the costs as there had been a default in the facility agreement and they were exercising a right of retention over the sums referred to in the letter.

Regus put forward the following arguments:

1) The letter was an undertaking in terms of which the bank were obliged to make payment. 2) There was a separate underlying agreement between the bank and Tritax/HUB in respect of

which Regus were, by means of a jus quaesitum tertio, entitled to payment from the bank. 3) That the bank was personally barred from relying on the terms of its agreements with

Tritax/the developers to resist payment to Regus. 4) That the letter contained negligent misrepresentations acted on by Regus to its detriment

and the bank was obliged to make reparation to the Regus for breach of a duty of care.

Lord Menzies rejected Regus’s arguments and dismissed the action. He found that he was unable to

construe the letter as amounting to a unilateral undertaking by the bank of a legally enforceable obligation to pay the sum to Regus.

The letter was no more than a letter of comfort, and as such, could carry a moral responsibility but not a legal obligation. The court could not enforce a moral responsibility where there was no legal

obligation.




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L. Batley Pet Products Ltd v. North Lanarkshire Council, 20 December 2011 – application of notice provisions in lease to agreement relating to sub-tenants works

Outer House Case considering a lease of premises at Wardpark South Industrial Estate in Cumbernauld. Batley acquired the tenant’s interest in the lease and North Lanarkshire Council were

sub-tenants.

Central to the dispute was a minute of agreement entered into between Batley’s predecessors as

tenants and North Lanarkshire Council regulating the terms and conditions on which the Council could carry out alterations to the property. It provided:

“By the expiration and sooner determination of the period of the sub lease (or as soon as the

license hereby granted shall become void) if so required by the mid landlord and at the cost of the sub tenant to dismantle and remove the Works and to reinstate and make good the

premises and to restore it to its appearance at the date of entry under the sub lease, such

reinstatement to be carried out on the same terms (mutatis mutandis) as are stipulated in this license with respect to the carrying out of the works in the first place (including as to

consents, the manner of carrying out works, reinstatement, inspection, indemnity, costs and otherwise).”

The lease came to an end on 18 February 2009. On 20 February 2009 the Council received a schedule of dilapidations in respect of the property. However, they claimed that, as they had

received the schedule after the expiry of the sublease, there was no obligation to remove the alterations (it having died on expiry of the lease). They argued that the notice provisions from the

head lease were incorporated in the sub lease and any notice required to be in writing and to be served prior to the end of the lease.

This argument was rejected by the temporary judge (Morag Wise QC) who noted:

“the wording of clause 2.5 which obliges the sub-tenant “if so required by the mid-landlord to remove the works” makes no mention of a notice. The means by which the sub tenant can be

so required are not specified. In my opinion, it cannot be said to be a mandatory term of the

Minute of Agreement that the mid-landlords convey in writing to the sub-tenants the requirement to remove the works unless [it] can be implied that service of some form of

notice or request is part of that term. If written notification of the type envisaged in clause 5.8 of the head lease cannot be so implied, then clause 2.5 would seem to me to permit the

pursuers to offer to prove that they required the defenders to remove the work by conveying that to them orally.”

And further:

“It seems to me that the [Council's] argument is predicated upon a notice being necessary for the purposes of clause 2.5. However, there is nothing in that provision of the Minute of

Agreement to support the contention that something formal is necessary before the sub-

tenants can be required to remove the works. For that reason I do not accept the submission that the notice provisions of the lease automatically apply to the “if so required” provision of

clause 2.5.”

An amendment to the pleadings was allowed in which Batley claimed that surveyors acting on their

behalf had contacted the Council on 22 December 2008 and, after receiving confirmation that the Council were intending to leave the premises, advised them that the surveyors would require access

to the property to prepare a schedule of dilapidations and that Batley would require reinstatement of the premises to their original condition.

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The temporary judge found that this was ‘just’ sufficient to entitle Batley to a proof before answer on the question of whether or not they had adequately conveyed the requirement for reinstatement of

the premises to the Council before the expiry of the sub lease.



(See appeal below)

PCE Investors Ltd v Cancer Research UK, 4 April 2012 – payment of rent prior to exercise of break option English High Court case concerning a break option contained in a sublease between Cancer Research

(the landlord) and PCE (the tenant). PCE sought to exercise the break option which was conditional

on payment of the rent up to the break date. The break date occurred shortly after a quarter day and, after receiving an invoice for a full quarter’s rent (payable quarterly in advance) from Cancer

Research, PCE sent an email to Cancer Research’s managing agents advising them that a payment had been made for the rent for the period between the quarter day to the break date and asking

whether that was the correct basis for calculating the rent for that period. The managing agents did

not respond.

Cancer Research then argued that the PCE had failed to terminate the lease properly contending that, to do so, PCE would have to (amongst other things) pay the full rent for the quarter in advance. The

court agreed with Cancer Research. On the September quarter day it could not be said with certainty that the sublease would terminate on the break date as the tenant may have been in breach of

another condition of the break option. The clear obligation on the quarter day to pay a full quarter’s

rent could not be retrospectively reduced merely because an event which occurred after that date operated to terminate the sublease from the future date.

PCE’s alternative argument based on estoppel also failed. On the facts before the court, there was no

basis for finding that there was a duty on the part of the Landlord to tell the Tenant that the Landlord

believed the full rent was due.

The full judgement is available from BAILII here: http://www.bailii.org/ew/cases/EWHC/Ch/2012/884.html

Robert Prow and Others v. Argyll and Bute Council, 9 May 2012 – rent review notices and counter notices Outer House case concerning a rent review under a lease of premises in Helensburgh. The landlords were the trustees of a pension fund. The tenants were Argyll and Bute Council.

On 19 July 2010 a surveyor wrote to the Council purporting to act for the landlord in relation to a rent review of the property and specifying the revised fair market rent for the property was £58k. The

letter contained several errors (including naming an entirely different company as landlord and stating an incorrect review date). On 24 August 2010 the surveyor again wrote to the Council in relation to

the rent review of the property and specifying the rent but this time correcting the errors in the

previous letter.

The Council did not serve a counter notice but continued to pay the rent payable prior to the review and the trustees sought declarator that the rent had been effectively reviewed.

Lord Menzies held that the errors contained in the letter dated 19 July were failures to comply with

the fundamental requirements of the lease and the letter did not operate as an effective rent review


http://www.bailii.org/ew/cases/EWHC/Ch/2012/884.html

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notice. However, the second letter did satisfy those requirements. The Council‘s argument that it was also invalid as it had not been signed by an officer of the landlord (as specified in the notice clause of

the lease) was rejected by Lord Menzies as this was not a mandatory requirement; the provisions of

the notice clause not suggesting that different methods of service would result in invalidity.

After considering the rent review clause as a whole, Lord Menzies also found that time was of the essence in relation to the 3 month period by which any counter notice (requiring determination of the

rent by an independent surveyor) had to be served by the Council in terms of that clause. The failure

of the Council to serve a counter notice within that period meant that the rent had been effectively reviewed at the review date.

The full report is available from Scottish Courts here:


Kathleen Kirkham v. Link Housing Group Limited, 4 July 2012 – Landlord liability for uneven path (See OCCUPIER’S LIABILITY)

Midlothian Innovation & Technology Trust v Robert William Ferguson, 6 July 2012 -arbiter’s jurisdiction, lease and option to purchase Outer House case concerning an arbitration in relation to a lease and option to purchase (governed

by missives, a minute of agreement and a minute of lease) Pentlandfield Business Park in Roslin.

Robert Ferguson had been a partner in a firm (subsequently dissolved) which was the landlord and

seller of the business park. MITT was the purchaser and tenant. An arbitration commenced between the parties in respect of a clause imposing liability for repair and maintenance of the business park on

the landlord. Mr Ferguson sought an interim interdict preventing the arbitration from progressing

arguing:

1) that (by ruling on a claim that arose under the missives and minute of agreement rather than the lease when only the lease contained an arbitration clause) the arbiter had exceeded

his jurisdiction; and 2) that the arbiter had no power to assess or award damages as the arbitration was governed

by the common law.

Lord Hodge was not persuaded that Mr Ferguson had demonstrated a prima face case for interim

interdict. The court would only interdict an arbiter from proceeding with an arbitration in exceptional circumstances which did not exist in this case. If, as Mr Ferguson contended, MITT did not have a

valid claim under the clause in the lease, the arbiter would be able to dismiss the claim as irrelevant

after a proof, the arbiter having jurisdiction to decide whether the claim under the lease was relevant.

With regard to the jurisdiction to award damages, Lord Hodge’s prima face view was that he was entitled to do so as the solicitors to both parties had signed an application to the chairman of RICS

conferring a power to award damages. Also, by failing to raise any objections to the claims in the first

three years of the arbitration, the parties had impliedly consented to confer on the arbiter the power to award damages.

The full judgement of the Scottish courts is available here:


Michael John Morris and others v Scott Eason and others, 26 July 2012 – Right of practice to occupy health centre where no assignation of lease from former partners in practice



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Outer House case concerning a GP practice operating at the Terra Nova Medical Centre on Dura Street, Dundee. Michael John Morris and others (the pursuers) were doctors who had retired from

the practice. They argued that they were the current tenants of the centre and that (following a

number of changes in the composition of the practice) all bar one of the current partners and the partnership practising at the centre had no right or title to occupy the premises. One of the original

partners (and tenant under the lease), Dr Ritchie remained in the practice but chose neither to pursue the action nor raise defences to it.

The pursuers had bought the centre from the Dundee City Council in 1993 then entered a sale and leaseback transaction with MPIF Holdings Ltd in 2006. The lease contained a general prohibition on

assignation and subletting but allowed assignations between partners in the practice without the landlord’s consent whilst requiring notification of assignations to the landlord. Despite the pursuers’

retirement from the practice, there had been no assignation of the lease to the new partners. Indeed the new partners had refused to accept an assignation of the lease from the pursuers. As a

consequence, the pursuers and Dr Ritchie retained the tenancy obligations meaning that if the

partnership failed to pay the rent, MPIF’s claim would be against the pursuers and Dr Ritchie rather than the partnership.

The new partners and partnership contended that none of the pursuers had occupied the premises as

individuals and argued that the partnership paid the rent and occupied the centre with knowledge of

the landlord and the agreement of the tenants (i.e. the pursuers and Dr Ritchie). As such, a right of occupancy subsidiary to the lease (possibly similar to a licence) had been created.

Lord Woolman rejected these arguments:

“The transfer of a real right, which includes “a right to occupy or use land”, requires to be in

writing: Requirements of Writing (Scotland) Act 1995 s. 1(2) and 1(7). The defenders do not

point to any document in support of their claim. Even if such an agreement could be established by actings, many questions would arise about the contours of the agreement.

Who are the parties? When was it made? What is its duration? Was a new agreement made each time a new partner was assumed? Can the permission be withdrawn and if so by whom

– the landlord or the pursuers or both? The complete absence of specification on these points

is in my view unsurprising. It demonstrates that there was no such agreement. It is also unclear how this private arrangement would fit with the Lease. I cannot see how an

agreement arose which is in some way derivative of the lease, yet contradicts its terms.”

Consequently, it was held that the new partners and partnership had no right or title to occupy the centre.

Lord Woolman also rejected an argument by the new partners that the pursuers had no title to sue due to the absence of Dr Ritchie from the action. This argument was based on the rule of common

property that the consent of all common owners must be obtained in decisions relating to the management of the property (including in the granting of a lease and in a removing). However, after

reviewing the authorities, Lord Woolman noted a modification of the rule to the effect that a mere

squatter would not be entitled to a defence based on the rule. As it had been held that the new partners and partnership were in occupation without a right, they were therefore not entitled to query

the pursuers’ title to sue.



Calmac Developments Ltd v Wendy Murdoch, 2 August 2012 – short assured tenancy, term and the civilis computatio


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Sheriff Court case considering a lease of residential property at 39 Calside Road in Dumfries. The landlords (Calmac) were seeking to recover possession of the property from the tenant at the end of

the term. The issue for the court was whether the lease was a short assured tenancy (in terms of the

Housing (Scotland) Act 1988).

For a tenancy to qualify as a short assured tenancy, it must be “for a term of not less than 6 months” (s 32(1) of the 1988 Act).

The lease stated:

”The Date of Entry will be 29th April 2011. The Let will run from that date until 28th October 2011…”

The general rule for calculating time periods, known as the civilis computatio, is that the whole of the

day on which a period commences is excluded and the whole of the day on which it ends is included

(days being indivisible for the purposes of the rule).

Following that rule, the period of the lease in question would be one day short of 6 months. The sheriff rejected Calmac’s argument that there is a general exception to the rule for leases (on the

basis that the date of entry should always be counted when computing the term of a lease).

However, after considering the authorities, he found that use of the words ‘date of entry’ in the lease meant that it had been contemplated that the tenant would take entry on that date thus creating an

exception to the general rule7

Consequently, the lease ran from midnight on the 28th April meaning that its term was exactly 6 months and the lease was correctly constituted as a short assured tenancy.

The full judgement is available from Scottish Courts here: http://www.scotcourts.gov.uk/opinions/SD203_11.html

Batley Pet Products v. North Lanarkshire Council, 7 November 2012 – written notice required for re-instatement following tenants works

Inner House case considering a lease of premises at Wardpark South Industrial Estate in Cumbernauld. Batley were tenants and North Lanarkshire Council were sub-tenants.

At the centre of the dispute were works which the Council carried out to the property under a minute

of agreement. In terms of the minute, the Council had to remove the works and re-instate the

premises at the end of the agreement if they were required to do so by Batley. Batley served a schedule of dilapidations after the end of the sublease. However, the Council argued that the

obligation to reinstate the premises died on the expiry of the sublease and therefore it did not require to comply.

In the Outer House, the temporary judge (Morag Wise QC) found that, in terms of the minute, there was no need for Batley to give written notice requiring removal of the works and allowed a proof to

consider whether Batley had adequately conveyed its requirement for re-instatement when a surveyor acting on its behalf had telephoned the Council before the end of the sublease and indicated re-

instatement would be required.

The Inner House allowed a reclaiming motion finding that the minute not only amended the sublease

but also ratified provisions in the sublease. These included a provision incorporating a requirement for

7 The sheriff then appears to say that, without the words ‘date of entry’, a lease which runs ‘from’ a specified date commences at midnight the following day. In this case that would have been midnight on 30th April. It may be that what was intended was that a lease that runs from a specified date commences at midnight on that date i.e. in this case it would have commenced at midnight on the 29th.

http://www.scotcourts.gov.uk/opinions/SD203_11.html

39

written notice which was contained in the lease. In the absence of such written notice there was no requirement on the Council to re-instate the premises. An attempt by Batley to claim the cost of re-

instating the premises under the general repairing clause in the sublease also failed.



Midlothian Innovation and Technology Trust v. Robert William Ferguson, 14 December

2012 -effect of renunciation on arbitration resulting from lease Outer House case concerning arbitration proceedings in respect of a lease over Pentlandfield business

park at Roslin in Midlothian. Midlothian Innovation let the premises from Robert W Ferguson & Co.

The lease was for 5 years and included an option to purchase as at 1 July 2007. The parties had also signed a minute of agreement. Both of the documents stipulated that, if the option were exercised,

Robert W Ferguson would grant a renunciation of the lease. Midlothian exercised the option on 1

December 2006 and a renunciation was signed on 2 July 2007. However, on 16 August 2007 both parties signed a joint application form seeking the appointment of an arbitrator in respect of a dispute

over compliance with the repairing obligations in the lease. The arbitration proceeded slowly but in 2011 Robert Ferguson (the surviving partner of the firm of Robert W Ferguson & Co) changed his

position and argued that, given the granting of the renunciation, the arbitrator had no power to make an award.

Lord Woolman rejected that argument. Although the acceptance of a renunciation by a landlord implies a discharge of all claims against the tenant, the renunciation is potentially subject to any

further agreement made by the parties. The parties had freedom of contract and were entitled to agree not only that they had a dispute arising out of the lease, but also that they wished to resolve it

by arbitration. The signing of the joint application form demonstrated the parties’ intention to have

the dispute referred to arbitration and Mr Ferguson’s participation on the proceedings until 2011 implied that he consented to the arbitration. Lord Woolman found that the arbitrator had jurisdiction

and the proceedings should proceed to a conclusion.


RPS RE II A LLP v. CBS Outdoor Ltd, 16 January 2013 – interpretation of break clause in lease

Outer House case considering the interpretation of a break clause in a lease of premises at Almondvale Office Park in Livingston.

The clause was clear in that CBS (the tenant) was required to serve notice exercising the break and pay a lump sum before terminating the lease. However words had been omitted from a third part of

the clause and, although a third and additional requirement appeared to be intended, it was unclear what it was.

CBS sought to exercise the break, served the notice and paid the lump sum. However, RPS (the

landlord) argued that CBS had not validly terminated the lease contending that payment in respect of

repairs required to be made in terms of the clause before CBS could terminate. (A schedule of dilapidations had been served on CBS by RPS prior to the termination but the parties had been unable

to agree the sum due.) In RPS’s view the third part of the clause had three possible meanings. These were that: prior to the termination date, the tenant had to either (a) pay and perform all its

obligations in full; or (b) pay all its monetary obligations; or (c) pay all sums over and above the lump

sum.



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In the first place Lord Woolman found that omission of words left the third part of clause with no

natural meaning. In the second place, when considering what a reasonable person would have

understood the clause to mean, although use of the words “in addition” did indicate that a third requirement was intended, omission of the words meant that it was not clear what the requirement

was (the fact that RPS had offered three possible meanings in itself suggested this). As such, it was not possible to interpret the clause as imposing a third obligation on CBS prior to termination of the

lease.



Gillian Dorothy McMillan and others v. William Hill (Scotland) Act Limited, 1 February

2013 – interpretation of repairing obligations in lease

Sheriff court case considering the repairing obligations contained in a lease of commercial premises

between (the partners and trustees of) the Bridge Street Partnership (the landlord) and William Hill (the tenant).

In terms of the lease the tenant was obliged to “render the Premises into a satisfactory tenantable

state and adequate for the Tenant’s purposes” and to maintain the premises to “at least such satisfactory tenantable state”. In a subsequent clause the tenant was also required to return the

premises (at the expiry of the lease) to the landlord “in such good and substantial repair and

condition as shall be in accordance with the obligations undertaken by the Tenant under the Lease”. The sheriff found that this meant that William Hill was obliged to leave the premises in a satisfactory

tenantable state and adequate for William Hill’s purposes as tenant. The sheriff principal allowed an appeal by the Partnership which argued that the phrase “adequate for the tenant’s purposes” referred

to an obligation on the tenant to fit out the premises for its purposes rather that an obligation to

leave the premises in that state.

Business common sense

The sheriff principal noted that the lease was a full repairing and insuring lease, the overall commercial purpose of which is that the landlord lets the premises in return for rent, and passes on

to the tenant the whole responsibility for its upkeep and maintenance. This generally means that the

landlord has little or no interest in the works which the tenant might carry out to suit its particular purposes, provided that the property is returned to the landlord at the end of the lease in its original

condition. Here, there was nothing in the lease to suggest that the landlord wanted the lease returned as a licenced betting shop.

A construction of the lease as a whole In agreeing with the Partnership’s interpretation of the lease, the sheriff principal took account of the

following:

1. the lease provided that the tenant accepted the premises “in their present condition”;

2. the term “satisfactory tenantable state” had been repeated in the context of the continuing nature of the repairing obligation during the currency of the lease (rather than just at its

commencement) but the reference to the tenant’s purposes had not; 3. the tenant was required to remove its fixtures and fittings on termination and, if adequacy

for the tenant’s purposes was the standard by which the repairing obligation was to be tested, it made little sense that all such fixtures and fittings required to be removed; and

4. it was impossible to see how a chartered surveyor (or, indeed, the court) could apply what

were ultimately two different tests to the same premises. Part of the premises might be in a satisfactory tenantable state but not be adequate for a licensed betting shop, or vice versa.


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The full judgment is available from Scottish Courts here: http://www.scotcourts.gov.uk/opinions/CA60_11.html

Regus (Maxim) Limited v The Bank of Scotland plc, 28 February 2013 – dispute as to payment for fit out costs at Maxim park

Inner House case relating to an agreement for lease of subjects at the Maxim office park in North

Lanarkshire. Tritax were owners of the development and Regus were to take a lease of part of the development. Monies were to be made available to Regus in respect of its fit out costs as an

incentive. Regus did not comply with restrictions on the type of tenant imposed by sale agreements and so HUB (a company created to run the restaurant and other facilities at the development) was

interposed to sub-let to Regus.

In terms of the agreement for lease, HUB were to deliver a letter to Regus (although the letter was

not addressed to Regus) from the Bank of Scotland relating to sums which the Bank held on deposit in respect of the fit out costs. This letter formed the crux of the case and was in the following terms:

“We understand that Heads of Terms have been agreed between TAL CPT and Regus (Maxim) Limited for the lease of the first floor of Building 1 at Maxim.

It may assist the proposed tenant to have confirmation from us that, on behalf of the

landlord (Tritax Eurocentral EZ Unit Trust) and TAL CPT, we hold the sum of £913,172 to meet the landlord’s commitment to fit-out costs. These funds will be released in accordance

with the drawdown procedure agreed between the parties, whereby the proposed tenant’s

contractors will issue monthly certificates.

This is subject always to agreement of wider commercial terms with the incoming tenant.”

Regus carried out the fitting out works and issued invoices to HUB who confirmed that the costs were

properly incurred and that the contribution should be paid to Regus. However, the bank refused to release the costs as there had been a default in the facility agreement and they were exercising a

right of retention over the sums referred to in the letter. Regus sued for payment of the costs from the bank. In the Outer House Lord Menzies had dismissed the action. He found that he was unable to

construe the letter as amounting to a unilateral undertaking by the bank of a legally enforceable obligation to pay the sum to Regus. On appeal to the Inner House, Regus relied on two arguments:

1. The letter was an undertaking in terms of which the bank were obliged to make payment. 2. That the letter contained negligent misrepresentations acted on by Regus to its detriment and

the bank were obliged to make reparation to the Regus for breach of a duty of care.

The court rejected Regus’s appeal. For a promissory obligation of the type argued for by Regus, clear

words are required. The letter merely confirmed that, at the date of the letter, the bank held the funds on behalf of Tritax and TAL (the developer/development manager). It did not contain an

unconditional obligation on the bank to pay the funds to Regus on demand as the bank’s own debt. The bank’s freedom to pay out the money would depend on the terms and conditions on which it held

the funds and the letter also spelt out that release of the money was governed by an agreed

procedure. In addition, the sentence referring to wider commercial terms made it plain that the confirmation was not unconditional. For the same reasons, whilst the letter made the representation

that the bank held the funds; it did not make a representation that the money would be released whatever the circumstances when Regus came to demand payment.

The full judgement is available from Scottish Courts here


.

http://www.scotcourts.gov.uk/opinions/CA60_11.html


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LICENSING

Brightcrew Limited v The City of Glasgow Licensing Board, 12 July 2011 – licensing, adult entertainment and the sale of alcohol

Appeal case concerning Brightcrew’s application for a premises licence in respect of an adult entertainment venue known as “Spearmint Rhino” on Drury Street in Glasgow.

The City of Glasgow Licensing Board (the Board) refused Brightcrew’s application on the basis that the Board considered the granting of the licence would be contrary to two of the licensing objectives

contained in the Licensing (Scotland) Act 20058. Specifically, it was considered contrary to ‘preventing crime and disorder’ and ‘protecting and improving public health’9.

In coming to this conclusion the Board referred to several alleged breaches of its “Code of Practice

relative to the provision of dance entertainment in licensed premises”. The Code of Practice had no

statutory basis but the Board would generally expect compliance with it and would take breaches of it into account when considering the suitability of premises for the sale of alcohol.

Conduct by Brightcrew which was identified by a licensing officer as being in breach of the code

included:

1) a member of staff being unaware of the location of the risk assessment for the premises;

2) the issuing of advertising flyers which failed to depict the dancers suitably clothed; 3) a drinks promotion which had conflicted with the Board’s policy on “happy hours” (which

was withdrawn after the licensing officer’s views were expressed to the local manager) 4) two dancers removing their bikini bottoms and exposing their genital area10; and

5) several dancers making “considerable contact” with patrons.

Brightcrew argued11 that, in taking the view that any breach of its Code of Practice could lead to

deprivation of the licence to sell alcohol, despite the lack of any objective effect of the breach on the licensing objectives relating to the sale of alcohol, the Board had made a material error of law.

An Extra Division of the Inner House allowed the appeal. The essential function of the 2005 Act is that of the licensing of the sale of alcohol. Since the licensing with which the Act is concerned is the

licensing of the sale of alcohol, inconsistency with a licencing objective means inconsistency flowing from the permitting of the sale of alcohol on the premises. Whilst the objectives contained in the Act

were desirable in a general sense, that did not empower a licensing board to insist on matters which, while perhaps unquestionably desirable in that sense, are nevertheless not linked to the sale of

alcohol.

In other words, the Board was not entitled to refuse to grant a licence on the basis of breaches of its

Code of Practice where the provisions breached did not relate to the sale of alcohol.

A full report of the decision is available from Scottish Courts here:


Bapu Properties Limited v City of Glasgow Licensing Board, 22 February 2012 – variation of premises licence

8 In terms of s23 (5) and s4. 9 Section 4(1)(a) and (d). 10 It was explained to the court that the ladies in question had been engaged for one evening only, had been instructed to retain their bikini bottoms but that they were “accustomed to different practices in Edinburgh, whence they came”. 11 In what was described by Counsel for the Board as a “full frontal approach”.


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Sheriff court case considering the decision of the City of Glasgow Licensing Board to refuse an application to vary a premises licence for an Indian Restaurant known as The Dhabba at Candleriggs

in Glasgow. The owners sought the varying order so as to include within the premises licence

external seating for 24 people on the pavement outside the restaurant and to amend the operating plan to include the provision of outdoor drinking.

The Licensing Board refused the application as: (1) granting the licence would be inconsistent with

the licensing objective of preventing a public nuisance in terms of the s30(5)(b) of the Licensing

(Scotland) Act 2005; and (2) the area was unsuitable for use for the sale of alcohol (in terms of the s30(5)(c)). The Board’s refusal was founded upon its conclusion that the location of the tables on a

busy street would cause congestion.

The sheriff allowed an appeal of the decision. In the first place, there was inadequate evidence of the congestion, the only factual evidence before the Board being a plan of the subjects and an assertion

by Bapu’s solicitor to the effect that the pavement was three metres wide and the tables took up one

metre of that:

“In my view, absent some other material consideration or information, it does not logically follow that the mere narrowing of a three metre footpath by one metre, leaving two metres

clear and available for pedestrians, would cause any congestion to occur, still less congestion

of such an intolerable volume, intensity, frequency and duration as to cause a public nuisance. Something more would be required to justify those conclusions. That might be

based, for example, upon factual information regarding the current and anticipated density and frequency of pedestrian and vehicular traffic at that location, viewed against an informed

assessment of the likely impact upon such traffic of a narrowing of the footpath in the manner proposed in the application. No such information was before the Board.”

In the second place, the public nuisance anticipated by the Board was not linked to the sale of alcohol. It arose from the expected congestion which, if it had existed at all, would have been

attributable to the physical presence of the tables and chairs (which had already been sanctioned by a section 59 agreement and planning consent). Thirdly, this also rendered the Board’s decision

irrational as the congestion and public nuisance would exist whether or not the variation application

was granted.

The full decision is available from Scottish Courts here: http://www.scotcourts.gov.uk/opinions/B2740_11.html

MISSIVES

William Stuart Fullerton v Frank Anson Smith and Margaret Smith, 25 July 2011 –

supersession of missives and time bar

Sheriff court case concerning an action for damages for failure to pay the purchase price timeously in

terms of missives for the purchase/sale of a house in Saltcoats.

The missives provided for a date of entry of 4th July 2008. However, settlement did not take place and the purchase price was not paid until the 28th November 2010. No formal amendment was made

to the missives. However, there was correspondence between the parties in which the sellers

indicated that they were reserving the right to recover losses in terms of the original missives. There were also various references to the date of entry and date of settlement in the correspondence

between the parties which led to debate in court as to whether the missives had been varied.

As is normal, the missives contained a supersession clause providing that they ceased to have effect after two years from the date of entry. The sellers served an action for claims on 24 of November

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2010. I.e. less than 2 years after entry was taken but more than 2 years after the date of entry provided in the missives.

The sellers claimed that the date of entry in the missives had been changed in the correspondence whereas the purchasers argued it had not.

Sheriff Livingstone found that the exchange of correspondence did not change the date of entry

which in his view had a technical as well as a practical meaning.

“In other words…the date that a party actually pays over the price i.e. the settlement date or

the date that a party actually moves in both of which might lay claim to being the date of entry will not affect the date of entry in the missives in the absence of parties agreeing same.

It might be more apt to describe the date of entry as being the agreed date for the seller to deliver a disposition in return for the buyer paying over the purchase price no matter when

these things actually happen. There is no doubt in this case that the date of entry was 4th

July 2008 and it seems to me that this was a contractually agreed date of entry and could only be changed by agreement and further such an agreement would have to adhere to

certain formalities. It is clear to me from the correspondence that although the Defenders solicitors asked the Pursuers to agree to a new date of entry the Pursuer never agreed to

that. What the Pursuer did do was agree to settle on 28th November 2008. That does not

constitute an agreement to change the date of entry. The Pursuer did sign a disposition which refers to “WITH ENTRY and vacant possession as at 28th November 2008

notwithstanding the date or dates hereof” but it seems to me that again that does not change the date of entry but effectively uses entry in a different sense referring to the date

from which the [purchasers] became the heritable proprietor.”

As a result the date of entry was 4 July 2008 meaning the proceedings should have been raised by

3rd July 2010 and sellers were time barred from raising the action.

A full report of the judgement is available from Scottish Courts here: http://www.scotcourts.gov.uk/opinions/A891_10.html

Persimmon Homes Limited v. Bellway Homes Limited, 9 September 2011– interpretation of contract Outer House case considering the interpretation of missives between two builders for the sale of land at Broomhouse in Glasgow.

The land was to be sold by Bellway to Persimmon for £4.16m. Bellway were to undertake works before the sale and the date of entry was tied to Bellway’s completion of the sellers works (which

involved the upgrading of a road and construction of a roundabout).

Condition 10 of the missives made provision for completion of the works and included a longstop date

of 15 December 2007. Condition 12 of the missives also related to the long stop date and provided:

“In the event that the Seller has failed to Complete all of the Seller’s Works or the Seller has not fully implemented the Seller’s Obligations by the Long Stop Date as such date may be

extended in terms of Condition 10(a) hereof then the Seller will be obliged to offer to sell to

the Purchaser another residential development site within Central Scotland of comparable size and value to the Subjects. Upon settlement of the transaction contemplated by the missives

in respect of the said other residential development site the missives to follow hereon (of which this offer forms part) shall be terminated”.

Bellway failed to complete the works by the longstop date and wrote to Persimmon offering to sell a

site in Airdrie to them instead. Persimmon sought damages for breach of contract.


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There were two questions for the court:

1) Whether the requirement for Bellway to offer an alternative site to Persimmon was the only remedy available to Persimmon in the event Bellway failed to meet the longstop date or

whether Persimmon were also entitled damages for breach of contact. 2) Whether condition 12 had in fact been breached by Bellway.

The remedies available to Persimmon Persimmon argued that when Bellway failed to fulfil the obligation contained in condition 10 by the

long stop date they were in breach of contract and the existence of Condition 12 was irrelevant to that.

However, Lord Glennie took the view that Bellway were not in breach of contract at this stage.

Although the right to damages for breach of contract is an important right which can only be taken

away by clear provision to the contrary, Bellway were not arguing that the provisions of condition 12 were an alternative to damages for non-performance of the contract. Instead, they were arguing that

breach of Bellway’s obligation under Condition 10 gave rise to a further obligation under Condition 12 to offer an alternative site. If the alternative site were not offered then, at that stage, a breach of

contract would occur giving rise to damages.

If the contract were construed in the manner suggested by Persimmon condition 12 would amount to

an option exercisable by them. If that was what was intended it was difficult to understand why it was not expressed as such. That damages would not be available unless there was a failure to

provide an alternative site, was further supported by the commercial background to the contract. What Persimmon wanted was an alternative site for development to enable them to deploy their

resources efficiently. That could best be satisfied by the provision of an equivalent site if the

Broomhouse site was unavailable. Thus the obligation to provide an alternative site was an essential feature of the structure of the contract and it was only if that obligation were breached that the right

to rescind and claim damages arose.

Breach of Condition 12

The next question was whether the offer of the site at Airdrie was sufficient to satisfy the requirements of Condition 12. Lord Glennie found that it was not. Whilst, the Airdrie site was (taking

a broad view) of comparable size (the difference in gross areas was 6.07% and the difference in net developable areas was 13.4%), it was not of comparable value. After considerable discussion as to

the method of valuation to be applied, Lord Glennie found that the value of the Broomhouse site was 17% higher than that of Airdrie and, as such, the sites were not of comparable value within the

meaning of Condition 12.



Port of Leith Housing Association v Mohammed Akram and another, 19 October 2011 – interpretation of missives and service of notice Outer house case concerning the interpretation of conditional missives and a purification letter

relating to the sale of property at Great Junction Street in Leith.

The missives were conditional on the results of ground and site examinations and environmental

audits. Clause 3.2 allowed for the purchasers to waive the conditions by giving a notice of deemed purification:

“This Condition 3 shall be construed solely for the benefit of the Purchasers and it shall be in

the sole option of the Purchasers at any time to intimate to the Sellers in writing that any or


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all of the suspensive conditions contained in Condition 3.1 is/are waived, in which case the Missives shall be deemed purified to that extent. This condition shall however only be purified

or deemed to be purified by the Purchasers giving written notice to the Sellers to that effect.”

Condition 3.3 provided that if the conditions hadn’t been purified by 30 July 2011 then either party

could resile from the missives without penalty.

On 22 July the Housing Association’s solicitors, TC Young sent Mr and Mrs Akram’s solicitors,

Somerville & Russell a letter advising that the conditions could be regarded as purified in terms of clause 3.2.

Mr and Mrs Akram argued that service of the notice was invalid as, in terms of clause 3.2 of the

missives, it required to be served on them and not their solicitors. They also contended that the notice was invalid as it referred to an incorrect date of entry.

Lord Hodge did not accept either of these arguments. With regard to service of the notice on the solicitors, the authorities on which Mr and Mrs Akram sought to rely were concerned with more

precise provisions on the service of notices than those contained in the missives between the Akrams and the Housing Association. The missives in this case had contained no precise requirements

relating to the service of notices and no indication that the parties had intended that service of the

purification letter on the sellers’ solicitors would not be valid. Moreover, the other provisions of the contract did not suggest that the parties intended to draw a clear distinction between themselves and

their agents. Lord Hodge said:

“I have formed the view that the very simplicity of the contractual provisions firmly points against a construction which would allow such a distinction to be drawn. Further, I do not see

the practical advantage or business rationale of serving the notice on the sellers rather than

on their solicitors; I would have expected the sellers immediately to take the notice to their solicitors to ascertain its validity”.

With regard to the reference to the date of entry in the purification letter, Lord Hodge found that,

assuming (there was dispute between the parties as to the correct date of entry which could not be

determined at that stage) the date was erroneous; the mistaken statement did not invalidate the letter:

“In my view, the function of the purification letter was simply to intimate that the purchasers

had waived the suspensive conditions …. That had the effect of deeming the conditions to be purified, as clause 3.2 provides. The contract fixed the date of entry in the definition section

of the missives…. Accordingly, there was no need to specify the date of entry in the

purification letter. Either the missives ruled or the parties had agreed to alter the date of entry.”

A separate question as to whether Somerville & Russell had actual or apparent authority to receive

the purification letter required to be dealt with by proof.



Aberdeen City Council v Stewart Milne Group Limited, 7 December 2011 – construction of missives and application of price uplift to sale to group company Supreme Court case concerning the interpretation of commercial missives for Stewart Milne’s

purchase of development land from Aberdeen City Council. The missives contained the following provision for an uplift in the price on the occurrence of certain events:


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“In addition to the purchase price detailed in Clause 2 hereof, the Purchasers and the Sellers have agreed that the Sellers shall be entitled to a further payment (‘the Profit Share’) upon

the Purchasers purifying the suspensive conditions contained in Clause 4 hereof and issuing a

notice to the Sellers intimating to the Sellers that the Purchasers wish to purchase the relevant part of the profit-share as defined in the Schedule to which the Sellers are entitled.

The Sellers’ entitlement to the relevant part of the profit-share will also be triggered by the Purchasers disposing either by selling or by granting a lease of the whole or part of the

Subjects.”

The clause therefore contains 3 triggers for the payment of the uplift (or profit share):

1) Stewart Milne could buy out the Council’s share by serving a notice on them indicating that

they wished to do so; 2) the Council would be entitled to a share on the sale of the property by Stewart Milne; or

3) the Council would be entitled to a share on a lease of the property by Stewart Milne.

Profit Share was defined in the schedule as follows:

“‘the Profit Share’ means 40% of 80% of the estimated profit or gross sale proceeds or lease

value less the Allowable Costs as herein defined.”

Stewart Milne sold the property to a group company and then argued that the uplift payable should

be based on the actual price paid (£483k- which meant that no uplift was payable) rather than the open market value (£5.67m) of the property. The Council argued the reverse.

It may have been intended that “estimated profit”12 applied to the notice procedure, “gross sale

proceeds” applied to a sale of the property and “lease value” applied to the lease of the property with

the prospect of a sale to group company simply not considered13 (by the Council at least).

However, although the Supreme Court14 (Lord Hope giving the leading judgement) observed that, it was not stated that “gross sale proceeds” are only to be used in the event of a sale on the open

market, it also noted that there was nothing in the definitions to say that “estimated profit” (or “open

market value”) could not also be applied to a sale.

Having observed that it was a reasonable assumption that all three methods were intended to produce the same figure (albeit by different routes) and that basing the calculation in the open

market was (on a fair reading of the agreement) the commercial purpose the various methods were intended to achieve, the Supreme Court came to the conclusion that the context showed that the

base figure was to be the open market value of the subjects.

Alternative argument

The Supreme Court also allowed Stewart Milne to introduce an alternative argument (which they had been prevented from presenting to the Inner House) to the effect that the word “disposal” in clause 9

should be read as referring to an arms length transfer at market value but not to an associated

company for a notional value. Thus the sale to the group company would not trigger the uplift but instead the onward sale by the group company on the open market would trigger the uplift.

However, the Supreme Court rejected that argument observing that that interpretation did not fit with the words of the contract. Also, as the group company were not party to the contract between the

Council and Stewart Milne, adopting the argument would mean that it would have been necessary to

re-write the contract to protect the Council against the obvious risks that the arrangement would entail. That was not an option open to the court.

Helping the feckless?

12 Which was defined as being the Open Market Value under deduction of the allowable costs. 13 Both the Inner house and the Supreme Court commented adversely on the drafting. 14 Upholding the declarator granted by the Outer House and upheld on appeal in the Inner House.

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Lord Hope also referred to the argument that a party who has been feckless in drafting a contract should not be protected from its fecklessness by the court’s application of a commercially sensible

approach15. However, Lord Hope did not view the current case in that way. In this case the context

showed that the parties’ intention must be taken to be that the base figure for the calculation of the uplift was to be open market value. The fact that this made good commercial sense was simply a

makeweight, the words of the contract making it clear that open market value must have been what the parties had in mind when they entered the contract. The only question was whether effect could

be given to the unspoken intention without undue violence being done to the words; the court finding

that it could.

The full judgement is available from the Supreme Court here: http://www.supremecourt.gov.uk/docs/UKSC_2010_0229_Judgment.pdf

George Wimpey West Scotland Limited V Alan Henderson, 11 October 2011- Builder barred from enforcing missives following ‘gentleman’s agreement’ with purchaser

Sheriff court case in which Wimpey sought damages from Mr Henderson in respect of his failure to pay the purchase price for subjects at Ferry Village in Renfrew. Mr Henderson was acting on behalf

of a group of investors who were purchasing multiple properties from Wimpey. Missives were

concluded on 21st December 2007. Wimpey had been anxious to conclude missives before Christmas and put pressure on Mr Henderson to conclude. However, although Mr Henderson was also keen to

proceed, he had concerns about the state of the property market and the fact that he was purchasing before the subjects had been built as he required finance for the transaction and the amount he could

borrow would depend on a valuation of the property which could not be obtained until completion of the subjects.

This led to an email exchange indicating an underlying agreement by which missives would be concluded allowing Wimpey to show the properties as sold on their accounts but by which the

properties would also be re-valued during 2008. Further negotiations could then take place and the properties could, if necessary, be re-marketed by Wimpey. In particular, Wimpey made the following

comment by email:

“With this in mind, I want to give you some reassurance that should the circumstances arise that

there are difficulties with the valuations we will find a resolution one way or another and I suggest that against this background I would like to have a “gentleman’s agreement” that we will have

valuations carried out in the new year with a view to having them all back early Feb which will be the basis of any negotiations (if need be). I just want to give you the comfort that in concluding missives

now will still allow for further negotiation should the valuations necessitate this.”

And, in response to a question by Mr Henderson as to what would happen if exchange bonds (being

used by the parties in place of a deposit)16 were not in place by the end of January as had been agreed:

“I would take the view of (sic) should this happen then we remarket the properties. If the question is will we come after you then I can give assuarnce (sic) that we wont, all I need is

enough notice, ie as early in the year as possible to remarket. Hope this helps.”

Further emails were exchanged in which it was agreed that a condition would be inserted into the

missives providing that, if exchange bonds were not in place by 31st January 2008 for plot 38, then Wimpey would be entitled to withdraw from the transaction at their instance. In the course of these

emails Wimpey also advised that they could agree that, should the situation arise that all Bonds were

15 Martin Hogg, Fundamental issues for reform of the law of contractual interpretation (2011) 15 Edin LR 406, 420. 16 In exchange for payment of a premium, an exchange bond would be issued by the exchange bond company (EIC) to Wimpey. The exchange bond ensured a payment by EIC to Wimpey of a sum in the event that the purchaser failed to proceed with the transaction. In that event EIC would have certain rights against the purchaser.

http://www.supremecourt.gov.uk/docs/UKSC_2010_0229_Judgment.pdf

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in place and the property had not achieved the values required, an agreement would be reached by both parties whereby Wimpey could remarket all or some of the properties. They said that, in effect

Wimpey would resile from the missives at no penalty to Mr Henderson expressing the hope that this

would alleviate the concerns of Mr Henderson and his business partner. However, nothing to this effect was inserted into the missives.

In September 2008 valuations were obtained which were substantially below that required for Mr

Henderson to obtain finance for the subjects. The parties entered into negotiations aimed at enabling

the sale to proceed but no agreement was reached. Nevertheless Wimpey wrote to Mr Henderson advising that the subjects were ready for occupation and that entry should take place on 17 October

2008. Entry was not taken and Wimpey resiled from the bargain, resold the property and sought damages from Mr Henderson in terms of the missives.

Mr Henderson argued that Wimpey were personally barred from enforcing the missives and also

sought rectification17 of the missives to reflect the true agreement; in his opinion that, following a

revaluation of the properties, the price could be revised or the transaction aborted.

Sheriff William Holligan found that Mr Henderson was not entitled to rectification of the missives as he was unable to show that there was a common intention18 between the parties as to what would

happen in respect of valuations were any further negotiations to fail.

“I return to the proposition that section 8 concerns a defectively expressed document. In this

case it is said to be defective because it does not contain a provision as to what would happen if the negotiations failed. What then was the common intention of the parties on that

issue? Viewed objectively, I find myself unable to say what that was. I have no doubt, with the benefit of hindsight, [Mr Henderson] is quite clear what he expected. However, even if

[Wimpey’s sales director] accepted that his expectation might have been reasonable, I cannot

conclude it reflects the common intention of both parties… The issue is one of rectification. This does not allow the court to write into a contract provisions where it is not proved both

parties shared a common intention on that particular issue.”

However it was clear that, when agreeing to conclude missives, Mr Henderson had relied on the

content of the emails and Wimpey were found to be personally barred from enforcing the missives:

“On any view of this matter, the missives did not reflect the whole commercial relationship between the parties. Not only did both parties know that but they both acted on the strength

of it.”

And further:

“To leave [Wimpey] with the unqualified right to insist on their rights under the missives,

given [Mr Henderson’s] business model, does not make commercial sense. It would make the agreement to renegotiate the price almost meaningless. Whether [Wimpey] deliberately said

nothing or genuinely did not turn their minds to the issue does not matter. As I have said the

matter requires to be looked at objectively. The missives said one thing: the words and to some extent the actions of [Wimpey] conveyed to [Mr Henderson] something different. To

that extent there was inconsistency. The element of unfairness is largely self evident.”

A full report is available from Scottish Courts here:

http://www.scotcourts.gov.uk/opinions/2011a200_09.html

17 In terms of s8 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985. 18 Section 8 applies where “a document intended to express or to give effect to an agreement fails to express accurately the common intention of the parties”.

http://www.scotcourts.gov.uk/opinions/2011a200_09.html

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Pinecraven Construction (Guernsey) Limited v. Dominic Donato Taddei and Claire Susanne Taddei, 26 January 2012 - conclusion of missives, effect of time limit

Outer House case considering the interpretation of missives for a property in Melrose, near Galashiels. Pinecraven sought damages and interest from Mr and Mrs Taddei as a result of their failure to settle

the transaction. Mr and Mrs Taddei argued that there was no concluded contract.

The crux of the Taddeis’ argument was that Pinecraven’s offer to sell contained a time limit for

acceptance after which the offer would be null and void. Whilst the Taddeis’ qualified acceptance arrived within the time limit, as it contained a qualification, it was not an acceptance of the offer.

Consequently, Pinecraven’s subsequent letter concluding the bargain had no effect.

Lord Kinclaven rejected the Taddeis’ arguments finding that, although the acceptance was qualified, it was still an acceptance within the meaning of the clause containing the time limit. Even if that were

not the case, the Taddeis’ qualified acceptance was a counter offer which was capable of acceptance

within a reasonable time, and indeed, was so accepted by Pinecraven’s letter concluding the bargain. As a result it was found that there was a concluded contract between the parties.

The full text of the decision is available from the Scottish Courts website here

http://www.scotcourts.gov.uk/opinions/2012CSOH%2018.html

Persimmon Homes Limited v Bellway Homes Limited, 3 April 2012 - construction of missives and rescinding from contact Outer House case considering the interpretation of missives between two builders for the sale of land

at Broomhouse in Glasgow. The land was to be sold by Bellway to Persimmon for £4.16m. Bellway

were to undertake works before the sale and the date of entry was tied to Bellway’s completion of these works (which involved the upgrading of a road and construction of a roundabout).

In terms of the missives, if the works were not completed before the longstop date, Bellway were to

offer an alternative site of comparable size and value to Persimmon. In a previous decision Lord

Glennie found that, although Bellway were not breach of contract at the point they failed to complete the works, the alternative site they offered to Persimmon was not of comparable size and value and,

following the failure to offer an alternative site, Bellway were then in breach of contract.

Persimmon’s letter giving notice that they were rescinding the contract referred only to the fact the works had not been completed in time and not to the failure to provide an alternative site. In these

proceedings Bellway argued that, as they were not limited to only one opportunity to offer a suitable

alternative site, the contract was still open for performance and they were not in breach of contract. However, Lord Glennie found that the contract had been validly rescinded by Persimmon’s letter. In

doing so he confirmed the principle that, providing the intension to rescind is clear, the fact that no reason is given or the wrong reason is given is not normally significant. Further, although Persimmon

failed to issue an ultimatum notice19 before rescinding the contract, even if they had served an

ultimatum, Bellway would have been unable to comply as they did not have a comparable site in their land bank at the relevant time. Also, as Bellway’s argument had been that the alternative site they

had offered fulfilled the requirements of the contract, the service of an ultimatum notice would have served no purpose.

The full judgement is available from Scottish Courts here. http://www.scotcourts.gov.uk/opinions/2012CSOH%2060.html

19 Time not normally being of the essence in a contract for land unless it is made so by service of an ultimatum.



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Louise Richal v. Michael Seed and Andrea Seed, 20 November 2012 – interpretation of missives, Aberdeen and Aberdeenshire standard clauses

Sheriff court case considering the interpretation of missives for a property in Ellon. Missives were concluded on 9 June 2010 and provided for a date of entry of 6 August 2010. The following clauses

(from the Aberdeen and Aberdeenshire standard clauses) were incorporated:

”(i) So far as the Seller is aware the Property is not affected by:-

…

(g) any proposals, applications or re-development plans affecting the Property or any adjacent or neighbouring property which could reasonably be considered to be detrimental to

the Property.

(ii) Without prejudice to the foregoing, the Seller warrants that he has not been served

with nor received any neighbour notification notice issued in terms of planning legislation by any third party. If such notice is served on or received by the Seller prior to the date of

settlement, the Seller will immediately forward the notice to the Purchaser’s Solicitor. If the proposals contained in the notice would have a materially detrimental effect on the Property

the Purchaser will be entitled to resile from the Missives without penalty due to or by either

party.”

The sellers then sent the purchasers a letter (dated 27 July) purporting to re-open the missives and changing the date of entry to 5 August 2010. The purchasers replied (on 30 July) accepting the terms

of the seller’s letter and again concluding the missives.

When the purchasers moved into the property following settlement they discovered a handwritten

note from the sellers attached to a letter (which had been received by the sellers on 15 July) to the sellers from Aberdeenshire Council. The letter advised that the Council had published the proposed

local development plan and that it included a proposal for development on or adjacent to the property. The notice and plan were, it was said, being issued to the sellers in line with regulation

14(2) of the Town and Country Planning (Development Planning) (Scotland) Regulations 2008. The

purchasers raised an action for breach of contract.

The sellers argued:

1) that the notice was not a “neighbourhood notification notice”; and 2) that the warranty in the missives applied as at the date of conclusion of the “original”

missives (5 weeks before the Council’s letter was received) and not as at the date the

“amended” missives were concluded (2 weeks after receipt of the letter). 3) The sheriff principal, agreeing with the sheriff’s interpretation of the missives, rejected these

arguments.

The neighbour notification notice

The sellers had argued that “neighbour notification notice” is a term of art derived from the statutory scheme contained in The Town and Country Planning (General Development Procedure) (Scotland)

Order 1992. In terms of that order, the owner of ground required to intimate his intention to develop its property to its neighbours. However, the scheme was changed when the 2008 Regulations (above)

came into force, making the local authority responsible for intimating proposed planning

developments (and containing no reference to a “neighbourhood notification notice”). The sheriff principal found that, nevertheless, the clause referred to “any neighbour notification”, the word ‘any’

being significant and indicating that the clause was intended to cover planning legislation as a whole20.

20 In reaching that conclusion the sheriff principal was “comforted by the thought that it would surely be startling to decide that the body of Aberdeen and Aberdeenshire solicitors expert in the law and practice of residential conveyancing would not have been aware of the changes in the legislative framework and would not have considered whether or not the standard clauses

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The warranty

As regards the warranty, the sellers argued that the contract was concluded on 9 June and that the

sole purpose of the later letters was to amend the date of entry (effectively meaning that the warranty was given as at 9 June). However, the sheriff principal found that the best approach was to

consider what the parties intended to be the date at which the warranty was given. The parties agreed that the warranty was as at the date of conclusion of the missives rather than as at the date

of the original offer. The effect of the later letters was to create a new date for the conclusion of

missives. Thus the natural consequence of amending the date of entry was to create a new date as at which the warranty was given.

The sheriff principal refused the appeal and agreed with the sheriff’s finding to the effect that the

sellers were in breach of contract.



OCCUPIER’S LIABILITY

John Dawson v. Ruth Page, 29 February 2012 – occupier not liable for wet plank which was obviously slippery Outer House case considering a claim for damages under the Occupiers Liability (Scotland) Act 1960.

Mr Dawson worked as a self employed courier and was delivering a package to Ms Page’s cottage. Building works were taking place at the cottage and the surroundings resembled a building site. After

making two unsuccessful visits to the cottage to deliver the package, Mr Dawson left the package

under an oil storage tank in the back garden. As he was leaving the cottage he slipped on a wet plank over a trench in the garden and injured his hand.

Mr Dawson’s claim for damages failed because the wet plank did not constitute a danger, and, even if

it did, there was no requirement on Ms Page to exclude people from the site or give warning of the

risks.

Lord Glennie observed:

“Wet planks may be slippery. A notice is not required to point that out. Such dangers, if they be dangers, send out their own warning. The pursuer observed that the plank looked

slippery. What more would a notice have told him? Accordingly, I reject the submission that

the defender was required, in the exercise of any duty under the Act to take reasonable care, to exclude people from the site or to put up a notice warning of whatever danger was posed

by the plank walkway.”

The full decision is available from Scottish Courts here:


Moira Brown v. Lakeland Ltd, 22 June 2012 - occupiers’ liability, lack of handrail and/or sign post Outer House case concerning an alleged breach of duty under the Occupiers’ Liability (Scotland) Act

1960 at Lakeland’s store on Hanover Street in Edinburgh. Miss Brown argued that a two-fold failure

should be amended to take that into account” (which would have been the inevitable result if the seller’s construction of the clause had been preferred).



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by Lakeland to install a handrail and to signpost an existing alternative exit on George Street (which had a ramp and handrail) resulted in her falling down a flight of stairs at the Hanover Street exit.

Whether or not Lakeland had breached its statutory duty depended on whether it had been negligent. The question for the court was whether Lakeland had done or omitted to do something which had, as

its reasonable and probable consequence, injury to others. This was a matter of fact and circumstance. Consideration was given to the knowledge and magnitude of the risk and the

practicality and effectiveness of preventative measures.

Lord Woolman found that Lakeland had not been negligent. As regards knowledge of the risk, it was

noted that there had been no history of accident amongst perhaps 3 million persons to have visited the store. In relation to magnitude of the risk, there was no risk of falling far (Miss Brown had fallen

four or five steps). With regard to practicality of preventative measures, Lakeland had already established a disabled entrance (on George Street) which complied with the relevant legislation and

had taken steps to bring its existence to the notice of customers. As to effectiveness of preventative

measures, there was no evidence that, had Lakeland installed a handrail at the Hanover Street entrance, it would have prevented Miss Brown’s accident. Further, Lord Woolman also took account of

the expert evidence of two architects which indicated that it was unclear whether planning permission would have been granted for a handrail.


Kathleen Kirkham v. Link Housing Group Limited, 4 July 2012 – landlord liability for uneven path

Inner House case in which Ms Kirkham sought damages from her Landlords after she tripped and fell over uneven paving slabs on her garden path. She relied both on the terms of her lease and the

Occupiers Liability (Scotland) Act 1960. The claim had been rejected in the Outer House and was appealed to the Inner House.

Lease In terms of the lease, Link undertook to:

Clause 5.3

1) “carry out all repairs within a reasonable period of becoming aware that repairs need to be done”

Clause 5.4

2) “carry out inspections, at reasonable intervals, of the common parts”. Clause 5.8

3) “keep in repair the structure and exterior of the house, including … pathways, steps or other means of access …”

Taking each of the clauses in turn the Inner house agreed with the findings of the Outer House:

1) Clause 5.3 did not come into play unless Link was made aware of a repair requiring to be done (which had not been done). Also, on a proper construction of the clause, Ms Kirkham

could not rely upon deemed knowledge.

2) Ms Kirkham’s garden path was not a common part. It was not a “common facility” shared by other tenants or residents, but rather was a dedicated access to Ms Kirkham’s property.

3) Clause 5.8 did not impose any repair obligation over and above what was to be found elsewhere in the tenancy agreement or in statute. The words “take reasonable care” did not

require to be read into the clause so that there could be argued to be a breach of a duty to take reasonable care by failing to inspect the pathway regularly.


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Occupiers Liability In terms of sections 2 and 3 of the 1960 Act, Ms Kirkham was entitled to such care as, in all the

circumstances of the case, was reasonable to ensure that she would not suffer injury or damage by

reason of danger arising from the state of the premises. In order to succeed, Ms Kirkham would have had to establish Link’s failure to take reasonable care for her safety. For example, she would require

to show a failure to set up an adequate system of inspection, or failure to properly implement a system of inspection which was already in place.

However, in this case Mrs Kirkham failed to provide evidence as to what other landlords in the same situation as Link did by way of periodic inspection. Therefore it was not apparent what Link required

to do in relation to the footpath. On the evidence available, it had not been established that the system undertaken was inadequate.



PLANNING

Hallam Land Management Limited v Edinburgh City Council, Scottish Courts, 6 May 2011

- Edinburgh Local Plan quashed for Newcraighall sites after successful appeal by Hallam

Appeal by Hallam against the adoption of the Edinburgh City Local Plan. Hallam argued that the Council had rejected reporters’ recommendations as to sites at Newcraighall North and Newcraighall

East without giving adequate reasons for doing so. The Council’s development company EDI was involved in both developments and the reporters had recommended reducing the number of housing

units allocated to each site. To make up the structure plan’s requirement for additional housing in the

urban fringe, the reporters recommended increasing the number of units at two other sites (one of which was owned by Hallam).

Lord Malcolm allowed the appeal and granted an order quashing the Edinburgh City Local Plan in so

far as it includes the allocation of housing units at both Newcraighall North and Newcraighall East. In

coming to this decision Lord Malcolm referred to the decision in Oxford Diocesan Board of Finance v West Oxfordshire District Council and another (1998):

“Even in cases involving planning judgement, the planning authority must give adequate and

intelligible reasons for its decision. It must be apparent that the authority fully and properly considered the substantial points raised by the reporters. It must deal with the matters

relevant to the merits of the decision and give sufficient reasons for departing from the

reporters’ conclusions. The obligation to deal with the matter thoroughly, conscientiously, and fairly is enhanced when (as here) the council is both a promoter of a site and the ultimate

decision-maker. It would not be sufficient for a planning authority merely to recite a series of assertions. While what is needed will vary from case to case and depend on the context and

precise circumstances, fair and specific consideration of the report is required.”



Dulce Packard and others for Judicial Review, 27 May 2011 – no bias in permission for Borders wind farm Case considering the grant of planning permission for a wind farm at Fallago Rig in the Lammermuir

Hills. Due to the large capacity of the development, consent was required by the Scottish Ministers in terms of the Electricity Act 1989. Consent was granted by the Scottish Ministers by a decision letter in



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November 2010. In terms of the legislation that consent is also deemed to be planning permission for the development.

There were a number of interested parties who objected to the development leading to two public enquiries and what is described as voluminous correspondence. The petitioners sought reduction of

the decision letter on various reasons (including natural justice, ultra vires, unlawful conditions and inadequate reasons), however, the main thrust of their argument was bias.

The petitioners argued that, while it was quite lawful for elected representatives to be predisposed to renewable energy (it being Government policy to encourage the development and use of renewable

energy from natural sources), it was not lawful to pre-determine an application which fits that policy without first considering the objections. In this case the petitioners argued that the government had

made up their mind to bring about the conditions in which consent could be granted. They argued that the Government had had covert conversations with the MOD (which was the main objector to

the development on the basis that the turbines could interfere with radar systems) and those

conversations were successful as the MOD withdrew its objection. This, they argued, showed bias.

After detailed consideration of the authorities Lord McEwan looked to the test for bias in Porter v Magill (2002) in which Lord Hope came to the conclusion the test was:

“… whether the fair minded and informed observer, having considered the facts, would conclude that there was a real possibility that …” (the decision taker) “… was biased”

Lord McEwan took the view that the best guidance on the application of that test to a planning case

was given in R (Lewis) v Redcar and Cleveland Borough Council (2009) which made it clear that a Minister’s position is different from someone holding a judicial or quasi judicial office:

“… the requirement made of such decision makers is not, it seems to me, to be impartial but to address the planning issues before them fairly and on their merits, even though they may

approach them with a predisposition in favour of one side of the argument or the other. It is noticeable that in the present case no complaint is raised by reference to the merits of the

planning issues. The complaint, on the contrary, is essentially as to the timing of the decision

in the context of some diffuse allegations of political controversy. So the test would be whether there is an appearance of predetermination in the sense of a mind closed to the

planning merits of the decision in question. Evidence of political affiliation or of the adoption of policies towards a planning proposal will not for these purposes by itself amount to an

appearance of the real possibility of predetermination or what counts as bias for these purposes. Something more is required… ‘ unless there is positive evidence to show that there

was indeed a closed mind, I do not think that prior observations or apparent favouring of a

particular decision will suffice to persuade a court to quash the decision … “

After considering the documents and evidence, Lord McEwan found that, far from showing pre-determination on the part of the Minister, there was a great deal to indicate the opposite i.e. an open

fair mind. He also failed to find that the conduct of the Minister could be criticised noting that “in the

realm of administrative law there is nothing wrong with the decision taker meeting an objector.”


Paul Bova and Carol Christie v The Highland Council, 19 August 2011 – judicial review, planning and flood risk Petition for judicial review of a decision by Highland Council to grant planning permission for a development of 64 houses at Resaurie near Inverness.


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The petitioners argued that the Council had failed to adopt the correct approach to assessing the risk of flooding arising from the development. In particular the petitioners argued that the Council had not

adopted a precautionary approach to flood risk as they should have done in terms of the planning

policy. They also argued that the Council had failed to understand and take proper account of objections which they had raised in a letter to the Council.

Lord Pentland refused the petition. The petitioner’s case referred to a change in the wording of the

planning policy. SPP721 had obliged the Council to “err on the side of caution where flood risk is an

issue” whereas the new Scottish Planning Policy22(SPP) which replaced it stated instead that developers and planning authorities should take a “precautionary approach” in taking decisions where

flood risk is an issue. This change, the petitioners argued, amounted to a new material consideration which the Council had to consider before granting the permission. However, Lord Pentland found

that the change was no more than “textual or cosmetic”. This meant there was no material change in policy and no new material consideration for the Council to consider before deciding the matter.

Lord Pentland was also not persuaded that the Council had failed to give adequate consideration to

the objections raised by the petitioners in their letter taking the view that all of the objections had been adequately summarised and addressed in the planning report which was presented to the

planning officials.

The full judgement is available from Scottish Courts here.


Penny Uprichard v. The Scottish Ministers and Fife Council, 7 September 2011 - planning, Fife Structure Plan Inner House case in which Penny Uprichard challenged a decision of the Scottish Ministers to approve

the Fife Structure Plan 2006-2026 with Final Modifications dated May 2009.

The Fife Structure Plan includes provision for a significant expansion of St Andrews with a view to making the town an ‘economic driver’ for Fife. The Council submitted a report containing

modifications to the Structure Plan23 and, after considering the Structure Plan and the Council’s

modifications, the Scottish Ministers issued the Finalised Fife Structure Plan incorporating Scottish Government modifications for consultation. Ms Uprichard objected to the modifications to the

Structure Plan as they did not reverse the plans for the expansion of St Andrews. However, the Scottish Ministers then approved the Structure Plan as modified and published a document24 (the May

Document) containing the reasons certain modifications had been made and other proposed modifications had not been made.

Ms Uprichard challenged that approval and concentrated her argument on an objection to the effect that assessments had shown St Andrews to be at its landscape capacity. The reason given for

rejection of that objection (in the May Document) was that a study25 had shown that there was some scope for development to the west of St Andrews. Ms Uprichard argued that that was insufficient

reason for rejecting the objection contending that the site to the west of St Andrews was insufficient

to accommodate development on the scale envisaged in the Structure Plan. She claimed that it was for the Scottish Ministers to give a reason for proposing development to the west of St Andrews that

was beyond the land available.

The Inner House refused Ms Uprichard’s reclaiming motion finding that, although her objection was

described as being purely a landscape objection founded on the alleged inadequacy of the landscape

21 Scottish Planning Policy (SPP) 7: Planning and Flooding 22 Scottish Planning Policy, February 2010 23 Proposed Modifications to Finalised Fife Structure Plan (2006) Arising from Re-Appraisal of Housing Land Requirement (2007). 24 Scottish Government Final Modifications to Fife Structure Plan – May 2009. 25 Landscape Capacity Assessment and Proposed Green Belt Study of St Andrews, a report by Alison Grant, landscape architect.


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capacity of St Andrews for the proposed level of development, it was in fact a root and branch objection to the fundamental aims of the Structure Plan so far as they affect St Andrews. As such it

was directed against the strategic land allocation to the west of St Andrews and the identification of

St Andrews as an economic driver for Fife.

The court found that there was a wealth of material entitling the Scottish Ministers to conclude that St Andrews West should be one of the strategic land allocations that were a key element in the

Structure Plan. The question of landscape capacity was taken into account but did not outweigh other

wider considerations that were inherent in the adoption of the overall Structure Plan strategy.

The reasoned justification that Fife Council had offered for its policy for the growth of St Andrews as an ‘economic driver’ for Fife had been constant throughout the Structure Plan. Reading the May

Document in its entirety, the Scottish Ministers had given due consideration to both that justification and to the objections of Ms Uprichard and had decided in favour of the justification. Their acceptance

of the Council’s justification was a clear and adequate answer to Ms Uprichard’s objection.

The Lord Justice Clerk (Gill) also made the following comments:

“In a case where the adequacy of reasons is challenged, the court should consider whether

the informed reader would understand the basis for the decision complained of. The reasons

must be intelligible and must deal with the substantive points that have been raised; but in my opinion it is important to begin by considering the nature of the decision that is

complained against and the context in which it has been made. In a case of this kind it is also important to assess the adequacy of the reasons on the basis that they are addressed to

persons who are familiar with the background and the issues.”



Marco McGinty v The Scottish Ministers, 4 October 2011 – challenge to National Planning Framework re new Hunterston plant Petition for Judicial Review in which Mr McGinty sought reduction of National Planning Framework for

Scotland 2 (NPF2) to the extent that it designates a new power station and transportation hub at Hunterston.

Mr McGinty’s argument was that the Scottish Ministers had not complied with their obligations relating

to notice and consultation with regard to the proposed development.

Facts and background

The Ministers conducted a consultation process on the scope and content of NPF2 between February and October 2007. A discussion draft was issued in January 2008 with a consultation period from 8

January until 15 April 2008. The revised NPF2 was published in December 2008 and considered by

the Scottish Parliament between 12 December 2008 and 6 March 2009. The finalised NPF2 was laid before the Scottish Parliament on 25 June 2009 and published on the Scottish Government’s website

on 2 July 2009.

The Hunterston development was included as item 9 in a list of 14 national developments in the

finalised NPF2 approved by the Ministers. However, it was not included in the discussion draft of NPF2 which had been issued in January 2008 (and contained only 9 proposed national

developments). Hunterston had been proposed as a candidate for national development during the consultation process, the responses to which were posted on the NPF website on 8 August 2008.


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On 19 September 2008 a supplementary consultation paper26 was published on the NPF website and included 52 potential national developments including Hunterston. At or about the same time the

“NPF2, SEA Guide” and a newsletter were also published on the NPF website. Both of these publicised

the supplementary paper and requested responses to it by 31 October 2008. Intimation of the supplementary paper was also made in the Edinburgh Gazette on 23 September 2008.

Arguments and decision

The Ministers contended that the publicity given to the supplementary paper was sufficient to comply

with their requirements in terms of the legislation27.They also argued that, in any event, the petition was barred by mora, taciturnity and acquiescence and further that Mr McGinty had no title and

interest to present the petition.

Mora With regard to mora, taciturnity and acquiescence, Mr McGinty said that he first became aware of the

Hunterston development’s inclusion in NPF2 at a public meeting in Largs on 28 July 2009, had

contacted solicitors on 11 August and raised the petition on 23 September 2011.

Lord Brailsford found that, had the period of delay been confined to the 7 week period, there would probably have been no merit in the plea of mora. However, having formed the view that the

procedure followed by the Ministers did not breach their obligations with regard to publicity, Mr

McGinty ought to have been aware of NPF2 in September 2008. Against that background Lord Brailsford was of the view that the plea of mora should be upheld.

Title and interest

With regard to Mr McGinty’s title and interest to raise the petition, the relevant facts were that Mr McGinty resided in Largs (about 5 miles from the Hunterston site). His only connection with the site,

beyond the geographical proximity, was that he occasionally used it on an informal basis for

recreational purposes. Lord Brailsford said:

“Without in any sense wishing to denigrate such usage, from which I have no doubt the petitioner obtains both pleasure and benefit on the occasions that he exercises it, it cannot I

think in fairness be regarded as other than somewhat vague and remote”.

At best, Lord Brailsford considered Mr McGinty may have been regarded as having title to sue in order

to “prevent a breach by a public body of a duty owed by that public body to the public”. However, it was also found 28that Mr McGinty did not have “a real and legitimate interest to protect” or “real and

practical” interest to bring the proceedings. Lord Brailsford noted:

“He does not reside adjacent to the site and is not therefore a neighbour. His use of the site

is limited, intermittent and non-essential. The type of usage he exercises over the site could in fact be exercised over any area of land to which the public has access at any location in

Scotland. He does not sue as a member or representative of a group or organisation with title or interest. If an interest of this sort were to constitute sufficient interest to sue in a public

law question then any member of the public who, on occasion, used a piece of ground for

recreational purposes would have a title and interest to challenge a public law decision which affected that ground…. I do not consider that it is either desirable or, perhaps more

pertinently, necessary for the discharge of public bodies to be subject to challenges by persons, no matter how well intentioned they may be, whose link with a site or subject are as

remote as this.”

Publicity

26 The paper is snappily entitled “National Planning Framework 2: SEA (Strategic Environmental Assessment) Supplementary assessment of the environmental effect of candidate national developments; Environmental Report, annex 2: Consultation paper”. 27 In terms of Town and Country Planning (Scotland) Act 1997 and Directive 2001/42/EC. 28 Following Axa General Insurance Limited and others v The Lord Advocate and others [2011] SLT 439.

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There was also discussion as to whether advertising the Edinburgh Gazette was sufficient to comply with the requirements for publicity given that it is not of wide publication and is not ready available

to, or even known by, members of the public. However, Lord Brailsford took the view that the

Edinburgh Gazette is the recognised method in Scots law of publishing formal and legal notices and, as long as that status remains, advertisement in it should be regarded as a proper means of bringing

matters such as the supplementary paper to the public attention.

Also, although many members of the public would rarely visit the Scottish Government’s website, it

too was an entirely proper means of making information available to the public.

Whilst publication in a local newspaper would be an effective means of bringing such matters to the public attention, Lord Brailsford did not consider it was the only means of doing so and, more

importantly, did not consider it was a necessary requirement. Such a requirement would add considerably to the burden and cost of the administration of strategic planning and would constitute

an unnecessary and onerous obligation on the Scottish Ministers.



Dawn Developments for Judicial Review of a decision of Lanarkshire Council, 18 October 2011 – planning and application of sequential test Case in which Dawn Developments sought judicial review of Lanarkshire Council’s decision to grant

planning permission to JHAG Ltd for a development which included a superstore, garden centre, filling station and hotel at Redwood Crescent in East Kilbride.

Dawn applied for planning permission for the erection of a superstore at West Mains Road in East Kilbride (approximately 1 km from JHAG’s proposed development) on 29 March 2010. JHAG’s

application had been lodged on 17 February and an objection to it was lodged on behalf of Dawn on 30 March.

Dawn had written to the Council requesting that its application should be considered at the same time

as JHAG’s. However, at a meeting on 7 September 2010, the planning committee decided to consider JHAG’s application ahead of Dawn’s.

Dawn argued:

1) that the council had failed to properly apply the sequential test; and

2) that the procedure leading to the decision had been unfair.

Application of the sequential test

National Planning Policy requires application of the sequential test when considering applications for retail development. The test is designed to protect the commercial viability of town centres and

involves considering locations for development in order from the town centre outwards.

In the first place Dawn said that when considering JHAG’s application the Council should also have

had regard to its application which was sequentially equal. They questioned whether the Council was entitled simply to disregard its proposals generally as relating to a sequentially equal site, and

whether, in considering the cumulative impact of JHAG’s proposed development with other actual or

potential retail developments, their site should be taken into account.

In the second place they argued that, in assessing whether JHAG’s proposals could be accommodated elsewhere, the scale of the development should not be determined by JHAG’s application without

considering whether a development on a smaller scale might be accommodated elsewhere.


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When considering the authorities, Lord Drummond Young noted that the width of discretion that is available to a planning authority in applying national planning policies. In particular he referred to

Tesco Stores [2010] CSOH 128 [2011] CSIH 9:

“the sequential test … should be treated as a statement of policy designed to facilitate the

delivery of national government objectives, not a rule of law. It was very difficult to suggest that there was one correct method of applying the test to the exclusion of other possible

approaches. The correct method was a matter for the exercise of the planning judgment of

the planning authority as to how to apply the sequential test. On that basis, a challenge to the application of the test would only be successful if the disappointed person could establish

that the planning authority’s decision was unreasonable in the Wednesbury sense.”

Lord Drummond Young found that a report prepared by the Council’s Executive Director (Enterprise Resources) and considered by the Planning Committee at a meeting held on 5 October 2010 fully

addressed the sequential approach and dealt with the cumulative effect of the development.

Lord Drummond Young also took the view that the reports conclusions fell squarely within the

planning judgment of the local authority and was not persuaded that an incorrect approach had been adopted.

Procedural unfairness With respect to procedural unfairness, Dawn argued that the Council’s officers significantly

misinformed the Planning Committee. Reports to, and comments made by, officers at the Committee’s meeting of 7 September 2010 were said to have contained inaccurate descriptions of the

status of their application. The officers, it was said, gave the Committee to understand that there were fundamental problems with the Dawn’s application, in relation to both transportation issues and

the period of time within which it was likely that such issues could be resolved.

However, the court heard that the Dawn had been represented at the meeting on the 7th and that

their representative had put their case clearly. Lord Drummond Young took the view that Dawn was given a clear opportunity at that meeting to state its case and to refute any misleading statements

made by Council officers. The request to conjoin the applications was refused the meeting and no

attempt was made to reduce that decision. It could not be said that there was any unfairness in taking JHAG’s application (which had been received first and proceeded rapidly) ahead of Dawn’s.

Further delay would have prejudicial to JHAG and it was open to the Council to consider whether that prejudice was outweighed by the prejudice to Dawn in not having its application considered.

As the decision not to conjoin the applications had been made and not challenged directly it was not

necessary to consider the events after the meeting of 7 September. However, correspondence and

other documentation after revealed that there were significant issues to be resolved with Dawn’s application which appeared to justify the statements made about the preparedness of Dawn’s

application.



Greenland Developments (UK) Limited v. The Scottish Ministers, 20 January 2012 –

planning, procedure and reasons for Reporter’s decision Inner House case considering a planning appeal in respect of a proposed development of 12 flats by

Greenland Developments on land to the south of Veitch’s Square, Stockbridge in Edinburgh. Despite being recommended for approval by the planning officer, the application was refused as the

development was deemed to be contrary to the Local Plan in various respects. Greenland appealed to the Scottish Ministers. Following an unaccompanied site inspection and consideration of the


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documentation, a Reporter refused the appeal by means of a brief decision letter. Greenland then appealed that decision. They argued:

the Reporter had failed to provide adequate and intelligible reasons for refusing the appeal;

the Reporter’s decision letter had failed to pay due regard to the terms of section 25 of the

1997 Act which provide that where, in making a determination under the Town and Country Planning (Scotland) Act 1997, regard is to be had to the development plan, the determination

shall be made in accordance with the plan unless material considerations indicate otherwise; the handling of the appeal by the Reporter had been tainted by procedural irregularities in

that the Reporter had refused a reasonable request on behalf of the appellant that she should

hold an accompanied site inspection and had also refused a request that she hear part of the appeal by way of oral process;

Regulation 4(2) of the The Town & Country Planning (Appeals) (Scotland) Regulations 2008

provides that within 21 days of receipt of notification of a Notice of Appeal, the planning

authority must send to the Scottish Ministers its response to the appeal, together with associated documentation. In this case the Council had failed to do so; and

finally, it was argued that the Reporter had erred in failing to consider whether the imposition

of a relevant condition might have rendered acceptable what she otherwise considered to be an unacceptable development.

An Extra Division of the Inner House refused the appeal finding that it had been open to the Reporter to reach the findings she had. It was perfectly clear from the decision letter which findings and

conclusions the Reporter had reached and why she had reached them. She also had the discretion to refuse to have an accompanied visit and to refuse to hold an oral hearing.

With regard to s25 of the 1997 Act, although the Reporter did not specifically refer to the statutory

provisions, she applied the correct legal test. She considered whether the proposed development

would have a detrimental impact on the amenity of the New Town conservation area. In the light of those findings she assessed whether the proposed development complied with specified polices in the

development plan, whether the proposed development would be in accordance with the development plan and whether any other material considerations warranted granting planning permission in the

face of conflict with the development plan.

With regard to the Reporter’s consideration of the response by the Council to the Greenland’s Notice

of Appeal, regulation 4(2) provides that, in addition to the planning authority’s response, the planning authority also require to send to the Scottish Ministers a copy of the documents which were before

the planning authority in reaching their decision, a copy of any report on handling and any conditions

the planning authority consider should be imposed in the event that the Reporter decides that planning permission should be granted. Given the scope of the documentation, the Extra Division did

not consider that the public interest would be served if the Reporter could not take the documents into account if they were not submitted in the 21 day period.

Finally, as regards the failure to consider whether the attachment of conditions may have rendered

the development acceptable, although reference to a possible condition had been made on behalf of

Greenland, it had not been argued that the imposition of the condition on its own would have enabled the Reporter to reach a different conclusion. Furthermore, the information before the Reporter was

not such as could have satisfied the Reporter that the householder concerned would agree to the condition or that there was any reasonable prospect that such a condition could be complied with.

The possibility of any other conditions being imposed was not raised with the Reporter at any stage.

The full text of the decision is available from the Scottish Courts website here:



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Tesco Stores Limited v Dundee City Council and Asda Stores, 21 March 2012 - sequential test and planning authority’s discretion

Supreme Court case considering an appeal from the Inner House which upheld the planning authority’s decision to grant permission for an Asda Store at a site in Myrekirk Road in Dundee.

Tesco (which owns a store 800m from the proposed site) argued that the planning committee had

failed to properly apply the “sequential test” (which involves considering suitable alternative sites for

development from the town centre outwards) which was set out in the development plan and planning policy. Tesco also claimed that the planning committee had failed to consider its own policy

in respect of the Lochee district. (There was an alternative site in Lochee which the Council had discounted as being too small.)

The Supreme Court refused the appeal. The argument centred on the meaning of the word “suitable”

which Tesco contended meant “suitable for meeting identified deficiencies in retail provision in the

area”. The Supreme Court found that the Council had been correct to proceed on the basis that the word “suitable” meant “suitable for the development proposed by the applicant” but this was subject

to the qualification that flexibility and realism must be shown by developers.

Asda had followed a flexible approach but did not regard the Lochee site as suitable for their needs.

In accepting that assessment, the Council had exercised their judgment as to how the policy should be applied to the facts and had not proceeded on an erroneous understanding of the policy.

Lord Reed observed that an error by the planning authority in interpreting its policies would be

material only if there was a real possibility that their determination might otherwise have been different and he was not persuaded that there was such a possibility in this case.

With regard to a planning authority’s exercise of discretion, Lord Reed also noted:

“planning authorities do not live in the world of Humpty Dumpty: they cannot make the development plan mean whatever they would like it to mean.”

The full judgement is available from the Supreme Court here: http://www.supremecourt.gov.uk/decided-cases/docs/UKSC_2011_0079_Judgment.pdf

Petition of William Grant & Sons Distillers Limited for Judicial Review, 13 June 2012- wind farm planning permission

Judicial Review seeking to reduce a conditional consent and the related deemed grant of planning permission for a 59 turbine wind farm development situated 5 miles south of Dufftown and just over

a mile outside the northern edge of the Cairngorms National Park.

William Grant were part of a group of third party objectors. The main thrust of their argument was

that, having concluded that there was a need for the wind farm at the site, the planning reporter was then “anxious not to find too many things in the way of a consent” and allowed the need for the site

to override other important adverse factors.

Section 36 of the Electricity Act 1989 provides that a generating station cannot be constructed except

with the consent of the Scottish Ministers. Section 57(2) of the Town and Country Planning (Scotland) Act 1997 provides that, on the granting of such consent, the Scottish Ministers may direct that

planning permission is deemed to have been granted subject to any conditions specified by the Ministers.

William Grant argued that section 25 of the 1997 Act, which requires that regard must be had to the

development plan in making any determination under the planning acts, also applied, contending that

http://www.supremecourt.gov.uk/decided-cases/docs/UKSC_2011_0079_Judgment.pdf

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the Scottish Ministers’ direction under s57(2) was flawed due to a failure to afford the development plan the enhanced status required by s25.

This argument was rejected by Lord Malcolm:

“In my view it is clear that the purpose of a section 57(2) direction is to allow circumvention of the process of a planning application, including any need for a determination in terms of

section 37 of the 1997 Act (which does specify that regard is to be had to the development

plan). By contrast, section 25 applies to decisions under the planning acts when it is a requirement that regard is to be had to the development plan. There are several provisions in

the 1997 Act where one finds such a requirement. Section 57(2) is not one of them.”

Lord Malcolm found that, although the need for the site may have played a significant part in the overall conclusion, the decision was an “entirely normal and rational exercise of the kind of

judgement required” in such applications and also rejected various other grounds of challenge based

on policies in the local plan and supplementary guidance.


North Lanarkshire Council against a decision of H M Begg and E D K Thomas, 18

September 2012 – planning, national waste policy and local planning considerations

Outer House case considering an appeal by North Lanarkshire Council under s239 of the Town and Country Planning (Scotland) Act 1997. It concerns a planning application by Shore Energy in respect

of a waste management and renewable energy plant at Carnbroe near Coatbridge. The Council

refused permission for the plant despite a recommendation by planning officials that the proposal be accepted. However, Shore Energy appealed to the Scottish Ministers against the refusal of planning

permission. After an inquiry, reporters appointed by the Scottish Government granted planning permission subject to conditions. The Council then appealed to the court under s239.

The crux of the dispute was the relative weight given to local planning and environmental considerations, on the one hand, and national environmental objectives on the other. The Council’s

reasons for rejecting the proposals indicate that priority had been given to local considerations whereas the reporters’ decision had treated the national need as a material consideration and

regarded local considerations as subordinate to it.

Lord Stewart noted that national policy had evolved after the planning application had been made

and that a new policy was launched (without consultation as a “revised annex” to the Scotland’s Zero Waste Plan, 2010) the day before the inquiry. However, no issue was raised about the lawfulness of

the policy. The matter for the court was whether the reporters’ understanding and application of the policy was sound and whether they had departed from it. In refusing the Council’s appeal Lord

Stewart said:

“The meaning assigned to the new policy by the reporters as I understand it is that the need

assessment area is, or at least that one of the relevant need assessment areas is, Scotland as a whole. The policy is quite capable of bearing this meaning. It was entirely reasonable for

the reporters to treat national need as a material consideration and, in this case, as the

determining consideration subject to any site-specific objections.”




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Appeal under section 238 of The Town and Country Planning (Scotland) Act 1997 by the Cairngorms Campaign and others, 21 September 2012- planning, adoption of local plan

Outer House case in which the Cairngorms Campaign and others sought reduction of a decision by the Cairngorm National Park Authority to adopt the Cairngorm’s National Park Local Plan. In particular

they complained about the adoption of development policies in the Local Plan which made provision for developments at Nethy Bridge (40 dwelling houses and business units), Carrbridge (up to 117

dwelling houses), An Camas Mòr (1,500 dwelling houses) and Kingussie (300 dwelling houses).

In a lengthy decision Lord Glennie rejected the campaigner’s arguments finding that, in adopting the

Local Plan, the Park Authority had neither acted unlawfully or illegally (in the Wednesbury sense – i.e. it had not reached a decision that no reasonable person in that position properly informed of the facts

could have reached) nor had it failed to give adequate reasons for its decision, the reasons given for the decision being clear. In coming to his decision, Lord Glennie also rejected a number of more

specific arguments made by the campaigners.

An important issue considered in the judgement was the Park Authority’s departure from the

reporter’s recommendations following the public inquiry. The Local Plan was implemented under the previous planning regime (which allows for wider discretion to depart from a reporter’s

recommendations following an inquiry than under the new planning regime). In that respect this

case can be contrasted with recent case, Tesco Stores Ltd v Aberdeen City Council (11 October 2012) which demonstrates the stricter rules which apply where a planning authority departs from a

reporter’s recommendations under the new planning system.


(The campaigners have since lodged an appeal.)

Tesco Stores Ltd v Aberdeen City Council, 11 October 2012 – planning, local development plan and reporter modifications Inner house case in which Tesco sought to have the Aberdeen Local Development Plan quashed.

Tesco had obtained planning permission and was intending to open a superstore on a site at the former Woodend Hospital Annexe on Rousay Drive in Aberdeen. Morrisons had also obtained

planning permission to develop a store on a site nearby at the former Summerhill School.

Tesco contended that the Council had acted unlawfully when it adopted the Local Development Plan

as the plan allowed for the possibility for there to be two superstores in west Aberdeen. In his report on the plan, the reporter had been concerned not to open up the opportunity for two stores in the

area and the council must have been aware, at that time the plan was adopted, that the Woodend development was proceeding. In adopting the plan therefore, Tesco argued that the Council had

contradicted the reporter’s recommendations.

The court refused Tesco’s application. It noted that the reporter’s report must be based on the

material presented to him before completing his examination and it was only on the basis of that material that the reporter could propose modifications to the Plan. The planning authority could only

refuse to make modifications recommended by the reporter in very limited circumstances (i.e. that

the reporter had reached an unreasonable conclusion on the material before him.)

In this case the reporter had recommended making no modifications to the proposed Local Development Plan in respect of the Woodend or Summerhill sites and there was no basis on which

the Council could have altered the plan.

The full judgement is available here:


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Walton (Appellant) v The Scottish Ministers (Respondent) (Scotland), 17 October 2012 – challenge to validity of schemes and orders allowing Aberdeen bypass Supreme Court decision considering an appeal from the Inner House in respect of a challenge to the

schemes and orders made by the Scottish Ministers (under the Roads (Scotland) Act 1984) to allow

construction of an Aberdeen bypass.

The bypass, as initially promoted by the Ministers, had its origins in a regional transport strategy published in March 2003 which, in addition to the bypass, had also considered various other proposals

for reducing congestion in Aberdeen. The Ministers decided to undertake the bypass. However, in December 2004, following a campaign against the routing of the bypass via Murtle of Camphill,

previously discarded options were reconsidered and became part of a public consultation. Prior to

making a decision the Minister for Transport, commissioned a report on an option which was a hybrid of two of these previous options. That hybrid option (known as the Fastlink) which linked

Stonehaven to the bypass was adopted (in December 2005) on the grounds it would also reduce congestion between Stonehaven and Aberdeen on the A90. The ministers then published

Environmental Impact Assessments (EIAs) on the basis that the scheme fell within the scope of the

Environmental Assessment Directive.

Following objections from Mr Walton29 and others, a public inquiry was held into environmental and technical issues concerning the bypass. However it did not consider the more fundamental question

of whether the bypass should be built at all. Litigation then followed through the courts.

In the Supreme Court, Mr Walton’s primary contention was that the Fastlink was adopted without the

public consultation required under the Strategic Environmental Assessment Directive30. Mr Walton also argued that common law principles of fairness required that the public inquiry should have

considered the (economic, social or strategic) justifications for building the Fastlink. Although Mr Walton only sought to quash the schemes and orders in so far as they concern the Fastlink, the

Ministers maintained that if the schemes and orders were to be quashed to any extent, the scheme

for the bypass would fall as a whole.

Requirement for a Strategic Environmental Assessment In coming to its conclusion, the court took account of the differences between EIAs and Strategic

Environmental Assessments (SEAs). It was noted that the EIA Directive is concerned with the assessment of the effects of “projects” on the environment. The SEA Directive, which was adopted 16

years later, is concerned with the environmental assessment of “plans and programmes” (which set

the framework of future development consent of “projects”) and is intended to give consideration to environmental considerations at an earlier stage in the process31.

The Supreme Court considered that, whereas the regional transport strategy (in March 2003) was a

“plan or programme” in terms of the SEA Directive, the Fastlink was neither a “plan or programme”

nor a “modification”32 to a “plan or a programme” and did not trigger the consultation requirements under the SEA Directive. It was instead a modification to a “project” and thus subject to the EIA

Directive rather than the SEA Directive.

Compliance with common law principles of fairness

29 Mr Walton was chairman of campaign group Road Sense which opposes the bypass. 30 Strategic Environmental Assessments apply to “plans and programmes” Environmental impact assessments apply to “projects”. 31 The SEA Directive was introduced as it had been found that, under the EIA Directive, at the time of the assessment of projects, major effects on the environment were already established on the basis of earlier planning measures. They could therefore be taken fully into account when development consent was given for the project. Under SEA the effects on the environment can be examined at the time of preparatory measures and taken into account in that context. 32 Under the SEA Directive “plans and programmes” includes “modifications” to plans or programmes.


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With regard to the common law principles of fairness concerning the holding of the public inquiry, in terms of the Roads (Scotland) Act 1984, the Ministers are under a duty to hold an inquiry if an

objection is made to an order or scheme by any person who requires notification of the scheme (in

terms of the 1984 Act) or any other person appearing to them to be affected.

As Mr Walton did not require to be notified of the scheme and nothing before the court indicated that he was regarded as a person affected, there was no suggestion that the Ministers were statutorily

obliged to hold an inquiry into his objections. There was also no suggestion that he had any

legitimate expectation that the remit of the inquiry would encompass the (economic, policy or strategic justifications) for building the Fastlink. No material before the court suggested that the

Ministers were bound as a matter of fairness to include the justifications for the building of the Fastlink within the remit of the inquiry.

Whether remedies should have been available to Mr Walton

In the Inner House it had been observed that:

1) if Mr Walton’s contentions had been accepted, the court would have exercised its discretion

(under to the 1984 Act) to decline to grant him a remedy, the court noting that it was not contended that the schemes and orders would substantially prejudice his interests or affect

his property;

2) Mr Walton was not a “person aggrieved”33 in terms of the 1984 Act; and 3) Mr Walton would not have had standing even if the test were the same as would apply to a

judicial review at common law.

Whilst reserving its opinion on the correctness of Inner House’s approach, the Supreme Court noted that, in terms of the Scotland Act 1998, the Scottish Ministers do not have the power to make

subordinate legislation or exercise a function which is incompatible with EU law. It would therefore be

necessary to consider the terms of the 1984 Act and the exercising of discretion under it in that context.

The Supreme Court also found that Mr Walton was a “person aggrieved” in terms of the 1984 Act. In

coming to this conclusion, it noted his representations to the Ministers and his role in the local inquiry

the fact that he lived in the vicinity of the bypass (if not the Fastlink) which would be busier as a result of the Fastlink. Also, his role in local environmental organisations and Road Sense helped to

demonstrate that he was more than a “mere busybody interfering in things which did not concern him”. As a consequence, the Supreme Court found him to have a genuine concern in what he argued

was an illegality in the consent for a project which would have a significant impact on the environment. In Lord Reed’s words he was “indubitably a person aggrieved within the meaning of

the legislation”.

As regards the common law test, the Supreme Court found that the same factors which brought him

within the definition of a “person aggrieved” would apply and he would have had standing to make an application for judicial review. Lord Reed also said:

“Not every member of the public can complain of every potential breach of duty by a public body. But there may also be cases in which any individual, simply as a citizen, will have

sufficient interest to bring a public authority’s violation of the law to the attention of the court, without having to demonstrate any greater impact upon himself than upon other

members of the public. The rule of law would not be maintained if, because everyone was

equally affected by an unlawful act, no-one was able to bring proceedings to challenge it.”

The full text of the judgement is available here: http://www.supremecourt.gov.uk/docs/uksc-2012-0098-judgment.pdf

33 A “person aggrieved” is entitled to challenge the validity of orders or scheme’s made under the 1984 Act in the Court of Session.

http://www.supremecourt.gov.uk/docs/uksc-2012-0098-judgment.pdf

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City of Edinburgh Council against a decision of The Scottish Ministers, 29 November 2012

– planning, listed building and special circumstances

Outer House case concerning an appeal by the City of Edinburgh Council against the decision of a reporter appointed by the Scottish Ministers.

The case relates to a listed tenement near the junction between Ferry Road and Newhaven Road in Edinburgh. The owner of the property sub-divided the principal front room (with stud partitions) to

create two bedrooms and a corridor without obtaining listed building consent.

The Council served an enforcement notice on the owner requiring re-instatement of the room to its original condition. The owner appealed against the enforcement notice contending that: (1) listed

buildings consent was unnecessary; or (2) that the consent should nevertheless be granted. In

support of the second argument the owner pointed to the fact that the alterations came to light when he had made an HMO (Houses in Multiple Occupation) application for the property as a result of

being accepted by the Council’s Adult Resource Team to provide supported lodgings for vulnerable adults. The reporter rejected the owner’s first contention but accepted his second contention

(attaching considerable weight to what he called the “special needs argument” and noting that the

changes were easily reversible) allowed the appeal and quashed the enforcement notice subject to the condition that the partitions be removed and the property be returned to its original condition

when it ceased to be on the Council’s register of supported accommodation for vulnerable adults. The Council appealed to the court.

Lord Tyre refused the appeal. The appropriate starting was section 14(2) of the Planning (Listed

Buildings and Conservation Areas) (Scotland) Act, which requires the reporter to have special regard

to the desirability of preserving the building or any features of special architectural interest which it possesses. It also creates a presumption against the granting of listed building consent in respect of

alterations which have an adverse effect on the special interest of the building. Reading the decision letter fairly and as a whole, Lord Tyre found that the reporter, having identified the correct starting

point, proceeded to assess whether there were considerations of sufficient force to overcome the

presumption against alteration. His reasons for deciding that there were such considerations were clearly explained. So far as the adverse effect is concerned, the reporter concluded that the external

visibility of the subdivision was negligible and that the works were easily reversible without damage to internal decorative features. He regarded this “modest” impact on the building as outweighed by

what he described as the special needs argument put forward by the property owner.



Bagmoor Wind Limited v. The Scottish Ministers, 7 December 2012 – planning, effect of wind farm on Special Protection Area for golden eagles Inner House case considering an appeal by Bagmoor against a decision of the Scottish Ministers to

adopt the recommendation of their reporter and reject Bagmoor’s planning application for a 14

turbine wind farm at Stacain near Inveraray in Argyll.

The site lies within Glen Etive and Glen Fyne Special Protection Area which was created to protect golden eagles and the reporter’s recommendation to reject the application was based primarily on the

effect the wind farm would have on the eagles.

In essence Bagmoor’s appeal was based on their complaint that the reporter had not given adequate

reasons for his decision. This was rejected by the Inner House which found that on each substantive or determining issue the reporter had given intelligible reasons for his decision and refused Bagmoor’s

appeal.


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Procedure

Central to the decision was the procedure to be followed under Conservation (Natural Habitats etc.)

Regulations 1994 (SI 1994 No 2716), which implement the Habitats (92/43/EEC) and Birds (2009/147/EC) Directives. Regulation 48 requires that an appropriate assessment is carried out as

regards plans which are likely to have a significant effect on a European site (in this case, the Glen Etive and Glen Fyne SPA). This involves a two stage procedure, the first stage being a preliminary

examination to determine whether an appropriate assessment requires to be carried out. The second

stage is a detailed assessment of the plans. If plans can be clearly carried out without an effect on the site, there is no need for the more detailed assessment. The court had the following to say on the

matter:

“There is no prescribed formula as to how the two stage exercise contemplated by regulation 48 and the Court of Justice is to be carried out. There are several ways in which it might be

done in the context of domestic planning legislation and, no doubt, the precise form will

depend upon a range of facts and circumstances, including the nature of the permission sought and the conservation objectives to be protected. However, with an application such as

the present, at least by the time the respondents elect to call it in and order a public inquiry, it ought to be made clear, at least in the normal case, that any preliminary examination stage

has been passed and that what is to be carried out at the inquiry is an “appropriate

assessment” in terms of regulation 48(1)(a). Public inquiries are not held in order to undertake preliminary examinations.

It may just be possible, in a rare case, for the respondents to order an inquiry yet leave it to

the reporter to decide whether an appropriate assessment is required. If that were done, the first “screening” stage ought to take the form of a preliminary examination undertaken (or

the form of which could be agreed) at a pre-inquiry meeting and before any assessment is

embarked upon. What should not occur, as happened here, is that the reporter carry out a detailed assessment and then decide that such an assessment was required before re-

assessing the same evidence to reach a substantive decision. Put another way, there was no point in the applicants adducing a body of detailed evidence and then inviting the reporter to

determine whether there was any need to adduce it.”

The reporter’s decision

In coming to his conclusion the Reporter had taken account of evidence of displacement of eagles from another wind farm at Beinn Ghlas. Bagmoor argued that this evidence was too qualified or

limited in character to justify a finding either that eagle’s occupation of Beinn Ghlas had been affected by the wind farm, or that a wind farm at Stacain would cause a similar abandonment.

However the court noted that, in terms of the legislation, the reporter required to recommend

approval of the application only if he could be “certain”, that the plan would not adversely affect the SPA’s integrity. In these circumstances, it had been sufficient for the reporter to find that the

evidence left open the possibility that a wind farm at Stacain would lead to abandonment of part of the site by the eagles. The reporter had not therefore required to resolve every aspect of the

evidence or every subsidiary issue relating to the site at Beinn Ghlas.

Bagmoor also objected to the reporter’s consideration of evidence from Scottish Natural Heritage that

eagles had 99% chance of avoiding a collision with the turbines and the contribution that “behavioural displacement” (i.e. the eagles moving away from the wind farm site to avoid collisions)

made to that figure. However, it was common ground the eagles would tend to shy away from use of

the wind farm and that constructing the wind farm would represent a loss of foraging ground. The court found that the reporter’s reference to the 99% avoidance rate in this context was simply

confirmation of what had already been clear and had been ascertained during his screening exercise. The displacement of the eagles had been “effectively confirmed” by that rate.




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PRESCRIPTION

David Barclay Smith v James Crombie and Mrs Rita Crombie, 21 March 2012 – a boundary dispute, habile titles and the operation of prescription (See BOUNDARY DISPUTES)

Sir Charles Christian Nicholson and others (The Trustees of Niall Calthorpe’s 1959

Discretionary Settlement) v G Hamilton (Tullochgribban Mains) Limited and the Keeper of

the Registers of Scotland, 24 August 2012 -habile titles and prescription (See BOUNDARY

DISPUTES)

REAL BURDENS

Propinvest Paisley LP against a decision of the Lands Tribunal, 29 June 2011– jurisdiction of Lands Tribunal to vary lease conditions Case considering the competency of the Lands Tribunal to discharge or vary conditions in a

registrable lease in terms of s90 of the Title Conditions (Scotland) Act 2003.

The Co-operative Group, who were tenants under a 125 year lease of subjects at the Paisley Centre,

sought to discharge or vary certain provisions including restrictions on the use of the property and a “keep open” clause contained in the lease.

The Lands Tribunal had rejected Propinvest’s (the landlord) preliminary arguments that it had no

jurisdiction to vary or discharge the conditions. However, an extra division of the Inner House held

that the Lands Tribunal had “gone too far, too fast and on inadequate foundation” in rejecting Propinvest’s challenge to their jurisdiction.

The Inner house found that the Lands Tribunal had not applied their minds to a significant aspect of

the decision in George T Fraser Limited v Aberdeen Harbour (1985). It was clear that the legislature did not intend all title conditions in registrable leases to be susceptible to the Lands Tribunal’s

jurisdiction34 and, in Fraser, the Lord President (Emslie) had35 identified two potential areas of

limitation:

1) that the condition must “relate to land”; and 2) that there must be an obligation. I.e. a burden on an established right.

With regard to the second area of limitation, the court in Fraser had held that the Lands Tribunal had no jurisdiction to interfere with a clause which, by excluding assignees without the landlords consent,

essentially defined the tenant’s identity from the outset. Such a clause was not a true burden just an important delimitation of the initial grant.

The Inner House found that, when rejecting Propinvest’s challenge to its jurisdiction, the Lands Tribunal had not considered the second aspect of the Fraser decision and had failed to consider

whether Fraser laid down a principle of general application which should have been followed. Fraser was plainly of high authority and it was at least arguable that the court there did seek to identify a

principle of general application.

The Inner House sustained Propinvest’s appeal and allowed a proof before answer on all aspects of

the dispute including whether the Co-operative Group could bring their application within the proper

34 In terms of s90 of the 2003 Act the Lands Tribunal for Scotland can vary or discharge title conditions. A title condition is defined (in s122) as “(a) a real burden (b) a servitude… (d) a condition in a registrable lease if it is a condition which relates to the land (but not a condition which imposes either an obligation to pay rent or an obligation of relief relating to the payment of rent). 35 When considering the discharge or variation of leasehold conditions under the Conveyancing and Feudal Reform (Scotland) Act 1970 from which the powers in the 2003 Act are derived.

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scope of the Lands Tribunal’s jurisdiction noting that a decision should not be reached without the fullest consideration of the Fraser decision.


Russel Properties (Europe) Limited v. Dundas Heritable Limited, 14 November 2012 –

enforceability of title condition under s53 Title Conditions (Scotland) Act 2003

Outer House case concerning the Westwood Neighbourhood Centre in East Kilbride. The centre contains a mix of flats, offices and shops. Dundas Heritable Limited owned the Westwood pub in the

centre and concluded missives to lease part of the pub to Tesco for use as a Tesco Express. Russel Properties (Europe) Limited owned much of the non-residential property in the centre including two

car parks. They sought an interim interdict preventing use of the pub as a shop pointing to a burden

in the title to the pub which restricted its use to that of a pub or a restaurant:

“Subject to the provisions of these presents the feu and the buildings and others erected thereon, or any part thereof, shall not be occupied or used for any trade, business or purpose

other than that of a licensed public house and/or public restaurant and purposes ancillary

thereto … without the written consent of the Superiors.”

Although the feudal superior had been granted the primary right to enforce the burden, Russel argued that, on abolition of the feudal system, it had acquired the right to enforce the burden under

s53 of the Title Conditions (Scotland) Act 2003. Put simply, s53 provides that, where burdens have been imposed under a common scheme on a group of related properties, the burdens can be

enforced by any of the related properties.

Lord Woolman refused the motion for interim interdict finding that Russel had failed to establish that

there was a case to answer. To do so they would have required to have shown evidence that there was a common scheme and that the properties were related.

Although there were also burdens in the titles to other properties at the centre which restricted the use of those properties, the burdens were not identical or even similar and did not show the required

mutuality of interest or sense of equivalence which would give rise to the creation of reciprocal rights under a common scheme. Also, although the term “related properties” is not defined in the 2003 Act

and the court has some discretion, Russel failed to argue that the properties fell within the classes of related property illustrated by examples provided in the Act. Lord Woolman therefore found that

Russel had not satisfied the criteria necessary to enforce the burden.



RECTIFICATION

John Nicholas Andrew Lubbock and Robert Cheyne Turcan as Trustees of the Elliot of Harwood Trust v. Robin Feakins and the Keeper of the Registers of Scotland, 17 February

2012 – attempted rectification following conveyancing error Sheriff Court case concerning the sale of Harwood Estate near Bonchester Bridge in Hawick. In 2002

the trustees sought to sell part of the estate with the exception of Harwood Mill, which was being retained as a residence for Andrew Lubbock, and the lodge, which was the subject of a liferent to

Georgina Lauder. However, no mention was made of the exception of the lodge in the narrative to the disposition and title to the lodge was included within the estate title registered in favour of the

purchaser, Mr Feakins in the Land Register for Scotland.



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When this was discovered some years later, the trustees sought declarator that the lodge had not

been included in the subjects of sale and an order that the Land Register be rectified. The trustees

argued that, as the scale of the plan attached to the disposition meant it was impossible to determine whether the lodge was part of the subjects of sale, regard should be had to the intention of the

parties in determining the effect of the disposition.

Although no mention was made of the exceptions in the missives or disposition, the trustees had

instructed their estate agents and solicitors that the estate was to be sold with the exceptions and the trustee’s solicitors had sent a fax to the purchaser’s solicitors indicating that the mill and lodge were

not included in the sale (a fact that had not been brought to Mr Feakins attention, his solicitors believing it unnecessary as he had been content with the plan which represented the subjects being

purchased). The draft sales particulars had also been drawn up in a manner which neither specifically included or excluded the mill and lodge (the estate agents having taken the view that specific

mention may have deterred purchasers and was unnecessary as the buildings were not within the

body of the estate).

Sheriff Daniel Kelly QC found that the Register was not inaccurate as the lodge had been transferred in the disposition. Even if the disposition had been ambiguous, the lodge was amongst the property

transferred in the missives. The missives had been agreed to be final36 and it was not open to have

regard to the prior intention of the parties. Further, even if the parties’ intentions had been considered, their intensions were not ‘as one’ as Mr Feakins did intend to purchase the lodge.

Finally, even had there been an inaccuracy in the Register, it would not have been open to order

rectification as Mr Feakins was ‘a proprietor in possession’37who would have been prejudiced by the rectification. Although Miss Lauder was in natural or direct possession of the lodge, neither she nor

the trustees held a registered title. Mr Feakins held title to and possessed the estate as a whole

(living on it with his family and having a sheep farm there too). Mr Feakins also understood that, following the sale, Miss Lauder’s liferent was with him as fiar and he allowed her to continue to

occupy the lodge. Although the Sheriff found there was difficulty in construing Miss Lauder’s occupation of the lodge as being civil possession on behalf of Mr Feakins, he nevertheless tended

towards the view that Mr Feakins might be construed as a proprietor of the whole estate including the

lodge.

The full report is available from the Scottish Courts here: http://www.scotcourts.gov.uk/opinions/AJ99_10.html

REGISTRATION OF TITLE

Orkney Housing Association Limited v Moira Atkinson and Thomas Atkinson, 14 July 2011

– rectification of access rights in land certificate

Sheriff court case concerning servitude rights over an access road near Dounby on Orkney. Orkney

Housing Association owned former garage premises on the B9057. Mr and Mrs Atkinson owned a property known as Esgar and also an access road leading to it known as Esgar Road.

The title to the former garage was registered in the Land Register for Scotland and included a right of

access over Esgar Road. The housing association built four houses on the property and created a

parking area to the rear of the property. Access to the parking area was taken via Esgar road. When the houses were almost completed Mr and Mrs Atkinson put up some fence posts between the road

and the parking area so as to prevent cars reaching the parking area. The housing association raised

36 The missives contained a clause stating that they represented the full and complete agreement between the parties and superseded any previous agreements between them. 37 In terms of section 9(3) of the Land Registration (Scotland) Act 1979, the Keeper cannot rectify the register to the prejudice of a proprietor in possession unless specific exceptions apply.

http://www.scotcourts.gov.uk/opinions/AJ99_10.html

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an action and obtained interim orders against Mr and Mrs Atkinson for the removal of the fence posts. They then completed the houses and sought damages for the loss of rental income incurred as a

result of the delay in completion of the houses which they said was due to Mr and Mrs Atkinson’s

obstruction of the parking area.

Mr and Mrs Atkinson counterclaimed arguing that the right of access did not exist having been abandoned or extinguished by prescription before first registration of the right in the land register. At

first instance the sheriff allowed a proof, appearing to be of the view that the defences were relevant,

in that, if the Mr and Mrs Atkinson were able to persuade the court that the right of access had been abandoned or extinguished before first registration, then they would be entitled to seek rectification

of the register.

The housing association appealed. They contended that (in terms of the Land Registration (Scotland) Act 1979) their land certificate was conclusive of the extent of the rights over Esgar Road and the

right of access could only be affected if the Keeper was capable of rectifying the register. As the

housing association were proprietors in possession of the property, the register could not be rectified to their prejudice (s9 of the ‘79 Act).

The sheriff principal agreed with the housing association’s arguments. The starting point was the

description of the subjects in the property section of the housing association’s title sheet:

”Subjects THE GARAGE, DOUNBY, ORKNEY KW17 2HX edged red on the Title Plan, together

with a right of access for all purposes over the road commonly known as the Esgar Road”.

So long as this description remained unaltered, the housing association had a right of access over the access road. Even if the Keeper had included the access right in error, the housing association as the

current proprietors of the subjects would remain entitled to the right of access unless and until the

error was corrected by rectification of the register.

The question then was whether it was open to the Keeper to rectify the register (or for the court or the Lands Tribunal for Scotland to order him to do so).

The answer to that question depended on:

1) whether the housing association was a proprietor in possession within the meaning of section 9(3) of the ’79 Act;

2) whether, if it was a proprietor in possession, it would be prejudiced by rectification, and 3) whether any of the exceptions to the prohibition on rectification against a proprietor in

possession applied (ss 9(3)(i) to (iv) of the ‘79 Act).

Having considered the authorities, the sheriff principal found that the housing association were

proprietors in possession. It was also plain that they would be prejudiced (and it would have made no difference if, as was argued for Mr and Mrs Atkinson, the prejudice was not “particularly significant”).

It was also found that none of the exceptions to the ‘proprietor in possession rule’ applied.

The Keeper would not therefore be entitled to exercise his power to rectify the register by deleting

reference to the right of access and nor would either the court or the Lands Tribunal be entitled to order him to do so. It was therefore of no relevance that the right of access may have been

extinguished/abandoned and included as the result of an error on the part of the Keeper.

The full judgement is available from Scottish courts here:



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SERVITUDES

Compugraphics International Ltd v. Colin Nikolic , 20 May 2011 - servitude rights to overhanging and encroaching air conditioning apparatus

Case concerning rights to air conditioning apparatus overhanging a neighbouring property. In 2007 Mr Nikolic bought land neighbouring Compugraphics factory at Eastfield Industrial Estate in

Glenrothes. He asked Compugraphics to remove the overhanging pipes, ductwork and supporting

stantions (which had been in place since 1971) from his land.

Compugraphics raised an action claiming that either (1) they owned the pipes and were entitled to retain them in place free from interference by Mr Nikolic or alternatively (2) that they had a servitude

right to retain the apparatus in place.

An Extra Division of the Inner House found that although the title contained a clear and unambiguous

bounding description under which Mr Nikolic owned the solum of the path the apparatus was overhanging, the apparatus which protruded into Mr Nikolic’s airspace was a fixture of the factory

which had been conveyed to Compugraphics. The court did not accept that the apparatus could remain in Mr Nicolic’s airspace as of right by virtue of constituting a separate heritable tenement.

However, it was possible that Compugraphics had obtained servitude rights by prescription allowing

them to retain the apparatus in position.

In coming to this conclusion the court confirmed that Scots law recognises servitude rights of both projection and support. Moreover, the servitude of support was not limited to support between

buildings (as is commonly encountered in flatted properties) but could also extend to support by pillars or posts in the ground.

It was also noted as an addendum that s77 of the Title Conditions (Scotland) Act 2003 which provides for a positive servitude of leading pipes over or under land may also assist in resolving the

dispute.



Roger Jones and Katherine Jones v. William Henderson Gray and Edna Drummond Ross

or Gray, 13 December 2011 – evidence for creation of servitude by prescription Outer House case concerning the creation of a servitude right of access by prescriptive possession. Mr

and Mrs Gray owned 40 Montgomerie Drive, Fairlie and a lane running to it from Montgomerie Drive. Mr and Mrs Jones owned 38 Montgomerie Drive and sought declarator that a servitude right of

pedestrian and vehicular access had been created in favour of no 38 over part of the lane leading to the rear of their property and garage.

The Joneses also said that the Grays had erected a lockable post and fence in front of their garage so as to obstruct access to it from the lane and sought a decree ordaining removal of the obstructions

and interdict preventing the Grays from interfering with the disputed area.

Section 3(2) of the Prescription and Limitation (Scotland) Act 1973 provides:

“If a positive servitude over land has been possessed for a continuous period of twenty years openly,

peaceably and without judicial interruption, then, as from the expiration of that period, the existence of the servitude as so possessed shall be exempt from challenge.”

In support of their action, the Joneses claimed that their predecessors in title had taken access over

the disputed area including daily access to the garage with their car and with their sailing dingy from


74

time to time between April 1979 and June 2007. The access had been free and uninterrupted and it was consistent with exercise as a matter of right. The Joneses had taken access over the disputed

area from June 2007 for parking their car in the garage, unloading their car and getting from the lane

to the garage doors.

The Grays argued that the Joneses had not adequately specified the continuity, volume and frequency of the possession in their pleadings nor had they demonstrated that possession had been

continuous for the prescriptive period or that it was open and ‘as of right’. They contended that the

action should be dismissed on the basis the Joneses arguments were irrelevant and/or that they did not give fair notice of important matters to the Grays.

Lord Doherty was not satisfied that the case should be dismissed. Applying the test set out in

Jamieson v Jamieson (1952), it was not a case which would necessarily fail even if all of the Joneses arguments were proved. Several of the issues between the parties involved questions of fact and

degree which would be capable of determination after a proof (e.g. whether possession was

continuous). Lord Doherty was also not persuaded that there was a lack of fair notice on important matters. The crux of the Grays’ complaint was that the use of the word “included” suggested that the

Joneses would be able to lead evidence of other unspecified modes of access of which no notice had been given. Lord Doherty considered that use of the word “included” did not reserve them a free

hand to do so and if it were to happen the Grays would be entitled to object to such evidence being

led.

A proof before answer was allowed.


Harton Homes Limited v. Mrs Anne Durk, 3 July 2012 – servitude by implication and availability of alternative routes

Sheriff Court case considering an alleged servitude right of access to a site for development on

Dundee Road in West Ferry. Harton Homes argued that a servitude right of access had been created by implication which led from their site to Dundee Road over the southern portion of a neighbouring

property owned by Mrs Durk and through a gap in a wall which separating both properties from the road.

Both Harton’s property and Mrs Durk’s property had previously formed part of larger subjects owned

by Mr and Mrs Callison who split the subjects in 1985 and sold parts to Harton’s and Mrs Durkin’s

predecessors in title. The break off dispositions conveying these parts made no reference to a servitude right of access. However, the route over which Harton claimed the servitude had been

created by implication had been marked as “mutual” on the plans attached to the break off dispositions.

A servitude can arise by implication on such a division of property where it is reasonably necessary for the comfortable use and enjoyment of one of the resulting parts. However, Mrs Durk argued that

there were other potential alternative means of access which could be taken from the north of the properties. Potential access routes existed from Ellislea Road (situated to the east of both subjects

and perpendicular to Dundee Road) or via another looping access road from Dundee Road meaning

that there was arguably no necessity to imply a servitude over Mrs Durk’s property. These routes were probably not as attractive to Harton as they were less convenient and their gradient and the

presence of a narrow archway made them unsuitable for construction traffic. Although the Callisons’ title to the larger subjects made reference to rights to use the alternative access ways, Harton argued

that that these rights did not extend to their part of the property (suggesting that the rights stopped short of their property, or had been abandoned and that the use by them of the rights would illegally

increase the burden on the servient property).


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The main thrust of Harton’s argument was based on there being a “common intention” among the

parties’ predecessors in title in 1984/5 (about the time the larger property was split) that access for

both properties be taken over Mrs Durk’s property. The sheriff noted that, while common intention may be relevant as potentially throwing light on whether the parties considered the access to be

necessary at the time of severance, it could not per se be a distinct ground for setting up an implied servitude. In any event the sheriff found himself unable to conclude that there was a common

intention that the access right Harton argued for be granted. At best there had been an anticipation

that the access would be available in 1984 when an application for outline planning permission for houses on each of the properties was submitted. Further, although later planning applications in

respect of services to the plots showed the access located clearly on Mrs Durk’s property, initial planning applications for houses had shown the access located centrally. Harton could also have

created a gap in the wall to the south of their property (similar to that in Mrs Durk’s property), the sheriff noting that there was no evidence of a title impediment and insufficient evidence of any

planning impediment to do so. (However, evidence suggested that Harton may not have wished to

create another gap in the wall as the gap situated on Mrs Durk’s property was more convenient and allowed for turning.)

After considering the evidence, the sheriff was not persuaded that there were physical difficulties or

title impediments which prevented use of an alternative means of access to Harton’s property. In all

the circumstances, Harton had failed to prove that the servitude through Mrs Durk’s property was reasonably necessary for the comfortable enjoyment of their property.



Niall Jervis Coll Livingstone or Bachuil v Yorick Paine and another, 12 October 2012 -servitude, res judicata, personal bar and tenant’s title Outer House case in which the Baron of Bachuil sought an interdict preventing the use of an access

way across his property over which Mr Paine and his partner claimed a servitude existed to a croft

(Croft Ballimackillichan). Mr Paine was the uninfeft (the disposition in his favour was awaiting registration) proprietor of the croft and his partner was a tenant at the croft.

Mr Paine argued:

1) That an action had been heard at the Sheriff Court in Oban in 1899 at which it was found

that a public right of way existed along a longer route of which the disputed access was part.

Although the public right of way was no longer in use, Mr Paine argued that a private right remained flowing from the findings in 1899. As a result of the doctrine of res judicata (i.e.

that a matter which has already been judged cannot be subject to further litigation), Mr Paine contended that the Baron could not challenge the servitude.

2) That, following the comments by the Baron’s parents (when the Baron’s father was the sole

proprietor of the property) indicating acceptance of the presence of the servitude (on which Mr Paine had relied when purchasing the croft), the Baron was personally barred from

challenging the servitude.

Res judicata

Lord Turnbull found that Mr Paine’s plea based on res judicata was irrelevant. The case had established a public right of way over a longer route in 1899 and did not confer a private right on

anyone. It did not operate to found a right of servitude on the owner of the croft more than 100 years later. The parties, subject matter and facts on which the decision was made were different in

each case.

Personal bar


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With regard to personal bar, Lord Turnbull found that, although it was only the Baron’s father’s comments which could found a plea of personal bar (he was the sole proprietor) and the comments

relied on were mainly made by his mother, the father’s comments went further than a mere failure to

dissent and could be construed as representations regarding access to the croft. As their weight might depend on the nature and detail of the conversation, Lord Turnbull allowed a proof at which Mr

Paine would have the opportunity of leading evidence on that aspect of his case on personal bar.

Title to defend

Lord Turnbull also agreed with the Baron’s argument that Mr Paine’s partner had no title to defend the action. As a dispute over the existence of a servitude, the matter was one which concerned only

the heritable proprietors of the two properties. Although the partner was a tenant, there was no evidence that the croft was let with a right of servitude in favour of the tenant.

The full judgement is available from Scottish courts here:


Gary Alexander Garden and Camelia Julia Garden v. Edmond John Arrowsmith and Jane

Christine Arrowsmith, 14 January 2013 – whether right of access to unbuilt garage binding on successors Sheriff court case concerning an alleged servitude right of access over a property in Aberdeen. In

1992 Jessie Sharp granted a disposition of a small area to the owner of the neighbouring property

(her brother, Peter Sharp) in which she purported to reserve a right of access over the property to any garage to be built on the part she retained. No garage was built until her successors in title, the

Gardens, built one in 2010. However, the Arrowsmiths (the successors in title to Peter Sharp) argued that the clause in the 1992 disposition created only a personal right between Jessie and Peter Sharp

which did not transmit to their successors in title. They contended that, without a garage, there could

be no servitude right as the purpose of the servitude could not be achieved.

The sheriff principal rejected that argument finding that the 1992 disposition did create a heritable and irredeemable servitude right of access over the Arrowsmiths’ property. The clause satisfied many

of the common requirements for the creation of a servitude. Although the word “servitude” was not used, that is not fatal to the creation of a servitude and the clause contained a reference to

successors in title and an obligation to insert in future transmissions. There also was an express

declaration that it was a “real and preferable” burden, the deed did not expressly exclude the constitution of a servitude and there were no indications that the right was intended to be personal.

Further, the sheriff principal took account of the fact that the garage was likely to be a permanent construction when coming to the conclusion that it was likely that the parties had contemplated that

the right would continue for the benefit of singular successors.



SOLICITORS AND PROFESSIONAL NEGLIGENCE

Cheshire Mortgage Corporation Limited and Blemain Finance Limited v Morna Grandison and Balfour & Manson, 23 September 2011 – solicitors’ implied warranty of authority Two Outer House cases in which Cheshire Mortgage and Blemain Finance (connected companies)

were the victims of a mortgage fraud and sought to sue the solicitors instructed by the fraudsters

(the banks had instructed separate solicitors) for breach of warranty of authority.



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In each case the fraudsters had pretended to be persons owning property which they were seeking to use as security for a loan (of £355,000 in one case and £203,000 in the other). They had been able

to produce evidence of their identity in the form of utility bills and driving licences to their solicitors

and to the banks. In both cases the fraudsters had approached the bank (directly in one case and via a broker in the other) before instructing their solicitors.

The banks argued that, in each case, the solicitors warranted that they had the authority of the

individuals who owned the properties over which standard securities were purportedly granted. The

solicitors recognised the doctrine of a solicitor giving an implied warranty of authority. However, they contended that it does not go as far as giving a warranty of the identity of the person for whom they

act, nor does it include any warranty as to whether he is or is not the owner or occupier of any particular property. In effect the solicitors said that they warranted only that they had authority from

persons who were already known to the banks and with whom the banks were already dealing.

Lord Glennie found in favour of the solicitors. The circumstances in which the solicitors came to

transaction were of particular importance. By the time the solicitors became involved, the banks knew who they were (or who they thought they were) dealing with. They had already made the decision to

lend to those individuals. The solicitors had been instructed (by the fraudsters) for the limited purpose of drawing up the loan and security documentation and liaising with the banks’ solicitors. In

the words of Lord Glennie:

“The position can be viewed, perhaps more graphically, in this way. Imagine the negotiations

between lender and borrower happening in a large room. Agreement in principle is reached between lender and borrower. The loan and security documentation requires input from

solicitors. The lenders instruct Mellicks, who enter the room. The borrowers decide to instruct solicitors of their own to safeguard their interests. They appoint Longmuir & Co, or Balfour &

Manson. They too enter the room. The solicitors begin the process of drawing up the

documentation. They eventually complete it, signatures are obtained from their respective clients, the signed documentation is handed over to the lenders or to Mellicks, and the loan is

advanced to the borrowers. In those circumstances, if one imagines that the lenders or Mellicks on their behalf were to ask Longmuir & Co, or Balfour & Manson, “who are you

acting for?”, the terse reply would be something like: “what do you mean, we’re acting for

the individuals on the other side of the room with whom you have already been in discussions and to whom you have provisionally agreed to lend money”. It is to my mind absurd to

suggest that in those circumstances one could imply a promise from the solicitors that they were acting on behalf of the Cheethams of 34 Danube Street or the Morgans of 3 Menteith

View, still less a promise that these individuals, calling themselves Cheetham and Morgan, did indeed own those properties”.

In one of the cases there was also discussion as to whether the solicitors were liable to the bank in terms of the letter of obligation they had granted. The bank argued that they suffered loss as a result

of the solicitors’ failure to procure the title deeds recording the security in terms of the solicitors undertaking. However, Lord Glennie again agreed with the solicitors’ arguments on this point:

1) the letter of obligation was collateral to the principal transaction between the bank and the borrowers and could not be enforced if that principal transaction was void; and

2) in any event, the bank could show no damages flowing from the failure by the solicitor to produce a title encumbered with the Standard Security, since the Standard Security referred

to in the letter of obligation was itself void.



(See appeal below)


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Kirkton Investments Limited v. VMH LLP, 8 December 2011 – solicitors’ negligence and liability for diminution in value following property slump

Outer House case concerning the damages payable as a result of a solicitor’s professional negligence. VMH LLP advised Kirkton in relation to the purchase of a site at 144 to 148 Slateford Road in

Edinburgh in 2005 from HBJ 590. The site had the benefit of conditional planning permission for 19 terraced townhouses and 8 apartments.

Two of the conditions related to a requirement for the installation of a ventilation system to a fish and chip shop (the Codfather) situated adjacent to the site to ensure that odours from the shop exited at

a suitable level.

In March 2005, the owner of the Codfather, Slateford Developments entered into an agreement with HBJ 590 allowing HBJ 590 to carry out the works to install the ventilation system.

Kirkton38 concluded missives for the sale of the site from HBJ 590 in April 2005 and in July 2005 Slateford Developments sold the Codfather to Ian McDonald Enterprises.

Kirkton began construction of the Development in autumn 2005. However, Ian McDonald disputed

Kirkton’s entitlement to install the ventilation system and requested a payment of £75k in return for

allowing the installation. Kirkton refused this offer on advice from VMH to the effect that they had a legal right to install the system. However, it was subsequently found that Kirkton did not have a real

right enforceable against the new owner of the Codfather.

In November 2007, having sought and failed to obtain a variation of the planning permission, Kirkton agreed to pay Ian McDonald £324k in return for the grant of a right to install the vent. In the

meantime Kirkton had postponed active marketing and the launch of the development. Unfortunately

for Kirkton the events also coincided with the onset of the property slump.

Kirkton argued that, as a result of VMH’s breach of duty, marketing and sales were delayed and VMH were liable for the consequences of the delay including the additional bank borrowing costs and lower

sales prices as obtained a result of their increased exposure to the vagaries of the property market.

Having initially argued otherwise, VMH accepted that an enforceable right could have been

constituted against the shop owner, it was their duty to advise Kirkton of that and take the required steps to constitute the right and that, by failing to do so, they were in breach of their duties to

Kirkton. However, they contended that the losses claimed in respect of additional bank charges and diminution in sales proceeds were not within the scope of their duties. VMH had not assumed the risk

of such losses and it would not be fair and reasonable to impose it on them.

Lord Doherty disagreed:

“In my opinion the scope of the [VMH’s] duties to [Kirkton] was sufficiently wide to include

the duty to avoid causing them each of the kinds of loss and damage they say were

sustained…

They were not merely providing information to [Kirkton]. Their duties were more exacting. They were under a duty to take the necessary legal steps to protect the position of the

[Kirkton] in relation to the ventilation issue at the time they concluded missives; and they

were under a duty to advise them correctly of their legal position at the time of the proposal by [Ian McDonald] so that a properly informed decision could be made then as to what action

to take…

38 The missives were in fact entered by Kirkton Developments Limited (a related company working in conjunction with Kirkton Investments Limited on the development).

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Having regard to the nature and content of [VMH's] duties to [Kirkton], and to the whole circumstances in which they arose and were breached, it appears to me to be fair, just and

reasonable that the scope of [VMH’s] duties should extend to the kinds of loss and damage

claimed… It was reasonably forseeable that [VMH’s] breach of duty might result in interruption to the planned progress of the development and sale of the properties, and

might occasion delay and expense. [VMH] were aware that the development was being financed by bank borrowing. It was reasonably foreseeable that delay would result in

additional borrowing costs. It was reasonably foreseeable that delay in achieving sales might

result in longer exposure to the vagaries of the property market.”

After discussion as to causation and valuation of the loss, Lord Doherty awarded damages of more than £1.1m broken down as follows:

1) the settlement payment paid to Ian McDonald- £324,000

2) the other extrication costs- £55,812

3) diminution in sales proceeds- £545,818 4) additional bank borrowing costs- £209,742

The full text of the decision is available from Scottish Courts here


Cheshire Mortgage Corporation Limited and Blemain Finance Limited v Morna Grandison and Balfour & Manson, 5 September 2012 – solicitors’ implied warranty of authority

Two Inner House cases in which Cheshire Mortgage and Blemain Finance were the victims of a

mortgage fraud and sought to sue the solicitors instructed by the fraudsters (the banks had

instructed separate solicitors) for breach of warranty of authority.

In each case the fraudsters had pretended to be persons owning property which they were seeking to use as security for a loan (of £355,000 in one case and £203,000 in the other). They had been able

to produce evidence of their identity in the form of utility bills and driving licences to their solicitors

and to the banks. In both cases the fraudsters had approached the bank (directly in one case and via a broker in the other) before instructing their solicitors.

The banks argued that, in each case, the solicitors warranted that they had the authority of the

individuals who owned the properties over which standard securities were purportedly granted. The solicitors recognised the doctrine of a solicitor giving an implied warranty of authority. However, they

contended that it does not go as far as giving a warranty of the identity of the person for whom they

act, nor does it include any warranty as to whether he is or is not the owner or occupier of any particular property. In effect the solicitors said that they warranted only that they had authority from

persons who were already known to the banks and with whom the banks were already dealing.

Outer house

In the Outer House Lord Glennie found in favour of the solicitors. The circumstances in which the solicitors came to transaction were of particular importance. By the time the solicitors became

involved, the banks knew who they were (or who they thought they were) dealing with. They had already made the decision to lend to those individuals. The solicitors had been instructed (by the

fraudsters) for the limited purpose of drawing up the loan and security documentation and liaising

with the banks’ solicitors.

In one of the cases there was also discussion as to whether the solicitors were liable to the bank in terms of the letter of obligation they had granted. The bank argued that they suffered loss as a result

of the solicitors’ failure to procure the title deeds recording the security in terms of the solicitors undertaking. However, Lord Glennie again agreed with the solicitors’ arguments on this point:


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1) the letter of obligation was collateral to the principal transaction between the bank and the borrowers and could not be enforced if that principal transaction was void; and

2) in any event, the bank could show no damages flowing from the failure by the solicitor to

produce a title encumbered with the Standard Security, since the Standard Security referred to in the letter of obligation was itself void.

The Inner House refused an appeal of Lord Glennie’s decision.

Inner House –agent’s authority An agent’s warranty authority is of limited scope. Whilst an agent will impliedly warrant that he has

authority to act on his client’s behalf it does not follow that he warrants the identity of his client nor the client’s title to the property in question. Although it would be open to the agent to expressly

warrant these things, it is almost inconceivable that the agent would agree to this. The court should not readily impose upon a person rendering professional services an absolute, unqualified obligation

amounting, in effect, to a guarantee of his client’s identity and title. Where the risks are commercial

risks involved in lending to a person who may not be all he claims to be, there is no reason why the risks should be transferred from a commercial firm to a professional firm such as a firm of solicitors.

Inner House –letter of obligation

The Inner House agreed that the letter of obligation was collateral to the void security transaction

(and consequently unenforceable). Also (although it may simply have been another way of expressing the same thing) the Inner House agreed that the bank could show no loss since the obligation to

which the letter was ancillary was void.


Karl Phimister v D.M. Hall LLP, 26 October 2012 – whether surveyor negligent in respect of error as to area in mortgage valuation

Outer House case in which Mr Phimister sued D.M. Hall for professional negligence in respect of a

mortgage valuation report carried out on a property in Buckie in Aberdeenshire. The report was prepared in support of Mr Phimister’s application for a residential mortgage over the property. The

report valued the property at £230k and noted that the garden ground and surrounding land was said39 to extend to approximately 1.12 acres whereas in fact it only extended to about 0.66 acres40.

Mr Phimister contended that DM Hall owed him a duty to check the area as part of their valuation and

they were negligent in failing so to do. Whilst the area of the subjects may not have affected the

valuation of the subjects for residential purposes (and Mr Phimister did not argue in court that it did), the smaller area severely restricted his opportunity to develop the site.

Lord Glennie found that Mr Phimister’s claim failed. To succeed Mr Phimister had to establish that the

discrepancy between the actual acreage and that represented in the sales particulars should have

been “obvious” to a surveyor carrying out his valuation with reasonable care. This would depend on the type of survey the surveyor was asked to carry out. Expert evidence agreed that the purpose of a

mortgage valuation report was not to check the acreage of the site but to provide a valuation for mortgage purposes. A mortgage valuation report was not the appropriate tool to assess development

potential; if the purchaser wanted such an assessment, he should instruct a development appraisal. A

surveyor instructed to survey the subjects with a view to ascertaining whether there was room for building a certain number of houses on plots of a certain size would require, in the exercise of

reasonable care, to assess the area of the subjects. However, Lord Glennie was not persuaded that a surveyor carrying out a residential mortgage valuation on a site with buildings standing on it would

39 DM Hall had not measured the area of the property and the area quoted came from the sales particulars. 40 A second valuation carried out on behalf of Mr Phimister by another surveyor (valuing the site as a development opportunity) valued the property at £140k and said that if it had extended to 1.12 acres the value would have been £210k.


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necessarily have been expected to notice that the site was considerably smaller than 1.12 acres. He would not, as Lord Glennie put it, “have been looking at the site through measuring eyes”.

In some cases the acreage of the site may be a relevant factor in assessing the value for mortgage purposes and, in such cases, the surveyor would have to take care to make an accurate

measurement, or check a measurement given by another. However, in this case, the value lay in the buildings and not in the size of the plot and it was found that there was no reason to place such a

burden on the surveyor.



Santander UK Plc v. Keeper of the Registers of Scotland, 8 February 2013 – liability of Keeper for registering fraudulent discharge

Outer House case in which Santander sought to recover losses from the Keeper of the Registers of

Scotland after the Keeper accepted a forged discharge (discharging a security held by Santander) for registration. The discharge was subsequently reduced and the Land Register was rectified to show

Santander’s security. However, the security only took effect as at the date of rectification meaning that a second security registered in favour of the Bank of Scotland (after the discharge was registered

but before the rectification took effect) received prior ranking to the Santander security. The Bank of Scotland later sold the property in terms of their security and no proceeds went to Santander (who

were still owed more that £240k in terms of the loan secured). Santander claimed that their loss

arose as a result of the fault and negligence of the Keeper.

Lord Boyd found in favour of the Keeper. After deciding that the Keeper’s decision to register the discharge was a matter on which the court could adjudicate (i.e. it was not a policy decision purely at

the Keeper’s discretion), the question for the court was whether the Keeper owed a duty of care to

the Bank. This would depend on whether the Caparo test was satisfied. In order to satisfy the Caparo test Santander had to show that the loss was foreseeable, the relationship between Santander and

the Keeper was sufficiently proximate and that it was fair just and reasonable to impose a duty of care on the Keeper. It was the last of these requirements on which Santander’s claim failed. Lord

Boyd (after noting that the Bank had assumed certain risks in lending to its client whereas the Keeper had made no assessment of the fraudster’s creditworthiness or honesty or whether the value of the

property would fully secure the loan), found that in the circumstances: where the loss was caused by

the criminal acts of Santander’s client, it was not fair, just or reasonable that the Keeper should be liable.

The full decision is available from Scottish Courts here.

http://www.legalknowledgescotland.com/?page_id=984

John Grimes Partnership Ltd v Gubbins, 5 February 2013 – engineer liable for loss in value of developer’s property following breach of contract Case from the Court of Appeal for England and Wales concerning a developer’s claim for damages against a consulting engineer who failed to perform tasks by an agreed date. The developer (a

farmer) sought damages in respect of the fall in the value of his development (due to the property slump) during the period of the delay.

In terms of an oral agreement (followed by a formal letter of engagement) reached with the developer on 6 September 2006, the engineer was to design a road and drainage to the developer’s

site and to obtain s38 approval (allowing adoption of the road by the roads authority in terms of the Highways Act 1980) by March 2007. An initial s38 approval was not obtained until 17 February 2008

and even then some parts had not been finalised. In April 2008 the developer engaged another


http://www.legalknowledgescotland.com/?page_id=984

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consulting engineer who obtained the necessary approval in June 2008. The judge found that the first engineer’s breach of contract delayed the development by 15 months and that had resulted in loss to

the developer because of the reduced value of the development.

The question for the appeal court was whether the developer’s loss was too remote to allow recovery.

The appeal court dismissed the engineer’s appeal agreeing with the judge’s finding that that the loss was not too remote as it was reasonably foreseeable as a serious possibility if there was a delay. It

also agreed with the judge’s finding that the case was not one of the unusual cases where the nature

of the contract and the commercial background, or other relevant special circumstances, mean that an implied assumption of responsibility for losses that can be reasonably foreseen was inappropriate.

The Court of Appeal’s comments on the length of delay are also worth noting:

“It may well be that the reason for the absence of many cases of this kind is that the property

market does not move as quickly as certain other types of market involving commodities and other

goods, and it takes a very lengthy delay in breach of contract before a provable loss of value can occur. A few days or even a few weeks delay is unlikely to give rise to a demonstrable loss on the

property market. It was the appellant’s delay of 15 months, in the Judge’s words an egregious delay, which in the present case gave rise to a quantifiable loss.”

The full judgement is available from BAILII here.

STANDARD SECURITIES

Mathew Purdon Henderson v Foxworth Investments Limited and Nova Scotia Limited, 12 April 2011 (See DILIGENCE AND INSOLVENCY)

Mathew Purdon Henderson v Foxworth Investments Limited and Nova Scotia Limited, 1

March 2013 (See DILIGENCE AND INSOLVENCY)

Santander v David Gallagher, 26 July 2011- service of calling up notice by Sheriff Officers through letterbox is incompetent

Sheriff Court case concerning the competency of service of a calling up notice under the

Conveyancing and Feudal Reform (Scotland) Act 1970.

After having failed to find Mr Gallagher, Sheriff Officers instructed by Santander, purported to serve the notice on Mr Gallagher by putting it through his letter box.

Santander sought to argue that service in this way satisfies s19 (6) of the 1970 Act which says:

“For the purposes of the foregoing provisions of this section, the service of a calling-up notice may be made by delivery to the person on whom it is desired to be served or the notice may

be sent by registered post or by the recorded delivery service to him at his last known address, or, in the case of the Lord Advocate, at the Crown Office, Edinburgh, and an

acknowledgment, signed by the person on whom service has been made, in conformity with

Form C of Schedule 6 to this Act, or, as the case may be, a certificate in conformity with Form D of that Schedule, accompanied by the postal receipt shall be sufficient evidence of

the service of that notice; and if the address of the person on whom the notice is desired to be served is not known, or if it is not known whether that person is still alive, or if the packet

containing a calling-up notice is returned to the creditor with an intimation that it could not

be delivered, that notice shall be sent to the Extractor of the Court of Session, and shall be equivalent to the service of a calling-up notice on the person on whom it is desired to be

served.”

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Santander referred to the unreported decision Household Mortgage Corporation plc-v-Diggory (1997) in which it was found that physical delivery to the debtor was not required where service by recorded

delivery post was employed.

However, Sheriff Mackie found that Santander’s calling up notice had not been competently served.

In terms of s19 (6) service can be made:

1) by delivery in person (which means the creditor has to place the document in the hands of

the debtor); 2) by recorded delivery at the last known address of the debtor (no personal delivery is

required and, so long as the document is not returned with intimation that it could not be delivered, then it can be presumed to have been served); or

3) by notice to the Extractor of the Court of Session (which refers to a situation in which the notice is valid even though the debtor knows nothing about it).

Whilst service by recorded delivery does not require that the document is physically delivered, that does not mean that alternative modes of service do not require to involve physical delivery.

Sheriff Mackie also made reference to Rule 5.4 of the Sheriff Court Rules which provides that a Sheriff

Officer can serve a document by depositing it at an address after making due enquiries. She noted,

however, that this only applies to official functions carried out under Act of Sederunt (Messengers-at-Arms and Sheriff Officers Rules) 1991. When serving the calling up notice, the Sheriff Officers were

carrying out an extra official function (i.e. not an official function) and, as such, the calling up notice required to be served in accordance with s 19(6) of the 1970 Act.

A full report of the decision is available from Scottish Courts here:


Gary Taylor and others as Trustees of the 2004/2005 Eurocentral Hotel Syndicate v. Hadrian S.A.R.L, 30 March 2012 -interim interdict refused for alleged improprieties in sale of security subjects Outer House case concerning a creditor’s right of sale over security subjects held under a standard

security. The syndicate financed the purchase of a site at Eurocentral near Motherwell, on which a hotel and office complex (which remained unoccupied) were constructed, partly by means of a loan

secured by a standard security.

The syndicate failed to make payments under the loan agreement and Hadrian (the holder of the

security) demanded payment of the loan, served a calling up notice on the syndicate and began to market the subjects. Hadrian received an offer from the hotel operator for £5m and another offer

from Calgacus Capital Limited (a wholly owned subsidiary of Hadrian) for £5.2m. The effect of the proposed deal with Calgacus would have been that (i) the syndicate’s members would have incurred

a balancing payment of £2.3m in respect of capital allowances (which the syndicate argued would not

have been triggered under the hotel operator’s bid) and (ii) that the syndicate would have been left owning the unoccupied office premises.

The syndicate sought interim interdict preventing the sale to Calgacus on the basis that the subjects

had not been advertised properly. They also argued that (in engineering a bid from its own subsidiary

which would result in a balancing payment) Hadrian had improperly used the procedure to apply commercial pressure to the syndicate to pay more towards their outstanding debt than the loan

agreement provided for. (The loan agreement prevented recourse to the personal assets of the members of the syndicate.)

Lord Hodge rejected the syndicate’s motion for interim interdict finding that the syndicate’s

challenges in respect of both the advertising of the property and the improper use of powers were


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weak. Also, if a more cogent case could be made successfully at a later stage, the syndicate would be entitled to an adequate remedy in damages. In coming to this conclusion, Lord Hodge noted that

the financial loss to the syndicate would have been greater than that of Hadrian if the interim

interdict were not granted. However, Lord Hodge also took account of the fact that the syndicate’s members had decided they were not prepared to contribute further funds or buy a variation of the

loan agreement when exposed to the tax clawback. In the absence of a clear legal wrong it was not appropriate to prevent Hadrian proceeding with the sale to Calgacus.

The full judgement is available from Scottish Courts here: http://www.legalknowledgescotland.com/?page_id=32&paged=9

Accord Mortgages Limited v Stephen Edwards (as representative of the late Miss Donna Edwards), 25 June 2012 – standard security and pre-action requirements where debtor deceased Note by Sheriff Peter J Braid relating to a case concerning a standard security over property at

Mucklets Crescent in Musselburgh. The debtor had died and her estate had been sequestrated.

Following the service of calling up notices and the expiry of the notice period, Accord (the creditor)

sought declarator that:

1) Miss Edwards’ representative was in default (within the meaning of standard condition 9(1)(a) of schedule 3 to the Conveyancing and Feudal Reform (Scotland) Act 1970);

2) the subjects were not used to any extent for residential purposes within the meaning of section 20(2A) of the 1970 Act; and

3) Accord had the right to sell the subjects, to enter into possession of them and exercise all

other rights and powers under the standard security, in terms of the 1970 Act.

The question arose as to whether Accord was entitled to seek declarator by ordinary action or whether they were bound to proceed under s24 of the 1970 Act (which provides for certain pre-action

requirements to provide protection for the debtor).

The sheriff agreed with Accord’s argument that it was not necessary to proceed under s24. In terms

of s20, which contains the right of sale, “where the standard security is over land…used to any extent for residential purposes“, the creditor can only exercise its rights by proceeding under s23A (which

deals with a voluntary surrender and had no application to this case) or under s24. However, in this case, the property was not being occupied by any person at the time of enforcement and, as such, it

could not be said that they were being used by anyone for any purpose, let alone used for residential

purposes. The point of time at which the use was to be considered was that at which the creditor wished to exercise its remedies.

The purpose of the pre-action requirements was to give the debtor information and assistance. Since

there was no living debtor, nor anyone using the house for residential purposes, it would be

impossible for Accord to comply with the pre-action requirements. Further, the court had no power to dispense with those requirements. The sheriff agreed that the court should therefore proceed upon

the basis that residential protections did not apply, meaning that the action should continue as an ordinary action with no pre-action requirement.

The sheriff noted that infelicities in the drafting of the Act could result in problems arising where the subjects were occupied; a creditor not necessarily being in a position to know what use is being made

of the subjects. Moreover, there may be cases where the debtor has died but the subjects are still being used for residential purposes. The question would then arise as to how a creditor is to comply

with the pre-action requirements.

The full note is available from Scottish Courts here:


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Bank of Scotland v William John Stevenson, 2 August 2012 – service of calling up notice by sheriff officer Sheriff Court case relating to the service of a calling up notice by sheriff officer. The notice was

posted through the door by the sheriff officer having established that the debtor (Mr Stevenson) lived

at the address and given 6 audible knocks (in accordance with the rules of court).

Mr Stevenson argued that, as the notice had been not served on the Defender personally and had been put through the letter box, the bank had failed to serve it properly in terms of the Conveyancing

and Feudal Reform(Scotland) Act 1970 (section 19(6)). Mr Stevenson contended that the bank’s action under the 1970 Act should therefore be dismissed.

Sheriff George Jamieson found that s19(6) of the 1970 Act permits certain methods of service but does not contain exhaustive provisions on the service of calling up notices. A sheriff officer was

entitled to serve the notice acting in his official capacity as an officer of court in accordance with the rules for citation set out in the relevant legislation and rules of court. Consequently, Mr Stevenson’s

motion to dismiss the action was refused.



Northern Rock (Asset Management) Plc v Stuart Douglas Fowlie, 25 September 2012 –

creditor’s powers of sale where property unoccupied Sheriff Court case in which Northern Rock sought declarator that Mr Fowlie was in default and that it

was entitled to sell41 a property subject to a standard security without following the procedure set out in s24(1B) of the Conveyancing and Feudal Reform (Scotland) Act 1970 as the property was

unoccupied.

In granting the declarator, Sheriff Mann agreed with the decision of Sheriff Braid in Accord Mortgages Limited v Edwards in which it was noted that s24 applies only where the subjects are being used for residential purposes and found that, where the subjects are unoccupied, they cannot be said to be

being used for residential purposes.

In this case, Northern Rock had lodged both a Field Agent Report and Sheriff Officer Report which

concluded that the property in question was unoccupied. Sheriff Mann observed that, as s24 requires the service of notice on the debtor of their right to make representations to the court, if the notice

were not served, then a debtor may choose not to oppose an action in ignorance of that right. As a result, the Sheriff concluded that creditors should not be allowed to raise proceedings by way of

declarator by ordinary cause unless they are in a position to demonstrate that, prima facie, the

subjects are unoccupied. Here, the Field Agent Report and Sheriff Officer Report had been an appropriate way for the creditor to show this.



TENEMENTS

41 And exercise its other powers under the Conveyancing and Feudal Reform (Scotland) Act 1970.




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Mr John Hunter v Mrs Helen Tindale, 22 July 2011 – pend is part of tenement and owner liable for common repairs

Sheriff Court case concerning the maintenance of part of an archway over a pend on Constitution Street in Edinburgh. The pend is a passage running through a tenement giving access to a courtyard

and premises to the rear. The issue for the court was whether the owner of the pend was liable for a share of the cost of repairs to the archway above it.

Sheriff Morrison found that the pend was not part of the tenement and, although it could be described as a “connected passage”, there were no stairs or landings within it meaning that it did not

satisfy the definition of a “close” in the Tenements (Scotland) Act 2004. As a result, the owners of the tenement were unable to recover a share of the costs from the owner of the pend.

Sheriff Principal (Stephen), however, allowed an appeal finding that, whilst the pend was not a close,

it was nevertheless a “sector” of the tenement in terms of s29 (1) of the Act. The sheriff principal

also took account of the fact that the pend was enclosed from the streetby large ornate gates and concluded that the pend did form part of the tenement. As such, the obligations (to provide support

and shelter) contained s8 (1) to (3) of the Act, applied to it.

In finding that the owner of the pend was liable for a share of the repairs the sheriff principal noted:

“It would also offend against common sense to hold otherwise. The requirement to repair the

pediment was accepted. The pediment relates to the archway over no 123. The viability and soundness of the pediment and archway must clearly be a matter of common concern to the

owners of the flats and also the pend. There would be serious implications for all if there were to be a fall of masonry or a collapse of the pediment/archway. The sheriff’s judgment

would excuse or exonerate the owners of the pend from responsibility for maintenance of the

archway or other common parts. This cannot be a proper or reasonable outcome in the circumstances. The archway forms the roof and boundary of the pend and the owner of the

pend has a common interest along with the owners of flats in 121 and 125 in maintaining the archway.”

The full judgement is available from Scottish Courts here: http://www.scotcourts.gov.uk/opinions/SA932_10_.html

TITLE

Drumpellier and Mount Vernon Estates Limited v Mark Peter Meehan and others, 26

September 2012 – whether title relates to dominium directum or dominium utile Outer House case concerning a dispute over ownership of the lands of Drumpellier and Langloan (including the Bargeddie Industrial Estate) in Lanarkshire.

Following an examination of the terms of the title deeds, Lord Woolman found that Drumpelier and Mount Vernon Estates held a real right in the property. On the other hand, the title held by Mr

Meehan (and others) was to the superiority only. (Superiorities were abolished with the abolition of the feudal system in 2004.)

Even if Mr Meehan’s title had included the dominium utile (or vassal’s interest in the property which was converted into outright ownership on abolition of the feudal system), one of the title deeds in the

chain was a non domino (from someone who is not an owner) and would have required to have been fortified by prescriptive possession. There was no evidence before the court that either Mr Meehan or

his predecessors in title had ever possessed the property.


http://www.scotcourts.gov.uk/opinions/SA932_10_.html

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TAX AND RATES

Gateshead Talmudical College v HMRC, 15 April 2011 – VAT Capital Goods Scheme

This is an appeal by Gateshead College against the decision of the First-tier Tribunal.

The Upper Tribunal concluded that Capital Goods Scheme (CGS) adjustments were required when

rental payments and VAT accounting stopped less than two years into a lease and leaseback arrangement.

CGS is a mechanism for regulating deductibility over the “VAT-life” of a capital good. For

VATpurposes a capital good is a developed property. The scheme operates by ensuring that the

deductibility for a property reflects the use to which the property is put over the VAT-life (adjustment period) of the property.

Facts

The main activity of Gateshead College is the provision of education. The background to this matter

is the building of an extension by Gateshead College. Gateshead College leased these premises to a property company called Starburst Properties Ltd. Starburst on the same day granted a sublease

over the same premises to Gateshead College. Gateshead College had registered for VAT two months earlier and had described its business as that of “property letting”. Both Gateshead College

and Starburst elected to waive the VAT exemption over these premises.

Gateshead College then took credit for the input tax on its construction costs relating to these

premises and this led to a VAT repayment for Gateshead College. However, after an initial period of less than two years the lease payments and the VAT accounting stopped. In addition, Starburst was

dissolved and struck off the company register. Gateshead College took no action to forfeit the lease the benefit of which became vested in the Crown as bona vacantia.

HMRC assessed Gateshead College for failure to make adjustments under the CGS and Gateshead College appealed to the First-tier tax Tribunal.

At the First-tier Tribunal HMRC successfully argued that the making of taxable supplies had been

reduced to nil once Starburst had been dissolved (as it could not be the recipient of any supplies). In addition the ceasing in the making of taxable supplies had given rise to the requirement to make a

CGS adjustment. Gateshead College unsuccessfully argued that the continued existence in law of

the lease meant that taxable supplies continued to be made after the initial period.

The arguments Gateshead College appealed to the Upper Tribunal on the basis that the First-tier Tribunal had erred

in law.

Gateshead College made two arguments. Firstly, it argued that the First-tier Tribunal had been

wrong to include that no supplies were being made under the lease because the parties has stopped abiding by its terms and one of the parties had ceased to exist. Gateshead College contended that it

had continued to make supplies despite its failure to seek payment of rent.

Gateshead College also argued that that the First-tier Tribunal had wrongly concluded that an

adjustment under the CGS should have been made because of a decrease in the making of taxable supplies. Gateshead College argued that CGS adjustments are triggered not by the reduction in the

value of taxable supplies but by a change in the extent of the use of the capital item for making taxable, as distinct from exempt supplies.


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The decision The Upper Tribunal dismissed Gateshead College’s first argument. The Upper Tribunal accepted the

lease existed as an item bona vacantia but that did not alter the fact that no rent was paid and

accounted for after a period of less than two years. A supply, i.e. rent, was therefore not being made once Starburst was struck off.

With regard to the “change of use” argument. The Upper Tribunal stated, as had the First-tier

Tribunal, that it was “completely untenable” to maintain this argument. The parties had stopped

abiding by the lease and the payment of rent had been abandoned completely. Gateshead College’s argument that the premises were used exclusively for leasing supplies, despite there being no actual

rental charges or payment nor any intention of any being made, could not be sustained.

The full judgement is available from BAILII here: http://www.bailii.org/uk/cases/UKUT/TCC/2011/131.html

Dundee City Council v Dundee Valuation Committee and Flemming Hansen, 23 November

2011 – whether landlord liable for council tax where lease in place but property unoccupied

Appeal by Dundee City Council against a decision of Dundee Valuation Committee. The question in dispute was whether Mr Hanson, the landlord of a number of (apparently unoccupied) flats in Dundee

was liable for council tax on those flats.

The council had determined that Mr Hanson was liable for council tax. However, the Valuation Committee allowed an appeal by Mr Hanson on the basis that, as a valid lease existed over each of

the flats, the tenants and not Mr Hansen were liable for the council tax.

The committee found that the leases had been continued by tacit relocation and, although the flats

were unoccupied, there was no rule of law requiring the landlord to serve a notice to quit or seek to recover the property where the tenant is not paying rent or appears to have abandoned the property.

On the basis there were tenants with leases, the tenants were responsible for the council tax in terms

of s75 of the Local Government Finance Act 1992.

The Second Division of the Inner House allowed the council’s appeal finding that the committee had erred in the procedure it had adopted meaning it had reached a decision which was “illogical,

erroneous in law and based on inadequate findings in fact”.

Procedure

At the root of the procedural failings was the Committee’s failure to make findings in fact before making its decision. In particular it had failed to consider whether the properties were unoccupied

because they had been abandoned by the tenants or whether the tenants were merely absent temporarily from the property.

Legal error The committee’s understanding was that when the term of a lease expired, the lease was

automatically renewed by tacit relocation and continued so to be renewed until either party served notice of termination or the landlord obtained a court order for eviction. Therefore, in the view of the

committee, since none of these events had occurred, the tenancies continued by operation of law.

However, the Inner House found that interpretation to be unsound:

“In leases of heritable property, the broad general principle is straightforward. If at the

expiry of the contractual endurance of the lease neither party indicates to the other that he does not consent to the renewal of the lease, the lease is held to be renewed on the basis

that the mutual consent of the parties is to be presumed from their silence. At common law,

http://www.bailii.org/uk/cases/UKUT/TCC/2011/131.html

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any overt indication by either party that he does not consent to the prolongation of the lease is sufficient to exclude tacit relocation.”

In considering whether the leases have been terminated by notice of termination or by a decree of removal, the Committee has overlooked the rule that the operation of tacit relocation is excluded

where the tenant does not retain possession after the contractual ish”

It was noted that, where a flat let under a short assured tenancy appears to be vacant at the end of

the lease, the question of whether the tenant has abandoned it will be particularly fact-sensitive.

A special problem in this case was that the landlord’s typical tenant would not be minded to give notice to the landlord and would simply vacate the flat and cease to pay rent. At first sight, that

would be evidence of abandonment. It may be supposed that those facts will come to the notice of the landlord. However, in view of the many diverse circumstances which can prevent the operation of

tacit relocation, it was essential that the Committee should hear evidence in respect of each flat and

make a decision based on the special facts applying.

Decision The Inner House allowed the appeal, recalled the committee’s decision and returned the cases to the

committee with a direction that it should hear evidence in respect of each flat and to make findings in

fact and law in order to decide whether the tenancies remained in force.


Cosmopolitan Bellshill Limited and Almondvale Investments (Jersey) Limited v North

Lanarkshire Council, 31 August 2012 – rates on new and unoccupied building

Outer House case considering whether a rating authority was entitled to levy rates on the owner of a newly erected and unoccupied building without first having served a completion notice (under

schedule 3 to the Local Government (Scotland) Act 1966) on the owner.

Cosmopolitan and Almondvale argued that demands for rates at office premises in Bellshill were

illegal as the Council had not served a completion notice on them to establish a deemed date of completion of the office. As such they sought repayment of £289k on the grounds of unjustified

enrichment.

However, Lord Hodge held that the action by Cosmopolitan and Almondvale was irrelevant. He found

that the language in the 1966 Act did not indicate that the completion notice procedure was intended to be the only method by which the owner and rating authority could establish the date of completion

of a building. There was also no policy reason for adopting such an approach.

Taken together, s24 of the 1966 Act and regulation 2 of the Non-Domestic Rating (Unoccupied

Property) (Scotland) Regulations 1994 require the levying of rates on all relevant buildings which have been unoccupied for a continuous period of more than three months. In order to be classified as

unoccupied for rating purposes a newly erected building must be complete in the sense that it is capable of occupation. The date of completion of a building is a question of fact and is one which the

rating authority and the owner can agree upon or contest in litigation. The completion notice

procedure provides an additional mechanism by which a rating authority can establish an undisputed deemed date of completion.





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VALUATION FOR RATING

Glasgow City Assessor v Monti Marino (Glasgow) Limited, 26 June 2012 -valuation of café

Appeal in the Land Valuation Appeal Court of the Court of Session concerning the valuation of unit in

the Silverburn Shopping Centre in Glasgow. The unit was a deli selling food and coffee as a franchise of Coffee Republic. The assessor entered the unit on the Roll as a shop with an annual value of

£159,000 as it was not a licensed restaurant, was adjacent to shops and could be easily altered to

shop use. However the Valuation Appeal Committee allowed an appeal by the unit’s owner, Monti Marino and applied a lower ‘restaurant’ rate entering a value of £87,000. The assessor then appealed

the Committee’s decision to the Court of Session.

The court refused the appeal noting that it has long been established that lands and heritage are valued in their current state without regard to the potential for physical adaption (providing that use

is beneficial and is not subject to arbitrary restrictions).

The question of whether the subjects should have been entered in the Roll as a shop or as a

restaurant or café was a question of fact for the Committee. At least five considerations pointed to the unit being a café or restaurant:

1) the layout of the premises with tables and chairs for diners and seats outside; 2) the extent of food-based spending at the premises by comparison with food outlets that are

valued as shops; 3) the fact that only a minority of the trade was take-away;

4) the fact that food was prepared on the premises for service at the tables; and 5) the availability of customer toilets.

The Committee’s decision was not unreasonable and there was therefore no error in law. Also, with regard to the assessor’s contention that the Committee should not have ignored the rental evidence

of the zoned shops, the Committee was entitled to adopt that valuation which it considered to be supported by the evidence relating to other food outlets at the Centre. Since the Committee regarded

the subjects as a restaurant, it was entitled to reject the values taken by the assessor from shops in

the mall.

The full judgement is available here: http://www.scotcourts.gov.uk/opinions/2012CSIH55.html

Rolls Royce and others v Assessor for Renfrewshire Valuation Joint Board, 27 June 2012

– valuation where lack of comparables Case concerning five linked appeals in the Land Valuation Appeal Court of the Court of Session. The appeals related to entries in the 2010 Valuation Roll for five large industrial buildings in Inchinnan

(ranging from 5,311 sq. m to 52,393 sq. m).

The valuation of the subjects had been difficult due to a lack of comparable rental evidence. Instead

of using a revaluation scheme by the Scottish Assessor’s Association (SAA), the assessor had used local rental evidence to devise his own scheme. The first step was to derive a basic rate from rental

evidence of smaller units in the area then to make a quantum adjustment to reflect the fact that the

unit rate deceases as size increases. The principle issue in this case was the size of the quantum adjustment applied.

The assessor’s approach was accepted by the Renfrewshire Valuation Appeal Committee. However,

whilst the court refused the appeals in relation to the two smallest buildings (it considered that the assessor had reliable rental evidence for buildings of up to 6,000 sq. m), it allowed appeals in relation

to the three larger buildings.


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The assessor was entitled not to apply the SAA valuation scheme if in his judgement the scheme was

not suited to the circumstances in the valuation area. The Committee had also been correct to reject

Rolls Royce’s valuation which followed the methodology of the assessor’s scheme but applied the quantum adjustment from the SAA scheme. However, there were two main problems with the

assessor’s calculation of the quantum discounts:

1) the assessor had relied on agreed valuations under the 2005 Valuation Roll and evidence of

rental growth from those valuations (whereas, on the correct approach, a revaluation should be based on a fresh appraisal of the subjects without regard to their earlier values); and

2) the assessor had also relied on the current rent for the Rolls Royce premises which, on the evidence before the Committee, had not been an open market rent and had been based on

pre-ordained contractual increases rather than contemporaneous review.

The cases in respect of the three larger buildings were returned to the Committee for a re-hearing

and the assessor directed to reconsider his valuations in the light of the decision.


The Assessor for Tayside Valuation Joint Board v Land Securities Plc and others, 6

September 2012 – non domestic rates, court refuses to allow revaluation of properties to take account of recession Decision of the Lands Valuation Appeal Court regarding an appeal by the assessor against a decision

of the Dundee Valuation Appeal Committee. (After noting that strict adherence with the legislation

would create a situation that was inequitable and unfair) the Committee had allowed 49 appeals by Land Securities and others against the valuation of shops in the Overgate Centre in Dundee on the

basis that a fall in the retail rental values caused by the recession (agreed to have happened on 1 April 2009) amounted to a material change in circumstances after the valuation date. The valuation

date was 1 April 2008 and took effect two years later on 1 April 2010.

The issue for the court was whether a material change of circumstances which had occurred during

the 2005 roll at a date (agreed to be 1 April 2009) after the valuation date for the 2010 roll should be reflected in the 2010 roll. The ratepayers did not argue that the values entered on the 2010 roll

should be reduced due to a supervening material change of circumstances. Instead their contention was that the values should not have been entered into the roll in the first place.

This argument did not find favour with the court. The Lord President said:

“In my opinion, this argument is fallacious. It overlooks the basis on which a revaluation is carried out. It confuses the date at which a value has to be struck with the date on which it

will come into force. The fundamental principle on which a revaluation is carried out is that all

of the lands and heritages entered in the new roll are valued to a common base. With one exception, there is no warrant in the legislation for the assessor’s adjusting tone date[1] 42valuations in respect of changes in value that occur between the tone date and the revaluation date. Inevitably, there will be increases and decreases in the values of various

groups or classes of lands and heritages during that period; but for there to be consistency in

the roll it is essential that all lands and heritages in the new roll must be valued as at one fixed date. The exception is the power given to the assessor in section 1(6)(c) of the 1975

Act (supra) to take account of a material change of circumstances in the period after the roll has been made up and before it has come into force.”

42 Where the assessor amends values of existing properties that are altered, extended or subject to other material change of circumstances and values new properties that are built, the rateable values are still based on the levels of value that prevailed at 1 April 2008. This date is known as the Tone Date.


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Appeals can be made under s 3(2) and 3(4) of the Local Government (Scotland) Act 1975. The right

of appeal under section 3(4) extends to a material change of circumstances occurring between the

date of delivery of the roll and the date on which the roll comes into force. It does not apply to a material change of circumstances occurring before the entry was made.

Section 3(2) also provides a general right of appeal against a new entry. It would have been open to

the ratepayers to appeal under section 3(2) (within the 6 month time limit) in respect of a material

change of circumstances occurring after the date of delivery of the roll. That did not assist the ratepayers in this case. The change of circumstances on which they relied had affected values by 1

April 2009 and there was no suggestion that the 2010 roll had been made up by that date.

The court allowed the assessor’s appeal and recalled the decision of the Committee.



A similar decision was reached in respect of properties at the Mercat Shopping Centre in Kirkcaldy in The Assessor for Fife v. Mercat Kirkcaldy Limited and others. The full text of that judgement is

available here: http://www.scotcourts.gov.uk/opinions/2012CSIH67.html

MISCELLANEOUS

Peter McSorley v David Drennan and Mrs Tracy Drennan, 10 July 2012 – remedy when land sold in error

Inner House case relating to the sale of a house and garden in Alloway. The seller, Mr McSorley also owned a small additional plot of land nearby, which was not part of the sale agreement. However,

the disposition mistakenly included the extra plot of land with neither solicitor noticing the error. A year later, the Drennans (the purchasers) sold on the entire estate to a third party, who asserted

ownership of the additional plot.

Mr McSorley claimed damages from the Drennans on the basis that they knowingly sold property not

belonging to them and that, as a third party had acquired the land in good faith, reduction of the disposition and rectification of the Land Register were not available. The sheriff and temporary sheriff

principal accepted this argument and allowed a proof on the level of damages. However, on appeal, the Inner House recalled the sheriff court decisions and dismissed the action finding that a remedy of

damages would be available where there was a breach of contract or breach of a delictual obligation.

However, Mr McSorley’s pleadings had not contained arguments to that effect.

The Inner House also rejected the notion that purchasers like the Drennans must be deemed to be aware of the technical details of dispositions noting that, in any case dependent on allegations of

deliberate and dishonest wrongdoing, it was essential for a pursuer to make specific and pointed

arguments in that regard.

It was noted briefly that Mr McSorley may yet be able to pursue a remedy based on reduction of the deeds despite the third party purchase or that remedies based in unjustified enrichment or delict may

also be available to him.

The full judgement of the Scottish courts is available here:





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Ewan Alexander v Skene Investments (Aberdeen) Limited and others, 3 August 2012 –

proving tenor of pre-page switch disposition, mora and the adoption of forgery principle Appeal to the Inner House in respect of decision of the Outer House on 1 September 2011. The case

relates to a disposition of flats at Queen’s Gardens in Aberdeen. Skene disponed the property to Mr Pocock in 2000. However, a page of the disposition was substituted changing the recipient of the

property to Howemoss Properties Limited (a company of which Mr Pocock was a director) and the

price (possibly for SDLT reasons) without Skene’s consent. In 2002 Howemoss sold one of the flats to a Mr Torr.

In 2003 Mr Pocock was sequestrated and Mr Alexander was appointed as permanent trustee and

began to investigate Mr Pocock’s property transactions. A judicial factor was also appointed in respect of the law firm which had acted for Mr Pocock and who, following an investigation, produced a report

in June 2004 outlining the changes made to the disposition. The trustee raised successful actions in

relation to other properties transferred by Mr Pocock but in April 2005 was still trying to locate the conveyancing file relating to the Queen’s Gardens property. In July 2007 the trustee received an

opinion from senior counsel relating to the Queen’s Gardens property and wrote to the Keeper of the Registers of Scotland and Mr Torr’s solicitors (in August and September 2007) indicating that he

intended to raise an action proving the tenor of the original disposition in favour of Mr Pocock. The

police became involved in November 2007 and in early 2008 the trustee instructed agents to commence proceedings.

Mr Torr granted a standard security over the flat in favour of Abbey National plc in February 2008 at

which point Abbey National are believed to have discovered that the disposition in favour of Mr Torr had not been registered (despite being granted 6 years previously) although the extent of their title

investigation was unknown.

In the Outer House Lord Uist rejected arguments by Abbey National that:

1) the trustee’s action was barred by mora, taciturnity and acquiescence; and

2) the trustee was personally barred from reducing the Howemoss disposition (meaning

Howemoss had no title to grant the disposition in favour of Mr Torr) as a consequence of the common law principle of adoption of forgery.

The Inner House refused Abbey National’s appeal and indeed went further allowing the trustees cross

appeal to the effect that Abbey National’s arguments relating to mora, taciturnity and acquiescence were irrelevant.

Mora, taciturnity and acquiescence It was necessary to consider all the circumstances of the case. However, Abbey National’s arguments

referred only to the date of the judicial factor’s report (in 2004) and the date the action was raised (2008) which was to ignore the events which occurred between those dates. Those events did not

support a categorisation of the trustee’s conduct as taciturnity and acquiescence:

“On the contrary, the steps taken by the [trustee] amounted to investigation, consultation,

the seeking of appropriate advice, warnings to both the Keeper and to a current heritable proprietor (Mr Torr), and the raising of an action. For this reason alone we find Abbey’s

averments of taciturnity and acquiescence to be inadequate and irrelevant. Furthermore we

agree with senior counsel for the [trustee] that the [trustee] was entitled responsibly to seek information and advice before raising a court action with all its consequences. In other words,

while the [trustee] was alerted to the problem in June 2004 by [the judicial factor’s] report, he was entitled to take the steps he did before launching into a litigation which, if not well-

based in fact and law, could result in considerable losses to the sequestrated estate.”

Adoption of forgery

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The crucial element of adoption of forgery is that a person who knows about the forgery, and knows that a third party is being misled into relying upon the forgery, says or does nothing to alert the third

party to the problem. In effect it was therefore necessary for Abbey National to prove that the trustee

not only knew that the disposition was falsified, but also that Abbey National were intending to lend Mr Torr money in reliance upon that falsified disposition, and yet did nothing to prevent Abbey from

relying upon the falsified disposition. Abbey National did not argue that they relied upon the falsified disposition itself – the nature and extent of their investigation into the title in respect of 5 Queen’s

Gardens being unclear. Perhaps more importantly, there are no arguments made on Abbey National’s

behalf that the trustee knew that Abbey National were, or were likely to, rely upon the falsified disposition. Furthermore, the trustees actings (in particular the letter to Mr Torr’s solicitor), did not

disclose a picture of an adoption of forgery. On the contrary, the trustee had taken active steps to warn Mr Torr’s agents that his disposition was from a non-owner and that court proceedings

challenging that disposition would be raised.

The full report is available from Scottish Courts here:


Scottish Water v Dunne Building and Civil Engineering Ltd, 8 August 2012 - negligence for damage caused by road works and the balance of proof Sheriff Court case relating to the blockage of a sewer on Queen Anne Street in Dunfermline which

Scottish Water were responsible for maintaining. A monobloc thought to be causing the blockage was discovered by Scottish Water in February 2009 after excavating and opening the pipe. Scottish Water

claimed damages from Dunne who had carried out reconstruction and resurfacing works for Fife Council in November 2007. The works had involved replacing the surface of the road and pavement

with monobloc.

At first instance the sheriff found that on the balance of probabilities the blockage had been caused

by the monobloc used by Dunne to resurface the road but was unable to make a finding as to how the monobloc had found its way into the sewer. As the Scottish Water had no direct evidence as to

what had happened in 2007 and were not able to prove that there was no other way the block could

have entered the sewer, the sheriff refused Scottish Water’s action for damages.

However, the sheriff principal allowed an appeal, finding that Scottish Water’s evidence was sufficient to raise a prima facie inference of negligence which had not been answered by Dunne. As such,

damages of £12,585 were awarded to Scottish Water.

The full judgement is available from Scottish Water here:


Grant Estates Limited v The Royal Bank of Scotland Plc, 21 August 2012 – alleged mis-sale of interest rate hedging products Outer House case concerning RBS’s sale of an interest rate swap agreement to Grant Estates Limited

(a property development company) in 2007. RBS put Grant into administration in February 2011 after Grant had suffered financial difficulties during the economic downturn. Grant claimed that RBS

had mis-sold the agreement, which the bank had represented as a device to protect Grant from a rise

in interest rates. In actual fact, when interest rates fell sharply and remained low, the agreement prevented Grant from benefitting from those lower interest rates it would have otherwise paid on its

borrowing. Grant maintained that, were it not for the agreement, it would not have gone into administration.



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Although Grant had accepted RBS’s terms of business which, amongst other things, expressly stated that RBS was not providing advice on the merits of the transaction and advised Grant to obtain

independent financial legal advice, Grant contended that:

1 the agreement breached the Conduct of Business Sourcebook issued by the FSA and the

Markets in Financial Instruments `Directive (2004/39/EC);

2.1 RBS had entered into a contract to give it advice on financial products and had given

negligent advice on those products; and

2.2 the agreement was entered as a result of fraudulent or negligent misrepresentation by RBS.

Grant sought reduction of the agreement and repayment of the sums paid under it together with

damages in respect of the breach the Sourcebook and Directive.

Lord Hodge rejected Grant’s arguments.

Conduct of Business Sourcebook

In terms of the Financial Services and Markets Act 2000, breaches of the Sourcebook and Directive

are only actionable by “private persons”. As a limited company acting in the course of business, Grant was barred from raising an action.

Negligence and misrepresentation

There had been no contract to provide advice. Although Grant argued that, when they had asked for financial advice and been given it by RBS, a contract arose by implication, Lord Hodge found that the

terms of business contradicted any such implied contract and there was no evidence of an express

agreement to depart from the terms of business. If Grant had relied on the statements by RBS as investment advice, that reliance had not been reasonable in the face of the contractual arrangements

the parties had entered.



Amey AG Limited v. The Scottish Ministers, 27 November 2012 – procurement, roads services contracts

Outer House case in which the Scottish Ministers sought an interim order bringing to an end a

prohibition under regulation 47(10) of the Public Contracts (Scotland) Regulations 2006. The prohibition prevented the Ministers from entering contracts relating to the provision of services in

relation to trunk roads.

In November 2010, the Ministers (acting through Transport Scotland) advertised two contracts for the

management, maintenance and improvement of trunk roads. After adopting the competitive dialogue procedure the Ministers invited tenders. Amey and three other operators submitted tenders. However,

the Ministers wrote to Amey advising that they considered Amey’s tender to be abnormally low. They stated that this presented them with unacceptable financial, operational and reputational risks in

fulfilling their statutory duties. They considered that Amey had manipulated the prices and rates and

explained their concerns in some detail. Correspondence followed in which Amey argued that it had taken a “holistic approach to the tender” and provided price and other information. However, the

Ministers rejected Amey’s bid concluding that the offer: (a) carried significant unacceptable risks; (b) was neither economically viable nor sustainable; and (c) was not genuine.”

Noting that Courts function was limited reviewing the Ministers’ decision solely to see whether or not

there is a manifest error and/or whether the process was in some way unfair, Lord Hodge saw no


96

legal basis on which Amey could challenge the Minister’s conclusion that its offer (a) carried unacceptable risks for them and (b) was neither economically viable or sustainable. However, if by

concluding that the offer was not genuine, the Scottish Ministers were suggesting that the offer was a

sham that was more problematic. Lord Hodge though did not consider that that was what was meant. The bids were assessed on the “Comparative Cost of Tender” which was a figure based on prices and

rates entered by the tenderers. Lord Hodge interpreted the use of the word “genuine” as referring to the way in which Amey chose to present its offer, noting that the prices and rates Amey provided

bore little relationship to the turnover that Amey expected from the contract. However, even the

Ministers’ use of the term ‘genuine’ had been incorrect, that would not have undermined their conclusions about the risk, economic viability and sustainability of the bid.

With regard to the limited scope of the court’s review, Lord Hodge found that Amey had at best a

weak prima face case (for continuing the prohibition). That was an important factor when considering the balance of convenience. Lord Hodge also took account of the need to avoid delay in the process

which would in turn lead to mobilisation issues for the successful contractors and increased costs for

both the successful contractor and the Scottish Ministers. On the other hand, if the contract went ahead and Amey subsequently successfully challenged the Ministers decision, it would then have a

remedy in damages. Taking these factors into account, Lord Hodge found that the balance of convenience favoured lifting prohibition. He also found that consideration of the public interest

favoured lifting the prohibition (noting the need for an effective and non-discriminatory procurement

process but also taking account of the need for economic and efficient operation of the procurement process and the need for proper provision of the required services to Scotland’s trunk roads).

Consequently, Lord Hodge granted the Scottish Ministers’ motion and lifted the prohibition preventing

Transport Scotland entering the proposed contracts with other contractors.



A related opinion adopting the same reasoning can be found here: http://www.scotcourts.gov.uk/opinions/2012CSOH182.html



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