Background
Outer House case in which East Renfrewshire Council sought an order under s75(2) of the Local Government (Scotland) Act 1973. The Council wanted to build a new school (on what it accepted was inalienable common good land) at Cowan Park in Barrhead.

S75(2) allows the Court to authorise a disposal of common good land on such conditions as it may decide to impose. However, the common law prohibition on appropriation of inalienable common good land remains intact meaning that the court has no discretion to allow a sale[1].

The Council’s plan was to finance the construction using a public/private partnership. The site would be leased by the Council to a company which would in turn grant a sublease to the Council. The Company would then grant a security to a private sector funder. The Council argued that this amounted to a disposal of the land meaning the court had discretion to allow it.

Decision
However, Lord Tyre found that the Council’s proposals could not be described as anything other than an appropriation. As such, the court had no power to authorise it.

In coming to this conclusion Lord Tyre took account of the following factors.

1. The Council were, at the time of the decision, the proprietors of the site and would remain so during the construction phase, throughout the duration of the lease and sub-lease, and permanently after the termination of the lease and sub-lease.
2. The Council were also, at the time of the decision, in possession of the site.  Because the lease and sub-lease had the same duration, they would remain in possession of it during the construction phase, throughout the duration of the lease and sub-lease, and permanently after the termination of the lease and sub-lease.  Their occupation would, be subject to the contractual rights of possession, including some exclusive possession during the construction phase, to be granted to the company but those rights were expressly declared not to constitute a lease.
3. The site would cease to be used by the Council for the purposes of the common good with effect from the commencement of the construction phase.
4. The company’s creditor would have the rights conferred upon it by the terms of whatever security was granted by the company in its favour.  It was reasonable to assume that either:

• the creditor, at the time when the security came to be taken, would be aware that a sub-lease in favour of Council had been granted; or
• if the sub-lease had not yet been granted, the Council would insist upon the creditor consenting to it.

As such, the creditor’s remedies would not include a right to enter into possession[2].

Lord Tyre therefore found it difficult to envisage circumstances in which the Council could ever be deprived of possession of the site.

The full judgement is available from Scottish Courts here.

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

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[1] See Portobello Park Action Group Association v City of Edinburgh Council, 2013 SC 184

[2] As the “offside goals rule” would apply with the effect that the Banks prior knowledge of the lease would put it in bad faith and prevent it enforcing the security against the Council  (See, for example, Trade Development Bank v Crittall Windows Ltd , 1983 SLT 510.)

Case from the Court of Appeal for England and Wales concerning a sale of freehold property in the West Midlands. The central issue for the court was whether VAT was payable on the purchase price.

The Purchase Price was defined in the contract as being £130k (no mention was made of VAT in the definition). However, the contract also incorporated the Standard Conditions of Sale[1] (4^th Edition) except where they were in conflict with the express terms of the contract.

Clause 1.4 of the Standard Conditions provides:

“1.4.1   An obligation to pay money includes an obligation to pay any value added tax chargeable in respect of that payment.

1.4.2     All sums made payable by the contract are exclusive of value added tax.”

Contracts were exchanged and the transaction completed in August 2006. CLP, the seller, opted to tax and became liable to pay VAT on the transaction. HMRC raised a notice of assessment in late 2007. In March 2008 CLP’s solicitors wrote to the purchasers’ solicitors indicating that the purchasers were liable to pay the VAT due (£22,750) to CLP. The purchasers failed to pay and CLP raised proceedings against them.

The court noted that the only reasonable interpretation of clause 1.4 was that the purchasers would have liability for any VAT. Also, previous case law provided powerful support for CLP’s argument that the purchase price of £130k was exclusive of VAT and that the purchasers were liable for any VAT due on the transaction.

However, the analysis did not end with the ascertainment of the meaning of clause 1.4; the contract had to be interpreted as a whole in the light of all the circumstances of the parties’ relationship and the relevant facts surrounding the transaction known to them. In that regard the following points were relevant.

It was never suggested that CLP ever communicated to the purchasers that it had exercised the option to tax.

1. The purchasers were individuals and, whilst the property was commercial, there had never been any suggestion that they were aware or had any reason to suppose that the transaction might be subject to a VAT charge.
2. The purchase price for the property had been agreed in principle a considerable time before completion and had been paid over by the purchasers to CLP by, at the latest, 2005. There was never any suggestion that VAT might be payable, still less that the purchasers would be liable for it. To the contrary, a letter from CLP’s solicitors in March 2006 contained an express acknowledgement that CLP had received “all of the sale monies of £130,000 on this matter, subject to contract”.
3. The standard requisitions had asked for details of the exact amount payable on completion and had elicited the response: “Balance of purchase monies”. No hint was given that VAT was or might be payable.
4. The contract provided that the “Purchase price” was £130k. It contained no indication that this price was exclusive of VAT. Indeed it was clear that this and no other sum was due upon completion because the contract included a table in which details of any “Other payments/ allowances” could have been (but were not) included. Moreover, and importantly, the contract provided that where there was any conflict between the express terms of the contract and the Standard Conditions, the express terms of the contract would prevail.

Taking all these matters into consideration the Court took the view that a reasonable person would have understood the parties to have intended that nothing was or could become payable by the purchasers over and above the specified purchase price of £130k.

Notably, in the particular circumstances of the case, the court found that it was not possible to interpret “Purchase price” as the price exclusive of VAT. As such, it considered that a reasonable person would consider that the express terms of the contract were not reconcilable with clause 1.4 of the Standard Conditions. In those circumstances, the court held that the express terms of the contract had to prevail.

The full judgement is available from BAILII here.

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

Background
This is an Outer House case concerning a lease of premises at the Gyle Shopping Centre in Edinburgh under which Gyle was the landlord and Marks & Spencer, the tenant.

Gyle entered an agreement with Primark for the erection of a new store on land which included part of a car park. However, Marks & Spencer’s premises were let together with a one-third pro indiviso share of shared areas which included the car park. In an earlier decision Lord Tyre had found that (1) the building of the Primark store would breach the lease with Marks & Spencer and (2) a meeting of the shopping centre management committee approving construction of the new building was not sufficient to vary the terms of the lease.

Arguments
Here Gyle argued that, although the lease had not been varied, Marks & Spencer were personally barred from objecting to the construction of the building as Marks & Spencer’s representatives had agreed to the building at the shopping centre management committee and that Gyle had relied on that agreement with their knowledge.

In particular Gyle argued that M&S was personally barred:

1. in terms of s1(3) of the Requirements of Writing (Scotland) Act 1995;
2. in terms of the (pre-1995 Act) common law rule of rei interventus; or
3. by waiving its right under the lease.

Decision
Lord Tyre rejected those arguments.

The 1995 Act
Lord Tyre found (in accordance with the decision of Lord Drummond Young in Advice Centre for Mortgages v McNicoll[1]) that s1(3) does not apply to leases; noting that s1(3) applies only to separate contracts relating to the land (i.e. transactions giving rise to merely personal rights) and not to dispositions and other deeds which actually effect the creation or transfer of an interest in land (i.e. transactions giving rise to a real right).

Rei interventus
With regard to the common law rule of rei interventus, Lord Tyre found that the (pre-1995 Act) common law rules (relating to both rei interventus and homologation) had been replaced in their entirety by the statutory rules contained in the 1995 Act and did not continue in parallel.

Waiver
On the subject of a potential waiver of Marks & Spencer’s rights in the lease, Lord Tyre said the following:

 “In my opinion, the evidence falls well short of establishing that there has been voluntary, informed and unequivocal waiver by [Marks & Spencer] of its right to prevent the construction and leasing of the building.  It seems to me that [Gyle’s] analysis perpetuates its original error of treating [Marks & Spencer’s] representatives who attended and approved the minutes of Management Committee meetings as equivalent to [Marks & Spencer] itself.  It wrongly characterises the conduct of those individuals as the conduct of [Marks & Spencer].  As I have already held, those individuals were not empowered in terms of [Marks & Spencer’s] lease to take decisions affecting [Marks & Spencer’s] real rights in the Shared Areas.  There was no evidence to indicate that they were even aware of what those rights were, although it was clear that the question of real rights was given no consideration by those representing [Gyle].  Nor was there any evidence of actings on the part of any person within [Marks & Spencer’s] organisation who was truly responsible for taking decisions regarding the variation of real rights under the lease which might induce [Gyle] to believe that [Marks & Spencer] regarded such decision-making as falling within the competence of the Management Committee.”

The full judgement is available from Scottish Courts here

(See also summaries of decisions finding (1) that M&S had not consented to the building of the Primark Store and that the building of the store without consent would be a breach of the lease (2)  that M&S was not unreasonably withholding consent to the Primark development.)

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

Inner House case concerning a lease of a unit in a large (and mostly unoccupied) industrial complex in Shotts. Dem-Master were the landlords and Alba, the tenants.

Background
Dem-Master raised an action for payment in respect of electricity and outstanding rent. Alba disputed that the sums were due and a secondary issue arose regarding access to the property. Alba argued that Dem-Master had restricted vehicular access to the property by securing gates and locking loading bay doors which were used to allow heavy goods plants and equipment to be manoeuvred into the premises.

Alba sought an interim interdict to prevent Dem-Master restricting access to the premises in such a way as to prevent their rights under the lease. Dem-master granted an undertaking allowing access via a defined route and Alba dropped their motion for interim interdict but subsequently returned to court arguing that Dem-master had failed to comply with the undertaking.

Arguments
Alba argued that they were unable to carry on their business and that they wished to vacate their premises and move to other premises but that they were unable to remove their plant and machinery without access to the loading bay door. Dem-Master argued that Alba had no right to exercise access via the loading bay doors in terms of the lease and, in view of the fact that Alba’s published accounts showed them to be insolvent, they were concerned that removal of Alba’s plant and machinery would prevent use of the Landlord’s hypothec (i.e. the right to retain a tenant’s property as security).

Decision
In the Outer House the motion for interim interdict was granted so as to allow access via the loading bay doors. The Inner House found that, on a construction of the lease (under which the landlord, acting reasonably was entitled to designate the route of the rights of access), it could not be said that Alba had the right to use the loading bay doors. However, the court did find that the balance of convenience (required to allow an interim interdict) did favour access over another route which would allow Alba to operate their business from the premises (but which would not allow the removal of their heavy plant and machinery from the unit).

The case was put out by order to discuss the exact terms of the order for interim interdict.

The full judgement is available from Scottish Courts here.

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

“Purpose of the Brief

This Brief explains a number of changes relating to the transfer of a business as a going concern (TOGC):

• a change in HM Revenue & Customs’ (HMRC’s) policy on whether the surrender of a property lease can be a VAT-free TOGC
• to clarify the scope of certain aspects of the policy change announced in RC Brief 30/12
• to explain a change in policy concerning TOGCs of new residential and relevant charitable developments.”

“Scotland

For the purposes of this Brief all references to ‘surrender’ of a lease include the renunciation of a lease in Scotland, all references to ‘assignment’ of a lease include the assignation of a lease in Scotland and all references to a ‘reversion’ retained by a transferor include the heritable title retained by the landlord in Scotland.”

The full “Brief” can be found here.

Sheriff Court case concerning the remedies available to a creditor (Acorn) under a standard security after it had granted a further security (and also assigned the personal obligation to pay the sums due) to a third party (Connaught) over the first security in its favour (The second security securing an advance made to Acorn by Connaught).

When Mr Smith (the debtor under the first security) failed to pay the sums due under the first security, Acorn served a calling up notice on him and, when he failed to comply, raised an action to enforce the first security and eject Mr Smith from the subjects (agricultural property). Mr Smith argued that, as the personal obligation to pay Acorn had been assigned to Connaught by way of the second security, there was no longer any debt due to Acorn. As such, Acorn had no title to sue.

The sheriff accepted Acorn’s argument to the effect that the statutory rights in a standard security which arise under the Conveyancing and Feudal Reform (Scotland) Act 1970 are separate to the common law rights in terms of the personal obligation contained in the separate contract between Acorn and Mr Smith. Both sets of rights could be held by different people. Acorn remained the creditor under the first security and, as such, was entitled to exercise the statutory rights to enforce the security albeit that the common law rights in the personal obligation had been assigned to Connaught and enforcement of the security would ultimately result in a payment to Connaught. This was logical as it provided Acorn with a powerful means of ensuring it could meet its obligation to Connaught and, from Connaught’s point of view,  it was right that a procedure by which Acorn could meet its obligation to them (along with any related costs) should be Acorn’s responsibility.

Accordingly the sheriff found that Acorn had both title and interest to sue.

The full judgement is available from Scottish Courts here.

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

Inner House case considering a petition brought by Sustainable Shetland for judicial review of the Scottish Minister’s decision to grant planning permission to Viking Energy Partnership for a 103 turbine wind farm development on a site of approximately 50 square miles on mainland Shetland.

When the relevant statutory provisions[1] were being considered in the Outer House, it was discovered that Viking did not hold a licence to generate electricity. On a construction of the provisions, Lady Clark found that it was not open to the Ministers to grant consent for the building of the wind farm to persons who were not licence holders or exempt persons[2] in terms of the legislation.

Lady Clark also concluded that there was merit in Sustainable Shetland’s argument that there had been a failure on the part of the Ministers to take proper account of their obligations under the Wild Birds Directive 2009[3], finding that they had failed to properly engage with the directive in any meaningful way when reaching their conclusion.

Arguments
The Scottish Ministers’ appealed on two grounds:

1. Whether, on a proper interpretation of the Electricity Act, an application for section 36 consent could competently be made only by a person who held a licence under section 6 or an exemption under section 5 (the competency issue).
2. Whether, having regard to the information before them, the Scottish Ministers had failed to engage with their obligations under the Wild Birds Directive (the whimbrel issue).

Decision
The Inner House allowed the appeal on both grounds.

The Competency issue
Sustainable Shetland decided not to insist on the competency issue and did not present any arguments based on it. However, at the suggestion of Lady Clark, an amicus curiae[4] was appointed to present the argument. Nevertheless, after presenting a written argument on the point, the amicus curiae indicated that he no longer considered that he could support the Lady Clark’s decision on the point. The Inner House considered that Sustainable Shetland and the amicus curiae had been correct in their decision not to support the decision of the Lady Clark on the competency issue.

The Inner House found that the holding of a licence is not a condition precedent to the granting of consent of section 36 and agreed with the reasoning of Lord Doherty in Trump International Gold Club Scotland Ltd v The Scottish Ministers in which the same argument (adopted by Trump following Lady Clark’s decision) was rejected [4].

The whimbrel issue
With regard to the whimbrel issue, the Inner House found that, instead of deciding whether the Ministers’ decision had been lawful once account had been taken of the Wild Birds Directive, Lady Clark had considered whether the Ministers had demonstrated that they had fully understood and complied with their obligations under the directive irrespective of the likely effect of the consent on the bird population. The Inner House noted that, whilst the Minister’s decision letter did not make specific reference to the Wild Birds Directive, it was clear from the letter that the decision had been made having regard to an assessment of the impact on the whimbrel population which had been put forward by Scottish Natural Heritage under reference to the Directive.

The full judgement is available from Scottish Courts here.

(See also appeal to the Supreme Court here.)

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

“Filing outside of ARTL – urgent requests for the SDLT certificate.”

More on this from HMRC can be found here.

The Community Empowerment (Scotland) Bill was introduced to the Scottish Parliament on 11 June 2014. It makes provision (amongst other things) for:

• the amendment of Part 2 (community right to buy) of the Land Reform (Scotland) Act 2003;
• extending the community right to buy to enable bodies to buy abandoned or neglected land;
• establishing registers of common good property and about disposal and use of such property; and
• the restatement and amendment of the law on allotments.

Community right to buy
Currently, it is not possible to exercise the community right to buy over areas which have been designated as “excluded land”. Excluded land comprises land with settlements of over 10,000 people meaning that in effect the community right to buy is confined to rural areas. The new Bill makes amendments allowing community bodies to register an interest in respect of land across Scotland, irrespective of the size of settlement effectively extending the right to urban areas. In addition the Bill makes various technical and procedural amendments aimed at making the procedure for exercising the right to buy easier and more flexible.

Abandoned and neglected land
The Bill also amends the 2003 Act to extend the community right to buy to allow community bodies to purchase neglected and abandoned land where the owner is not willing to sell.

Common Good land
The Bill places a statutory duty on local authorities to establish and maintain a register of all property held by them for the common good. It also requires local authorities to publish their proposals and consult community bodies before disposing of or changing the use of common good assets.

Allotments
The Bill repeals and replaces the Allotment Acts with the aim of updating and simplifying the legislation. It requires local authorities to take reasonable steps to provide more allotments if waiting lists exceed certain trigger points and provides protection for both local authorities and plotholders.

The Bill is available from the Scottish Parliament here.

The explanatory notes are available here.

Supreme Court 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.

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 the circumstances, the Inner House found that the various transactions surrounding Letham Grange had been intended to defeat the claims of lawful creditors.  For those reasons a decree granting reduction of the standard security was given. The Inner House also found that Lord Glennie had failed to give satisfactory reasons for the factual conclusions he had reached on the evidence.

The Supreme Court unanimously allowed an appeal of the Inner House decision.  Whilst the Inner House had been correct to identify that an appellate court can interfere where it is satisfied that the trial judge has gone “plainly wrong”, it had erred in concluding that Lord Glennie had been “plainly wrong” in this case.

Lord Glennie had clearly understood that the critical issue was whether “the alienation was made for adequate consideration”. He was aware that an obligation on the part of Nova Scotia could only constitute part of the consideration for the sale if it was undertaken as the counterpart of the obligations undertaken by Letham Grange. His opinion had focused whether, and not when, any obligation was taken to assume the Letham Grange debts and he had been entitled to accept Mr Liu’s evidence on that point. The Supreme Court noted that Lord Glennie had taken into account the various criticisms of Mr Liu’s evidence before concluding that his evidence was credible and reliable and also noted that the weight given to the material evidence was pre-eminently a matter for the trial judge (subject only to the requirement that his findings be reasonable).

The full judgement is available from the Supreme Court here.

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.