Outer House case concerning the interpretation of a minute of agreement in respect of professional fees relating to a planned development.

Background
Mr Kennedy and others (the trustees) were the owners of a 6.293 acre site in Ayr which they agreed to sell to a house builder (DMH). The missives of sale included a term which allowed DMH to resile from the bargain on the payment of an “abort fee”. DMH paid the fee and resiled. The parties then entered a minute of agreement which provided for the trustees to reimburse DMH for professional fees of just over £165k in certain circumstances if the trustees agreed to sell the site to a third party.

When the trustees agreed to sell the site to Miller Homes, DMH served charges on the trustees for payment of the professional fees.  The trustees denied liability to pay and sought suspension of the charges. The question for the court was whether, in terms of the minute of agreement, there was a liability to pay the fees in the situation where DMH had not obtained planning consent for the development.

Decision
On the interpretation of the contract, Lady Stacy said:

“I accept the submissions made by both counsel to the effect that the task of the court is to consider what the reasonable person, armed with the information that the parties reasonably had at the time of entering into the contract, would consider was meant by the words of the contract.  I accept that the construction should, if there is a choice, favour a commercially sensible outcome.  I am bound by the case of Grove Investments to proceed in that fashion. The words of the contract are to be read as a whole, and if possible meaning given to all of them.  I am not concerned to find out what the parties intended to agree, but rather what in the context of the facts agreed or proved, their words show that they did agree. I have reached my view by considering all of the circumstances known to both parties. I have not relied on internal communications known to only one of them.”

 On that basis, and after noting that the minute of agreement was not easy to construe, Lady Stacy accepted DMH’s arguments to the effect that the trustees were liable to pay the fees even where planning permission was not obtained and refused the trustees’ petition.  In coming to that conclusion Lady Stacey found that, although the trustees commercial intention had been hard to ascertain, they had entered the agreement and agreed to make the payment because they wished to encourage  DMH to proceed with their planning application during the period when the trustees were looking for a third party to purchase the site. If, however, the intention had been that the payment would only be made if DMH were successful in obtaining planning permission, it would not have been drafted in the way it had been drafted.  It would not have been difficult to draft an agreement which stated plainly that payment was dependent on DMH obtaining planning permission and the minute of agreement did not do so.

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.

Background
Inner House case considering the interpretation of a detailed planning permission granted in respect of Springkerse Retail Park near Stirling.

The provision at the centre of the dispute (condition 3) contained a definition of household goods which listed various specific types of (non-food) goods permitted for sale.

Coal Pension Properties (CPP) argued that the retail units within the park could be used for the sale of a wider range of goods than those contained in the condition 3 list and applied for a certificate of proposed lawful use permitting “the retail sale of any non-food goods”. Stirling Council refused the application and a reporter appointed by the Scottish Ministers refused an appeal of that decision. CPP appealed to the Inner House.

Argument
CPP contended that the condition 3 list only applied to units engaged in the selling of household goods. (i.e. those which were not engaged in selling household goods could sell any non-food goods). They also argued that the planning permission did not exclude the operation of the Town and Country Planning (Use Classes) (Scotland) Order (which allows buildings within class 1 (shops) to be used for the retail sale of goods other than hot food without it being taken as a development requiring planning permission).

Decision
The Inner House rejected those arguments and refused the appeal.

The court noted that, when interpreting a planning permission, the question is not what the parties intended but what a reasonable reader would understand would be permitted by the planning authority. On that basis, the court found that the condition 3 list applied to all of the retail units in the park. The court also agreed with the Scottish Ministers’ argument that, if CPP were correct then, if no unit sold household goods, the condition would not apply and would serve no purpose. In addition, the court took account of an earlier decision letter in relation to the grant of outline planning permission (to which the detailed planning permission expressly referred) which indicated that the condition 3 list applied to all of the retail units in the park.

With regard to the Use Classes Order, the court found that, when construed as a whole considering the purpose and context of the permission (including the earlier outline permission which had referred to the need to restrict the non-food goods sold at the retail park to protect town centre shopping facilities), the planning permission had the effect of excluding the operation of the Use Classes Order.

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.

Sheriff Court case relating to a short assured tenancy of a flat on Laurence Street in Broughty Ferry. Ms Cordiner was the tenant and Mr Al-Shaibany, the landlord. In terms of the lease, the rent for the first and last months was payable in advance. The lease also provided that no deposit was required by the tenant. In terms of the Tenancy Deposit Scheme (Scotland) Regulations 2011, if a landlord fails to pay a tenancy deposit into an approved scheme within 30 days of the beginning of the lease, it may be liable to pay a penalty to the tenant for failing to comply with its duties.

The question for the court was whether payment of the last month’s rent fell within the definition of a “tenancy deposit” (provided in the Housing (Scotland) Act at s120).

The definition provides that:

“A tenancy deposit is a sum of money held as security for

(a) the performance of any of the occupant’s obligations arising under or in connection with a tenancy or an occupancy arrangement, or

(b) the discharge of any of the occupant’s liabilities which so arise.”

The sheriff found that the payments made by Ms Cordiner under the lease has been payments of rent and not payments held as security for the performance of any of the tenant’s obligations. In coming to that conclusion found the reasoning of the English Court of Appeal in Johnson v Old[1] to be persuasive. In particular, the sheriff noted that in that case:

“the Court made the crucial distinction between a payment discharging an obligation or liability and a payment made as security for that obligation or liability. A payment as security does not discharge the obligation or liability. Rather, it is an assurance that the obligation or liability will be discharged at a future time. The court concluded that a payment of rent in advance is a payment which discharges the obligation to pay rent and is not therefore a payment held in security for the discharge of any such obligation in the future”.

As regards the present case the sheriff stated:

“[Ms Cordiner] paid the first and last rental payment at the start of the lease. At that time she discharged her obligation to pay the first and last month’s rent in accordance with the lease. It seems to me to be wrong to describe that money as money held as security for the performance of an obligation, if that obligation has already been discharged. There was no evidence to suggest the rental payments were being held for any other purpose.

 As the payment of the last month’s rent was not “held as security” for the performance of the obligations under the lease, the payment was not a tenancy deposit in terms of the 2006 Act and did not require to be paid into an approved scheme in terms of the 2011 Regulations.

 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] [2013] EWCA 415; [2013] HLR 26.

Outer House case considering an option agreement over land at Greystone farm, Alford in Aberdeenshire.

Background
Mr Kenwright owned the land and entered into an option agreement with Stuart Milne by missives agreed in 2003. In terms of the agreement Stuart Milne could exercise the option to purchase parts of the farm land with detailed planning permission (which the parties were to work together to obtain) and consents for a housing development. Under the agreement Mr Kenwright was bound to enter any section 75 agreement[1] required by the local authority and Stuart Milne was to indemnify Mr Kenwright against any obligations he incurred under such an agreement.

Stuart Milne applied for and entered negotiations with Aberdeenshire Council regarding planning permission. It was agreed that the council would grant planning permission for two areas referred to as phase 1 and phase 2 and that an area of land between the two phases would be conveyed (for no purchase price) by Mr Kenwright to the council for the building of a new school/community centre. The planning permission was then granted subject to a section 75 agreement obliging Mr Kenwright to transfer the school land to the council.

In June 2010 further missives varied the agreement to change the purchase price for the phase 1 land and made provision for Stuart Milne to exercise the option in respect of the school land (at a purchase price of twice the open market agricultural value of the land). Stuart Milne also wrote to Mr Kenwright in June 2010 undertaking to “implement and perform or to procure the implementation and performance” of the obligations under s75 agreement and indemnifying him against any loss.

In July 2010 Stuart Milne exercised its option to purchase phase 1 and began building the development. The option agreement expired in January 2013 and the council called on Mr Kenwright to convey the school land to it in August 2013. He did so in September 2013.

Arguments
Mr Kenwright argued that the indemnity granted in June 2010 obliged Stuart Milne to exercise the option in respect of the school land (paying him the agreed price) and then convey it to the council (for no consideration) in terms of the 2010 missives.

The questions for the court were whether Stuart Milne was obliged to indemnify Mr Kenwright and, if so, what loss had he suffered.

Decision
Lord Woolman found that, in terms of the June 2010 indemnity letter, Stuart Milne had the option to implement and perform the obligation contained in the s75 agreement using the procedure contained in the 2010 missives (i.e. purchasing the school land from Mr Kenwright for the agreed price then selling to the council for no consideration) or it could ‘procure’ the implementation and performance of the obligation. Stuart Milne had procured implementation and performance of the obligation when Mr Kenwright had conveyed the land directly to the council. There was no binding obligation requiring Stuart Milne to follow the procedure contained in the 2010 missives and it was able to choose not to do so.

Lord Woolman observed that, if Mr Kenwright had not transferred the school land to the council, the council would have refused to grant planning permission or required a developer’s contribution from Stuart Milne (which would have reduced the price Stuart Milne would have been willing to pay Mr Kenwright): meaning that, in effect, Mr Kenwright had already received the value of the school land. Lord Woolman also noted that Mr Kenwright retained the phase 2 land which had an enhanced value due to the planning permission.

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] Agreements which local authorities can use to divert some of the benefit received from the grant of planning permission for a development back to the public sector.

Background
Inner House case in which Mr Leonard sought damages from the Loch Lomond and the Trossachs National Park Authority after falling and injuring himself while descending a path forming part of the West Highland Way at Balmaha. Mr Leonard (who had been 12 at the time of the accident) argued that the park authority had breached its duty under the Occupier’s Liability (Scotland) Act 1960 due to the presence of hazards and lack of preventative measures on the path.

Outer House decision
In the Outer House, Lord Uist found that the circumstances leading to the fall had not been proved but, even if they had been, there would have been no duty on the park authority under the 1960 Act. After considering the authorities (which suggest that, whilst an occupier will have a duty to fence off special or unfamiliar hazards, an occupier will not be liable for obvious dangers including natural features), Lord Uist found that the path under consideration in this case was “a long-standing artificial feature which was neither concealed nor unusual and did not involve exposure to any special or unfamiliar hazard. It had become a permanent, ordinary and familiar feature of the landscape”.

As a result, the park authority owed no duty to Mr Leonard (or anyone else) under the 1960 Act in respect of the path. Lord Uist also went further and found that, in addition to being inapplicable to long standing features, the occupier’s duty would not apply to other obvious artificial features (even though recently constructed) which have become part of the landscape and which do not involve exposure to special or unfamiliar hazards.

Appeal to the Inner House
On appeal, Mr Leonard argued that, in coming to his conclusion that the circumstances leading to the fall had not been proved, Lord Uist had overlooked or misstated some of the evidence.

Decision
The Inner House rejected that argument finding that Lord Uist had properly addressed himself as to what was relevant and material and had not omitted evidence.

Having come to that conclusion, the appeal had to be refused and it was not necessary for the court to consider the outcome in the event that Mr Leonard had been able to prove that he had tripped or lost his footing on the path. However, the court was nevertheless satisfied that Lord Uist had not been in error in that respect and noted:

“…the Lord Ordinary reviewed the authorities and correctly concluded that the law is to the effect that there is no duty on an occupier of land to warn or fence against obvious dangers.  In so far as a stone pitched path – as in the case of any rural path- inherently presents some risk of tripping or slipping, the Lord Ordinary was in our view well entitled to regard such as an obvious danger to which those using such a path required to be alert and to exercise appropriate care.”

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.

The latest additions to the LKS style bank are:

1.3.4.3​ -​ Offer by landlord take renunciation of lease from tenant and grant new lease to tenant​​
1.3.3.2​ – Offer by assignee to take assignation of lease from assignor​.​

These are available to our subscribers here and for individual purchase here .

Petition for Judicial Review in which Trump International sought to challenge the Scottish Government’s decision to consent to an offshore wind farm near its golf resort at Menie in Aberdeenshire [1].

Trump argued that the Scottish Government should not have granted consent in terms of s36 of the Electricity Act 1989 as the wind farm developer did not hold a licence to generate electricity. Trump founded on the decision in Sustainable Shetland v The Scottish Ministers[2] in which Lady Clark found that consent to build a wind farm could not be granted to developers who did not already hold a licence to generate electricity. In the Outer House Lord Doherty disagreed with the interpretation taken in Sustainable Shetland, rejected that argument and dismissed Trump’s petition.

The Inner House have refused an appeal finding that the entitlement to apply for a section 36 consent is not limited to developers who already hold (or are exempt from holding) a licence to generate electricity and that, where an applicant under section 36 obtains consent, it will require to obtain a licence or an exemption before it can generate electricity at the wind farm.

The court also rejected arguments made by Trump to the effect that the Scottish Ministers’ decision had been pre-determined and showed bias.

The full judgement is available from Scottish Courts here.

Also see appeal to the Supreme Court here.

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

[2] [2013] CSOH 158

Background
Outer House case concerning a ground lease of a 4 acre site in Houstoun Industrial Estate in Livingston. There was a building on the site which had been there since the lease was granted in 1977. The tenant wished to demolish the building (which it argued was past its economic lifespan, and obsolete) and re-develop the site but the landlord argued that the tenant did not have the right to demolish the building in terms of the lease. At the centre of the argument was the tenant’s obligation “to maintain in good order and when necessary to re-erect” the buildings on the site.

Arguments
The landlord argued that the tenant’s obligation was to maintain the building in good order and that re-erection would only become necessary where the building was destroyed (for example by fire or in an explosion).

The tenant argued (1) that the building could be demolished and re-erected where it was necessary for the tenant’s (or a sub-tenant/assignee’s) use of the site. If that were  not the case, then (2)  development was permitted when circumstances rendered re-erection necessary such as in the circumstances existing here, where the present building was obsolete and could only be repaired by expenditure of unreasonable sums of money. Demolition as a precursor to re-erection was, the tenant argued, therefore “necessary”.

Decision
Lord Tyre, giving the lease an interpretation consistent with that which would have been understood by a reasonable person with background knowledge reasonably available to the parties at the time of the contract, accepted the tenant’s second argument.

“I accept the tenant’s alternative submission that there may be circumstances where re-erection of a building is “necessary” even though an existing building is still standing on the site.  These might include (i) where the existing building is obsolete and unsuitable for any reasonable use, regardless of cost of repair; or (ii) where the cost of repair is excessive in relation to what it would cost to demolish and rebuild premises similar to the existing building.  In each of these cases (and I note that the tenant offers to prove in the present case that both of those descriptions apply), I consider that it is in accordance with commercial common sense to describe re-erection as “necessary”.  It must follow, as a matter of practicality, that demolition of the existing obsolete and/or uneconomic building is also “necessary” in order to allow re-erection to proceed.”

However, Lord Tyre also noted that the Landlord would be able to withhold consent not only to the detailed plans for re-development but also to the demolition preceding re-erection if (acting reasonably) it was not satisfied that the re-development was necessary (in terms of (i) and (ii) above).

The full judgement is available here.

Sheriff Court case considering the extent of leased premises situated in Eastfield Industrial Estate in Penicuik.

The premises were situated above the Loon Burn which flows through a culvert. The culvert became damaged and the tenant argued that repairs were the landlord’s responsibility and sought an order compelling the landlord to repair the culvert or pay damages sufficient to cover the costs of repair.

The question for the court was whether the leased premises included the culvert.

The landlord’s title, as shown on his land certificate, was a coelo usque ad centrum (i.e. from the heavens to the centre of the earth) and thus, if the tenant had taken a lease of the whole of the landlord’s interest, the leased premises would include the solum of the property and therefore the culvert. The tenant pointed out that the description of the property in the lease was different to that in the Land Certificate arguing that, if a full transfer of the premises had been intended, the landlord could have put the matter beyond doubt by including the full conveyancing description from the land certificate.

The tenant also referred to the definition of conduits which included various wires and pipes not serving the premises, noting that a tenant would not take on liability for conduits not serving the premises and suggesting that it was therefore unlikely the premises included the conduits.

The sheriff preferred the landlord’s arguments finding that, although the descriptions were different, the description of the premises in the lease was full and unlimited with no hint of reservation or separation of the solum (albeit there were some small differences in other boundaries of the property which the sheriff concluded were sufficient to explain any dissimilarity in descriptions in the land certificate and lease).

The sheriff also rejected the tenants arguments in relation to the conduits noting that, although some of the conduits did not serve the premises, the parties had expressly recognised and regulated that situation in the lease. As a result, the sheriff was not prepared to infer that the conduits did not form part of the premises on the basis that some did not serve the premises.

Accordingly, the sheriff found that the leased premises included the Loon Burn culvert.

The full judgement is available from Scottish Courts here.

Sheriff Court case concerning a petition for sequestration of a debtor by Glasgow City Council.

In terms of the Bankruptcy (Scotland) Act 1985[1], sequestration will not be awarded in favour of a creditor where the debtor “forthwith pays or satisfies, or produces written evidence of the payment or satisfaction of, or gives or shows that there is sufficient security for [the debt]”.

In this case the sheriff accepted an argument by the debtor that, because the Council held a standard security over subjects owned by the debtor’s brother in law, the debtor had shown that there was “sufficient security for payment of” the debt in question and refused the petition for sequestration.

That decision was appealed by the Council which argued that, in terms of the relevant provision of the 1985 Act, the debtor had to show not only that a security covering the debt existed but also that the security was capable of immediate realisation so as to lead to payment of the debt without undue delay. In that regard, Council pointed to the fact that the standard security in this case had been granted by a party other than the debtor and that the subjects secured were residential (meaning various statutory pre-actions requirements would have to be carried out before the security could be realised) thus leading to a delay in payment of the debt.

The Sheriff Principal found that the authorities supported the Council’s argument, allowed an appeal of the sheriff’s decision and awarded the sequestration.

 “Sufficient security for the payment of the debt, in my opinion, means a form of security which, by its nature, brings about immediate payment or guarantees such payment…”

 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] Section 12(3A)(b).