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.)