Inner House case concerning a planning appeal relating to a site on Seafield Road in Blackburn. Hallam applied for planning permission in principle for the construction of a residential development of approximately 120 houses. West Lothian Council refused planning permission for the development and an appeal to the Scottish Ministers by Hallam was also refused by the reporter appointed to determine it.  Hallam appealed to the Court of Session against the reporter’s decision.

There were two main issues at the centre of the appeal:

• whether there was a deficiency in the supply of land for new housing and whether the proposed development would help make good any such deficiency; and
• whether there was adequate school accommodation for children from the proposed development.

The reporter had found that the supply of effective housing land in West Lothian and in the area local to the appeal site was “adequate to meet current market demand for new houses” and thus the proposed development was not justified in terms of maintaining a five years’ supply of effective housing land.   The reporter also concluded that there was a lack of education capacity at Bathgate Academy and St Kentigern’s Academy to accommodate children from the proposed development meaning that the development did not comply with the relevant strategic development plan.

The Inner House found that the reporter had been entitled to conclude that insufficient capacity was available in local secondary schools to support the proposed development and, consequently, that planning permission for the development would not comply with the strategic development plan. That conclusion had been sufficient to allow the reporter to refuse Hallam’s appeal. However, the Inner House also noted that the reporter’s conclusion with regard to the supply of housing land had been erroneous and that the court would have allowed the appeal if it had not been for the lack of education provision.

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
This is an Inner House case concerning a dispute over property at Rigside in Lanarkshire. Mr McAllister had occupied the land since at least June 2006 (using it for pallet storage and lorry parking). However, Douglas & Angus Estates and Mr Carmichael argued that they were common owners of the property and that Mr McAllister was in occupation of the property without title. Whilst Mr McAllister did not claim to have title to the property himself he argued that the estate and Mr Carmichael did not own the property either (and thus had no title to sue).

The question for the court was whether a party (in this case the estate and Mr Carmichael) requires to establish a title to land where a second party, whom he is trying to remove (in this case Mr McAllister), does not have title but claims that the land may be owned by a third party (in this case, the statutory successors to Lanark County Council).

Arguments
It was accepted that, where the party being removed denies the title of the party seeking removal without arguing that he himself has title, the party seeking removal only requires to show a prima face title[1]. However, Mr McAllister contended that there is an exception to that rule where the party being removed argues that there is a competing title in favour of a third party[2]. In this case, although he did not produce a competing title, he pointed to a reference to the disputed property in his own title (of a neighbouring property) which stated that, at the time of the deed, the disputed property was thought to be owned by Lanark County Council (which, if true, would have precluded the estate and Mr Carmichael from owning the property in terms of their titles).

Decision
However, although the Inner House accepted that, if Mr McAllister had shown a competing title, the estate and Mr Carmichael would have had to establish a title to the disputed property in order to seek Mr McAllister’s removal from it, in this case, the statement in Mr McAllister’s title to the effect that the disputed property was thought to be owned by Lanark County Council was not the equivalent of a competing title. As such, the estate and Mr Carmichael only had to show a prima face title in order to pursue the action.

The court noted that what exactly may be regarded as an ex facie valid title would depend on its particular terms. And, in this case, although the descriptions in the title deeds were vague and unclear, it could not be said that the deed on which both the estate’s and Mr Carmichael’s titles relied did not include the disputed property. Consequently, the estate and Mr Carmichael (or one or other of them) had an ex facie title sufficient to allow them to pursue the action against Mr McAllister.

In those circumstances the Inner House upheld the previous decision of the Sheriff Principal granting decree in favour of the estate and Mr Carmichael and dismissing Mr McAllister’s defences as irrelevant.

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] Ie a title that, “at first sight” or “on the face of it”, appears to be valid.

[2] Lock v Taylor 1976 SLT 238.

Background
This is an Outer House case in which Mr Aronson sought rectification of the Register. Mr Aronson had bought a property (on Dean Street in Kilmarnock) from the Bank of Scotland which was exercising a power of sale under a standard security following a repossession.

The property previously belonged to Mr Alexander who, in addition to granting the standard security in favour of the Bank of Scotland, had subsequently granted three further securities in favour of two other creditors. When Mr Alexander fell into arrears, the Bank of Scotland obtained a warrant to repossess and sell the property[1] (in May 2010) and subsequently disponed the property to Mr Aronson (in February 2011).  At the time of the repossession proceedings it was common for creditors to repossess and sell property without first following the calling up procedure and, in this case, the Bank had not served a calling up notice. However, in November 2010 the Supreme Court[2] decided that in any case where a creditor seeks repayment of a debt, failing which, the sale of the security subjects, it must first serve a calling up notice and thereafter wait two months before repossessing the property.

Mr Aaronson submitted an application to register the disposition in the Land Register in March 2011. In terms of the (Form 2) application, Mr Aronson required to indicate whether the necessary statutory procedures had been followed in relation to the Bank’s power of sale and, as a result of the Supreme Court’s decision noted above and the failure to follow the calling up procedure, Mr Aronson indicated that the necessary procedures had not been complied with.

When the Keeper registered the disposition, she excluded indemnity in respect of Mr Aronson’s title and, although the standard security in favour of the Bank of Scotland did not appear in the Charges Section of the Title Sheet, the three securities in favour of the other two creditors did[3].

In terms of the relevant legislation[4], where a creditor grants a disposition in exercise of a power of sale, the property is disburdened of that security and all other securities ranking equally with it or behind it. Mr Aronson sought to have the register rectified so as to delete the three remaining securities. The Keeper maintained that the register was not inaccurate as the property had not been disburdened of the standard securities on the basis that there had been no sale of the property in terms of the legislation as the Bank had not followed the correct procedure.

Decision
Lord Doherty rejected the Keeper’s argument and found that the register was inaccurate. There had been a sale by the bank, within the meaning of the legislation and, as such, the property had been disburdened of the securities.

As to a contention by the Keeper that, allowing the property to be disburdened of the securities where the correct procedures with regards to repossession and sale had not been followed, was to allow the Bank to benefit from its own wrong and was contrary to public interest, Lord Doherty said the following:

 “While I do not rule out entirely the possibility that the circumstances of some sales might be so contrary to public policy that Parliament might be taken to have intended to exclude them from the ambit of s. 26, I am very clear that the circumstances of the sale by the Bank to the pursuer do not fall within any such category.  In treating the loan default as a default in terms of standard condition 9(1)(b), and in proceeding down the s. 24 route, the Bank acted in good faith and in accordance with what was then understood (by the courts, conveyancers, and financial institutions and their advisers) to be a lawful route to sale.  There was no deception or bad faith.  There was no intention to depart from or undermine the proper procedures for sale…  …In such circumstances I see no scope for giving any weight to the canon of construction that a party should not be permitted to benefit from his own wrong.  I am equally clear that there is no justification for giving “sale” in s. 26(1) a strained construction in order to avoid the natural construction producing serious damage to the public interest.  On the contrary, in my view the natural and ordinary meaning relied upon by the pursuer serves the public interest.  On the other hand, deserving persons such as the pursuer would be prejudiced by the strained construction which the first defender suggests.  That strained construction is also one which runs counter to the presumption that a statutory provision should be construed so as not to produce injustice.”

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] Under s24 of the Conveyancing and Feudal Reform (Scotland) Act 1970.

[2] Royal Bank of Scotland plc (Respondent) v Francis John Wilson and another, [2010] UKSC 50.

[3] Notes were appended to the entries excluding indemnity both in respect of any loss arising from rectification of the register to delete the standard securities or from the property being found not to have been disburdened of the above standard security.

[4] S26(1) of the 1970 Act.

Outer House case concerning an alleged contract relating to the purchase of a local authority flat at Partick Bridge Street in Glasgow in 1989.

Mr Khosprowpour claimed that he had loaned £8k to Mrs Mackay for the purchase of her flat and that the parties had entered a contract by which Mrs Mackay would remain in the property for the rest of her life without repaying the loan but that Mrs Mackay would make a will transferring it to Mr Khosprowpour on her death. Mrs Mackay also granted a standard security (securing all sums due and which may become due) in favour of Mr Khosprowpour in 1991.

Although Mr Khosprowpour said that Mrs Mackay had originally granted a will passing the property to him, she later executed a new will directing that her executors pay the sale proceeds of the flat to her children (who included Mr Khosprowpour’s former wife).

Mr Khosprowpour sought damages for breach of contract. Mrs Mackay’s executor argued that, as a contract relating to heritage[1], the contract required to be constituted by probative writing (i.e. signed and witnessed) and was consequently not enforceable. On the other hand, Mr Khosprowpour argued that the contract did not relate to heritage but instead was an innominate or unusual contract and, as such, could be proved prout de jure (by any means known to law). Even if that were not the case, Mr Khosprowpour argued that, by virtue of his payment of the funds and Mrs Mackay’s execution of the first will, Mrs Mackay was personally barred[2] from relying on the lack of formalities to resile from the agreement. Conversely, Mrs Mackay’s executor argued the fact that the Standard Security was granted in security of sums due rather than an obligation to include a provision in the will suggested that payment of the funds and execution of the first will were not unequivocally referable to an obligation requiring her to leave the title to the flat to Mr Khosprowpour in her will.

After considering the authorities[3], Lord Turnbull found that the contract related to heritage and, as such, required formal writing for its constitution. However, it was found that Mr Khosprowpour had set out a stateable case regarding personal bar and a proof was allowed to consider whether it could be established.

The full judgement is available from Scottish Courts here.

(NB: see appeal to Inner House here.)

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

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[1] As the alleged contract took place in 1989, the Requirements of Writing (Scotland) Act 1995 did not apply and the situation was governed by the pre-1995 Act common law rules on the requirements of writing.

[2] By virtue of the common law rule of rei interventus (where there are important actings by the party seeking to rely on the agreement which are known to and permitted by the other party and which are unequivocally referable to the purported contract.)

[3] In particular McEleveen v McQuillan’s Executrix 1997 SLT (Sh Ct) 46.

Background
Outer House case in which Northern Rock sought damages from the solicitor of one of its customers. Headway Caledonian Ltd borrowed sums from Northern Rock to finance the purchase of a Business Park in Hamilton. In return it granted a standard security in favour of Northern Rock. Some years later, Headway’s solicitor sent a draft discharge of the standard security to Northern Rock requesting that it sign and return the document. In the accompanying email, the solicitor stated that the company intended to sell the subjects and redeem the loan. However, that information was incorrect as Headway only intended to sell part of the subjects and to redeem part of the loan. (The reason for the error was unknown.)

Northern Rock (which had not instructed solicitors to act on its behalf in the transaction) relied on the email and granted the discharge of the standard security. The solicitor then registered it in the Land Register. As a result the loan became unsecured. Headway then became insolvent and the Northern Rock raised an action for damages against the solicitor and her firm in respect of its losses.

The solicitor argued that the lender was a third party to whom she did not owe a duty of care.

Lord Doherty agreed with that argument.

Decision
Whilst a solicitor on one side of a conveyancing transaction will not normally owe a duty to the party on the other side, the law will imply a duty in exceptional circumstances.

The crucial considerations this case were (i) whether it was reasonable in the circumstances for Northern Rock to rely upon the misstatements without checking them by seeking clarification from the solicitor and/or looking at their file; and (ii) whether it ought to have been foreseeable by the solicitor that Northern Rock might reasonably rely upon the misstatements without checking them, and thereby suffer loss.

In favour of the view that there was the requisite foreseeability and reasonable reliance were that the email (i) contained no disclaimer; (ii) had a degree of urgency in its tone; (iii) was communicated directly to Northern Rock, rather than to professional advisers; and (iv) that it came from a solicitor (a trustworthy source).

On the other hand, being a commercial bank, Northern Rock were in no sense vulnerable or dependent. They had the ability to obtain legal advice if they required it. Ultimately though, the critical information had been factual and concerned matters that could have been checked very easily and very quickly by Northern Rock.

Lord Doherty also took into account the fact that the erroneous information in the email conflicted with what had previously been agreed between Headway Caledonian and Northern Rock and that in some respects the email had been vague and ambiguous and, as such, “cried out for further clarification”.

The full judgement is available from Scottish Courts here.

(NB: see appeal to the Inner House here. See also the decision of Lord Woolman allowing the Proof here.)

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

Background
Inner House case relating to a development at Rubislaw Quarry in Aberdeen. The developers sought the co-operation of those with interests (proprietors/tenants) in nearby office blocks (who were concerned that the new development would have a detrimental effect on the value of their properties) with respect to access to the development site. An agreement was entered into between the developers and the proprietors/tenants which included a restriction on the net lettable office space within the new development. The court action involved successors to the original parties to the agreement.

Arguments
The developers sought declarator that the relevant clause:

1. allowed the total amount of office space in the development to exceed the restriction (i.e. they argued that the restriction did not apply to owner occupied or vacant office space); and
2. was not a real burden and, as such, bound only the original parties to the agreement and not their successors.

Decision
Those arguments were rejected both in the Outer House and again on appeal to the Inner House.

Meaning of the clause
Taking account of the commercial purpose of the clause and the overall commercial context in which that agreement operated, the court found that the intention was to provide for a maximum floor area which was capable of being let for office use.

Whether binding on successors
Whether the burden was real (i.e. binding on successors) depended on whether the restriction on office space was:

1. purely a trading condition, designed solely to protect the personal commercial interests of those  interested in the offices; or
2. whether it, in addition to any personal benefit, also conveyed a material benefit on the properties themselves.

The proximity of the development to the offices was an important consideration (without physical proximity there can be no real burden). Not only were the properties adjacent to one another, it was intended that they should share the same access road.  The proprietors/tenants were seeking protection against reductions in rental values arising from the introduction of additional competition within the neighbourhood. The restriction therefore benefited the offices as commercial properties by protecting their rental value. The court also found that the clause did not result in an unreasonable restraint of trade noting that it had been negotiated as part of commercial agreement between the parties (there being no suggestion that there was any disparity in the parties’ bargaining power) which indicated that it was reasonable as between the parties. The clause merely restricted the amount of office space that could be constructed and did not prohibit use of the property as office space. Further, the court noted that there was no suggestion that the extent of the actual restriction imposed was in any way unreasonable or disproportionate in the context of the whole of the Rubislaw developments.

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 in which Mr McWatters sought the revocation or suspension of a Demolition Order over his flat on Bruce Street in Port Glasgow.

Background
When Mr McWatters bought the flat, in September 2011, it was already subject to a Closing Order. Then, in August 2012, the Council made a Demolition Order in respect of the whole building of which Mr McWatters’ flat formed part (as part of wider regeneration plans for the area).

Closing Orders, which prohibit the use of a house for human habitation, can be made by a local authority[1] where the authority is satisfied that any house (forming part of a larger building) does not meet a tolerable standard[2] and that it ought to be demolished. The owner of the house is then able to offer an undertaking[3] to the local authority that it will bring the house up to a tolerable standard. The local authority can then (if it accepts the undertaking) issue a suspension order suspending the Closing Order or, alternatively, it can issue a Demolition Order. After a Demolition Order has been granted, it can only be revoked if the whole building is brought up to standard.

In this case Mr McWatters argued that he had given undertakings to the Council to bring the whole building up to a tolerable standard and that they had unreasonably refused the undertakings.

Decision
However, the sheriff found that Mr McWatters’ plans for bringing the property up to standard were lacking in detail and costings, and despite the fact that the Demolition Order could only be revoked if the whole building were to be brought up to tolerable standard, he had failed to prove that he had the authority of the other owners in the building authorising him to proceed with a renovation at an open-ended cost on their behalf. As such, Mr McWatters had failed to show that he is was a position financially or practically to complete a renovation of the whole building and his plans were found not only to be wholly lacking in specification and detail but also wholly lacking in credibility.

The sheriff also found that McWatters failed to provide a good reason for interfering with the Council’s decision to demolish the property in support of their regeneration plan, noting in particular that Mr McWatters had failed to take steps to bring his own flat up to standard between purchasing it in September 2011 and the granting of the Demolition Order in August 2012 and that he had also failed to bring the whole building up to standard during the period after the granting of the Demolition Order when he claimed to have the authority of the other owners to 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.

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[1] Under s114 of The Housing (Scotland) Act 1987.

[2] For the local authority to proceed by way of a Closing Order there must also be other houses in the building which do meet the tolerable standard.

[3] Under s117 of the 1987 Act.

Inner House case in which Tesco sought to challenge a decision by Perth and Kinross Council to agree to the removal of a condition contained in a section 75 agreement made with Sainsbury’s.

 The s75 agreement was ancillary to a grant of planning permission allowing Sainsbury’s to construct a large store on a site in Perth to the southwest of the junction between the A9 and A85. There was known to be traffic congestion in the vicinity of the proposed development and Sainsbury’s had put forward a number of proposed road traffic “mitigations” in order to ensure that the new superstore would cause “no net detriment” to the road network. In terms of clause 5 of the s75 Agreement, Sainsbury’s agreed to pay a traffic mitigation sum before it commenced work on the development.  Clause 6 of the Agreement contained a trading restriction to the effect that the new superstore should not open for trading until such time as the Council had let the contract for the construction of the road improvement works.

There was some slippage from the original timetable for the carrying out of the road improvement works which meant that it would not be possible for the Council to let the contract for the construction of the works when originally envisaged. This led to the possibility that Sainsbury’s would end up in the position of having completed the development but be unable to open for trading because of a delay in the letting of the road construction contact.

As a result, Sainsbury’s applied to, and obtained from the Council, a modification of the s75 agreement deleting clause 6 of the agreement.

Tesco (the owner of a nearby store) argued that, in allowing the modification, the Council had:

1. failed properly to interpret its own development plan;
2. failed to address a material issue, namely whether clause 6 was still necessary and/or still served a useful purpose;
3. failed to give adequate or intelligible reasons for its decision and/or had no factual basis for key parts of its decision; and/or
4. reached a decision that no reasonable planning authority could have reached.

The Inner House rejected all of those arguments and refused Tesco’s petition.

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 issue
Inner House case in which RBS sought payment of sums due under a personal guarantee granted by Mr O’Donnell and Mr MacDonald the directors of Whinhill Developments Ltd which had been formed to purchase a potential development site at Stone Farm in Greenock. The directors argued that the guarantee had been induced by negligent misrepresentations made on behalf of RBS.

The background
RBS and Whinhill entered a one year loan agreement in September 2007 whereby RBS would provide a loan of £1.65m to fund the purchase. Whinhill bought the site for about £1.5m and planned to obtain planning permission then sell the site to a builder or developer. Whinhill granted a standard security and floating charge in favour of RBS (the site being Whinhill’s only asset).  Whinhill were unable to repay the loan at its expiry in September 2008. The parties then agreed to refinance the loan facility with a new loan of £1.695m to be repaid by March 2011; the Whinhill directors providing a personal guarantee for the company’s liabilities to a maximum aggregate value of £300k.

Whinhill failed to repay the sums due after a default event occurred and RBS sought payment of the sums due under the guarantee in February 2011. Central to the case was the property crash in 2008 and the falling value of the property. The loan was originally advanced in mid-2007 on the strength of a market valuation of £3m. When the facility was refinanced in 2008, property values had “fallen off a cliff” and the credit division of RBS was enforcing a 70% loan to value ratio. However, Whinhill’s relationship director in RBS’s commercial banking division was keen to avoid the crystallisation of, what may have been by then, a worthless security. He received word from Ryden that the property could be valued at £2m which, with a personal guarantee from Whinhill’s directors, would allow the 70% loan to value ratio to be met.

On three separate occasions RBS told the directors that Ryden would or had re-valued the subjects at £2m. The directors had understood the revaluation could be relied on for lending and guarantee purposes and, in the Outer House, Lord Malcolm took the view that it was reasonable for them to do so. Shortly after the first occasion (but before the second), RBS’s relationship director received the updated valuation from Ryden by letter. However, the letter made it clear that the report was not suitable, nor to be relied on by the bank, for lending purposes (it was also based on an assumption of increased development density which had not been discussed with the Whinhill directors). The directors were not informed of this and there was no evidence that the report had been received by the directors who then granted the personal guarantee in favour of the bank.

The decision
In the Outer House Lord Malcolm found that the RBS statements were material factors in the directors’ decision to grant the guarantee and that the guarantee would not have been granted if they had been aware of the true position. As a result, a reduction of the guarantee was granted.

Whether the Whinhill directors were also entitled to damages for their losses depended on whether the misrepresentations amounted to a breach of a duty of care owed to them. Lord Malcolm found that, in using the assurance given by Ryden before receipt of the report to help persuade the Whinhill directors to agree to the guarantee, the relationship director had to be taken as having assumed responsibility for its accuracy. He then came under an obligation of enquiry or disclosure if he subsequently received material which cast doubt on the information given to the directors. And thereafter, he had a duty not to repeat the misrepresentation. The relationship director had breached that duty and the Whinhill directors were entitled to damages for loss sustained as a consequence.

The Inner House were in agreement with Lord Malcom’s findings and refused an appeal.

The full judgement is available here.

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

John Swinney has announced the proposed rates and bands for the Land and Buildings Transaction Tax (LBTT) as part of the Draft Budget.

LBTT will replace Stamp Duty Land Tax (SDLT) in Scotland on 1 April 2015.  The new tax will have a progressive structure to bands and rates (i.e. tax is charged on the proportion of the price exceeding the threshold (like income tax) rather than charging the higher rate of tax on the whole price (per SDLT). This approach is intended to remove the distortions in house prices which may result from the bunching of sales around the thresholds that can occur with SDLT. 

Residential Purchases
The rates and bands which apply to the purchase of residential properties are as follows: 

Non-Residential Purchases
The rates and bands which apply to the purchase of non-residential properties are as follows:

.

Non-Residential Leases
The rates and bands which apply to non-residential leases are as follows (as with SDLT, the rates are applied to the Net Present Value (or NPV) of the rent payable under the lease):

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The following tax rates and bands will also be applied to any premium payable under the lease:

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Further information and tax calculators are available from the Scottish Government here.
A summary of the Land and Buildings Transaction Tax (Scotland) Act 2013 is available here.