Background
Inner House case concerning a lease of property on Kelvinhaugh Street in Glasgow. (The subjects were greater than two acres in extent and were the subject of a probative lease). The natural term of the lease had come to an end (on 27 February 2012) and the lease continued by tacit relocation. By letters dated 3^rd and 16^th of January the tenants gave notice to the landlords that the lease was to terminate at 27^th February 2013. The tenants argued that in doing so they had complied with the requirement, at common law, to provide 40 days clear notice of the termination.

Arguments
However the landlords argued that the situation was governed by s34 of the Sheriff Courts (Scotland) Act 1907 which deals with removings and provides that notice requires to be given 6 months before termination.

In the sheriff court the sheriff agreed with the tenants’ interpretation and the landlords appealed.

Decision
In the Inner House the appeal was refused. The court found that s34 applies to the situation where the landlord initiates the termination process but not where the tenant initiates the process. This was in contrast to s35 which provides for the situation where the tenant initiates the termination and preserves the common law position on the giving of notice. As such the common law applied and a period of 40 days’ notice was sufficient to terminate the lease.

“… [W]e have reached the view that the submissions for [the tenants] are sound, and that the sheriff’s analysis and conclusions were correct.  The structure of sections 34-37 of the 1907 Act makes a clear distinction between a landlord’s notice in writing to remove and a tenant’s letter of removal.  The first proviso to section 34, which requires not less than 6 months’ notice before the termination of the lease, relates to a notice in writing to remove.  It relates to termination initiated by the landlord, and not termination initiated by the tenant.”

As to the contrasting approaches of s34 and s35, the court noted the element of additional protection provided for the tenant when the landlord exercises the remedy of ejection without independent judicial termination (which is not required when the tenant initiates the procedure).

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 planning appeal in respect of an application for the development of a waste to energy combined heat and power plant in Invergordon.

The Reporter determining the appeal had granted permission subject to a number of conditions, one of which permitted the power plant to accept a maximum of 100,000 tonnes per annum of waste originating from within the Highland Council area.  However, the condition also stated that a proportion of the waste could originate beyond the Highland Council area.

The Inner House found that the condition was invalid as the reference to the waste from outwith the Highland Council area meant that the permission granted went beyond that which had been applied for (the application had provided for incineration of Highland waste only) and thus beyond what had been considered at the planning inquiry. The developer’s Environmental Impact Assessment had also been drawn up on the understanding that only Highland waste was to be treated at the plant. All of this meant that the planning authority (Highland Council) and the Ross Estates (objectors) had been disadvantaged and their appeal on that basis was held to be well founded.

The court found that the invalid condition was not severable from the rest of the planning decision (on the basis that the planning permission may not have been granted at all if it had been appreciated that the condition was invalid) and so it was not possible to quash only that condition. However, whilst the planning inquiry required to be re-opened, it was unnecessary to rehear the entire case and the inquiry would only have to deal with the invalid condition. If the reporter considered that the condition was essential to the grant of permission he would have to hear evidence and submissions from all of the parties on its merits. If the reporter were to consider the condition, as drafted, not to be essential to the permission, then it was open to him to substitute an amended condition.

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
Outer House case relating to the lease of commercial premises in Port Glasgow. @SIPP were the landlords and Insight, the tenants. @SIPP argued that, when the lease came to an end, the premises were not in good and substantial condition and a dispute arose as to the extent of the tenants repairing obligations under the lease.

There were two issues for the court to decide.

• Whether the tenants’ obligation on termination of the lease was limited to putting the premises into the condition in which they were accepted by it at the commencement of the lease.
• Whether the landlord was entitled to payment of a sum equal to the cost of putting the premises into the relevant state of repair, regardless of whether it actually intended to carry out any such work.

Decision
Putting and keeping
Lord Tyre began by rejecting @SIPP’s contention[1] that an obligation to keep the premises in good and substantial repair necessarily imports an obligation to put the premises in that condition regardless of its condition at the commencement of the lease. Then, taking a modern approach (which requires the court to consider what a reasonable person would have understood the parties to have meant by the language they used, rather than necessarily imposing interpretation which is grammatical result of the language used) to construction of the relevant clause, Lord Tyre found that the tenant’s obligation was referable to the condition in which they were accepted at the commencement of the lease (and not the condition in which they were deemed to have been accepted).

Remedy for breach of the repairing obligation
Where a tenant breaches its obligation to return the premises to the condition specified in the lease at the end of the term, the landlord is entitled to common law damages for the loss sustained. The landlord will normally argue that that loss amounts to the cost required to put the premises into the specified condition. However, that will not be the measure of the loss in all cases. In some cases the proper measure of loss may be the diminution in the capital value of the subjects[2] and in some cases, for example where the building is to be demolished (for reasons unconnected with the tenant’s breach), the landlord may be unable to show any loss at all.

In this case @SIPP argued that the relevant clause in the lease provided an express right to payment of a sum equivalent to the cost required to put the premises into good and substantial repair and that in exercising that contractual right it was not making a claim for damages for its loss.

However, Lord Tyre found that there was nothing in the relevant clause compelling the interpretation favoured by @SIPP. In the view of Lord Tyre, a lease would require very clear wording to allow a conclusion that the tenant had to pay a sum which bore no relation to that required to compensate the landlord for the loss actually sustained as a result of a breach of the repairing obligation.

As such, Insight were entitled to prove that @SIPP’s loss was equivalent something other than the cost of repair and the case was put out by order for discussion as to further procedure[3].

The full judgement is available from Scottish Courts here

(NB see appeal to Inner House appeal here)

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

__________________________________________

[1] This argument was based on the judgment of the Supreme Court in L Batley Pet Products Ltd v North Lanarkshire Council[2014] UKSC 27, however, Lord Tyre found that the reference to putting/keeping the property in good condition related to a commentary on the particular clause used in that case rather than making a general statement/change as to the law.

[2] In this case the estimated cost of the works required was over £1m whereas Insight argued that even if it had carried out all of the works in the schedule of dilapidations, the capital value of the premises would only have increased by £175k.

[3]The question of whether @SIPP would be entitled to recover the cost of the repairs if it could prove an intention to carry out the repairs regardless of the extent to which the cost of the repairs would exceed the increase in capital value of the subjects was left open.

Sheriff court case relating to a lease of premises on Buchanan Street in Glasgow. ELB were the Landlords and Prestwick Hotels Ltd, the tenants.

Background
Prestwick were dissolved in June 2013 and then restored to the register of companies in October 2013. In terms of the Companies Act 2006[1] when a company is dissolved its property (including leasehold property) falls to the Crown as bona vacantia and the Crown must then decide whether or not to disclaim the property. In this case the Crown opted to disclaim the property which (in terms of s1020 of the 2006 Act) had the effect of terminating the lease.  ELB therefore sought to recover possession of the subjects from Prestwick.

The crux of the case was the meaning of s1032(1) of the Companies Act 2006 which provides:

 “The general effect of an order by the court for restoration to the register is that the company is deemed to have continued in existence as if it had not been dissolved or struck off the register.”

Arguments
Prestwick argued that the effect of this section was that when it had been restored to the register all matters reverted to the pre-dissolution status quo to the extent that bona vacantia no longer applied to the premises. As such the lease continued and there was no foundation for ELB’s action to recover possession of the premises. The sheriff agreed with those arguments and dismissed ELB’s action.

Decision
However, on appeal, the sheriff principal recalled the sheriff’s decision and found that ELB were entitled to recover possession of the premises. In coming to this conclusion the sheriff principal took account of the uncertainty which would result if the restoration of the company were also to restore the lease. In terms of s1030(4) of the 2006 Act a company can be restored to the register up to 6 years after it has been dissolved. Thus if, for example, a landlord recovered possession of the premises following a dissolution and let it to another tenant, following Prestwick’s reasoning, the new tenant would cease to have any rights to the premises, if (at any point during the 6 year period) the original tenant were restored to the register.

As such, the sheriff principal found that Parliament did not intend that 1032(1) should operate so as to re-write history in an unrestrained manner and that the specific provisions contained in s1020 relating to the termination of the lease should prevail over the general effect of s1032.

With regard to the effect on Prestwick the sheriff principal said the following:

“My decision might be seen as somewhat harsh in so far as [Prestwick] are concerned.  However, I would reject any such criticism.  Firstly, in general terms, the construction placed upon the provisions of the 2006 Act simply serves to highlight the importance to be attached to proper compliance with features such as the regular and timeous lodging of company accounts etc.  Dissolution of a company is rightly associated with very significant consequences not only for the company itself but also for other parties with whom they have contracted.”

The full judgement is available from Scottish Courts here.

(See appeal to Inner House here.)

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

_________________________________________

[1] Section 1012

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.

________________________

[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.

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.

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.