Outer House case concerning a lease of premises at the Gyle Shopping Centre in Edinburgh under which the 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. Gyle sought declarator from the court to the effect that (1) that the building of the Primark store did not breach the lease and (2) Marks and Spencer had consented to the building of the new store. (Gyle also made a further argument based on personal bar, which would only require to be considered if the Court found in favour of Marks & Spencer on the first two arguments).

A breach of the lease?
The essence of Gyle’s argument was that the right to the car park granted to Marks & Spencer under the lease was not a real right.  In particular they argued that a self-standing grant of tenancy to a pro indiviso share in land could not meet the requirements of a lease conferring a real right. As a consequence they contended that the right was only enforceable against the original landlord (Gyle’s predecessor in title) and not Gyle. Lord Tyre rejected that argument finding that the right in the car park was granted as a pertinent of the lease which conferred a real right enforceable against the landlord’s successors and, as such, the right in the car park was also enforceable against the landlord’s successors. Consequently, building the Primark store in the car park would constitute a breach of Marks and Spencer’s lease.

Consent to the new store?
In the absence of a variation recorded in the appropriate register, the lease could only be varied in accordance with its terms. Gyle argued that Marks and Spencer had approved the building of the store at a meeting of the shopping centre management committee and that the approval had been recorded in the minutes and signed by all of the parties (including Marks and Spencer). However Lord Tyre found that there was nothing in the lease conferring a power to vary the lease upon the management committee. Although he did not require to decide the issue, Lord Tyre also found that the terms of the lease required that a change to the car parking area would require probative (i.e. signed and witnessed) writing.

Having regard to the outstanding issue of personal bar, Lord Tyre put the case out By Order to discuss further procedure.

The full judgement is available from Scottish Courts here.

(See also summaries of decisions in which the court found (1) that M&S was not personally barred from preventing Gyle from erecting the store on the car park and (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.

The problem
It has long been common practice for developers to dispose of the common parts to developments by selling individual plots with a right of common property in whatever is left at the completion of the development. (This has the advantage that the developer does not have to decide on the ultimate layout of the development before it starts and has the flexibility to change the layout as building proceeds).

However, in terms of both property law [1] and registration law [2], it is incompetent to convey an area that is indeterminate. Although there have long been doubts about the competence of the practice [3], the practical benefits to developers have meant that it was nevertheless common practice and the common areas of many developments have been described in this way.

PMP
In 2008 the case of PMP Plus Ltd v The Keeper of the Registers of Scotland and others [4] confirmed that the practice is not competent. In that case a developer sold plots in a development with a share in the common areas (which were described as being those areas not exclusively alienated to the home owners) but decided prior to the completion of the development to sell a part of the development (which would otherwise have formed part of the common areas) to PMP for the building of a health centre. The Keeper excluded indemnity in respect of PMP’s title  on the grounds that the home owners may have acquired title to the common parts as a result of the conveyances in their favour. However, the Lands Tribunal for Scotland decided that the home owners did not have an effective title to the common areas due to the absence of a sufficient description.

Update 27
In response to PMP, the Keeper issued update 27 which contained guidance on how the Keeper would deal with applications relating to such developments post PMP. It made it clear that, for developments where the first split off deed/plot sale occurred on or after 3 August 2009 (described as “new developments”) there was a change in policy and, where identification of the common areas depended on completion of the development (or other future uncertain event), the Keeper would no longer show the conveyance of the common areas in the title sheet.

However, for developments where plots had been sold before 3 August 2009 (described as “existing developments”), the Keeper would continue to reflect the terms of the conveyancing showing the conveyance of common areas in the title sheet even where identification of the common areas was dependent on completion of the development (or other future uncertain event). This approach was intended to ensure consistency and equality within developments. It was also intended to take account of the possibility that rights in the common areas may be created when the last plot is sold[5].

Lundin
In June 2013, the Lands Tribunal for Scotland issued the decision in Lundin Homes v Keeper of Registers of Scotland[6]. Lundin went a step further than PMP as it made it clear that the identity of the common areas does not become fixed merely because the last plot in the development has been sold and, where the common parts have been insufficiently described in the original purchases from developers, subsequent sales of the properties will not cure the defect[7].

AI27
Following Lundin, rather than issue a replacement for Update 27, the Keeper issued an “additional information” paper (referred to here as “AI27”) to be read alongside it. This approach can be slightly confusing as some of the guidance in AI27 conflicts with Update 27. The following is an attempt at consolidating the provisions of Update 27 and AI27.

New developments (First registrations)
AI27 makes no change to the guidance issued in Update 27 in respect of “new developments”. In such cases, the Keeper will continue to take steps to remove wording from the title sheets which identifies the common areas by reference a future uncertain event.

Existing developments

First Registrations and transfers of part
As noted above Update 27 takes account of the possibility that rights in the common areas may be created when the last plot is sold.  AI27 acknowledges that, following the decision in Lundin, the occurrence of a future event/sale of the final plot by itself will not create rights in the common areas.

However, AI27 also makes the point that, if a deed is drafted so as to properly identify the common areas, it may[8] (along with the positive effect of registration/“the Midas touch”) have the effect of creating rights in the common areas. The Keeper will therefore consider applications for a first registration or transfer of part within an existing development where there is an attempt to identify the common areas and recommends that solicitors considering this approach should contact pre-registration enquiries.

AI27 makes it clear that, where there is no attempt to identify the common areas, the Keeper will continue to reflect the terms of the conveyancing. This is the same approach as Update 27. However AI27 goes on to suggest that, where a solicitor considers that rights in common have not been validly created in a split off disposition, he or she may wish to reflect that in the deed submitted for registration.

Dealing of a whole
The hierarchy of the headings in Update 27 is slightly confusing and may at first sight seem to indicate that the guidance relating to applications for the registration of the dealing of a whole falls under “new developments”. However, as noted above, the Keeper will remove wording transferring rights in common areas from the title sheets to new developments where it refers to a future uncertain event[9]. Such wording will not therefore arise on a “dealing” occurring in a “new development”. On the dealing of a whole within “existing developments”, Update 27 made it clear that the Keeper’s policy (as with first registrations) will be to make no changes to wording relating to common areas (and not to exclude indemnity). That does not change. However, Update 27 did indicate that completion of the development may create rights in common areas. Whereas, AI27 makes it clear that it will not.

In addition AI27 acknowledges that it may be possible in some cases to fix the problem with some remedial conveyancing. In this regard we are advised that the Keeper will consider applications which attempt to identify the common areas[10].

Vague verbal descriptions (no reference to future uncertain events)
PMP made reference to deeds containing verbal descriptions of common areas which do not specifically identify the common areas by reference to the OS map. Update 27 advises that the Keeper’s policy is, and will continue to be, to reflect the terms of the conveyancing without requiring a full bounding description of or plan delineating such common areas[11]. However, Update 27 also notes comments in PMP to the effect a description without reference to extraneous material might well be thought to be a central feature of a map based registration system and suggests that applicants consider those comments. This advice proved to be well founded as Lundin makes it clear that reference to extraneous material (with the possible exception of other publicly accessible registered titles) for description is incompetent. Consequently, where such wording appears on a registered title it will be superfluous and ineffectual. (However, see comments on prescription below.)

Update 27 also suggests than an applicants may want to request (with the support of a certified plan or deed plan) to have such areas mapped on to the title plan for its interest (albeit indemnity is likely to be excluded unless the other owners and developer are also parties to the plan). No further guidance on this issue was given in AI27.

Sale of potential common areas by developer

Registered titles
This policy on the sale of potential common parts by a developer perhaps represents the biggest change in policy. Update 27 provides that, where a developer was attempting to convey possible common areas, the Keeper would require evidence that the developer’s title to the land being sold was not void or voidable.  That is changed in AI27. In cases where the developer’s title is registered in the Land Register the Keeper will no longer require such evidence and will register titles without exclusion of indemnity.

Sasine titles
However, where the developer’s title and subsequent plots sales have been recorded in Sasines the situation is treated differently as prescription may play a role in creating rights to the common areas[12]. Where the relevant split off deed has been recorded in Sasines, and the title is habile[13] prescription may have cured defects in the title thus giving the owners of individual units in the development title to the common areas. Thus, where a developer is attempting to sell parts of a development in which the dispositions conveying individual plots have been recorded in the Register of Sasines, the developer will require to provide evidence that there is no conflicting possession by persons other than the developer.

Superfluous wording
The Keeper’s policy with regard to “existing developments”[14] will result in superfluous and ineffective wording in registered titles and we are again told that no steps will be taken to remove such wording at present due to the effect of prescription. In addition to its role with regard to Sasine titles, AI27 also refers to the impact of prescription on Land Register titles.

Land Registration (Scotland) Act 2012 and prescription
Whilst prescription does not currently play a part in Land Register titles[15], the Land Registration (Scotland) Act 2012[16], changes that and will allow prescription to run on deeds presented for registration[17]. AI27 advises that the Keeper is currently considering the implications of the 2012 Act. She will not  therefore take steps to rectify the Register (unless she receives an application for rectification) until that consideration is complete.

It may be that the operation of prescription under the 2012 Act helps to shore up titles in need of fortification. However, we should bear in mind that it will also bring about an end to the “Midas touch” (which, where common areas are correctly identified, can presently cure defective descriptions).

Prescription as a cure
Whether under Land Register titles or Sasine titles, it will seldom be that prescription provides a complete fix for the problem and we should also bear in mind some of the limitations of possession to demonstrate title. Whilst a proprietor is likely to be able to show prescriptive possession of the common areas it uses regularly (e.g. a communal bin store), there will be other areas for which it may be hard to show (and harder yet to prove) possession (e.g. communal flower beds). And others that may prove more useful to some people than others (e.g. communal parking bays may not be of too much to a plot owner who doesn’t own a car). Consequently relying on prescription is therefore likely to lead to patchy, inconsistent and unclear ownership of the common areas in developments.

The lack of a share in a communal flowerbed will most likely not be of huge importance to most owners. Carless proprietors are unlikely to be overly concerned about the parking bays until they come to sell the property to someone with a car. However, in all cases a lack of ownership in the common areas is likely be more of an issue if they come to be sold by the developer and used for something the plot owners find undesirable.

Where we are now?
The combination of PMP, Lundin, Update 27 and AI27 leaves us in the following situation.

• Many units within developments do not include a share of the common areas[18]. Clients and their lenders will require to be advised accordingly.
  • This should be clear from the land certificate on the dealing of property within a “new development”[19]. (Albeit there may be some instances where the applicant has not paid heed to the advice in update 27 and ineffectual vague verbal descriptions which do not identify the common areas by reference to a future event remain on the title.)
  • When involved with first registrations, or dealings of properties in “existing developments”, descriptions will need to be examined carefully. Those purporting to identify and convey common areas by reference to a future event[20] will be ineffective[21]. However, AI27 makes it clear that the Keeper will consider attempts to rectify the situation which do correctly identify the common areas.
• On a purchase of potential common areas (identified by reference to a future event) from the developer, the Keeper’s approach, after Update 27 but prior to AI27, was to require evidence that the applicant’s title was not void or voidable and would exclude indemnity if not satisfied.  Since AI27:
  • The Keeper will not require such evidence nor exclude indemnity for Land Register titles.
  • But, where plot sales have been recorded in Sasines, she will require evidence that there has been no possession adverse to that of the developer.

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Outer House case in which Fordell sought £338k from Deloitte it said was due under an alleged agreement relating to a dilapidations claim in respect of a lease of property at 18 Charlotte Square and 4 Charlotte Lane in Edinburgh.

The lease came to an end in March 2012 and before that a schedule of dilapidations was served. A dispute then took place as to the scope and cost of the remedial works required following which surveyors liaised on behalf of each of the parties with a view to reaching a negotiated agreement.

Fordell argued that a binding agreement had been reached between the parties that Deloitte would pay £338k in full and final settlement of the claim. Deloitte argued that there had been no concluded contract because:

1.     the communications did not record an intention to be bound by the exchange of emails;
2.     there was no evidence that Fordell would use the money for the dilapidations works;
3.     the phrase “without prejudice” was used in Deloitte’s surveyor’s emails;
4.     there was a need for a formal legal document; and
5.     there was no agreement on a date for payment.

After considering the authorities[1] Lord Malcolm found that the proper approach in such cases was well settled:

“In summary, both parties must have manifested an intention to be immediately bound to all the legally essential elements of the bargain. In assessing this, the court adopts an objective approach, based upon what an informed reasonable person would have understood by the words and conduct of the parties or their agents.”

Lord Malcolm held that the negotiations had not resulted in a concluded contract between the parties. One of Deloitte’s emails contained a condition that Fordell would use the money for the dilapidations works which was not withdrawn and remained unmet. An email which Fordell argued had concluded the bargain did not waive or abandon that requirement. Fordell contended Deloitte were not entitled to require such evidence. However, Lord Malcolm took the view that, whatever the law on dilapidations claims, Deloitte were entitled to insist on such evidence as they wished, and to make it a condition for payment.

Lord Malcolm also took the view that the use of the words “without prejudice” and the need for a formal agreement reflected a shared understanding that neither of the surveyors could bind the parties. That was made clear in the correspondence. At each stage, before making a binding offer, or counter offer, the surveyors had required direct instructions from their respective clients and the words “without prejudice” required to be seen in that context[2]. Lord Malcolm described the lack of agreement regarding a date for payment as a “loose end” but saw it as further demonstration that the parties’ minds had not met on the key aspects of the deal.

Fordell’s claim for payment was dismissed.

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 concerning a planning appeal by Patersons in respect of the refusal of an application to allow the extraction of minerals at Lamington near Biggar.

Paterson’s planning application was refused by South Lanarkshire Council on 28 March 2012. A subsequent appeal was then refused by a reporter appointed by the Scottish Minister’s on 9 January 2012 on the basis of both the landscape and visual impacts of the proposed development.

Paterson’s appealed to the court on the basis that the reporter had:

• failed to keep in mind the overriding and imperative nature of the need for mineral;
• erred in his interpretation and application of planning policies ENV4 (Protection of the Natural and Built Environment), ENV29 (Regional Scenic Areas and Areas of Great Landscape Value Policy) and MIN2 (Environmental protection hierarchy);
• reached a decision which was perverse or “Wednesbury unreasonable”; and
• failed to use the opportunity to resolve matters by imposing conditions.

The Inner House refused the appeal. It found, when the decision was read as a whole, it could not be suggested that the reporter overlooked, or lost sight of, the overriding and imperative nature of the need for minerals. It also found that the reporter’s interpretation of each of the planning policies had been correct. Further, he had taken all of the positive factors into account before exercising his planning judgement to decide that the positive factors were outweighed by the negative factors and, as such, his decision was not perverse or “Wednesbury unreasonable” (i.e. a decision so unreasonable that no reasonable person acting reasonably could have made it). With regard to the possibility of imposing conditions, the court found that the reporter had been entitled to be cautious in his approach to suggest conditions when there might be EIA publicity requirements, and moreover the reporter had not had sufficient material before him to enable him to assess the repercussions or consequences of such conditions.

 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.

This is an 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 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 Woolman considered the authorities on liability for economic loss including Midland Bank plc v Cameron, Thom, Peterkin & Duncans[1] in which Lord Jauncey identified four conditions that should normally be present for liability in such cases:

“…

1. the solicitor must assume responsibility for the advice or information furnished to the third party;
2. the solicitor must let it be known to the third party expressly or impliedly that he claims, by reason of his calling, to have the requisite skill or knowledge to give the advice or furnish the information;
3. the third party must have relied upon that advice or information as a matter for which the solicitor has assumed personal responsibility; and
4. the solicitor must have been aware that the third party was likely so to rely.”

Lord Woolman found that liability in delict[2] could not be decided without hearing the evidence and allowed a proof.

The full judgement is available from Scottish Courts here.

Sheriff court case concerning the meaning of “a premium” in the context of residential leasing.

Mr Cross and others (the students) sought a lease of property at Elmfield Avenue in Aberdeen. They completed an application form supplied by Aberdeen Property Leasing which revealed that the rent was to be £1,300 per month, and that a deposit of £1,300 and an “Admin fee” of £125 plus VAT thereon were to be paid prior to entering into the lease. The students paid the deposit and administration fee. In June 2009 they entered into the lease and were granted an assured tenancy of the property.

The students subsequently raised a small claims action seeking repayment of the administration fee which they argued was an illegal premium.

At the time the lease was entered section 82(1) of the Rent (Scotland) Act 1984 provided:

“any person who, as a condition of the grant, renewal or continuance of a protected tenancy, requires, in addition to the rent, the payment of any premium or the making of any loan (whether secured or unsecured) shall be guilty of an offence under this section”.

And s90 of the 1984 Act provided:

““premium” includes any fine or other sum and any other pecuniary consideration in addition to rent”

On 29 November 2012 s90[1] of the 1984 Act was amended by section 32(3) of the 2011 Act and now provides:

“”premium” means any fine, sum or pecuniary consideration, other than the rent, and includes any service or administration fee or charge.”

Aberdeen Property argued that the administration fee had been legitimately charged as, at the time the lease was entered into (i.e. prior to the amendments), administration fees were not prohibited.

The students argued that administration fees were prohibited at the time the lease was entered into and that the amendments made by section 32(3) of the 2011 Act simply clarified the meaning of “a premium”. They explained that the clarification was necessary because of confusion on the part of some landlords about what they could and could not charge and because of poor and inconsistent practices adopted by many landlords in relation to the imposition of charges and fees in addition to the rent and refundable deposit.

The sheriff agreed with the students’ interpretation and granted decree for repayment of the administration fee with interest:

“In my opinion the definition was not changed – it was improved to make it crystal clear to all involved in residential leasing that administration fees ought not to have been imposed and ought not to be imposed. The administration fee imposed by the defender is “a pecuniary consideration in addition to the rent” (s90 of the 1984 Act – prior to amendment). I asked [Aberdeen Property’s representative] if she could explain to me what the administration fee of £125 could possibly be if not “a pecuniary consideration in addition to the rent”. She has yet to answer that question. I have concluded that the administration fee imposed by [Aberdeen Property] was a prohibited payment and accordingly the pursuers are entitled to the return of it.”

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.

Outer House case concerning the lease of a fast food restaurant and car parking spaces at Queens Drive Leisure Park, Kilmarnock.

Background
The lease contained a prohibition on subletting but stated that the landlord could not unreasonably withhold or delay consent to a subletting to a subtenant who was “respectable and responsible”. Burger King were the tenants under the lease and wished to sublet the premises to Caspian Food Retailers Limited. Burger King’s solicitors wrote to Castlebrook requesting consent for the subletting and providing some information on Caspian. Castlebrook’s agents replied seeking further information (including 3 years audited accounts and references from at least two previous landlords). Burger said that they had no accounts or references for Caspian as it was a new company.

Arguments
Castlebrook argued that, as Caspian had no track record, they had no idea whether the company was “respectable and responsible” but indicated that, if the main company in the group were to grant a guarantee or take the sublease itself, consent would be granted.  Burger King argued that, when taken with the fact that Castlebrook could continue to rely on Burger King’s covenant as tenant, there were no reasonable grounds to refuse the subletting. Castlebrook acknowledged the excellent track record of other companies in the group but contrasted that with Caspian itself which had no track record and refused to grant consent. Burger King sought declarator from the court that Castlebrook had refused consent unreasonably and a decree ordaining Castlebrook to issue the consent.

Decision
Lord Tyre found merit in Castlebrook’s argument to the effect that the landlord should first consider whether the proposed subtenant was respectable and responsible and then, if it found that it was not, the landlord was entitled to refuse consent without justifying that refusal by reference to any reason other than the non-respectability and/or non-responsibility of the sub-tenant. Lord Tyre referred to support for this approach in Bates v Donaldson:

“It will be seen that it is only when a respectable and responsible person is proposed as assignee or undertenant that this clause (as to the permission not being unreasonably withheld) comes into play. If the person proposed be not a respectable and responsible person, the lessor has an absolute right to refuse permission; if, however, the person proposed be respectable and responsible, then the lessor cannot unreasonably withhold his permission.”[1]

With regard to the meaning of “respectable and responsible”, Lord Tyre noted that “respectability” had been held to refer to the manner in which the company in question conducted its business and to its reputation and that “responsibility” had been held to refer to financial capacity. In each case he found that supporting evidence should relate to the proposed subtenant itself and not to other group companies or other entities that could provide assistance to the proposed subtenant:

“In my opinion a landlord who stipulates that a proposed sub-tenant must be responsible is reserving to himself the right to be satisfied as to the financial soundness of the sub-tenant itself and not as to the soundness of individuals or entities who might or might not provide assistance in the event of financial difficulty. So far as respectability is concerned, it may be that little should be required to satisfy the landlord, but once again I consider that evidence of respectability should relate to the proposed sub-tenant itself. A company does not acquire respectability automatically along with its certificate of incorporation, although it may not be long before its mode of carrying on business affords sufficient indication that it could not reasonably be regarded as anything other than respectable. That is not, in my view, the same as an assessment of the respectability of the company’s owners or of other companies in common ownership.”

Lord Tyre dismissed Burger King’s action but noted that if Burger King had provided material demonstrating even a successful first few months’ initial trading by Caspian, including landlords’ references, it might have been difficult for Castlebrook to justify a refusal of consent.

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.

Case from the Court of Appeal for England and Wales considering the treatment of rent payable during an administration and whether part of a payment of rent payable in advance could be treated as an expense of administration (and thus paid in priority to unsecured debts).

One of the companies in the Game group of companies was the tenant of many hundreds of properties from which the group traded. The rent in respect of most of those properties was payable quarterly in advance on the usual English quarter days (which include 25 March). On 25 March 2012 approximately £10m in rent became due under the leases and on the following day the Game Group went into administration. Trading continued from some stores which were included in a sale of the business and assets of the group to Game Retail Limited which was outwith the group. Approximately £3m in rent was said to be outstanding in respect of those stores.

The cases of Goldacre (Offices) Limited v Nortel Network UK Limited[1] and Leisure (Norwich) II Limited v Luminar Lava Ignite Limited[2] had decided that part of an instalment of rent cannot be treated as an expense in the context of insolvency. In Goldacre  it was found that, where a quarter’s rent payable in advance fell due during a period in which the administrators were retaining the property for the purpose of the administration, then the whole of the quarter’s rent was payable as an administration expense, even if the administrators were to give up occupation later in the same quarter. In Luminar  it was decided that, where a quarter’s rent payable in advance fell due before entry into administration, none of it was payable as an administration expense even if the administrators retained possession for the purposes of the administration.

As a result of Goldacre and Luminar it has become increasingly common for companies to enter administration on the day immediately following a quarter day, thus avoiding liability to pay the rent in full even if they retain possession of their leased property. A quick sale of the business to a new company can also mean that the new company can, in effect, trade for the first three months rent free.

The High Court in this case followed Goldacre and Luminar. However, the Court of Appeal applied the “salvage principle” under which liability for rent incurred before the winding up may be treated as if it were an expense of the winding up (on equitable grounds) where a liquidator or other office holder retains the property for the benefit of the winding up or administration. Consequently, the court allowed the Landlords’ appeal and over-ruled Goldacre and Luminar finding that an application of the salvage principle means that:

“the office holder must make payments at the rate of the rent for the duration of any period during which he retains possession of the demised property for the benefit of the winding up or administration (as the case may be). The rent will be treated as accruing from day to day. Those payments are payable as expenses of the winding up or administration. The duration of the period is a question of fact and is not determined merely by reference to which rent days occur before, during or after that period.”

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.

Outer 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.

Arguments
Mr Leonard (who had been 12 at the time of the accident) argued that the park authority had breached its duties both at common law and under the Occupier’s Liability (Scotland) Act 1960 due to  the presence of hazards and lack of preventative measures on the path. He contended that the steps provided by the park authority were very uneven, inconsistent in shape and sloping downwards at various different angles and also that there were exposed roots and other tripping hazards such as man-made drainage gullies on the steps.  There was also a steep unfenced drop from the path to the public road. Mr Leonard argued that a risk assessment of the type that was standard practice in the design and planning process for any public right of way in open areas would have revealed the need for (amongst other things) a hand rail which would have slowed Mr Leonard’s descent and prevented his fall to the road.

The park authority argued that a hand rail was not required at the relevant part of the path as the gradient was not severe and the drop was less than two metres. They also said that it was likely that a hand rail would be vandalised and would have placed a maintenance risk on them. Further they contended that, given the gradient of the slope and width of the area before the drop, Mr Leonard would not have fallen to the road if he had been descending the path at walking pace.

Decision
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[1]. 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), Lord Uist adopted the approach of Lord Emslie in Graham v East of Scotland Water Authority[2]. In Graham, Lord Emslie found that the test of ‘obviousness’ was not per se satisfactory. He noted that the early authorities have used the term ‘obvious’ to denote features of the environment which are “permanent, ordinary and familiar” and went on to say that, whilst natural landscape features plainly fall into that category, so too do long standing artificial features.

Lord Uist then concluded 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 1960 Act in respect of the path.

However, Lord Uist also went further and indicated 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 special or unfamiliar hazards:

“it is not a requirement that the artificial feature be well established or long standing before the principle[3] of Stevenson[4] and Taylor[5] applies: it is sufficient that it is obvious, part of the landscape and does not involve exposure to any special or unfamiliar hazard. If, for example, an accident happened a week after an obvious artificial feature which became part of the landscape (such as a pond, swimming pool or path) had been constructed I see no reason why the principle in Stevenson and Taylor should not apply. Of course, by its very nature, the path in this case presented a danger in the form of the risk of tripping or slipping, but that is a risk which those venturing upon the hill must be taken to have accepted. Adapting the words of Lord Hutton in Tomlinson[6], it would be contrary to common sense, and therefore not sound law, to expect the defenders to provide protection to members of the public (by means of a handrail or barrier or anything else) against such an obvious danger. The fact that [Mr Leonard] was aged only 12 at the time is of no relevance to the issue of the existence of a duty on the [park authority].”

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.

Outer House case in which Mrs Cooper sought reduction of a standard security (in so far as) granted by her in favour of the Bank of Scotland over her share of the home she shared with her husband. Mrs Cooper argued that her husband had procured her signature of the security by misrepresentation and that the bank had neither advised her of the consequences of signing the document nor advised her to take independent legal advice.

Background
The Coopers’ had granted a standard security over their house in favour of the Bank of Scotland in 2002 (securing the present and future debts of both/either of them). At about the same time Mr Cooper obtained an overdraft from the Bank of Scotland for his business and, when the business overdraft grew to £72k, granted a personal guarantee in favour of the Bank of Scotland in January 2006 (in effect securing the business debt over the house). At the end of 2006 the house was re-mortgaged in favour of the Halifax. Due to an oversight (there was still outstanding business debt), and despite an instruction to the contrary, the security in favour the Bank of Scotland was discharged. In March 2007 the Bank of Scotland wrote to the Coopers asking them to sign a fresh security in respect of the business debt. Mr Cooper had failed to tell Mrs Cooper about the overdraft and personal guarantee. When the fresh security arrived, he gave Mrs Cooper the second page only and asked her to sign it telling her only that it related to the mortgage and that the higher monthly payments would pay off the mortgage more quickly.

Arguments
Mrs Cooper based her case on the principles arising from Smith v. Bank of Scotland[1] in which it was found that a bank may owe a duty to warn a potential cautioner of the consequences of entering into a proposed obligation and advise him or her to take independent advice where:

“the circumstances of the case are such as to lead a reasonable man to believe that owing to the personal relationship between the debtor and the proposed cautioner the latter’s consent may not be fully informed or freely given…”

In order to have an obligation set aside, the cautioner must show[2] (1) that an actionable wrong has been perpetrated by the principal debtor (2) that the creditor was in bad faith and (3) that the obligation was undertaken gratuitously.

The Bank of Scotland argued that, because Mrs Cooper had been liable for Mr Cooper’s business debts before the discharge (in error) of the 2006 security, the Bank had no reason to believe that her consent to the 2007 security was not freely given. Further, they argued that reducing the security would give a windfall benefit to Mrs Cooper and put her in a better position than she would otherwise have been by allowing her to escape from the obligations previously incumbent upon her merely because of the erroneous discharge of the 2002 security.

Decision
Lord Tyre found had that Mrs Cooper was entitled to a reduction of the standard security. The grant of the standard security by the pursuer was gratuitous (i.e. there was no obligation on Mrs Cooper to grant it). Having accepted that Mr Cooper had misrepresented the purpose and effect of signing the security to Mrs Cooper, it was also found that Mr Cooper had committed an actionable wrong. The Bank of Scotland were also found not to have acted in good faith as there was no evidence that either they or their solicitors took any steps whatsoever to bring to the pursuer’s attention the consequences for her of signing the standard security. The letter sending the security for signature had been in bland terms and conveyed an impression that the execution of the security was something of a formality. There was also no mention of the need for Mrs Cooper to obtain independent legal advice.

The discharge of the 2002 security had not been gratuitous as it had been granted in consideration of repayment of the loan then outstanding. The bank did not attempt to argue that the discharge could have been reduced on the ground of a unilateral uninduced error on the part of the bank (or their solicitors). There was no obligation on Mrs Cooper to grant the 2007 security at the time she signed it. That was the time to have in mind when determining whether restoration of the position was possible. Consequently, Lord Tyre held that the reduction of the 2007 security should not be refused on the basis that it would fail to restore the parties to the position they had been in prior to the granting of the security.

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.