Outer House Case in which the administrators of Oceancrown Ltd and other associated companies (including Loanwell Ltd and Questway Ltd) sought reductions of the sales of various properties by the companies as gratuitous alienations[1].

Background
The companies in administration were part of a group under the control of a Mr Pelosi. The group was involved in the development and letting of commercial and residential properties. Mr Pelosi had effective control of all of the companies which were operated as one enterprise and operated on the basis of one bank account in the name of Questway Ltd.

Mr Pelosi negotiated the sale of 278 Glasgow Road, Rutherglen to Clyde Gateway Development Limited. On 10 November 2010 Oceancrown disponed 278 Glasgow Road to Strathcroft (then 99% owned by Mr Pelosi) for £762k. On the same day Strathcroft disponed the same property to Clyde Gateway for £2.1m (plus VAT of £367.5k[2]).

The bank’s solicitors were advised that sale of 278 Glasgow Road was part of a series of transactions also involving 110, 210 and 260 Glasgow Road, and 64 Roslea Drive (owned by Oceancrown, Loanwell and Questway and over which the bank held standard securities), the total sale price for which was £2.414m. When the bank’s solicitor (who was unaware of the sale of 278 Glasgow Road to Clyde Gateway) received the sale proceeds, it delivered discharges of the securities. Dispositions were executed (On 24 November 2010) transferring 110, 210 and 260 Glasgow Road to Stonegale Limited (of which Mr Pelosi’s son was the sole shareholder and director) and 64 Roslea Drive to Mr Pelosi’s son. The son then sold 64 Roslea Drive to a third party for £125k. Although no money was paid, the dispositions for the four properties recorded a consideration of £1.652m in total. Stonegale did not dispute that all the funds paid to the bank to discharge the securities came from the purchase of 278 Glasgow Road by Clyde Gateway.

Argument for the administrators
The administrators argued that a large proportion of the money received from Clyde Gateway (in respect of 278 Glasgow Road) was attributed to the other dispositions in order to make it appear that the transfers to Stonegale and Mr Pelosi’s son were made for consideration. In the view of the administrator, the back-to-back sale and transfers had been structured so as to keep £1.7075m out of reach of the bank and to transfer the properties to Stonegale and Mr Pelosi’s son for no consideration. The court was therefore asked to reduce the transfers of 110, 210 and 260 Glasgow Road, and 64 Roslea Drive.

Argument for Stongale
Stonegale argued that the issue for the court was whether the alienations of 110, 210 and 260 Glasgow Road and 64 Roslea Drive, Glasgow were made “for adequate consideration”. Oceancrown, Loanwell and Questway had each received consideration which was paid to their secured lender. The parties agreed that the sums attributed to 110, 210 and 260 Glasgow Road, and 64 Roslea Drive exceeded their market value. The source of the funds was irrelevant. The bank had decided to discharge the security over 278 Glasgow Road on the basis of a valuation it had received and had made a bad bargain. The other transactions were separate. Consideration had been paid to Oceancrown, Loanwell and Questway as they had reduced their indebtedness to the bank.

Decision
Lord Malcolm found otherwise. “Consideration” is “something which is given, or surrendered, in return for something else”[3] No one paid anything for 110, 210, 260 Glasgow Road and 64 Roslea Drive. Oceancrown, Loanwell and Questway did not receive anything in return for the dispositions. They gifted the properties to the disponees. The fact that the bank was misled into using part of the sale price of 278 Glasgow Road to discharge all the standard securities did not supply the missing consideration. If the bank had known that 278 Glasgow Road had been sold for £2.4m, the same overall reduction in bank indebtedness would have occurred, but only the standard security over 278 Glasgow Road would have been discharged. The tranfsfers under challenge were gratuitous alienations. As such, reductions of the dispositions of 110, 210, 260 Glasgow Road were granted and Mr Pelosi’s son was be ordered to repay (to the administrators) the £125k paid to him by the third party for the purchase of 64 Roslea Drive.

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 Land Valuation Appeal Court. The Valuation Appeal Committee dismissed an appeal from M&S on the basis that M&S’s written statement in support of its appeal (which had been submitted on the last possible day) did not comply with the Valuation Appeal Committee (Procedure in Appeals under the Valuation Acts) (Scotland) Regulations 1995. M&S then appealed to Land Valuation Appeal Court which allowed the appeal.

In order to comply with the regulations the statement had to intimate three essential points; namely (1) the grounds of appeal; (2) the value for which the appellant contended; and (3) the basis on which that value was arrived at. The court found that it had done so. Although the Assessor argued that the statement failed to specify the ground of appeal, the court noted that the statement contended (amongst other things) that the assessor’s valuation was incorrect and excessive and that M&S’s agents disputed the proposed valuation rate. In the view of the court further elaboration was not required.

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 the construction of an asset sale agreement.

Background
Forest were tenants under a lease. When Forest went into administration the lease was one of the assets for realisation by the administrators. Forest (through its administrators) signed an asset sale agreement with Forever Fuels which related to the sale of property including the lease. In terms of the agreement, £100k became payable to Forest upon delivery of an assignation of the lease and landlord’s consent to the assignation.

Landlords Consent was defined in the asset sale agreement as follows:

 “’Landlord’s Consent’ means the unconditional written consent of the Landlord (and any other relevant party) to the grant of the Assignation of the Seller’s interest in the lease to the Buyer on terms acceptable to the Buyer acting reasonably;”

When it signed the assignation the landlord wrote to Forest’s solicitors consenting to the assignation “only on the basis that” arrears of rent were paid.

Sheriff court decision
In the sheriff court the sheriff came to the conclusion that the £100k was due. The words “on terms acceptable to the Buyer acting reasonably” were indicative of the only circumstances in which a condition of consent would not be regarded as unconditional (i.e. the consent would only be held to be conditional if the buyer (Forever Fuels) was required to do something which was unacceptable to it).

Sheriff principal and Inner House decisions
The sheriff principal disagreed with that interpretation and found that the parties had intended that (for payment to be triggered) the landlord’s consent would have to be free of any condition. As settlement of the rent arrears was not beyond dispute, the landlord’s consent had been conditional. As such the sum of £100k was not payable. The Inner House agreed with the sheriff principal’s reasoning finding that (despite shortcomings and deficiencies in the drafting elsewhere in the agreement) the definition of the term “Landlord’s Consent” was not ambiguous.

The phrase “on terms acceptable to the Buyer acting reasonably” did not qualify “unconditional written consent” but instead qualified “the Assignation of the Seller’s interest” (i.e. to trigger payment, the terms of the assignation document would have to be acceptable to the hypothetical reasonable buyer.)

 “..it is clear that so long as the landlord’s consent is conditional, the buyer’s right to the lease will be incomplete; there will be no consent upon which the buyer can rely in any question with the landlord until the condition is purified. The buyer’s position, in that respect, is the same whether the condition requires action on his part or on that of the seller. It is inconceivable that parties could have intended that the buyer’s position would be protected if the condition was one which he could purify himself but not if it was a condition the purification of which was outwith his power. There is nothing in the agreement which indicates that such absurdity could have been intended. As the March Hare might have observed, “unconditional” simply means what it says.”

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.

Decision of the Lands Valuation Appeal Court in which a number of ratepayers appealed against the values entered in the roll at the time of the 2005 Revaluation and for their retail premises in Sauchiehall Street in Glasgow. Following the appeal, the Glasgow Valuation Appeal Committee found that a combination of events consisting of the opening of out of town shopping centres, the economic downturn, the withdrawal from the market place of various traders and the expansion and improvement of the St Enoch Centre brought about a material change of circumstances[1] affecting rental values in virtually all retail premises within the principal trading sections of Sauchiehall Street. As such, the values were reduced by 30%.

The Assessor appealed and the Lands Valuation Appeal Court found that only the economic crisis constituted a relevant material change of circumstances and returned the case to the Appeal Committee. After hearing expert evidence from both sides as to how much of the reduction was due to the economic crisis, the Committee allowed the appeals and found that the valuations should be reduced by 6.66%[2]. The ratepayers argued that the reduction should have been the full 30% and requested that the Committee state a case for the Appeal Court. The Assessor cross appealed arguing that there should be no reduction at all.

Before the Appeal Court the ratepayers argued that the court should:

1. resile from its previous decision in this case and decide instead that any change in rental value in an intermediate year, whatever the cause, was per se a material change of circumstances, except where it was trivial;
2. restore the original decision of the Committee (and reduce the values by 30%).

The Appeal Court rejected those arguments and refused the appeal (and cross appeal). The court was satisfied its previous decision was sound in law. It noted that, while a material change of circumstances may now[3] consist of a fall in rental value, not every fall in rental value constitutes a material change of circumstances. If that were the case the whole system of quinquennial revaluation would be undermined:

 “The system of quinquennial revaluation is based on the principle that subjects entered in the roll at a revaluation will remain at the same value until the next revaluation, unless a material change of circumstances occurs in the interim. In reality, the rental values of commercial subjects of all kinds may fluctuate constantly throughout the quinquennium. The submission for the appellants, if sound, would apply to all lands and heritages that are entered in the roll. If every downward fluctuation, whatever the cause, constituted a material change of circumstances, the whole basis of quinquennial revaluation would be undermined. The quinquennium would consist of an endless series of material change appeals relating to all kinds of lands and heritages.”

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 Lands Tribunal for Scotland in which Ms Rivendale sought to appeal the Keeper’s refusal to rectify the Land Register in her favour.

Background
Ms Rivendale purchased a cottage in Tarbert, Argyll in 2010 but was unable to register title to an area of ground in front of the cottage as it was included in her neighbour’s title. The tribunal found that Ms Rivendale was the “true owner” of part of the area of ground and that the register was inaccurate in that respect. However, in terms of s9(3) of the Land Registration (Scotland) Act 1979, the register cannot be rectified[1] where rectification would result in prejudice to a proprietor in possession. Ms Rivendale’s neighbour, who had used the disputed area (on part of which there was a track) to access two building plots and other land owned by her, argued that she was a proprietor in possession and would suffer prejudice if the register were rectified.

Reasoning
When considering the issue, the tribunal took the view that, in this case, it was not sufficient simply to decide whether or not the neighbour was in possession of that area as a whole. Rather, because there were two different characters of use of the area in question (Ms Rivendale used the area as garden ground and her neighbour used it as an access track), the matter became a question of finding where one use ended and the other began.

Decision
As such, the tribunal found that the neighbour was the proprietor in possession of part of the property on which there was a track but not a part which was grassed nor a part on which there were flower beds. As a consequence, Ms Rivendale was entitled to rectification of the register in respect of the part of the disputed area which extended to the edge of the track but not to the part on which the track was situated.

The full decision is available from the Lands Tribunal for Scotland here.

(See appeal to the Inner House below)

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

Case from the Lands Tribunal for Scotland in which Lundin homes appealed against the Keeper’s decision to exclude indemnity from their title to a development site.

Background
The site had been part of a larger development and had been intended as a detention pond for surface drainage run off but was not required for that purpose. Lundin bought the site from the receiver of the original developer. However, the Keeper excluded indemnity from Lundin’s title on the basis that the site could have been conveyed to the proprietors of the houses in the larger development as part of the common parts.

In the case of PMP Plus Ltd v The Keeper of the Registers of Scotland and others[1] it was established that it is not possible to create rights in common areas where the identification of those areas is dependent on a future uncertain event; for example, where a developer dispones properties (before the development has been completed) with a right of common property in the areas of the development which will be left over after the houses have been erected[2].

Keeper’s Argument
The Keeper argued that this case differed from PMP in that the development had been completed and the owner of the last of the houses in the larger development could have obtained title to the common areas (including Lundin’s site) as, at the time the last property was conveyed, the common areas became identified and were no longer uncertain.  On this reasoning, the Keeper argued, subsequent re-sales of the houses (after the common areas became identified by the sale of the last house in the development) would also carry a share of the common parts. The “Midas effect” effect (under which an entry on the register cannot be void, meaning that, if a title is registered, and so long as the subjects can be identified[3], that title becomes the actual title even if that does not represent the correct legal position) was important to the Keeper’s argument.

Decision
The tribunal rejected this argument finding that the common parts had not been sufficiently identified in the title to the last of the houses and noted the difficulty in determining with certainty when a development has been completed[4]. The title to the last of the houses did not show or attempt to describe the extent of the common parts or all of the boundaries of the other properties. The development title which had been marked up with progressive titles by the keeper did show all of the boundaries and common parts but it had been “closed” meaning that it was not public and could only be searched internally by Registers’ staff.

The tribunal found that reference to extraneous material, (with the possible exception of other publicly accessible registered titles) in order to establish completion and identify common parts is incompetent. As such, the owner of the last house to be sold in the larger development had no right to the Lundin site (or indeed the rest of the intended common areas within the development) and the Keeper had not been entitled to exclude indemnity when registering Lundin’s title.

It was also noted that re-sales of the houses did not include a right to the common areas as, even with the assistance of the “Midas” effect, the conveyance only disponed what was contained in the title sheets and the titles in the re-sales suffered from the same lack of description as the first purchases.

The full decision is available from the Lands Tribunal for Scotland here.

(See also Miller Homes Limited v The Keeper of the Registers of Scotland, LTS/LR/2013/06).

A blog on Registers of Scotland’s policy with regard to development common areas is available here.

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

Case from the Lands Tribunal for Scotland in which Mr and Mrs Franklin sought variation or discharge of a title condition preventing them from building a two-storey extension at their house in Dalgety Bay. Mr Lawson was a neighbour who objected to the extension on the basis that it would interfere with his view and take sunlight from his garden.

A condition in a prior feu disposition prevented alterations to the house without the consent of the superior. This condition was supplemented by another condition which allowed the feuars to enforce the conditions of their feu dispositions against each other but only with the superior’s consent. There was also a further clause giving the superiors the right to waive or vary all conditions.

The question arose as to Mr Lawson’s right to enforce the burden. In terms of section 52 of the Title Conditions (Scotland) Act 2003, following feudal abolition and removal of the superior, burdens created under a common scheme can be enforced by the proprietor of any property within the common scheme. However there must also be nothing in the title of the burdened property indicating that there are no third party rights of enforcement. Usually, the superior’s right to vary or waive the real burdens will indicate that there are no third party rights of enforcement. That was the situation in this case and, although there was also a positive power allowing the co-feuars to enforce the conditions, the tribunal found that (due to requirement for superior’s consent) the effect of the provision was simply to reinforce the proposition that the ultimate right of enforcement rested with the superior not the co-feuars. Thus Mr Lawson could not enforce the burden under s52.

However, the tribunal found that Mr Lawson had a right to enforce the burden under s53 of the 2003 Act under which properties within a group of related properties can enforce burdens imposed under a common scheme against other properties within the group. (There is no requirement that there be nothing indicating that there are no third party rights of enforcement under s53).

In terms of s8 of the 2003 Act a person can only enforce a real burden if they have an interest to enforce it. In order to have an interest to enforce it, a breach of the burden must result in “material detriment” to the value or enjoyment of the enforcer’s property. There was some discussion as to Mr Lawson’s interest to enforce. However the Tribunal took the view he did have an interest to enforce and said the following with regard to the meaning of “material detriment”:

“It is enough to say that we are satisfied that [Mr Lawson] does have an interest to enforce. As will appear from the discussion below, we have no doubt that the extension would have a material adverse impact on the respondent’s enjoyment of his property within the meaning of sec 8. In that context we see no reason to exclude the special attraction the view has for the respondent himself as an aspect of enjoyment of the property but, in any event, where there is an identifiable element of detriment which cannot be disregarded as insignificant or of no consequence, it seems to us that the test of materiality can be met. We think this is in accord with the substantive views expressed by the Sheriff Principal in Barker v Lewis at [27]. We do note that at para [24] he described “material” as an adjective of degree. However, this may be misleading. It can properly be seen to have a primary meaning as simply the opposite of “immaterial”. Determination of what is “material” does involve assessment of matters of degree but what is required is a decision as to whether or not the subject matter is “material”. The term is not primarily an adjective expressing quantity.”

After hearing the evidence, the Tribunal agreed to vary the title condition to the extent necessary to permit the Franklin’s proposed extension. No compensation was awarded to Mr Lawson. Although the Tribunal accepted that variation of the condition would result in a degree of loss to him, it noted that compensation could only be awarded for “substantial loss” and it could not find sufficient material to justify making any award.

The full decision is available from the Lands Tribunal for Scotland here.

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

Outer House decision concerning Trump International’s challenge to the Scottish Government’s decision to grant permission for an offshore wind farm near its golf resort at Menie in Aberdeenshire. (My blog on some of the issues surrounding the golf resort can be seen here.)

Following the recent decision in Sustainable Shetland v The Scottish Ministers in which Lady Clark came to the conclusion that it was not competent to grant planning permission for a wind farm to persons who were not licence holders or exempt persons[1] under the Electricity Act 1989, Trump International lodged a minute of amendment seeking to add the argument made by Sustainable Shetland (referred to as the “competency question”) to their pleadings. They also sought to have the competency question dealt with before the other issues in the case and referred to the Inner House.

Lord Woolman allowed Trump international to amend their pleadings[2] to include the competency question but, having regard to the potential consequences and effect it might have on the overall delay, refused the motion to detach the competency question from the other issues in the case.

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 Heary sought damages after suffering injury when climbing over a locked gate whilst attempting to leave a breakers yard he had been visiting.

Facts
Mr Phinn carried on a business known as Phinn Parts Auto Breakers from a yard in Dundee. Mr Heary had arrived at the yard and was directed by Mr Phinn to the part of the yard where he might find the parts he was looking for. Shortly afterwards, Mr Phinn left the yard and went home. Before leaving, Mr Phinn’s son had entered the yard and shouted to ask if anyone was there but had received no answer. When Mr Heary sought to leave the yard, he found that there was nobody else in the yard and that a communal gate, shared with four or five neighbouring businesses, was locked. He then attempted to climb over the gate to get out but fell. Mr Phinn denied locking the gate (he, along with the proprietors of the other yards, held keys to it) and it was not established who had done so.

Occupier’s Liability (Scotland) Act 1960
When considering Mr Phinn’s potential liability under the Occupier’s Liability (Scotland) Act 1960, the sheriff found that, although Mr Phinn was not the owner of the communal gate, he was an occupier in terms of the Act by reason of the control he exercised over the access. However, it was found that a gate operating normally could not be said to constitute a danger and accordingly there was no obligation on Mr Phinn under the Act.

Common Law
In contrast, it was found that, as Mr Phinn invited people on to the premises, he owed Mr Heary a duty to take reasonable care for his safety at common law. It was foreseeable that, if Mr Phinn allowed Mr Heary to be locked into the yard, he might injure himself whilst taking steps to escape. It was also foreseeable that, even if Mr Phinn did not lock the gate himself, one of the occupiers of the neighbouring yards may have done so. There was therefore a duty on Mr Phinn to take reasonable care to ensure that no one was left in the yard when he vacated it. The sheriff found that, although a check may have been carried out, given the size of the yard, the check had been inadequate. That failure to carry out an adequate check had caused Mr Heary’s injuries. However, after taking account of the fact that the incident had taken place during the day, the fact that the site was not completely isolated and that Mr Heary had decided to climb the gate (which was a significant obstacle) after waiting only 25 minutes, the sheriff found that there had been contributory negligence on the part of Mr Heary and reduced the award of damages by 50%.

 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 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 considering the relevant statutory provisions[1], 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.

However, Lady Clark rejected Sustainable Shetland’s arguments relating to the need for a public enquiry finding that, on reading the Ministers’ decision letter as a whole, the Ministers had considered that they had sufficient information to come to a conclusion without holding a public enquiry and Sustainable Shetland had failed to demonstrate that the Ministers were not entitled to reach that conclusion.

The full judgement is available from Scottish Courts here.

(NB: See appeal to Inner House  and further appeal to the Supreme Court here. See also related decision in relation to intervention by interested parties and Trump International v Scottish Ministers).

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