Sheriff Court case concerning the validity of an irritancy notice.

Background
Shetland Leasing were the landlords, and Mr Younger the tenant, under the lease of commercial premises at North Ness Industrial Estate in Lerwick.

Shetland Leasing served a notice on Mr Younger (under s4 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985) advising that they had failed to pay rent and interest due in terms of the lease and demanding payment of £10,167.64 (stated to be the outstanding rent) within 14 days failing which Shetland Leasing would terminate the lease. The notice also stated that once payment had been received Shetland Leasing would advise as to the interest due.

Mr Younger did not pay and Shetland Leasing served a termination notice on Mr Younger. Mr Younger’s solicitors then sent the outstanding rent to Shetland Leasing’s solicitors and Mr Younger remained in the premises. Shetland Leasing sought declarator that the lease was at an end and summary ejection of Mr Younger from the premises.

Argument
Mr Younger argued that the irritancy notice was invalid as it did not adequately convey what required to be done in order to comply with it. In particular it did not include adequate specification of the rent said to have been in arrears: the rent was said to be for a period of 5 months rent but the actual figure quoted in the notice did not equate to that. Mr Younger contended that it was unclear whether the sum of £10,167.64 included interest and, because it was unclear which months had been paid in full and which had not, he could not calculate the interest due on the lease.

Decision
The Sheriff found that the lease had been validly terminated and granted decree for summary ejection of Mr Younger.

The purpose of the notice was to give a clear and unambiguous intimation to the tenant that there were arrears of rent which required to be paid within a specified period, failing which the landlord could rely on the irritancy clause in the lease to bring it to an end. The notice served by Shetland Leasing clearly demanded rent only and not interest.

In terms of s4 of the 1985 Act the landlord must demand payment of: “the sum which he has failed to pay together with any interest thereon in terms of the lease “. The lease made the tenant liable to pay interest on unpaid rent from the due date for payment until payment was “actually made”. The interest could not be calculated until payment was made. The sheriff found that the obligation as regards interest was to pay it within a reasonable period after payment of the rent. It followed that it was not necessary, or appropriate, that the notice demanded payment of the interest and its validity of the notice could not be attacked on that basis.

The sheriff also found that, although the notice referred to Mr Younger’s failure to pay interest when in fact there was no obligation to pay interest at that point, it did not make the notice invalid as Mr Younger ought to have known by reference to the lease that it was not payable at that time and could not have been misled by the assertion.

With regard to Mr Younger’s assertion that the arrears were overstated, the sheriff said:

“That is not a defence that is open to a tenant who has received such a notice and has done nothing in response to it. It may well be the case that the sum claimed in such a notice is inaccurate. That could be so for a variety of reasons. But in this case we are dealing with a commercial lease. The defender is a man of business. In running his business he must maintain records. He ought to know whether or not he is actually in arrears with his rent. He ought to be able to calculate from his records the extent to which he is in arrears with his rent. But all that the defender avers is that he was aware that he was in arrears of rent to some extent but was unaware of the exact amount. If it is truly the defender’s position that the section 4 notice overstated the arrears he could, and should, have responded to the notice by asserting a lower amount of arrears than was claimed and by paying that lower amount.”

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 brownfield site at St David’s Harbour in Dalgety Bay owned by Eadie Cairns Limited. The site had been previously used for both commercial and residential purposes until 1980 when it became derelict.

Background
In 2007 Fife Council produced a planning brief for developers proposing a mixed use development on the site. Eadie Cairns submitted an application for outline planning permission for a commercial and residential development along the lines of the planning brief. The Council failed to determine the application timeously and it was made the subject of a public local inquiry.  The Council opposed only the residential part of the application. In November 2007, the reporter at the inquiry allowed an appeal against the failure to determine the application and granted outline planning permission[1]. In October 2009 Eadie Cairns applied for detailed planning permission for 27 flats, a restaurant/bistro and a lighthouse. Planning permission was refused and the reporter[2]  refused an appeal on the basis of the siting of the flats.

By February 2010, the new proposed Dunfermline and West Fife local plan had been drafted. It  recorded that the Eadie Cairns site already had outline planning permission for commercial leisure and housing uses but also stated that if the permission were to remain unimplemented and expire the site should remain undeveloped and revert to greenspace. Eadie Cairns made representations opposing this aspect of the draft plan.

When considering approval of the plan, the Scottish Ministers required Fife Council to prepare a summary of unresolved issues in relation to the plan (including reasons the Council did not modify the plan in response to issues raised in representations). The Council identified Eadie Cairns objection to its site’s reversion to open space if planning permission lapsed and, as a reason for not accepting the objection, said:

“The site has significant planning history and was the subject of recent planning appeal.  The Draft local plan … maintains [the Council’s] position should the permission remain unimplemented.”

Meantime Eadie Cairns submitted a fresh planning application (for 24 flats, a restaurant/bistro and a lighthouse) after detailed discussions with Council’s planning officers. The Council again failed to determine the application timeously and Eadie Cairns again appealed to the Scottish Ministers. On the same day (3 May 2012) as the reporters ceased gathering information relating to the proposed local plan, Eadie Cairns sought to draw their attention to the fresh planning application stating that the planning officers’ support for the new application was inconsistent with the Council’s proposal for the site to revert to green space. The reporters refused[3] to consider this information and (noting that the outline permission for the site had lapsed) formally adopted the plan. The Scottish Ministers then refused the fresh application on the basis it did not accord with the plan.

Argument
Eadie Cairns sought an order quashing the entry relating to their site in the plan on the basis of the Council’s failure to give reasons. They argued that the reporters had not noticed the council’s failure and had not sought out their reasons (in contravention of national planning policy and guidance). The lack of reasons meant that the reporters could not properly scrutinise whether the proviso (i.e. that the site should return to greenspace) was appropriate or not.

Decision
Representations made by Eadie Cairns on 3 May 2012
The Inner House found that there had been no requirement for the reporters to take into account the representations Eadie Cairns had made on 3 May 2012 with regard to the fresh planning application. The statutory scheme involved a “cut-off date” at the point the reporter had completed examination. The purpose of the reporter’s examination was to assess issues raised in unresolved representations. The examination began at the point the Council summarised the objections and gave its reasons for not modifying the daft plan. Although the reporter could call for further representations, it was not obliged to consider any offers to provide additional representations. Consequently the “cut-off date” had long since passed by 3 May 2012.

Reasons given by Fife Council
The Inner House held that the Council had given no reasons for not modifying the proposed plan in terms of Eadie Cairns’ representations. Whilst the Council would not be criticised for giving reasons in a succinct, broad manner, intelligible reasons have to be given. The Council’s explanation of their position had been opaque. Their position, at the 2007 inquiry, was that commercial leisure, but not residential, development was appropriate for the site. However the inquiry had established that they had been wrong in relation to proper planning considerations and that a mixed commercial leisure and residential development was appropriate. Not only should the Council’s reasoning have provided coherent justification (preferably in the form of a material change in circumstances) for departing from the findings of the reporter in the 2007 inquiry, but it should also have given justification as to why the Council was no longer supporting the principles it had promoted in the 2007 planning brief.  In the absence of such reasoning there was:

“no apparent justification in planning terms for leaving an area of privately owned ground in amongst what is an urban development as, in effect, wilderness, especially in circumstances where it had formerly been the site of a bustling commercial harbour and remains what appears to be a prominent element in the local planning context.”

Reasons given by the reporters
The effect of this flaw in the Council’s reasoning had been that the issues had not been properly focused before the reporters. Whilst the reporters could have cured the flaw by requesting more information, they had not done. The Inner House found that no intelligible reason had been given by the reporters as to why the principle of commercial leisure and residential development established in 2007 was no longer appropriate for the site.

The Court also noted that the reporters had provided an erroneous, or at least materially incomplete, narrative of the planning history of the site and quashed the whole proposal relating to the site in the development plan.

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 in which Mr Barr appealed a decision of the Outer House refusing his appeal of East Renfrewshire Council’s decision to grant planning permission to Stewart Milne Homes Limited to construct a development in Newton Mearns.

Background
Mr Barr lived at Fa’side House which was adjacent to the proposed development and was accessed by a tree lined driveway. The planning brief stated that the development should deliver “protection of the existing tree boulevard along the access to Fa’side House”. Mr Barr argued that the Outer House failed to recognise that, when granting permission for the development, the Council had failed to take account of a key requirement in its own planning brief and thus failed to take account of a material consideration.

Decision
The Inner House refused the appeal finding that it was plain from the decision that the judge had correctly identified the legal issue submitted by Mr Barr. It also refused to accept that the Council had failed to have regard to the content of its planning brief. In the Council’s “Report of Handling” there had been express reference to the planning brief and its objectives, including the need to protect the tree boulevard.

In the court’s opinion, Mr Barr’s complaint was, in essence, not that the Council had failed to have regard to the objectives of the planning brief but that they had failed to reach a conclusion that the proposed development would, in a material way, breach the planning objectives. In effect, Mr Barr was arguing that the proximity of the trees to the new development would inevitably lead to the trees requiring to be removed for safety reasons. However, the court found that Mr Barr had failed to show that there was evidence before the Council to support this argument.

In the view of the court, Mr Barr’s criticism of the Council decision related to the merits of the planning decision and to matters on which the Council was entitled to reach a conclusion.

The full judgment 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 whether additional parties (including the Trump Organisation) could intervene in the case of Sustainable Shetland v The Scottish Ministers which concerned the Scottish Government’s decision to grant planning permission for a wind farm on Shetland.

Background
In the Outer House Lady Clark had, in essence, found that consent to build a wind farm could not be granted to developers who did not already hold a licence to generate electricity (this finding has become known as “the competency question”). As was noted by the Inner House, the competency question has caused a “degree of consternation” amongst wind farm developers.

The Scottish Minister’s sought to appeal the decision of the Outer House. However, although they have indicated that they wish to maintain environmental arguments, Sustainable Shetland have indicated that they do not wish to maintain an argument based on the competency question.

A variety of parties including the Trump Organisation[1], various wind farm developers and the RSPB then sought to intervene in the proceedings in terms of Rules of Court 58.8(2) (which allows parties directly affected by any issues raised in proceeding to intervene) and 58.8A (which allows parties to intervene in order to raise an issue of public interest).

Decision
Rule 58.8(2) – parties directly affected
The Inner house found that Trump and the other wind farm developers could not be said to be directly affected by the issues raised in the proceedings:

 “As a general rule, if a public law decision is challenged, for whatever reason, the range of persons able to enter the process remains limited to those who can show an interest in the outcome of the case; that is to say not in the potential legal reasoning employed by the court in reaching a decision, but in the decision itself. Neither Trump nor AES K2 and the related companies have any interest in the outcome of whether the Shetland windfarm goes ahead.”

Rule 58.8A – issues of public interest
Trump’s application under rule 58.8A also failed. They were not advancing a public interest point. The point which they sought to make was one intended as a protection of their private interests in the marketing of their Menie development.

The Outer House also rejected the RSPB’s application under rule 58.8A noting that, although they had interest in the bird life on the wind farm, they had had the opportunity to intervene in the Outer house proceedings and chose not to do so. Consequently, the Inner House did not consider it appropriate to allow the RSPB to enter the process at the appellate stage under the guise of a public interest intervention. Further, given the positions of Sustainable Shetland and the Scottish Ministers, the court did not consider that any propositions advanced by the RSPB would be likely to assist the court.

The full judgement is available from Scottish Courts here.

Inner House case in which SEPA and others appealed against a decision of Lord Hodge in the Outer House to the effect that the liquidators of Scottish Coal could (1) abandon mining sites and (2) abandon/disclaim the related statutory licences/permits (which in effect allowed the liquidators to avoid onerous obligations requiring restoration of the sites).

SEPA’s arguments
Abandonment of land
SEPA argued that the liquidator did not have the power to abandon or disclaim property.  Whilst a liquidator could disclaim land in the sense of declining to deal with it, the land continued to be owned by the company and the liabilities arising from ownership continued to be enforceable. Lord Hodge, they argued, had been in error when he stated that a liquidator could disclaim “by taking steps to terminate the company’s ownership of the land”.

Abandonment of the statutory licences
With regard to the liquidator’s power to abandon or disclaim the statutory licences:

1. there was no power to “disclaim” in the sense that a liquidator could terminate a licence unilaterally and without reference to the statutory surrender procedures;
2. even if  1. were wrong and a liquidator did have a general power to disclaim property, the scheme laid out in the CARs[1] created a form of licence that could not be renounced in that way, even if other licences could be so renounced; and
3. it had been within the legislative competence of the Scottish Parliament to promulgate the CARs with that effect.

Decision
Abandonment of land
A person can abandon land, in the sense of leaving it physically, intending to give up its use permanently. However, the Inner House found that that was not what was under consideration in this case. What required to be decided was whether a person can “abandon” or “disclaim” ownership of land. There are a number of methods by which a person’s ownership can be terminated: destruction of the land itself, where the owner ceases to exist, by operation of law (e.g. enforcement of a security or a compulsory purchase) or by voluntary transfer to another person. However, there is no legal process whereby a person can transfer land into oblivion. A person cannot abandon the ownership of land in the sense of casting away the real right.

The court also noted the difference between the insolvency regimes in England and Scotland created by s178 of the Insolvency Act 1986, which allows a liquidator in England (but not in Scotland) to “disclaim” onerous property[2].

Abandonment of the statutory licences
The CAR regime prohibits activities which have or are likely to have a significant adverse impact on the water environment. In particular, activities liable to cause pollution are controlled but controlled activities can be carried out by a “responsible person” on the grant of a licence by SEPA. Liquidators are expressly included within the definition of “responsible person”. In addition to being an asset, licences bring with them associated liabilities and can be varied or terminated on application to SEPA which, if it grants an application to surrender a licence, must specify the steps necessary to avoid a risk of adverse impact on the water environment and to leave the water environment in a state that complies with European, UK and Scottish legislation.  On a broad interpretation of the regulations the provisions expressly impose the surrender regime on liquidators[3]. In the view of the Inner House:

“The alternative and narrower interpretation would require the CARs to be read in a way that goes against the ordinary meaning of the language used. Specifically, the CARs do not say that a liquidator is a “responsible person” only for so long as he does not exercise a power to disclaim. Such an interpretation is contrary to the plain meaning of the CARs and ignores the additional problem that a Scottish liquidator does not, in any event, have a general or statutory power to disclaim. It would be a curious construction of an explicit provision that a liquidator is a responsible person and, therefore, responsible for ensuring compliance with the statutory licence, only for as long as he chooses. The narrower interpretation of the CARs is further undermined by the existence of the specific surrender provisions.”

Competence of the CARs
In the Outer House Lord Hodge had the view that the Scotland Act 1998[4] required him to take a narrow interpretation of the CAR regime. However, the Inner House disagreed. Even when taking a broad approach to interpreting the provisions, and although the effects of the provisions would be felt by liquidators of companies being would up in England, the CAR regime dealt with matters which formed part of the law of Scotland and did not form part of the law of England. Also, when considering whether the provisions dealt with reserved matters (i.e. corporate insolvency) the court found:

 “The purpose of the CARs as a whole, and the provisions relating to a liquidator in particular, is an environmental one. Neither the CARs as a whole, nor the provisions relating to liquidators, have as their purpose an insolvency objective. The effect on liquidators of companies possessing a CARs licence is no more than a loose or consequential connection. In all the circumstances, those provisions of the CARs which are said to restrict the power of a liquidator cannot be said to relate to reserved matters.’”

The Inner House allowed the appeal and directed that the liquidators did not have the power to “abandon (otherwise disclaim)” the sites or the statutory licenses.

The full judgement is available from Scottish Courts here.

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.

Rumbelow & Rumbelow v Revenue & Customs [2013] UKFTT 637 (TC)

In the first case Mr and Mrs Rumbelow left the UK to set up home in Belgium, as a prelude to semi-retirement and with a view to becoming non-resident in order to shelter their UK property from Capital Gains Tax (CGT).   The issue was whether in the tax years in question they remained resident in the UK and were therefore subject to UK CGT.  Mr and Mrs Rumbelow lost because of the ties they retained with the UK.  This tribunal used evidence of cash withdrawals, debit card purchases and records of their business transactions to track their movements during this time.  These showed that their visits to the UK were more frequent and extensive than they had described.  They also kept a taxed and insured car at their fully furnished Cheshire property where they stayed on their UK visits.  The Rumbelows lack of detailed records also hindered their attempts at showing they were non-UK resident during the years in question. The full decision can be found here.

Gibson v Revenue & Customs [2013] UKFTT 636 (TC)

In the second case Mr Gibson demolished his home and built a new house on the site.  HMRC denied principal private residence relief on its disposal.  Even though Mr Gibson had been “camping” for several months in his new house while the building works were going on the Tax Tribunal ruled that this did not amount to residence.  The full decision can be found 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.