Northern Rock (Asset Management) Plc v. Jane Steel and Bell & Scott, 19 February 2016 – solicitor’s liability to client’s bank on discharge of security

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

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

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

In the Outer House Lord Doherty agreed with that argument finding that, in the circumstances: (1) it was not reasonable for Northern Rock to rely on the solicitor’s statements without checking them by seeking clarification from the solicitor and/or looking at their file; and (2) that it was not reasonably foreseeable by the solicitor that Northern Rock would rely on the statements without such checks.

Decision
The Inner House allowed an appeal finding that, in the circumstances, it was reasonably foreseeable that Northern Rock would rely on the solicitor’s statements and sign and return the discharges. Consequently the solicitor was to be taken to have assumed responsibility for her statements. The Inner House considered that Lord Doherty had not considered whether it was fair just and reasonable to impose a duty on the solicitor:

“As a consequence of the Lord Ordinary’s approach, he did not go on to consider whether the imposition of a duty of care would be fair, just and reasonable.  The context was, for the reasons I have explained, a background of assumption of responsibility and reasonable foresight of significant economic loss suffered by a bank in a sufficiently proximate relationship with a solicitor who had previously shown herself to be a trustworthy source.  The context was also, importantly, that that solicitor whilst acting outwith her mandate and instructions made a serious error and put in train a series of events which caused the bank to suffer significant loss.  What then of the fact that the loss could have been avoided if, having received the email which ought never to have been written and the attachments which ought never to have been sent, the bank had checked its file?  Does that mean that it would not be fair, just and reasonable to hold the solicitor liable?  I cannot identify any policy reason for doing so.  Nor can I conclude that that fact demonstrates that the solicitor should be relieved of liability.”

The full judgement is available from Scottish Courts here.

 

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The Old Course Limited v Fife Council Assessor, 7 June 2016 –entry of showhouses on valuation roll for non-domestic rates

Inner House case considering the entry of apartments at the Hamilton Grand in St Andrews on to the valuation roll (for non-domestic rates). Old Course had furnished 2 (out of 26) of the apartments at development and used them as showhouses when selling the other apartments. The assessor entered the showhouses on to the valuation roll with the description “showhouse”.

Old Course appealed against the entry arguing that the showhouses should have been excluded[1] from the roll on the basis that they were dwellings[2]. Although the apartments in question were used as showhouses, Old Course argued that, in terms of the legislation, it is the nature of the subjects (i.e. the natural physical characteristics) which determines whether or not a property is a dwelling and that the use to which the subjects are put is irrelevant.

The Inner House refused the appeal noting that:

 “in characterising subjects for the purposes of valuation for rating it is proper to look not only to their physical circumstances but also to the use to which they are put.  Subjects are valued in their actual state and according to their existing use”.

The court found there was nothing in the legislation to support Old Course’s arguments that use of the subjects is irrelevant and that Old Course’s proposed interpretation of the legislation would lead to absurd results.

The full judgement is available from Scottish Courts here.

 

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[1]  In terms of s.73 of the Local Government Finance Act 1992.

[2] In terms of s. 72(2) of the 1992 Act.

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The City of Edinburgh Council v Martin Smith, 19 April 2016 – Short Scottish Secure Tenancy -creation of unintentional further contractual tenancy prevents landlord recovering possession

Sheriff court case in which the City of Edinburgh Council sought decree for payment of arrears of rent and recovery of possession of a property at Springwell Place in Edinburgh.

The Council let the property to Mr Smith under a Short Scottish Secure Tenancy Agreement for an initial period of 6 months after which it was renewed on a month to month basis until one of the Council’s managing agents served a notice to quit on the tenant requiring him to remove from the property in February 2015. On the same date a notice of intention to raise proceedings for possession was served in terms of s36 of the Housing (Scotland) Act 2001.

In terms of s36(5), where the landlord has served the appropriate notices and raised the proceedings within the relevant timescale, the court must grant an order for recovery of possession if the tenancy has reached its end, tacit relocation is not operating and no further contractual tenancy is in place.

However, in this case, the sheriff was advised that an agreement had been reached with Mr Smith whereby he would remain in occupation of the property on payment of an agreed sum by way of rent (which also included the rent arrears). At a subsequent hearing before the sheriff the council also sought an adjournment rather than decree in order to give the tenant an opportunity to comply with his obligations before it obtained the decree.

Although Mr Smith did not appear in court and did not lodge any response to the council’s action, the sheriff found that the agreement between him and the council constituted a contractual tenancy:

“[t]hree of the essential clauses of a lease appear to have been agreed, namely, the parties, the subjects and the rent.  In those circumstances, at common law, the duration of the lease would be implied to be one year”.

As such, the sheriff found that the council was not entitled to recover possession in terms of s36(5) as a “further contractual tenancy” was in place and council’s action was dismissed.

The sheriff also noted that, according to the council’s pleadings, the notice to quit had been hand delivered by the council’s managing agent and, if so, it had not been validly served as only Sheriff’s Officers have the authority to serve such a notice personally meaning that, even if there had not been a further contractual tenancy in place, the requirements of s36(5) would still not have been met.

The full judgement is available from Scottish Courts here.

 

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Peter Kennedy, North Hamilton and Edward Tulloch v Dickie & Moore Holdings Limited, 24 May 2016 – interpretation of contract

Inner House case concerning the interpretation of a minute of agreement between the owners of a development site in Ayr (the trustees) and Dickie & Moore.

The Trustees and Dickie & Moore had concluded missives for the sale of the site but later Dickie & Moore resiled from the missives (after paying an abortion fee). Dickie & Moore had been attempting to obtain planning permission for the site. When they resiled from the missives, the parties agreed that Dickie & Moore would continue to seek planning permission and the parties entered the minute of agreement by which the trustees would reimburse Dickie & Moore for professional costs if the trustees were to agree unconditional missives (i.e. missives which were not conditional on the obtaining of planning consent) with a third party.

The trustees entered unconditional missives to sell the site to a third party and, despite the fact that they had not succeeded in obtaining planning permission, they sought recovery of their professional costs from the trustees.

The minute of agreement provided:

“AND WHEREAS it has been agreed between the parties that in the event of the Sellers concluding unconditional (that is not subject or no longer subject to a suspensive condition) missives with a third party for the sale of the said subjects extending to 6.293 hectares or a substantial part thereof during the shorter of the period when the Planning Consent obtained or to be obtained by DMH for the development of the said subjects remains extant and the period of five years from the date of these presents, as the case shall be, the Sellers will reimburse DMH the full amount of the said professional fees together with any further vouched professional fees (up to a maximum of TEN THOUSAND POUNDS (£10,000) STERLING) incurred by DMH in obtaining such Planning Consent”

The question for the court was whether, in terms of the agreement, Dickie & Moore were entitled to recover their professional costs incurred in pursing the planning permission when the trustees concluded unconditional missives with the third party despite the fact that Dickie & Moore had not obtained planning permission.

The Inner House (allowing an appeal) took the view that the whole structure and purpose of the agreement was predicated on Dickie & Moore successfully pursuing their outstanding planning application. The Court did not consider that the parties had agreed to a situation whereby Dickie & Moore could achieve nothing in respect of planning consent but, provided that there was a sale within five years of the date of the minute of agreement, would be entitled to payment of the fees they had already incurred. Lady Clark made the following comments as regards the commercial sense of the possible interpretations:

“It is very difficult to understand why it would make any commercial common sense for the [the trustees] to pay substantial fees, for which they were not liable, in circumstances where [Dickie & Moore] were not obliged to achieve anything in relation to future planning consent but became entitled to repayment merely in the event of a sale to a third party within five years of the minute of agreement.”

The full judgement is available from Scottish Courts here.

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Scottish Parliamentary Corporate Body v The Sovereign Indigenous Peoples of Scotland, 5 May 2016 – removal of protestors camping at the Scottish Parliament

This is an Outer House case in which the Scottish Parliamentary Corporate Body sought an order for removal of a group of individuals camped within the grounds of the Scottish Parliament with the stated intension of remaining there until Scotland declares itself an independent country.

Lord Turnbull found that the corporate body was the valid proprietor of the grounds on which the camp was located, that the campers had no lawful right to encroach upon the corporate body’s property and found that arguments made by the campers concerning the impact of the Treaty of Union (leading to the creation of Great Britain) on the provision of the corporate body’s powers by the Scotland Act 1998 had no foundation. Lord Turnbull also rejected arguments based on rights claimed by the campers under The United Nations Declaration on the Rights of Indigenous People of 2007 and, in addition, found that the campers’ occupation of the camp did not fall within rights of access (the “right to roam”) created under the Land Reform (Scotland) Act 2003.

However, Lord Turnbull did find that, as the corporate body is a public body, it is unlawful for it to act in a way which is incompatible with the European Convention for the Protection of Human Rights and Fundamental Freedoms. As such, it was necessary to consider whether granting an order for removal of the campers was compatible with the rights guaranteed by the convention; in particular article 10 (freedom of expression) and article 11 (freedom of assembly and association). Consequently, Lord Turnbull granted a procedural hearing anticipating that it would lead to a further hearing to consider evidence on the proportionality of granting the order removing the camp (i.e. to allow the corporate body’s right to the removal order to be assessed against the campers right to freedom of expression and freedom of assembly and association).

The full judgement is available from Scottish Courts here.

 

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Elsick Development Co Ltd v Aberdeen City and Shire Stratetgic Development Planning Authority, 29 April 2016 – validity of planning obligation in s.75 agreement.

Inner House case considering an appeal relating to a section 75 agreement between Elsick Development Company and Aberdeen and Aberdeenshire Strategic Development Planning Authority. EDC wished to construct a development at Elsick (near Stonehaven). The agreement provided for EDC to make payments to a Strategic Transport Fund in terms of non-statutory Supplementary Planning Guidance. EDC had concerns that the planning guidance was invalid and, in terms of the agreement, no contribution was to be paid if the guidance was found to be invalid.

EDC argued before the Inner House (amongst other things) that the Supplementary Planning Guidance was contrary to national planning policy as it failed to comply with the requirement that any planning obligation must relate directly to the development proposed (as is provided for in the Scottish Government Planning Circular “Planning Obligations and Good Neighbour Agreements (Circular 3/2012)).

The court allowed the appeal finding that:

“It is a fundamental principle of planning law that a condition attached to the grant of planning permission, whether contained in a section 75 Agreement or otherwise, must “fairly and reasonably relate to the permitted development” …  This principle is reflected and explained by the Scottish Government Circular (3/2012) …  This makes it clear to planning authorities that an obligation must be “related and proportionate in scale and kind to the development”

 However, the court concluded that the Strategic Transport Fund was designed to pay for transport projects and infrastructure (“interventions”) which were not directly related to the proposed development.

 “The STF, and the requirement in the statutory Supplementary Guidance (SG) to contribute to it, may be regarded as a sound idea in political or general planning terms.  It may be seen as an imaginative idea which allows advanced strategic planning objectives to be achieved in a structured manner, financed by new development.  That does not, however, permit the imposition of an obligation on a developer to contribute to an intervention which is simply not related to the proposed development…  It may be that legislation could authorise the type of contribution envisaged by the [planning authority] …  but it has not yet done so in Scotland.”

 The full judgement is available from Scottish Courts here.

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Land Reform (Scotland) Act 2016

An Act of the Scottish Parliament making provision for:

  • a land rights and responsibilities statement (to be reviewed every five years) to contain principles for guiding the development of public policy on land rights;
  • establishing a Scottish Land Commission (to monitor the system governing ownership and management of land and to recommend changes in the public interest);
  • a public register of persons with a controlling interest in land (aimed at improving transparency of landownership);
  • requiring that Ministers issue guidance on the circumstances in which landowners should carry out engagement with the community;
  • empowering communities to buy land where it is necessary to further sustainable development;
  • the application of non-domestic rates to shootings and deer forests;
  • empowering local authorities to change the use of inalienable common good land;
  • additional powers for Scottish Natural Heritage to intervenewhere the management of deer by landowners and occupiers is not delivering in the public interest;
  • amendments and procedural clarifications to be made to the access rights over land  contained in Part 1 Land Reform (Scotland) Act 2003; and
  • reform of the agricultural holdings legislation (aimed at improving relationships and re-dressing imbalances between tenants and landlords).

The Act received Royal Assent on 22 April but further regulations are required to bring the various provisions into force.

The Act is available here.

 

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Ross Cooper v Simon Marriott, 30 March 2016 – application of tenancy deposit scheme where property alleged not to be tenant’s main home and tenant accused of dishonesty

Background
Sheriff court case concerning a short assured tenancy of a flat in Edinburgh in relation to which a deposit of £550 was paid to the landlord but not paid into an approved tenancy deposit scheme as required under the Tenancy Deposit Schemes (Scotland) Regulations 2011. The tenant applied to the sheriff for an award of an amount of money as a sanction for the landlord’s failure to comply with his obligation under the regulations.

Arguments
The landlord argued that:

  1. the tenancy was not protected by the 2011 regulations because the property was not ‘the principal home’ of the tenant during the duration of the lease (as the tenant had worked 3 and half days a week in Skye for a period of 6 months); and
  2. even if the tenancy was protected by the regulations, a new tenancy was created in June 2014 in respect of which no deposit was made (meaning any action under the original lease would have been time barred at the time of the court action);  and
  3. if the application was not time barred, the sanction provision was unenforceable, by the tenant, due to his dishonesty and illegality.

Decision
The sheriff rejected all of these arguments.

In the first place, the question of the tenant’s principal home did not have any bearing on the case. (The landlord had referred to the definition of an assured tenancy contained in s12 of the Housing Scotland Act 1988 which requires that the property is the tenant’s only or principal home. However, this was a short assured tenancy not an assured tenancy)

In the second place, although the tenancy agreement commenced on 15 June 2013 for a period of 12 months until 14 June 2014, it continued, with the consent of parties, until it terminated on 17 July 2015. Whilst the landlord had argued that a new lease was created in June 2014, the sheriff held that the tenancy was continued after 14 June 2014 on the principle of tacit relocation[1]. In coming to this conclusion, the sheriff noted that, after 14 June, the parties to the contract were the same, the property was the same and the only change was that the landlord had abated the rent by £50 because of a problem with the water supply. As such, the sheriff had no reason to think there was anything other than an extension to the original lease. (Meaning the action had been raised in sufficient time (i.e. within 3 months of 17 July 2015) in terms of reg. 9(1) of the 2011 Regulations).

Finally, the principle of illegality referred to by the landlord had no application to this case. (Although the sheriff also found that the landlord’s allegations in this regard were unsubstantiated). The sheriff stated that, although in some cases of partial breach of the regulations where the deposit was ultimately paid into to the scheme, the conduct of the tenant could be relevant to the sanction, where the deposit is never lodged, he failed to see how the tenant’s character could ever mitigate the breach.

As such, a sanction of twice the value of the deposit[2] was awarded[3].

It is also of note that, with regard to arguments by the Landlord to the effect that he had not understood the regulations and was only an ‘amateur landlord’, the sheriff said the following:

 “the regulations do not recognise the status of ‘amateur landlord’.  Landlords who rent to the public are covered by the regulations whether they are large commercial concerns or single property, buy to let landlords.”

 The full judgement is available from Scottish Courts here.

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[1] Where the term of a lease comes to an end and the tenancy then renews itself on the same terms and conditions.

[2] The maximum award is three times the value of the deposit.

[3] Less £50 for minor damage which had occurred to the property.

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Charlotte Waelde v Felix Ulloa, 29 March 2016 – liability for windows in tenement roof

This is a Sheriff Court case concerning the liability for repairs to the roof of a building in Edinburgh.

The building was formerly a single dwelling but subdivided into three flats and fell within the definition of a tenement in terms of the Tenements (Scotland) Act 2004. The title deeds contained a burden sharing the cost of repairs to the roof on the basis of the assessed rentals for the flats.

Ms Waelde was seeking the recovery of the costs of repair of a skylight and Velux window in the roof of the property from the owner of one of the other flats.

Velux Window
With regard to the Velux, Mr Ulloa argued that, because the Velux had been added after creation of the burden, the burden did not apply to it. That argument was not accepted by the sheriff who, noting that the repairs were to the outer edge of the frame of the Velux and the wall separating the building from the building next door, was “attracted by the idea” that a roof should:

“be taken to include parts added thereto which are of the same character; and that an obligation to contribute to the cost of maintaining it created by the type of burden in the present case should be treated as extending to the cost of maintaining same.”

Also, the sheriff noted that Mr Ulloa had bought his flat after the Velux window had been added and took the view that Mr Ulloa had acquiesced in the presence of the Velux and the burden should be interpreted in a way consistent with the window forming part of the roof.

However, although the sheriff could make a finding in principle that Ms Waelde could recover the costs of repairs to the Velux, Ms Waelde did not provide evidence as to the rateable values of the flats and consequently the sheriff found that her case in that regard had to fail.

Skylight
With regard to the skylight, the sheriff found that the repairs (replacement of Flashband tape on the surfaces of the glass panes themselves) were not repairs to the roof and consequently the title burden did not apply. However, the sheriff found that the skylight acceded to the roof. And, whilst that did not mean the skylight became part of the roof, it did mean that it was part of the building. But, as the roof was common property and the skylight acceded to it, the skylight was common property too (the sheriff noted that he came to this conclusion with some hesitation). In terms of the Tenement Management Scheme (TMS) contained in the 2004 Act, common property is “scheme property” and in terms of Rule 4(2)(a) of the TMS, MR Ulloa was liable for one third of the cost of maintaining the skylight.

The full judgement is available from Scottish Courts here.

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