News archive

Outer House case concerning the nature and extent of tenants’ obligations under a lease of office premises at Chesser House on Gorgie Road in Edinburgh. Mapeley were the landlords and the City of  Edinburgh Council, the tenants.

At the expiry of the lease Mapeley served a schedule of dilapidations on the Council and sought payment of just over £8m.The interpretation of the tenant’s repairing obligations under the lease were at the centre of the dispute. There were two issues of interpretation for the court:

1. whether, in terms of the lease, the landlord was entitled to receive a sum equivalent to the cost of repairing the premises even if it had no intention of carrying out the required repairs; and
2. whether, in terms of the lease, the tenant was obliged to replace the plant and equipment on the premises at the end of the lease whatever the condition of those items (i.e. even if not missing, broken, worn, damaged or destroyed.)

In essence, the Council argued that, in terms of the lease, (a) the landlord was not entitled to recover the costs of putting the property into the standard of repair contained in the lease where the landlord did not intend to undertake the work and (b) the tenant did not require to replace or renew items of plant and equipment where the items were not missing, broken, worn, damaged or destroyed.

Lord Doherty found that the precise wording contained in lease was capable of bearing both that interpretation and the interpretation argued for by the landlord (per 1. and 2. above). However, where such wording is capable of bearing more than one meaning, the court requires to adopt the interpretation which best accords with business common sense. As such Lord Doherty preferred the interpretation contended for by the Council noting that, to adopt Mapeley’s approach, would have involved a radical departure from the common law which would have resulted in excessive and disproportionate consequences and, as a result, would have required to have been clearly indicated in the lease (which it had not been in the lease in question).

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.

The following property styles have now been added to the LKS style Bank:

• 1.3.2.3 Offer by tenant to take lease of commercial property with tenant’s fitting out works
• 3.3.7 Licence for tenant works – standard version
• 3.3.8 Licence for tenant works – simplified version
• 1.3.5.2 Offer By Sub-tenant To Take Sub-lease Of Whole Commercial Premises From Mid-landlord.

These are available to our subscribers here. (Contact  andy@legalknowledgescotland.com to receive a subscription quotation.)

And for individual purchase here.

You can see a complete list of all property styles currently available here.

All relevant LKS property styles have been updated to take account of Land and Buildings Transaction Tax (which came into force on 1 April) and the  Construction (Design and Management) Regulations 2015 (which come into force on 6 April).

These are available to our subscribers here. (Contact  andy@legalknowledgescotland.com to receive a subscription quotation.)

And for individual purchase here.

A big day in the journey towards a Scottish tax system.

Today the Scottish Parliament has two more economic levers, the Land and Buildings Transaction Tax (LBTT) and the Scottish Landfill Tax (SLfT).  Up till today the Scottish Parliament only has control of two minor taxes; council tax and business rates. The revenue from each of these taxes is approximately £2bn.  The revenue from LBTT will be approximately £300m and SLfT £100m.

The Scottish Government has also shown that it wishes to do things differently. The Scottish Government decided to not use HMRC to administer the new Scottish taxes and instead has adopted the innovative approach of using two existing Scottish public bodies to collect these new taxes. An idea first proposed by myself in 2005. That means that whilst Revenue Scotland will be the collection authority accountable to the Scottish Parliament, some powers will be delegated to the Registers of Scotland and the Scottish Environmental Protection Agency. The importance of the creation of Revenue Scotland should not be underestimated.

I wrote an article for the Journal of the Law Society of Scotland predicting much of this almost ten years ago.  This article an be found here.

Further evidence of how things are going to be done differently here in Scotland is a ‘General Anti-Avoidance Rule’ (GAAR) that is stronger than the UK version. The Scottish GAAR goes further than its UK counterpart as it targets artificial, not merely abusive schemes as with UK GARR.

Recent announcements from the Scottish Government on corporation tax, air passenger duty, reform of council tax and the re-introduction of the 50p rate of income tax also, I suspect, show that this is just the beginning.

Outer House case concerning a petition for judicial review of the decision of Fife Council to grant planning permission for the building of a new Madras College on land at Pipeland on the outskirts of St Andrews.

The current Madras College is located on two sites and in need of replacement. The Executive Committee of Fife Council agreed that a replacement school should, where possible, be situated on a single site. Planning permission for the building of a new school on a single site at Pipeland was issued on 16 May 2014.

The Petitioners argued that in granting the permission the Council:

1)    had not considered an alternative site at North Haugh which could be used in conjunction with playing fields at Station Park (on the other side of the A91);

2)    if that argument was wrong and the Council had considered the North Haugh site then the Council had wrongly considered it to be a split site; and

3)    If the Council had been entitled to treat the North Haugh site as being split, then it had erred in excluding it from further consideration on that ground.

Lord Doherty rejected those arguments finding that the North Haugh site had been considered as an option and, after noting that North Haugh and Station Park are split by a major A class road and were not contiguous, that the Council’s consideration that the site was a split site was neither perverse nor erroneous. Lord Doherty also found that the North Haugh site had not been discounted solely on the basis that it was a split site and account had been taken of actual disadvantages of the site such as travel time for staff and pupils and the fact that North Haugh was a small site without space which may prove necessary to deal with a developing curriculum in the future. The petition was therefore refused.

The full judgement is available from Scottish Courts here.

(NB: See appeal to Inner House here.)

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

The second edition of Private Client Scotland is now available.  The ‘preview edition’ published in November 2014 can be found here.  

“In this edition there are articles on the Scottish Government’s proposal to reform our law of succession and an update and hopefully some closure on the validity or otherwise of continuing Powers of Attorney made in the standard form recommended by OPG (Scotland). Included in ‘Case reviews’ is the decision of Sheriff Hammond that a relationship of approximately 13 months qualifies as ‘cohabitation’ for the purposes of section 25 of the Family Law (Scotland) Act 2006. ‘Professional updates’ include a link to HMRC’s December ‘Trusts and Estates newsletter’ and confirmation of a new and designated guardianship court sitting in Edinburgh. Lastly the ‘News items’ section includes stories that range from a new Cabinet Secretary for Justice to an unexpected tax bill for Boris Johnson.”

If you would like to subscribe to Private Client Scotland please email me at james@legalknowledgescotland.com

Background
Supreme Court case concerning agreements between RBS and a property developer. In July 2007 the bank and the developer entered written agreements for loans of £845k and £560k in respect of the purchase of two plots of land at Gleneagles on which the developer was to build two houses.

Argument
The repayment date for the loans was in August 2008 and, when the developer failed to repay the loans at that date, the bank sued the developer for recovery of the funds. However, the developer counter claimed arguing that he had only entered into the loan agreements on the basis of assurances given by the Bank that it would make additional funding (of up to £700k) available to fund development on the plots and claimed damages in respect of the bank’s breach of those assurances. The assurances said to have been given by the bank included a telephone call prior to the signing of the agreements in which the developer was told that, in addition to the sums lent to buy the land, the bank would advance further funding for development of the land.

The central issue for the court was whether, on an objective assessment of the exchanges between the parties, the bank had entered into a legally binding agreement to lend Mr Carlyle the money for development of the plots in addition to money for their purchase.

Court of Session decisions
In the Outer House Lord Glennie found that bank had agreed a “collateral warranty” obliging them to lend for the development of the plots. However, the Inner House allowed an appeal finding that the telephone call only amounted to a statement of future intention and that legal obligations would only arise when the parties entered a written contract[1].

Supreme Court decision
The Supreme Court have allowed an appeal of the Inner House decision.

The court found that the Inner House had disagreed with Lord Glennie on questions of fact without having sufficient regard to the limited role an appeal court has in such questions. (Generally speaking, a court of appeal can only interfere with the decision of the judge at first instance on a question of fact where the decision of the judge cannot be reasonably be explained or justified on the evidence before him[2].)

In this case the court found that, although Lord Glennie could have interpreted the evidence differently and concluded that there was no obligation on the bank to lend the money for the development, he had a reasonable evidential basis for coming to the conclusion he had (i.e. that the bank had made a legally binding promise to provide the development funding).

The court also found that use of the term “collateral warranty” had been a distraction in this case and that the bank’s obligation could equally have been described as a “promise” or “unilateral undertaking”. In coming to its conclusion the court noted that, in Scots law, unlike the situation in England, a unilateral undertaking such as a promise can be binding without consideration from the recipient of the promise and that the undertaking or promise does not require to be collateral to another contract.

The full judgement is available from the Supreme Court here.

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

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 [1] The court said “If the [developer] considered that the [written agreements] did not properly reflect what he understood was to be agreed, or had been agreed orally, then he ought not to have signed the agreements. At all events, whatever the [developer] thought was the position, the informed observer would understand the written agreements to cover all matters agreed to date. It may well be that, at that time, the [bank] fully intended to enter into a further bargain with the [developer] to advance additional funding for the building works. However, they had not done so and did not do so. That may have been contrary to the spirit of the negotiations prior to the signing of the written agreements, but that spirit, or its moral content, cannot be taken as creating a legally binding voluntary obligation.”

[2] Lord Hodge’s judgement refers to the reasons for the restriction on the role of the appeal court highlighting that it is the judge at first instance who hears the evidence and is best placed to assess the credibility of the witnesses and, having heard the evidence over an extended period, will have “greater familiarity with the evidence and a deeper insight in reaching conclusions of fact than an appeal court whose perception may be narrowed or even distorted by the focused challenge to particular parts of the evidence”. Lord Hodge also noted the increased cost which would be incurred if all questions of fact were open for redetermination on appeal.

These new Practice Notes can be found in the ‘Know How’ section of the website.

Sheriff Court case concerning a property dispute between two neighbours in Contin near Strathpeffer. Mr Munro sought declarator that he owned a small piece of ground (described in the case report as “wedge” shaped) between his property and that of Mr and Mrs Finlayson. The Finlaysons occupied the disputed area as a driveway and garden ground and Mr Munro sought an order removing them from it and an interdict to prevent them from using it in the future.

Background
The sheriff granted declarator to the effect that Mr Munro owned the land but the order removing the Finlaysons from the land was restricted so as to allow the Finlaysons to take vehicular access over the driveway and allow a reasonable turning circle within the garden. The sheriff restricted the order for removal on the basis of the “Anderson v Brattisanni’s principle” which he found entitled the court not to grant an order for removal against a person encroaching on another’s land where:

• the person encroaching has acted in good faith;
• the extent of the encroachment is inconsiderable;
• the encroachment does not materially impair the proprietor in the enjoyment of his property; and
• an order for removal would cause the encroaching party a loss wholly disproportionate to the advantage which it would confer upon the proprietor.

Arguments
Mr Munro appealed against the restriction. He argued that the Anderson principle applied to situations where a structure had been erected on the land rather than where, as with this case, no structure had been built. If he was wrong and the principle did apply, Mr Munro argued that the sheriff had not applied it properly.

Decision
The Sheriff Principal allowed the appeal[1] finding that, although the principle did apply (as there had been encroachment in the building of a driveway and yard), the sheriff had not applied the principle properly. He found that the principle was one which had to be used exceptionally and sparingly and that, in that context, the creation of what would essentially be a servitude right across Mr Munro’s land would be “a step too far”. (If the principle were to be extended to such cases it should be extended in a superior court.)

The Sheriff Principal also agreed with arguments by Mr Munro to the effect that, if he were obliged to keep the disputed land clear (to allow access for the Finlaysons), it would prevent his use of it (noting that it was a necessary inference of the sheriff’s findings that the land could be used for parking and storage) and, as such, the encroachment could not be said to be inconsiderable. The sheriff had found that, if the Finlaysons had to be removed from the property, they would have to incur considerable expense in constructing an alternative access which would be “entirely disproportionate” to the “very marginal benefit” to Mr Munro if they were not to be removed from the property. However, the Sheriff Principal noted that the suggestion that the property provided no benefit to Mr Munro contradicted the sheriff’s earlier conclusions and, more importantly, that, in describing the issue as one of “marginal benefit”, the sheriff had applied the wrong test; the correct test being one of “material impairment”.

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.

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[1] The Sheriff also summarised the current law relating to the “Anderson v Brattisanni’s principle” as follows:

1. The principle is part of the law of civil remedies, not the law of property. In its application it creates no new rights; it merely prevents the proprietor from exercising a right;

2. The principle is an exception based on equitable considerations. (Indeed, in Grahame v Magistrates of Kirkcaldy the Lord Chancellor compares it favourably to the law of equity as practised by the English Court of Chancery (at p 96).);

3. The party seeking its application must have acted in good faith, or as in Grahame v Magistrates of Kirkcaldy not done so but thereafter had taken steps to remedy its previous failings;

4. The principle will be applied only sparingly and in exceptional circumstances;

5. It has, to date, been applied only in cases where the encroachment was by a physical thing, such as a gable wall or an extractor flue attached to a wall;

6. The encroachment must be inconsiderable and does not materially impair the proprietor in the enjoyment of his property, by which is meant his property as a whole and not the piece of ground which has been encroached. Indeed, in all the authorities before Anderson v Brattisanni’s the piece of ground upon which the thing was constructed was lost altogether;

7. Its removal would cause to the encroacher a loss wholly disproportionate to the advantage which it would confer upon the proprietor. In calculating that advantage the court will take into account whether or not the encroaching party has offered compensation or, if not, whether it is open to the court on the evidence to fix a value for reasonable compensation;

8. Future as well as past economic loss will be taken into account.

This new Practice Note can be found in the ‘Know How’ section of the website.