Minevco Ltd v Barratt Southern Ltd [1999] ScotCS 7 (8 January 1999)

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The pursuers are the heritable proprietors of subjects at Schoolhill, Aberdeen. In September 1976 the City of Aberdeen District Council, the then local planning authority, granted on the application of the pursuers outline planning permission for a development on land at Schoolhill, then partly owned by the pursuers and partly by the Council. That permission, which was for a mixed commercial and residential development, bore the reference number CP76/9/91.

In 1978 the pursuers and Barratt Developments (Properties) Limited ("Properties") entered into certain missives of let. Those missives were in 1981 superseded by the ground lease referred to below, the date of entry under which was 5 September 1978. By disposition in their favour dated 22 December 1978 and recorded in the General Register of Sasines on 2 November 1979 Properties acquired title to certain heritable property ("the adjacent subjects") contiguous with that owned by the pursuers. Also contiguous was the further property referred to above ("the additional subjects") then owned by the District Council but which it was anticipated might be acquired in whole or in part for the purposes of development. Prior to 1981 a further application for planning permission was made to the local planning authority. That application was submitted by Properties in co-operation with the pursuers. It was for a substantial commercial development on a site which embraced the subjects owned by the pursuers, the adjacent subjects and the additional subjects. That application was granted on 28 August 1981. An application by Properties for approval of reserved matters was granted in 1982.

The ground lease, which was dated 24 April and 29 June and recorded in the General Register of Sasines on 2 September 1981, was entered into by the pursuers as landlords, Properties as tenants and Barratt Developments Limited as guarantors. By the ground lease the pursuers let to Properties the subjects then in their ownership at Schoolhill for the period of 150 years from 5 September 1978. By Clause FIRST it was provided:

By Minute of Agreement dated 5 May, 15 June and 12 October and recorded in the General Register of Sasines on 17 November 1983 the ground lease was varied by deleting in Clause FIRST the words "within three years after the date of entry" and substituting "prior to First March, Nineteen hundred and eighty-six". A further variation (not material for present purposes) was then made. The Minute of Agreement further stated:

By an Addendum to Lease between the pursuers and Properties (by then styled "Barratt Properties Limited") dated 14 and 27 January and recorded in the General Register of Sasines on 12 February 1986 a further variation was made to the ground lease. That variation related to the annual rent of the subjects. That Addendum to Lease also provided - "Save as hereby altered the terms of the said Lease will continue in full force and effect".

Although the declaration at the end of Clause FIRST of the ground lease envisaged that the Tenants might acquire the additional subjects, in the event the pursuers ultimately acquired part of the additional subjects from the District Council. At about the same time the pursuers also had to surrender to another local authority for road widening purposes part of the property at Schoolhill already owned by them. That state of affairs was reflected in a Minute of Agreement and Amendment of Lease dated 22 and 23 May and 5 June 1990 among the pursuers, Properties and Barratt Developments Limited (by then styled Barratt Developments plc) by which the subjects leased under the ground lease were consensually altered by both exclusion and inclusion of areas of ground. The subjects of lease as so altered are hereinafter referred to as "the amended subjects of lease". That deed also provided - "Save as hereby altered the terms of the said Lease, as previously amended, continue in full force and effect". In 1991 Properties, with the consent of the pursuers, assigned their interest under the ground lease (as amended) to the defenders. By the same deed they disponed to the defenders the adjacent subjects.

Planning permission CP76/9/91 expired in 1981. The planning permission granted in 1981 expired in 1986. Difficulties appear to have been presented to development under the latter permission by a variety of circumstances including reduction of the available site due to road widening. In September 1989 the local planning authority granted an application made by the defenders for erection of an office development on a site embracing the amended subjects of lease and the adjacent subjects. An application by the pursuers for approval of reserved matters under that permission was granted in July 1993. In June 1993 again on the application of the defenders the local planning authority granted planning permission renewing the permission granted in September 1989. An application by the pursuers for approval of reserved matters under that permission was granted in December 1996.

In this action the pursuers' first and second conclusions are in the following terms:

By their third conclusion the pursuers seek damages as an alternative to specific implement.

From the information placed before me at debate it is doubtful whether the grant on 4 December 1996 referred to in the second conclusion was strictly of planning consent, as distinct from an approval of matters reserved by the planning consent granted in 1993. For immediate purposes the distinction is unimportant, though it may ultimately come to be of significance in relation to the subsistence of a relevant planning consent. For present purposes I shall refer to the planning consent referred to in the second conclusion as "the 1990's planning permission".

Planning permission CP76/9/91 has long expired. It is not contended that an undertaking in respect of "pure office buildings" is sufficiently certain to be legally enforceable. The part of Clause FIRST of the ground lease on which the pursuers rely is that relating to the erection of "such other buildings as the Tenants shall be permitted to build by the Local Planning Authority". They contend that the office development permitted by the 1990's planning permission falls within that description. That permitted development relates to development on a site which embraces the extended subjects of lease and the adjacent subjects, the latter being in the ownership of the defenders. The pursuers do not by their second conclusion seek an order on the defenders to erect buildings on the adjacent subjects, only on the extended subjects of lease. However, in terms of rights claimed, the pursuers maintain that, in respect that the defenders have failed to use their best endeavours to erect or cause to be erected on the subjects of lease buildings permitted to be built thereon by the local planning authority (namely, permitted under the 1990's planning permission), the defenders are presently in breach of their contractual obligation under Clause FIRST of the ground lease.

The non-erection of buildings has important financial consequences for the pursuers. Although a basic ground rent is payable (and was consensually increased in 1986) the principal return to the pursuers as Landlords as envisaged under the ground lease is a flow of income dependent on the rents and other annual income receivable from lettings of office space in erected buildings.

The pursuers condescend in some detail on the dealings over the years between them on the one hand and the defenders' predecessors and later the defenders on the other. Those dealings, in addition to the contractual matters referred to above, included co-operation in planning and in acquisition of the additional subjects (with substantial expenditure) and in other matters designed towards the realisation of a commercial development at Schoolhill. The pursuers aver that their whole dealings with the defenders and their predecessors have been on the basis that the buildings to be erected on the subjects of lease would form part of a larger development including development on the adjacent subjects. They aver that they would not have taken certain steps which they took or refrained from taking certain other steps had the defenders or their predecessors suggested that they would not proceed with such a larger development. In response to an attack by the defenders on the relevancy of the action, the pursuers rely on, among other things, principles of personal bar and of waiver.

Mr Currie for the defenders submitted that neither the first nor the second conclusion of the summons was relevantly based on any obligation truly incumbent on the defenders, that the lack of relevancy was not cured by the pursuers' resort to personal bar or to any similar principle and that on a sound analysis any residual element in Clause FIRST was void for uncertainty. The 1990's planning permission on which the pursuers sought to rely was, he argued, not one such as was described in Clause FIRST in respect that it did not relate to the erection of buildings "on the leased subjects and the additional subjects" (i.e., in effect, on the extended leased subjects) but embraced a wider development including development on the adjacent subjects. Moreover, any relevant obligation had now flown off by the lapse of time. Clause FIRST (as amended) included the phrase "prior to First March, Nineteen hundred and eighty-six or such extension of time as may be agreed between the parties". There was no averment that any extension of time had been agreed under that Clause. The stipulated time period referred either to the date of the grant of a relevant planning permission (in which event reliance on the 1990's planning permission was irrelevant) or to the date by which buildings were to be erected (in which event the relevant date had long passed). There was, moreover, no justification under Clause FIRST for the defenders being ordained to build on the extended subjects of lease some part of a monolithic structure over those and other subjects. The 1990's planning permission did not provide for development in part only. The pursuers' contention of personal bar appeared to amount to the proposition that in light of the history it was not open to the defenders to contend that what the pursuers sought was inconsistent with their rights under Clause FIRST. However, to make out such a case it would be necessary to demonstrate that the actings of the defenders (and their predecessors) relied on amounted to a representation that the defenders would not regard their contractual obligations as confined to those defined by the terms of the contract. There were no relevant averments to that effect. It was fatal to the pursuers' contention that the parties had by formal deeds in each of 1983, 1986 and 1990 expressly stated that the ground lease, insofar as not varied, remained in full force and effect. That was inconsistent with any departure from the scope of the defenders' legal obligation under Clause FIRST. At best for the pursuers the defenders' actings amounted to a statement of possible intention to carry through a development on subjects which embraced the extended subjects of lease and the adjacent subjects. That was not a relevant basis for the operation of personal bar (Stair Encyclopaedia Vol.16, paras.1602 and 1612). Insofar as the pursuers sought to rely on variation of the contract (as they did by averments introduced by amendment subsequent to the initial diet of debate) those were irrelevant. If variation of a formal written contract was to be inferred from actings, the actings had necessarily and unequivocally to import the variation claimed (Walkers on Evidence pp.307-8). They must be capable of no other explanation and required to be tied to some particular variation. In the present case any claimed variation of the time limit in the obligation in Clause FIRST was, first, inconsistent with the formal writings by which the parties had regulated their relationship, second, would leave a completely open-ended contractual situation in relation to time (which was not a rational inference to draw) and, third, was not a necessary and unequivocal inference from the actings (which were readily explicable by the defenders being content to await the outcome of planning applications at which time they would decide on commercial grounds whether or not to proceed

Mr Williamson for the pursuers emphasised in response the character of the contract entered into by the parties. It was a lease for a term of 150 years with building obligations incumbent on the Tenants. It was accepted that, in the context of a lease of particular subjects, no contractual obligation arose which could compel the defenders to build on other subjects. It would be surprising if such a contract had (either originally or by variation) made any such provision. However, the construction of buildings was a necessary trigger for the principal income stream to be drawn by the Landlords. The buildings referred to in Clause FIRST were (one) such buildings as might be constructed under the specified planning permission, (two) pure office buildings, which were not defined, and (three) such buildings as the Tenants should be permitted to build by the local planning authority. None of these was necessarily confined to a physical entity exclusively rested on the subjects of lease. If the Tenants chose to apply for and were granted planning permission for a development which included but extended beyond those subjects, the obligation under Clause FIRST would bite. The subsisting obligation was "tenant selected and local authority controlled". Accordingly, when the 1990's planning permission was obtained by the defenders, they came under a potentially enforceable obligation to the pursuers to erect such buildings (insofar as on the extended subjects of lease). The reference in Clause FIRST (as amended) to "prior to First March, Nineteen hundred and eighty-six" did not exclude the coming into existence of such an obligation. Such a time limit was not "of the essence". Moreover, Clause SEVENTH of the ground lease (the irritancy clause) suggested that the critical date was not 1 March 1986 but the date of receipt of a written notice by the Landlords under that clause. In any event, any time limited had been mutually varied by implication or alternatively waived by the defenders. The parties' actings (which were bilateral and joint) after 1986 were consistent only with the proposition that they were agreed that any time limit imposed by the reference to 1 March 1986 was departed from. Although no express alternative time had been agreed, the law would imply a reasonable time in substitution. In relation to waiver, the pursuers accepted the law as expressed in Armia Limited v Daejan Developments Limited. Lord Keith (at page 72) had described waiver as a matter of fact. It could not readily be determined without inquiry into the facts. The pursuers' situation was not unlike that which had occurred in Donnison v Employers' Accident and Live Stock Insurance Co Ltd (1897) 24R 681. Reference was also made to Lousada & Co Ltd v J.E. Lesser (Properties) Limited 1990 S.L.T.823, Inverclyde (Mearns) Housing Society Ltd v Lawrence Construction Co Ltd 1989 S.L.T.815 and Presslie v Cochrane McGregor Group Ltd 1996 S.L.T.988. The question was whether in the whole circumstances it could properly be inferred that a right had been waived, not whether that was the only inference possible. The pursuers' contention on personal bar was not that it imposed an obligation on the defenders to build on their own property but that, they having chosen to obtain the 1990's planning permission and having acted as they had, the defenders could not be heard to deny that Clause FIRST encompassed an obligation to carry out the development permitted by the 1990's planning permission insofar as concerned the extended subjects of lease. Reference was also made to Lord Advocate v Shipbreaking Industries Ltd 1991 S.L.T.838 and to Barratt Scotland Ltd v Keith 1994 S.L.T.1343. In relation to the second conclusion, the prima facie remedy under Scots law where a contractual obligat

I have come to the view that this action cannot satisfactorily be disposed of, in whole or in part, without first ascertaining the material facts, including the whole context in which the various planning and other matters were dealt with by the parties (including the defenders' predecessors) and in which their contractual relationship was established and varied over the years. In these circumstances it is undesirable to express any firm legal conclusions until such facts have been ascertained. What follows seeks to explain why I have decided that inquiry is appropriate.

"The buildings" as defined by Clause FIRST of the ground lease embraced in the first place buildings which might be constructed in accordance with the 1976 permission. The development envisaged by that permission appears to have extended beyond the physical area of the subsequently leased subjects and of the additional subjects; thus Clause FIRST refers to buildings which might be erected "insofar as the said permission relates to the leased subjects and the said additional subjects or part thereof". It is not at present clear whether the development envisaged on the area beyond those areas as are referred to in Clause FIRST was discrete from that envisaged within it. Although by the dates on which the ground lease was executed in 1981 the 1976 permission was about to expire, Clause FIRST presumably reflects the missives entered into in 1978. Accordingly, from the outset there appears to have been no necessarily exact correlation between the site in respect of which permission for development was granted and the area to be leased by the pursuers to the defenders' predecessors. It was also, it seems, envisaged in 1981 that development to be carried out might be partly on land owned by the pursuers and partly on land which might have been acquired by the Tenants under the lease (viz the additional subjects). These imprecisions may reflect the uncertainties of the planning and land ownership situations inherent in a co-operative exercise of this kind. Accordingly, although one might ordinarily expect the buildings to be erected under a ground lease with construction obligations to be buildings wholly within the subjects of lease and in pursuance of a planning permission similarly confined, the buildings envisaged by Clause FIRST of the ground lease do not appear to be necessarily so restricted. The factual matrix is thus potentially important to the construction of this clause. It may also be relevant to take into account in this connection the terms of the planning application which was ultimately granted in August 1981, though apparently lodged a considerable time earlier and extant when the ground lease was executed. That permission (and presumably the relative application) related to the leased subjects, the additional subjects and the adjacent subjects. That was the same area (subject to changes made in furtherance of road widening proposals) to which the 1989 permission and the 1990's permission each related. Although not directly part of the factual matrix surrounding the execution of the ground lease in 1981, it is potentially relevant to their later mutual intention that the parties subsequently amended Clause FIRST in 1986 and again in 1990 in the context of the 1981 and the 1989 permissions having been granted. It is difficult to suppose that amendment was thought appropriate unless it was mutually intended that there was to remain an enforceable obligation to erect buildings of the described class. Accordingly, on this aspect of the case the circumstance that the parties on several occasions amended their contractual relationship without amending the definition of "buildings" in Clause FIRST is not necessarily destructive of the pursuers' contention. In these circumstances it is inappropriate, in my view, to determine prior to inquiry whether or not the 1990's permission falls within the class of buildings described in that Clause. As regards personal bar, it is not possible to determine without inquiry whether or not the actings of the defenders or their predecessors are properly to be regarded as implicit representations that the developments applied for (and granted), including what became the 1990's permission, were within the scope of Clause FIRST of the ground lease.

As regards the temporal element, there is no doubt, in my view, that the term "within three years after the date of entry" was an important term of the ground lease as originally entered into. In circumstances where there is no question of a party seeking to resile from a contract, I doubt whether it is important to determine whether that term was or was not "of the essence". It was not in the end seriously disputed that the matter to which it related was the timescale for the erection of the buildings. The ground lease as executed thus imposed an obligation on the Tenants to use their best endeavours to erect the buildings within three years of 5 September 1978. The amendment of 1983 had the effect of substituting for that period the period prior to 1 March 1986. A consequence of the passing of the latter date without buildings being erected was (subject to the matter of "best endeavours" and to resolution of any question of a then current planning permission answering the description in Clause FIRST) to put the Tenants then in breach of contract. Remedies may at that time have been available to the pursuers, though it seems that they did not exercise them. The parties thereafter continued to co-operate in relation to planning applications. They further amended the lease in 1990, specifically amending the extent of the leased subjects. The pursuers aver that the purpose of that amendment was to facilitate development following the requirement to give up ground for road widening purposes. The parties did not at that time or at any other time expressly agree a date to be substituted for 1 March 1986 or otherwise agree an extension of time; nor did they expressly agree that the provision as to time should be deleted. However, I am not satisfied that on a construction of the pleadings it can be held with confidence that, in the absence of any such express steps, Clause FIRST no longer applies to any subsisting situation. No obligation ceased to be prestable on the passing of 1 March 1986; the passing of that date was rather an event which may have given rise to certain remedies in the pursuers and may have exposed the defenders' predecessors to certain liabilities. While the 1990's permission was not in contemplation prior to 1 March 1986, its predecessor, the 1989 permission (apparently in the same terms), was in existence and may have been in contemplation when the parties amended the ground lease in 1990. The fact that the parties did not in that amendment expressly amend the date by which the buildings required to be erected is not, in my view, necessarily destructive of the contention that the ground lease was varied in that respect by actings. While the test for variation by actings of a formal deed is apparently strict, the circumstances averred in the present case may be exceptional. It may be unsurprising that in light of the difficulties in obtaining an acceptable planning permission and of the fact that the earlier substitution of date had not proved fruitful, a view was taken (perhaps implicitly) that there was no advantage to be had in prevailing circumstances in making another specific amendment as to time. The proper inference may be that the parties implicitly agreed that, while their respective rights and obligations under Clause FIRST were to continue, no express time limit should be substituted for 1 March 1986. Such an attitude is not obviously irrational. The law might imply a term as to reasonable time, the application of that term being conditioned by the relevant permission and the circumstances subsisting when it comes to be applied. On the other hand, the defenders' actings may possibly have been reasonably explicable by a decision by them to explore options commercially without being committed contractually. Whether any such explanation is sufficient to exclude the implied variation as to time contended f

There remains a difficulty for the pursuers in respect that it is possible, at least theoretically, that two or more planning permissions for the same subjects but in different terms might be extant at any particular time. Mr Currie submitted that, as matters now stood, Clause FIRST was void for uncertainty. He did so on the premise that the 1990's permission had been demonstrated not to be relevantly encompassed by Clause FIRST. He did not, as I understood him, argue that Clause FIRST had, by reason of the possibility of two or more currently extant permissions, been void for uncertainty from the outset or from very shortly thereafter when permission CP76/9/91 expired. The possibility of a multiplicity of extant permissions may be inherent in the phrase "such other buildings as the Tenants shall be permitted to build by the Local Planning Authority". On the other hand it may be arguable that there is an implicit restriction to one permission at any time. A court is reluctant to construe a central provision in a commercial bargain as void for uncertainty. This difficulty is also best resolved after inquiry.

The discussion before me was primarily directed to the contractual issue to which the first conclusion relates. The second conclusion was also, though to a more limited extent, the subject of argument. That conclusion is essentially concerned with remedies and I consider it appropriate to resolve the issue of rights before determining what remedy or remedies (if any) may be available. I observe only that, assuming that there exists at the time when decree is moved for a planning consent which could be implemented within the timescale referred to in the second conclusion, serious difficulties may, in my view, yet arise in relation to the court ordaining a party to erect in furtherance of a planning consent a non-severable part of the development so permitted. It may be necessary for the pursuers to frame their conclusion for damages so that it is not dependent on failure to implement the second conclusion. For the present, however, it is not appropriate, in my view, to dismiss the action insofar as laid on those conclusions.

For the foregoing reasons I shall allow to parties a proof before answer of their whole respective averments. The case will be put out By Order for discussion of preparations for such a proof.

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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Minevco Ltd v Barratt Southern Ltd [1999] ScotCS 7 (8 January 1999) URL: http://www.bailii.org/scot/cases/ScotCS/1999/7.html Cite as: [1999] ScotCS 7

Scottish Court of Session Decisions