Alumno Miller Telford Ltd v The Board of Management of Edinburgh's Telford College
| Jurisdiction | Scotland |
| Judge | Lord Glennie |
| Neutral Citation | [2011] CSOH 213 |
| Year | 2011 |
| Date | 21 December 2011 |
| Docket Number | CA164/10 |
| Published date | 21 December 2011 |
| Court | Court of Session (Outer House) |
| OUTER HOUSE, COURT OF SESSION [2011] CSOH 213 | |
| CA164/10 | OPINION OF LORD GLENNIE in the cause ALUMNO MILLER TELFORD LIMITED Pursuer; against THE BOARD OF MANAGEMENT OF EDINBURGH'S TELFORD COLLEGE Defender: ________________ |
Pursuer: Cormack, McGregor; McGrigors LLP
Defender: Moynihan QC, Borland; Harper MacLeod LLP
21 December 2011
INTRODUCTION
[1] In this action, the pursuer, Alumno Miller Telford Limited ("AMT"), seeks to enforce an agreement, known as the Nomination Agreement, entered into between itself and the defender, the Board of Management of Edinburgh's Telford College ("the College"), on 21 and 22 December 2009. It sues for declarator that the Nomination Agreement is binding upon the parties and enforceable against the College, for declarator as to its proper construction and as to how it is to operate (with an alternative claim for rectification), and for payment of sums allegedly due thereunder.
[2] The defender contends that the Nomination Agreement is not binding and enforceable, for three main reasons, namely because: (a) it is insufficiently certain in its terms to be enforceable; (b) it was ultra vires the defender; and (c) it was entered into without the authority of the defender.
[3] It was agreed between the parties that all questions of liability, focusing on these three issues, should be dealt with first. A three day proof was fixed for that purpose. It subsequently became clear, however, that further factual investigations were necessary before the issue of authority could be determined. In those circumstances the parties agreed, with the approval of the court, to deal at this stage only with the first two issues, namely (a) certainty of terms, and (b) the question of ultra vires, with the third question, that of authority, to await a further hearing should it arise.
[4] Evidence was adduced from a number of witnesses of fact. So far as concerns the development of the project and the negotiations leading to the conclusion of the Nomination Agreement, Ben McLeish (who was at the material time Assistant Principal and Director of Finance at the College) took the lead on behalf of the College. He gave evidence, as did Dr Jennifer Rees, a member of the Board of Management of the College (whose evidence was taken on commission). There was evidence too from David Campbell, Alan Baxter and Maurice Bourne, who were all closely involved on behalf of AMT (Mr Bourne's evidence was taken on commission). Evidence was led also from the solicitors involved in drawing up the Nomination Agreement, namely Roger Cotton, of Brodies LLP, for the College, and Sophie Black and Natalie Todd, both of McGrigors LLP, for AMT. In the case of Ms Black and Ms Todd, they had both lodged witness statements and these were agreed to be their evidence without the need for them to be called. Anthony Kopsch, James Godfrey, and Christopher Brown (a chartered accountant in the firm of Scott-Moncrieff) gave evidence relating to the assessment within AMT of the project and of the Nomination Agreement after its conclusion. In relation to the ultra vires issue, Grant Macrae of KPMG gave evidence for AMT by reference to his Report which had been lodged in process and was cross-examined on it; while Martin Fairbairn, from the Scottish Funding Council, was called to give evidence by the College. It seemed to me that no real issue of credibility arose. Where the witnesses differed in their accounts, I give my conclusions, in so far as relevant, in the body of this Opinion.
RELEVANT FACTS
Events relating to the conclusion of the Nomination Agreement
[5] The events leading up to the conclusion of the Nomination Agreement in late December 2009 can best be taken from the evidence given at the proof by Ben McLeish, supplemented from time to time by the evidence of other witnesses. Mr McLeish was, at the material time, the Assistant Principal and Director of Finance at the College. He had originally joined the College in June 2002 on secondment from the Scottish Funding Council ("SFC"). In 2008-2009, the period with which this action is concerned, he had responsibility, within the Senior Management Team at the College, for finance, estates, facilities and, latterly, information technology. He explained in his evidence that he led on the acquisition of residences by or for the College, in line with the agreed College strategy and objectives. Mr McLeish remained with Telford College until he was placed on gardening leave in about mid-April 2010, at a time when questions were first raised about the Nomination Agreement. He left his position with the College in May 2010 and thereafter became Director of Sector Development with Scotland's Colleges, a position which he held until the end of March 2011. He is a qualified chartered accountant.
[6] The College had for some years been interested in exploring the possibility of providing student residences on site. Having the residences on campus, or immediately adjacent thereto, was perceived as being likely to make the College more attractive to both domestic and international students. The College had a long term growth agenda to develop international and domestic business - or, put more simply, to increase student numbers - as well as taking up other commercial opportunities such as arrangements with language schools over the summer periods. The possibility of achieving a single site campus with student residences was raised during discussions between the College and Morrisons supermarket in 2004/05 relating to a possible re-location of the College to a site owned by Morrisons in Granton. Those discussions progressed to the point where the College moved to the Morrisons' site in Granton in 2006.
[7] The student accommodation on the new campus at Granton was created by the renovation and conversion of an existing shell building on the site. The work was carried out by AMT, who purchased the building from Morrisons in December 2009 under a Ground Lease for a term of 175 years at the same time as the Nomination Agreement was entered into. AMT took a loan of approximately £4.5m from Alliance & Leicester plc ("A&L") to fund the development, and granted a standard security over the property in favour of A&L. The intent was that AMT, having developed the accommodation block, would let the rooms directly to students of the College. AMT required some assurance that if it were to incur the cost of development there would be sufficient take-up by students of the accommodation thereby made available to make the development commercially viable. The Nomination Agreement, which I shall describe in more detail below, was entered into between the College and AMT to provide AMT with this assurance, by means of an "occupancy guarantee". It is this occupancy guarantee which is at the heart of the dispute between the parties. The Nomination Agreement takes its place, therefore, as one amongst a number of contractual arrangements entered into between the College, AMT and A&L relating to the conversion of the shell building within the new campus at Granton, and its conversion into student accommodation, those other agreements including the loan by A&L and the security provided by AMT. To complete the circle, as further security for its loan to AMT, A&L took from AMT an assignation in security of its rights against the College under the Nomination Agreement, that assignation being reinforced by a Step-in Agreement, enabling it, in circumstances in which it was entitled to enforce its security, to step into the shoes of AMT under the Nomination Agreement and be in a position to exercise rights under the occupancy guarantee directly against the College.
[8] The accommodation itself, once the conversion was complete, comprised 21 five bedroom flats, each with a common kitchen and living room area, plus two single bedrooms on the ground floor, configured for use by disabled students, and a further three single rooms on other floors, all of the single rooms having their own kitchen and living room areas. Accordingly, there were, in total, 110 rooms, five of which were single room flats (two for disabled students) while the remaining 105 were arranged as five bedroom flats with common kitchens and living rooms.
[9] Mr McLeish explained that in the four or five years before the negotiations leading up to the Granton development, there had been at least six previous attempts by the College to get a similar project off the ground with other potential providers of student accommodation, but those had not come to anything. The College had no interest in running accommodation itself, since this was very resource intensive and, in any event, not seen as part of its core functions. Nor did the College itself want to undertake the building or conversion of residences - this posed too much risk for it and, since it could not use the annual grant from the SFC towards such a development, would be unaffordable. The most the College wanted to do was to provide a revenue commitment, one that was off balance sheet. Outsourcing the provision and running of the residences was suited to this strategy; and it tied in with the College's approach to outsourcing ancillary services such as cleaning, catering and plant maintenance.
[10] The discussions which eventually led to the conclusion of the various agreements began in mid to late 2008. At that time, other corporate entities were involved as potential partners, but in due course AMT became the intended provider of the accommodation. One of the individuals with whom Mr McLeish was in discussions about the project was Mr David Campbell a director both of Ely Property Group UK, a company involved at an earlier stage, and also, though later, of AMT. Mr Campbell sent Mr McLeish a rough draft of an agreement in January 2009. At that time it was contemplated that Ely Property UK Ltd would be the contracting party. The proposal from Mr Campbell suggested that the...
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