Beaghmor Property Limited V. Station Properties
| Jurisdiction | Scotland |
| Judge | Lord Hodge |
| Neutral Citation | [2009] CSOH 133 |
| Court | Court of Session |
| Published date | 30 September 2009 |
| Year | 2009 |
| Date | 30 September 2009 |
| Docket Number | CA126/09 |
| OUTER HOUSE, COURT OF SESSION [2009] CSOH 133 | |
| CA126/09 | OPINION OF LORD HODGE in the cause BEAGHMOR PROPERTY LIMITED Pursuers; against STATION PROPERTIES LIMITED Defenders: ________________ |
Act: Davie; Davidson Chalmers LLP
Alt: Barne; Biggart Baillie LLP
30 September 2009
[1] This is an application by the defenders under section 15K(2) of the Debtors (Scotland) Act 1987 as amended ("the 1987 Act") to recall an inhibition on the dependence and also the warrant for diligence on the dependence granted by an interlocutor dated 5 August 2009.
[2] The pursuers, Beaghmor Property Limited ("Beaghmor"), have sought for some time to acquire for development a site at 6 Cockburn Street, 8 Advocates Close, 18-21 Market Street and the Tower Building, Advocates Close, Edinburgh ("the site"). Beaghmor entered into a lock-out agreement with Station Properties Limited ("Station"), which own the site. In that agreement Station undertook that between 30 June and 31 July 2009 it would negotiate exclusively with Beaghmor for the sale of the site. Beaghmor have commenced this action for damages for breach of the lock-out agreement and have registered an inhibition on Station which is limited to the site.
[3] Beaghmor claim damages of £4,500,000, which they aver are the profits which they projected from their proposals to develop and sell on the developed site and their advanced negotiations with an end user.
[4] Station admit breach of certain of their obligations under the lock-out agreement but seek recall of the inhibition on the dependence and the warrant for diligence. They submit that Beaghmor cannot satisfy the court on each of the grounds listed in section 15K(9) of the 1987 Act, namely (a) that they have a prima facie case to support their claim in damages, (b) that there is a real and substantial risk that enforcement of any decree against Station would be defeated or prejudiced by insolvency and (c) that it is reasonable in the circumstances that the warrant and inhibition should continue to have effect.
The factual background
[5] Beaghmor have negotiated to purchase the site on two occasions before this summer. On the second occasion, in February 2009, Beaghmor submitted a formal offer to purchase the site for £7.5 million. On each occasion the negotiations broke down when another party offered to purchase the site. But each time the sale to that other party did not proceed. Unsurprisingly, when two directors of the parties agreed in June 2009 to resume negotiation of a sale at the price of £7.5 million, Beaghmor wanted the security of a lock-out agreement to prevent a repetition of what had occurred before.
[6] The material provisions of the lock-out agreement dated 29 and 30 June 2009 were as follows:
"3. Lock-out Obligations
3.1 Subject to the other terms and conditions of this deed during the Lock-out Period the Seller or any agent acting on their behalf .... shall not:-
3.1.1 actively market the Property for sale;
3.1.2 seek any offers for or seek any interest in the sale of the Property to or from any third party;
3.1.3 supply any information about or copy deeds or documents or other material relating to the Property or any occupiers of the same to any third party;
3.1.4 proceed with or accept any offer made by any third party in respect of the sale of the Property or the granting of an option or any other rights over same, or any other dealing in respect thereof;
3.2 During the Lock-out Period the Seller shall act in good faith and shall:-
3.2.1 notify all agents previously instructed in relation to the Property and any third parties who were aware that the Seller was willing to consider offers for the Property that it is under offer and instruct the agents not to reveal to any party details of the Transaction;
3.2.2 notify the Purchaser of any bona fide unsolicited offer made in respect of the Property by any third party;
3.2.3 use all reasonable endeavours following on the last date of execution of this Lock-Out Agreement to enter into the Transaction with the Purchaser and, to that end, procure that the Seller's Solicitors shall seek to negotiate the terms of a draft Agreement with the Purchaser's Solicitors;
3.2.4 implement the Transaction as soon as reasonably practicable;
3.3 The Purchaser and the Seller shall act in good faith with a view to agreeing the principal terms of a contract for the Transaction and entering into Missives to implement the Transaction and, to that end, they shall procure that the Purchaser's Solicitors and the Seller's Solicitors shall seek to negotiate the terms of the Missives to give effect thereto as soon as reasonably practicable;"
[7] Station in their defences admitted that they had broken clause 3.1 and clause 3.2.2 of the lock-out agreement. They entered into binding missives with AMCO Developments Limited ("AMCO") on 5 August 2009 under which AMCO agreed to purchase the site, excluding 8 Advocates Close. The agreement comprised a detailed offer on behalf of AMCO dated 5 August 2009 to purchase that property for £8.5 million subject to certain suspensive conditions and an unqualified acceptance of that offer on the same date. The documents appended to the offer revealed that there had been an earlier offer dated 9 July 2009, which had been prepared after AMCO had obtained detailed information about the site.
[8] At the hearing on the motion for recall Mr Barne on Station's behalf submitted that AMCO's offer had been unsolicited. He accepted that Station had broken their contract by not revealing the offer contrary to their obligation in clause 3.2.2. In the course of the discussion he also submitted that Station's admission of the breach of clause 3.1 should be confined to clause 3.1.4, namely the proceeding with AMCO's offer during the lock-out period. Miss Davie for Beaghmor did not accept that AMCO's offer was unsolicited. There was therefore a dispute about an important factual circumstance which could not be resolved at the hearing.
The parties' submissions
[9] Mr Barne submitted that Beaghmor did not have a prima facie case for claiming substantial sums in damages such as to justify diligence on the dependence for two reasons. First, he submitted that the appropriate measure of damages for breaking a lock-out agreement is the wasted transaction costs of the party who was not in breach. Secondly, he argued that Beaghmor had not averred a relevant case of the loss of an opportunity which would sound in damages, because there was no averment that they would have been prepared to match the offer of £8.5 million if Station had, as it was bound, disclosed AMCO's offer. Station denied Beaghmor's averment that the parties had reached agreement on the substance of the missives. In support of his assertion that the appropriate measure of damages was the wasted transaction costs he referred to Walford v Miles [1992] 2 AC 128, Lord Ackner at p.139, Pitt v P.H.H. Asset Management Ltd [1994] 1 WLR 327, Sir Thomas Bingham MR at p.334, Moroney v Isofam Investments SA [1997] EGCS 178 and Tye v House and Jennings (1998) 76 P & CR 188, Evans Lombe J at p.190. Scots law did not exclude such a claim: Fielding v Newell 1987 SLT 530 and Dawson International plc v Coats Paton plc 1993 SLT 80. He also submitted by reference to Transfield Shipping Inc v Mercator Shipping Inc [2009] 1 AC 61 that liability in damages for the loss of Beaghmor's hoped-for contract was not the sort of risk which Station assumed when they entered into the lock-out agreement. On the correct approach to the recall of diligence on the dependence he referred to the Inner House decision in Gillespie v Toondale Ltd 2006 SC 304 and Lord Pentland's opinion in MRK 1 Ltd v Sakur and Bachir [2008] CSOH 176.
[10] Mr Barne's other submissions were (i) that there was no substantial risk of Station's insolvency having regard to a statement of assets and liabilities dated 26 August 2009 and (ii) it was not reasonable to maintain the inhibition. In relation to the former, he submitted that on a proper valuation Beaghmor's claim was probably in the region of £25,000 which Station had sufficient resources to meet. In relation to the latter submission he advanced six arguments. First, the inhibition could have a disastrous effect on Station, which was a property company, and in particular could undermine the valuable deal with AMCO which Station's bankers, Clydesdale Bank plc, wished to see proceed. Secondly, a lock-out agreement did not justify the remedy of an inhibition which operated as an interdict. Thirdly, if the deal with...
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