Kirkton Investments Limited V. Vhm Llp
| Jurisdiction | Scotland |
| Judge | Lord Doherty |
| Neutral Citation | [2011] CSOH 200 |
| Court | Court of Session |
| Published date | 09 December 2011 |
| Year | 2011 |
| Date | 08 December 2011 |
| Docket Number | A989/08 |
| OUTER HOUSE, COURT OF SESSION [2011] CSOH 200 | |
| A989/08 | OPINION OF LORD DOHERTY in the cause KIRKTON INVESTMENTS LTD Pursuer; against VMH LLP Defenders: ________________ |
Pursuer: Currie QC et O'Brien; Warners, Solicitors.
Defenders: Ferguson QC et Duncan; Dundas & Wilson C.S. LLP.
8 December 2011
Introduction
[1] In this action the pursuers seek damages from the defenders, their former solicitors, for professional negligence.
[2] The case came before me for a proof before answer. In the course of the proof I heard evidence from Mr Berry, Mr Nicholas Watson MRICS of Rettie & Co, Mr Donald Reid, Solicitor,
Mr James Thompson C.A., Mr Gordon Porter FRICS, Mr Russell Kennedy, and Mr John Dixon MRICS. In terms of the Joint Minute
(No. 32 of Process) certain matters were agreed between the parties. In addition a number of written reports were tendered in evidence, and parts of these were
relied upon by both parties.
Background and history of events
[3] The pursuers are a limited company which invests in and develops property. Kirkton Developments Limited ("KDL") is a related company which engages in
similar activities, often in conjunction with the pursuers. At all material times the controlling shareholder in both companies was Alan Berry. Mr Berry had been
involved in property development for several years. His previous projects had largely involved development of older properties, on occasion with partial new build
. However, there was no evidence of him previously having funded and built a new build development on the scale of the development at 144 -148 Slateford Road
. The defenders are a limited liability partnership of solicitors.
[4] During 2004 the pursuers and KDL were interested in acquiring and developing a site at 144 to 148 Slateford Road, Edinburgh ("the site") for housing.
The defenders were instructed to act for the pursuers and KDL in relation to the acquisition of the site. The defenders were aware that the intention was that both
the pursuers and KDL would be involved in the project with the pursuers owning the site and KDL carrying out the development. They were also aware that the
project was being funded by means of bank borrowing.
[5] 134 -136 Slateford Road comprises a shop adjacent to the site. It was, and is, used for the sale of hot food (initially fish and chips, subsequently pizzas).
In 2004 it was owned by Slateford Developments LLP ("SDL"). SDL wished to obtain planning consent to convert a garage adjacent to the shop into a house.
SDL anticipated that in order to obtain such consent it would need to obtain a right of access over the site, and ensure that the part of the site immediately adjacent
to the garage was left open.
[6] In April 2004 the owners of the site, HBJ 590 Ltd ("HBJ 590"), applied for planning permission to build houses and flats on it ("the development").
The development comprised nineteen terraced townhouses and eight apartments. On 2 July 2004 the Development Quality Sub-Committee of the planning
authority adopted a report recommending that planning consent be granted subject to certain conditions. One of the recommended conditions was that prior to
occupation there should be installed and be operational a ventilation duct to take odours from the shop into the development and to dispel them at ridge level.
Another was that prior to planning consent being granted HBJ 590 should be required to enter into a suitable legal agreement with the owner of the shop to secure
ongoing maintenance of the ventilation duct. The existing ventilation duct at the back of the shop was considered to be inadequate for dispersal of odours.
[7] HBJ 590 and SDL entered into an agreement in February and March 2005 whereby HBJ 590 would grant a servitude right of pedestrian access over part
of the site in favour of SDL's property in return for SDL granting HBJ 590 the right at all necessary times and on all necessary occasions to carry out all necessary
works in connection with the installation of a new ventilation system at the shop.
[8] Missives for the purchase of the site by KDL from HBJ 590 Ltd were concluded on 1 April 2005. The missives contained the following suspensive condition:
"Entry and actual occupation shall be given to the purchaser 14 days after the final letter from The City of Edinburgh Council granting Planning Consent for
the Development following on the date of execution of a Section 50 or section 75 Agreement entered into between the seller and The City of Edinburgh
Council or otherwise confirming resolution of the planning conditions and in particular the condition relating to the required ventilation works at the rear of
the shop at 136 Slateford Road, Edinburgh, in terms entirely satisfactory to the purchaser. The seller shall take all reasonable steps to ensure that the
section 50 or section 75 Agreement or confirmatory letter is entered into as soon as is reasonably practicable. The said ventilation works will be carried
out subsequently by the purchaser and, upon completion, their reasonable and proper costs will be reimbursed by the seller within 14 days of presentation
of the relevant receipts."
Title to the site was taken in the name of the pursuers.
[9] On the basis that there was an agreement in place between HBJ 590 and SDL the planning authority granted full planning permission for the site on
11 April 2005. The consent was subject to certain conditions. Condition 8 provided:
"Prior to occupation of the development the applicant shall install and have operational a ventilation duct which will take odours from the Codfather,
136 Slateford Road into the development hereby approved and dispel the odours at ridge level to the satisfaction of the Head of Planning and Strategy
as shown in approved drawing number E1430L(--)013B."
[10] By missives concluded in July 2005 SDL sold the shop to Ian McDonald Enterprises Limited ("IME"). In terms of the missives IME undertook to SDL to
adopt and implement the terms of the arrangement between SDL and HBJ590 as regards the flue connection.
[11] The defenders acted for both the pursuers/KDL and IME in relation to their respective purchases. Mr Hunter acted for the pursuers/KDL and
Mr McCombie acted for IME. Mr Hunter advised Mr Berry that the pursuers/KDL would have a legal right to install the ventilation duct at the shop.
The pursuers began construction of the development in the autumn of 2005.
[12] In late 2005 it became apparent that IME disputed the pursuers' entitlement to affix the ventilation duct to the shop. Around the same time the application for
planning permission to convert the garage adjacent to the shop to a house was refused. At a meeting at the defenders' offices on 13 December 2005 IME offered
to allow installation of the flue in return for a payment of £75,000. Mr Hunter advised the pursuers/KDL that they had a legally enforceable right to connect the
flue. In view of that advice the pursuers did not accept IME's offer. As a result of the conflict of interest which had arisen the defenders ceased to act for the
pursuers/KDL in February 2006.
[13] Mr Berry considered how best to deal with the difficulty which had emerged. His preferred course (rather than litigate with IME) was to seek a variation of
the planning permission so as to remove the requirement which condition 8 imposed. IME proposed to let the shop for use as a pizza takeaway. Mr Berry and
those advising him - planning consultants and solicitors - felt the ventilation arrangements to deal with smells from the fish and chip shop were no longer needed.
The pursuers applied for a variation of the planning permission. In addition they explored the possibility of HBJ590 seeking to enforce its contractual rights anent
installation of the flue against SDL, and SDL seeking to enforce its contractual rights thereanent against IME. In December 2006 the pursuers' solicitors wrote to
the defenders intimating that the pursuers held them responsible for the predicament in which they found themselves, but indicating that they remained optimistic
that the planning authority would agree to removal of the planning condition.
[14] In 2006 Mr Berry obtained marketing and pricing advice from Rettie & Co. The initial plan had been for the development to be completed and released in
phases. Phase 1 was to be the eastmost townhouses, two of which were to be showhouses (one to be used as a showhome and the other as a sales office).
Phase 2 was to be the mid-section of the townhouses, Phase 3 the western section, and Phase 4 the apartments. Marketing the development was to begin in the
summer of 2006 with first sales from Phase 1 being achieved in July 2006. There was some slippage with the result that it became clear that the first phase could
not be reached until the late autumn of 2006. In the circumstances Rettie & Co. advised that it would be preferable to postpone Phase 1 and the sales launch until
spring 2007, because the early part of the year was usually the most favourable time for sales and for an uplift in prices. The pursuers agreed with that advice.
In addition they considered the revised plan would have considerable operational advantages: major works could be completed without the constraints which the
presence of occupiers would entail.
[15] To the rear of the site is a railway line (Edinburgh to Carstairs) and its embankment. The terrace of townhouses is next to it. They are smaller than normal
townhouses and have no gardens. They are three storey with a garage, study and wc on ground level, an open plan lounge/dining room/kitchen on the first floor,
and two bedrooms and a bathroom on the second floor. Behind each house there is a very small drying area (about 1.5 metres deep) which is accessed through a
door from the study. At the back of each house's drying area is a high brick wall clad with timber which goes up the side of the railway embankment.
The total...
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