Mactaggart And Mickel Limited V. Charles Andrew Moore Hunter And Another

Pursuer: Connal Q.C.; McGrigors LLP

Defender: Ellis Q.C.; Balfour & Manson LLP

16 September 2010

[1] The pursuers ("MML") are developers; the defenders ("Mr and Mrs Hunter") were owners of a site, which had potential for development, at 501 and 505 Lanark Road West, Balerno ("the site"). The parties entered into missives for the sale of the site dated 6 and 9 July 2007 ("the missives"). Disputes in relation to the parties' obligations under the missives have given rise to this action and a counterclaim. The court by interlocutor dated 30 March 2010 allowed a preliminary proof on issues of liability. Parties agreed to focus their dispute in the preliminary proof principally on two issues. The first was whether MML had used "reasonable endeavours" to obtain planning permission for the site. The second was whether MML acted in good faith and reasonably at the relevant date when it served an "Unsatisfactory Planning Notice". After dealing with those matters and the defence of waiver, I discuss the provisions of the missives which govern parties' rights in the event of breach and the law of unjustified enrichment, as parties also debated the nature of the remedies which might be available.

The site

[2] The site is located in a prominent position on the approach to Balerno from Edinburgh at the junction of Lanark Road West and Bridge Road. At the relevant time it comprised two housing plots with one house on each and substantial garden ground. The site also contained a number of mature trees which the planning authority was likely to wish to preserve. It rises gently from Lanark Road West towards Bridge Road and drops to the east.

The relevant planning policies
[3] The site is on the northern edge of the Balerno Conservation Area, which was originally designated in 1975. Its boundary was amended in 1987 and it was re-designated with amended boundaries in 2003. The Balerno Conservation Area Character Appraisal ("the Appraisal") speaks of the area containing two areas of distinct character, namely the open approach to the village and the tightly knit old village centre. In describing the spatial pattern and townscape of the eastern approach to the village the Appraisal spoke of a secluded location, the stone walls and buildings creating a sense of a gateway to a country estate and the rural approach to the village with open fields and mature trees. It recognised however that the pedestrian safety improvements, with an increased number of traffic lights and islands, had detracted from the rural character of the approach.

[4] The Rural West Edinburgh Local Plan ("the local plan"), which the City of Edinburgh Council ("CEC") adopted in June 2006, contained policies to protect the conservation areas within its plan area. It suffices for the purposes of this opinion to describe the thrust of the policies rather than record their precise terms. Policy E35 provided that developments would be permitted only if all features which contributed to the special character and appearance of the area were retained. Policy E36 required that development should be of good architectural quality and relate in mass, scale, design and materials to the existing fabric. More generally, Policy E41 required new development to be integrated with its surroundings in terms of scale, form, siting, street pattern, alignment and materials. It instructed that special attention be paid to design quality at gateways and arterial routes. Policy E42 required new development to make a positive contribution to the overall character of its context and immediate setting.

[5] CEC also published non-statutory guidance in relation to proposals affecting, or within the grounds of, pre-1914 villas ("the Villa Areas guidelines") which were designed to conserve and enhance the particular character of villa areas. The Villa Areas guidelines provided guidance on proposals for new dwellings and house extensions in the grounds of villas, informing developers that CEC might require early consultation with the Head of Planning and the submission of additional information with the planning application. While reference was made to this document, it was not clear that it was directly relevant to MML's application which involved the demolition of the existing houses within the site.

[6] The local plan also had policies relating to sustainable development (policy E1) and affordable housing (policy H7) which are relevant but of less materiality to the issues in this action.

The missives

[7] The missives provided that MML would purchase the site for £3.5 million with a date of entry on 17 July 2007 or such other date as was agreed. Clause 1.1 defined the price as that sum. MML was to pay a deposit of £1.5 million on the date of entry and were to receive in return a disposition of the site at the date of settlement. In clause 1.1 the "Development" which MML sought to obtain was defined as "the Purchaser's proposed development for no fewer than 17 Units and no more than 19 Units on the Subjects;" and "Unit" was defined as "either a dwellinghouse or a flatted dwellinghouse." The term, "Planning Permission" was defined as "detailed planning permission...for the Development."

[8] Before the parties entered into the missives, they had discussed various proposals which MML's architects had prepared for the development of the site. Those included proposals ranging from seven detached houses and a nursing home to combinations of flats and houses or flats, townhouses and houses, totalling seventeen units. Several options included flats at the north eastern corner of the site which with different combinations of houses comprised seventeen units. It was not clear which of the various plans had been shown to Mr Hunter. It was suggested that plans involving nineteen units post-dated the missives. While clause 1.1 defined the development as "the purchaser's proposed development", no particular proposal was appended to the missives.

[9] The missives contained provisions which addressed the uncertainty as to the outcome of a planning application to develop the site. To protect Mr and Mrs Hunter, MML was required to pursue a planning application with all reasonable diligence and to use reasonable endeavours to obtain detailed planning permission for their development (Clause 11.4.1). If they obtained a satisfactory planning permission they were to serve a satisfactory planning notice (and similar notices of satisfaction in relation to their site survey and roads construction consent) and thereafter pay the price (under deduction of the deposit) on the date of completion. There was also a provision for overage: the price was to be increased by £175,000 for every unit above seventeen which the planning authority permitted. MML also was to grant and deliver at the date of entry a standard security over the site in favour of Mr and Mrs Hunter to secure its obligation to re-convey the land on repayment of the deposit if it did not obtain a satisfactory planning permission.

[10] To protect MML the missives empowered it to serve an unsatisfactory planning notice at any time within the earlier of 18 months after the date of entry and 21 working days after the issue of the planning permission, confirming that the planning permission was unsatisfactory (clause 11.1.2). Mr and Mrs Hunter were obliged to repay the deposit within 21 days of receipt of the unsatisfactory planning notice (clause 13). If the deposit was not repaid on time, MML was to have certain remedies. Interest was to be paid at 4% over the base lending rate of The Royal Bank of Scotland plc and MML was entitled to arrange the discharge of the standard security and to rescind the missives (clause 13.4 and 13.5). MML was also protected by the requirement that Mr and Mrs Hunter grant and deliver at the date of entry or date of settlement (when the deposit was paid) a power of attorney authorising MML to discharge the standard security (clause 4). Thus it was within the power of MML to arrange the discharge of the standard security if the sellers did not co-operate.

[11] There was a whole agreement clause (clause 1.4) which was in these terms:

"The Missives (including the annexations thereto) shall, as at the date of conclusion thereof, represent and express the full and complete agreement between the Seller and the Purchaser relating to the sale of the Subjects and shall supersede any previous agreements, representations or others between the Seller and the Purchaser relating thereto."

[12] That was the basic structure of the missives. As clause 11.4.1 is central to the issues in which I have heard the proof, I set it out in full:

"The Purchaser shall, having regard to inter alia the consultative nature of the planning process, submit its application for Planning Permission with all reasonable diligence and in any event within six calendar months of service of a Satisfactory Survey Notice. The Purchaser shall be entitled to amend the application lodged in respect of the Planning Permission and to appeal against any refusal or deemed refusal thereof and against any grant of the same subject to conditions which are not in terms satisfactory to the Purchaser. The Purchaser shall use reasonable endeavours to obtain the Planning Permission and will keep the Seller informed as to the progress of the application. If having complied with the foregoing obligations the Purchaser is of the view (Acting reasonably and in good faith) that the Planning Permission will not be granted the Purchaser shall be entitled to serve on the Seller an Unsatisfactory Planning Notice."

The progress of the development

[13] To pursue the development MML engaged Fouin & Bell ("FB") as its architects and Wren & Bell...