Manorgate Limited V. First Scottish Property Services Limited
| Jurisdiction | Scotland |
| Judge | Lord Woolman |
| Neutral Citation | [2013] CSOH 108 |
| Court | Court of Session |
| Date | 04 July 2013 |
| Published date | 04 July 2013 |
| Docket Number | CA84/11 |
| OUTER HOUSE, COURT OF SESSION | |
| [2013] CSOH 108 | |
| CA84/11 | OPINION OF LORD WOOLMAN in the cause MANORGATE LIMITED Pursuer; against FIRST SCOTTISH PROPERTY SERVICES LIMITED Defender: ________________ |
Pursuer: Sandison QC and Reid; Maclay Murray & Spens LLP
Defender: Weir QC and Hawkes; Simpson & Marwick
4 July 2013
Summary
[1] In 2006 Manorgate Limited purchased a site on the corner of Riggs Road and Whitefriars Street in Perth ("the Site"). It intended to demolish the existing buildings and erect new commercial premises in their stead. One of the new units was to be used as a retail branch for its flooring business. The other units were to be let to complementary traders. After Manorgate paid the purchase price and took entry, it discovered a crucial fact. The Site was designated as being one of archaeological significance.
[2] The designation had a major effect on Manorgate's plans. In granting planning permission to carry out the proposed development, the planning authority required Manorgate to carry out archaeological investigations. Those investigations disclosed that a mediaeval Friary with associated burial ground had once stood on the Site. Extensive human remains lay below the earth's surface. The planning authority stipulated that those remains had to be dealt with in a sympathetic manner. There were two main options. The first was to remove the remains by way of excavation. The second was to design the foundations for the new buildings in a manner which did not interfere with the remains. Over a very lengthy period Manorgate considered various solutions with the aid of its professional advisers. Ultimately, it concluded that the development was uneconomic. It closed down the Site in March 2010 and it has remained 'mothballed' ever since.
[3] The archaeological designation of the Site should have been noted in an appropriate property search. In this case, First Scottish Property Services Limited ('FSPSL') carried out the search. It provided a Property Enquiry Certificate ('PEC'), which the sellers' solicitors exhibited to Manorgate. The PEC failed to disclose the archaeological designation.
[4] Manorgate now claims damages of £1,211,818.69 from FSPSL, together with interest. Put broadly, that sum is based upon (a) the lost capital value of the Site (b) site investigation costs; (c) trading losses; and (d) development losses. FSPSL admits that it was negligent. It accepts that the PEC should have referred to the archaeological designation. But it maintains a number of lines of defence. They include causation, contributory negligence, remoteness and mitigation.
[5] In my view, these lines of defence fall to be rejected and the real question is the proper calculation of Manorgate's loss.
The Facts
The Friary
[6] The Order of the Brothers of Our Lady of Mount Carmel, or 'Carmelites', established the Friary of Tullilum in Perth in the 15th century. It thrived for a considerable period. At some point in the 16th century, the Bishop of Dunkeld came to live there in order to escape Highland raids. Over the course of centuries, however, the Friary fell into disuse and its buildings became derelict. By Victorian times, no visible evidence of the establishment remained.
[7] Despite the name of the adjacent thoroughfare ('Whitefriars Street'), in modern times many people were unaware of the Friary's existence. They included the sellers from whom Manorgate acquired the Site. Its history was, however, known to some individuals. The Ordnance Survey map of 1862 identified the area as being the supposed site of a Whitefriars Chapel.
[8] In 1982 archaeologists carried out limited excavations in the area of the Site. They confirmed the existence of the Friary. They also discovered the remains of twenty one human bodies and concluded that the Site incorporated a burial ground. But archaeologists were unable to determine the exact configuration of the buildings. Further, they did not know the precise location or dimensions of the burial ground.
[9] Part II of the Ancient Monuments and Archaeological Areas Act 1979 empowers local authorities to designate sites of archaeological significance. At the time of Manorgate's purchase, Perth & Kinross Council had designated the Site and published Policy 61 of the Perth Area Local Plan. It stated:
"Proposals Map B indicates Areas of Archaeological Significance where the District Council will seek to protect archaeological remains from avoidable disturbance. Where development is proposed in such areas, encouragement will be given to approved investigators excavating and recording archaeological features before development takes place. If necessary appropriate conditions will be attached to planning consents. The District Council will also seek to protect other sites of archaeological interest, which may be discovered. Where it is likely that archaeological remains may exist, the prospective developer will be required to arrange for an archaeological evaluation to be carried out by a professionally qualified archaeological organisation or archaeologist before the planning application is determined."
Manorgate
[10] Manorgate operates a retail flooring business, which trades under the name 'Direct Flooring'. In 2006, it traded from eight branches in Scotland and was looking to expand. One of its directors, John Semple, was in charge of its expansion plans. He instructed Douglas Livingston, a chartered surveyor, to assist in the search for a new site. Mr Livingston had begun working with Manorgate in 2005 as an independent property consultant. After a short period, he effectively worked as a member of its in-house team. Mr Livingston's career as a surveyor commenced in 1977. He has extensive experience of the Scottish property market.
[11] Manorgate's candidates for the new branch included Perth, Dunfermline and Stirling. It intended to use one of the units in the new premises to open one of its own branches and to let the remaining units to other similar traders. Alternatively, it was prepared to consider selling the subjects after development and leasing back one unit. It had adopted a similar approach at sites in Falkirk and Bathgate.
[12] In early 2006, Mr Livingston and Mr Semple embarked on a car trip to try to find a location for the new branch. They noticed the Site, although it was not on the market for sale at the time. Mr Semple thought that it "looked perfect", because it had a good trading location on the corner of a busy road, a short distance from a retail park and relatively close to Perth town centre.
[13] At that time, the Site comprised a small commercial complex of older buildings. One of them contained a joinery business operated by the owners of the Site, James Normand and Son. In addition there were four small flats in a separate building. All of the buildings were in relatively poor condition.
[14] Mr Livingston considered that the planning authority would be unlikely to grant retail planning consent. He believed, however, that it would grant restricted consent for 'trade counter' use. He advised Mr Semple that in his opinion the Site would be likely to yield a significant profit to Manorgate.
[15] Mr Livingston made enquiries and discovered the identity of the Site owners. He contacted Mr Normand junior by telephone and learned that the firm was keen to move to new premises. He also discovered that the sellers had been involved in protracted missives with a local housing association. The association had made an offer for the Site the previous year, subject to the condition that it obtained satisfactory planning consent. Matters had stalled mainly because the association had failed to secure permission for the number of flats it wished to erect. That had a consequential effect on the proposed purchase price. The missives contained a formula which linked the price to the number of flats that could be included in the new development.
[16] Mr Livingston relayed the information he had gleaned from Mr Normand to Mr Semple. After some discussion, Mr Semple confirmed that he wished Manorgate to acquire the Site. The property market was buoyant and he saw this as a good opportunity. In order to make the offer as attractive as possible, Mr Semple decided that it should not contain a suspensive condition regarding planning consent. He believed that the sellers would not agree to conditional missives and he was keen to conclude matters quickly.
[17] Mr Livingston suggested to Mr Semple that Manorgate should make an offer for the Site in the region of £425,000.00 to £450,000.00. That was based upon his valuation and is contained in a letter dated 28 March 2006. Mr Semple instructed him to try to agree a lower price. Mr Livingston and Mr Normand then carried on negotiations by telephone. Mr Livingston said that Manorgate was willing to make an offer without a suspensive planning condition. In addition, it was willing to allow the joinery business to remain in occupation of its premises at the Site until its new facility was built. The outcome of these negotiations was that Mr Normand agreed to sell the subjects to Manorgate for £385,000.00.
[18] Manorgate elected not to obtain a site survey prior to concluding the transaction. Two factors influenced its decision. First, the condition of the existing buildings was immaterial as they were going to be demolished. In Mr Livingston's opinion, the ground was suitable for the proposed new buildings and he so advised Mr Semple. Secondly, there was the question of cost and delay. Manorgate was purchasing the subjects using its own funds. While a lending institution would have insisted upon a 'red book' valuation survey, that would have been expensive and might have led to delay.
The Missives
[19] Calum Fraser of Hannay Fraser, solicitors, acted for Manorgate in the conveyancing transaction. On 6 April 2006, he submitted a formal offer on behalf of Manorgate to purchase the Site at...
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...the ancient Monuments and archaeological areas act 1979 (UK) (as to which, see Manorgate Ltd v First Scottish Property Services Ltd [2013] CSOh 108) or the antiquities and Monuments Ordinance (Cap 53) (hK). See also pugh-Smith and Samuels, Archaeology in Law (Sweet & Maxwell, 1996). In aust......