Redding Park Development Company Limited V. Falkirk Council For Judicial Review Of An Expert Determination Of Donald Mackinnon Dated 22 October 2010

JurisdictionScotland
CourtCourt of Session
JudgeLord Menzies
Neutral Citation[2011] CSOH 202
Date08 December 2011
Publication Date08 December 2011
Docket NumberP705/11

OUTER HOUSE, COURT OF SESSION

[2011] CSOH NUMBER 202

P705/11

OPINION OF LORD MENZIES

in the Petition of

REDDING PARK DEVELOPMENT COMPANY LIMITED

Petitioner;

against

FALKIRK COUNCIL

Respondent:

For Judicial Review of an expert determination of Donald Mackinnon dated 22 October 2010

________________

Petitioner: Patterson QC, Solicitor Advocate; Dundas & Wilson CS

Respondent: Howie QC; Morton Fraser LLP

8 December 2011

Introduction

[1] In this petition for judicial review the petitioner seeks reduction of a purported determination by an independent expert and an order for the respondent to repay the sum of £326,520 which was paid to the respondent following that determination.

[2] The dispute between the parties arises as a result of missives whereby the petitioner agreed to purchase from the respondent two areas of ground at Reddingmuirhead Village, Falkirk ("the subjects"). The areas of land adjoining the subjects were owned by the petitioner and by a director of the petitioner. Both the subjects and the adjoining lands (together "the whole site") had previously been used for industrial purposes, and required remediation works before being developed for residential use. Put shortly, the missives provided that the petitioner would pay a purchase price to the respondent. The petitioner would then carry out remediation works, and having completed these would evidence to the respondent the Certified Costs of doing so. If the parties could not agree the Certified Costs, the matter was to be referred to an independent expert. If the Certified Costs (as agreed or determined) were less than a specified figure, the petitioner was to pay the difference to the respondent. In the event of certain circumstances occurring after completion, the respondent would be entitled to an uplift in the purchase price. In security of such entitlement and the possibility that the respondent might be entitled to a "rebate" on Anticipated Remediation Costs, the petitioner delivered to the respondent at completion a standard security over the whole site.

[3] The petitioner paid the purchase price to the respondent and carried out remediation works to the whole site. The petitioner and the respondent were thereafter unable to agree what headings of costs incurred by the petitioner could fall within the definition of Certified Costs for the remediation works. While discussions were continuing between the parties on this matter, the petitioner wished to sell part of the subjects. In October 2006 the respondent agreed to (and did) grant the petitioner a discharge of the standard security in exchange for the sum of £300,000 being deposited with the petitioner's solicitors in an interest bearing account in trust for the benefit of the party entitled to repayment of this sum or any part of it.

[4] The parties could not agree which heads of cost fell within the definition of Certified Costs. By letter dated 4 December 2007 the petitioner applied to the Chairman of the Royal Institution of Chartered Surveyors in Scotland for the appointment of an independent expert to determine the dispute. The letter stated that "the dispute between the applicant and the respondent is in the interpretation of the "Certified Costs" and what should be included in Remediation costs." Mr Donald Mackinnon was nominated to act as independent expert, and accepted the nomination. Amongst the documentation placed before Mr Mackinnon was a document headed "7. Spreadsheet showing total costs and Falkirk Council total apportionment" ("sheet 7"), which was part of a document prepared by the petitioner entitled "Evidence of Actual Costs Properly and Reasonably Incurred by Redding Park Development Company in carrying out the Remediation Works ("the Certified Costs") and Development Costs All With Regard to the Contract with Falkirk Council re the Land at Reddingmuirhead, Falkirk" ("the evidence document"). These documents were designed to show how the petitioner had apportioned costs between the subjects and the adjoining land, and the various headings and sub-headings which the petitioner contended should fall within the definition of Certified Costs.

[5] Having considered submissions from both parties, Mr Mackinnon issued his determination on this dispute on 24 June 2008 ("the first determination"). He set out in paragraph 97 of his determination his decision as to what the Certified Costs included. In paragraph 98 he observed that "Many of the above items require quantification by the parties. As quantum did not form part of this process I have not and have not wished to ascertain the value of the clawback, if any, appropriate to the Council".

[6] Following the issue of the first determination, the parties were unable to agree the figure for Certified Costs, and in June 2010 they appointed Mr Mackinnon as independent expert to determine quantum of the sums claimed under Certified Costs. The petitioner relied on its written submission to Mr Mackinnon dated 7 July 2010. The respondent argued that the petitioner could not include further heads of claim beyond those referred to in sheet 7 submitted in the process leading up to the first determination, nor could the petitioner seek to change the method of apportionment relied on in that process. The petitioner maintained that Mr Mackinnon should have regard to all the evidence presented to him. By his determination dated 22 October 2010 ("the second determination") Mr Mackinnon essentially agreed with the respondent's position. He decided that he was not able to look beyond the heads of claim or the method of apportionment identified in the earlier process. He decided that he could not look beyond the value of items which had been accepted or not disputed by the respondent in the earlier process, and that the method of apportionment adopted in that earlier process could not be revisited. In these respects the petitioner now maintains that Mr Mackinnon misdirected himself, failed to exhaust his remit and failed to determine the Certified Costs as he was obliged to do. He asked himself the wrong questions and excluded the consideration of material which he was required to consider.

[7] Separately, the petitioner maintains that Mr Mackinnon exceeded his remit by finding that a "clawback" payment was due by the petitioner to the respondent. In paragraph 67 of the second determination Mr Mackinnon stated inter alia:

"Having considered the parties' submissions and all the evidence presented to me, I determine:

1. The amount of the Certified Costs is £3,946,233.35.

2. This results in a 'clawback' payment being due by Redding Park to the Council of £930,403.65 which is subject to the applicable VAT and which payment is to be made no later than 22 November 2010".

Mr Mackinnon was only empowered by condition 4.2 of the missives to determine whether "the Certified Costs represent the proper and reasonable costs incurred by the Purchaser in carrying out the Remediation Works". Part 2 of paragraph 67 exceeded this remit, so the second determination is a nullity.

[8] For its part the respondent maintains that Mr Mackinnon did not fail to exhaust his remit, and that his decision that he was not permitted to look beyond the heads of claim or the method of apportionment which were in issue in the first determination was sound. If he exceeded his remit in making a finding that a "clawback" payment was due by the petitioner to the respondent and that payment was to be made no later than a particular date, this aspect was a discrete element of his determination and was severable from the rest of the determination - if he made an error in this regard, this would not result in the entire determination being reduced.

[9] The respondent makes a separate argument on approbation and reprobation. Following the issuing of the second determination the petitioner's solicitors consulted with the petitioner, and then wrote to the respondent enclosing a cheque in payment of the sum found due. The petitioner took no steps to challenge the validity of the second determination for about six months, and then only after the respondent had sought to enforce the determination by way of service of a statutory demand. The respondent argues that, having approbated the determination, the petitioner cannot be permitted to reprobate it by asserting its invalidity. The respondent further maintains that the petitioner is personally barred from asserting that the second determination is void and a nullity.

[10] Before the first hearing in this matter, both parties helpfully lodged written notes of arguments (Nos. 14 and 15 of Process). In the course of the first hearing, I indicated to Senior Counsel for the respondent that I would welcome authorities on the question of approbation and reprobation. He provided these, but did not address me on them in detail, and Senior Counsel for the petitioner sought the opportunity to consider them and make submissions on them. Parties agreed that the most convenient way of addressing this matter was by the lodging of further written submissions, without a further hearing. Such further written submissions were in due course lodged, and form Nos. 16 and 17 of Process. I have taken into account all of the submissions for the parties, both those written and those made at the bar.

The contractual provisions
[11] The most important elements of the parties' contract for present purposes are clauses 4 and 7 of the missives, which are in the following terms:

"4. Remediation Costs

4.1 No later than 3 months following completion of the Remediation Works the Purchaser shall evidence to the Council the actual costs properly and reasonably incurred by the Purchaser in carrying out the Remediation Works ("the Certified Costs"). For the avoidance of doubt the Certified Costs shall include all costs properly and reasonably incurred by the Purchaser relating to site survey and investigation, testing and certification in...

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