Scottish Court of Session Decisions

This case, which called before me on Procedure Roll, concerns the sale of land and buildings at Inveresk. The defenders, who were selling, removed certain fixtures from the subjects before they left. The pursuer, who was the purchaser, seeks damages, firstly for the market value of these items, and secondly for loss of one year's rental income because tenants to whom he had leased the subjects declined to take occupation by reason of the defenders' actions.

On conclusion of the submission in support of the pursuer's first plea-in-law, the solicitor-advocate for the defenders sought leave to amend by deleting Answer 3 and by inserting in place thereof the word "Admitted". He therefore conceded that interim decree should pass in favour of the pursuer on the sum of £4000 with interest on that at 8% a year from 31 March 1998. That represented the market value of the fixtures removed. The only issue then left was the claim for damages for consequential loss.

The pursuer's averments relating to this lack coherence. The missives of sale were produced and held as repeated brevitatis causa. From these it appears that by letters dated 27 February, 12 and 21 March and 24 April 1997 the defenders agreed to sell and the pursuer agreed to buy the subjects. The pursuer's offer to purchase was conditional on the grant of detailed planning permission for the erection of at least six dwelling houses. The defenders accepted that condition. Outline planning permission for this had been granted on 30 May 1997. By letter dated 11 August 1997 the defenders withdrew their acceptance of the offer to purchase, alleging that the pursuer's planning application was invalid and incompetent. That withdrawal was repeated in a letter dated 5 March 1998, which also declared the offer no longer capable of acceptance. By letter dated 12 March 1998 they withdrew the terms of their letter of 5 March, and modified the terms of their original acceptance by adding a condition that the pursuer would lodge all documents required to enable his application for detailed planning permission to be determined on 19 March 1998. It was also provided that if permission was granted entry and payment of the price would be seven days thereafter, and that if it was refused or the application continued, entry and payment would be on 31 March 1998. By letter dated 12 March 1998 that further qualification was accepted on behalf of the pursuer.

The pursuer also avers that after the grant of outline planning permission the defenders continually pressed the pursuer for settlement. He also avers that in view of continuing uncertainty he agreed to lease the subjects, pending the grant of detailed planning permission, to a company for one year from 1 May 1998 at a monthly rental of £1950. That agreement was confirmed in writing on 15 March 1998. On 8 May 1998 the tenants withdrew from the agreement to lease because the subjects had been rendered untenantable. The pursuer avers that he entered the lease to generate some income from his investment and to defray his borrowing costs. He continues.

In contending that the loss of rental claim was too remote the solicitor-advocate for the defenders made two submissions. In brief, these ran as follows.

Firstly, it was accepted that the defenders contemplated the possibility that detailed planning permission might not be granted. Under reference to Gloag: Contract 2^nd ed. p 696 / 7 and Walker: Contract § 33.30 it was contended that no reasonable person at the time of making the contract could have anticipated that the defender would enter a residential lease for a year which would require the fixtures to be in place. There were no averments of knowledge or special circumstances sufficient to put a reasonable person on notice, such existed in Diamond v Campbell-Jones [1961] Ch 22 and Cottrell v Steyning & Littlehampton Building Society [1966] 1 WLR 753. The most easily foreseeable scenario was that the pursuer would get detailed planning permission quickly, since it usually follows from the grant of outline permission, and would demolish immediately.

The averment that the pursuer intended to purchase as a commercial venture, and not to occupy, did not place it within reasonable contemplation that the pursuer might let the property. It might have been reasonable to say that after detailed planning permission had been refused, the pursuer, anticipating delay, might then have arranged to generate some income from the subjects, but not that he would tie his hands with a year's lease.

Secondly, the averments about the terms of the lease and the reason for its termination were lacking in specification.

In reply counsel for the defenders moved for a proof before answer. The essence of his submission was as follows.

It was undesirable to decide issues of policy without hearing the facts, and issues of remoteness are inextricably bound up with issues of fact: Balfour Beatty v Scottish Power 1994 SC (HL) 20, Cossar v UPS 1999 SLT 259. None of the cases relied on by the defenders had been decided without inquiry. On the basis of Victoria Laundry v Newman [1949] 2 KB 528 and Czarnikow v Koufos [1969] 1 AC 350 the Court has to decide if the loss claimed was in the reasonable contemplation of the parties, actual or imputed. This was a case of common contemplation. The pursuer had anticipated delay, but the defenders having withdrawn their acceptance on the basis that the planning application could not proceed also had in contemplation that planning permission might not be granted. A claim for loss of rent could not be said to be bound to be rejected.

The missives made clear that refusal of detailed planning permission or further delay was a serious possibility. If the pursuer had been asked to take on the risk of delay in the grant of planning permission it was not surprising he should protect himself by seeking to generate income in the interim. It does not matter he anticipated the problem of a delay in planning permission, the defenders had anticipated it as well. It was of little significance that the missives of let were entered before 19 March, enough was known of the background of difficulty.

It was admitted that the property had been bought as a commercial adventure and not as a private residence. It is conceded that the defenders were aware that it was possible that planning permission would not be granted on 19 March. They must have contemplated that the pursuer would have put the property to some use. A lease was the only likely option. It is not the correct approach to think what is the most easily foreseeable scenario.

I do not consider that there is substance in the defenders' argument that there is insufficient specification of the reasons why the lease was terminated. In terms of the missives, which are incorporated into the pleadings brevitatis causa, the subjects comprised a dwelling house, boarding dog and cat kennels, and other outbuildings. It is averred by the pursuer that the tenants proposed to use the subjects as a store and as accommodation for two persons. I consider the absence of the fixtures admittedly removed by the defenders is a sufficient basis in averment to draw a factual inference that the residential part of the subjects had been rendered uninhabitable.

However, in my opinion the main contention advanced on behalf of the defenders is sound. It raises no issues of policy. It concerns only the simple issue of whether or not the pursuer's averments are adequate to support evidence relevant to the head of loss claimed.

I do not agree with the view of counsel for the pursuer that no significance should be attached to the fact that the lease was entered before the outcome of the application for detailed planning permission was known. On the contrary, I think it is important to appreciate that what in fact is averred to have happened was that the pursuer agreed to enter a lease of the subjects by 15 March 1998 at latest. That was three days after conclusion of the missives, four days before the date for determination of the application for detailed planning permission, and nineteen days before he entered into possession. Because of the lease the pursuer would not have been able to develop the subjects until the ish on 30 April 1999 at the earliest.

The damages recoverable are limited to losses of a type which the defenders might reasonably have contemplated at the time of the contract. In assessing what falls within reasonable contemplation regard must be had both to the knowledge to be imputed to them as reasonable people, or that which they actually possessed. I do not consider that this is a case where the loss sought to be recovered by the pursuer falls into either category.

The course which the pursuer took was not something which reasonable people could have anticipated as likely, in the ordinary course of things. The intention apparent from the missives was for the buildings to be demolished and re-developed. The date for hearing the application for detailed planning permission was known. The pursuer did not await its outcome. Instead, only days after completion of the missives, and before he was in possession of the subjects, he contracted to lease them for twelve months. That was a course of action which was out of the ordinary. The missives did not anticipate its occurrence.

There are insufficient averments to support proof of knowledge on the defenders' part that that was what the pursuer was going to do, at the time the missives were completed. There is no averment that the defenders knew at that stage that, although the missives referred to demolition of the subjects, he intended prior to disposal of the planning application to enter a residential lease for a period of twelve months. That points to the pursuer having altered his original intention, but there is nothing to indicate the defenders' awareness of it.

There are averments of tardiness on the pursuer's part to settle the transaction, and that the defenders applied pressure to achieve this. However, it does not follow from that circumstance that the defenders should have anticipated either that detailed planning permission would not be obtained on 19 March, or that having paid the purchase price and obtained entry, the pursuer would delay progressing the development as originally contemplated.

The statement "Accordingly, the defenders contemplated the possibility that detailed planning permission would be refused or delayed, as in fact happened." really avers a conclusion drawn from inadequately specified premises. It is also averred that that the defenders knew that the pursuer purchased the subjects as a commercial venture, and did not intend to occupy them as a private residence. That is apparent from the missives. However, it does not follow from either of these averments that the defenders should have anticipated that there might delay in obtaining detailed planning permission, that the pursuer, as a businessman, would then turn to other income generating measures, and in particular would enter a residential tenancy.

In submission on the pursuer's behalf it was argued that the missives indicated further delay was regarded as a serious possibility. It was inferred that the pursuer had been asked to assume the risk of delay. It was implied that both sides were aware of the background of difficulty. I am of the view that the question I have to determine must be tested by reference only to the averments and documents properly incorporated into the pleadings. I thought these were quite insufficient to fix the defenders with the degree of implied knowledge which in argument for the pursuer it was suggested existed.

It seemed to me that the pursuer's contention that in none of the cases cited had a claim been dismissed without inquiry ignores two matters. Firstly, it ignores the fact that the English system of pleading lacks the advantages of the Scottish concept of relevancy. In the English cases cited the issue of remoteness was inevitably determined only after proof. They therefore do not assist in assessing the sufficiency of the averments made. Secondly, it ignores the fact that in the Scottish cases cited the averments of knowledge on the part of defenders, actual or imputed, were much more precise than those made in this case.

Assuming the most favourable application of the legal test for determining whether this head of damage is to be excluded as too remote, the defender has satisfied me that even if the pursuer were to prove all the facts adumbrated by his averments, his claim would fail. He has been unable to set out sufficient by way of averment for this head of claim to be considered relevant. Accordingly I have concluded that the fourth plea-in-law for the defenders should be sustained, and that with the exception of the first, second and last sentences, Article 4 of Condescendence falls to be excluded from probation.

It was agreed that the expenses of the debate should be reserved.