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Cite as: [2003] ScotCS 234
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Scottish Youth Theatre v Anderson & Ors [2003] ScotCS 234 (22 August 2003)
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EXTRA DIVISION, INNER HOUSE, COURT OF SESSION |
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Lord Osborne Lord Macfadyen Lord Abernethy
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A1212/02 OPINION OF THE COURT delivered by LORD OSBORNE in RECLAIMING MOTION by SCOTTISH YOUTH THEATRE (PROPERTY) LIMITED Pursuers and Respondents; against JOHN NEILL ANDERSON and OTHERS, the Trustees of the Royal Scottish Academy of Music and Drama Endowment Trust Defenders and Reclaimers; _______ |
Act: Glennie, Q.C., Brown; McClure Naismith, Glasgow (Pursuers and Respondents)
Alt: McNeill, Q.C., McLean; MacRoberts (Defenders and Reclaimers)
22 August 2003
The background to the present proceedings
[1] In this action, the pursuers, Scottish Youth Theatre (Property) Limited sought declarator, implement and certain interdicts, which failing, damages against the defenders, who are the Trustees of the Royal Scottish Academy of Music and Drama Endowment Trust, which was constituted by Deed of Declaration of Trust by John Neill Anderson and others, dated 18, 22, 24 and 28 June and registered in the Books of Council and Session on 7 July, all days in the year 1993. The action has arisen out of an agreement entered into between the parties, dated 22 June and 8 August 2000, regarding the purchase of certain heritable subjects at Dunblane Street and McPhater Street, Glasgow, which is No. 6/2 of Process. It was then agreed that the defenders would, in the first place, purchase the whole of the subjects concerned from the then owners and, thereafter, sell a part of them to the pursuers. The context in which the agreement was entered into was that the defenders wished to construct student residential accommodation on a part of the site in question, while the pursuers were interested in building premises for their own purposes, including rehearsal space, on the remainder of the site. Both parties saw advantages in having these respective facilities built adjacent to each other. The whole of the site in question was, as envisaged, in due course, acquired by the defenders. Since the resolution of the present dispute between the parties depends upon a proper interpretation of certain parts of the agreement mentioned, it is appropriate that, first of all, we should set out here those parts of the agreement which appear to us to be of importance in this context. In the agreement, the defenders are referred to as "the Trustees"; the pursuers are referred to as "SYT". The relevant passages are as follows:"WHEREAS:
(A) the Trustees have completed negotiations for the purchase of the
Subjects;
(B) subject to the purification of the suspensive conditions set out in the
Contract, SYT is committed to purchasing the SYT Area from the Trustees;
(C) subject as aforesaid, the Trustees and SYT have agreed to cooperate in
the redevelopment of the Subjects to enable the Trustees to acquire and develop the Student Residence Area and SYT to acquire and (subject to SYT obtaining funding for such development as aftermentioned) develop the SYT Area;
NOW THEREFORE it has been agreed between the parties as follows:-
1. DEFINITIONS AND INTERPRETATIONS
1.1 Unless the context otherwise requires, the following expressions shall
bear the following meanings:-
'the Contract' means the agreement for the sale of the SYT Area by the Trustees to SYT the terms of which are set forth in the Schedule;
'the Plan' means the plan annexed and signed as relative to this Agreement;
'the Schedule' means the Schedule annexed and signed as relative to this Agreement;
'the Student Residence Area' means the northern part of the Subjects shown delineated and shaded pink on the Plan;
'the Subjects' means that area of ground on the west side of Dunblane Street, Glasgow, registered in the Land Register of Scotland under the Title Number GLA 116795;
'the SYT Area' means the southern part of the Subjects shown delineated and hatched blue on the plan;
'SYT Project' means the acquisition, design, construction and completion of a complex including rehearsal space on the SYT Area by SYT;
...
'Trust Project' means the acquisition, design, construction and completion of residential accommodation for students on the Student Residence Area by the Trustees;
...
2. CO-OPERATION
2.1 The parties hereby agree that with effect from the date of this
Agreement the parties shall co-operate with one another in fairness and in good faith in all practical matters of mutual responsibility and interest affecting the implementation of the SYT Project and the Trust Project respectively and will respond promptly to requests properly made by the other party for approvals, information or assistance.
2.2 SYT and the Trustees respectively undertake to each other that the
parties have jointly made application for all necessary detailed planning consents and building warrants ('the Consents') and will diligently pursue obtaining the Consents for the SYT Area and the Student Residence Area respectively and that copies of all applications for the Consents will be made available on request to the other party.
...
2.5 The Trustees and, provided that (a) the suspensive conditions set out in
the Contract are purified and (b) SYT obtains funding for that part of the SYT Project other than the acquisition of the SYT Area on terms acceptable to SYT (as to which SYT shall be the sole judge), SYT respectively undertake that the SYT Project and the Trust project will be implemented:-
2.5.1 in a good and workmanlike manner and in accordance with
good building practices;
2.5.2 with good and suitable materials;
2.5.3 in conformity with the Consents; and
2.5.4 with due diligence.
3. CONTRACT TO PURCHASE
The Trustees enter into a contract for the sale of the SYT Area by the Trustees to SYT on the terms and conditions set forth in the Schedule.
4. COSTS AND EXPENSES
4.1 In respect that there is an existing building on the Subjects which will
require to be demolished and that the Trustees will incur certain demolition and site clearance costs in relation to the Subjects, SYT undertakes to free and relieve the Trustees of 40% of the following expenses properly and reasonably incurred by the Trustees and to make payment to the Trustees within fourteen days of demand of all sums due by SYT in terms of this clause being such share of ... ."
At this point in the agreement there is set out in detail a definition of the costs and expenses which are to be dealt with in terms of paragraph 4.1 of the agreement. The details of these provisions are not material to the present dispute. Paragraph 4.2 of the agreement contains details of arrangements for the demolition of the existing building on the subjects. These were, in general, to be the subject of consultation between the parties, although certain particular matters were the subject of specific agreement. The terms of the agreement continue:
"4.3 The parties have already submitted separate applications for planning
permission for the SYT Project and the Trust Project respectively. Any costs or expenses in connection with such planning applications which are referable to the Student Residence Area exclusively or the SYT Area exclusively as the case may be shall be the responsibility of the party so affected. ... ".
Paragraph 5 of the agreement contains provisions relating to what are described as excluded items, being costs and expenses relating to the contemplated enterprise which are not to be shared or met jointly. Section 6 and, so far as material to this dispute, Section 7 of the agreement are in the following terms:
"6. COMMON SERVICES
6.1 The parties shall co-operate with one another where necessary to
permit the provision to the Student Residence Area or the SYT Area, as the case may be, of all water, gas, electricity, telephone, sewerage, drainage and other pipes, cables and service media so as to facilitate the SYT Project and the Trust Project.
6.2 The parties undertake to instruct their respective professional teams of
architects, structural engineers, mechanical and electrical engineers and other professionals engaged or to be engaged in connection with the SYT Project and the Trust Project respectively to consult and co-operate with one another in the sharing of all relevant information.
6.3 In the event that the layout or design of the buildings or other
structures on the Student Residence Area and/or the SYT Area involve the creation of a lane or pend or other open and unbuilt area between the buildings on the Student Residence Area and the buildings on the SYT Area then there shall be reserved from the SYT Area in favour of the Student Residence Area or reserved from the Student Residence Area in favour of the SYT Area as the case may be a real burden and restriction whereby no ventilation fans or exhaust manifolds and equipment or hot air or other pipes or extractors shall at any time vent into the air space between the buildings on the Student Resident Area and the buildings on the SYT Area nor shall the respective owners or occupiers of the SYT Area and the Student Residence Area emit from their respective properties excessive noise, dirt, fumes, smoke or cause a nuisance of any kind to the other property.
7. PRE-EMPTION
7.1 SYT undertakes that until the full implementation of the SYT Project
(as evidenced by the issue by the relevant local authority of a completion certificate in respect of the building warrant therefor) it will not sell, alienate (including alienation by the grant of a lease) or otherwise dispose of the SYT Area or any part thereof to a third party without first making a formal offer to the Trustees to sell the SYT Area to the Trustees with a date of entry 2 months from the date of such offer and at the Reacquisition Price and otherwise on the same terms and conditions mutatis mutandis as those contained in the Schedule (other than Conditions 3, 5.3, 10 (other than 10.4 and 14-18 (inclusive)) and the Trustees shall be obliged within a period of twenty one days from the date of receipt of such formal offer to accept the same. The Reacquisition Price payable by the Trustees in the event of its receiving an offer from SYT in terms of this clause shall be determined in accordance with the following formula:-
Reacquisition Price =
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£400,000.00 + 400,000.00 |
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(Current RPI - Previous RPI) Previous RPI |
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Where the above terms shall have the following meanings:-
'Purchase Price' shall mean the sum of Four Hundred Thousand Pounds;
'RPI' shall mean the General index of Retail Prices published by the Department of Trade and Industry or any successor ministry or department or such similar national economic indicator which shall replace the General Index of Retail Prices;
'Current RPI' shall mean the latest available RPI figure as at the date of the offer by SYT to the Trustees in terms of this Clause;
'Previous RPI' shall mean the annual RPI figure published for the month of August nineteen hundred and ninety nine.
... ".
Section 8 of the agreement contains provisions, which it is not necessary to set forth in detail, providing that the provisions of the agreement are not to constitute or operate as any form of partnership between the parties within the meaning of the Partnership Act 1890. Section 9 of the agreement is in the following terms:
"9. RIGHTS OF ACCESS
The Trustees grant to SYT and SYT grants to the Trustees all necessary licences and rights to permit the other and its contractors and professional team to enter upon and carry out all necessary works on the Student Residence Area or the SYT Area (as appropriate) for the purposes of implementing the Trust Project and the SYT Project (as appropriate)."
"DUNBLANE STREET/McPHATER STREET SITE
As you are aware, over the past few weeks various conversations have taken place between our organisations regarding the future development of the site at Dunblane Street, A meeting has been proposed by RSAMD, but has not taken place due to the difficulty in getting the necessary people together during the summer.
It is my feeling that such a meeting is probably not necessary at the present time. As previously stated, Scottish Youth Theatre is at present in negotiation with Persimmon City Developments over a proposal to house the company at the former Sheriff Court building in Ingram Street. However, these negotiations are by no means finalised, and it could be some months before any form of definitive agreement is reached.
In addition, it could be longer before we are confident that the project is progressing as planned.
Scottish Youth Theatre is still committed to going ahead with the agreed programme of work on the shared site, as detailed in our present contract. Scottish Youth Theatre will purchase the agreed portion of the site, and proceed with the demolition of the Stagecoach building, contributing 40% of the costs.
If the situation changes significantly, we will, of course, inform RSAMD as soon as possible. However, at present Scottish Youth Theatre cannot afford to lose the option of the Dunblane Street/McPhater Street site without knowing that the alternative at Sheriff Court is confirmed. Unfortunately, as stated above, this process looks like being a prolonged one.
I hope that this clarifies our position, and we will, of course, keep you informed of any developments. I trust this is in order."
"My clients have become increasingly concerned about SYT's position regarding the development at Dunblane Street. You will I think have seen the summer 2001 edition of 'The Sytizen' which talks of a 'new plan' for a national centre for youth theatre and the proposal that SYT will occupy the basement of the Sheriff Court development with rehearsal space. In addition, Lord Gill, Chairman of RSAMD, recently received a letter from Harry Warnock of SYT, dated 17 August, in which it is clear that the Dunblane Street proposal has been relegated to the status of 'option' with the Sheriff Court development now the preferred option.
Further, SYT have pursued the Sheriff Court proposal without disclosing that fact to my clients; my clients learned of it from the Press; and they understand that SYT have withdrawn instructions from their architect in respect of the Dunblane Street site.
My clients' concern derives of course from the reversal of SYT's commitment to develop at Dunblane Street. The 'joint development' at Dunblane Street would have been compatible with my clients' own proposals. The deal with your clients reflects a high degree of delectus personae because of the synergies which the 'joint development' would have delivered, viz:
- the rehearsal space would have been shared.
- SYT could have used RSAMD's student accommodation during the RSAMD vacation.
- the planned SYT development would have been a suitable and appropriate neighbour for the adjoining RSAMD student residences and the Academy itself.
The loss of those synergies is highly unwelcome to my clients.
My clients have now taken advice from Senior Counsel regarding the latest developments. My clients are advised that your clients are in breach of clause 2.1 of the agreement. The agreement does not give SYT 'an option' to develop at Dunblane Street which is dependent upon the outcome of alternative negotiations. Rather it requires SYT to be committed to developing their project at the Dunblane Street site in accordance with the planning permission obtained. The current preference of SYT for an alternative site and the active steps taken to pursue that alternative cannot be reconciled with the terms of clause 2.1 of the agreement. The clear purpose or goal of the agreement is the development of both the SYT and the Trust projects at Dunblane Street. Your clients' conduct amounts to repudiation of the agreement.
On behalf of The Royal Scottish Academy of Music and Drama Endowment Trustees, I hereby intimate that my clients are treating the agreement as repudiated and at an end. Specifically, my clients will not be conveying any land at Dunblane Street to SYT. I should be grateful if you will acknowledge receipt of this letter."
Submissions of the defenders and reclaimers
[7] Senior counsel for the defenders and reclaimers began his submissions by analysing the decision of the Lord Ordinary. The critical parts of that decision were in paragraphs [25] and [26]. The issue was whether what the pursuers were alleged to have been doing prevented implementation of the comprehensive development envisaged in the agreement. The reclaimers would be submitting that the pursuers could not be seen as having proceeded diligently in a situation when they were looking at another site. [8] Senior counsel for the reclaimers next proceeded to examine in detail the provisions of the agreement, which we have already quoted. Having examined the contents of section 2 of that agreement, which were concerned with co-operation, he submitted that there was no indication in that part of the agreement of any separation of the projects and no indication of a mere entitlement on the part of the pursuers to purchase the land and not proceed with the project. [9] In reviewing the provisions of the agreement between the parties, senior counsel for the reclaimers drew attention particularly to section 6 which dealt with common services. In this part of the agreement there was a clause requiring co-operation between them in relation to such practical matters. Likewise, in section 9 of the agreement, each party granted rights of access to the other for certain purposes; this involved practical co-operation. [10] Section 7 of the agreement was concerned with pre-emption. Senior counsel for the reclaimers accepted that the pursuers were authorised to sell their interest in the site prior to the erection of a building on that part of it. It was contemplated that there would be a disposal by the pursuers to the defenders on the terms agreed. The defenders were contractually obliged to accept an offer by the pursuers in terms of the agreement. [11] It was submitted on behalf of the reclaimers that the agreement dealt with several important matters. The first of these was the sale of the land itself by the defenders to the pursuers. The second was the necessary co-operation between the parties in anticipation of the projects proceeding. The contract was not just a set of missives of sale. It sought to govern the way in which the parties were to operate upon a single site. If the language used in one clause of the agreement was ambiguous, it was necessary to look at the other clauses for assistance in interpretation. It was accepted that section 7 of the agreement contemplated that the whole project might not proceed; in particular that the SYT project might not proceed. [12] However, the reclaimers sought to emphasise the terms of section 2 of the agreement and, in particular, clause 2.1. It created an obligation of co-operation; the reclaimers were entitled not to be left in limbo by the conduct of the respondents. The agreement did not simply involve two heritable proprietors co-operating in a limited way in regard to two separate sites. For that reason it was contended that the provisions of the agreement were inconsistent with the respondents' claim that they could take no steps to proceed with their project. The contract declared that the parties had agreed to work together. Against that background and particularly having regard to sections 6 and 9 of the agreement, clause 2.1 had to be seen as more fundamental than the Lord Ordinary had concluded that it was. Clause 2.5 contained two individual obligations, one undertaken by each party, which were obligations that the projects would be implemented. Sections 6 and 9 of the agreement were relevant to that matter, since they made specific provision for the facilitating of the other parties' responsibilities in the projects. The terms of clause 2.1, properly construed, were wide in their effect. However, senior counsel for the reclaimers had to agree that the provisions of clause 2.5 did not operate until the funding provision contained in sub-paragraph (b) had been satisfied. He contended that, prior to the issue of funding being settled to the respondents' satisfaction, clause 2.1 imposed the requirement of diligence in pursuing the matter upon them. [13] It was necessary, in the proper interpretation of the agreement, that it should be looked at as a whole in the context of the factual circumstances existing at the time of its conclusion. It was submitted that the Lord Ordinary had failed to do that. His analysis of the nature of the agreement in the seventh sentence in paragraph [25] of his opinion was erroneous. In this connection reference was made to ground of appeal 2. [14] Senior counsel for the reclaimers next went on to consider the terms of the letter of 17 August 2001, which had to be properly understood. In the second paragraph, the reference to "the company" was, of course, a reference to the respondents. In the third paragraph, the reference to "the project" was a reference to the project contemplated by the respondents as a possibility in the former Sheriff Court building in Ingram Street. In the fourth paragraph, the reference to "the agreed programme of work" on the site at Dunblane Street was plainly a reference to the programme of demolition of the Stagecoach building existing on that site. There was no indication in this letter of a funding difficulty faced by the pursuers. However, there was a clear expression of the respondents' preference for development at the Ingram Street site. It was quite apparent from this letter that the respondents were not working together with the reclaimers in a full sense; they were co-operating only in relation to the matter of the demolition of the existing buildings on the Dunblane Street site. The context of paragraph 4 of the letter indicated that the words of the first sentence in it did not mean what they said. If the impression were gained from the terms of the letter that the respondents were going to "walk away" from development at the Dunblane Street site, then there would be a breach of clause 2.1 of the agreement. In answer to questions by the court, senior counsel for the reclaimers submitted that there was a borderline as regards the conduct of the respondents, which contractually they could not cross. When the respondents' Board considered positively some development opportunity other than the Dunblane Street site, the borderline would have been crossed. It was quite plain from the letter of 17 August 2001 that that had occurred. The consideration might not even involve positive interest in a particular alternative site. Instruction of a surveyor to report to them generally would not constitute a breach of the agreement; however, if the instruction given was to consider whether alternative sites were available, that would come close to repudiation of the agreement. The letter, in effect, said that the respondents' preference was for the Ingram Street development, but that they would be committed to the demolition work on the Dunblane Street site. It was plain that the writer of the letter of 17 August 2001 had failed to recognise the implications of clause 2.1 of the agreement. The letter was not an affirmation of commitment to co-operation in terms of the agreement. In all these circumstances, the Lord Ordinary's interlocutor should be recalled and decree of absolvitor, failing which dismissal, granted in favour of the reclaimers. Only if the court considered that there was some ambiguity in the factual circumstances of the case might an enquiry be necessary.Submissions for the pursuers and respondents
[15] Senior counsel for the pursuers and respondents moved the court to refuse the reclaiming motion and to adhere to the interlocutor of the Lord Ordinary. He submitted that the core of the reclaimers' submissions was to be found in the terms of clause 2.1 of the agreement. Their position involved a misconstruction of that part of the agreement. The reclaimers' position was based upon the letter of 17 August 2001, which was said to embody a breach of the respondents' obligation to co-operate with the reclaimers, a fundamental breach in the circumstances, entitling them to rescind the contract, as they claimed they had done. It had been made clear before the Lord Ordinary that the reclaimers were not contending that there had been an anticipatory breach of contract, it was said then and was being said now that there had been an actual breach of the agreement. However, there were no averments of any actual failure on the part of the respondents to co-operate with the reclaimers. The latter had to say that, in some way, clause 2.1 was a contractual condition any breach of which entitled the other party to rescind. The important elements of the reclaimers' case appeared to be found in Answer 4 in their pleadings between pages 16F and 17E in the record. The averments there found were not so much averments of a failure to co-operate, but of "bad faith", or of events characterised by the reclaimers as evidence of such. The actual averment of breach was to be found at page 17B, where there was an allegation of non-commitment. The pursuers' submission was that that was not a relevant defence to the action. [16] All of the clauses of the agreement which were material in the context had been mentioned already. The most important were clauses 2.1, 2.5 and those forming part of section 7 of the agreement. In relation to clause 2.1, it had been emphasised that it took effect "from the date of this agreement". It was pertinent to consider what were the obligations involved. Before the agreement had been negotiated, applications for planning permission had been made. However, it was plainly contemplated that there might be outstanding planning applications, as appeared from clause 2.2. Under clause 2.5, certain undertakings had been given by the reclaimers to implement their project and the respondents to implement theirs, although the words used had, by inadvertence, been put the wrong way round. There had to be "due diligence". However, it was plain from the context that there was ample scope for co-operation between the parties from the beginning. That co-operation would relate to the reclaimers' project. As regards the respondents' project, their position was different. They were to purchase a particular part of the site from the reclaimers, who were obliged to sell to them. There was also a conditional obligation upon the respondents to develop their project, set forth in clause 2.5. That obligation was subject to the suspensive conditions set out in the contract and also the condition in sub-paragraph (b) regarding funding. Only when those conditions were satisfied was there any obligation to proceed with due diligence. It was submitted that the obligation upon the respondents, derived from clause 2.5, did not operate until the funding condition had been satisfied. However, certain things were not dependent upon the purification of that condition. In particular, the reclaimers were obliged to proceed. The sale of land was to proceed, since it was not qualified by any condition regarding funding. The application for planning permission required to be made. The reclaimers had to proceed with detailed plans. Demolition of the existing buildings on the site had to proceed regardless of the funding position. The 40% obligation in relation to that, incumbent upon the respondents, was not dependent on the availability of funding for their project. It was submitted that all of the matters mentioned might require co-operation between the parties. While clause 4.2 of the agreement contained detailed provisions regarding the effecting of the demolition of the existing buildings on the site, involving co-operation between the parties, there was no presumption against surplusage. Clause 2.1 might properly be regarded as a general clause reflecting matters which, in some cases, were subsequently dealt with in detail, as, for example, in sections 4, 6 and 9 of the agreement. Furthermore, it could have content beyond that, for example in relation to co-ordination in the preparation of architects' drawings. [17] Reverting to the wording of clause 2.1, certain matters had to be emphasised. First, it was concerned with co-operation in relation to all "practical matters". That meant what it said, that is to say, matters on the ground. Those matters were matters "of mutual responsibility and interest". Those words indicated the area of co-operation being where it was necessary in achieving projects which complemented each other. The words "affecting the implementation" of the projects simply limited the scope of the obligation; what this language could not do was impose an obligation upon the respondents to proceed with their project before they had the funding acceptable to them required for it. [18] Examination of the terms of clause 2.5 showed the difference between the positions of the reclaimers and the respondents. The reclaimers were obliged without qualification to proceed with their project. However, the qualification in respect of the respondents, which was limited to their project, not the acquisition of land or demolition, related to the obtaining of funding satisfactory to them, meant that the projects could proceed without synchronisation. If the respondents had said in the letter of 17 August 2001 that they had failed to obtain satisfactory funding for their project, there would have been no breach of contract on their part. There then could have been a decision on the respondents' part to abandon that project and operate the clause of pre-emption. [19] It had been said that for the respondents to look at any other specific development opportunity amounted to a breach of their obligations under the agreement. To the extent that that contention was based upon some alleged failure on their part to proceed with "due diligence", the contention was unsound, since the obligation to proceed with "due diligence", derived from clause 2.5.4, arose only after funding acceptable to the respondents had been got. That was not the position here. It was quite legitimate for them to look at development opportunities elsewhere when a public funder was involved, as was the case here. Public funding might be available on a different scale in relation to different sites. In this connection reference was made to the respondents' averments in Condescendence 4 between pages 12D and 13B. In these circumstances it was entirely proper for the respondents to look at the options available to them in the round. [20] Reverting to the letter of 17 August 2001, the question was how what was said in that letter could amount to a breach of the obligation of co-operation set forth in section 2 of the agreement. There was no answer to the question. The respondents had been frank with the reclaimers as to what was happening. Furthermore, in paragraph 4 of the letter it was said on the respondents' behalf that they were "still committed to going ahead with the agreed programme of work on the shared site, as detailed in our present contract." There plainly was commitment on the part of the respondents, since they were obliged to meet the 40% of the demolition costs, which could not be recovered under the clause of pre-emption in section 7 of the agreement. In truth, there was nothing in the letter of 17 August 2001 to show any breach of contract on the part of the respondents under clause 2.1. That was true, even if clause 2.1 had the wider meaning contended for. In the whole circumstances, the reclaiming motion should be refused.Decision
[21] In our opinion, the issue which the court requires to decide is whether the conduct of the respondents, as evidenced in certain documents, particularly the letter dated 17 August 2001, and in certain averments, particularly those in Answer 4 for the reclaimers between page 16F and 17B of the record, was such as to entitle the reclaimers to treat the respondents as having repudiated the agreement between them. That issue, we consider, depends on whether, at the date when the reclaimers purported to rescind that agreement, in the letter of 27 September 2001, the respondents were in material breach of the agreement. That latter issue inevitably depends on how the agreement is properly to be construed. [22] Before coming to consider the proper construction of the agreement, it is appropriate, first of all, to examine precisely what is said to have been the breach of contract, upon the basis of which the reclaimers purported to rescind it. In that connection, it appears to us to be necessary to examine, first, the contents of the letter of 27 September 2001, in which solicitors acting for the reclaimers purported to rescind the contract; and secondly, the averments made by the reclaimers of breach of contract, which are to be found in Answer 4 of the record. Looking first at the terms of the letter of 27 September 2001 the position of the reclaimers was made quite clear. In the first full paragraph on page 2 of the letter it is stated:"My clients are advised that your clients are in breach of clause 2.1 of the agreement. The agreement does not give SYT 'an option' to develop at Dunblane Street which is dependent upon the outcome of alternative negotiations. Rather it requires SYT to be committed to developing their project at the Dunblane Street site in accordance with the planning permission obtained. The current preference of SYT for an alternative site and the active steps taken to pursue that alternative cannot be reconciled with the terms of clause 2.1 of the agreement."
It is obvious from this passage in the letter that a breach of clause 2.1 of the agreement is alleged upon the basis there set forth. Coming to consider the averments of breach of contract made by the reclaimers, the position is apparently somewhat less clear. The crucial averments are to be found between page 16F and page 17B of the record. It is there averred on their behalf:
"In these circumstances the pursuers have acted in bad faith. They have acted in a manner wholly contrary to the purpose of the agreement that the SYT and Trust Projects would proceed together on the Dunblane Street site. They are no longer committed to the development of the SYT National Centre at Dunblane Street and have indicated a preference to proceed with development at Ingram Street. The pursuers are accordingly in breach of the agreement."
" ... co-operate with one another in fairness and in good faith in all practical matters of mutual responsibility and interest affecting the implementation of the SYT Project and the Trust Project respectively and will respond promptly to requests properly made by the other party for approvals, information or assistance."
We consider it important to recognise that the co-operation provided for was to be in relation to "all practical matters of mutual responsibility and interest affecting the implementation" of the two projects. We were impressed by the submissions made by senior counsel for the respondents concerning the scope of the language used in this clause. He figured a number of matters of a practical nature concerning the mutual responsibility and interest of the parties in implementation on which co-operation might be required as from the conclusion of the agreement. Such matters as the obtaining of planning and other consents, the arrangements for the demolition of the existing buildings on the site and related matters were mentioned. As he pointed out, certain of these matters were the subject of other provisions in the contract, particularly in section 4. However, we agree with his contention that there is no presumption against surplusage in the agreement and, accordingly, clause 2.1 may properly be viewed as a general clause reflecting subsequent detailed provisions. Furthermore, as he pointed out, it was possible to figure other matters than those which were the subject of a subsequent provision in the contract on which co-operation might be necessary. We are confirmed in that view on account of the fact that clause 2.1 is concerned with "the implementation of the SYT Project and the Trust Project". The definitions of those projects curiously refer to the matter of "acquisition", in the case of the SYT project, of a complex and, in the case of the Trust project, of residential accommodation. Regardless of whether the use of that word was appropriate in the context, we consider that the fact of its use does indicate some content for the obligation created in clause 2.1 of the agreement which could emerge at the earliest stage following its conclusion.
[25] Having examined the provisions of clause 2.1, the issue then is whether anything in the conduct of the pursuers, evidenced as described, amounts to a material breach of that clause. We are quite unable to conclude that it does. The essence of the letter of 17 August 2001 was the disclosure that the respondents were actively considering and negotiating in relation to the establishment of a centre for their purposes in the redeveloped Sheriff Court building in Ingram Street. The submission made was that it was not contractually open to them to proceed in that way. As was observed by the Lord Ordinary in paragraph [25] of his opinion, no doubt a contractual term could have been incorporated in the agreement imposing such a ban, but in fact no such term appeared in the contract. With that view we are in agreement. Further, we consider that no such term can be read into it, as a matter of implication. [26] In view of the averments, to which we have referred, in Answer 4 of the record, it is now necessary for us to examine the more general purpose of the agreement between the parties, with a view to deciding whether the respondents' actions amounted to a material breach of contract. Having considered the various parts of the contract which were contended to be material to the present dispute, we have reached the conclusion that the agreement has two discernible separate parts. The first provides for the acquisition by the respondents of the SYT area, as defined in clause 1.1. The second provides for the development of that area and the student residence area, also there defined, on the terms and conditions set forth in the agreement. As regards the first part of the agreement, it is, in our opinion, clear that the respondents came under an unqualified obligation to acquire ownership of the SYT area, as is evident from section 3 of that agreement and the Schedule to it. As regards the second part of the agreement, the positions of the reclaimers and the respondents differed. In terms of clause 2.5 of the agreement, making allowance for the obvious error in that clause already referred to, the reclaimers came under an unqualified obligation to implement the Trust project, as defined in clause 1.1, whereas, the respondents undertook a qualified obligation to undertake implementation of the SYT project. The qualifications are those contained in sub-paragraphs (a) and (b) of clause 2.5. The second of these qualifications, of course, related to the respondents obtaining funding for that part of the SYT project, other than the acquisition of the SYT area, on terms acceptable to them, as to which they were to be the sole judge. Having regard to the implications of clause 2.5 particularly, we conclude that the averments made at page 16F and 17A of the record concerning the "purpose of the agreement that the SYT and Trust projects would proceed together on the Dunblane Street site" is based upon a misapprehension of the effect of the agreement. That agreement contains no basis which can be seen as a guarantee that those projects would be implemented together; further, the agreement contains no guarantee that the SYT project would necessarily ever be implemented. Whether it was or was not implemented plainly was made to depend upon the availability of acceptable funding for that project. Against that background, we conclude that there was nothing in the conduct of the respondents, evidenced as described, which amounted in a general sense to a material breach of the contract, in respect that it was contrary to the contemplated purpose of the contract. In taking the view of the contractual agreement which we have, we regard section 7 of it, dealing with pre-emption, as of importance. Plainly, that section of the agreement contemplates that, in certain circumstances, the qualifications to the respondents' obligation, to be found in clause 2.5, not having been purified, the situation could emerge in which the respondents wished to dispose of the SYT area. Section 7 provides the mechanism whereby that might be done. [27] In any event, we consider that the reclaimers read very much more into the terms of the letter of 17 August 2001 than those terms justified. As appears from the averments in Condescendence 4, at pages 12D to 13E of the record, the respondents faced certain funding difficulties. The respondents were dependent upon there being available to them public funding from one source or another. Refusal of their application for National Lottery funding had been notified to them on 2 February 2001. Against that background, it was perhaps not surprising that they involved themselves in the exploration of possible developments, other than that at Dunblane Street, in respect of which some prospect of public funding might exist. It appears to us that that is what was referred to in the letter of 17 August 2001. It seems that the respondents believed that a possible development at Ingram Street might be favourably considered by some of those holding public funds. However, as at 17 August 2001, no conclusion had been reached in the negotiations involving the respondents and Persimmon City Developments as regards that. In that context, in the fourth paragraph of the letter of 17 August 2001, the respondents affirmed that they were "still committed to going ahead with the agreed programme of work on the shared site, as detailed in our present contract." Whether those words are properly to be read as relating only to the demolition work in respect of the existing buildings, or are wider, it appears to us that they plainly indicate on the part of the respondents a present commitment to the implementation of the agreement between them and the reclaimers. In any event, we consider that nothing in the letter of 17 August 2001 can be seen as a repudiation of the obligations incumbent upon the respondents in terms of the agreement. Unfortunately, no doubt as a result of the disappointment which the reclaimers experienced in the light of what was said in that letter concerning possible alternative developments by the respondents, they took it upon themselves to purport to rescind the contract in the letter of 27 September 2001. In our judgment, they had no justification for so doing. [28] In all of these circumstances we have reached the conclusion that this reclaiming motion must be refused. Accordingly, we shall adhere to the interlocutor of the Lord Ordinary dated 29 April 2002.