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Elmford Ltd v. McLaglan Investments Ltd [2005] ScotCS CSOH_81 (23 June 2005)

OUTER HOUSE, COURT OF SESSION

[2005] CSOH 81

CA78/04

OPINION OF LORD EASSIE

in the cause

ELMFORD LIMITED

Pursuers

against

McLAGAN INVESTMENTS LIMITED

Defenders

________________

Pursuers: Dean of Faculty (Martin Q.C.), Smith; Paull & Williamsons

Defenders: Currie, Q.C., Higgins; Maclay Murray & Spens

23 June 2005

Introductory
[1] By missives concluded on 17 April 1996 the pursuers sold to the defenders an area of land extending to 4.045 ha and forming part of a larger area of land belonging to the pursuers and registered in the Land Register under title No.GLA21311. The land comprised under that title lies to the east of Robroyston Road, Glasgow and generally to the north of Saughs Road. I was informed, consistently with the plan attached to the missives, that Saughs Road was originally a narrow road or lane running eastwards from Robroyston Road. At the date of the missives it had been replaced as a thoroughfare by what was originally termed the Robroyston Road/M80 Link Road running east from Robroyston Road to the M80 motorway a few metres to the south of the track of the original Saughs Road. The Link Road thus connected with Robroyston Road at a roundabout situated at the south-western corner of the subjects GLA21311.

[2] The parcel of 4.045 ha sold by the pursuers to the defenders lies at the western end of the larger subjects, GLA21311. The western boundary of the parcel, adjoining Robroyston Road, is co-extensive with the western boundary of the larger subjects GLA21311. Its internal eastern boundary is approximately 228 metres to the east of the roundabout on Robroyston Road and runs north/south except for a small semi-circular area extending eastwards at the southern end of the eastern boundary with the pursuers' remaining property. Using the term loosely and inaccurately the area of ground sold to the defenders might be described as "approximately square" since its sides are broadly equally and present angles which are approximately rectangular, or chamfered in the case of the corner abutting the roundabout from which the Link Road heads east to the M80.

[3] It is not in dispute that the purpose of the sale of the 4.045 ha to the defenders was to allow them to develop the site for a retail food store. This is reflected in the definition of "the Development" in the definition clause (clause 1.1) of the missives (No.6/1 of process). It is also not in dispute that the remaining land was, and is, intended for the construction of non-food retail accommodation. Thus, in the definition clause the term "Non-Food Retail Site" is defined as meaning -

"the intended non-food retail park of 130,000 square feet or thereby together with fast food outlet, and public house/restaurant to be constructed upon the land adjacent to the Development and comprising the remainder of GLA21311".

Road construction - missives
[4] The missives contain certain provisions relating to road construction. One set of provisions relates to the up-grading of the existing roundabout on Robroyston Road at its junction with the Link Road to the M80 motorway. This upgrading evidently involved the acquisition of two small areas of land in order to enable the central circle of the re-constructed roundabout to have a larger diameter than the existing. The re-constructed roundabout is referred to in the missives as the "Saughs Road Roundabout". No dispute arises respecting the construction of the Saughs Road Roundabout. It is sufficient to note from both the terms of the definition of "Ancillary Rights" and the plans annexed to the missives that access to the retail development as a whole was intended to be by means of a road leading from the Saughs Road Roundabout, as an additional fourth leg, into the area sold to the defenders.

[5] In addition, the missives contain provisions respecting the construction of internal road works and the present dispute relates to these provisions. The missives place obligations on the defenders which the pursuers contend have not been fully implemented. Clauses 9.1 and 9.2 of the missives are in these terms:

"9.1 The Purchaser shall from and after the obtaining of Access (or earlier, at the discretion of the Purchaser):-

(a) to the extent that such have not previously been obtained diligently pursue the obtaining of all necessary consents for the construction of the Road and Saughs Road Roundabout including without prejudice to the foregoing generality Roads Construction Consent and shall keep the Seller fully advised as to the progress being made;

(b) subject always to, and conditional upon (a) above, carry out and complete the construction of the Road and Saughs Road Roundabout in a good and workmanlike manner using good quality materials of their several kinds.

9.2 If the Purchaser shall not have completed the Road and/or Saughs Road Roundabout within 12 months of the later of (i) the obtaining of all necessary consents as provided for by 9.1(a) above and (ii) the obtaining of Access the Seller or its successors as heritable proprietors of the remainder of GLA21311 shall be entitled to enter upon the Property and such other subjects to which the Purchaser has access for the purpose of carrying out and completing the construction of the Road and Saughs Road Roundabout. The Seller or its successors as aforesaid shall be entitled to recover from the Purchaser on an indemnity basis all costs properly incurred by it in connection with the carrying out of such works."

As just indicated in the preceding paragraph, no issue arises respecting the Saughs Road Roundabout. The dispute relates to the obligations of the defenders respecting the "Road" which is defined in clause 1.1 of the missives as follows:

"'Road' means the internal distributor road and roundabout to be constructed by the Purchaser in terms hereof but only to the extent as indicatively shown by the dotted lines on Plan 1 (but declaring in any event that the northmost point of the roundabout shall not be located north of point A on Plan 1 nor the southmost point thereof located south of point B on Plan 1, the distance between points A and B being 50 metres or thereby) with requisite footpaths and lighting and being of adoptable standard and of such capacity as will service the Development and the Non-Food Retail Site without the requirement for upgrading, the said road to be constructed as a General Access Road in accordance with the Guidelines for Development Roads, Strathclyde Department of Roads 1986, unless the local authority requires otherwise;"

[6] The definition of the "Road" thus invites study of Plan 1 and the dotted lines to which reference is made. Plan 1 shows equidistantly separated dotted lines leading from the Saughs Road Roundabout in an approximately eastward direction to a delineated circle at the very eastward end of the 4.045 ha site sold to the defenders, the eastern hemicycle of which is the semicircular area to which I referred in describing in para.[2] supra the eastern boundary of the land sold to the defenders. Point B on the Plan is marked on the southern boundary of the 4.045 ha site at a point on that boundary where it would be met by a line dividing the delineated circle in a north/south direction - representing an extension of the boundary line to the north of the delineated circle. Point A is marked on the boundary between the 4.045 ha site and the "Non-Food Retail Site" at a distance approximately equal to the diameter of the delineated circle from the northmost point of the circumference of that circle. According to the definition of the "Road" the distance between Points A and B is approximately 50 metres.

The roadworks which have been constructed
[7] It is not in dispute that the defenders have constructed an internal road leading from the Saughs Road Roundabout giving access to their retail food supermarket and its associated car parking areas. However the internal road so constructed ends some distance short of the land retained by the pursuers for the Non-Food Retail Site. This is not disputed by the defenders. What the defenders have done is to construct the internal roundabout referred to in the definition of the "Road" some metres to the west of the delineated circle on the plan annexed to the missives. The position is illustrated in the plans annexed to the pursuers' registered title GLA119747 (No.6/4 of process). Put in other words, the defenders have constructed a road which leads from the Saughs Road Roundabout in a generally easterly direction towards the circle delineated on the Plan 1 annexed to the missives, where it then enters into a roundabout. The roundabout is not however in the delineated circle but some distance west of that delineated circle from the boundary with the pursuers' Non-Food Retail Site. As the Dean of Faculty observed, the roundabout is in itself curious as being "two legged" - so that the motorist entering it has only one possible exit (unless he wishes to do a "U-turn" and leave by the road from which he entered). Accordingly, in order to obtain access from that roundabout to the Non-Food Retail Site, a road would have to be constructed over an area of ground within the defenders' ownership. (It is also the case that the southernmost point of the roundabout which has been constructed is slightly to the south of point B on Plan 1.)

The Deed of Conditions
[8] The defenders maintain that in so constructing the internal road and roundabout they have fully implemented their obligations under the missives. That contention proceeds, in part, upon the fact that the missives made provision for the pursuers' executing a Deed of Conditions, a draft of which was annexed to the missives. A Deed of Conditions in terms of the draft was in fact so executed and registered in the Land Register on 18 April 1996. It is therefore necessary to note the parts of the Deed of Conditions which may be relevant to the dispute.

[9] The Deed of Conditions (No.6/3 of process) employs slightly different terminology from that used in the missives. Thus the "Non-Food Retail Site" in the missives is referred to as the "Non-Food Site" and land sold to the defenders is referred to as the "Retail Foodstore Site". But nothing turns on this difference of terminology. Clause 3 of the Deed of Conditions - headed "Access Road" - is in these terms:

"The Proprietors of the Retail Foodstore Site shall have a heritable and irredeemable servitude right of pedestrian and vehicular access to and egress from the Retail Foodstore Site over and across the Access Road so far as lying within the Non-Food Site, and the Proprietor of the Non-Food Site shall have a heritable and irredeemable servitude right of pedestrian and vehicular access to and egress from the Non-Food Site over and across the Access Road so far as lying within the Retail Foodstore Site on the following basis:-

3.1 the Proprietor of the Retail Foodstore Site shall have sole control of the Maintenance of the Access Road so far as lying within the Retail Foodstore Site;

3.2 the Proprietor of the Non-Food Site shall pay to the Proprietor of the Retail Foodstore Site on demand with interest one-half of the reasonable costs incurred from time to time by the Proprietor of the Retail Foodstore Site in the Maintenance of the Access Road so far as lying within the Retail Foodstore Site;

3.3 the Proprietor of the Non-Food Site shall have sole control of the Maintenance of the Access Road so far as lying within the Non-Food Site and shall itself bear all costs of the Maintenance incurred in connection therewith;

...".

The term "the Access Road" is given this definition in clause 1.1.1 of the Deed of Conditions:

"'the Access Road' means the internal distributor road and roundabout, with relative footpaths and lighting, to be constructed by the Proprietor of the Retail Foodstore Site pursuant to the Planning Permission but notwithstanding the Planning Permission to be of such capacity as is sufficient to service the Retail Foodstore Site and the Non-Food Site without the requirement for upgrading and to be constructed of adoptable standard as a General Access Road in accordance with the Guidelines for Development of (sic) Roads, Strathclyde Department of Roads 1986, unless the local authority requires otherwise as such road and roundabout is indicatively shown by the dotted lines on the Plan (but declaring that in any event the northmost point of the said roundabout shall not be located north of point A on the Plan nor shall the southmost point thereof be located south of point B on the Plan, the distance between points A and B being 50 metres or thereby);"

The term "Planning Permission" has the same meaning as in the missives, viz. an identified existing grant of outline planning permission, No.294/95 and the Plan attached to the Deed of Conditions is the same as Plan 1 attached to the missives. The other provision of the Deed of Conditions invoked by the defenders is clause 7 which, under the heading "Further Assurance", states that:

"The Proprietors shall enter into such further deeds and documents, if any, from time to time as may be required to give effect to the provisions of this deed."

For completeness, the "Proprietors" are defined in clause 1.1.12 as being the proprietors of the Retail Foodstore Site and the Non-Food Site respectively.

The pursuers' contention
[10] Without at this point entering into the detail of the conclusions of the summons, which seek various declarators and implement, it may be said that the pursuers' position is that the defenders are obliged under the missives to construct a distributor road and roundabout between the Saughs Road Roundabout and the Non-Food Retail Site which does not stop short of the boundary between the Non-Food Retail Site and the subjects sold to the defenders but which gives direct access to the Non-Food Retail Site. In other words, the missives provide for the construction by the defenders of a direct access from the Saughs Road Roundabout to the Non-Food Retail Site and the defenders are not entitled to terminate their roadworks in such a way as not to afford access to the Non-Food Retail Site without further negotiation or agreement on the construction of an additional section of road. There being no dispute that the roadworks as constructed by the defenders do not provide that access to the Non-Food Retail Site, the pursuers seek decree de plano.

The defenders' contention
[11] The position adopted by the defenders is that, properly construed, the missives impose no contractual obligation upon the defenders to take the Road to the boundary of the Non-Food Retail Site so as to afford immediate access and that what they have in fact constructed constitutes full performance of their obligation under the missives. In support of that interpretation the defenders aver, in summary, (Defences, Answer 3) that at the time of concluding missives no planning consent had yet been granted for the Non-Food Retail Site and consequently the parties could not enter into a detailed roads agreement, it being uncertain what the road requirements of the Non-Food Retail Site would be. A roads agreement would be expected to deal with "numerous matters" such as the use to be made of the roads, and provisions respecting drainage and signage. Further discussion and agreement on this would be required. This need was reflected in clause 7 of the Deed of Conditions, which was an unusual clause, reflecting parties awareness that further discussion and agreement would be required. A proof before answer was accordingly necessary to examine these issues.

The argument for the pursuers
[12] Counsel for the pursuers submitted that the proper approach to the interpretation of the missives was that set out in the well-known passage in Lord Hoffmann's speech in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 912-3. Reliance was placed in particular on the reference in principle (5) to the need to give precedence to business commonsense. The commercial purpose of the provisions in the missives for the construction of the "Road" was evident from the missives themselves, namely to provide a road which would be carried to the boundary of the Non-Food Retail Site and thereby provide the access to that site. That evident purpose could be seen from the definition of "Road", being that which the defenders undertook to construct, and which referred to its necessity of being of such capacity as to service both the Development (the defenders' property) and the Non-Food Retail Site. That was also consistent with the declaratory section of the definition of "Access" - to the land required for the upgrading of the Saughs Road Roundabout - which provided for the primary requirement of the seller for access to the Non-Food Retail Site from the Saughs Road Roundabout. The declaratory section is in these terms:

"Declaring always that the Purchaser shall be prohibited from taking access to the Property by alternative means unless there shall be provided suitable alternative access to the Non-Food Retail Site to that provided and referred to in Plan 1 and in the definition of 'Road' aftermentioned;"

Importantly, the relevant plan annexed to the missives itself showed a road going to the boundary of the Non-Food Retail Site.

[13] Interpreting the missives as obliging the defenders to construct the road as going to the boundary was wholly consistent with the Deed of Conditions. Clause 3 of the Deed of Conditions provided for mutual vehicular and pedestrian servitudes of access and made provisions for maintenance of the roadway, all of which could only make sense if the section within the retail food site were to be taken right up to the boundary of the Non-Food Retail Site. The Deed of Conditions contain no provisions respecting construction of any roadworks. At most, clause 7 of the Deed of Conditions was concerned with such further deeds, if any, as might be necessary to give effect to the servitude right over the "Access Road", the definition of which presumed the obligation of construction to lie elsewhere.

Argument for the defenders
[14] Counsel for the defenders submitted that clause 9 of the missives contained no express obligation to build a road up to the boundary. The only express stipulation related to the position on a north/south axis of the roundabout and the capacity of the carriageway. Nothing was said about the siting of the roundabout in terms of an east/west axis. The defenders were therefore entitled to site the roundabout - and thus terminate the Road - some distance west of the boundary. The issue of how access would then be obtained from that roundabout, constituting the end of the Road, to the Non-Food Retail Site would then be addressed by a separate agreement pursuant to clause 7 of the Deed of Conditions. So what had been constructed could be said properly to be an access road to the Non-Food Retail Site although further agreement on the construction of a carriageway would be necessary to give effect to the servitude right. That would accord with the common practice, in such commercial arrangements for retail developments, of having an agreed road layout but in the circumstances that an agreed road layout had not been possible at the time of the conclusion of the missives since the Non-Food Retail Site had yet to acquire planning consent.

Discussion and Decision
[15] In my view the argument for the pursuers is clearly to be preferred. The obligation undertaken by the defenders in clause 9 of the missives was diligently to pursue the obtaining of any necessary consents (in so far as not previously obtained) and carry out and complete the construction of the "Road". The definition of the "Road" defines it as the internal distributor road and roundabout and refers to its being "indicatively shown by the dotted lines on Plan 1" with the roundabout being situated between points A and B on that plan. Points A and B are clearly shown as being on the boundary and the definition of "Road" tells us that they are 50 metres apart. In my view it is perfectly clear from that plan that what is indicated is a road proceeding from the Saughs Road Roundabout to an internal roundabout situated on the boundary between points A and B. The defenders' contention that points A and B define only the north/south axis for the internal roundabout, enabling them to locate it at any point to the west of the boundary does not accord at all with what I regard as the natural and obvious reading of the definition and the plan. But additionally, the definition of the "Road" provides for its being "...of adoptable standard and capacity as will service the Development and the Non-Food Retail Site without the requirement for upgrading...". The function of the "Road" is therefore plain and it cannot possibly serve that function of affording access to the Non-Food Retail Site unless it be taken to the boundary of the Non-Food Retail Site. That function is underscored by the declaratory part of the definition of "Access", quoted in para.[12] above.

[16] Given the terms of the missives which, in my opinion, plainly require the defenders to construct across the land which they are buying a road which will give access to the Non-Food Retail Site, the contention that the defenders could satisfy that obligation by terminating the road some distance to the west of the boundary, leaving any ultimate connexion to the Non-Food Retail Site as a matter requiring further agreement is untenable. In so far as it was submitted that the Deed of Conditions envisaged the need for such future agreement by reason of its clause 7, I regard such a suggestion as misconceived. In my view it is plain that the Deed of Conditions proceeds on the basis of the implement of the obligation in the missives to construct the "Road". Its purpose is to make real (as opposed to personal) the rights to use the "Road". Clause 7 does not envisage any further "agreement" but is concerned simply with deeds executory of the Deed of Conditions. Moreover as the Dean of Faculty pointed out, there is nothing in it which is suspensory of the obligation under clause 9 of the missives. It may also be noted that clause 7 talks of the proprietors entering into "such further deeds and documents, if any from time to time as may be required..." (emphasis added). The defenders' argument, as I understood it, was to the effect that at the time of conclusion of the missives parties envisaged the need for a further agreement. But the inclusion of the qualification "if any" is not consistent with the defenders' argument which proceeds on the basis that the parties had in contemplation the necessity of a further agreement.

[17] Counsel for the defenders sought support for their position by invoking the factual circumstance that, at the time of both the conclusion of the missives and the construction of the internal road within the retail food site, the possible layout of the internal roads and parking areas in the Non-Food Retail Site was not known. So, it was said, the defenders could not know precisely where the internal distributor road should lead into the Non-Food Retail Site. Hence, it is said, clause 7 of the Deed of Conditions required to come into play as a means of resolving this potential issue and allowing for negotiation of the line of access from the internal distributor roundabout. But as the Dean of Faculty pointed out, in my view correctly, the contention that until the layout in the Non-Food Retail Site was settled the defenders could not perform their contractual obligations is mistaken. Under the missives the defenders could place the roundabout within the flexibility given by points A and B on the Plan but, subject to those constraints, the choice of the ultimate position of the roundabout on the boundary was a matter for the defenders' decision. While the existence of the internal roundabout in a position, between A and B, chosen by the defenders might potentially constrain the future internal road development arrangements within the Non-Food Retail Site, that was a constraint with which the pursuers had agreed to live.

[18] For these reasons I consider that the pursuers' interpretation of the missives is the correct one and I turn now to the terms of the conclusions of the summons.

[19] The first conclusion of the summons is for a declarator and it is in two parts. Part (a) advances the pursuers' interpretation of the missives and I did not understand it to be in dispute that if I were in favour of the pursuers on the substantial question of the correct interpretation of the missives the declarator sought under Part (a) should be pronounced. Part (b) of the first conclusion seeks declarator that the defenders are in breach of their obligation "...diligently to pursue the obtaining of all necessary consents for the construction of the Road in terms of Clause 9.1(a) of the [missives]". Junior counsel for the defenders, whose submissions were adopted by her senior, submitted that there was no information before the court enabling it to conclude that the defenders had not obtained the necessary consents. The position of counsel for the pursuers was to the effect that it was assumed that the roadworks as constructed matched, among other consents, the detailed planning consent. If so, it followed that the defenders had not sought and obtained the consents necessary to construct a road which properly satisfied their contractual obligation under the missives. However, counsel for the defenders declined to say whether the consents held by the defenders enabled the Road to be constructed in the manner contended for by the pursuers. The pursuers' argument that prima facie what has been constructed should be assumed to mirror the consents sought and obtained is in my view, also on that prima facie basis, sound; the consents obtained are a matter within the defenders' knowledge and nothing is said in the pleadings, or was said at the Bar, to the effect that the defenders sought and obtained consents for the construction of an access road in accordance with the interpretation of the missives for which the pursuers have, in my judgment rightly, contended. In the context of litigation on the Commercial Roll, I find this retinence on the part of the defenders disquieting. But given that retinence it is in my view appropriate to grant Part (b) of the declarator in the first conclusion together with the declarator in the second conclusion (which I understood not to be in contention were I to reach the decision on the interpretation of the missives which I have reached) and also the decree of specific implement sought in conclusion 3 which seeks implement of the defenders' obligation to pursue the obtaining of all necessary consents for the construction of the Road in terms of the missives.

[20] The reason for the pursuers not seeking implement of the full construction of the Road at this stage is - as I understand it - that the Road may only lawfully be constructed if the necessary consents are furthcoming from the relevant local authorities. The pursuers have however a fourth conclusion in the summons in these terms:

"For declarator that, if the defenders fail to implement their obligation in terms of conclusion 3, the pursuers are entitled (a) to obtain all necessary consents to carry out and complete the construction of the Road, and (b) subject to the terms of clause 9.2, to enter upon the property belonging to the defenders for the purpose of carrying out and completing the construction of the Road."

The conclusion proceeds, at least in part, upon the power of entry given in clause 9.2 of missives which gives the seller power to enter upon the purchaser's property if the Road has not been completed within 12 months of the obtaining of the necessary consents. Senior counsel for the defenders submitted that, if I were in favour of the pursuers' construction of the missives, decree in terms of conclusions 1 to 3 would be sufficient at this stage. Given that this is a commercial action and that, as I understand it, the defenders belong to a major group of companies, I shall at this stage grant decree only in terms of conclusions 1 to 3. I shall refuse the pursuers' motion for declarator in terms of the fourth conclusion in hoc statu reserving leave to the pursuers to apply to the court in this process for any further declaratory order or decree of implement which may be necessary.