Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2009] CSOH 79
CA173/08	OPINION OF LORD DRUMMOND YOUNG in the cause CALA MANAGEMENT LIMITED Pursuers; against THE FIRM OF MESSRS A & E SORRIE Defenders: ­­­­­­­­­­­­­­­­­________________

Act: Connal, QC, Solicitor; McGrigors

Alt: Lake, QC; Higgins; Maclay Murray & Spens

2 June 2009

[1] The partners of defenders are the heritable proprietors of land at Blackhall Road, Inverurie. By missives dated 29 and 30 January 2002 the defenders entered into an agreement with the pursuers whereby they granted the pursuers irrevocable options to call for the sale of two areas of that land in exchange for payment by the pursuers of the sum of £1. By further missives dated 15 and 27 November 2002 between the pursuers and the defenders, the pursuers agreed to purchase from the defenders of further area of land amounting to 2.43 hectares lying to the north of Blackhall Road, provided that certain conditions were satisfied. Those missives were referred to respectively as "the option missives" and "the purchase missives". The option missives provided, in short, that in exchange for payment of the sum of £1 the defenders would grant the pursuers options to acquire the whole or part of the land specified; such acquisition could take place in up to four tranches. It was a condition of the exercise of the options that the pursuers should obtain planning permission for the development of at least 60% of any tranche that was acquired by them, and the pursuers were authorized to make applications for planning permission for development that was predominantly residential but might contain a minimum level of commercial development. If an option was exercised, the defenders were to receive a purchase price equivalent to 87.5% of the open market value of the land so acquired by the pursuers. The purchase missives provided, in short, that the pursuers were to acquire the area of 2.43 hectares for a purchase price of £1,250,000; that sum, however, was only payable 28 days after the pursuers had acquired planning permission and all necessary consents for the residential development of the subjects, and after the exercise by the pursuers of the first of the options under the option missives. Once again, the pursuers were authorized, and indeed obliged, to seek planning permission for the residential development of the subjects.

[2] The pursuers subsequently lodged two planning applications with Aberdeenshire Council, first for full planning permission for the erection of 239 dwellinghouses on the major part of the land specified in the two sets of missives and secondly for outline planning permission for proposed class 6 (storage and distribution) use of the remainder of the land. The defenders were advised of those applications. On 18 December 2007 Aberdeenshire Council resolved to grant both applications subject to completion of a section 75 planning agreement covering a number of issues. Thereafter the pursuers entered into negotiations with Aberdeenshire Council with a view to concluding such an agreement. The terms of a section 75 agreement were eventually agreed between the pursuers and the Council, but the agreement required that it be executed by the defenders as proprietors of the land. On 10 or 11 November and 11 December 2008 the pursuers submitted to the defenders two requests to execute the agreement. The defenders refused to do so.

[3] A few days thereafter the pursuers raised the present proceedings against the defenders. In the summons the pursuers conclude for declarator that, in terms of the option missives and the purchase missives, the defenders are obliged to execute the section 75 agreement, and for decree ordaining the defenders to execute that agreement. The defenders lodged defences, in which they contend that they are not obliged to execute the section 75 agreement negotiated between the pursuers and Aberdeenshire Council. Each party tabled a preliminary plea to the relevancy of the other's pleadings, and the action was appointed to debate to enable those pleas to be argued. The debate was heard on 24, 25 and 26 March 2009.

[4] It was a matter of agreement that the critical questions between the parties turned on the construction of one specific provision found in both sets of missives (clause (4)(v) of the offer containing the terms of the option missives and clause (3)(e) of the offer containing the terms of the purchase missives). In the option missives this was stated in the following terms:

"and further the Heritable Proprietors [the defenders] will be obliged at the reasonable request of our clients to enter into such Agreements with the Local Planning, Roads or any other relevant Authority required as a pre-requisite to the grant of Planning Permission or any other necessary Consent in respect of the Option Area or any part or parts thereof".

In the purchase missives this was stated as follows:

"and further your clients will be obliged, at the reasonable request of our clients, to enter into such Agreements with the Local Planning, Roads or any other relevant Authority required as a pre-requisite to the grant of Planning or any other necessary consents in respect of the subject of purchase".

[5] The argument advanced by the defenders at debate was in summary as follows. Any obligation to execute the section 75 agreement must arise under the two sets of missives. In view of the terms of the clauses quoted in paragraph [4] above, any request to execute an agreement must meet two requirements: (i) it must require the defenders to enter into an agreement that is a prerequisite to the grant of planning permission for the property to which the particular set of missives relates; and (ii) it must be reasonable. The defenders submitted that neither of those requirements was satisfied. In relation to the first, they submitted that the section 75 agreement was not a prerequisite for the grant of planning permission to the land to which each request related; in particular, the request made under the option missives sought an agreement that would regulate the development of the land contained in the purchase missives, and the request made under the purchase missives required an agreement that would regulate residential and other development on the option land. In relation to the second requirement, the defenders submitted that in the context of the missives as a whole a number of significant liabilities and obligations placed on the defenders were not reasonable, and for that reason alone the defenders were not obliged to execute the section 75 agreement. For the foregoing reasons the defenders submitted that the summons was irrelevant, and the action should be dismissed. For the pursuers it was submitted that on a proper construction of the two sets of missives the grant of planning permission was central to the operation of the bargain between the parties, and control of the planning process had been placed in the hands of the pursuers. Consequently the critical question was not whether the document containing the section 75 agreement was itself reasonable in a general sense, but whether being asked to sign a document to obtain planning permission was reasonable. The proposed section 75 argument was necessary for the grant of planning permission, and accordingly the request to sign it was reasonable. Moreover, the defenders' criticisms of the terms of the section 75 agreement were essentially based on extreme or unreasonable examples, and should therefore be ignored. In these circumstances the defenders were obliged to execute the agreement. The defences were accordingly unfounded in law, and decree de plano should be pronounced.

[6] The proper construction and analysis of the two sets of missives is clearly critical to the matters in dispute between the parties. I will accordingly begin by setting out in some detail the provisions of each set of missives, and at the same time I will indicate what I conceive to be the proper approach to their construction. In particular, I will consider the construction of the provisions quoted at paragraph [4] above dealing with the obligation on the defenders to enter into agreements with the local planning and roads authority. Thereafter I will set out the provisions of the proposed section 75 agreement, again in some detail, and will consider the extent to which those provisions may go beyond what is required by the missives. Finally, I will consider the terms of the two requests made by the pursuers for execution of the section 75 agreement and consider whether the defenders are obliged to accede to those requests by the terms of the two sets of missives.

The option missives
[7] The material provisions of the option missives are contained in the offer sent by the pursuers' agents to the defenders' agents on 29 January 2002. In exchange for payment of the sum of £1, the pursuers were granted exclusive and irrevocable options to acquire two areas of land at Blackhall Road, Inverurie, Aberdeenshire ("the Option Area"), those areas being delineated on a plan annexed to the offer. Clause (3) of the offer makes detailed provision for the exercise of the options. Each option except the last should relate to at least 20% of the Option Area, and there should be no more than four individual exercises of the options, spaced no more than two years apart. Clause (3)(iii) then provides as follows:

"[The pursuers] accept that they will only be entitled (but not bound) to exercise the Options hereby conferred upon them once they have obtained on terms acceptable to them (of which they shall be the sole judge) at least planning permission in outline ('Planning Permission') for the development of the part of the Option Area to which the individual exercise of any of the Options hereby conferred relates and the effect of which is that at least 60% of that part of the Option Area to which the individual exercise of any of the Options hereby conferred relates are Developable Acres as hereinafter defined".

"Developable Acre" is defined as meaning the dwellinghouses to be erected on any individual tranche of the Option Area, together with the sola and curtilages thereof and any private recreational open space intended for use as children's play areas solely by the residents of the dwellinghouses. That definition does not, however, include the roads and pavements giving access to the development, nor any public open spaces within the development, nor any land that was the subject of commercial development; this is a point of some significance (see paragraph [31] below). Finally clause (3)(iv) makes certain further provisions relating to the options. These include a provision for the automatic lapse of the options if they are not exercised within five years (subsequently extended), and a put option in favour of the defenders which arises in the event that the pursuers exercise one or more options but fail to take the whole of the ground. In theory it is possible that the whole of the Option Area could be acquired by the pursuers in one exercise of their option. At this point, however, I should note that, in an e-mail dated 7 November 2008, the pursuers' agents intimated to the defenders' agents that the option would be exercised in tranches. I accordingly assume that that is the procedure that will be followed in practice, and I will construe the relevant documents in the light of that assumption.

[8] Clause (4) of the option missives, which contains the crucial provision referred to at paragraph [4] above, deals with planning permission. The clause begins as follows:

"During the subsistence of the Options hereby conferred [the defenders] do hereby specifically authorise [the pursuers] to make applications for Planning Permission for a predominantly residential development (and some commercial development but only such a minimum level of commercial development as may be required by the Planning Authority) and for all other necessary consents for the development of the Option Area or any part or parts thereof..., and to make relative Applications for necessary Highways Consents, to make representations to appropriate Authorities regarding Development Plan proposals and development proposals and, generally, during the subsistence of the Options hereby conferred to use all reasonable endeavours to progress expeditiously to obtain a Development Plan allocation for predominantly residential use and the said commercial development and/or at least Planning Permission in respect of the Option Area or any part or parts thereof".

Clause (4) contains a number of ancillary provisions. Sub-clause (i) provides that any planning application must relate to a predominantly residential development, with only such minimum level of commercial development as might be required by the planning authority. Sub-clause (ii) empowers the pursuers to amend, substitute, vary or withdraw any applications made for the necessary consents; its effect was to place the pursuers in charge of the process of applying for planning permission and other consents. Sub-clause (v) then provides as follows:

"The measures specified in this Clause will be at no expense to [the defenders] but [the defenders] shall be bound to afford to [the pursuers] all reasonable assistance in these respects and, without prejudice to that generality, [the defenders] will not be entitled to object to any Applications made subject to any Applications being in conformity with the declarations and restrictions specified in the preamble to this Clause (4) or Appeals taken by [the pursuers] in terms of this clause nor to pursue development proposals in respect of any land within the vicinity of the Option Area and remaining in the ownership of [the defenders] without the prior written consent of [the pursuers] if in the reasonable opinion of a properly qualified Planning Consultant the promotion of such land for development purposes would be likely to prejudice the successful outcome of any application for Planning Permission or any other development consent made in respect of the Option Area", that being subject to exceptions for two identified fields.

The foregoing passage is important for two reasons. First, it makes it clear that the expenses of the planning process were to be borne entirely by the pursuers. Secondly, it provides that the defenders are not entitled to resist the pursuers' planning applications in any way, or to pursue any planning applications that might have an adverse effect on the pursuers' application.

[9] Thereafter, clause (3)(v) sets out the provision quoted at paragraph [4] above. The construction of that provision was central to the dispute between the parties, but it must be construed in the light of the contract as a whole. Certain further provisions of the option missives are also of some significance in understanding the essential bargain between the parties, and I will deal with these before considering the construction of the final words of clause (3)(v). The first of these provisions is clause (9), which provides that the defenders are not to be entitled to sell or otherwise deal with the Option Area or any part or parts thereof unless any such dealing is made subject to the options conferred upon the pursuers and the pursuers have first granted their prior written consent. That clause differs from the obligations that the pursuers now seek to impose on the defenders under the section 75 agreement: see paragraphs [24], [26], [28] and [29] below. Clause (12) provides that when the pursuers exercise their Options the Option Area or the relevant part thereof is to be acquired on terms specified in the Schedule of Terms and Conditions. The latter Schedule states the manner in which the purchase price is to be calculated, and is discussed in paragraph [10] below. Clause 16 provides that the pursuers will reimburse the professional costs incurred by the defenders up to a maximum of £29,500 plus VAT and planning costs incurred by the defenders up to a maximum of £4,850. That is significant because it indicates that no costs or liabilities were to be imposed on the defenders in consequence of the missives; this point is important in considering the provisions of the section 75 agreement.

[10] The Schedule of Terms and Conditions provides in clause (1) that the purchase price of any Purchase Area (defined as an area of land over which an option is exercised) should be a sum equivalent to 87.5% of the Open Market Value of the Purchase Area, calculated in a manner that is specified in detail. If agreement cannot be reached, the matter is remitted to the decision of three firms of chartered surveyors. Thus the price received by the defenders for the land did not amount to full open market value; that amount was discounted by 12.5%. The reason for this is clearly that the pursuers were obliged to procure planning permission, which would enhance the value of the land. The fact that a specific discount was agreed is important, however, because it tends to indicate that future liabilities should not be imposed on the defenders. A further feature of clause (1) is important. In calculating the open market value, an "appropriate and realistic deduction" is to be made for the cost to the pursuers of inter alia providing in terms of the planning consents any infrastructure outwith or within the Purchase Area. Such cost was clearly a future liability at the time when the option missives were concluded. That is important because it indicates that, to the extent that it was intended that the ultimate liability for any future costs was to fall on the defenders, specific provision to that effect was made. The general scheme of clause (1) is accordingly that, in calculating the consideration payable to the defenders, infrastructure costs were deducted and a percentage deduction was made for the pursuers' trouble and expense, but otherwise the defenders were to obtain the agreed percentage of the open market value, without any deduction for further expenses. This is of great importance when the terms of the section 75 agreement are considered, because under that agreement, for reasons discussed at paragraphs [19] - [28] below, the defenders must bear the bulk of the infrastructure and other costs prior to the time when the sale of the land actually takes place.

Construction of obligation to enter into agreements with local authority
[11] I will now consider the construction of the provision in the option missives quoted at paragraph [4] above. Two expressions used in that provision appear to me to be important. First, the obligation on the defenders to enter into an agreement with the local authority arises "at the reasonable request" of the pursuers. Secondly, any such agreement must be "required as a pre-requisite to the grant of Planning Permission or any other necessary Consent in respect of the Option Area or any part or parts thereof". The second of these expressions is reasonably straightforward. On the ordinary meaning of the words used, I am of opinion that any request by the pursuers must be necessary in order to obtain planning permission or other necessary consents in respect of part or all of the Option Area; if the request is not necessary in that sense, it cannot be said to be "required as a pre-requisite". In relation to the first of these expressions, it was argued by the pursuers that the grant of planning permission was central to the operation of the bargain between the parties, and that accordingly the critical question is whether being asked to sign a document required for planning permission is reasonable; it is not material whether that document is in itself reasonable in any more general sense. In other words, the emphasis should be on the reasonableness of the request rather than the reasonableness of the terms of the document. In my opinion this construction is not correct. The expression "at the reasonable request" must obviously be construed in the context of the missives as a whole, and certain features of the parties' agreement are in my view important in construing the expression. In the first place, the obtaining of planning permission was, as the pursuers accepted, central to the operation of the agreement. In the second place, the negotiation of planning permission, including any agreements necessary to that end, was entirely the responsibility of the pursuers. It was not envisaged that the defenders would take part in that negotiation, except perhaps in relation to one or two peripheral matters. In the third place, at the time when the missives were concluded an application for planning permission was well in the future, and the details of any such permission could not be foreseen. Consequently there was considerable uncertainty at that stage as to what the terms of the permission and any ancillary agreement might be. In the fourth place, however, it was clear that the defenders, as the landowners at the material time, would require to enter into a section 75 agreement with the local planning authority; that meant that they were vulnerable to any adverse obligations or other provisions contained in such an agreement. In the fifth place, the word "reasonable" was clearly inserted deliberately; the remainder of the provision under consideration makes perfectly good sense without it. In these circumstances, I am of opinion that the clear purpose of the reference to a "reasonable" request was to protect the defenders' position. At the end of the planning negotiations, over which they had no control, they were to be presented with an agreement that contained binding obligations. In that situation, I consider that the defenders would have a very obvious concern with the content of any proposed section 75 agreement. Consequently the word "reasonable" must in my opinion relate to the content of the request, as contained in the terms of the proposed agreement; it cannot be confined to the mere making of the request, as the pursuers argued.

[12] If the pursuers' construction were adopted, the result of the provision under consideration would be that the pursuers could agree almost anything with the local authority and, provided that such provision was necessary to obtain planning permission, the defenders would be obliged to sign the resulting section 75 agreement; in other words, the pursuers would be given a blank cheque. In some cases a provision of that sort might be reasonable. In the present case, however, it is significant that the defenders were only to obtain 87.5% of the market value of the land, and did not obtain any payment in advance of the purchase price. These factors strongly suggest that there must be limits on the pursuers' power to negotiate planning permission, and in particular that there must be limits on the extent to which any such planning permission and ancillary agreements might place onerous burdens on the defenders.

[13] The next issue is the specific content that should be given to the word "reasonable". In my opinion a number of matters are relevant. First, any request must clearly be judged against the terms of the parties' missives, to determine whether it is consistent with the rights, obligations and other provisions contained in those missives. In this connection, both the general structure of the missives and their specific terms must be considered. Secondly, it is relevant to consider whether any provisions of the proposed section 75 agreement can be considered unduly burdensome on the defenders. In this connection, it is important to consider the extent to which financial burdens or other obligations are placed on the defenders by the proposed agreement. Thirdly, it is in my opinion material that the function of the requirement of reasonableness is to protect the defenders. It was necessary that the pursuers should be accorded a great deal of flexibility in conducting the planning negotiations, but that flexibility carried with it the risk that the defenders would be adversely affected by provisions of the resulting agreement. The word "reasonably" was inserted precisely to protect them against that risk.

The purchase missives
[14] The material provisions of the purchase missives are contained in the offer sent by the pursuers' agents to the defenders' agents on 15 November 2002. An area of 2.43 hectares lying to the north of Blackhall Road was sold by the defenders to the pursuers at a purchase price of £1,250,000; the price was to be payable on the date of entry. A one metre wide strip of ground along the northern boundary of the land was excluded from the sale. This was a barrier to any road from the subjects of sale to the ground lying to the north, and it was a matter of agreement that this was intended to operate as a ransom strip. Under clause (2) of the offer, entry was to be given at a date 28 days after the later of two events: receipt by the pursuers all necessary consents for development of land in terms of clause (3), and the exercise by the pursuers of the first of the series of options arising under the option missives. The fact that these events are stated in the alternative indicates that planning permission for the 2.43 hectares was regarded as independent of the exercise of the options under the option missives; it follows that it could not be assumed that planning permission for the subjects of the option missives would also extend to the subjects of the purchase missives. In relation to the necessary consents for the development of the 2.43 hectares, it is provided that the criterion for entry is "receipt by [the pursuers] in writing in terms acceptable to them (of which they shall be the sole judge) of the last of all necessary consents in terms of Clause (3) hereof". That would include not only planning permission but roads construction consent, and possibly building warrant. Finally, it should be noted that the defenders cannot require the pursuers to purchase this area of land in the event that the conditions are not purified; there is no put option in their favour.

[15] Clause (3) of the offer of 15 November 2002 provides that it is a material and suspensive condition of the offer that the pursuers should obtain on terms acceptable to them, of which they were to be the sole judge, all necessary consents for the residential development of the subjects of purchase at a specified density. This was subject to a number of conditions, which included an obligation on the pursuers to lodge with the planning authority an application for detailed planning permission; such application was to be made within 12 weeks of conclusion of the missives, and the pursuers were to use reasonable endeavours to obtain planning consent within 12 months. Under clause (3)(b) the pursuers were placed in charge of the planning application. Clause (3)(e) provides that the matters specified in clause would be "at no expense" to the defenders, but that the defenders should be bound to afford to the pursuers all reasonable assistance in these respects. In particular, the defenders were not to be entitled to object to any applications made or appeals taken by the pursuers, nor to pursue development proposals in respect of any land within the vicinity of the subjects of purchase without the pursuers' consent. That is followed by the obligation set out in paragraph [4] above, which I discuss in the following paragraph. The opening part of clause (3)(e) makes it clear that the defenders were not to incur any expense in connection with the application for planning permission, and to that extent corresponds to clause (4)(v) of the option missives. Finally, clause (6) of the purchase missives states that it is a material and suspensive condition of the offer that the defenders proceed to exercise an option in respect of the Option Land in terms of the option missives. Moreover, it is specifically stated that in the event that the option missives should lapse or otherwise cease the bargain contained in the purchase missives will be at an end, without penalty due to or by either party.

Construction of obligation to enter into agreements with local authority
[16] At the end of clause (3)(e) the obligation set out in paragraph [4] above is stated; this is an obligation at the reasonable request of the pursuers to enter into such agreements with the local planning, roads or any other relevant authority as are required as a pre-requisite to the grant of planning or any other necessary consents in respect of the subjects of purchase. The wording used in latter part of clause (3)(e) is very similar to the last part of clause (4)(v) of the option missives, and in my opinion it must be construed in the same way as the latter clause, for the same reasons. The reasoning at paragraphs [11], [12] and [13] above applies equally to clause (3)(e). One difference is that the agreed purchase price was not expressly fixed at a percentage of the open market value, unlike the option missives, where it was fixed at 87.5% of the open market value. Nevertheless, the opening part of clause (3)(e) indicated that the application for planning permission was to be at no expense to the defenders. That is a clear indication that the purchase missives were structured in such a way that the defenders did not incur liabilities until the purchase price was paid, and that leads to the conclusion stated in paragraph [12], that there must be limits to the pursuers' power to negotiate planning permission.

The section 75 agreement
[17] In due course a section 75 agreement was negotiated between the pursuers and Aberdeenshire Council. It is not suggested that the defenders played any significant part in its negotiation. A copy of the agreement was sent to the defenders together with the first request to sign it in November 2008. In a later version of the agreement certain changes have been made. The agreement must, of course, be read with the accompanying grant of planning permission. The likely terms of the planning permission are found in a report for the Garioch Committee of the Council dated 18 December 2007. This indicates that it is proposed to grant full planning permission for the erection of 239 dwellinghouses on land at Blackhall Farm (reference 2744) and outline planning permission for proposed Class 6 (storage and distribution) use at Blackhall Farm (reference 3002). The planning permission 2744 covers part of the option land and the whole of the purchase land; the permission 3002 is situated entirely on the option land, towards its western end, and directly across Blackhall Road from the purchase land. Thus the structure of the planning permission does not correspond to the structure of the missives. The same is true of the proposed section 75 agreement, which deals with both the option land and the purchase land. In addition, the boundaries shown on the plan exhibited to the defenders' agents in November 2008 in order to show the extent of planning permission and the pursuers' proposals indicate that the boundary of the development to the north of the purchase land runs along the boundary of the land owned by the defenders; the 1 metre wide ransom strip is ignored.

[18] The proposed section 75 agreement involves three parties, Aberdeenshire Council, the defenders and the pursuers. The defenders must of course be parties to any such agreement, because they remain the heritable proprietors of the land affected until such time as the pursuers exercise their options under the option agreement or purchase land in terms of the purchase agreement. The expression "the Proprietors" is used throughout the agreement and is defined at the outset as the defenders and their successors in title to the Development Site. It is clear from the terms of the proposed section 75 agreement that substantial obligations and burdens are to be placed on the Proprietors, and I will now consider these in detail.

[19] In the first place, under clause 3 of the agreement the Proprietors are obliged to pay a Community Facilities Contribution to the Council in respect of each housing unit. That contribution is to be used by the Council towards the cost of providing nursery, primary and secondary school accommodation, community hall facilities, library provision, recreational facilities, public transport and waste facilities in order to serve the residential part of the development site. The Community Facilities Contribution is fixed at the sum of £1,780 per house, subject to index linking; on the basis of 239 houses that amounts to £425,420 in total before indexation. Clause (4) provides that the Community Facilities Contribution is to be paid by the Proprietors to the Council by quarterly instalments based on the number of individual housing units which have been completed during the preceding three month period. The first such instalment is to be calculated nine months from the development start date, and the quarterly instalments are to continue until all housing units have been completed. If, as the pursuers have intimated, the option land is acquired in tranches, it is clearly likely that the defenders will continue to fall within the definition of "the Proprietors" as houses are constructed on the earlier tranches. In addition, the ransom strip along the northern boundary of the purchase land falls within the area covered by the section 75 agreement that is to be retained by the defenders. That means that they will continue to fall within the definition of "the Proprietors" throughout the construction of the development. Thus the defenders will be liable under the section 75 agreement for payment of the Community Facilities Contribution.

[20] In my opinion this liability gives rise to a legitimate concern on the part of the defenders, for three reasons. First, the structure of the bargains contained in the two sets of missives is that the defenders receive payment for the land when the missives are finally implemented, at the time when property in the land or tranches of the land passes to the pursuers; until that time the missives make clear that liabilities to pay money do not fall on the defenders (see paragraphs [8], [9], [10] and [15] above). Likewise, although the defenders ultimately take the burden of the infrastructure costs (paragraph [10]), they do not actually pay any sum; instead, the price that they receive is reduced to allow for those costs. All these features are in my opinion quite inconsistent with any imposition of a liability to pay money on the defenders. Secondly, and related to the last consideration, the section 75 agreement is structured in such a way that it does not take account of the likelihood that the option land will be acquired in tranches and the fact that the defenders will retain the ransom strip along the northern boundary of the purchase land. The result of these features is that the defenders will continue to be "Proprietors" throughout the duration of the development, and consequently will be liable for the Community Facilities Contribution. Thirdly, under clause (1)(ii)(b)(ii) of the schedule to the option missives, in calculating the open market value of any Purchase Area a deduction is to be made for the cost to the pursuers of inter alia "the provision of any Public, Community or Educational Facilities associated with the Purchase Area but not necessarily situated thereon". Under that provision, it seems clear that the total amount of the Community Facilities Contribution must be deducted in arriving at the open market value. Thus the cost is ultimately borne by the defenders, but that cost is only borne when the consideration for the land is paid. That structure is inconsistent with the notion that the defenders could be liable for payment of instalments of Community Facilities Contribution as they fall due. The foregoing matters appear to me to be significant, because the sum involved is potentially large. I am accordingly of opinion that the liability under the section 75 agreement to pay the Community Facilities Contribution is a strong indication that the agreement is not reasonable from the defenders' point of view.

[21] For the defenders, it was submitted that the obligations to pay sums to the Council that are incumbent upon the Proprietor might not come into operation, and would only become effective in the event of non-payment by the developer (who might not be the pursuers). That is probably correct, on the assumption that the Council attempted to recover the Community Facilities Contribution (and other payments) from the developer of the land rather than the defenders as Proprietors. Nevertheless, the liability arises, in the case of the Community Facilities Contribution, as houses are constructed, and under the section 75 agreement that liability is clearly placed on the Proprietors. On that basis I do not think that it is possible to suggest that the defenders' concern is insignificant.

[22] In the second place, clause 5 of the section 75 agreement provides that the Proprietors shall pay to the Council a Percentage for Art Contribution amounting to £35,500 in total; of that sum £25,000 is attributable to the residential development and £10,500 to the commercial development. Those amounts are index-linked, and interest is payable in the event of late payment. The residential portion is to be paid by the Proprietors before the occupation of the first open market house within the development, and the commercial portion is to be paid by the Proprietors within 20 days of commencement of development on the Employment Land (that being defined as the land identified as being subject to the commercial development). In this case I am once again of opinion that the liability gives rise to a legitimate concern on the part of the defenders, for essentially the same reasons as the concern in relation to clause (3) set out at paragraph [20] above. In this case the two payments will be made at an early stage in the development, the date of occupation of the first open market house and the start of the commercial development. It is obvious that, at least on the first of those dates, the defenders are likely to fall within the definition of "the Proprietors". In addition, the retention of the ransom strip along the northern boundary of the purchase land means that they will probably remain within that definition throughout the development. Moreover, in this case the Percentage for Art Contribution appears to fall within the terms of clause (1)(ii)(b)(ii) of the schedule to the option agreement, with the consequences described above. In these circumstances I am of opinion that the liability of the defenders qua Proprietors to pay the Percentage for Art Contribution supports the conclusion that the section 75 agreement is not reasonable from the defenders' standpoint.

[23] In the third place, clauses 6 and 7 of the section 75 agreement require further payments to be made. Clause 6 provides that the Proprietors shall pay a Bus Subsidy to the Council by way of three annual payments of £81,820 each. The first such payment is due on the first anniversary of the Development Start Date, which is defined as the commencement of the residential part of the development. The sums in question are index-linked. Once again I consider that the liability imposed on the defenders qua Proprietors gives rise to a legitimate concern on their part, since at the time when the first payment is to be made it is quite likely that they will still fall within the definition of Proprietors; once again the reasons are broadly similar to those set out in paragraph [20] above, although in this case the argument based on the terms of clause (1)(ii)(b)(ii) of the schedule to the option agreement is perhaps less clear; that clause refers to "Public, Community or Educational Facilities associated with the Purchase Area", and without detailed information as to how the Bus Subsidy is applied it is difficult to know whether it is intended to provide facilities "associated with" the Purchase Area. Nevertheless, I consider that the other two arguments are compelling, and I am of opinion that the liability to pay the Bus Subsidy is an indication that the section 75 agreement is not reasonable. Clause 7 provides that the Proprietors shall pay an Affordable Housing Contribution to the Council within 28 days of the commencement of development on the Employment Land. That sum, which is fixed at £12,305, subject to index linking, is to be used for the provision of affordable housing within the community. At the start of development on the Employment Land it is likely that the defenders will fall within the definition of Proprietors, and accordingly I consider that this matter gives rise to a legitimate concern for them, for the same reasons as with clause 6. Consequently the liability to pay an Affordable Housing Contribution provide support for the conclusion that the section 75 agreement is not reasonable.

[24] In the fourth place, certain concerns arise out of provisions in the section 75 agreement that two identified areas of land should be used to provide low-cost housing or socially rented housing; the land in question is referred to as "Affordable Housing Land". One of the areas in question is situated within the part of the option land that is referred to as Area 4 for planning purposes and the other is situated within the purchase land, which is referred to as Area 6 for planning purposes. Clause 11 of the section 75 agreement provides that the Proprietors are to reserve the Affordable Housing Land for the purpose of constructing 30 Affordable Housing Units within Area 4 and 10 Affordable Housing Units within Area 6. On the commencement of development in each of Area 4 and Area 6 the Proprietors are to construct roads and install services of sufficient capacity to accommodate the relevant number of Affordable Housing Units. Within six months of the provision of services the Proprietors are obliged to conclude a binding contract of sale with a Registered Social Landlord for a consideration that is not to exceed the Affordable Housing Land Market Value. In this case the defenders' concerns relate to the manner in which the Affordable Housing is unequally distributed between the option land and the purchase land, and is concentrated on one relatively small part of the option land. On the option land, 201 houses are to be constructed, of which 30 were to be Affordable Housing Units. Within the area designated Area 4, however, Affordable Housing Units amount to 50% of the total. On the purchase land, Affordable Housing Units amount to 25% of the total, a higher percentage than on the option land. Thus, under the option missives, it would be open for the pursuers to fail to take the whole of Area 4, and in that way avoid the obligation in respect of Affordable Housing. The areas referred to in the section 75 agreement are not related to the missives and need not correspond to the tranches in which land is acquired under the missives. After six years the defenders would be entitled to exercise the put option found in clause (3)(iv) of the option missives, but that would occur at the end of the development and the price obtained would reflect the fact that the land was largely designated for Affordable Housing.

[25] The purchase missives raise a more significant problem in two respects. First, the purchase missives do not contain a put option that the defenders can exercise to compel the pursuers to take the land. Secondly, the purchase missives only become unconditional when the last of all the necessary consents is obtained in terms acceptable to the pursuers, and it is provided that the pursuers are to be the sole judge of that matter (see paragraphs [14] and [15] above). There is accordingly a risk that the defenders could be left with Area 6, the 2.43 hectares, burdened with the obligation to construct a high proportion of Affordable Housing Units on that land. Those units will, however, have benefited the option land, in that the Council's intention was obviously to provide a specified number of Affordable Housing Units on the whole of the land subject to development.

[26] Clause 11(a) of the section 75 agreement provides that, on commencement of development in each of Area 4 and Area 6, the Proprietors shall construct a road and services to the edge of the Affordable Housing Land in each phase. That obligation on the Proprietors arises as soon as development begins in either of the two designated areas. This gives rise to a problem because the numbered areas referred to in the planning documents may not correspond to the tranches in which the pursuers take the option land. Consequently it is possible that the pursuers might exercise an option in relation to part of the Area 4 land that is not subject to Affordable Housing requirements but decline to exercise an option in respect of the remainder of the land. That would, as soon as development started on the land so taken, have the effect of triggering the obligation on the defenders as Proprietors to construct the roads and services for the Affordable Housing Land. Clause 11(b) provides that, within six months of the relevant phase of the Affordable Housing Land becoming serviced land, the Proprietors should enter into a contract to sell to a Recognised Social Landlord for a consideration that is not to exceed the Affordable Housing Land Market Value. That is inconsistent with the option missives; the missives provide for the sale of the whole of any tranche taken by the defenders at market value, whereas clause 11(b) provides for a compulsory sale at a lower value.

[27] In my opinion the considerations discussed in the three preceding paragraphs give rise to legitimate concern on the part of the defenders. The difficulties arise out of the fact that the areas referred to in the planning documents do not correspond to tranches in which the pursuers may take the land. The result is that the defenders are exposed to the risk of liabilities which may involve them in expenditure or a sale at a lower value in a manner that appears to me to be inconsistent with the scheme of the two sets of missives. The pursuers sought to counter the defenders' argument on clause 11 by suggesting that it is not a reasonable construction of the parties' agreement to hypothesize unlikely or extreme events. I do not think that the possibilities put forward by the defenders can be described as extreme. Even if they are less likely than not, they give rise to a risk that a liability will fall on the defenders. In my view the existence of a risk of liability, unless it can be described as insignificant or de minimis, is a source of legitimate concern. In this connection, it seems to me that it would have been possible to structure the section 75 agreement in such a way as to eliminate the risk of liability on the defenders, or alternatively for the pursuers to grant an indemnity in favour of the defenders in respect of any additional liabilities that the defenders might incur in consequence of the section 75 agreement; these possible solutions apply to all of the liabilities that may fall on the defenders under the section 75 agreement. In relation to clause 11, the defenders also argued that there was no time limit in clause 11(a) for the construction of roads and services. Nevertheless, in those circumstances the law would imply an obligation to construct the necessary works within a reasonable time, and it must I think the assumed that the defenders would, if necessary, require to implement any obligations incumbent on them.

[28] In the fifth place, clause 15 of the section 75 agreement provides that the Proprietors are to be obliged to lay out and maintain to the Council's satisfaction certain areas of public open space. After those areas have been laid out, the Proprietors are obliged either to convey them to the Council (which may include provision for the payment of a capitalized maintenance charge, in accordance with the Council's approved policy) or to transfer the areas to a company or organization approved by the Council. This obligation is stated to be in accordance with the terms of Decision Notice 1 and any plans approved thereunder. When the draft section 75 agreement was first considered by the defenders, the only version of that decision notice was that attached to the Garioch Committee Report of 18 December 2007. That indicated a landscaping scheme for the entire area subject to the development, and that that scheme was to be implemented in the first planting season after the start of the development. The pursuers indicated that they intended to acquire the option land in tranches; consequently this obligation would fall on the defenders as Proprietors of the land that had not yet been acquired. That would involve an obligation on the defenders to carry out the necessary landscaping works despite the fact that the cost of those works had been deducted from the open market value to be received by them (see paragraph [10] above). Such a provision is in my opinion inconsistent with the bargain between the parties contained in the missives, in that at obligation is placed on the defenders to perform works that the defenders are, through a deduction from the market price, paying the pursuers to perform (see paragraph [20] above).

[29] A further matter of concern arises under clause 15. The obligation on the Proprietors to convey the open space land to the Council or a third party is clearly intended to be for no consideration (and indeed money may be payable to the Council to provide for future maintenance). That too appears inconsistent with the missives, in that it involves the defenders in an obligation to convey land to a party other than the pursuers at a price that is different from that specified in the missives. In this connection, clause (2) of the schedule to the option missives provides that, in that it was anticipated that the local authority might require the pursuers to convey land within the Option Area for community or other public purposes or public open space, such land should be conveyed by the defenders to the pursuers at the then current use value proposed within the development scheme under appraisal relating to that area. In practice that provision may be of help in relation to clause 15, but clause (2) only comes into operation when the pursuers have exercised an option to purchase the land in question. In addition, the section 75 agreement specifies different parties from those in clause (2) (the Council or an approved company or organization rather than the pursuers) and a different price (nil rather than current use value). In my opinion those changes are material. Once again they illustrate the failure of the section 75 agreement to cohere with the provisions of the missives.

[30] Yet a further problem that arises under clause 15 is that the plans of the development made available do not appear to exclude the ransom strip that the defenders are to retain along the northern boundary of the purchase land. Consequently, if the landscaping scheme for Area 6 (the purchase land) took in any part of the ransom strip, the defenders would be bound to convey that part to the Council or an approved company or organization. That would involve an inconsistency with the terms of the missives, which might in some cases be significant in that the value of the ransom strip could be destroyed. In my opinion the foregoing issues arising out of clause 15 are matters of legitimate concern to the defenders, in that they involve either inconsistency with the missives or potentially onerous obligations on the defenders that are not contained within the missives. In response to the defenders' arguments on clause 15, the pursuers submitted that the landscaping scheme could not be approved until detailed planning consent was obtained, and that any possible difference between the phasing of development under the planning consent and phasing of acquisition under the missives was either of no moment or already catered for by the terms of the missives. It is no doubt correct that the landscaping scheme could not be approved until detailed consent was obtained. Nevertheless, the matters referred to in this and the two preceding paragraphs appear to me to be potentially of some significance. They are not matters that are catered for by the terms of the missives; for the most part they involve clear inconsistencies with the missives.

[31] In the sixth place, clause 16 of the section 75 agreement provides that "The Proprietors shall reserve the Employment Land for employment use development only and no other uses in all time coming". The Proprietors are further to carry out the servicing of the Employment Land, including the construction of roads, footpaths and services. Finally it is declared that the clause will not operate so as to prevent the use of the Employment Land for agricultural purposes, but that applies only up to the date of commencement of development on the Employment Land. Three difficulties arise under this clause. First, although it is perhaps a minor point, the somewhat unequivocal wording of the first sentence of the clause (quoted above) could in some circumstances involve the sterilization of the land if for any reason employment use became impossible or impracticable. Secondly, the obligation on the Proprietors to service the land involves a significant potential liability. The possibility that the defenders might be called on to meet this liability is increased by the fact that, under the terms of the option missives, it is unlikely that the defenders would acquire the Employment Land in a single tranche. That is because, under clause (3)(iii) of the option missives, at least 60% of the part of the Option Area to which any individual exercise of an option relates must be Developable Acres; the latter expression is defined to exclude Employment Land. Thirdly, while the land designated as Employment Land is used for agricultural purposes at present, the authority for such use will come to an end as soon as development starts on the land. That means that agricultural use might have to cease even before the whole of the Employment Land had been acquired by the pursuers (for example, in the event that the Employment Land is acquired in two or more tranches). A similar point relates to the Contribution for Art specified in clause 5 of the section 75 agreement and the Affordable Housing Contribution specified in clause 7; both of these are triggered by the start of development. It follows that, for example, the erection of a mobile telephone mast on the land would trigger the obligation to make these payments. In my opinion all of the above considerations are a matter of legitimate concern to the defenders. In response to the defenders' arguments, the pursuers submitted that the complaint was based on extreme or unlikely events, and that a telephone mast would be permitted development not requiring consent. In my view the events in question are possible, and, as I have mentioned above, the critical point is the risk to which the defenders are exposed. In relation to erection of a telephone mast, that is permitted development but is still "development", and that would trigger the various obligations referred to above.

[32] The defenders also founded on clause 22 of the section 75 agreement, which provides that, except in respect of any sale to the Developers, the Proprietors will not sell, assign, dispone, lease or in any way alter their interest in the Development Site or any part thereof prior to the recording of the section 75 agreement in the General Register of Sasines or its registration in the Land Register. The reason for this clause is clearly to enable the section 75 agreement to bind the land prior to its disposal to the Developer. The defenders accepted that that in itself is reasonable, but they submitted that clause 22 went further than the missives in preventing all dealings, because the defenders were unable to register the section 75 agreement and there was no obligation on any other party to register it, nor any end date by which registration must take place. In my opinion the answer to this is that the section 75 agreement clearly contemplates registration or recording within a reasonable time, and in my opinion, provided that the development proceeds, it would be in the power of the defenders to compel either the pursuers or the Council to register the agreement.

[33] Nevertheless, I am of opinion that the six features of the section 75 agreement that are discussed at paragraphs [19]-[30] are, taken together, clearly sufficient to justify the defenders in refusing to execute the proposed section 75 agreement. That agreement involves liabilities that go substantially beyond anything contemplated in the missives; the scheme of the missives was clearly that the defenders received a restricted consideration payment of which was deferred, but at the same time incurred no liability to make any payment until the consideration was due. Moreover, in certain important respects the liabilities imposed on the defenders by the section 75 agreement are quite inconsistent with the structure of the missives, and involve the assumption of risks that are not in my opinion consistent with the financial rights and obligations contemplated in the missives.

The requests for execution of the section 75 agreement

[34] The pursuers served two requests on the defenders for execution of the section 75 agreement. The first of these is dated 10 November 2008, although it does not appear to have been sent to the defenders until the following day; that appears from an e-mail sent by the pursuers' agents to the defenders' agents on 11 November. It is clear from the terms of the latter e-mail that the defenders' agents had raised a number of concerns, and that these had been rejected by the pursuers. The request reads as follows:

"On behalf of our clients, CALA Management Ltd... and further to the terms of the Missives entered into between our respective clients dated 29^th and 30^th January 2002, we hereby call upon your clients to agree to enter into a S75 Agreement in terms of the draft exhibited to you and for your clients to confirm that agreement no later than 4 p.m. on 17^th November 2008".

The request according to its terms relates only to the option missives, and it requires confirmation that the section 75 agreement will be executed by 17 November. The section 75 agreement in question is that discussed in the preceding section of this opinion.

[35] The critical question is whether the request made in that letter conforms to the requirements of the closing words of clause (4)(v) of the option missives: see paragraph [11] above. In my opinion it does not do so. In the first place, the section 75 agreement referred to in the request relates to both the purchase land and the option land; the area known as Area 6, which is referred to in the agreement, consists of the purchase land. The agreement contains a substantial number of obligations relating to the purchase land which are binding upon the Proprietors. As indicated above, I am of opinion that any request under clause (4)(v) must be necessary in order to obtain planning permission or other necessary consents in respect of part or all of the Option Area; otherwise, the request cannot be "required as a pre-requisite" of planning permission or other consents in respect of the Option Area. It cannot be said in my view that obligations relating to the purchase land are necessary in order to obtain planning permission for the option land; the two areas are separated, and no reason was suggested that separate planning permission could not be granted for each area, each such planning permission being subject to its own section 75 agreement. In the circumstances I am unable to conclude that the section 75 agreement referred to in the letter of 10 November was "required as a pre-requisite" of planning permission in respect of the option land. The section 75 agreement was negotiated by the pursuers, and it was their decision to structure the planning permission and relative agreement in this way.

[36] In the second place, I am of opinion that the section 75 agreement referred to in the request of 10 November cannot be regarded as reasonable, for a number of separate reasons. First, the agreement imposes obligations to make payments and carry out works in a manner that is fundamentally inconsistent with the structure and terms of the missives concluded between the parties; in particular, clauses 3, 5, 6, 7, 11, 15 and 16 of the section 75 agreement impose such terms. Secondly, the section 75 agreement does not properly reflect the nature of the contract contained in the missives. Thus clauses 11 and 15 of the agreement impose obligations to convey land to third parties other than the pursuers for sums that are not those specified in the missives. Furthermore, under the same two clauses, the agreement imposes obligations to convey land for Affordable Housing or landscaping irrespective of whether any option has been exercised over that land. The agreement also potentially imposes an obligation to convey away part or the whole of the ransom strip on the northern boundary of the purchase land; that arises under clauses 11 and 15. Thirdly, the section 75 agreement imposes conditions which may have a detrimental effect on the defenders. In particular, clause 16 of the agreement restricts the use of land in a fairly drastic manner, in such a way that it may have a detrimental effect on the defenders' commercial interests; clauses 5 and 7 have the effect that any use of the land that amounts to development triggers a liability to make substantial payments; and the distribution of land for affordable housing between the option land and the purchase land may impose a disproportionate burden on the defenders if, as is possible, the pursuers acquire the option land but not Area 6, the purchase land. All the foregoing matters are discussed at length in paragraphs [17]-[33] above.

[37] Fourthly, the request of 10 November required consideration of decision notices and plans that were not produced at the time when it was received. In the summons (article 5 of condescendence) it is averred that "only a limited number of changes" were made to the terms of the draft decision notices on the planning application between the date of the original report by the relevant committee (18 December 2007) and the draft decision notices dated 11 December 2008. It is further averred that these changes diluted a number of the provisions and arose following negotiations between the pursuers and the Council. Although the changes in the decision notices may have been minor, I am of opinion that, if a party to missives is to be asked to consent to a section 75 agreement, it is essential that he should have access to the relevant planning documents, including the decision notices, in a definitive form. The terms of the planning permission are important, and it appears to me to be elementary that they should be known in full to any party who is asked to consent.

[38] In the circumstances described in the last two paragraphs, I am of opinion that the request to enter into the section 75 agreement made in November 2008 cannot be regarded as reasonable. In reaching this conclusion it is obviously essential to take into account all of the factors that I have described. When they are taken together, I consider that the result is clear. Consequently the defenders were not obliged to enter into the section 75 agreement on the ground that the pursuers' request was not reasonable and accordingly did not fall within the requirements of the closing words of clause (4)(v) of the option missives.

[39] A second request for execution of the section 75 agreement was served on the defenders on 11 December 2008. The operative part of the letter of request was in the following terms:

"On behalf of our clients, CALA Management Ltd... and further to the terms of the Missives entered into between our respective clients dated 15^th November and 27^th November (2 Letters) all 2002 and as subsequently amended relative to the subjects comprising 2.43 Hectares at Mains of Blackhall, Inverurie, we hereby call upon your clients to agree to enter into a S75 Agreement in terms of the draft exhibited here with and for your clients to confirm that agreement no later than 5 p.m. on Friday, 19^th December 2008".

The letter then went on to refer to two typographical errors in the draft section 75 agreement. The draft planning decision consent documents were also referred to; copies were enclosed. It was stated that these documents were exhibited in relation to the earlier request made in November 2008. That cannot in fact be correct, because the time limit in the earlier request had expired and thus the documents came too late. As the terms of the letter of request of 11 December made clear, this request was made under the purchase missives, not the option missives.

[40] In relation to the two draft planning decision consent documents, the first, relating to the residential development, stated that no works were to take place until a scheme of hard and soft landscaping relating to the whole application had been approved by the planning authority. Fifteen matters were specified that had to be taken into account in such a scheme. All landscaping in accordance with the scheme was to be completed during the planting season immediately following the occupation of the penultimate dwelling house in each phase of the development. The phasing of the development, however, was still to be agreed, and thus the planting scheme was uncertain in an essential respect. The second planning consent document dealt with the employment land and the commercial development. It also referred to the landscaping proposals; in this case the approved scheme was to be completed during the planting season immediately following the commencement of the development. The defenders at this stage did not know what the phases of the development were to be, and in particular they did not know how the landscaping related to the areas specified in the section 75 agreement or to the tranches in which the option land was to be acquired. Consequently the defenders were left in a state of uncertainty about important aspects of the planning permission.

[41] In these circumstances, it is necessary to consider whether the request made in the letter of 11 December 2008 conforms to the requirements of the closing words of clause (3)(e) of the purchase missives, construed in the manner explained at paragraph [11] above. In my opinion it fails to do so. In the first place, it cannot in my view be said that the section 75 agreement is a pre-requisite of planning permission for the purchase land; it covers a much wider extent, namely the whole of the option and purchase land, and the conditions and restrictions are much greater than those required for the development of purchase land. In a sense it can be said that the regulation of development of the option land, including the employment land, had nothing to do with the grant of planning permission of the purchase land; certainly there was no necessary connection between the two. Moreover, no employment land was lost through the residential development of purchase land, and accordingly it could be said that there was no need for any condition that employment land should be provided on that area. In addition, the purchase land bore a higher proportion of affordable housing than the option land. It seems likely that the burden that was placed on the purchase land in this way was greater than was necessary to obtain planning permission for the purchase land, and was only necessary in order to obtain permission for the whole of the option land.

[42] In the second place, I consider that the request contained in the letter of 11 December cannot be regarded as reasonable, in terms of clause (3)(e). My reasons for this conclusion are those set out at paragraphs [35]-[37] above; what is said there is equally applicable to the purchase land. In addition, the points regarding the employment land and the distribution of affordable housing made in paragraph [41] can also be regarded as going to reasonableness, as well as the question of necessity. Indeed, a number of the obligations affect the purchase land disproportionately; in addition to the share of affordable housing allocated to it, both the Percentage for Art Contribution and the Bus Subsidy are payable in full as soon as there is any residential development of the purchase land, even if the pursuers decide not to exercise their options in relation to the option land. When all of these matters are taken cumulatively, I think it clear that the requirement that the request should be reasonable was not satisfied. I accordingly conclude that the defenders were not obliged to enter into the section 75 agreement.

Arguments for the pursuers
[43] At this point I should note the principal arguments that were made on behalf of the pursuers. Their fundamental argument related to the construction of clause (4)(v) of the offer containing the terms of the option missives and clause (3)(e) of the offer containing the terms of the purchase missives. I have dealt with this matter at paragraphs [11]-[15] and [16] above. It was further submitted that the parties had had the opportunity of considering in the missives the potential issues that might concern them if the option were to be exercised in tranches rather than by a single act. At the time when the missives were framed, the defenders had an opportunity to consider the provisions that they would wish to have in order to deal with that possibility. The problem with this argument is that the missives were drafted a very substantial time before the section 75 agreement was concluded, and indeed before the planning process had got under way to any significant extent. That planning process was entirely under the control of the pursuers. Moreover, the planning process was clearly likely to involve complex negotiations covering intricate points of detail; that is very apparent from the terms of the draft planning permission documents and the section 75 agreement. In these circumstances it seems to me that it would be impossible for the defenders to know in advance what precise provisions should be inserted in the missives to deal with the details of the likely section 75 agreement. What was done, however, was to provide that the obligation to enter into a section 75 agreement was to be "at the reasonable request" of the pursuers; the requirement that the request should be reasonable was designed precisely to cover the matters of detail that were likely to arise in any section 75 agreement. That provides the degree of flexibility that is necessary to deal with matters of detail arising well into the future.

[44] The pursuers further submitted that the planning application had nothing to do with the defenders, and that the defenders should accordingly have no control, except possibly in extreme cases, over the content of the resulting section 75 agreement. The answer to this point is in my opinion that the terms of the planning permission and the section 75 agreement were liable to have an effect on the defenders rights and obligations, as is illustrated by the foregoing discussion of the terms of the agreement. In these circumstances I consider it entirely reasonable that the defenders should have a significant degree of control over the terms of any such agreement, to the extent that their rights are affected or any significant obligations are placed upon them. In relation to the defenders' arguments on the reasonableness of the section 75 agreement, the pursuers submitted that in considering that agreement it was not appropriate to consider extreme or unlikely circumstances. The difficulty with this argument is in my opinion that it fails to deal with the fundamental premise of the defenders' argument, namely that the defenders were exposed to the risk of various adverse outcomes. Any individual outcome may be less likely than the contrary; nevertheless, the risk of such an outcome seems to me to be an entirely relevant consideration for the defenders to take into account. Moreover, as the number of individual risks increases, their total significance also increases. Overall, it seems to me that the totality of risks in the present case fully justified the defenders' position that it was not reasonable to expect them to execute the section 75 agreement. That is particularly so in view of the manner in which the consideration payable under the missives was structured. In the option missives, the defenders took a discount of 12.5% of the open market value and undertook to bear the infrastructure costs. In my view there was nothing in the missives to suggest that they should bear further liabilities.

[45] Among the risks referred to by the defenders is the possibility that the option contained in the option missives might be exercised in such a way as to produce an adverse outcome for the defenders. The pursuers submitted that it could not be assumed that any particular form of tranched acquisition would occur. It appears to me, however, that acquisition in tranches was likely; that was expressly stated by the pursuers' agents in the e-mail of 7 November 2008 referred to in paragraph [7] above, and in any event tranched acquisition would have obvious advantages for the pursuers' cash flow. A major problem in the structure of the section 75 agreement was that that agreement and the related planning permissions were not properly integrated with the pursuers' power to acquire the option land in tranches; in particular, the areas referred to in the planning documents had no relationship to any tranches in which the option land might be acquired, with the result that there was a mismatch between the section 75 agreement and the missives. As a practical matter, it would not have been particularly difficult to deal with this matter by the grant of undertakings as to the tranches in which land would be taken. Similarly, the defenders' other complaints could have been dealt with by, for example, providing indemnities against any liabilities that might fall on the defenders in future. In the event, however, the section 75 agreement was put forward for signature without any attempt to deal with the mismatch between the areas in the section 75 agreement and those in the missives or with the defenders' other concerns.

[46] The pursuers submitted that the mismatch between the planning documents and the missives arose out of the fact that the parties had chosen to incorporate their bargain in two sets of missives, but it had been contemplated that the planning application and resulting section 75 agreement would be dealt with on a unitary basis. When the missives are examined, however, this submission is not borne out. In particular, in clause (4) of the option missives it is stated that the pursuers are authorized to make applications for planning permission and other necessary consents "for the development of the Option Area or any part or parts thereof". Similarly, in clause (3) of the purchase missives, it is stated that the pursuers should obtain all necessary consents "for the residential development of the subjects of purchase". There is nothing in that wording to suggest that a single planning application was contemplated. Consequently, to the extent that the use of a single application has caused problems, the pursuers are responsible. Finally, it was submitted for the pursuers that Aberdeenshire Council would, or might, not accept any agreement other than the proposed section 75 agreement. The attitude of the Council is not dealt with to any significant extent in the pursuers' pleadings, and for that reason alone I am of opinion that this argument must be rejected. In any event, it seems to me that the defenders' concerns could have been dealt with by an appropriate agreement between the parties containing suitable indemnities. For this reason, too, I consider that the Council's attitude is not relevant.

Relevancy of the summons
[47] The pursuers' case is that, because of the terms of the option missives and the purchase missives, the defenders are obliged to execute the section 75 agreement on being requested to do so. For the reasons stated above, I am of opinion that, on a proper construction of the parties' missives, the defenders were not obliged to execute the section 75 agreement that was tendered by the pursuers in November and December 2008. Consequently the requests made by the pursuers for execution of the agreement on 10 or 11 November 2008 and 11 December 2008 were not validly made. The pursuers' case is accordingly irrelevant, and I will dismiss the action.