Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2011] CSOH 56
CA111/09	OPINION OF LORD GLENNIE in the cause EAST DUNBARTONSHIRE COUNCIL Pursuers; against GLADEDALE (NORTHERN DIVISION) LIMITED Defenders: ­­­­­­­­­­­­­­­­­________________

Council: Clark, Q.C., Barne; Shepherd & Wedderburn

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

24 March 2011

Introduction

[1] The pursuers ("the Council") and the defenders ("Gladedale") are both parties to a Tripartite Agreement with The University Court of the University of Glasgow ("the University") dated 1, 2 and 3 May 2007 relating to the Bearsden Academy and St Andrews College Sites at Bearsden, in terms of which the Council were to purchase the St Andrews Site from the University and were to sell the Bearsden Academy Site to Gladedale.

[2] One purpose of the linked transactions was to enable the Council to re-locate the Bearsden Academy into a newly built campus at the St Andrews Site, which it was acquiring from the University, thereby freeing up the existing Bearsden Academy Site for sale to Gladedale for redevelopment. The St Andrews Site Agreement between the University and the Council therefore forms an essential part of the context against which the Agreement between the Council and Gladedale must be understood, not only because it forms part of the same Tripartite Agreement but also because the purchase of the St Andrews Site by the Council provided the opportunity for the Council to relocate the Bearsden Academy.

The St Andrews Site Agreement

[3] The sale and purchase of the St Andrews Site ("the St Andrews Site Agreement") is provided for in clause 2 of the Tripartite Agreement and in Part 1 of the Schedule thereto. The price payable by the Council was made up of the Base Price of £15,000,000, together with an Additional Sum calculated by reference to the total sums payable by Gladedale to the Council for the Bearsden Academy Site (including index-linked payments and interest payable by Gladedale thereunder). The Completion Date was 3 May 2007. On that date the Council were required to pay the Initial Instalment of £6,000,000 - the Second Instalment of £5,000,000 was payable on 4 April 2008, and the Third Instalment of £4,000,000 (plus any Additional Sum) was payable on the earlier of the second anniversary of the Completion Date (i.e. 3 May 2009) or the first working day after the Phase 3 Entry Date under the part of the Tripartite Agreement relating to Gladedale's purchase of the Bearsden Academy Site (sometimes referred to as "the Council/Gladedale Agreement"). Clause 2.4 of Part 1 of the Schedule provided that it was "an essential condition of the agreement between the University and the Council, construed for the benefit of the University only", that the three instalments were paid by the Council to the University on the due dates by telegraphic transfer to a particular account. Interest would accrue on any part of the price not paid on the due date. The potential consequence of late payment was spelled out in Clause 2.5, which provided that failure by the Council to pay the Initial Instalment and any interest thereon in full within 15 Working Days after the date when the same fell due to be paid would constitute a material breach entitling the University to rescind its contract with the Council, resell the St Andrews Site, and recover from the Council any shortfall between the price on resale and the Base Price payable under the Agreement, all without prejudice to its right to claim damages. There is no equivalent provision relating to delay by the Council in payment of the Second or Third Instalments, though I should note that Clause 10 provided that, except where otherwise provided for, "time shall be of the essence with respect to all timescales specified in this Part of the Schedule". I should also mention Clause 3 of Part 1 of the Schedule which is concerned with Entry. It provided that entry to, and vacant possession of, the St Andrews Site (subject to certain detailed provisions which follow) was to be given by the University to the Council on the Completion Date (i.e. 3 May 2007 or such other date as might be agreed in writing) in exchange for payment by the Council of the Initial Instalment and delivery by the Council of a duly executed Standard Security securing payment of the Second and Third Instalments. Clause 3 went on to provide that "Entry will be an essential condition of the bargain", and stated that if the University was unable to offer vacant possession within 14 days of the Completion Date, other than as a result of delay or fault on the part of the Council, "then the [Council] will be entitled on the date falling fourteen days after the Completion Date or at any time thereafter to give 14 days written notice of its intention to resile", and would be entitled to resile if, upon the expiry of that 14 day notice, the University was still unable to implement fully its obligations.

The Council/Gladedale Agreement

[4] The terms and conditions of the Council/Gladedale Agreement are set out in clause 3 of the Tripartite Agreement and in Part 2 of the Schedule thereto. The price to be paid by Gladedale was £25,000,000 plus certain Index Linked Sums payable in accordance with Clause 1.2.7. The price was payable in three Instalments. Instalment One in the amount of £6,000,000 was payable on the Date of Entry, 3 May 2007 (the same date as the Completion Date under the St Andrews Site Agreement). Payment of Instalment Two in the sum of £5,000,000 was due on the Phase 2 Entry Date of 4 April 2008 (the date for payment of the Second Instalment by the Council under the St Andrews Site Agreement). The Final Instalment of £14,000,000, and the Index Linked Sums (in respect of Instalments One and Two and the Final Instalment), was to be paid on the Phase 3 Entry Date which was defined, in Clause 1.2.14, in the following terms:

"'Phase 3 Entry Date' means such date as the Council may intimate to Gladedale on not less than five working days prior written notice, provided such dates shall be no later than the second anniversary of the Date of Entry, the Council being bound to use reasonable endeavours to procure ... that the Phase 3 Entry Date occurs as soon as practicable after 14 January 2009".

There is an issue in the pleadings as to whether the Council was in breach of that reasonable endeavours obligation, but it was not developed before me and I need not consider it further at this stage. Clause 2.4 provided that it was "an essential condition" that Instalment One was paid in full no later than 4.30pm on the Date of Entry. In the event that Instalment One plus any interest due thereon was not paid in full within 14 days of the Date of Entry, the Council would be entitled to treat Gladedale as being in material breach of contract and would be entitled (but not bound) to rescind the Council/Gladedale Agreement and resell the Bearsden Academy Site without prejudice to its right to claim damages. The importance of the payment provisions in respect of all Instalments of the price was made clear in Clause 2.6, which provided that in the event that Instalment One or any subsequent Instalment of the Price was not paid in full by 4.30pm on the relevant date for payment, Gladedale would be deemed to be in material breach, whether or not consignation of that Instalment or any other part of the Price had taken place; all this subject to the qualification (in Clause 2.7) that the Council had no right to rescind the Agreement or to receive interest for late payment of any part of the Price if and to the extent that the delay in making payment was due to their fault or that of their agents in fulfilling their obligations under the Council/Gladedale Agreement. Clause 2.8 again emphasised the link between the two parts of the Tripartite Agreement by providing that it was "an essential condition" of the Council/Gladedale Agreement, "construed for the benefit of [Gladedale] only" that the Council paid the University the Instalments due under the St Andrews Site Agreement as soon as practicable but no later than two working days from receipt of the equivalent instalments from Gladedale under the Council/Gladedale Agreement.

[5] Clause 3 of Part 2 of the Schedule dealt with Entry. In view of the importance it assumed in the argument before me I should set out the material parts of it:

"3.1 Entry to and actual occupation (subject to the Council's rights under Condition 8 below) of the Bearsden Academy Site will be given on the Date of Entry in exchange for:-

3.1.1 Payment of Instalment One;

3.1.2 The delivery of the Gladedale Standard Security duly executed by Gladedale in a Self-Proving Manner

3.1.3 Delivery of the Council Lease in accordance with Clause 8 below, such Lease to be duly executed by Gladedale in a Self-Proving Manner;

....

3.2 In exchange for Instalment One and the other items referred to at Clause 3.1 above, the Council shall:-

3.2.1 Deliver a Disposition of the Bearsden Academy Site in favour of Gladedale ....

....

3.6 In exchange for payment of Instalment Two, the Council shall on the Phase 2 Entry Date:-

3.6.1 Give to Gladedale vacant possession of Phase 2; and

3.6.2 Deliver to Gladedale (a) a Deed of Restriction in respect of the Gladedale Standard Security insofar as relating to Phase 2, and (b) a Partial Renunciation of the Council Lease in respect of Phase 2 ...

...

3.7 In exchange for payment of the Final Instalment, the Council shall on the Phase 3 Entry Date:-

3.7.1 Give to Gladedale vacant possession of Phase 3; and

3.7.2 Deliver to Gladedale (a) a Discharge of the Gladedale Standard Security, and (b) a Renunciation of the Council Lease ...

...

3.9 Entry will be an essential condition of the bargain. If the Council fails to give vacant possession of the Bearsden Academy Site (subject to the Council Lease) in terms of Clause 3 above within fourteen days of the Date of Entry other than as a result of some delay or fault on the part of Gladedale or its agent then Gladedale will be entitled (but not bound) on the date falling fourteen days after the Date of Entry to give 14 days written notice of its intention to resile from the Council/Gladedale Agreement. If upon the expiry of the said period of 14 days notice the Council has still failed to give possession of the Bearsden Academy Site in accordance with Clause 3 above, Gladedale will then be entitled to resile from the Council/Gladedale Agreement forthwith by giving written notice to that effect forthwith. ..."

Finally, I should refer to the terms of Clause 8 which deals with the lease of the Bearsden Academy Site back to the Council and phased possession of the Site. Clause 8 provides as follows:

"8.1 On the Date of Entry Gladedale shall be given vacant possession of Phase 1 only.

8.2 On the Date of Entry Gladedale shall grant and the Council shall accept the Council Lease of Phases 2 and 3 on the following principal terms and Clauses:

8.2.1 The Council Lease shall endure for the period from the Date of Entry until the Phase 3 Entry Date but subject to the provisions of Clause 4.6 for a Partial Renunciation as at Phase 2 Entry Date;

8.2.2 The rent payable by the Council will be £1 per annum (payable only if asked);

8.2.3 Throughout the period of the Council Lease the Council shall be responsible for paying all outgoings of whatsoever nature relating to their use and occupancy of Phases 2 and 3;

8.2.4 Phases 2 and 3 shall be used only for educational and related purposes ...

8.2.5 The Council shall not be entitled to assign the Council Lease or to sublet Phase 2 or Phase 3 in whole or part but without prejudice to the Council's right (i) to allow use by third parties for educational or community purposes and (ii) to grant rights of access and use to contractors, sub-contractors and others in connection with the implementation of the PPP Agreement ...."

The Council Lease referred to in Clauses 3 and 8 is defined in Clause 1.2.2 as being the short-term lease of part of the Bearsden Academy Site to be granted by Gladedale to the Council in terms of a draft which forms Part 4 of the Schedule to the Tripartite Agreement. The period of that lease was to be two years from the Date of Entry, continuing from month to month thereafter until terminated by one month's prior notice given by either party. The Permitted Use was for educational purposes. It is apparent that the Council were to continue to use restricted parts of the Bearsden Academy Site - initially Phases 2 and 3, and later Phase 3 alone - until completion of construction of the new school buildings on the St Andrews Site, which would allow them to move the Bearsden Academy to the St Andrews Site, and give vacant possession of the remaining part of the Bearsden Academy Site to Gladedale at the end of the two year period.

[6] The Date of Entry under the Council/Gladedale Agreement was 3 May 2007, the same date as the Completion Date under the St Andrews Site Agreement. On that date Gladedale duly paid Instalment One in exchange for the delivery to them of a Disposition of the Bearsden Academy Site in their favour. At the same time, they delivered to the Council a Standard Security securing payment by them of Instalment Two and the Final Instalment; and also delivered the Council Lease in terms of which they immediately leased back Phases 2 and 3 of the Bearsden Academy Site back to the Council for a period of two years. On the Phase 2 Entry Date of 4 April 2008, Gladedale paid Instalment Two in exchange for vacant possession of Phase 2, a Deed of Restriction in respect of the Standard Security in so far as relating to Phase 2, and a Partial Renunciation of the Council Lease in respect of Phase 2.

The dispute

[7] The dispute between the parties concerns the Phase 3 Entry Date, payment of the Final Instalment and the giving to Gladedale of vacant possession of Phase 3. The Council make the following averments in Article 6 of Condescendence:

"On 1 December 2008 the defenders wrote to the pursuers regarding the Final Instalment of the Price. The letter referred to a meeting which was due to take place on 3 December 2008 at which the parties were 'to discuss [the defenders'] final payment for the site and the current poor trading conditions which are adversely affecting the housing market', and stated that the defenders' main purpose' was 'to explore how [they] might amend the current third tranche payment'. A copy of the defenders' letter of 1 December 2008 is produced and referred to for its terms which are held as incorporated herein brevitatis causa. At the meeting on 3 December 2008, the defenders indicated that they would have difficulty in paying the Final Instalment within the contractual time limit due to the downturn in the housing market and the difficulties the defenders would have in obtaining financing. At the said meeting, the defenders also indicated that their preference was that the Phase 3 Date of Entry should not be as early as 14 January 2009. At meetings between the parties on 24 February 2009 and 10 March 2009, the parties discussed varying the terms of Part 2 of the Schedule so that the Final Instalment would itself be payable in instalments and the Phase 3 Entry Date would be deferred. At the meeting on 24 February 2009, the defenders stated that they had no immediate plans to take occupancy of Phase 3. They indicated that they were looking at the possibility of turning the school into sheltered housing rather than flats, which would require planning permission. At the said meeting, the defenders proposed that they would make payment of the £14 million if the pursuers would write off the indexation element of the final instalment. At the said meeting, both Charles Church and Sandy McBride of the defenders stated that the defenders could not make payment of the Final Instalment. At the meeting on 10 March 2009 Mr Charles Church of the defenders stated that the defenders would not pay the sum of £14 million of plus the indexation provided for in terms of Part 2 of the Schedule. At the said meeting, the defenders stated that their board had rejected the proposal which had been put forward by the defenders at the meeting on 24 February, to make payment of the £14 million if the pursuers would write off the indexation element. The defenders proposed phased payments and stated that the best they could do would be to pay an amount of between £4 million and £9 million in May. Further, Mr Sandy McBride of the defenders stated that even if the pursuers successfully sued for the Final Instalment, the defenders would not be in a position to pay the full amount due unless this was paid over a period of two or three years. ..."

I was referred without objection to the letter of 1 December 2008 from Gladedale to the Council and to a record of the meeting of 24 February 2009.

[8] Certain options were suggested by Gladedale, including phased payments and a possibility of early payment of the full £14 million if the Council waived the indexation payment. The Council's position was that the full £14 million should be paid when due; and it was left that Gladedale would formally respond in writing with options for the Council to consider. Gladedale requested that the Council should formally write to them to inform them that the Morven Road site would not be vacated on the planned date. The Morven Road site was part of the Bearsden Academy Site.

[9] In Article 8 of Condescendence, the Council make the following further averments:

"As hereinbefore condescended upon, new school buildings are being constructed on the St Andrews Site, to which Bearsden Academy will be relocated. There have been delays in the construction of the new school buildings. In light of those delays, which have impacted upon the relocation of Bearsden Academy to the St Andrews Site, the pursuers were content to discuss deferring the Phase 3 Entry Date. On 31 March 2009, the defenders sent to the pursuers a formal proposal to pay the Final Instalment in three tranches. A copy of the defenders' letter of 31 March 2009 is produced and referred to for its terms which are held as incorporated herein brevitatis causa. Further correspondence and discussions took place between the parties, but no agreement was reached to vary the terms of Part 2 of the Schedule."

I was referred to the letter of 31 March 2009 from Gladedale to the Council. Attached to it was a proposal for payment by Gladedale of £14 million in four instalments, beginning with a payment of £8 million in May 2009 followed by payments of £2 million each in October 2009, March 2010 and May 2010, all this expressly on the assumption that indexation provided for in the contract would no longer apply.

[10] The Council did not seek to treat Gladedale as in (anticipatory) repudiatory breach so as to entitle them to bring the Council/Gladedale Agreement to an end. Indeed, it is their case that that Agreement remains in effect, with each party remaining bound to perform their obligations thereunder. The Council contend, in Article 8 of Condescendence, that, no notice of any earlier date having been given by them, the Phase 3 Entry Date was 3 May 2009 (this is not in dispute between the parties). Gladedale failed to pay, or to tender payment of, the Final Instalment on that date. That was a material breach of contract by Gladedale, relieving the Council of their obligation under Clause 3.7 to give Gladedale vacant possession of Phase 3 (together with the Discharge of the Standard Security and the Renunciation of the Lease) on that date. But they did not accept that breach as entitling them to rescind the contract. They contend that Council/Gladedale Agreement remains alive for performance; and they now seek to enforce it.

[11] Gladedale, for their part, contend that by not giving vacant possession of Phase 3 (and delivering the Discharge and the Renunciation) on that date - and indeed by their inability to give vacant possession on that date - the Council themselves were in material breach of contract which they (Gladedale) have accepted as bringing the contract to an end. On 5 May 2009, they wrote to the Council purporting to rescind the Agreement between them.

[12] The Council do not accept that they were in breach by not giving or being able to give vacant possession on that date. Nor, even if they were in breach in that respect, do they accept that that breach was a material breach entitling Gladedale to rescind. The Council say that it was Gladedale who were in breach on 3 May 2009 by failing to tender payment and, for what it is worth, by purporting to rescind the contract on 5 May 2009. However, as I have already made clear, the Council's position is that although Gladedale were in material breach of contract, they have not accepted that breach as bringing the Agreement to an end; and the Agreement remains alive.

[13] In terms of the first conclusion in this action, the Council seeks declarator that Gladedale are bound to implement the Tripartite Agreement by making payment to them of the sum of £18,906,178 (that being the balance of the Price and the Index-Linked Payments which together constitute the Final Instalment) together with interest thereon at a rate of 4% above the Bank of Scotland base rate, in exchange for which the Council are to comply with their obligations to give vacant possession (and deliver the Discharge and the Renunciation). They also conclude, secondly, for payment of that sum and, thirdly, for payment of a further sum of £78,360 (with which I am not presently concerned). Gladedale resist this on the ground that the Council/Gladedale Agreement has come to an end, having been rescinded by them on 5 May 2009 in light of the Council's material breach thereof.

[14] Before dealing with the arguments presented by the parties at Debate, I should set out briefly certain further averments which are relevant to the issues between the parties. First, I should refer to averments by the Council as to the difficulties that arose in respect of giving vacant possession to Gladedale on the Phase 3 Entry Date. The Council say that after they had entered into the Tripartite Agreement, they entered into a PFI contract with Inspired Education (East Dunbartonshire) Ltd ("InspirED") in terms of which InspirED was to procure the construction of various school buildings, including new buildings for the Bearsden Academy on the St Andrews Site. Under this agreement, the Target Service Availability Date for the new Bearsden Academy buildings was 6 April 2009. That was the date upon which, all things being equal, the Council could commence occupation of the new Bearsden Academy buildings and remove from the old Bearsden Academy Site. In 2008 the Council became aware that the timescale for completion of the new Bearsden Academy buildings might be delayed. In about February 2009 it became apparent to the Council that the new Bearsden Academy buildings would not be completed by 6 April 2009 (or even by 3 May 2009, the Phase 3 Entry Date under the Council/Gladedale Agreement). In June 2009, significantly after the Phase 3 Entry Date, the Council were given a revised completion date for the new Bearsden Academy buildings of August 2009. The Council say that it was not within their control to bring forward the date of completion of the new Bearsden Academy buildings. Once it became apparent that the new school buildings would not be ready before the Phase 3 Entry Date, it would have been possible for them to have arranged temporary school facilities, and thereby be in a position to give vacant possession of the Bearsden Academy Site to Gladedale, at a cost to them of approximately £1 million. However, having regard to a number of factors they did not do so. Those factors included the Target Service Availability Date of 6 April 2009 to which they were working until a late stage, the continuing uncertainty about when the new school buildings would be completed, the cost of arranging temporary schooling facilities, the reluctance to interrupt important school exams scheduled for May and June and - and this is of importance for the present dispute - the fact that Gladedale "had unequivocally represented to [them] that they were not in a position to make payment of the Final Instalment". They say that at the meetings of 24 February 2009 and 10 March 2009, to which I have already referred, Gladedale made "unequivocal representations ... that they would not make payment of the Final Instalment." At no time were those representations withdrawn. The Council believed them to be true. Those representations justified the Council's belief that Gladedale would not pay the Final Instalment. In reliance upon that, they refrained from moving the school pupils and staff into temporary accommodation or making other arrangements to enable them to give Gladedale vacant possession on 3 May 2009. Had those representations not been made, they would have put in place their business continuity plan to ensure that vacant possession of Phase 3 was provided on the Phase 3 Entry Date. The Council, they say, will suffer substantial prejudice if, contrary to those repeated representations, Gladedale are now permitted to found upon the fact that they, the Council, did not give vacant possession of Phase 3 as giving them a right to rescind.

[15] Gladedale deny that they made any such representations. They say that they would in fact have been able to make payment to the Council of the Final Instalment on the due date had the Council themselves been able to fulfil their obligations under the Agreement and give vacant possession of Phase 3. They focus on correspondence which took place just before the Phase 3 Entry Date of 3 May 2009. That date fell on a Sunday. Gladedale aver that, on 29 April 2009, their solicitors sent drafts of the Discharge and Renunciation to the Council's solicitors for revisal. Those were the documents which the Council required to deliver to Gladedale, along with vacant possession, in exchange for payment by Gladedale of the Final Instalment. The Council's solicitors returned the drafts with some revisals by email dated 1 May 2009, stating that there was no point in having the documents engrossed "until our respective clients have concluded their discussions". Gladedale's solicitors replied by email that same day, stating that there was a clear contractual obligation on the Council to provide vacant possession by 3 May 2009, and asking them to "let me know once the drafts have been engrossed and executed". However, the Council's solicitors refused to confirm prior to 3 May 2009 that the renunciation of the lease and the discharge of the standard security had been engrossed and that vacant possession would be granted. They were therefore, say Gladedale, in actual breach of their obligations under Clause 3.7. The Council do not dispute the terms of the emails of 29 April and 1 May 2009.

Submissions

[16] The matter came before the court for a Debate, at which Gladedale sought to have the action dismissed as irrelevant and the Council sought decree on the ground that the defences were irrelevant. There was little dispute between the parties as to the essential facts, though it was accepted that on certain issues - such as, for example, any representations made by Gladedale and the Council's alleged reliance on them, and the ability of Gladedale to raise the money by the Phase 3 Completion Date - evidence might need to be led if they became relevant.

[17] For Gladedale, Mr Lake, QC submitted that the Council's claim was irrelevant and fell to be dismissed. The Council's averments did not show that Gladedale were in repudiatory breach of contract. But even if they did, that repudiation was not accepted by the Council. That was common ground. In those circumstances, the contract remained alive for the benefit of both parties: see Fercometal Sarl v. Mediterranean Shipping Co. SA [1989] 1 AC 788, Suisse Atlantique Societe D'Armement Maritime SA v. NV Rotterdamsche Colen Centrale [1967] AC 361, especially at 419 per Lord Upjohn; and see also Gloag, Contract (2^nd ed) at pp559-600. The Council remained bound to perform their part of the Agreement. In particular, they remained bound in terms of Clause 3.7.1 and 3.7.2 to give Gladedale vacant possession of Phase 3 on the Phase 3 Entry Date of 3 May 2009 and at the same time to deliver to Gladedale a Discharge of the Gladedale Standard Security and a Renunciation of the Council Lease, both duly executed by the Council in a Self Proving Manner. They did not do this and were therefore themselves in breach of their obligations under the Agreement as at that date. That breach was a material breach. The giving of vacant possession was a key obligation under the Agreement. The Bearsden Academy Site was being purchased for the purpose of property development. Vacant possession was critical. As to whether timing was critical, this turned on the construction of the contract as a whole. The old law, exemplified in cases such as Visionhire Ltd. v. Britel Fund Trustees Ltd. 1991 SLT 883, to the effect that, absent express provision or clear implication to the contrary, there was a general presumption against time being of the essence, should no longer be followed. Those cases were decided many years before the current approach to construction was laid down in Investors Compensation Scheme Ltd. v. West Bromwich Building Society [1998] 1 WLR 896. In that case Lord Hoffman made it clear (at p.912G) that almost all "the old intellectual baggage of 'legal' interpretation" had been discarded; and see also Credential Bath Street Ltd v. Venture Investment Placement Ltd (unreported) 31 December 2007, [2007] CSOH 208) at paragraph [38]. Mr Lake also referred to Simmers v. Innes 2008 SC (HL) 137, in particular at paras [18] and [23]. The proper approach was to look at the contract as a whole, without "throwing into the mix" the fact that time is generally not of the essence in a commercial contract.

[18] The stipulation as to time in respect of the Phase 3 Entry Date was not merely a stipulation as to time for payment. It was a long stop date for entry: see Clause 1.2.14 which provided that the Phase 3 Entry Date "shall be no later than" 3 May 2009. Clause 2.4 made the time for payment of Instalment One of the essence of the contract; and Clause 2.6 made it clear that the time for payment of all the Instalments was of the essence. It was likely that the parties intended the counterpart of the payment obligation - the giving of vacant possession and the delivery of the Discharge and Renunciation - also to be of the essence. Further, the Final Instalment was the aggregate of £14 million and the Index Linked Sums calculated on all three Instalments. That latter component was linked to interest on those Instalments from a date in 2006 and/or the increase in the Halifax/Bank of Scotland Plc House Price Index from 2006 to the date when the relevant instalment was actually paid. Any delay in the Phase 3 Entry Date would have the effect of increasing that sum. The parties cannot have intended that, by delaying giving vacant possession and delivering the Discharge and Renunciation, the Council should be better off at the expense of Gladedale. 3 May 2009 was the final date for Phase 3 Entry. By failing to give vacant possession on 3 May 2009, and by failing to give the Discharge and Renunciation by that date, the Council was in material breach of contract, or in breach of a material term, and Gladedale were entitled to accept that breach as bringing the contract to an end. They did this by their letter of 5 May 2009.

[19] The Council sought to argue that they were not in breach on 3 May 2009 because Gladedale themselves did not tender payment. The Council apparently relied on the doctrine of mutuality or retention - their argument was that they were entitled to withhold performance until Gladedale were in a position to perform. Mr Lake referred to the classic statement of the principle in Turnbull v. McLean & Co. (1874) 1 R 730 at 737-8, recently considered by the Supreme Court in Inveresk Plc v. Tullis Russell Papermakers Ltd. 2010 SLT 941. The Council's argument was unfounded. Gladedale had never intimated that they could not or would not pay on the Phase 3 Entry Date. Nor could the Council rely upon Gladedale' failure to tender payment on 3 May 2009. Gladedale' obligation was to tender payment in exchange for vacant possession and delivery to them of the Discharge and Renunciation. The Council made it clear on 1 May 2009 that they were not in a position to deliver the Discharge and Renunciation. Nor, as at that date, were the Council in a position to give vacant possession. In those circumstances, whether as a matter of the proper construction of the Agreement or by operation of the principle of mutuality/retention, Gladedale were themselves under no obligation to tender payment. Accordingly, the Council could not justify their own conduct by reference to Gladedale's non-payment.

[20] Mr Lake posed the question: where does that leave the parties? He recognised that this was an unusual case. The Tripartite Agreement involved three parties. Further, under the Council/Gladedale Agreement, Gladedale had already acquired title to the Bearsden Academy Site. Some consideration, therefore, needed to be given to the consequences of Gladedale having brought the contract to an end as between themselves and the Council by reason of the Council's material breach of contract. Gladedale were not seeking selectively to unpick parts of the Agreement, nor to obtain and hang on to a windfall benefit. In those circumstances, if Gladedale were relieved from the obligation of paying the Final Instalment of the Price then it might be that the Council would have a claim for unjust enrichment. But no such claim was made in this action.

[21] Finally, Mr Lake addressed the question of personal bar raised by the Council in its pleadings. He referred me to the well known passage in the speech of the Lord Chancellor (Birkenhead) in Gatty v. Maclaine 1921 SC (HL) 1, 7. He asked, rhetorically, where was the representation which was relied upon? All that was averred by the Council was that Gladedale had represented that they would not or could not pay the Final Instalment. If that was right, that gave the Council a choice as to whether to affirm or rescind the contract. But there was no harsh result in law which required to be mitigated by the doctrine of personal bar. Reference was made to William Grant & Sons Ltd. v. Glen Catrine Bonded Warehouse Ltd. 2002 SLT 1419, in particular at paras [29], [33], [44] and [48]. It was to be noted that in Fercometal the question of estoppel was raised and rejected in similar circumstances; see at pp.805F-806E. There was no averment in this case that Gladedale had represented that they did not require vacant possession by 3 May 2009. Nor was there any averment that "but for" any alleged representation by Gladedale, the Council would have given vacant possession. It was clear from their own averments that they could not do so.

[22] For the Council, Mr Clark, QC said that neither side asserted that the contract had been brought to an end by acceptance of anticipatory breach. Gladedale's case was that there had been an actual material breach by the Council in failing to give vacant possession by 3 May 2009 in accordance with Clause 3.7.1. It was on this basis that Gladedale had purported to rescind the contract by letter of 5 May 2009. However Gladedale admitted that they had not tendered payment on that date. They were therefore in material breach. In those circumstances the Council were not in breach by failing to give vacant possession and to deliver the Discharge and the Renunciation. The alternative analysis was that as at 3 May 2009 each party was entitled to withhold performance of its obligations because of the threatened breach by the other. In those circumstances the contract remained on foot and it was open for the Council, when they offered vacant possession in the future, as they did now, to insist on performance by Gladedale.

[23] Mr Clark's main argument, however, was that any breach by the Council was not a material breach entitling Gladedale to rescind. He sought to put the matter in context. This was not a typical case, since the disposition of the Bearsden Academy Site had already been granted some two years earlier. This was not a deferred sale; ownership had passed to Gladedale on 3 May 2007. It was important to note that this was a Tripartite Agreement. The two parts of the Agreement should be read together. It was clear that in the St Andrews Site Agreement, Part 1 of the Schedule, the parties had considered in detail when and in what circumstances there was a right to rescind. That question was covered specifically in Clauses 1.6, 2.4, 2.5, 2.7 and 3. While the earlier provisions dealt with the consequences of late payment by the Council to the University, Clause 3 was important because it showed that the parties to that Part of the Agreement had focused attention on the question of whether the time for giving vacant possession of the St Andrews Site should also be "of the essence". Clause 3 made it clear that,

"Entry to, and vacant possession of the St Andrews Site ... in exchange for payment of the Initial Instalment and delivery of the duly executed Standard Security ... will be an essential condition of the bargain."

If vacant possession was not given by the University within fourteen days after the Completion Date, the Council were entitled to resile from the St Andrews Site Agreement. There was no equivalent provision in the Council/Gladedale Agreement. Clause 10 of Part 1 of the Schedule provided that time should be of the essence "with respect to all timescales specified in this Part of the Schedule", but again, there was no equivalent in Part 2. It was, however, clear from Part 2 of the Schedule that the parties had also directed their attention to when they wanted to make time of the essence. He referred in particular to Clauses 2.4 and 3.9. But they had not made the time for giving vacant possession of Phase 3 of the essence.

[24] In answer to the point made by Mr Lake about the Index Linked part of the Final Instalment, he accepted that as a matter of construction delay would be likely to lead to the Council recovering a greater sum. But the point did not go anywhere since, in such a case, where the failure to pay on the Phase 3 Entry Date was the result of a breach of contract by the Council in failing to give vacant possession, then the Council would be liable in damages for any extra sum which Gladedale had to pay by virtue of the Index Linked provision. That point, therefore, did not assist Gladedale. Indeed, the Index Linked provisions assisted the Council's construction. The index linking was by reference to a starting date of 1 May 2006, a date just over one year before the due date for payment of Instalment One. The Index Linked Sum on Instalment One and Instalment Two was to be included within the Final Instalment. If Gladedale were correct in their argument that they were entitled to rescind in the circumstances of this case, it would mean that they were relieved from their obligation to pay the Index Linked sums already accrued due on those earlier Instalments. The parties could not have intended this.

[25] The dispute here concerned the Final Instalment due to be paid on the Phase 3 Entry Date. By that time, the first and second Instalments had been paid and title had passed to Gladedale. The Council held a Standard Security securing payment by Gladedale of the Final Instalment. The Council remained in possession of Phase 3 of the Bearsden Academy Site by virtue of the Council Lease, restricted, by that stage, by the Deed of Restriction relating to Phase 2. That Lease was for 2 years from 3 May 2007, continuing from month to month thereafter until terminated by one month's prior notice given by either party. This suggested that the giving of vacant possession on 3 May 2009 was not of the essence, of the contract since the parties contemplated that the lease might go on from month to month. The two year Lease came to an end on 3 May 2009, the Phase 3 Entry Date. Whether or not the Council voluntarily gave vacant possession of Phase 3 on that date, it was within the power of Gladedale to obtain vacant possession by serving a one month notice and bringing the Lease to an end.

[26] Mr Clark submitted that time for completion was not normally of the essence of a contract. He referred to Simmers v. Innes at paras [18] and [23]. This was not strictly a completion case, but, even if it was, time would not normally be of the essence. He referred also to Gretton & Reid, Conveyancing (3^rd ed.) at paras 5-04 to 5-09. In a case where entry has been taken before settlement, it was "probably the law that the buyer can rescind only if restitutio in integrum remains possible". Restitutio was impossible here, since houses had been built upon part of the land conveyed to Gladedale. Mr Clark recognised that there was no pleading to that effect; he was therefore not taking the restitutio point further at this stage, but if the court was against him on his main point, that would be a matter for further pleading and proof. He referred also to a number of other cases in support of the proposition that time was not normally of the essence. These were: Burns v. Garscadden (1900) 8 SLT 321; Rodger (Builders) Ltd v. Fawdry 1950 SC 483 (citing a passage from the Opinion of the Lord Ordinary at p.492, which was not reclaimed); and Raineri v. Miles [1981] AC 1050 at 1087, 1093. That applied in the present case and was fortified by the structure of the agreement in terms of which Gladedale had already been given title to the subjects. In the usual case the counterpart to payment was giving title, but this had already been performed some 2 years earlier. If one was looking for further counterparts of the payment obligation, they were to be found in Clause 3.7.

[27] In the context of the argument about mutuality, Mr Clark referred me to Forster v. Ferguson & Forster, Macfie & Alexander 2010 SLT 867 at paras.[9]-[10] and [15]. A party to a mutual contract cannot demand fulfilment of the obligations in which he is a creditor unless he has performed, or is prepared to perform, the obligation which he is himself undertaking, and in which he is the debtor: ibid para.[15] (at p.874L). Applying that principle, the obligation on the Council to give up the Standard Security and renounce the lease did not arise for performance, since Gladedale themselves did not tender performance. Neither party was therefore in breach. In order for Gladedale to be entitled to complain about the Council's inability to perform by giving vacant possession, Gladedale must themselves show that they were willing to perform. It was questionable whether Gladedale ever tendered performance. It was also questionable whether Gladedale were able to raise the money, but if that was critical it could only be decided at proof.

[28] Turning to the question of personal bar, Mr Clark also referred both to Gatty v. Maclaine and to Fercometal. Fercometal made it clear that an unaccepted anticipatory breach might give rise to arguments about estoppel or personal bar. In this case, Gladedale said, in effect, that they were not going to take possession on 3 May 2009. That gave rise to an implied representation that the Council need not give vacant possession on that date. The Council's case was that they relied on that in not making alternative arrangements which, had they made them, would have meant that they could have given vacant possession on 3 May 2009.

Discussion

[29] The arguments in this case have raised a number of interesting questions, in particular on the question of anticipatory breach and on the scope for the operation the principle of mutuality or retention when such a breach is not accepted. In particular, it raises the question of whether, if the innocent party does not accept the anticipatory repudiation but elects to affirm the contract, he may nonetheless withhold performance of his obligations until such time as the guilty party indicates that he is once again prepared to perform his obligations. A similar question was, as I understand it, decided in the negative in English law in Fercometal, in which an argument to this effect, founding upon the decision of the Court of Appeal in Braithwaite v. Foreign Hardwood Co [1905] 2 KB 543, was rejected. In Scotland, the right of the innocent party to withhold performance notwithstanding his affirmation of the contract, would seem capable of being justified on grounds of mutuality: see Turnbull v. Maclaine & Co, Forster v. Ferguson & Forster and Inveresk Plc v. Tullis Russell Papermakers Ltd. I have come to the conclusion, however, that this case can be decided without the necessity of undertaking a detailed analysis of this part of the law of contract. The short answer to Gladedale's attack on the relevancy of the Council's case lies, so it seems to me, in the proper construction of the contract between the parties.

[30] The issue between the parties is whether, as between them, the Agreement remains alive for performance. I was told, though there is no pleading to this effect and the point is therefore only of passing interest, that the Council offered vacant possession of Phase 3 on 23 June 2009, nearly two months after the Phase 3 Entry Date. So if the contract remains alive, the Council's case is that they are now ready and willing to perform their part and demand performance from Gladedale. Of course, if that is not accepted as a matter of fact, there will require to be further procedure, no doubt involving amendment of the pleadings and the leading of evidence at a proof. I refer to it at this stage simply to show that the question at issue between the parties is a live question. All depends on whether the contract is still on foot or whether, as Gladedale contend, it has been brought to an end by their acceptance of what they seek to classify as the Council's material breach of contract in failing to give vacant possession, and in failing to deliver the Discharge and the Renunciation, on 3 May 2009. That in turn depends upon whether, as a matter of construction, the obligation on the part of the Council to give vacant possession and deliver those documents on that date is an essential term on the contract or, to put it another way, whether in relation to these obligations, time for performance by the Council was "of the essence".

[31] There is a considerable body of authority to the effect that in a mercantile contract, and in particular in a contract for the sale of heritable property, time for completion is not normally regarded as of the essence of the contract. This is apparent from the decisions in Visionhire v. Britel Fund Trustees Ltd., Simmers v. Innes, Burns v. Garscadden, Rodger (Builders) Ltd. v. Fawdry and Raineri v. Stickney. In Visionhire the point at issue was whether the time for triggering a rent review clause was of the essence. Burns v. Garscadden and Rodger (Builders) Ltd. v. Fawdry both concerned payment of the price. Simmers v Innes concerned the giving of notice in respect of an option to purchase. None of these, therefore, are concerned with the precise circumstances of the present case, which is about time for the giving of vacant possession on the part of the vendor. But the clear effect of the statements of principle in the judgments in such cases is that, in the ordinary case, absent particular indications to the contrary, time is not of the essence. In Raineri v. Miles the question did arise in respect of the delay in completion by the vendor, a situation more directly applicable to the present dispute, and the relevance of English authorities to this question was made clear both by the First Division in Visionhire and by the House of Lords in Simmers. In my opinion it is going too far to say, as Mr Lake submitted, that such a presumption is part of the old intellectual baggage of interpretation to be discarded in light of the approach to construction identified in the speech of Lord Hoffman in Investors Compensation Scheme Ltd v. West Bromwich Building Society. It has often been said, though the accuracy of this has been questioned, that the principles of construction laid down in Investors Compensation Scheme were by no means new, founding as they did upon principles identified in cases such as Prenn v. Simmonds [1971] 1 WLR 1381. But whether this is so or not, the presumption that time is not of the essence has been affirmed very recently in Simmers. To that extent at least the old baggage appears still to be of relevance.

[32] It is, however, only a presumption; and that presumption gives way to any contra-indication in the contract, whether by express provision or by inference from the contract construed as a whole against the background of the surrounding circumstances. The contract in the present case is unusual in many respects. First, it is a Tripartite Agreement, between three parties, containing, in effect, two separate but related contracts for the sale and purchase of heritable property. They are clearly linked, both in practical terms, since the release to the Council of the St Andrews Site was a necessary part of their ability to sell the Bearsden Academy Site to Gladedale for development and, once certain building works had been carried out, to re-locate the Bearsden Academy itself to the St Andrews Site and thereby give vacant possession of the existing Bearsden Academy Site to Gladedale; and also, because many of the provisions of the two contracts, contained in Part 1 and Part 2 of the Schedule to the Tripartite Agreement, mirror each other. Thus, the payment dates under the two contracts are the same. The Initial Instalment in Part 1 of £6 million, the equivalent of Instalment One in Part 2, was payable on 3 May 2007. The Second Instalment in Part 1 of £5 million, equivalent to Instalment Two in Part 2, was payable on 4 April 2008. And the Third Instalment under Part 1, equivalent except in amount to the Final Instalment under Part 2, was payable on a date fixed, in effect, by reference to the Phase 3 Entry Date in Part 2. Further, both Parts 1 and 2 of the Schedule contained detailed stipulations as to time in certain circumstances being of the essence. Under Part 1, time for payment of each of the three Instalments is of the essence: see Clause 2.4 and 2.5. The position is the same under Part 2: see Clauses 2.4 and 2.6. And there is a further linkage in that Clause 2.8 of the Council/Gladedale Agreement makes it an essential condition that the Council will make payment promptly to the University under Part 1.

[33] So far as concerns entry, however, there is a difference between the terms of Parts 1 and 2. Clause 3 of Part 1 makes entry and the giving of vacant possession by the University an essential condition of the bargain between the University and the Council concerning the St Andrews Site. In Part 2, the giving of vacant possession subject to the Council Lease on the Date of Entry (3 May 2007) is likewise an essential condition of the bargain. But there is no stipulation that time for giving vacant possession to Gladedale at the Phase 3 Entry Date, 2 years later is of the essence of the contract. The absence of express provision to this effect, when the parties to both parts of the Tripartite Agreement have displayed an ability to say that time is of the essence when they mean to make it so, is, in my view, compelling.

[34] There is, so it seems to me, good reason for time not being of the essence in this respect. The sale of the St Andrews Site by the University to the Council is a sale with vacant possession on 3 May 2007, with the consideration being payable in three Instalments, the second and third of them being in the nature of deferred payments. It makes sense (though it would not be an inevitable or necessary part of any such agreement) for the parties to stipulate in that Agreement that the time (3 May 2007) for giving entry and giving vacant possession of the St Andrews Site should be of the essence. The Council, as purchasers of the St Andrews Site, wish to make progress in building new school premises on the site. Only by making progress at a suitable rate will they be able to give vacant possession to Gladedale of the Bearsden Academy Site. So far as concerns the Bearsden Academy Site, Gladedale acquire title in return for the payment of Instalment One on 3 May 2007. They have, as from that date, vacant possession subject to the Council Lease. There is good reason for making time for that initial transfer of title and possession of the essence of the agreement. Thereafter the giving of further vacant possession is phased, as the scope of the Lease is whittled down. The Council are given a lease of Phases 2 and 3. When Instalment Two is paid in April 2008, Phase 2 is released from the Council Lease and vacant possession of that part of the Bearsden Academy Site is given to Gladedale. They can commence development work on Phase 1 at any time from 3 May 2007 and on Phase 2 at any time from April 2008. Payment of the Final Instalment on a date intended to be no later than 3 May 2009 releases to Gladedale the remainder of the site (Phase 3). In return for payment of the Final Instalment, the Council renounce the remaining part of the Lease. But the obligations surrounding the payment of the Final Instalment must be seen in the context that by the time they are due to be performed, Gladedale have paid two Instalments of the price and, in return, have been given title to the whole of the Bearsden Academy Site as well as vacant possession of Phases 1 and 2.

[35] In those circumstances it would, I think, be surprising if the parties had intended that Gladedale should have a right to rescind in the event that the Council failed to give vacant possession and renounce the Lease on the Phase 3 Entry Date of 3 May 2009. That would be a drastic remedy, with uncertain consequences. Mr Lake frankly accepted that it was difficult to foresee precisely what the consequence of the rescission in those circumstances would be. Would it be rescission of the whole agreement, involving a transfer of title to the whole of the Bearsden Academy Site back to the Council, notwithstanding that Gladedale had by then carried out work on the site so as to make restitutio in integrum difficult if not impossible? Or would it be rescission only of that part of the Agreement which related to Phase 3, leaving Gladedale as owners of Phases 1 and 2 but without any further obligations of payment? I was not addressed on the question of whether the Instalments payable by Gladedale to the Council in respect of the Bearsden Academy Site represented an estimate of the value attributable to each of the three Phases, but this seems unlikely given that the first two Instalments match pound for pound the First and Second Instalments payable by the Council to the University in respect of the St Andrews Site under Part 1 of the Schedule. But unless the Instalments match the value of the Phases already transferred by the Council to Gladedale, a partial rescission of the contract would appear inequitable. It might be possible for that inequity to be addressed by some claim for unjust enrichment in the event that Gladedale had acquired part of the Bearsden Academy Site at an undervalue, but it is by no means clear that where, as here, the relations between the parties are regulated by contract, there is always room for the doctrine of unjust enrichment to apply: c.f. Dollar Land (Cumbernauld) Ltd. v. CIN Properties Ltd. 1998 SC 90, per Lord Hope at p.100.

[36] There is a further difficulty in the way of Gladedale's arguments on construction. The Council/Gladedale Agreement expressly contemplates the possibility of the Council Lease, occupation under which is the impediment to vacant possession being given, continuing month to month after 3 May 2009, subject to termination on one month's notice. This is important for two reasons. First, it suggests that the parties at least contemplated that vacant possession might not be given on 3 May 2009. That seems to me to be inconsistent with the parties having regarded vacant possession by 3 May 2009 as critical to the Agreement. Second, it points to the fact that the solution to the problem of not being given vacant possession on 3 May 2009 lies in Gladedale's own hands. If Gladedale wish to obtain vacant possession if the site, all they need do is to serve notice terminating that Lease. If, despite such a notice, the Council continue to delay, it is open to Gladedale to take steps to remove them. Why should one infer that the parties intended to confer on Gladedale a right of rescission in the case of a failure to give vacant possession by 3 May 2009 when the agreement itself provided a mechanism for them obtaining vacant possession within a month thereafter?

[37] Accordingly, I am firmly of the opinion that the obligation on the Council to give vacant possession on 3 May 2009 and to deliver the Discharge and Renunciation on that date are not essential terms of the contract. Time is not of the essence in respect of those obligations. It follows that even if the Council were in breach in failing to perform those obligations on that date, that breach was not a material breach entitling Gladedale to rescind the contract.

[38] It follows from my finding that any breach by the Council was not a material breach entitling Gladedale to rescind the Council/Gladedale Agreement that that Agreement remains alive for performance.

[39] In light of my decision that the Council were not in material breach on 3 May 2009, I do not need for present purposes to decide whether they were in breach at all. There is no counterclaim in the present action for damages. The question of breach, therefore, does not strictly arise. If it were to have become relevant, however, it seems to me that it would have been difficult to resolve at Debate. The Council's case that they were entitled to retain or withhold performance of their obligation to give vacant possession because of Gladedale's continuing anticipatory breach, their contention being that Gladedale made it clear throughout that they would not and could not pay on the due date, would require proof of the relevant facts. There are a number of complicating factors. One question would be whether the Council could have given vacant possession had they been obliged to. If not, the question would arise as to whether the doctrine of mutuality can be invoked by a party who, far from voluntarily withholding performance of his obligations because the other party was in default, in fact cannot perform his obligations. Can mutuality be used as a defence in such circumstances? One might think not. But what if the Council's inability to perform on 3 May 2009 stemmed from a decision taken in light of a threatened breach by Gladedale at an earlier point in time? There might need to be an investigation into whether the conduct of Gladedale in late 2008, intimating potential difficulties in paying on the due date, was sufficient indication that they were not willing to perform so as to justify the Council in not taking the steps necessary to enable them to give vacant possession on 3 May 2009. And the question might arise as to whether the Council, faced with such a threatened breach, if it were established, was required to notify Gladedale that in light of that threatened breach they were withholding performance by not taking such steps. Equally, looking at the principle of mutuality from the point of view of Gladedale, who say that they were not obliged to tender payment because the Council were not ready and willing to perform their obligations, questions arise as to whether they could in fact have made payment on the due date, or whether they are seeking to avail themselves of the principle of mutuality in circumstances where they could not in fact have performed. These issues, or some of them, are potentially complex. It would be necessary, in my opinion, for the factual basis to be determined before they could be decided between the parties in this case

[40] Finally, I should say that on the averments in the Summons I am not persuaded that the Council have articulated a relevant case on personal bar. Had it been relevant to my decision, I would, however, have afforded them an opportunity to develop their case that Gladedale represented that they were not interested in taking vacant possession on 3 May 2009 and that, in those circumstances, they impliedly represented that the Council need not offer it. But I need say no more about this aspect at this stage.

Disposal

[41] Since I have held that the Council/Gladedale Agreement remains alive for performance, it seems to me that the Council should in principle be entitled to declarator in terms of the first conclusion. However, rather than pronounce declarator in those terms at this stage, I shall, as requested by both parties, put the case out By Order to hear any representations as to the precise interlocutor to be pronounced, and to consider whether there are any remaining issues to be resolved.