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Cite as: [2015] ScotCS CSOH_103
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OUTER HOUSE, COURT OF SESSION
[2015] CSOH 103
P930/14
OPINION OF LADY STACEY
In the petition
KENNEDY AND OTHERS
Petitioners;
for
Suspension and interdict
Petitioners: Logan; Campbell Smith LLP
Respondents: Dunlop; Gillespie MacAndrew LLP
31 July 2015
[1] In this proof the petitioners are Peter Norman Bingham Kennedy as an individual and as one of the trustees under a deed of trust registered in the Books of Council and Session 19 April 1994. The petitioners were owners of a site comprising 6.293 hectares at Doonholm, Alloway, Ayr. The respondents are Dickie & Moore Holdings Limited, a limited company which is a developer and house builder.
[2] In 2008 the petitioners agreed to sell the site to the respondents. The missives which were concluded in 2008 and varied, in a manner immaterial to the present case, in 2009, included a term whereby if the respondents wished to resile from the bargain they required to pay an “abort fee” to the petitioners. The respondents did resile, by letter dated 7 December 2009, and paid the abort fee. The bargain between the parties to buy and sell the site thereby came to an end.
[3] The parties entered into a Minute of Agreement dated 16 May 2011 and subsequent dates and registered in the Books of Council and Session on 7 June 2011. So far as relevant, the minute is in the following terms: –
“Whereas in pursuance of Missives concluded between DMH [the respondents] and the Sellers [the petitioners] dated 25 March 2008 and subsequent dates in connection with the purchase from the Sellers by DMH of 6.293 hectares of ground at Doonholm Alloway Ayr, DMH expended the sum of £165,397.10 sterling in professional fees as detailed in the Schedule annexed and subscribed as relative here to and whereas it has been agreed between the parties that in the event of the Sellers concluding unconditional… missives with a third party for the sale of the said subjects… during the shorter of the period when the Planning Consent obtained or to be obtained by DMH for the development of the said subjects remains extant and the period of five years from the date of these presents, as the case shall be, the Sellers will reimburse DMH the full amount of the said professional fees together with any further professional fees (up to a maximum of £10,000) incurred by DMH in obtaining such Planning Consent which reimbursement will take place within 10 days of the Sellers receiving payment of the price or the first instalment thereof in respect of the said subjects or part thereof;”
[4] The issue before the court is the meaning of that Minute of Agreement. The respondents have served charges on the petitioners for payment of £165,397.10. The petitioners deny liability to pay and seek suspension of the charges. There is no dispute between the parties that the petitioners concluded unconditional missives with a third party, Miller Homes Ltd (Miller Homes), within five years of the date of the agreement; nor is it disputed that the petitioners have received the first instalment of the purchase price. There is no dispute that the respondents did not obtain planning consent. The dispute is whether there is liability to pay when the respondents did not obtain planning consent.
[5] The petitioners argue that there is no planning consent obtained by the respondents; therefore the period during which any such consent is extant must be shorter than five years. Thus the sale of the site during the five years following the execution of the agreement does not trigger liability to pay. Their argument is that planning permission must be granted before any obligation to pay may exist. The respondents argue that there is no obligation on the respondents to obtain planning consent; the petitioners are obliged to pay if they sell to a third party within five years of the agreement; they did so; therefore the petitioners are obliged to pay.
Background
[6] Evidence was given orally and by affidavit by Mr Kennedy, Mr John Dickie, a director of the respondents, Mr Jamie Irvine, a director of Miller Homes, Mr Andrew Lindsay, a surveyor, and the solicitors for the parties, Sir Adrian Shinwell (for the petitioners) and Mr Harris Muir (for the respondents). Mr Tom Donald, the petitioners’ land agent was mentioned in evidence. He died in 2011 and Mr George Gourlay took over as land agent. There was little if any dispute between the parties about the underlying facts. Both counsel accepted that each witness was credible as they were doing their best to be truthful. The issue between the parties arises on the proper interpretation of the Minute of Agreement.
[7] The respondents wanted to develop the site but having concluded missives in 2008 found that their bank was not prepared to lend in 2009. Therefore they resiled from the missives. They had spent money in obtaining reports on the site and had made an application for planning permission, paying the requisite fee to the local authority to do so. They had obtained from the local authority a “minded to grant” decision which meant that in the Local Development Plan the site was zoned for new housing, and that subject to an agreement under section 75 of the Town and Country Planning (Scotland) Act 1997 being signed, and other conditions being accepted, planning permission would be granted. The respondents were disappointed at the lack of funds from the bank and wished to consider if there was some development which they could carry out at this site. They were aware that the local authority could decide to reallocate to another site the provision for new housing if the development did not go ahead. They knew that that would also affect the petitioners, as the value of the land would diminish. Further, the company had expended approximately £165,000 which it would be lost if they did not go ahead with any development at that site.
[8] Consequently, Mr Dickie, director of the respondents, spoke directly to Mr Kennedy in or around March 2010 indicating that it would be to the advantage of both of them if the development or another development of new housing on that site could go ahead. Mr Dickie was hopeful that he might be able to fund a different development from that first proposed. That did not prove possible. He contacted other house builders with a view to their developing the site. At one stage he thought that his company might succeed in developing a sub division of the site if another developer bought it from the petitioners. The respondents had appointed a team of advisers to deal with planning and architectural matters, landscape design and ecology, and engineering services, including site investigation reports. In his opinion the work which his company had carried out could be of use to another company; he described it as work which de-risked the site.
[9] Mr Dickie was keen to recover as much of the money his company had spent as possible. He instructed his solicitor to approach the petitioners’ solicitor with a view to agreement being reached that if the petitioners sold the site to someone else for development, the respondents would be paid approximately £194,576.59 by the petitioners.
[10] Mr Muir, solicitor acting for the respondents, sent a first draft of an agreement (7/2 of process) to Sir Adrian Shinwell, solicitor to the petitioners, by letter dated 27 May 2010. The draft was, so far as relevant, in the following terms:-
“WHEREAS in pursuance of Missives concluded between DMH [the respondents] and the Sellers [the petitioners] dated 25th of March 2009… in connection with the purchase from the Sellers by DMH of 6.293 hectares… DMH expended the sum of £194,576.59 in professional fees as detailed in the schedule annexed and subscribed as relative hereto AND WHEREAS it has been agreed between the parties that in the event of the Sellers concluding missives with a third party for the sale of the subjects… within a period of 10 years from the date hereof, the Sellers will reimburse DMH the full amount of the said professional fees which reimbursement will take place within 10 days of the Sellers receiving payment of the price or the first instalment thereof in respect of the said subjects…”
The schedule was in the following terms:
“Doonholm
Professional Fees
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The sum involved reduced for reasons which are not material to this case, to approximately £165,000. The solicitor’s fees were deleted. It is not in dispute that the sum due, if any, is that in the agreement.) His covering letter (7/1 of process) was to the effect that he had received instructions from Mr Dickie and had drafted the agreement.
[11] Mr Dickie and Mr Donald met in the summer of 2010 and Mr Dickie wrote to Mr Donald on 30 August 2010 (6/25 of process) as follows:-
“Planning approval process to be completed. This will involve the completion of the section 75 agreement. Minute of Agreement requires to be completed, ensuring that if the land is sold to another party then Dickie & Moore shall be reimbursed for their costs. Please note that a draft agreement is with Sir Adrian Shinwell”.
[12] Sir Adrian wrote to Mr Kennedy and Mr Donald on 28 September 2010 summarising Mr Kennedy’s instructions to him. He stated, so far as relevant:-
“Peter has decided to go to stage 1 (planning) as detailed in John Dickie’s email of 30 August. This is however, subject to Tom confirming that the section 75 agreement relates only to the requirement of so called affordable housing…..
Peter’s thinking is that completing the planning process and obtaining the Consent protects the option of redevelopment within the lifetime of the consent and yet does not commit him and the Doonholm Trustees to anything at all. …
That said, Dickie & Moore will only incur the further expense of obtaining the consent if Peter and the Trustees undertake to reimburse Dickie & Moore for their costs. I do indeed have a draft of the Minute of Agreement…
One other issue in relation to the Minute of Agreement and it relates to the question of timing. Dickie & Moore had proposed that, if Peter and the Trustees sell the land within a period of ten years then they would reimburse Dickie & Moore according to the agreed list of costs. Ten years….is far too long …and the period should equate with the time limit on the consent itself- this may be five years…”
[13] Mr Muir made a file note on 5 October 2010 (7/3 of process), so far as relevant in the following terms: –
“telephone conversation with Adrian Shinwell on 5 October.… Adrian had written to him [Mr Kennedy] and to Tom Donald suggesting that Tom Donald go back to John Dickie with the following proposal: –
Dickie & Moore proceed to stage 1 and obtain the planning consent. This is on the assumption that the section 75 agreement can be signed and agreed and only relates to social housing.
In exchange for this Peter Kennedy would sign the agreement regarding the timing of fees but that subject to 2.1 (sic) the agreement and obligation would only exist for as long as the planning permission was extant i.e. five years unless renewed and the fees to be paid would not include solicitors fees…
If the foregoing is agreed… Adrian suggests that we sit down have a chat and see what may be possible and what may not be possible.”
The word “five” was scored out in pencil and the figure “3” was substituted. No agreement was achieved at that time.
[14] Mr Dickie wrote to Mr Kennedy on 22 March 2011 (6/28 of process) at which time he was still hopeful that his company could develop the site in some fashion. He stated:
“As previously discussed we are more than happy to progress the consent but with the proviso that our investment to date is protected. I would therefore seek an agreement with you that if the land is sold to another party our costs are reimbursed at that point. ….
Notwithstanding stage 1, we are keen to continue negotiations regarding purchase of the land. If we agree a land purchase the former Minute of Agreement would be waived. ..
In summary I would propose a two stage approach:
Stage 1
- Conclude Minute of Agreement
- Secure Planning Consent.
Stage 2.
- Dickie & Moore to submit revised offer.
- If revised offer is unacceptable the land may be sold to another and fee costs reimbursed per Minute of Agreement.
….”
[15] Sir Adrian wrote to Mr Kennedy on 28 March 2011(6/29 of process) stating :-
“My own feeling is that this transaction is not going anywhere or, if it does, then there will be an alternative developer. Dickie & Moore have, however made clear that they will not be reverting with a proposal unless ‘the claw back arrangement’ is in place first…..
Fundamentally the issue remains as it was before- if we wish Dickie & Moore Holdings Ltd to proceed to obtain the planning consent (which as I understand it would then be in place for five years) we need to enter into the claw back arrangement”.
[16] The next day Sir Adrian wrote to Mr Muir stating:-
“I now have instructions from Peter Kennedy to the effect that he will wish your clients to proceed to secure the planning consent.
I am to revise your Minute of Agreement and hope to be able to revert to you in that regard very shortly”.
He then wrote on 30 March 2011 (7/5 of process) to Mr Muir enclosing the draft agreement revised as follows:-
- The date of the missives was corrected.
- The sum due was revised downwards to £165,397.10.
- The clause concerning conclusion of missives with a third party was revised to require unconditional missives.
- The provision “within a period of ten years from the date hereof” was deleted and for it substituted
‘during the period when the Planning Consent obtained or to be obtained by DMH for the development of the subjects remains extant’.
That draft has the words ‘OR 5 YEARS !’ in Mr Muir’s writing on it; he could not recall when he had written these words but said that he would have done so because he understood that the liability to pay would subsist for five years from the date of the agreement.
[17] Mr Muir sent a fax to his client (7/7 of process) stating that the sum had been revised downwards, and that it was to subsist only for the duration of planning permission, not for 10 years. He sought instructions. On 6 April 2011 Mr Muir wrote to Sir Adrian (7/8 of process) advising that Mr Dickie wanted to be paid a further sum up to £10,000 in respect of further costs that may be incurred in getting planning consent. Mr Harris enclosed a draft (7/10/2 of process) in which he had inserted a clause providing for payment of costs up to £10,000 incurred by the respondents in obtaining a planning consent. In discussion between the two solicitors the word “costs” was discussed and the phrase “vouched professional fees” was substituted. It is not disputed that the sum of £10,000 was never sought by the Respondents. They took the view that it was due if and only if they incurred the fees in obtaining planning permission.
[18] Sir Adrian wrote to Mr Muir on 8 April 2011 returning the draft, marked “x’d [revised] subject to client approval”. That draft so far as relevant was as follows:-
“…AND WHEREAS it has been agreed between the parties that in the event of the Sellers concluding unconditional missives…with a third party for the sale of the subjects …during the period when the Planning Consent obtained or to be obtained by DMH for the development of the said subjects remains extant, the Sellers will reimburse DMH the full amount of the said professional fees together with any costs (up to a maximum of £10,000) incurred by DMH in obtaining such Planning Consent which reimbursement will take place within ten days of the Sellers receiving payment of the price…”
There are two pen strokes between “extant” and “the” and between “the”and “said” which Mr Muir said he made indicating that another revisal would be made.
[19] On 26 April 2011 Sir Adrian wrote to Mr Muir (7/13 of process) stating the following:
“… Peter Kennedy has approved the draft Minute of Agreement which accompanied your letter of 12 April with one provision – that provision constitutes an enquiry as to the “life expectancy” of the reports/surveys reflected in the Schedule to the draft Agreement. In the absence of Tom Donald, Peter has proposed a 15% per annum breakdown of the professional fees starting, I suppose one year after the date upon which the Planning Consent is granted.
I shall be grateful if you will consult with John Dickie in relation to this single issue and then revert.”
[20] On 11 May 2011 Sir Adrian wrote to Mr Muir enclosing a draft further revised. That document incorporating two revisals, firstly the words “the shorter of” inserted between “during” and “the period” and the words “and the period of five years from the date of these presents, as the case shall be” after the words “remains extant”. Those revisals were accepted by Mr Muir who sent the engrossed deed by letter of 11 May to Sir Adrian for execution by the petitioners.
[21] Thus the first version of the deed amounted to an agreement that the petitioners would reimburse the respondents in the event of a sale being achieved in ten years; it was revised by deletion of the ten year period, and by providing that reimbursement would be made during the a period in which planning consent obtained or to be obtained by the respondents was extant; the next revisal provided for payment of up to £10000 in respect of further vouched professional fees incurred in obtaining planning permission; the last revisal introduced the five year provision and the provision that payment would be made if a sale was achieved in the shorter of two periods. While Mr Muir had been the originator of the five year proposal, he did not formally revise the deed so as to include it. The clause referring to it was inserted by Sir Adrian.
[22] Mr Dickie explained the course of events as far as he recalled them. He approached Mr Kennedy in March 2011. He knew his company could not go ahead with the originally proposed development but he still wanted to recover the money he had spent. He explained to Mr Kennedy that his company’s continuing involvement with the local authority meant that he could keep the planning consent “rolling” and he could try to introduce a new builder. In his affidavit evidence he stated that the advantage of keeping the consent rolling was that it would avoid a contribution towards a primary school being sought by the local authority. Such a contribution would in Mr Dickie’s experience have meant a deduction in the purchase price.
[23] Mr Kennedy’s evidence was that he understood that Mr Dickie was keen to protect his costs expended on the site. Mr Kennedy was advised by his land agent, Mr Donald, that it was important that the planning application went ahead so that the allocation for new housing by the local authority was maintained. Mr Kennedy told Mr Dickie that he would refer any agreement to his lawyer. He was reluctant to agree to cover costs expended by the respondents unless there was a benefit to the petitioners in doing so. He might have been inclined to agree to pay the costs if the respondents succeeding in getting planning permission. He thought that nothing should be paid to the respondents unless planning permission was obtained. He said that for a payment to be made to the respondents, two things had to happen; the respondents had to get planning permission, and unless the respondents were able to buy the site, the petitioners had to find another buyer. Mr Kennedy did not recall all the detail of all that had happened, nor all of the correspondence passing between him and his solicitor, nor all of the advice he was given, but was clear that he took advice from Sir Adrian and also from Mr Donald. While he did speak directly to Mr Dickie he made no agreements with him, instead explaining that he would refer to his lawyers. He was shown a numbers of letters and emails passing between himself and Mr Donald and Sir Adrian and confirmed they reflected his view of what had happened.
[24] Mr Irvine explained the involvement of Miller Homes. Missives for sale by the petitioners to Miller Homes were concluded in 2012. The company was approached by Mr Gourlay, land agent for the petitioners (in succession to Mr Donald,) in or around early 2012. Mr Gourlay explained that the respondents had been intended developers but they could not go ahead due to the down turn in the economy. Mr Irvine was interested, and examined the publicly available planning file in the local authority office. He instructed the company’s solicitor to put heads of terms to the petitioners’ solicitor on or around 20 April 2012.
[25] Sometime in May 2012 Mr Irvine had a conversation with Mr Dickie, whom he had known for some time as both are in the building industry. Mr Dickie made Mr Irvine aware of a “bank of information” which he had in relation to the proposed development. A meeting took place with Mr Irvine, Mr Dickie and Mr Euan Lawrence, planning consultant present. Mr Dickie explained the low density proposals for which his company had obtained committee approval. The site was of interest to Mr Irvine, but for a different development, of higher density housing. No documents were left with Mr Irvine. However, Mr Irvine did meet Mr Lawrence again and also Mr Lindsay of URS, consultants who had been engaged by Mr Dickie’s company and who had provided a report. Mr Irvine received a CD of documents from Mr Lindsay. The work done on behalf of the respondents included detailed drawings in relation to roads and drainage, and although these were made available to Miller Homes they were of no use because the Miller Homes proposals were for a different density of housing. URS were engaged by Miller Homes to prepare preliminary analyses of early design proposals; they were asked to tender for engineering work, but their tender was not accepted.
[26] In December 2013 Mr Kennedy met Mr Dickie and MrLawrence, who advised both the respondents and Miller Homes Ltd. Mr Kennedy knew that Miller Homes applied for planning permission quite separately from the application previously made by the respondents. He was surprised that Mr Lawrence advised both the respondents and Miller Homes Ltd. He was also surprised that documents referring to the site were passed by the respondents to Miller Homes Ltd without his knowledge.
[27] Mr Irvine’s position was that two documents were of some use to his company, being the site investigation report prepared by URS, and a topographic survey. No one ever offered to sell him these reports. His company had its own reports prepared in any event. However, Miller Homes did submit the URS report with its initial planning application. Mr Irvine frankly accepted he had no permission to do this. It was done due to pressure of time in the local authority timetable which had to be met. He had wrongly thought at one time, before giving evidence, that the company had replaced the report with a fresh one commissioned by them, but had checked and he accepted that had not happened. He stated that there is little reference to the report in the local authority planning officer’s report, and no comment from any consultee. Mr Irvine did not regard the fact that another builder had applied for planning permission as an advantage from a developers point of view; it could cause difficulty if the plans were different from that already proposed.
[28] Mr Lindsay is technical director with AECOM, formerly called URS. He had acted for Mr Dickie for several years, Mr Dickie being a director of various companies involved in house building. His firm was instructed in 2007 as civil and structural engineers for the site. They completed a stage 1 geo-environmental desk study, a full ground investigation report and an engineering appraisal. This comprised the majority of the technical work from an engineering perspective needed to allow development of the site. He supported the planning process by supplying necessary material to the planning consultants, Lawrence McPherson Associates. On Mr Dickie’s instructions, he emailed Mr Irvine and Mr Lawrence on 5 July 2012 (7/23 of process) summaries of all that had been done and outlining the status of “all technical deliverables”. Mr Lindsay explained that the work he had done included obtaining consent for drainage approval, for roads, and for foundations for a show house. While he accepted that a ground investigation report would have a shelf life of about four or five years, and that consents would require to be refreshed due to the passage of time, he believed that all designs, technical input and site appraisal information could be used to inform future designs and strategies.
[29] Mr Lindsay attended meetings with Mr Irvine and Mr Lawrence between October 2012 and March 2013. The purpose was to help Miller Homes understand what work had been done, and to establish what work they would do in their own appraisal. In accordance with normal practice in his profession, he did so at no cost to Miller Homes, in order to attempt to re-establish relations with the company which was going to develop the site. He carried out work instructed by Miller Homes during April 2013, for which his firm was paid, which included both preparation and updating of work on drainage, foundation zoning and earthworks. Mr Dickie was aware of this and raised no objection. Mr Lindsay’s firm tendered for work in October 2013 but their tender was not accepted. In his opinion the work carried out by him for Mr Dickie’s company was valuable to Miller Homes in that it would offer comfort to a new developer by reducing the extent of unknowns, and demonstrating that the site was technically deliverable and met the requirements of Regulators. Mr Lindsay’s evidence was not in dispute. It provided background information. I did not find that it was material in resolving the dispute between the parties.
[30] The solicitors for the parties drew up the Minute of Agreement. They revised it in the traditional manner by making revisals and sending the document back and fore between them. They did not involve their clients in drafting, but properly sought instructions when needed. The evidence they gave may therefore be relevant when construing the agreement. The wording is that of the solicitors, not the clients.
[31] Sir Adrian Shinwell acted as solicitor to the petitioners from about 1994, and for Mr Kennedy as an individual from about 1979. He was aware that the petitioners resolved to raise capital by sale of part of the Doonholm estate; to achieve the best value, they wanted to sell land for residential housing development. The site was identified as suitable. He explained his understanding that the local authority required to draw up a Local Development Plan in which they identify a housing supply target and allocate a range of sites expected to be effective during the lifetime of the plan. If the land so identified ceased to be effective then the allocation may be lost in favour of another site. In 2009 the site was identified by the local authority as having an allocation of housing.
[32] The respondents were introduced to the petitioners by Mr Donald, the petitioners’ land agent. The development proposed by them was attractive to the petitioners, and a price was agreed. Missives were concluded in 2008. In 2009 due to the down turn in the economy the respondents were unable to finance the development and resiled from the missives in December 2009. A sum of £20,000 was paid by the respondents to the petitioners in March 2010, in accordance with the missives which provided for such a payment in the event of the respondents resiling.
[33] Sir Adrian was aware that Mr Donald had told Mr Kennedy that the planning application made by the respondents could fall, and the allocation could be relocated. He also knew that Mr Dickie had told Mr Kennedy this. He knew that Mr Dickie had written to Mr Kennedy on 26 March 2010 (6/17 of process) referring to a meeting attended by Mr Kennedy, Mr Dickie them and Mr Lawrence, stating this:-
“Reverting to the question of securing a planning consent I would confirm that we have spent £184,626.59 and the attached schedule details these costs.
I would like to see these costs protected and should the land be sold to another, these costs would be reimbursed to us. This will require a legal agreement which I would propose is drafted by our solicitor for consideration by yourself”.
[34] The first proposal from Mr Muir, solicitor to the respondents was sent to Sir Adrian on 27 May 2010. A draft agreement was sent, providing that if the petitioners sold the site to a third party within ten years of the agreement the petitioners would reimburse the respondents for certain identified costs already incurred by the respondents. Sir Adrian could see no commercial benefit to the petitioners. He wrote to Mr Kennedy enclosing the draft agreement and expressing concern. He noted the petitioners were being asked to reimburse the respondents’ whole costs “on the basis that the relevant expenditure was required to take the transaction to the stage where obtaining Planning Permission was a distinct possibility”. He commented that some of the reports would have a life span and might turn out to be useless in any resale negotiation; an alternative purchaser might have to start from scratch to obtain planning permission; and solicitors’ fees should not be recoverable. He stated that the ten year period was far too long. Mr Kennedy’s reply to Sir Adrian (6/39 of process) gave no agreement to the proposal; he thought that “the concept should be that the amount payable should equate to the value of the various reports to a new purchaser”. He thought there might be justification if the respondents got full planning permission.
[35] Sir Adrian’s evidence was that Mr Kennedy had considered a provision whereby the sum to be reimbursed was written down at the rate of 15% per annum to reflect diminution in value of the reports over the years. Mr Kennedy discussed that with Mr Dickie who did not consent to it. Mr Kennedy was concerned that the respondents could obtain planning consent and then renew it for several years which would mean that the petitioners were obliged to reimburse for an uncertain period during which time any value the reports had would diminish. Therefore Sir Adrian inserted the five year provision, after discussion with his client and with Mr Muir, to provide a long stop date. He was certain that the five year provision was not an alternative to the period during which the planning permission was extant; rather it was a provision designed to limit exposure to five years even if the planning permission was extant for longer than that.
[36] Sir Adrian stated that the petitioners were only interested in “getting something for something” and had no interest in paying out money for nothing. While they understood that the respondents had incurred costs in preparation for development which they were unable to progress, that was not due to any action of the petitioners. It was only because the petitioners did have an interest in the allocation by the local authority and in the next stage of planning consent being granted that they entered the agreement with the respondents. They were prepared to reimburse the respondents (and pay further fees) if and only if the respondents obtained planning permission. There was no reason for the petitioners to pay the respondents if the respondents did nothing, and the petitioners succeeded in finding another purchaser.
[37] Mr Muir had acted for Mr Dickie and various companies in which Mr Dickie was a director for many years. He confirmed the history of the missives from which his client required to resile. The idea of the Minute of Agreement arose when the respondents were still hopeful that they might carry out some development there. Mr Dickie wanted to protect the money his company had spent. The company was still trying to get planning permission in 2010, and Mr Muir found the local authority slow to deal with the matter. He recalled from a file note a conversation he had with Sir Adrian on October 2010 when Sir Adrian said that he had no instructions to complete matters but would advise Mr Kennedy that the petitioners should sign the agreement only on the basis that the obligation would subsist for the period during which the planning permission was extant. In 2011 when Sir Adrian sent back his first revisal Mr Muir was not surprised to find that the ten year period was not acceptable. He appreciated that the revisal meant that the obligation to reimburse would subsist only during the period that planning permission remained extant, which he understood had recently been changed from five to three years, in respect of planning consent of this sort.
[38] As a consequence of the revisals, Mr Muir sought instructions by fax, on which he stated that the period would be only the duration of the planning permission, instead of being 10 years. He advised Mr Dickie that it should be five years, in order to protect the company. He wrote “OR 5 years !”on the draft. He was clear in his own mind that reimbursement was related only to a sale and was not conditional on planning consent being obtained. Mr Muir also got instructions to seek a further payment of up to £10,000 in relation to costs of obtaining planning permission. Mr Muir spoke to Sir Adrian on 11 May, and on that day Sir Adrian sent back the agreement with the revisals described above.
[39] Mr Muir received the revised draft. He thought that it reflected the agreement that he was instructed to achieve, that is that reimbursement would be due if a sale took place within the shorter of two periods: three years from the grant of planning permission or five years from the date of the agreement. He thought that the petitioners could tell from the agreement when they were free to sell without having to reimburse the respondents. The longest period would be five years. When a sale was achieved within five years, Mr Muir expected the petitioner to reimburse the agreed figures in the schedule, but not to pay the £10,000 expressly said to be in respect of costs incurred in obtaining planning permission. He and Mr Dickie understood that as planning permission had not been obtained by the respondents, that sum was not payable. Mr Muir knew that the grant of planning permission required a section 75 agreement to be signed by the petitioners as proprietors of the site. Thus the granting of planning permission depended not only on the local authority but on the petitioners. He was concerned to protect this client company against the possibility that it might not be granted.
Submissions
[40] Counsel for the petitioners submitted that in light of the case of Multi-Link Leisure Developments Ltd v North Lanarkshire Council 2010 (UKSC) 47, the correct way to determine the issue is to consider the contract embodied in the Minute of Agreement by looking at the minute as a whole, and attributing meaning to each of the words. He referred to the speech of Lord Hope of Craighead at paragraph 11:-
“Effect is to be given to every word, so far as possible, in the order in which they appear in the clause in question. Words should not be added which are not there, and words which are there should not be changed, taken out or moved from the place in the clause where they have been put by the parties.”
[41] Counsel argued that effect must be given to the words “the shorter of”. It is a comparative phrase and when read along with the phrase “as the case shall be” in the Minute of Agreement, it must be read as applicable to two discrete periods, being
- The continued existence of planning permission
- A five year period in which a sale takes place.
He argued that as planning permission was never obtained by the respondents, the period during which such planning permission was extant never started. Thus the period of five years, he argued, was not relevant. He argued it was obvious that the period of planning permission being extant was the shorter of the two periods.
[42] Counsel for the petitioners’ principal argument was that the Minute of Agreement is not ambiguous and that if meaning is given to all of the words there is only one interpretation which can be given to it. Counsel argued that the true construction of the contract between the parties was that the petitioners were due to pay to the respondents the sum set out if and only if the respondents obtained planning permission and the petitioners sold the site to a third party either within the lifetime of that planning permission, or within 5 years, whichever was shorter, of the date of the Minute of Agreement. If I was with him on that construction, then much of the evidence in the case was irrelevant.
[43] Counsel for the respondents argued that the Minute of Agreement was ambiguous and that the agreement should be construed in the way described in the case of Rainy Sky v Kookmin Bank plc [2011] 1 WLR 2900. He argued that potential different meanings could be taken from the words. He submitted that the correct construction was that the agreement contains a suspensive condition which is that the site must be sold to a third party. That suspensive condition is subject to two alternative and independent time limits. The first time limit is the period during which planning consent obtained by the respondents is extant. The other time limit is five years from the date of the agreement. Each is a time limit in which the suspensive condition, that is the sale of the land, is capable of being purified. He did not however argue that his was the only potential construction. He accepted that counsel for the petitioners had identified another potential meaning, and while he did not concede that construction was correct, he accepted that the words could be described as ambiguous.
[44] Thus the first issue I require to consider is whether or not the terms of the Minute of Agreement are ambiguous. I have decided that they are. In considering all of the words in the agreement it is plain that the trigger for payment is the petitioners concluding unconditional missives with a third party for the sale of the subjects. The difficulty is whether there is another suspensive condition, that the respondents require to obtain planning permission. The period is stated to be “the shorter of the period when the planning consent obtained or to be obtained by DMH… remains extant and the period of five years from the date of these presents, as the case shall be”. Thus the planning consent envisaged may not yet exist, because the words “or to be obtained” are used. Therefore there is no start date for the planning permission. Planning permission was never obtained by the respondents and counsel for the petitioners argued that the period when planning consent obtained or to be obtained by DMH remains extant was no period at all and therefore was shorter than 5 years. Counsel for the respondents, on the other hand, argued that there were 2 periods set out; one being an undefined period of planning permission and the other being 5 years. In the event, as happened, that planning permission is not obtained, he argued that the trigger event of a sale to a third party happening within the five-year period made the sum of money payable.
[45] In my opinion, the agreement is ambiguous and could be read in at least two ways. In evidence it was clear that Sir Adrian Shinwell on one hand and Mr Muir on the other hand had read the agreement in different ways. The solicitors were both experienced in this type of work. I take the view that each genuinely thought that the Minute of Agreement achieved what their respective clients wanted. In my opinion, if the agreement between the parties was that nothing would be payable unless the respondents obtained planning permission, then that could have been provided in a straightforward way. I do not accept counsel for the petitioners’ argument that there is no alternative construction. It seems to me that the Minute of Agreement is open to construction.
[46] Counsel for the petitioners’ fallback position was that if the contract was found to be ambiguous it should be construed in the light of the case of Rainy Sky by ascertaining what a reasonable person would have understood the parties to have meant, that reasonable person being in possession of all the relevant background information. If more than one construction was possible, then the court should choose the more sensible commercial construction. He argued that the construction of the contract by that method resulted in no sum being due by the petitioners. He referred to the speech of Lord Clarke of Stone–Cum-Ebony at paragraph 14:-
“For the most part, the correct approach to construction of the bonds, as in the case of construction of any contract, was not in dispute. ….I agree with Lord Neuberger that those cases show that the ultimate aim of interpreting a provision in a contract, especially a commercial contract, is to determine what the parties meant by the language used, which involves ascertaining what a reasonable person would have understood the parties to have meant. As Lord Hoffman made clear in the first of the principles he summarised in the Investors Compensation Scheme case [1998]1WLR 896, 912H, the relevant reasonable person is one who has all the background knowledge which would reasonably have been available to the parties in the situation they were in at the time of the contract.”
[47] Further, at paragraph 21 his Lordship said:-
“The language used by the parties will often have more than one potential meaning. I would accept the submission made on behalf of the appellants that the exercise of construction is essentially one unitary exercise in which the court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge which would reasonably have been available to the parties in the situation they were in”.
[48] At paragraph 30 his Lordship concluded:-
“As stated in a little more detail in paragraph 21 above it is in essence that where a term of a contract is open to more than one interpretation it is generally appropriate to adopt the interpretation which is most consistent with business common sense”.
[49] Counsel referred to the case of Global Port Services v Global Energy (Holdings) Ltd [2015] CSOH 18 as an example of the judge weighing commercial purposes as an aid to construction. The judge found that one construction made no commercial sense and so preferred the other.
[50] Counsel commended the case of Grove Investments Ltd v Cape Building Products Ltd 2014 Hous. LR 35 as a case in which the court give guidance on the construction of contracts, and decided the case on the basis of the method set out in the case of Rainy Sky. An extra division of the Court of Session in that case applied the case of Rainy Sky, quoting from that case and from the case of HHY Luxembourg Sarf v Barclays Bank plc [2010] EWCA Civ 1248 to the following effect: –
“when alternative constructions are available one has to consider which is the more commercially sensible… If a cause is capable of two meanings… It is quite possible that neither meaning will flout common sense. In such circumstances, it is more appropriate to adopt the more, rather than the less, commercial construction.”
The court noted that such an approach is not subject to additional qualifications, for example that a literal construction would produce an absurd result. It noted the view of Lord Clarke in the last mentioned case to the following effect: –
“if the language is capable of more than one construction, it is not necessary to conclude that a particular construction would produce an absurd or irrational result before having regard to the commercial purpose of the agreement…”
And then, quoting Hoffman L J in the Cooperative Wholesale Society Ltd v National Westminster Bank plc {1995} 1E.G.L.R 97 :-
“but language is a very flexible instrument and, if it is capable of more than one construction, one chooses that which seems most likely to give effect to the commercial purpose of the agreement.”
[51] The court summarised the position in paragraph 9 thus: –
“Thus in any case where the contractual provision is capable of more than one meaning, the court should adopt the meaning that best accords with commercial common sense. This is an important point in the construction of commercial contracts”.
[52] A note of caution was sounded in paragraph 10 thus: –
“In particular, in construing contracts it is important to recognise that an unfortunate result for one party may simply be the result of a bad bargain, and apparent anomalies may be the result of trade-offs made during the negotiation of the contract. The court cannot correct a bad bargain, and it must respect the substance of the transaction that the parties actually entered into. Nevertheless many judges tend to develop commercial expertise of commercial contracts over the years, both in practice and in the legal profession… For that reason, although they must be sensitive to the possibility of trade-offs and bad bargains, they will usually be in a good position to decide what is commercially sensible. Rainy Sky establishes that, if a contractual provision is capable of bearing two meanings, it is normally the commercially sensible meaning that should be chosen.”
[53] The court also states that in construing contracts the court should bear in mind that a contract is a cooperative enterprise, entered into by parties for the mutual benefit. Thus construction should be done in such a way that the benefits that may reasonably be expected from the contract to accrue to both parties. A contract should be construed in such a way that an excessive or disproportionate burden does not fall on one party through the application of the contractual provision. “Excessive or disproportionate” is to be objectively excessive or disproportionate according to what would be the expectation of reasonable parties in the particular contractual context. Commercial predictability is also regarded as a feature of a contract and so construction should be such as to avoid arbitrary or unpredictable burdens are in positions and arbitrary unpredictable benefits. Further, in construction of a contract court should have regard to the common law as “the common law will achieve the result in accordance with commercial sense”. Thus the common law can often serve as a benchmark against which considerations of fairness can be measured.
[54] In the case of Gyle Shopping Centre General Partners Ltd v Marks & Spencer plc 2015 CSOH 14 Lord Tyre adopted the approach set out in the cases referred to above. At paragraph 14 he observed that the lease which he had to construe was an intricate document drafted with particular care and attention to detail and providing much by way of context for any interpretation issue. He required to read it as a whole and to ascertain what a person with all the background knowledge reasonably available to the parties at the time of the contract would have understood them to mean by the language used. He considered that the draughtsmanship of the lease ought to be treated with respect.
[55] Counsel also referred to the case of PDPF GP Ltd v Santander UK plc 2015 CSOH 40 in which Lord Woolman applied the method approved in the cases of Rainy Sky and Grove Investments. He referred to paragraph 18 in which his Lordship stated, following a review of the circumstances surrounding the contract, that he preferred to approach the question on a broader basis than solely the syntax of the lease. He considered the view of a reasonable person who had all the relevant background knowledge and in so doing considered a number of factors, including the fact that repairing and reinstatement burdens formed a valuable part of the consideration, and that had the landlord been required to pay for repairs and reinstatement the rent would have been much higher. He found from that that one would reasonably expect that the landlord would wish to insist on performance of these obligations.
[56] Counsel argued that the matters which the reasonable person would know were those matters which were common knowledge between the parties. Thus internal letters between persons on one side of the contract were not useful except in so far as they showed what was said to those on the other side of the contract. Only limited weight, if any weight at all, could be put on such documents.
[57] The relevant background as shown in the evidence was that the respondents had spent money on a project they were unable to progress due to lack of funding. They had no right to be reimbursed that money. The respondents tried to get the petitioners to agree to reimburse the money. They petitioners made it clear that they wanted the respondents to obtain planning consent and the respondents expressed an intention to do so. There was no commercial sense in the petitioners reimbursing the respondents for doing nothing. On the other hand, there was some commercial benefit to the petitioners in planning consent being obtained even if the respondents did not go ahead with any development. Such consent would have the effect of preserving the allocation for new housing made by the local authority. The reports obtained by the respondents remain the property of the authors. While Miller Homes had used one of the reports, it had no entitlement to do so as admitted by Mr Irvine. Mr Kennedy had said in evidence that he did not understand why the reports were given to Miller Homes without his knowledge or consent; he made the same point in an email to his solicitor, (6/43 of process); but his solicitor had explained that this was a mistake on Mr Kennedy’s part, as he had no right to object to the respondents doing as they pleased with the reports. There was no right of property in the reports so far as the petitioners were concerned. Counsel accepted that Mr Irvine did not regard the existence of planning consent for a separate development from that which he proposed as valuable but it was plain that the petitioners did think it valuable and that was the “commercial imperative” that drove the agreement.
[58] The design team which had been instructed firstly by the respondents obtained some work from Miller Homes and attempted to obtain more work. They were entitled to do so and that there was nothing in that to indicate that the respondents were giving any commercial benefit to the petitioners. Counsel argued that there could have been an agreement between petitioners and respondents that the petitioners would pay for the reports, or had Miller Homes made access to the reports a condition of their offer to purchase the site, or had acknowledged in the price they were prepared to pay that the reports were of use to them, then the respondents would be able to argue that they should recover the cost of the reports from the petitioners. That however was not the case that was made.
[59] Counsel argued that the sums sought by the respondents included planning fees of £14,500 which were of no value to a developer putting in his own application. He argued that fees charged by architects for designing houses that were never going to be dealt were similarly of no value to anyone else. Even the work done on drainage and sewage and roads was likely to be of no value when the development proposed by Miller Homes was for greater density of housing.
[60] Counsel therefore argued that the petitioners wanted planning permission and entered into the agreement with the respondents because they wanted the respondents to continue with their application and were prepared to agree to make payment if and when it was granted in order to encourage them so to do.
[61] Counsel made a timeous objection to evidence given in his affidavit by Mr Dickie to the effect that keeping the planning application “rolling” benefited the petitioners. He objected on the basis of there being no pleadings for such a case. I heard the evidence under reservation. In my opinion, while there is no use of the word “rolling” in the pleadings it is plain enough that the respondents offered to prove that the continuing existence of the allocation for new housing was of advantage and I therefore regard the evidence as admissible.
[62] Counsel prayed in aid the evidence that the respondents did nothing between the date of the execution of the minute of agreement and late 2013 in relation to the section 75 agreement. He argued that that indicated that the respondents knew that in order to get payment under the agreement they required to obtain planning permission. By actively resuming the quest for planning permission, the respondents showed that they knew that no payment was due to them unless they obtained planning permission. That is not factually accurate, as there is correspondence between solicitors in 2012 relating to the section 75 agreement.
[63] Therefore the submission for the petitioners was that contract should be construed in accordance with commercial sense, to the effect that the petitioners did not agree to make a gift to the respondents; rather they agreed to reimburse their expenses if they succeeded in getting planning permission. Counsel argued that the words “as the case shall be”make it clear that both the sale to a third party within five years and the obtaining of planning permission are related contingencies, both necessary before the respondents are entitled to payment. In discussion he modified that submission to submit that while the words “as the case shall be” might be otiose, they were at least consistent with his original submission.
[64] For the respondents, counsel submitted that certain principles applied to the task of construction of the contract. Firstly, the court should consider the meaning of what the parties said in the contract and not what the parties meant to say. The parties’ intentions must be ascertained by how they have expressed their obligations in writing. As a general rule, negotiations prior to the execution of the contract could not be used as an aid to interpretation, as the position of parties inevitably changes during negotiation. Such prior negotiations might have assist in establishing what knowledge the parties had of the circumstances. Similarly, earlier versions of an agreement might be considered as part of the circumstances. He cited the cases of Prenn v Simmonds [1971] 1 WLR 1381; Wickman Tools v Schuler AG [1974] AC 235; Pioneer Shipping v BTP Tioxide [1982] AC 724; Bank of Scotland v Dunedin Property Investment Co Ltd 1998 SC 657 and Taylor v John Lewis Ltd 1927 SC 891.
[65] He agreed with counsel for the petitioners that a court could not rescue a party or a legal adviser from a bad bargain, citing the case of City Wall Properties (Scotland) Ltd v Pearl Assurance plc 2004 SC 214. He accepted that in applying the method set out in Rainy Sky, a court might give some latitude in order to ensure that a commercial contract was enforceable, but it could not substitute a different bargain. (East Anglican Electronics Ltd v OIS plc 1996 SLT 808.) A contract must be considered as a whole and that in the context of the factual commercial background to the contract, for which he cited the case of Charter Reinsurance Co Ltd v Fagan 1997 AC 313. Counsel accepted that the construction of a contract on a commercially sensible basis is to be favoured, as more likely to give effect to the parties’ intentions. In order so to do regard may be had to the commercial purpose of the contract. He argued that this may involve first considering the words used then the background of the facts, although the wording of the contract is the paramount consideration when interpreting the contract. He relied on the cases of Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd 1997AC 749; MWF Wilson Lace) Ltd v Eagle Star Insurance Co Ltd 1993 SLT and Glasgow City Council v Catstop Limited 2003 SLT 531.
[66] Counsel argued that the surrounding circumstances would not normally include the conduct of parties following the conclusion of the agreement for which he cited the case of Whitworth Street Estates Ltd v Miller 1970 AC 583. The court could however look at the aim of the transaction.
[67] Turning to the interpretation of the agreement in the present case, he argued that the commercial objective of the agreement was not to value the land with the benefit of planning permission. The sum of approximately £165,000 was in respect of professional fees already incurred. It was to be paid if the site was sold to a third party. As was stated by counsel for the petitioners, prior to the execution of the agreement the parties no longer had any contractual obligation to each other over the site, because the missives which had bound them no longer applied, the respondents having resiled and paid the agreed sum. Therefore, in entering into the agreement at all the petitioners must have recognised that the sums expended by the respondents could be to the benefit of the petitioners. Such benefit accrued from the use of the reports in the preparation, submission and implementation of a planning application for the development of the land. The commercial objective for the petitioners was to sell the land at a price reflecting the development potential identified within the reports. Counsel argued that the court could have regard to the earlier drafts of the proposed agreement which contained one constant term namely
“… It has been agreed between the parties that in the event of the sellers concluding unconditional… missives with a third party for the sale of the said subjects during the period… the sellers will reimburse DMH the full amount.”
[68] He argued that no matter what terms may have been inserted about the period during which payment would be made, as that clause had always been present, that was the commercial aim of the agreement.
[69] Counsel argued that had the obtaining of planning consent been a condition precedent to reimbursement there would be little or no commercial sense in drafting a contract which was absent any minimum specification of the planning consent. As the contract stood, planning consent for any development would suffice. In any event, it would make no commercial sense for the respondents to agree that reimbursement was conditional upon obtaining planning consent as the grant of consent was not within their power; the section 75 agreement required the signature of the heritable proprietor, that is the petitioners.
[70] While accepting that post agreement conduct by parties was not generally relevant counsel argued that such conduct could be of assistance to the court in ascertaining the commercial objective of both parties at the time of entering the agreement. The respondents provided Miller Homes with the reports and some assistance in securing planning permission. The ground investigation report was lodged along with the planning application by Miller Homes. The conduct by the respondents, in progressing with their own planning application though not finally obtaining consent, but in assisting Miller Homes with its planning application, showed that the respondents did not regard the contract as obliging them to obtain planning permission.
[71] Counsel submitted that the petitioners were legally advised throughout the negotiation of the contract and there was no basis for rescuing them from a bad bargain if that was what the court found the contract amounted to.
[72] Counsel submitted that the court, in making a purposive interpretation of the contract, should find that the suspensive condition is a sale to a third party. The period of time during which that sale would trigger the obligation on the petitioners to reimburse the respondents was whichever of two periods was shorter: either the life of any planning permission obtained by the respondents or five years from the date of the agreement. Counsel argued that payment was due if a sale occurred within five years of the date of the agreement if planning permission was not granted. Counsel argued by analogies: that if a testator left a legacy to be paid to a legatee within the shorter period of three years from the legatee’s marriage and five years from the date of the testator’s death, if the legatee had not married by five years from the date of death, the legacy would then be payable. As another example, he referred to a roads construction consent which might provide that the developer had to produce a roads bond within the shorter period of twelve months, or within two months of the first house being occupied. If the second event did not occur, that is if the houses were not occupied, the bond would still be required within twelve months. He argued the current case was similar; the money was payable at the time of sale, if that occurred within five years of the agreement, and no planning permission had been granted.
Discussion and decision.
[73] I do not find the terms of this contract easy to construe. I accept the submissions made by both counsel to the effect that the task of the court is to consider what the reasonable person, armed with the information that the parties reasonably had at the time of entering into the contract, would consider was meant by the words of the contract. I accept that the construction should, if there is a choice, favour a commercially sensible outcome. I am bound by the case of Grove Investments to proceed in that fashion. The words of the contract are to be read as a whole, and if possible meaning given to all of them. I am not concerned to find out what the parties intended to agree, but rather what in the context of the facts agreed or proved, their words show that they did agree. I have reached my view by considering all of the circumstances known to both parties. I have not relied on internal communications known to only one of them.
[74] Mr Kennedy and Mr Dickie were both of the view that the existence of the allocation for new housing in the Local Development Plan was of commercial value to the petitioners. That is an entirely understandable view. They were both of the view that that allocation was at risk unless a planning application proceeded. Both Mr Kennedy and Mr Dickie thought that the existence of the reports obtained by the respondents did have the effect of de-risking the site. Each of them thought that the reports might have some value to any third party seeking to develop the site. Each of them thought that the existence of the “minded to grant” permission was of value to a third party. Mr Irvine did not find the reports particularly useful although he accepted that he had used the ground investigation report. Neither Mr Kennedy, representing the petitioners, nor Mr Dickie, representing the respondents knew at the time of entering into the agreement what Mr Irvine’s view was.
[75] Mr Dickie wanted to develop the site in some shape or form and retained some hope that he would be able to do so at the time of entering the agreement. Mr Kennedy knew of Mr Dickie’s hope, but had no way of knowing whether it was realistic or not. He knew however that Mr Dickie was endeavouring to interest other developers in the site. Therefore I find that at the time of entering into the agreement, both Mr Kennedy and Mr Dickie knew that there was at least a good chance that the respondents would not go on to develop the site.
[76] Mr Dickie tried to get Mr Kennedy to agree to pay for the reports which had been obtained but he did not succeed in persuading Mr Kennedy to do that. Mr Kennedy stated that he would take advice from his lawyers. The first agreement sent by Mr Muir to Sir Adrian provided that the petitioners would pay the respondents if and when they sold the land, within a ten year period. The petitioners did not agree to that and inserted a revisal referring to the respondents obtaining planning permission. That revisal altered the draft contract. Mr Muir wrote as a revisal “or 5 years”. His use of the word “or” is consistent with the contention that the passage of 5 years was an alternative to the granting of planning permission. Sir Adrian was never content that the petitioners should pay the respondents unless the petitioners got something in return. In any event he thought the period of ten years too long, but was prepared to advise that five was reasonable. He introduced the words “or the shorter of” and “as the case shall be” in order to limit the period of liability, but did not intend the payment to be due unless planning permission was obtained within that period.
[77] Bearing in mind that I required to construe the words used in the agreement, in the context of the reasonable person, reasonably well-informed, I am unable to construe that agreement as stating that the respondents will be paid only if they obtained planning permission. The difficulty in so doing is caused by a lack of clarity in the wording itself. Counsel for the petitioners argued that the construction advocated by the respondents ignored the words “the shorter of”. I do not accept that argument. It is possible to read the agreement as stating that if a sale is achieved, payment will be due to the respondents in two situations. The first is if planning consent has been granted and is still extant, so long as five years have not passed since the agreement was executed. The second is if no planning consent has been granted, and five years have not passed since the agreement was executed. Thus if planning consent was granted on 1 July 2011 and was extant for three years, liability to pay would cease on 1 July 2014. If no planning consent was granted, a sale would trigger liability during the five year period following execution of the agreement.
[78] Further, the commercial objective of the petitioners in entering into the agreement at all is hard to ascertain. As is pled by them, after the abort fee was paid by the respondents, there was no contract between the parties concerning the site. The petitioners had no legal obligation to pay any of the money which the respondents had expended on applying for planning permission. If the respondents wished to give reports to a third party to assist with that third party obtaining planning permission, that was a matter for the respondents. The petitioners did not simply decline to pay any sums to the respondents. Instead they instructed their solicitor to conclude an agreement which could lead to their having liability to pay. I therefore find that the petitioners were of the view that the allocation for housing was valuable to them, and that one way of protecting that asset was to have full planning permission granted. They knew that no one else was interested in the site at the time of the ending of the missives. They had not found a new purchaser at the time of entering into the agreement. That being so, had the respondents simply walked away, the petitioners perceived themselves as being at risk of losing the allocation.
[79] I find that the petitioners agreed to make payment to the respondents of the sum in the Minute of Agreement because they wished to encourage the respondents to proceed with their planning application during the period when the petitioners were looking for a third party to purchase the site. The agreement does not, however, provide that the payment will be made only if the respondents are successful in obtaining planning permission. If that had been the intention then it would not have been drafted as it has been drafted. It would not have been difficult to draft an agreement which stated plainly that payment was dependent on the respondents obtaining planning permission. It would not have been difficult to draft a condition putting a time limit on liability. Further, the phrase “as the case shall be” does not bear the meaning for which counsel for the petitioners contended. Sir Adrian was the author of the phrase but could not explain what it added to the Minute of Agreement. He thought it might be described as otiose. It seems to me that it may be verbiage, that is otiose, or it may indicate that there are two scenarios in mind, one in which planning permission is granted, and one in which it is not. Therefore it is, so far as the petitioners are concerned, at best neutral and at worst destructive of their argument.
[80] In my opinion the Minute of Agreement does not clearly set out the respondents submitted construction either. In considering all of the circumstances it is hard to ascertain the aim of the respondents. That aim was obvious when the first draft agreement was sent by Mr Muir; as confirmed by Mr Dickie in evidence, he wanted to get back as much of the money his company had spent as he could. Mr Kennedy told Mr Dickie he would take advice, and he did not tell Mr Dickie he would agree to his proposal. Sir Adrian revised the first draft in such a way as to alter the agreement radically, but Mr Muir did not appear to react by insisting that the agreement be absolutely clear that obtaining planning was not required. Mr Dickie muddied the waters further by seeking an extra payment of £10,000 in respect of expenditure on getting planning consent. That could suggest that his aim had changed, and that he accepted that planning consent was a prerequisite. On the other hand, I accept counsel’s argument that such an aim is unlikely as the granting of planning permission was dependent on the petitioners as heritable proprietors, and so the respondents are unlikely to have agreed to a condition which the other party could prevent them fulfilling. Mr Kennedy suggested a term by which the amount to be reimbursed would reduce annually. That reflected his view that the reimbursement was connected to the value of the reports. The proposal was not accepted. The aim of the parties is not very clear.
[81] I have decided that the Minute of Agreement must be construed as submitted by the respondents. Payment is due in the event that the site is sold to a third party within five years of the agreement. I do so on the basis that the agreement is capable of more than one interpretation. That construction is in accordance with the words used. I have considered the evidence and have decided that on the basis of information available to both parties, there is nothing which would show that the construction contended for by the petitioner should be preferred.
[82] I therefore refuse the petition. Parties were agreed that expenses should follow success and I will therefore award expenses in favour of the respondents.