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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> LAW & Ors (trustees of the JAL FISH LIMITED), AGAINST ROBERTSON CONSTRUCTION EASTERN LIMITED [2018] ScotCS CSIH_24 (04 April 2018)
URL: http://www.bailii.org/scot/cases/ScotCS/2018/[2018]_CSIH_24.html
Cite as: 2018 SLT 377, 2018 SC 428, [2018] ScotCS CSIH_24, [2018] CSIH 24, 2018 GWD 11-142
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SECOND DIVISION, INNER HOUSE, COURT OF SESSION
Lord Justice Clerk
Lord Brodie
Lord Drummond Young
[2018] CSIH 24
CA121/16
OPINION OF THE COURT
delivered by LADY DORRIAN, the LORD JUSTICE CLERK
in the cause
(FIRST) JOHN ALLAN LAW and GILLIAN MARGARET LAW and LEGAL & GENERAL
ASSURANCE SOCIETY LIMITED as trustees of the JAL Fish Limited Small Self-
Administered Pension Scheme; (SECOND) J A L FISH LIMITED; (THIRD) GILLIAN
MARGARET LAW
Pursuers and Reclaimers
against
ROBERTSON CONSTRUCTION EASTERN LIMITED
Defenders and Respondents
Pursuers and Reclaimers: Malone (sol adv); Brandon Malone & Company
Defenders and Respondents: Burnet; Clyde & Co
4 April 2018
Introduction
[1] This reclaiming motion seeks to challenge the decision of the Lord Ordinary that an
obligation contained in missives for the sale of land did not amount to an “obligation
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relating to land”, and therefore had prescribed, in terms of the Prescription and Limitation
(Scotland) Act 1973, section 6 and schedule 1, para 2(e).
[2] The relevant obligation is in the following terms (emphasis added):
“8.1 In exchange for payment of the Purchase Price, there will be delivered (a) a validly
executed Disposition of the Subjects in favour of the Purchaser… and (b) the duly
executed Overage Agreement…”
In terms of clause “(c) ‘the Purchase Price’ means…£475,000…” and “(g) ‘the Overage
Agreement’ means the overage agreement to be entered into between the parties the draft of
which is annexed and forms part III of the Schedule” to the missives. The same definition
applies to both the Subjects, as defined in the missives, and the Overage Property, as defined
in the draft Overage Agreement between the same parties.
[3] The Overage Agreement itself provided for the making of certain payments in favour
of the pursuers and reclaimers (“the reclaimers”) in the event of the grant of certain consents
or planning permission in respect of specified development of the land, and its onward sale.
The defenders and respondents (“the respondents”) would not, however, be obliged to seek
such consents or permission, or otherwise to make payment to the reclaimers in the event
that no steps were taken whatsoever towards development or sale of the land. Depending
on the nature of development of the land, payment of a fixed sum would fall to be made to
the reclaimers of £1.5million (“Overage Payment – Development A”) or £1million (“Overage
Payment – Development B”), in each case under deduction of the “Base Price” of £475,000,
equating to the Purchase Price payable under the original missives. The trigger for payment
in each case is the sale of the land, whether as mixed commercial and residential
developments as a whole, or upon disposal of the final plot of any solely residential
development (“Development B”).
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[4] The reclaimers seek to rely principally on the cases of Barratt Scotland Ltd v Keith 1993
SC 142 and Glasgow City Council v Morrison Developments Ltd 2003 SLT 263, and to
the relevant principles are to be derived from these authorities, but contend that the
Lord Ordinary was correct to consider that the case of Smith v Stuart (supra) was binding
upon him.
[5] The reclaimers concede that, if the obligation does not relate to land, then it has
prescribed by virtue of section 6 of the 1973 Act, the action having been raised after expiry of
the quinquennial prescriptive period.
The Lord Ordinary’s decision
[6] The Lord Ordinary held ([2017] CSOH 70) that the relevant obligation was personal
and collateral, in the latter sense that it did not form part of the purchase price of the land in
question, as contractually defined (para [14]). The expression “any obligation relating to
land” was to be given its natural and ordinary meaning, was apt to cover a wide range of
obligations, not limited to real rights in land, but not covering obligations to which land was
only incidental: land must be the main object of the obligation (para [17], applying Barratt
and Smith v Stuart).
[7] The relevant focus was the nature and main object of the particular obligation in
issue, rather than any counterpart obligation (para [23]; cf Glasgow City Council v Morrison
Developments Ltd at paras 9 – 10, 13 and 16; and Clydeport Properties Ltd v Shell UK Ltd 2007
SLT 547 at 551D – E). It would not necessarily follow from the fact that a counterpart
obligation related to land that the obligation in question would also possess that character
(ibid; cf 1973 Act, section 15(2)).
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[8] Even if the case of Smith v Stuart were not formally binding upon him, the
Lord Ordinary considered that there was no justification for declining to follow the
authoritative guidance contained therein, which appeared to be consistent with that set out
in Barratt (supra).
Submissions for the reclaimers
[9] In summary, the reclaimers maintained three broad propositions in the course of
submissions. First, that the core obligations of a transaction in which an interest in land is
created or transferred (which was described as a “land transaction”) would all be obligations
relating to land within the meaning of the 1973 Act. Secondly, that the relevant obligation in
the present case, which was expressly conceded to be a mere obligation to enter into the
overage agreement, was one of the core obligations in, and part of the object of, missives of
sale of land, and therefore amounted to an obligation relating to land. Thirdly, that the
Lord Ordinary had erred in failing to recognise it as such.
[10] The reclaimers readily conceded that, for the purposes of the 1973 Act, it was
necessary to examine the nature of the particular obligation sought to be enforced (Barratt
(supra), LJC (Ross) at 153G). The relevant obligation in the present case was the obligation to
enter into the overage agreement, rather than any of the obligations contained in the overage
agreement itself. Nonetheless, it was relevant to consider the context in which that
obligation arose, whereby it was an obligation relating to land by virtue of being “a core
obligation in a contract which has as its subject matter the creation of rights or interests in
land”, such as missives of sale of land (Barratt (supra), Lord Kirkwood at 159D; Glasgow City
Council v Morrison Developments at para 13). Where the obligation arose in that context, as a
core rather than incidental obligation of a land transaction, it would amount to an obligation
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relating to land. The scope of the core obligations was to be ascertained according to the
terms of the particular contract before the court. However, where the obligation in question
formed part of the consideration in a land transaction, it was of necessity a core obligation of
that transaction, and therefore an obligation relating to land. In the present case, the
obligation to enter into the overage agreement was said to be “one of the core obligations on
which the parties have contracted”. It was “a counterpart obligation (along with the cash
price) to the grant of a disposition in favour of the purchaser” and therefore amounted to an
obligation relating to land.
[11] The reclaimers would have been entitled to refuse to convey the land upon the
respondents’ failure to enter into the overage agreement upon settlement. The terms of the
contract were certain, and there was an obligation on both parties to enter into it. Thus, the
obligation was not merely incidental to the transaction, or one that could be enforced only
after completion of the sale, such as a collateral warranty. The relevant clause 8.1 was not
happily worded, but it had been a matter of concession before the Lord Ordinary that the
clause ought to have expressed an exchange of the disposition on the one hand, for the
purchase price and overage agreement on the other. Those were the core obligations of the
contract; they encapsulated “the deal” or operative part of the missives. The overage
agreement clearly favoured the reclaimers, as sellers, to the extent of a financial advantage of
upwards of £1 million; such a continuing liability was of no benefit to the respondents. To
the extent that it did not properly reflect where the benefit lay, therefore, the clause was
acknowledged to be “wrongly worded”. Properly construed, however, the overage
agreement was logically part of the consideration to be received in exchange for conveyance
of the land, regardless of who might deliver it to whom: it was part of the “price” in the
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natural and broad sense of the word, notwithstanding that it did not fall within the
contractual definition of the “Purchase Price” provided by the missives. This argument was
acknowledged to be the sole fundamental point underlying the reclaimers’ position. It could
be viewed as an aspect of the general mutuality of obligations, rather than the correlativity
of rights and obligations in the narrow sense addressed by section 15(2) of the 1973 Act. It
could not be correct that an obligation to deliver a disposition subsisted, whilst the
corresponding obligation to make payment prescribed; to hold otherwise would be
destructive of the mutuality principle, and could lead to injustice. Thus, counterpart
obligations at the core of a land transaction were to be treated as obligations relating to land.
[12] This was also a critical distinction from the circumstances pertaining in Smith v
Stuart, where the unilateral undertaking was merely to enter into a contract, the terms of
which had not been agreed, at some future undefined point, regarding the terms upon
which payment might be made if certain events came to pass in respect of the land. Such an
undertaking did not concern the creation of an interest in land, nor would the proposed
contract, if entered, have done so; it existed in isolation. The obligation not existing within a
land transaction, whether unilateral or bilateral in form, it could not amount to an obligation
relating to land.
[13] In the present case, whilst the obligation may not, in isolation, amount to an
obligation relating to land, it was properly to be regarded as such since it arose as a counter-
prestation to the delivery of a disposition. It was not merely “collateral”, as the Lord
Ordinary had determined. In these circumstances, the ratio of Smith v Stuart (LJC (Ross) at
paras 12 and 13) did not apply. The “underlying obligation”, which in each case regulated
the future payment of a portion of the proceeds of sale in the event of certain specified
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circumstances arising, was the same at a superficial level only. In the present case, any sums
due in terms of the overage agreement were, in reality, an additional element of the price
under the original missives. Having regard to the bilateral nature of the parties’ obligations,
and the extent to which they were counter-prestations, the Lord Ordinary ought to have
treated the obligation to enter into the overage agreement as an obligation relating to land.
Submissions for the respondents
[14] In reply, the respondents conceded that, whilst in strict terms of the missives, the
obligation was on the reclaimers (as sellers) to deliver a signed copy of the overage
agreement to the respondents (as purchasers), there was an implied obligation on the
respondents to enter into the overage agreement. Nonetheless, the Lord Ordinary had been
correct that it amounted to a mere personal and collateral obligation.
[15] It was necessary to demonstrate that the particular obligation in question created an
interest in land, and was not merely an incidental matter within an overall contract relating
to land (Barratt (supra), LJC (Ross) at 148D, 153 and 154C – D, Lord McCluskey at 157I and
158B – C, and Lord Kirkwood at 158F – G). To be an “obligation relating to land” the
obligations required to have land as its main object. In the present case, the particular
obligation sought to be enforced was the obligation to enter into the overage agreement.
The obligation under the overage agreement itself was a mere obligation to pay an amount
of money. An agreement to regulate the basis upon which the proceeds of a relevant future
sale of land would be paid as between the parties, in the uncertain event that any of
specified circumstances came to pass, did not oblige one party to confer on the other any
right or interest in the land itself (Smith v Stuart) and did not have land as its main object.
As a consequence, the particular obligation was not an obligation relating to land.
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[16] The reclaimers took matters too far insofar as they submitted that a core obligation of
a lease or contract for the sale of land would qualify per se as an obligation relating to land.
It was not sufficient that the contract related to the creation or transfer of rights or interests
in land in general: the particular obligation had to be so related. A core obligation could not
simply be anything that was said to be part of a reciprocal obligation, such as reciprocal to
payment of the purchase price, in order automatically to constitute an obligation relating to
land. If that were correct, any obligation could be so converted, contrary to the tests set out
in Barratt and Smith v Stuart.
[17] Whilst it was accepted that the overage agreement was to be entered as part of the
overall deal between the parties, the terms of the relevant clause 8.1 dealt with the
mechanics of exchange only. The respondents had been obliged to enter into the overage
agreement, such that each party would retain a copy of it, but the relevant clause did not
show that to be a core obligation in the manner suggested by the reclaimers.
[18] The execution and delivery of the overage agreement did not form part of the
contractually defined price payable, and paid in full, in respect of the land. It was a separate
obligation under the missives, albeit that the underlying “potential obligation” was to make
payment following upon future sale of the land. Accordingly, the Lord Ordinary had been
correct to hold that the obligation did not form part of the price in the wider sense
contended by the reclaimers. The overage agreement did not even purport to create or
transfer an interest in land. Nor did it preserve any such interests, such as a right in security
over the subjects or real burden in favour of the reclaimers, pending further development
and sale, either of which would have amounted to an obligation relating to land on the basis
that it created an interest in the land.
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[19] The decision in Glasgow City Council v Morrison Developments Ltd was to be treated
with some caution, as the Lord Ordinary had done, at least insofar as it depended upon the
particular terms of the lease at issue. Specifically, in order for the lease to take effect, the
tenant first had to build and then occupy the premises. The creation of the tenant’s interest
in land was predicated upon the construction of the buildings. It was in that particular
context that the court had concluded that it was an obligation relating to land. In the present
case, there was merely an agreement in relation to future payment, which could not be said
to have land as its main object. In that regard, the decision in Smith v Stuart was the most
relevant case cited to the court, and an authoritative decision of the Inner House.
Accordingly, it had not been open to the Lord Ordinary to decline to follow it, and he had
been correct to conclude that the obligation in the present case was not an obligation relating
to land.
Decision
[20] Schedule 1, para 2(e) of the Prescription and Limitation (Scotland) Act 1973 excludes
from those obligations subject to the short negative prescriptive period “any obligation
relating to land”, which expressly includes obligations to recognise a servitude and certain
statutory obligations upon the Keeper of the Registers of Scotland, but is otherwise
undefined. The short question that arises, therefore, is what amounts to an “obligation
relating to land”?
[21] At the outset, it may be pertinent to note that, in the context of considering “whether
the scope of the category ‘obligation relating to land’ ought to be revisited”, the Scottish Law
Commission has observed that “its boundaries are now not significantly in doubt”
(Discussion Paper on Prescription (SLC DP No. 160, February 2016, para 2.58, citing Glasgow
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City Council v Morrison Developments Ltd; Johnston, Prescription at paras 6.55 – 6.62). That
being so, the Commission has indicated that it is “reluctant to make proposals for change in
this area in the absence of perceived problems”.
[22] On a plain reading, the object of the statutory provision is the substance of the
particular obligation founded upon, rather than the character of the surrounding deed or
contract within which it may be found. Whilst the latter may be said to relate to land in a
generalised sense and, to that extent, will inevitably contain one or more obligations relating
to land, that conclusion does not, of itself, assist in the identification of any particular
obligation as one relating to land. A deed or contract may relate generally to land, but a
particular obligation contained within it may not.
[22] Of course, the meaning and effect of a particular obligation will be construed, in the
customary manner, according to the whole terms of the surrounding deed or contract. In
that sense, it will be legitimate to have regard to the wider context in order to consider
whether, properly construed, the particular obligation is an obligation relating to land.
Nonetheless, the proper focus is the nature of the relationship between the particular
obligation and land (‘any obligation relating to land’), which must be sufficiently strong to
ensure that the statutory distinction of a category of ‘obligations relating to land’ is a
meaningful one.
[23] In Barratt Scotland v Keith, the Second Division held (LJC (Ross) at 153H, emphasis
added) that “having regard to the natural and ordinary meaning of words, an obligation to
deliver a disposition of heritable subjects is an obligation relating to land. It matters not that
the obligation is a personal obligation and that no real right is involved.” That the
disposition itself gave rise to an obligation relating to land was sufficient, in that case, to
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confer a similar character upon the antecedent obligation to deliver the disposition (cf “an
obligation arising out of a breach of an obligation relating to land is not the same thing as an
obligation relating to land”: Clydeport Properties Ltd v Shell UK Ltd at 551H citing Lord
Advocate v Shipbreaking Industries Ltd 1991 SLT 838 at 840J-K). Thus, to say that there is “no
real right…involved” (Barratt (supra), LJC (Ross) at 153H) is only true in the sense that such a
right may not arise directly or immediately from the obligation in question: hence, the
obligation to deliver a disposition of land, rather than the obligation to dispone the land or
the disposition itself, is nonetheless an obligation relating to land. In that case the particular
obligation is crucial to the transfer of real rights in land, brought about in terms of the
disposition.
[24] In Barratt (supra), the court does not appear to have contemplated any obligations
relating to land otherwise than in the sense of those necessarily contributing to the creation
or transfer of rights or interests in land. Whilst not purporting to define the scope of
“obligations relating to land”, however, the court endorsed (LJC (Ross) at 154A-C) the views
of the Lord Ordinary to the effect that “certain obligations in which land was dealt with only
incidentally were not ‘obligations relating to land’.” As it was put by the Lord Ordinary in
that case (at 148E):
“With the exception of cases in which land is dealt with incidentally only, contractual
and other forms of obligation, such as unilateral gratuitous promise, to create rights
and interests in land, or to convey land or interests in land, are in my opinion typical
‘obligations relating to land’. The sum of these examples would not adequately
define the expression.”
Thus, the “typical” cases of creation or transfer of land or interests in land, whether directly
or indirectly, are examples of a potentially wider category. A further example may be the
extinction or variation of such rights or interests, at least in the case of subordinate real
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rights such as a real burden on a tenant’s rights under a lease. In any event, a meaningful
distinction requires to be drawn in respect of those obligations falling beyond the scope of
the “typical” cases, yet still relating sufficiently closely to land in order to amount to
‘obligations relating to land’ for the purposes of paragraph 2(e) of schedule 1 to the 1973 Act.
[25] Plainly, something more than “some connection with land” (see, eg, Barratt,
Lord McCluskey at 157I) is required. What is envisaged, as it has been characterised
subsequently, is that “the land must be the main object of the obligation” (Smith v Stuart
“in line with the approach in Barratt”.
[26] In the intervening period, between the consistent decisions of the Second Division in
Barratt and Smith v Stuart, the courts have sought at first instance to apply the distinction
between obligations relating to land and those dealing with land only incidentally, as
derived from Barratt. To an extent, however, those decisions (for example, Glasgow City
Council v Morrison Developments Ltd and Clydeport Properties Ltd v Shell UK Ltd) may have
obscured the critical focus on the particular obligation to be enforced, at least as a matter of
expression if not substance, before the position was subsequently clarified in Smith v Stuart.
[27] In Glasgow City Council v Morrison Developments Ltd, the court approached the issue
according to whether a particular obligation could be said to form one of “the central or core
obligations” of a contract relating to land (Lord Eassie at para [13]):
“It is in my view clear from the decision in [Barratt] that the phrase ‘obligations
relating to land’ is not confined to real rights and their correlative obligations but
extends to personal obligations arising under contracts which have as their subject
the creation of rights or interests in land or the transfer of the existing rights or
interests in land. Accordingly, while under a contract of lease there may possibly be
incidental or ancillary obligations which might not come within the expression
‘obligations relating to land’, the central or core obligations, such as the grant of the
tenant’s interest and the reddendum must fall within the scope of that term.”
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As in Barratt, therefore, the focus remains on the creation or transfer of rights or interests in
land. However, it is of some importance to emphasise that, properly construed, the relevant
question is not whether the particular obligation is “incidental or ancillary” to the contract in
which it appears, but whether it deals only incidentally with the land: the same answer may
or may not be produced in either case. Likewise, to ask whether the particular obligation is
amongst “the central or core obligations” of a contract relating to land, or “correlative” of a
right thereunder, may shift the focus unduly from the relevant relationship between the
particular obligation and the land. Such an analysis may be problematic, in particular, as
tending to suggest that the character of the particular obligation in question is dependent
upon the core purpose of the contract, or the mutuality of obligations thereunder. A
particular obligation may not be a “core obligation” of the deed or contract relating to land,
of which it happens to form a part; nonetheless, it may amount to an obligation relating to
land because it otherwise has land as its main object. Conversely, a particular obligation
may be a “core obligation” of such a deed or contract, yet it may not have land as its main
object and therefore may not amount to an obligation relating to land. In other words, it is
conceivable as a matter of principle that the basis upon which the surrounding deed or
contract relates generally or principally to land may differ from the basis upon which any
particular obligation therein may also be deemed to relate to land.
[28] Moreover, and in any event, it must be emphasised that the “correlativity” of
obligations, in the general sense of mutuality in a contractual context, is not the appropriate
touchstone for the purposes of identifying whether any particular obligation relates to land
(cf 1973 Act, s 15). It will be of little relevance to consider the mutuality of obligations in any
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given circumstance, beyond the narrow concern as to whether implement of the particular
obligation in question is necessary, directly or indirectly, to the creation or transfer of rights
or interests in land.
[29] When understood in that context, the decision in Glasgow City Council v Morrison
Developments Ltd is merely indicative of the fact that it will often be sufficient, in practical
terms, to determine whether an obligation ‘relates to land’ according to whether it forms a
core part of a contract creating or transferring rights or interests in land: viz. the “typical”
case of obligations relating to land conceived of in Barratt. In such cases, it is tolerably clear
that the particular obligation will be critical, whether directly or indirectly, to the creation or
transfer of rights or interests in land (as discussed in Barratt), in which case the land will
inevitably be the main object of the obligation (Smith v Stuart). Thus, in Glasgow City Council
v Morrison Developments Ltd, the court was particularly concerned with those obligations that
were essential to the creation of the tenant’s subordinate interest in land. According to the
highly unusual terms of the particular lease before the court, it was crucial to the very
existence of the lease that the tenant was obliged to construct the subjects of let, and to make
payment of the grassum, as direct counterparts of the grant of the tenant’s interest in the
land. Those obligations were entirely correlative and interdependent to that end, and on
that basis amounted to obligations relating to land. In that particular factual context, the
court’s reliance on correlativity ought to be understood as merely demonstrative of the
essential nature of the tenant’s obligations to the creation of his interest in the land. The
general mutuality of obligations under the lease was otherwise irrelevant and, on a fair
reading, the court ought not to be taken to have decided anything to the contrary.
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[30] A similar approach was adopted in Clydeport Properties Ltd v Shell UK Ltd, where the
court considered whether the particular obligations in question formed “an intrinsic part of
the lease or, to use the expression in Glasgow City Council v Morrison Developments Ltd,
correlative with the grant of the interest in the land.” Yet again, therefore, the fact that an
obligation is demonstrably intrinsic or correlative to the grant of such an interest in land is of
some significance, insofar as it may be indicative of the correlative obligation, itself, relating
to land. Such an analysis must be recognised, however, as a shorthand method of
identifying the relevant relationship between the particular obligation and land. The
purpose is not to consider the intrinsic parts of the lease, in the sense of merely identifying
the material or substantial aspects of such a contract: a test of materiality is inevitably far
broader in scope, and would seriously undermine the meaningful distinction of a category
of particular obligations ‘relating to land’ from those obligations subject to the effects of
short negative prescription (cf eg 1973 Act, sch 1, para 1(g): “any obligation arising from…a
contract or promise…”).
[31] In Clydeport, the court was satisfied that land could not be said to be “only
incidental” to the obligations in question, apparently having regard to the fact that the
obligations were contained within a contract creating or transferring rights or interests in
land (ie a lease), and that they fell upon the tenant by virtue of their interest in the land. It
may be difficult, otherwise, to discern the basis upon which to distinguish the obligations in
that case from any other obligations to carry out “repairs to heritable fixtures” where land is
“merely the environment” within which the works are to be carried out, which would not
ordinarily amount to obligations relating to land (cf Barratt (supra), LJC (Ross) at 154A – C,
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Opinion of the Court delivered by Lord Brodie at para [17]: “a construction of the 1973 Act
which has the result that what are essentially tradesmen’s bills do not prescribe before the
passage of 20 years seems extravagant”). Be that as it may, the decision in Clydeport
proceeded upon the basis of significant concessions made by counsel, and ought not to be
taken to establish any general principle to the effect that materiality to such a contract is
sufficient to establish that a particular obligation therein relates to land, or otherwise to
extend the scope of the ratio to be derived from Barratt.
[32] In the present case, returning to the context of missives for the sale of land, the
reclaimers seek to rely upon the three constituent elements of clause 8.1, namely (i) payment
of the purchase price; (ii) delivery of the executed disposition; and (iii) delivery of the
executed overage agreement, as amounting to the core “deal” between the parties. In
essence, the analysis commended to us by the reclaimers was that it would be sufficient to
consider the substance of that transaction, as a land transaction in the round, in order to
determine that those (three) “core” or “non-incidental” obligations, including the particular
obligation to deliver the executed overage agreement, were obligations relating to land.
Specifically, it was argued that, in substance if not in form, the obligation to deliver the
executed overage agreement was to be deemed a part of the consideration in return for
which the land was transferred: in its broadest sense, the land was sold in return for a cash
price together with the separate payment obligations contained within the overage
agreement.
[33] Whilst it is readily conceivable that the overage agreement formed a material part of
those arrangements, that is not the relevant question before us. The task is for this court to
consider, not the general nature of the whole transaction, as reflected in the contractual
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terms, but the nature of the particular obligation sought to be enforced. The fundamental
flaw underlying the reclaimers’ approach has been to assume that the character of the
contract, as embodying a “land transaction”, and the identification of an obligation as one of
the central features of that transaction, will be sufficient and determinative of the obligation
relating to land. Such an approach adopts the wrong starting point, namely an analysis of
the contract as a whole, rather than the particular obligation. Moreover, it encourages a
focus on the wrong relationship, namely that between the obligation and the wider features
of the contract, rather than the obligation and the land itself. Neither of these matters will be
determinative of the issue before us. Thus, in the present circumstances, the assumed
equivalence of a central feature of the whole transaction between the parties, and an
obligation relating to land, has led the reclaimers astray.
[34] The reclaimers recognised that the contractual clause 8.1 relied upon by them does
not achieve what the parties may have intended: namely, that the delivery of a duly
executed overage agreement was to form a part of the consideration to be made over in
exchange for conveyance of the land. Nonetheless, it is that admittedly failed intention
upon which the reclaimers seek to rely, and to which the court is encouraged to give effect,
as the only basis upon which it is contended that the particular obligation is an obligation
“relating to land”. No doubt for these reasons, the reclaimers sought to emphasise in the
course of submissions that the relevant obligation was that falling upon the respondents to
enter into the overage agreement, whereas the obligation to deliver the executed deed would
appear, at least on the face of the relevant clause, to fall upon the reclaimers themselves,
such is the apparent oddity of the drafting.
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[35] For the avoidance of doubt, the court does not consider that anything material turns
on the distinction between an obligation to enter the overage agreement, and the obligation
to deliver a duly executed overage agreement, as at the date of entry. As in Barratt (supra),
however, whether it is analysed on the basis of the obligation to deliver or execute the
overage agreement, or having regard to the payment obligations arising from the overage
agreement itself, it is not an obligation of which land is the main object. In the present case,
albeit that the parties may have intended otherwise, the delivery of the duly executed
overage agreement did not form part of the contractually defined purchase price in respect
of the land; nor did it otherwise amount to a direct counterpart, by way of consideration, in
exchange for delivery of the disposition, on a plain reading of the particular clause founded
upon.
[36] Whilst the court notes the reclaimers’ assertion as to the true substance and intended
effect of the transaction, and the substantial benefit of the overage agreement being in their
favour, it is conceivable that the respondents enjoyed some practical benefit from such an
arrangement, by which any development potential of the land was not accounted for in the
purchase price payable immediately upon settlement, but deferred, potentially indefinitely.
In any event, the fact remains that, beyond any questions of consideration or relative benefit,
there is no other basis upon which this court is invited to conclude that the particular
obligation relied upon by the reclaimers, in the specific terms placed before us, amounts to
an obligation relating to land. Specifically, it is not contended that the obligation to execute
or deliver the overage agreement, in isolation, amounts to an obligation relating to land.
Nor is the overage agreement founded upon as a ‘land transaction’ of itself, such that it may
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be said to contain obligations relating to land, or to confer a similar character upon any
obligation to execute or deliver it.
[37] For all of the foregoing reasons, the court considers that the Lord Ordinary correctly
identified and applied the relevant legal principles in the particular circumstances of this
case. The outcome, in the present case and others of this type, must be recognised as highly
fact-specific, depending upon the terms of the particular obligation before the court. That
being so, the Lord Ordinary cannot be criticised for having regard to what was fairly
characterised as the ‘authoritative guidance’ of the Inner House in its application of well-
established general principle in the similar case of Smith v Stuart albeit that the factual
context in that case was not “on all fours” with the present case. The reclaiming motion is
refused.