Scottish Court of Session Decisions

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URL: http://www.bailii.org/scot/cases/ScotCS/2020/2020_CSOH_26.html
Cite as: 2020 SCLR 821, 2020 GWD 16-226, [2020] ScotCS CSOH_26, [2020] CSOH 26

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CA137/18

OUTER HOUSE, COURT OF SESSION

OPINION OF LORD ERICHT

In the cause

IAN DUNCAN

against

GLASA LLP

[2020] CSOH 26

Pursuer

Defender

Pursuer: Simpson QC, McLelland; Drummond Miller LLP

Defenders: Mure QC, Massaro; CMS Cameron McKenna Nabarro Olswang LLP

3 March 2020

[1] This is one of three cases arising out of an aborted project for a hydroelectric dam

and turbine on the Kildermorie Estate. The cases are all commercial actions. At the

Procedural Hearing the commercial judge allowed a diet of debate and appointed parties to

lodge a joint list of questions for the court. I was informed by parties that the intention was

that further procedure, including matters of specification, would be ordered in due course

depending on the answers to these questions. The cause called before me for a debate on the

agreed joint questions. In this opinion, I shall, after having set out the background, address

each question in turn. The questions deal with issues in the three cases as a whole, and are

not ascribed to a particular case. I shall treat this opinion as the lead opinion applicable to

all three cases.

Page 2 ⇓

Background

[2] Prior to the hydro electric project, Kildermorie Estate was owned by the Duncan

family. The Estate as a whole was managed by the Kildermorie Partnership (“KP”). The

partners of KP were Ian Alexander Duncan (“Mr Duncan”), Carol Hammond Duncan and

Alexander James Duncan. Heritable title to the Kildermorie Estate was divided, with part of

the Estate being owned by KP, part of the estate being owned by Mr Duncan in a personal

capacity and part of the estate being owned jointly by Mr and Mrs Duncan.

[3] In outline, the proposed hydro electric project was for a joint venture with an

electricity company, SSE Generation Limited (“SSE”) for the construction of a new hydro

electric dam and turbine house on the estate and the sharing of the profits of that new

scheme. A small existing hydroelectric scheme on the Kildermorie estate was to be

incorporated into the project.

[4] A Limited Liability Partnership (“Glasa LLP”) was set up as a joint venture vehicle

for the project. A Limited Liability Partnership Agreement (the “Agreement”) was entered

into dated 20 and 21 June 2010. The parties to the Agreement were KP and SSE. KP entered

into the Agreement in pursuance of its business of managing Kildermorie Estate. Recital D

stated:

“The Parties have agreed to enter into a joint venture through the vehicle of an LLP

in order to operate in business together and in particular from the Date of

Commissioning to operate the Kildermorie Hydro Electric Scheme and to effect the

Glasa Hydro Scheme Development for their mutual benefit as afternoted, utilising

their respective facilities and areas of expertise”

[5] Certain conveyancing documentation was entered into in relation to the Scheme as

follows:

Page 3 ⇓

(1) Deed of Servitude dated 21 June 2010 granted by Mr Duncan in favour of KP

over land in the Kildermorie Estate owned by Mr Duncan (the “IAD

Servitude”);

(2) Deed of Servitude dated 21 June 2010 granted by KP in favour of Glasa LLP

over land in the Kildermorie Estate owned by KP (the “KP Servitude”);

(3) Disposition dated 21 June 2010 by KP to Glasa LLP whereby KP conveyed to

Glasa LLP part of the Kildermorie Estate owned by KP which was to be the

site of the turbine house, together with the servitude rights (and under the

servitude conditions) in the IAD Servitude;

(4) Disposition dated 21 June 2010 by KP to Glasa LLP whereby KP conveyed to

Glasa LLP part of the Kildermorie Estate owned by KP which was to be the

site of the reservoir and dam, together with the servitude rights (and under

the servitude conditions) in the IAD Servitude and the KP Servitude.

[6] SSE had an option to terminate the Agreement and wind up the LLP (clause 17.1 of

the Agreement). SSE exercised this option in 2014.

[7] The three commercial court actions arise in relation to the consequences of the

termination, in particular in respect of activities undertaken on the estate prior to the

termination and remedial works.

[8] In the current case, Mr Duncan sues Glasa LLP in respect of construction works,

remedial works, damage to roads, tree felling and loss of value of the estate due to reduction

of deer numbers as the result of vehicular access and tree felling and Mr Duncan’s

management time. He sues under the Agreement (on the basis that he has a ius quaesitum

tertio) and under the IAD Servitude.

Page 4 ⇓

[9] In the case of Kildermorie Partnership v Glasa LLP (CA 138/18), KP sues Glasa LLP in

respect of construction works, damage to roads, loss of income and profit from shooting and

holiday lets, tree felling, Mr Duncan’s time and solatium.

[10] In the case of the Kildermorie Partnership v SSE (CA139/18), KP seeks to enforce SSE’s

obligations under the Agreement to put Glasa LLP in funds, so that Glasa LLP is in a

financial position to meet awards made by the court if KP or Mr Duncan, as the case may be,

is successful in the other two actions.

Terms of the Glasa LLP Limited Liability Partnership agreement between Kildermorie

Partnership and SSE

[11] The Limited Liability Partnership agreement between the Kildermorie Partnership

and SSE included the following provisions:

“1. DEFINITIONS AND INTERPRETATION

1.1 In this Agreement, the following expressions shall, unless otherwise specified

or the context otherwise requires, have the meanings set opposite them

respectively:

…

Access Roads means the existing tracks and new tracks to be constructed on

the Subjects and the Property all as shown per the solid green, solid pink,

solid purple and broken pink and broken orange lines on Plan A;

…

The Act means the Limited Liability Partnership Act 2000;

…

Business means the business of owning, developing and operating the Hydro

Scheme Developments for the purpose of harnessing water power to generate

electricity on the Property;

…

Page 5 ⇓

Commencement Date means the date of the final execution of this

Agreement;

Commencement of Construction means the date on which the LLP notifies

KP in writing, giving no less than 7 days’ notice, using the style of notice set

out in Part 13 of the Schedule that it intends to initiate the Glasa Hydro

Scheme Development under the Planning Permission and to take first entry

onto the Subjects, excluding any operations relating to site investigations;

…

Date of Commissioning means (other than intermittent exportation of

electricity for testing purposes prior to commissioning of the Glasa Hydro

Scheme Development), the date on which electricity is first commercially

exported from the Glasa Hydro Scheme Development;

…

Dispositions means the disposition by Ian Alexander Duncan and

Mrs Carol Hammond Duncan as Partners of and Trustees for the firm of

Kildermorie Partnership in favour of the LLP in respect of the generating station

site for the Glasa Hydro Scheme Development and the disposition by

Ian Alexander Duncan and Mrs Carol Hammond Duncan as Partners of and

Trustees for the firm of Kildermorie Partnership in favour of the LLP in respect

of the site for the reservoir and dam for the Glasa Hydro Scheme Development,

each in the form agreed by or on behalf of KP and SSE;

…

Expiry Date means 85 years from the Commencement Date;

…

Glasa Hydro Scheme Development means the construction, maintenance

and operation, (and if applicable) decommissioning, removal and site

restoration of a hydro-electric generating scheme together with all necessary

ancillary plant, Electricity and Telecommunication Cables, buildings, dam,

reservoir and equipment required for generating electricity situated on the

Subjects are shown indicatively on Plan A and Plan B and pursuant to the

Planning Permission;

…

Guarantee means a parent company guarantee in terms of Clauses 17.8

and 20 hereof;

Page 6 ⇓

…

Hydro Scheme Developments means the Glasa Hydro Scheme Development

and, following its conveyance to the LLP in accordance with this Agreement,

the Kildermorie Hydro Scheme;

…

Kildermorie Hydro Scheme means the existing operational hydro scheme as

at the Date of Commissioning owned by KP and located on the Property

together with all related necessary ancillary plant, Electricity and

Telecommunications Cables, buildings, dam, reservoir and equipment

required for generating electricity situated on the Property and/or the

Subjects all as shown outlined in red on Plan B;

LLP means the limited liability partnership to be incorporated in Scotland

under the Limited Liability Partnerships Act 2000 pursuant to this

Agreement;

Members means (subject to any such person ceasing to be a Member in

accordance with this Agreement) SSE and KP and any persons who are from

time to time admitted as members of the LLP in accordance with the terms of

this Agreement and the Act;

…

Plan A means the plan of the Property, identified as Plan A and annexed at

Part 1 of the Schedule or such substitute plan as KP and SSE may agree;

Plan B means the plan identified as Plan B and annexed at Part 1 of the

Schedule or such substitute plan as KP and SSE may agree;

…

Planning Permission means the consent under section 36 of the Electricity

Act 1989 (as amended) to be obtained by SSE following its Application of

10 December 2009 per Schedule Part 4 in respect of a generating scheme at

Kildermorie, permission under the Town & Country Planning (Scotland)

Act 1997, and authorisation under the Water Environment (Controlled

Activities) (Scotland) Regulations 2005, and such other statutory consents and

permissions as may be required at the time to enable the Hydro Scheme

Development to proceed;

…

Property means the property at Kildermorie Estate, Alness, Ross-shire

outlined in red on Plan A;

Page 7 ⇓

Property Documents means the Dispositions, the disposition by

Ian Alexander Duncan in favour of Himself and Mrs Carol Hammond Duncan

the Partners of and Trustees for the Kildermorie Partnership in respect of the

site for the generating station for the Glasa Hydro Scheme Development, the

deed of servitude by Ian Alexander Duncan in favour of Himself and

Mrs Carol Hammond Duncan the Partners of and Trustees for the Kildermorie

Partnership, and the deed of servitude by Ian Alexander Duncan and

Mrs Carol Hammond Duncan as Partners of and Trustees for Kildermorie

Partnership in favour of Glasa LLP each on the form agreed by or on behalf of

SSE and KP;

Record of Condition means the written and photographic record of the

condition of the Subjects and the Access Roads produced by the parties (i) in

respect of the land to be used for the Glasa Hydro Scheme Development prior

to the Commencement of Construction and in accordance with Clause 27.2

and (ii) in respect of the Kildermorie Hydro Scheme; such record of condition

to be completed in any event at the sole expense of SSE, and by agreement

between the Members; and failing agreement as to its terms to be prepared

by such independent chartered surveyor as may be appointed (on the

application of either Member) by the Chairman of the Scottish branch of the

Royal Institution of Chartered Surveyors; the said Record of Condition

following completion to be signed by the parties hereto as relative to this

Agreement;

…

Restoration Period means the period of time following the Expiry Date

during which the LLP whom failing KP (being able to call upon the

Guarantee and such further financial provision as may have reasonably been

required by the Authorities) shall carry out decommissioning, restoration and

removal works of the Glasa Hydro Scheme Development;

…

Servitudes means the servitudes granted from time to time by KP and by

Ian Alexander Duncan in favour of the LLP as owner of the Subjects;

…

Subjects means the subjects from time to time owned by the LLP and

forming part of the Property on Plan A as such subjects may be amended or

increased pursuant (i) to the conveyance to the LLP of the Kildermorie Hydro

Scheme pursuant to Clause 27.1 and (ii) to any Additional Disposition and

including, where the context permits, the Servitudes;

Table of Tree Crop Compensation means the table of crop compensation in

respect of areas of trees to be felled forming Part 11 of the Schedule which

Page 8 ⇓

shows the compensation payable per hectare of trees according to their age

and yield class indexed in accordance with the Forestry Commission

Standing Timber Price Index, as may be in force at the time.

…

1.2.8

A reference to a party is a reference to a party to this Agreement and, subject

to Clause 15, a reference to a party includes a reference to that party’s

successors in title, assignees and transferees (in any).

…

2. COMMENCEMENT

…

2.2 Immediately following incorporation of the LLP, KP shall deliver the duly

executed Disposition to SSE which SSE shall register on behalf of the LLP.

2.3 The LLP shall subsist until the Expiry Date unless and until the LLP shall

previously be wound up in accordance with the terms of this Agreement or

the provisions of the Act.

…

MANAGEMENT

6.1 Save as otherwise expressly provided in this Agreement or as may otherwise

be agreed by the members in writing:

6.1.1 all matters regarding the control or management of the Business and

the operation of the LLP shall be determined by the Members;

6.1.2

the approval of a Member or Members holding over 50% of the

Relevant Percentages shall be sufficient to determine any matter, such

approval to be either by way of a written resolution which is

circulated to all Members (provided that the same shall be deemed to

be passed no earlier than three Business Days after its circulation but

thereafter as soon as it has been approved by Members holding

over 50% of the Relevant Percentages) or at a meeting of the Board in

accordance with the following provisions of this Clause 6.

…

6.4 Unless determined otherwise by the Members, SSE is authorised on behalf of

the LLP to undertake the matters set out in Part 10 of the Schedule and, to the

extent that the LLP proceeds with the Glasa Hydro Scheme Development,

Page 9 ⇓

SSE will act in accordance with the standards that may be expected of a

reasonable and prudent developer of hydro electricity generation schemes.

…

8. FINANCING OF THE LLP

…

8.2 On the date of this Agreement, SSE shall pay £50 to the LLP by way of capital

contribution. KP shall, pursuant to the Property Documents, transfer the

Subjects in terms thereof and thereafter be deemed to have made a Capital

Contribution to the LLP in the amount of £1,000,000. On the date of this

Agreement KP shall procure the execution and delivery to the LLP or its

advisers of the Property Documents.

8.3 SSE shall at its sole discretion determine from time to time the amount of

additional capital or other form of funding that it contributes to the LLP in

order to fund the LLP’s construction, development and operation of the

Hydro Scheme Developments, provided that, to the extent to which the Glasa

Hydro Scheme Development is progressed, all funding for the costs incurred

by the LLP in the Hydro Scheme Developments shall be contributed by SSE

together with, in each case when the same become payable, amounts equal to

the general administrative costs of the LLP and the amounts set out in

Clause 22 as payable to KP, and SSE shall make such contributions to the LLP

accordingly.

…

12. OBLIGATIONS OF THE MEMBERS RELATING TO THE HYDRO

SCHEME DEVELOPMENTS

12.1 KP shall provide at its own expense such local monitoring and other service

facilities in relation to the Hydro Scheme Developments as specified in Part 6

of the Schedule and as the Members may reasonably determine as

appropriate.

12.2 KP shall comply with the obligations set out in Part 6 of the Schedule.

12.3 SSE shall, and shall procure that the LLP shall, comply with the obligations

set out in Part 7 of the Schedule.

12.4 The parties shall adopt the Record of Condition prepared by the parties prior

to the Commencement of Construction of the Glasa Hydro Scheme

Development.

Page 10 ⇓

12.5 The planning application in respect of the Glasa Hydro Scheme development

is appended as Part 4 of the Schedule.

12.6 SSE shall, to the extent necessary for the operation of the LLP’s business and

permitted by applicable law and regulation, use the consent under Section 36

of the Electricity Act 1989 (as amended) for the Glasa Hydro Scheme

Development, the Controlled Activities Regulations licence for the Glasa

Hydro Scheme Development and the Schedule 5 Licence for the Glasa Hydro

Scheme Development (the Consents) for the lawful operation of the Glasa

Hydro Scheme Development and shall exhibit the Consents to KP if

requested to do so.

12.7 In the event that:

12.7.1 Commencement of Construction of the Glasa Hydro Scheme

Development has not occurred within 5 years of the Final Consent

Date, and/or

12.7.2 Commencement of Construction has occurred but the LLP has ceased

to complete material construction of the Glasa Hydro Scheme

Development within 5 years of Commencement of Construction:

KP shall be entitled but not bound to terminate this Agreement and either to

wind up the LLP or to require SSE to transfer its interest to KP or to its

nominee for a consideration equal to the greater of (a) £1 or (b) the aggregate

of any amounts standing to the credit of any account of the LLP and which

may subsequently be paid to the LLP in respect of the period prior to

termination, less any sums due and payable to KP at the date of such

termination.

…

15.4.4 The assumption by any Family Member as a partner of KP or the resignation

of any partner of KP shall not require the consent of the Members but KP

shall as soon as practicable notify the other Members of such assumption or

resignation.

…

15.7 KP hereby warrants that it is entering into the arrangements contemplated by

this Agreement in pursuance of its existing business of manging the wider

Property.

…

Page 11 ⇓

17. TERMINATION / CONTINUATION

17.1 Without prejudice to the terms of Clause 17.7 hereof, SSE shall have the

option to terminate this Agreement and to wind up the LLP, (unless during

the applicable notice period KP notifies SSE that it wishes to acquire, or

procure that its nominee shall acquire, SSE’s interest for the greater of (a) £1

or (b) the aggregate of any amounts standing to the credit of any account of

the LLP and which may subsequently be paid to the LLP in respect of the

period prior to termination, less any sums due and payable to KP at the date

of such termination (a Transfer Notice) in which case SSE shall transfer its

interest for such consideration):

17.1.1 prior to the Commencement of Construction by giving not less than

three months written notice to KP to that effect and at the expiry of

said notice this Agreement shall terminate and, unless a valid Transfer

Notice has been given, the LLP shall be wound up; and

17.1.2 at any time following the Commencement of Construction by giving

not less than twelve months’ prior written notice and at the expiry of

said notice the Agreement shall terminate and unless a valid Transfer

Notice has been given the LLP shall be wound up;

declaring that in the event that SSE exercises this option to terminate this

Agreement the LLP shall be obliged to continue to pay all sums due

hereunder up to the date of such termination, and to effect reinstatement in

terms of 17.7.

…

17.3 Upon the termination of this Agreement, pursuant to Clause 16 where KP is

the Defaulting Member, SSE shall have the option either to:

17.3.1 procure that the LLP shall grant a lease in the form set out in Part 12

of the Schedule to SSE or another SSE Group Member, then procure

that the LLP shall reconvey to KP the Subjects for £1 and then acquire,

or procure that another SSE Group Member shall acquire, the interest

of KP (save for any rights to the Subjects) for a consideration equal to

any element of KP’s Capital Contribution which has been made in

cash and the return of any other cash standing to the credit of the KP

Current Account; or

17.3.2 require KP or its nominee to acquire SSE’s interest and in

consideration thereof procure that the LLP grants SSE or another SSE

Group Member nominated by SSE a lease in the form set out in Part 12

of the Schedule.

17.4 The termination of the Agreement howsoever caused shall be without

prejudice to any obligations, rights or liabilities of any of the Members which

Page 12 ⇓

have accrued prior to such termination or claims which any Member may

have against another for antecedent breach and shall not affect any provision

of this Agreement which is expressly or by implication provided to come into

effect on or continue in effect after termination (including, without limitation,

Clause 17.3).

17.5 The provisions of Clause 8 of this Agreement shall remain in full force and

effect and continue to be enforceable in accordance with their terms

notwithstanding that the Member ceases to be a Member. The termination of

Membership does not affect the rights and obligations of any party accrued

under this Agreement as at the date of this Agreement, and those rights and

obligations shall continue to be enforceable in accordance with their terms.

17.6 SSE in hereby authorised to execute on behalf of the LLP a lease in favour of

SSE or its nominee in the form set out in Part 12 of the Schedule where such

lease may be granted pursuant to Clause 17.3.

17.7 Prior to the termination of this Agreement (whether at the natural expiry of

this Agreement or otherwise including where terminated in accordance with

Clause 17.1 or 17.2) failing which during the Restoration Period SSE shall, or

shall procure that the LLP shall, comply with the following restoration

obligations unless a lease is granted pursuant to Clause 17.3:

17.7.1 In the event that the Glasa Hydro Scheme Development ceases to be

operational on a permanent basis (which for the avoidance of doubt

shall mean two consecutive years of bona fide non-operation following

the Date of Commissioning), the LLP shall be obliged:

(a) to:

(i) reinstate fully and expeditiously all damage caused to the

Property by the construction of the Glasa Hydro Scheme

Development and make safe the buildings and erections and

apparatus on the Property erected on or for the purpose of the

Glasa Hydro Scheme Development to the state shown in the

Record of Condition unless required otherwise by the

Authorities; and

(ii) unless otherwise agreed in writing by KP, within one year of

notice being given to the LLP by KP and/or the Authorities (as

the case may be), ensure that (a) the reservoir has been made

and certified safe to the extent that the Reservoirs Act 1975 as

amended or re-enacted may require and (b) such reservoir and

the dam being rendered into a condition which is suitable and

to the reasonable satisfaction of all relevant Authorities having

regard to the assumption (if not a fact) that neither the dam

nor the reservoir will be subject to continuing maintenance

Page 13 ⇓

declaring for the avoidance of doubt (and notwithstanding the

provisions of Clause 17.7.1(b) hereof) that the dam will be

removed only in the event that either the relevant Authorities

or KP (with the consent of the relevant Authorities) require the

LLP to remove the dam; and further declaring that the LLP

shall carry out the necessary reinstatement works to the

reservoir and/or within one year of notice having been served

upon them by KP (or such other period as may be stipulated

by the Authorities), failing which KP shall be entitled to call

upon the Guarantee in order to meet the costs of any

outstanding restoration/removal works and to instruct and

execute such necessary works to the state shown in the Record

of Condition, the Guarantors being obliged to meet any

shortfall in the LLP’s reimbursement of KP for the costs

reasonably and necessarily incurred by KP in so doing; or

(b) unless otherwise requested by KP in writing, to remove the Glasa

Hydro Scheme Development (but consistent with the provisions

for the dam referred to in Clause 17.7.1(a) above, and not only to

make safe the intakes and underground tunnels all in accordance

with the Planning Permission, but which will also be adjusted,

removed and/or covered to permit water to flow down the

original water courses but also so that no structures are visible on

the surface) and to reinstate the Subjects including any Access

Roads as referred to in paragraph 1.2 of Part 5 of the Schedule and

any additional parts of the Property used by the LLP referred to in

paragraph 1.1 of Part 5 of the Schedule, and the Subjects shall be in

no worse condition then as reflected by the Record of Condition,

such restoration to be in accordance with the terms of the Planning

Permission and to the reasonable satisfaction of KP.

…

19. RIGHTS OF THE PARTIES IN RESPECT OF THE PROPERTY AND THE

SUBJECTS

19.1 KP shall have the rights set out in Part 8 of the Schedule in addition to any

other rights set out in the Agreement.

19.2 SSE shall have the rights set out in this Agreement.

19.3 The LLP shall have the rights in respect of the Property and the Subjects set

out in Part 5 of the Schedule in addition to any other rights set out in this

Agreement.

19.4 KP warrants that immediately prior to the transfer of the Subjects to the LLP,

KP will have a valid and marketable title to the Subjects and immediately

Page 14 ⇓

prior to the grant of those of the Servitudes as are granted by it, it will have

valid title to grant those Servitudes.

20. GUARANTEE

20.1 SSE will, prior to the Commencement of Construction and by way of

provision for restoration costs for works referred to in Clause 17 hereof,

provide KP with a Guarantee in terms satisfactory to KP acting reasonably to

cover the estimated costs of the full cost of the decommissioning, removal

and reinstatement obligations of the LLP are set out within the Planning

Permission and maintain such sum (subject to any review as per Clause 20.3

hereof) throughout the duration of this Agreement including the Restoration

Period until fulfilment of the LLP’s restoration obligations hereunder but

subject always to the provisions of Clause 17.8.

…

24. ASSIGNATION

Without prejudice to Clause 15 no party shall be entitled without the prior written

consent of the other parties to this Agreement to assign or transfer either the benefit

or burden of this Agreement or any right and/or obligation under this Agreement

save for any assignation or transfer by SSE that is required as a result of statutory

obligations (in which case SSE shall notify KP of the same).

…

28. TREE FELLING

28.1 If SSE by written notice to KP requests that the trees growing upon any area

of ground covered by a Felling Licence be felled after the Commencement

Date and KP consent to such request, then KP (subject to any provisions

required by the Planning Permission and/or relevant Felling Licence) will

arrange a standing sale to achieve a clear fell of the said area in accordance

with the terms of the said felling licence and the LLP will pay to KP within

30 days of receipt by KP of written evidence confirming sale compensation at

the rate of £5.56 per tonne (Index Linked) for all timber harvested and sold

together with reimbursement of all necessary forestry work costs, declaring

that any such felling and harvesting will require to be carried out only

between the months of March and October in each year and the LLP shall be

obliged to pay such compensation whether or not the Glasa Hydro Scheme

Development proceeds.

28.2 Subject to the agreement of KP, such agreement not to be unreasonably

withheld or delayed, where the Glasa Hydro Scheme Development requires

the felling of any trees on the Subjects of the Property.

Page 15 ⇓

28.2.1 KP or the LLP shall carry out all tree felling in accordance with a

felling programme agreed in advance between KP and the LLP (both

acting reasonably) and in accordance with the UK Forestry Standard

as amended from time to time and the LLP will make payment as per

the Table of Tree Crop Compensation for the trees (but for the

avoidance of doubt any trees felled under Clause 28.1 shall not be

compensated for by reference to the Table of Tree Crop

Compensation), be it conifers and/or broadleaf trees (if any) removed

from pipelines, cables, the power house and Access Roads as well

reimbursement to KP of all necessary forestry work costs but

declaring that in the event that KP keep the timber arising from KP or

the LLP’s felling, then the amounts as calculated from the Table of

Tree Crop Compensation will be reduced by the value (if any) of the

timber felled as evidenced by the payment schedule (on a standing

sale basis) from the timber purchaser;

28.2.2 subject to the agreement of KP all timber felled by the LLP shall be

stacked at convenient locations to be agreement between the members

acting reasonably;

28.2.3 the timber felled as aforesaid shall belong to the owner thereof who

shall be entitled to dispose of the same and retain the full proceeds

thereof. No timber shall be sold or otherwise disposed of by the LLP.

28.3 In the event that the Subjects include areas of standing timber which are not

felled by KP or the LLP then (a) KP on behalf of the LLP shall have the right

at all times to manage such areas of standing timber including the right to

thin, fell and replant such areas as KP in consultation with the SSE (both

parties acting reasonably) shall agree and (b) the LLP in consultation with KP

shall be entitled at any time throughout the duration of this Agreement to fell

the same subject to the provisions of Clause 28.2.

28.4 KP will be responsible for clearing any associated wind blow that occurs due

to the removal of trees during construction and for a period of five years after

Commencement of Construction and LLP shall pay compensation to KP

accordingly on the basis of the Table of Tree Crop Compensation as per

Clause 28.2.1.

…

32. ENTIRE AGREEMENT

This Agreement together with any documents referred to in this Agreement and/or

any other documents entered into on or after the date of this Agreement which

specifically refer to this Agreement in either case between the Members or between

any of the Members and the LLP are party constitute the entire agreement between

the Members with respect to the subject matter thereof and expressly exclude any

Page 16 ⇓

warranty, condition or other undertaking implied at law or by custom and supersede

all previous agreements and understandings between the Members with respect

thereto and each of the Members acknowledges and confirm that it does not enter

into this Agreement in reliance on any representation, warranty or other undertaking

not fully reflected in the terms of this Agreement (or in one of such documents).

…

SCHEDULE

PART 5

USE OF THE SUBJECTS AND THE PROPERTY

1.1 The LLP shall have the right, and shall use the Property and the Subjects only

until the Expiry Date and, where applicable, during the Restoration Period:

1.1.1

to construct, operate, inspect, maintain, upgrade, renew, repair,

restore, remove and decommission and, subject to KP’s approval,

enlarge a dam, a reservoir, a hydro power station, intake sites, head

pond areas, and such other weirs dams, plant equipment and other

structures on the Subjects in connection with the Hydro Scheme

Development to be operated by the LLP declaring that any

enlargement, apart from any enlargement necessary as a consequence

of a change in statutory requirements due to changes in legislation

(which shall be deemed to be approved), shall be subject to the written

approval of KP having first been provided with a fully detailed

proposal and associated plans, such approval not to be unreasonably

withheld or delayed;

1.1.2 to construct, use inspect, maintain, repair and renew the Access

Roads;

1.1.3

to access to over and across the Subjects and the Property adjacent to

the Subjects for the purposes of site investigation and survey work,

construction, maintenance, operation, improvement, renewal, repair,

decommissioning, removal and restoration of the Hydro Scheme

Developments subject to the prior agreement of KP (acting reasonably

and without undue delay) as to the location of such accesses,

compounds, or areas that may be required from time to time. This

includes without limitation lay down areas in order to facilitate the

rights granted in 1.1.1 above but subject always to the KP having

approved, prior to commencement of construction, a plan showing

the indicative layout of the proposed Hydro Scheme Developments

including areas of temporary occupation required to facilitate

construction, such approval not to be unreasonably withheld or

delayed but declaring for the avoidance of doubt that any minor

changes, being those which do not require a further application to be

made for Planning Permission or a variation to the existing consent,

Page 17 ⇓

shall be deemed to have been approved by KP. The right of access so

conferred is conditional upon the LLP making good any damage to

the reasonable satisfaction of KP and consistent with the information

contained within the Record of Condition;

…

1.2 Subject to Part 8 of this Schedule, the LLP shall have an exclusive right of

pedestrian and vehicular access via the Access Roads to and from the Subjects

and to neighbouring land adjoining the Property upon which the Hydro

Scheme Developments which are located and are to be constructed for the

purposes of construction, maintenance, decommissioning, removal and

restoration of the Hydro Scheme Developments until the Expiry Date and

during the Restoration Period and that via the Access Roads and to construct

new roads as shown indicatively in solid purple, solid pink and broken pink

on Plan A or by such other routes as shall be agreed between KP and the LLP

acting reasonably and which new roads shall be deemed to be Access Roads.

The LLP shall be obliged to ensure that all vehicular access to and across the

Subjects by it or on its behalf is in suitable vehicles so as to cause the least

practicable damage to the said roads and others and the Subjects and the

Property, including where appropriate low ground pressure vehicles. In the

event that damage is caused to the said roads and paths then the LLP shall

repair the damage within 21 days of the damage being notified to the LLP,

and in the event that the damage is not so repaired within the 21 day period

to allow the said roads and paths to be used by a vehicle appropriate for that

particular road or path then KP shall be entitled to repair the said road or

path and charge the LLP for the reasonably and properly incurred costs of

repairing same. In so far as within the control of the LLP, none of the roads or

footpaths constructed or reconstructed as part of the Hydro Scheme

Developments will constitute a public right of way other than any already

previously designated as such a right of way.

SCHEDULE

PART 7

LLP OBLIGATIONS

2.4 To pay any rates, developments tax or charges including any aggregates tax

assessed on the Hydro Scheme Developments due to its use on the Subjects.

2.5 To free, relieve, indemnify and hold harmless KP against all actions,

proceedings, damages, penalties, costs, charges, claims and demands

incurred to KP in consequence of any breach of the provisions of this

Agreement by the LLP or those for whom the LLP is responsible in law and

against all loss and damage arising as a result of the exercise by the LLP of

the rights conferred on it by this Agreement including (notwithstanding the

foregoing generally) from any damage that may be caused to fisheries and

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the water environment as a direct result of the Glasa Hydro Scheme

Development.

2.6 Without prejudice to the foregoing indemnity, to maintain public liability

insurance cover to a sum of not less than Ten Million Pounds Sterling

(£10,000,000) in respect of each and every loss and to provide evidence of

such cover annually on the written request of KP or such greater sum to be

agreed by the parties (making reference to an expert if necessary as per

Clause 26) on the tenth anniversary of the Commencement Date and on each

subsequent tenth anniversary thereafter, and such sum to cover for the

avoidance of doubt the Restoration Period.

2.7 Not to object to any application for consent or permission for development on

the Property by KP which would not have any material effect on the

Development, and further not make any such objection without first

discussing the basis of any objection with KP.

2.8 To keep all equipment forming part of the Hydro Scheme Development in

good working order and the exterior of any structures built for the purpose of

the Hydro Scheme Development on the Subjects in good and tenantable

repair.

2.9 To display such warning or other notices as are required by statute but

subject thereto not to display any advertisements on the Subjects or elsewhere

on the Property without the prior written agreement of KP who shall not

withhold their consent unreasonably.

2.10 Subject to Clause 2.1 in Part 7 of the Schedule to this Agreement to comply

with the Planning Permission and any relevant consents and to use best

endeavours not to damage or disturb or pollute any existing drains,

waterways, fences or walls on the Subjects and for the Property, but in the

event that such damage is caused to remedy same as may be directed by the

relevant Authorities or by KP acting reasonably (if there is no relevant

Authority applicable in the circumstance), or if not possible to remedy to pay

reasonable and appropriate compensation to KP and such other third parties

as the case may be in lieu.

2.11 From the Commencement of Construction and in accordance with the Record

of Condition until at least the third anniversary of the Date of

Commissioning, and other than extraordinary damage caused by KP, to be

solely responsible for the repair, maintenance and where necessary renewal

of the Access Roads referred to in paragraph 1.2 or Part 5 of this Schedule and

having reinstated the same to the condition required by the provisions of

Clause 12.4, but not before 3 years from the Date of Commissioning to

contribute, according to user, to the cost of maintenance, repair, and when

necessary for the foregoing purpose, renewal of the same so as to preserve

them in that condition but declaring that the LLP shall, at their own sole

Page 19 ⇓

expense, repair as soon as reasonably practicable, any extraordinary damage

caused to the said roads by the LLP but declaring that the LLP shall carry out

adequate repairs, weather permitting, to allow access for normal estate

purposes at all times. The LLP shall be entitled to request that KP carry out

maintenance, repair, and when necessary for the foregoing purpose and

renewal of the Access Roads, and where reasonable KP shall carry out the

same, subject to the aforesaid provisions that costs shall be borne by the LLP.

…

2.15 The LLP shall repair and make good (or if it is not possible to repair or make

good then to adequately compensate for) any surface damage to ground

suffered as a result of the construction work or in exercise of any of the rights

granted under this Agreement.

PART 13

FORM OF NOTICE (COMMENCEMENT OF CONSTRUCTION)

The Glasa LLP

(Registered in Scotland with registered number)

[Address]

To: The Kildermorie Partnership

[Address]

Dear Sirs

Commencement of Construction

We refer to the LLP Agreement amongst you, SSE Generation Limited and ourselves

dated ◦ 2010 (the LLP Agreement). Terms defined in the LLP Agreement shall have

the same meaning when used in this letter.

We hereby give you notice that we intend to initiate the Glasa Hydro Scheme

Development under the Planning Permission and to take first entry on to the Subjects

(excluding any operations relation to site investigations) on [date].

[Date] shall therefore be the Commencement of Construction for the purposes of the

LLP Agreement.”

Terms of the IAD Servitude

[12] The relevant provisions of the servitude granted by Mr Duncan in favour of the

Kildermorie Partnership are as follows:

“DEED OF SERVITUDE by

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IAN ALEXANDER DUNCAN residing [address] (who and whose successors as

proprietors of the Benefited Property (after defined) are hereinafter referred to as the

‘Burdened Owner’)

in favour of

IAN ALEXANDER DUNCAN and Mrs CAROL HAMMOND DUNCAN, both

residing [address] the present Partners in the firm of Kildermorie Partnership (who

and whose successors as proprietors of the Burdened Property (after defined) and

hereinafter referred to as the ‘Benefitted Owner’)

DEFINITIONS AND INTERPRETATIONS

1.1 Definitions

In this Deed:

‘Benefited property 1’ means ALL and WHOLE the subjects shown

delineated in red and crosshatched on Plan 1 annexed and signed as relative

hereto and being the subjects disponed by and shown on the plan annexed

and signed as relative to the Disposition by the Burdened Owner in favour of

the Benefitted Owner dated of even date herewith and registered or about to

be registered in the Land Register of Scotland (being the subjects to comprise

a Generating Scheme);

‘Benefited Property 2’ means ALL and WHOLE the subjects shown

delineated in red and coloured red on Plan 2 annexed and signed as relative

hereto and being the subjects disponed by and shown on the plan annexed

and signed as relative to the Disposition to be granted by the Benefited

Owner in favour of Glasa LLP and to be registered in the Land Register of

Scotland (being the subjects comprising the existing Hydro Scheme);

‘Benefited Property 3’ means ALL and WHOLE (1) the subjects shown

coloured in yellow, and (2) the subjects shown outlined in blue, on Plan 3

annexed and signed as relative hereto and being the subjects disponed by and

shown on the plan annexed and signed as relative to the Disposition by the

Benefited Owner in favour of Glasa LLP dated of even date herewith and

registered or about to be registered in the Land Register of Scotland (being

the subjects comprising the Dam and Reservoir);

‘Burdened Property’ means All and Whole that area or piece of ground

extending to Seven Hundred and Forty Eight hectares and Forty Two decimal

or one-hundredth parts of a hectare (748.42ha) or thereby in the said Parish

and County and being the subjects registered in the Land Register of Scotland

under Title Number ROS9481;

…

Page 21 ⇓

‘Servitude Area 1’ means the ALL and WHOLE (i) the solum of the roadway

shown coloured blue on Plan 4 annexed and signed as relative hereto,

(together with such adjoining land extending up to twenty metres on either

side of the roadway as is required by the Benefited Owner), and (ii) the solum

of that area of ground shown coloured purple on the said Plan 4 (together

with such adjoining land extending up to twenty metres on either side of the

roadway as is required by the Benefited Owner).

‘Servitude Area 2’ means ALL and WHOLE those areas shown in dotted blue

lines on Plan 5 annexed and signed as relative hereto;

‘Servitude Conditions’ means the conditions under which the Servitude

Rights are to be exercised set out in Part 2 of the Schedule; and

‘Servitude Rights’ means the servitude rights set out in Part 1 of the

Schedule.

…

GRANT OF SERVITUDE

IN CONSIDERATION of certain goods and onerous causes but without any

consideration being paid to the Burdened Owner by the Benefited Owner, the

Burdened Owner grants the Servitude Rights but subject always to the

Servitude Conditions.

DATE OF COMMENCEMENT OF SERVITUDE

The Servitude Rights granted in the Schedule of this deed will be exercisable

with effect from 21 June 2010 notwithstanding the dates of this Deed. The

Servitude Rights granted in Schedule Part 2 will be exercisable from the date

of commissioning of the existing Hydro Scheme notwithstanding the dates of

this Deed.

…

Part 1

The Servitude Rights granted in favour of Benefited Property 1. Benefited

Property 2 and Benefited Property 3

The following servitude rights are imposed on the Burdened Property in favour of

Benefited Property 1, Benefited Property 2 and Benefited Property 3:

A servitude right of vehicular (including heavy vehicles) and pedestrian

access and egress at all times over and across Servitude Area 1 for the

Page 22 ⇓

purpose of laying, constructing, inspecting, repairing, maintaining, renewing,

replacing and widening the road over Servitude Area 1 to such a standard as

is required by the Benefited Owner to successfully operate a generating

scheme at the Benefited Property 1, an existing hydro scheme at the Benefited

Property 2 and a new hydro scheme at the Benefited Property 3 but provided

always the Benefitted Owner shall not be entitled to use or encroach upon

land outwith Servitude Area 1 other than the adjoining land extending to up

to twenty metres on either side of the roadway as hereinbefore referred to.

A servitude right of vehicular (including heavy vehicles and plant and

equipment) and pedestrian access and egress at all times for all purposes over

and across Servitude Area 1 (as upgraded in terms of Servitude Right 1

above) to the Benefited Property 1, the Benefited Property 2 and the Benefited

Property 3.

A servitude right to widen the roads and verges and the right to upgrade the

drainage ditches along Servitude Area 1.

A servitude right of vehicular (including heavy vehicles and plant and

equipment) and pedestrian access and egress at all times over and across the

Burdened Property to erect and install a bridge over the Allt a Chlaiginn burn

and a section of new road between the points A and B the route of said new

road to be agreed between the parties (both acting reasonably) and thereafter

a servitude right of vehicular (including heavy vehicles and plant and

equipment) and pedestrian access and egress at all times over and across the

said bridge and new road for all purposes.

A servitude right to lay, construct, inspect, repair, maintain, renew and

replace underground and overground water pipelines along Servitude

Area 3, together with a servitude right of access, at all times, thereto.

Part 2

The Servitude Conditions

The Servitude Rights created by this Deed are subject to the following Servitude

Conditions:

1. The Benefited Owner will:

1.1 make good on demand all damage caused to the Burdened Property and / or

the Servitude Area 1, by reason of the exercise of the Servitude Rights by the

Benefited Owner or their tenants, agents, employees, workmen and others

authorised by them from time to time, to the reasonable satisfaction of the

Burdened Owner;

1.2 use their best endeavours to ensure that the Servitude Rights are exercised so

as to cause the minimum disturbance, nuisance or annoyance as is reasonably

Page 23 ⇓

practicable to the Burdened Owner and their tenants or occupiers, and all

other adjoining or neighbouring proprietors, tenants or occupiers, and

1.3 indemnify the Burdened Owner in respect of all claims, demands, expenses,

liabilities, actions or others arising in consequence of the exercise of the

Servitude Rights by the Benefited Owner.

2. The Benefited Owner will at all times maintain the road in good repair and

condition to the reasonable satisfaction of the Burdened Owner.

3. The Benefited Owner will pay to the Burdened Owner on demand from time

to time a share, apportioned on the basis of use, of the costs properly and

reasonably incurred by the Burdened Owner in repairing, maintaining,

repairing, renewing and replacing the Servitude Area 1 other than during the

first three years from the date of entry hereunder during which period the

Benefited Owner will meet the whole costs of maintaining, repairing and

renewing Servitude Area 1. If the Benefited Owner fails to pay in full any

such sum so demanded within twenty one days of the date of demand

interest at Four per cent per annum above the base lending rate from time to

time of the Royal Bank of Scotland Plc will run thereon on any outstanding

balance from the date of demand until payment in full by the Benefited

Owner.

4. In the event of the Benefited Owner requiring the removal of fences in order

to exercise any of the Servitude Rights such fences will be replaced by the

Benefited Owner at their sole expense along such new fence line as agreed

with the Burdened Owner, both parties acting reasonably.

5. If the Benefited Owner require to fell trees for the purposes of carrying out

the construction of the new bridge and road the Benefited Owner shall by

written notice to the Burdened Owner request that the trees growing upon

Servitude Area 1 covered by a Felling Licence be felled after the date of

commencement of the servitude and the Burdened Owner consents, such

consent not to be unreasonably withheld or delayed, to such request, then the

Burdened Owner will arrange a standing sale to achieve a clear fell of the said

area in accordance with the terms of the said felling licence and the Benefited

Owner will pay to the Burdened Owner compensation at the rate of £5.56 per

tonne Index Linked for all timber harvested and sold together with

reimbursement of all necessary forestry work costs within 30 days of receipt

by the Benefited Owner of written evidence confirming such sale and costs,

declaring that any such felling and harvesting will require to be carried out

only between the months of March and October in each year.

The Burdened Owner and the Benefited Owner shall carry out all tree felling

in accordance with a felling programme agreed in advance between the

Burdened Owner and the Benefited Owner (acting reasonably) and in

accordance with the UK Forestry Standard as amended from time to time and

Page 24 ⇓

the Benefited Owner will make payment according to the Table of Crop

Compensation per Schedule 4 for the trees but for the avoidance of doubt any

trees felled per the paragraph above shall not be compensated for by

reference to the Table of Crop Compensation be it conifers and/or broadleaf

trees (if any) removed from pipelines, cables, the power house and Access

Routes as well reimbursement to the Burdened Owner of all necessary

forestry work costs but declaring that in the event that the Burdened Owner

keep the timber arising from the Benefited Owner’ felling, then the amounts

as calculated from the Schedule will be reduced by the value (if any) of the

timber felled as evidenced by the payment schedule (on a standing sale basis)

from the timber purchaser; and in the event of any difference of opinion on

the terms of this clause it shall be interpreted in accordance with the Glasa

LLP Limited Partnership Agreement dated 20 and 21 June 2010.”

Terms of the KP Servitude

[13] The KP Servitude defined the Kildermorie Partnership as the “Burdened Owner”

and Glasa LLP as the “Benefited Owner” and included the following provisions:

“DEFINITIONS AND INTERPRETATIONS

1.1 Definitions

In this Deed:

‘Benefited Property 1’ means ALL and WHOLE the subjects shown