Bell & Scott Property Update, May 2007

Welcome to the May 2007 issue of Bell & Scott Property Update.

Property Update provides a round up of relevant case law and other items which we consider may be of interest to those in the property industry.

In this month's issue we comment on a recent appeal case which looked at freedom of information and its correlation with the planning system and a case concerning an option agreement to buy land where the last minute nature of the extension led to arguments over whether the extension was valid.

Recent Decisions

All will be Revealed

The importance of the Freedom of Information Act in bringing transparency to the planning process

The recent Court of Session decision in the case of The Scottish Ministers v The Scottish Information Commissioner (David Elstone and Martin Williams’s Applications) clarifies the significance of the Freedom of Information (Scotland) Act 2002 to the planning process.

A planning application was submitted to North Ayrshire Council for a waste disposal and ecological conservation area at Trearne Quarry, Gateside, against which there were more than 900 objections. The planning sub-committee agreed to refer the matter to the Scottish Ministers and to grant planning permission subject to several conditions. The Scottish Ministers then advised the Council that they did not require the application to be referred to them for determination. The Council was therefore able to determine the application as it thought fit.

David Elstone and Martin Williams requested copies of all paperwork and correspondence relating to the Scottish Ministers’ decision be released by the Scottish Ministers. The requests were refused. After having sought review of the refusal, David Elstone and Martin Williams applied to the Scottish Information Commissioner for a decision. The Scottish Information Commissioner decided that certain documents withheld by the Scottish Ministers should be released. The Scottish Ministers appealed the decision to the Court of Session.

The Scottish Ministers argued that the approach of the Information Commissioner precluded consideration of documents on a group or class basis and that the release of the information could inhibit civil servants from giving their advice on this type of application. The Information Commissioner had been clear that each document should be examined individually to determine whether or not the release of the documents would have the suggested inhibiting effect. In relation to this case, the view was that disclosure would not have had that effect and furthermore there was a strong public interest in the release of the documents.

The Inner House of the Court of Session upheld the decision of the Information Commissioner and dismissed the appeal. The court agreed that the documents had to be looked at individually rather than on a class basis.

Michael Gilmartin, a Senior Solicitor in our Corporate Team, comments:

When making a decision on whether or not to disclose a particular document, or certain information contained within a document, a public authority must examine each document individually and make an informed decision on each document. It is not sufficient for a public authority to claim that all the information before it is exempt from disclosure on a certain basis. Rather, it must justify withholding each piece of information from disclosure. It is particularly interesting to see how the court took the view that the release of correspondence between public officials may justify exemption from disclosure on the basis that it may inhibit such officials from corresponding with each other in the future for fear of such information being disclosed, but that it may also justify disclosure as it provides a transparency of decisions of public authorities, which is, after all, what the Freedom of Information (Scotland) Act is all about.

Case referred to: The Scottish Ministers v. The Scottish Information Commissioner

The full text of the decision is available from the Scottish Courts website here

Peter and Rita Rennie owned Angel Farm, Coleford, Gloucestershire. On 17 September 1992 , the Rennies entered into an Option Agreement with Westbury Homes. Westbury was to pursue planning permission for residential development of the farm. The Option Period was 10 years but the Agreement also said that “at any time during the last year of the Option Period… the intending Purchaser may by notice in writing served upon the intending Vendor require such period to be extended by 5 years and upon service of such notice and payment to the intending Vendor of the additional sum of... £20,000 this Agreement shall be construed as if the Option Period was 15 years”.

On Thursday 12 September 2002, Westbury’s solicitors wrote to Mr Rennie’s solicitors (Mrs Rennie having died in 1998) stating that they would “very shortly be put in funds for the extension of the option for a further 5 years upon payment of £20,000 by Westbury” and asking for bank account details so they could transfer the money. Nothing then happened until Tuesday 17 September when Westbury’s solicitors obtained the bank account details by phone and immediately transferred £20,000 into Mr Rennie’s solicitors’ account.

Two days later Mr Rennie’s solicitors wrote to Westbury’s solicitors alleging that the option had not been validly renewed and tried to return the £20,000 by enclosing a cheque for that amount. The dispute went to court.

The parties agreed fairly early on that the original Option Period had expired at midnight on Monday 16 September 2002 . The points at issue in court were: (1) whether the letter from Westbury’s solicitors dated 12 September 2002 was effective notice that Westbury was extending the option and (2) whether the option could be extended without the £20,000 having been paid within the original 10 year Option Period.

The court held (1) that the letter of 12 September had been a valid notice in terms of the Option Agreement and (2) that it was not necessary for the £20,000 to have been paid within the Option Period. Accordingly the Option Period had been extended for 5 years.

Bruce Anderson , Head of our Strategic Land Team, comments:

On the face of it this is a reassuring case for developers; it has a happy ending. However, it should perhaps be taken as a cautionary tale.

It appears that Mr Rennie was ready to use the slightest opening to attempt to have Angel Farm released from the option. As far as can be judged from the report of the case, Westbury had complied with its obligations in terms of the Option Agreement, including spending substantial sums in successfully seeking allocation of part of the land for housing development. Clearly Mr Rennie was trying to profit from what he and/or his solicitors saw as a technical slip-up by Westbury.

On the question of whether the letter of 12 September was sufficient notice in terms of the Option Agreement, the court followed the line adopted by a number of previous decisions. The judge took the view that the test was whether a reasonable recipient of the letter of 12 September would have understood it as a notice to extend the Option Period or not. In the circumstances there seemed little doubt that any reasonable recipient in Mr Rennie’s shoes would have understood it as notice that Westbury intended to extend the Option Period. Interestingly, the judge felt that it was largely irrelevant whether or not Westbury intended it to be a valid notice or not.

The judge felt that the question of whether or not the £20,000 had to be paid within the 10 year period or not was even more clean-cut. In his view the wording (quoted above) made it absolutely clear that the notice had to be served within the 10 year period but said nothing about when the £20,000 had to be paid. Therefore, by implication, the £20,000 simply had to be paid within a reasonable time.

There is an interesting contrast between the ways in which the court dealt with these two points. On the first point, the court took a view as to what a “reasonable recipient” would have thought of the letter while on the second point the court applied a very strict legal interpretation of the wording.

I am sure that Westbury (now part of Persimmon) was much relieved by the outcome. However, while things worked out well for the developer, I would not take the case as reassuring but rather as a near miss. It is, of course, an English case and would not necessarily be followed in Scotland, but it is a reminder of the risks which are always round the corner and the importance of giving thought and attention to the basics. There is a salutary quote in the report of the case (from Lord Justice Neuberger in an earlier case) where he welcomed the practical attitude to the validity of notices taken by the courts in a number of cases but added: “this is not to say that a slipshod approach to the drafting of such notices has thereby been sanctioned by the House of Lords”!

 Case referred to: Rennie v. Westbury Homes (Holdings) Limited

 The full text of the decision is available from the British and Irish Legal Information Institute website here

News

Modernising the Planning System: Unlocking Planning's Potential

With the Scottish planning system undergoing its most significant changes in the last 60 years, the Scottish Executive has published a guide setting out what they (the Scottish Executive), The Royal Town Planning Institute and Planning Authorities are doing to adapt to the new planning system. The guide also sets out how the approach to development planning, development management and enforcement will be changed.

The Scottish Executive’s guide is available here

The Scottish Executive has produced a consultation paper on Implementing the Water Environment and Water Services (Scotland) Act 2003. The paper is entitled ‘Water, Sewerage and Drainage Infrastructure: Construction Standards and Vesting Conditions, A Consultation’. The objective of the consultation is to invite comment on the core standards and conditions that developers will be required to meet for water and sewerage infrastructure. Views are also sought on whether there is a need for regulation to ensure compliance with these standards and conditions.

The Scottish Executive’s consultation paper is available here