Property developer’s breach of missives action continued to proof

Lord Tyre
Lord Tyre

A company that was formed to complete a development of 55 residential apartments at a site near the Portobello Kilns in Edinburgh, has had its petition to amend a Deed of Conditions.

PHG Developments Scot Ltd executed the deed to grant and regulate, among other things, common ownership of a boundary wall, and rights of access to and use of parking spaces in a car park in the basement of the apartment building.

The petition was heard in the Outer House of the Court of Session by Lord Tyre. Due to COVID-19 restrictions, the debate was conducted by means of written submissions and a telephone conference.

Inadvertently granted rights

The stated purpose of the amendment was to enable the petitioner to implement obligations under missives entered into by an associated company and Lothian Arcades Limited, the proprietor of an adjacent development known as the Arcade. The missives related to access to and use of car parking spaces in the Kilns site by property owners in the Arcade. LAL contested the petition.

In 2013, LAL was sold 18 car parking spaces in the finished Kilns development by KDL, the company that then owned the site. KDL and PHG had at all material times been under the control of the same person, Mr Daniel Teague.

The rights that LAL were to receive included a servitude right for pedestrian access via a doorway to be formed in the adjacent wall to the Arcade site. The wall was to be blocked off until such time as the Arcade was completed. The Kilns development was completed in July 2015, with the 55 apartments sold off to individual proprietors and the car park door created and blocked off as described in the missives.

In September 2018 LAL raised an action seeking damages from KDL and Mr Teague as guarantor. They claimed that KDL were in material breach of their missives under the obligations, as the proprietors of the 55 apartments had been given rights to all the parking spaces in the development and owned in common the wall where the doorway was built.

By the time of the action, the date of entry had passed and LAL were no longer the proprietors of the Arcade. Nonetheless, the Lord Ordinary agreed with LAL’s submissions. In light of this, PHG brought an application under the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 for rectification of the Deed of Conditions granted to LAL.

The petitioner averred that, due to LAL unexpectedly not allowing for the foundations of the eastern wall to be built on both sides of the boundary, it had been possible for PHG to inadvertently make the wall common property of the Kilns site. It also averred that it had not intended to grant the owners of the 55 apartments any rights over LAL’s parking spaces.

In these circumstances, the petitioner averred that the Deed of Conditions failed to express accurately its intention as the grantor of the Deed of Conditions at the date on which it was executed, and proposed a number of amendments. It was not considered necessary to amend the deeds granted to the apartment owners.

The respondent submitted that the petitioner’s approach was misconceived. The proper mechanism would be to amend the titles of the apartment owners, engaging their right of veto over the proposed corrections. It could not be right that PHG could bypass that protection by seeking rectification of the Deed of Conditions alone and leaving it to the Keeper to deal with the titles of the apartment owners.

Nothing requiring consequential amendment

In his decision, Lord Tyre first considered the competence of the application, saying: “[The deed] was executed and registered at a time when none of the apartment owners had acquired a registered title to his or her apartment. Nor was it granted to give effect to the Car Parking Missives; all that PHG offer to prove in these proceedings is that it was not intended to interfere with implementation of the missives. In these circumstances I am satisfied that the application is correctly made under [the 1985 Act] and that the issue to be determined is whether or not it failed to express accurately the subjective intention of PHG at the time when it was granted.”

He continued: “In my opinion, [there is no] need for PHG to seek an order for rectification of the dispositions in favour of the apartment owners. If an order is granted for rectification of the Deed of Conditions, the deed will have effect as if it had always been in its rectified terms. The references to the Deed of Conditions in the dispositions would therefore be deemed retrospectively to be to the deed in its rectified terms. There is nothing in the terms of the dispositions which would require consequential amendment.”

Having decided that the petitioner’s intentions were established by their averments, he went on to say: “None of the other criticisms of PHG’s case made by LAL are of such weight as to preclude enquiry. I reject LAL’s submission that the case amounts to no more than bare assertion of defective expression.”

He continued: “In this context, the averments that I have held to be insufficient of themselves to justify an order for rectification, i.e. that the Deed of Conditions was not to prevent the obligations imposed by the Car Parking Missives from being fulfilled, and that it was to remain possible to convey the parking spaces to LAL with vacant possession and access to them through the doorway, provide a factual explanation of why the deed fails accurately to express the grantor’s intention. PHG’s averments as to how it came about that the doorway was, as it claims, inadvertently included in the common parts are also relevant by way of explanation of how the grantor’s intention came to be defectively expressed.”

Lord Tyre concluded: “I do not regard it as either necessary or appropriate to address at this stage any matters concerning the exercise of the court’s discretion as to whether or not to grant an order under section 8. It may be arguable that considerations such as carelessness on the part of PHG or its agents, or the nature and extent of any prejudice that would be caused to any person by the proposed rectification, are relevant to the exercise of the discretion, but these are matters that ought to be canvassed, if at all, after enquiry. Nor is it necessary at this stage to consider the specific amendments to the Deed of Conditions that PHG wishes the court order to make, beyond confirming that I reject LAL’s contention that each proposed amendment requires to be the subject of specific averment.”

For these reasons, the case was put out by order for discussion of further procedure, with Lord Tyre considering that “the appropriate course of action is to allow a proof before answer on the petition and answers as adjusted, leaving parties’ preliminary pleas standing”, before pronouncing an interlocutor.

© Scottish Legal News Ltd 2021

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