Inner House upholds decision to allow petition for rectification of parking rights deed to proceed to proof

Lothian Amusements Ltd, the 57th respondent to the petition raised by PHG Developments Scot Ltd, argued that the 55 apartment owners, none of whom entered a response to the petition, required to actively consent in order for real rights granted to them to be removed.

The appeal was heard by the Lord President, Lord Carloway, sitting with Lord Malcolm and Lord Pentland. The petitioner was represented by Lindsay QC, instructed by Ennova Law and the respondent and reclaimer by DM Thomson QC, instructed by DLA Piper Scotland.

Inadvertently granted rights 

The petitioner, PHG, now in liquidation, was formed to complete a development of 55 residential apartments in Portobello, Edinburgh, known as the Kilns. The development was also to include a basement car park containing 73 spaces. The respondent, LAL, was formerly the heritable proprietor of an adjacent development site known as the Arcade. 

LAL entered into missives with another company, KDL, under the control of PHG’s director to purchase the excess 18 spaces for use by owners of apartments in the Arcade. The missives provided that the sale disposition of the 18 spaces would include rights to access and egress across the car park through a door in the eastern wall of the development, which was to be built across both complexes. When the wall was built, however, it was only on the Kilns site. 

A Deed of Conditions executed by PHG in 2014 covered the whole of the Kilns development including the 18 spaces. The Deed provided the future owners of the 55 apartments in the Kilns development with a right to park in any one of the 73 spaces, and rights of access and egress across the whole car park. This Deed was referred to in the dispositions for each of the 55 apartments. 

In September 2018 LAL brought a commercial action against KDL for breach of the missives. It was found that by granting the apartment owners the right to park in all the spaces, KDL could not grant LAL vacant possession of the 18 surplus spaces. As a result of this, PHG sought rectification of the Deed of Conditions under section 8(1)(b) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985. 

PHG contended that it had inadvertently made the doorway and 18 spaces a common part of the Kilns development and had not intended to grant the apartment owners a right to access them. The Deed therefore failed to accurately express its intention as the grantor. In response to the petition, LAL argued that the 55 apartment owners required to consent to the rectification for it to proceed. 

The Lord Ordinary who heard the petition found that there was no need for the apartment owners to consent. If an order for rectification of the Deed of Conditions was made, the Deed would have effect as if it had always been in its rectified terms. Nothing in the dispositions for the 55 apartments therefore required amendment. 

On appeal to the Inner House, it was submitted for LAL that the Lord Ordinary had erred in holding that section 8 of the 1985 Act permitted the loss of real rights on an offer to prove mere unilateral error of expression. This conclusion would give rise to the “startling consequence” that real rights acquired in good faith by the apartment owners could be taken away without their consent. Said real rights were acquired via the dispositions, which incorporated the Deed of Conditions in unrectified form., not via the Deed itself. 

Suitable for remission 

All three judges gave opinions, with the main opinion being delivered by Lord Pentland. He began by noting: “The question before this court, as it was before the Lord Ordinary, is whether the petitioner’s averments are suitable to be remitted to probation, that is whether they are relevant and whether they are set out with sufficient specification to justify a factual inquiry being held into whether the averments can be proved.” 

Turning to examine the petitioner’s averments, he said: “The petitioner sets out in some detail that the document fails in a number of respects to express accurately the petitioner’s intentions at the time it was executed. Prima facie it follows, as it seems to me, that the petitioner has pled a case that is suitable to be remitted for a factual inquiry.” 

He said of LAL’s objections: “It seems to me that the argument is misconceived in principle. It ignores the crucial effect of section 8(4) of the 1985 Act, which provides that a document ordered to be rectified under this section shall have effect as if it had always been so rectified.” 

Lord Carloway, who agreed with Lord Pentland, added: “As a generality, it is correct, as LAL have submitted, that section 8 of the 1985 Act does not envisage that a person, who has acquired a real right in good faith, can lose that right on the basis of a unilateral error in the expression of the deed which created that right. If a person so acquiring the right tendered a plea to that effect, it may well be sustained. No such plea has been advanced in this case. It is not for LAL, in the absence of an interest, to do so.” 

He concluded: “If the Deed of Conditions were to be rectified, there would be an alteration of the real rights of the owners of the 55 flats; although not one that would have any substantial practical effect on their enjoyment of their single car parking space. These owners seem content with that occurring, even if they have not formally consented to it.” 

Lord Pentland concluded: “If the law deems it never to have existed in its original terms, but always in its rectified terms, it follows that the references to the Deed in other documents, such as the split-off dispositions, can only be to the rectified Deed. Retroactive rectification must be effective for all purposes. This is, in my view, a crucial feature of the statutory rectification scheme.” 

For these reasons, the reclaiming motion was refused. 

Difficulty with the proposition 

Lord Malcolm took a slightly different view of the case.

His opinion began: “In agreement with [Lord Pentland] I see no merit in the complaints as to lack of specification in the pleadings. I have more difficulty with the proposition that the rights of the purchasers of the apartments can be altered without their consent simply on proof that the deed of conditions did not reflect the intentions of the petitioner.” 

However, he continued: “For myself I would not question LAL’s right to object, but in the particular and unusual circumstances of the case, including that all of the proprietors enjoy an allocated car park space, and that despite service of the petition on each of them, the court has heard not even a murmur of a dissent, I consider that it would be reasonable to proceed on the basis of implied consent on their part, at least in respect of whatever may follow from the grant of the prayer of the petition.” 

Lord Malcolm said of his reservations: “I do not press the above reservations to a dissent in respect of the view of your Lordships that the court should adhere to the interlocutor allowing a proof before answer, though I would comment that even if the petition is ultimately successful in rectifying the deed of conditions, the absence of rectification of the dispositions may yet cause difficulties for the petitioner.”