Scottish Court of Session Decisions

SECOND DIVISION, INNER HOUSE, COURT OF SESSION
Lord Justice Clerk Lady Paton Lord Abernethy	[2012] CSIH 32 XA132/10 OPINION OF THE LORD JUSTICE CLERK in Appeal by (1) EDWARD GARDNER FOX, (2) DAVID WONG, (3) MRS LILY WONG, (4) NEELAM GAJRI, (5) MRS JAGJWAN KUMAR GAJRI and (6) SUKHBINDER SINGH SANDHU Appellants; against (1) THE SCOTTISH MINISTERS and (2) GLASGOW CITY COUNCIL Respondents: _______

For the appellants: Smith, QC; MacRoberts

For the Scottish Ministers: (First hearing) O'Carroll, (Second hearing) Mure, QC; Scottish Government Legal Directorate

For the Council: Martin, QC; Director of Corporate Services, Glasgow City Council

27 March 2012

Introduction

[1] This is an appeal under paragraph 15 of the First Schedule to the Acquisition of Land (Authorisation Procedure) (Scotland) Act 1947. It relates to the Argyle Street/Robertson Street, Glasgow Compulsory Purchase Order 2008 (the CPO). The appellants crave the court to quash the decision of the Scottish Ministers by which they confirmed the CPO. The appeal is therefore technically incorrect. The remedies that paragraph 15 provides, so far as relevant to this case, are the suspension ad interim of the CPO (para 15(1)(a)) or the quashing of the CPO or any provision contained therein (para 15(1)(b)). However, we need not concern ourselves with that point for reasons that will become clear.

[2] Glasgow City Council (the Council) made the Order under section 189(1)(b) of the Town and Country Planning (Scotland) Act 1997 (the 1997 Act). It relates to three properties situated in Argyle Street and one property situated in York Street (the subjects). The six persons in whose names the appeal was brought represent all of the affected interests in these properties. Only the first, second and third of them have insisted in the appeal. I will refer to them simply as the appellants. For a proper understanding of the problems that this case raises and to deal correctly with matters of principle raised by the appellants' motion for expenses, I shall set out the history in detail.

The history

[3] On 9 and 11 June 2008 the Council entered into a Minute of Agreement with Progress Property Developments Limited (PPD) for the acquisition by the Council by way of a CPO of the subjects as part of PPD's site assembly for the development of an international hotel and serviced apartment complex with conference and leisure facilities.

[4] This was a typical back-to-back, or agency, agreement by which an acquiring authority agrees to promote a CPO over a site proposed for development and, if the CPO should be confirmed, to transfer any properties thereby acquired by it to the developer; and the developer agrees in turn to indemnify the authority in respect of costs incurred by it, including any compensation payable to affected owners and occupiers. It is normal in such cases for the developer's obligations under the agreement to be guaranteed. This form of agreement is not entirely risk-free for the acquiring authority, as this case shows.

[5] On 23 July 2008 the Council made the Order. On 27 August 2008 it submitted it to the Scottish Ministers for confirmation. The appellants objected. The Ministers appointed a Reporter to hold a public local inquiry into the objections.

[6] The Inquiry took place from 1 to 3 September 2009. The appellants challenged the viability of the proposal on the view that the costs of the development would at best only equal its end value, with no room for developer's profit; and that it was unlikely that the development would be funded.

[7] There is no doubt that the viability of a project of this kind is a material consideration to a decision on the question whether the CPO should be confirmed. The Reporter heard extensive evidence on that topic. I need not go into the details. In his Report dated 21 October 2009 he concluded that the weight of evidence showed that the scheme would be financially viable and that it was much more likely than not that the necessary funding would be available for the scheme (Report, para 70). He concluded that the Council had put forward a compelling case (para 79). He recommended that the CPO should be confirmed (para 80).

[8] On 24 October 2009 a Receiver was appointed to certain properties of PPD in England.

[9] By Decision dated 28 October 2009 the Ministers accepted the Reporter's recommendation and confirmed the CPO. That is the decision appealed against.

[10] It thereupon became the duty of the Council to publish notice of the confirmation of the CPO as soon as might be and in the prescribed form (1947 Act, First Sched, para 6). In the event, the Council did not do so at that stage, perhaps because the developer had yet to produce a guarantee.

[11] In January and February 2010 the first appellant's solicitors took up with the Council the question of its delay in publishing the notice of confirmation of the CPO. They also expressed concern at the receivership of PPD's English assets. The Council pointed out that the development site was by then held by PPD's subsidiary, Argyle Street Properties (No 2) Ltd (ASP2). It assured the first appellant's solicitors that it would "make checks to satisfy itself in relation to matters." At this point there was a threat of judicial review.

[12] On 15 March 2010 the Council rejected a freedom of information request by the first appellant's solicitors on the grounds of privilege and commercial confidentiality.

[13] By Assignation dated 25 and 30 March 2010, PPD assigned its interest under the Minute of Agreement to ASP2 with consent of the Council.

[14] By Minute of Agreement dated 24, 25 and 27 August 2010 between the Council, Anglo Irish Bank Corporation Ltd (Anglo Irish) and ASP2, Anglo Irish gave a guarantee to the Council for the performance by ASP2 of its obligations under the agency agreement up to maximum of £1.4 million. The Agreement was conditional on the Council's having executed a general vesting declaration by 31 December 2010.

[15] On 7 September 2010 the Council published notice of the confirmation of the CPO. In terms of the legislation that date was the date from which the CPO became operative.

[16] On 19 October 2010 the appellants challenged the confirmation of the CPO on the ground that the authorisation was not within the powers of section 189(1)(b) of the 1997 Act. The essence of their case was that the Ministers, in adopting the Reporter's reasons, failed to produce proper, adequate and intelligible reasons for their decision (cf Compulsory Purchase (Inquiries Procedure) (Scotland) Rules 1998 (SI No 2313)). The findings were without a proper basis in fact; separatim were unintelligible; separatim failed to take account of material considerations; and separatim were unreasonable. The Ministers could not properly have been satisfied that a compelling case in the public interest to justify confirmation had been made out by the Council. The appellants also contended that the Reporter had erred in placing the onus on the appellants to establish that funding for the project would not be forthcoming (Report, para 69) and that confirmation would not be in the public interest (para 76). To give preference to the public interest in securing a large hotel in Glasgow over the loss of the appellants' property rights was disproportionate.

Subsequent events

[17] In 2009 the Irish Government established the National Asset Management Agency (NAMA) as one of several measures to deal with problems in the Irish banking sector. NAMA became the principal creditor of ASP2.

[18] On 3 May 2011 NAMA put ASP2 into administration. On 16 May 2011 the first appellant's solicitors asked the Council to confirm its position in relation to the appeal, and the CPO procedures generally, in light of the administration.

[19] On 24 June 2011 the administrators' statement of proposals indicated that ASP2 had been insolvent from 31 March 2009.

[20] On 28 June 2011 the administrators were reported in the media as having said that the proposed development was unlikely to happen.

[21] It appears that between May and July 2011 the Council had meetings with Anglo Irish and the administrators. The administrators continued to have discussions with the appellants with a view to a voluntary acquisition. The proposed hotel managers remained committed to the proposal. It was the Council's view that the prospects for the development were still sufficiently strong to justify its maintaining the CPO.

[22] On 8 July 2011 the Council told the first appellant's agents that it had been in contact with the administrators and that they were satisfied that a development in line with the planning purpose for which the CPO was being promoted was still viable and achievable. The parties thereupon proceeded to fix a hearing in the appeal for three days beginning on 31 January 2012.

[23] In September 2011 there were further discussions between the Council and the administrators. The Council awaited confirmation from NAMA that they were willing to extend the guarantee, which depended on the administrators' report to NAMA on the available options.

[24] On 27 October 2011 NAMA notified the Council that it could not reinstate Anglo Irish's guarantee. The result of that was that the Council would become liable for all the CPO costs, including compensation, if it were to proceed with the CPO. In the meantime the management agreement with the proposed hotel operator had come to an end.

[25] On 28 October 2011 the first appellant's solicitors raised with the Ministers and with the Council the question whether they would reconsider their positions on the CPO and on the appeal. They questioned whether the administrators would be prepared to continue to provide the indemnity on costs and compensation.

[26] Thereafter, since the appellants and the Ministers were concerned to know if the Council was still minded to enforce the CPO, we put the case out for a By Order hearing that was fixed for 16 December 2011.

[27] On 13 December 2011 the Chief Executive of the Council, acting under delegated powers, approved the recommendations of a report to the Executive Committee of the Council that the Council should withdraw from the present appeal; terminate its agency agreement with ASP2; and take no further action in respect of the CPO process.

The By Order hearing on 16 December 2011

[28] At the outset of the By Order hearing senior counsel for the Council intimated the decision of the Chief Executive dated 13 December 2011. He sought leave for the Council to withdraw from the proceedings. He said that the Council's position was that while it did not oppose the appeal, it did not consent to the quashing of the decision appealed against. He was prepared to give an undertaking that the Council would take no further action in respect of the CPO.

[29] Counsel for the Ministers intimated that the Ministers did not concede that the decision complained of was not within the powers of the section; but that they consented to the quashing of the CPO. If the court was unwilling to quash the CPO, the Ministers would accede to the undertaking proposed by the Council and would be content with that.

[30] Counsel for the first, second and third appellants moved that, since neither the developers nor the Council sought to pursue the CPO, it should be quashed. Section 3 of the Human Rights Act 1998 applied, because the appellants would be unable to sell their properties while the CPO remained in force.

[31] In light of these motions, we expressed the view that the court ought not to quash a decision of the Scottish Ministers, even where the Ministers consent to that course, unless the court has been given a convincing justification for its doing so. That is why when the Scottish Ministers no longer oppose a statutory appeal, it is necessary for them to give to the court a narrative explaining why it should allow the decision to be quashed (McAllister v Secretary of State for Work and Pensions 2003 SLT 1195, at paras [3]-[7]). On the information available to us at the time, the strength of the appellants' case was far from obvious. It seemed to us, therefore, that if the objective of all parties was that the CPO should not take effect, that would have to be achieved by other means. Since there appeared to be some doubt as to the options available to an acquiring authority once a CPO is confirmed, and as to the ways in which the interests of the appellants and of prospective purchasers of their properties could be protected, we continued the hearing so that we could be addressed on these matters and on the related question of expenses.

[32] On 19 January 2012 a meeting of the Council ratified the decision of the Chief Executive to which I have referred.

The continued hearing

The undertaking

[33] At the continued hearing, the Council tendered an undertaking in the following terms.

The Council undertakes to the court and the appellants as heritable proprietors of the areas of land which are the subject of the Order that, if the Order is not quashed, the Council will for a period of three years from 7 September 2010 take no further steps to acquire any of the areas of land in question by use of powers provided by the Order, and will not serve any Notice to Treat nor make any general vesting declaration for that purpose. The Council agree that this undertaking extends to any third party who already holds or who may acquire an interest in the land whether by sale, disposition, lease, security, charge, servitude, wayleave, or any other dealing with the land, and any party who derives right from them. The Council further agree, if requested, to provide written confirmation to any third party holding or acquiring such an interest in respect of said land of the terms of this undertaking, and if required to endorse in gremio any deed in respect of such a dealing that it undertakes to take no further steps to acquire said land as specified above.

The parties were agreed that this was a suitable and effective way of bringing the appeal process to an end, other than in relation to expenses.

[34] In the light of the undertaking, counsel for the appellants intimated that he no longer insisted in his motion to us to quash the decision complained against. Instead, he accepted the submission of counsel for the Ministers that the appropriate interlocutor was that we should refuse the appeal.

Conclusions on the undertaking

[35] There are two practical difficulties for the appellants and the Council in this case, namely that there is no statutory procedure by which the Ministers can rescind a decision made by them to confirm a CPO; and there is likewise no statutory procedure by which an acquiring authority can withdraw a confirmed CPO. I remain convinced that this court cannot properly quash a CPO under paragraph 15 (supra), even if all parties agree to that course, unless it is persuaded after a full hearing that the conditions set out in paragraph 15 are met. That of course is not the case here.

[36] It follows therefore that the CPO remains valid until it expires by the passage of time; that is to say in this case until 7 September 2013. The existence of the CPO may therefore adversely affect the appellants' interests and those of heritable creditors throughout that period.

[37] The Council submits that the undertaking, which extends to successors in title, is a sufficient safeguard; and that a breach of it could be remedied by judicial review (R (Iceland Foods Ltd) v Newport City Council
[2010] EWHC 2502 (Admin)).

[38] The Ministers are neutral as to whether the undertaking is enforceable. They observe that, were it not for the undertaking, it would be lawful for the Council now to enter into an agreement with another developer to implement the same scheme on the same terms.

[39] In Ystalyfera Iron Co v Neath and Brecon Railway Co ((1873) LR 17 Eq 142) Sir George Jessel MR refused to grant an injunction against the exercise of compulsory powers because inter alia the right had not been abandoned through the lapse of time. In Grice v Dudley Corporation ([1958] 1 Ch 329), an action for a declaration that a notice to treat was invalid, Upjohn J expressed the following propositions:

" ... first, the promoter exercising statutory powers must proceed to enforce his notice in what, in all the circumstances of the case, is a reasonable period ... Secondly, the promoter may evince an intention to abandon his rights given to him by the notice to treat, in which case the owner is entitled to treat those rights as abandoned ... Thirdly, this court has an inherent jurisdiction to control the exercise of statutory powers if, but only if, it can see that the powers are being exercised not in accordance with the purpose for which the powers were conferred ... These three propositions are, in point of law, distinct, but, in practice, they tend to merge one into the other, more particularly the first two, for unequivocal acts of abandonment seldom arise" (at p 339).

With regard to the second proposition, he said that

" ... no authority really is required as the proposition is self evident. Sir George Jessel MR in the Ystalyfera case recognises abandonment as a possible way of terminating the promoter's rights. The only difficulty is as to what acts evince an intention to abandon. It is a question of fact in each case" (at p 341).

Upjohn J found that each of these propositions applied in that case and granted the declaration.

[40] In Simpsons Motor Sales (London) Ltd v Hendon Corporation ([1964] AC 1088) in the Court of Appeal Upjohn LJ, adopting his analysis in Grice v Dudley Corporation (supra), repeated the view that abandonment was a relevant ground for resisting compulsory purchase (at p 1117). The House of Lords took the same view. Lord Evershed said:

"It cannot, I think, be in doubt that in a case such as the present a local authority may abandon a right to purchase compulsorily land in respect of which a compulsory purchase order has been obtained: and that if such abandonment is accepted by the owner then the compulsory purchase order ceases to be effective" (at p 1125).

[41] In my opinion, if an acquiring authority can abandon its rights under a CPO by its conduct, a fortiori it can do so by express words. I conclude that in the circumstances of this case the proposed undertaking is the best means that the Council can devise to give practical effect, in a question with the appellants, to its stated resolve no longer to implement the CPO. With the agreement of your Ladyship and your Lordship, we therefore dismissed the appeal at the conclusion of the hearing.

Expenses

The submissions

[42] No claim for expenses is made by or against the Scottish Ministers; but there is an issue of expenses between the appellants and the Council.

[43] Counsel for the appellants moved for the whole expenses of the appeal against the Council; failing which, for expenses from July 2011. His primary motion was made on the basis that on 7 September 2010 the Council could and should have abandoned its pursuit of the CPO, instead of publishing the notice of confirmation, because by that date it should have been obvious to it that the project was unviable. It knew by then that ASP2's parent company was in difficulties. It would have been prudent to establish at that stage whether ASP2 had the financial capacity to see the project through. The bank guarantee covered only the CPO costs. The construction costs would be about £50 million. By abandoning the project there and then the Council could have spared the appellants the expense of the present proceedings. Instead, by publishing the notice of confirmation on that date, it left the appellants with no option but to appeal so that the CPO would not become unchallengeable (1947 Act, First Sched, paras 15-16). Furthermore, the appellants' contention at the Inquiry that the project was unviable had been vindicated. Only the appellants had led independent expert evidence on the point. Therefore, although the appeal had been refused, the Council had put the appellants to needless expense (Shepherd v Elliot (1896) 23 R 695). Counsel submitted that in any event the Council should have withdrawn its opposition to the appeal no later than July 2011 since by then the developers' guarantee had expired, ASP2 was in administration and there was no prospect that the necessary funding of about £50 million would emerge from any other source. Any prospective developer would have to take on the obligations under the agency agreement and incur the cost of buying the other elements of the development site from the administrators of ASP2. In the event, the Council let the appeal, and therefore the appellants' preparations, continue until the matter was brought to a head at the By Order hearing.

[44] Counsel for the Council submitted that there should be no expenses due to or by. The appellants had not succeeded in the appeal. The Council had at all times acted reasonably and in the public interest. The Reporter resolved the financial viability argument in the Council's favour. The appellants had had the opportunity to avoid the expense of the Inquiry by accepting offers for their properties from the Council that were substantially above market value. After the Inquiry they continued to indicate their willingness to sell; but the prices demanded by them, and particularly by the first appellant, were grossly excessive. At the Inquiry they had not spoken to their apprehended losses or to the alleged breaches of their human rights. None was in actual occupation of any part of the subjects. The first appellant had withheld disclosure to the Council that he had sold the business which occupied his shop premises. The appellants themselves had been dilatory in progressing the appeal. It could have been decided and disposed of before ASP2 went into administration.

Conclusions on expenses

[45] In my opinion the appellants' motion is without merit. The appellants cannot reasonably claim that expenses should follow success since they have not made out any of the requirements of paragraph 15 of the First Schedule to the 1947 Act. I see no reason why we should assume that this appeal would have succeeded. Moreover, the undertaking given by the Council was not related to the strength of the appellants' case. It was prompted by economic circumstances. The history of the project that I have set out indicates, in my view, that as matters stood in December 2011 the Council made a pragmatic and responsible decision not to enforce the CPO.

[46] I do not accept the argument that later events vindicated the position of the appellants at the Inquiry. On the contrary, as the Report of the Inquiry shows, the appellants lost on the viability issue hands-down. The problem that emerged thereafter was not so much one of viability as one of funding the project in changed economic circumstances, and particularly in light of the banking crisis and its consequences.

[47] In my opinion, it was reasonable for the Council to pursue the scheme, and therefore the CPO, in the period after September 2010. This was obviously a major development opportunity that would have been of great benefit to the Broomielaw area. It was reasonable for the Council to attempt to find a funding solution in the public interest. I cannot see how the Council can be faulted for having published the notice of confirmation when it did. On that view, the primary motion for the appellants fails.

[48] I am further of the view that the Council cannot be faulted for its conduct in the period from July 2011 to date. The decision not to follow up the CPO was not one to be taken lightly. The Council was entitled, and in my view duty bound, to continue with the CPO so long as there remained any reasonable hope that the project might go ahead. As late as July 2011 there was still some reassurance to be had from the administrators. It was not until 27 October 2011 that there was final confirmation that NAMA would not provide the guarantee. I cannot say that the delay between then and 13 December was unreasonable, especially since the appellants themselves had taken no procedural steps between March and August 2011 by way of expediting the appeal.

Disposal

[49] I propose to your Lordship and your Ladyship that as between the appellants and the Council, we should find no expenses due to or by either party in respect of the appeal.

[50] There remains the question of the expenses of the hearing on 13 March 2012 so far as it related to the appellants' motion for expenses. The discussion regarding the disposal of the appeal was not contentious and took up little time. Most of the hearing was taken up with the debate on expenses. In my opinion, the Council is plainly entitled to the expenses occasioned by that debate. It would be open to us to remit to the auditor to assess what proportion of the total expenses of the day should be attributed to the debate. Instead, I think that we should take a broad axe to the question. I propose that we should find the appellants liable to the Council for two-thirds of its expenses of and in connection with the hearing.

SECOND DIVISION, INNER HOUSE, COURT OF SESSION
Lord Justice Clerk Lady Paton Lord Abernethy	[2012] CSIH 32 XA132/10 OPINION OF LADY PATON in Appeal by (1) EDWARD GARDNER FOX, (2) DAVID WONG, (3) MRS LILY WONG, (4) NEELAM GAJRI, (5) MRS JAGJWAN KUMAR GAJRI and (6) SUKHBINDER SINGH SANDHU Appellants; against (1) THE SCOTTISH MINISTERS and (2) GLASGOW CITY COUNCIL Respondents: _______

For the appellants: Smith, QC; MacRoberts

For the Scottish Ministers: (First hearing) O'Carroll, (Second hearing) Mure, QC; Scottish Government Legal Directorate

For the Council: Martin, QC; Director of Corporate Services, Glasgow City Council

27 March 2012

[51] I agree with my Lord in the chair and have nothing to add.

SECOND DIVISION, INNER HOUSE, COURT OF SESSION
Lord Justice Clerk Lady Paton Lord Abernethy	[2012] CSIH 32 XA132/10 OPINION OF LORD ABERNETHY in Appeal by (1) EDWARD GARDNER FOX, (2) DAVID WONG, (3) MRS LILY WONG, (4) NEELAM GAJRI, (5) MRS JAGJWAN KUMAR GAJRI and (6) SUKHBINDER SINGH SANDHU Appellants; against (1) THE SCOTTISH MINISTERS and (2) GLASGOW CITY COUNCIL Respondents: _______

For the Appellants: Smith, QC; MacRoberts

For the Scottish Ministers: Mure, QC; Scottish Government Legal Directorate

For the Council: Martin, QC; Director of Corporate Services, Glasgow City Council

27 March 2012

[52] I agree with the Opinion of your Lordship in the chair and have nothing to add.