FIRST DIVISION, INNER HOUSE, COURT OF SESSION
Lord President Lady Clark of Calton Lord Marnoch	[2012] CSIH 1 CA111/09 OPINION OF THE COURT delivered by THE LORD PRESIDENT in Reclaiming Motion by EAST DUNBARTONSHIRE COUNCIL Pursuer and Respondent; against BETT HOMES LIMITED (formerly GLADEDALE (NORTHERN DIVISION) LIMITED) Defender and Reclaimer: _______

Act: Clark, Q.C., Barne; Shepherd & Wedderburn (for the Pursuer and Respondent)

Alt: Lake, Q.C., Higgins; Maclay Murray & Spens LLP (for the Defender and Reclaimer)

6 January 2012

Introduction

[1] In May 2007 the reclaimer, the respondent and The University Court of The University of Glasgow ("The University") entered a tripartite Agreement in relation to the sale of two separate areas of land in Bearsden, East Dunbartonshire. Attached to that Agreement was a Schedule, divided into a number of parts. Part 1 of the Schedule set out an agreement whereby the respondent agreed to purchase the St Andrews College Site from the University ("the Part 1 Agreement"). The respondent intended to construct a new building on that site and there to relocate Bearsden Academy, one of its schools. Under Part 2 of the Schedule, the reclaimer agreed to purchase from the respondent the former Bearsden Academy Site ("the Part 2 Agreement"). It intended to construct thereon a new housing development, to be built in three phases.

[2] The respondent has raised an action seeking declarator that the reclaimer was bound to fulfil its obligations as regards Phase 3 and for payment of sums it avers are due to it. The dispute is focussed on whether, in specifying a date by which "vacant possession" of the Phase 3 subjects had to be provided by the respondent to the reclaimer under the Part 2 Agreement, parties intended that time should be of the essence: whether a failure to obtemper that obligation would of itself constitute a material breach of contract allowing the reclaimer to rescind, as it purported to do by its letter of 5 May 2009. On 24 March 2011, following debate, the Lord Ordinary decided that any such breach was not material, that there was thus no right to rescind and that whether there had been a breach of contract at all was a matter which would require proof. Against that decision this reclaiming motion has been brought. The respondent has lodged grounds of cross appeal directed against the Lord Ordinary's decision that its averments do not articulate a relevant case of personal bar against the reclaimer.

Background

[3] The Opinion of the Lord Ordinary sets out in detail the contractual context and the nature of the dispute which arose between the parties (at paras [4] - [15]). A summary of the main matters relevant to the submissions made in this reclaiming motion, which focussed on the Phase 3 Entry Date and the events surrounding it, is set out below.

Price, Payment and the right to resile

[4] In terms of both the Part 1 and the Part 2 Agreements, the price payable for the purchase of the St Andrews Site and the Bearsden Academy site was made up of three instalments. The Completion date for the purchase of the St Andrews Site was 3 May 2007, on which date the respondent had to pay the University £6,000,000. The second instalment of £5,000,000 was payable on 4 April 2008. Identical payments were to be made on the same dates to the respondent by the reclaimer in relation to the Bearsden Academy Site. The arrangements as regards the third instalment differed as between the Part 1 and the Part 2 Agreement.

[5] Under the Part 1 Agreement that instalment amounted to £4,000,000 plus any "Additional Sum". The Additional Sum was defined in clause 1.1.2 of the Part 1 Agreement as follows:

"1.1.2 "Additional Sum" means the sum equivalent to Sixty per cent (60%) of the amount by which the total sums payable by Gladedale to the Council (including index-linked payments in terms of the Council/Gladedale Agreement and including all, if any, interest paid by Gladedale to the Council consequential upon any delay by Gladedale in settling any sums due under the Council/Gladedale Agreement) exceeds the sum of Twenty five million pounds (£25,000,000.00)."

Clause 2.1 of the Part 1 Agreement provided that the third instalment "shall be payable" on the earlier of (a) the first working day after the Phase 3 Entry date, as defined in the Part 2 Agreement, and (b) the second anniversary of the Completion Date. The Additional Sum was payable 10 working days after the due date of the Final Instalment under the Part 2 Agreement.

[6] Under the Part 2 Agreement the third instalment, described in clause 1.2.6 of the Part 2 Agreement as the "Final Instalment", was the aggregate of £14,000,000 and the "Index Linked Sums" calculated in respect of Instalment One, Instalment Two and the Final Instalment. The Index Linked Sum was defined by a complex formula in clause 1.2.7 of the Part 2 Agreement. "Completion Date" was defined as 3 May 2007 or such other date as might be agreed in writing by all the parties to the tripartite Agreement.

[7] Clause 2.5 and 2.5.1 of the Part 1 Agreement provided that failure to pay the Initial Instalment within fifteen working days of the date on which it fell due constituted a material breach of that Agreement and expressly provided that this entitled the University to rescind by written notice. Similarly, clause 2.4 of the Part 2 Agreement provided that failure to pay the first instalment within fourteen days of the Date of Entry constituted a material breach of contract and expressly provided that this entitled the respondent to rescind the contract, again by written notice. Clause 2.6 of the Part 2 Agreement provided that if the reclaimer failed to pay the first or any subsequent instalment in full by 4.30 pm on the date on which it fell due then, whether or not it had taken entry, it would be deemed to be in material breach and interest would accrue on those instalments. No express provision was made for rescission in such circumstances. Interest at a prescribed rate was payable on the outstanding instalment.

Entry to the Bearsden Academy site

[8] Clause 1.2.3 of the Part 2 Agreement defined the "Date of Entry" for the Bearsden Academy Site as being 3 May 2007, or such other date as might be agreed in writing. However, individual "Entry Dates" in relation to Phases 2 and 3 were also specified. The Entry Date for Phase 2 was given as 4 April 2008 or such other date as might be agreed in writing. The Entry Date for Phase 3 was defined in the following terms:

"1.2.14 "Phase 3 Entry Date" means such date as the Council may intimate to Gladedale on not less than five working days prior written notice, provided such date shall be no later than the second anniversary of the Date of Entry, the Council being bound to use reasonable endeavours to procure (so far as within the Council's control) that the Phase 3 Entry Date occurs as soon as practicable after 14 January 2009."

The Phase 3 Entry Date, in terms of that definition, was to be no later than 3 May 2009, which date fell on a Sunday. The Monday immediately following was a public holiday.

[9] The provisions as to Entry to the Bearsden Academy Site were set out in clause 3 of the Part 2 Agreement, which, so far as relevant, provides:

"3. Entry

3.1 Entry to and actual occupation (subject to the Council's rights under Condition 8 below) of the Bearsden Academy Site will be given on the Date of Entry in exchange for:-

3.1.1 payment of Instalment One;

3.1.2 the delivery of the Gladedale Standard Security duly executed by Gladedale in a Self-Proving Manner;

3.1.3 delivery of the Council Lease in accordance with Condition 8 below, such Lease to be duly executed by Gladedale in a Self-Proving Manner; ...

...

3.6 In exchange for payment of Instalment Two, the Council shall on the Phase 2 Entry Date:-

3.6.1 give to Gladedale vacant possession of Phase 2; and

3.6.2 deliver to Gladedale (a) a Deed of Restriction in respect of the Gladedale Standard Security insofar as relating to Phase 2; and (b) a Partial Renunciation of the Council Lease in respect of Phase 2, both duly executed by the Council in a Self-Proving Manner.

3.7 In exchange for payment of the Final Instalment, the Council shall on the Phase 3 Entry Date:-

3.7.1. give to Gladedale vacant possession of Phase 3; and

3.7.2 deliver to Gladedale (a) a Discharge of the Gladedale Standard Security, and (b) a Renunciation of the Council Lease, both duly executed by the Council in a Self-Proving Manner.

...

3.9 Entry will be an essential condition of the bargain. If the Council fails to give vacant possession of the Bearsden Academy Site (subject to the Council Lease) in terms of Clause 3 above within fourteen days of the Date of Entry other than as a result of some delay or fault on the part of Gladedale or its agent then Gladedale will be entitled (but not bound) on the date falling fourteen days after the Date of Entry, to give 14 days written notice of its intention to resile from the Council/Gladedale Agreement. If upon the expiry of the said period of 14 days notice the Council has still failed to give possession of the Bearsden Academy Site in accordance with Clause 3 above Gladedale will then be entitled to resile from the Council/Gladedale Agreement forthwith by giving written notice to that effect forthwith. Notwithstanding the foregoing Gladedale will then be entitled to recover from the Council all properly and reasonably incurred losses and expenses incurred by Gladedale arising as a result of the Council's failure to give vacant possession of any Phase of the Bearsden Academy Site on the due date, Gladedale being bound by the common law obligation to mitigate its losses."

The respondent's lease over the Bearsden Academy Site

[10] The lease of the Bearsden Academy site was defined in Clause 1.2.2 of the Part 2 Agreement in the following terms:

"1.2.2 "the Council Lease" means the short-term lease of part of the Bearsden Academy Site to be granted in terms of Clause 8 such lease to be in terms of the draft which forms Part 4 of this Schedule (with such amendments as may be agreed between the Council and Gladedale, each acting reasonably)".

[11] Clause 8 of the Part 2 Agreement was in the following terms:

"8. Lease to Council/Phased Possession

8.1 On the Date of Entry Gladedale shall be given vacant possession of Phase 1 only.

8.2 On the Date of Entry Gladedale shall grant and the Council shall accept the Council Lease of Phases 2 and 3 on the following principal terms and conditions:-

8.2.1 the Council Lease shall endure for the period from the Date of Entry until the Phase 3 Entry Date but subject to the provisions of Clause 4.6 for a Partial Renunciation as at the Phase 2 Entry Date;

8.2.2 the rent payable by the Council will be £1 per annum (payable only if asked);

8.2.3 throughout the period of the Council Lease the Council shall be responsible for paying all outgoings of whatsoever nature relating to their use and occupancy of Phases 2 and 3;

8.2.4 Phases 2 and 3 shall be used only for educational and related purposes (including, as ancillary thereto, general community use);

8.2.5 the Council shall not be entitled to assign the Council Lease or to sublet Phase 2 or Phase 3 in whole or in part but without prejudice to the Council's right (i) to allow use by third parties for educational or community purposes and (ii) to grant rights of access and use to contractors, sub-contractors and others in connection with the implementation of the PPP Agreement;

the risk of damage to or destruction of any buildings or other structures upon Phases 2 and 3 shall (as between the Council and Gladedale) remain with the Council throughout the period of the Council Lease and the Council will maintain all usual and necessary insurances against property owners liability and third party risks and shall produce evidence of such insurance on request."

The draft lease was contained at Part 4 of the Schedule to the tripartite Agreement. The duration of the lease was defined in clause 1.1 as follows:

"1.1 Definitions

In this Lease (including this sub-clause and the Schedule) the following words and expressions shall have the following meanings:-...

'the Duration' the period of two years from (and including) the Date of Entry and continuing from month to month thereafter until terminated by one month's prior notice given by either party".

Further relevant provisions in the Part 1 Agreement

[12] It is worth highlighting two aspects of the Part 1 Agreement which arose during the submissions before us. Firstly, clause 3 provided that a failure by the University to provide vacant possession within fourteen days of the Completion Date would, provided it was not at fault, entitle the respondent to resile from the Part 1 Agreement on giving 14 days' written notice. Secondly, Clause 10 expressly provided that time was of the essence in the Part 1 Agreement. It was in the following terms:

"10. Time of the Essence

Except where provision is made in this Part of the Schedule for the possibility of extensions of timescales, time shall be of the essence with respect to all timescales specified in this Part of the Schedule"

No similar provision is to be found in the Part 2 Agreement.

The nature of the dispute

[13] The exact circumstances giving rise to the dispute were not a matter of agreement as between the parties. The reclaimer's position was that many of the issues which arose would require proof. Nevertheless, a general understanding of the background can be gleaned from parties' averments and the submissions made before this court and the Lord Ordinary. In December 2008 the reclaimer wrote to the respondent indicating that it wished to discuss the possibility of amending the terms under which the Final Instalment under the Part 2 Agreement was to be made, indicating that it might have difficulties in making that payment standing the poor trading conditions which it was experiencing. A meeting took place shortly thereafter, with further meetings and correspondence in February and March 2009. It is averred by the respondent that various discussions took place with regard to a proposal by the reclaimer that the respondent write off the indexation element of the final instalment and to the possibility of phased payments in relation to that instalment. No agreement was reached.

[14] The respondent also avers that by this time delays as regards the construction of the new Bearsden Academy building had become apparent, with the result that it was willing to discuss deferring the Phase 3 Entry Date. However, if necessary, temporary accommodation could have been arranged for the school from the Phase 3 Entry Date. It avers that it did not make such arrangements for a number of reasons, including the cost involved, uncertainty about the when the new school building would be completed and a desire not to interrupt important examinations scheduled for May and June 2009. Importantly, it also avers that in making its decision not to arrange temporary accommodation it relied on "unequivocal representations" made by the reclaimer that it would not pay the Final Instalment, that those representations were not withdrawn and that they were believed. The respondent did not treat those representations as a repudiatory breach by the reclaimer, but instead considered both parties to remain bound by their obligations under the agreement. The respondent further avers that, standing those representations, the reclaimer cannot rely on any failure to provide vacant possession and is in breach of contract by failing to tender payment of the Final Instalment and in purporting to rescind the contract on 5 May 2009.

[15] The reclaimer denies making any such representations. It avers that it "would have been able to make payment of" the Final Instalment. It avers that on 29 April 2009 it sent drafts of the discharge of the standard security and of the renunciation of the lease to the respondent's solicitors to revise. The respondent's solicitors returned the draft by email dated 1 May 2009 with revisals, but indicated that there was no point in having the documents engrossed "until our respective clients have concluded their discussions". The reclaimer's solicitors replied the same day referring to the contractual obligation on the respondent to provide vacant possession by 3 May 2009 and asking for notification once the draft documentation was engrossed and executed. No such notification was given and no confirmation was provided that vacant possession would be provided by 3 May 2009. On 5 May 2009, as earlier noticed, the reclaimer wrote to the respondent purporting to rescind the Part 2 Agreement as regards the Phase 3 aspects, standing the failure of the respondent to give vacant possession. Its position is that it was entitled to do so, as the respondent was in material breach of contract as of 3 May 2009 by failing to provide vacant possession of the Phase 3 subjects and deliver the discharge and renunciation. The reclaimer makes no averment that it in fact paid the Final Instalment or took any specific steps to tender such payment.

Discussion - was time of the essence?

[16] The tripartite Agreement, of which the agreement between the reclaimer and the respondent forms part, is not a mercantile contract in the sense in which a contract for the sale or carriage of goods may be so described. It is a contract essentially for the sale and purchase of two inter-related parcels of land, with ancillary provision in relation to the lease of one of those parcels. The Agreement may have a commercial element in it in respect that the purchase of the Bearsden Academy Site was for development by the reclaimer for housing purposes; but its essential character as a contract for the sale and purchase of heritage is not materially affected by that element.

[17] The principal issue which was debated before us was whether time was "of the essence" of the respondent's obligation under clause 3.7 of the Part 2 Agreement. This issue logically arises only if the respondent was in breach of the obligation in question. The respondent contends that it was not. We shall require in due course to say something about that contention; but for the purposes of discussing the principal issue we assume, for the present, that the respondent was so in breach.

[18] In arguing that time was not of the essence of the obligation in question Mr Clark relied primarily on the terms of the tripartite Agreement. He postponed to a later stage his submissions on the authorities, contending then that they strongly supported the conclusion to be drawn from the terms of the Agreement themselves. Mr Lake for the reclaimer was at pains to rely primarily on the terms of the parties' contract, maintaining that, consistently with the decision of the House of Lords in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 (especially per Lord Hoffmann at pages 912-3), contractual documents were to be interpreted by judges according to "the common sense principles by which any serious utterance would be interpreted in ordinary life". Lord Hoffmann continued:

"Almost all the old intellectual baggage of 'legal' interpretation has been discarded."

He then identified five principles. Thus, Mr Lake argued, it was inappropriate to start the exercise of interpretation of the contract with any presumption or other hurdle.

[19] We are content to adopt the mutual approach of counsel and address the interpretation of this contract without any legal preconceptions. Subject to what we say later about the practical consequences of the reclaimer's position, there is no basis, on averment or in argument, for there being any circumstances extraneous to the terms of the tripartite Agreement themselves which form a relevant background to the interpretation of these terms. One begins, accordingly, with an overview of the contractual terms. Their broad purpose was to secure an arrangement whereby the respondent acquired from the University a site ("the St Andrews Site") upon which to build a new Bearsden Academy and disposed of to the reclaimer the existing site of the Academy ("the Bearsden Academy Site"). These two transactions were closely linked to each other - hence the tripartite Agreement, with additional provisions in a schedule dealing respectively with the contractual terms special to the University and the respondent on the one hand and the respondent and the reclaimer on the other (the Part 1 and the Part 2 Agreements respectively). The terms in relation to payment were interrelated. In each case payment was to be made by three instalments. The first and second instalments payable by the respondent to the University (£6 million and £5 million) were identical to those payable by the reclaimer to the respondent; the third instalments were different (£4 million payable by the reclaimer and £14 million payable by the respondent) but the University was to receive, shortly after payment by the reclaimer of its final instalment, an "Additional Sum" equivalent to 60% of the amount by which the total sums payable by the reclaimer to the respondent (including certain index linked payments) exceeded £25 million. The dates for payment of the three instalments by the respondent were closely related to the dates for payment of the instalments by the reclaimer. Each of the parties to the transactions in respect of each site undertook not to vary the relative terms and conditions of their agreement without the consent of the third party (the Agreement, clauses 4 and 5). It was expressly agreed (clause 11) that no variation of the Agreement (itself in self-proving form) should be valid unless executed in writing on behalf of the University, the reclaimer and the respondent in a self-proving manner. Accordingly, the tripartite Agreement and the terms of the Part 1 Agreement are clearly a relevant context for the interpretation of the Part 2 Agreement.

[20] All the parties clearly gave attention when the tripartite Agreement was drawn to the circumstances in which a party might resile. In the Part 1 Agreement it was expressly provided (clause 2.5/2.5.1) that failure by the respondent to pay the initial instalment in full within fifteen working days after it fell due would constitute a material breach of contract entitling the University to rescind (and conferring certain further rights on it in that event). No such rights were conferred in the event of failure timeously to pay the second and third instalments. On the other hand, entry to and vacant possession of the St Andrews Site was to be given to the respondent in exchange for payment of the initial instalment (and delivery of a Standard Security) with an express entitlement in the respondent in the event of entry not being given timeously to give written notice of its intention to resile from the Part 1 Agreement (clause 3). On the expiry of that "ultimatum" period without implement the respondent was, it was expressly provided, entitled then to resile.

[21] The Part 2 Agreement differed from the Part 1 Agreement in that, although the respondent was to give entry to the reclaimer as owner on payment on the first instalment, vacant possession of the whole Bearsden Academy Site was not to be given at that time. A lease was to be entered into under which possession was granted to the respondent, that possession to be ceded in phases timed to correspond with the dates for payment of the instalments. The first phase was to be ceded on the Date of Entry (the date when the first instalment was payable), the second phase on the "Phase 2 Entry Date" (the date when the second instalment was payable) and the final phase on the "Phase 3 Entry Date" (when the final instalment was payable). The "Phase 3 Entry Date" was defined, a definition to which we shall have to return.

[22] In parallel with clause 3 of the Part 1 Agreement, clause 3.9 of the Part 2 Agreement provided that entry was to be an essential condition of the bargain. That clause then made express provision for an entitlement, on notice, to resile in the event of failure to give timeous entry at the Date of Entry (for Phase 1). No equivalent provision for rescission was made in respect of vacant possession on the Phase 2 Entry Date or on the Phase 3 Entry Date. That omission is, in our view, highly significant. The natural inference is that parties did not envisage that failure to give vacant possession on either the Phase 2 Entry Date (in so far as concerned the land delineated for the purposes of Phase 2) or on the Phase 3 Entry Date (for the balance of the land) would call for an ultimatum procedure leading potentially to a right to resile from the bargain, far less for there being a right to resile arising automatically in the event of vacant possession not being given on either of those entry dates. Indeed counsel for the reclaimer did not contend that any such right did arise on failure to give vacant possession on the Phase 2 Entry Date.

[23] Wholly consistent with vacant possession at the Phase 3 Entry Date not being of the essence of the bargain are the provisions for possession conferred by the lease in favour of the respondent. The reclaimer granted to the respondent a lease of the land for the "Duration", that term being defined as "the period of two years from (and including) the date of entry and continuing from month to month thereafter until terminated by one month's prior notice given by either party". The date of entry was 3 May 2007. The continuation of possession from month to month after 3 May 2009 (the second anniversary of the date of entry - see the definition of Phase 3 Entry Date) shows that parties envisaged that the respondent might remain in possession after the Phase 3 Entry Date. This would be unsurprising. What was envisaged was that a new academy complex would be constructed on the St Andrews Site. Prior to its availability on completion the Academy would, it was hoped, continue to function on the Bearsden Academy Site, albeit possession of parts of that site, including the playing fields, would be ceded to the reclaimer at the relative entry dates.

[24] The reclaimer's contention that time was of the essence of the respondent's obligation under clause 3.7 of the Part 2 Agreement depends heavily, if not exclusively, on the definition of "Phase 3 Entry Date" in clause 1.2.14 of that Agreement. A definition section would, however, be an unlikely place in which to find, expressly or by implication, a provision making time of the essence. That definition envisaged that the Phase 3 Entry Date might be earlier than the second anniversary of the Date of Entry. A power was given to the respondent to fix, on five working days notice, the Phase 3 Entry Date - on its face at any time - but with the respondent bound to use reasonable endeavours to procure (so far as within its control) that the Phase 3 Entry Date occurred as soon as practicable after 14 January 2009. The date was, however, to be not later than the second anniversary of the Date of Entry, that is not later than 3 May 2009. That "long-stop" date, when read with clause 3.7, no doubt imported that on 3 May 2009 the respondent was, in exchange for payment of the "Final Instalment" (£14 million and the Index-Linked Sums) obliged to do the things specified in that clause, viz. gave to the reclaimer vacant possession of Phase 3 and deliver the documents referred to in clause 3.7.2. A failure to perform that obligation would be a breach of contract, with a possible liability in the respondent to pay any established damages attributable to that breach. But there is nothing, in our view, in the clause that makes that obligation of such a character that failure to perform it gave rise to a right in the reclaimer to rescind the bargain.

[25] Mr Lake emphasised that, in contrast to the provision for earlier entry being in the discretion of the respondent - subject to an obligation to use reasonable endeavours -, 3 May 2009 was "mandatory". But that a party is bound to perform by a particular date does not, subject to the other terms of the contract, import that failure to do so will confer a right to rescind on the "innocent" party. The other terms of this contract, which we have analysed above, point strongly to a contrary inference. Neither does any desire for certainty (which a "long-stop" date would provide) nor the fact that the land was intended to be used for development elevate the obligation to one of such materiality as to warrant rescission for its breach. Mr Lake also relied on the circumstance that the ceding of vacant possession was ultimately in the control of the respondent; there was, he said, no harshness in the respondent having to vacate, even if that meant it having to find temporary accommodation for the Academy. No doubt a failure to perform might, as mentioned above, expose the respondent to a claim in damages, and even possibly, if time were made of the essence by the service at common law of an ultimatum and its not being met, to a claim for rescission; but it did not, in our view, expose it to rescission merely by non-performance. Lastly, Mr Lake relied on the circumstance that the price payable by the reclaimer in respect of the Index-Linked Sum would increase the longer vacant possession was postponed. But any financial damage occasioned to the reclaimer by such delay could be countered by a claim in damages. We do not find the factors relied on by Mr Lake, either individually or cumulatively, when considered in light of the whole other provisions of the contract, to be persuasive of the view that time was of the essence.

[26] One circumstance extraneous to the contract may have a bearing on its interpretation. The Bearsden Academy Site was to be acquired for development purposes. Possession was to be given over three phases and it accordingly may be assumed that actual development would follow a similar pattern. By the time of the Phase 3 Entry Date significant development (for domestic housing purposes) had taken place - Phase 1 was complete, Phase 2 was under construction. In its letter of 5 May 2009 purporting to rescind the contract the reclaimer offered to re-convey Phase 3 to the respondent. At no stage has it offered to re-convey Phase 1 or Phase 2. What it seeks to do is accordingly to rescind a contract partly and significantly performed. No doubt a partly performed contract may be rescinded. Turnbull v McLean & Co (1874) 1 R 730 exemplifies a situation in which that was contemplated; but the bringing to an end, in that case, of a running contract for the supply of goods could not give rise to the complexities which might ensue if the present contract was brought to an end in respect only of the Phase 3 aspect. The respondent, having committed itself to the purchase of the St Andrews Site, would be left with the rump of the Bearsden Academy Site without payment of the third instalment for it and of any of the Index-Linked Sum. There would also have been implications for the University with its entitlement to a share in the Additional Sum. The offer to prove that the values of the parcels of land broadly corresponded to the instalment figures does not remove these complexities. Nor does reliance on the possibility of (uncertain) claims for unjustified enrichment. That is not to say that time might not, in appropriate circumstances, have been made of the essence - by, for example, an unreasonable and unjustified delay in giving possession followed by the expiry of a reasonable ultimatum without performance; but the complexity of consequences is a factor which tends to suggest that parties cannot have contemplated that failure timeously to perform the obligations in clause 3.7 would in itself be a ground for rescinding the contract.

[27] No authority was put before us to the effect that, in a contract for the sale of heritage, there is, absent express contractual provision, an implication or presumption that the giving of vacant possession on the stipulated date is of the essence of the contract. Such authority as there is tends to point in the opposite direction. In Lowe v Gardiner 1921 SC 211 Lord Skerrington at page 217 observed:

"Sales of heritable property do not, generally speaking, fall within the category of agreements where time is of the essence of the bargain."

- though his Lordship may have had more in mind the obligation to pay the price rather than to deliver the property. The development, following earlier authority, founded principally on Lord Sorn's judgment in Rodger (Builders) Ltd v Fawdry 1950 SC 483, especially at page 492, of the ultimatum procedure tends to confirm that time is not ordinarily of the essence of contracts of that type. It is true that Rodger was a case of failure to pay the price; but Lord Sorn also relied on the English case of Stickney v Keeble [1915] AC 386, where the obligation in question was delivery of a title. In Gloag on Contract (2^nd ed.) the learned author at pages 615-6 discusses materiality of time for performance in contracts for the sale of goods; he says:

"In contracts for the supply or carriage of goods which vary in price from day to day, prima facie stipulations as to the time either of giving or taking delivery are of the essence of the contract".

In the next paragraph ("Sale of heritage") the discussion is primarily on the marketability of the title. In the final sentence however, it is stated:

"But delay in the completion of a title may justify the purchaser in intimating that if it is not completed within a fixed time (provided that the time given is, in the circumstances, reasonable) he will resile from the contract".

Reference is made to a number of authorities, both Scottish and English, including Stickney v Keeble, which touch on the ultimatum procedure. The clear implication is that, in general and absent specific provision to the contrary, time is not of the essence in a contract for the sale of heritage. In Simmers v Innes [2007] CSIH 12 the bargain in question contained a provision which entitled one of the parties (Mr Simmers) to acquire certain shares and certain related heritable property for a stipulated consideration. The Lord Ordinary held that time was of the essence of that provision. His decision in that respect was overturned by an Extra Division which held, for the reasons explained at paras [103] to [110], that time was not of the essence. The Division took into account, among other authorities, Rodger (Builders) Ltd v Fawdry and Investors Compensation Scheme Ltd v West Bromwich Building Society. An appeal was taken to the House of Lords, where the leading speech was delivered by Lord Neuberger of Abbotsbury (2008 SC (HL) 137). An argument advanced unsuccessfully by the appellant was "that the normal rule that time is not of the essence for completion was rebutted by the terms of the agreement" (para [20]). Of this Lord Neuberger said at para [23]:

"I turn to the alternative ground relied on by Mr Innes, namely that the presumption that time is not of the essence of completion of the bilateral sale agreement is rebutted in the present case. It is clear that

'[i]n a contract for the sale of heritage, where it is stipulated that the price is to be paid on a particular date, payment of the price on the appointed date is not, in general, an essential condition of the contract, and failure to pay on that date does not entitle the seller to resile'

(Rodger (Builders) Ltd v Fawdry, page 492). The law of Scotland and the law of England and Wales march together here (although on somewhat different jurisprudential bases) (Visionhire Ltd v Britel Fund Trustees Ltd [1991 SLT 883]). Accordingly, time will only be of the essence where the contract so provides, or where 'the nature of the subject matter of the contract or the surrounding circumstances show that time should be considered to be of the essence' (United Scientific Holdings Ltd v Burnley Borough Council [[1978] AC 904], page 944)."

The remaining members of the Appellate Committee agreed with Lord Neuberger, three out of four of them expressly agreeing with his reasons. Although this aspect of the case proceeded on a concession by counsel for the appellant (that the normal rule is that time is not of the essence in a contract of this kind), it would be remarkable that the concession was not questioned by any of their Lordships had there been any doubt about it. The concession was, in our view, rightly and inevitably made.

[28] Lord Neuberger referred at para [23] to Visionhire Ltd v Britel Fund Trustees Ltd where the First Division had to decide whether time was of the essence in relation to a provision for rent review in a commercial lease. There was an issue about the applicability of certain principles developed in the law of England, including a summary in Halsbury's Laws of England (4^th ed.), vol.9, para 481 which was in the following terms:

"The modern law, in the case of contracts of all types, may be summarised as follows. Time will not be considered to be of the essence unless: (1) the parties expressly stipulate that conditions as to time must be strictly complied with; or (2) the nature of the subject-matter of the contract or the surrounding circumstances show that time should be considered to be of the essence; or (3) the party who has been subject to unreasonable delay gives notice to the party in default making time of the essence".

In this regard Lord President Hope said at page 888:

"Stipulations as to time generally are, I think, in a special position because of the hardship which may arise if, for example, a party is held to be in material breach where he is just one day late in doing something which the contract requires. It appears to have been accepted that it is not inconsistent with the general principle that contracts should be enforced according to their terms to ask whether the parties really intended that provisions as to time should be enforced in this way. I see Gloag's recognition at page 617 that stipulations as to time of payment are not to be treated as material conditions of a contract except in very special cases as illustrating this point. If the approach is essentially to look to what the contract actually says and then to enforce it according to its terms I would have expected an equally strict view to be taken in regard to materiality. The point which emerges from Gloag's discussion is that, while stipulations as to time which are expressed in terms which show that strict compliance is required will be enforced accordingly, there is room also for a consideration of the nature of the contract and the circumstances in order to decide whether or not a stipulation is material and, as such, is of the essence of the contract. That seems to me to be sufficiently close to Halsbury's position for it to be a position which Scots law can accept also as a statement of the modern law. ... It seems to me, therefore, that there is no essential difference between the positions adopted in the two countries and that the rules which according to English law are stated as presumptions are really to be seen as rules of construction which take their place along with various other rules in order to ascertain what the intention of the parties truly was in order that the contract which they have made should be enforced."

The other judges agreed. Accordingly, whether it is treated as a matter of presumption or as a canon of construction, the approach to the interpretation of contracts of that kind was that, subject to contrary indications in the terms of the particular contract or in its relevant surrounding circumstances, it was to be expected that it was not the intention of parties that time be of the essence.

[29] Visionhire preceded Investors Compensation Scheme Ltd v West Bromwich Building Society which, on one view, might be thought to have swept away all presumptions or other preliminary aids to interpretation. But in The BOC Group v Centeon, 9 July 1999 unreported but cited in McMeel: The Construction of Contracts, Evans LJ commented:

"The old intellectual baggage has been discarded but the courts are not travelling light. The cabin trunks have been replaced by airline suitcases; the contents are much the same though they are expressed in more modern language."

Even Lord Hoffmann has not banished the word "presumption". In Fiona Trust v Privalov [2008] 1 Ll.L.R. 255 at para 13 he said:

"In my opinion the construction of an arbitration clause should start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal. The clause should be construed in accordance with this presumption unless the language makes it clear that certain questions were intended to be excluded from the arbitrator's jurisdiction."

While various traditional canons of construction may require to be reconsidered, and in some cases reformulated or discarded, in the light of the modern approach to the construction of contracts (Credential Bath Street Ltd v Venture Investment Placement Ltd 2008 Hous LR 2, per Lord Reed at para [38]), we have no reason to doubt that the parties to the tripartite Agreement, assisted by their lawyers, understood that, if they were to make time of the essence in relation to any provision, they required to do so expressly. They made such express provision, including provisions for ultimata, in clause 3 of the Part 1 Agreement and in clause 3.9 of the Part 2 Agreement. They made no equivalent provision in relation to the respondent's obligations under clause 3.7. The implication must be that they intended that time should not be of the essence of that provision.

[30] Mr Lake relied on the observations of Lord Cairns LC in Bowes v Shand (1877) 2 App. Cases 455 at pages 463-4; but it is clear that the contract there under discussion was a mercantile contract for the sale and delivery of a commodity (rice) to which the observations of Gloag on Contract at page 615 are apt. Even if there was a commercial element in the reclaimer's bargain to purchase the Bearsden Academy Site for development, it was a quite different contract from that discussed in Bowes.

[31] Harold Wood Brick Co Ltd v Ferris [1935] KB 198 is more in point; but there there was an express stipulation that, in the event of failure by the purchaser to complete by a specific date, the sellers were entitled to rescind the sale. Two of their Lordships (Slesser and Roche LJs) did not rely for their conclusions on that clause but on other provisions of the contract for their conclusion that time was "of the essence". They did so for the purpose of deciding whether the plaintiffs were entitled to damages - the sole point in issue in the case. The question was whether the stipulation as to time could be disregarded without injustice to the parties (Slesser LJ at page 207). The case is of no assistance in relation to whether failure to give possession (and to deliver other completion documents) on the appointed day gives rise of itself to a right to rescind. Under Scots law there would be no difficulty in holding that breach of a provision as to time gave rise, at least prima facie, to a claim in damages. It does not follow that the "innocent" party could, upon such breach, forthwith rescind the contract.

[32] The burden of the relevant authority is accordingly to the effect that time is not of the essence (in the sense relevant for purposes of rescission) in a contract of the type here under discussion. This confirms the conclusion which is clear from the terms of their bargain that the present parties cannot be taken to have intended that any failure of the respondent to perform clause 3.7 timeously would of itself give rise to a right in the reclaimer instantly to rescind. The reclaimer's defence to the action is accordingly irrelevant and this reclaiming motion must be refused.

Was the respondent in breach?

[33] That defence also proceeds on the assumption that the reclaimer has relevant averments that the respondent was in breach of a term of the contract - material or otherwise. The contract between the reclaimer and the respondent gave rise to mutual obligations but the clause relied on by the reclaimer for present purposes (clause 3.7) provided:

"In exchange for payment of the Final Instalment, [the respondent] shall [on 3 May 2009]:-

3.7.1 Give to [the reclaimer] vacant possession of Phase 3: and

3.7.2 Deliver to [the reclaimer] (a) a Discharge of the Gladedale Standard Security, and (b) a Renunciation of the Council Lease, both duly executed by [the respondent] in a Self-Proving Manner."

Although mutual performance was called for, the structure of that clause envisages that the reclaimer will perform first, the respondent being obliged to perform on and only on, albeit immediately on, performance by the reclaimer. The reclaimer's obligation was to pay by telegraphic transfer to a specified account or to such other account as might be intimated by the respondent (clause 2.3). While it would no doubt be going too far to require, in circumstances where there was reason to believe that the respondent was not ready and able to perform its counter-obligation, the reclaimer actually to make the transfer as a precondition of the counter-obligation becoming prestable, the reclaimer, in our view, could not rely on non-performance of clause 3.7 as a breach of contract unless it had, in a meaningful sense, itself tendered performance on the date in question (White and Carter (Councils) Ltd v McGregor 1961 SC (HL) 1, per Lord Keith of Avonholm at page 19). That might have been done by intimating on the date for performance (or on the first working day thereafter) that the reclaimer held itself ready instantly to transfer from a funded account the Final Instalment (being the sum of £14 million plus the Index-Linked Sum calculated in relation to all three instalments). The reclaimer has no averment to that effect. As it happened, 3 May 2009 was a Sunday and the following day a public holiday. Thus the date for performance was arguably Tuesday 5 May. On that date the reclaimer made no tender of performance but, before the day had expired, purported to rescind the contract. The reclaimer has averments (answer 8) that "as at 3 May 2009, the defenders would have been able to make payment to the pursuers of the Final Instalment, in the event that the pursuers had been able to fulfil their obligations under the contract and give vacant possession of Phase 3. Only the giving of vacant possession of Phase 3 by the pursuers could trigger the defenders' corresponding obligation to make payment of the Final Instalment. At no stage prior to 3 May 2009 did the pursuers advise the defenders that they would be unable to provide vacant possession of the Phase 3 subjects on or before that date." ("Unable" in that last sentence is presumably a misprint for "able".) These averments are irrelevant, first, because they proceed on the basis that only the giving of possession could trigger the reclaimer's obligation (an inversion of the true contractual position), and secondly, because what the reclaimer would have been able to do falls far short of actual performance by it. Accordingly, had it been necessary to do so, we would have held the reclaimer's averments of breach of contract to be irrelevant.

[34] We were referred to Fercometal v Mediterranean Shipping Co [1989] 1 AC 788 and in particular to the observations made by Lord Ackner at page 805. But this does not assist the reclaimer; rather it is against it. Mr Lake expressly disavowed any intention by the reclaimer to rescind the contract on the basis of anticipatory breach by the respondent. In the week prior to 5 May the emphasis was on performance. But, if neither party sought to rescind on the basis of anticipatory breach, the contract remained live for both parties and each was bound to perform at the due date. Even if the mutual obligations were exactly contemporaneous, the reclaimer was bound to tender performance on that date if it was to rely on the respondent's non-performance. It was not entitled to withhold tendering performance and at the same time found on the respondent's breach.

The cross-appeal
[35] There remains the respondent's cross-appeal. This does not strictly arise but, as we heard argument upon it and as the Lord Ordinary made some observations in relation to it, we should discuss it briefly. The respondent's averments on this matter are in Article 8 of the condescendence. In summary they are to the effect that the reclaimer made repeated unequivocal representations, which were not withdrawn, that it was not in a position to and would not make payment of the Final Instalment, that the respondent was induced thereby to organise its affairs on the basis that such payment would not be made on that date (and that vacant possession of Phase 3 would not then be required on that date) and that accordingly the reclaimer cannot rely on the respondent's failure to give such possession. The Lord Ordinary does not explain why he was not persuaded that the respondent had, on its current pleadings, articulated a relevant case of personal bar. The averments in question appear to us to be sufficient to admit of personal bar as explained by Lord Birkenhead LC in Gatty v Maclaine 1921 SC (HL) 1 at page 7. Had the matter arisen, we would have allowed these averments to go to probation.

Disposal
[36] The respondent does not expressly aver that it is now able and willing to give vacant possession to Phase 3 in exchange for payment of the Final Instalment and delivery of the two deeds referred to in clause 7.2.2. But the whole debate before us proceeded on the basis that it was so able and willing. The live issue between the parties was whether, as between them, the Agreement remained live for performance (Lord Ordinary at para30]). It was not disputed before us that, if the Lord Ordinary reached the correct conclusion on the issue of materiality, as we hold that he did, the respondent was entitled to interim decree in terms of the Lord Ordinary's interlocutor of 1 June 2011.

[37] In these circumstances the reclaiming motion is refused and the case remitted to the Lord Ordinary to proceed as accords.