Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION

[2017] CSOH 70

 

CA121/16

OPINION OF LORD DOHERTY

In the cause

(FIRST) JOHN ALLAN LAW and GILLIAN MARGARET LAW and LEGAL & GENERAL ASSURANCE SOCIETY LIMITED as trustees of the JAL Fish Limited Small Self-Administered Pension Scheme; (SECOND) J A L FISH LIMITED; (THIRD) GILLIAN MARGARET LAW

Pursuers

against

ROBERTSON CONSTRUCTION EASTERN LIMITED

Defender

Pursuers:  B Malone, solicitor advocate;  Brandon Malone & Company

Defender:  Burnet;  Clyde & Co

28 April 2017

Introduction
[1]        The short issue in this Preliminary Proof on the commercial roll is whether an obligation in missives which the pursuers seek to enforce against the defender is an “obligation relating to land” in terms of the Prescription (Scotland) Act 1973 (“the 1973 Act”), Schedule 1, paragraph 2(e).  If it is, the obligation is a subsisting one.  If it is not, it is common ground that it was extinguished by the short negative prescription before the action was raised. 

 

The Facts
[2]        Although the case was set down for a Preliminary Proof, by the time of the Proof there was no material dispute as to the facts.  No evidence required to be led.  The following matters were either a matter of admission or the subject of agreement in the Joint Minute No 17 of process. 

[3]        By a missive offer dated 29 April 2008 the defender offered to purchase from the pursuers 34, 36 and 47 South Esplanade West, Torry, Aberdeen (“the Subjects”).  In Clause 1 of the offer “the Purchase Price” was defined (Clause 1(c)) as meaning £475,000 excluding VAT;  and “the Overage Agreement” was defined “the overage agreement to be entered into by the parties the draft of which is annexed and forms part III of the Schedule.”  Clauses 3, 8.1 and 14 of the offer provided:

“3. The Purchase Price in respect of the Subjects will be payable on the Date of Entry when full vacant possession of the Subjects will be given to the Purchaser.

…

8.1  In exchange for payment of the Purchase Price, there will be delivered (a) a validly executed Disposition of the Subjects in favour of the Purchaser … and (b) the duly executed Overage Agreement (in duplicate to allow the parties hereto to retain one copy each).

…

14. The terms and conditions of this offer and all that may follow hereon will remain in full force and effect and binding on both parties, in so far as not implemented, notwithstanding entry having been taken, delivery of the Disposition hereinbefore mentioned and payment of the Purchase Price.”

Part III of the Schedule to the offer contained the terms of the proposed Overage Agreement.  For present purposes it is unnecessary to describe its contents at length.  It suffices to say that its provisions were detailed and that, if executed, it would have obliged the defender to make a payment to the pursuers in the event of certain types of development consent being obtained and the Subjects being sold.  In the event of the compulsory purchase or acquisition of the Subjects by a statutory or other authority the defender would have been bound to pay the pursuers half of the sum by which the relevant compensation or payment exceeded £475,000.  By missive letter dated 2 May 2008 the pursuers accepted the defender’s offer. 

[4]        The transaction settled on 9 May 2008.  The defender paid the pursuers the purchase price of £475,000 and a disposition of the Subjects was delivered to it by the pursuers.  The defender obtained entry.  In Condescendence 10 and 11 the pursuers aver: 

“10. The Overage Agreement had not been prepared at this point, and was not executed by either party at that time…

 

11. Shortly after the Date of Entry, the market for commercial property collapsed due to the banking crisis and the defender did not progress the development of the Subjects…”

Those averments are admitted by the defender.

[5]        On 7 August 2013 the defender applied for planning permission for development of the Subjects as offices.  In about October 2013 the pursuers’ agents wrote to the defender’s agents claiming a payment in terms of the Overage Agreement.  The defender did not accept that it had any obligation to make any payment to the pursuers.  

[6]        In October 2016 the pursuers raised the present action.  The first conclusion of the summons is for specific implement of the defender’s obligation under the missives

“to execute and deliver to the pursuer (sic) a duly executed Overage Agreement in duplicate in the form of the Minute of Agreement (re. Overage) annexed to and forming part III of the Schedule to the offer to purchase dated 29 April 2008…”

Alternatively, failing implement, the second conclusion seeks payment by the defender of £1,025,000.  The defender maintains that any obligation to enter into an Overage Agreement has been extinguished by the short negative prescription. 

[7]        It was common ground that the obligation which the pursuers seek to enforce was not superseded by delivery of the disposition (Contract (Scotland) Act 1997, s. 2). 

 

The Relevant Provisions of the 1973 Act
[8]        As at 9 May 2013 (the fifth anniversary of the obligation having become enforceable) the relevant provisions of the 1973 Act provided: 

“Section 6.— Extinction of obligations by prescriptive periods of five years.

(1) If, after the appropriate date, an obligation to which this section applies has subsisted for a continuous period of five years—

(a) without any relevant claim having been made in relation to the obligation, and

(b) without the subsistence of the obligation having been relevantly acknowledged,

then as from the expiration of that period the obligation shall be extinguished:

…

(2) Schedule 1 to this Act shall have effect for defining the obligations to which this section applies.

…   

15.— Interpretation of Part I.

…

(2) In this Part of this Act, unless the context otherwise requires, any reference to an obligation or to a right includes a reference to the right or, as the case may be, to the obligation (if any), correlative thereto.

…

Schedule 1 OBLIGATIONS AFFECTED BY PRESCRIPTIVE PERIODS OF FIVE YEARS UNDER SECTION 6

 

1. Subject to paragraph 2 below, section 6 of this Act applies—

(a) to any obligation to pay a sum of money due in respect of a particular period—

(i) by way of interest;

(ii) by way of an instalment of an annuity;

[...] ¹

(v) by way of rent or other periodical payment under a lease;

(vi) by way of a periodical payment in respect of the occupancy or use of land, not being an obligation falling within any other provision of this sub-paragraph;

(vii) by way of a periodical payment under a [title condition] ² , not being an obligation falling within any other provision of this sub-paragraph;

[(aa) to any obligation to pay compensation by virtue of section 2 of the Leasehold Casualties (Scotland) Act 2001 (asp 5);] ³

[(aa) to any obligation to make a compensatory payment (‘compensatory payment’ being construed in accordance with section 8(1) of the Abolition of Feudal Tenure etc. (Scotland) Act 2000 (asp 5), including that section as read with section 56 of that Act);] ⁴

[(ab) to any obligation arising by virtue of a right–

(i) of reversion under the third proviso to section 2 of the School Sites Act 1841 (4 & 5 Vict. c.38) (or of reversion under that proviso as applied by virtue of any other enactment);] ⁵

[(ii) to petition for a declaration of forfeiture under section 7  of the Entail Sites Act 1840 (3 & 4 Vict. c.48);] ⁶

[(ac) to any obligation to pay a sum of money by way of costs to which section 12 of the Tenements (Scotland) Act 2004 (asp 11) applies;] ⁷

…

(g) to any obligation arising from, or by reason of any breach of, a contract or promise, not being an obligation falling within any other provision of this paragraph.

 

[Notes

1. Repealed by Abolition of Feudal Tenure etc. (Scotland) Act 2000 asp 5 (Scottish Act) Sch.13(1) para.1 (November 28, 2004: as SSI 2003/456)

2. Words substituted by Title Conditions (Scotland) Act 2003 asp 9 (Scottish Act) Sch.14 para.5(3)(a) (November 28, 2004 being the day appointed by SSI 2003/456 art.2 for the purposes of 2003 asp.9 s.71)

3. Added by Leasehold Casualties (Scotland) Act 2001 asp 5 (Scottish Act) s.4(a) (April 12, 2001)

4. Possible drafting error, para.1(aa) is purportedly inserted but that provision already exists so a second para.1(aa) is inserted by Abolition of Feudal Tenure etc. (Scotland) Act 2000 asp 5 (Scottish Act) Pt 3 s.12(a) (November 28, 2004)

5. Added by Title Conditions (Scotland) Act 2003 asp 9 (Scottish Act) Pt 8 s.88(a) (April 4, 2003: as 2003 asp 9)

6. Added by Title Conditions (Scotland) Act 2003 asp 9 (Scottish Act) Pt 8 s.88(a) (November 28, 2004: as SSI 2003/456)

7. Added by Tenements (Scotland) Act 2004 asp 11 (Scottish Act) s.15(a) (November 28, 2004

...]

 

2. Notwithstanding anything in the foregoing paragraph, section 6 of this Act does not apply—

…

(e) except as provided in [paragraph 1(a) , (aa) , (ab) or (ac)] ² of this Schedule, to any obligation relating to land (including an obligation to recognise a servitude);

…

 

[Notes

…

2. Words substituted by Tenements (Scotland) Act 2004 asp 11 (Scottish Act) s.15(b) (November 28, 2004)].”

 

Submissions for the Pursuers
[9]        Mr Malone submitted that the obligation to enter into the Overage Agreement arose from the missives.  It had become enforceable at the date of entry at the latest.  It was an “obligation relating to land” (1973 Act, Sched. 1, para 2(e)).  The words “any obligation relating to land” were to be given their natural meaning.  They were capable of encompassing a large number of obligations, including personal obligations.  Some personal obligations in missives could be collateral to the sale of the heritage, but the obligation to enter into the Agreement did not fall into that category.  It had been one of the core obligations under the missives, part of the quid pro quo or counterpart for the sale and disposition of the Subjects.  It was one of the obligations which were correlative to the grant of the disposition.  The main object of both the obligation to enter into the Agreement and the obligations in the Overage Agreement was land - the Subjects.  It would be formalistic and wrong to say that the obligation to enter into the Agreement did not relate to land but merely related to the making, execution and delivery of an agreement.  The main object, and the underlying obligations, related to land (Barratt Scotland Ltd v Keith 1993 SC 142, per Lord McCluskey at page 157G‑H).  Reference was also made to Lord Penrose in the Outer House in that case at page 148D-F and to Lord Justice Clerk Ross at pages 153H, 154A-C, and 155B-D; and to Glasgow City Council v Morrison Developments Ltd 2003 SLT 263, per Lord Eassie at paragraphs 13 and 16.  Brief mention was also made of Cumbernauld Housing Partnership Ltd v Davies 2015 SC 532, but it was submitted that no assistance was derived from it. 

[10]      Mr Malone maintained that while the facts of Smith v Stuart 2010 SC 490 were superficially similar, on a proper analysis it did not present an obstacle to the proposition which he advanced.  Its ratio was that an obligation to enter into an agreement which did not have land as its main object was not an “obligation relating to land”.  The case was readily distinguishable.  The points of distinction were (i) the undertaking had been to enter into an agreement at an unspecified time, whereas here the obligation was to enter into the Agreement by the date of entry;  (ii) the person seeking to enforce the obligation had not been obliged to enter into an agreement, whereas here both parties were obliged to enter into the Agreement;  (iii) the obligation there had been a unilateral undertaking, whereas here the obligation formed a material part of the terms of missives of sale;  (iv) the main object of the obligation there had not been land, whereas here it was - the obligation was one of the counterpart or correlative obligations for the grant and delivery of the disposition;  (v) the undertaking had merely set out the broad terms of a possible future agreement whereas here the terms of the Agreement had been agreed and were set out in the draft Agreement incorporated in the missives;  (vi) part of the argument in Smith had been that the undertaking had conferred a jus quaesitum tertio on the pursuer, whereas no such argument was advanced here.  Mr Malone further submitted that, in any case, the Lord Justice Clerk’s observations in paragraphs 14 and 15 were obiter dicta.  They were not binding, and in the materially different circumstances of the present case I should not feel constrained to follow them. 

[11]      The pursuers’ third and fourth pleas-in-law should be sustained, the defender’s second and fourth pleas-in-law repelled, and decree of specific implement pronounced in terms of the first conclusion.  

 

Submissions for the Defender
[12]      Mr Burnet submitted that the defender’s second plea-in-law should be sustained and decree of absolvitor pronounced.  He accepted that it was an implied term of the missives that by the date of entry each party would enter into an Overage Agreement in the terms annexed to the missives.  He also accepted that that obligation had become enforceable by 9 May 2008.  Nevertheless, it was an obligation arising from a contract (1973 Act, Schedule 1, paragraph 1(g)) to which section 6 of the 1973 Act applied.  It had subsisted for five years without any relevant claim or relevant acknowledgement having been made.  It had accordingly been extinguished by the short negative prescription. 

[13]      The obligation to enter into the Overage Agreement was not an “obligation relating to land” (1973 Act, Sched. 1, para 2(e)).  It was a personal collateral obligation.  While it was accepted that some personal obligations could be obligations relating to land, the obligation founded upon here was not such an obligation.  It was an obligation to enter into an agreement.  Land was not its main object.  Its enforcement would not confer a right or interest in land on the pursuers.  The obligation was to enter into an agreement in terms of which part of possible future sale or compensation proceeds might fall to be paid to the pursuers in certain circumstances.  The situation was not materially different from that in Smith v Stuart.  That decision was in point and was binding on the court.  The ratio of that case was that an obligation to enter into an agreement concerning the potential future sale proceeds of heritage was not an “obligation relating to land”.  There was no good basis for either distinguishing Smith or otherwise declining to follow it. 

 

Decision and Reasons
[14]      In my opinion the obligation the pursuer seeks to enforce is a personal obligation.  It is also collateral in the sense that in terms of the missives its performance did not form part of the Purchase Price.  However, those conclusions do not resolve the issue before the court, because it is clear that obligations relating to land include some types of personal obligation. 

[15]      Authoritative guidance as to the meaning of “any obligation relating to land” is contained in the Inner House decisions of Barratt Scotland Ltd v Keith and Smith v Stuart.  Two Outer House decisions which also discuss the issue are Glasgow City Council v Morrison Developments Ltd and Clydeport Properties Ltd v Shell UK Ltd 2007 SLT 547;  and some brief passing consideration was given to it in the recent Inner House decision of Cumbernauld Housing Partnership Ltd v Davie (but ultimately the court decided that the obligation in question was one falling within Sched 1, para 1(ac)).   

[16]      It is unnecessary to repeat what was said in Barratt:  the relevant passages are at page 148C-F (in the Opinion of the Lord Ordinary, Lord Penrose), pages 153F-154D (Lord Justice Clerk Ross), pages 156H-158C (Lord McCluskey), and page 159C-G (Lord Kirkwood). In the context of the present dispute Smith v Stuart warrants closer examination.  There the owner of land (the defender) gave a written undertaking to his sister (the pursuer).  The undertaking was set out in a letter to her dated 5 May 1995 and was signed by him.  It was in the following terms: 

“I, ALEXANDER  SHEWAN  STUART, hereby confirm that, I will enter into a formal Minute of Agreement with my sister, ELIZABETH  ANNE SMITH, Glenloye, Ardo, Whitecairns, Aberdeen to the following effect:

 

1) In the event of the sale of the land adjacent to The Stead Inn, Denhead, Potterton for agricultural or development purposes, half of the sale proceeds of the said land will fall to be paid to my sister, the said Elizabeth Anne Smith, and

 

2) In the event of the sale of the said land for agricultural purposes, I will effect the sale on the basis that if the purchaser from me were to sell the said land for development purposes, the increase in the value of the said land over agricultural value because of the said sale for development purposes will be paid equally to both myself and my sister, the said Elizabeth Anne Smith.

 

3) In the event of the sale of the said land for agricultural purposes and that I do not wish to retain any interest in the future development of the property I will effect the sale on the basis that if the purchaser from me (or any future purchaser thereafter) were to sell the said land for development purposes, one-half of the increase in the value of the said land over agricultural value because of the said sale for development purposes will be paid to my sister, the said Elizabeth Anne Smith.”

The pursuer brought an action in the sheriff court to enforce the undertaking.  She sought, inter alia:  (1) declarator that the defender was bound to enter into a minute of agreement on the terms set out in the undertaking;  (2) decree ordaining him to execute and deliver the minute in terms to be adjusted by the parties' agents, failing which in terms to be adjusted at the sight of the court;  (3) declarator that the defender was bound to implement paragraphs 1 to 3 of the undertaking in one or other of the events specified in those paragraphs;  and (4) decree ordaining him to implement those paragraphs in one or other of those events.  The sheriff sustained the defender’s pleas to the relevancy of the pursuer’s averments.  He also sustained a plea that the obligation which the pursuer sought to enforce had been extinguished by the short negative prescription.  He rejected a submission that the obligation was an obligation relating to land.  He characterised the promise in the undertaking as a promise to share the proceeds of sale.  He dismissed the action.  The pursuer appealed to the Court of Session.  The First Division refused the appeal.  Lord Justice Clerk Gill delivered the leading Opinion (with which Lords Carloway and Bracadale agreed).  The Lord Justice Clerk encapsulated the issue on appeal in paragraph 7 of his Opinion:

“The issue

 

[7] The parties agree that the undertaking is a ‘promise’ falling within para 1(g) of sch 1. The only issue is whether it is an ‘obligation relating to land’ (sch 1, para 2(e)). If it is, the 20-year prescription applies to it. If it is not, it has prescribed by virtue of sec 6.”

 

Counsel for the pursuer submitted (see para 8 of the Opinion) that the obligations in paragraphs 1 to 3 of the undertaking became binding on the pursuer as soon as he signed it;  that the Minute of Agreement would simply be a mechanism to formalise it and give practical effect to it;  that the undertaking conferred on the pursuer an interest in the land (in particular in its planning status and value), imposed on the defender an immediate obligation to secure that interest in one of the ways set out in paragraphs 1 to 3, and gave the pursuer a jus quesitum tertio;  that the undertaking was a promise by the defender to secure payment by a third party purchaser to the pursuer;  that it created an obligation relating to land “in its broadest sense” because the payment was  derived from the sale of land and its amount was related to a change of the land’s use.  The undertaking was equivalent to disponing half of the land to the pursuer.  It put her in the position she would have been in if she had owned half the land.  The court’s reasons for refusing the appeal were set out at paragraphs 9-15:

“9. The expression ‘any obligation relating to land’ is not defined by the 1973 Act. In Barratt Scotland Ltd v Keith the Second Division did not attempt a definition, other than to say that that expression must be given its natural and ordinary meaning. It is clear that the expression is apt to cover a wide range of obligations and that is not limited to those relating to real rights in land. In Barratt Scotland Ltd v Keith an obligation in missives to deliver a valid disposition in exchange for the purchase price was held to be an obligation relating to land. But, as the court recognised in that case, there are obligations to which land is only incidental and which cannot properly be said to ‘relate’ to it.

 

10.  I incline to the view expressed by Johnston (Prescription and Limitation, para 6.60) that for para 2(e) of sch 1 to apply, the land must be the main object of the obligation. That, I think, is in line with the approach of the court in Barratt Scotland Ltd v Keith.

 

11. The wording of the undertaking is unambiguous, in my opinion; so extrinsic evidence as to its construction is neither necessary nor admissible. This case can be decided on a straightforward construction of the words themselves.

 

12. In my opinion, the undertaking does not create an obligation relating to land. The obligation that it creates is an obligation on the part of the respondent to enter into an agreement with the appellant at an unspecified time. On that view, I consider that paras 1 to 3 of the undertaking do not add to or extend the respondent's obligation. They merely outline the content of the proposed agreement. I conclude therefore that the nature of the obligation is independent of the land itself.

 

13. It is significant that there is no obligation on the appellant to enter into the proposed agreement. She could have good reasons not to do so. The undertaking does not specify a date by which the agreement is to be entered into. It is therefore not certain that there will ever be an agreement. For these reasons, I reject the submission for the appellant that the undertaking creates obligations under paras 1 to 3 that are immediately prestable by the appellant.

 

14. In any event, even if counsel for the appellant were right in his submission that the undertaking creates a direct obligation on the part of the respondent to implement whichever of paras 1 to 3 should apply, the obligation would not be an obligation relating to land. Paragraphs 1 to 3 regulate the basis on which half of the proceeds of a relevant sale will be paid to the appellant in the uncertain event that any of the specified situations should arise. They do not oblige the respondent to confer on the appellant any right or interest in the land itself. As the sheriff has observed, the appellant would not be a party to any missives for the sale of the land and would have no title to sue for implement of them. Her only recourse would be against the respondent for her share of the proceeds of an asset that happened to be land.

 

15. I do not accept the submission of counsel for the appellant that the unilateral undertaking of the respondent conferred on the appellant a jus quaesitum tertio that would be enforceable by her if the respondent should enter into a bargain for the sale of the land. There is no such bargain and there can be no question of the appellant's being a tertius until there is. The purpose of that submission is to support the idea that the undertaking confers on the appellant an interest in the land. For the reasons that I have given, I consider that even if the submission were sound, it would take the appellant no further forward because she would still have no higher right than a right to a share in the proceeds of a sale.”

[17]      In my opinion the ratio of Smith v Stuart is found in paragraphs 10, 12 and 13.  The expression “any obligation relating to land” is to be given its natural and ordinary meaning, is apt to cover a wide range of obligations, is not limited to real rights in land, and is not apt to cover an obligation to which land is only incidental.  While the introductory words of paragraph 10 suggest a degree of tentativeness in expressing the further view that land must be the main object of the obligation, I read the Lord Justice Clerk as having affirmed that view and held it to be consistent with the approach of the court in Barratt Scotland Ltd v Keith (rather than having reserved his opinion, or stated that he did not need or wish to express a concluded view).  He went on to decide that an obligation to enter into an agreement with a landowner governing the division of the proceeds of a possible future sale, or sales, of the whole or part of the land is not an “obligation relating to land”.  Reading paragraphs 10 and 12 together, I understand him to have concluded that, having regard to the nature and object of the obligation to enter into the agreement, it was not an obligation relating to land.  He proceeded on the basis that the only obligation which the undertaking created was an obligation to enter into an agreement along the lines which the undertaking set out.  Paragraphs 1 to 3 provided a broad description of the obligations which the undertaking envisaged being constituted, but those paragraphs did not create those obligations. 

[18]      The Lord Justice Clerk went on (at paras 14 and 15) to consider what the position would have been if, contrary to his view, the undertaking had created an obligation on the respondent to implement whichever of paragraphs 1 to 3 should apply.  Here too he was clear that the obligation would not have been an obligation relating to land.  It would merely have been an obligation to pay the pursuer part of the proceeds of a future sale.  It would not have conferred on the pursuer any right or interest in the land itself.  The argument that the obligation conferred on the pursuer a jus quaesitum tertio was rejected on the grounds (i) that in the circumstances no such right arose, and (ii) that even if it had the pursuer’s right would still have been no higher than a right to share in the proceeds of sale.  

[19]      I am bound to follow the ratio of Smith v Stuart if it is in point.  Moreover, the further guidance which the case provides is clear and recent, and from a unanimous superior court.  There would have to be cogent reasons to justify a refusal to follow it.  

[20]      Mr Malone did not submit that the case had been wrongly decided, or that any of the court’s reasoning was erroneous.  Rather, he submitted that the circumstances of the present case fell to be distinguished.  

[21]      In my opinion the first two differences (that in Smith the undertaking was to enter into an agreement at an unspecified time, whereas here the obligation was to enter into the Agreement by the date of entry;  and that in Smith the person seeking to enforce the obligation had not been obliged to enter into an agreement, whereas here both parties were obliged to enter into the Agreement) do not take the pursuers anywhere.  Neither factor was essential to the court’s decision or to its reasoning.  Neither provides a good ground for holding that Smith is not in point.  Similarly, it is immaterial that there was an argument concerning jus quaesitum tertio, whereas here there is not.  The issue of jus quaesitum only arose in Smith if paragraphs 1-3 of the undertaking were obligatory (which the court held they were not).  In any case, the jus quaesitum argument was just one of the bases upon which the pursuer in Smith maintained that paragraphs 1-3 created obligations relating to land.  The argument was rejected by the court in Smith and it was not advanced here by Mr Malone.

[22]      A more material distinction may be that the undertaking merely set out the broad terms of a future agreement, while the missives obliged each party to contract in terms of the draft Overage Agreement.  So far as the defender was concerned that meant that he agreed that he would execute the Agreement and be bound by each of the obligations described in it.  Even if because of this difference I am not formally bound by the ratio in Smith, in my opinion the difference would not justify declining to following the further guidance which the case provides.  If in characterising the nature of the obligation one should look to the nature of the “underlying” obligations in the Overage Agreement, Smith indicates that such obligations are not obligations relating to land:  they merely regulate the basis upon which a portion of sale proceeds will be paid should certain specified circumstances arise.  Mr Malone did not suggest that the issue of the proceeds of compensation would fall to be treated any differently.  

[23]      That brings me to the final grounds for distinction relied upon by Mr Malone:  that in Smith the obligation was a unilateral undertaking and the main object of the obligation was not land;  whereas here the obligation formed a material part of bilateral missives of sale, was one of the counterpart or correlative obligations for the grant and delivery of the disposition, and, he maintained, its main object was land.  These points overlap and it is convenient to deal with them together.  The bilateral nature of the parties’ obligations, and the extent to which there were counter-prestations, are matters to which the court ought to have regard when characterising the nature of the obligation and whether it relates to land.  However, in my opinion it is important to remember that ultimately the focus should be on the nature and main object of the particular obligation in issue, not on the nature and main object of any counterpart obligation.  It does not necessarily follow from the fact that a counterpart obligation is an obligation relating to land that the obligation itself must also possess that character.  A non sequitur to that effect - seemingly based on the terms of section 15(2) of the 1973 Act - appears to have formed at least part of the basis of counsel for the pursuers’ submissions in Glasgow City Council v Morrison Developments Ltd (at paras 9-10).  In my opinion section 15(2) provides no warrant for such an approach.  The correlativity which the subsection deals with is that between rights and obligations.  Properly construed, section 15(2) provides that any reference to an obligation includes a reference to the right correlative thereto, and that any reference to a right includes a reference to the obligation (if any) correlative thereto.  It does not provide that any reference to an obligation includes reference to any counterpart obligation.  Thus in Glasgow City Council v Morrison Developments Ltd it did not follow from the fact that the obligation of the landlord to give his tenant possession was an obligation relating to land that each and every (or indeed, any) obligation of the tenant which might be described as the counterpart, or part of the counterpart, to the landlord’s obligation was also necessarily an obligation relating to land.  However, it seems that the Lord Ordinary accepted all of the reasons which counsel for the pursuers advanced (paras 13, 16) and that a material factor in reaching his conclusions was the “correlativity” of the tenant’s obligations to pay the grassum and construct the shops with the landlord’s obligation to grant the lease (paras 13, 16).  In Clydeport Properties Ltd v Shell UK Ltd Lord Glennie referred to and agreed with the Lord Eassie’s approach in Glasgow City Council v Morrison Developments Ltd.  A landlord sought implement of a tenant’s obligations to remediate the subjects of a lease.  Lord Glennie held that the tenant’s obligations to remediate were obligations relating to land, observing, inter alia, that they were “to use the expression in Glasgow City Council v Morrison Developments Ltd, correlative with the grant of the interest in the land”.  It is unnecessary to consider whether the outcome in Glasgow City Council v Morrison Developments Ltd would have been any different had Lord Eassie rejected the non sequitur in counsel’s submissions;  or whether Lord Glennie’s decision or reasoning in Clydeport would have altered if the matter had been clarified before him. 

[24]      Whether one focusses merely on the nature and object of the obligation to enter into the Agreement, or whether one takes account of the “underlying” obligations which would be imposed by the Agreement, the differences upon which Mr Malone relies do not appear to me to be crucial to the reasoning in Smith.  The essence of that reasoning was that on the former approach the nature of the obligation was independent of the land itself (para 12);  and that on the latter approach the nature of the obligation was a right to share in the proceeds of sale of the Subjects following their development (or in compensation for the acquisition of the Subjects);  and that in neither case was the obligation an obligation relating to land.  

[25]      In my opinion, for the foregoing reasons, it is not open to me to decline to follow Smith.  Applying Smith, the obligation which the pursuers seek to enforce is not an “obligation relating to land” in terms of Schedule 1, paragraph 2(e).  While it subsisted, it was an obligation to which section 6 applied.  It subsisted from 9 May 2008 for a period of five years without any relevant claim or relevant acknowledgement being made.  It was extinguished at the end of that five year period.   

[26]      Finally, I record that the submissions also briefly touched upon the words of exception in Schedule 1, paragraph 2(e), and on an argument that each of the exceptions must be obligations relating to land otherwise there would have been no need to except them.  Since it was clear that the expression “any obligation relating to land” must be given its natural and ordinary meaning, and that it is apt to cover a wide range of obligations, the argument was not developed.  The possible availability of such an argument was noted by Lord McCluskey in Barratt Scotland Ltd v Keith at page 157C-D: 

“The opening words of para. 2(e) are ‘except as provided in paragraph 1(a) of this Schedule’, but neither party suggested that the terms of para. 1(a) of the Schedule were of material assistance in interpreting the words “any obligation relating to land”. It might have been open to argue that the words ‘any obligation relating to land’ fell to be construed fairly widely because otherwise it would have been unnecessary to except certain of the obligations in para. 1(a) but, in the absence of any submission on the matter, I do not rely upon the terms of para. 1(a).”

It may also have been adverted to obliquely in Cumbernauld Housing Partnership Ltd v Davies, (per Lord Brodie delivering the Opinion of the Court towards the end of paragraph 17).  While nothing turns on it in the present case (and I do not express a concluded view), I have some reservations as the extent to which the suggested approach may be a reliable aid to the construction of the expression at issue.  First, in my opinion the words of exception in paragraph 2(e) are a saving.  It is well recognised that savings may be regarded as unreliable guides to the provisions to which they are attached.  Very often a saving is unnecessary but is put in ex abundante cautela (Bennion on Statutory Interpretation (6^th ed), Section 243).  In Ealing London Borough Council Appellants v Race Relations Board Respondents [1972] AC 342 Lord Simon of Glaisdale observed (at page 363D-E): 

“ … I think that considerable caution is needed in construing a general statutory provision by reference to its statutory exceptions. 'Saving clauses' are often included by way of reassurance, for avoidance of doubt or from abundance of caution.”

Second, while it is true to say that the saving would have been unnecessary if no obligations within each of paragraph 1(a) to (ac) were capable of being obligations relating to land, it does not follow from the presence of the saving that every obligation falling within each of those categories must be an obligation relating to land. 

 

Disposal
[27]      I shall sustain the defender’s second plea-in-law, repel the pursuers’ third plea-in-law, and pronounce decree of absolvitor.  I shall reserve meantime all questions of expenses.