I made the point that run of cases looked to be coming to an end following the Supreme Court case of Arnold v Britton and the messages that the court gave in the case - (1) the importance of the words actually used in the contract; and (2) judges should avoid re-writing contracts in attempts to assist unwise parties or to penalise an astute party.
Scottish cases after Arnold v Britton
My article also looked at the Scottish case of Petition of Kennedy and others for suspension and interdict which was decided following Arnold v Britton. Kennedy took a stricter approach to interpretation that had been evident in the Scottish courts prior to that point. That stricter approach appeared, until now, to be a theme of the more recent cases (see David D E Kenwright v Stewart Milne Group Limited [2015] CSOH 85 and Stewart Wells Hill and Anr v Stewart Milne Group Limited and Anr [2016] CSIH 35) However, Kennedy has just been successfully appealed.
Peter Kennedy & Others v Dickie & Moore Holdings Limited
To recap the facts in Kennedy, a sale of land had been concluded between the seller and the buyer. The buyer intended to build houses on the land. The buyer later pulled out of the contract but, at a later point, the same parties entered into a new contract. That new contract provided for payment to be made by the seller to the buyer of costs incurred by the buyer in seeking planning permission. The understanding was that the buyer would continue to progress the application for planning permission. In terms of the new contract, payment of the previously incurred costs (of circa £165,000) plus new costs up to a cap of £10,000 was to be made where there was a new sale of the land to a third party "during the shorter of the period when the planning consent obtained or to be obtained by [the buyer] for the development of the [land] remains extant and the period of 5 years from the date of [the agreement], as the case shall be." .
The land was duly sold to a third party developer within 5 years of the date of the agreement. The buyer had never obtained planning permission but sought payment of the abortive costs. The seller denied payment was due because planning permission had not been obtained. The buyer argued that planning permission was not necessary and payment was due as a result of the sale being achieved within 5 years of the date of the agreement. Following a proof, the Lord Ordinary found that the two timescales set out in the clause were independent of one another, so that payment would be due even if planning permission was obtained. As a result, the court found that payment was due to the buyer.
That decision was appealed and the Inner House has just issued its decision on the reclaiming motion. The appeal has been allowed, meaning that no payment is due to the buyer.
In coming to that decision, Lady Clark took the view that there was no lack of clarity in the wording in the contract - it was clear to her that the buyers were not entitled to payment purely because there had been a sale to a third party within 5 years of the date of the second agreement. She considered that the agreement clearly provided for a comparison between two time periods, one of which could only be triggered by the grant of planning permission. Importantly, she said that the agreement was one where the buyers agreed to continue to seek planning consent - even though there was no specific obligation on the buyers to do that. Lord Malcolm agreed with that, commenting that "[T]he starting point is the wording used in the agreement when read in its context. If the words used can be given a sensible meaning, which is free from ambiguity, and reflects the commercial sense which the parties are expected to possess, then, absent some compelling countervailing factor, that meaning should be employed to resolve the dispute. "
So, despite the warnings from the Supreme Court in Arnold v Britton, commercial common sense is front and centre again - at least in this case. Whether Kennedy marks a return to more cases being decided on the basis of commercial common sense will remain to be seen.
