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	Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Morston Assets Ltd v City Of Edinburgh Council [2001] ScotCS 44 (23 February 2001) URL: http://www.bailii.org/scot/cases/ScotCS/2001/44.html Cite as: [2001] ScotCS 44

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[1] The respondents to this petition for judicial review - the City of Edinburgh Council - are proprietors of an area of vacant land, formerly in the ownership of British Rail, extending to approximately 4.9 hectares in the Lochend area of the City. In the spring of the year 2000 they resolved to put it on the market and sales particulars were prepared and distributed. The brochure containing those particulars is produced both by the petitioners and also by the respondents (Nos.7/1 and 6/1 of process respectively).

[2] The brochure, as might be expected, includes various matters relating to the property offered for sale. It includes a section headed "Conditions of Sale". Among its provisions are statements that offers are invited on the basis of vacant possession; that preference will be given to offers which are not conditional upon planning consent; and that offers submitted should include full details of the proposed development. The brochure also contains a section headed "Submission of Offers". It begins by stating in bold print - "The closing date for offers is 12 noon on Friday 16 June." This section continues in the next line by stating - "All offers received after the closing date will be returned and will not be taken into consideration by the Council." There then follow certain instructions concerning the manner in which offers should be sent, which include the instruction that offers received by fax will not be accepted.

[3] From what is averred in the petition and from the terms of the correspondence produced in process and referred to at the first hearing, it appears that the petitioners, a company with its offices in Norwich, submitted an offer dated 14 June 2000 setting forth its development proposal. So far as the consideration being put forward was concerned, that offer provided for a stated sum of money, plus a further sum equivalent to a stated percentage "of additional value enhancement in usual government clawback terms, such entitlement to remain in force for 10 years." The offer contained no further explanation of the passage just quoted. Clarification of that passage was sought by the respondents in a fax sent to the petitioners on 20 June 2000. A reply purporting to deal with that aspect was received by a fax of the same date. The petitioners were subsequently told by a letter dated 22 June 2000 from the senior surveyor in the respondents' employment who was dealing with the matter that she was recommending to the respondents' Executive to accept another bid for the site.

[4] No immediate response was made by the petitioners to that letter. It is averred, however, in the petition that in

The respondents' officials replied by fax on the same day stating that -

[5] It may be interposed at this point that the concern that the press had obtained some information concerning details of the offers made as part of the tendering process appears to have materialised in the press cuttings lodged as productions by the respondents. It may further be observed that the faxed offer of 11 August 2000 itself refers to material allegedly recently published in the press and said to be suggestive that some conditional bids had been much higher than unconditional ones.

[6] The petition goes on to aver that on 15 August 2000 the Council Executive resolved to accept an offer made by another offeror and that the faxed offer of 11 August 2000 was not considered by the Executive. The decision of the Executive was reviewed by the respondents' Resource Management and Audit Scrutiny Panel which, on 14 September 2000, accepted the Executive's decision to dispose of the property to the other offeror. It is then said in the petition that the petitioners "believe and aver" that the offer which the Executive decided to accept was lower than the offer made by the petitioners by fax on 11 August 2000. The basis for such a belief is not set forth in averment.

[7] The decisions of the respondents' Executive and Panel of 15 August and 14 September 2000 respectively to the effect that the other offer should be accepted are challenged in this petition, which seeks their reduction. The petition also seeks, consequentially, reduction of any acceptance of that other offer issued to the maker of that offer. The petition further seeks a decree ordaining the respondents -

[8] The basis for challenging the validity of those decisions and for seeking the decree ordaining the respondents to consider the offer of 11 August 2000 is set out in paragraph 5 of the petition which reads as follows:

[9] For convenience, the full text of section 74 of the Local Government (Scotland) Act 1973, as amended, - "the Act" - so far as material is in these terms:

At the first hearing Mr Jonathan Mitchell, Q.C., who appeared for the respondents, submitted that although answers had not yet been lodged on behalf of the respondents it was competent in terms of R.C. 58.9 to determine the petition and he would, as part of his argument, invite me to dismiss the petition as irrelevant. Mr Glennie, Q.C., for the petitioners, did not dispute the competency of that course, although his position was, or would be, that answers should be ordered in terms of R.C. 58.9(2)(b)(iv). I decided that I should in the first place hear the arguments on the relevancy of the petition.

[10] In his submissions, Mr Mitchell began by adverting to the terms of section 74 of the Act and pointed out that they did not require a local authority to obtain in absolute terms the best price but simply the best price that could be reasonably obtained. The adverb "reasonably" was not one which could "wrap up" the other adverbs "unethically, unprofessionally and dishonestly". Yet the thrust of the petitioners' case was that there was a duty to consider an offer made long after the closing date and to play one bidder off against another. It was well recognised in Scottish legal practice that where a closing date had been fixed it would not be proper professional practice for a solicitor to assist his client to enter into negotiations with an unsuccessful bidder, unless the negotiations with the selected bidder had been terminated. The Law Society guidelines on this matter were published (Parliament House Book F.981). He further referred to the pertinent textbooks, namely Cusine & Rennie on Missives §1.36; Halliday on Conveyancing Law and Practice §30-15; Gretton & Reid on Conveyancing §3.06; and Sinclair Handbook of Conveyancing Practice in Scotland §4.1 ff. In England, setting a closing may have consequences in the shape of giving contractual rights - Blackpool & Fylde Aero Club v Blackpool Borough Council [1999] 1 WLR 1195, 1201F but the position in Scotland was not perhaps so clear cut. The respondents having thus set a closing date in the sale particulars and having stated expressly that any offer received later would not be considered but returned, other parties who had submitted offers could expect the respondents not to entertain any offer lodged long after the due closing date. The complaint made in the petition was essentially a complaint that the respondents had omitted to act in a way which would be, if not dishonest, at least improper. The petitioners were in effect saying that the respondents were allegedly in breach of section 74 of the Act because they had omitted to favour the petitioners by acting improperly in their favour. Were it, alternatively, to be contended for the petitioners by declining to consider their late bid that the respondents had treated the petitioners unfairly, the answer to that was that, in a field such as this, there was no duty in law to act fairly - Stanifer Developments Ltd v Glasgow Development Agency 1999 S.C. 156.

[11] In his response I did not understand counsel for the petitioners to endeavour to make any case based on a duty to act fairly. Rather, the basis of the petitioners' case was entirely the contention that by failing to consider the petitioners' faxed offer of 11 August 2000 the respondents were in breach of the statutory duty imposed on them under section 74 of the Act. Except with the consent of the Secretary of State - as to the seeking of which there was no suggestion - that duty required the respondents to obtain the best consideration reasonably obtainable. Reasonableness affected the notion of the evaluation of the consideration. Thus, in Stanifer, it was recognised by the court that the best consideration reasonably obtainable involved not just the highest figure tendered, but also "deliverability" - the likelihood of that figure being realised in practice. However, for the purposes of section 74 "consideration" went only to matters of monetary return. Counsel referred to R. v Pembrokeshire County Council, ex parte Coker and another [1994] 4 A.E.R. 1006, 1012 in which Lightman J stated:

Setting a closing date did not mean that the seller was bound to ignore offers after the date. It was not submitted by the respondents that there was a legal prohibition in Scotland on doing so. The issue therefore became one of appropriateness. The Law Society of Scotland's guidelines were not absolute. Paragraph 7 of those guidelines envisaged a purchaser's solicitor being instructed, with propriety, to submit a revised offer if expressly invited to do so by the seller's solicitors. While counsel recognised that the reference in the sale particulars to a preference for offers not conditional on planning consent did not preclude the seller from considering bids not so conditional, there were, he said, special circumstances in that the petitioners had understood - wrongly - that such bids would not be considered at all. That misunderstanding prompted the late bid. It was wrong to have a rigid rule of refusing to consider a late offer, after the closing date, which might thereby prevent a local authority from getting what was truly the best price. There was an onus on the respondents to explain their reason for declining to consider the late bid. Such a reason would need to be directed towards their ability to obtain the best price. If the reason were that the late offers were of lower value than the prior, preferred offer they could simply explain that in their answers by setting out the details of the offers. The respondents should therefore be ordered to lodge answers and the respondents' motion for dismissal at this stage should be refused.

[12] In my view it is necessary to bear in mind that the petitioners do not seek to put in issue the respondents' decision to market the site by inviting the submission of offers by prospective purchasers by a fixed closing date plainly and publicly stated in the sale particulars. It is, I think, within common knowledge that the invitation of offers within a fixed closing date announced in advance is a well used practice, particularly among public authorities. It is also in my view not difficult to see that, at least in part, the underlying rationale of setting a closing date for offers or tenders is that of ensuring that in submitting an offer timeously each offeror will put forward its best offer, knowing that no subsequent offer will be considered. That such a system is one recognised method of obtaining the best consideration available in the market was not - as I understood it - disputed by counsel for the petitioners.

[13] On the contrary, the contention of the petitioners was rather that the provisions of section 74 of the Act confined attention to the reasonableness of the amount of the consideration in an absolute sense which required the respondents to evaluate all offers including any made long after the closing date in order to see whether by accepting a late offer they might yet get a higher price, there being no technical legal obstruction in Scotland to accepting a higher late offer, notwithstanding the terms of the earlier particulars of sale.

[14] In my opinion the petitioners' contentions are unsound. I am prepared, at least for present purposes, to accept that in Scotland the setting of a closing date does not, as a matter of strict law, prevent a seller from accepting a higher offer from a potential purchaser, made after the closing date. But, for what are in my view understandable reasons, the adoption of such a course on the part of a seller is not well regarded, as is indicated by all of the textbooks on conveyancing practice to which I was referred. For example, Cusine and Rennie refer (para.1.36) to a seller adopting such a course as an "unscrupulous" seller. In the present case, to accede to the view that the respondents were bound to consider - and thus by implication accept, if appropriate, - the faxed offer of 11 August 2000 would involve the respondents departing from the clearly stated basis of the competitive tendering exercise upon which they were engaged. Such a departure would be seen - I think rightly - by those who had participated in the submitting of bids before the published closing date as an act of bad faith on the part of the respondents, putting in question the reliability of any such future exercise upon which the respondents were to embark.

[15] I am not persuaded by the suggestion that the element of reasonableness in the duty under section 74 is confined purely to the quantum of the consideration. The phrase employed in the statute is the adverbial one of "reasonably obtained", which directs one if not primarily, then in large measure to the manner or method of obtaining the best price. On the assumption that the consideration proffered in the faxed offer of 11 August 2000 were better or higher than the best offer obtained in the competitive tendering exercise, with its clearly published closing date, acceptance of that offer would in my view be seen as the best price obtained, not reasonably, but unreasonably.

[16] In these circumstances I am of the view that the petition discloses no prima facie relevant case and that it should be dismissed at this stage, no useful purpose being served by calling for answers.