SECOND DIVISION, INNER HOUSE, COURT OF SESSION
Lord Justice Clerk Lord Carloway Lord Bracadale	[2010] CSIH 29 XC53/09 OPINION OF THE LORD JUSTICE CLERK in the Appeal by ELIZABETH ANNE SMITH Appellant; against ALEXANDER SHEWAN STUART Respondent: _______

For the appellant: Bovey QC; Lefevre Litigation

For the respondent: McColl; Russel + Aitken

15 April 2010

Introduction

[1] This is an appeal from an interlocutor of Sheriff D J Cusine pronounced at Aberdeen Sheriff Court on 23 February 2009.

[2] The respondent is the owner of certain land at Denhead, Potterton, Aberdeenshire. In 1995 he gave an undertaking to the appellant. He set it out in a letter to her dated 4 May 1995 which bears to have been signed by him on 11 May 1995. It is 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."

[3] The appellant has raised this action to enforce the undertaking. She seeks inter alia (1) declarator that the respondent is 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 respondent is 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.

[4] I refrain from commenting on the fact that this action was raised in 2001.

[5] In the interlocutor appealed against, the sheriff sustained the respondent's pleas to the relevancy and a specific preliminary plea that since the appellant had failed to intimate a relevant claim within a period of five years from the date on which the undertaking became enforceable, the claim had prescribed. He dismissed the action.

The legislation

[6] Section 6 of the Prescription and Limitation (Scotland) Act 1973 (the 1973 Act) provides as follows:

"6. (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."

Schedule 1 provides inter alia:

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

(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.

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

(e) ... to any obligation relating to land (including an obligation to recognise a servitude)."

The issue

[7] The parties agree that the undertaking is a "promise" falling within paragraph 1(g) of Schedule 1. The only issue is whether it is an "obligation relating to land" (Sched 1, para 2(e)). If it is, the twenty-year prescription applies to it. If it is not, it has prescribed by virtue of section 6 (supra).

Submissions for the appellant

[8] Counsel for the appellant submitted that the obligations set out in paragraphs 1 to 3 of the undertaking became binding on the respondent as soon as he signed the undertaking (Stobo v Morrisons' Gowns Ltd 1949 SC 184). The Minute of Agreement to which the undertaking referred was simply a mechanism to formalise the undertaking and give practical effect to it. The undertaking had conferred on the appellant an interest in the land, and in particular in its planning status and value, and imposed on the respondent an immediate obligation to secure that interest in any one of the ways set out in paragraphs 1 to 3. This gave the appellant a ius quaesitum tertio. The sheriff erred in characterising the undertaking as a promise to share the proceeds of sale. It was a promise to secure payment to the appellant by a third party purchaser. That created an obligation relating to land "in its broadest sense," because the payment was derived from the sale of land and the amount of it was related to the question of a change in its use. The undertaking was equivalent to disponing half of the land to the appellant. It put her in the position that she would have been in if she had owned half of the land. It could best be understood after inquiry into the factual circumstances in which it had been given (cf Glasgow City Council v Caststop Ltd 2002 SLT 47). Counsel for the appellant moved us to allow the appeal, repel the respondent's preliminary plea and to appoint proof before answer on the whole record.

Decision

[9] The expression "any obligation relating to land" is not defined by the 1973 Act. In Barratt Scotland Ltd v Keith (1993 SC 142) 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 (supra), 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 Mr Johnston QC (Prescription and Limitation, para 6.60) that for Schedule 1 paragraph 2(e) 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 (supra).

[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 paragraphs 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 paragraphs 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 paragraphs 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 ius 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.

[16] On the view that I have taken, it is unnecessary to decide whether the appellant's fourth crave is competent. I shall say only that I have never heard of the court's granting a decree ad factum praestandum that is conditional on an event that may never occur.

Disposal

[17] I propose to your Lordships that we should refuse the appeal.

SECOND DIVISION, INNER HOUSE, COURT OF SESSION
Lord Justice Clerk Lord Carloway Lord Bracadale	[2010] CSIH 29 XC53/09 OPINION OF LORD CARLOWAY in the Appeal by ELIZABETH ANNE SMITH Appellant; against ALEXANDER SHEWAN STUART Respondent: _______

For the appellant: Bovey QC; Lefevre Litigation

For the respondent: McColl; Russel + Aitken

15 April 2010

[18] For the reasons given by your Lordship in the Chair, I agree that this appeal should be refused.

SECOND DIVISION, INNER HOUSE, COURT OF SESSION
Lord Justice Clerk Lord Carloway Lord Bracadale	[2010] CSIH 29 XC53/09 OPINION OF LORD BRACADALE in the Appeal by ELIZABETH ANNE SMITH Appellant; against ALEXANDER SHEWAN STUART Respondent: _______

For the appellant: Bovey QC; Lefevre Litigation

For the respondent: McColl; Russel + Aitken

15 April 2010

[19] For the reasons given by your Lordship in the Chair, I agree that this appeal should be refused.