Arbitration Appeal no.3 of 2024 (Court of Session) [2025] CSOH 7 (16 January 2025)

OUTER HOUSE, COURT OF SESSION

[2025] CSOH 7

P1120/24

OPINION OF LORD BRAID

In the petition

ARBITRATION APPEAL NO 3 OF 2024

Petitioners: Turcan Connell

Respondent: City of Edinburgh Council

16 January 2025

Introduction

[1]

The petitioners wish to appeal the partial award of an arbitrator dated 7 November

2024 on the ground that the arbitrator erred on several points of Scots law (a legal error

appeal). The arbitration was subject to the provisions of the Arbitration (Scotland) Act 2010

and the Scottish Arbitration Rules, as set out in schedule 1 to that Act. In terms of rules 69

and 70, a legal error appeal may be made to the Outer House only with the agreement of the

parties or with the leave of the Outer House. The respondent has not agreed to the appeal

and so the petitioners seek leave of the court.

[2]

By virtue of rule 70(3) leave for a legal error appeal may be given only if the court is

satisfied:

(a)

that deciding the point of Scots law in question will substantially affect a

party's rights;

(b)

that the arbitrator was asked to decide the point; and

(c)

that the arbitrator's decision on the point

(i)

was obviously wrong, or

(ii)

if the point is of general importance, is open to serious doubt.

[3]

There is no disagreement between the parties that the first two limbs of that test are

met, nor for that matter do the petitioners contend that the arbitrator's decision was

obviously wrong. The issue is whether, in relation to any of the proposed grounds of

appeal, the second branch of (c) is also satisfied.

[4]

Rule 70(5) provides that the Outer House must determine an application for leave

without a hearing (unless satisfied that a hearing is required). Having perused the

pleadings (which are in full terms), the productions (which included the pleadings in the

arbitration, the notes of argument lodged by each party in the arbitration, and the

arbitrator's decision) and the bundles of authorities lodged by both parties, I am well versed

in the arguments on both sides. I do not consider that a hearing is required.

Section 75 of the Town and Country Planning (Scotland) Act 1997

[5]

Since the dispute relates to an agreement entered into in 2003 between D and the

respondent (a planning authority), pursuant to section 75 of the Town and Country

Planning (Scotland) Act 1997, it is convenient to set out the material terms of that section as

it was in force at that time in its original form:

"75 Agreements regulating the use of land

(1)

A planning authority may enter into an agreement with any person interested

in land in their district (insofar as the interest of that person enables him to bind the

land) for the purpose of restricting or regulating the development or use of the land,

either permanently or during such period as may be prescribed by the agreement.

....

(2)

An agreement made under this section with any person interested in land

may, if the agreement has been recorded in [...] the Land Register of Scotland, be

enforceable at the instance of the planning authority against persons deriving title to

the land from the person with whom the agreement was entered into.

....

(3)

Nothing in this section or in any agreement made under it shall be construed-

(a)

as restricting the exercise, in relation to land which is the subject of

any such agreement, of any powers exercisable by any Minister or authority

under this Act so long as those powers are exercised in accordance with the

provision of the development plan, or in accordance with any directions

which may have been given by the Secretary of State as to the provisions to

be included in such a plan..."

The dispute

[6]

The section 75 agreement in question pertained to an area of ground referred to in

the agreement as the Development Site. The agreement was registered in the Land Register

and thus, by virtue of section 75(3), it became enforceable at the instance of the respondent

against singular successors of D. The agreement contained an arbitration clause.

[7]

Subsequently, D sold to the first petitioner the majority of the land comprising the

Development Site, with the exception of certain plots which it had previously sold. The first

petitioner has since sold on some of the land to third parties, but still owns a substantial part

of the Development Site. D did not assign its rights under the agreement to any of the

petitioners (nor to any other party).

[8]

The largest part of the dispute centres on the construction of clause 2 of the section 75

agreement, dealing with the provision of affordable housing in the Development Site.

Insofar as material it provides:

"2. Affordable Housing

2.1 D will allocate six areas on the Development Site for the development of

affordable housing. Such areas will be nominated by D and shall be located

two within Phase 1, one within Phase 2 and three within Phase 3 and shall be set

aside and available only for the construction of the total affordable housing units.

2.2 Subject to the provisions of clause 2.3 hereof, D shall use reasonable

endeavours to enter into affordable housing contracts which, individually or

cumulatively, shall provide for the construction of, or the sale of land for the

construction of, the following amount of affordable housing units within the

Development Site by each of the following stages of development:...

[...]

2.5 Unless otherwise agreed with the [respondent], affordable housing shall not be

provided on the Development Site in blocks of more than 100 residential units.

2.6 Of the total affordable housing units, D shall be bound to procure that 70% shall

be allocated for socially rented housing and 30% shall be allocated for share

ownership schemes, subsidised LCHO and unsubsidised LCHO, or as otherwise may

be agreed between D and the [respondent] at the time of the development of any part

of such affordable housing provision.

[...]

2.11 It will not be necessary for 15% of the total relevant housing units in the

implementation of each housing consent to be affordable housing units, and not all

successors in title of D must exercise reasonable endeavours to enter into affordable

housing contracts, provided always that, either individually or cumulatively, D or at

least one successor in title of them to part or parts of the Development Site

undertakes reasonable endeavours to enter into the affordable housing contracts

referred to in the foregoing clauses."

"Total affordable housing units" was defined in the agreement as meaning: "the lesser of

(a) 510 residential units and (b) the number which is 15% of all residential units to be

constructed on the Development Site."

[9]

A separate dispute also relates to clause 5.3, which provides, insofar as material:

"D undertakes save to the extent hereinafter specified not to construct without the

approval in writing of the [respondent] (which consent will not be unreasonably

withheld or a decision thereon unreasonably delayed) any permanent road crossings

nor alter any ground levels or locate any services within [a specified area] until such

time as the [respondent] notifies D in writing that it does not require the transfer of

[the specified area] or 1 January 2020 whichever is the earlier date SAVE THAT D

shall be entitled without requiring the further consent of the [respondent] to

construct the principal transport corridor to serve the Site (being [ ] Road or such

other route or routes as may be determined in substitution for such Road), form such

other roads, associated services and other works anticipated by and incorporated by

reference in the Planning Permission and to construct such other services and others

as are reasonably required in connection with the development of the Site provided

always that in forming such roads, installing such services and carrying out such

other works D will have due and proper regard to the need to ensure that in crossing

[the specified area] the roads, services and other works are designed and located in a

way which will enable them to be maintained replaced and investigated or renewed

..."

[10]

The petitioners' principal complaint is that, properly construed, the agreement

provides for a maximum number of affordable housing units on the Site; that the

respondent breached clause 2 of the agreement (a) by granting planning permission over

land not owned by the petitioners with the result that across the Site as a whole, the

maximum number of affordable housing units was exceeded; and (b) by granting planning

permission for blocks containing more than 100 residential units, again over land not owned

by the petitioners, and without the petitioners' consent; and that the petitioners have title

and interest to sue in respect of these alleged breaches. They further contend that the

respondent breached clause 5.3 by requiring them to seek planning permission and roads

authority consent for any roads within the Site. The respondent takes issue with all these

points. The dispute was referred to arbitration, in accordance with an arbitration clause.

The arbitrator's decision

[11]

The issues which the arbitrator had to resolve, insofar as material for present

purposes, were:

(a)

Which, if any, of any obligations owed by the respondent to D in terms of

clause 2 of the agreement were the petitioners entitled to enforce as successors in title

to D of only some parts of the Development Site?

(b)

On a proper construction of clause 2, (i) did the respondent owe any duty to

the petitioners to limit the amount of residential development granted planning

permission on the Site for use as affordable housing, including in relation to parts of

the site not owned by it; and (ii) was the respondent obliged not to grant planning

permission for affordable housing in a single block comprising over 100 units, even

where an application for such was made by the owner or intended developer of such

land (and where the land was not owned by the petitioner)?

(c)

On a proper construction of clause 5.3, were the petitioners exempt from

seeking planning permission and roads authority construction consent for any roads

within the Site?

[12]

Insofar as the first of these is concerned, the arbitrator decided that the petitioners

did not have title and interest to raise complaints against the respondent in respect of

obligations said to be owed by the respondent under the agreement, except insofar as such

obligations were owed to the petitioners as owners of the Site. The essence of his reasoning

was that it was clear from section 75 that an agreement entered into pursuant to that section

could be made only between a planning authority and a person both interested in and able

to bind the land. D was such a person, but when it disponed parcels of land to third parties,

it ceased to be such a person in relation to that land. The agreement then became

enforceable against the various owners of the parcels of land disponed by D. The critical

point was that liability under the agreement followed the land. Obligations owed in respect

of parcels of land owned by third parties could be enforced at the instance of the respondent

against the third party owners, but not against other owners of other parcels including those

owned by the petitioner. As regards rights, the arbitrator accepted that a transferee of land

subject to the section 75 agreement could acquire enforceable rights, but only in respect of

land acquired and held by it. To allow a party to claim under the agreement in respect of a

parcel of land to which he had no right or title would undermine the integrity of the

statutory provision. The arbitrator rejected the petitioners' arguments that a real personal

burden had been created in favour of the petitioner, or alternatively that the agreement was

enforceable by the petitioners as a tertius in terms of a jus quaesitum tertio created as between

D and the respondent.

[13]

In relation to the second issue, the arbitrator preferred the respondent's construction

of the affordable housing provision, which was that, read as a whole, the agreement

provided for a minimum, not a maximum, level of affordable housing units. Thus, he

decided that the respondent was not obliged to limit the amount of affordable housing for

which it granted planning permission on the Site; and, further, that the agreement of the

petitioners was not required to allow the provision of affordable housing in blocks of over

100 units, or to the variation of clause 2.6 in relation to development of any land not owned

by the petitioner. The arbitrator further decided that insofar as it was contended that the

effect of clause 2 was to restrict the ability of the respondent to exercise its statutory powers

in a particular manner, any such restriction would be counter to section 75(5)(a) of the

1997 Act in its then form, and unenforceable.

[14]

In relation to the third issue, similarly, the arbitrator found that insofar as clause 5.3

purported to exempt the petitioners from the requirement to seek planning permission and

roads authority consent for any roads with the Site, it was counter to section 75(5)(a) and

unenforceable.

[15]

Consequent to those findings, the arbitrator dismissed the petitioners' claim insofar

as it was based on any alleged breach of clause 2.5 or 2.6, or of clause 5.3.

The grounds of challenge

[16]

The petitioners contend that the arbitrator made the following eight errors of law:

[17]

First, that his approach to construction of the section 75 agreement, resulting in his

finding that the petitioners had title to sue only in respect of obligations pertaining to the

particular parts of the Development Site owned by them, was inconsistent with the

important principle of law that all of the obligations on one side of a contract were taken to

be reciprocal to those on the other side in the absence of a clear indication in the contract to

the contrary (there being no such clear indication here): JH & W Lamont of Heathfield

Farm v Chattisham Ltd 2018 SC 440, per the Lord President (Carloway) at [20]; Inveresk

plc v Tullis Russell Papermakers Ltd 2010 SC (UKSC) 106, per Lord Hope of Craighead at [42].

[18]

Second, that in holding that the petitioners had title and interest only insofar as

obligations were owed to them in respect of the land they owned, the arbitrator erred by

failing to recognise that the enforceability of the section 75 agreement as a real burden could

not sensibly be limited in the manner that he suggested, whereby owners of parcels of land

which were formerly part of the entire development site could only enforce the agreement

insofar as it related to activities carried out upon that land (as opposed to activities

undertaken on the Site which affected the land owned by the successor in question).

Reference was made in this regard to an article by Professor Paisley, Personal Real Burdens,

2005 Juridical Review 377, at 399.

[19]

Third that the arbitrator erred in holding that the petitioners should not be regarded

as enjoying a jus quaesitum tertio conferring on them the ability to sue. The requirements for

the creation of a jus quaesitum tertio were all made out: see McBryde, The Law of Contract in

Scotland (3

Ed), para 10.08). The arbitrator had focussed on whether successors of D were

burdened by the section 75 agreement, but that was nothing to the point so far as the

question of intention to benefit a successor was concerned.

[20]

Fourth, that the arbitrator erred in his construction of clause 2. To the extent that his

reasoning was based upon his prior conclusions regarding title and interest, his reasoning

was flawed in limine. Having regard to the definition of affordable housing units, which

provided for the lesser of two alternatives, properly construed the agreement sought to place

a cap upon the total number of affordable housing units upon the Development Site.

[21]

Fifth, that the arbitrator erred in finding that on a proper construction of the

agreement, the agreement of the petitioners was not required for the variation of clause 2.5

or clause 2.6. Again, the view he reached was predicated on his unsound conclusion as to

title and interest. The approach taken by the arbitrator stripped the relevant provisions of

the section 75 agreement of any meaningful content.

[22]

Sixth, that the arbitrator erred in, to any extent, basing his above findings upon his

view of the effects of section 75(5)(a) of the 1997 Act. Even if the respondent's statutory

powers were not fettered as a result of the obligations it undertook under the section 75

agreement, such a conclusion had no effect upon the proper construction of the obligations

undertaken by it; so, even if it was statutorily empowered to act as it did in granting

planning permissions for affordable housing, such conduct remained a breach of the terms

of the agreement properly construed.

[23]

Seventh, that the arbitrator erred in declaring that insofar as it was contended that

the effect of clause 2 or any part thereof was to restrict the ability of the respondent to

exercise its statutory powers in a particular manner, any such restriction would be counter

to section 75(5)(a) of the 1997 Act, in respect that the relevant question was the proper

meaning and effect of the section 75 Agreement, not whether the respondent retained its

statutory powers. The error lay in the arbitrator proceeding on the basis that the proper

construction of the agreement depended upon whether its statutory powers as such were

affected. Further, there was no warrant for the conclusion that section 75(5)(a) had effect so

as to render the provisions of clause 2.5 unenforceable.

[24]

Eighth, that for the reasons set out in the sixth and seventh grounds of appeal, the

arbitrator erred in finding that clause 5.3 was unenforceable.

[25]

In relation to all of these grounds of appeal, the petitioners aver that the points in

question are all matters of general importance, and that the arbitrator's decision on all of

them is on any view at least open to serious doubt. The dispute between the parties

concerns the ability of successors to enforce, against a planning authority, obligations which

are undertaken in agreements entered into under section 75 of the 1997 Act. Given the

prevalence of such agreements, the questions of title to sue, and of construction which arise

are in themselves matters of general importance. The scale and size of the Site and the

developments being undertaken on it were also such as to imbue the points raised by the

petitioners with the necessary quality of general importance.

The respondent's answers

[26]

The respondent denies that the arbitrator erred in any of the eight respects averred in

the petition.

[27]

In relation to the first ground of appeal, there was no title to sue in the abstract. The

petitioners' case principally related to alleged breaches of the section 75 agreement by the

respondent by granting planning permission to the owners of other plots. The arbitrator did

not err in finding that the petitioners had no title to sue, except in respect of obligations

pertaining to those particular parts of the Site owned by the petitioners. As regards

mutuality, the petitioners' argument was misplaced. The petitioners were not party to the

section 75 agreement, nor had it been assigned to them; the petitioners' putative title was

based entirely upon section 75, not common law principles, as the arbitrator correctly held.

There was nothing in the statutory scheme or in private law principle which explained how

the petitioners had any title to sue in respect of section 75 planning obligations affecting

other plots of land. The arbitrator's decision on the first ground of appeal was not open to

serious doubt.

[28]

In relation to the second ground of appeal, neither Professor Paisley's article nor the

petition addressed or identified any legal mechanism of how it is that a successor to a plot

subject to a section 75 agreement acquired any right to enforce in respect of other plots. It

was striking that the law of title conditions which can give rise to mutual enforcement

had strict title and interest requirements on top of specific rules about whether, for example,

properties are "related". On the petitioners' approach, there were no such rules for planning

obligations which would become mutually enforceable by owners across a development.

[29]

In relation to the third ground of appeal, the arbitrator was correct to reject the

petitioners' contention that they should be regarded as a tertius with an ability to sue under

the law of jus quaesitum tertio. There was Outer House authority that third parties had no

title to enforce a section 75 agreement: Jordanhill Community Council v Glasgow City Council

[2018] CSOH 11, para [71], per Lady Wolffe.

[30]

In relation to the fourth ground of appeal, the construction of clause 2 was not a

matter of general importance being found as it was in a non-standard section 75 agreement

which applies to a single development. The arbitrator had made clear that his construction

of clause 2 was not tied to his decision on title to sue. The arbitrator's interpretation of the

clause was not open to serious doubt. The "total affordable housing" referred to the

maximum that the developer might be required to attempt to provide, which was why it

referred to the lesser of two potential amounts. It did not impose a cap on what they or

others could choose to propose.

[31]

In relation to the fifth ground of appeal, this turned on the proper construction of

clause 2.5 of the agreement. That was not a point of general importance, nor was the

arbitrator's decision open to serious doubt. In terms of section 75, as then in force, it was

only someone who had an interest in land who could enter into a planning obligation. By

parity of reasoning it is only the person with an interest in land the owner who could

agree to a variation of a section 75 obligation with the planning authority. On the

petitioners' construction, planning obligations in section 75 agreements for large

developments would become ossified as soon as plots were sold subject to the planning

obligations, because unanimity of all grantees would then be required to vary a provision in

the terms of clause 2.5.

[32]

In relation to the sixth ground and seventh grounds of appeal, the arbitrator's

construction of section 75(5) was in accordance with appellate English authority on the

equivalent English provisions, and was also consistent with binding Scottish Authority:

Elsick Development Co Ltd v Aberdeen City and Shire Development Planning Authority

[2017] UKSC 66, 2018 SC (UKSC) 75.

[33]

In relation to the eighth ground of appeal, the proper construction of clause 5.3 was

not a matter of general importance. The arbitrator did not err in law.

[34]

As regards the test for leave, the arbitrator did not make any errors of law, far less

were his conclusions open to serious doubt. No issues of general importance were raised by

the grounds of appeal. Given the arbitrator's construction of clause 2 of the section 75

agreement, the arguments in relation to title to sue even if they were considered to raise a

point of general importance were academic in light of the factual and context specific

construction of clause 2 of the agreement which applied in this development.

Decision

[35]

The parties lodged a number of Outer House cases dealing with the approach to be

taken when considering leave in legal error appeals: Arbitration Application 1 of 2013

[2014] CSOH 83 (Lord Woolman); Arbitration Appeal No 1 of 2019 2019 SLT 1309 (Lord Bannatyne);

Arbitration Appeal No 1 of 2023 [2023] CSOH 78 (Lord Richardson). While it is clear from

those cases (and the authorities referred to therein) that, in general, the ethos of the law is to

strive to uphold arbitration awards in order to preserve the advantages of arbitration, and

the bar for leave is deliberately set high, equally all of those cases were ones in which it was

argued that the decision was obviously wrong, a test which it is all but impossible to satisfy

in the majority of cases. In the present case, the petitioners do not assert that the arbitrator's

decision was obviously wrong, but they do need to satisfy me not only that it is open to

serious doubt, a lesser test, but that the point is also one of general importance. I was not

referred to any authorities as to the meaning of "serious doubt", but on any view, in order to

give content to "serious", it must entail more than that there is a possibility that the

arbitrator's decision might be wrong. Beyond that, it is probably unwise to attempt to put a

gloss on the statutory wording, by rephrasing it in some other way. It must always be a

value judgment as to whether any doubt as to the correctness of the decision is a serious one,

or not. As to whether a point is of general importance, one which arises out of a bespoke

contract is unlikely to have any wider resonance (cf: Arbitration Application 1 of 2013, above,

Lord Woolman at [33]). Likewise, factors such as the size and scale of the development,

while doubtless of importance to the parties, are not such as to imbue the points raised with

the quality of general importance.

[36]

As regards the first ground of appeal, I find the respondent's arguments to be the

more compelling. Given that the petitioners are neither party to the original agreement nor

assignees of D's rights, the authorities referred to by the petitioners are nothing to the point.

It is not in dispute that the respondents could owe reciprocal obligations to the petitioners in

respect of the land owned by them. The petitioners' argument does not explain by what

mechanism the petitioners could have acquired rights in respect of land not owned by it. If

a serious doubt arises, it is as to the soundness of that argument, rather than the arbitrator's

decision.

[37]

The same can be said of the second and third grounds of appeal, where the

respondent's arguments are also to be preferred. In relation to the former ground, even if

the views expressed in Professor Paisley's article are such as to give room for an alternative

view, they are not such as to raise a serious doubt as to the correctness of the arbitrator's

decision. Even if the views expounded by Professor Paisley were generally accepted as

being correct, that does not explain why the successor to a plot subject to a section 75

agreement acquires any right to enforce in respect of other plots. Even if that is wrong, the

argument that this agreement, correctly construed, has created a personal real burden is

weak. In relation to the third ground, Jordanhill Community Council v Glasgow City Council,

above, supports the view that third parties have no title to enforce a section 75 agreement.

Again, any serious doubt is as to the petitioner's argument, rather than the arbitrator's

decision.

[38]

The fourth ground of appeal is squarely directed at the correct construction of the

particular section 75 agreement entered into in this case and whether it imposed a maximum

or minimum requirement for affordable housing units. Even if the arbitrator was wrong in

reaching the conclusion he did on title and interest, he went on to construe the agreement on

its own terms, applying the recognised principles of contractual construction (see para [50]

of his award). The word "lesser" which appears in the definition does not do the heavy

lifting required of it by the petitioner. All that the definition does is provide a mechanism

for ascertaining whether the number of units is one figure, or another. Thereafter it is a

question of construction of the agreement as a whole as to whether the figure so arrived at is

the minimum number of such units which the developers must attempt to provide, or

whether it is a number which must not be exceeded by the developer. At best for the

petitioners, the use of "lesser" in the definition is neutral as to whether the figure arrived at

is a minimum or maximum requirement. For the reasons advanced by the respondent, I

consider that the construction arrived at by the arbitrator was correct. At any rate, that

construction is not open to serious doubt.

[39]

The fifth ground of challenge is also directed at a proper construction of the

agreement, this time of clause 2.5, and the meaning of "unless otherwise agreed". The

arbitrator's conclusion that this must refer to an agreement reached with the owner of the

land in question is not open to serious doubt. As he pointed out, the alternative

construction, that the petitioners had the power to control what happens on parcels of land

not owned by it (which would entail that the agreement of every owner on the Site was

required), makes no sense.

[40]

The sixth and seventh grounds of challenge are that the arbitrator erred in basing his

views to any extent on section 75(5)(a) of the 1997 Act as it then stood. Its terms are set out

above. Having regard to the authority referred to by the respondent (and to Windsor and

Maidenhead RBC v Brandrose Investments Ltd [1983] 1 WLR 509, also referred to by the

arbitrator at para [52]), I do not entertain any serious doubt as to the correctness of the

arbitrator's reasoning as to the meaning and effect of section 75(5)(a). In any event, he

makes clear in that same paragraph that his reliance on that provision merely supported the

conclusion he had already reached on the correct construction of the clauses in question; it

did not underpin his reasoning.

[41]

The eighth ground of challenge is directed at the proper construction of clause 5.3.

As the reporter acknowledges, it is not happily worded. Even if a different construction

might have been reached, the decision is not open to serious doubt. The reporter did more

heavily rely on section 75(5)(a) in reaching this decision, but, as above, there is no serious

doubt as to his reasoning in this regard.

[42]

Turning to the question of general importance, the fourth to eighth grounds of

appeal on any view are specific to the construction of the particular section 75 agreement in

this case and are of importance only to the parties. Likewise, whether a jus quaesitum tertio

was created is so closely tied in to the particular terms of the agreement that I do not

consider that it is of general importance. The points raised by the first two grounds of

appeal could more easily be seen to be of general importance; but I have ultimately reached

the view that they, too, are so closely linked to the petitioners' construction of clause 2 of the

section 75 agreement with regard to affordable housing (which they are unable to pursue

further) that they are not of general importance. As the respondent puts it, those arguments

are academic in light of the construction of clause 2, and as such, do not raise a point of

general importance. Finally, the importance and size of the development do not turn any of

the legal points raised into ones of general importance.

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