Property firm loses breach of contract appeal over failed purchase of heritage centre

The prospective purchaser of a heritage centre in South Lanarkshire has lost an appeal against the rejection of their breach of contract claim.

Shine Properties Ltd contracted with the Biggar Museum Trust to purchase the property, a former church, in 2016. The sale never went through, and the trust resiled from the contract. The appellant raised an action against the trust claiming damages for loss of profit and abortive costs resulting from the breach.

The appeal was heard in the Sheriff Appeal Court (Civil Division) by Sheriff Principal StephenSheriff Principal Murray, and Appeal Sheriff Holligan.

Required title indemnity policy

The contract was constituted by missives consisting of an offer in March 2015, a qualified acceptance in January 2016 and a concluding letter in June 2016. The nine-month gap between the initial offer and the qualified acceptance was on account of the trust requiring access rights from South Lanarkshire Council.

It was a suspensive condition of the initial offer that the appellant received a building warrant for the development they proposed to use the site for on terms reasonably satisfactory to them. The qualified acceptance added a clause which provided that the trust would deliver a defective title indemnity policy in respect of the lack of formal access rights over certain areas of the property.

The council approved an application for the building warrant in February 2017, a fact which the appellant did not inform the trust of. The sheriff who heard the case at first instance found that the terms of the warrant were reasonably satisfactory and therefore the date of entry should have been 10 working days after the grant. The transaction did not settle on that day.

Following correspondence between the appellant and the trust’s agents, a new settlement date of 16 June 2017 was proposed. Settlement did not take place on the proposed date. When asked to produce the title indemnity policy, the trust’s agents asked their insurer to put a policy in place on the basis of an earlier draft agreement.

The insurers responded to the trust’s correspondence on 15 June 2017 requiring confirmation that the appellant did not intend to build over the area covered by the policy. Having received no correspondence back from the appellant’s solicitors by noon on the 16th, the trust wrote to the appellant resiling from the contract.

The appellant’s agents emailed the trust’s agents on 21 June 2017 confirming that no works were intended on the relevant area. They enquired whether the matter could be brought to settlement without a requirement to comment on the formal letter of 16 June 2017. The pursuer’s agents threatened legal proceedings on 28 June 2017. The respondent’s agents adhered to their position. The appellant accepted that the contract was at an end on 1 August 2017.

The appellant submitted that the principle of mutuality of contract applied in this case. The trust could not insist on performance of the appellant’s obligations when it was not in a position to fulfil its own obligations under the contract.

The appellant did nothing

The opinion of the court was delivered by Appeal Sheriff Holligan. Regarding the title indemnity insurance, he said: “It is a matter of fact that provision of the policy would have been easy to achieve. It was described as being akin to obtaining car insurance online. The terms of the policy had already been adjusted. All that was required was confirmation of two matters which was forthcoming on 21 June 2017, several days after the relevant date. The sheriff found that, had the information been provided, the policy would have been available for settlement at 12 noon on 16 June 2017. The information was within the knowledge of the appellant.”

On the application of the mutuality principle in the current case, he said: “The sheriff accepted that the respondent would have been in position to deliver the defective title indemnity insurance at settlement, had the appellant responded to the request from the respondent’s agent to provide the information requested by the insurers to enable them to issue a defective title insurance policy. The provision of the policy was wholly dependent upon the appellant providing certain information to the respondent as to the appellant’s intention as to the property. The appellant knew the date, and indeed the time, for settlement but it did nothing in response to the request for information.”

He continued: “The appellant did not ask for further time or provide any explanation as to why there might be a delay. Had the information been provided timeously the transaction could have settled. The appellant cannot rely upon the apparent failure on the part of the respondent to provide the policy when it failed to give the respondent the information it required to satisfy its obligation. On the evidence before the sheriff all other requisites for settlement were satisfied.”

For these reasons, the appeal was refused.

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