Lands Tribunal for Scotland

NOTE

Railtrack plc, Graham Group &
Union Square Developments Limited
v
Aberdeen Harbour Board

In the Note appended to our Order of 17 December 2001 we intimated that, subject to matters with which the present report is not concerned, we would be prepared to discharge land obligations relating to various plots of land at Guild Street, Aberdeen, to allow development of a transport and shopping centre complex. The respondents as benefited proprietors lodged a claim seeking an award of compensation in terms of section 1(4)(i) of the Conveyancing and Feudal Reform (Scotland) Act 1970.

Although a diet of proof was provisionally fixed to take place in November 2002, parties were agreed that in the particular circumstances of the case it would be appropriate to seek the preliminary views of the Tribunal on certain broad issues. These were defined by reference to the terms of paragraph 1(a) of the applicants' response to the claim: "The claim is posited on the false proposition that the land obligations in question are to provide a railfreight facility for such volumes of traffic as the customers or users of Aberdeen Harbour Board may care to provide. There is no such obligation. Consistently with the titles, the applicants are entitled to use the site with no railfreight facility whatsoever, using the site for any other railway purposes they see fit. Any proper claim for compensation, accordingly, would be on the basis of the patrimonial loss arising only from the increased entitlement to use the land which is sought in the current application. In any event, the current railfreight facility is far more limited than the enormous facility that is contemplated by the claim…"

We heard debate on 12 August 2002. Parties were again represented by Mr Jonathan Mitchell, QC, and Miss Sarah P L Wolffe, Advocate, and by Sir Crispin Agnew, QC Parties were agreed that it would not be appropriate for the Tribunal to dismiss the claim in whole or to attempt to exclude particular averments from probation. However it was suggested that guidance from the Tribunal at this stage would be of assistance in preparation for the proof. Parties were agreed that we should proceed by putting the case out for a hearing on further procedure.

Authorities

The following authorities were referred to in debate:

Abrahams v Reich (Herbert) Ltd (1922) 1 KB 536, 553
Devlin v Conn 1972 SLT (Lands Tr) 11
Elboramhor Limited v Brand (4 October 1990; LTS/LO/1989/97)
Re Kennet Properties' Application 1996 72 P&CR 353
Lavarack v Woods of Colchester Limited 1967 C.A.278, 294
Morran v Glasgow Council of Tenants Association and Others S.C.279
SJC Construction C Ltd v Sutton London Borough Council 29 P&CR 322
Stockport Metropoliltan Borough Council v Alwiyah Developments 1983 52 P&CR 278
Strathclyde Joint Police Board v The Elderslie Estates Limited and Others (17 Aug 2001); LTS/LO/2000/42)

A summary of relevant lands and titles can be found in our said Note. The site on which development is proposed extends to over 7.6 hectares and is made up of a number of parcels of land held on separate titles. We are, for present purposes, concerned only with two titles which together cover an area part of which is currently operated as a freight railhead. This area is burdened by land obligations which restrict it to use "for railway purposes". The following assumptions were explicit or implicit in the debate. The obligation did not compel the burdened proprietor to provide any rail freight facility. Without breach of the obligation the land could be left unused or could be put to a variety of uses which would not benefit the respondents in any positive way. However, if the obligation was not discharged, the applicants would be unable to proceed with their proposed development. Accordingly they would, in practice, keep the railhead facility there. The railway system operators, EWS Limited or Freightline, would seek to increase usage of the facility and would develop the yard to provide a container handling system which would be adequate to cope with all the potential container traffic from the harbour. Even if the effect of retention of the rail freight facility at Guild Street was to prevent development of adequate facilities for other users, the applicants would upgrade the track south from Aberdeen to ensure adequate gauge clearance for modern containers. Because such a rail freight facility would be available at Guild Street, the respondents would be able to attract very significant new business based on their customers use of container facilities. Such business would be able to be accommodated by the harbour without loss of existing or other prospective new trade. (It was, for the purposes of the present debate, irrelevant to consider whether such business could be accommodated within the area of the harbour as it existed at the time when the burden was imposed or the implications if that was not so). The container based business would, accordingly, provide a source of wholly additional profit for the respondents. If the freight facility at Guild Street was lost, the probability of such additional profit for the respondents would also be lost.

It was recognised, of course, that critical issues will depend on expert prediction as to events which, at best, would not occur for several years. Most, if not all, the propositions set out above were subject to challenge by the applicants and were expected to be the subject of contentious evidence. We recognise the problems which the respondents may face in establishing all of these points. While the evidence bearing on the probability of the establishment of a brand new Hub at Orkney may be relatively straightforward to assess, difficult "chicken and egg" questions may arise in respect of the inter-related questions of the need for upgrading of the railway line to accommodate modern container traffic and the attraction to Aberdeen of shippers using such modern containers, including of course, a feeder link from the Hub. However we have assessed matters on the assumption that all these issues will be established in favour of the respondents.

Before turning to the submissions, it is appropriate to explain the "granite wall" condition which emerged as a convenient illustration of the nature of the comparative chains of consequences founded on by the respondents. One of the land obligations in favour of the present respondents obliged the burdened proprietor to maintain a granite wall - or equivalent - along the frontage with Market Street. If that burden was not discharged, the proposed development would not go ahead in its present form and it was assumed, for purposes of debate, that if it was not discharged the proposed development would not be able to go ahead. Accordingly, the chains of events relative to the granite wall condition, would be the same as for the railway purposes condition.

Submissions for the applicants

For the applicants, it was submitted that land obligations were simply a type of contract. The scheme of the Act was clear. Strathclyde Joint Police Board v The Elderslie Estate Ltd and Others was a recent example of many cases confirming that the power which a benefited proprietor enjoyed before the passing of the 1970 Act, to demand "ransom" payments, had been removed. The effect of section 1 was to allow the burdened proprietor to break the contract by means of a discharge, subject to provision for compensation. This was effectively analogous to an obligation to pay damages for breach. The language of section 1(4) was consistent with this analysis.

It was of critical importance to recognise that the section was concerned with legal obligations. A benefited proprietor might have rights requiring another to act in a particular way or restrict his activities. It was well established that such proprietor had no claim for losses which did not flow from the obligation itself. Mr Mitchell referred to Devlin v Conn as an example. He submitted that it was well established that loss had to be measured by reference to the extent of the obligation and not by reference to what would be expected to happen in practice if there was no breach. In the context of breach of contract generally, this was the subject of binding of authority: Morran v Glasgow Council of Tenants Association and Others and Lavarack v Woods of Colchester Ltd. Damages had to be assessed against fulfilment of contractual duty in the way least burdensome to the obligated party.

Mr Mitchell submitted that the matter could be looked at in more than one way. It could be considered as an issue of remoteness of loss. Morran at page 283I. When considering the question of remoteness it was significant that the granite wall condition would support exactly the same argument as the railway use one. The losses now claimed could hardly have been in contemplation in respect of that condition.

Mr Mitchell said he had not been aware of any cases previously before the Tribunal bearing on the present issue. However, Sir Cirspin had drawn to his attention the case of Elboramhor Ltd v Brand. The dictum at page 14 supported his submission but he accepted that there appeared to have been no legal argument and no specific analysis of the issues.

He accepted that, in considering whether or not to vary or discharge an obligation, the Tribunal might be entitled to have regard to practical consequences as well as the strict obligations. However, at the stage of compensation, there was no basis for this. The scope and purpose of the obligation was important in looking at the foreseeability argument. The Tribunal was entitled to look at the commercial nexus in which the agreement was reached. There was nothing which could support a view that positive provision of a rail freight facility for harbour users was intended as a commitment.

Compensation ought to be assessed by reference to the value of the benefit conferred by the obligation and not the negative burden it created. Various comparisons were made, in addition to discussion of the granite wall condition. If the Tribunal had been asked to discharge a right of way, compensation would surely be assessed by reference to the loss of the right to cross the burdened ground and not by reference to the impact of any development it prevented. In the present case, in light of well established authority, there was no basis for any claim to a share of development value: Strathclyde Police Authority.

Submissions for the respondents

Sir Crispin submitted that the applicants' analysis of section 1(4)(i) based on breach of contract was wrong. But for section 1, the respondents had an absolute right to refuse to waive the condition. That applied despite changing circumstances. Accordingly, a land obligation intended for one purpose could be enforced to achieve a quite different result. The scheme of section 1(3)(a), (b) and (c) was to allow the Tribunal to grant variation or discharge in circumstances which reflected past, present, and future circumstances, respectively. In that context, section 1(4) could not be seen as equivalent to damages for an authorised breach but as providing for compensation for the effects of discharge. Regard could be had to future consequences. That was not limited. The only question was one of interpretation. Section 1(4), by use of the word "may", gave the Tribunal a discretion as to whether there should be any award of compensation and, by the use of the word "just", gave the Tribunal a wide approach as to the amount. The word "just" did not apply to the right to an award but simply to the amount. It allowed the Tribunal to take a broad approach and, for example, was wide enough to cover an award for intangibles such as amenity or other losses which may not be readily quantifiable. In his submission, the real issue turned simply on the term "in consequence". That expression covered the expectation of what would have been, had the waiver not been granted. The relevant land was currently used as a freight railhead. That use would continue and develop.

Sir Crispin referred to SJC Construction Company Limited v Sutton London Borough Council where Lord Denning (at page 326) in relation to similar language in the Law of Property Act 1925, observed that there was no method prescribed by the Act to compensate for "loss or disadvantage suffered", and suggested that it was essentially a question of quantum. He submitted that "disadvantage" described a loss which was not easily measurable. He also referred to Stockport Metropolitan Borough Council v Alwiyah Developments and the dicta of Lord Eveleigh in support of the proposition that "in consequence of" meant simply that you had to look at what would or would not have happened.

Sir Crispin accepted that if discharge of the granite wall obligation would have the same consequences as discharge of the "railway purposes obligation", compensation on this approach would have to be the same. He did not seek to challenge the suggestion that compensation based on loss of a prospective rail freight link would be inappropriate in relation to discharge of a burden relating to a granite wall. Indeed, Mr Mitchell in response founded strongly on his understanding of Sir Crispin's attitude as accepting the view that no such compensation would be expected in respect of discharge of the granite wall condition. Sir Crispin made no attempt to correct this view of his position. Pressed by the Tribunal on the nature of the distinction to be drawn between the two obligations to justify a different result, he first suggested simply that it might not be considered "just" in respect of discharge of the granite wall obligation to award compensation based on railway usage. Ultimately, however, he appeared to say that the reason for this distinction would turn on purpose. He suggested that the Tribunal would not be entitled to reject, without proof, a claim of the same nature as the present, but based on discharge of the granite wall condition. However we understood him to accept that any proof would be limited to examination of purpose. If we were satisfied at this stage that the granite wall obligation was not in any way intended to relate to use of the land as a freight railhead for benefit of the harbour, we would be entitled to reject any such claim without further evidence.

However, he submitted that a proof would be essential in the present case. The relevant circumstances justifying the claim included the fact that the obligation was expressly for railway purposes; they had had the benefit of the railway line for freight for many years; the operators would provide the facilities; and, accordingly, all that was necessary from the applicants was continued provision of the railway track.

If it was recognised that the breach of contract approach was fundamentally wrong, it would be necessary to have a proof to establish the consequences of discharge in terms of the statutory scheme. Proof would be needed to show what the applicants, as burdened proprietors, would in fact do if the burden was not discharged.

In answer to attempts by the Tribunal to ascertain whether any limits to the scope of "consequences" could be defined, Sir Crispin said that the consequence must be related in some way to the overall purpose of the burden. Here, the core of the obligation was that it was use for railway purposes. He stressed that if there was a practical benefit from refusal to discharge, it was loss of that benefit which should be the subject of compensation. If there was no practical benefit, he accepted that it was pure ransom and that there should be no compensation.

In Elboramhor Ltd the Tribunal had decided that it was competent to look at the consequences. That was appropriate as part of the exercise of discretion. He also referred to Re Kennet Properties' Application where the Lands Tribunal in England had said that even although an obligation was redundant it could provide an incidental benefit which might give it a value: (at page 358). The assessment of compensation was not "exclusively an exercise in awarding damages" but was to be "such sum as the Tribunal may think just": (at page 364).

Pressed to say whether it could ever be "just" to award compensation for loss of a commercial advantage arising as an entirely accidental or unintended benefit from a land obligation, he suggested that this could be a matter for the exercise of discretion. However discretion could not be exercised without a proof of "all the circumstances". He recognised that this might more accurately be expressed as "all the relevant circumstances". We were unable to ascertain what circumstances might be relevant in addition to those set out in the assumptions upon which we presently proceed.

In response

Mr Mitchell emphasised that the relevant condition and the granite wall condition would both have the same consequences. However it was accepted by the respondents that no award of compensation would follow from discharge of the latter. The only distinguishing feature between the two obligations was the reference to "railway" as the purpose. But there was no attempt to suggest that the purpose of the railway obligation was to provide a benefit for the respondents. The so-called "overall purpose" of the land obligation had not been put in issue. It had arisen as part of the evidence on the merits. It would have been of importance at that stage. There was nothing in the pleadings to require further proof. Mr Mitchell looked at various matters which had been touched upon by Sir Crispin as possibly necessitating examination after proof. He submitted that the terms of the obligations were patent from the titles; the nature and extent of the use to date had already been examined in evidence; the expected events, if the obligation was not discharged, would be the same if the claim was based on discharge of the granite wall condition. This required no further evidence. The picture was in fact clear. The claim was based on a loss of hope or, of expectation. Although Mr Mitchell, in opening, had recognised that the debate before us was not focused by pleas which could lead to the respondents' claim being dismissed or specific parts of it being refused probation, he concluded by submitting that it was plain that there was no need for proof on the main issue.

Discussion

At the heart of the respondents' case is the simple proposition that comparison of the probable sequence of events following discharge of the land obligation with events if it remained in place, shows a lower level of profit. Accordingly a consequence of the discharge is a probable loss to them. This was enough to bring the claim within section 1(4). The Tribunal had discretion as to whether and how much compensation to award but could not exercise that discretion without full proof of all the circumstances. The applicants' contention, put shortly, is that the right to compensation should be seen as equivalent to a right to damages assuming a breach of a contractual obligation. As the applicants were not obliged to act in the way predicted, the comparison relied on by the respondents was not a proper basis for compensation. Both parties, however, recognised that in terms of the statutory scheme, the Tribunal had a discretion.

We are not satisfied that assessment of compensation under section 1(4) should be viewed as equivalent, or analogous, to damages for breach of the contractual obligation. Our jurisdiction must be exercised on the statutory terms and we cannot substitute rules established at common law for assessment of damages, even where such rules are clear. We are satisfied that our discretion is wide enough to allow us to take into consideration matters which would not be relevant in a claim for breach of contract. An example of such circumstances can be found in Re Kennett, discussed further below.

When comparing contractual remedies with the statutory provision for compensation the availability of the remedies of interdict or specific implement cannot be overlooked. Such remedies may have the effect of imposing consequences upon the burdened party going far beyond any assessment of damages. Equally, the consequences may confer benefits quite independent of damages.

Mr Mitchell accepted that there was no authority directly supporting his submission. In Elboramhor, the Tribunal in its assessment of ground (c) noted as a relevant circumstance, that the land obligation in question would not prevent the applicants from carrying out extensive development. The reasonableness of the development proposed - which would require waiver of the obligation - had to be looked at in light of that alternative. When considering the claims for compensation, the Tribunal said that they had to be looked at against the background of the alternative developments which would be possible without infringing the restriction.

Counsel fairly accepted that he could not place much weight on this. It was not clear to what extent the matter had been subject of analysis in submission. We consider it important to note that the Tribunal expressly found that such alternative development "could not be considered unlikely". They found that such development could have been even more intrusive and having a greater impact on amenity than the development proposed. The claims for compensation were rejected. Although the decision is consistent with the submission that compensation must be assessed against the least burdensome method of compliance with the obligation, it is also consistent with the view that compensation should be assessed by having regard to practical consequences. It does not point clearly one way or another.

Although we do not accept that the assessment of compensation under section 1(4) can be seen as equivalent to assessment of damages for breach of the obligation discharged, we are satisfied that regard must be had to the fact that the scheme of the Act is to deal with legal obligations. The comparison with assessment of damages for breach of contract is instructive. Such a comparison is an appropriate element to have in mind when assessing compensation under section 1(4).

However, we are not satisfied that comparison with damages for breach of contract necessarily provides clear guidance in a situation where the alternative ways of performing the contract may be as burdensome in practical terms for the burdened party as performance in the way relied on by the claimant.

Mr Mitchell relied heavily on the principle set out in Morran v G C T A. In that case the pursuer would have had a statutory right to claim for unfair dismissal had he been employed for two years. In fact, he was wrongfully dismissed shortly before that period had elapsed. Had he been given the period of four weeks notice provided for in the contract, instead of being dismissed in breach of contract, he would have completed the necessary two years service and would have been able to make a statutory claim. In his common law claim he sought to recover damages to reflect the loss of his right to claim such compensation. The Court pointed out that as well as their right to give four weeks notice, the employers had an express contractual right to give payment in lieu of notice. Had they chosen this option, the employment would not have lasted for two years. They held, as well established, that in an action for damages for breach of contract, the pursuer is entitled to recover damages which will put him in the position in which he would have been had the defenders fulfilled their obligation in the way which would have been "less burdensome to them".

There was no direct attack on the implications of this decision. It may be observed, however, that in Morran, the Court had to consider the question of burdensomeness solely in relation to the extent of the defender's obligations to the pursuer. On the facts of the case, no other issues arose. However in a different type of contract the question of whether regard should be had to the defender's whole circumstances in assessing burdensomeness might well arise. If it is appropriate to consider the reality of the actual burden as it would affect the defenders in the situation they were in at the time, the way would be open for consideration of the whole practicabilities.

This particular issue is not resolved by the Court's alternative approach viewing matters by reference to the first limb of the test in Hadley v Baxendale. Although described by counsel as an "alternative" way of approaching matters, it is more accurately described by the Lord President as looking at the matter "from a slightly different angle". It is an approach which depends on the defender having a choice of methods of fulfilling their contractual obligations.

The test of foreseeability applied by the Court is, arguably, of limited value in relation to real burdens. Parties would realise that they were intended to apply for a very long time. They would have to concede that the burden might apply in circumstances which they could not accurately foresee. If the parties to the disposition had been invited to express a view as to what was likely to be the circumstances in 2002, the Harbour Commission's robust approach would probably have been simply to say that if the Railway did not need the land for railway purposes they could give it back to the Harbour Board. That was the effect of the contractual provision. That would meet the needs and expectations of parties at the time.

If it could be shown that the circumstances were such that the only realistic option which the applicants had as a way of complying with the land obligation was to use it as a freight railhead, the decision in Morran would not conclusively cover the point.

The possibility of reference to wider circumstances was discussed by Lord Diplock in Lavarack v Woods of Colchester Ltd (at page 294) where he said: "The assumption to be made is that the defendant has performed or will perform his legal obligations under his contract with the plaintiff and nothing more. What these legal obligations are and what is their value to the plaintiff may depend upon the occurrence of events extraneous to the contract itself and, where this is so, the probability of their occurrence is relevant to the estimate". If, in assessing how the defenders perform their bare legal obligations under the contract, regard is to be had to external circumstances, it may be shown that the only way the defenders could, in fact, have performed their contractual obligation would have been a way more beneficial to the pursuer than the theoretical alternative way. At page 295 Lord Diplock pointed out that the Court "must not assume that [the defendant] will cut off his nose to spite his face and so control [external events] as to reduce his legal obligations to the plaintiff by incurring greater loss in other respects. That would not be the mode of performing the contract which is 'the least burdensome' to the defendant". It accordingly seems clear that if the defendant, for any reason, did not in practice have any option but to perform the contract in one particular way, the theoretical right to perform in some other way would fall to be disregarded in assessment of damages. Similarly, if performance in a way less beneficial to the plaintiff would prove unduly burdensome to the defendants, the possibility of such performance would have to be ignored. It is not necessary for us to consider the more difficult questions which might arise where matters were less clear cut. It is clear that if a defender is not entitled to cut off his nose to spite his face, the balance of economic benefit will normally be a highly significant, if not determinative factor.

In short, even if our approach to section 1(4) should follow the principles of damages in cases of breach of contract, we are not satisfied that such principles would require us to close our eyes to the practical limitations bearing upon the contractual options which might have been open to defenders had they sought to avoid breach. That said, we consider that the underlying principle that damages are not to be assessed on the basis of an obligation which the defender is not obliged to perform, is a helpful one to which we can properly have regard as an important element in the exercise of our discretion.

We do not think that the literal approach to 'consequences' urged on behalf of the respondents, provides an adequate basis for assessment of compensation under section 1(4). It was recognised, of course, that it was qualified by the existence of a statutory discretion. It is how that discretion might be exercised which is the present issue. It is well recognised in other fields that claims for compensation require to have some limits. In relation to breach of contract, principles discussed in the tract of cases following on Hadley v Baxendale are well known. We heard no submission in relation to delictual claims, but these also present a problem of determining at what point, if any, liability for consequences of fault should stop. Tests of remoteness and of foreseeability have been discussed and distinctions drawn between their applicability to issues of liability and issues of quantum.

It is unnecessary for us to consider these matters in detail. It is sufficient to note that a test of mere causal connection has been recognised to be insufficient in the search for justice between the parties. We, accordingly, have no difficulty in accepting that the discretion given by section 1(4) allows consideration of the fairness of imposing liability to make compensation. We are not satisfied that a distinction falls to be drawn between the discretion as to whether there should be any award, conferred by the use of the word "may", and the discretion as to amount to be governed by the word "just". We would, on any view, be seeking to exercise our discretion to produce a just result. No further limitation is imposed by the Act.

In testing the approach based on consequences requiring only a causal connection, mention must be made of the granite wall condition. As we have seen, the claim now stated could equally be based on discharge of that condition. In recognising that such a claim would not be appropriate, Sir Crispin was driven to rely on the different purposes of the two conditions.

There is, of course, a sense in which the loss of a rail freight facility can be seen to be related to discharge of a condition obliging use for rail purposes. Plainly provision of the rail freight facility would be a direct compliance with the obligation. In no sense would it be a direct compliance with the building obligation. However, when it is recognised that, in each case, the obligation could be fully implemented without provision of a freight facility, it seems to us that the connection is more apparent than real.

Where the purpose of a land obligation can be shown to be protection of the benefited proprietor from the very consequences which are subject of a claim, there will be little doubt that such consequences are a suitable basis for compensation. Where, indeed, such a clear link is demonstrated the Tribunal may be slow to find that any of the statutory grounds for discharge or variation have been established. On the other hand, as discussed in our said Note, the fact that protection from the adverse consequences complained of was not an identifiable purpose of the obligation will not, of itself, be determinative on the merits. It will, however, be an important element in assessing the weight to be given to such consequences. Different considerations apply at the stage of compensation. We do not need to go so far as to say that absence of any connection of purpose between the loss and the condition is fatal to such claims but we are satisfied that it is an important factor.

We are not persuaded that, in relation to the respondents, a relevant difference of purpose exists. If anything, the granite wall condition can be taken to have been imposed for the benefit of the harbour, either to protect visual amenity or to cut off the railway site. The very existence of the granite wall separating the burdened subjects from the harbour is itself an element tending to show that the purpose of the railway use condition was not to benefit the respondents

As was, perhaps, anticipated by Sir Crispin, we did not derive direct assistance from the authorities to which he referred. SJC was mentioned only for the dictum of Lord Denning (at page 326) to the effect that in relation to compensation no method was prescribed by the Act by which it is to be assessed. It is essentially a question of quantum. We doubt whether the substantive decision in that case can be seen as a reliable source of guidance to the Scottish legislation. In any event, the dictum cited related to quantum of loss rather than head of claim. It is not of assistance in the present context.

Stockport Metropolitan Burgh Council was a case where a local housing authority was in benefit of a covenant requiring land to be used for agricultural purposes. Use for housing would spoil the view and reduce the value of certain houses owned by them. The burden was therefore of practical benefit. However, they sought compensation based on the probable price they might expect for a waiver in free negotiation. The Court held that the proper measure of loss was the diminution in the value of the houses to the applicants. Eveleigh LJ, (at page 281) said that the benefit envisaged by observation of the covenant had to be a practical one as opposed to a pecuniary one but (at page 282) he reserved his position on the question of whether the loss or disadvantage to be compensated had to be a practical one as opposed to a financial one. That issue does not arise sharply at this stage. In any event, the approach being considered by him would appear to be precluded by the words "as such benefited proprietor" which appear in the Scottish Act. Sir Crispin did cite the subsequent passage where his Lordship observed: "A loss which is the consequence of an event is usually something which would not have ensued had that event not happened". However the observation was made in the context of a different issue and adds little to the construction of the term "consequence".

We sound a general note of caution against the citation of English authority in this field. The terms of the English legislation are quite different from the Scottish provisions and dicta bearing on that legislation are made in the context of an entirely different system of land law. Unless the Tribunal can be satisfied that it has a secure grasp of the whole background understanding of the judges in such cases, there is a considerable risk of being misled. If we cannot be satisfied of the proper approach to the Scottish legislation by application of principle and sound analysis, assisted by Scottish authority where appropriate, we are unlikely to be persuaded by dicta from English cases.

The point is perhaps well illustrated by reference to dicta in Re Kennet. Sir Crispin referred to this case for an observation of the Lands Tribunal (at page 358 ½) relating to a situation where: "The covenant provides a benefit which is incidental to, but not part of, the original purpose for which it was imposed". It was said that the Tribunal would have jurisdiction to discharge such a covenant as "obsolete" (within the meaning of section 84 of the Law of Property Act 1925, as amended) but that it might not exercise its discretion to do so. This seems, on the face of it, to be consistent with the approach which we have taken to the merits of discharge in this case. The dictum provides no guidance in relation to compensation. It is, however, of interest that the Tribunal felt it necessary to set this comment in context by elaborate analysis of the inter-relationship of the various provisions of section 84.

We may further observe that the actual decision in relation to the facts and covenant in that case appears to proceed on a somewhat narrower view of "purpose" than we might consider appropriate in the context of the Scottish legislation. In that case the covenant limited building on certain ground. The purpose of this might have been taken broadly to be preservation of a view. The Tribunal found the purpose to be "preservation of an open view for each owner across his neighbour's land". Because of subsequent building - some in breach of the covenant - most, if not all, the owners no longer had an entirely open view. The Tribunal considered that the original purpose could not be served and that the covenant could be said to be obsolete, despite a finding that all the owners enjoyed a view over the application site which was of practical benefit and of substantial advantage to them. For the reasons referred to above, we are not confident that we understand the whole implications of the dicta in that case. The Tribunal appears to have drawn a distinction between the "original purpose" as preservation of an entirely open view and an "incidental benefit" as being preservation of a more limited view. That may be an accurate use of the term "incidental". However certain Scottish dicta relating to "peripheral" or "incidental" benefits have had in mind benefits entirely divorced from the original purpose. These might more accurately be described as accidental or "windfall" benefits. An example might be the granite wall condition where the benefit of providing control of the site can be seen to have nothing to do with the amenity purpose of the obligation as imposed.

Sir Crispin also referred to dicta in the Kennet case that assessment of compensation is not "exclusively an exercise in awarding damages" (at page 364). The Tribunal in that case went on to identify equitable considerations which led to the conclusion that no award should be made even where the claimant had a demonstrable loss. No such considerations arise in the present case. If we were to take anything from this dictum it would be that assessment of damages was the main exercise - to be modified where appropriate. However, we place no weight on this. The Tribunal was not in terms considering the matter of whether the assessment should be on the same basis as contract and that cannot be assumed.

As we have found nothing in the various authorities to give clear guidance on the approach we should take to section 1 (4) in the circumstances of this case, we have to consider how we should exercise our jurisdiction and whether it is appropriate to attempt to do so at this stage. Although the hearing took the form of a debate on pleadings in the compensation claim, we have, of course, heard a full proof on the merits. The claim for compensation would not be limited by that proof but we consider that our overall understanding of matters in light of the proof allows us to take a more positive approach to the exercise of discretion than might otherwise have been appropriate on pleadings alone. It can also be said that, although we heard reference to a need to "consider all the circumstances" at the stage of exercising our discretion, we heard nothing in submission to suggest that any new factors relevant to that discretion would be disclosed by further proof.

We consider that the exercise of our discretionary power under section 1(4) can be approached by recognising it as prima facie unreasonable or unjust, to require a party to make payment, by way of compensation, for not doing something which he is under no obligation to do. We have not been persuaded that there is anything in the circumstances of this case to displace that view.

We recognise, of course, that there is a sense in which the applicants may be said to be obliged to maintain the rail head as the only practical means open to them to use the subjects under the burden in the circumstances in which they now find themselves. That may be implicit in the respondents' submissions as to the probable course of events although the matter was not put in that way. However, it is plain that the purpose of the obligation was not to oblige that specific use. There was no intention to commit them to that. The obligation itself left use entirely as a matter of operational discretion for them. Even if we could take the view that no distinction is to be drawn between the type of freight which might have been expected to be carried in the mid-nineteenth century and the modernised container traffic which is the subject of the claim, the fact remains that the parties did not intend, by the obligation, to commit the rail company to provision of a rail freight line.

Further, it is clear that the burden expressed in terms of 'railway purposes' was not intended to commit the burdened proprietor to the provision of railway facilities to meet the particular needs of the respondents. We consider that an important factor in the assessment of whether any award of compensation should be made.

Also of some significance is the fact that the claim is not based on loss of any established benefit to the claimants. The applicants offer to provide facilities to enable the current use to continue. It accounts for an insignificant portion of the freight passing through the harbour. The use is not use by the respondents themselves and any assessment of loss to them based on established use would not fall into the category of "substantial loss or disadvantage".

Further the use made of the present railhead is different in kind from the nature of the use postulated by the claim. There is, at present, no significant containerised trade. To allow that use to be made at the level contemplated by the claim would require a significant in-put by way of improved handling equipment even if the current tracks did not have to be relaid to provide an adequate straight siding. The claim is based on the availability of facilities which the applicants have not yet provided and are under no obligation to provide.

For the respondents, it is said that if the applicants simply continue to provide the tracks, the actual handling facilities will be provided not by them but by parties to whom they have leased or otherwise agreed to allow use of the track and related equipment. That was a relevant link in establishing a chain of probable consequences. We do not consider it a relevant distinction for present purposes. The facility required by the respondents' customers would be one to be supplied by new facilities on the applicants' land provided by them or persons deriving right from them.

It is, we think, also relevant, in the context of the exercise of a discretion, that the loss founded upon is one which would not, on any view, arise for several years. It is dependent on a number of factors outwith the control of either party. Although we may be satisfied on balance of probability that it is a loss which will arise on the basis of comparison of the alternative chains of events, it is quite clear that the predicted gap in time before any loss would emerge, is long enough for other events to intervene. For example, in the context of the compensation claim the respondents aver that national policy in favour of inter-modal rail links with the harbour has 'moved forward.' If that is so, it is conceivable that development wholly eliminating the freight line might not go ahead, whatever the precise current commitment. That is speculation which might not disturb the weight of other evidence on balance of probability. However, there will always be a real doubt as to whether the chains of events now relied on would in fact have transpired.

As we have observed, the use relied on has not been, and will not be, use by the respondents themselves. The use will be by their customers. Their predicted loss is at one remove. We place little weight on this although it is a further factor tending against an award to the respondents. We accept, for present purposes, that loss of a facility which provides a benefit to customers may be a loss of a practical benefit to the respondents. It plainly has some similarity to a right of access available for use by shop customers although the comparison may not be valid in all respects. It may also be said that we did not hear submission bearing directly on any distinction to be drawn when considering the nature of the loss itself.

These various matters all tend to support the prima facie conclusion referred to above. We have found nothing to displace that. Further, we need not shut our eyes to the commercial nature of the proposed development. If any significant payment has to be made to the respondents, the calculations upon which the present development proposals are based would obviously have to be carried out afresh. This may put at risk the reasonable use of the land which we have found established in our consideration of the merits. An element of that, was the proposal to improve rail facilities for existing freight customers. As matters stand at present, development of a modern freight rail head at Raith would be in the public interest. We have held established, for the purposes of assessment on the merits, that the provision of a new facility at Raith is conditional on the development at Guild Street. The respondents challenged this but, in the present context, it may not matter whether their challenge was well founded or not. If the applicants are able to develop a modern freight rail terminal at Raith without taking the burdened subjects out of use for railway purposes, the practical need to develop the subjects as a modern freight terminal would be significantly reduced if not removed. The applicants would have greater freedom to use them for other rail purposes.

Assessing matters on the assumption that the respondents will be able to establish on balance of probabilities that a loss to them will arise assessed by reference to the comparative chains of events, we are satisfied that it would not be just to award compensation in this case, assessed on that basis.

Decision

We have endeavoured to deal with this matter expeditiously in order to give as much notice as possible before the proof. We have come to a reasonably clear view as to the appropriate exercise of the discretion and as at present advised, in light of evidence we have heard, averments in the compensation claim and submissions we are satisfied it can be exercised at this stage and without proof. However, we are aware that having, in effect, rejected the main lines of argument submitted by parties, our reasoning may have gone a little beyond the matters debated. We do not intend that the debate be, in any sense, re-opened. However, we would not preclude further submission, particularly on the question of whether there are further factors to be considered and which might require proof.

As matters stand we think it might have been possible to give effect to the views expressed above, by an explicit order either limiting the scope of the proof or expressly excluding from probation the bulk of the claim as presently formulated. However, parties were agreed that there should be a hearing on procedure and our Order gives effect to that.

Note issued: 29 August 2002

LTS/LO/2001/13, 14 to 21 & 28 to 31