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Court rejects multi-million pound development profit claim regarding Commonwealth Games hotel

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Court rejects multi-million pound development profit claim regarding Commonwealth Games hotel

02 September 2015

PiP 3 Ltd v Glasgow City Council [2015] CSOH 119

Lord Woolman has rejected a multi-million pound development profit claim raised by a developer against Glasgow City Council. The development site lies in an area designated for the 2014 Commonwealth Games, near the Sir Chris Hoy velodrome and the Emirates Arena. Several years prior to the Games, PiP 3 became interested in acquiring the site and developing a hotel on it. PiP 3 entered into an option agreement with the Council and sought to exercise the option. However, PiP 3 did not pay the sums required on the settlement date. This resulted in Glasgow City Council rescinding the option agreement. PiP 3 raised an action for breach of contract, claiming damages of £15,372,790 based on the alleged profit that would have been made from the development. PiP 3 also included an alternative case, in which it argued that Glasgow City Council had made misrepresentations regarding the state of the site. In this limb of the case, PiP 3 sought to recover the abortive costs (just over £1m) it claims have been incurred in relation to the project.

The Council challenged the relevancy of the case based in contract, though conceded that the case based on misrepresentation was fit for inquiry. Lord Woolman held that on a proper construction of the option agreement, PiP 3 was not entitled to withhold payment of the purchase price. Accordingly, Glasgow City Council was entitled to rescind the option agreement, and the case based in contract thus failed.

Lord Woolman also held that PiP 3 was not entitled to assert that they would not have transacted due to the alleged misrepresentations regarding the site (and seek abortive costs) whilst at the same time asserting that they would always have proceeded with the development (and claim full development profits). The claim was clearly a “no transaction” case, and thus limited to one for abortive costs. As was conceded by the Council, a proof before answer has been allowed on the issue of whether there was any misrepresentation – an allegation which is firmly denied by the Council.

Roddy Dunlop QC and John MacGregor, of Axiom, acted for Glasgow City Council.