In this case Cala Management Limited entered into an Option Agreement and separately missives with the Defenders. Two planning applications had been made but the grant of planning permission in respect of each was subject to a Section 75 Agreement. It appeared to be intended that only one Section 75 Agreement would be entered into. The terms of this having been negotiated between Cala and the Council (where the Defenders having no involvement in this process), Cala called upon the Defenders to enter into the Section 75 Agreement. They refused to do so. The case concerns the competing arguments as to whether they were or were not obliged to do so. The argument of the Defenders were fully upheld by Lord Drummond Young.

The request to enter into a Section 75 Agreement was apparently made in terms of the Option Agreement rather than the missives. Unfortunately the decision does not set out the terms of the missives or the Option Agreement in any detail and it is not entirely clear why the request was made in this way.

Essentially the Defenders were obliged to enter into a Section 75 Agreement “at the reasonable request” of Cala and to the extent it was necessary as a “pre-requisite to the grant of planning”.

As the Section 75 Agreement covered the land subject to the missives as well as the land subject to the Option Agreement, the first issue decided by Lord Drummond Young in effect was that it could not be said that entering into the Section 75 Agreement was a pre-requisite to the grant of planning permission n terms of the Option Agreement. The obligations to be undertaken would equally apply to the missives.

The next issue was the one of reasonableness. Cala argued that the concept of reasonableness only related to their request and not the provision of the Section 75 Agreement itself. Lord Drummond Young rejected this argument.

As a consequence of this Lord Drummond Young then had to go on and consider whether or not the terms of the Section 75 Agreement were reasonable with the consequence that the Defenders were obliged to enter into the Agreement. He decided having regard to all the circumstances the terms were not reasonable. He carried out a detailed analysis of the provisions. At least part of the difficulty was caused by the fact that the Section 75 Agreement related to land which was not to be transferred to Cala. A further issue appeared to relate to the fact that the land was only to be transferred in tranches. The consequence of this Lord Drummond Young decided was that the Defenders might be obliged to fulfil certain of the commitments and therefore it was not reasonable for them to be called upon to enter into an Agreement which might have that effect.

While ultimately this case probably turns upon its own factual position and the terms of the missives and the relevant Option Agreement, it is a good example of how what is considered to be a fairly standard process can go wrong. It appears in particular that for whatever reason the practical arrangements for securing planning permission failed to take into account the legal arrangements which had been put in place.