Outer House dismisses developer’s £5m damages action over invalid exercise of land option

About this case:

• Citation:
  [2026] CSOH 88
• Judgment:
  External link
• Court:
  Court of Session Outer House
• Judge:
  Lord Harrower

The case was heard by Lord Harrower, with Findlay KC and Garrity –instructed by Ledingham Chalmers LLP, appearing for the pursuer – and MacColl KC, instructed by Morton Fraser MacRoberts LLP, appearing for the defender.

Lord Harrower held that an undertaking given by Kirkwood Homes Ltd, although incapable of varying the parties’ bilateral contract, had curtailed the company’s option rights so that they could only be exercised over the whole development site or another area agreed between the parties.

Kirkwood Homes Ltd, a residential property developer, raised proceedings against Robert Cameron, the owner of Conveth Mains, a large farm north of Laurencekirk in Kincardineshire, following a dispute over an option agreement concerning land at the farm.

The parties entered into the agreement in December 2008 in respect of 328.22 acres. It permitted Kirkwood Homes to exercise options over parts of the land during a 10-year option period.

Under the original missives, the developer was entitled to call for the sale of all or any of the individual areas shown on an annexed plan, or parts of them, once the necessary planning permission and other development consents had been obtained. Kirkwood Homes paid £84,000 for the first five years of the option period and thereafter £5,000 annually.

In 2014 the company applied to Aberdeenshire Council for planning permission to develop 310 houses and associated infrastructure on part of the option area.

The council indicated in January 2016 that it was minded to grant permission, subject to a planning agreement under section 75 of the Town and Country Planning (Scotland) Act 1997. Later that year, in connection with a request that Mr Cameron enter into that agreement, Kirkwood Homes undertook that any option would be exercised only once and over an area comprising at least the whole development site, or such other area as the parties might agree. Full planning permission was granted in December 2016.

Smaller area specified

Shortly before the option period expired, Kirkwood Homes served a notice dated 28 November 2018 purporting to exercise its option over an area which was smaller than, and different from, the development site.

The parties thereafter corresponded for several months about valuation. In February 2019, after agreement had not been reached, Mr Cameron decided to ask the Royal Institution of Chartered Surveyors to nominate surveyors to determine the value.

However, on 13 March 2019 he informed Kirkwood Homes that he regarded the option notice as invalid and would not continue with the valuation procedure.

The developer treated this as a repudiatory breach of the missives and, in June 2019, purported to accept that repudiation. With the option period having expired, it claimed that it had lost the opportunity to exploit the development potential of the land and sought damages of more than £5 million.

The action came before Lord Harrower on the procedure roll for discussion of the parties’ preliminary pleas, with the principal issue being whether the developer’s option notice was valid.

Unilateral promise

For Mr Cameron it was submitted that Kirkwood Homes had been entitled, following its 2016 undertaking, to exercise an option only over an area comprising at least the whole development site or another area agreed between the parties.

There was no dispute that the 2018 notice related to less than the whole site, nor that the parties had reached any agreement allowing an option to be exercised over the smaller area.

The defender therefore argued that the notice was invalid and created no obligation on him to sell the land. Any case based on waiver or personal bar was also irrelevant, as those doctrines operated as a shield rather than a sword and could not create a contractual obligation.

Kirkwood Homes argued that the validity of the option notice had to be determined by reference to the original missives rather than the later undertaking.

It submitted that the undertaking was a unilateral promise and therefore incapable of varying the bilateral contract between the parties. Senior counsel for the developer accepted during the debate that the undertaking might instead give rise to an issue of personal bar, but submitted that this would require factual questions to be determined at proof before answer.

Option rights curtailed

Lord Harrower noted that both parties agreed that the undertaking did not vary the missives themselves. However, he accepted the defender’s analysis that its “practical effect” was to alter the rights Kirkwood Homes retained under the agreement.

It was not disputed that the undertaking amounted to a binding promise by the developer.

Lord Harrower said that its effect was “to restrict the manner in which the pursuer might validly or effectively exercise its option under the missives”.

He added: “Put differently, it extinguished whatever rights the pursuer had under the missives to exercise its option in any manner other than as set out in the undertaking.”

The judge explained that the option rights were inherently capable of unilateral exercise by Kirkwood Homes. Because the company could exercise those rights without Mr Cameron’s further consent, it was also capable of unilaterally restricting or extinguishing them without requiring a formal variation of the missives.

While accepting that a unilateral promise could not vary a bilateral contract, Lord Harrower concluded that this did not answer the issue before him.

He said: “While, therefore, I accept that a unilateral promise cannot vary a bilateral contract, in my view, the argument is beside the point.”

The undertaking was properly understood as having curtailed the substantive option rights available to Kirkwood Homes rather than merely regulating the form in which an option notice was to be served.

Rights could not be revived

Lord Harrower also rejected the developer’s reliance on waiver or personal bar.

Once Kirkwood Homes had extinguished its right to exercise the option in any way other than that specified in the undertaking, those doctrines could not revive the right.

The judge said that personal bar and waiver operated “as a shield rather than a sword”. The only means by which the extinguished option right could have been recreated was through a fresh grant by Mr Cameron, and no such grant had been made.

Lord Harrower therefore sustained the defender’s first plea-in-law and dismissed the action, reserving the question of expenses.

He added that, had the action not been dismissed, he would have excluded certain averments made by the defender from probation if his analysis of the contractual position proved to be wrong, while allowing the remaining challenged averments to stand as narrative.