Monopoly Money?

Great news of a successful case in the Dundee Sheriff’s court (same as small claims in rest of UK) – the Sheriff found an illegal monopoly and was able to strike out the burdens because under Scottish Law you cannot create a monopoly in the title deeds.  You might say how does this help everyone else?  Well…

The most common feature of the way the private estate model is being implemented is that home owners have no choice of provider. They are also very often being exploited, so there are grounds for a legal challenge under UK wide competition law.  The more legal experts who back up what we know to be happening to us, the better.

It may be a very good time to launch a mass reporting campaign to the Competition and Markets Authority, who are a bit like Action Fraud in that they monitor activity but don’t take up individual small cases.  We will shortly be developing a template to help members join in this action. Remember challenges over PPI initially and successfully took this route.

If you want to read the Sheriff’s verdict, here it is:

‘The defenders relied on the Marriott decision in support of their submissions that the burden is void for uncertainty and invalid because it creates a monopoly.
The Marriott decision involved the pursuer (as respondents) and has a number of facts in common with the present case. The developer in that case disponed open ground to the respondents whose title was burdened with the obligation to maintain that open ground. The applicants’ title, and that of the other homeowners in the development, was burdened with the
obligation to pay the respondents for that maintenance. Proceedings were brought by the applicants to the Lands Tribunal challenging the validity of the burden under
section 90(1)(a)(ii) of the 2003 Act on five grounds.
One of those grounds was that the burden created a monopoly contrary to section 3(6) and (7) of the 2003 Act. Another ground was that the burden was invalid due to uncertainty. The applicants’ succeeded only on one ground, which the Tribunal described as technical, that the burden was invalid due to uncertainty. The reason that the burden was invalid was that the benefitted land was not adequately defined in the constitutive deed. The deed had defined the benefitted land (the open ground) as “the areas of amenity woodland, landscaped open spaces, play areas and others to be provided on the Whole Subjects in terms of the Planning Permission…together with any variation thereof…”. The Tribunal considered that the extent of a real burden must be found within the four corners of the document creating it (“the four corners rule”). That rule remains part of Scots law subject to the relaxation provided in section 5(2) of the 2003 Act which permits reference to a public document such as an enactment or public register (paragraph 88).
The majority of the Tribunal went on to reject the applicants’ argument that the burden creates a monopoly contrary to section 3(7) of the 2003 Act. Mr Ralph Smith QC dissented from the majority.
Section 3(7) provides:
“Except in so far as expressly permitted by this Act, a real burden must not have the effect of creating a monopoly (as for example, by providing for a particular person to be or to appoint-(a) the manager of the property or (b) the supplier of any services in relation to the property).”
The majority, at paragraph 105 concluded that the burden does not create or result in the creation of a monopoly but reflects a monopoly. That conclusion is based on the
reasoning that the burden is for payment of a share of the management operations relating to open ground. The payment has been made to the respondents as providers of the management operations. The burden reflects the monopoly which is the respondents’ exclusive right to manage their own land but it does not have the effect of creating a
monopoly. The burden requiring the respondents to maintain the land turns the right to maintain the land into an obligation but does not change the underlying monopolistic character of the ownership of land or the monopolistic rights that go with it. It may vary the characteristics of the monopoly but does not have the effect of creating a monopoly.
I prefer the reasoning and observations made by Ralph Smith QC in Marriott and am of the view that the burden is expressly caught by the plain words of section 3(7) and the example given there. The burden in the present case provides for a particular person, namely the pursuers (and their successors in title to the Open Ground), to be the supplier of the maintenance services in relation to the Open Ground. It provides for a particular person, namely the pursuers (and their successors in title to the Open Ground, to be the manager of the Open Ground. It seems to me that situation is expressly prohibited by section 3(7)(a) and (b) and the burden is therefore invalid.
In any event, it seems to me that the burden has the effect of creating a monopoly. As was explored in the Marriott case, there is no definition of a “monopoly” within the 2003
Act. A “monopoly” can be defined as a situation where the party has exclusive possession or control of or trade in a commodity or service. It seems to me that the essential question is whether the effect of the burden in clause Thirteenth is to create a situation where a party has exclusive control of or trade in a commodity or service. The effect of the clause, in my view, is to provide that only the pursuers and their successors manage the Open Ground and only the pursuers and their successors provide maintenance services for the Open Ground for which the defenders and the other proprietors of the Ardler Development must pay. The burden can in my view be easily understood as having the effect of creating a monopoly for the provision of services by the pursuers for which the defenders and the others must pay. The fact that the pursuers are entitled to make a profit, by charging reasonable management remuneration, is consistent with the creation of a monopoly.
It is true that the pursuers as landowners have always had the exclusive right to maintain their own land. However, in my view, it would not be appropriate to describe that as a monopoly service: when a landowner is maintaining his own land he is not providing a service to anyone else. But once the defenders become obliged to pay for those services, the
maintenance works can be properly described as a service provided for the benefit of another. Without the burden the pursuers have no right to charge the defenders for payment of the maintenance costs.
It is the burden which has the effect of allowing the pursuers alone to charge the defenders for that service.
It seems to me to be significant that the word “property” is not qualified in any way in section 3(7) and does not exclude property owned by the manager or provider of the services. The only circumstances where the prohibition does not apply is where such a burden is expressly permitted by the Act. Section 63 of the 2003 Act permits manager burdens for a maximum period of 5 years in certain circumstances but does not describe the burden created in clause Thirteenth.
In my view, it makes no difference that the clause envisages management and provision of services may be by the pursuers’ successors in title to the Open Ground, as was submitted by the pursuers. The effect of the burden is still that one party manages and provides services for which the third party must pay.
I have concluded that the burden is therefore invalid. That provides a defence to this action and it follows that the pursuers claim for payment must fail.
I therefore conclude that the defenders are under no obligation to pay a pro rata share of the costs of maintaining the Open Ground as the burden has the effect of creating a monopoly and is invalid. I will fix a hearing on expenses.’