Contract (Commercial)

East Dunbartonshire Council v Bett Homes Limited formerly Gladedale (Northern) Division Limited, [2012] CSIH 1, 6 January 2012

Wed, 08 Feb 2012 00:00:00 GMT

Inner House case concerning tripartite agreement between East Dunbartonshire Council, Bett Homes and Glasgow University. The agreement allowed the Council to sell the Bearsden Academy site to Bett for development and relocate the school to a site at St Andrews College in Bearsden which it was purchasing from the University of Glasgow.

The Council sought declarator that Bett was bound to fulfil its side of the bargain and pay the final instalment of the purchase price for Academy site. The dispute centred on whether the time was of the essence regarding the entry date on which vacant possession was to have been given to Bett. Bett argued that it was of the essence and, the Council having been unable to give vacant possession on the agreed date, it had been in material breach of contract and Bett had validly rescinded the contract. The Inner House upheld Lord Glennie’s decision finding that time was not of the essence and the contract remained live for performance.

EDI Central Limited v. National Car Parks Limited, [2012] CSIH 6, 20 January 2012

Tue, 24 Jan 2012 22:49:39 GMT

Inner House case considering an agreement between NCP and EDI for a development at Castle Terrace car park in Edinburgh. The agreement involved EDI being interposed into a lease of the subjects between the City of Edinburgh Council and NCP in return for a capital payment of £5m and then using its close links with the City of Edinburgh Council (EDI being wholly owned by the Council) to deliver the development.

In terms of the agreement, EDI were obliged to “use all reasonable endeavours” expected of “a normal experienced prudent developer in the circumstances” to pursue the development. However, the development did not take place and, as it was entitled to do under the agreement, EDI served notice on NCP requiring NCP to buy back the tenant’s interest under the lease. NCP failed to do so contending that they were not obliged to serve the appropriate notice [1] as EDI were in material breach of the agreement having failed to comply with their obligation to use all reasonable endeavours. NCP argued that EDI had approached the project as if they merely had an option to pursue the development rather than an obligation compelling them to undertake it. The question for the court was whether EDI had met the required standard.

The Inner House upheld Lord Glennie’s judgement that EDI had met the standard and found that the work they carried out and the assessment they reached were not significantly different from those to be expected of a normal experienced prudent developer in the circumstances. In particular, EDI could not be criticised for failing to pursue further steps in relation to any of four alternative sites since (on the evidence heard by Lord Glennie) such further steps would have been futile. It was clear from the papers available to the court that the problem of finding alternative car parking space was critical to unlocking the development and it had not been possible to identify alternative provision for car parking.

The Court also said the following on the standard of effort required from the Council:

“In our opinion it is clear that the obligation to pursue a project or seek a planning consent with all reasonable endeavours is one that requires the court to consider whether there were reasonable steps which the obligant could have taken but did not. For that reason it is a higher or more onerous obligation than one restricted to using “reasonable endeavours”. However, whether the phrase used is “all reasonable endeavours… or “reasonable endeavours” we agree with the view expressed by Lord Hodge in MacTaggart & Mickel Homes Ltd v Hunter… that an obligation in either terms does not require the obligant to disregard its own commercial interests. Where the balance between the obligation to use reasonable endeavours and countervailing commercial considerations falls to be struck depends on the wording of the obligation in question. In considering what steps would be reasonable, the court also has to consider whether any further steps would have been successful. We agree with Lord Hodge… that if an obligant can show that it would have been useless for it to have taken a particular step (or steps), because it would not have been sufficient to achieve success, that would provide an answer to any claim that the obligant had acted in breach of contract… Equally if there was an insuperable obstacle, it is irrelevant that there may have been other obstacles which could have been overcome, or at any rate in respect of which the obligant had not yet done all that could reasonably be expected of it to try to overcome.”

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[1] The buy back procedure involved a complex notice procedure which depended on NCP serving a “Re-Assignation Clearance Notice” when required by EDI.

George Wimpey v Alan Henderson, A200/09, 18 October 2011

Thu, 19 Jan 2012 20:42:00 GMT

Sheriff court case in which Wimpey sought damages from Mr Henderson in respect of his failure to pay the purchase price for subjects at Ferry Village in Renfrew. Mr Henderson was acting on behalf of a group of investors who were purchasing multiple properties from Wimpey. Missives were concluded on 21st December 2007. Wimpey had been anxious to conclude missives before Christmas and put pressure on Mr Henderson to conclude. However, although Mr Henderson was also keen to proceed, he had concerns about the state of the property market and the fact that he was purchasing before the subjects had been built as he required finance for the transaction and the amount he could borrow would depend on a valuation of the property which could not be obtained until completion of the subjects.

This led to an email exchange indicating an underlying agreement by which missives would be concluded allowing Wimpey to show the properties as sold on their accounts but by which the properties would also be re-valued during 2008. Further negotiations could then take place and the properties could, if necessary, be re-marketed by Wimpey. In particular, Wimpey made the following comment by email:

“With this in mind, I want to give you some reassurance that should the circumstances arise that there are difficulties with the valuations we will find a resolution one way or another and I suggest that against this background I would like to have a “gentleman’s agreement” that we will have valuations carried out in the new year with a view to having them all back early Feb which will be the basis of any negotiations (if need be). I just want to give you the comfort that in concluding missives now will still allow for further negotiation should the valuations necessitate this.”

And, in response to a question by Mr Henderson as to what would happen if exchange bonds (being used by the parties in place of a deposit)[1] were not in place by the end of January as had been agreed:

“I would take the view of (sic) should this happen then we remarket the properties. If the question is will we come after you then I can give assuarnce (sic) that we wont, all I need is enough notice, ie as early in the year as possible to remarket. Hope this helps.”

Further emails were exchanged in which it was agreed that a condition would be inserted into the missives providing that, if exchange bonds were not in place by 31st January 2008 for plot 38, then Wimpey would be entitled to withdraw from the transaction at their instance. In the course of these emails Wimpey also advised that they could agree that, should the situation arise that all Bonds were in place and the property had not achieved the values required, an agreement would be reached by both parties whereby Wimpey could remarket all or some of the properties. They said that, in effect Wimpey would resile from the missives at no penalty to Mr Henderson expressing the hope that this would alleviate the concerns of Mr Henderson and his business partner. However, nothing to this effect was inserted into the missives.

In September 2008 valuations were obtained which were substantially below that required for Mr Henderson to obtain finance for the subjects. The parties entered into negotiations aimed at enabling the sale to proceed but no agreement was reached. Nevertheless Wimpey wrote to Mr Henderson advising that the subjects were ready for occupation and that entry should take place on 17 October 2008. Entry was not taken and Wimpey resiled from the bargain, resold the property and sought damages from Mr Henderson in terms of the missives.

Mr Henderson argued that Wimpey were personally barred from enforcing the missives and also sought rectification[2] of the missives to reflect the true agreement; in his opinion that, following a revaluation of the properties, the price could be revised or the transaction aborted.

Sheriff William Holligan found that Mr Henderson was not entitled to rectification of the missives as he was unable to show that there was a common intention[3] between the parties as to what would happen in respect of valuations were any further negotiations to fail.

“I return to the proposition that section 8 concerns a defectively expressed document. In this case it is said to be defective because it does not contain a provision as to what would happen if the negotiations failed. What then was the common intention of the parties on that issue? Viewed objectively, I find myself unable to say what that was. I have no doubt, with the benefit of hindsight, [Mr Henderson] is quite clear what he expected. However, even if [Wimpey’s sales director] accepted that his expectation might have been reasonable, I cannot conclude it reflects the common intention of both parties… The issue is one of rectification. This does not allow the court to write into a contract provisions where it is not proved both parties shared a common intention on that particular issue.”

However it was clear that, when agreeing to conclude missives, Mr Henderson had relied on the content of the emails and Wimpey were found to be personally barred from enforcing the missives:

“On any view of this matter, the missives did not reflect the whole commercial relationship between the parties. Not only did both parties know that but they both acted on the strength of it.”

And further:

“To leave [Wimpey] with the unqualified right to insist on their rights under the missives, given [Mr Henderson’s] business model, does not make commercial sense. It would make the agreement to renegotiate the price almost meaningless. Whether [Wimpey] deliberately said nothing or genuinely did not turn their minds to the issue does not matter. As I have said the matter requires to be looked at objectively. The missives said one thing: the words and to some extent the actions of [Wimpey] conveyed to [Mr Henderson] something different. To that extent there was inconsistency. The element of unfairness is largely self evident.”

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[1] In exchange for payment of a premium, an exchange bond would be issued by the exchange bond company (EIC) to Wimpey. The exchange bond ensured a payment by EIC to Wimpey of a sum in the event that the purchaser failed to proceed with the transaction. In that event EIC would have certain rights against the purchaser.

[2] In terms of s8 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985.

[3] Section 8 applies where “a document intended to express or to give effect to an agreement fails to express accurately the common intention of the parties”.

L. Batley Pet Products Ltd v. North Lanarkshire Council, [2011] CSOH 209, 20 December 2011

Thu, 12 Jan 2012 20:08:00 GMT

Outer House Case considering a lease of premises at Wardpark South Industrial Estate in Cumbernauld. Batley acquired the tenant’s interest in the lease and North Lanarkshire Council were sub-tenants.

Central to the dispute was a minute of agreement entered into between Batley’s predecessors as tenants and North Lanarkshire Council regulating the terms and conditions on which the Council could carry out alterations to the property. It provided:

“By the expiration and sooner determination of the period of the sub lease (or as soon as the license hereby granted shall become void) if so required by the mid landlord and at the cost of the sub tenant to dismantle and remove the Works and to reinstate and make good the premises and to restore it to its appearance at the date of entry under the sub lease, such reinstatement to be carried out on the same terms (mutatis mutandis) as are stipulated in this license with respect to the carrying out of the works in the first place (including as to consents, the manner of carrying out works, reinstatement, inspection, indemnity, costs and otherwise).”

The lease came to an end on 18 February 2009. On 20 February 2009 the Council received a schedule of dilapidations in respect of the property. However, they claimed that, as they had received the schedule after the expiry of the sublease, there was no obligation to remove the alterations (it having died on expiry of the lease). They argued that the notice provisions from the head lease were incorporated in the sub lease and any notice required to be in writing and to be served prior to the end of the lease.

This argument was rejected by the temporary judge (Morag Wise QC) who noted:

“the wording of clause 2.5 which obliges the sub-tenant “if so required by the mid-landlord to remove the works” makes no mention of a notice. The means by which the sub tenant can be so required are not specified. In my opinion, it cannot be said to be a mandatory term of the Minute of Agreement that the mid-landlords convey in writing to the sub-tenants the requirement to remove the works unless [it] can be implied that service of some form of notice or request is part of that term. If written notification of the type envisaged in clause 5.8 of the head lease cannot be so implied, then clause 2.5 would seem to me to permit the pursuers to offer to prove that they required the defenders to remove the work by conveying that to them orally.”

And further:

“It seems to me that the [Council's] argument is predicated upon a notice being necessary for the purposes of clause 2.5. However, there is nothing in that provision of the Minute of Agreement to support the contention that something formal is necessary before the sub-tenants can be required to remove the works. For that reason I do not accept the submission that the notice provisions of the lease automatically apply to the “if so required” provision of clause 2.5.”

An amendment to the pleadings was allowed in which Batley claimed that surveyors acting on their behalf had contacted the Council on 22 December 2008 and, after receiving confirmation that the Council were intending to leave the premises, advised them that the surveyors would require access to the property to prepare a schedule of dilapidations and that Batley would require reinstatement of the premises to their original condition.

The temporary judge found that this was ‘just’ sufficient to entitle Batley to a proof before answer on the question of whether or not they had adequately conveyed the requirement for reinstatement of the premises to the Council before the expiry of the sub lease.

Aberdeen City Council (Respondent) v Stewart Milne Group Limited (Appellant) (Scotland), [2011] UKSC 56, 7 December 2011

Thu, 15 Dec 2011 10:51:00 GMT

Supreme Court case concerning the interpretation of commercial missives for Stewart Milne’s purchase of development land from Aberdeen City Council. The missives contained the following provision for an uplift in the price on the occurrence of certain events:

“In addition to the purchase price detailed in Clause 2 hereof, the Purchasers and the Sellers have agreed that the Sellers shall be entitled to a further payment (‘the Profit Share’) upon the Purchasers purifying the suspensive conditions contained in Clause 4 hereof and issuing a notice to the Sellers intimating to the Sellers that the Purchasers wish to purchase the relevant part of the profit-share as defined in the Schedule to which the Sellers are entitled. The Sellers’ entitlement to the relevant part of the profit-share will also be triggered by the Purchasers disposing either by selling or by granting a lease of the whole or part of the Subjects.”

The clause therefore contains 3 triggers for the payment of the uplift (or profit share):

Stewart Milne could buy out the Council’s share by serving a notice on them indicating that they wished to do so;
the Council would be entitled to a share on the sale of the property by Stewart Milne; or
the Council would be entitled to a share on a lease of the property by Stewart Milne.

Profit Share was defined in the schedule as follows:

“‘the Profit Share’ means 40% of 80% of the estimated profit or gross sale proceeds or lease value less the Allowable Costs as herein defined.”

Stewart Milne sold the property to a group company and then argued that the uplift payable should be based on the actual price paid (£483k- which meant that no uplift was payable) rather than the open market value (£5.67m) of the property. The Council argued the reverse.

It may have been intended that “estimated profit” [1] applied to the notice procedure, “gross sale proceeds” applied to a sale of the property and “lease value” applied to the lease of the property with the prospect of a sale to group company simply not considered [2] (by the Council at least).

However, although the Supreme Court [3] (Lord Hope giving the leading judgement) observed that, it was not stated that “gross sale proceeds” are only to be used in the event of a sale on the open market, it also noted that there was nothing in the definitions to say that “estimated profit” (or “open market value”) could not also be applied to a sale.

Having observed that it was a reasonable assumption that all three methods were intended to produce the same figure (albeit by different routes) and that basing the calculation in the open market was (on a fair reading of the agreement) the commercial purpose the various methods were intended to achieve, the Supreme Court came to the conclusion that the context showed that the base figure was to be the open market value of the subjects.

Alternative argument

The Supreme Court also allowed Stewart Milne to introduce an alternative argument (which they had been prevented from presenting to the Inner House) to the effect that the word “disposal” in clause 9 should be read as referring to an arms length transfer at market value but not to an associated company for a notional value. Thus the sale to the group company would not trigger the uplift but instead the onward sale by the group company on the open market would trigger the uplift. However, the Supreme Court rejected that argument observing that that interpretation did not fit with the words of the contract. Also, as the group company were not party to the contract between the Council and Stewart Milne, adopting the argument would mean that it would have been necessary to re-write the contract to protect the Council against the obvious risks that the arrangement would entail. That was not an option open to the court.

Helping the feckless?

Lord Hope also referred to the argument that a party who has been feckless in drafting a contract should not be protected from its fecklessness by the court’s application of a commercially sensible approach [4] However, Lord Hope did not view the current case in that way. In this case the context showed that the parties’ intention must be taken to be that the base figure for the calculation of the uplift was to be open market value. The fact that this made good commercial sense was simply a makeweight, the words of the contract making it clear that open market value must have been what the parties had in mind when they entered the contract. The only question was whether effect could be given to the unspoken intention without undue violence being done to the words; the court finding that it could.

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[1] Which was defined as being the Open Market Value under deduction of the allowable costs.

[2] Both the Inner house and the Supreme Court commented adversely on the drafting.

[3] Upholding the declarator granted by the Outer House and upheld on appeal in the Inner House.

[4] Martin Hogg, Fundamental issues for reform of the law of contractual interpretation (2011) 15 Edin LR 406, 420

Port of Leith Housing Association v Mohammed Akram and another, [2011] CSOH 176

Tue, 01 Nov 2011 15:37:35 GMT

Outer house case concerning the interpretation of conditional missives and a purification letter relating to the sale of property at Great Junction Street in Leith.

The missives were conditional on the results of ground and site examinations and environmental audits. Clause 3.2 allowed for the purchasers to waive the conditions by giving a notice of deemed purification:

"This Condition 3 shall be construed solely for the benefit of the Purchasers and it shall be in the sole option of the Purchasers at any time to intimate to the Sellers in writing that any or all of the suspensive conditions contained in Condition 3.1 is/are waived, in which case the Missives shall be deemed purified to that extent. This condition shall however only be purified or deemed to be purified by the Purchasers giving written notice to the Sellers to that effect."

Condition 3.3 provided that if the conditions hadn’t been purified by 30 July 2011 then either party could resile from the missives without penalty.

On 22 July the Housing Association’s solicitors, TC Young sent Mr and Mrs Akram’s solicitors, Somerville & Russell a letter advising that the conditions could be regarded as purified in terms of clause 3.2.

Mr and Mrs Akram argued that service of the notice was invalid as, in terms of clause 3.2 of the missives, it required to be served on them and not their solicitors. They also contended that the notice was invalid as it referred to an incorrect date of entry.

Lord Hodge did not accept either of these arguments. With regard to service of the notice on the solicitors, the authorities on which Mr and Mrs Akram sought to rely were concerned with more precise provisions on the service of notices than those contained in the missives between the Akrams and the Housing Association. The missives in this case had contained no precise requirements relating to the service of notices and no indication that the parties had intended that service of the purification letter on the sellers' solicitors would not be valid. Moreover, the other provisions of the contract did not suggest that the parties intended to draw a clear distinction between themselves and their agents. Lord Hodge said:

“I have formed the view that the very simplicity of the contractual provisions firmly points against a construction which would allow such a distinction to be drawn. Further, I do not see the practical advantage or business rationale of serving the notice on the sellers rather than on their solicitors; I would have expected the sellers immediately to take the notice to their solicitors to ascertain its validity”.

With regard to the reference to the date of entry in the purification letter, Lord Hodge found that, assuming (there was dispute between the parties as to the correct date of entry which could not be determined at that stage) the date was erroneous; the mistaken statement did not invalidate the letter:

“In my view, the function of the purification letter was simply to intimate that the purchasers had waived the suspensive conditions …. That had the effect of deeming the conditions to be purified, as clause 3.2 provides. The contract fixed the date of entry in the definition section of the missives…. Accordingly, there was no need to specify the date of entry in the purification letter. Either the missives ruled or the parties had agreed to alter the date of entry.”

A separate question as to whether Somerville & Russell had actual or apparent authority to receive the purification letter required to be dealt with by proof.

Cheshire Mortgage Corporation Limited and Blemain Finance Limited v Morna Grandison and Balfour & Manson, [2011] CSOH 157

Tue, 11 Oct 2011 18:20:29 GMT

Two Outer House cases in which Cheshire Mortgage and Blemain Finance (connected companies) were the victims of a mortgage fraud and sought to sue the solicitors instructed by the fraudsters (the banks had instructed separate solicitors) for breach of warranty of authority.

In each case the fraudsters had pretended to be persons owning property which they were seeking to use as security for a loan (of £355,000 in one case and £203,000 in the other). They had been able to produce evidence of their identity in the form of utility bills and driving licences to their solicitors and to the banks. In both cases the fraudsters had approached the bank (directly in one case and via a broker in the other) before instructing their solicitors.

The banks argued that, in each case, the solicitors warranted that they had the authority of the individuals who owned the properties over which standard securities were purportedly granted. The solicitors recognised the doctrine of a solicitor giving an implied warranty of authority. However, they contended that it does not go as far as giving a warranty of the identity of the person for whom they act, nor does it include any warranty as to whether he is or is not the owner or occupier of any particular property. In effect the solicitors said that they warranted only that they had authority from persons who were already known to the banks and with whom the banks were already dealing.

Lord Glennie found in favour of the solicitors. The circumstances in which the solicitors came to transaction were of particular importance. By the time the solicitors became involved, the banks knew who they were (or who they thought they were) dealing with. They had already made the decision to lend to those individuals. The solicitors had been instructed (by the fraudsters) for the limited purpose of drawing up the loan and security documentation and liaising with the banks’ solicitors. In the words of Lord Glennie:

“The position can be viewed, perhaps more graphically, in this way. Imagine the negotiations between lender and borrower happening in a large room. Agreement in principle is reached between lender and borrower. The loan and security documentation requires input from solicitors. The lenders instruct Mellicks, who enter the room. The borrowers decide to instruct solicitors of their own to safeguard their interests. They appoint Longmuir & Co, or Balfour & Manson. They too enter the room. The solicitors begin the process of drawing up the documentation. They eventually complete it, signatures are obtained from their respective clients, the signed documentation is handed over to the lenders or to Mellicks, and the loan is advanced to the borrowers. In those circumstances, if one imagines that the lenders or Mellicks on their behalf were to ask Longmuir & Co, or Balfour & Manson, “who are you acting for?”, the terse reply would be something like: “what do you mean, we’re acting for the individuals on the other side of the room with whom you have already been in discussions and to whom you have provisionally agreed to lend money”. It is to my mind absurd to suggest that in those circumstances one could imply a promise from the solicitors that they were acting on behalf of the Cheethams of 34 Danube Street or the Morgans of 3 Menteith View, still less a promise that these individuals, calling themselves Cheetham and Morgan, did indeed own those properties”.

In one of the cases there was also discussion as to whether the solicitors were liable to the bank in terms of the letter of obligation they had granted. The bank argued that they suffered loss as a result of the solicitors’ failure to procure the title deeds recording the security in terms of the solicitors undertaking. However, Lord Glennie again agreed with the solicitors’ arguments on this point:

the letter of obligation was collateral to the principal transaction between the bank and the borrowers and could not be enforced if that principal transaction was void; and
in any event, the bank could show no damages flowing from the failure by the solicitor to produce a title encumbered with the Standard Security, since the Standard Security referred to in the letter of obligation was itself void.

Persimmon Homes Limited v. Bellway Homes, [2011] CSOH 149

Tue, 04 Oct 2011 11:02:00 GMT

Outer House case considering the interpretation of missives between two builders for the sale of land at Broomhouse in Glasgow.

The land was to be sold by Bellway to Persimmon for £4.16m. Bellway were to undertake works before the sale and the date of entry was tied to Bellway’s completion of the sellers works (which involved the upgrading of a road and construction of a roundabout).

Condition 10 of the missives made provision for completion of the works and included a longstop date of 15 December 2007. Condition 12 of the missives also related to the long stop date and provided:

“In the event that the Seller has failed to Complete all of the Seller’s Works or the Seller has not fully implemented the Seller’s Obligations by the Long Stop Date as such date may be extended in terms of Condition 10(a) hereof then the Seller will be obliged to offer to sell to the Purchaser another residential development site within Central Scotland of comparable size and value to the Subjects. Upon settlement of the transaction contemplated by the missives in respect of the said other residential development site the missives to follow hereon (of which this offer forms part) shall be terminated”.

Bellway failed to complete the works by the longstop date and wrote to Persimmon offering to sell a site in Airdrie to them instead. Persimmon sought damages for breach of contract.

There were two questions for the court:

Whether the requirement for Bellway to offer an alternative site to Persimmon was the only remedy available to Persimmon in the event Bellway failed to meet the longstop date or whether Persimmon were also entitled damages for breach of contact.
Whether condition 12 had in fact been breached by Bellway.

The remedies available to Persimmon

Persimmon argued that when Bellway failed to fulfil the obligation contained in condition 10 by the long stop date they were in breach of contract and the existence of Condition 12 was irrelevant to that.

However, Lord Glennie took the view that Bellway were not in breach of contract at this stage. Although the right to damages for breach of contract is an important right which can only be taken away by clear provision to the contrary, Bellway were not arguing that the provisions of condition 12 were an alternative to damages for non-performance of the contract. Instead, they were arguing that breach of Bellway’s obligation under Condition 10 gave rise to a further obligation under Condition 12 to offer an alternative site. If the alternative site were not offered then, at that stage, a breach of contract would occur giving rise to damages.

If the contract were construed in the manner suggested by Persimmon condition 12 would amount to an option exercisable by them. If that was what was intended it was difficult to understand why it was not expressed as such. That damages would not be available unless there was a failure to provide an alternative site, was further supported by the commercial background to the contract. What Persimmon wanted was an alternative site for development to enable them to deploy their resources efficiently. That could best be satisfied by the provision of an equivalent site if the Broomhouse site was unavailable. Thus the obligation to provide an alternative site was an essential feature of the structure of the contract and it was only if that obligation were breached that the right to rescind and claim damages arose.

Breach of Condition 12

The next question was whether the offer of the site at Airdrie was sufficient to satisfy the requirements of Condition 12. Lord Glennie found that it was not. Whilst, the Airdrie site was (taking a broad view) of comparable size (the difference in gross areas was 6.07% and the difference in net developable areas was 13.4%), it was not of comparable value. After considerable discussion as to the method of valuation to be applied, Lord Glennie found that the value of the Broomhouse site was 17% higher than that of Airdrie and, as such, the sites were not of comparable value within the meaning of Condition 12.

Regus (Maxim) Limited v The Bank of Scotland plc, [2011] CSOH 129

Tue, 16 Aug 2011 14:30:00 GMT

Outer House case relating to an agreement for lease of subjects at the Maxim office park in North Lanarkshire. Tritax were owners of the development and Regus were to take a lease of part of the development. Monies were to be made available to Regus in respect of its fit out costs as an incentive. Regus did not meet qualifying criteria for type of tenant to whom parts of the development could be let imposed by the sale agreement and so HUB (a company created to run the restaurant and other facilities at the development) was interposed to sub-let to Regus.

In terms of the agreement for lease, HUB was to deliver a letter to Regus from the Bank of Scotland relating to sums which the Bank held on deposit in respect of the fit out costs. This letter formed the crux of the case and was in the following terms:

"We understand that Heads of Terms have been agreed between TAL CPT and Regus (Maxim) Limited for the lease of the first floor of Building 1 at Maxim.

It may assist the proposed tenant to have confirmation from us that, on behalf of the landlord (Tritax Eurocentral EZ Unit Trust) and TAL CPT, we hold the sum of £913,172 to meet the landlord's commitment to fit-out costs. These funds will be released in accordance with the drawdown procedure agreed between the parties, whereby the proposed tenant's contractors will issue monthly certificates.

This is subject always to agreement of wider commercial terms with the incoming tenant."

Regus carried out the fitting out works and issued invoices to HUB who confirmed that the costs were properly incurred and that the contribution should be paid to Regus. However, the bank refused to release the costs as there had been a default in the facility agreement and they were exercising a right of retention over the sums referred to in the letter.

Regus put forward the following arguments:

The letter was an undertaking in terms of which the bank were obliged to make payment.
There was a separate underlying agreement between the bank and Tritax/HUB in respect of which Regus were, by means of a jus quaesitum tertio, entitled to payment from the bank.
That the bank was personally barred from relying on the terms of its agreements with Tritax/the developers to resist payment to Regus.
That the letter contained negligent misrepresentations acted on by Regus to its detriment and the bank was obliged to make reparation to the Regus for breach of a duty of care.

Lord Menzies rejected Regus’s arguments and dismissed the action. He found that he was unable to construe the letter as amounting to a unilateral undertaking by the bank of a legally enforceable obligation to pay the sum to Regus.

The letter was no more than a letter of comfort, and as such, could carry a moral responsibility but not a legal obligation. The court could not enforce a moral responsibility where there was no legal obligation.

Stewart Hill and another v Stewart Milne Group, [2011] CSIH 50

Thu, 11 Aug 2011 10:53:23 GMT

Inner House case considering whether a contractual clause constituted a penalty and was therefore unenforceable.

The clause in question was contained in an agreement between Stewart Milne Group, Bett Limited and Stewart and Robert Hill which related to the development of two sites in Wishaw. Basically, the agreement provided that Stewart Milne and Bett would install sewerage and surface water drainage systems at the site they were developing which the Hills would be able to connect their site to the systems at no cost. If the drainage systems were not completed by the 28 March 2008 the Hills were entitled to receive payment from Bett and Stewart Milne of a penalty of £5,000 per calendar month until the systems were completed.

The works were not completed by 28 March 2008 and payments were made to the Hills until December 2008 but then stopped leading to the court action being raised by the Hills.

The temporary sheriff principal held that the clause imposed a liability to make payment on the occurrence of what was a breach of contract. Whilst it was for the party seeking to show that the clause is a penalty to raise the issue, it was then for the party relying on the clause to demonstrate that it was a genuine pre-estimate of losses and damage caused by the breach. In this case Stewart Milne and Bett had raised the issue and the Hills had put themselves in a position to show that the provision was a genuine pre-estimate of their loss. However, as the Hills had not shown that, but for the failure to complete the system by 28 March, they would have been able to complete their site, sell it and realise the return, they could not succeed.

However an Extra Division of the Inner House agreed with the submissions made on behalf of the Hills to the effect that it was for Stewart Milne and Bett as the parties claiming that the provision was an unenforceable penalty clause to show that this was the case and they had failed to do so.

In coming to his decision, the key question the sheriff principal had failed to consider was whether Stewart Milne and Bett had provided any argument in support of their contention that the provision was an unenforceable penalty. It appeared from the sheriff principal’s decision that he considered that it was not only for the Hills to show that the provision was a genuine pre-estimate of damages but also that the supposed breach of contract had given risen to a loss of the sort that the pre-estimate had been directed at quantifying. There was no such requirement. The whole purpose of a provision such as the one used in this case is to avoid the need for proof; not only proof as to quantification of the loss but also proof that the loss had occurred.

The Inner House therefore allowed the appeal against the sheriff principal’s decision.

Robert Holden v Royal Bank of Scotland and Douglas Cowan v Royal Bank of Scotland, [2011] CSOH 84

Tue, 12 Jul 2011 17:41:17 GMT

Two related cases in which guarantors under personal guarantees sought to avoid liability under the guarantees and also to avoid sequestration as a result of the guarantees being called up. The Royal Bank of Scotland was the creditor in both cases.

The guarantors applied for an interim interdict to prevent the Bank obtaining sequestration. The Royal Bank had loaned sums to two companies of which the guarantors were directors. The guarantors claimed that a Bank employee had made representations to them to the effect that the bank could not exercise the guarantees until it had first pursued all steps against the companies.

Lord Brodie refused to grant the interim interdict finding that the guarantors had failed to make a prima face case. And even that decision was wrong and they had managed to make a prima face case, the guarantors delay in bringing the case had been too long.

The error the bank’s employee was said to have induced was one as to the meaning of a formal legal document. The guarantors knew that they were entering binding legal documents and they were only in error as to the circumstances in which the guarantee would be enforceable. Any award of reduction would have been dependant on restitutio being possible (i.e. the Bank being paid). The issue was not solely between the companies and the bank as the loans had been advanced on the strength of the guarantees.

Thomas Barr v James Wilson Gilchrist and others, [2011] CSOH 72

Tue, 12 Jul 2011 17:09:08 GMT

Case considering duties owed by the parties to a joint venture to each other. Thomas Barr entered into a joint venture with Hawkhill to purchase and resell Omne House (an office building at Riverside Park in Irvine). Hawkhill, which was controlled by a Mr Gilchrist, sold Omne house to Fearann of which Mr Gilchrist was a director along with his wife (who also owned all of the shares). Fearann was not a party to the joint venture.

In response to Mr Barr’s claims for payment of half of the sale proceeds, Mr Gilchrist argued that Hawkhill had various outstanding claims for payment in respect of other developments (which were the subject of separate court proceedings) and the property had been transferred in an attempt to improve its position in respect of these outstanding claims.

In granting summary decree (for payment of half of the sale proceeds), Lord Hodge found that Hawkhill had acted in breach of trust. He confirmed that a joint venture is a species of partnership and that the sale of the property to Fearann in order to improve its position in relation to the other outstanding claims amounted to a breach of fiduciary duty.

Macintyre House Limited v. Maritsan Developments Limited [2011] CSOH 45

Mon, 30 May 2011 20:29:00 GMT

The defenders were a company who purchased and resold land for development. They had collaborated with the pursuers to identify potential vendors for the defenders’ land. The two parties had entered into an agreement to regulate their relationship, signed in June and July 2005.

A dispute subsequently arose between the parties in relation to the treatment of VAT due on payments made under this agreement, and in this action, the defenders sought to have the agreement rectified. In esto, the defenders argued that if the document was not rectified in order to give it a meaning which was commercially sensible, then it should be interpreted in light of its context, to mean that any sums the defenders had to remit to the pursuers were inclusive of VAT. The pursuers submitted by reply that the court should be reluctant to rectify the agreement, as to do so was to merely introduce a misdescription of the parties’ agreement; its terms were clear.

The court noted that the parties were agreed as to the correct approach to the interpretation of commercial contracts and the exclusion of pre-contractual negotiations as an aid to construction: see, Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, Lord Hoffmann at p.912 and Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101. Noting that the agreement in question in this action was not easy to interpret, the court noted that it felt the parties had given insufficient thought to the expression of their intentions. The court noted that certain clauses appeared to have been lifted from other contracts, and that the ordinary expectation that parties to a formal document had chosen their words with care could not be met in this case. The court noted that it was required to consider what a reasonable businessman standing in the shoes of the parties would have understood them to have meant by the words which they have used in the context of the contract as a whole and having regard to the relevant commercial background.

In doing so, the court found that the defenders’ proposed constructions did not make business sense, and that the pursuers may well have been entitled to further sums. The court put the case out to determine further procedure in light of the defenders’ counterclaim.

Molson Coors Brewing Company Limited v Tahir Ramsan, Sheriff George Alexander Way, Dundee Sheriff Court, 11 March 2011

Sun, 22 May 2011 22:16:00 GMT

In this action, the pursuers made a claim for payment against the defender on the basis that he had entered into a personal guarantee in favour of the pursuers in support of a company, Glam Leisure Limited, of which he was a director. The defender accepted that he had signed the document purporting to be a personal guarantee. The question at issue was the proper construction of the document.

It was submitted for the defender that he had made clear to the pursuers that he did not want to trade with them on credit terms and would not personally guarantee company debts. It was argued that he was induced to sign the relevant documents by misrepresentation. It was alleged that the defender had signed the agreement because the pursuers promised to hold promotional events at the night club premises operated by Glam Leisure in Dundee.

It was submitted for the pursuers that the defender had admitted signing the relevant documents, one being the account opening element of the sale and purchase agreement between Glam Leisure and the pursuers (signed in a representative capacity) and the other being a personal guarantee. The witness to the signature of the personal guarantee was a book keeper retained by Glam Leisure, who was independent from the pursuers. The personal guarantee should be construed according to the ordinary language used, as a guarantee on a personal liability basis of Glam Leisure’s debts.

Having considered parties’ submissions and a recent Inner House decision in Brandon Hire PLC v Steven Russell [2010] CSIH 7, the Sheriff considered the defender must be deemed to have read the deed and accepted personal liability as a guarantor. The wording of the deed was clear and unambiguous. The defender had signed above a clearly printed line underscored with the word ‘Guarantor’. He could have put his pen through any part of the deed he declined to sign, but he did not do so and was bound by its terms. In the present case, (distinguishable from the Extra Division case of Montgomery Litho Limited v Maxwell 2000 SC 56) the defender could not reasonably assert that the deed did not make it abundantly clear that he was being asked to sign a guarantee in his personal capacity as guarantor. Further, the defender’s position on misrepresentation was wholly misdirected.

The Sheriff concluded that the defender’s case on the merits was unsupportable in law both on the issue of proper construction of the deed of guarantee and that of alleged misrepresentation. Quantum was not disputed. The pursuers’ preliminary pleas were sustained and decree de plano was granted as craved with expenses as taxed.

William Rennie and Co Ltd v. BP Exploration Operating Co Ltd [2011] CSIH 10

Thu, 07 Apr 2011 21:45:34 GMT

In this Stated Case on points of law arising from arbitration proceedings, brought under section 3 of the Administration of Justice (Scotland) Act 1972, the respondents had been granted a servitude in relation to pipelines running between two of their installations. The land of the tenement under the grant of servitude had been latterly acquired by the reclaimers. The dispute between the parties related to the proper interpretation and application of a certain clause in the grant of servitude between them, which concerned the circumstances in which compensation would be payable by the respondents to the reclaimers, for the prevention of the development of their land due to the existence of the pipelines.

The reclaimers had attempted during the late 1990s to develop the land for residential purposes, however planning permission had been refused. The reclaimers had intimated to the respondents that compensation was due, because planning permission had been refused on the basis of the pipes posing a health and safety risk to potential residents. The respondents had resisted the claim for compensation, on the basis that planning permission for the development had been refused for grounds unrelated to the existence of the pipelines. The parties had referred their dispute to arbitration, which had partially upheld the claims of the reclaimers.

On appeal, the Inner House noted that the arbiter’s approach to the interpretation of the clause was correct and was in line with the authorities on the interpretation of commercial documents. The arbiter’s decisions were accordingly upheld in law.

John Kenneth Brown v. Rysaffe Trustee Company (CI) Limited [2011] CSOH 26

Wed, 23 Mar 2011 22:51:03 GMT

The pursuer and the defenders were parties to a loan agreement, entered into on 20 June 2007; the loan enabled the pursuer to buy shares in Kenmore Property Group Limited, a company in which the pursuer was a director. Under the agreement, a clause gave the defender discretion to waive re-payment of the loan, and if that discretion was undertaken, the defender was to indemnify the pursuer from any tax liability that arose there from.

The repayment of the loan was duly waived, and the pursuer settled his tax liability with HMRC. In the present action, the pursuer sought to be indemnified in respect of this tax liability, as per the terms of the agreement. In defence, the defenders submitted that they had entered into the agreement as Trustee of Kenmore Property Group Employee Benefit Trust and not in a personal capacity, and that this should be regarded as an implied term of the agreement. The defenders also argued that the loan agreement document should be rectified so as to make it clear that it undertook its obligations as trustee only.

Having heard submissions, the Lord Ordinary preferred the position of the defender and noted that it was clear that even with detailed analysis of the document that the defenders had entered into the agreement as a trustee of the trust. The Lord Ordinary found that this matter was clear and that there was no ambiguity in respect of the capacity in which the defenders entered into the agreement: as trustee only, without the assumption of any personal liability in the event of the trust not having sufficient funds to meet the liability. The Lord Ordinary was satisfied that this interpretation of the loan agreement could be achieved without any need for the implication of additional terms. The Lord Ordinary noted that in any event, had it been necessary to do so, he would have been prepared to resort to implied terms of the contract, and/or rectify the document.

Timeshare Management Services Limited v. Loch Rannoch Highland Club [2011] CSOH 23

Sun, 20 Mar 2011 22:47:00 GMT

The defenders were a club, whose members had purchased the use of timeshare apartments situated on the edge of Loch Rannoch. The pursuers were a company set up in 2002 specifically for the purposes of managing the business of the defenders, a relationship which was regulated by a “Management Agreement”. This Management Agreement was brought to an end by rescission letter in October 2008, following disagreements that had arisen between the parties. In this action, the pursuers disputed that they were in material or repudiatory breach of contract, so as to entitle the defenders to terminate the Management Agreement, and sought damages for the defenders’ unlawful repudiation of the contract.

Having heard evidence on the disagreements that arose between the parties in the course of performance of their contract, the Lord Ordinary found that the pursuers were not in breach through their attempts to purchase office premises in 2006, nor in relation to their conduct prior to and during the defenders’ 2006 AGM. The Lord Ordinary moreover found that the many allegations of dishonesty made against the pursuers (in relation to the purchasing of furnishings for the timeshare apartments and the pursuers’ travel expenses) were without foundation and that they did not conduct themselves improperly in relation to the defenders’ AGM of 2008. The Lord Ordinary accordingly found that the breaches alleged by the defenders in the action were not made out; therefore the rescission letter sent by the defenders was unlawful. The court found that the letter was of itself a repudiatory breach of the parties’ Management Agreement and that the pursuers were accordingly entitled to damages on this basis.

Rejecting the defenders’ arguments that no loss had been established, the Lord Ordinary found them liable to pay the pursuers the sum of £186,056.

Ian MacDonald v. John Nicholson and Eveanne Nicholson, Sheriff Principal Edward F Bowen QC, Edinburgh Sheriff Court, 18th January 2011

Fri, 28 Jan 2011 11:44:00 GMT

The parties entered into an agreement in May 2005 whereby the pursuer (and appellant) was to design and construct a timber framed riding arena for the defenders (and respondents).

First Instance Proceedings:
The pursuer sought decree for payment of outstanding sums. He averred that the price agreed was to be the amount it would cost him to build the arena and that it cost him £53,219.57 to do so. The defenders submitted that the price was to be £21,000 as well as any sums for additional work agreed upon. Payment of £24,721.86 had been made in November 2005 representing the agreed cost plus payment for additional work carried out. The defenders also counter-claimed, averring that the arena was not fit for purpose, did not comply with the Building Warrant issued for it and would require to be demolished and rebuilt.

The sheriff found that the total agreed cost of the project, including extra work, was £30,000. The sheriff rejected the pursuer’s submissions and granted decree in favour of the defenders for damages in the sum of £15,000, representing the amount required to remedy building defects.

Appellate Proceedings:
The pursuer appealed on two grounds: that the sheriff had erred in concluding that the parties agreed a price of £30,000; and that, even if a price of £30,000 was agreed, the quantification of loss was incorrect. The pursuer submitted that the award of damages should be guided by the principle of restitutio in integrum, meaning that the amount awarded should restore the defenders to their original position had the defects not occurred. As the defenders had already paid £24,721.86 and could expect to pay £15,000 for remedial work, the sum required to return them to an agreed price of £30,000 was £9,721.86 and not the £15,000 awarded.

The sheriff principal sustained the appeal in part and reduced the sum of damages payable to the defenders to £9,721.86. The sheriff principal accepted the second ground of appeal but rejected the first. He noted that, while the figure of £30,000 was not satisfactorily arrived at, this was not fatal and it was open to the sheriff to so fix the contract price.

Bell Building Projects Ltd. v. Carfin Developments Ltd., Sheriff Principal Taylor, Glasgow Sheriff Court, 24th September 2010

Mon, 24 Jan 2011 16:53:01 GMT

The defenders (and appellants) were a construction development company. The pursuers (and respondents) were subcontractors of the defenders. In July 2008 the pursuers issued a payment claim for building and ancillary works carried out for the defenders in Motherwell. The defenders resisted payment and issued a Notice of Withholding in respect of six items. The dispute was referred to adjudication where it was decided that the defenders were entitled to withhold payment in respect of two items but were required to pay the balance.

A second dispute was referred to adjudication in July 2009. The pursuers sought payment in respect of the two items denied in the first adjudication as well as payment of a retention fee. The second adjudicator found that the pursuers were entitled to both sums. In the time between the two adjudications, the Defects Liability Period specified in the Certificate of Practical Completion issued in November 2007 had expired (on the 23rd November 2008).

The pursuers sued for payment in Glasgow Sheriff Court and were granted summary decree. The defenders then appealed to the Sheriff Principal.

Defenders’ Submissions:
The defenders averred that second adjudicator did not have jurisdiction to set aside the decision of the first adjudicator because the issue at dispute was the same in both cases. The second adjudicator therefore ought to have resigned. The issue at dispute was whether defects continued to exist in the building works. The second adjudicator would only have been entitled to set aside the decision of the first if different factual circumstances existed and in this case they did not.

Pursuers’ Submissions:
The pursuers responded that the second adjudicator would have jurisdiction where the two decisions concerned different stages of the contract with different contractual provisions applying. By the time of the second reference to adjudication the Defects Liability Period had expired. The second reference therefore dealt with a different stage of the contract and with different contractual provisions and so was a separate and distinct dispute.

Decision:
The Sheriff Principal found for the pursuers and held that the adjudicators were not dealing with the same issue. The sheriff at first instance was therefore entitled to hold that the second adjudicator had jurisdiction to decide the dispute and did not require to resign.

Wyman-Gordon Limited v. Proclad International Limited [2010] CSIH 99

Sun, 09 Jan 2011 15:41:04 GMT

The pursuers and reclaimers to this action were specialists in the extrusion of pipes; they manufactured an ordinary extruded pipe, made from carbon steel, known as the Ex pipe. The defenders and respondents were engaged in the design, manufacture and supply of pipeline components, including pipes. They had developed a patented process for the manufacture of clad co-extruded pipes, known as the Proclad Wex pipe.

In early 2002, the respondents approached the reclaimers, with a view working together on a joint project: manufacturing and supplying an American company with both Wex and Ex pipes of various diameters. After the supply of these pipes proceeded, it became clear that significant numbers of the Wex pipes were failing to meet the specifications and tolerances agreed by the parties. Following failed negotiations, the reclaimers raised the present action, claiming certain sums as payment of the unpaid price of the goods supplied by them by the respondents and damages for their alleged breach of contract. The Lord Ordinary had granted decree in favour of the reclaimers for part of their claim, but review of his interlocutor was sought on two basis: (i) firstly, that he had erred in the application of the law relating to repudiation relating to the facts established by evidence; and (ii) that he erred in basing his decision on an implied term that was not contended for by either party, upon which no evidence had been led, and which had not been the subject of submissions to him.

Having heard submissions from the parties, the Inner House noted that the law on repudiation was well-settled, and the court saw no reason to innovate on it. What the court required to do was to analyze the evidence before it and consider whether or not it objectively amounted to a repudiation of the parties’ contract. The court did not agree with the reclaimers that the Lord Ordinary had applied the wrong test with regards the law of repudiation, and rejected this submission. However, the Inner House found that the parties' contractual arrangements contained no express provision as to which of them must bear the risk of or responsibility for the phenomenon of "tearing", or separation of the clad bond, were that to materialise. In these circumstances of uncertainty, the court thought it might be wholly understandable and not unreasonable for parties to table proposals or suggestions designed to cater for emerging difficulties which the terms of the contract did not contemplate and the precise cause of which remained uncertain. The Inner House noted that such conduct would be harder to characterise as repudiatory conduct than would be the making of proposals or suggestions for deviation from contractual terms that were clear. Accordingly, the Inner House held that the commercial judge had erred in constructing the reclaimers as having repudiated the parties' contractual arrangements.

Noting a gap in the existing contractual arrangements in respect of this matter, the Inner House observed that the commercial judge had felt it necessary to imply a term into the parties' contract to deal with the allocation of such risk. The Inner House noted that they considered it “surprising” that the commercial judge concluded that it was proper for him to reach his conclusion regarding an implied term in the absence of any pleadings in relation to the matter, in the absence of any evidence which either party might have wished to lead in relation to the matter and without having heard any submissions on the matter from the parties. The court noted that in normal circumstances, if a party to a contractual dispute considered that, for example, in order to give the contract business efficacy, it was necessary for a particular term to be implied in the contract, that party could be expected to make an averment to that effect in the pleadings and, if appropriate, then to lead evidence concerning the basis for the implication of such a term and to make submissions in relation to the issue. The other party would then be given fair notice of what was contended for and have a full opportunity of engaging in any evidential consideration of the need for the implied term and of making submissions to the court about it.

The court noted that none of that happened in the present case, despite the fact that the commercial judge had previously held a preliminary proof on the subject of the terms of the contract or contracts between the parties. In these circumstances, the Inner House concluded that the course which the Lord Ordinary had followed must inevitably be seen as producing unfairness and injustice to the parties and accordingly, allowed the reclaiming motion.

R & D Construction Group Limited v. Hallam Land Management Ltd [2010] CSIH 96

Tue, 04 Jan 2011 10:17:33 GMT

In November 1999 the respondent entered into an option agreement to purchase up to 21.1 acres of land from a vendor. In October 2003 the reclaimer concluded missives with the respondent to purchase from it 4.685 acres of that land at a price of £571,314.

Clause 4.1.10, introduced in the respondent's qualified acceptance of 24 September 2003, contained a suspensive condition, which provided that the missives would be essentially conditional upon the seller (the respondent) “agreeing a purchase price for the Subjects with the current proprietor in terms wholly acceptable to the Seller (the Seller being required to sell to use all reasonable endeavours in this regard)”.

On 26 May 2004, having failed to agree a price with the vendor, the respondent purported to resile from the purchase contract. The reclaimer brought an action for breach of contract, founding on the parenthetical requirement in clause 4.1.10. The respondent argued that the requirement was unenforceable, being no more than an agreement to agree, or, alternatively, being concerned with an object which was too vague and uncertain to have contractual force. On 16 September 2009, following proof, the Lord Ordinary decided that the requirement was enforceable, but that, on the acceptable evidence, the respondent was not in breach of contract.

Against that the decision, the present reclaiming motion was brought. The respondents had also lodged a cross-appeal on the grounds that Clause 4.1.10 was an agreement to agree, and hence, was incapable of giving rise to enforceable legal obligations and also, that in any event, it would be too vague and uncertain to be given contractual force.

Having heard submissions and considered the evidence led at proof, the Inner House concluded that the nature of Clause 4.1.10 was to direct the respondent, in the context of the missives, to use all reasonable endeavours to secure with the current proprietor agreement on a price which was wholly (and subjectively) acceptable to the respondent. However, the court noted that the requirement did not demand the taking of further steps by the respondent to secure a higher (amended) price between the respondent and the reclaimer so as to facilitate an agreement between the respondent and the vendor which, against that amended price, would be wholly acceptable to the respondent. Moreover, the Inner House did not deem the clause to be too uncertain to be enforceable. On the matter of whether the obligation was breached, the Inner House noted that this was essentially a question of fact and that the Lord Ordinary had been entitled to come to his own opinion on the evidence heard. The Inner House did not accept the reclaimer’s arguments that no judge acting reasonably could have accepted the evidence and come to that view. Appeal dismissed.

AMW Plumbing and Heating Limited v. Zoom Developments Limited, Sheriff Principal Taylor, Glasgow Sheriff Court, 21 October 2010

Sun, 02 Jan 2011 20:12:45 GMT

The pursuers and respondents (hereafter ‘the pursuers’) were a plumbing and heating company. The defenders and appellants (hereafter ‘the defenders’) were a housing development company. The parties entered into a contract under which the pursuers were to carry out plumbing and heating works at a development of sixty five flats to be constructed in three separate blocks by the defenders.
Work was completed by the pursuers, without defect or complaint, on the first and second blocks in April 2008 and October 2008 respectively. As the defenders had not yet constructed the third block, the pursuers were unable to complete the work contracted. The pursers were paid for the work completed on blocks one and two save for a 5% retention fee to be paid one year after ‘Practical Completion’ of the total work as provided by clause 5.7 of the contract. The action was raised in 2009 to recover this 5% fee.

First Instance Proceedings:
At first instance and appeal the defenders averred that they were entitled to delay payment of the fee by suspending the work under clause 2.3 of the contract. The defenders accepted that they alone controlled when Practical Completion could be achieved and therefore controlled when the pursuers could receive payment. They sought to rely on the terms of the contract, however ‘unpalatable’ they may have been to the pursuers.
The pursuers submitted that the defenders’ right to suspend the work under clause 2.3 was qualified by clause 3.1 which stipulated that the defenders could only suspend subcontractors’ employment under certain conditions.
The sheriff at first instance found for the pursuers and held that, as the clause 3 conditions were not satisfied, the defenders did not have the right to suspend the works and accordingly the pursuers were entitled to repayment of the retention fee.

Appellate Proceedings:
At appeal, Sheriff Principal Taylor held that 1) the sheriff at first instance had erred in his interpretation of the contract in finding that the defenders did not have the right to suspend the works and 2) the fee was recoverable nonetheless since the contract fell foul of the Scheme for Construction Contracts by not providing an adequate mechanism for determining when payments would become due.
1) In his first finding, the Sheriff Principal held that clauses 2.3 and 3.1 provided mechanisms for suspension in different terms. The former permitted suspension of work being carried out whereas the latter permitted suspension of the pursuers’ employment to carry out the work. Therefore the defenders did not require to satisfy the clause 3 conditions and were entitled to suspend the work under clause 2.3 alone.
2) The pursuers argued that, as it was accepted by both parties that the agreement was a ‘Construction Contract’ in terms of the Housing, Grants, Construction and Regeneration Act 1996, the Scheme for Construction Contracts applied. Under paragraph 3 of the Scheme, where there is no adequate mechanism for determining when payments become due, parties must follow the procedure in paragraphs 4-7 of the scheme.

The defenders submitted that an adequate mechanism did exist even though their exclusive control over the achievement of Practical Completion meant that retention fee payment could be delayed for several years through no fault of the subcontractor. They maintained that the contract ought to be honoured free from interference from the court.

The Sheriff Principal found that the mechanism for payment to the pursuers for work properly done was inadequate in light of the defenders’ control over the date of Practical Completion. Further, clause 5.7 did not satisfy the purpose of retention in building contracts; being the provision of security in the event that defects arise following the completion of works. The pursuers’ contention that the retention fee was a ‘final payment’ under paragraph 5 of the Scheme was rejected but it was accepted that paragraph 4 applied under which payment falls to be paid within 7 days of the recipient making a claim. The initial writ could be viewed as a claim for payment therefore payment fell to be made within 7 days of the initial writ being raised in 2009.

EDI Central Limited v. National Car Parks Limited [2010] CSOH 141

Sun, 02 Jan 2011 12:08:33 GMT

The defenders ran the Castle Terrace car park in Edinburgh, which was owned by the City of Edinburgh Council and leased to the defenders. The Castle Terrace car park was successful and profit-making, and the defenders proposed to develop it further. The defenders submitted that the pursuers had represented that because of their close links with the Council, they would be uniquely placed to deliver the proposed development of the Castle Terrace car park. The parties agreed that in exchange for the defenders receiving a cash payment of £5 million from the pursuers and a share in the profits, the pursuers would be interposed in the lease of the car park, and would pursue its development directly with the Council.

In the present action, the pursuers sought buy-back of their interest as tenant under the lease from the defenders however the defenders refused to consent to this re-assignation arguing that the pursuers were in material breach of contract. They argued that the pursuers failed to pursue the development with “all reasonable endeavours and as would be expected of a normal prudent commercial developer experienced in developments of that nature”. The defenders submitted that the pursuers merely approached the development as if the agreement gave them an option to do so, they did not recognize that they were compelled to pursue the development, and that this was in breach of their obligations under the agreement. In contrast, the pursuers admitted that while they were actively pursuing other car park developments at the same time, they submitted that the Castle Terrace development was a sensitive site for development, because of a recognized lack of parking in that area of the city. They submitted that in order to obtain the Council’s consent to the proposed development of Castle Terrace, it would be necessary for there to be alternative parking available, to replace that lost on a short-term basis, during the development. They thus had to pursue the development of another car parking site in the interim period.

Having heard evidence and submissions from the parties, the Lord Ordinary concluded that it was clear that there was no prospect of obtaining consent from the Council unless some other alternative parking facility was available, and there was thus a need to pursue the provision of alternative spaces first before further advancing the development of the Castle Terrace car park. The Lord Ordinary concluded therefore that the pursuers were not in breach by concentrating their efforts on pursuing the alternative development as a means of unlocking the potential for the Castle Terrace development. The Lord Ordinary noted that even if they should have contacted the defenders for help when it became clear their efforts were not successful, the court found there could not have been a material breach of the “reasonable endeavours” obligation, since it was not shown to have adversely affected the defenders. The Lord Ordinary concluded that the assessments made by the pursuers were not significantly different from those to be expected of a normal experienced prudent developer in the circumstances and in any event, any breach such as there was, could not have been material. It was therefore not equitable for the defenders to withhold performance of its obligations in re-assignation and refuse to pay the required sum to the pursuers. Decree granted.

Tullis Russell Papermakers Limited v. Inveresk Limited [2010] CSOH 148

Sun, 02 Jan 2011 12:02:22 GMT

Prior to June 2005 both parties were involved in the business of the manufacture and sale of paper products. These products included board which had a smooth coating, making it suitable for high quality printing to produce e.g. greeting cards, catalogues and packaging for cosmetics and pharmaceuticals etc.

In June 2005, the pursuers agreed to acquire the defenders’ Gemini brand of paper board and its goodwill, together with customer information related to the brand and certain related assets. The defenders agreed that during the period of five months from 9 June to 8 November 2005, they would manufacture and distribute Gemini board under licence from the pursuers. During this period, and immediately thereafter, it became apparent that the Gemini board manufactured by the defenders and supplied to their customers contained an unusually large number of defects. The pursuers also became concerned that in dealing with the complaints of customers supplied with defective board, the defenders adopted an antagonistic attitude; they thought that the defenders' behaviour was liable to alienate Gemini customers. Following the end of this period, the pursuers also discovered that sales of the board were lower than they had expected, and they attributed this to the defective quantities of board produced and the hostile attitude of the defenders in handling their customer complaints. The pursuers raised an action against the defenders, concluding for payment of £5,358,032.90, the majority representing damages for breach of contract, with residual sums representing payments due under the parties’ contract. The defenders lodged a counterclaim for £680,685 by way of damages for breach of contract, which was later reduced to £4,640.80, before being dismissed by the court.

Having heard evidence and submissions from the parties, the Lord Ordinary concluded that the defenders were in breach of contract. The court noted that the levels of defective board produced by the defenders during the relevant period were greatly above industry norms and that the precise cause of these defects had never been fully explained by the defenders. Moreover, the court concluded that the evidence led proved the defenders had handled customer complaints in a manner that was likely to damage the relationship with Gemini customers, and thereby to damage the value of the Gemini brand as a whole. The court also held that on any reasonable basis, it must have been obvious that was the likely outcome of their conduct and thus found that the defenders were in breach of contract.

In considering whether the breaches of contract caused loss to the pursuers, the court noted that there was substantial evidence that brands, and the esteem such brands are held in, was extremely important for trading within the paper industry. Moreover, there was considerable evidence that there had been a fall in sales of the Gemini brand during the relevant period; the Lord Ordinary concluded that on the evidence it was very likely that the Gemini sales were affected by the defenders’ conduct and found there was sufficient causation, resulting in loss to the pursuers. Having heard expert evidence on loss, the Lord Ordinary concluded that an award of damages for £4,250,000 would be appropriate.

Whyte & Mackay Limited v. Capstone International plc [2010] CSIH 87

Sun, 14 Nov 2010 22:32:30 GMT

The reclaimers were whisky distillers. The respondents were beverage distributors, who operated in the United States of America. The parties entered into a Distributorship Agreement, in which the reclaimers granted to the respondents the exclusive right to purchase John Barr Scotch Whiskies in bottles for resale in the domestic market of the United States of America.

The reclaimers averred that in order lawfully to distribute and sell alcohol in the United States of America, the respondents would require to hold certain federal permits. It was later discovered that the respondents did not hold any such permits; rather these were held by another company, Emerald Brands Incorporated. While the respondents were in agreement about the general regulatory framework, they denied that it was necessary for them to have permits issued in their own name, and averred that US law permits an importer such as the respondent to conduct operations via a licensed third party.

The reclaimers averred that the respondents’ failure to obtain the permissions necessary to discharge their obligations under the Distributor Agreement, and their purported discharge of these obligations in an unlawful manner, were material breaches of the agreement, entitling them to terminate the agreement. The reclaimers sought declarator to this effect.
In contesting this claim, the respondents mounted a counterclaim, seeking an order ad factum praestandum ordaining and requiring the reclaimers to continue, pending the currency of the current litigation and until valid termination of the agreement, to accept orders from the respondents.

In determining this claim, the Lord Ordinary opined that he was aware he had to avoid significantly innovating on the parties' contractual rights and obligations; he found this to be the most difficult aspect of the case as presented to him. The Lord Ordinary recognised that to grant the interim order sought by the respondents would impose an obligation upon the reclaimers which went beyond what they were obliged to do in terms of their agreement with the respondents and the parties' subsequent trading relationship. In effect, such an order would deprive the reclaimers of the remedy of declining to supply further whisky to the respondents until all outstanding debts had been paid. The Lord Ordinary properly recognised that this would "arguably be an innovation on the rights and remedies available to the parties under the contract." However, he sought to avoid such an innovation by attaching a condition to the order to the effect that the reclaimers were not obliged to accept orders from the respondents until the respondents had made payment of other debts due to the reclaimers by them.

The reclaimers submitted that the Lord Ordinary had erred in law, failing to appreciate the significance of their case that such trading had amounted to unlawful activity on the part of the respondents. While the respondents had attempted to remedy this unlawful activity through a merger with the company which held the licenses, this only addressed the issue of future illegality, it did not provide a remedy sought in respect of the past illegality. Moreover, the Lord Ordinary had failed to appreciate the result of his interlocutor was to compel the reclaimers to ship whisky on demand to the USA. As the producer and supplier of the said product, the reclaimers submitted they were the dominant partner in this trading relationship, and it was entirely appropriate that they should be able to withhold supply for commercial reasons. E.g. they might have wished to supply to someone else; they might have wished to delay accepting an order until such time as the price increased etc. For the court to impose such demands on the reclaimers, making them accept any order submitted by the respondents, was too significant an innovation on the contractual relationship between the parties.

In accepting the submissions of the reclaimers, the court noted that it was clear in Scots law that a party to a contract is entitled to enforce that contract by decree for specific implement. The court noted that that right is subject to the court’s discretion to deny such a remedy in only exceptional cases, with the court further noting that such discretion should only be used where there is a very cogent reason making it “inconvenient and unjust” to grant specific implement. By requiring the reclaimers to continue to accept orders from the respondents, the court order was innovating on the reclaimers' right to treat each order as a separate entity and to refuse to accept an order placed with the reclaimers by the respondents. The court moreover failed to appreciate the significance of the illegal activities undertaken by the respondents. Interim order ad factum praestandum recalled.

Charles William Pagan and others v. John Bernard Clarke and another [2010] CSOH 147

Sun, 14 Nov 2010 22:26:37 GMT

The pursuers sought payment from the defenders, in terms of Clause 7 of their Minute of Agreement. This clause related to the payment of certain sums, and the calculation of those sums, following the dissolution of the parties’ partnership - Pagan Osborne, a firm of solicitors. The dispute focused on whether the calculation of the sums due to the pursuers included the non-legal work of the firm, in its reference to “the work in progress of the Firm at the Retirement Date”. The defenders argued that the pursuers had proceeded on a material misconstruction of this phrase, in excluding the non-legal work from this calculation.

The court noted that five broad sectors of activity where carried on by Pagan Osborne at the material time. The first of these was the provision of legal services. Additionally, the firm also carried out significant financial services asset management work, property services, and independent financial advice. For these non-legal sectors, the firm did not operate a time-recording system.

The parties were agreed that the principles on which a contract should be interpreted were those summarised by the House of Lords in Investors Compensation Scheme Ltd v West Bromwich Building Society 1998 1 WLR 896 at 912-913. Thus it was agreed that the question for the court was this: to ascertain what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean.

The court concluded that the words “the work in progress of the Firm at the Retirement Date” had the meaning submitted by the defenders, namely that this phrase included the non-legal work of the firm within the calculation of payments due to the pursuers. The court noted that the phrasing in the contract was not limited or restricted, suggesting that all work of the firm was to be taken into account. The pursuers’ construction of the phrasing was accordingly too narrow, and moreover, did not fit with the purpose of the agreement. Defenders’ plea-in-law sustained, and action dismissed.

Aberdeen City Council v. Stewart Milne Group Limited [2010] CSIH 81

Thu, 04 Nov 2010 22:31:46 GMT

Reclaiming motion:- The pursuers agreed to sell the defenders 11 acres of lands in Aberdeenshire, through missives ultimately concluded in August 2004. A price of £365,000 was stipulated in the missives however this was subject to a price-uplift, which could become payable if the defenders subsequently sold the property. The land was duly sold by the defenders in December 2006, for the price of £483,020.

Under the provisions of the parties’ contract, certain allowable costs were required to be considered in order to calculate the level of uplift due. The defenders argued their allowable costs were £559,696 and that because this figure was higher than the resale price, no uplift fee was due to the pursuers. The pursuers however contended that the subjects were in fact worth the sum of £5,670,000, making the true uplift figure in the region of £1.7 million. The pursuers argued that under the parties’ contract, any sum due as an uplift should be calculated by reference to the open market value of the subjects; conversely, the defenders argued the calculation was to be based upon the sum actually paid by the buyer. The Lord Ordinary previously found in favour of the pursuers, and the defenders reclaimed against that finding.

In rejecting the reclaiming motion and sustaining the declarator of the Lord Ordinary in favour of the pursuers, the Inner House treated the matter as one of construction. Noting that the parties clearly anticipated a sale by the defenders would be a relevant event to trigger the uplift calculation, they objectively intended a sale at arms length, for open market value. Giving effect to the plain words of the contract, the Inner House held the commercial value of the provision was clear and accordingly rejected the reclaiming motion.

Alton B Copland Ltd v. Orkney Builders (Contractors) Ltd [2010] CSOH 135

Sun, 10 Oct 2010 20:41:38 GMT

Alton B Copland Limited ("ABC") was a company which carried out plumbing and related work in Orkney. Orkney Builders (Contractors) Limited ("OB") was a building contractor which was also based in Orkney. For about twenty years until 2008, ABC and OB collaborated on projects in Orkney. During most of that period, OB treated ABC as its preferred plumbing sub-contractor. The court noted that differences had since arisen between the parties, with the present action concerning disputes in relation to four contracts in which ABC acted as a subcontractor of OB.
The court noted that much of the evidence on which the parties relied at proof was in the form of oral recollection of witnesses, reflective of the informal nature in which the parties conducted their business together.

(i) St Magnus Manse, Kirkwall

In February 2003, ABC entered into a subcontract with OB to provide plumbing, gas installation and roofing services for works to be carried out on a manse in Kirkwall. ABC submitted a tender for £24,005.06 in respect of the plumbing element of the works. Another plumbing subcontractor, Steven R Paterson Limited ("SRP"), offered to carry out the plumbing work for £20,925.63. Notwithstanding SRP's lower offer, OB appointed ABC as the subcontractor, but used SRP's subcontract rates and price while listing ABC as the subcontractor in its main tender. OB submitted that in a telephone conversation shortly before the submission of the main tender, ABC had agreed to carry out the subcontract works by matching SRP's price. The court accepted that while OB’s directors acted at the time in the belief that SRP’s prices governed the subcontract, the court was not satisfied that ABC accepted this unusual arrangement. Noting that it was clear the two managing directors of the companies enjoyed good social and commercial relations, and much of their commercial dealings proceeded on a basis of trust, it was clear there had been a misunderstanding of the terms of their agreement on this occasion. Absent proof of the unusual arrangement plead by OB, the court found that ABC’s tender governed the subcontract, and that OB were bound to pay to ABC the difference between their tender and that of the lower SRP tender they believed the contract had proceeded on.

(ii) Dounby Care Home and (iii) Dounby Surgery

In October 2003, ABC submitted a tender to OB to provide plumbing services for the construction of a care home in Orkney, and a medical surgery adjacent to this building. The court noted that it was not uncommon for ABC to offer AB a main contractor’s discount of between 1% and 2.5%. However, on this occasion, ABC offered an unusually high discount of 4%. The parties were in dispute about whether this discount was offered on the condition that OB would make prompt and monthly payments of the sums due to ABC as its subcontractor. On the evidence, the court was satisfied that 4% was an unusually large discount for ABC to offer, and that when ABC agreed to this discount, they expected prompt and regular payments from OB, particularly due to their concerns over cash flow on such a large project. However, the court was not satisfied that OB assented to this agreement due to the lack of sufficient evidence on OB’s assent to this condition. The court noted that the casual nature of the parties’ conversations on this point made it difficult for the court to objectively hold that agreement had taken place.

(iv) Wellington Street

In March 2004, ABC submitted a tender to OB for a subcontract for plumbing services in a proposed residential development for Orkney Housing Association Limited. The parties disputed whether ABC had agreed to give OB a 2.5% main contractor’s discount on the subcontract price. ABC submitted that they had not agreed to this discount, and the relevant director would have remembered if he had so agreed. OB submitted that clear agreement had taken place over a telephone conversation between directors, and had been witnessed by several members of their staff, who gave evidence to this effect. This evidence was also supported by written documentation accompanying the subcontract. On this basis, the court was satisfied that this discount had been agreed.

A second dispute on this development contract concerned a price uplift. In July 2004, OB enquired in a telephone conversation whether ABC would be willing to fix their prices for leadwork and plumberwork for a period of two years; the parties disputed the content of this call. ABC led evidence that the prices would be fixed, but only if OB allowed a 5% mark-up on the prices quoted on the tender; OB’s evidence was that this mark-up had not been agreed, and would not have been agreed, without agreeing a mark-up from the employer for OB as main contractor, as its own tender would have been based on ABC rates. Contemporaneous documentation supported ABC’s assertion that a 5% mark-up had been agreed and the court concluded that there had been agreement on this price uplift.

A third dispute centred on whether OB was entitled to make a deduction from ABC, on the grounds of their alleged double-counting of pipework. Having heard evidence, the court was not concluded that there had been no double-counting on the project, and therefore concluded that OB was not entitled to make such a deduction.

A fourth dispute on this contract concerned whether OB was entitled to deduct sums from payments due to ABC, in respect of the cost of joiner work which OB had to pay for, as a result of an alleged mistake by ABC’s employees in the installation of pipes. Evidence was led from employees and directors of OB, to the effect that ABC’s plumbers had installed pipes in the wrong position, leading to OB having to cut holes in plasterboard. This evidence was supported by contemporaneous documentation and the court concluded accordingly that OB was entitled to deduct the sums from ABC in order to pay for the remedial joinery.

G4S Cash Centres (UK) Limited v. Clydesdale Bank Plc [2010] CSOH 133

Wed, 29 Sep 2010 17:18:00 GMT

The pursuers and defenders had entered into a services agreement for the distribution of cash processing services, under the terms and conditions set out in the agreement. The agreement has not been terminated and is due to expire in 2014.

"Service fees” as defined in the agreement, were fixed until August 2002, the seventh anniversary of execution. There was a provision in the agreement obliging the defenders to undertake a review of the service fees after the seventh anniversary, with a view to determining the service fees payable thereafter. The parties were in dispute as to whether or not this review could result only in a decrease in the level of the services fees due, unless the defenders consented to an increase.

The pursuers submitted that the structure of the agreement was clear; that the services to be supplied were to gradually increase over the first seven year period, and that the fees for those services were to be fixed over that period. Thereafter, the pursuers submitted, there was to be a review of the fixed fees, to cover the last five years of the agreement. The pursuers submitted that if the defender’s construction of the agreement were correct, it would mean that the pursuers were locked in a twelve year fixed fee agreement, with no right to exercise a break option, and that this would make commercial nonsense.

The court agreed with these submissions, finding that the review provision did indeed allow for increases to fees, without the defenders consent, after the seven year period. Obiter, the court noted that it did not favour the pursuer’s submissions on commercial nonsense, noting that if a party enters into a bad bargain which he subsequently regrets, he cannot generally turn to the courts to remedy this. Pursuer’s plea-in-law sustained; defender’s plea-in-law repelled. Decree of declarator granted.

Professional Financial Services v. Fiona Dick t/a The Heathfield Partnership [2010] CSOH 131

Sun, 26 Sep 2010 17:36:43 GMT

In this action, the pursuers sued the defender for damages for alleged breach of conduct. The pursuers were a firm of independent financial advisors, and the defender is an independent financial advisor who was previously an authorised representative of the pursuers, offering advice and selling financial products to their clients. Acting in that capacity in 2000, the defender provided advice to clients of the firm, who subsequently invested funds in an investment vehicle, which was recommended by the defender. The advice given however was incorrect and negligent, with the couple subsequently losing money on their investment. An award was made against the pursuers by the Financial Services Ombudsman, following a complaint in respect of this advice, however the sum awarded to the couple was in excess of their professional indemnity insurance. The pursuers thus sought recovery, by way of damages, from the defender in respect of the loss they suffered.

The defender submitted that an implied term of contract existed between the pursuers and defender, to the effect that the pursuers would maintain professional indemnity insurance cover against the risk of liability to clients arising from negligent acts or omissions of the defender in the course of her appointment. The defender further submitted that in the event of the pursuers sustaining a loss as a result of such an insured risk, the pursuers were entitled to seek to recoup their loss only from such professional indemnity insurance, with no further claim lying against the defender. Key to the defender’s pleadings was the admission of the pursuers that the defender paid a percentage of her commission to the pursuers for the purpose of securing adequate professional indemnity insurance cover.

In a particularly concise judgment, the court opined that as a result, it was clear from this admission that an implied term to this effect did exist in the contract between the pursuer and the defender. Defender’s first plea-in-law and action dismissed.

Whyte and Mackay Limited v. Capstone International Limited [2010] CSOH 106

Thu, 05 Aug 2010 18:21:06 GMT

The pursuers, a company who distilled whiskey, entered in to a Distribution Agreement with the defenders, a company who distribute alcohol in the United States, in which the pursuers granted the defenders the exclusive right to purchase John Barr Scotch Whiskies in the United States. In 2010 negotiations took place in relation to the pursuers seeking to purchase the defenders' business. During the course of the pursuers carrying out due diligence in regard to the defenders' business, the pursuers discovered that the defenders did not hold any of the permits, certificates or permissions required in order lawfully to distribute and sell alcohol in the United States. It was averred that the necessary permissions were held by another company related to the pursuers, Emerald Brands Incorporated. The pursuers averred that the defenders' failure to obtain the permissions necessary lawfully to discharge their obligations under the agreement, and their purported discharge of those obligations in an unlawful manner, were material breaches of the Agreement. By letter dated 6 April 2010 the pursuers gave notice to the defenders in terms of Clause 3.3(c) of the Agreement requiring the defenders to all such material breaches of the Agreement within 14 days of the notice. By letter dated 19 April 2010 the defenders' denied that they were in breach of the Agreement, and asserted that the defenders have and continued to perform their obligations under the Agreement. By letter dated 23 April 2010 the pursuers wrote to the defenders observing that the fourteen day period for remedy of material breaches had now expired, and that the defenders had been unable to demonstrate that the material breaches referred to had been remedied and were entitled to terminate the Agreement and they confirmed that the Agreement was terminated with immediate effect. Here the pursuers sought declarator that the Agreement was validly terminated by the pursuer's letter dated 23 April 2010 and further sought payment of £239,882.90 due in respect of supplies of Scotch whisky delivered to the defenders but not paid for. The defenders lodged a counterclaim in which they sought an order ordaining and requiring the pursuers to continue the relationship pending the conclusion of the current litigation and until valid termination of the Agreement and, failing such an order, they sought of $10,000,000 as damages for the pursuers' breach of contract. Here counsel for the defenders sought an interim order ad factum praestandum in order to continue existing supply arrangements. Here the court considered whether the defenders had made out a prima facie case in their written pleadings. The court also considered the balance of convenience and whether it justified the making of the interim order sought having regard to the nature and degree of the harm likely to be suffered on either side by the grant or refusal of the interim order together with the relative strengths of both cases.

RTS Flexible Systems Limited v Molkerei Alois Muller Gmbh & Company KG (UK Production), [2010] UKSC 14

Thu, 20 May 2010 19:22:28 GMT

The appellant (A) appealed against the decision of the CA that it had not entered into a contract with the respondent (R). Although the parties had intended that a written contract would set out the terms on which the work was to be carried out, work had begun before the terms were finalised. For the purpose of enabling the work to begin, and while continuing to negotiate the full contract terms, the parties had entered into a contract formed by a letter of intent.

The Supreme Court restated the principles to be applied in circumstances where work had been carried out but there was a dispute as to whether a contract had been entered into. Where a contract was being negotiated subject to contract, and work began before the formal contract was executed, it could not be said that there would always, or even usually, be a contract on the terms that were agreed subject to contract. That was too simplistic and dogmatic an approach. The court was not to impose binding contracts that the parties had not reached; all would depend upon the circumstances. On the evidence in this case, a binding agreement had been reached. Appeal allowed.

RTS Flexible Systems Limited v Molkerei Alois Muller Gmbh & Company KG (UK Production) [2010] UKSC 14

Wed, 05 May 2010 16:18:37 GMT

William Grant & Sons Limited and others v. Mercer Limited [2010] CSOH 52

Wed, 14 Apr 2010 12:28:58 GMT

The first pursuer is a company which distils whisky. In 1993 three schemes for the employees of the company were amalgamated into the William Grant & Sons Limited Pension Scheme of which the second pursuers are the trustees. The defenders are a consulting actuary company and provided services to the second pursuers under a contract. In this action the pursuers sought declarator that under the Pension Scheme the normal retirement date for all members of the scheme was first equalised at aged 65 upon the execution of a Replacement Definitive Deed, under Clause 5 of the Schedule to the Supplemental Definitive Deed and Rules, on 24 May 2001 and, further, sought damages from the defenders for loss, injury and damage they claim they suffered as a result of the breach of contract and negligence of the defenders. Due to the “Barber judgment" from the European Court of Justice in 1990 the defenders drew the attention of the pursuers to the Barber decision and its implications for the Pension Scheme and it became necessary for the Pension Scheme to be amended so as to provide that female and male members of the Pension Scheme had the same normal retirement date. Here at debate the issue was whether the requirements of Clause 5 of the Rules were fulfilled and the Pension Scheme was thereby amended to comply with the "Barber judgment" at a date earlier than 24 May 2001. It was submitted on behalf of the defenders that it was necessary for the pursuers, if they were to succeed, to show that equalisation had not in fact taken place earlier than May 2001 and if equalisation had occurred in 1993/4 the pursuers would have acted correctly throughout and would have sustained no loss and, as such, it was incumbent on the pursuers to exclude such earlier equalisation. It was submitted on behalf of the pursuers that if the "Barber" window was not closed until 2001 it would result in much greater costs to the pursuers than would otherwise be the case and the pursuers' averments on this issue were relevant for enquiry. Further, it was submitted that the defenders did not give effect to equalisation until 24 May 2001 and all that was required was to aver that an amendment to equalise the scheme was not effected in 1993 or 1994 and amounted to an averment that there was neither the deed nor the resolution necessary under Clause 5 of the Rules. Here the court considered whether there were sufficiently relevant and specific averments to allow the pursuers to seek to discharge the burden of proving that equalisation of the notional retirement date was not effected prior to May 2001.

John Humphries Parkes v. Cintec International Limited [2010] CSOH 38

Thu, 25 Mar 2010 18:35:12 GMT

A Final Order was issued by the Chancery Division of the High Court of Justice in England on 16 October 2003. The petitioner was a judgment debtor in respect of the Final Order to the respondent to this petition. Here the petitioner applied in terms of paragraph 10 of Schedule 6 to the Civil Jurisdiction Act 1982, to reduce the registration of a Certificate of money provisions contained in the judgment dated 16 October 2003 under Rule of Court 62.37(3). The Final Order was made with the consent of the petitioner and his co-defendant following the judgement. It was the petitioner’s position here that registration was effected by the fraudulent uttering of a forged document and the respondent had failed to adhere to the terms of the Final Order. The petitioner's motion was the prayer of the petition should be granted to the extent of reducing the registration of the Certificate. It was the respondent’s position that the petition should be dismissed. It was submitted on behalf of the petitioner that the commentary to the Rules of Court at paragraph 13.2.2 in relation to the correct designation of parties in a summons required a full designation including the correct name and address and the Certificate had not contained the addresses of the petitioner and his co-defendant. On behalf of the respondent it was submitted that the English Court had concluded that it was a good Certificate and as far as English Law was concerned the Certificate had been issued in accordance with Schedule 6 and accordingly, the Keeper was presented with a valid Certificate. It was further submitted that the effect of paragraph 6 of Schedule 6 was that the registered Certificate was the equivalent of a Court of Session decree and once the Certificate was registered the petitioner was in the same position as an unsuccessful litigant against whom decree had passed and if he wished to challenge it, he should have taken immediate steps which he had not. Here the court considered whether the registration of the Certificate was valid.

Rowan Timber Supplies (Scotland) Limited v The Scottish Water Business Stream Limited – Edinburgh Sheriff Court, 26 February 2010

Wed, 24 Mar 2010 14:21:25 GMT

Between 1993 and 2008 the Pursuers/Appellants received a number of charge notices from the Defenders/Respondents for water and sewage charges. These were paid but the Pursuers discovered in 2007 that they had not been using the Defenders’ infrastructure and, therefore, were not liable to pay the charges. The Defenders repaid some of the sums paid but argued that payments made before April 2002 were not recoverable on the basis that they had prescribed under s6(1) of the Prescription & Limitation (Sc) Act 1973. The Pursuers raised proceedings to recover those payments. They referred to the fact that s6(4) of the 1973 Act provides that, in calculating the prescriptive period for any obligation set out in Schedule 1 to the Act, which includes redress for unjustified enrichment, including any obligation of restitution, repetition or recompense, any period during which the creditor was "induced to refrain from making a relevant claim in relation to the obligation" because of error induced by words or conduct of the debtor, should not be taken into account. The Pursuers argued that the Defenders’ conduct in issuing repeated charge notices induced them to refrain from making any relevant claim in relation to the repayment of those charges. The Pursuers relied on the very fact that incorrect invoices had been issued to them to support their argument that the claim had not prescribed. They did not rely on any distinct or separate act on the part of the Defenders as having induced them to refrain from making a claim. The Sheriff at first instance decided that the Pursuers’ averments were irrelevant and dismissed the action. The Defenders had argued that the Pursuers had no relevant averments of error induced by the Defenders’ conduct. Although it might be claimed that the invoices had induced the Pursuers to make the payments wrongly in the first place, it could not be said that they had induced them to refrain from seeking repayment. The Defenders also argued that s6(4) had the effect of suspending a prescriptive period that had already started to run. The conduct on which the Pursuers were relying - the issuing of incorrect invoices - occurred before each prescriptive period had started and, therefore, could not be said to interrupt it. The Sheriff accepted both these arguments. The Pursuers appealed, arguing that that Sheriff had erred in applying an unduly narrow construction to the terms of s6(4). Reference was made to the decision in the case of BP Exploration Company Limited v Chevron 2002 SCHL 19. The Pursuers argued that, for the exception in s6(4) to be relied on, it was sufficient that the creditor was ignorant of his right to claim if that ignorance was induced by words or conduct on the part of the debtor. It was not necessary to show that the Pursuers had intended to pursue a claim, but had been persuaded not to by the Defenders’ words or conduct. In addition, there was no basis for claiming that the error had to be caused by an act on the part of the Defenders that was separate from the conduct which gave rise to the cause of action. Reference was made to the case of Caledonian Railway Company v Chisholm 1886 13R 773 in support of this contention. The Defenders reiterated the arguments they had made at first instance and also argued that there were a number of points on which the Caledonian Railway case could be distinguished. The Sheriff Principal had to decide which construction of s6(4) was correct and whether the Sheriff had, in fact, erred dismissing the action.

C R SMITH GLAZIERS (DUNFERMLINE) LIMITED v TOOLCOM SUPPLIES LIMITED (Defenders) and FIT-LOCK SYSTEMS LIMITED (Third Party) [2010] CSOH 7

Thu, 21 Jan 2010 12:13:36 GMT

Outer House: Preliminary proof; The pursuer and Defender (the third party was not present or represented) conducted a preliminary proof in respect of their contractual relationship. In particular, the defenders had, over a period of years, provided rivets to the pursuers following the conclusion of multiple contracts of sale for rivets. The issues in dispute before proof were in respect of the defenders' and the pursuers' standard terms incorporated in each individual contracts of sale; whether the individual contracts included implied terms imposed by the Sale of Goods Act 1979 ss 14(2), 14(3) and 13(1).

Education 4 Ayrshire Limited v. South Ayrshire Council [2009] CSOH 146

Thu, 05 Nov 2009 08:26:03 GMT

In December 2006 the pursuers and the defenders entered in to a contract in which the pursuers undertook to carry out "Works" including the design and construction of six schools including Prestwick Academy. The pursuers sub-contracted the Works to a Building Contractor, Carillion. In terms of the contract each phase of the Works had to achieve Service Availability on the Target Service Availability Date, which included three phases in relation to Prestwick Academy. In this action the pursuers averred that there was a delay to the Works at Prestwick Academy as a direct result of the discovery of asbestos which was not revealed by a survey and sought:- (1) declarator that the issue of Acceptance Certificates in relation to Phases 1, 2 and 3 of the Prestwick Academy Project Facility had been delayed by a period of 16 weeks owing to a Works Compensation Event, namely the discovery of Asbestos; (2) declarator that they were entitled to a postponement for 16 weeks of the Target Service Availability Date for Phases 1, 2 and 3 at Prestwick Academy; and (3) payment of £815,792.00 plus VAT and interest. The defenders contended that the pursuers could not claim postponement or payment because they failed to give the required notice or notices in terms of clause 17 of the contract within the required time. At a debate on the defenders' plea-in-law to the relevancy of the pursuers' case it was submitted on behalf of the defenders that because no valid notice was given in terms of clause 17 the pursuers' case in support of their second and third conclusions must fail and should not be remitted to probation. The issue at debate was whether a letter of 2 May 2007, which included the words "...In accordance with Clause 17.1 of the project agreement, we hereby inform you that we anticipate a delay in achieving the Target Service Availability Date in relation to Prestwick Academy..." , was capable of constituting a valid notice for the purposes of clause 17. It was submitted on behalf of the defenders that the letter was insufficient notice of any claim. It was submitted on behalf of the pursuers that the letter was sufficient and to require such wording as required in clause 17 would be unduly formalistic. Here the court considered whether a notice served in accordance with clause 17 had to comply strictly with its terms.

Hardev Singh Purewall and others v. Gurbax Kaur Purewall [2009] CSIH 74

Thu, 08 Oct 2009 08:27:07 GMT

Reclaiming Motion:- In this action the pursuers and respondents' sought certain payments from the defenders and reclaimers which arise out of the dissolution of a partnership in which the parties, together with the reclaimer's late husband were partners. On 29 October 2008, the Lord Ordinary pronounced an interlocutor granting decree against the defender and reclaimer for the sums specified therein together with sums representing contractual and judicial interest and it is against that interlocutor which the reclaimer has reclaimed. The issue here was the the meaning of the expression 'date of determination' as used in clause Ninth (b) of the contract of partnership. It was submitted on behalf of the reclaimers that, in holding the words "dissolution" and "determination" were synonyms, the Lord Ordinary had erred in law by misapplying the principles of contractual interpretation and had erred in his analysis of the partnership agreement. It was submitted that an ordinary and natural meaning should be given to the words used in a contract. If the words "determination" and "dissolution" were not synonyms and did have different meanings then, for the respondents to succeed, it would require the Court to hold that to give the words their ordinary and natural meaning would be to flout business common sense and that something had gone wrong with the language, or the drafting of the contract. It was submitted that the partnership agreement was a formal document and the Court should not readily accept that linguistic mistakes had been made. It was submitted on behalf of the respondents that the Court should refuse the reclaiming motion and adhere to the Lord Ordinary's interlocutor as the Lord Ordinary had held that the words "date of determination" in Clause Ninth (b) meant the date of dissolution of the partnership and that accordingly the first instalment fell due six months thereafter on 31 May 2004 and the Lord Ordinary had rejected the reclaimer's submission that the relevant date was the date of the arbiter's final order. Here the court considered whether the Lord Ordinary had correctly interpreted the expression.

McCalls Limited v Capture Imaging Limited – Aberdeen Sheriff Court, 28 July 2009

Thu, 01 Oct 2009 15:19:25 GMT

The Pursuers claimed damages from the Defenders agruing that they had been induced to enter into contracts for the lease of copying and printing equipment on the basis of negligent misrepresentations made by a director of the Defenders, Mr Y. The Pursuers sold and hired out highland dress and accessories. The Defenders supplied and sold copying, scanning and printing equipment. Mr Y had contacted the Pursuers and had offered to supply them with new and updated copying and printing equipment. The Pursuers used their printer for printing promotional material and colour accuracy was important to them. During discussions, Mr Y made a number of statements about the printing machine he was offering to supply. He suggested that it would produce better quality prints and would far exceed the quality of their current printer. The Pursuers were given samples so that they could compare the print quality of the respective machines. After delivery of the printer, the Pursuers expressed disatisfaction with the print quality. A PBA took place after which the Pursuers submitted that the statements made by Mr Y had induced them to enter into contracts with the Defenders and that Mr Y and the Defenders had owed a duty of care to them. The Defenders were responsible for Mr Y’s negligent misrepresentations. The statements that had been made were false and a loss had been incurred. The Pursuers had had to outsource printing work and hire alternative printing equpment. In making those representations, Mr Y had known that the Pursuers would rely on them for the purpose of entering into the contracts. The Defenders insisted on their second plea in law – that the Pursuers’ averments were irrelevant and lacking in specification - and sought absolvitor.They argued that the Pursuers had not averred the nature of the relationship between the parties that gave rise to a duty of care. The Pursuers’ case could have been brought under Section 10 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 or under delict. As the Pursuers’ claim had not been set out on the basis of Section 10, it had to be viewed as a delictual case. There had been no evidence to support the necessary special relationship between the parties or the special skill or knowledge on the part of Mr Y on the quality of print that would be essential to the success of a delictual case. The Pursuers had to prove that the statements that had been made had been representations of fact and that they had been false. Mr Y’s statements had been expressions of his view on matters like print quality. These had simply been his own opinion and the final judgement had been left to the Pursuers. There had been no evidence to suggest that the statements had been false. The Sheriff considered a number of cases on delictual liability for negligent misrepresentation, including Headley Byrne & Company Limited v Heller & Partners Limited. He had to decide whether Mr Y had made negligent misrepresentations to the Pursuers which had induced them to enter into the contracts.

Albert Bartlett & Sons (Airdrie) Limited v. Gilchrist & Lynn Limited & Atlas Ward Structures Limited & Briggs Amasco Limited [2009] CSOH 125

Wed, 09 Sep 2009 09:27:39 GMT

Proof:- The pursuers process, package and supply potatoes to the food trade and operate from premises in Airdrie. In October 2001, the pursuers invited tenders for the design and construction of a new potato processing and packaging plant in Airdrie. In December 2001, a contract was entered in to between the pursuers and the defenders whereby the defenders were responsible for the design and construction of the new building and by way of sub-contracts the third parties were also involved in the design and construction of the building. During the course of the construction concerns were expressed by the pursuers to the defenders and the others involved regarding water leaking through the roof. The pursuers were assured that there were no problems and any defects would be remedied once the works were completed. The pursuers took possession of the new building on 17 November 2003 and since then there has been widespread water ingress at various points of the roof. In this action the pursuers sought damages from the defenders for the loss and damage which they suffered through the defenders' breach of contract. It was accepted by the defenders that the roof was not watertight and they admitted that they were in breach of contract. Agreement was reached between the defenders and the third parties as to issues of liability, relief and apportionemnt inter se and an interlocutor was pronounced assoilzing the second third party. The only issue at proof between the pursuers, the defenders and the remaining third parties related to the quantification of damages to which the pursuers were entitled. It was the pursuers contention that they were entitled to damages assessed on the basis of an overcladding solution, which would involve draining the skylights in the roof and installing over the existing roof cladding a properly fixed single ply profiled roof sheet. The defenders and the third parties submitted that that was unreasonably expensive and would not resolve the problems of water ingress to the building. It was submitted on behalf of the defenders and third parties that a cheaper and more effective solution would be to apply the Kemperol 2K PUR system to the areas of the roof which leak. The court considered that:- (1) a pursuer who is the victim of a breach of contract cannot recover from the party in breach the cost of reinstatement where such cost is unreasonable and out of all proportion to the benefit that it will achieve, even in a case where the court is satisfied that the pursuer intends to adopt such an expensive scheme if awarded damages on that basis, and (2) the duty to mitigate his loss may require the pursuer to put in hand the cheaper of two alternative schemes. Here the court made an assessment of the competing expert evidence in relation to the roof and the technical merits and demerits of the two solutions under consideration. The court considered the preferable solution having regard to it's technical merits, aesthetics, any diminution of the value of the premises and the costs of the installation to determine the award of damages to the pursuers.

Thomas Park and Another for Partial Recall of Inhibition [2009] CSOH 122

Tue, 25 Aug 2009 20:08:57 GMT

The petitioners are tenants under a long lease of a restaurant in Bothwell. The respondent, as pursuer, raised an action against the petitioners, as defenders, in Hamilton Sheriff Court where they sought payment from the defenders of £204,000. By letters of inhibition registered on 18 September 2007 following registration of a notice of inhibition on 31 August 2007 the respondent inhibited the petitioners on the dependence of the action. Here the petitioners sought recall of the inhibition but only as it related to the restaurant in Bothwell on the basis that:- (1) the missives for the sale of the long lease had been concluded before the inhibition became effective; and (2) if the subjects had been caught by the inhibition they should be released on the ground of oppression. Following debate, on 19 August 2008 Lady Dorrian held that the inhibition became effective from the conclusion of the day on which the notice of inhibition had been registered, namely 31 August 2007. The issue here was whether the missives for the sale of the long lease of the restaurant had been concluded by midnight on 31 August 2007. It was submitted on behalf of the petitioners that missives for the sale of the subjects had been concluded during the course of 31 August 200, that the transaction had not been caught by the inhibition and that it should be partially recalled in terms of the prayer of the petition. It was submitted on behalf of the respondents that in contracts for the transfer of heritable property there was a requirement for writing both before and after the Requirements of Writing (Scotland) Act 1995 and that that Act had not changed the need for delivery of missives. Here the court considered whether fax transmissions of the qualified acceptance and the final acceptance on 31 August 2007 were sufficient for the conclusion of missives on that date.

Bell and Scott LLP v. David Stanley Kane [2009] CSOH 111

Thu, 30 Jul 2009 15:29:36 GMT

Proof before answer:- In terms of a business transfer agreement dated 13 and 27 July 2006 the defender, a partner in the law firm "Clairmonts", sold his interest in that law firm, including his interest in the business as a going concern to the pursuers, another law firm. Subsequently, pursuant to another agreement the defender became a partner with the pursuers. The price for the purchase of the defender’s interest in Clairmonts was £800,000 payable by six instalments the last instalment being payable 30 months after the effective date on 1 February 2009. It was agreed that if the defender retired with effect from a date earlier than 30 months from the effective date, or was in breach of any of the restrictive covenants in clause 12.1.2, he would forfeit his right to any outstanding part of the instalments. On 2 August 2008 the defender gave the pursuers six months notice in writing of his intention to retire as a member of the pursuer which took effect from 1 February 2009, a date 30 months from the effective date after which he joined another firm of solicitors. In this action the pursuers claimed that in January 2009 the defender, whilst still a partner with the pursuers, was in breach of the restrictive covenant in clause 12.1.2. The issue at the proof before answer was whether, prior to leaving the partnership, the defender acted in breach of clause 12.1.2. It was submitted on behalf of the pursuers that, whilst there was no evidence that the defender had breached either limb of clause 12.1.2 by enticement or soliciting, the defender had breached the prohibition on interfering with clients. It was submitted on behalf of the defender that there was no interference of the kind prohibited by the clause. Here the court considered the meaning of the words "interfere with" as referred to in clause 12.1.2 and whether the pursuers had shown that the defender was in breach of that clause.

J.S. Swan (Printing) Limited v. Kall Quik UK Limited [2009] CSOH 99

Wed, 08 Jul 2009 14:30:00 GMT

Debate:- In this action the pursuers sought declarator that the defenders were in material breach of a franchise agreement dated 18 October 2001. The pursuers, a printing company, are registered in Scotland. The defenders, a company who grant franchises to others, are registered and domiciled in England. At debate the question was whether the pursuers had pleaded a relevant case that the court here had jurisdiction in terms of paragraph 3(a) of Schedule 4 to the Civil Jurisdiction and Judgments Act 1982. In the franchise agreement the defenders gave the pursuers certain rights for a period of ten years. Counsel on behalf of the defenders submitted that the pursuers' averments as to the place of performance of the relevant obligations were irrelevant and the action be dismissed as the pursuers had averred no relevant ground of jurisdiction. Counsel on behalf of the pursuers accepted that the obligation founded on had to be performed in a single place but submitted that the issue was how that single place was to be identified. Counsel for the pursuer submitted that it was not necessary for the pursuers to aver an express or implied term that performance was to be in Scotland and it was sufficient that the obligation was capable of being identified with Scotland. Here the court considered whether it should apply Scots law as the governing law in deciding what is the place of performance of the obligation in question and, if so, to ascertain whether Scotland was the place of performance of the obligation or obligations which formed the basis of the claim in the action. Here the court considered whether the pursuers had relevantly averred that the court had jurisdiction on the basis of the place of performance of the contractual obligations on which they founded in their summons.

Baillie Estates Limited v. Du Pont (UK) Limited [2009] CSOH 95

Wed, 01 Jul 2009 18:21:00 GMT

In 2006 the pursuers, who design and manufacture signs in Scotland, purchased from the defenders a printing machine. Since then the pursuers have not been happy with the printing machine's performance and have sought to reject the machine on the ground that it was not of satisfactory quality or fit for purpose under section 14 of the Sale of Goods Act 1979. Here the pursuers sought inter alia declarator that they were entitled to reject the printing machine. The defenders lodged defences in which they averred that they were not subject to the jurisdiction of the court on the basis of Clause 28 of the standard terms of sale which state:- "These conditions shall be subject to and shall be construed in accordance with the Laws of England. The Courts of England shall have exclusive jurisdiction over any dispute which may arise hereunder, unless the parties agree otherwise in writing." Here at a preliminary proof the court considered the circumstances in which the parties entered into the contract of sale to ascertain whether the defender's standard terms had been incorporated into the contract and thus whether the court had jurisdiction to hear the case. Here the court considered, in particular, whether the parties had entered into a binding contract for the supply of the printing machine by 19 November 2006, before Du Pont intimated their standard terms and conditions. If that was indeed the case, then those standard terms would not be incorporated into the contract of sale.

Halifax Life Limited v. DLA Piper Scotland LLP [2009] CSOH 74

Tue, 02 Jun 2009 03:15:00 GMT

On 29 May 2008 the defenders, a limited liability partnership of solicitors, offered by way of a formal letter, to purchase commercial subjects in Glasgow, for £8,800,000, on behalf of a purchaser, who was defined in the offer as "the Members of the 227 Syndicate" but who, it transpired, did not exist on 29 May 2008. Tods Murray LLP, acting on behalf of the pursuers, accepted the offer with an unqualified acceptance. In this action the pursuers sought:- (1) declarator that the defenders were personally liable to implement the contract and damages for breach of contract, and, alternatively, (2) damages for loss caused by negligent misrepresentation. The pursuers' case was based on the contention that the defenders were liable in damages for breach of contract for the loss caused by their failure to purchase the subjects, which the pursuers later sold for a much smaller sum. The defenders submitted that the case pleaded in contract was irrelevant and that the correct remedy was an action for breach of warranty of authority, which was deemed as a delictual case. Here at debate the issue was whether the pursuers had pleaded a relevant case that the defenders were personally liable to implement the contract because they knew of the non-existence of the principal and purported to enter into the contract as agents. Here the court considered whether the defenders incurred personal liability under the contract.

Lonedale Limited and Others v. Scottish Motor Auctions (Holdings) Limited [2009] CSOH 64

Thu, 07 May 2009 08:21:00 GMT

Debate:- On 25 April 2007 the pursuers entered into a Share Purchase Agreement (SPA) with the defenders for the sale of the issued share capital of Scottish Motor Auctions Limited (the Company) to the defenders for £15 million, £14.5 million to be paid in cash on completion and the remaining £500,000 plus interest to be paid into a retention account in the joint names of the parties' solicitors. The SPA provided that prior to completion the sellers should procure the declaration of a dividend by the Company in their favour, in an amount calculated in accordance with a clause in the SPA. The completion dividend would be payable within 10 business days of finalisation of the completion accounts. Completion took place on 25 April 2007 and the Company transferred the sum of £642,000, being the agreed estimate of the completion dividend, to the retention account. The completion accounts were finalised on 31 August 2007, and the completion dividend was ascertained to be £566,681 which amount fell to be paid to the pursuers by 17 September 2007, being the date 10 business days after finalisation of the completion accounts. The purchasers were entitled to deduct from the sums in the retention account the amount of their claims against the sellers under the SPA. The defenders intimated claims against the pursuers and sought payment of those amounts from the retention account. The pursuers submitted that no valid claims had been made by the defenders sufficient to trigger the release of those sums to the defenders and the sums in the retention account should be released to the pursuers. At debate on the pleas-in-law of both parties the issue was whether the claims entitled the defenders to payment from the retention account or whether the pursuers were entitled to the release of the sums to them.

Alexander Inglis & Son Ltd v. Oxenfoord Home Farm (Pathhead) [2009] CSOH NUMBER59

Thu, 30 Apr 2009 10:15:00 GMT

Proof Before Answer:- In this action the pursuers, a company of grain merchants, sought damages from the defenders, a farming company, in respect of the defenders' breach of contract. The defenders denied liability. The issue in this case was whether or not in September 2006, the pursuer, through a director, Mark Paton, agreed to a variation of a wheat supply contract previously entered in to between the parties. It was the defenders' position that the contract had been varied at a meeting, in particular, that the pursuers would not insist on the defenders supplying 400 tonnes of wheat for the year 2007-2008. The pursuers, on the other hand, denied such a meeting taking place, let alone a variation of the terms of the contract. Here the court considered whether such a meeting took place and whether a variation of the contract occurred. In the event that the court held that the defenders had breached their contract with the pursuers damages had been agreed in the sum of £28,443.36 together with interest at 8% per annum from the date of citation until the date of decree and thereafter with interest at the applicable judicial rate.

Cyrus Energy Limited & Xyrex Limited v. Alan Stewart & Patrick McTurk [2009] CSOH 53

Thu, 09 Apr 2009 09:24:00 GMT

On 17 October 2006, the defenders were employed as managing directors of the pursuers, sister companies, respectively and both men entered into a Service Agreement with their respective companies, both of which included a restrictive covenant. On termination of their employment, the defenders agreed:- (1) to a non-solicitation restraint; (2) to a non-trading restraint; and (3) to a world-wide restraint against working in competition with the business of their employers. On 3 and 4 November 2008 the defenders tendered their respective resignations and on 13 February 2009 interim interdict was granted against the defenders, the interlocuters reflecting the terms of the restrictive covenants. In this motion for recall it was submitted on behalf of the defenders that the worldwide restraint went too far, going beyond what was required to protect the legitimate interests of the pursuers and that the balance of convenience favoured the defenders. Counsel for the pursuers submitted that the covenants were valid and should be upheld. Here the court considered whether the interim interdicts should be continued in respect of restraints (1), (2) and (3).

Bell & Scott L.L.P v. David Kaye [2009] CSOH 51

Thu, 09 Apr 2009 09:21:00 GMT

Interim Interdict:- From 1 August 2006 the defender, a solicitor, sold his business to the pursuers, a firm of solicitors and became a member of that firm. On 2 August 2008 the defender gave notice that he would resign as a member of the pursuers with effect from 2 February 2009. Since February 2009 the defender has been a member of a further firm of solicitors. This action arose out of the terms of the Business Transfer Agreement by which the defender sold his business to the pursuers including the right of the purchasers to represent themselves as carrying on business in succession to the vendor and restrictive covenants which covered the behaviour of the defender while he remained a member of the pursuers and also his behaviour when he left the firm. The Agreement provided that the restrictive covenants would not apply if the pursuers failed to pay an instalment of the purchase price timeously and the pursuers had not paid the final instalment of £250,000 which was due on 2 February 2009. The pursuers argue that that involves no failure on their part as they allege that the defender was in breach of his restrictive covenant. In this action the pursuers sought interdict ad interim and the court considered the allegations of the breaches of the two restrictive covenants and whether the pursuers had made out a prima facie case of breach and where the balance of convenience lay.

The Scottish Coal Company Ltd v. Trustees of F.I.M. Timber Growth Fund III [2009] CSOH 30

Thu, 05 Mar 2009 13:45:00 GMT

Debate:- The pursuers and the defenders entered into an agreement in April 2003 which gave the pursuers rights to prospect for coal in an area of land of which the defenders were the successors of the feuars with whom the pursuers had contracted with. In this action the pursuer sought declarator of:- (1) that the coal prospecting agreement was assigned by the feuars to the defenders, (2) that the agreement remained in full force and effect and binding on the pursuers and the defenders and (3) that the "Option Period" as defined in the agreement had not commenced and would not commence until the "Title Dispute Resolution Date" as defined in the agreement was reached. Here at debate the pursuers submitted that they were entitled to decree de plano as the defences were irrelevant. In response the defenders submitted that the pursuers' averments were irrelevant and should be dismissed on the basis that:- (1) the contract had been frustrated by the assignation which had rendered it impossible to perform; (2) on a proper construction of the agreement the option period had expired; and (3) personal bar. Here the court considered the relevancy of the averments in the summons and the defences.

Derek Crighton & Eleanor Crighton v. (First) Catlin (Five) Limited & (Second) Brit Underwriting Limited & (Third) Great Lakes Reinsurance (UK) plc & (Fourth) GE Insurance Solutions & (Fifth) Bestpark International Ltd (formerly Trenwick International Ltd)

Wed, 17 Dec 2008 17:45:00 GMT

Procedure Roll:- In this case the pursuers were a married couple who traded as partners. The first named defenders were the lead syndicate in relation to a policy of insurance which was the subject of dispute and that the second, third, fourth and fifth named defenders were also Lloyds syndicates or representatives of the underwriters of the syndicates which underwrote the policy. In this action the pursuers sought declarator that the defenders were obliged to indemnify the pursuers for their respective shares of losses arising from floods in November 2002 of their premises in Elgin in terms of a policy of Insurance issued by or through Lloyds Broker Giles Insurance Brokers on 20 September 2002. It was submitted on behalf of the defenders that the pursuers' case was irrelevant because there were no averments which would allow the pursuers to lead evidence that what was done fell within the obvious and clear ostensible authority of Giles. Counsel for the pursuers sought declarator in terms of the first conclusion and invited the court to restrict the proof to quantum. Here the court considered the relevancy of the pursuers' pleadings in light of the contract in force between the parties.

Stefan Blacha v. The Bank of Scotland plc [2008] CSOH 173

Wed, 17 Dec 2008 17:44:00 GMT

Debate:- The pursuer claimed that sums debited from his account on the instructions of a firm of solicitors in Manchester, Davis Blank Furniss, were made without his authority and the sums debited from the account included a sum at credit of the account in the sum of £350,000. They also included sums paid under a loan facility. The defenders claimed that they had authority and that this was shown from the face of the pursuer's pleadings and at debate on the defenders' general plea to the relevancy it was submitted by them that the case was irrelevant and should be dismissed. Here the court considered whether the authority given in the facility letter was sufficient to cover the funds at credit of the account as well as any funds drawn down on the facility and whether the pursuer's case was irrelevant.

O’Farrell v Moroney – Edinburgh Sheriff Court, 20 October 2008

Thu, 04 Dec 2008 15:53:00 GMT

The Pursuer bought a peregrine falcon from the Defender for £900. The falcon died 25 days later and the Pursuer raised a small claim action for the purchase price. The Pursuer, an experienced falconer, argued that he had trained and developed the bird reasonably but it had died after a short time and this must have been due to an underlying illness or condition. In terms of Section 48(a) of the Sale of Goods Act 1979, he was entitled to rescind the contract as the falcon did not conform to the contract. In terms of that s.48(a), a purchaser in a consumer contract can seek a replacement or rescind the contract if the goods do not conform to the contract at the time of purchase. That right can be founded on if, at any time within 6 months of the goods being delivered, they are found not to conform. The Defender argued that the falcon had been healthy when it was sold to the Pursuer at 8 weeks old. He had guaranteed to replace the falcon if it had become seriously ill or died within 7 days of purchase. That was reasonable as this was the likely incubation period of any illness which might be building up at the time of sale. The Defender contended that it was the way in which the Pursuer had trained the falcon that had led to its death as it had been put under stress as a result of a rigorous training regime. That particular type of falcon was bred in such a way as to lead to a greater susceptibility to stress induced illness. Sheriff concluded that Sections 48 (a) to (f) of the 1979 Act applied in this case. Having heard evidence, the Sheriff accepted the Defender’s position and found that the Pursuer have over extended the falcon on its final flight and this had proved too much for the bird. The Pursuer has not proved that the falcon did not conform at the time of delivery and his claim was unsuccessful.

Khalid Parvaiz v. Thresher Wines Acquisitions Limited [2008] CSOH 160

Tue, 25 Nov 2008 20:50:00 GMT

Procedure Roll:- In this action the pursuer concluded for:- (1) production and reduction of a Minute of Preference and Enactment of Sale dated 29 March 2007 relative to a shop at 9 Hyndland Street, Glasgow; and (2) for the repayment by the defender, the heritable proprietor of 9 Hyndland Street, to the pursuer of the sum of £26, 200 with interest. At a procedure roll debate a motion on behalf of the defenders was made for dismissal of the action on the ground that the pursuer's averments were irrelevant and lacking in specification. Counsel on behalf of the pursuer invited the court to allow a proof before answer. It was submitted on behalf of the defender that the pursuer had purchased the particular title at an auction sale. The nature of an auction was that the item was exposed and once a bid was accepted the successful bidder goes away with the item, the auctioneer gives no guarantee. Now the pursuer sought reduction and repayment of the deposit on the basis that the defender had no title to the toilet area which had been occupied by it. It was submitted on behalf of the defenders that the situation was one of caveat emptor. It was submitted on behalf of the pursuer that it was a high test to be met if a case was to be dismissed by reason of irrelevancy.

Hardev Singh Purewall & Kirpal Kau Purewall & Belhar Singh Sanghera & Surinder Kaur Sanghera v. Gurbar Kaur Purewall [2008] CSOH 147

Wed, 22 Oct 2008 09:37:00 GMT

Debate:- Prior to 30 November 2003 the pursuers and the defender, together with the defender's late husband, were in partnership as restaurateurs of an Indian restaurant and was governed by a contract of partnership dated 4 January 1991 and registered in the Books of Council and Session on 14 January 1991. Following the defender's husband’s death in 2002 the pursuers served a notice of dissolution of partnership,the effect of which was to dissolve the partnership as at 30 November 2003. The defender carried on the business on her own. After dissolution of the partnership, the partnership accountant prepared a draft balance sheet as at 30 November 2003, the date of dissolution, and profit and loss account. The defender thereafter validly objected to the accounts and an arbiter heard parties at a proof before answer, and by note dated 3 March 2008 rejected the defender's objections to the accounts and on 27 March 2008 issued a final order which held that the final balance sheet as at 30 November 2003 as prepared by the partnership accountants was correct and final. In the present action the pursuers sought payment of those sums together with interest. The defender accepted that the sums standing at the pursuers' individual capital accounts were due by her, however, she contended that her obligation to pay those sums crystallized only when they were finally determined. At debate counsel for the defender submitted that the expression "date of determination" was crucial in assessing when the sums fell to be paid and the interest to be paid. On behalf of the pursuers it was submitted that that the expression "date of determination" should be construed as referring to the date of dissolution of the partnership rather than the date of the arbiter's award. Here the court considered the meaning of the expression "date of determination" as used in clause Ninth (b) of the contract of partnership.

Global Resources Group Limited v. Alex Mackay [2008] CSOH 148

Wed, 22 Oct 2008 09:36:00 GMT

Debate:- In this action the pursuer sought damages from the defender alleging that the defender committed the delict of inducing a breach of contract. On behalf of the defenders it was submitted that the action should be dismissed as the pursuers had not relevantly averred a delictual case of inducing breach of contract as a person only commits such a delict when he induces or procures another person to break his contract. It was submitted that there were no averments that the defender had actively associated with GDP by persuading them to break their contract with the pursuers or at least by facilitating active steps on the part of GDP to break their contract. It was submitted on behalf of the pursuers that the delict of inducing breach of contract was committed where a defender caused another to break his contract in the knowledge of the terms of that contract which were being broken by his conduct and there was no rule that only inducement in the sense of deliberate persuasion of another to act in breach of his contract would suffice. Here the court referred to the following example to consider whether the pursuers had pled a relevant case:- “A commits the delict or tort of inducing a breach of contract where B and C are contracting parties and A, knowing of the terms of their contract and without lawful justification, induces B to break that contract. When that occurs, B is liable to C for breach of contract and A is liable to C for the delict of inducing that breach.”

Nigel Henderson & Norma Henderson v. Royal Bank of Scotland plc [2008] CSOH 146

Wed, 22 Oct 2008 09:34:00 GMT

Debate:- In this action the pursuers sought damages for alleged negligent misrepresentation and breach of contract on the part of the defenders during the course of various property transactions and loans in the 1990s. An earlier action arising out of the same circumstances, but on the basis of different pleadings to the present action, was dismissed in October 2006. At debate senior counsel for the defenders challenged the claim on three grounds:- (1) that the loss claimed was outside the scope of the bank's duty of care; (2) that the pursuers had failed to specify their loss; and (3) there was no warrant to imply a term into the Loan agreements. On behalf of the pursuers senior counsel argued that the claim was sufficiently relevant and specific to justify a proof before answer. Here the court considered, in relation to the provision of incorrect information, the loss for which a person is answerable. The court further considered whether the pursuers averments regarding loss were relevant and whether in providing inaccurate breakage costs for repaying the loans the defenders were in material breach of contract.

Norwest Holst Limited v. Carfin Developments Limited [2008] CSOH 138

Wed, 24 Sep 2008 18:00:00 GMT

Debate:- In November 2006 the pursuers, a firm of building contractors, entered into a contract with the defenders for the construction of works in a site at New Stevenston Road, Carfin. The defenders were the employers in terms of the contract and appointed the Mason Evans Partnership as the Engineer under the contract. In this action the pursuers sought payment of sums owing plus interest. The pursuers claimed payment of an amout of £1,136,525, as certified by the Engineer, less payments previously made of £919,665. The balance concluded for was £216,860 and the pursuers sought summary decree for that sum. The defenders disputed the pursuers' case in particular the certification issued by the Engineer. It was submitted on behalf of the defenders that when there is a binding reference to arbitration the proper course is to sist the cause until it has been settled by arbitration and the defender has such a right whenever an action has been brought by someone who is party to an arbitration agreement in respect of the subject of the action. Here the court considered whether the defenders had raised any points which could be said to raise a real dispute or difference so that the cause should be sisted for arbitration.

Colin Fraser (A.P.) v. The Professional Golfers' Association Limited [2008] CSIH 53

Wed, 17 Sep 2008 05:13:00 GMT

Reclaiming Motion:- In this action the appellant sought damages from the respondents for a breach of contract. The appellant enrolled with the respondents to become a professional golfer and attended and satisfactorily completed training courses and became entitled to sit the respondents' final examination. He was required as part of that final examination to sit a practical test. He passed all parts of this examination with the exception of the part relating to the alteration and repair of golf clubs. He accordingly re-sat that part of the examination and failed it again. Thereafter, he re-sat the practical examination for the third and final time permitted under the Regulations and on 29 November 1995 failed again. This meant that membership of the respondents was permanently unavailable to him. The appellant initially sought a judicial review of the respondents' decision to fail him, but was unsuccessful. In 2000 he raised the present action that, in failing him, the respondents were in breach of an implied term of the contract between them. The Lord Ordinary considered three areas in respect of which the appellant averred that the criticism of him was unjustified. It was submitted here on behalf of the appellant that the Lord Ordinary should have found that the appellant should have been given 26 marks out of the available 30, or at least 21, if the respondents' examiners had assessed him in accordance with the contractual term, and he should therefore have found that the appellant would have passed. Here the court considered firstly whether it could deal with the refined basis of the reclaiming motion and, if so, whether in light of the findings made by the Lord Ordinary it could be said that a fair and reasonable examiner would have awarded the appellant the 26 marks claimed, or at least 21.

Thomas Park and Another for Partial Recall Inhibition [2008] CSOH 121

Tue, 19 Aug 2008 18:16:00 GMT

Petition for Partial Recall of Inhibition:- The petitioners were spouses who formally traded from a restaurant in Bothwell which they occupied under a long lease. In 2006 another couple obtained an interest in the business and entered into a partnership with the petitioners. Later in the same year an action was raised by the respondent in Hamilton Sheriff Court against all four partners seeking payment of a sum of £204,000. The petitioners were inhibited by the respondents by letters of inhibition registered on 18 September 2007 following registration of a notice of inhibition on 31 August 2007. It was the petitioners position that they entered into missives dated 7, 10 and 31 August 2007 for the sale of the lease. Here the petitioners sought partial recall of the inhibition in so far as it related to the subjects of the lease as the inhibition became effective on 31 August 2007 as a result of the notice of inhibition and because the missives were not concluded before that date, the inhibition was effective to prevent implement of the missives. The question before the court was when the inhibition took effect. The general position is that where missives are concluded before the date on which an inhibition becomes effective, they will not be struck at by the inhibition. Here the court considered whether the minute of sale was a genuine transaction or one which had been manufactured to defeat the fair operation of the inhibition.

Royal Insurance UK Limited v. Amec Construction Scotland Ltd and Others [2008] CSOH 107

Wed, 30 Jul 2008 10:43:00 GMT

Amendment Procedure:- The pursuers raised the action in September 2002, and was founded upon alleged breaches of collateral undertakings which the respective defenders granted in the pursuers' favour relative to the conduct of the reconstruction works. Further, the pursuers asserted a contractual right, by virtue of the same collateral undertakings, to be indemnified against the losses which they sustained. Previously, in November 2007, the court rejected the defenders' challenge to the pursuers' title and interest to pursue the action notwithstanding the absence of any reference in the instance to the trustee capacity in which their claim was said to be advanced. However, the court went on to hold that the court could no ignore the pursuers' omission to design themselves properly in the instance and rendered the summons defective in form and thereby incompetent. Here the pursuers sought to amend the Record by adding at the end of their own instance the words "... as trustees for Royal Insurance plc conform to an Agreement between Royal Insurance plc and the pursuers dated 31 December 1992." It was submitted on their behalf that these additional words supplemented their designation, in curing a technical want of form, and there could be no valid bar to amendment along such lines. It contrast it was submitted that the pursuers' motion to amend should be refused outright and, further, that the action should be dismissed as both incompetent and out of time, the proposed amendment being an illegitimate attempt to cure, if not a fundamental lack of title or interest to sue, then a radical incompetence having substantial legal consequences. Further, any contractual or other obligation on their part towards the pursuers as trustees had been extinguished by the operation of the five-year prescription under Sections 6 and 11 of the Prescription and Limitation (Scotland) Act 1973. Here the court considered whether the pursuers' claim had prescribed and, if so, whether the court should exercise it's discretion in the pursuers' favour and allow the amendment.

K.K.A. Limited v MacDonald Hotels Ltd [2008] CSOH 108

Wed, 30 Jul 2008 10:21:00 GMT

Proof:- In this action the pursuers sought to recover architects fees from the defenders in relation to a hotel development at a golf and country club in Cheshire. Around 1994, the pursuers, a firm of architects began carrying out work for the defenders, a hospitality company which owns and develops hotels. Evidence was led on behalf of both parties. The pursuers' claimed that they were entitled to the sum sued for as being fees due under the normal percentage fee arrangement that operated between parties at planning determination stage. The defenders contended that the pursuers had failed to establish either what the normal arrangement was or that it applied to the particular development. Here the court considered what the terms of the contract, in relation to professional fees due, were. In particular, whether or not any departure from the normal fee arrangement was agreed between the parties, having regard to a previous course of consistent conduct between the parties.

Richard Durkin v DSG Retail Limited & HFC Bank plc, Aberdeen Sheriff Court, 26 March 2008

Wed, 14 May 2008 17:09:00 GMT

Contract of Sale and Consumer Credit Contract - whether rescinded – measure of damages

The Pursuer purchased a laptop computer from the First Defenders’ retail outlet, PC World, on the understanding that he could return it if it did not have an internal modem. He paid £50 and signed a credit agreement with the Second Defenders. The laptop did not have an internal modem but PC World refused to accept the return of the computer and did not take any steps to repay the Pursuer or to cancel the credit agreement. The Pursuer left the laptop in the shop and made no payments to the Second Defenders. The Pursuer advised the Second Defenders that he was terminating the credit contract. The Pursuer sought a Declarator that he was entitled to rescind, and had rescinded, both the contract of sale and the consumer credit agreement. He also sought damages. The Pursuer had funded his lifestyle by making use of zero percent interest free credit on transferred balances on credit cards by transferring the balance due on his credit card to another credit card on a regular basis. As the Pursuer had made no payments to the Second Defenders, they arranged for his name to be placed on a credit register. As a result, he was unable to open new accounts with credit card companies and other lending institutions. He has to pay a significant amount of interest over the 4½ year period of the dispute. The Sheriff held that it had been a material term of the contract between the Pursuer and the First Defenders that the laptop should have an inbuilt modem. As it did not, the First Defenders were in material breach of that contract and the Pursuer was entitled to reject the computer, to treat the contract as repudiated and to rescind the contract. The contract between the Pursuer and the Second Defenders was a debtor, creditor supplier agreement in terms of Section 12(C) of the Consumer Credit Act 1974. As the First Defenders were in material breach of their contract with the Pursuer, he was not obliged to make payments under the contract with the Second Defenders and was entitled to rescind that contract by virtue of Section 75(1) of the 1974 Act. The Second Defenders had negligently allowed misrepresentation to be made, namely that the Pursuer was in default under a credit agreement. They had taken no steps to withdraw this, despite the Pursuer’s repeated requests. The Pursuer’s loss had resulted from the Second Defenders’ fault and breach of duty. There were three elements to the Pursuer’s claim for damages – his loss of zero interest credit card use; the loss of his proposed purchase of a house in Spain with the capital gain that would have given him; and general injury to his credit.

Forster v Ferguson & Forster & Others – Glasgow Sheriff Court, 27 February 2008

Wed, 30 Apr 2008 18:19:00 GMT

Contract - Partnership Agreement- Mutuality of Contract - Retention of performance on basis of Pursuer's breach of fiduciary duty

The Pursuer was a former partner in a firm of Stranraer solicitors. He had acted fraudulently when dealing with clients. He accepted that he was in breach of the fiduciary duty he owed to his partners and, therefore, in breach of the partnership agreement. He raised an action in the Commercial Court against the firm and his former partners for payment of a pension. The Defenders refused to make payment and, among other arguments, relied on the principle of mutuality of contract. At first instance, the Defenders were successful. The Pursuer appealed. Having considered the terms of the partnership agreement, the Sheriff Principal allowed the appeal. He considered that he was bound by the decisions in cases of Bank of East Asia 1997 SLT 1213 and Macari v Celtic Football & Athletic Club 1999 SC 628. In essence the question to be considered was "was the contractual obligation undertaken by the Defenders to pay to the Pursuer a pension, the counterpart of the Pursuer's obligation not to defraud clients and not to breach the fiduciary duty he owed to his partners?". The Sheriff Principal concluded that retention of performance of an obligation due under the contract was not an appropriate defence in the particular circumstances of this case. The case continued on the basis of other arguments put forward by the Defenders.

William Stewart & Jemina Stewart v. Pure Limited [2008] CSOH 49

Thu, 27 Mar 2008 11:43:00 GMT

Summary Decree - Contract :- In this action the pursuers sought damages for a breach of contract by the defenders. The pursuers, as travel agents, were approached by 189 clients who were to take part in the island games in Rhodes, Greece. The pursuers approached the defenders, who were aircraft brokers, to provide aircraft for the outward flight from Scotland to Rhodes and the return flight to Scotland and by exchange of emails in January 2007, an agreement was reached between the pursuers and the defenders. The outbound flight took place, however, the defenders failed to provide an aircraft for the return flight and in consequence, the pursuers had to make alternative transportation arrangements for their clients to return home and the pursuers claimed £55,893.00 as damages from the defenders for their breach of contract, for the costs of obtaining an alternative aircraft and one nights accomodation for the passengers on Rhodes. Here the pursuers sought summary decree in terms of Rule of Court 21.2. The court considered whether it was satisfied that there was no defence to the action disclosed in the defences and that on the available material the defender was bound to fail and there was nothing of relevance to be decided at proof. The defenders raised the question of causation and contributory negligence in that the pursuers failed to confirm the booking for the return flight in accordance with an implied term of such contracts and by failing to confirm with the defenders that a return flight had been booked, the pursuers failed to provide accurate information to their clients to allow them to make an informed judgment in their choice of travel arrangements. Here the court considered whether to grant the motion for summary decree.

Supersave Mini Market & Others v. Walters Holland (Life and Pensions) Limited & Another [2008] CSOH 48

Thu, 27 Mar 2008 11:42:00 GMT

Procedure Roll - Contract:- In this action the pursuers were property investors, the first defenders were insurance brokers and the second defender was a director and employee of the first defenders. The pursuers owned a block of property in Wishaw and insurance of the property was arranged through the defenders. The premises were affected by fires, on 11 September 2002 , 28 November 2002 and 10 December 2002. Here the pursuers sought to recover from the defenders the losses they suffered by reason of the fact that the building was uninsured and made a case in fault and breach of contract against the first defender on the basis that:- (1) no reasonably competent insurance broker would have failed to disclose to the pursuers all information they received pertinent to the insurance; (2) no such broker would have failed to obtain insurance for the property; (3) no such broker would have failed to advise the pursuers as soon as reasonably practicable that the property was uninsured; and (4) any such broker would have been aware that the fact that the flats formed part of a property in respect of which insurers had already declined cover would be a material fact to the pursuers and no such broker would have failed to disclose that fact to the insurers. The case against the second defenders was based on fraud on the basis that he falsely and misleadingly advised the pursuers that the whole property was insured when he knew this not to be the case. Here the case called on the defenders' preliminary pleas on the pursuers' pleadings. For the first defenders it was submitted that the averments were insufficient to establish a case against him of non disclosure regarding the flats and the averments were not sufficient to enable the pursuers to prove that the first defender knew the flats were the same as those which had previously formed part of the Stag Hotel. For the second defender, it was averred that there were insufficient averments of fraud in relation to the flats. Here the court considered whether the averments in relation to non-disclosure and fraud were sufficient.

Ronald Evan Wilson v. Dunbar Bank plc [2008] CSIH 27

Thu, 27 Mar 2008 11:41:00 GMT

Reclaiming Motion - Contract:- The pursuer built a block of flats in 1995 with the assistance of borrowings obtained from the defenders, which were secured over the new development. The pursuer was unable to repay the borrowings and the defenders called up their security, and took possession of the subjects in September 1996. The subjects were thereafter sold, however, the pursuer was dissatisfied with the price obtained and here the pursuer sought damages from the defenders on the basis that they failed to sell the subjects for the best price that could reasonably have been obtained, contrary to their duty in delict and under section 25 of the Conveyancing and Feudal Reform (Scotland) Act 1970. At first instance a judge held that the development had been sold as a whole to an investor, without any meaningful attempt to sell the individual flats on the residential market, where a higher price would have been expected to be achieved and awarded damages to the pursuer. Here the defenders appealed, not against the judge's decision 's that the defenders failed to perform the duties in question, but, rather, that he erred in his assessment of damages and interest. Here the court considered whether the judge's approach to the quantification of damages and the calculation of interest was flawed.

Anne and Eddie Strachan v Highlands Joinery Products Limited – Inverness Sheriff Court, 29 February 2008

Wed, 26 Mar 2008 11:58:00 GMT

Appeal against Sheriff's decision to allow PBA - alleged breach of contract - relevancy and specification - averments re loss of profits from business

The Pursuers/Respondents contracted with the Defenders/Appellants for the supply of windows and doors for their property. They claimed that the windows and doors were not of satisfactory quality, in breach of an implied term of the contract in terms of Section 14(2) of the Sale of Goods Act 1979 and that, as a result, they had sustained various losses, including loss of profits from a business which they had intended to run from the property. The Defenders challenged the relevancy and specification of the Pursuers’ pleadings and, following a Debate, the Sheriff allowed a Proof Before Answer. The Defenders appealed, arguing that the Sheriff had erred in law in allowing a Proof on the Pursuers’ averments in support of their claim for loss of profit. The Pursuers claimed that they had purchased the property so that they could live there and operate a business from the property. They averred that the Defenders had been aware of their intention to operate a business from the property. Section 53(A) of the Sale of Goods Act 1979 deals with the measure of damages for a seller’s breach of contract and Section 54 indicates that nothing in the Act affects the right of the buyer to recover interest or special damages in any case where, by law, interest or special damages may be recoverable. These sections open up a claim for damages under the rules in Hadley v Baxendale 1854 9 Ex 341. The crucial question was whether, if it was proved that the Defenders knew that the Pursuers intended to run a business from the property, this would be enough to support a finding that the Defenders should have realised that, if the windows and doors were not of satisfactory quality, the property would not be wind and water tight and would be unfit for use by the Pursuers for business activities and, as a result, they would suffer a loss of profits. The Sheriff Principal concluded that the Pursuers’ averments, if proved, would be sufficient to support their claim for loss of profits and refused the appeal.

Scottish and Southern Energy plc v. Lerwick Engineering and Fabrication Limited [2008] CSOH 41

Wed, 12 Mar 2008 11:16:00 GMT

Procedure Roll:- The pursuers entered into a contract with the defenders in terms of which the defenders carried out work on boilers at their premises. As part of the work the defenders carried out work on a boiler and a fire thereafter occurred. It was averred that the pursuers suffered loss and damage and they claimed from the defenders under and in terms of the contract between the parties. At procedure roll counsel for the pursuers invited the court to to grant decree de plano and restrict inquiry to quantum. It was submitted that on the basis of the admitted facts, the contractual obligation to indemnify arose and no proof in respect of that was required as the terms of the contract were admitted. Counsel for the defenders sought dismissal of the action, failing which a proof before answer on restricted averments. It was submitted on behalf of the defenders that the principle was that a party cannot claim indemnity for losses suffered through negligence of that party unless either the indemnity expressly provides for recovery of such losses or there is no other loss that the clause might relate to. Clause 13(ii) of the contract provided that the defenders shall indemnify the pursuers against "loss or damage to property of the pursuers... howsoever caused...by any of the employees, servants, agents or sub-contractors of the defenders while on the pursuers' premises in performance of this Order". Here the pursuers were seeking an indemnity in respect of loss and damage to their property caused by the defenders' servants.

Knowles Food Services Limited v. CGU Insurance plc [2008] CSIH 20

Wed, 05 Mar 2008 11:33:00 GMT

Appeal from Sheriff Court:- This was an appeal from the Sheriff at Aberdeen in relation to the construction of an insurance policy offering cover to the reclaimers in respect of premises they owned in Aberdeen. The pursuers' claims were dismissed by the Sheriff. The relevant damage was cracking to a supporting beam caused by vibration coming from building operations nearby. The pursuers' claim was purely for the cost of remedial work to the beam. It was submitted on behalf of the pursuers that the sheriff had misconstrued the exception by interpreting the words "own collapse or cracking" as meaning collapse or cracking of the building itself, thus, on his interpretation, excluding cover under Exception E and there was no need to proceed to the defined contingencies which modified the exceptions in exception E which has been quoted. It was submitted on behalf of the defenders that the sheriff had reached the right conclusion by reason of the fact that the policy's terms had to be looked at as a whole and the proper construction excluded, under Exception E, cracking of the building itself and thereafter extended cover only if the circumstances of the particular claim fell within the defined contingencies. Here the court considered whether the construction of the insurance policy that was favoured by the Sheriff was correct.

The Aberdeenshire Council v Bruce Plant Limited – Banff Sheriff Court, 8th February 2008

Thu, 21 Feb 2008 21:47:00 GMT

Appeal – Action for Payment under Contract – Whether Obligation had been extinguished by Prescription – Sections 6(1) and 10(1) of the Prescription & Limited (Scotland) Act 1973.

The Pursuers/ Appellants raised an action for payment against the Defenders/Respondents in October 2006. Following a Diet of Debate, the action was dismissed on the basis that the Defenders’ obligation to make payment to the Pursuers had been extinguished by prescription in terms of Section 6(1) of the 1973 Act. The Pursuers appealed against the Sheriff's decision. The material facts in relation to the issue of prescription were not in dispute. The Pursuers had carried out various works as sub-contractors to the Defenders, who were the main contractors in a contract with SH Ltd. It was agreed that the Defenders’ obligation to make payment to the Pursuers for those works had become enforceable in September 1997. There had been a dispute between the Defenders and SH Ltd over payments due by SH Limited to the Defenders in terms of the main contract and this had led to court proceedings. SH Ltd had counterclaimed and one element in the counterclaim related to the works carried out by the Pursuers as sub-contractors. It appeared that, in light of this, the Defenders disputed the amounts due in terms of invoices raised by the Pursuers. It was accepted that the Defenders' obligation to the Pursuers had been extinguished unless the terms of correspondence between representatives of the parties had constituted relevant acknowledgements within the meaning of section 10(1)(b) of the 1976 Act. It was agreed that Section 10(1)(b) required that there should have been an admission in writing by or on behalf of the debtor and that this must have been unequivocal. It was also agreed that, in construing the letters, it was legitimate to consider them in the context of prior correspondence between the parties and that it was enough that the debtor had acknowledged that the obligation still subsisted in principle, even if he did not acknowledge that a specific sum was due. Having considered the terms of the relevant correspondence, the Sheriff Principal decided that letters sent by the Pursuers’ representative satisfied the criteria set out in Section 10(1)(b) and that there had been a relevant acknowledgement of the Defenders’ obligation to the Pursuers in 2001 and 2003. The letters constituted unequivocal written admissions, clearly acknowledging that the Defenders’ obligation to the Pursuers still subsisted. The appeal was upheld and the case remitted to the Sheriff for further procedure.

Tawne Overseas Holdings Limited v. The Firm of Newmilne Farms & Others [2008] CSOH 12

Thu, 31 Jan 2008 07:46:00 GMT

Proof:- In this case the pursuers owned a farm in Perthshire together with shooting rights and an adjacent house. In 1998, the first defenders leased the farm and the shootings, and the second and third defenders leased the house. The pursuers purchased the farm and the house from the second and third defenders on a sale and leaseback arrangement, however, the pursuers experienced difficulties in obtaining the rent from them. Due to business difficulties the defenders sought a reduction of the rent. To enable mortgage payments to be maintained the pursuers decided to try to achieve an arrangement which would ensure that rent was coming in on a regular basis and the parties agreed to a reduction in the rent payable under the leases to £20,000 per annum for the house lease, and £65,000 per annum for the farm lease, payable quarterly in advance from 28 November 2000. The problems continued resulting in the present action. In this action the pursuers sought:- (1) declarator that the house lease has been irritated because of lateness in the payment of rent, and for removal of the defenders from the subjects; (2) an action for payment of outstanding rental in respect of the house lease; (3) an action seeking declarator of irritancy and removing in respect of the farm lease; and (4) a payment action in respect of the farm lease. Here the case proceeded to prof in respect of these actions.

Pine Energy Consultants Ltd –v- Talisman Energy (UK) Limited 2008 CSOH 10

Thu, 24 Jan 2008 14:42:00 GMT

Debate - In this action the pursuers were seeking: 1. For declarator that the pursuers and defenders were in partnership. 2. For count and reckoning by the defenders with the pursuers for the whole and for payment by the defenders to the pursuers of the balance found to be due. 3. Failing an accounting, for payment by the defenders to the pursuers of an overriding royalty. 4. Alternatively (a) to find and declare that the defenders have been unjustly enriched and (b) for payment by the defenders to the pursuer (sic)of the sum of TWENTY FIVE MILLION POUNDS (£25,000,000) STERLING with interest and expenses. At this time the Defenders were seeking to have their general plea to the relevancy and specification of the pursuers' averments upheld and have the action dismissed.

Wyman-Gordon Limited v. Proclad International Limited (no. 2) [2007] CSOH 209

Thu, 10 Jan 2008 17:35:00 GMT

This case related to the pursuers seeking payment of the unpaid price of goods sold and supplied by them to the defenders and for damages for breach of contract. The defenders had a counterclaim for damages for breach of contract by the pursuers. Following the leading of evidence at a preliminary proof, at which all of the individuals who were involved with the parties' contract at management level gave evidence, Lord Drummond Young was invited to make certain findings as to the terms of the parties' contract, and to express a concluded view on the question of whether the defenders had waived any right to rely on one of the contractual terms that were in dispute.

Scott Greck v. Henderson Asia Pacific Equity Partners (FP} LP+ Henderson Equity Partners (GP) Limited +Roger Greville [2008] CSOH 2

Thu, 10 Jan 2008 14:29:00 GMT

In this action, the pursuer sought declarator that he was a "Good Leaver" in terms of a Limited Partnership Agreement between himself, the second defender and others. The second defender as the General Partner in the Limited Partnership established by The Limited Partnership Agreement had declared the pursuer to be a "Bad Leaver". The pursuer's status as a "Good" or "Bad" Leaver would have consequences in terms of his entitlement to "carried interest" in the assets of the Limited Partnership. The court considered a number of issues including whether the pursuer was a Bad Leaver as defined in The Limited Partnership Agreement or if he was automatically a “good leaver”, and whether the discretion should have been exercised in the pursuer's favour.

Seabourne Developments Ltd v. The Shiprow Development Co Ltd [2007] CSIH 90

Thu, 13 Dec 2007 16:48:00 GMT

Appeal from the Sheriff Court:- In July 2004, the appellants sold a cinema multiplex and two commercial units in Aberdeen, to the respondents for over £11 million. The appellants did not transfer the relevant funds in terms of the obligations in the missives and in 2005 the respondents raised an action in the sheriff court in Aberdeen, seeking payment of certain specific sums in implement of their obligations. The appellants argued that information necessary for the calculation had not been provided to them and they contended that the action should go no further until the figures were available. The sheriff granted decree for certain sums and the appellants then appealed the sheriff's interlocutor of 8 September 2006. In this appeal from the sheriff court it was submitted for the appellants that they had been unable to recognise, understand, or accept the figures put forward in the respondents' pleadings and productions and, whilst it was not the appellants' position that the respondents' case was irrelevant, the manner in which the sums due was quantified was disputed. It was further submitted that having chosen an action for payment of specific sums rather than a count, reckoning and payment, it was for the respondents to aver and prove how those sums were calculated and the respondents had failed to do so here. It was submitted on behalf of the respondents that the defences were irrelevant, and the granting of decree de plano by the sheriff was appropriate.

William Lippe Architects Limited v. James Innes [2007] CSIH 84

Tue, 20 Nov 2007 19:07:00 GMT

Contract - Reclaiming Motion:- Between March 2000 and June 2004, the firm carried out architectural services for the respondent in relation to the intended development of part of the respondent's property in Inverurie. On 6 July 2005, the reclaimers raised two invoices against the respondent for work carried out to the sum of £42,548.82. On 30 November 2006, the Lord Ordinary repelled the first plea-in-law of the reclaimers, sustained the respondent's second plea in law and assoilzied the respondent from the conclusion of the summons as the court considered that consensus in idem had not been established between the parties as to remuneration. It was against that decision that the reclaimers reclaimed here. The key issue was whether a binding agreement had been reached between Mr. Lippe, on behalf of the former firm, and the respondent for the payment of remuneration by the respondent for architectural services provided on a "no win no fee" basis.

Marjandi Limited v Bon Accord Glass Limited – Aberdeen Sheriff Court, 15 October 2007

Thu, 15 Nov 2007 20:42:00 GMT

Action for Payment - The Commercial Agents (Council Directive) Regulations 1993 - Definition of Commercial Agent
The Pursuers were sales agents for the Defenders and negotiated contracts with customers on the Defenders' behalf for the erection of conservatories and extensions. There was no written contract between the parties. In a commercial action, the Pursuers sought a number of payments under the Commercial Agents (Council Directive) Regulations 1993, together with an order for the provision of information. In determining whether the Pursuers were commercial agents to whom the Regulations applied, the Sheriff had to consider whether the contracts which the Pursuers negotiated the Defenders' behalf were contracts for the sale and purchase of goods. The Sheriff held that each contract was, in fact, a single contract for the hire of works, rather than for the sale of goods and, therefore, not a contract to which the Regulations applied. The Sheriff also looked at whether the Pursuers’ activities as agents were to be considered secondary, in which case the Regulations would not apply. Having considered the relationship between the Pursuers and the Defenders, and the guidance given in the Schedule to the Regulations, the Sheriff concluded that the activities of the Pursuers as agents could not be considered secondary.

City Wall Properties (Scotland) Limited v. Pearl Assurance plc [2007] CSIH 79

Tue, 06 Nov 2007 19:11:00 GMT

Commercial Lease - Reclaiming Motion:- This appeal related to a dispute between the landlords (pursuers and reclaimers) and the tenants (defenders and respondents) as to the proper construction of the terms of the rent review clause. As the 3 yearly rent review approached the parties found themselves in disagreement as to the proper construction of the rent review clause (clause 3), and the present action was raised in December 2002. In it the pursuers sought declarator supporting their construction of the rent review provision. After sundry procedure following a proof before answer the Lord Ordinary pronounced an interlocutor dated 25 October 2005 assoilzieing the defenders from the pursuers' conclusion for declarator and at the same time dismissing a counter-claim. Here the pursuers appealled against that interlocutor. The primary issue raised in the reclaiming motion was a short question of construction of a clause in a commercial contract. The particular subject of the dispute was the opening words of clause 3 that stated:- "The rent so payable shall be subject to review at the instance of the landlords at the relevant review date by addition per space of the product of 96 multiplied by 'the car park factor'". Here the court considered the construction of the clause from the view of a reasonable commercial person, looking at the matter objectively.

Autolink Concessionaires (M6) plc v. Amey Construction Limited & Others [2007] CSOH 81

Fri, 04 May 2007 00:00:00 GMT

Commercial Action - Contract

Countrywide North Limited v. GWM Developments Limited [2007] CSOH 60

Fri, 23 Mar 2007 00:00:00 GMT

Breach of Contract - Debate

Giftex Corporation v. Divex Limited [2007] CSOH 48

Fri, 02 Mar 2007 00:00:00 GMT

Proof Before Answer - Breach of Contract

Colin Fraser (AP) v. The Professional Golfers' Association Limited [2006] CSOH 129

Sat, 25 Nov 2006 00:00:00 GMT

Breach of Contract

Central Car Auctions Limited v. House of Sher (UK) Limited [2006] CSOH 137

Tue, 05 Sep 2006 00:00:00 GMT

Preliminary Proof - Breach of Contract

Jessie Duncan and Another v. The MFV Marigold PD 145 and Others [2006] CSOH 128

Tue, 22 Aug 2006 00:00:00 GMT

Debate - Dissolution of Partnership

MacKays Stores Limited v. Toward Limited [2006] CSOH

Fri, 30 Jun 2006 00:00:00 GMT

Commercial Action - Action for Payment - Debate

MacKays Stores Limited v. Toward Limited [2006] CSOH

Fri, 30 Jun 2006 00:00:00 GMT

Commercial Action - Action for Payment - Debate

Alan Baxter Wilson v. Jaymarke Estates Limited + James Shaw

Fri, 25 Nov 2005 00:00:00 GMT

Company Law:

ITP SA v. Technip Offshore UK Limited formerly known as Coflexip Stena Offshore Limited

Tue, 15 Nov 2005 00:00:00 GMT

Expenses:

APC Limited (in receivership) v. Amey Construction Limited + Sir Robert McAlpine Limited + Taylor Woodrow Civil Engineering Limited + Barr Limited all together traing as Amey-Robert McAlpine - TaylorWoodrow - Barr M6 Joint Venture

Fri, 11 Nov 2005 00:00:00 GMT

Action for Recovery:

Anthony M Chapment v Scotleg Sales Limited

Fri, 30 Sep 2005 00:00:00 GMT

Civil

Caterleisure Limited v. Glasgow Prestwick International Airport Limited

Fri, 01 Jul 2005 00:00:00 GMT

Commercial Contract Action:

Elmlford Limited v. McLaglan Investments Limited

Thu, 23 Jun 2005 00:00:00 GMT

Contract:

John Brady + Mrs Moira Anderson Grant or Brady v. Hutton and Phillip and Others

Tue, 03 May 2005 00:00:00 GMT

Breach of Contract/Debate:

Alba Management Consultants Limited v. Carillon PLC + Carillon Service Limited

Wed, 20 Apr 2005 00:00:00 GMT

Verbal Agreement:

Scrabster Harbour Trust + Mowlem Marine a Trading Division of Mowlem PLC V Mowlem PLC Trading as Mowlem Marine + Scrabster Harbour Trust

Wed, 23 Mar 2005 00:00:00 GMT

Two Commercial Actions Relating to the Same Dispute:

The Dundee Taxi Cab Limited v. Dundee City Council + Dundee Taxi Association

Fri, 18 Mar 2005 00:00:00 GMT

Appeal By Second Defendants:

Alan Jones + Mrs. Brenda Margaret Jones v. Andrew Stuart Wood + Mrs. Margaret Wood + John Derek Thomson Bogie

Fri, 18 Mar 2005 00:00:00 GMT

Rectification: