Scottish Court of Session Decisions

This was an action at the instance of Edward Harvey, spirit merchant, Lochgelly, against John J. Smith, lodging-house keeper, 88 Candlemaker Row, Edinburgh, concluding that the defender should be ordained “to implement and fulfil in all respects his part of the missives of sale of the subjects in Lochgelly used by the pursuer as a lodging-house, with the fittings and fixtures therein, and the goodwill of the business carried on in the premises, entered into betwixt him and the pursuer, dated the 5th day of May 1902, by accepting a valid disposition containing all usual and necessary clauses executed by the pursuer in his favour of all and whole these premises in High Street, Lochgelly, used as a lodging-house and belonging to the pursuer, with the fittings and fixtures therein and the goodwill of the business carried on in the premises, and tendered to him, and also by making payment to the pursuer of the sum of £1200 sterling, the agreed-on price and value of the said premises in Lochgelly and others, with interest.”

There was a further conclusion “that in the event of the defender failing within one month from the date of the decree to follow hereon to implement, the foresaid missives of sale” he should be ordained to make payment to the pursuer of the sum of £250 in name of damages.

The pursuer founded on an offer made by the defender to the pursuer, and on a letter of acceptance by the pursuer, both dated 5th May 1902. The offer of the defender, which was produced, bore that the defender offered “to purchase from you the subjects in Lochgelly used by you as a model lodging-house, together with the fittings and fixtures therein, and the goodwill of the business carried on in the premises, at the price of £1200,” on the following conditions—(1) that entry should be given by 1st June 1902, when the price should be payable; (2) of the said price the

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sum of £1000 should be allowed to remain as a first bond on the property, with interest at 4 1 2 per cent. per annum, the amount in said bond to be paid in instalments of not less than £100 per annum; and (3) that a formal conveyance should be given to the defender with the usual clauses.

The letter of acceptance bore that the pursuer accepted the defender's “offer of this date to purchase the lodging-house property in Lochgelly belonging to me, together with the fittings and fixtures therein, at the price of twelve hundred pounds sterling, on the conditions stated in said offer.”

The offer by the defender and the acceptance by the pursuer were not written by but were signed by the defender and pursuer respectively. On the offer, opposite the pursuer's signature, were the words “adopted as holograph.” On the acceptance, opposite the defender's signature, were the words “adoped” or “ddoped as holograph.”

The defender averred, inter alia, that he “on 5th May 1902 was on a holiday to Lochgelly. He met several acquaintances and had a considerable quantity of liquor. He thereafter called at the pursuer's public-house there where he was supplied with more liquor. The pursuer and defender were old acquaintances. While the defender was considerably under the influence of drink the pursuer offered to sell him the property in question, along with the fixtures, fittings, and goodwill of the business. The defender stated at the time that the purchase could only be carried out with the consent of his wife, who was to supply the money, and also on condition of his obtaining the consent of his landlord in Edinburgh for the disposal of his present business, which is that of a common lodging-house, and licensed as such. This was agreed to, and later on in the day the pursuer persuaded the defender to go to Thornton along with him, where he had telegraphed to Mr David Robertson, solicitor, Markinch, who acts as the pursuer's agent, to meet them. The parties met there, and the pursuer's agent drew up and wrote out the alleged offer, of which he did not give the defender a copy, along with the alleged acceptance. The defender in writing and signing the docquet appended to said alleged offer did so in the belief that the premises were duly licensed, and that the alleged offer contained all the conditions of the proposed purchase… . The defender is very illiterate and can barely read writing or write. The defender was induced by the pursuer to write and sign said docquet under the belief that the lodging-house was licensed by the authorities, and that he was making a conditional offer, the pursuer having fraudulently concealed from the defender that the local authority had refused to renew the licence, and that the said conditions of the purchase had been omitted, or that it was necessary that the offer should have embraced them; and further, the pursuer fraudulently took advantage of the defender's state of intoxication and his illiteracy and inability to read writing so as to induce him to write and sign said docquet when he was wholly incapable of understanding it and the effect of said alleged offer. On the defender's return home he consulted his wife, who refused her consent. He also approached his landlord, but he refused to allow him to renounce his lease, or to allow him to assign it to another. The defender on the following day, through his solicitor, who had not seen the alleged offer, acquainted the pursuer that the proposed purchase was off. … A few days thereafter the defender discovered that the licence for said lodging-house had been withdrawn by the authorities a considerable time previous to the alleged purchase. … The pursuer well knowing how matters stood in his acceptance of the defender's alleged offer carefully kept out the goodwill of the business, which previous to the withdrawal of the licence was the most valuable asset.”

The pursuer admitted that the pursuer and defender met at Lochgelly on 5th May 1902 and that the offer and acceptance, excepting both the signatures and the holograph docquets thereof, were written by Mr Robertson. He explained that the omission of goodwill in the acceptance was purely a clerical error, and that he had always been willing to convey the same to the defender. Quoad ultra he denied the defender's statements.

The action was raised on May 21st 1902, although the date at which under the contract entry was to be given and the price become payable was June 1st 1902. The pursuer averred that before the summons was served the defender had given written intimation to the pursuer that he refused to carry out the agreement come to in the said missives of sale.

The pursuer pleaded, inter alia—“(1) The defender having by missives of sale entered into an agreement with the pursuer to purchase the said property, should be decerned and ordained to implement and fulfil his part of said agreement, and ought to be found liable in the expenses of the present action. (2) Failing implement of the said missives of sale by the defender, the pursuer is entitled to compensation for the loss and damage sustained by him in consequence of the defender's breach of the agreement contained in said missives.”

The defender pleaded, inter alia—“(2) The action is premature. (3) The alleged offer and acceptance do not form a concluded contract of purchase, and being neither holograph nor tested, the defender ought to be assoilzied. (4) In any view, the pursuer cannot enforce it, on the ground (1st) of fraudulent concealment on the part of the pursuer; (2nd) essential error of the defender as to the substance and effect of said alleged offer; (3rd) that when the defender wrote and signed said docquet he was so much intoxicated as to be wholly incapable of understanding it and the effect of said alleged offer; and (4th) that the said alleged offer, in consequence of the defender being unable to read writing, and its

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effect not having been explained to him, is not his deed.”

On January 27th 1903 the Lord Ordinary ( Kincairney) found that the defender refused to implement the contract libelled, repelled the first plea-in-law for the pursuer, and dismissed the action in so far as regards the primary conclusion of the summons, repelled the third plea-in-law for the defender, and sustained the second plea-in-law for the defender so far as regards the said primary conclusion of the summons, and quoad ultra repelled said plea, and before further answer allowed the parties a proof of their averments.

A proof was led, the purport of which sufficiently appears from the opinions of the Lord Ordinary and of the Judges in the Inner House.

On June 17th 1903 the Lord Ordinary found—(1) That a contract of sale and purchase of the subjects set forth in the summons was concluded between the parties on 5th May 1902 by the missives; (2) that the defender had refused to carry out said missives; (3) that no sufficient grounds for such refusal had been established; (4) that the defender was liable in damages for breach of contract, and assessed the damages at £50.

Opinion.—“I have found this to be a very difficult case, the evidence is incomplete, obscure, conflicting, and on both sides unreliable. It is an action brought to enforce implement of missives of sale of a lodging-house at Lochgelly belonging to the pursuer. The missives bear to be dated 5th May 1902, and consist of an offer by the defender Smith to purchase the house and an acceptance of the offer by the pursuer Harvey. The price specified in the missives is £1200. The defender has refused to implement the missives, and he has pleaded that this action is premature. That plea has been sustained by interlocutor dated 27th January 1903, and the action resolves itself into an action of damages for breach of contract. The grounds on which the defender has refused to fulfil the contract are in substance these. He disputes the authenticity of the missives, and he pleads besides that the contract, if completed, cannot be enforced because of the defender's state of intoxication at the date of the bargain, and his inability in any case to understand the missives; and he pleads besides fraudulent concealment and essential error. These two last grounds depend on the averment that the defender believed that the house was a licensed house and that it was not, and that the pursuer concealed that it was not licensed, and further that the authorities had refused to renew its licence, it being averred that it had been licensed before. It is also averred, at least so I understand the defender's answer 2, that the sale was conditional on the consent of the defender's wife, and also on the consent of his landlord in Edinburgh allowing the defender to give up a lease of a common lodging-house in Candlemaker Row. There are no reductive conclusions. A proof has been taken of these pleadings, and the case has now to be disposed of on the proof. The narrative of the transaction is introduced very abruptly, and it is desirable if not necessary to advert to the antecedent relations of the parties. They were well acquainted. Both had kept common lodging-houses in Lochgelly. The defender had kept one there in or about the years 1897 and 1898. In May 1900 he left Lochgelly and came to Edinburgh, where he has since kept a common lodging-house in Candlemaker Row. The pursuer built the lodging-house which is the subject of this action in or about 1898 or 1899, and he depones that he occupied it as a licensed lodging-house until 1900, when he says it ceased to have a licence, but he continued to occupy it as a lodging-house. The witness Small, Town-Clerk of Lochgelly, depones that the licence was refused on the 14th May 1900, and has not been re-granted. The reason for this refusal does not clearly appear, but apparently it was because the defender kept a public-house, and it was thought undesirable that the keeper of a common lodging-house should do so.

It does not appear clearly whether this alleged withdrawal of a licence was known to the defender. His knowledge of it is not proved. But it appears that more than once there had been negotiations for the purchase of the pursuer's lodging-house by the defender at the price of £1000 or thereby, but these negotiations came to nothing.

With regard to the transaction now in question, the facts seem to be some what as follows:—“On 5th May 1902 the defender went to Lochgelly. He says that he went for a holiday, and he did not tell his wife that he had any intention of buying the pursuer's lodging-house. He made no appointment with the defender, but he called on him at his public-house, and found him at home, and the pursuer depones that the defender then agreed to buy the pursuer's lodging-house for £1200. The pursuer gives no details, and does not account for the price being run up to £1200. The pursuer proposed that they should have the contract written out by an agent, and with the defender's consent he telegraphed to his agent Mr Robertson, writer, Markinch, to meet them at Thornton Junction. As it happened, Mr Robertson was at home and received the telegram, and as it happened he was able to meet them at Thornton Junction. At this point the story is taken up by Mr Robertson, who explains that he was informed of the bargain and the terms of it, getting his information chiefly from the pursuer. He then wrote an offer as from the defender, and an acceptance of the offer by the pursuer; the one is No. 6 and the other No. 9 of process. He depones that the documents were signed by the parties, and that each at his dictation, wrote opposite his signature the words ‘adopted as holograph,’ the word ‘adopted’ being misspelled in the offer. Mr Robertson depones that he read these documents to the parties. The evidence on this point is corroborated by the pursuer Harvey.

Mr Robertson also says that the defender

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instructed him to advertise his business in Edinburgh for sale, which he did. He made, however, no inquiries about the business, nor any inquiry whether the defender had an agent in Edinburgh. The whole of the business in which Mr Robertson was engaged occupied about twenty minutes, after which the defender took the train to Edinburgh. It seems that on parting he said, ‘I must consult my wife about this.’

The pursuer and Mr Robertson both depone that all this time the defender Smith was perfectly sober, evidence which receives some what important corroboration from a witness, Bailie Laing, at whose shop the pursuer and defender called.

This account is given almost entirely by the pursuer and Mr Robertson for the reason that the defender depones that he was so drunk that he did not understand what he was about. When examined about his signature he vacillates extremely. He admits his signature, but ends by denying that he wrote the words adopted as holograph, because he says that were not like his ‘hand of write,’ although he says he had hardly ever written before. I did not consider this part of the evidence creditable to the defender. The defender's evidence about his state of intoxication is poorly corroborated, the best witness for him being a miner called Donaldson; but he, on being asked at the end of his evidence ‘Are you prepared to swear that Mr Smith was so drunk that he could not understand what he was bargaining about?’ answers ‘No, at the time he left me.’

It appears that the defender reached his house in Edinburgh at a late hour that night, when his wife ‘thought he had got a little drink.’ He said nothing to his wife about what he had done, but she found in his pockets in the morning the pursuer's acceptance of his offer (No. 9 of process); and on examination he admitted he had been trying to settle to buy the lodging—house; when she said she would never put her foot in it. It appears also that he remembered enough of what had happened to go to his landlord to get his consent, which the landlord refused. He afterwards discovered, as he says, that the house was unlicensed. He then intimated that he would not carry out the sale, and he offered first £5, and afterwards £50 to get off the bargain,—offers which were refused. These are the main facts. I think it cannot be denied that they are singular and suspicious. The defender does not appear to have intended to buy the pursuer's business when he left Edinburgh, and his conduct seemed more like that of a drunk man than a sober. The transaction was a large one. The price offered was £1200, £200 higher than he had previously offered, although it is to be kept in view that only £200 of it was to be paid in money. Besides, it is to be kept in view that the transaction involved the change of his house from Edinburgh to Lochgelly. It certainly seems as if Mr Robertson took very little time to transact such an important piece of business—especially when Smith had no independent adviser. Mr Robertson, indeed, says that he considered he was acting for both. But he had acted for the pursuer, and he charged him with the whole account, and charged the defender nothing. I hold that he was agent for the pursuer, and I am not prepared to accept his view that he was acting for the defender also. No doubt he did act for the defender in advertising his Edinburgh business for sale, about which proposed sale we hear no more.

Having gone over these facts, I can do little more than merely state the conclusions to which I have come about the defender—except about one important point which I will refer to immediately.

I am then of opinion ( first) that the authenticity of the missives is sufficiently established; ( secondly) that it is not proved that the defender was so intoxicated at the time of the transaction as to be incapable of understanding it, or that the offer made by him is not his deed, and therefore I think that the third and fourth heads of plea four should be repelled. I do not say that the considerations as to the defender's state of intoxication are all one way, but only that the proof in support of the defence on this head is insufficient. I do not require to decide whether these pleas can be entertained without a reduction.

I further hold that it is not proved that the bargain was conditional on the consent of the pursuer's wife or of the defender's landlord. I do not in saying so mean to affirm that it would have been competent to prove that there were these conditions, but I do not require to consider the question of competency.

But there remain for consideration the first and second heads of pleas four, which raise to my mind by far the most difficult questions in the case, the pleas of essential error and of concealment, and it is not without much hesitation that I have come to the conclusion that they should be repelled. I think that they are pleas which could not receive effect except in a reduction. The essential error averred is that the defender thought that the pursuer's premises were licensed, whereas they were not. A great deal is said in the evidence about licensed and unlicensed lodging-houses, but it was not explained either in the proof or the arguments what the licence of a lodging-house was, and under what authority it was granted.

I understand that common lodging-houses are regulated under the provisions of certain sections of the Public Health (Scotland) Act 1897, part 5, but in none of these sections is there any mention of a licence. The control and good management of common lodging-houses seems under the Act to be attained by registration in a register of lodging-houses. From section 40 it would appear that the approval of the local authority is required for common lodging-houses, and it may be that that approval is known as a licence. At all events, what is meant by the averments of the want of licence of the pursuer's house I take to be that it has not the advantages, whatever they may be, of a common lodging-house

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as defined in the statute.

A common-lodging is defined in the statute, section 3, as ‘a house or part thereof where lodgers are housed at an amount not exceeding 4d. per night, or such other sum as shall be fixed under the provisions of the Act.’ And I understand that anyone who keeps lodgers at that low rate in a house which is not registered as a common lodging-house is liable to prosecution. Now, I gather from the proof that the pursuer's house is not a house (whether from want of registration or want of licence) authorised to take in lodgers at these low prices; and if the missives in this case had described the subjects as a common lodging-house I would have been disposed to hold that under such missives the defender could not have been compelled to accept a disposition of a house which did not answer to the statutory definition of a common lodging-house. But the term ‘common lodging-house’ is not used in the missives. The one missive speaks of a house used as a model lodging-house (not a statutory term), and in the other the only term used is lodging—house. So that it seems to me that there is no warrant for affirming that the subject of the sale was a common lodging-house. There is no representation to that effect. The pursuer says that there are licensed lodging-houses and unlicensed, and that the rooms in unlicensed lodging-houses are let at higher rates than rooms in licensed houses, that he prefers a house to be unlicensed, and that he keeps a lodging-house though it is not a licensed one, and there seems no evidence against that. Now, the bargain was made on the premises where the pursuer was carrying on his business openly, and the defender ought to have seen, or if he did not see, to have inquired, what kind of lodging-house he carried on, and not having done so I think that he has not established a right to reject a disposition of the subjects merely because the house did not correspond with the definition of a common lodging-house in the statute. It is one of the consequences of carrying out a business transaction hurriedly that points of importance are omitted. I might add that there is no proof that the defender would have had any difficulty in getting his house registered.

I have therefore come to the conclusion that I cannot sustain these pleas.

It is further said that the pursuer's house was under a challenge at the time by the local authority, and that the pursuer was bound to have informed the defender of this. He says he did inform him, and I cannot hold the contrary proved. In any case, I could not have held an omission to mention this circumstance a sufficient ground for setting aside the bargain. I am therefore of opinion that the defender is chargeable with breach of contract, and is liable in damages.

As to the amount of damage, I am really without reliable evidence. The pursuer has not tested the market. Proceeding on such evidence as I have, I assess the damages at £50.”

The defender reclaimed.

After there claiming-note had been lodged the defender and reclaimer lodged a minute averring that “after the date of the judgment pronounced by Lord Kincairney in this cause the pursuer and respondent made application to the Dean of Guild Court of the burgh of Lochgelly for warrant to enlarge his lodging-house there (being the subject in dispute), and that on 14th September 1903 plans were passed and warrant granted by the said Dean of Guild Court for such enlargement. Following upon the said warrant an addition was made by the pursuer and respondent to the said lodging-house property, the said addition was duly roofed in, and a door was slapped in the gable of the ground floor of the property in dispute in order to connect it with the new building.”

The pursuer and respondent in his answers admitted these statements, and explained that the said addition was built upon property which was not included in the sale, and had in no way injured or depreciated in value the subject in dispute. If the defender now desired to implement the contract the pursuer offered to close up the said door and to restore the subject sold to its former condition.

Argued for the defender and reclaimer—The action having been raised before the date fixed for the implement of the contract, was premature, and should be dismissed altogether as being incompetent on that ground—Ersk. iii. 6, 10; Crear v. Morrison, June 2, 1882, 9 R. 890, 19 S.L.R. 639. The conclusion for implement was the primary and fundamental conclusion of the summons, and if it failed the conclusion also for damages, being merely ancillary, fell to be dismissed— Skerret v. Oliver, January 30, 1896, 23 R. 468, 33 S.L.R. 323. There was no consensus in idem, in respect that the acceptance did not meet the offer, there being no mention in the acceptance of the goodwill of the business. The omission of the goodwill was particularly significant and important in view of the fact that the licence of the lodging-house sold had, unknown to the defender, been withdrawn before the alleged sale. It was admitted that an acceptance might be in general terms and that it need not contain an enumeration of items accepted, but if items were enumerated, as in this case, and some item was omitted, there was no consensus in idem. The acceptance was not to be regarded as holograph in spite of the addition of the words “adopted as holograph.” These words were neither signed nor initialled by the defender. He did not understand the meaning of the word “holograph,” and it was not explained to him. There had been no rei interventus. In determining the effect of these words the whole circumstances must be looked to—the fact that the transaction was carried through by an agent of the pursuer, and the defender was not advised by a separate agent, the defender's illiteracy, and his condition of intoxication,—and in the circumstances it should not be held that the defender thereby bound himself

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irrevocably as by a duly tested writ. The pursuer had personlly barred himself from now seeking implement of the contract, for at his own hand he had altered in a very material way the subjects alleged to have been sold, and so rendered himself unable to implement the contract.

Argued for the pursuer and respondent—Before the action was raised the defender had given written intimation to the pursuer that he refused to carry out his contract. In view of this intimation it was competent for the pursuer to bring his action before the date fixed for implement. The pursuer, however, accepted the Lord Ordinary's view, and did not ask decree of implement, so that the action became merely an action of damages for breach of contract. There was here a duly completed contract. The acceptance was distinct, its plain meaning being to accept the offer as it was made. The omission to mention the goodwill in the acceptance was a clerical error, but that omission did not prevent the parties being in idem. The pursuer was in fact willing to hand over the goodwill. It was unnecessary in an acceptance to recapitulate every item. It was settled that a missive which was neither holograph nor tested was to be regarded as holograph if attested in the manner here employed— Gavine's Trustee v. Lee, January 12, 1883, 10 R. 448, 20 S.L.R. 303. The mere illegibility of the words written by the defender afforded no ground for not giving effect to them— Stirling Stuart v. Stirling Crawfurd's Trustees, February 6, 1885, 12 R. 610, 22 S.L.R. 391. The alterations made by the pursuer in the subjects could not bar him from getting damages for breach of contract. The Lord Ordinary had found that the defender had refused to implement the contract, and that fact was undisputed. Acting on the view taken by the Lord Ordinary that the action had resolved itself merely into an action for damages, the pursuer had made the alterations on the subject, but he was willing to restore the subjects exactly to their condition at the date of the sale.

At advising—