Clancy v Caird [2000] ScotCS 127 (17 May 2000)

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[1] The pursuer claimed to have sustained loss as a result of alleged misrepresentations made to him by the defender at the time when he was arranging to purchase a residential home known as Deveron House, Strathleven Place, Dumbarton. The proof began with the pursuer asserting that he had been given incorrect information about occupancy levels; fees payable by residents; wage rates payable to staff and, generally, in relation to running costs. He also asserted that the accounts provided to him by the defender were incorrect. Accordingly he averred misrepresentation either fraudulent or negligent. The pursuer's case, both on evidence and on pleadings, was not particularly clearly focused. The word separatim occurs thirty three times in condescendences 12 to 17.

[2] The proof in this case was concluded on 5 October 1999. While in the course of my preparing an opinion, certain events occurred which required the case to be reported to the Inner House for directions. That followed a contention made by the pursuer that the proof should be recommenced and heard before a permanent Lord Ordinary. The Inner House delivered their opinions on 4 April 2000 wherein it was determined that I should continue to deal with the case. Because of the lapse of time between the conclusion of the proof and the present, I listened again to the entire proceedings, both evidence and submissions, (they having been tape recorded) so that my impressions of the reliability, credibility and demeanour of witnesses as noted by me at the time could be checked again.

[3] The pursuer purchased the residential home and business from the defender, taking entry on 12 November 1996. His title is registered. The disposition narrates the price of £385,000 as being for the subjects known as Deveron House. There had been an exchange of missives comprising letters from the pursuer's solicitors to the defender's solicitors dated 13 and 23 September and letters from the defender's solicitors to the pursuer's solicitors dated 13 and 24 September 1996. The missives were to cease to have any binding effect as a separate contract after one year unless founded upon in court proceedings within that year. This action began on 6 November 1997. The pursuer first met the defender on 6 September 1996 at the home. The pursuer and his wife were shown around the home. The manageress of the home, Samuelina Ferguson was in the home on that day. At that meeting the defender told the pursuer that at that time there were 17 residents living in the home and that that was the normal level of occupancy comprising full time residents and temporary residents on respite care. The defender also provided a list of staff employed by the business. That list included wage rates. A list of residents (6/28/73) was supplied to those acting for the pursuer as his agents on 10 September 1996 by Deborah Caird, the defender's daughter. It contained fee income details.

[4] The only other occasion when the pursuer and defender met was on 19 September 1996 when the pursuer was accompanied by a representative from his bank. During that meeting the defender received a telephone call which was an enquiry relating to another potential resident. The defender indicated that if that person took up a place the home would be full.

[5] The home was licensed for 20 residents. When the pursuer took entry on 12 November 1996, he found fewer than 17 residents there.

[6] The pursuer was provided with draft accounts prepared by Kidsons Impey for the two preceding financial years to 31 May 1996 which indicated the fee income and level of profit obtained. He instructed a valuer, Miss Lawrence, to provide a valuation for the purpose of obtaining bank finance. Miss Lawrence visited the home on 10 September 1996 and produced a valuation, 6/6/7 of process. That valued the property, on the basis of open market value for existing use, at £375,000. On the basis of that report which contained certain caveats and some inaccuracies, the pursuer obtained the promise of a loan and submitted his offer which was accepted.

[7] Pursuer's counsel, at the conclusion of the proof, intimated that he could no longer insist upon two of the pursuer's pled complaints in relation to staff wages and staff numbers. In view of the evidence from the pursuer and the surveyor those concessions could not properly have been withheld. There accordingly remained for determination the allegations of fraudulent or negligent misrepresentation in relation to the number of residents and the alleged mis-statement of fees. That mis-statement was not said to be in relation to the amount of fee income disclosed in the accounts which had been produced to the pursuer, but was said to relate to the source of some of that income, said not to be "normal".

[8] The pursuer in his evidence made much of his perception of a distinction between permanent and respite residence. This distinction was not supported by Miss Lawrence, his surveyor, as a matter of materiality for the purposes of her valuation and, in any event, did not appear to the court to have any significance when considering the number of occupants. The pursuer, who was an accountant, appeared to have taken no steps to satisfy himself as to the accuracy of the draft accounts produced by Messrs Kidsons Impey, to have taken no steps to ascertain the actual number of residents in the house or said to be coming into the house at any particular date before conclusion of missives when it could have been relevant to him, nor despite his averred complaint, to have taken any step to ascertain the actual wages paid to any of the existing employees. It did not appear that he had made any attempt personally to obtain any register of residents and he produced no convincing document in that regard. He said that if he had known what he described as the "true" situation in regard to the number of residents and the position of staff, he would not have paid the price he did. He was not able from his own knowledge or, in particular, his visits to assert that the defender's figures were not accurate.

[9] In evidence he said that when he took entry there were thirteen permanent residents and one respite resident in the home.

[10] In his pleadings in condescendence 9 he averred the names of thirteen persons resident at that time. However, first, in a letter from his solicitors written on his instructions dated 9 October 1997 (No.22 of process) (which formed the basis of instructions given to Miss Lawrence for a supplementary report to which reference is made later), it is stated that in June 1996 three residents died and one was transferred to hospital. This, the letter continues, brought the number of full time residents down to ten. These ten residents it asserted were "the only ones in the home when our client took it over in November 1996". Only the pursuer could have been the source of the information in that letter. The letter was not spoken to by the pursuer nor put to him, it only being produced to the court when it became apparent in the course of the proof that the surveyor who was then giving evidence in support of her supplementary opinion had received written instructions giving details. No motion was made to recall the pursuer to explain matters and the writer of the letter did not give evidence.

[11] Second, the pursuer shortly before the proof, compiled No.20 of process, a summary of what he said was the position about numbers present in the home between April 1995 and 15 November 1996. That purported to be divided into "permanent" and "respite" residents and was said to have been derived from the record in the home when he took over. It purported to show 13 residents on the week ending 6 September 1996 and 15 residents the following week. Even taking the pursuer's classification there were never fewer than 12 permanent residents between the week ending 13 September 1996 and his date of entry on No.20 of process, again contrary to the said letter of 9 October 1997. The records in the home are referred to later. Those records were documents left at handover and compiled by Ms Ferguson and formed 6/11 of process. The letter of 9 October 1997 concentrates on "full time" residents only.

[12] I am accordingly unable to accept as reliable the evidence of the pursuer as to numbers of residents at any particular date before 12 November 1996 and cannot regard it as conclusive even for 12 November 1996.

[13] Ms Ferguson was the manageress of the home from June 1996, beginning as "acting manageress" at that time. Previously she had been in the home for nine and a half years as a worker. It was, at that period of Ms Ferguson's employment, the then manageress who had had responsibility for keeping record and care plans at the home as well as accounting for any fee income collected at the home. Ms Ferguson was manageress when Mr Clancy took possession. She had been manageress at the time of the negotiations between the pursuer and defender. The defender relied upon her at that time to conduct the day to day running of the home and it was to him, or to his daughter Deborah, that Ms Ferguson would report in relation to numbers of residents and such takings as were in her possession from residents. She said in evidence that she had never been asked for and had never supplied any list of residents or indeed any numbers of residents to anyone before the sale and in particular not to the pursuer's surveyor and not to the defender himself. Perhaps as a method of explaining how it would be that she, the manageress, did not provide that information she asserted that she and another employee, Miss McKenzie, had been told (on the pleadings it was said by the defender, in evidence it was said by Ms Ferguson to have been by Deborah Caird) to say to any inquirer that there were seventeen residents. Miss McKenzie did not give evidence and I did not believe Ms Ferguson about that assertion, preferring the evidence of the defender and Deborah Caird.

[14] She was asked to provide the pursuer at some time after he took occupation with a list of residents and register details. Various pieces of paper were produced in a black folder purporting to be the register (6/11). These were spoken to by Ms Ferguson. On closer examination these turned out to be some form of jottings or aide memoire compiled by Mrs Ferguson long after the events for the purposes of the pursuer. Her evidence on this matter was very confused. In chief, she said she could not remember why she had completed the first two sheets as productions. She said she kept a complete new record of everything in a red folder. A black folder was later referred to. It was a black folder which was produced to the court. She said it was not her responsibility to keep records. She said that she compiled the documents because they did have a register but she could not find it. She had made it up, but not past the date of entry. The document produced was not chronological nor sequential. It contained on its first pages dates long after the pursuer's date of entry. She denied that the list of 19 residents (7/8) was in her writing. Pursuer's counsel made valiant efforts to obtain from her evidence by way of recollection about the numbers, dates of occupancy and fees paid utilising the names on the record. It was, however, clear that the only evidence she could give depended upon her notes.

[15] I was quite unable to regard that material compiled and spoken to by her as providing reliable evidence sufficient to establish any facts which could lead to a conclusion that there had been misrepresentation even on the lesser standard of negligence and certainly not as establishing fraudulent misrepresentation.

[16] Other factors were present in the case which indicated the lack of reliability of Mrs Ferguson, from whom the entire basis of the pursuer's case came. The first was the statement that Miss Caird and a Miss Gordon who worked in the home were drawing social security benefits, (condescendence 10). In evidence-in-chief she asserted that both these ladies were "signing on the Broo". The clear implication of that was to attack the honesty of Miss Caird. The truth was that Miss Caird was occupied on a work placement training scheme for which she received a grant. She was visited at the home, work at which was part of her training, by the appropriate supervisors of that scheme. That whole matter was entirely above board. The second matter was in relation to an application Ms Ferguson made to the Local Authority to work as the manageress of the house and be recognised as such. Her application was rejected because of her failure to supply adequate references. In evidence she alleged that she had changed her mind and did not want her application to go forward but that was not supported by the correspondence from the authorities. Thirdly, she said that the surveyor was told that there were only thirteen residents in the home by Miss McKenzie. That piece of hearsay evidence did not square with the surveyor's account of being told 15 to 17 residents.

[17] I am accordingly unable to hold on the evidence of Ms Ferguson what the level of occupancy was at any particular time in the course of her reign as manageress, a post which she still occupies. For that reason alone, the pursuer would have failed to discharge the onus of proof upon him and the defender would be entitled to absolvitor.

[18] Miss Lawrence's report and supplementary report were produced. In her report of 11 September 1996 (674) she stated that she had been provided with the following sources of information, (1) architect's plans, (2) draft profit and loss accounts for the business for the financial years ending 31 May 1984, 1995 and 1996, (3) discussions with the owner and the manger on site, (4) information gathered from West Dunbartonshire Social Work Department. There was no evidence that Miss Lawrence had ever discussed the home with the owner, the defender, whether on site or elsewhere. Further she was unable in evidence to say that she had had any discussions with the manageress on site. She said she had spoken to "someone in authority" but, at least according to Ms Ferguson, that did not refer to her, and so it must have been Miss McKenzie who, said Ms Ferguson, did not lie on the matter. At p.14 of that report Miss Lawrence said that at the time of her inspection she was advised that there were fifteen to seventeen residents in occupation with some temporarily out for clinical care. She added in bold type "we would recommend that the potential purchaser satisfy himself as to the occupancy rates of the home and its continued ability to generate an occupancy rate in excess of 85% (seventeen residents is 85%)." Miss Lawrence made various calculations from the accounts produced which she said satisfied her that the 85% occupancy was likely to be correct, being consistent with a calculation based on the social work department fee for a week's occupancy. Her file notes, 6/28/28 however show that her valuation was based on fee income shown in the accounts, not current numbers.

[19] Subsequent to the letter No.22 of process, she produced a revised document purporting to show a lesser value. That document was difficult to follow either on the fact or logic. Its premise was that the accounts prepared by Kidsons Impey were inaccurate. That assumption appears to have been based upon the contention that the occupancy level was lower than seventeen, which was the upper level in her report. This speculation could not be otherwise checked in the course of the proof. The final accounts, No.7 of process, were the same as those in draft and there was no successful challenge as to their accuracy. Indeed no attempt had been made by the pursuer by way of specification of documents to recover records kept by or on behalf of the defender and in particular any of the material before Messrs Kidsons Impey and records appeared to have gone missing at around the change of location of the accountant's offices. In the event, as earlier narrated, pursuer's counsel did not maintain the position that the accounts were inaccurate.

[20] Miss Lawrence's supplementary report was wholly unsound and forms no foundation for any claim that the property was undervalued.

[21] Miss Trotter was an officer employed by Dumbarton Council and part of her remit was Deveron House. She said that the Council had a file for that establishment, which she described as "case notes". She spoke to the letter 6/9 of process, a document which contained certain figures for resident numbers. She could not remember whether she had got that information on a visit or from a telephone conversation with somebody in the home who would be, she thought, the most senior person there. She was concerned with the total numbers in the home, not whether they were "full time" or respite residents. Nonetheless, the numbers provided by Miss Trotter do not tally with those purportedly derived from the aforesaid register or the summary thereof No.20 of process. She had noted 14 residents at 11 September 1996, a figure different from that narrated as being Miss Lawrence's information in No.6/7/15 of process. Despite the terms of the letter of 17 July 1998 (6/9/1 of process), she could not recall whether in fact she visited the home that day.

[22] She also said that she had had drawn to her attention the fact that some persons resident in the home were not paying fees. She thought this information had come from a member of staff. She said to the court that she was concerned about persons being offered free accommodation for holidays, because, she said, it meant that there was "unfair competition" for the local authority homes. She was unable to explain how the recipient of free accommodation would be detrimentally affected thereby. If the conduct of inspections of residential homes is in some way linked to the competition they provide for local authority homes, it should not be so linked.

[23] The defender explained his reason for selling the home. He had, in the winter of 1995, been very seriously ill and his survival had been in question. He did recover, but insufficiently to carry on with his full range of business. The home was but one of his business concerns. He was not latterly involved in day to day management. He put the home on the market in about June 1996. When he met the pursuer and told him there were seventeen residents in the home, he was sure that that had been the case. He had a list (7/8) at the second meeting showing 19. That was not in the defender's nor his daughter's writing (compare 6/28/73). He said it was Ms Ferguson's list. I consider it probably was. Some of the residents were permanent in the sense that they were not there on respite care; others were on respite care. Ms Ferguson did not have to do with the finances of the home other than the collection of such fees as were appropriate to be collected by her.

[24] A curious aspect of the evidence in this case was that the defender said that a friend of his, a successful Canadian businessman whom he had known in the past and who visited Scotland from time to time, was impressed by the home and asked the defender at his discretion to provide holiday care for old people. He funded the defender to achieve this by some £25,000 or so in cash and relied entirely upon the defender to administer it. The defender did not account to the benefactor, Mr Frank Gordon. No vouching for the arrangement was produced, but the effect of it, I find, was evident in the defender's accounts. It might appear that this evidence was placed before the court in order to explain Mrs Ferguson's conviction about the level of the income which she collected being insufficient to provide the profits disclosed on the accounts.

[25] Counsel for the pursuer founded upon the unusual nature of this arrangement and invited me to disbelieve the defender.

While strictly it does not matter whether the defender is believed or otherwise in the light of the state of the evidence in the case for the pursuer, I was not prepared to disbelieve him in the light of the evidence of Frank Gordon.

[26] Mr Gordon gave evidence to the effect that he had supplied completely trustingly a sum to the defender via the defender's daughter to fund holidays or respite for impecunious old persons who might benefit from the home. Mr Gordon said he was impressed by the home and regarded it as a suitable way of making a charitable donation. He wanted no publicity or thanks and did not want his name revealed to any of the recipients.

[27] Although this is a somewhat odd situation at first sight, as counsel for the pursuer stressed, I was not convinced that I should disbelieve Mr Gordon. In the first place he had come from Vancouver to give evidence in the case. Secondly, if his evidence were untrue, not only was he committing perjury himself but a case of subornation of perjury by the defender would also emerge. Mr Gordon gave his evidence in an impressive manner I was prepared to accept it. Many people make charitable donations to good causes anonymously.

[28] Miss Caird, the defender's daughter, did the books for the home subsequent to her father becoming ill until Mr Clancy took over. She said that there were records in the home and that there had been one set in Glasgow as well as some in Dumbarton. She thought that the Glasgow records had been sent to Kidsons Impey to deal with the accounts. She thought they contained the name, room and amount. She sent the residents' list 6/28/73 as well as the staff list from the records in her office. She had obtained the names from Ms Ferguson. There were no free in the sense of unpaid rooms in the home. She received the money from Mr Gordon for his gift and put it in the safe. The records in the Glasgow office were separate from those in the home. She said they had never been returned to her from the Accountants. I saw no reason to disbelieve her.

[29] Samantha Gordon confirmed that while she was manageress, although she could not remember the exact occupancy, the home was not impoverished and she did not feel that there were lots of empty beds. She left as manageress just before August 1996. She had also been upon a work placement course.

[30] On the whole matter I find that the records produced by the pursuer in support of his averments are incomplete and unreliable. They consist only of such documents as Ms Ferguson either had in her possession or recreated. I find that Mrs Ferguson had no responsibility for accounts, these being kept and compiled in the defender's Glasgow office. I find that the accounts produced demonstrated a viable level of occupancy but that actual numbers could vary from day to day due to the very nature of the business carried on. There were no free places.

[31] I hold that Ms Ferguson did supply information from time to time relating to numbers of residents, not only to the defender, but also to his daughter and that the defender's statements derived from that source. It is not established that such statements were inaccurate or a misrepresentation. Further, and in any event, I find that neither the pursuer nor his surveyor relied materially on information provided by the defender or his daughter from the content of the surveyor's report. What was material was the survey, the licence and the accounts. Those indicated a viable property and a viable business. Further, no sum is attributed in the disposition to the business as opposed to the heritable property.

[32] The pursuer has failed to satisfy me that the statements made by the defender and the list of residents supplied by him through his daughter were misrepresentations. The proof wholly failed to establish a fraudulent misrepresentation. All the essential figures founded upon by the pursuer of and relating to occupancy have derived from Ms Ferguson. If there were any misrepresentation it would have been made personally by the defender in good faith, having obtained the information from others, see Boyd & Forrest v Glasgow & S W Railway Co 1912 SC (HL) 93 at p.99.

[33] The pursuer also pled a case based on an alleged breach of warranty. This, in my view, cannot arise in the circumstances of this case. On the pursuer's behalf it was sought to include as a condition of sale that at the date of entry there would be seventeen residents. That condition, perhaps, was an attempt to meet the caveat in Miss Lawrence's report of 11 September, but in any event was rejected. The only mention of the matter in the missives was that the defender would use his best endeavours to ensure that there would be seventeen residents within the subjects as of the date of entry. It was specifically provided that no guarantee would be given in that connection given the age of the residents. The clause in the missives continued:

[34] In my opinion it is impossible to attempt to derive from that provision any warranty or any other basis upon which a claim could arise based upon the actual or any number of occupants at the date of entry. The concluded bargain did not envisage that there would be 17 residents. Further the pursuer was aware, and it was inherent in the nature of the business, that numbers on one day might not be the same as on another. There could even have been no residents at all on 12 November. This is further illustrated by the Disposition which allocates the whole price to the heritage.

[35] The matter of damages does not arise as a result of the view above taken. It was submitted for the defender that there was no evidence upon which any damage could be quantified, even if there had been misrepresentation. I agree. I would have found it impossible to quantify damage on the basis of Miss Lawrence's supplementary report, the only material upon which the pursuer could found. There was no factual basis for any of the assumptions made in that report. In particular, based as it is upon the assertion that the accounts prepared by Messrs Kidsons Impey were erroneous, and that assertion having been departed from, it wholly fails. I would only add that a further factor in support of the defender's position is that those accounts were prepared for submission to the Inland Revenue and it might appear unlikely that profits would in such circumstances be overstated by or on behalf of the defender.

[36] It was admitted by the pursuer that the sum of £3,493.77 had been received by him in respect of fees due to the defender and that he had not paid over that sum. It would appear that that sum was in the hands of the pursuer by at least 1 January 1997 (see 71 and 72 of process) and I accordingly grant decree for a sum of £3,493.77 with interest thereon at the rate of 8 per centum per annum from 1 January 1997 and repel the pursuer's pleas in the counter-claim. In relation to the principal action I sustain the defender's second and third pleas and repel the pleas for the pursuer and grant absolvitor.

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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Clancy v Caird [2000] ScotCS 127 (17 May 2000) URL: http://www.bailii.org/scot/cases/ScotCS/2000/127.html Cite as: [2000] ScotCS 127

Scottish Court of Session Decisions