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OUTER HOUSE, COURT OF SESSION
[2007] CSOH 75
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A276/02
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OPINION OF LORD MENZIES
in the cause
LACHLAN
McFARLANE (A.P.)
Pursuer;
against
ERIC McFARLANE
(A.P.)
Defender:
________________
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Pursuer:
M.J. Bell; Drummond Miller LLP
Defender: Bowen;
Anderson Strathern
20 April 2007
Introduction
[1] The parties are
brothers. They have been in dispute with
each other over several matters for many years.
At present there are three actions involving the parties which are in
dependence before the courts. There is
an action at the instance of the present defender (hereinafter "Eric") against
the present pursuer (hereinafter "Lachlan") in Hamilton
Sheriff Court for recovery of possession of
heritable subjects at 204 Alexander Street,
Wishaw, which action was raised in 1998.
There is an action at the instance of Lachlan
against Eric which was raised in 2002 in the Court of Session ("the first Court
of Session action"). This action also
relates to the heritable subjects at 204 Alexander
Street, Wishaw;
in this action Lachlan seeks inter alia decree of specific implement ordaining Eric to implement
an alleged agreement between the parties of 11 June 1996 by executing and delivering a valid
disposition of these subjects to Lachlan. There is another action in the Court of
Session ("the second Court of Session action") which relates to an undertaking
allegedly given by Eric to Lachlan relating to payment following
the sale of a property in Bellshill.
[2] The
dispute which came before me at proof before answer is focused in a Minute and
Answers lodged within the process of the first Court of Session action. Stated shortly, in the Minute (No.21 of
process), as amended at the bar, Lachlan seeks declarator that correspondence
passing between agents for Lachlan and Eric between 25 April and
25 August 2005 and a telephone conversation of 15 June 2005
constitutes a binding contract for the extrajudicial settlement of the first
Court of Session action. Consequent upon
this, Lachlan seeks a sist to allow settlement to be
implemented in terms of the binding contract entered into by the parties, or
alternatively decree for specific implement of that contract. Alternatively, Lachlan
seeks declarator that by contract entered into by the parties themselves by
word of mouth in October 2005 the parties reached agreement in the compromise
of the first Court of Session action.
Again, consequent upon this declarator Lachlan
seeks a sist to allow settlement to be implemented, or alternatively decree for
specific implement of that contract.
Eric's position in answer is simply that there has been no binding
contract between agents or between parties themselves for the settlement of the
first Court of Session action;
therefore, that action not having been settled by compromise, the Minute
should be dismissed and the action should be allowed to proceed to its
conclusion.
The evidence
[3] Five witnesses gave
evidence. First, Mr Kenneth Lang,
who was aged 41 and had been a practising solicitor since about 1989. He specialised in civil litigation, and had
been an employee of Mellicks, Solicitors from about 1989 until about 1998, when
he became a partner of that firm. In
about 1998 he was instructed to act on behalf of Lachlan,
in both the Sheriff Court
action and the first Court of Session action.
He also acted on behalf of Lachlan in the second
Court of Session action. He withdrew
from acting after the dispute arose which is focused in the present
Minute. Second, Lachlan
himself, who was aged 50 and the brother of Eric. Third, Mr Kenneth Bonnington,
aged 51, who was a qualified solicitor and had been a partner of Cartys,
Solicitors, Wishaw for the last twenty six years. He was instructed to act on behalf of Lachlan's
wife Lila in connection with the Sheriff Court
action, and made an application on her behalf in the Sheriff
Court process to allow her to be joined as a third
party minuter. Fourth, Derek Livingston,
who was aged 48 and had been a partner in Naftalin Duncan, Solicitors
since 1981. He was instructed by Eric to
act on his behalf in the first and second Court of Session actions, but was not
instructed in the Sheriff Court
action. The final witness was Eric, who
was aged 58 and not employed.
Evidence
relating to an alleged agreement between agents, which is the subject of the
first crave of the Minute
[4] Mr Lang stated that he
was the author of the letter dated 25 April
2005 (No.6/4 of process).
This letter was written following some correspondence between
Mr Lang and Golds, Solicitors who acted on behalf of Eric in the Sheriff
Court action.
In this letter, addressed to Mr Livingston, Mr Lang indicated
that without instructions from his client he considered that "as responsible
agents we really ought to make a further attempt to see if the matter was
capable of extrajudicial settlement". In
this letter he set out two proposals, in the following terms:
"Firstly, an
amount of £110,000 would be paid to Eric McFarlane for his interest in 204 Alexander
Street, and in exchange title would be
transferred. Furthermore, both the Sheriff
Court action and the Court of Session case
pertaining to 204 Alexander Street
would be dismissed. In other words this
proposal would result in the Court of Session undertaking action remaining
'live'. Alternatively, it was suggested
that title to 204 Alexander Street
would be transferred for no consideration with all court actions between the
parties being brought to an end. In
addition, Lachlan McFarlane would forego any interest he may have in the estate
of the parties' mother."
The letter went on as follows:
"... obviously
were the proposals set out in this letter to be unacceptable, it would be of
assistance for Eric McFarlane to set out any offer he has to make. Failing extrajudicial settlement it is of
course inevitable that all litigations will continue apace. I look forward to hearing from you."
Mr Lang explained in evidence
that he was trying to engender discussions by sending this letter.
[5] Mr Livingston
replied by letter dated 11 May
2005 (No.6/5 of process). In
this letter Mr Livingston makes it clear that he writes with the authority
of Eric and states that he has "discussed matters with my client at some length
here". This letter is at the centre of
the claim in the first crave of the Minute, and I therefore set out its terms
in full:
"I assume the
intention is that my client will transfer his whole title and interest at 204
Alexander Street to your client. My client informs me that, in his opinion,
this is worth a minimum of £250,000. I
understand that in 1998 the house alone was valued at £110,000 and, in
addition, there are parcels of land there.
My client would however be prepared to accept £200,000 to resolve the matter. Alternatively, bearing in mind that your
client has indicated that his offer is made on the basis of what the property
is worth, my client would be willing to enter into an agreement whereby the
subjects would be valued at market value by a firm of surveyors and your client
would agree to pay whatever that valuation came to and my client would accept
it. This would be on the understanding
that your firm would provide three firms of surveyors and my client could chose
one of them. The costs of the survey
would be split equally.
The sum paid by
your client would be in full and final settlement of the existing Court of
Session action at the instance of your client relative to 204 Alexander
Street and also the Hamilton
Sheriff Court action. If your client wishes to persist with the
other action in the Court of Session, that will obviously be a matter for him.
I should be
grateful if you could revert to me regarding which, if either, of these
proposals is acceptable to your client or whether we are going to require to
bring the Court of Session action relative to Alexander
Street to a conclusion through the litigation
process."
[6] Mr Lang
stated that he understood this to be an offer of two possible methods whereby
the extrajudicial settlement of the Hamilton Sheriff
Court action and the first Court of Session action
might be achieved. On receipt of this
letter Mr Lang took Lachlan's instructions, and
then there was a telephone conversation between Mr Lang and
Mr Livingston on 15 June 2005. Although Mr Lang had looked for a file
note setting out the terms of this conversation, he could not find it. However, he remembered the terms of the
conversation, during the course of which he explained to Mr Livingston
that Lachlan was not prepared to pay £200,000 but he was prepared to accept the
alternative proposal that the subjects would be valued at market value by a
firm of surveyors chosen by Eric from a list of three firms of surveyors to be
provided by Mellicks. Mr Lang had
taken instructions from Lachlan before this telephone
conversation, and had been instructed by him to accept the alternative
proposal. This would result in
settlement of the Sheriff Court
action and the first Court of Session action, leaving the second Court of
Session action to proceed to a conclusion.
(There was no discussion about the expenses of the actions, because any
question of expenses was academic, Lachlan being in
receipt of legal aid in both the Sheriff Court
and the Court of Session actions and Eric being legally aided in the Court of
Session actions). Mr Livingston
asked Mr Lang to revert to him with a list of three possible firms of
surveyors. There was no suggestion that
there were any other outstanding matters to be dealt with, and Mr Lang's
understanding was that at last, after many years of acrimonious litigation,
there was an agreement in place to resolve the Sheriff
Court action and the first Court of Session
action.
[7] By
letter dated 21 June 2005
Mr Lang wrote to Mr Livingston suggesting three firms of surveyors
(No.6/7 of process). (None of the
witnesses could shed any light as to the authorship of the handwritten
interlineations on the copy letter which is No.6/7 of process). By letter of the following date
Mr Livingston replied to Mr Lang (No.6/8 of process) asking him for
the avoidance of doubt to confirm that Lachlan was agreeable to the matter
being put out to survey on the basis set out in the letter dated 11 May
2005, the cost of the survey to be split equally and Lachlan would then make
payment in full and final settlement of the existing court action at the
instance of Lachlan relative to 204 Alexander Street and the Hamilton
Sheriff Court action at the instance of Eric relative to both properties, and
to confirm exactly when Lachlan would propose that he would be in a position to
make such settlement. Mr Livingston
stated that he had covered all these matters in the telephone conversation of
15 June. In answer to a question
from the court, Mr Lang did not remember that the question of date of
payment had ever been raised before this letter. There was no suggestion of any pressure of
time with regard to payment, and he did not recollect the date of payment being
raised as an issue before this date.
[8] Mr Lang
then went on holiday, and on his return he had a further telephone conversation
with Mr Livingston on 16 August
2005 (No.6/6 of process is a copy of the file note). In this conversation Mr Livingston put
forward a further proposal, namely that Eric would be prepared to accept
£150,000 in payment for the house provided that this was done before the end of
August. Mr Lang took Lachlan's
instructions on this, and these were that Lachlan "was
happy to proceed with the original agreement, namely that the house would get
valued and this would be binding".
[9] On
25 August 2005 Mr Lang wrote again to Mr Livingston (No.6/9 of
process) stating that Lachlan was not prepared to agree a valuation of
£150,000, but he was happy to proceed on the basis of a joint valuation of the
subjects with parties then being bound by the figure arrived at. This letter appended details of three firms
of chartered surveyors (one of which was different from the suggestion in 6/7
of process). Mr Livingston replied
by letter dated 7 September 2005
in the following terms:
"We refer to the
above and to previous correspondence relative to 204 Alexander
Street.
Bearing in mind the delays which have already taken place here without
any substantive response having been received until very recently our client
has now decided that he is dissatisfied with the length of time negotiations
are taking and his position is that as far as he is concerned he is not
prepared to sell the property for any less than £150,000. In these circumstances he is looking for
agreement to be reached regarding this within the course of the next
7 days failing which his position is that he is not prepared to negotiate
further regarding the matter. If we hear
from you within the course of the next 7 days confirming your client will pay
the sum of £150,000 then we should be able to move matters on regarding dates
of entry etc. Otherwise it would seem
that the present negotiations are at an end."
[10] Mr Lang stated in evidence that he was surprised by this
letter, because he had considered the matter to be resolved. There were no negotiations ongoing after the
telephone conversation of 15 June
2005 - Lachlan had rejected the later
suggestion of a fixed price of £150,000, and parties had already agreed both
the principle and the mechanism for settlement.
[11] In cross-examination Mr Lang explained the background to
the Sheriff Court action as
follows. Title to the subjects at 204 Alexander
Street, Wishaw was in Eric's name. The property was derelict and under threat of
demolition. It was agreed between Eric
and Lachlan that Lachlan would
renovate the house to mortgageable condition, and when Lachlan
could obtain a mortgage, Eric would transfer title to the property to Lachlan
for the sum of £60,000, with Lachlan foregoing any claim
on his mother's estate. This agreement,
which was reached in about 1996, formed the basis of Lachlan's
defence to the Sheriff Court
action. There were four days of proof in
that action in March and July 2002, but with further days of proof required,
the action was sisted at the instance of Eric and remains sisted. Mr Lang confirmed that he had
discussions with Tracy Campbell of Golds as shown in Nos.7/29 and 7/31 of
process, but at this time Tracy Campbell did not have Eric's instructions to
settle. After the four days of proof,
Lila McFarlane, who was Lachlan's wife, entered the Sheriff
Court process as a party minuter to assert her
rights under the Matrimonial Homes Act. Mr Lang
was aware that Lachlan would not be prepared to abandon
the second Court of Session action without consideration. He reiterated that the question of the date
of payment of the price brought out in the agreed valuation was never
discussed; the first time that date of
payment was raised was in Mr Livingston's letter dated 22 June 2005, by which time Mr Lang
considered that a concluded agreement had been reached. He denied that the file note of the telephone
conversation on 16 August 2005 (No.6/6 of process) showed that he was
still negotiating with Mr Livingston - this merely indicated that he had
instructions from Lachlan to proceed with the agreement on the second option,
but Eric was making a new and entirely separate proposal for a fixed price
settlement of £150,000 and it was this on which Mr Lang was to take
instructions from Lachlan. Mr Lang's
response to the letter of 7 September 2005 was contained in a letter of
the following day (No.7/21 of process) in which he indicated that he regarded
Eric's position as set down in the letter of 7 September 2005 as somewhat
disingenuous, and that Lachlan "is prepared to adhere to the agreement reached
between parties which would enable this longstanding dispute to be resolved in
relatively short compass".
[12] Mr Lang accepted that there was no discussion as to who
should be parties to a disposition of the subjects, nor any discussion as to
the date or method of payment, but he did not consider that these matters were
necessary for a concluded agreement for the compromise of these two
actions. It was put to him that all that
had been agreed was a framework for agreeing the price of the property, but
thereafter there was no agreement as to how the sale should be implement, but
he disagreed with this and expressed the view that the agreement which had been
reached was broader than this and encapsulated settlement of the Sheriff Court
action and the first Court of Session action.
It was always agreed that the subjects comprised both house and land -
there was never any suggestion that any land should be hived off. Mr Livingston never raised the question
of the expenses of either action at any stage before Mr Lang withdrew from
acting when he realised that he might be a witness in these proceedings. None of the matters referred to at
page 11C of the amended Record on the Minute and Answers was the subject
of discussion (i.e. the parties to the disposition, the date and method of
payment, date of entry, clear title, effect of building warrants, effect of
non-payment and a method of carrying out the transaction which satisfied the
Requirements of Writing (Scotland) Act 1995.)
None of these matters were the sort of things that he would expect to be
the subject of an agreement to compromise an action. Mr Lang had been involved professionally
in several litigations in which heritable property was involved and in which
settlement had been agreed. In none of
these litigations had the formal details of conveyancing been discussed, and
Mr Lang had not involved himself in the formalities of conveyancing.
[13] Lachlan gave evidence that he had seen
the documents which were Nos.6/4 - 6/10 inclusive before. Mr Lang had told him of the proposals
contained in the letter of 11 May
2005, and Lachlan had instructed him to
accept the alternative proposal. He
expressly instructed Mr Lang that he would not drop the second Court of
Session action as part of any settlement agreement, but subject to this he
instructed Mr Lang to revert to Mr Livingston to accept the
alternative proposal. He had seen the
letter of 21 June 2005
in which Mr Lang suggested three firms of surveyors to value the property,
and he was content with this. Although
he was not present, he understood that Mr Lang had discussed the
alternative proposal with Mr Livingston, and Mr Lang had told him
that he had reached a genuine agreement with Mr Livingston whereby
whatever surveyor they chose, he would be bound to pay the sum brought out as
the valuation of the property, and he was told that "the deal was done". He was not aware of any other matters that
had to be dealt with, and he understood that the valuation was to be of both
the house and the land. He was
subsequently shown the letter of 7 September
2005 (No.6/10), but he described this as "moving the goal posts"; he was definitely of the opinion that an
agreement had already been reached, and this letter caused him surprise. He was not prepared to agree to the new
proposal contained in this letter. The
second file note of 16 August
2005 (No.6/6 of process) was an accurate reflection of his
conversation with Mr Lang on that day.
[14] Mr Livingston stated that he was instructed by Eric
shortly after the first Court of Session action was raised, and although he was
aware that there was a Sheriff Court
action he had no involvement in it.
Before the letter of 25 April
2005 (No.6/4 of process) he had not had any communication with
Mr Lang regarding any of the actions, although he was aware that there had
been discussions between Mellicks and Golds regarding settlement. Having received the letter of 25 April 2005, he took
instructions from Eric and the letter of 11 May 2005 was shown to Eric before it was sent and
he confirmed that it accorded with his instructions. Mr Livingston thought that the first
option (with a figure of £200,000) would be Eric's suggestion, and the alternative
valuation method would be Mr Livingston's.
[15] He remembered the telephone conversation between Mr Lang
and himself and he accepted that this happened on or about 15 June 2005, although he did not take a
note of the conversation. His
recollection was that Lachlan would go for the survey
option; he thought that the entire
telephone conversation was fairly brief.
As a result of this conversation he felt that they were getting
somewhere, and it appeared that one of the main points of an agreement was coming
into place, namely a mechanism for agreeing a price. He acknowledged that he received the letter
of 21 June 2005, a
copy of which was 6/7 of process, but he had never seen the manuscript
additions to that copy and did not recognise the handwriting. He did not have instructions to select one of
these firms; he wrote the letter of 22 June 2005 because he regarded
Mr Lang's letter of 21 June
2005 as quite inspecific and he did not want to incur the expense
of instructing a surveyor and then finding that there was no settlement agreement
in place. Mr Lang had not said that
he fully accepted the alternative proposal put forward in the letter of 11 May 2005, and there had been
no discussion regarding a date of entry or other technicalities which one would
expect to see in missives. Although Eric
was quite happy to have a surveyor's valuation, Mr Livingston commented
that "there were a lot of i's to be dotted and t's to be crossed".
[16] Mr Livingston remembered his telephone conversation with
Mr Lang on 16 August 2005,
and confirmed that Mr Lang's file note (No.6/6 of process) accords with
his recollection of this conversation.
He observed that they were still negotiating at this time, and he had
received no response to the matters set out in his letter of 22 June. He was still looking for a date for payment
in his letter of 7 September 2005, and he observed that although he was
not a conveyancer, missives are not normally agreed just on the basis of price.
[17] In cross-examination Mr Livingston confirmed that the
first time that the question of the date of payment of the sum brought out by
the valuation was raised was in the letter of 22 June 2005.
He did not raise this in his letter of 11 May 2005 because there was no point in dealing with
other such details as one would expect to see in missives - this was simply an
initial negotiation. He did not raise
the question of the date of payment because he wanted to get the mechanism for
achieving a price agreed before other details which one would expect to see in missives
were agreed. He would expect to see a
specific price and a date of entry and a specified rate of interest in the
event of default, all being spelt out in a joint minute to settle an
action. Although he accepted that Mr
Lang told him in the telephone conversation of 15 June 2005 that Lachlan
found the second proposal in the letter of 11 May 2005 acceptable, he expected Mr Lang to
write to him. He did not think that he
raised the question of the timing of the payment of the price with
Mr Lang. The first time that this
was raised was in the letter of 22 June
2005. He accepted that the
file note of the telephone conversation on 16 August 2005 was an accurate record of that
conversation, but he could not explain why he did not raise the issue of time
of payment at that time, except to say that he was looking to Mr Lang to
confirm this in writing. He did not
believe that there was any agreement at that stage, and his main purpose in
telephoning Mr Lang was to put the new proposal for settlement at a fixed
price of £150,000 to him. He accepted
that he may not have used the word "negotiations" until the letter of
7 September 2005, but he pointed out that he did use the words "without
prejudice" and also "proposals". He
considered that there was no binding agreement between himself and Mr Lang
on behalf of their respective clients for a number of reasons - the lack of a
date of entry, the question of time for payment of the price, and the fact that
the provisions of the Requirements of Writing Act were not fulfilled. There was therefore no formal binding
agreement.
[18] In answer to questions from the court, Mr Livingston
stated that he would expect to see all the provisions that one would normally
see in missives in an agreement for compromise of an action. He distinguished an agreement to compromise
an action which did not involve heritable property and one which did involve
heritable property. In the latter case,
he would expect to see most of what one would see in missives in an agreement
to compromise an action. He would expect
to see an exchange of formal letters, with express provision as to who the
parties were, clear provision as to the date of entry, clear provision as to
the price, a clear mechanism as to how the price was to be ascertained, and
probably provision for payment of interest (although it could still be "a
binding missive" without provision for interest and without provision for
risk). He was asked to comment on a
situation whereby an action which involved heritable property was settled by
two counsel reaching an oral agreement in Parliament Hall; he expressed the view that at the very least
he would expect them to reach agreement regarding date of entry and date of
payment, and an exchange of formal written letters contained in either a joint minute
or an exchange of missives.
[19] Eric McFarlane confirmed in his evidence that the letter of 11 May 2005 (No.6/5 of process)
was written on his instructions and with his knowledge. The alternative proposal accurately reflected
his instructions; once the solicitors
had tied up the loose ends, he expected that they would get the property
surveyed and Lachlan would pay the price. He remembered making an appointment to see
Mr Livingston and asking him why it was taking so long, and
Mr Livingston told him that until he got answers, he was not letting him
get into a position where they were only half way to a settlement. Eric's concern throughout was where Lachlan
was going to find the money to pay the price;
Mr Livingston told him that he could not insist on knowing where
the money was coming from, but he did need to be convinced that the money was
available. Eventually Eric lost patience
with the delay, and the letter of 7 September
2005 was in accordance with his instructions. After he was shown Mr Lang's letter of 8 September 2005 (No.7/21 of
process) he determined that he would authorise no further negotiations through
Mr Livingston.
[20] In cross-examination Eric could not remember Mr Livingston
telling him that he had talked to Mr Lang on the telephone. He could not remember when he had the meeting
with Mr Livingston in which he queried the delay and Mr Livingston
told him that he would not let him get into a position whereby there was no date
for payment agreed, although he guessed that this would be in June 2005 and it
was certainly later than 11 May
2005. He was asked whether
the question of when the money would be paid had ever been raised, but he could
not remember dates. He was, however,
aware that three surveyors had been suggested by Mr Lang in the letter of 21 June 2005.
Evidence
relating to an alleged oral agreement between the parties themselves in October
2005 which is the subject of the fourth crave of the Minute
[21] Lachlan
stated that after the correspondence in September 2005 he wanted to see if any
further steps could be taken to settle the actions. A diet of proof was fixed in the first Court
of Session action for a date in November 2005.
In early October 2005 he telephoned Eric one evening, at about 7.00pm or 8.00pm.
Heated words were exchanged, but by the
end of the telephone conversation they had reached a verbal agreement to bring
matters to an end without the need for solicitors. They agreed that Lachlan
would instruct his solicitors in the next day or two to make a formal offer to
pay the sum of £135,000 to Eric in return for title to the subjects at 204 Alexander
Street, Wishaw, and the first Court of Session
action and the Sheriff Court
action would proceed no further. There
was no specific discussion about where the money would come from, and Eric did
not indicate that he required the money to come from a specific source. At the end of this telephone conversation Lachlan
was in no doubt that an agreement had definitely been concluded between him and
Eric on these terms. There was another
person in Lachlan's house when he made this telephone
call, but Lachlan asked him to remove himself during the
call; at the end of the call Lachlan
told this person that he had at last reached agreement with his brother. (This person was not called as a witness at
the proof). Lachlan
also told his wife that he had reached agreement with Eric on these terms.
[22] In cross-examination, Lachlan accepted
that this telephone conversation probably occurred on 5 October 2005, and that he and his brother had a
heated conversation. It was put to him
that he had mentioned the sum of £135,000 but that Eric had replied that he
would not accept this, and in any event that any offer would have to be made in
writing; Lachlan
denied this and said that Eric had told him that he was going to do him a
favour. The agreement was for the sum of
£135,000 to be paid to Eric, and for the Sheriff Court
action and the first Court of Session action to proceed no further: the agreement did not extend to the second
Court of Session action. Shortly after
this telephone conversation Lachlan spoke to
Mr Lang and it was agreed that Lachlan's wife's
solicitor would make an offer to Eric's solicitor. Lachlan remembered
Mr Lang telling him that Eric was insisting on both Court of Session
actions being dropped, but this would never have been acceptable to Lachlan.
[23] Mr Lang stated that on 6 October 2005 he received a telephone call from Lachlan
to the effect that he had discussed matters with Eric, that Eric had reiterated
that he wanted payment of £150,000, but that after discussion over the
telephone the brothers had agreed that the price should be £135,000. Thereafter Mr Lang spoke to
Mr Livingston, and told him that he understood that the brothers had
agreed that the Sheriff Court action and the first Court of Session action
would settle in return for payment of £135,000 and a transfer of clear title to
the subjects. Mr Livingston
eventually replied indicating that Eric's understanding was that the figure of
£135,000 would be paid in return for settlement of all three cases (including
the second Court of Session action).
Mr Lang took Lachlan's instructions on this,
and Lachlan told him that this was not the agreement,
and that he would not have agreed to include the second Court of Session
action. Nothing further happened, and
Mr Lang withdrew from acting on behalf of Lachlan
when it became clear that he might require to be a witness in these
proceedings. His understanding of the
agreement which had been reached between the brothers was that the price to be
paid for the subjects was a fixed price of £135,000.
[24] Eric stated that before the telephone conversation on 5 October 2005 he had not spoken
to Lachlan, either face to face or over the phone, for
many years. He gave a tearful
explanation of Lachlan having put a gun to his head when
he was in his mother's house in 1997, and that relations between the two
brothers had broken down after this. He
stated that on 5 October 2005
he was asleep and was awakened by the telephone ringing. The caller was Lachlan
who was abusive towards him and swore at him.
Lachlan offered to pay him £110,000 and he would
drop the two Court of Session actions in return for title to the whole
subjects. After about ten minutes
conversation, Lachlan increased his offer to £115,000,
and then to £120,000. Eric stated that
his response was that any offer would have to be put in writing, but that the
figures suggested were not acceptable.
The conversation ended with Lachlan offering
£125,000, with a possible further £5,000 in cash, and dropping both Court of
Session actions, in return for title to the subjects. Eric was quite certain that there was never
any mention of the Sheriff Court
action being dropped. Eric was adamant
that Lachlan never offered him £135,000. When his wife returned later that evening he
told her what had happened. (Eric's wife
was not called as a witness at the proof.)
On the following day Eric telephoned Mr Livingston, who was
out; when Mr Livingston returned
his call, Eric told him the terms of the conversation. Despite the terms of Mr Livingston's
file note of 7 October 2005
(No.7/23 of process) Eric was adamant that the figure of £135,000 was never
mentioned. With regard to the letter
from Mr Livingston to him dated 12 October 2005 (No.7/25 of process)
Eric was prepared to accept the first two items (although these were not the
subject of discussions with Lachlan);
items 3 and 5 had never been discussed, item 4 was what
Lachlan proposed, and item 6 was drafted by Mr Livingston. Eric denied under cross-examination that his
recollection of the telephone conversation with Lachlan
on 5 October 2005 was
vague - he observed that it burned into him, and there was no possibility that
his recollection was wrong, nor that there had been any misunderstanding.
[25] Mr Livingston remembered Eric telephoning him and telling
him about a telephone conversation which he had had with Eric on about
5 October 2005. Eric had told him
that Lachlan had given him a certain amount of abuse,
and had offered to pay him £135,000 and to drop both Court of Session actions
in return for title to the property.
Mr Livingston confirmed that Nos.7/23 and 7/24 of process were file
notes of telephone conversations which he had with Mr Lang. He confirmed that he had written the letter
dated 12 October 2005
to Eric (No.7/25 of process) which set out his understanding of Eric's
instructions. He then became aware of
Carty's letter to Golds dated 10 October
2005 (part of No.7/26 of process), and became concerned as to who
would be paying the price for the subjects, Lachlan or
his wife Lila. Although
Mr Livingston had discussions with Mr Lang, these came to nothing
because Mr Lang's instructions were that the second Court of Session action
would be continuing, whereas Eric's understanding of what was being offered was
that both Court of Session actions would be dropped.
[26] Kenneth Bonnington of Carty's acted on behalf of Lila
McFarlane; his instructions were
confined to protecting her rights under the Matrimonial Homes Act to the
subjects. He first became involved in
about 2003 or possibly 2004, when the Sheriff Court
action was sisted after the four days of proof which had been heard in
2002. He lodged a Minute on behalf of
Lila McFarlane in the Sheriff Court
action. He wrote the letter dated 10 October 2005 to Golds (part
of No.7/26 of process). Lila McFarlane
instructed him to write this letter because the level of animosity between the
two brothers was such that an offer from Lila was more likely to be accepted
than an offer from Lachlan. Lila McFarlane told him that the sum of
£135,000 was likely to be acceptable.
Mr Bonnington had no first hand knowledge of any discussions
between Lachlan and Eric. It was Lila McFarlane, not Lachlan,
that instructed him to write this letter, and his knowledge of the various
disputes between the parties was confined to Lila's involvement in the Sheriff
Court action.
He did not really know any details about the two Court of Session
actions.
Submissions for Lachlan
[27] Counsel for Lachlan
moved me to sustain his first plea-in-law and grant decree as first and second
craved, and to repel the defender's first and second pleas-in-law. In the event that I was not prepared to grant
the second crave, he sought decree in terms of the first and third craves. In the event that I was not prepared to
accede to either of these motions, he moved me to sustain the second
plea-in-law for the pursuer and to grant decree in terms of the fourth and
fifth craves; and in the event that I
was not prepared to grant decree as fifth craved, he moved me to grant decree
as fourth and sixth craved.
[28] Counsel submitted that the correspondence and the evidence of
Mr Lang and Mr Livingston clearly showed that the letters and the
telephone conversation of 15 June 2005 constituted a concluded binding
contract on behalf of the pursuer and the defender by their agents for the
compromise of this action by way of a transfer of the heritable property at
204 Alexander Street, Wishaw at a price to be fixed by an independent
surveyor to be appointed at the instance of the defender, with the result that
the first Court of Session action and the Sheriff Court action would be
disposed of by way of absolvitor with
no expenses due to or by either party.
He submitted that it was not necessary for such a contract to be set out
in a joint minute, nor to have the authority of the court interponed
thereto; any form of binding agreement
was sufficient to compromise an action.
In support of this he referred to Gloag
on Contract at pps.43/44, and Murphy
v Smith 1920 S.C. 104. An informal exchange of letters, or a
combination of informal writings and verbal agreement, was sufficient - see Love v Marshall (1872)
10 M. 795; Anderson v Dick
(1901) 4 F. 68. This remains the case
even where the action, or the settlement thereof, involves transfer of
heritable property - Gloag on Contract
at p.164; Torbat v Torbat's Trustees
1906 14 S.L.T. 830. The details set
forth in the defender's pleadings at Answer 5, such as the date and method
of payment, date of entry, clear title, effect of building warrants, and a
method of carrying out the transaction which satisfied the Requirements of
Writing (Scotland) Act 1995 were irrelevant.
[29] The only matters which required to be agreed for a binding
contract to be concluded were the parties, the price and the property. In the present case, the parties were clearly
Lachlan and Eric - Carty's letter of 10 October was
not relevant. The property was clearly 204 Alexander
Street, Wishaw, and it was clear that everyone was
agreed that this meant both the house and land at that address. So far as the price was concerned, a clear
agreement was reached as to a specific method of ascertaining the price, as set
out in the letter of 11 May 2005,
the telephone conversation of 15 June
2005 and subsequent correspondence.
The mechanism for reaching the price was quite clear. Counsel referred to Cusine and Rennie on Missives at paras.4.06 and 4.09, and NJ and J MacFarlane (Developments) Limited
v MacSween's Trustees 1999 S.L.T.
619. Mr Livingston appeared to
focus on the absence of a specific agreement as to date of payment and date of
entry, but these are not essential elements even in a contract for the sale of
heritage, let alone a contract for the compromise of a court action: Rodger
(Builders) Limited v Fawdry 1950 SC 483; Gordon District Council v Wimpey
Homes Holdings Limited 1988 S.L.T. 481.
If the court was satisfied that there was consensus, this could be
achieved by informal writings and telephone conversations, and all the
requirements for the sale of heritage were present.
[30] With regard to the telephone conversation on 5 October 2005, the same
submissions applied. If the court was
satisfied that there was consensus, there was sufficient to constitute a
binding agreement to compromise the action.
Both parties understood by this time that any method of disposal of the
action by the earlier agreement was not going to happen, and reached agreement
on new terms verbally.
[31] Counsel submitted that all the witnesses gave evidence to the
best of their ability. There was no
dispute in the evidence that the averments in statement 5 of the Minute
were accurate - the only dispute was that Mr Lang believed that this
constituted a binding agreement, whereas Mr Livingston believed that there
was never any binding agreement. The
subjective beliefs of these witnesses are irrelevant, because the court must
look at the matter objectively. Looked
at in this light, a concluded agreement was reached.
[32] If it was necessary to look to the telephone conversation in
October 2005, counsel invited me to prefer the evidence of Lachlan
to that of Eric. Lachlan's
account received some support from Mr Livingston's letter of 12 October 2005 (No.7/25 of
process). Where there was a conflict
between the two brothers, the court should prefer Lachlan's
evidence. Eric was very emotional in
giving his evidence; his recollection
was vague on many points and clearly affected by emotion.
Submissions for Eric
[33] Counsel for Eric invited me
to repel the minuter's first, second and third pleas-in-law, to sustain the
respondent's first and second pleas-in-law and to dismiss the Minute. He made three submissions, as follows:
(i) The pursuer's case based
on the first agreement was fundamentally irrelevant, because it was superseded
by the second agreement.
(ii) The minuter has failed
to establish with regard to the first agreement that the parties had made a
binding contract of compromise by means of the letter of 11 May 2005 and the telephone conversation
of 16 June 2005.
(iii) The minuter has failed
to establish that he concluded a contract of compromise with the respondent by
telephone conversation on about 5 October 2005.
[34] Counsel accepted that in a contract for the compromise of court
proceedings there was no need for any particular formalities, and that the
requirements of Writing (Scotland)
Act 1995 did not apply to such a contract, nor were there the requirements
which one would need in order to constitute a valid exchange of missives. The critical issue in the present case is
whether, viewed objectively, a concluded agreement was reached by means of the
letter of 11 May 2005
and the telephone conversation of 15 June
2005, or by the telephone conversation of 5 October 2005. A contract must be construed objectively,
according to the standards of a reasonable man who is aware of the commercial
context, and it is permissible in construing a contract to have regard to the
circumstances in which it came to be concluded for the purpose of discovering
the facts to which the contract refers and its commercial purposes, objectively
considered: Middlebank Limited v The
University of Dundee and Another [2006] CSOH 202.
[35] As a matter of law, where a pursuer avers two alternative
cases, counsel submitted that the implication of the second alternative is that
there has been supersession of the first agreement. In the present Minute, Lachlan
is offering to prove the second agreement, and therefore as a matter of law he
is not relying on the first agreement, and he must stand or fall on the
alternative case.
[36] In any event, the minuter has failed to establish that a
binding contract of compromise was concluded between Mr Lang and
Mr Livingston. Mr Lang's
position was that what was set out in the letter of 11 May 2005 was sufficient
to constitute a binding offer which he was entitled to accept by his telephone
call of 15 June, and thereafter there was no obligation on him to agree
any further terms and in particular no obligation to agree the date of the
payment of the price for the subjects.
[37] Counsel submitted that Mr Lang could not be relied
upon in this regard, particularly when
regard is had to the surrounding circumstances.
There were four aspects of these circumstances to which counsel pointed:
(i) There had been
considerable pre-existing correspondence between Golds (acting on behalf of
Eric in the Sheriff Court Action) and Mellicks between about 29 March and 11 April 2005, which had not
resulted in settlement (Nos 7/29 to 7/31 of process).
(ii) By comparison, the
discussions between Mr Lang and Mr Livingston which are alleged to
have resulted in settlement were surprisingly brief, being the letters of
25 April and 11 May and the telephone conversation of 15 June 2005.
(iii) In the letter of 22 June 2005, Mr Livingston
appears to be continuing with the pre-existing negotiations; he seeks confirmation of the basis on which
the matter was to be put out to survey, and confirmation of the date of
payment.
(iv) After the telephone
conversation in October 2005 Lachlan told Mr Lang
about the conversation and Mr Lang told him to get on with it. This was consistent with there having been no
concluded contract, and the parties still being engaged in a course of
negotiations.
[38] Counsel submitted that the averments in statement 5 of the
minute were not borne out by Mr Lang's evidence - Mr Lang did not use the
words "settlement" when referring to the letter of 11 May 2005.
However, he conceded that not all of the averments in answer 5 had been
borne out by the evidence, and that on the evidence the transfer of the
property would have been from the respondent to the minuter. Looking to the terms of the third crave, the
minuter was still not seeking declarator as to when payment would be made; an interlocutor pronouncing decree in terms
of the third crave would therefore be incomplete, and counsel sought to draw
the inference that there was not a concluded and binding contract by the end of
the telephone conversation of 15 June.
Moreover, the third crave goes too far in seeking a valid marketable
title to the subjects - even if there was a contract, all that the minuter
would be entitled to would be the defender's whole right title and interest in
the subjects.
[39] In assessing whether the parties had reached a binding
agreement when viewed objectively, it was open to the court to look to
subsequent correspondence, including the letter from Mr Livingston to Eric
dated 12 October 2005
(No. 7/25 of process). This letter set
out the sort of conditions which might be expected between two experienced
litigation solicitors. Mr Lang's
evidence that this was done simply by the letter of 11 May 2005 and the subsequent telephone conversation
was unreliable. Counsel accepted that a
date of entry was not necessary for a binding contract of compromise to be
concluded, but the date and method of payment were fundamental to such a contract. It should be remembered that both parties
were in receipt of legal aid; the
question of how any settlement would be funded was bound to be a matter of
concern. Looking to the averments in
answer 5 to the minute, counsel did not found on the need for agreement as to
clear title, the effect of a building warrant or the effect of non-payment, nor
did counsel rely on the standard security apparently held by Golds over the
subjects, about which no evidence had been led.
However, what was required for any agreement to be concluded was
agreement that there would be either an exchange of missives or delivery of a
disposition. The fact that neither
Mr Lang nor Mr Livingston had kept a record of the telephone
conversation of 15 June might suggest that this was not the final step in
concluding a contract, but merely another stage in negotiations which would
require further work before the dispute could be resolved. Objectively construed, the letter of
11 May and the telephone conversation of 15 June amounted to no more
than a framework agreement which might become the basis for a binding contract
of compromise, but it did not contain provision as to the date of payment of
the price, and this was an essential term of the contract. As a matter of law, the date of payment is an
essential term in all contracts for compromise of court actions, and is a
requirement for finality; without it,
there can be no concluded agreement. In
any event, even if this submission was wrong, the absence of a term stating the
date of payment is a relevant circumstance in construing whether the parties
intended to reach a concluded contract of compromise.
[40] With regard to the telephone conversation on about
5 October 2005, it was submitted that the minuter had not proved, on the
balance of probabilities, that he had reached a binding agreement with the
respondent at this time. There was no
objective independent corroboration of Lachlan's version
of the telephone conversation. What each
party told their solicitors is not sufficient corroboration. Nothing advanced by either party would
justify the court in preferring the evidence of one brother to that of the
other brother. The onus rested on Lachlan
to establish this contract, and he cannot do this on the basis of his own
evidence alone with no objective method of testing this. Counsel invited me to prefer the evidence of
Eric to that of Lachlan, but in any event, there was not
sufficient evidence to enable Lachlan to discharge the
onus of proof. The letter from Cartys (No
7/26) does not support Lachlan's evidence that he had agreed
the figure of £135,000 with Eric, and this letter undermined Lachlan's
position.
Discussion
[41] Actions which are pending in Scottish Courts are settled
routinely by the most informal methods.
Frequently actions in this court involving large sums of money (and
often involving heritable property) are settled by means of verbal agreement
between counsel or between solicitors, or by means of an informal exchange of
correspondence. Sometimes the agreement
is thereafter set out in more or less formal terms, in a minute of agreement or
a joint minute, but this is far from being the universal practice. There is no requirement in our law for a
particular formality or method of concluding a contract for the compromise of a
court action. It may be that an
agreement concluded informally (and particularly verbally) will be more
difficult to prove and found upon than a more formally constituted agreement,
and may give rise to greater scope for dispute as to its precise terms, but
informality or absence of writing is not a necessary requisite for such a
contract: Gloag on Contract at pages 44/45;
Murphy v Smith; Love v Marshall; Anderson
v Dick.
[42] It would be neither possible nor fruitful to attempt to provide
an exhaustive list of the essential terms of the contract for the compromise of
a court action - each case must depend on its own facts and circumstances. However, it is important to bear in mind that
what is being considered in the present case is not a contract for the transfer
of title to heritable property, nor for the transmission of any real
right; this is a contract for the
compromise of a court action, conferring only personal rights. An agreement that there will be a transfer of
real right in property in the future may be a term of this contract, but it
does not follow that terms which might be essential for such a future transfer
of property are essential in the present contract. It must also be borne in mind that the court
will not make a contract for parties, nor will it create terms in a contract
which one or other party might, with the benefit of hindsight, have preferred
to have included in the contract. In the
present case, the only details which required to be agreed between the parties with
regard to a future transfer of title were (a) the property to be transferred
(b) the price or other consideration, specified either as a fixed and
determinate sum, or to be determined by a clear and unambiguous method, and (c)
the parties to the contract.
[43] Missives for the purchase of heritable property will normally
contain provision for a date of entry and date of payment of the price, and in
many cases there will be provision for payment of interest in the event of
failure to make payment timeously.
However, these are not essential terms in missives, the absence of which
would mean that there was no contract.
As Lord Sorn observed in Rodger
(Builders) Ltd (at page 492):
"In a contract for
the sale of heritage, where it is stipulated that the price is to be paid on a
particular date, payment of the price on the appointed date is not, in general,
an essential condition of the contract, and failure to pay on that date does
not entitled the seller to rescind. But
payment of the price by a fixed date may be made an essential condition of such
contract."
If it is possible to conclude
missives without a date for payment of the price, or without payment of the
price by a specified date being an essential condition of the contract, a fortiori
it is competent to conclude a contract for the compromise of an action without
such a provision. It may well be that
the party presently with title to the heritable property might wish such a
condition to be present, but its presence is not essential for the creation of
a contract to compromise the action.
[44] It should also be remembered that in well recognised
circumstances the courts will be prepared to imply terms into a contract. I was not addressed on this matter by counsel
for either party, and it is therefore not appropriate that I should develop
this matter any further, beyond observing that it may be possible that a court
would imply a term into the present contract that payment of the price should
be made within a reasonable time after the valuation by an independent valuer
has been obtained.
[45] There was not much dispute about the facts relating to an
alleged agreement between agents in the present case. Although Mr Lang was of the opinion that
there was a concluded agreement reached at the end of the telephone
conversation of 15 June 2005, and Mr Livingston was of the opinion
that no concluded agreement had been reached because of the absence of any
agreement as to date of entry and date of payment, and the other formalities
referred to at paragraph [18] hereof, there was no real dispute as to the terms
of the correspondence and discussion between the two agents. Moreover, both counsel in their submissions
before me accepted that the question whether a contract was or was not
concluded was to be answered objectively, and did not depend on the subjective
view of either agent. I am satisfied on
the basis of the evidence led before me that a contract for the compromise of
the first Court of Session action and the Sheriff
Court action was concluded by means of the letter
dated 11 May 2005 (No.
6/5 of process) and the telephone conversation between Mr Lang and
Mr Livingston on 15 June
2005. By the end of that
telephone conversation there was agreement as to the parties, the method of
achieving the price, and the property itself.
Mr Livingston
may have expected there to have been further terms agreed, along the lines set
out in his evidence at paragraph [18] above, but his subjective expectation as
to these matters is not relevant to the question of whether a contract was or
was not concluded, and I am satisfied that his expectation was based on a
misconception as to what was required by way of formalities and essential terms
for a contract for the compromise of a court action. The parties were agreed about all the matters
which had been discussed at that time.
The date of payment had never been raised as an issue, and
Mr Livingston accepted that the first time that this was raised was in the
letter of 22 June 2005 (No. 6/8 of process). By that date the parties had already reached
a concluded agreement, and it was too late (in the absence of a further
agreement) to attempt to stipulate a date by which payment of the price must be
made. Construing the letter of
11 May and the telephone conversation of 15 June objectively, in
their commercial context and against the circumstances of the long history of
the dispute between Lachlan and Eric and the commercial purposes of the
contract, I am satisfied that the two solicitors concluded a binding contract
for the compromise of these actions on 15 June 2005.
[46] The
first submission made by counsel for Eric was that where a pursuer avers two
alternative cases, the implication of the second alternative is that there has
been supersession of the first agreement.
I do not consider that this submission is well founded. It appears to confuse elements of the law of
personal bar with elements of the rule of construction of pleadings relating to
a weaker alternative case. There are no
averments nor any plea-in-law to support a case of personal bar in the present
proceedings, and no doubt it was for this reason that counsel did not submit
that Lachlan was personally barred from
founding on the contract which I have held to have been concluded on 15 June 2005. It is
possible to envisage circumstances in which the evidence might have supported a
case of personal bar or waiver. If for
example there had been a letter from Mr Lang to Mr Livingston in
August or September 2005 acknowledging that Lachlan could not found on any
earlier possible agreement to compromise these actions, or waiving his right to
do so, one could see that such a line of defence might be stateable. Similarly if Lachlan by his words or actions
expressly or impliedly departed from the earlier agreement and acted in such a
way that the only inference which could be drawn was that he had departed from
his right to enforce that agreement, such a line of defence might be
arguable. However, I do not consider
that the evidence amounted to this, and in any event as already observed there
was no case on paper or argued before me that Lachlan was barred from founding on
the earlier agreement. Nothing in the
pleadings or in the evidence regarding what happened after 15 June 2005 provides support for counsel's first submission.
[47] It
follows from the above that I am satisfied that the parties have reached a
binding agreement for the compromise of the first Court of Session action and
the Sheriff Court action. That is enough for the disposal of this
minute and answers. However, as I heard
evidence and submissions about the alleged oral agreement between the parties
themselves in October 2005, it is appropriate that I should summarise briefly
my opinion as to this aspect of the case.
I begin by observing that I found Lachlan to be a much more impressive
witness than Eric. Generally I found Lachlan to be a reasonably credible
and reliable witness. He gave his
evidence quietly and with a calm demeanour, and he appeared to have a clear
recollection of events and was not prone to exaggeration. By contrast, Eric was emotional and on
occasions tearful when giving his evidence;
his recollection differed from that of his solicitor, and he was
surprisingly vague on many matters.
[48] Notwithstanding
my observations about the credibility and reliability of the two parties as
witnesses, the onus of establishing that there was a concluded verbal agreement
reached between the parties in the telephone conversation on 5 October 2005 rests with Lachlan. I am not
satisfied that he has discharged that onus.
Lachlan was adamant in his evidence that he would not have been
prepared to drop the second Court of Session action as part of a deal involving
the sum of £135,000 being paid to Eric.
Eric, on the other hand, maintained that the sum of £135,000 was never
offered by Lachlan, and that in any event, Eric would only have been prepared
to agree to a deal involving both Court of Session actions being dropped. I am prepared to accept (despite Eric's
denial on this point) that in the course of this telephone conversation Lachlan offered the sum of
£135,000. This accords with Lachlan's discussions with Mr Lang
shortly afterwards, and Mr Lang's file note (7/23 of process), and also
Mr Livingston's letter to Eric dated 12 October
2005
(7/25 of process). However, I am not
satisfied that there was truly consensus between the brothers as to what should
happen with the second Court of Session action.
Lachlan maintains that this was excluded from the agreement, whereas
Eric maintains that it was included in the agreement. Eric's position is supported by what he
discussed with Mr Livingston, which is recorded in the letter of 12 October 2005 (7/25 of process). Cartys' letter to Golds dated 10 October
2005 (part of 7/26 of process) provides no support for Lachlan's position, referring
as it does only to settlement of the Sheriff Court action (although
Mr Bonnington was only instructed on behalf of Lila MacFarlane in respect
of that action). Neither the person who
was present in Lachlan's house when the telephone conversation occurred, nor
Lachlan's wife Lila were called as witnesses to support Lachlan's version of
events. In summary therefore, I am not
persuaded that Lachlan has discharged the onus which rests on him of
proving, on the balance of probabilities, that the two brothers reached
consensus as to the terms of an agreement in the course of the telephone
conversation on 5 October 2005.
[49] I shall
therefore sustain the first and third pleas-in-law for the pursuer and minuter,
repel the pleas-in-law for the defender and respondent, and grant decree in
terms of the first crave of the minute.
I shall sist the cause to enable the subjects to be valued in accordance
with the mechanism agreed between the parties, and further to enable the
necessary conveyancing details to be concluded, and a disposition of the
subjects to be executed by the defender and respondent in favour of the pursuer
and minuter (or his nominee) and delivered in return for payment of the
price. The case will be put out By Order
on Wednesday 11 July 2007.
