KKA Ltd v. MacDonald Hotels Ltd [2008] ScotCS CSOH

the defenders would pay the pursuers 3% of the total value of the estimated construction cost of the bedrooms and 4% of the total value of the estimated construction cost for the other parts for which the pursuers' were responsible
the fee would be paid:

i. 25% based on estimated construction costs to be paid by the defenders to the pursuers at submission of planning application stage; and

ii. a further 10% at the planning determination stage.

('the percentage fee arrangement').

[7] The bedroom element was calculated by reference to 3% rather than 4% because an element of repetition benefit was involved. The second stage payment of 10% was payable on determination, that is, irrespective of whether or not planning permission was granted.

[8] The percentage fee arrangement was thereafter applied, in practice, by the parties to the other projects in which the pursuers provided architectural services to the defenders, repeatedly thereafter. The only project in respect of which it was contended by the defenders that it did not apply was the Portal project. The application of the percentage fee arrangement to projects other than the Lymm Hotel project was not recorded in writing; it was simply the way that fees were rendered and paid.

[9] The Portal project originally involved the preparation and submission of a planning application for a hotel of some 155 bedrooms and associated link, conference, leisure and car parking provision. David Aldridge wrote to Jim Busby of the defenders in relation to fees due at that stage by letter dated 5 February 2001, which was in the following terms:

"Dear Jim

PORTAL GOLF & COUNTRY CLUB - PROPOSED HOTEL
Further to our conversation at Craxton Wood regarding the above and my subsequent letter to you outlining the present position (which we were at three months ago), I now enclose our Fee Application no.2113 for architectural services on the above proposed hotel. This is in line with our agreement with yourselves i.e. 25% at Planning Stage.

I trust that you will find this in order. However should you have any queries whatsoever do please give me a call.

Kind regards

Yours sincerely

"VM Aldridge"

pp DAVID ALDRIDGE

KKA"

[10] The enclosed fee application was prepared by David Aldridge and dated 31 January 2001. Its terms included the following:

"Interim Fee No. 1
RIBA Stage D - Scheme Design = 25% basic service

Fee agreed for various elements:

Bedroom block - 3% of estimated value of £4m

Leisure / Conference / Alterations / Extensions - 4% of estimated value of £3m

Interim Fee requested at this stage - 25% of Total fee

Bedroom Block: -£4m x 3% x 25% = £30,000

Leisure. Conf/Alts/Extens -£3m x 3% x 25% = £30,000"

A total fee of £60,000 was thus brought out and VAT was added to it to bring out the sum due at that stage. The defenders paid it.

[11] There was strong public opposition to the scheme that had been submitted for planning approval to the extent that the chief planning officer ultimately asked that the scheme be withdrawn. It was. That happened in about February 2003. There was, accordingly, no determination by the planning authority in respect of that first scheme that was submitted.

[12] The scheme was then scaled down and redrawn by the pursuers and a second scheme for the Portal project was submitted for planning approval. Before carrying out that work for the second scheme, David Aldridge contacted Donald McDonald to discuss fees. He also consulted the various experts. An agreement was reached with Donald McDonald that the total professional fees for the stage to submission of the second scheme for planning approval would be £15,000, of which £6,500 (plus VAT) would be the fee due to the pursuers. A fee note for that sum was submitted in terms of a fee note dated 17 December 2003. It was not timeously paid and Fred Phillips, one of the pursuers' directors, wrote chasing it (and other fees), by letter of 7 January 2005.

[13] The second planning application was approved. By letter dated 27 April 2005, Vale Royal Borough Council, the relevant planning authority, wrote to David Aldridge at the pursuers' address intimating:

"This application has now been considered by the Council and it has been resolved that it be approved subject to a Section 106 Legal Agreement. Our Legal Department will be contacting you in due course."

[14] No other conditions for the grant of planning permission were stipulated. By that date, David Aldridge had, however, left the pursuers; he retired in 2003 and although he worked as a consultant to the pursuers thereafter, he ceased doing so in about February 2005. The reference to s.106 is a reference to s.106 of the Town and Country Planning Act 1990 which, put shortly, empowers a planning authority to include, in any agreement which has as its purpose the regulation or restriction of development, any incidental or consequential provisions as appear to be necessary and expedient. Such agreements may be negotiated so as to secure appropriate benefit for the locality.

[15] Planning permission was issued by Vale Royal Borough Council in terms of a Decision letter dated 10 May 2006 by which time, it would seem, an appropriate s.106 agreement had been entered into.

[16] The pursuers understood that planning determination stage had in fact been reached in relation to the second Portal planning application prior to May 2006 and issued a fee note dated 8 February 2006, for 10% of their fee, having calculated the estimated construction costs in the light of the scaled down development. It included the following narrative:

"Agreed fees are 3% for bedrooms and 4% for other areas of construction cost. The estimated construction cost is based on 85 bedrooms at £3,400,000 and other areas (existing alterations, leisure and external work) at £1,750,000

The fee to Planning Decision Stage is 35%, less 25% paid at the planning application stage, = 10% now due.

The Fee is calculated as follows:

Bedroom Wing @ £3,400,000 x 3% x 10% = £10,200

Other Areas @ £1,750,000 x 4% x 10% = £7,000

--------

Total 17,200"

[17] The defenders did not write or otherwise contact the pursuers in response nor did they pay the fee. The fee remains outstanding and is the fee (plus VAT) sued for in the present action. The pursuers heard that the defenders were intending to use the services of other architects for the remainder of the project. Fred Phillips wrote to the defenders accordingly, by letter dated 7 June 2006, in the following terms:

"Dear Kenny

PORTAL GOLF & COUNTRY CLUB

PROPOSED RESIDENTIAL WING, LEISURE FACILITIES AND CAR PARK

We understand that following planning approval you have recently appointed other architects to continue with the above development. There are therefore a number of matters which need to be dealt with.

1. We do not have any formal termination of our employment on this project. We would be grateful if you could inform us in writing that you have now ended our appointment.

2. We still have outstanding fees due on this project for our services up to the planning decision stage. Our invoice ref 3424, dated 8^th February 2006 for the total sum of £20,210 .00 is still unpaid.

3. We wish to point out that the copyright of our drawings, and the intellectual property of our design, remains with ourselves. We must insist that neither you nor any other designers or contractors acting on your behalf make any further use of our drawings or design in connection with this project.

Yours sincerely

Fred Phillips

KKA"

[18] The defenders did not and have not paid the sum of £20,210 brought out in the pursuer's invoice 3424. The defenders responded to Fred Phillips letter of 7 June 2006 by letter dated 22 June 2006:

"Dear Fred

Portal Golf & Country Club
With reference to your letter dated 7^th June 2006 to Mr K. Maclennan regarding the above property I comment as follows: -

1. I confirm that your appointment is now formally terminated on this project.

2. As this project has been ongoing for a considerable time, and long before my employment with Macdonald Hotels, I would appreciate it if you could confirm, by sending me a copy of the conditions of your appointment including your fee proposal and the instruction received from Macdonald Hotels confirming your fee. I would also suggest that you reconsider your final fee account, on the basis that having become personally involved in this project in January 2005, it was in fact myself and the QS (Fitzimmons) who have dealt with the Planners and Lawyers over the last eighteen months in securing the S106 which has resulted in Planning Approval.

3. With regards to the copyright issue, I believe, that on agreement of item 2 above, we (the client) would be in a position to implement the approved scheme with a consultant of our choice.

Trusting that the above is satisfactory to yourselves, however, should you have any queries please do not hesitate to contact me.

Yours sincerely

pp Hugh Cooper,

Property Director

c.c. Kenny McLennan"

[19] The pursuers raised the present action shortly thereafter.

The Issue
[20] The pursuers' case is that they are entitled to the sum sued for as being fees due under the normal percentage fee arrangement that operated between parties at planning determination stage. The defenders' submission at the end of the proof was that the pursuers had failed to establish either what the normal arrangement was or that it applied to the Portal project. On the contrary, according to the defenders, it was agreed that a lump sum fee of £60,000 would be payable, nothing more, apart from the £6,500 which was specifically agreed.

[21] In their defences, the defenders accepted that the parties' normal fee structure was the percentage fee arrangement. Whilst their averments are to the effect that the percentage arrangement applied only where the defenders already owned and controlled the land to be developed, the evidence was not that to effect. All the witnesses spoke of that arrangement applying in projects from the Lymm Hotel onwards without any distinction being drawn according to whether or not the defenders already owned or controlled the land.

Relevant Law
[22] Contracts relating to professional fees do not require to be in writing. They can, accordingly, be proved by oral evidence. Further, as with any contract, their terms can be express, incorporated or implied (see: McCutcheon v David MacBrayne Ltd 1964 SC (HL) 28 at p.42). In particular, terms may be implied where there has been a consistent course of dealing on a particular basis. If there is a consistent course of conduct, it can give rise to the implication that in similar circumstances, parties have agreed a similar contract (McCutcheon at pp. 35, 36, 44).

[23] Reference should also be made to the best evidence rule as it was relied on by Mr Sandison, on behalf of the defenders. Put shortly, it is that secondary evidence is inadmissible when primary original evidence is available. Thus it is normally incompetent, at proof, to establish the terms of a document that is not produced.

The Evidence
[24] Two witnesses gave evidence for the pursuers: Mark Batley and Fred Phillips. One witness gave evidence for the defenders: David Aldridge.

Although David Aldridge was the director who was principally responsible for the client contact in the case of the defenders, Mark Batley was, as he volunteered, central to all the projects and very much his right hand man. It was also plain from Mark Batley's own evidence that he was heavily involved in and knowledgeable about the work carried out for the defenders. He was clear in his evidence that there was a usual or normal fee arrangement with the defenders comprising the percentage fee arrangement. It dated back to the Lymm Hotel project. He also referred to it as a standing arrangement. He said that there was a written agreement for the Lymm Hotel project which provided for the fee being calculated and paid on that basis. He explained that that basis was then applied for all other projects. In answer to a question in cross examination as to how the defenders would have known that that was the fee basis for the Portal project he said that the client knew that because that was the agreement that they had had with the defenders on all projects since 1998/9, the date being a reference to the time of the Lymm Hotel project. He referred to the Lymm document as being a 'generic' document. It was now lost. Neither he nor any other witness suggested, however, that the Lymm Hotel document contained any terms to the effect that the fee arrangement for that project would apply to future projects. Rather it was a matter of that being what happened. The fee arrangement agreed for the Lymm Hotel project was adopted and used in all subsequent projects. His evidence on the matter was clear and convincing.

[25] Regarding the Portal project, Mr Batley spoke to the £6,500 that was agreed as a fee for the reworking and resubmission of the planning application. Other than that there was no variation to the usual arrangement. He firmly rejected any suggestion that anything other than the usual arrangement had been agreed for the Portal project. In particular, there was no question of a block fee for the project having been agreed. He would have certainly expected to know if it had. He would have heard about it and it would have been discussed at Board level. He was the chief designer for Portal. The pursuers had worked on the basis that they were entitled to be paid 10% of their fee at planning determination stage. He did not know how it could be asserted that there was a block fee agreement when David Aldridge had sent out a fee note for £60,000 plus VAT which was expressly stated to be an interim fee.

[26] Fred Phillips joined the pursuers in 2000 as an associate director. He became involved in work being carried out for the defenders in 2002 and when David Aldridge retired in 2003 he took over broad responsibility for all outstanding work involving the defenders although it seems that that was of diminishing amount since the work largely went with David Aldridge to the consultancy that he set up at retiral. Mr Phillips' evidence was clear and professional. He gave the impression of being cautious and careful. Mr Phillips became aware that there was what he referred to as a "well established fee arrangement" with the defenders when he took control in March 2003. He spoke to it being the percentage fee arrangement. It applied to all projects involving the defenders and he understood it to apply to the Portal project as well. He would have expected David Aldridge to tell him if a different arrangement had been agreed for Portal; he had discussed the project with him on many occasions. His interest in the defenders' fees arose from the fact that when he took over a role in relation to them it largely involved chasing outstanding fees. He did not accept that a total fee of £60,000 + £6,500 had been agreed for Portal. It was an ongoing project and fees were payable at the appropriate stages, up to 100%. 10% of the fees were payable at planning determination stage.

[27] Mr Phillips also expressed serious concerns that the appearance of the exterior of the Portal hotel complex, as completed after their appointment had been terminated, was so similar to the pursuers' design, that their copyright may have been infringed. He had inspected it from the outside and concluded that it had.

[28] David Aldridge is now 69 years old and referred to his age as being the reason why he had not been prepared to agree to give evidence. He lives in the Wirral and said it was a matter of "at my age, travelling this distance ...etc It's not one of my choices." As against that, he gave as his occupation "semi -retired from architect" and explained that he was at the stage of really calling on his fifty two years of expertise and choosing what he wanted to get involved in. It was not immediately obvious why a man who was still working in a demanding professional role should have difficulty in travelling to Scotland from the Wirral.

[29] The pursuers became clients of the defenders after Donald McDonald had contacted David Aldridge directly in about 1994. Mr Aldridge confirmed that the Lymm Hotel project involved the percentage fee arrangement. He also accepted that that became the usual fee arrangement between the parties. When it came to the Portal project, he said:

"I think you could accept initially that the ongoing arrangement was what we (KKA) were looking for."

[30] Mr Aldridge explained that it was he who had brought Donald McDonald and the owner of Portal together with a view to pursuing a development opportunity. He had spoken to the chief planner "who I had a very, very good dialogue with" and who had said to him that he wanted him to make "one trip to the planning committee" with a "complete masterplan". He gave the impression that the chief planning officer was supportive of an all embracing extensive scheme.

[31] On being asked whether the ongoing arrangement was specifically agreed for the Portal project he said that firstly the answer was no. They did not:

"...specifically say that it would be 4% and 3% and so on but I think it was taken for granted by McDonalds and ourselves."

"No, but I would have assumed and they would".

[33] Mr Aldridge said that he had had a discussion with Donald McDonald and Michael Taylor (a trustee of the Ferranti Trust which owned the land at Portal). He said that he had looked at the rough costs of what the built form that they were looking for would work out at. Then, to arrive at the fee, he said:

"I looked at our arrangement - 4% for conference, link, leisure etc and 3% for bedrooms"

and the fee worked out at "circa £60,000".

He said that having done that, he said to Donald McDonald:

"you don't own the land - we won't treat this entirely as a flyer because we want paid for it in the end of the day but it will cost you £60,000. That's £30,000 to Michael Taylor or Ferranti ....."

[34] He was speaking quickly and I was having difficulty in noting his evidence at that point. I asked him to repeat what he had said as I had not managed to note it all. What he then said was somewhat at variance with the above. It was:

"it's a flyer. It may not get approval - the chances were high that it wouldn't. But McDonalds were prepared to take the risk and fund it - fund the £60,000 fee."

[35] He then said he had lost track of what he had previously said. I have, since the proof, listened to the tapes to check inter alia Mr Aldridge's evidence hence my ability now to provide details of his initial answer and the extent to which I have been able to use quotation marks in this opinion.

[36] Mr Aldridge was asked whether the agreement was that the defenders would pay 25% of 3 and 4% of construction costs or that they were to pay £60,000 plus VAT. His response was equivocal. He said:

"I wouldn't say it was based on 3 and 4% as per the fee agreement. I have referred to it as a lump sum but it was in line with our general agreement with McDonalds. My recollection is £60,000 was agreed as a lump sum."

When he was referred to his letter of 16 March 2001 and his reference within it to 25% of their fee being due at planning stage, he accepted that the letter read as indicating that what was agreed was a percentage arrangement rather than a lump sum. He added:

"Yes, it would suggest it's in line with their agreement. Well, it was a fee of £60,000. Call it a lump sum - based on the 25% arrangement not on 35% arrangement."

[37] When he was referred to his letter of 21 March 2001 and the reference to paying fees for Portal 'in line with our agreement' he said:

"As I say, I believe it was first stated as a lump sum but it's in line with our general agreement with McDonalds so I can take, quite honestly, various letters and go whichever way. It's not 35%, it's 25% in line with our agreement and it happens to come out on the estimates, to around £60,000."

[38] Under reference to the fee note for £60,000 plus VAT, dated 31 January 2001, which he accepted was prepared by him, he was asked what was the nature of the agreement that the pursuers had with the defenders. He said:

"The nature of the agreement was that the fees applicable would 3% and 4% of estimated cost, 25% claimable at planning submission and a further 10% on determination - that fee note is for scheme 1."

[39] Mr Aldridge explained that, in respect of the scaling down and resubmission of the planning application, he agreed an overall fee for all the experts with Donald McDonald, of £15,000, £6,500 of which was to be the pursuer's element.

[40] Regarding what happened after the submission of the scaled down scheme, Mr Aldridge said that planning consent was granted "subject to an awful lot of conditions" and that a lot of work was involved in purifying the conditions. He thought that planning consent had remained subject to these conditions until May 2006.

[41] Mr Aldridge indicated in his evidence in chief that he never agreed that 10% of the fee would be payable at planning determination stage. He said that there was no agreement that any further fees were payable beyond the £60,000 and £6,500 fees. He said that he "would have talked it over with Mark in detail" and that they "would discuss it". He was sure about that.

[42] In cross examination, Mr Aldridge, having accepted that the usual arrangement was the percentage fee arrangement confirmed that the defenders understood that to be the normal arrangement. He was then asked whether anything was said to vary the normal arrangement in respect of the Portal project. He answered 'no' and added only that it was always based on estimated costs, agreeing with Mr Di Rollo that costs would usually go up rather than down.

[43] He accepted that the fee note prepared by him, being an interim fee note, would lead to the assumption that further fees were to be charged. He also said, in contradistinction to the impression that he had seemed to seek to create in his evidence in chief, that at no time did he say to Mark Batley or Fred Phillips that anything other than the normal fee arrangement had been reached regarding Portal. It was put to him that the pursuers would have been entitled to charge 25% of their fees for the second planning application but he came to an arrangement about the fee in the circumstances and his reply was "absolutely". That is, he took no issue with the proposition that as matters stood between the parties, the submission of the second planning application would normally have attracted the implementation of the usual percentage fee arrangement. It was then put to Mr Aldridge that other than the agreement to modify the planning submission stage fee to £6,500, there was no approach to modify the normal fee arrangement for that scheme. His answer was: "That's correct."

[44] In re-examination, Mr Aldridge referred to thinking he had said that £60,000 was both a lump sum and a structured arrangement based on estimated costs. He said that the £60,000 was the figure suggested to Donald McDonald regarding what had to be paid. Further, on being asked whether the £6,500 was agreed as a lump sum, he said:

"that was a clear lump sum."

[45] On being asked towards the end of re-examination a clear question as to what his position was as to whether a further sum was payable on determination of the Portal planning application, he said:

"how do you mean ? - what's my position?"

He was then asked what his position was as to whether he had made any agreement that determination of the second planning application would attract a further fee. His answer was:

"Scheme 1 was completed to the 25% stage and a fee of £60,000 was paid for 25% of the work as per our agreed arrangement. We entered into a new agreement to adjust those drawings for the lump sum figure to KKA of £6,500. If the scheme had been refused or approved, on determination, in my view that was the end of the contract irrespective of estimated fees or estimated costs coming into it because I did a quick calculation on scheme 2 and I think from memory it was something like £10,000 less than the fee we'd already been paid, even with an uplift on current prices on the bedroom. That was my position at the time."

Findings on the Evidence
[46] I have no difficulty in concluding from the evidence that after the Lymm Hotel project the parties conducted a course of dealing in which the pursuers were remunerated on and in accordance with the percentage fee arrangement. It was not a matter of the Lymm Hotel contract documents obliging the defenders to do so but rather a matter of what happened in that project being replicated as a matter of practice in subsequent projects without it being specifically documented. The defenders' letter of 22 June 2006 confirming the termination of the pursuers' appointment was the first occasion on which the defenders questioned the basis on which the Portal fee was being charged. By that time, the defenders had paid, without question, the £60,000 fee which was rendered expressly as an interim fee note as '25% of basic service'.

[47] The issue that arises from the evidence is whether or not any departure from the normal fee arrangement was agreed for the Portal project. Mr Batley and Mr Phillips were clear that, other than the restriction to a fee of £6,500 for the submission of the second planning application, it was not. Mr Aldridge said, in cross examination, that the only modification to the normal fee arrangement for the second scheme was the restriction to £6,500 for the planning submission fee. Mr Batley's and Mr Phillips' evidence to the effect that fees, particularly the defenders' fees, were much discussed within the organisation was clear and convincing and I accept it. Indeed, Mr Aldridge gave evidence not only that that was something that happened but, in cross examination, that he did not indicate to either Mr Batley or Mr Phillips that he had agreed any variation from the norm for Portal. I accept that if any variation from the normal arrangement had been agreed for Portal, Mr Batley and Mr Phillips could have expected to have been told about it but they were not.

[48] Overall, Mr Aldridge was not an entirely reliable witness. On collateral matters, his explanation for not having been prepared to come and give evidence was unconvincing, he was wrong about planning permission having been granted subject to many conditions that required to be purified prior to May 2006 and his explanation of the chief planning officer having urged him to submit a complete masterplan did not rest easily with his comment that the chances were high that the scheme would not get approval. Moreover, when it came to the critical matter of his recollection of the conversation he had in which, according to him, a figure of £60,000 was mentioned by him to Donald McDonald, other than indicating that it took place at the outset of the project prior to the submission of the first scheme, he did not say when or where it occurred or what, if anything, was said by Donald McDonald in the course of the conversation. Then, on being asked to repeat his account of it within seconds, he gave a different version of what was said. To an extent, the second version was contradictory of the first, the former indicating that the pursuers would not treat the project entirely as a 'flyer' and the latter indicating that it was a 'flyer'. I cannot, on his evidence, reach any conclusion regarding what was said in any conversation between David Aldridge and Donald McDonald about fees in relation to the Portal project and there was no other evidence led regarding any such conversation.

[49] When it came to the question of the fee arrangement for Portal, Mr Aldridge contradicted himself. His said that the ongoing arrangement was what the pursuers were looking for and that it was taken for granted between the parties that it applied to the Portal project. His description of the nature of the fee agreement that the pursuers had with the defenders showed that it was the normal percentage fee arrangement. He said, in cross examination, that nothing was done to vary the normal agreement in respect of the Portal project. He said, in particular, that no attempt was made to vary the normal percentage fee arrangement in respect of the second scheme other than the restriction to £6,500 for the planning submission fee. He said that, otherwise, the pursuers would have been entitled to charge 25% on the submission of the second scheme. The letters and fee note prepared by him are consistent with the parties' normal fee arrangement applying, not with a lump sum fee having been agreed. His explanation that the letter of 21 March was based on a 25% arrangement not a 35% simply does not make sense when viewed against the background of him having, on 31 January 2001 issued a 25% fee on the express basis that it was an interim fee.

[50] Mr Aldridge, somewhat tellingly, referred to the £6,500 fee as being a 'clear' lump sum as if in recognition of there being lack of clarity in his overall 'lump sum' fee position. If that was what led him to distinguish between them, it was appropriate. There was an inherent illogicality in Mr Aldridge seeking to present the fee as being both a lump sum and a structured percentage arrangement based on estimated costs. The latter would leave room for later adjustment of the fee, something which could not apply in the case of a lump sum and the notion of a structured arrangement, which is suggestive of staged payments, seems inconsistent with payment of a lump sum. Further, he did not seem to see that if, as was the case, he was saying that at the outset the fee agreement was the normal arrangement with 25% payable at planning submission and 10% payable at planning determination it could not at the same time be the case that he had also at the outset agreed a single lump sum fee payable only at planning submission stage. His response that that was all to do with scheme 1 does not dispose of the inherent illogicality. Rather it highlights it. That is because it was in respect of scheme 1 that he was saying both that the normal fee arrangement applied and he had agreed a lump sum fee of £60,000.

[51] As regards the second scheme, whilst it was clear that there was agreement to modify the fee for taking it to planning submission stage, Mr Aldridge did not suggest that any agreement was entered into to refrain from charging the usual planning determination stage fee. Whilst he gave evidence that he did not specifically agree with the defenders that it would be payable, that is not the point. Where the normal fee arrangement applied, the course of conduct of the parties was that nothing specific was said. Further, his evidence that the pursuers would in fact have been entitled to charge 25% again at the stage of submission of the second scheme was indicative of him accepting that the normal arrangement applied to it, particularly in the light of his evidence that no modification to the normal percentage fee arrangement was agreed other than the £6,500 restriction for the first stage.

[52] Ultimately, Mr Aldridge's evidence was that he did not believe that the defenders had any further liability in respect of the Portal project. That belief stemmed from him having done a "quick calculation" and having reached a view which seemed to be that the fee that they had been paid in respect of the first scheme was higher than that which they would have been paid at both stage 1 and stage 2 had the second scheme been the only scheme they had worked on for the Portal project. That was not, however, a view which, on the evidence, he shared with anyone else nor, more importantly, was it a view which, on the evidence, translated itself into any fee agreement with the defenders at all. It was also a view which simply could not be justified once the whole of Mr Aldridge's evidence was taken into account.

[53] In these circumstances, I cannot find that Mr Aldridge and Donald McDonald agreed that a lump sum fee of £60,000 would be payable for the Portal project. Nor can I find that any variation to the normal percentage fee arrangement was agreed between parties for Portal, apart from the restriction to £6,500 for stage 1 of the second scheme.

Submissions for the Pursuers
[54] On behalf of the pursuers, Mr Di Rollo relied on the defenders' averments which admitted that the terms of the normal percentage fee arrangement were as above. He also relied on the evidence of all witnesses as to what the normal fee arrangement was, pointing out that it was not the pursuer's case that the normal fee arrangement was set out in a document. The relevance of the Lymm Project contract was that it reflected the normal percentage fee arrangement. There was no need to see that document. Then he submitted that the evidence was overwhelmingly in favour of that normal arrangement not having been varied for the Portal project so far as the payment of 10% of fees being due at planning determination stage was concerned.

[55] Mr Di Rollo submitted that the only persons who could say directly whether or not anything different from the norm was agreed for Portal were David Aldridge and Donald McDonald. The latter had not given evidence and Mr Aldridge had accepted, in cross examination, that nothing was said to vary the normal arrangement. The only reasonable conclusion from the correspondence was that the normal arrangement applied. Parties were not at variance as to what the normal arrangement consisted of. The defenders had not responded to the 10% invoice, which was rendered in February 2006 by saying that the fee was not due. They had done nothing. It was only when the pursuers had written in June 2006 that they had done so. There had been no averment of a lump sum fee having been agreed in the original defences. There was no reason for a lump sum fee to be agreed. Conversely, it was not difficult to see why there had been an agreement to restrict the second planning submission fee to £6,500.

Submissions for the Defenders
[56] Mr Sandison submitted that the pursuers had failed to establish that any contract was concluded between the parties entitling them to the fee for which they sued, in the circumstances which occurred. He criticised them as proceeding on the assumption that the normal arrangement applied unless the defenders could show that it did not. That was an erroneous approach. It was for the pursuers to show that such an agreement existed. There was no evidence before the court to suggest that the normal arrangement was to apply to the Portal project.

[57] Mr Sandison accepted that a consistent course of conduct may show that terms are to be implied but the pursuers had not established such a course here. They did not have sufficient averments. There were parallels with the circumstances in the case of McCutcheon. Further, the court was being asked to construe a document, the Lymm Hotel contract, that was not before it. That exercise could not, Mr Sandison urged, be begun without the contract itself. In the circumstances, the pursuers had failed to establish that the normal fee agreement applied to Portal and also had failed to establish what the terms of the normal fee agreement were.

[58] In any event, on the evidence, there was agreement to the contrary. The agreement was, he submitted, simply for £60,000 to be payable as a lump sum fee. That meant it was payable as a single fee and as complete payment for the project work. As regards Mr Aldridge's concession in cross examination that nothing was said to vary the normal arrangement in respect of the Portal project, Mr Sandison's response was that the witness was just saying that there was a normal arrangement. Mr Aldridge was adamant, he submitted, that he could not see that the defenders had any further liability to the pursuers.

[59] As regards the absence of any reference to a lump sum agreement in the original defences, Mr Sandison said that nothing should be taken from that as there was no evidence about the state of the instructions given by the defenders at the time they were drafted.

Discussion
[60] I propose to deal firstly with Mr Sandison's submission that the pursuer's case required the construction of a document that was not before the court. It was a submission based on the best evidence rule. I reject it. The pursuers' case is not that the Lymm Hotel contract contained any terms which obliged the parties to conduct their business on the basis of any particular fee arrangement in the future. Their case does not call for the Lymm Hotel contract to be construed and I am readily satisfied that the best evidence rule does not come into play. No witness suggested that the Lymm contract contained terms which would apply to future projects. Rather, the evidence of all the witnesses was that the Lymm Hotel project was the first occasion on which the percentage fee arrangement was applied and that thereafter parties as a matter of practice conducted their business in a manner which involved the application of the same percentage fee arrangement.

[61] It follows that I do not accept the submission that there are parallels between the circumstances of this case and those that obtained in the case of McCutcheon where it was held that there was no consistent course of dealing on which the defenders could found.

[62] The witnesses were all clear as to the precise elements of the normal fee arrangement insofar as relevant for the purposes of the present case. That is, they were all clear that the pursuer's fee was calculated by reference to the total estimated construction costs (3% of the estimated bedroom costs and 4% of the other costs), that 25% of that fee was payable at planning submission stage and that a further 10% was payable at planning determination stage. Furthermore, the defenders' pleadings aver precisely that as having been the terms of the fee arrangement. Whilst they also aver that those terms only applied to projects where the defenders already owned the land, as I have noted, no witness spoke to that being the case; in particular, the defenders' witness, Mr Aldridge, never suggested that that was so. In common with the pursuers' witnesses, he was clear that that was the normal fee arrangement for all projects after that for the Lymm Hotel.

[63] As regards Mr Sandison's submission that the pursuers' averments were insufficient to allow them to rely on the evidence as to a continuing course of conduct between the parties, I reject it also. Notice is given of a series of other hotel projects in which the parties were involved and averments follow regarding the normal percentage fee arrangement which was agreed. Further, the evidence was led without objection and evidence regarding the normal fee arrangement was led in chief from the defenders' witness.

[64] In all the circumstances, I am readily satisfied that as from the time of the Lymm Hotel project, the parties agreed that their business should be conducted on the basis of the percentage fee arrangement. There is ample evidence of a course of dealing between them in which that arrangement was applied to give rise to the inference that such an agreement existed. As I have explained, I cannot, on the evidence, make any finding that there was any agreement to vary the percentage fee arrangement in respect of the Portal project except in relation to the planning submission fee for the second scheme, which was restricted to £6,500, and that is not the fee that is sued for in this action.

[65] The pursuers seek decree for £20,210.00 with interest from 10 March 2006 until payment. That date is specified as being 30 days after the date of their invoice. However, it is clear that the planning decision was not actually reached until 10 May 2006 so the second stage payment was not actually due until then. Allowing thirty days thereafter for payment, the last date on which the fee should have been paid by the defenders was 10 June 2006. Interest is payable in accordance with the provisions of the Late Payment of Commercial Debts (Interest) Act 1998, as amended, at 8% above Bank of England Base Lending Rate. Collection costs of £100 are also properly sought in terms of the pursuer's second conclusion.

[66] I will, accordingly, pronounce decree for £20,210.00 with interest thereon at 8% above the Bank of England Base Rate from 10 June 2006 until payment and also for the sum of £100. I will reserve meantime the question of expenses and the case will be put out By Order to hear any motions that parties have to make in that regard.

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	Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> KKA Ltd v. MacDonald Hotels Ltd [2008] ScotCS CSOH_108 (24 July 2008) URL: http://www.bailii.org/scot/cases/ScotCS/2008/CSOH_108.html Cite as: [2008] ScotCS CSOH_108, [2008] CSOH 108

Scottish Court of Session Decisions