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OUTER HOUSE, COURT OF SESSION
[2008] CSOH 14
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CA56/06
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OPINION OF LORD GLENNIE
in the cause
PRIMARY HEALTH CARE
CENTRES (BROADFORD) LIMITED
Pursuers;
against
PRABHULING
RAVANGAVE
First Defender;
and
SHEILA ANNE TURVILLE
Second Defender;
and
DR ALAN WILLIAM
HUMPHREY
First Third Party:
and
HIGHLAND
HEALTH BOARD
Second Third
Party:
ญญญญญญญญญญญญญญญญญ________________
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Pursuers: MacColl; Shepherd & Wedderburn
First Defender: Brodies
Second Defender: Party
First Third Party: Simpson & Marwick
Second Third Party: R.F. Macdonald
29 January
2008
[1] In
this action the pursuers conclude, first, for declarator that the first and
second defenders are jointly and severally liable for all the tenant's
obligations arising under and in terms of the lease (hereafter "the Lease") of
the Broadford Medical Centre, Broadford, Isle of Skye
dated 25 November and 7 December
2000; and, secondly, for expenses.
The Lease is between the pursuers as Landlord and Drs Humphrey and
Ravangave (as the partners of and trustees for the firm of Broadford Medical
Practice) as the Tenant.
Drs Humphrey and Ravangave are respectively the first third party
and the first defender in this action.
[2] The
Medical Centre is owned by Dr Humphrey.
It has been operated for some time as a surgery for general medical
practitioners. In about the year 2000,
and for some years previously, Dr Humphrey had practised from the Medical
Centre as a general medical practitioner in partnership with
Dr Ravangave. The partnership was
known as the Broadford Medical Practice.
In late 2000, Dr Humphrey leased the premises to the pursuers for a
period of 99 years. They, in their turn,
by the Lease, let the premises to Drs Humphrey and Ravangave as the then present
partners of the partnership, together with their permitted successors and
assignees. The Lease was for a period of
33 years from 16 November 2000.
[3] The
second defender, Dr Turville, was not, as at the date of the Lease, a
partner in the partnership.
Clause 1.3 of the Lease (no. 24/1/2 of process), however,
provided for what was to happen if there was to be a change in the
partnership. So far as material, that
Clause reads as follows:
"1.3 ...
(j) if the
Tenant consists of a firm or partnership the obligations of the Tenant shall be
binding jointly and severally not only on all persons who are partners of the
firm at the time that this Lease is executed but also on all persons who shall
become partners of the firm at any time during the Term and their respective
executors and representatives whomsoever as well as on the firm and its whole
stock, funds, assets and estate without the necessity of discussing them in
their order and such obligations shall subsist and remain in full force and effect
notwithstanding any change or changes which may take place in the name of the
firm or the constitution of the partnership whether by the assumption of a new
partner or partners or by the retiral, death or outgoing for any other cause of
any individual partner; Declaring that
on the retiral, death or outgoing of any individual partner the Landlord shall
(upon the written application of the outgoing or retiring partner or his or her
executors) grant a discharge to such partner or his executors from such
partner's joint and several liability in terms of this Lease provided that the
number of continuing partners (including any new partners assumed in
substitution of a deceased, retiring or outgoing partner) shall not fall below
two and declaring that the remaining partner will use his reasonable endeavours
to engage a replacement partner as soon as reasonably practicable after such
retiral, death or outgoing; ..."
Clause 5.15.5 of the Lease
provided that the tenant should neither assign the whole of the premises nor
sublet part of the premises without the previous consent of the landlord "which
shall not be unreasonably withheld".
[4] After
the Lease was entered into, the partnership occupied the premises without
incident for some time. From about the
second payment onwards, rent under the Lease was paid direct to the pursuers by
the National Health Service. Rent has
been paid in this manner ever since.
[5] In
November 2001 Dr Turville became a salaried partner in the partnership. She and the two existing partners,
Drs Humphrey and Ravangave, entered into a Partnership Agreement dated
13 November 2001 ("the Partnership Agreement") (no. 24/1/3 of
process) regulating the affairs of the partnership. In terms of clause 4.1 thereof,
Dr Turville acknowledged that
"as a partner in the Practice she is liable along with the
other partners for implementation of the obligations of the Practice in terms
of [the Lease] even although she was not a party to it."
The Partnership Agreement made it
clear that Dr Turville had no interest in the capital of the practice and
was to receive no share of the profit beyond her salary. By clause 6.4 of the Partnership
Agreement, Drs Humphrey and Ravangave indemnified Dr Turville against
any claims which might be made against the practice, other than those covered by
insurance. It is clear that Dr Turville
took legal advice as to the effect of the Partnership Agreement before she
signed it.
[6] On
about 1 October 2002, the provision of medical services at Broadford moved from
the General Medical Services ("GMS") scheme to the Personal Medical Services
("PMS") scheme. As from that time, Drs Humphrey,
Ravangave and Turville received a salary from the NHS for their
services. Following upon the move to PMS,
negotiations took place between the pursuers and the Highland Primary Care
National Health Service Trust ("the Primary Care Trust"), the predecessors of
the Highland Health Board ("the Health Board").
The Health Board is the second third party in this action. The negotiations were with a view to the
Health Board taking an assignation of the Lease. Those negotiations never resulted in a
written assignation, nor in any express oral agreement
between the parties whereby the Lease was assigned. The Health Board was not permitted in terms
of its internal financial rules to take on an assignation of the Lease.
[7] Dr
Humphrey retired from practice as a doctor on about 31 March 2003. Dr Ravangave is now in practice
elsewhere, having ceased to practise as a doctor from Broadford in about April
2004. Dr Turville continues to practice
as a doctor in Broadford.
[8] By
the end of the evidence the above facts were not, I think, in dispute. In any event, I find them to be proved.
The
parties' pleaded cases
[9] The
pursuers aver that on ceasing practice on about 31 March 2003, Dr Humphrey
retired from the partnership; and they agreed to discharge him from his
obligations under the Lease in terms of clause 1.3(j) thereof. They contend that the partnership continued
with Drs Ravangave and Turville as partners; and that, pursuant to
clause 1.3(j) of the Lease, Drs Ravangave and Turville continued to be
liable for all of the tenant's obligations under and in terms of the
Lease. They go on to say, though it is
not strictly relevant to their claim against Dr Turville, that the partnership
dissolved when Dr Ravangave resigned in about April 2004. They aver that in terms of clause 1.3(j)
Dr Ravangave was not entitled to and did not receive a discharge of his
obligations under and in terms of the Lease upon his resignation. Nor, obviously, did Dr Turville.
[10] Dr Turville's pleaded case, by contrast, is that the
partnership was dissolved on or about 30 September 2002, when all three
partners became salaried employees of the Primary Care Trust and no longer practised
as self-employed medical practitioners.
She goes on to aver that the Lease was, in effect, taken over by the
Primary Care Trust and that an informal tenancy was created between the
pursuers and the Primary Care Trust. The
same lines of defence were pled also by the first defender, Dr Ravangave.
[11] In addition to setting out defences to the action,
Dr Turville has convened Dr Humphrey as a third party. She contends that if she is liable to the
pursuers, then Drs Ravangave and Humphrey are also liable to them on a
joint and several basis. This claim is reflected in her fifth plea-in
law. She also claims against
Drs Ravangave and Humphrey on the basis of the indemnity provision in the
Partnership Agreement, a claim reflected in her sixth plea-in-law. Dr Ravangave for his part claims over
against the Health Board, as the statutory successor to the Primary Care Trust,
on the basis that if he remains liable under the Lease, it is because the
Primary Care Trust was in breach of its undertaking to take over the Lease and
thereby relieve him of his obligations thereunder.
Procedural
matters
[12] In June 2007, after the usual incidental procedure, a proof
before answer was fixed for 20
November 2007 and a number of days following. The proof was to cover all issues arising
between all parties, including the third party proceedings. At a By Order hearing on 8 November, however,
the court was told that Dr Ravangave, would not be
opposing the pursuers' first conclusion (for him to be found jointly and
severally liable with Dr Turville) and intended to abandon his plea directed
against the Health Board. He therefore
did not intend to make any submissions at proof. This meant that the Health Board would not be
taking part in the proof (in the event, at the start of the proof I pronounced
an interlocutor in terms of a Joint Minute assoilzing the Health Board from the
claims directed against it). It also
meant that Dr Ravangave's role (if any) at the proof would be passive. After further discussion, it was decided,
with the agreement of all parties, that the proof should be split so that it
would only deal with issues as between the pursuers and the defenders, Drs Ravangave
and Turville. The order made, in paragraph
4 of the interlocutor of 8 November
2007 was, so far as material, to the following effect:
"... restricts the
proof before answer [previously allowed] to a proof before answer on the
parties' averments as contained in the summons and defences, and the pursuers'
pleas-in-law, the first named defender's first, second and third pleas-in-law
and the second-named defender's [i.e. Dr Turville's] first, second, third and
fourth pleas-in-law."
Dr Turville's first, second, third
and fourth pleas-in-law, included within the proof, were directed against the
pursuers' claim and in support of the lines of defence pled by her. I have already noted that her fifth and sixth
pleas-in-law, which were excluded from the present proof were pleas to the
effect that esto she was liable to
the pursuers, then she could claim over against Drs Ravangave and Humphrey. At the beginning of the proof, it was
confirmed to me that Dr Ravangave would play no part in the proof, though I was
not asked to pronounce decree against him at that time. Accordingly, the proof proceeded between the
pursuers and Dr Turville without the attendance of Dr Ravangave or, and this is
of greater importance, of Dr Humphrey.
[13] I emphasise these procedural matters because, as it has turned
out, the agreed absence from this hearing of other parties, and in particular
Dr Humphrey, has been and remains of some significance in the conduct of the
proof. As an illustration of this I
should mention that, at one point in her evidence-in-chief, Dr Turville
sought to advance a case that, although her involvement in the partnership
ceased as at 30 September 2002,
Drs Humphrey and Ravangave remained in partnership until at least 31 March 2003. That line of evidence was not foreshadowed in
the pleadings and Mr MacColl, who appeared for the pursuers, objected not
only on that ground but also because it raised issues upon which Drs Humphrey
and Ravangave might have wished to be heard - it might, for example, have
called into question Dr Humphrey's right to the release he obtained under
Clause 1.3(j) of the Lease. Some delay
ensued whilst Dr Turville formulated a minute of amendment to raise this
point; and intimation was made not only to the pursuers but also to
Drs Humphrey and Ravangave. It
became clear that if the amendment were to be pursued, they would wish to have
the opportunity of answering it.
Ultimately Dr Turville did not move her minute of amendment and the
proof was able to continue after a relatively short interruption. Further, rather later in the hearing I raised
with Mr MacColl the question whether, on the hypothesis that the
partnership had come to an end on 30 September
2002, the release from liability given to Dr Humphrey in 2003,
might have an impact upon the remaining liability of the other two
partners. He objected that this was not
an issue which had been raised by Dr Turville in her Answers; and,
furthermore, if it were allowed to be raised, it might give rise to questions about
the effectiveness of that release given to Dr Humphrey. It would be unfair and possibly prejudicial
to Dr Humphrey to allow this issue to be raised at this stage. The point was well made, though I shall have
to return to the underlying issue in due course. What these matters did show was that where,
as here, an order had been made for a limited proof with only some of the
parties being present, the court ought to be particularly careful about
allowing a departure from the pleadings which might impact upon the position of
those parties who were not before the court.
Evidence
[14] In addition to giving
evidence herself, Dr Turville called two witnesses, a Mr Govier and a
Mr Wilson, respectively the former and present practice managers at the
surgery. The pursuers called
Dr Humphrey; three representatives of the Health Board, namely
Mr Slavin, Mr Swatman and Dr Gibbins; and Christine Neve, a director
in an associate company of the pursuers who had been involved in some of their
dealings with the Medical Centre. I was
satisfied that they were all doing their best to put the facts, so far as they
knew and understood them, before the court.
Insofar as they gave evidence about matters of which they had knowledge,
it seemed to me that they were generally to be regarded as reliable. Indeed there was little conflict on any of
the primary facts in this case. I found
the witnesses less reliable, however, when they
attempted to give an interpretation of events as they unfolded, of the
existence of the partnership at any particular time and as to the relationship
between the Health Board and the pursuers in respect of the Lease of the
premises. I do not propose to set out
the evidence in any detail, but will instead deal with it when considering the
two issues upon which this case turns.
The
basis of liability
[15] I did not understand Dr Turville to dispute that when she
became a partner in the partnership, albeit only a salaried partner, she became
jointly and severally liable under the Lease.
Indeed, she accepted this in her submissions at the close of the
proof. Nor, as I understood it, did she
dispute the general proposition advanced by Mr MacColl that, where a
partnership is a tenant under an assignable lease, upon the dissolution of the
partnership, the partners at the time of dissolution will be personally liable on
a joint and several basis for the tenant's obligations under the lease (though the
tenancy will for a time fall vacant). I
accept the correctness of that general proposition, which is supported by the analysis
of Lord Penrose in Lujo Properties Ltd.
v. Green 1997 SLT 225. The position might be
different if the lease was not assignable at all or if the pursuers had an
unfettered right to refuse consent to assignation (see Lujo Properties at p.238 and Moray
Estates Development Co v Butler
1999 SLT 1338 at 1343); but in the present case the pursuers' right to refuse
consent is limited by reference to a test of reasonableness (clause 5.15.5 of
the Lease) and, therefore, for present purposes, the Lease is to be regarded as
assignable. Accordingly, upon the
dissolution of the partnership, the Lease persists without a tenant (until the
Lease is assigned) and the obligations on the tenant under the Lease become
enforceable against the partners at the time of dissolution. Mr MacColl explained, and I accept, that the
basis for this liability is that, in Scotland, partners have a secondary
liability as cautioners for the obligations of the partnership; and in the
event of the partnership being dissolved their liability is that of cautioners
for the liabilities of the former partnership: see Miller, The Law of
Partnership in Scotland, 2nd ed. pp.363-371 and Mair v Wood 1948 SC 83
per the Lord President (Cooper) at 86-7.
When
was the partnership dissolved?
[16] The first question that arises for decision is: when did the partnership come to an end? The pursuers' case, as I have noted, is that
the partnership continued beyond March 2003 and that, when Dr Humphrey
retired in March 2003 (and was given a discharge by the pursuers),
Drs Ravangave and Turville remained as partners and remained jointly and
severally liable under the Lease. That is
the case that they offer to prove.
Dr Turville says that the partnership came to an end on 30 September 2002 when she and
Drs Humphrey and Ravangave all became salaried employees of the Primary Care
Trust. The pursuers have pled no esto case covering the possibility that
a finding to that effect might be made.
[17] Until the end of September 2002, the relationship between the
practice and the National Health Service had been under the GMS contract. This is the traditional form of contract and
Drs Humphrey, Ravangave and, latterly, Turville had carried on the
practice as self-employed doctors working together in a partnership. It is not in dispute that this changed at the
end of September 2002. As a result of negotiations
successfully carried out on behalf of the partnership by Dr Humphrey, all
three doctors entered into a PMS contract under which they were paid salaries
by the Primary Care Trust. The change
took effect from 1 October 2002.
[18] The evidence as to whether or not the partnership continued
after the end of September 2002 is not altogether satisfactory. The difficulty is compounded by the fact
that, as Dr Turville explained, a doctor carrying on in practice with
other doctors has habitually tended to refer to the other doctors in the practice
as his "partners". This has reflected
the usual position in the past and I accept Dr Turville's evidence that
she (and, I would assume, others) continued to use that terminology regardless
of whether her status remained that of a self-employed doctor or became that of
a salaried employee in a medical practice.
Thus, I do not pay much regard to the fact that in a letter of 8 November 2002, after the
change to PMS, Dr Turville referred to herself as a partner and raised the
question of other partners being taken into the practice. Equally, it seemed to me that
Dr Humphrey in his evidence was unclear as to whether the partnership
continued beyond the end of September 2002.
I formed the view that insofar as he spoke of the partnership continuing
he really meant that the practice continued.
In April 2003, upon his retirement from practice, his solicitors wrote
to the pursuers seeking a discharge of his liability from his obligations under
the Lease in terms of clause 1.3(j) thereof. Dr Humphrey clearly regarded his retirement
from practice as equivalent to his retirement from the medical partnership, and
this was no doubt the basis upon which his solicitors wrote that letter. However, for the same reasons as I have
already given, I do not think much weight can be attached to this.
[19] There was one piece of evidence which seemed to me to fall into
a rather different category. This was
the partnership tax return signed by Drs Humphrey, Ravangave and Turville
for the accounting period ending 30 September
2002 (no. 56 of process).
This notes the date of cessation of the medical partnership as being 30 September 2002. On page 7 of the return, individual
partner details are given for Drs Humphrey and Ravangave. In each case the box headed "date ceased to
be a partner" is filled in with the date "30/9/2002". The
same is true for the individual partner details given for
Dr Turville. It appeared from the
evidence given by Dr Humphrey that the tax return may have been prepared by,
or from information given by, his wife, who acted as secretary and accounts
manager to the partnership. However, it
was submitted to the Inland Revenue on behalf of the partnership by R A Clement Associates, the Chartered Accountants for the
partnership. It was no doubt prepared
with their professional advice.
[20] In my opinion the signed Partnership Return is likely to be the
most reliable evidence of when the partnership came to an end. It accords with the reality surrounding the
change from GMS to PMS and to the former partners having become salaried
employees of the Primary Care Trust.
There was some reference by Dr Turville to her having carried out
certain "insurance work". It was not clear
from the evidence whether this was before or after October 2002, nor whether
this was private work; nor even whether this was work carried out by all
partners so as to provide some basis for saying that the partnership continued,
if only in respect of this work, for a period after September 2002. The matter was not pursued in any detail and
I do not think that it is sufficient to contradict the view to which I have
come that the partnership came to an end at the end of September 2002.
[21] Mr MacColl in his final submissions very fairly accepted
that the evidence before the court on this issue was "somewhat uncertain and
contradictory". In answer to a question
from the court as to what his final position was as to how the evidence stood,
he accepted that on the balance of probabilities, and in particular on the
basis of the oral evidence of Dr Humphrey, it was more likely that the
partnership came to an end on 30 September 2002 rather than at the later
date contended for by the pursuers in the Summons. I agree with that. I find that the partnership came to an end at
that time.
What
is the consequence of that finding?
[22] It follows from this that the pursuers have failed to prove the
facts upon which, in the Summons, they rely in support of their claim for
declarator that Drs Ravangave and Turville are jointly and severally
liable for the tenant's obligations under the Lease. Mr MacColl contends that this does not
matter. On the version of the facts
averred by Dr Turville, he says, she and Dr Ravangave, along with
Dr Humphrey, were partners at the date the partnership was dissolved. The evidence having come out to support that
version of the facts, the conclusion still follows that Drs Ravangave and
Turville are jointly and severally liable for the obligations of the tenant
under the Lease, albeit that on these facts, but for the release given to him,
Dr Humphrey would also be jointly and severally liable with them. He submits that the pursuers are entitled to
declarator in the terms concluded for. It does not matter that another party may
also be jointly and severally liable. He
does not ask the court to do other than declare that Drs Ravangave and
Turville are jointly and severally liable.
He submits that he is entitled to declarator to this effect on the basis
of the facts as found by the court despite not having pled an esto case to that effect.
[23] There are, so it seems to me, two main difficulties in the way
of this submission. One is a pleading
point. The other is a legal one. I deal first with the legal objection. It arises out of the release granted to
Dr Humphrey in 2003. He applied to
the pursuers to be released from liability in terms of clause 1.3(j) of
the Lease. He was granted that release
unconditionally. True it is (or so I
assume) that he applied for release under that clause on the basis that he was
retiring from a continuing partnership. Prior
to the release being granted, however, the pursuers were made aware of
Dr Turville's contention that the partnership had come to an end at the
end of September 2002. Nonetheless, they
went ahead and granted Dr Humphrey the release he sought. During the course of the proof I raised with
Mr MacColl the question whether the discharge of one person jointly and
severally liable might serve to release others from that liability. Under reference to Clark,
A Treaty of the Law of Partnership and Joint-Stock Companies According to the
Law of Scotland (1866) at pp.276-278, Mr MacColl argued that this was English
rule of common law and did not apply in Scotland. The English position is conveniently set out
in Deanplan Limited v Mahmoud [1993] 1 Ch. 151 which has been
referred to in a number of cases since as containing an accurate statement of
the (English) law on this point: cf. Johnson v Davies [1999] 1 Ch. 117 and Jameson
v Central Electricity Generating
Board [2000] 1 AC 455, per Lord Clyde at 485. I accept Mr MacColl's submission that it is,
to put it at its lowest, dangerous to rely upon English authorities in this
area of the law. According to Clark,
it appears to be accepted that the principle that release of one person jointly
and severally liable releases all has no place at common law in Scotland. However, Clark (op. cit.) refers to the provisions of
section 9 of the Mercantile Law (Scotland)
(Amendment) Act 1856 which provides that:
"where two or
more parties shall become bound as cautioners for any debtor, any discharge
granted by the creditor in such debt or obligation to any one of such cautioners
shall be deemed and taken to be a discharge granted to all the cautioners ...".
This might be seen as a statutory
importation of the English rule for certain cases. As I have already indicated, the liability of
the former partners upon the dissolution of the partnership is a liability as
cautioners, and section 9 would seem to apply.
Clark argues, however, at page 277, that
this enactment "plainly applies to persons bound as cautioners eo nominee, and not to guarantees (sic) becoming such by implication of
law." Mr MacColl relies on that passage
to say that the section does not apply in the case of former partners becoming
bound as a matter of law as cautioners to the obligations of the
partnership. I do not see why that
should be so. It is not clear to me that
Miller, The Law of Partnership in Scotland,
2nd ed. (1994) at page 284, takes the same view.
[24] Mr MacColl submits that the "release" point is not open to
Dr Turville. It is not a question
of competency to be taken by the court.
It is for the defender to take it if so minded. In the present case it has not been pled and
therefore is not a live issue. It should
not be allowed since one consequence would be that it would open up the
question of the liability of Dr Humphrey.
At present the pursuers have granted a release to Dr Humphrey on a
certain hypothesis of fact, namely that he had resigned from a continuing
partnership. The court having found
against the pursuers on those facts, the factual basis upon which the release
was granted to Dr Humphrey is removed.
If Dr Turville seeks to rely upon that release as releasing her from
liability, it would be open to the pursuers to argue that Dr Humphrey had
not obtained a proper release (the release having been
granted upon a shared misapprehension that the partnership was
continuing) and, if necessary, to take steps to reduce it. The consequence of allowing this point to be
taken, therefore, would be potentially prejudicial to Dr Humphrey's
position. It would be unfair to
Dr Humphrey if the court were to raise, or to allow Dr Turville to
raise, this point at this stage in his absence from the proof.
[25] There is considerable force in the objection that the position
of Dr Humphrey ought not to be prejudiced in his absence. However, it seems to me that it does not lead
to the conclusion for which Mr MacColl contends. On the way in which the case has been
advanced by the pursuers in their pleadings, the point about the release of
Dr Humphrey does not arise. On
their case he was released when he retired from a continuing partnership in
March 2003. His release was in
accordance with the terms of the Lease to which all partners are taken to have
agreed. That agreement contemplated the
continuing liability of the remaining partners.
In those circumstances there could have been no argument available to
the other remaining partners to the effect that the release of Dr Humphrey
had in some way released them from liability.
Section 9 of the 1856 Act must be read subject to any contrary agreement
of all parties: and Clause 1.3(j) contains such a contrary agreement on the
basis that the partnership continues. Since
that was the only way in which the pursuers put their case, there was no
occasion for either of the defenders to raise the point about release. The point only arises now because the
pursuers wish to rely, as a fallback, upon a factual position which they have
not pled even on an esto basis. Dr Turville cannot be criticised for
failing to plead a case the need for which would arise only if the pursuers
plead an esto case along the lines
indicated. Whether the release argument,
if pled, would succeed is a separate question.
It is certainly arguable that, in the circumstances of Dr Humphrey not
leaving a continuing partnership, the agreement of the partners in Clause
1.3(j) to accept a continuing liability has no application. I do not, however, need to decide this.
[26] I turn to deal with the pleading point. It is not open, in my opinion, for a party to
seek to rely after evidence has been adduced upon a case which he has not
pled. It is true that the evidence about
the partnership having been dissolved as at the end of September 2002 has been
led, but it was led as relevant to the defences pled by Dr Turville. This is not a case, therefore, of evidence
being led without record and without objection, which may be founded upon by a
party in support of a modification or development of a case already pled by
them. In truth, the case which the
pursuers now seek to put forward is not a modification or development of the
case which they have pled but one which they have, until now, denied in their
pleadings and which amounts to an entirely different factual case from that
upon which they went to proof. It would
have been open to the pursuers to plead an esto
case in response to the defenders averments, but they chose not to do so. Mr MacColl
did not apply for leave to amend to introduce an esto case, but had he so applied I would have been disinclined to
allow it at the stage of submissions since it would have given rise to the
chain of arguments outlined above which might, had they succeeded, have been highly
prejudicial to Dr Humphrey. I can
only infer that when Dr Humphrey and his legal representatives agreed that
the proof should go ahead on the issues between the pursuers and the two
defenders in his absence, he must have done so on the basis that the case to be
advanced by the pursuers was that which they had pled. He would have had an interest in being
present at the proof if he had thought that the pursuers were claiming, albeit
on an esto basis, that the
partnership was dissolved at a time when he was a partner with the potential
consequence that the release granted to him by the pursuers might be undone.
[27] Mr MacColl advanced another argument. He said that he did not need an esto case. The matter, he argued, could be resolved on
his plea to the relevancy of the defenders' averments. The defenders had pled that the partnership
was dissolved at the end of September 2002.
That was legally irrelevant as a defence to the claim for declarator
that they were jointly and severally liable for the obligations of the tenant
under the Lease. He was entitled to
decree of declarator on that basis. I do
not accept this submission. For the pursuers
to be entitled to decree of declarator on the basis of plea to the relevancy of
the defenders' averments, they must establish that those averments, even if
made out, are insufficient to prevent the pursuers succeeding on their pleaded
case. They cannot do this. The pursuers' pleaded case is that the
defenders are jointly and severally liable because they were partners when the
partnership was dissolved in 2004 after the retirement of
Dr Humphrey. That position is
denied by the defenders. That denial is
sufficient to prevent the pursuers succeeding on their plea to the relevancy. The factual averments made by the defenders
help to defeat the pursuers' factual case.
But they do not provide the basis for the pursuers to succeed unless the
pursuers advance a case on that basis. If
the pursuers had wished to found upon those averments, they should have done so
in their pleadings. If they had pled an esto case asserting liability on the basis of the facts averred by the defenders, it is
possible that they might have succeeded at debate on their plea to the
relevancy of defenders' averments. But
they did not.
[28] In those circumstances, having found that the pursuers have
failed to prove the factual basis upon which their conclusion for declarator
rests, I propose to uphold the second plea-in-law for Dr Turville and
grant decree of absolvitor.
[29] It is, therefore, not strictly necessary for me to decide the
second line of defence put forward by Dr Turville. However, in case this case should go further,
I propose to do so, but I intend to express my conclusions briefly.
[30] Dr Turville contends that after September 2002 the Lease
was taken over by the Primary Care Trust, now the Health Board. She contends that since that time it has been
in exclusive occupancy of the premises with the agreement and full consent of
the pursuers; it has paid the rent under the Lease directly to the pursuers and
continues to do so; and has undertaken routine maintenance and repairs in the
building. Dr Turville accepts that there
has been no written transfer or assignation of the Lease but says that these
circumstances show an implied assignation or, to put it another way, the
creation of an informal tenancy in favour of the Health Board which fills the
void temporarily created by the dissolution of the partnership. In addition, she says that over the course of
meetings between the Health Board and Mr Bastian, a former director of the
pursuers, which meetings were attended by Dr Humphrey, agreement was
reached that the Lease was to be transferred.
[31] On the evidence I accept that the Health Board, through its
salaried employees including Dr Turville (and earlier Drs Humphrey and
Ravangave) has been in occupation of the premises since the end of September
2002. De facto this has occurred without, it seems, any party having
addressed its mind to that question.
Further, I accept that the Health Board has paid the rent directly to
the pursuers and has undertaken certain maintenance works. There was evidence about the repair of the
boiler on one occasion. There was evidence
led, under objection, about certain other small repairs. The problem with all these matters is that
they do not show conduct by the Health Board which is any sense unequivocally
referable to it having taken over the Lease.
It was established in evidence that under the GMS contract the NHS
undertook obligations to medical practitioners in terms of payment of (or in
some cases, perhaps, a contribution to) rent for the relevant premises and
undertook other obligations. There was,
as I understood it, an agreement to this effect known as, or contained in, the
"red book". In many cases the NHS
discharged its obligation to a practice by making arrangements to pay the rent
direct to the landlords. On the evidence
led in the present case, this is what appears to have happened from a very
early stage, perhaps as early as the second payment of rent under the
Lease. The payment of rent after
September 2002 is therefore to be seen simply as a continuation of a practice
which existed before that. It cannot
support the case that the Health Board have taken over the tenancy. Nor do I consider that the carrying out of
certain matters of routine maintenance carries with it the implication that the
Health Board has taken over the Lease. Although
it is true that the Health Board was, through its employees, de facto in occupation of the premises,
again it seems to me that this was a mere continuation of what had gone before
in that the three practitioners at the practice in October or November 2002
were the same three as had been partners in the medical practice in September
2002. The incidence of occupancy by the Health
Board was merely the consequence of the change from GMS to PMS. I must also have some regard to the fact that
negotiations were being carried out with a view to the Health Board taking over
the tenancy. Those negotiations never
reached a stage at which the pursuers were asked to approve a change of
tenant. The Lease provides that any
assignation must be with the consent of the pursuers, such consent not to be
unreasonably withheld. It provides also
for notices to be given of any change of tenancy. None of this took place. Negotiations for the transfer of the Lease to
the Health Board foundered over the question of the repairs that required to be
carried out to the building and the rent which the pursuers were demanding in
light of the need to carry out those repairs.
I am satisfied on the evidence that agreement was never reached between
the pursuers and the Health Board that the Health Board should take over the
Lease, still less that they had done so.
[32] Dr Humphrey, who attended the negotiations, was of the
opinion that the Health Board had agreed that it would take over the
Lease. This would have made good sense
from the point of view of the former partners in the practice. However, I do not need to decide whether any
such agreement was reached between the Health Board and those former
partners. Putting the matter at its
highest, and accepting (though without deciding) that there was such an
agreement, it never materialised into an agreement with the pursuers whereby
the Lease was transferred.
[33] Mr MacColl submits that even if I had
found that the actings of the pursuers and the Board were such that some
inference could be made that they were assuming towards each other the rights
and obligations of landlord and tenant, nonetheless the defenders case must
fail for want of a written document complying with section 2 of the
Requirements of Writing (Scotland) Act 1995. Section 1(2) of that Act provides that a
written document complying with that section shall be required for "a contract
or unilateral obligation for the creation, transfer, variation or extinction of
a real right in land" and for "the creation, transfer, variation or extinction
of a real right in land otherwise than by the operation of a court decree,
enactment or rule of law". The statutory
equivalent of rei interventus set out
in section 1(3) of the Act does not apply to the latter case. It follows that writing would be required for
the creation of a tenancy in favour of the Board or for the assignation of the
tenancy from the former partnership to the Board. There being no such writing,
Dr Turville's argument must fail.
[34] I accept Mr MacColl's argument that the transfer of the
Lease by assignation or otherwise to the Board would require to be in
writing. However, it seems to me that
that is not the problem with which I am here concerned. Although the case made in the defences is
focused on the argument that the Health Board became tenants under the Lease,
the more general point behind such averments is that the defenders,
Dr Ravangave and Dr Turville, were released from their
obligations. Those obligations were
obligations not as tenants but as cautioners for the obligations of the
tenants. Such obligations are not real
obligations; nor are the rights of the pursuers against the former partners
real rights in land. They are personal
rights arising from the obligations of the defenders as former partners. As such, the extinction of those rights would
not be the extinction of real rights in land and would not, so it seems to me,
require to be in writing. Section 1(2) of the Requirements of
Writing (Scotland)
Act 1995 has no application to such a case.
[35] One point made by Dr Turville is that from September 2002
until just before this action commenced in 2006, the pursuers never once
contacted her (and I assume the same is true in respect of
Dr Ravangave). It was only when the
negotiations with the Health Board broke down that they turned to the defenders
and sought to hold them liable. She says,
as I understand it, that in those circumstances the pursuers by conduct
released her from her cautionary obligations.
I note, in parenthesis, that this may be another circumstance in which
the release of Dr Humphrey may have some relevance, but I put this to one
side for present purposes. I accept that
the pursuers did not contact Dr Turville.
Insofar as they contacted the office manager, he was, as were all the
others, a salaried employee of the Health Board. In other words all their dealings, whether
negotiating for a formal transfer of the Lease or simply making contact in
respect of other matters, were in one way or another with the Health
Board. Nonetheless, I do not find in
those circumstances, taken at their highest in favour of Dr Turville,
sufficient to enable me to hold that the pursuers released her from her
obligations under the lease. Had I had
to decide the case on this ground, therefore, I would have found in favour of
the pursuers.
Disposal
[36] However, for the reasons I have given, I conclude that the
pursuers' case against Dr Turville must fail and I propose to assoilzie her from the conclusions of
the Summons. Before doing so, however, I
will put the case out By Order. This is
so that the position of Dr Ravangave can be dealt with, presumably in a manner
consistent with the way in which I have dealt with the claim against
Dr Turville, and so that questions of expenses can be addressed.
