COLIN McCAFFERTY v. WILLIAM MUIR McCAFFERTY [1999] ScotSC 22 (2nd August, 1999)

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The sheriff, having resumed consideration of the cause SUSTAINS the second plea-in-law for the defender; ASSOILZIES the defender from the crave of the initial writ; FINDS the pursuer liable to the defender in the expenses of the cause so far as not already disposed of; APPOINTS the defender to make up an account thereof and remits the same, when lodged, to the auditor of court to tax and report.

This is an action in which the pursuer craves payment to him by the defender of the sum of Ј21,500. The defender's first plea-in-law, a plea to the competency of the action, was not insisted on. The case came before me for debate on the defender's second and third pleas-in-law. These were in the following terms:-

Counsel for the defender indicated that there were three branches to her argument: (1) prescription which was directed at her second plea-in-law; (2) a submission that there were no relevant averments to support a claim for recompense (third plea-in-law); (3) a submission that the pursuer's averments on quantum were irrelevant and lacking in specification (also third plea-in-law).

In this note I shall begin by summarising the pursuer's pleadings. I shall then, for ease of comprehension, deal separately with each branch of the defender's argument, summarising the submissions of each party and then giving my opinion on the matters dealt with in these submissions. Although my decision on the first branch, prescription, is in fact sufficient for disposal of the action, I shall deal fully with all the other submissions.

The pursuer's averments so far as material to this debate may be summarised as follows.

In April 1987 the pursuer wished to purchase certain heritable property as an investment. He was advised by his then solicitors that the property should be taken in joint names of himself and his brother (the defender) in order to avoid any claim on it by his ex-wife, from whom he was divorced on 13 January 1983. The defender was willing to go along with this arrangement provided that he was not liable for any of the cost of purchasing the property. Both parties understood that the defender would reconvey his share of the property when required to do so by the pursuer. The purchase of the property was completed on 11 June 1987. The whole price of Ј13,250 was paid by the pursuer, and he also paid legal expenses of Ј464.25. The disposition was recorded on 18 June 1987. The disposition, whose terms are incorporated into the pursuer's pleadings, narrates inter alia:-

After the purchase of the property the pursuer carried out various works on it. The total cost of these works was Ј19,949.17. The pursuer instructed an architect in connection with the works. He had a dispute with the architect about fees. This dispute was handled on the pursuer's behalf by his then solicitors. The solicitors did not advise the pursuer that the wording of the title to the property meant that the defender had an interest in the dispute. The solicitors never contacted the defender to obtain his instructions. The pursuer leased part of the property to a neighbour. The neighbour had no dealings with the defender and the defender had no involvement in the arrangement with him.

In 1996 the defender claimed ownership of a one half share of the property. Before that the pursuer had not realised that the terms of the disposition would entitle the defender to raise an action of division and sale. The pursuer did not realise that the defender had any rights over the property. The pursuer assumed that he would get the property transferred to his name on demand. He believed himself to be the owner of the property. He incurred expenditure on the property in the bona fide belief that it was his. On 19 July 1996 the defender raised an action of division and sale in Perth Sheriff Court. The pursuer did not defend the action, and decree in absence was granted in the defender's favour on 27 August 1997. The pursuer could not have defended that action by reference to principles of equity. He was correctly advised to raise a separate action on the basis of unjust enrichment. The sum which he could claim in such an action became known only when the property was sold. The pursuer had followed the legal advice given to him. Following decree in the action of division and sale the property was placed on the market and sold for a price of Ј43,000. According to the decree of the sheriff in Perth dated 27 August 1997 that price, after deduction of any debts or burdens and the expenses of the action and all other expenses affecting the sale was to be divided equally between the pursuer and defender. Accordingly the defender was lucratus to the extent of at least Ј21,500.

At the time of the purchase of the property in 1987 the pursuer was unaware as to the consequences of the title being held in joint names. He was advised by his then solicitors that having the property in joint names was a method by which he could defeat a potential claim against him by his former wife. He received no other advice. The sale price of the property reflected the fact that the pursuer had spent Ј19,947.17 on improvements to it. The defender had therefore gained Ј21,500 "as a result of the pursuer's loss". The pursuer was entitled to payment of this sum from the defender. No other legal remedy was available to the pursuer. The defender had refused to reimburse this sum to the pursuer.

It was accepted that the disposition of the property to the parties predated the raising of the present action by more than five years. However, the quinquennium in respect of the defender's unjust enrichment commenced only in 1998. Before payment of the purchase price of Ј43,000 there was no relevant obligation under section 6(1) of the Prescription and Limitation (Scotland) Act 1973 (hereinafter referred to as "the 1973 Act"). Before receipt by the defender of Ј21,500 he was not lucratus. If the quinquennium did begin prior to payment of the purchase price it commenced in 1996 when the defender raised the action of division and sale. When the pursuer paid the purchase price of the property in 1987 and expended money on improvements he believed that the defender had no right to raise an action of division and sale and that the defender had no intention of departing from the understanding previously referred to. Esto the defender had entered into a partnership with the pursuer in respect of the purchase of the property (which the pursuer denied), the short negative prescription did not apply under reference to paragraph 2(d) of .Schedule 1 to the 1973 Act.

Esto (as averred by the defender but denied by the pursuer) the defender contributed Ј7,000 towards the purchase price of the property this did not entitle him to an equal share in the subsequent sale price of it as the pursuer carried out and paid for the work on the property without any assistance from the defender.

The only plea-in-law which is now insisted on by the pursuer is in the following terms:-

Section 6 of the Act accordingly applied to the obligation founded on by the pursuer in the present case. The present action was raised in May 1998. The "appropriate date" here was the date when the obligation became enforceable. That was the date when the disposition of the property was recorded or, at worst for the defender, the date of the works which the pursuer averred he had carried out. The disposition was recorded on 18 June 1987. So far as the works were concerned all but three of the invoices produced (the invoices being the only indication of when the expenditure was made) predated the raising of the action by more than five years.

The pursuer sought to argue on record that the "appropriate date" was either the date when the property was sold following the action of division and sale or the date when that action was raised as it was only on one of these dates that the defender's obligation became enforceable. This argument was misconceived. The only averments which the pursuer made to support these two date were what he believed. Beliefs were irrelevant in determining when a quinquennium started to run.

Counsel referred me to N.V. Devos Gebroeder v Sunderland Sportswear Ltd 1990 S.C. 291, a decision of the First Division of the Court of Session, and especially to what was said by the Lord President (Hope) at 301:-

In the present case the obligation to make recompense arose when the disposition was recorded as it was from that moment that the pursuer was in a position to make a relevant claim. The fact that the pursuer did not believe this was irrelevant.

A similar principle applied so far as the works carried out by the pursuer were concerned. The period ran from the date when all the facts were established on the basis of which the defender was lucratus. That was the dates of the invoices. Again the pursuer's belief was irrelevant.

The Devos Gebroeder case was, in any event authority for the proposition that any argument was misconceived which was based on the necessity of requiring a judicial finding before a claim quantum lucratus became enforceable. In this context counsel also referred to Flynn v UNUM Ltd 1996 S.L.T. 1067, a decision of the Second Division of the Court of Session. The disposition here showed that both parties were pro indiviso proprietors. Therefore the date of recording was the date when the claim become enforceable. The court in Flynn had laid emphasis on having regard to the terms of the contract. In the present case the terms of the disposition were the equivalent of the terms of the contract in that case.

Finally, on this branch of her submission counsel referred to what she submitted was an inconsistency between parts of the pursuer's averments. On the one hand the pursuer averred that he had entered into a scheme with the defender to defeat a claim by his former wife; on the other hand he averred that he did not realise until a later date that the defender had any interest in the property. The pursuer could not have it both ways. It was open to the court to draw the inference from the pursuer's averments that he must have known that he was giving the defender an interest in the property as there was no way in which he would be able to defeat any claim by his former wife without such an interest. This was crucial to the exercise of the court's equitable jurisdiction.

Counsel for the pursuer submitted first that the defender's position was that he had contributed to the cost of purchasing the property. Therefore the defender was founding on some sort of partnership or joint venture. In terms of paragraph 2(d) of Schedule 1 to the 1973 Act the negative prescription under section 6 of the Act did not apply to "any obligation under a contract of partnership ... not being an obligation remaining, or becoming, prestable on or after the termination of the relationship between the parties under the contract". The "partnership" had ended only when the property was sold. The defender's obligation had therefore not prescribed.

Secondly, counsel submitted that the defender was not lucratus until the purchase price had been paid by the purchasers of the property in 1998. That was well within the five year period of prescription. Before that time the defender had done nothing with the property. He had not asked for rent, he had not put in a tenant, he had not occupied any part of the property. There had therefore been nothing to trigger the commencement of the prescriptive period in the way in which the receipt by the defenders of defective goods had done in the Devos Gebroeder case. The position would have been different if the defender had turned round after the disposition had been recorded and had wanted to sell the property.

The defender had not been lucratus when the disposition was recorded. The pursuer had been improving the property all the time. It was the sale which enriched the defender. The pursuer had been deprived of half the purchase price. It was the sale which was the "trigger" referred to by the Lord President in Shilliday v Smith 1998 SC 725 at 727D.

The pursuer had not defended the action of division and sale. He could not have done so on any basis of equity. Counsel referred me to Upper Crathes Fishings Ltd v Bailey's Executors 1991 S.L.T. 747, a decision of the First Division of the Court of Session, in which it was held that the right of a pro indiviso proprietor to insist on an action of division and sale was an absolute right and that a defence based on equitable considerations was irrelevant except in the context of working out a remedy. Counsel conceded that a counterclaim might have been possible but that did not render a separate action incompetent. In any event the pursuer could not have quantified his claim until the property was sold. The pursuer had taken advice on what he should do when faced by the action of division and sale. He had been advised not to defend that action but to raise the present action. That had been correct advice.

The Devos Gebroeder case was distinguishable. In that case there had been a supply of goods since 1981. Nowhere in the case was it suggested that the quinquennium should start in 1981. The starting date of the prescriptive period was the date when the contract fell apart and payment was stopped. In the present case events had been triggered by the actions of the defender which had been quickly followed by his receiving money. That was at the pursuer's expense as he had thought that he was proprietor.

The mischief at which the 1973 Act was directed was stale claims. The claim in the present case was far from stale. Counsel mentioned the case of Morgan Guaranty Trust Company of New York v Lothian Regional Council 1995 SC 151, a decision of a Bench of Five Judges in the Court of Session. He submitted that if payments in that case had gone on for more than five years the pursuers would not have been barred from recovering them.

On the whole matter of prescription it would be appropriate to allow a proof before answer.

In what he described as a "last ditch" submission on this part of the case counsel referred to the 1973 Act, section 6(4)(a)(i) which provides that no account is to be taken in reckoning the prescriptive period of any period "during which by reason of fraud on the part of the debtor ... the creditor was induced to refrain from making a relevant claim in relation to the obligation". He submitted that the defender's conduct could be said to fall into the category of fraud even though there were no specific averments to that effect.

Dealing with the pursuer's submission on prescription based on the proposition that the parties had entered into partnership or a joint venture, counsel submitted that I should disregard it as the pursuer had no foundation on record for such a submission. She further submitted that the pursuer had failed to meet the argument that, on the pursuer's pleadings, the defender had become lucratus more than five years prior to the raising of the action.

The crucial question in this context is, if the defender was lucratus, on what date did his obligation become enforceable? In other words, on what date did the defender become enriched? What was the date of the "trigger" as the Lord President put it in Shilliday? In my opinion, that must be the date when the disposition was recorded. As from that date the defender was infeft in a half share of the property and had a right to raise an action of division and sale as he ultimately did. The fact that he chose to wait nine years before raising such an action is immaterial; it was the bringing into existence of such a right which enriched him and gave rise to the obligation.

Counsel for the defender founded strongly on the case of Devos Gebroeder. In my opinion she was amply justified in doing so as the ratio of the case is directly in point, even though the facts are very different. In that case there had been a course of trading between the parties beginning in 1980. In December 1982 the defenders refused to pay for a consignment of material on the ground that it was defective. They had, however, been able to make use of part of that consignment which had been delivered before 1 December 1982. The pursuers raised an action for payment under the contract between the parties. In March 1986 the Lord Ordinary held that they were not entitled to payment because they were in material breach of contract. The pursuers reclaimed and, while the case was in the Inner House, were allowed to amend to add an alternative case based on unjust enrichment in respect that the defenders had been lucrati by being able to make use of some of the defective consignment. This amendment was lodged in December 1987. The pursuers argued that the starting point of the prescriptive period was the Lord Ordinary's decision in 1986. The Inner House held that this was not so; the starting point had been prior to 1 December 1982 as it was then that the defenders had first been lucrati by receiving and making use of the goods supplied by the pursuers which proved in part to be defective. The pursuers' claim based on unjust enrichment had thus prescribed.

Counsel for the pursuer in the present case sought to distinguish Devos Gebroeder. He submitted that even though there had been a prior course of trading no one had suggested that the quinquennium had commenced until , as he put it, "the contract fell apart". As I understand this submission, counsel was seeking to equiperate the situation which existed in the present case prior to the raising of the action of division and sale, to the prior course of trading in Devos Gebroeder. In my opinion this submission is unsound. In Devos Gebroeder the relationship between the parties changed when the defenders received and made use of the defective consignment; it was that event which triggered the obligation to make recompense. In the present case the relationship between the parties did not change when the defender raised his action of division and sale. That action was raised to enforce an obligation which had lasted since the disposition of the property had been recorded. The pursuer's submission with regard to Devos Gebroeder is, in my opinion, very similar to that made by the pursuers in the latter case with reference to the decision of the Lord Ordinary in 1986. That submission was rejected by the First Division for reasons which are binding on me and with which, in any event, I respectfully agree.

The other submissions of counsel for the pursuer on this branch of the case also fall to be rejected.

His first submission was based on the suggestion that the defender was founding on an agreement for some sort of partnership or joint venture. The simple answer to that is that, even if this were the case, it is the pursuer's pleadings and not those of the defender with which I am concerned at the present stage. The only mention of such an agreement in the pursuer's pleadings is at the end of article 5 of the condescendence, where he avers "Separatim, esto the defender entered into a partnership with the pursuer in respect of the house purchase, (which is denied) the short negative prescription does not apply." It is clear from this that a partnership agreement is no part of the pursuer's case. Therefore he is not entitled to found on the statutory exception under paragraph 2(d) of Schedule 1 to the 1973 Act.

Counsel's "last ditch" submission must also be rejected. It was based on the suggestion that the pursuer's failure to insist in making a relevant claim was induced by the defender's conduct. Again there is a simple answer to this point: there are no averments in the pursuer's pleadings from which fraud may be inferred. Counsel submitted that such averments were unnecessary. In my opinion, this is not correct. I refer to Macphail's Sheriff Court Practice, 2nd edition at paragraph 9.30 in the chapter on written pleadings, where it is stated, "Where a charge of fraud is made, the facts and circumstances from which fraud may be inferred must be distinctly stated." This proposition is supported by reference to a number of authorities. The failure of the pursuer in the present case to make such averments is fatal to his submission on this point.

On the whole matter of prescription therefore I consider that the submissions for the defender are to be preferred. Counsel for the defender moved me to sustain the defender's second plea-in-law and to grant decree of absolvitor. I did not understand counsel for the pursuer to demur from this disposal in the event of my finding in favour of the defender on this point. Accordingly the second plea-in-law for the defender is sustained and the defender assoilzied from the crave of the initial writ.

Counsel began by referring me to Dollar Land (Cumbernauld) Ltd v CIN Properties Ltd 1998 SLT 992, a decision of the House of Lords, and in particular to what was said by Lord Hope of Craighead at p. 998J. There his lordship approved what had been said by Lord President Rodger in the Inner House of the Court of Session to the effect that the matters which a pursuer had to prove in a case based on recompense were (1) that the defender had been enriched at his expense; (2) that there was no legal justification for the enrichment; and (3) that it would be equitable to compel the defender to redress the enrichment. This, counsel submitted, was an authoritative statement of the criteria which a pursuer had to satisfy in an action such as the present one. She proceeded then to deal with each of the three criteria.

Counsel submitted that in order to satisfy this criterion the pursuer had to establish that the defender had made no contribution to the purchase price of the property. Although the pursuer averred that this was the case, the terms of the disposition of 1997 (which were incorporated into the pursuer's pleadings) demonstrated that the both the pursuer and the defender had in fact contributed towards the price. The pursuer could not competently lead evidence to contradict the terms of the disposition. Counsel referred me to Gordon-Rogers v Thomson's Exr 1988 S.L.T. 618, a decision of Lord Morison sitting in the Outer House. The pursuer's averment to the effect that the defender had not contributed to the purchase price was therefore irrelevant.

Expanding on the same point about the inadmissibility of extrinsic evidence, counsel submitted that, in any event, the best evidence of the ownership of the property was the disposition itself. Therefore, the pursuer's averments of the reasons why the property was put in joint names were irrelevant. In any event, the pursuer averred that a reconveyance by the defender of his one half share would be necessary. This was inconsistent with his averment that the defender had no right in the property.

Counsel accepted that the case of Newton v Newton 1925 SC 715, a decision of the Second Division of the Court of Session, might appear prima facie to be against her submission on the question of the admissibility of extrinsic evidence. However, she sought to distinguish that case. In it the pursuer had not been attempting to go behind the terms of a disposition. The pursuer was seeking to recover only the cost of improvements. He had already failed in an action of declarator of trust quoad the title to the property. In Newton there was no need to lead evidence that the narrative clause in the disposition was incorrect. In any event, Newton had to be read in the light of more recent authorities, especially Dollar Land.

Counsel submitted next that the pursuer had no relevant averments to satisfy the second criterion laid down in Dollar Land, viz that there was no legal justification for the defender's enrichment.

In this connection she pointed out that the defender was undoubtedly a proprietor of the property and had succeeded in an action of division and sale. The pursuer had not averred any of the traditional grounds of unjust enrichment. Counsel referred to Shilliday v Smith, cit. supra, especially to what was said by the Lord President at pp. 727C-H and 730C-731E. She pointed out that in the present case, unlike Shilliday, the pursuer did not say that he would not have carried out improvements to the property if he had been aware of the true position. If the pursuer in the present case were correct, the pursuer in Shilliday would not have had to aver that the payments by her had been in contemplation of marriage, but these averments were the basis of the court's decision in that case. In the present case the pursuer did not aver any consideration which had failed. He did not aver that the scheme to defeat his former wife's claim had failed. Accordingly, on the authority of Shilliday, the pursuer had failed to make any relevant averment of facts to show that the defender's enrichment was unjust. His plea-in-law disclosed no legal basis for the unjustness of the enrichment. It was a mere statement that the defender had been enriched.

The pursuer's pleadings contained no averments of error as to the effects of the disposition. To make a relevant case such averments were required. Counsel referred me to Morgan Guaranty Trust Company of New York v Lothian Regional Council, cit. supra. Insofar as Morgan Guaranty suggested that the onus was on the defender to show that recompense was inequitable, it had been overtaken by Dollar Land in which it was stated that the onus to prove equity was on the pursuer.

Because of the inconsistencies in the pursuer's pleadings already referred to it was not clear whether the legal basis for the lack of justification of the defender's enrichment was a mistaken belief in the mind of the pursuer. In any event, it was still incumbent on the pursuer to show that it would be equitable for him to recover. On the facts averred he failed to do this. On the pursuer's averments it was clear that he accepted that he had an interest in the property. Accordingly, at least half of what he had expended on improvements was in suo. Indeed, given that the pursuer maintained that he believed that the defender had no interest in the property, on the pursuer's own pleadings all the works had been carried out in suo.

The pursuer's averments failed to distinguish between necessary works and improvements. Counsel referred me to D. & S. Miller v Crichton (1893) 1 S.L.T. 262, a decision of Lord Low sitting in the Outer House as authority for the proposition that a joint owner has an obligation to make recompense for necessary work, but that, in the case of ameliorations, it depended on the nature of the co-ownership. The pursuer had no averments on the nature of the pursuer's possession. His averments were accordingly irrelevant and lacking in specification as a basis on which his claim could be quantified.

First, counsel submitted that as the background to the case was a scheme whereby the pursuer sought to frustrate a claim on the part of his ex-wife, he could not ask the court to exercise an equitable remedy in his favour in order to restore him to the position in which he would have been. The situation was one of the pursuer's own making.

Secondly, it was not open to the pursuer to claim an equitable remedy in this action when he could have done so by way of counterclaim in the action of division and sale which he had chosen not to defend. Counsel referred me to Ralston v Jackson 1994 S.L.T. 771, a decision of the Second Division of the Court of Session, which was a case of division and sale where the competency of a counterclaim had not been questioned. Counsel referred me also to Johnston v Robson 1995 S.L.T. (Sh. Ct.) 26 in which Sheriff Principal Maguire held that a counterclaim in an action of division and sale was competent as it would be capable of ascertainment once the sale had taken place and would avoid a multiplicity of actions. In these circumstances the pursuer's averment that he could not have defended the action of division and sale by reference to the principles of equity was irrelevant.

Counsel next referred me to Varney (Scotland) Ltd v Lanark Town Council 1974 SC 245, a decision of the Second Division of the Court of Session, especially to what was said by the Lord Justice-Clerk (Wheatley) at pp. 252-253 and by Lord Fraser at p. 259. The court should be slow to grant an equitable remedy where the pursuer had failed to take the opportunity of raising the matter in a previous action.

Concluding this part of her argument counsel submitted that in the pursuer's only surviving plea in law no legal ground was stated for compelling the defender to make recompense for his enrichment.

So far as the defender's argument to the effect that the pursuer would be unable to lead evidence of the circumstances in which the disposition had been granted was concerned, counsel submitted that the case of Gordon Rogers v Thomson's Exr, cit. supra should be distinguished. In that case the disposition narrated that each party had paid equal shares towards the purchase price. The disposition in the present case had no such narration. The precise wording was crucial. In the present case both parties averred that the narrative clause of the disposition was inaccurate. The pursuer maintained that he had paid the full price. The defender denied this and averred that he had given some money to the pursuer and paid the balance by instalments. In that situation extrinsic evidence was admissible: Hay's Trs, cit. supra. Counsel also referred to M'Menemy v Forster's Tr. 1938 S.L.T. 555, Macphail's Evidence, para. 15.08 and the Walkers' Evidence, para. 266.

In what he described as his "fall back position" counsel submitted that, in any event, the character of the alleged understanding between the parties made extrinsic evidence admissible. The "flavour" of the alleged agreement which was to defeat a claim by the pursuer's ex-wife, was unsavoury. In this context he referred me to Macphail's Evidence, para. 15-08, Dickson's Evidence, para. 1038 and Smith v Kerr (1869) 7M 863.

On the whole matter, the pursuer was entitled to lead evidence to demonstrate that what was narrated in the disposition was incorrect.

Counsel accepted the three-part test laid down by Lord Hope of Craighead in Dollar Land (Cumbernauld) Ltd v CIN Properties Ltd, cit. supra. He submitted that I should reject what he described as the defender's "technical argument" on the pleadings. The record disclosed the facts which the parties offered to prove. It was for the judge to apply the law to these facts. The pursuer had averred a narrative which, if correct, disclosed a case of unjust enrichment. It was not necessary for the pursuer to use that actual term. Counsel referred me to W.J. Stewart's The Law of Restitution and in particular to pages 224 and 225 where, in the appendix, the learned author gives examples of style writs. It was the style for a writ based on recompense which had been followed in the present case. The pursuer's second plea-in-law was the same as in that style. It was not necessary in the plea-in-law to use a word such as "unjustly" or "unjustifiably". In Shilliday v Smith, cit. supra at 727A-B the Lord President had indicated his approval for a plea-in-law which was in comparable terms.

The principle of Newton v Newton, cit. supra applied. Although the facts of that case were different the principle that a court was entitled to have regard to the true relationship between the parties was equally applicable to the present case. Counsel referred me particularly to what Lord Hunter said at p. 222. That case made it clear that the court should take a sympathetic and generous view of those labouring under a misapprehension.

Even though what the pursuer averred about the intention to defeat any claim by his ex-wife did not shed a particularly good light on him, there was just enough in his averments to entitle a court to hold that it would be equitable for him to receive his half share. Counsel for the defender had conceded that the categories of unjust enrichment were not closed. The circumstances of the present case were more straightforward than those in Shilliday v Smith, cit. supra. Here the condictio causa data causa non secuta did not apply as nothing had been done in contemplation of a future event. The position was that the pursuer simply did not understand the significance of putting the property in joint names. In Shilliday there had been a large measure of agreement between the parties about the facts. A debate had accordingly been the ideal way of determining the issue. In the present case the facts were in dispute. Therefore there should be a proof before answer.

The defender had relied strongly on Dollar Land (Cumbernauld) Ltd v CIN Properties Ltd, cit. supra. The whole basis of that case was that the parties had agreed something. The court had not been prepared to exercise an equitable remedy because to do so would have been contrary to the terms of the agreement. That was not the situation in the present case.

Counsel for the defender had argued that the pursuer should have counterclaimed in the action of division and sale in Perth Sheriff Court. Because the pursuer had failed to do so did not mean that the present claim could not be brought. All that Johnston v Robson, cit. supra had decided was that a counterclaim was competent in an action of division and sale. It did not decide that it was incompetent to raise a separate action. In Johnston the counterclaim had been capable of quantification. In the present case at the time when the action of division and sale had been before the court the defender in that action (the present pursuer) was unable to say by how much the defender in the present action had been lucratus as the house had not been sold. In D. & S. Miller, cit. supra the defender had again been in a position to quantify his claim. By not defending the Perth case the pursuer had caused very little delay in the resolution of the dispute between the parties.

On the general question of relevancy counsel submitted that the pursuer's submissions had failed to engage with the three stage test laid down in Dollar Land (Cumbernauld) Ltd v CIN Properties Ltd, cit supra. It was immaterial that the facts of that case were different. The pursuer had laid stress on the question of equity. However, that stage should not be reached as it was the last stage in the test.

Counsel emphasised that it was the pursuer's pleadings which were under scrutiny. In any event, the disposition, the terms of which were incorporated into the pursuer's averments, narrated that the purchase price had been paid by both parties. It did not state in which proportions the price had been paid. The defender's averments were not inconsistent with this.

Dealing with the form of the pursuer's second plea-in-law, counsel submitted that the style in Stewart had been drafted before the House of Lord decision in Dollar Land. It was the latter which must rule. It was incumbent on the pursuer to state in his plea-in-law the basis on which the enrichment of the defender justified recompense. Counsel disputed that the Lord President in Shilliday v Smith, cit. supra had approved a plea-in-law similar to that in the present case. The plea approved of in Shilliday had been in a different form and had set out the legal basis of the claim. In his plea the pursuer had to state the reason why the defender's enrichment was not justified. He had failed to do so.

The pursuer averred that the purpose of putting the property in joint names was to defeat a possible claim by his ex-wife. He must have known that this would give the defender an interest in the property. He therefore could not have a bona fide belief that the property belonged to him alone. That was the point which went to the heart of the case.

Any authority predating Dollar Land should be treated with caution. In Newton v Newton, cit. supra it had been accepted that the pursuer had a bona fide belief that the property belonged to him. That was not the case on the present pleadings.

Under reference to Shilliday v Smith, cit. supra at 730I counsel submitted that the pursuer in the present case was acting in suo. In order to negative that he had to point to a reason over and above his own interest for the expenditure. He had failed to do so.

On the question whether the pursuer should have made a counterclaim in the action of division and sale counsel referred me to Ralston v Jackson, cit. supra and Upper Crathes Fishings Ltd v Bailey's Executors, cit. supra. In the latter case the court had held that in an action of division and sale a defence based on equitable considerations was irrelevant except in the context of working out a remedy. Applying that to the circumstances of the present case, a decision on how the proceeds of the sale should be divided was "working out the remedy". A counterclaim would therefore have been competent and appropriate.

Counsel for the pursuer had submitted that because the parties were substantially at odds as to the facts of the case, evidence should be led in a proof before answer. No matter how far apart the parties were on the facts, the purpose of the debate was to establish whether the pursuer had pleaded a relevant case. As he had not done so, it was appropriate that the case should be disposed of at debate.

The pursuer cannot succeed in proving this essential criterion for an action of recompense unless he is entitled to lead evidence to contradict the clear terms of the disposition which narrates that the purchase price of the property was paid by both parties. In my opinion, it is immaterial that the disposition does not narrate the proportions which each party contributed. It is the fact that both are said to have contributed that is important.

The general rule that extrinsic evidence cannot be led to contradict the terms of a probative document is well established. I refer for convenience to Macphail's Evidence, chapter 15 where the authorities are laid out in detail. Unless the pursuer can overcome that general rule he is bound by the terms of the disposition.

Counsel for the pursuer founded strongly on the case of Newton v Newton, cit. supra. In my opinion Newton is distinguishable on its facts. In that case the pursuer had bought a house in contemplation of his marriage with the defender. For a reason which is immaterial for present purposes the title was taken in the defender's name. The parties married but soon separated. The pursuer sought to establish that the defender held the house in trust for him but the court found against him on that matter and held that the defender was the proprietor of the house. The pursuer then raised an action based on unjust enrichment seeking to recover from the defender the value of improvements which he had carried out on the house. The Court of Session affirmed the sheriff's decision in the pursuer's favour, holding that the sheriff had been entitled to hear evidence of the pursuer's state of mind at the date when he directed that the title to the house should be taken in the defender's name. The Court of Session specifically held that the pursuer was not seeking to contradict the terms of the disposition (Lord Justice-Clerk Alness at p. 720). The important distinction on its facts between Newton and the present case is that in Newton the pursuer averred (and proved) that he would not have carried out the expenditure on the house if he had been aware of the true legal position. In the present case the pursuer has no such averments. He avers that he carried out work in the bona fide belief that the property was his, but that is all he says. In this connection I refer to what was said by the Lord President about Newton in Shilliday v Smith, cit. supra at 731 B-C: -

Another ground for distinguishing Newton, although perhaps a less important one is that in that case the pursuer was claiming recompense in respect of money he had spent on improvements to the house. In the present case, although the pursuer has averments about improvements carried out by him, his counsel made it quite clear that these averments were not the basis of the pursuer's claim; that was that the defender had benefited from the fact that the property had been sold for a considerably higher price than had been originally paid for it. This is despite the terms of the pursuer's only plea-in-law, which I have quoted earlier in this note.

Counsel for the defender also submitted that the law had moved on since Newton. She pointed out that the three criteria set forth by Lord Hope of Craighead in Dollar Land (Cumbernauld) Ltd v CIN Properties Ltd, cit. supra represented the current authoritative statement of the law. In my opinion, this is correct. In Newton Lord Anderson (at p. 723) states what he conceives to be the criteria for a case of recompense: (1) that expenditure was made by the pursuer; (2) that this expenditure was made in error; and (3) that the error was justifiable or excusable. In my opinion, these criteria are significantly different from those adumbrated by Lord Hope in Dollar Land, which suggests that the law may have advanced since Newton. In any event, the former case is of higher authority than the latter and is binding on me.

I am therefore of opinion that Newton does not offer the pursuer any assistance.

Counsel for the defender founded on the case of Gordon-Rogers v Thomson's Executors, cit. supra while counsel for the pursuer sought to distinguish it. In my opinion, the facts of that case are closer to those of the present action than are those in Newton. In Gordon-Rogers a husband and wife had taken title to property in joint names with a special destination to the survivor. The narrative clause of the disposition declared that the purchase price had been paid by both. The wife died leaving a will purporting to bequeath her one half pro indiviso share to the pursuer. The husband's executors claimed that she had not been entitled to bequeath her share because of the destination in the disposition. The pursuer sought declarator that he was joint proprietor with the husband's executors on the basis that the destination had been purely testamentary. He averred that, despite the narrative of the disposition, the purchase price had truly been paid entirely by the wife. The defenders challenged the relevancy of that averment, inter alia, on the ground that it would be incompetent to lead extrinsic evidence to contradict the clear terms of the disposition. Lord Morison found in favour of the defenders, holding that extrinsic evidence would indeed be incompetent. He founded on the general rule stated by Dickson, Law of Evidence in Scotland, paras 1017 and 1021.

In Gordon-Rogers counsel for the pursuer founded on Hay's Tr. v Hay's Tr., cit. supra, as did counsel for the pursuer in the present case. However, I do not think that Hay's Tr. is of any great assistance in the present case. That action was in the form of a special case and proceeded on an agreed statement of facts. The question of leading extrinsic evidence to contradict the terms of the disposition did not therefore arise. In the present case the pursuer seeks to contradict the terms of the disposition. The defender maintains that the disposition is accurate insofar as it narrates that both parties contributed towards the purchase price. The only way in which the pursuer could prove his case is by leading extrinsic evidence. In my opinion, following that of Lord Morison in Gordon-Rogers, he could not competently do so.

For the sake of completeness I should say that I found the "fall back position" of counsel for the pursuer unpersuasive. It was to the effect that extrinsic evidence could be admitted because of the character of the alleged understanding between the parties. In support of this submission counsel founded on Macphail's Evidence, para. 15-08, Dickson's Evidence, para. 1038 and the case of Smith v Kerr, cit. supra. In my opinion, these authorities have no relevance to the present case. They are concerned with the situation where "it is alleged that the writing was not intended to be a true record of the contract, but was merely a cover for some ulterior transaction of a different nature" (Macphail, op. cit., para 15.08). That is not the situation here. Even though the pursuer avers that the property was taken in joint names in order to defeat a possible claim by his ex-wife, the transaction concerned was, according to his pleadings, the purchase of heritable property as an investment. It was not a cover for anything.

On the whole matter therefore I hold that the pursuer would not be entitled to lead extrinsic evidence to contradict the terms of the narrative clause of the disposition. His averments seeking to do so are accordingly irrelevant. There would be no purpose in allowing these averments to proceed to any sort of probation. The defender's third plea-in-law should therefore be sustained on this ground.

In this context counsel for the defender referred me to Shilliday v Smith, cit. supra. In that case the parties had formed a relationship and lived together in the pursuer's cottage. The defender then bought a house and the parties became engaged. The house was bought with the intention that the parties should eventually live in it. Meanwhile they continued to live together in the pursuer's cottage. The pursuer contributed towards the cost of improvements to the house which the defender had bought. The relationship came to an end and the pursuer sought to recover what she had expended. The sheriff granted decree in the pursuer's favour and the sheriff principal upheld this decision. On appeal from the sheriff court to the Court of Session the First Division held that as the pursuer had made the expenditure in contemplation of marriage the condictio causa data causa non secuta applied and the appeal should be refused.

Counsel for the defender referred me to the case more for the observations made therein on the law of unjust enrichment than for its facts. Indeed, she submitted that Shilliday should be distinguished on its facts on the simple ground that in the present case the pursuer did not aver that he had expended money on the basis of an expectation which was not fulfilled. Counsel referred especially to the Lord President's (Rodger) opinion at p. 727C-H, where he discusses the principles of unjust enrichment and at pp. 730C-731E. In the latter passage the Lord President states:-

In my opinion the pursuer has failed to make any relevant averments of a lack of legal justification for any enrichment of the defender. What the pursuer's averments amount to is a statement that the defender has benefited to the extent of one half of the purchase price of the property. However, given the view which I have taken on the determinative effect of the narrative clause of the disposition, the defender is legally entitled to benefit from the sale of the property. In any event, the decree in the action of division and sale gave the defender a legal entitlement to share in the proceeds. The averments of expenditure by the pursuer, insofar as they are of relevance at all, do not assist the pursuer. On his own averments he was the sole owner of the property. Therefore, any expenditure by him was in suo.

The form of the pursuer's only outstanding plea-in-law illustrates the defect in his pleadings. The premiss of that plea is "The defender having been enriched ... by reason of the expenditure made and work done by the pursuer". That does not state that the defender has been unjustly or unjustifiably enriched. That failure means that the proper foundation for a case of recompense as desiderated in Dollar Land (Cumbernauld) Ltd v CIN Properties Ltd, cit. supra has not been laid. In this connection I respectfully disagree with the style given in W.J. Stewart's The Law of Restitution for the appropriate plea-in-law in such an action. Nor am I able to accept, as argued by counsel for the pursuer, that the plea-in-law approved by the Lord President in Shilliday v Smith, cit. supra was in comparable terms to the plea in the present action. The plea in Shilliday made it quite clear that the pursuers claim was based on a condition which had failed. It was a plea entirely appropriate to the circumstances of that case. The plea in the present case is not appropriate to its circumstances.

Counsel for the pursuer suggested that the points taken by counsel for the defender on the pleadings, especially the plea-in-law, were mere technicalities. I cannot agree. A plea-in-law is an essential part of our pleadings. It should lay down the legal basis of a party's case. If the legal proposition contained in a plea-in-law is unsound it is likely that the party's case itself is unsound also. In my opinion, that is the situation in the present case. The plea is inept and there are insufficient averments to support the pursuer's claim of unjust enrichment. On this ground too the defender's third plea-in-law should be sustained.

The first point made by counsel for the defender was that because the pursuer's purpose in entering into the arrangement with the defender was to frustrate any claim by his ex-wife, he could not ask the court to exercise an equitable remedy. In my opinion it would not have been proper to dismiss the action on this ground alone. If this had been the only point taken by the defender I should have allowed a proof before answer.

The second argument advanced on behalf of the defender depended on the fact that the pursuer had not lodged a counterclaim in the action of division and sale brought in Perth Sheriff Court by the defender. I think that counsel for the defender almost reached the point of submitting that the pursuer was, by his failure to lodge a counterclaim, barred from insisting in the present action. In my opinion, this is not so. While I am satisfied on the basis of the authorities founded on by the defender that a counterclaim would have been competent in the Perth action, I am not persuaded that the pursuer's failure to take that step is fatal to his present action. A perusal of the relevant rule in the Ordinary Cause Rules makes this clear in my opinion. Rule 19.1(1) provides inter alia:-

This must, I think, imply that where a counterclaim is competent a separate action is also competent. I do not consider that the dicta in Varney (Scotland) Ltd v Lanark Town Council, cit. supra to which counsel for the defender referred me in any way detract from this principle. I should therefore have rejected the submission made by the defender on this matter.

To sum up, if I had not been granting absolvitor on the basis of the defender's second plea-in-law, I should, for the reasons stated above, have sustained the defender's third plea -in-law and dismissed the action.

Counsel submitted that the pursuer's averments in support of the sum sued for, viz Ј21,500, were unspecific and vague. In article 3 of the condescendence the pursuer averred that he had carried out certain works. In article 5 he averred that he had expended a total of Ј19,949.17 in improving the property. In article 4 the pursuer averred that the defender was lucratus "to the extent of at least Ј21,500". There was no averment that the defender had actually received that sum. The averments of expenditure by the pursuer suggested that the action was based on quantum meruit rather than quantum lucratus. In an action based on recompense the claim should be based on the advantage which the recipient obtained: Gloag on Contract, 2nd edition, p. 328. From the pleadings there was no means of ascertaining the extent by which the defender was alleged to have gained. The defender therefore did not have fair notice of the case against him.

Counsel submitted that although the pursuer had set out details of what he had spent on the property, the basis of his action did not depend on that. The crucial averment was that in which the pursuer said that the property had been sold for Ј43,000. The sum sued for was one half of that sum. It was as simple as that. The averments of expenditure by the pursuer were to give fair notice of what he had invested in the house. It was a case of belt and braces. If the pursuer proved that he had expended the money on the property it would support his allegation that he had considered the property to be his. Even if all the averments about expenditure were deleted the pursuer's case would still be relevant.

The pursuer's crave was based on the selling price of the property. The obligation to recompense had been triggered by the sale. Therefore the selling price should be the basis of the claim.

I can deal with this matter relatively briefly. As it is clear that the pursuer's claim is based on the price paid for the property and not on what the pursuer expended on it, the averments of expenditure are, in my opinion, irrelevant and should not be remitted to probation. Even if the case had been proceeding to proof before answer I should have excluded these averments. So far as the remaining averments on quantum are concerned, while "to the extent of at least Ј21,500" is not particularly happily phrased, I am of opinion that these averments are not so lacking in specification as to justify dismissal. If this had been the only matter at which the defender's plea to the relevancy had been directed, I should have allowed a proof before answer.

The defender has been successful in obtaining decree of absolvitor. He is therefore entitled to the expenses of the action so far as not already disposed of.

I have already granted a motion certifying the cause as suitable for the employment of counsel. However, it is appropriate that I should take this opportunity to express my thanks to both counsel for the very high standard of debate which they presented before me. It was a pleasure to hear their submissions.

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	Scottish Sheriff Court Decisions
You are here: BAILII >> Databases >> Scottish Sheriff Court Decisions >> COLIN McCAFFERTY v. WILLIAM MUIR McCAFFERTY [1999] ScotSC 22 (2nd August, 1999) URL: http://www.bailii.org/scot/cases/ScotSC/1999/22.html Cite as: [1999] ScotSC 22

Scottish Sheriff Court Decisions

COLIN McCAFFERTY v. WILLIAM MUIR McCAFFERTY [1999] ScotSC 22 (2nd August, 1999)