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Scottish Sheriff Court Decisions |
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You are here: BAILII >> Databases >> Scottish Sheriff Court Decisions >> Gibson v. Robb [2004] ScotSC 30 (26 April 2004) URL: http://www.bailii.org/scot/cases/ScotSC/2004/30.html Cite as: [2004] ScotSC 30 |
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SHERIFFDOM OF LOTHIAN AND BORDERS
A323/03
JUDGMENT OF
SHERIFF PRINCIPAL IAIN MACPHAIL QC
in the appeal
in the cause
GRAHAM GIBSON
Pursuer and Appellant
against
MELANIE ROBB
Defender and Respondent
_________________________
Act: J A Brown, Advocate; Miller Beckett & Jackson, Glasgow
Alt: Kermack; Turcan Connell
EDINBURGH, 26 April 2004
The Sheriff Principal, having resumed consideration of the cause, opens up the closed record and allows the same to be amended (1) on page 17, line 16, by the deletion of the word 'occurrence' and the substitution therefor of the word 'concurrence', (2) on page 22, line 5, by the insertion of the word 'joint' before the word 'venture', and (3) on page 26, line 1, by the insertion after the words 'Council Tax' of the words '(incurring a shortfall to be met by the defender of £25), to Time Retail'; of new closes the record; allows the appeal; recalls the interlocutor of 9 December 2003 complained of; sustains the first and third pleas-in-law for the pursuer and appellant in the principal action; repels the second plea-in-law for the defender and respondent in the principal action; repels of consent the fifth, sixth and seventh pleas-in-law for the pursuer and appellant in the principal action; finds and declares that the pursuer is entitled to insist in an action of division and sale of the subjects described in the first crave of the initial writ; dismisses craves 1, 2, 3, 4 and 5(c) of the counterclaim and pro tanto sustains the first plea-in-law for the pursuer in the counterclaim; certifies the debate and the appeal as suitable for the employment of junior counsel; quoad ultra continues the cause until 19 October 2004 at 10.30 a.m. within the Appeal Court, Court No 9, Sheriff Court House, 27 Chambers Street, Edinburgh.
NOTE
Introduction
[1] This is a dispute between a man and a woman who formerly cohabited in a flat of which they were registered as the proprietors. Their relationship having come to an end, the man, who is the pursuer, has brought an action of division and sale of the flat. The defender resists this action on the ground that she and the pursuer were and are in partnership and the flat is partnership property: thus, she maintains, the pursuer is not entitled to the remedy of division and sale. She counterclaims for a declarator that they are in partnership and, amongst other things, for decree ordaining the pursuer to fulfil what she avers to be his obligations to the partnership. The pursuer challenges the relevancy of the defender's averments both in the principal action and in the counterclaim. The Sheriff has allowed a proof before answer, and the pursuer has appealed.
The pleadings
[2] The defender's averments are somewhat diffuse and repetitive but they may, I think, be summarised as follows. The parties formed a sexual relationship in August 1998. They began cohabiting in a property in Kelso which belonged to the defender. She sold that property in 1999 and went to live with the pursuer in his flat in Edinburgh. She contributed capital and effort in renovating that flat. It was sold when it was marketable. The parties then bought a flat at 27A East London Street on 14 December 1999 for £93,000. They did so 'for the benefit of the joint venture they were then involved in.' They expended effort and capital on that flat, as well as the skill, expertise and contacts of the defender, in the improvement of it. They spent about £17,000 on the renovation of that flat. They sold it for £147,177 on 10 September 2001, bringing that joint venture to an end. [3] The defender continues (on page 22 of the record):'The pursuer and the defender agreed that they would form a new joint venture in respect of 5/1 Bellevue Place, Edinburgh and would contribute the capital profits made by each of them from the joint venture in respect of 27A East London Street aforesaid into said new joint venture. The business of the pursuer and the defender involved entering into single joint ventures for the renovation of dilapidated properties and for the resale thereof with a view to profit.'
The most elaborate statement of the defender's position appears in the first paragraph of the statement of facts in the counterclaim. She there avers:
'The pursuer and the defender were and are carrying on business together, in common with a view to profit, and were and are in partnership. The partnership between them was and is a single adventure or undertaking, and ought not to be dissolved until the termination of the undertaking in terms of section 32(b) of the Partnership Act 1890. The single adventure or undertaking was the purchase of a property, namely 5/1 Bellevue Place, Edinburgh, as a property which was not readily marketable in the market place of residential property owing to its state of repair with a view to remedying the disrepair of the property and returning the property to the market for sale with a view to profit based upon the expense of the property and the expense of remedying the defects, whilst taking advantage of the main residence exemption for the purposes of capital gains tax by virtue of their residing in the said property. In doing so, the pursuer and the defender were relying on the contribution of capital by the pursuer and the defender, the efforts of the pursuer and the defender and the contacts acquired by the defender in the provision of goods and services required by the said partnership at a trade rate in her employment as a business development manager of a property development firm. The pursuer and the defender purchased the property at 5/1 Bellevue Place, Edinburgh, specifically with this intention in mind. The property was purchased on 7 September 2001.When the pursuer and the defender occupied the said property, owing to the state of the property they required to cook on a camping gas stove and were unable to have showers or baths, but were prepared to tolerate this for the purpose of the joint adventure. The pursuer and the defender operated a separate account, in the name of the defender, owing to the pursuer's credit rating, with the Royal Bank of Scotland plc, in order to meet the expenses of the joint adventure and other common expenses between them. The pursuer and the defender obtained a building warrant on 7 November 2001, numbered 01/06390/ALT, for the renovation of the said property. The pursuer and the defender embarked upon the renovation of the said property in terms of said building warrant and have nearly but not yet completed the works in terms of said building warrant. No completion certificate has yet been obtained in terms of said building warrant, nor have the works required thereunder been completed. During the course of the summer of 2002, the pursuer and the defender agreed that the joint venture between them would benefit if the said property at 5/1 Bellevue, Edinburgh, had the benefit of parking at the rear of the said property, taking access thereto by way of a lane leading to the rear of the said property. [ . . . ] It is the contention of the defender that the completion of these works would maximise and increase the joint profit to the partnership between the pursuer and the defender if these works were completed. It was contemplated as part of the joint venture between the pursuer and the defender that these works would be completed, with a view to profit for the partnership between them. Thereafter, for reasons of his own, the pursuer, and for reasons not relating to the action between the parties, removed himself from the property and sought to terminate the partnership between the parties hereto, which he was not entitled to do in terms of said section 32(b) of the 1890 Act. Said partnership continues in existence until completion of said joint venture and the pursuer is not entitled to seek the premature dissolution of said partnership. The defender is entitled to insists on the continued involvement of the pursuer, by way of his contribution of effort and capital until the completion of said joint venture.'
'There was no discussion between the parties anent termination of one joint venture and the reinvestment of profits in a new joint venture. The pursuer did not agree to any such arrangement. The only relevant discussions between the parties were of selling one jointly owned home and buying another larger and more desirable jointly owned home. There was no business element to the transaction.'
The defender's response to each of those three passages in the pursuer's pleadings is a general denial. Thus her position must be that discussions about the formation of a business venture did indeed take place between the parties and that the pursuer did consent to such a business venture. She does not specify, however, when, where or in what terms such discussions took place or such consent was given.
[6] In the principal action the pursuer pleads, inter alia:'1. The defender's averments being irrelevant, the defences should be repelled and decree granted as craved.
3. The pursuer and the defender being joint proprietors pro indiviso of the subjects, the pursuer is entitled to insist in the present action.'
Further pleas for the pursuer, nos 5, 6 and 7, appear in the record as a result of a printing error, and I have repelled those pleas of consent. The defender pleads, inter alia:
'2. The pursuer not being a proprietor, pro indiviso, with the defender, but, instead, being a joint proprietor by virtue of being a trustee for and partner of the joint venture or partnership between the pursuer and the defender, the pursuer is not entitled to the remedy of division and sale, as craved, ineptly, for the pursuer.'
In the counterclaim the defender's crave for a declarator is not supported by any plea-in-law. She pleads, inter alia:
'1. The pursuer being a partner of a partnership between the pursuer and the defender, as hereinbefore condescended upon, for the purposes of a single adventure or undertaking, which single adventure or undertaking not being capable of dissolution until the completion thereof, the Court ought to ordain the pursuer to complete said single adventure or undertaking.'
The pursuer pleads in the counterclaim, inter alia:
'1. The defender's averments anent the counterclaim being irrelevant, the counterclaim should be dismissed.'
The defender states general pleas to the relevancy of the pursuer's averments in both the principal action and the counterclaim, but she reserved those pleas and offered a proof before answer. She did not argue her preliminary pleas either before the Sheriff or at the hearing of the appeal.
[7] In relation to the pleadings it only remains to notice that I have allowed three minor amendments in order to correct mistakes in the printing of the record.The judgment of the Sheriff
[8] In her judgment the Sheriff narrates the arguments deployed before her and states her reasons briefly. Thus in relation to the defender's averments in the principal action she writes:'I took the view that on a fair reading of the defender's averments she had set out in her answers to the principal claim [i.e. in the principal action] along with the counterclaim a case which gave fair notice of a defence based on a joint venture partnership, the joint venture itself and prior dealings.'
In relation to the counterclaim the Sheriff heard argument on its competency in the absence of a plea, as of course she was entitled to do, and concluded that the counterclaim was competent. That decision was not challenged before me and I agree with it. The Sheriff also held that the defender's fourth crave in the counterclaim, which is a crave for payment, should fall, as should head (c) of her fifth crave. Again, those decisions were not challenged on appeal. In her interlocutor the Sheriff 'deleted', that is, dismissed, the fourth crave and head (c) of the fifth crave of the counterclaim and quoad ultra allowed a proof before answer of the averments in the principal action and counterclaim. She states, having considered the arguments on competency:
'So that in respect of the first, second, third and fifth craves I took the view that they were competent, and sufficiently stated at this stage to be remitted to probation although in the fifth crave (c) would fall as correctly conceded.
'I have been persuaded that the fourth crave is so doubtful as to fall at this stage.
'The craves which relate directly to the defender's claim to a joint venture partnership should remain until matters are established at proof and if the defender's position is correct can be more fairly and conveniently crystallised at that stage. Fair notice has been given as to the defender's position. It would be hoped that once the basis of the pursuer's and defender's ownership of the property at 5/1 Bellevue Place, Edinburgh is established then parties could move forward to a negotiated settlement.'
The hearing of the appeal
[9] At the hearing of the appeal I understood the parties to be primarily concerned to obtain a decision as to whether the pursuer was entitled to insist in an action of division and sale. I was advised that if that issue were to be decided in the pursuer's favour, the parties would then discuss between themselves the various pecuniary claims made by the defender in heads (a) (b) and (d) of her fifth crave in the counterclaim. I shall therefore consider, first, the relevancy of the defender's averments in support of her second plea-in-law in the principal action, which is to the effect that the pursuer is not entitled to the remedy of division and sale since he is in partnership with her and the flat is partnership property (see paragraph 6 above). I shall then consider, secondly, her averments in support of her craves 2 and 3 in the counterclaim which seek decree ordaining the pursuer to fulfil what she avers to be his obligations to the partnership. Finally, I shall notice briefly her averments in support of the claims in crave 5 to which I have referred. [10] It is convenient to mention here that at the beginning of his speech the defender's solicitor stated that the defender was a party litigant and he had only been instructed to conduct the debate and the appeal. I had some difficulty in seeing the relevance of that. It was not suggested that the defender's pleadings should be entitled to any special indulgence on that account, nor was there any motion for leave to amend them in any respect. I have therefore decided to disregard this information.Division and sale
[11] The pursuer's counsel submitted that the pursuer, as a pro indiviso proprietor, had an absolute right at common law to insist in an action of division and sale, subject only to his barring himself from doing so by contract or, perhaps, in circumstances where the law of personal bar might apply: Upper Crathes Fishings Ltd v Bailey's Executors 1991 SC 30; Bush v Bush 2000 SLT (Sh Ct) 22. Counsel also cited Scrimgeour v Scrimgeour 1988 SLT 590, Berry v Berry (No 2) 1989 SLT 292 and Burrows v Burrows 1996 SC 378. There were no averments relevant to instruct a case that the pursuer had by contract abandoned that absolute right. There was a presumption that cohabitants did not intend to create enforceable contractual obligations inter se: MacQueen and Thomson, Contract Law in Scotland, p 70, para 2.64(2); McBryde, The Law of Contract in Scotland (2nd ed), pp 89-92; Gloag, Contract (2nd ed), pp 8-9; Balfour v Balfour [1919] 2 KB 571; Spellman v Spellman [1961] 1 WLR 921; Jones v Padavatton [1969] 1 WLR 328; Pettitt v Pettitt [1970] AC 777; Merritt v Merritt [1970] 1 WLR 1211. It was for the defender to make averments which, if proved, would be sufficient to displace that presumption. She must therefore establish three matters. (1) That there was an onerous commercial contract between the parties to enter into a partnership. Counsel referred to 16 Stair Memorial Encyclopaedia para 1007; Miller, Partnership (2nd ed), p 44; Bell, Comm, ii, 511; and Mair v Wood 1948 SC 83. (2) That all the essentials for consensus in idem had been settled: May and Butcher Ltd v The King [1934] 2 KB 17. (3) That, even if such a contract existed, it included a waiver by the pursuer of his right to insist in an action of division and sale, and there was a subsequent agreement between the parties relative to the creation of a car park: Small v Fleming Outer House, 27 March 2003, unreported, para 67. The defender had not made sufficient averments on those three matters. Her plea that the pursuer was not entitled to the remedy of division and sale was thus unsupported by relevant averments: it should therefore be repelled, and decree granted in terms of the pursuer's first crave. [12] In reply, the defender's solicitor submitted that the parties were carrying on a business in common with a view to profit, and thus the relation between them was one of partnership: Partnership Act 1890 ('the 1890 Act'), section 1(1). It had been entered into for a single adventure or undertaking, and would only be dissolved by the termination of that adventure or undertaking: see section 32 (b). The averred agreement relative to the construction of a car park amounted to a variation by consent of the terms of the partnership: section 19. Notwithstanding the terms of the title to the flat, it was partnership property: section 20. It was unnecessary for the parties to agree expressly to form a partnership: Dollar Land (Cumbernauld) Ltd v C I N Properties Ltd 1996 SC 331. There had been no commercial aspect to the agreements between family members which had been held to be unenforceable in the English courts. In the present case the contract between the parties had been of a commercial rather than a social nature. The parties had done such a thing before; they had formed a new joint venture; and sufficient averments had been made about the financial operation and the administration of the partnership, and the variation of its terms. As to the essentials for consensus in idem, the 1890 Act filled in any blanks (section 24) and made provision for the distribution of assets on the final settlement of accounts (section 44). The effect of the partnership was that the flat ceased to be co-owned, and thus there could be no question of a division and sale. There were sufficient averments about the agreement relative to a parking space. [13] In my opinion the defender's averments in support of her plea that the pursuer is not entitled to the remedy of division and sale are irrelevant and lacking in specification. It is, I think, unnecessary to consider whether there is in the law of Scotland any presumption of fact that an arrangement between cohabitants is not intended to create any legally enforceable obligations. It seems reasonable simply to assume that there may be circumstances in which arrangements between cohabitants are intended by them to have the force of law: that, I think, could not be seriously disputed. The question here is whether the defender has made averments, sufficiently relevant and specific to entitle her to inquiry, that the parties entered into a partnership. It should be noted that it is not her case that they entered into an arrangement without realising that it was a partnership: she expressly avers an agreement to enter into a joint venture with a view to profit - see the averments quoted in paragraph 3 above. The pursuer is therefore entitled to fair notice of the facts which the defender intends to prove in support of that proposition. First, where, when, in what circumstances and in what terms was this agreement reached? There is no suggestion that there was any formal deed, or any exchange of correspondence, any written memorandum or any documentation of any kind. Was there, then, an oral agreement, preceded by some discussion? The defender's position on averment is not satisfactory. As I have already noted in paragraph 5, she meets with a bare denial the pursuer's averments that they never discussed the formation of a business venture in connection with the flat at 5/1 Bellevue Place, and that he at no stage consented to such a business venture. Her denial must mean that, according to her, such discussions took place and the pursuer gave his consent; but she does not disclose in her pleadings the time when, the place where, or the terms in which such discussions took place or such consent was given. In this vital respect, accordingly, she denies to the pursuer fair notice of her case. Nor is there any averment of any of the essential elements of any partnership agreement. There is an averment that the parties have met equally between them the expenses of the joint venture; but it is not said how much capital, or in what proportions, each party contributed to the joint venture, or in what proportions they were to share in any profits. Nor is anything said about taxation or accounts. The only account that is mentioned is an account in the name of the defender (not in the name of the partnership) which was not devoted exclusively to the finances of the partnership but was also used in relation to 'other common expenses between them'. [14] The requirement of adequate specification of the constitution and terms of the agreement is a serious one, because the existence of a partnership, if proved, would mean that the pursuer would no longer enjoy his absolute right as a pro indiviso proprietor to insist in an action of division and sale. The limited exceptions to that absolute right are explained in 18 Stair Memorial Encyclopaedia para 32. The pleadings rather indicate that no abandonment of that right was intended: although, according to the defender, the parties had decided to purchase the property for the purposes of the partnership, the title to the flat was taken in the name of both parties, not in the name of the partnership. [15] The defender in her pleadings frequently asserts the existence of a partnership; and she also seeks to fortify her position by making a number of argumentative calls on the pursuer to explain or specify this or that, at pages 6, 7 and 19 of the record. Assertions, however, do not afford specification; and such calls are valueless - see Macphail, Sheriff Court Practice (2nd ed), vol 1, pp 287-288, para 9.70. [16] There was some discussion of the defender's averments relative to the creation of a parking space at the rear of the property. It was said that they indicated a variation of the partnership agreement. There is, however, no specification of the nature or cost of the work involved, or of the proportions in which the parties would contribute to the cost or as to which of them would instruct and supervise the operation. In any event the averment of a variation cannot supply deficiencies in the specification of the averments of the original contract. [17] The defender's solicitor also founded on the defender's averments that the parties had engaged in a similar joint venture when they had bought, improved and sold the flat at 27A East London Street. Again, however, there is no specification of any agreement, financial contributions, profits, taxation or accounts. A further attempt to support the defender's position was made by referring to an averment that the pursuer 'consistently pressed for the properties condescended upon to be sold as soon as they were in a habitable and marketable condition.' That does not appear to me to point in the direction of the existence of a partnership rather than the existence of a natural desire on the part of a co-proprietor to sell the improved property and move on. [18] I am therefore unable to agree with the Sheriff that the pursuer has been given fair notice of the defender's case. I consider that the pursuer's first and third pleas in the principal action are well-founded. I have accordingly sustained those pleas, repelled the defender's second plea-in-law in the principal action and granted a declarator that the pursuer is entitled to insist in an action of division and sale of the subjects.Counterclaim, craves 2 and 3
[19] Since I have repelled the defender's plea that the parties were in partnership, it is unnecessary for me to determine the relevancy of the defender's averments in support of her craves in the counterclaim for decree ordaining the pursuer to fulfil what she avers to be his obligations to the partnership. I shall, however, dispose of the pursuer's preliminary plea in the counterclaim and briefly explain my views. [20] The defender's craves 2 and 3 in the counterclaim are in these terms:'2. To ordain the pursuer to fulfil his obligations to the said partnership between the pursuer and the defender, by expending money and effort in completing the adventure or undertaking of the partnership and that by joining with the defender in (a) completing all the works to the dwellinghouse at 5/1 Bellevue Place, Edinburgh necessary and required in order to apply for and receive a completion certificate in respect of building warrant number 01/06390/ALT dated 7 November 2001 and issued by the City of Edinburgh District Council; (b) applying for and obtaining permission in terms of the Town and Country Planning Acts, and joining together with the proprietors of 1 and 3 Bellevue Place, Edinburgh in developing at said dwellinghouse at 5/1 Bellevue Place, a car park in the garden ground of said property and said adjoining properties, serving all three said properties and to do all other necessary works in terms of said planning permission; (c) joining with the said proprietors for the time being of the ground floor premises at 1 and 3 Bellevue Place, aforesaid in order to constitute the necessary servitudes between the proprietors of the said properties and the partnership property in order to procure that the right to park thereby enabled becomes a real right for said proprietors; and (d) offering said dwellinghouse at 5/1 Bellevue Place for sale, and selling same, with a view to the profit of the said partners of said partnership and for equal distribution of the net profit in terms of said partnership.
3. To ensure that all works hereinbefore craved are carried out at the sight of the Court.'
Counterclaim, crave 5
[24] Crave 5 seeks a decree for payment under three heads, (a), (b) and (d). The defender has acquiesced in the Sheriff's dismissal of crave (c). As to head (a), the defender avers that she has been making in full the payments under the mortgage, and she seeks recovery of the pursuer's share of those payments. The pursuer's counsel conceded that this claim was relevant in principle but he submitted that it was not clear how the sum craved, £1,231.24, was composed. Craves (b) and (d) do not appear to be supported by any pleas-in-law. Counsel questioned the relevancy of the averments in support of them. The defender's solicitor, on the other hand, submitted that sufficient had been averred to entitle the defender to inquiry, and cited Moss v Penman 1993 SC 300.
Result
[25] As I understood the position by the end of the hearing of the appeal, there was a prospect that, if the pursuer were to be found entitled to an action of division and sale, the parties might be able to resolve their differences over the remaining heads of crave 5. I therefore consider that the appropriate course is to pronounce an interlocutor granting the declarator sought by the pursuer in the principal action and disposing accordingly of the relative craves in the counterclaim and of the parties' various pleas-in-law. I have granted the unopposed motion for the pursuer to sanction the appeal as suitable for the employment of junior counsel, but I have not made any other order as to expenses. The remaining heads of crave 5 continue to be outstanding. The parties should now, I think, have an opportunity to consider whether it is necessary for this action to proceed further. I have therefore continued the cause for some six months, until 19 October 2004. The case will call before me at 10.30 am on that date unless in the meantime any application is made by either party, or both. Each party is, of course, free to lodge a motion at any time whether with a view to resuming the progress of the case or to arranging for its settlement.
