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	Scottish Sheriff Court Decisions
You are here: BAILII >> Databases >> Scottish Sheriff Court Decisions >> Conyers v. Conyers & Company Ltd [2005] ScotSC 23 (18 April 2005) URL: http://www.bailii.org/scot/cases/ScotSC/2005/23.html Cite as: [2005] ScotSC 23

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SHERIFF SCOTT

CA820/04

Act: Loney Alt: Caplan

GLASGOW, 18 April 2005.

The Sheriff, having resumed consideration of the cause, sustains the defenders' first plea-in-law and dismisses the action; finds the pursuer liable to the defenders in the expenses of the cause; allows an account thereof to be given in and remits same when lodged to the Auditor of Court to tax and to report thereon.

Sheriff

NOTE:

As indicated in the Note appended to the Court's interlocutor dated 23 February 2005, the scope of the debate was restricted to whether the letter, No. 5/4 of process, constituted the requisite contractual notification of default.

By way of background, Mr Caplan for the defenders, advised the Court that the pursuer and Mr Frederick Williams had previously owned the defender company in equal shares. Thereafter, Mr Williams bought out the pursuer's shareholding. As part of the overall bargain, the payment agreement, No. 5/1 of process, was entered into by the parties involved in the present litigation and by Mr Frederick Williams.

The agreement included, inter alia, a clause dealing with "payment" and a further clause dealing with "default". Mr Caplan submitted that the latter clause was of significance for present purposes since it provided for a particular sum of money becoming due "...following the Company committing an Event of Default".

Certain undertakings were set out in clause 5 of the agreement. In particular, in terms of clause 5.2.2 the defenders and Mr Frederick Williams both gave undertakings to the pursuer to the effect that the defenders would "not arrange any additional overdraft or other borrowing facilities or make any loan or advance or give any credit".

Mr Caplan then drew the Court's attention to the terms of clause 6.1.2. He stressed that there were, in effect, three legs to this particular part of the agreement, viz. there required to be default or a failure by the company; there was a 7 day remedial period; and that 7 day period only commenced once the default or failure had been notified to the company i.e. the defenders.

In Mr Caplan's submission, the Court required to be satisfied that all three elements existed before it could entertain any suggestion that the pursuer was entitled to proceed with an action.

In support of the contention that notice had been given to the company, Mr Caplan advised the Court that the pursuer relied upon the letter, dated 4 October 2004, No. 5/4 of process. This was a letter from the pursuer's agents to Messrs Anderson Fyfe in which, inter alia, it was suggested that an event of default as set out in clause 6 of the payment agreement had occurred. It was argued on behalf of the defenders that nowhere within the letter was there to be found any reference to the defenders. On the contrary, the names of the pursuer and Frederick Williams appeared in the heading and the second paragraph was in the following terms:-

"We write to formally intimate that our client holds your client in default of the agreement. In terms of clause 5.2.2, your client is prohibited from arranging any additional overdraft or other borrowing facilities, without the consent of our client. He has done both. In the first place, The Royal Bank of Scotland loan is shown, in the June accounts, as having increased by £2,624.60. In the second place, there is a new Directors loan, by your client, in the sum of £15,000, again provided without the consent of our client."

Mr Caplan submitted that repeated references to the third person singular could only be references to Mr Frederick Williams as opposed to the defenders. Furthermore, the "new Directors loan" was said to have been made by "your client". Accordingly, having regard to the ordinary language of the letter, it was contended that it was insufficient to constitute notice to the company in terms of clause 6.1.2. The letter itself merely referred to what Mr Williams was alleged to have done. On no reasonable construction of its terms could it amount to notification to the company.

In reply, for the pursuer, Miss Loney maintained that proper intimation had been given. She advised the Court that when the original sale transaction had been completed two different agreements had been entered into. Number 5/5 of process was a separate minute of agreement entered into between Frederick Williams and the pursuer. Miss Loney accepted that clause 6.1.2 of the payment agreement undoubtedly required that notice be given to the limited company. However, the person or entity responsible for giving notification had not been specified nor had the precise method involved. Furthermore, it was unclear as to whether notice was to be given at the company's registered office or a place of business.

In contrast, the minute of agreement made specific provision in connection with the giving of notice. Miss Loney highlighted the terms of clause 9.10 of No. 5/5 of process which read as follows:-

"Any notice or other document to be given hereunder shall be delivered or sent by first class recorded delivery post or by facsimile transmission to the party to be served at that party's address or facsimile number."

It was submitted on behalf of the pursuer that, when it came to the payment agreement, No. 5/1 of process, the parties had been deliberately unspecific anent the manner and circumstances in which notification was to be given.

At or about the end of September 2004, parties' agents had been involved in correspondence. Against that background, the letter of 4 October 2004 (No. 5/4 of process) had been sent. Miss Loney indicated that Messrs Anderson Fyfe had responded by way of a letter dated 8 October 2004 (No. 5/6 of process) and she referred the Court to the second paragraph thereon which was in the following terms:-

"We are taking our clients' instructions on the claim being made by your client and will be in touch shortly."

Miss Loney accepted that the defender company did not feature in the heading of that letter or, indeed, in the heading of the previous letter dated 4 October. However, in her submission, a letter heading did not fall to be regarded as a determinative factor. The Court was entitled to look at the whole terms of the correspondence, in the context in which it had been issued, with a view to establishing what was being conveyed. In addition, Miss Loney sought to stress that the undertakings given in terms of clause 5 of No. 5/1 of process, had been made by both Mr Williams and the company.

The Court was referred to the case of Deltavale Properties Ltd v Mills and Others [1990] 2 All ER 176. It was suggested that this case was authority for the proposition that a notice was valid where it was sufficiently clear in meaning and intent so as to leave the recipient in no reasonable doubt as to how and when it was intended to operate. Miss Loney submitted that the "true meaning and intent" of the letter dated 4 October 2004 was to give notice of default to the company and that, accordingly, a proof in respect of the wider issues in the case should be allowed.

By way of a short reply, Mr Caplan pointed out that the minute of agreement, No. 5/5 of process, was between two individuals and did not involve the limited company defender. He also suggested that his instructions to act on behalf of the defenders in this matter had only been received once the action had been raised. Any prior involvement on his part had been restricted to acting on behalf of Mr Williams.

In any event, Mr Caplan characterised clause 6.1.2 of the payment agreement as being the crux of the dispute between the parties. Default could only arise if the seven day period had elapsed without the default being purged. The company had never received notification of the alleged default and, accordingly, the defenders were entitled to dismissal.

Having considered the competing arguments, I have reached the conclusion that the submissions advanced on behalf of the defenders ought to be preferred. In my opinion, the letter of 4 October 2004, when properly construed, cannot be said to amount to the requisite notification under the agreement between the parties to this litigation.

This may seem to pave the way for a somewhat "technical" outcome. However, the terms of clause 6.1.2 are clear; the default founded upon required to be notified to the defender company before the remedial period could start to run. Accordingly, the defenders were never afforded the opportunity to purge their alleged default. It follows that, on no view of matters, could the pursuer hope to establish an "event of default" in the context of the present action. To that extent, the approach adopted on behalf of the defenders was perfectly legitimate in terms of the contractual provisions and gave rise to a substantial point of relevancy.

It may be that the pursuer will now seek to instigate fresh proceedings. However, before he can do so, he must ensure that, from his perspective, the payment agreement upon which he founds is properly adhered to, particularly in relation to the terms of clause 6.1.2.

In light of the defenders' success at debate, they are entitled to the expenses of this action.