Local Planet Solutions Ltd v. Ritchies HGV Training Centre Ltd [2006] ScotSC 49 (19 May 2006)

A2739/02

JUDGMENT OF

SHERIFF FIONA LENNOX REITH, QUEEN'S COUNSEL

in the cause

LOCAL PLANET SOLUTIONS LIMITED, having their Registered Office at Europark, Reema Road, Bellshill ML4 1RR

Pursuers

against

RITCHIES HGV TRAINING CENTRE LIMITED, Hobden Street, Glasgow G21 4AQ

Defenders

Act: Kerr; Yuill & Kyle, Solicitors, Glasgow

Alt: Carlin; Friels, Solicitors, Uddingston

GLASGOW, 19^th May 2006.

The Sheriff, having resumed consideration of the cause,

FINDS-IN-FACT:-

(1) The pursuers are a computer network company providing computer hardware and network services. They have their registered office at Europark, Reema Road, Bellshill. The pursuers are a "Microsoft" certified partner, a "Veritas" certified partner and a "Sage" certified partner.

(2) The defenders are a company incorporated under the Companies Acts and have their registered office in Scotland. They have a place of business at Hobden Street, Glasgow. The defenders business includes the training of forklift and HGV drivers.

(3) In about February 2001 Mr Walker Ritchie, Managing Director of the defenders, approached Mr Paul Brennan, Managing Director of the pursuers, about the possible supply by the pursuers to the defenders of a computer network and accounts system. This followed a recommendation by Glasgow North Ltd, a local enterprise company from whom the defenders' subsequently received a training grant. The defenders had a computer system in place but they required an updated system, including a new file server and infrastructure and networking.

(4) In about February 2001 Mr Brennan of the pursuers and Mr Clelland Anderson, then a director of Business Intelligence International Limited (B.I.I.), met with Mr Ritchie to discuss the defenders' requirements. The defenders' accountant, Mr Hugh McLair, was also present. Mr Ritchie and Mr McLair explained that there were limitations with the system the defenders then had in place. The accounting software the defenders then had was known as "Sage Line 50". Mr Brennan suggested a demonstration of "Sage Line 100" software to see if this would meet the defenders' needs. The defenders agreed to this.

(5) The defenders did not want to have a "bespoke" system written from scratch specifically for them. Such a bespoke system would have been very expensive. The defenders therefore wanted to have an "off the shelf" system which could be adjusted to meet their requirements. An "off the shelf" package of software is a series of applications which can be purchased from a supplier. This can then be installed and run with a few days' training and support. Such a package has a great deal of functionality at relatively small cost to an organisation as compared to a bespoke system developed uniquely for a business.

(6) Both Sage Line 50 and Sage Line 100 were "off the shelf" accounting software packages. Such "off the shelf" systems commonly include programs or functions which may not be used by all users. It is normal for an "off the shelf" package to include modules in excess of the requirements of some customers. Customers generally get a lot more than they need for their outlay.

(7) Mr Brennan explained to Mr Ritchie that the said demonstration would be made by Mr Anderson. Mr Ritchie was told that the pursuers would work in conjunction with B.I.I. in the installation of a system for the defenders and the provision of associated services for the Sage software.

(8) B.I.I. was a company with which the pursuers worked closely on contracts. The pursuers provided hardware and networking services. B.I.I. specialised in the provision of Sage accounting software packages together with associated training, support and other technical services.

(9) Between about February and June 2001 representatives of the pursuers and B.I.I. attended at the defenders' premises to further assess the defenders' requirements and to provide the defenders with demonstrations of the hardware and software available. The pursuers were also asked to prepare a proposal for consideration by the defenders.

(10) The pursuers were told by the defenders that the defenders were looking for a computerised accounts system whereby information relating to a customer only required to be entered into the system once for the generation of a booking form and invoice and for that information then to be posted automatically through to the accounting part of the software for the production of profit and loss accounts, balance sheets, VAT returns and other related accounting reports. The defenders had found that their existing Sage Line 50 software did not enable them to enter such information only once for the production of the documentation required.

(11) The defenders were at that time using a Microsoft program, Word or Access, to produce booking forms and invoices. They were not producing the booking forms and invoices on their existing version of Sage Line 50. They were using Sage Line 50 for other functions.

(12) The defenders also wanted a system for analysis in relation to specific "cost centres" to enable them to analyse the profitability of particular aspects of their training business, such as vehicles or groups of vehicles in relation to which training was being provided. The defenders had found that their existing Sage Line 50 software did not provide this level of analysis.

(13) The defenders already had modules in their existing system for invoicing, sales order processing and purchase order processing. The defenders would have required the purchase ledger and the cashbook modules in Sage Line 100. The most cost-effective way of providing the additional modules to meet the defenders' requirements was for them to purchase the Sage Line 100 "Business Suite" package. The Sage Line 100 Business Suite could not be purchased without such modules. It would have been more expensive for the defenders to have purchased Sage Line 100 alone, with the additional modules being purchased separately.

(14) In about June 2001 the pursuers submitted to the defenders the proposal document comprising No 5/1/1 of process. This proposal document outlined what the pursuers considered would meet the defenders' requirements in the light of their discussions. The defenders had also been provided with the standard Sage brochures relating to the product proposed.

(15) Mr Anderson met with Mr Ritchie in order to go through the proposal in detail. This took about 2 hours. Mr McLair was also present.

(16) In the proposal document the pursuers proposed the provision of hardware including a Toshiba Network Fileserver using a Microsoft Windows NT Server operating system together with a backup solution, including Veritas backup software, Network Setup and an uninterruptible power supply and cable. Pricing for the provision of the proposed hardware was included. The proposal document also included a proposed upgrade from the defenders' then single user Sage Line 50 software system to Sage Line 100 Business Suite. The Business Suite was to allow four users. The provision of the software was to include a Sage annual licence for one year, one year's annual service and support, data conversion from Sage Line 50, installation and configuration of the upgraded system, the provision of three layouts in respect of stationery (namely, invoices, statements and remittance advices) and six days training and implementation in relation to the upgraded system.

(17) In about mid-June 2001 Mr Ritchie contacted Mr Brennan to advise that the said proposal was acceptable. He did not ask any questions or propose any modifications. Mr Ritchie wanted the system to be installed as soon as possible.

(18) The terms agreed between the parties were as follows:-

(a) that the pursuers were to advise the defenders on their computer requirements;

(b) that the pursuers were to install and configure the system;

(d) that the pursuers were to install a backup system to recover data;

(e) that the system was to be networked;

(f) that the pursuers were to set up a program which would allow the defenders to invoice and to log training booking forms;

(g) that the booking forms and layouts were to be approved and acceptable to the defenders;

(h) that the pursuers were to effect training of the defenders' employees and the implementation of the system;

(i) that the pursuers were to provide support for one year;

(j) that the system was to be able to produce analysis of "cost centres" in relation to the defenders' business; and

(k) that the system was to enable the defenders to enter information relating to a customer once for the generation of both a booking form and an invoice and for that information to be posted automatically through to the accounting part of the software for the production of profit and loss accounts, balance sheets, VAT returns and other related accounting reports.

(19) It was also an implied condition of the said contract between the parties that the pursuers would use the necessary skill of a reasonably competent computer engineer in implementing the said contract. This term was necessary for the business efficacy of the said contract.

(20) The hardware, backup and networking was thereafter provided, installed and configured by the pursuers. In about late June 2001 Mr Robert Mann, a computer network engineer with the pursuers, installed the server in a portakabin on the defenders' premises and configured it. He also installed the said operating system onto the server and switches (cables) between the server and four desktop computers. The server and one of the desktop computers were in one portakabin. The other three desktop computers were in an adjoining portakabin. He connected the computers in the adjoining portakabin to the server by means of a network hub. He configured those computers to connect to the server and to the backup system. The backup system was installed on the server itself. This operated as a backup system for all the computers connected to the said network.

(21) Initially, only one of the said desktop computers was connected and configured to the server by Mr Mann. This computer was used by "Karen", the defenders' then Accounts Manager. Mr Mann connected and configured the remaining three computers in the adjoining portakabin to the server and network a short time later. This was after there had been a break-in at the defenders' premises. The cabling between the server and the said first computer had been cut. As a result, "Karen" had not been able to log onto the Sage Line 100 system. Mr Mann had had to reconnect her computer to the server with new cable. After he had done so, "Karen" was able to log back on to the Sage Line 100 system again.

(22) It is therefore probable that the Sage Line 100 software had been installed on at least the server and "Karen's" computer before the rest of the computers were networked by Mr Mann.

(23) Mr Mann gave "Karen" training in relation to the backup procedure. He also tested the backup to check that it was working. It was then working.

(24) In any event, it is probable that the installation of the Sage Line 100 software would not have adversely affected the networking between the desktop computers and the server. In addition, Sage Line 100 can be installed either before or after backup software for a server and computers on a network.

(25) The Sage Line 100 Business Suite software was installed and configured on the system by Mr Clelland Anderson of B.I.I.. He also had a number of meetings with "Karen". She ran the accounts system for the defenders. She was the principal point of contact for the pursuers and B.I.I.. Initially the said software was installed on "Karen's" computer. This was until the server had been installed. Mr Anderson then transferred the data, configured for the needs of the defenders, onto the server. Once the installation was complete, the Sage software was installed on the server. The other computers had software installed as the "client" software. Sage had also issued four licences for each of the work stations. This then gave all the users on the network access to the Sage Line 100 system. There were four other computers connected to the server as part of the overall network but only three of them were capable of running the Sage Line 100 software. It had proved impossible for the pursuers to install the Sage Line 100 software onto the fourth desktop computer. This was because other incompatible software had previously been installed on it. Mr Anderson drew this to the attention of the defenders.

(26) Mr Anderson tested the said Sage Line 100 software. It was working.

(27) Following installation of the Sage Line 100 software, about six days training and implementation was provided and effected. Mr Clelland Anderson was involved in the design of the training to be provided. The majority of the training and implementation was then done by Mrs Kirsty Scott, an IT Consultant with B.I.I.. "Karen" was given the most training. Mrs Taylor, also in the employment of the defenders, was also given some training. Mrs Scott was satisfied that, following the training and implementation, both "Karen" and Mrs Taylor were able to use the system unaided.

(28) The defenders ceased using the Sage Line 50 software and started using the Sage Line 100 software instead.

(29) Both "Karen" and Mrs Taylor thereafter made telephone calls seeking support in terms of the parties' contract.

(30) The defenders at no time asked the pursuers to provide further training for any of their employees.

(31) The defenders applied for and received a training grant from Glasgow North Limited, a local enterprise company, upon completion of the said training provided. This training grant amounted to at least £2,000.

(32) The portakabins in which the pursuers had installed the hardware and software contracted for were a temporary arrangement for the defenders whilst a permanent office was being built nearby on the defenders' premises.

(33) Between the completion of the installation of the new system by the pursuers and the commencement by Mrs Avril Kilcullen of her employment with the defenders in November 2001 as Accounts Manager in succession to "Karen", the defenders moved from the said portakabins into their new offices.

(34) The pursuers were not engaged by the defenders to move the said computers, equipment and network into or install it in the new building. They therefore did not move it, configure it or set it up in the new location. It was not proved who was responsible for this.

(35) On 25 June 2001 the pursuers rendered invoice No 4852, comprising No 5/1/2 of process, in the sum of £19,389.85 in respect of the provision of the said hardware and software services to the defenders.

(36) A first payment to account in the sum of £5,000.00 was made by the defenders to the pursuers on or about 4 July 2001.

(37) A second payment to account in the sum of £5,000.00 was made by the defenders to the pursuers on or about 13 August 2001.

(38) A third payment to account in the sum of £5,000.00 was made by the defenders to the pursuers on or about 27 September 2001.

(39) The said third payment to account was made by cheque handed by Mr Ritchie to Mr Brennan at a meeting between them in September 2001. At the meeting the only reason given by Mr Ritchie for not paying the balance due to the pursuers was a complaint about the layout of the booking form and invoice to be prepared by the pursuers. Mr Ritchie told Mr Brennan that on successful re-working of the invoice he would pay the balance due. No other complaint was made by the defenders to the pursuers at the said meeting.

(40) At the said meeting Mr Ritchie told Mr Brennan that he was going to replace the said desktop computers. He told Mr Brennan that he had a relative who was planning to provide other computer systems to replace the old systems.

(41) Prior to the raising of these proceedings the defenders made no other complaint to the pursuers.

(42) In about October 2001 the pursuers were requested to provide additional cabling and an engineer to fix all computers not connecting to the network after the office move. The pursuers rendered an invoice in the sum of £117.51, inclusive of VAT, in relation to this request. The invoice comprises No 5/1/6 of process.

(43) The pursuers had also provided other additional cabling and an 8 port mini-hub, and had traced a fault in a cable between hubs in respect of which additional invoices Nos 5/1/3, 5/1/4 and 5/1/5 of process had also been rendered by the pursuers to the defenders.

(44) No 5/1/7 of process comprises the pursuers' statement of account relating to the defenders. After deduction of said payments to account, the balance recorded as being due by the defenders to the pursuers is the sum of £4,906.87.

(45) Between about September 2001 and April 2002 the pursuers provided about fourteen different layouts for the booking form and invoice. Twelve of these are included in No 5/1/8 of process. The pursuers maintained a log, comprising No 5/9 of process, relating to telephone calls made to the defenders between 4 April 2002 and 13 May 2002 in an attempt to resolve any concerns about the booking form and invoice.

(46) On or about 13 May 2002 Mr Ritchie refused to speak to or to meet with the pursuers to resolve this issue. It was intimated that Mr Ritchie did not want to go ahead with the implementation of the booking form. This constituted obstructive behaviour which prevented performance by the pursuers of the condition of the contract between the parties relating to the provision of stationery layouts.

(47) In about April 2002 the defenders instructed a software support company, Vector, to examine their computer system. On the instructions of the defenders, Vector then carried out certain work in relation to the defenders' computer system. This included the re-installation of backup software and networking between computers and a server. It was not proved whether this was networking between the defenders' existing computers, with which the pursuers had been working, and the server installed by the pursuers, or whether this was networking between new computers and a new server supplied by Vector.

(48) It is probable that, at some point between the said meeting in September 2001 and the completion of work done by Vector in about July 2002, new computers were installed on the defenders' premises to replace the older computers with which the pursuers had been working.

(49) Between about May and July 2002 Sage Line 50 software was re-installed on the defenders' computer system. It was not proved whether this was done by Vector or by Avril Kilcullen. It was also not proved whether this was on the defenders' existing server and computers, with which the pursuers had been working, or on a new server and computers.

(50) The defenders now have the current version of the Sage Line 50 software. It includes a "project analysis" feature. This allows the defenders the level of cost centre analysis they were seeking in relation to aspects of their business. The version of Sage Line 50 available in 2001 did not include this feature. The current version of Sage Line 50 still does not allow a user to enter information only once for the production of the information set out in Finding-in-Fact 10.

(51) The sums charged by Vector for services provided by them to the defenders are not proved.

(52) The pursuers advised the defenders on their computer requirements.

(53) The pursuers set up a program which would allow the defenders to invoice and to log training booking forms.

(54) The booking forms and layouts were not approved and acceptable to the defenders.

(55) The pursuers effected training of the defenders' employees and implementation of the system.

(56) The pursuers installed and configured the system.

(57) The computer network would allow four users. However, the Sage Line 100 software operated on only three of the computers.

(58) The pursuers installed a backup system to recover data.

(59) The system was networked by the pursuers.

(60) The pursuers provided support for one year.

(61) The system as installed, configured and implemented by the pursuers was able to produce analysis of cost centres in relation to the defenders' business.

(62) The system as installed, configured and implemented by the pursuers enabled the defenders to enter information relating to a customer once for the generation of a booking form and invoice and for that information to be posted automatically through to the accounting part of the software for the production of profit and loss accounts, balance sheets, VAT returns and other related accounting reports.

(63) In implementing the said contract the pursuers used the necessary skill of a reasonably competent computer engineer.

FINDS-IN-FACT-AND-IN-LAW:-

(1) The pursuers having supplied the computer hardware, software and services to the defenders contracted for, and the defenders being due and resting owing to the pursuers in respect of the price thereof, the pursuers are entitled to payment from the defenders therefor in the total sum of 4,906.87;

(2) The defenders have failed to prove that the pursuers are in material breach of contract;

(3) The defenders have failed to prove that they suffered any loss entitling them to an award of damages;

(4) The pursuers are entitled to be absolved from liability in respect of the counterclaim;

THEREFORE, Sustains the first and second pleas-in-law for the pursuers in the sum of FOUR THOUSAND NINE HUNDRED AND SIX POUNDS AND EIGHTY SEVEN PENCE (£4,906.87) STERLING; Repels the first and second pleas-in-law for the defenders; Grants decree for payment by the defenders to the pursuers of the sum of £4,906.87 with interest thereon at the rate of 8% per centum per annum from 12 June 2002 until payment; Sustains the second and third pleas-in-law for the pursuers in the counterclaim; Repels the defenders' first and second pleas-in-law in the counterclaim and Grants decree of absolvitor in respect of the crave of the counterclaim; Reserves meantime all questions of expenses and Appoints parties to be heard thereon on 1^st June 2006 at 9.30 am within the Sheriff Court House, 1 Carlton Place, Glasgow.

NOTE:

(A) INTRODUCTION:

(1) In this action the pursuers seek decree for payment of the sum of £4,906.87, together with interest, for the supply by them to the defenders of computer hardware, software and associated services. The sum sued for represents the balance of accounts rendered to the defenders in the total sum of £19,906.87 with payments to account totalling £15,000.00 having been paid by the defenders to the pursuers in 2001.

(2) The defenders maintain in their defences that the pursuers are in material breach of contract and are, accordingly, not entitled to payment of the sum sued for. The defenders also have a counterclaim for damages in the sum of £10,081.45. In their averments in support of this counterclaim the defenders aver two possible positions.

(3) The defenders' primary position is to the effect that the pursuers should have advised them that their existing computer system was sufficient for their purposes and that, on that basis, the defenders have overpaid the pursuers and that, in the light of alleged material breaches of contract on the part of the pursuers, the pursuers should be liable to the defenders in damages for certain costs which it is said would be necessary to rectify those breaches. It should be observed at this point that the legal basis advanced in the pleas-in-law for the defenders in the counterclaim is to the effect that, the pursuers being in material breach of contract, they are liable to the defenders in damages. There is no plea-in-law directed to repetition of any sum said to have been overpaid.

(4) The defenders' secondary position appears on averment to be on the basis that the Sage Line 100 software installed by the pursuers was appropriate. The defenders aver that in that event, in the light of the alleged material breaches of contract on the part of the pursuers, the pursuers should be liable to the defenders in damages for certain costs which it is said would be necessary to rectify those breaches.

(5) The pursuers' position in relation to the counterclaim is that they deny being in material breach of contract. Their position also is that the defenders have in any event suffered no loss as a result of any breach of contract on the part of the pursuers.

(6) The pursuers led in evidence five witnesses, namely, Mr Paul Brennan, the Managing Director of the pursuers, Mr Clelland Anderson, a Director of Business Intelligence International Limited (B.I.I.), Mrs Kirsty Scott, an IT (Information Technology) consultant with B.I.I., Mr Robert Mann, a computer and network engineer with the pursuers, and Mr Ian Mackay, an IT Consultant.

(7) The defenders led in evidence four witnesses, namely, Mr Walter Ritchie, Managing Director of the defenders, Mrs Aileen Taylor, Programmes Manager with the defenders, Mrs Avril Kilcullen, Accounts Manager with the defenders, and Mr John Blakeley, an IT Consultant.

(8) Ultimately, the parties were at one in relation to most of the actual conditions of the contract entered into between the pursuers and the defenders. There was, however, an issue about the question of implied terms of the contract. The most significant areas of dispute related to (a) the question of whether the pursuers were in breach of any of the conditions of the contract and, if so, (b) whether any of these breaches was material. This included the question of the allowance of an opportunity to remedy a breach. There was also an issue about the effect of alleged obstruction of the contract by the defenders. There was, finally, the question of whether the defenders had in any event established any entitlement to an award of damages in terms of the counter-claim.

(B) BACKGROUND:

(9) Most of the background to the eventual contract agreed to between the parties was not a matter of dispute. The defenders had been given the pursuers' name by Glasgow North Limited, a local enterprise company.

(10) Mr Ritchie approached Mr Brennan about the possible supply of a computer network and accounts system. The accounting system the defenders then had was called Sage Line 50. Mr Ritchie and Mr Brennan met in February 2001, along with other representatives of the defenders and representatives of B.I.I.. B.I.I. was described in evidence as being the pursuers' "sister company" as they worked closely together. Mr Brennan suggested that Sage Line 100 software might meet the defenders' needs.

(11) A demonstration of the software was then given by Mr Clelland Anderson of B.I.I.. Mr Ritchie denied in evidence that he was told that B.I.I. would be involved. However, both Mr Brennan and Mr Anderson were clear that Mr Ritchie had been told this. Mr Anderson, for example, explained to him that B.I.I. would be supplying the Sage software and supplying the training and services for that software. I was entirely satisfied from the evidence of both Mr Brennan and Mr Anderson that this had been made clear to Mr Ritchie. I formed the view that Mr Ritchie could well by now have forgotten having been told this at the meeting.

(12) The initial meeting was followed by a number of further meetings between the parties and demonstrations of hardware and software between February and June 2001.

(13) The pursuers then prepared a proposal document for consideration by the defenders. The pursuers took account of the defenders' requirements as these had been explained to them at the meetings.

(C) THE CONTRACT:

Terms Expressly Agreed:

(14) In June 2001 the proposal document, No 5/1/1 of process, was submitted to the defenders. It was submitted by Mr Carlin on behalf of the defenders that the contract consisted of the proposal document. This was not disputed on behalf of the pursuers. Ultimately, I was satisfied from both what was admitted on record and from the evidence that the terms expressly agreed between the parties were those recorded in Finding-in-Fact 18.

(15) In relation to condition (j) referred to in Finding-in-Fact 18, this was a matter about which the pursuers had themselves included averments at page 8 of the Closed Record. This was not admitted by the defenders. Indeed, they had no averment to the effect that this had been a condition of the parties' contract or that such a condition had been breached by the pursuers. However, it was clear from the evidence on behalf of both parties that this was something which the defenders had wanted and which the pursuers considered could be provided by Sage Line 100. It was something which could not then have been provided by Sage Line 50.

(16) In relation to condition (k) referred to in Finding-in-Fact 18, this was a matter included in the defenders' averments at page 13 of the Closed Record. This was not admitted by the pursuers. However, it was again clear from the evidence on behalf of both parties that this was also something which the defenders had wanted and which the pursuers considered could be provided by Sage Line 100. It was something which could not then be provided by Sage Line 50.

Implied Terms:

(17) The defenders' position on record was that "It was an implied condition of the contract that the pursuers would use the necessary skill of a reasonably competent computer engineer in implementing the contract. It was an implied condition that in exercising that skill the pursuers would not provide a system which was far in excess of the requirements of the defenders." These implied terms were said to be "necessary for the business efficacy of the contract".

(18) The contention on record therefore appears to be that in using the necessary skill of a reasonably competent computer engineer in implementing the contract the pursuers were not to provide a system which was far in excess of the requirements of the defenders. This interpretation is re-inforced by averments at page 15 of the Closed Record which state: "If the pursuers had used the skill of a competent computer engineer they would not have provided Sage Line 100, but have (sic) provided Sage Line 50." Further, at pages 16 and 17 of the Closed Record there is the following averment: "It was an implied condition of the contract that the pursuers would use the necessary skill of a competent computer engineer to provide a system (sic), which was far in excess of the requirements required by the defenders. The pursuers advised the Sage Line 100 program, which was a far more advanced system than that required by the defenders. The defenders could have operated adequately on Sage Line 50. The pursuers were therefore in breach of the implied term of the contract."

(19) The pursuers admit on record at page 7 that it was an implied condition of the contract that they would use the necessary skill of a reasonably competent computer engineer in implementing the contract, but this is under explanation that they did exercise such necessary skill in implementation of the contract.

(20) In the course of his submissions, Mr Carlin accepted that it was for the defenders to prove that the implied terms existed. He submitted that there were three ways in which this could be done. The first way would be by way of statute. The second way would be by way of a custom of trade. The third way would be by way of establishing that the implied term in question was necessary for the business efficacy of the contract. His contention was that both implied terms were necessary for the business efficacy of the contract in this case. He submitted that this was proved by evidence given by Mr Blakeley, the IT consultant led on behalf of the defenders, who had spoken of the concept of trust between a company such as the defenders, where the Managing Director was "computer illiterate", and the pursuers who were to advise on a computer system. Mr Carlin submitted that in the absence of such trust, anything could be sold. As I understand it, this was a reference in particular to a passage in Mr Blakeley's evidence where he had said: "You have to trust the supplier implicitly and believe that he will deliver what your business requires."

(21) Miss Kerr on behalf of the pursuers did not dispute that the first implied term contended for by the defenders would be necessary for the business efficacy of the contract. However, she was not prepared to accept that the second implied term contended for was proved or appropriate.

(22) In my opinion, Miss Kerr was correct not to make such a concession. It is in my opinion appropriate to bear in mind the particular nature of the business and contract involved in the present case. It was clear from the evidence of the defenders that they wished to be supplied with an "off the shelf" accounting software system. This was in contrast to a bespoke software system which is written specifically for the needs of a particular client. A bespoke system would have been very much more expensive than an "off the shelf" system. There was no dispute between the parties (with the exception of Mrs Kilcullen who was, in my opinion, mistaken on this matter) that the Sage Line 100 Business Suite is an "off the shelf" accounting package. Mr Mackay explained the distinction between a bespoke system and an "off the shelf" package. He confirmed that it was "absolutely normal" for an "off the shelf" package such as Sage Line 100 Business Suite to offer a customer modules in excess of their requirements. As he put it: "Generally you get a lot more than you need for your money". As Mr Anderson explained, an "off the shelf" package such as Sage Line 100 Business Suite was also a less expensive option than buying individual modules required by a client. In addition, Mr Blakeley stated in cross-examination that the way Sage products are sold it is often cheaper to take all the modules within the package rather than to select one or two that were required by the business, and that it was therefore not uncommon for organisations to acquire modules which they never use. It is also pertinent to record that when Mr Blakeley was asked whether he would consider that Sage Line 100 was a system which was in excess of the defenders' requirements, he ultimately confirmed that he would not say it was in excess.

(23) I had no hesitation in accepting the evidence of Mr Brennan, Mr Anderson, Mr Mackay and Mr Blakeley on these matters. I am therefore not persuaded that the concept of trust founded upon by Mr Carlin in his submissions establishes that the second implied term for which he contended was one which should be regarded as being necessary for the business efficacy of the contract in the particular circumstances of the present case. I am therefore not satisfied that the second implied term contended for was proved.

Objection Renewed:

(24) At this point, it is convenient to turn to address an objection renewed on behalf of the pursuers in the course of submissions. In the course of the cross-examination of Mr Brennan, Mr Carlin had sought to ask Mr Brennan some questions about the first implied term. Miss Kerr had objected to this line of evidence on the basis that the defenders had not averred that the course adopted by the pursuers was one which no other computer engineer of ordinary skill would have taken if he had been acting with ordinary care. I was reminded of the familiar passage in Hunter v Hanley 1955 SC 200 at page 206. I allowed the evidence under reservation of all questions of relevancy and competency. The objection was renewed at the stage of submissions. I was therefore invited to disregard the evidence in relation to the alleged breach of the implied term which was said to have consisted in the pursuers' provision of a system which was "far in excess" of the defenders' requirements,

(25) I took the view that this submission was misconceived. The pursuers had in their own averments at page 7 of the Closed Record admitted that it was an implied condition of the contract that the pursuers would use the necessary skill of a reasonably competent computer engineer in implementing the contract. In relation to the second implied term, it is to be noted that the defenders' averment at page 14 of the Closed Record was that it was an implied term that in exercising "that skill" the pursuers would not provide a system far in excess of the defenders' requirements. The words "that skill" clearly referred back to the immediately preceding averment in which the defenders had referred to the "necessary skill of a reasonably competent computer engineer in implementing the contract". This averment had, as I have already observed, been admitted by the pursuers. I therefore take the view that the pursuers had to be taken as having admitted that there had been an implied term of the contract to the effect that the degree of skill to be used would be the "necessary skill of a reasonably competent computer engineer". That being so, I took the view that this excluded any argument that this should now be superseded by the higher degree of skill contended for under reference to Hanley v Hanley, supra. I therefore repel the objection.

(D) WHETHER THE DEFENDERS WERE IN BREACH OF ANY OF THE CONDITIONS OF THE CONTRACT?

(26) I now turn to deal with the question of whether the pursuers were in breach of any of the conditions of the contract.

(27) I address first the implied terms.

Whether the pursuers were in breach of any implied term?

(28) Under reference to the first implied term, in his submissions Mr Carlin founded upon certain criticisms which had been made by Mr Blakeley in the course of his evidence. There were criticisms of:

(a) the proposal document

(b) the absence of a "requirements specification document"

(d) the absence of a "timescale for implementation"

(e) the way in which Mr Blakeley understood that certain hardware and software, including backup, had been installed and tested, and

(f) the way in which Mr Blakeley understood that the pursuers had gone about getting information for the customisation of documents and reports for the defenders.

(29) It should first of all be observed that none of these criticisms formed any part of the defenders' case on record, either in the form of a duty or in the form of any alleged breach of duty. Neither was it explained in submissions how any of these matters might represent a breach of the first implied term.

(30) In any event, on the basis of the evidence of Mr Brennan, Mr Anderson and Mr Mackay, all of whom have experience of involvement in the actual business of supplying such systems, I am satisfied that in view of the nature of the contract in this case for an "off the shelf" system which was to be installed in a short period of time there was no merit in the first four criticisms. There were numerous meetings between the parties and demonstrations of the proposed hardware and software. Mr Anderson had then spent about two hours making a presentation of the proposal to Mr Ritchie. It was also supported by Sage documentation. Mr Brennan pointed out that a "requirements specification document" was not needed in this case. It would have increased the cost for the defenders. It was something which "consultants do" and was not what he, Mr Brennan, would typically do in an installation of the type involved here. Likewise, it was he said too small a project for a "project plan". My impression was that Mr Blakeley, a consultant, was speaking of standards higher than entirely necessary for the business of the supply of such an "off the shelf" system. It was also pointed out on behalf of the pursuers that Mr Ritchie had accepted the proposal document without asking any questions or proposing any modifications. The defenders had wanted the work to be done as soon as possible. Mr Brennan gave evidence to the effect that the timescale was determined by the authorisation of a training grant from Glasgow North Limited. The defenders had required to be invoiced within a short timescale before a training grant approved for them had expired.

(31) In relation to the fifth area of criticism, I took the view that this likewise lacked merit. In particular, I was satisfied that Mr Anderson had told the defenders that the Sage software could not be installed on the fourth computer and that the backup had been tested by Mr Mann. I am not satisfied that it is correct to say that the Sage software had not been loaded onto the server. Indeed, my recollection of Mr Anderson's evidence-in-chief was that although the Sage software was initially installed on "Karen's" computer it was then transferred over to the server, which would then have given all the other users access to the system and that the initial installation was deleted. "Client software" had been installed on the other desktop computers. "Karen's" surname was never given in evidence.

(32) In relation to the sixth area of criticism, I formed the view from the evidence of Mr Brennan, Mr Anderson and Mrs Scott that this also lacked merit. In relation to the documentation such as booking forms and invoices, on the basis of the evidence of, in particular, Mr Anderson and Mrs Scott, I am satisfied, first, that the pursuers did seek information from the defenders with a view to customising the documents and, second, that the system when installed by the pursuers did in fact allow the defenders to produce their reports and cost analysis required. The evidence of Mr Anderson and Mrs Scott was to the effect that the system installed was fully functioning. The only area of difficulty was in relation to the booking form which the defenders never accepted. As Mr Anderson put it: "Ritchies chose not to produce a booking form...it was on the system anyway." He was clear that the defenders were able to produce accounting information notwithstanding the non-approval of the layout of the booking form. He also said: "All other of the aspects of the system were running and functioning well." In cross-examination he said: "...the booking form was in place to produce a booking form, every part of the system was also operational and Ritchies may have chosen to re-enter information into another system that they have to use the whole booking form but they could have produced it from the Sage system. The full system was operational, no question about that at all whatsoever".

(33) Mr Anderson had a great deal of knowledge and experience of Sage software systems. He had previously worked for Sage Group Plc as Business Development Manager for UK and Ireland. He had qualifications in both computer science and accounts. He was a "Sage Developer" and programmer. He had been the key programmer in developing the Sage Line 100 software. He remarked at one point: "I would say I am probably one of the best in the country, fully trained in not only all accounting and procedural aspects of it, I am a fully qualified trainer. I am also a Sage Developer, ie a programmer, I know the database structures inside out, back to front. I can basically make the software do what any decent sized business would require...it was myself that designed the whole system (Sage Line 100) and I was the key programmer in developing it...the company and staff at (B.I.I.) were also awarded Best Sage Developer of the Year in 2002". He was likewise familiar with Sage Line 50. I had no hesitation in accepting Mr Anderson as being an impressive witness in whom I could have confidence. I took the view that he was both credible and reliable.

(34) In this connection, Mr Brennan had also said that the system could be used with any of the forms the pursuers had produced but that Mr Ritchie had rubbished the pursuers' attempts and had refused to be more specific. As Mr Brennan put it at one point in cross-examination: "We spent many months...making minor modifications in the hope that we would get paid. To suggest that the only alternative is that we made 14 different copies of the form, spent 4¹/₂ years, £20,000.00 pursuing this matter when we want full, simple, straightforward instructions like that, just didn't happen. This is what we were doing with Ritchies for all these months and Walter Ritchie wouldn't meet with us or speak with us, wouldn't give us a specific definitive design and, eventually, walked away from it". He also told the court: "Karen had repeatedly agreed layouts with the pursuers." Mr Brennan was likewise a witness of considerable experience in his field. He gave his evidence in a careful, considered and detailed manner. I accepted him as being a credible and reliable witness.

(35) If, contrary to my view, the second implied term contended for by the defenders was to be regarded as being necessary for the business efficacy of the contract between the parties in this case, I would in any event have come to the view that the pursuers would not have been in breach of any such implied term.

(36) The central thrust of the defenders' case on record, and in their counterclaim, was that the pursuers should have advised the defenders that Sage Line 50 was adequate for their requirements and that they should not have recommended Sage Line 100 as this was said to be a far more advanced system than was required by the defenders.

(37) Mr Brennan and Mr Anderson explained very clearly why they had recommended Sage Line 100 and why Sage Line 50, in the form available at the material time, would not have met the defenders then stated requirements. The defenders were not happy with their existing system as it was not providing them with the degree of cost analysis information they wanted. Mr Brennan confirmed that Sage Line 100 Business Suite provided all the functionality of Sage Line 50 which the defenders were already using but with additional modules which provided better breakdown of cost analysis. The defenders had also wanted an automated system which would allow them to input information once in order to generate various documents. This could not be done on their existing Sage Line 50 system.

(38) Mr Mackay, the IT Consultant led on behalf of the pursuers, was supportive of the pursuers' proposal in relation to the Sage Line 100 system. The defenders' expert witness, Mr Blakeley, however, maintained that Sage Line 50 as at February 2001 could have been used to provide the cost analysis the defenders' required. His own organisation had done this. His position was that Sage Line 100 would have provided a "pretty report" but that that would not have been something the defenders' would have been looking for. None of this had been put to any of the witnesses led on behalf of the pursuers or, indeed, to Mr Ritchie or Mrs Kilcullen. Mr Blakeley's position was that Sage Line 100 had been one possible solution to have suggested to the defenders but that a second possible solution would have been to point out to the defenders how Sage Line 50 could have been utilised to obtain "cost centre" information. Ultimately, Mr Blakeley, conceded in cross-examination that he would not say that Sage Line 100 was a system which was in excess of the defenders' requirements. Also, when it was put to him in cross-examination that if it was to be accepted that the defenders were looking for one system to be able to produce what they were looking for in terms of cost analysis and a booking form and invoice, whether it would be reasonable for the pursuers to have suggested Sage Line 100, he agreed that it would have been. He had not used Sage Line 100 himself. Mr Blakeley also agreed that Sage Line 50 could not have met the defenders' requirements about the provision of a booking form and invoice. In all the circumstances, I am satisfied that it was not unreasonable for the pursuers to have recommended Sage Line 100. I would therefore in any event have concluded that the pursuers were not in breach of any second implied term as contended for.

Whether the pursuers were in breach of any of the express terms of the contract?

(39) I turn now to deal with the question of whether the pursuers were in breach of any of the express terms of the contract.

Background:

(40) The case for the pursuers on record was to the effect that in about June 2001 they delivered and installed hardware, software and provided training, all as specified in the proposal document and that, after the system was installed, it was tested by the pursuers and found to be working properly. The evidence led on behalf of the pursuers supported that position. Four witnesses were led on behalf of the pursuers who had had involvement with the contract at the material time, namely Mr Brennan, Mr Anderson, Mrs Scott and Mr Mann. Mr Brennan explained that he had formed the pursuers' company in 1996 and that the pursuers were, and are, a "Microsoft" certified partner, a "Veritas" certified partner (in relation to backup software) and a "Sage" certified partner. Mr Anderson was highly qualified in relation to Sage software systems as I have already indicated. Mrs Scott was also a well qualified IT consultant. She was a Sage accredited consultant with B.I.I.. To become accredited by Sage she had had to pass examinations. She had been a Sage consultant for about 10 years. I was satisfied that they were appropriately qualified in their respective fields. I had no reason to conclude that Mr Anderson and Mrs Scott gave other than credible and reliable evidence.

(41) Robert Mann was responsible for delivering, installing and configuring the hardware and networking. I had no reason to conclude that he was other than an entirely competent computer network engineer. He gave his evidence in a careful and considered manner. I formed the view that he was a credible and reliable witness.

(42) Ultimately, the evidence on behalf of the pursuers, particularly from Mr Brennan and Mr Anderson, was to the effect that the system installed was fully functioning with the exception of the booking form aspect which it was explained the defenders chose not to produce from the system.

(43) So far as Mr Mackay was concerned, albeit that I had no reason to conclude that he was other than truthful in his evidence, the extent to which I felt I could place significant reliance upon his evidence about the computer system was relatively limited as he - like Mr Blakeley - had at no time examined the system actually installed by the pursuers.

(44) By contrast, the case for the defenders on record was principally to the effect that the system provided by the pursuers was far more complex than the defenders required, that the pursuers should have advised that Sage Line 50 met the defenders' requirements, that the system installed did not operate fully, that it was not implemented, that no proper training was given, that four users were not "provided", that the system was not networked, that the system was not installed and configured, that the pursuers refused support in June 2002, that Sage Line 100 was only networked on one other desktop computer, that Sage Line 100 was installed on only one desktop computer and that the backup, although installed, did not work. The defenders maintained on record that in June 2002 they rescinded the contract by telephone, and that they instructed Vector to network the remaining desktop computers to the server, to re-install the backup and to re-install the Sage Line 50 software.

(45) This was in support of the sole substantive plea-in-law on their behalf on the merits which was to the effect that decree of absolvitor should be granted on the basis that the pursuers were in material breach of contract.

(46) Three of the witnesses led on behalf of the defenders had had some varying degrees of involvement with the contract with the pursuers and the system installed by the pursuers. Mr Ritchie had been involved in meetings with the pursuers, including the meeting in September 2001. He was not, however, involved in the day to day working of the system. For example, although he had seen "Karen" at her computer, he did not know what she had been doing on the computer. In so far therefore as he gave evidence relating to the operation of the system, his actual knowledge of the system and its operation was very limited indeed. Mrs Aileen Taylor was with the defenders throughout, from February 2001, and is still employed by the defenders. However, she herself made it clear that her knowledge was principally related to the question of the booking forms for the programmes run by the defenders. She was not in the defenders' accounts department. "Karen" was in the defenders' accounts department. On the evidence it seems likely that "Karen" left the defenders' employment in about October 2001. Mrs Avril Kilcullen took over from her as "Accounts Manager". Mrs Kilcullen commenced employment with the defenders in November 2001.

(47) I would pause at this point to observe that I formed the distinct impression that Mr Ritchie and Mrs Taylor sought to downplay "Karen's" role and status in the defenders' organisation. There had been clear evidence from Mr Brennan, Mr Anderson and Mrs Scott to the effect that "Karen" had been the pursuers' principal point of contact for the pursuers, that she had attended numerous meetings with the pursuers, that she was the person who had run the accounts system in the defenders' organisation and that she was the "actual key to the whole implementation of the system". As Mr Brennan put it on one occasion, "Karen was the person who ran the system and attended absolutely every training course...and having Karen no longer in situ in Ritchies was in my estimation probably going to need to invest in further training at that point to get the members of staff up to the level Karen was at."

(48) When it came to the evidence on behalf of the defenders, a quite different picture was painted about "Karen's" role and involvement. For example, when Mr Ritchie was asked about what position "Karen" had held within the defenders, he described her as "office staff". When asked if she held a senior position in terms of office staff he replied: "No, certainly not." He confirmed that Mrs Kilcullen had taken over from "Karen". Mrs Taylor described "Karen" as "just account clerk" and maintained that "Karen" was not present at the meetings with the pursuers. This was contrary to the evidence of Mr Ritchie, Mr Brennan and Mr Anderson, all of whom I preferred in relation to this aspect of the matter. When I asked in cross-examination whether "Karen" had any real seniority in the company, she replied "No, none at all...she was just a young girl."

(49) It was only when Mrs Kilcullen gave evidence that it emerged that she had in fact taken over from "Karen" as the Accounts Manager and therefore that "Karen" had held that position.

(50) I therefore formed the view that the evidence on behalf of the pursuers about "Karen's" role and involvement in relation to them and the contract until her departure was to be preferred to the picture painted on behalf of the defenders.

(51) So far as Mrs Kilcullen was concerned, when she took over in November 2001, the defenders had already moved from the portakabin accommodation - where the pursuers had been instructed to install the computer system - into new office accommodation. She therefore did not have any knowledge of the system as installed by the pursuers prior to the office move.

(52) Mr Anderson explained in cross-examination: "The whole system could be used in its entirety. One thing you have to remember is that the person who was trained up left the company and that was Karen. She was the person who was key to the whole running of the system; she was the person who was the company bookkeeper and accountant and she left so if they weren't able to do something it is essentially because the remaining staff didn't know how to and there was no request made for further training." I accepted his evidence on this.

(53) In relation to the office move, I am satisfied that the pursuers were not engaged by the defenders to move the computer equipment and network or to install it into the new building. Mr Ritchie gave evidence to the effect that the defenders had been so employed but I am satisfied that this was not the case. I preferred the clear evidence on behalf of the pursuers to the effect that this was simply not so. Mr Brennan was quite clear in his evidence-in-chief where he said: "It wasn't us that moved the network and set it up in a new location." It was not suggested to him in cross-examination that he was incorrect about this. This suggestion only emerged for the first time on the fifth day of the proof when Mr Ritchie was giving evidence. In all the circumstances, I accepted and preferred Mr Brennan's evidence to the effect that the pursuers did not configure or set up the computer system and network in the new location.

(54) Mr Blakeley said that there could be a number of possible explanations to account for computers which are said to have been networked being later found not to be networked. One explanation was that the networking was never done, but another explanation was that the networking was done satisfactorily but was somehow disturbed later on. I accepted Mr Mann's evidence to the effect that the networking was done satisfactorily. I also accepted his evidence to the effect that even if the Sage Line 100 software had been installed after the networking had been done that would not have changed anything to do with the networking. I therefore consider it likely that it was somehow disturbed later on, such as in the course of the office move.

(55) When it was put to Mr Mackay in cross‑examination that if Vector had networked the remaining desktop computers to the server in April 2002, reinstalled the Veritas back‑up software in about June 2002 and reinstalled Sage Line 50 software in about July 2002, that meant there was a problem, he responded to the effect that this could indicate that there had been a problem, unless the desktop computers concerned were new computers or if equipment had been moved around. I have already commented on the question of movement of equipment. I comment below, at paragraphs (59) to (62), on the question of new computers. Mr Mackay also confirmed that there could be a number of reasons why back‑up software ceases to work, such as there being a tape problem. He also pointed out the difficulties presented when a key employee leaves the organisation, especially if the person was responsible for doing the management accounting analysis. I also noted confirmation from Mr Blakeley to the effect that Sage Line 100 software can be installed either before or after backup software.

(56) In this connection, I have already referred to evidence given by both Mr Brennan and Mr Anderson about the significance of "Karen's" role. In cross‑examination, Mr Brennan also explained that when she left the defenders they had a "knowledge shortfall". This was a matter about which I was reminded by Miss Kerr in the course of her submissions.

(57) In addition to all of this, Mr Brennan gave evidence to the effect that at the meeting with Mr Ritchie in September 2001 the only reason given by Mr Ritchie for not paying the balance due to the pursuers was a complaint about the layout of the booking form and invoice. He gave Mr Brennan a cheque for £5,000.00 at the meeting. Mr Brennan said that he was told that the final balance due would be paid on successful re-working of the invoices. As I recall it, it was not suggested to Mr Brennan in cross-examination that this had not been said to him. I am satisfied that no other complaint, such as those now made by the defenders on record, was made at the meeting or in the course of the contract. Indeed, even when Mr Ritchie refused to meet with the pursuers in May 2002, as I am satisfied was the position, no other reason was advanced for non-payment of the balance.

(58) At one point in his evidence, Mr Ritchie made some vague assertions in cross-examination to the effect that other (unspecified) complaints about the system had been made to Mr Brennan but he was unable to indicate when. In addition, this had not been put to Mr Brennan in cross-examination for his comment. I preferred Mr Brennan's evidence on this matter.

(59) At the meeting in September 2001, Mr Ritchie had also told Mr Brennan that he was going to replace the desktop computers. At another point in his evidence, the way Mr Ritchie put it to Mr Brennan was that he had a relative who was planning to provide other computer systems to replace the old systems. Mr Brennan therefore suspected that the computers referred to in Mr Blakeley's report might have been the new computers that Mr Ritchie had been going to buy.

(60) When Mrs Kilcullen came to give evidence, she mentioned the question of new computers. She was being asked about the backup system. She responded to the effect that she had not realised that it was not working "until the new computer software people came in" and had told the defenders that it had never been backed up. There had been other evidence to the effect that Vector was the company which had come in and examined the backup system. Mrs Kilcullen was then asked why the new people had come in. She replied: "To put a new computer system in, the actual computers themselves, and put in a new server and things like that". She also mentioned that she had purchased the replacement Sage Line 50 from Sage and that she had transferred all the information from Sage Line 100 to Sage Line 50 personally. All of this appeared to be somewhat at variance with evidence given by Mr Blakeley about the involvement of Vector. Mr Blakeley had at no time examined the system as and where installed by the pursuers. His evidence was based on papers he had received from the defenders' solicitors and interviews with individuals from the defenders and from Vector. No-one from Vector was led in evidence before the Court or was available for cross-examination. There was therefore no direct account of their findings, exactly what they had been engaged by the defenders to do, when, where and why, and at what cost.

(61) Mr Blakeley's understanding, on the basis of his enquiries of representatives of Vector and the defenders, was that the defenders had called in the services of Vector. He narrated his understanding that Vector had networked "the remaining pc's" (which I understood to have meant the old computers) to "the server" (which I took to mean the old server) in April 2002. According to Mr Blakeley's understanding, Vector had also installed Veritas backup in June 2002 and had then re-installed Sage Line 50 in July 2002. This account of events did not appear to sit entirely comfortably with the account of events concerning the new Sage Line 50 software given by Mrs Kilcullen. On any view, it seems likely that at some point between the meeting in September 2001 and the completion of the work done by Vector in July 2002 new computers were installed on the defenders' premises to replace the older computers with which the pursuers had been working.

(62) It was therefore not clear to me just what Vector found, what they actually did, when and the reasons for whatever they did. It was very much less than clear that the computer system they came to deal with in about April 2002 was the same as that which had been installed by the pursuers prior to "Karen's" departure. It seems even less likely that it was in the same condition, particularly having regard to the office move. In all the circumstances, I did not feel that I could attach any significant weight to Mr Blakeley's second-hand evidence about Vectors findings, involvement and actions.

(63) All of this is also against the background that I am satisfied that no complaints were made by the defenders to the pursuers about anything other than the booking form layouts. Miss Kerr emphasised this strongly in her submissions.

(64) Further, as Miss Kerr reminded me in the course of her submissions, Mr Blakeley had said in the course of his evidence: "The supplier has to be given every opportunity to put matters right". In this case, if the pursuers had been in breach of the contract in the numerous and fundamental respects now contended for on behalf of the defenders, it is very surprising that they did not complain to the pursuers. It is in any event clear that the defenders did not give the pursuers "every opportunity to put matters right", as counselled by Mr Blakeley.

(64) This is all also in the context that the defenders had already paid £15,000.00 - representing more than three-quarters of the sums invoiced by the pursuers. Miss Kerr again placed heavy emphasis on this factor in her submissions.

(65) The position therefore is:

(a) that Mr Blakeley was in his evidence placing reliance upon information given to him by two people in Vector from neither of whom the court heard in evidence;

(b) that it is unclear just what role Vector played, why and what their actions were;

(c) that even by the date of the termination of the contract, the defenders had not complained to the pursuers about matters other than the booking form layouts;

(d) that the defenders had not afforded the pursuers every opportunity to put right any such matters;

(e) that they had by September 2001 paid more than three-quarters of the total sums due to the pursuers;

(f) that not long after that "Karen", the person who was key to the implementation of the system, left the defenders' employment;

(g) that before the replacement of "Karen" with Mrs Kilcullen the defenders had also moved to new premises, and

(h) that the pursuers were not those responsible for moving the network and setting it up in the new location.

(66) Against that background, I have formed the view that it is very difficult to accept the majority of the criticisms now advanced on behalf of the defenders as being ones which can be laid at the door of the pursuers.

(67) I found Mr Brennan, Mr Anderson, Mrs Scott and Mr Mann (subject to two particular matters about which I believe he was mistaken as I indicate below) to be credible and reliable witnesses. They were experienced professionals in their respective fields of expertise. I have already commented on my conclusions in relation to Mr Mackay. I was satisfied that the system installed was fully functioning, albeit that there was an ongoing area of difficulty about the layout of the booking form. I was also satisfied that "Karen" was able to operate the system installed. I formed the view, however, that after she had left, there was a "knowledge shortfall". The defenders did not ask for anyone else to be trained in her place. If there were the widespread and fundamental difficulties alleged by the defenders, it is extremely difficult to understand why there were no complaints to the pursuers other than about the issue of the booking form layouts and why the pursuers were not given "every opportunity to put matters right". Instead, Vector were called in. It appears that even as far back as September 2001 Mr Ritchie was proposing to replace computers. At all events, in my opinion, the Court was not told the whole story by the defenders about what had happened and about the involvement of Vector.

(68) I felt uncomfortable about the reliability, and possibly even the credibility, of certain of the evidence given by Mr Ritchie and, to a lesser extent, Mrs Taylor. I have already commented on the evidence given by Mr Ritchie and Mrs Taylor about "Karen's" role and status. I also comment at paragraph (97) below about Mrs Taylor's evidence in relation to training. Mr Ritchie's approach and demeanour did not give me confidence that he was a witness who was always careful, reliable and entirely truthful. He was vague in relation to a number of important aspects of his evidence, such as those referred to in paragraphs (58) and (74). There were also a number of instances of important matters emerging only in the course of his evidence, such as those to which I refer in paragraphs (53), (80) and (115), which had not been put to any of the relevant witnesses for the pursuers for their comment. This is also against the background that I did not feel that the Court had been told the whole story by the defenders about what had happened after June 2001, particularly concerning the involvement of Vector. In relation to Mrs Kilcullen, I had no reason to think that she was doing other than her best to assist the Court in a truthful manner. However, her memory in relation to things such timing, such as is mentioned in paragraph (87) below, tended to be vague. In relation to Mr Blakeley, although I had no reason to think that he was doing other than his best to assist the Court, the extent to which I could place significant reliance upon his evidence about the computer system was relatively limited as he - like Mr Mackay - had at no time examined the system actually installed by the pursuers. In addition, he had not used Sage Line 100.

(69) The only witness for the defenders who had any knowledge about the working of the system itself prior to "Karen's" departure and prior to the office move was Mrs Taylor. However, she herself accepted that she had limited knowledge of the accounts side of things as that was not her department. Her real involvement was from the point of view of the booking forms for the programmes run by the defenders. She said a number of things about what she had "assumed" was happening on the accounts side, but it was clear that this was not her area of responsibility or expertise.

(70) It is against this background that I turn now to deal with the specific criticisms founded upon by Mr Carlin in the course of his submissions as regards the express conditions of the contract.

(71) Mr Carlin's first area of criticism was that the pursuers had failed to provide "job costings". This was not averred as a complaint on record. The defenders have no case on record that the pursuers had a duty to provide job costings and no averment that the pursuers failed in any such duty. In any event, I accepted the evidence of Mr Anderson to the effect that the system, as installed, did provide such analysis and that "Karen" was able to produce it. Mrs Kilcullen gave evidence that by the time that she had arrived in November 2001 the system was not providing such an analysis. However, this was after "Karen", the person who had been trained and who had been key to the implementation of the system, had left. It is not clear why Mrs Kilcullen was apparently unable to get the system to produce the job costings. However, I accepted the evidence of Mr Anderson to the effect that the system as and when supplied prior to the office move and "Karen's" departure had been able to do that.

(72) Mr Collins second area of criticism was that the system still required information to be entered three times rather than just once. Mr Anderson was clear that the system supplied to the defenders could do this and that, if it was not providing this, that was "down to the operators". "Karen" had been trained to the full extent to produce all the necessary documentation automatically. He was likewise clear that the system could produce booking forms and invoices. Mr Anderson's position was that the defenders "chose" not to produce booking forms from the system. At one point he said: "The booking form was in place to produce a booking form, every part of the system was also operational and Ritchies may have chosen to re-enter the information into another system that they have to use the whole booking form but they could have produced it from the Sage system. The full system was operational, no question about that at all whatsoever." Mrs Scott also gave evidence to the affect that "Karen" had been shown how to input the information only once.

(73) Against the background of my conclusions in relation to this section of my Note as set out in paragraphs (40) to (69) above, I take the view that, prior to her departure, "Karen" had been able to operate the system as intended and I am persuaded that the pursuers' position is to be preferred, namely that they are not in breach of contract in this respect.

(74) Mr Carlin's third area of criticism was in relation to the booking form layouts. It was clear from the evidence that the booking form layouts were never approved and accepted by the defenders, even although, according to the pursuers, "Karen" had been happy with many of them. There was much evidence about the many forms produced by the pursuers and about exchanges by telephone, fax and at meetings about the layout of the forms. When Mr Ritchie was asked why he had not approved the layouts, he appeared to have difficulty explaining just what he had not been happy about. Mrs Taylor was much more specific - albeit giving examples which did not coincide with the two examples which had ultimately been given by Mr Ritchie. She made requests for changes. From what Mrs Taylor explained in evidence, many of the changes requested by her did not appear to have been unreasonable ones, although it is fair to record that Mr Mackay did comment in relation to two requests made in August and September 2001: "It seems like a bit of a moving feast to me".

(75) However, Mrs Scott experienced difficulty when trying to deal with Mr Ritchie. Although one of the proposed booking forms had been accepted by "Karen" prior to her departure, Mr Ritchie had told Mrs Scott in relation to a form which had been produced by Mrs Scott that it was "a lot of shite". Mrs Scott gave evidence to the effect that she had looked to him for guidance as to the specific areas he was not happy with but that he did not give her such guidance. It is fair to record that Mr Ritchie's demeanour and approach in the course of his evidence suggested to me that he could well be someone with whom it would be less than easy to have dealings.

(76) The defenders maintained that they had given the pursuers a style of booking form they had wanted, being No 6/3/6 of process. However, Mr Brennan commented in relation to this: "If you think for one second we have gone 4¹/₂ years, 14 copies of the invoice and £20,000.00 to pursue the matter to conclusion and waited all these months, all for the want of designing something as simple as that, and believe me, that wasn't the only document he referred to. They came back continually with small modifications. "Make it look like this". We repeatedly fulfilled requests such as that to have them all thrown back at us."

(77) In the event, the pursuers produced about fourteen different layouts for the booking form and invoice. There were communications between the pursuers and the defenders about the layout by telephone, fax and at meetings. By early April 2002 the question of the layout of the booking form had still not been resolved. The pursuers made numerous attempts to speak with the defenders about the layouts between early April and mid-May 2002, as recorded in the log comprising No 5/9 of process. Mr Brennan explained that the log had been kept because he had had suspicions that Mr Ritchie was going to try to "spin matters out" and "avoid payment". This was therefore a record of when calls were made to try to get a meeting with Mr Ritchie to resolve the matter. Mr Brennan confirmed that Mr Ritchie had ultimately refused to speak to or to meet with the pursuers to resolve the issue and that the pursuers has been told that Mr Ritchie did not want to go ahead with implementation of the booking form. It was not suggested to Mr Brennan in cross-examination that his evidence on this was incorrect. I therefore accepted his evidence on this.

(78) Miss Kerr submitted that, as a general rule, if a party to a contract impedes or prevents performance of a term of the contract, that does not result in a breach of contract by the other party. The other party may treat the contract as having been performed: McBryde, The Law of Contract in Scotland, 2^nd Edn at paragraph 20-16. I was also referred to Mackay v Dick and Stevenson (1881) 8 R (HL) 37 and in particular to the opinion of Lord Watson at page 45. I was invited to excuse the pursuers from performance of their obligation to produce an acceptable form as performance had been affected by the actions/default on the part of the defenders in failing to state clearly what they were looking form in terms of layout and in failing to meet the pursuers in April and May 2002 to discuss layout.

(79) I accepted the evidence on behalf of the pursuers to the effect that "Karen" had agreed to a number of the proposed forms but that Mr Ritchie had not been agreeable to them. It was not entirely clear from his evidence just what it was that the pursuers were doing wrong. Mrs Taylor made more tangible points. She explained that there were a number of telephone calls backwards and forwards in which the pursuers had been asked if they had done amendments suggested by her and then, when they came back, finding that the defenders were not happy with them or that no changes had been made. At one point, she explained: "We just felt overall that they were very poor". Mr Blakeley supported this position. On the other hand, from the pursuers' perspective, Mr Brennan explained that the pursuers' felt that they had done all they reasonably could. There were then the attempts by the pursuers to sort things out in April and May 2002.

(80) That final aspect of the matter causes me no little concern. I accepted the evidence on behalf of the pursuers about the telephone calls, as recorded in No 5/9 of process. Despite the fact that the defenders themselves averred on record that they had rescinded the contract by telephone call, when it was put to Mr Ritchie in cross-examination that what had happened on 13 May was as recorded in No 5/9 process, he responded to the effect that he had telephoned the pursuers and had asked the pursuers to forget the £5,000.00 the defenders still owed the pursuers and that he would forget the £15,000.00 he had already given them. He maintained in evidence that he had never cancelled any agreement. He maintained that the next step was that he had received a solicitor's letter from the pursuers, albeit that he did not go on to say anything about the content of the letter. Neither was it produced in evidence. It should be recorded that this was the first time there had been mention of such an account of events. None of this had been put to Mr Brennan in cross-examination for his comment. Mr Ritchie was then asked in evidence in chief: "Did you feel that you could continue with the relationship?" He replied "No". He went on to explain that this was because he was not getting any of the information he needed to run the business.

(81) It should, however, be noted that this was at a stage after he had already got Vector to come in and do work in relation to the computer system. In addition, I accepted that Mr Ritchie had on 13 May 2002 refused to speak to or meet with the pursuers. In my opinion, therefore, this was conduct on the part of the defenders showing that they regarded the contract as being at an end. At the very least, Mr Ritchie's actions on 13 May 2002 amounted to obstructive behaviour which prevented performance by the pursuers of the condition of the contract about the provision of booking form layouts.

(82) In my opinion, therefore, the pursuers are entitled to treat that condition of the contract - in the sum of £450.00 - as having been performed.

(83) If I am incorrect about that, the question of whether any breach of this condition amounted to a material breach will be examined in section E of this Note.

(84) Mr Carlin's fourth area of criticism was that the system was not networked. I had no hesitation in accepting and preferring the evidence of Mr Mann in particular about the successful networking of the system by him. He gave his evidence carefully and in an entirely straightforward manner. He gave evidence to the effect that he had connected not only "Karen's" computer to the server but also four further computers in an adjoining portakabin. Mr Anderson confirmed that a total of four computers had been networked, on which he installed, albeit in one case unsuccessfully, the Sage software. I believe that Mr Mann was mistaken in thinking that there were four additional computers. That would meant a total of five computers having been networked, which would have been one more than contracted for. I therefore preferred the evidence of Mr Anderson on this matter. It should be recalled that the position advanced on behalf of the defenders was that only one desktop computer had been networked by the pursuers. Against the background of my comments about the background to this whole matter as set out in paragraphs (40) to (69), I found it utterly incredible that Mr Mann would only have networked one computer to the server. It is also convenient at this point to make mention of a passage of evidence given by Mr Mann's evidence to the effect that he had networked the further remaining desktop computers about three months after the first ones. When he was asked in evidence-in-chief whether he could recall the time period from the first being installed to the second in the main portakabin, he replied "I don't know exactly. It was possibly within 3 months. It certainly wasn't something that was done within a fortnight". Nobody else suggested that there was a gap as long as three months. I therefore think it more likely than not that it was nearer a fortnight than three months.

(85) When it was put to Mr Brennan that the other desktop computers had not been networked and that only one computer had had the Sage Line 100 software loaded onto it, he responded: "...why on earth would we go to all the trouble and not connect additional pc's to the network. Why on earth would they pay us £15,000.00 from a £19,000.00 bill if we only connected one pc? It is utter, utter nonsense." He also went on to add: "It beggars belief that a company with Microsoft and Veritas and Sage Line 100 accreditations would put all this work in to conclude this business and we would leave, frankly, such elementary parts of the product undone." I accepted his evidence on this.

(86) I again observe that there were no complaints to the pursuers about a lack of networking before or after the sums totalling £15,000.00 were paid. I therefore had no hesitation in rejecting this criticism.

(87) Mr Carlin's fifth area of criticism was that the pursuers had refused to provide support for the one year period specified in the contract. That period would have expired in June 2002 in terms of the contract. In support of this contention, Mr Carlin founded on evidence given by Mrs Kilcullen to the effect that on one occasion between November 2001 and May 2002 she had been refused support. She had until then had the pursuer's full support. In relation to that one occasion, she gave evidence about having been put through to a director who had said to her that the pursuers "were unable to support her at that point". She said that he had told her that there had been "a problem" and that they would not be able to support the defenders. This had not been the subject of any previous complaint or averment. Even more importantly, this allegation had not been put to any of the pursuers' witnesses, including Mr Brennan, for their comment

(88) The fact that Mrs Kilcullen spoke of a "director" of the pursuers saying that there "had been a problem" suggests to me that this is more likely than not to have been when there was evidence of relations having broken down between the parties in May 2002. I also noted Mr Blakeley's evidence in cross-examination when he said that he had been told by the defenders that they had received some support from the pursuers and that it was "not a question of all or nothing".

(89) Mr Brennan was asked about "support" at one point. However, that was in the context of suggestions that the pursuers had refused to support a further licence when the first year's licence ran out. Even if this is correct, that would not have represented a refusal of support in the first year as contracted for as this concerned a further licence for the future. At all events, when asked if the pursuers had refused to support a further licence, Mr Brennan replied: "Oh no, very careful the whole way through not to refuse support". It was not suggested to him in cross-examination that the position had been as was later stated in evidence by Mrs Kilcullen.

(90) In all the circumstances I am not satisfied that I can properly conclude that the pursuers were in breach of contract in this respect. I therefore do not accept this criticism.

(91) Mr Carlin's sixth area of criticism was that the system did not allow four users. The defenders' position was that only one computer was connected to the network. I have already indicated that I have rejected this contention. Mr Carlin's position in submissions was that Mrs Kilcullen had said that the system did not allow four users. My note of her evidence was that when asked whether it was possible that there were four users in total, she replied to the effect that she could not be certain. Mr Anderson had explained that four computers were connected to the server but that only three of them had been capable of running the Sage software. This had proved impossible due to other software which had already been installed on the computer by others. As Mr Anderson put it: "It rendered the computer useless". He had drawn this to the attention of the defenders. It was not suggested to him in cross-examination that his evidence about this had been incorrect. He also explained that four licences had been issued by Sage for each of the workstations, for three of the computers. There was no evidence that the defenders had ever complained about this. Mr Mann later gave evidence to the effect that he had networked all four computers. I had no hesitation in accepting the evidence given in relation to this matter by Mr Anderson and Mr Mann.

(92) Mr Carlin submitted that the system had to be able to allow four users in the sense that there had to be four computers. Miss Kerr suggested that four people could have used three computers. I note that in the course of examination-in-chief, Mr Anderson was asked about No 5/1/1 of process at page 6 where it is recorded: "No of users: 4". He commented: "That is correct, 4 concurrent users". That suggested to me that what was envisaged was the provision of four concurrent users for the Sage software. On that basis, three computers upon which Sage software was included would not have fulfilled the condition about "4 users". On the other hand, I am satisfied that no complaint was ever made about the fourth computer by the defenders. The question of whether this represents a material breach of contract will be considered in section E of my Note.

(93) Mr Carlin's seventh area of criticism was that the pursuers provided no proper training. This was on the view that the system was not up and running fully. I have already indicated my conclusion that the full system was operational. In relation to the booking forms, I have accepted the evidence on behalf of the pursuers to the effect that the defenders chose to re-enter information into another system. They could have produced the booking form from the Sage system. I accepted Mr Anderson's evidence in cross-examination to this effect. In relation to training itself, I accepted the evidence of Mrs Scott, Mr Anderson and Mr Mann. "Karen" was given the most training. Mrs Taylor was given some training. Mrs Scott confirmed that she was able to and did provide training. She confirmed that she was satisfied that both "Karen" and Mrs Taylor were able to use the system unaided. She confirmed that training was given to a standard whereby the staff could use the system themselves.

(94) According to Mr Brennan, whose evidence I accepted, the defenders obtained the training grant on completion of the training provided by the pursuers. He had checked with Glasgow North Limited that the grant had been paid to the defenders. His understanding was that the amount paid had been £5,000. It was put to him in cross-examination that the amount involved had been £2,000. He responded that he could be mistaken but that he was pretty sure. I was therefore satisfied that the training grant had amounted to at least £2,000.

(95) In relation to the question of training, the position therefore was that the defenders had obtained such a grant upon completion of training by the pursuers. In these circumstances I found it difficult to understand how it could now be suggested that the pursuers had not provided the training contracted for. It was also of some note, and it was not suggested otherwise, that the defenders at no time asked the pursuers to provide further training for any of their employees.

(96) I was also reminded by Miss Kerr of evidence given by Mr Brennan in cross-examination to the effect that on completion of the implementation and training the defenders had gone "live on Line 100 and stopped using Line 50, so, completely contradicting" the assertion that the defenders had had to use Sage Line 100 because they had had no other system they could use. He continued: "They had Line 50 and were ready to move onto 100 and the fact they did when they were ready to do so makes a strong point. They were ready and trained and networked. It was installed correctly and to suggest none of the things happened and they moved off their existing accounts system and moved onto the new one I think is ludicrous."

(97) Curiously, even although it was put to Mrs Scott in cross-examination that Mrs Taylor had only had half a day's training, when Mrs Taylor came to give evidence, she went so far as to say that she had had no training. I did not accept her evidence to this effect. In the event, I consider it likely that there was a "knowledge shortfall" when "Karen" had left the defenders and that the defenders did not ask for any further training to be provided for staff.

(98) In all these circumstances, I therefore also reject this ground of criticism.

(99) Mr Carlin's eighth area of criticism was that the backup system was not working. However, the contractual provision was to the effect that the pursuers were to "install" a backup system to recover data. I have already indicated my conclusion that the backup system was installed and tested successfully by Mr Mann and that backup can stop working for a number of reasons. According to Mr Mackay, "usually with a backup system it is either a tape problem, the tape gets dirty, corrupt, whatever, or a tape drive problem, the physical hardware unit goes faulty. This is usually what would happen." I am satisfied that whatever may have been found in April to June 2002 by Vector, the pursuers complied with the condition of the contract to install the backup system which they also tested and found to be working at that time. What is puzzling is why, when the defenders are said to have learned that the backup was not working, they did not complain to the pursuers and give them an opportunity to rectify the position. In all the circumstances, I reject this criticism also.

(100) Mr Carlin's ninth area of criticism was that the pursuers were to install and configure the system but that they did not do so. I have concluded that the pursuers did install and configure the system. As I have already indicated, I accepted the evidence of Mr Anderson and Mrs Scott to the effect that the system was fully operational when left by the pursuers with the exception of the defenders choosing not to produce a booking form from it.

(E) WHETHER THE PURSUERS WERE IN MATERIAL BREACH OF CONTRACT IN ANY RESPECT?

(101) In relation to the question of material breach of contract, I was referred by Mr Carlin to McBryde (supra) at paragraphs 20.94, 20.96, 20.104, 20.108, 20.126, 20.134 and 20.136. I was also referred to in the NV Devos Gebroeder v Sunderland Sportswear Ltd 1987 SLT 331 at 337, letters F to H; Steele v Young 1997 SC 360; Graham & Co v The United Turkey Red Company 1922 SC 533, and Ramsay & Son v Brand 1960 SC (HL) 28. In relation to Ramsay & Son, I would pause to observe that in McBryde supra at paragraph 20.133, the learned author recorded that this case "may not represent the present law". This may be because the dicta of Lord Wrenbury at page 33 to which I was referred by Mr Carlin appears to ignore, in building contracts at least, any distinction between a material and a non-material breach.

(102) Mr Carlin submitted that the question was the nature of breach rather than its consequences, although these might illustrate materiality. A material breach did not mean that there must be a material loss. The nature of the breach should be judged objectively, rather than according to the intention of the party in breach. Whether or not a breach was material was he submitted primarily a question of fact. If there is defective performance it may be necessary to investigate the extent of the defect. Mr Carlin further submitted that when there is a material breach, the innocent party may withhold performance until the party in breach performs. This was a result of the mutuality principle. In the event of a material breach, the innocent party may decide to end all further performance of the contract and may probably do so even if acting in bad faith. The innocent party may or may not intimate this decision to the party in breach. If there is intimation there is rescission of the contract which takes effect from intimation. But rescission is not always essential. A material breach by one party gives the other party an option to be free from further performance of obligations and the innocent party "may not be due to pay any sums under the contract after the material breach, nor from after the date of rescission, if any": McBryde supra at paragraph 20-108.

(103) Mr Carlin also very fairly reminded me of the passage in McBryde supra at paragraph 20.126 where the learned author refers to Strathclyde Regional Council v Border Engineering Contractors Limited 1998 SLT 175 at page 177 in which Lady Cosgrove had treated it as a "basic principle" that an opportunity to remedy a breach should be given before rescission. I was also reminded of the proposition that when a breach is material the contract price cannot be sued for. Mr Carlin's submission was that in such a situation the remedy would be for unjustified enrichment. He told me that he was not submitting that any form of breach, in contrast to a material breach, would disallow a party from suing on the contract concerned. His position therefore was that a breach would have to be a material breach to have this effect.

(104) His submission was that in the present case the breaches concerned were material and therefore that the pursuers could not sue for the balance of the invoice amounts. He further submitted that in such circumstances the pursuers' remedy would have been to sue on the basis of quantum meruit but that that was not the basis of the pursuers' case. He further submitted that if the breaches were not material, the pursuers would be entitled to sue for the balance said to be due but that the defenders could in that event have a proper counterclaim for damages.

(105) Subject to my observation in relation to Ramsay & Sons supra, the propositions advanced by Mr Carlin on the basis of the passages to which he referred in McBryde supra respectfully appeared to me to be correct. I would only add that at paragraph 20.96, in addition to stating that whether or not a breach was material was a question of fact, the learned author expands on this by stating: "The answer depends on circumstances at the time of the contract and also subsequently...What has happened is also significant."

(106) In looking at the nature of the breach in question, it is well settled that in any contract which contains many stipulations there are some which go to the root of the contract and others which do not. Only a breach going to the root of the contract entitles the innocent party to declare the contract to be at an end: NV Devos Gebroeder supra at page 337.

(107) In this case, Mr Carlin's third area of criticism (referred to in section D commencing at paragraph (74)) was in relation to the booking form layouts. If I am incorrect in my conclusion that the pursuers are entitled to treat the condition of the contract relating to the booking form layouts as having been performed, the question would then be whether the breach would have amounted to a material breach of the contract.

(108) The starting point is that this element formed part of the invoice No 5/1/2 of process which totalled £19,389.85, inclusive of VAT. Item 11 on that invoice reads: "Stationery layouts - ie invoices, statements, remittance advices, etc (based on 3 layouts)". This was also the wording in the original proposal document, comprising No 5/1/1 of process. The sum for this item was £450.00 plus VAT of £78.75. I accept that a material breach does not mean that there has to be a material loss. Nevertheless, it is part of the whole facts and circumstances to be considered objectively. Ultimately, although the pursuers produced at least fourteen layouts, none of which was approved by and accepted by the defenders, it seemed clear from the evidence of a number of witnesses that the question of the layout of the booking forms was important to the defenders. For example, Mrs Taylor gave evidence to the effect that the defenders placed the "utmost importance" on getting the booking form right. On the other hand, when it was put to Mr Ritchie that it was only in September 2001 that he advised the pursuers that he was unhappy with the layout of the booking form, he responded in evidence: "Forget the booking form. I wasn't happy with the set-up, not getting the information we were to get from it."

(109) If getting the booking forms right really was of the utmost importance, that response struck me as a surprising one. It left me with the impression that whatever had been at issue in relation to the booking form had perhaps not been quite as important as had otherwise been suggested. There was also the evidence on behalf of the pursuers to the effect that the full system was operational but that the defenders had chosen not to produce a booking form although one could have been produced from the Sage software. Instead they chose to re-enter information into another system. This is relevant when considering the "extent of the defect" and the circumstances not only at the time of the contract but also what happened subsequently. Mr Ritchie also then chose to refuse to speak to or to meet with the pursuers with a view to resolving the issue of the layout of the booking form.

(110) In all the circumstances, looking at the nature of the breach, including the extent of the defect, the circumstances at the time of the contract and then what actually happened after that, I am not satisfied that it can be said that the breach of this condition, if there be a breach, amounted to a material breach of contract between the parties. I am not, for example, persuaded that this condition was one which went to the root of the contract.

(111) Mr Carlin's sixth area of criticism (referred to in section D commencing at paragraph (91)) was that the system did not allow four users. Item 6 of the invoice, No 5/1/2 of process, was relevant to this. That item had been in the sum of £4,880.00 plus VAT. On the invoice it reads: "Sage Line 100, Windows, Business Suite, 4 user". This was also the wording on the proposal document at page 7. There was also reference to this in the summary of the proposed new system at page 6 of the proposal document where it stated: "Software package: Sage Line 100 Business Suite - No of users: 4".

(112) In considering the nature of this breach, including the circumstances not only at the time of the contract but also looking at what actually happened after that, it is in my opinion relevant in looking at the whole circumstances to have regard to the following factors: first, that Mr Anderson told the defenders about the impossibility of loading the Sage Line 100 software onto the fourth computer, second, the lack of any complaint, and, third, the lack of any opportunity having been given to the pursuer to put matters right.

(113) In addition, there was no evidence indicating what the value of three users might have been as compared to four users, bearing in mind also the lack of any complaint about this.

(114) In all the circumstances, in looking at the nature of the breach, including the extent of the defect, the circumstances at the time of the contract and what actually happened after that, I am not satisfied that it can be said that the breach of this condition amounted to a material breach. I am not, for example, persuaded that this condition was one which went to the root of the contract.

(F) SUBMISSIONS ON BEHALF OF THE DEFENDERS CONCERNING RESCISSION OF CONTRACT:

(115) Mr Carlin made certain submissions in relation to what he described as being the rescission of the contract. Mr Carlin reminded me that Mr Ritchie had given evidence to the effect that in May 2002 he had suggested to the pursuers that they should forget the £5,000.00 still owed to him and that he would forget the £15,000.00 already paid by the defenders and that after that he had received a solicitor's letter. Mr Ritchie had been asked in evidence-in-chief: "Did you feel you could continue with the relationship?" He replied to that: "No". There was no evidence given about the content of the solicitor's letter; neither was it put in evidence. In addition, as I have already indicated, none of this was put to any of the pursuers' witnesses, and in particular Mr Brennan, in cross-examination for their comment. Mr Carlin went on to submit: "There was a clear expression of conduct which showed that the contract was regarded as terminated". This adopted the formulation in McBryde supra at paragraph 20.107. Mr Carlin submitted that the contract was "effectively rescinded". I can only assume that Mr Carlin was suggesting that any such action was by the defenders. This was their position on record at page 16. The suggestion on record was that this was after numerous problems had arisen in relation to the system. However, I am satisfied that the only reason given by the defenders at that time related to the booking form layout and that, in relation to that matter, the defenders' actions in refusing to speak to or meet with the pursuers in May 2002 amounted to impeding or preventing performance of the term of the contract about that. It is therefore not clear to me that the defenders would have been entitled to rescind the contract, effectively or otherwise. I would add that there was no evidence from Mr Ritchie that following the "solicitor's letter" to which he referred, there had been any express separate rescission of the contract by the defenders such as is averred to have occurred in a telephone call in June 2002 on record at page 16.

(G) RESULT IN RELATION TO THE PRINCIPAL ACTION:

(116) In the whole circumstances and for all of these reasons, I have concluded that the pursuers are entitled to payment of the sum sued for. I accordingly sustain the pursuers' first and second pleas-in-law in the principal action, repel the pleas-in-law for the defenders and grant decree in respect of the crave of the initial writ.

(H) COUNTERCLAIM:

(117) Mr Carlin next submitted that if any breaches were not material, this would result in the pursuers being able to sue for the balance of the sums said to be due in terms of the pursuers' contract. In that event, the defenders would he submitted be entitled to counterclaim for damages.

(118) In the counterclaim the defenders had averred, first of all, that they had overpaid the pursuers by £5,851.45. It was said that this was part of the sum counterclaimed by way of damages. It was also averred on behalf of the defenders that, on the basis that the pursuers should have advised that Sage Line 50 was sufficient, the defenders would "require to pay the sum of £4,230.00 to have the contract completed".

(119) An alternative approach then taken was to aver that to complete the contract undertaken by the pursuers to install Sage Line 100 software would incur the defenders costs. These were said to total £5,816.25. It was then averred that if the pursuers were not in breach of the condition of the contract in relation to advice about Sage Line 100, the counterclaim would be restricted to £5,816.25.

(120) I have to say that I found these averments difficult to understand. I regret to say that this remained the position both in relation to the evidence given in relation to this aspect of the matter by Mr Blakeley and in relation to the submissions made by Mr Carlin in relation to this aspect of the matter.

(121) Insofar as the defenders purported to be seeking an award of damages representing any amount overpaid, in my opinion the defenders are not entitled to do so on the basis averred on record, including the plea-in-law on their behalf. The appropriate plea-in-law, with appropriate supporting averments, would have been a plea of repetition. That does not form part of the defenders' case.

(122) In any event, if there was any element of overpayment in relation to the booking form layout element and/or the element relating to three users rather than four users, the extent of any such overpayment was not quantified. Further, as I have indicated, it was in my opinion not unreasonable for the pursuers to have recommended Sage Line 100. Ultimately, Mr Blakeley confirmed this.

(123) Turning to the sums otherwise said to be due in damages, in my opinion, the defenders have in any event not proved any actual loss in respect of which an award of damages would properly be due.

(124) The defenders advanced two possible scenarios in evidence, which Mr Blakeley attempted to explain. His evidence related to his supplementary report, No 6/4/2 of process. Mr Carlin told me that these sums would be counterclaimed for in the event that any breach on the part of the pursuers was found to be non-material. Mr Carlin sought to maintain that the sums sought represented sums which would have been required in order to put the defenders into the position they ought to have been in had the contract been performed. The first scenario was predicated on the basis of a retention of the Sage Line 50 software and the alternative scenario was predicated on the basis of acquiring the Sage Line 100 software. However, both scenarios put forward in Mr Blakeley's supplementary report, as confirmed in his evidence, were, as Miss Kerr reminded me in her submissions, totally hypothetical and had not in fact happened. Mr Blakeley accepted this in the course of his evidence. The costs referred to in both scenarios had therefore not actually been incurred by the defenders. He accepted that these costs were all hypothetical, and that they were also on the hypothetical basis of a decision by the defenders to bring in a "professional consulting company" to carry out an "audit". Mr Blakeley also confirmed that he was not saying that this would have been required. Further, he confirmed that this had not even actually happened. Mr Mackay had likewise been critical of any suggestion that this would have been required.

(125) In the event, none of this actually happened because the defenders' chose to take a different route. The defenders' did not arrange for an audit by a professional consulting company. They instead engaged Vector, a software company, to provide services, the full nature and extent of which was not disclosed to the Court in evidence. Mr Blakeley's evidence was that Vector is a software support company and that Vector is still in existence. The defenders' chose to rely on limited and second-hand evidence from Mr Blakeley about what was said to have been Vector's involvement rather than leading first-hand evidence from those involved in Vector. In addition, the defenders chose not to lead any evidence about the costs actually incurred by them in taking that alternative route. Mr Carlin conceded in his submissions, correctly in my opinion, that the defenders would not be entitled to recover more than any actual losses incurred. He also conceded, again correctly in my opinion, that no evidence of any actual loss had been led by the defenders. That being so, the defenders have not proved any losses and, in my opinion, they would not in any event be entitled to any award of damages in terms of their counterclaim.

(126) It should also be recorded that the pursuers were critical of a number of the figures suggested by Mr Blakeley as representing costs on the hypothetical bases he was advancing. One example was that Mr Blakeley had given a figure of £900.00 in relation to rectifying the backup. When Mr Brennan was asked to comment on this in cross-examination, he gave evidence to the effect that the defenders' had produced an invoice from Vector for £300.00 plus VAT for this work. It was not suggested to Mr Brennan that his evidence about this was incorrect. The defenders did not introduce into evidence any such invoices from Vector.

(I) RESULT IN RELATION TO THE COUNTERCLAIM:

(127) In my opinion, the basis of and approach taken in relation to the counterclaim was misconceived. The defenders have in any event proved no loss entitling them to any award of damages in respect of any breach of contract on the part of the pursuers.

(128) In these circumstances and for all of these reasons, I have concluded that the defenders are not entitled to any sum of damages in terms of the counterclaim. I have accordingly sustained the second and third pleas-in-law for the pursuers in the counterclaim (the fourth plea-in-law being in the event unnecessary), repelled the defenders' pleas-in-law and granted decree of absolvitor in respect of the crave of the counterclaim.

(129) The question of expenses has been reserved as requested by both parties.

SHFLRSCRitchies.

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	Scottish Sheriff Court Decisions
You are here: BAILII >> Databases >> Scottish Sheriff Court Decisions >> Local Planet Solutions Ltd v. Ritchies HGV Training Centre Ltd [2006] ScotSC 49 (19 May 2006) URL: http://www.bailii.org/scot/cases/ScotSC/2006/49.html Cite as: [2006] ScotSC 49

Scottish Sheriff Court Decisions