Scottish Sheriff Court Decisions

SHERIFFDOM OF LOTHIAN AND BORDERS AT EDINBURGH

 

Case No: A138/10

JUDGEMENT   of   SHERIFF WILLIAM HOLLIGAN   in the cause   AMA (NEW TOWN) LIMITED, a company incorporated under the Companies Acts (Company Number SC098553) and having its registered office at 15 Coates Crescent, Edinburgh, EH3 7AF   Pursuers   against   ANTHONY FINLAY, residing at 16 The Oaks, Old Shore Road, Newtonards, Country Down   Defender

 

Act: Reid QC, Burness

Alt: Stuart & Stuart

 

Edinburgh:19^th August 2010

 

The Sheriff, having resumed consideration of the cause, sustains the pursuers' third plea in law; repels the defender's pleas in law; grants decree in terms of the pursuers' first and second craves; reserves all questions of expenses and appoints parties to be heard thereon at 10am on 6^th September 2010 within the Sheriff Court, 27 Chambers Street, Edinburgh.

 

 

 

 

Note

[1] This action concerns certain heritable subjects described in the pleadings as plot B 3.0.1, Block Jex-Blake House, Springside, Edinburgh and also as Flat 5, 2 McEwan Square, Edinburgh ("the property"). The facts are not in dispute. Put broadly, the property comprised a plot to be developed by the pursuers. By missives dated 5^th, 13^th and 15^th February 2008 ("the missives") the pursuers contracted to sell the property to the defender. The price was £149,000. The defender paid a non-refundable reservation fee and a non-refundable deposit. As the property was, at that point, not built the missives contained a mechanism for establishing a date of entry at a point in the future. The date of entry so established was 23^rd December 2009. It is a matter of admission that the defender was unable to proceed with the purchase of the property on the date of entry and that he is in breach of contract with the pursuers.

 

[2] The pursuers have raised the present action against the defender in which the pursuers have two craves: the first crave is for payment by the defender to the pursuers of the sum of £141,850; the second crave is for payment by the defender to the pursuers of the sum of £639.88. It was accepted that the sum contained in the first crave is, in effect, the balance of the purchase price after deductions have been made for the non-refundable amounts already paid by the defender and certain other amounts. Nothing turns on the arithmetic. The second crave relates to interest on the purchase price. The second crave did not feature greatly in the debate before me. The pursuers' first and second pleas in law seek payment of the balance of the purchase price together with interest.

 

[3] Both parties lodged rule 22.1 notes. The matter came for debate before me on the respective preliminary pleas of the parties. The defender seeks dismissal of the action. The pursuers seek decree de plano.

 

Submissions for the Defender

 

[4] For the defender, Mr McMillan directed his attention to the remedy sought by the pursuers. In short, it is not competent for the pursuers to seek decree for payment of the balance of the price. The contract contains mutual obligations. Where the pursuer retains title to the property he cannot seek decree for payment of the price. In support of his proposition, Mr McMillan referred me to the following authorities: Gloag on Contract (2^nd edition) page 592; Turnbull v McLean and Co (1874) 1R 730 at page 738; Gloag and Henderson, The Law of Scotland (12^th edition) paragraph 10.24. In short, in Mr McMillan's submission, these authorities support the proposition that a creditor in a contractual obligation, when confronted with a breach of contract on the part of the debtor, may either raise an action seeking specific implement or claim damages. Mr McMillan also referred me to White & Carter (Councils) Ltd v McGregor 1961 SC(HL) 1. Mr McMillan acknowledged that White & Carter was authority for the proposition that, in certain circumstances, a creditor may seek payment of the price where there is a breach of contract. However, that case was limited to circumstances in which the creditor could proceed without assistance from the debtor. In the present case the pursuers have withheld performance of their obligations, as they are entitled to do, and have not handed over the keys or given the defender vacant possession. The pursuers are obliged to seek specific implement of the contract or to rescind the contract altogether and claim damages. Mr McMillan referred me to Green's Encyclopaedia of Scottish Legal Styles Volume 8 pages 122-124. That particular style sets out a form of specific implement which should have been followed in this case. Mr McMillan then referred me to the case of King v Moore 1993 SLT 1117. That case concerned the purchase of a farm. The purchasers failed to comply with their obligations on the date of entry. The creditor first sought specific implement and thereafter damages. King v Moore is an illustration of the procedure which should be adopted. In anticipation of the pursuers' submission, Mr McMillan referred to the case of Bosco Design Services Limited v Plastic Sealant Services Limited 1979 SC 189. That case concerned a breach of missives in which the pursuers did seek payment of the price. However, the case could be distinguished because the heritable proprietor had already given possession of the subjects to the purchaser. Mr McMillan also referred me to pages 3 to 4 of part 2 of the Scottish Law Commission Report on Remedies for Breach of Contract (Scottish Law Commission number 174) which, he said, supported his submission. I should, at this point, add that, at a later stage, Mr McMillan also referred me to Walker on Contract (2^nd edition) pages 521-523, particularly at paragraphs 32.9 and 32.10. In short, I should sustain his second plea in law and dismiss the action upon the basis that the crave for payment of the price is incompetent.

 

Submissions for the Pursuers

 

[5] In Mr Reid's submission, the defences are irrelevant and I should therefore sustain the pursuers' pleas in law and grant decree de plano for the sum sued for. The pursuers in this case had taken a deliberate decision not to follow the style referred to in Green's Encyclopaedia and the procedure illustrated by the case of King. In Mr Reid's submission, the defender's attack on the pursuer's crave was unsound and it followed that the defences were irrelevant. The defender admits that the date of entry was properly constituted pursuant to the mechanism established in the missives. The defender also admits a failure to pay. There is no issue taken in the pleadings on quantum and the defender concedes that he is in breach of contract. The defender's submissions appear to be based upon the principle of mutuality and are misconceived. Here the defender is in breach of contract and the pursuers are entitled to withhold performance namely delivery of the disposition and the giving of vacant possession. As a general matter of principle, where there is a breach of contract, an innocent party has a choice of either suing for implement (and here implement is payment) or to accept the breach of contract and treat the contract as repudiated. Acceptance of the breach discharges both parties from further performance of their obligations pursuant to the contract and entitles the innocent party to claim damages. In the present case the pursuers have chosen to affirm the contract and to seek implement, namely payment by the defender of the price. The pursuers do not have to deliver a disposition or give entry before they seek implement. It is enough for the pursuers to say (and it may even be implied) that in seeking implement they are ready and willing to implement their obligations under the contract. All that is required of the defender is that he pay the price. The pursuers are then under an immediate obligation to deliver the disposition and to give entry. There is no cooperation that is required of the defender in the sense outlined in White & Carter.

 

[6] Mr Reid then referred to Bosco. In his submission, unless the court concludes that Bosco was wrongly decided or can be distinguished, it endorses the form of crave in the present action and should be followed. Mr Reid produced a copy of the pleadings in the case of Bosco. In that case, following the failure by the defender to pay the purchase price, the pursuers raised an action for the payment of the purchase price which failing for declarator that the purchasers were in breach of the terms of the missives; they also sought decree of removal from the subjects and damages. The pursuers initially obtained decree for payment of the purchase price. The price remained unpaid and they then moved the court for decree in terms of the second conclusion. The Lord Ordinary (Lord Stott) refused the motion as incompetent upon the basis that the sellers would hold two decrees and would thus be able to pursue two separate remedies which were mutually exclusive. The sellers reclaimed. In allowing the reclaiming motion, the Inner House concluded that upon the grant of decree in terms of the second conclusion (namely damages), the pursuers would be personally barred from proceeding further to enforce the decree for payment. In the course of his opinion, the Lord President stated that conclusions set out in Bosco were frequently sought and not essentially dissimilar from those contained within the Encyclopaedia of Scottish Legal Styles. It is clear from the opinion of the Lord President that he was content with the pleadings. Mr Reid then referred to the pleadings in the Bosco case which, in his submission, were similar to those contained in the present action. That the defenders had taken entry was not a ground of distinction. It is noticeable that there were no averments to the effect that the sellers were ready and able to implement their obligations pursuant to the missives. That was one reason why Mr Reid submitted that the question of performance by the seller may be a matter of implication. The decision in Bosco was that a single conclusion for payment is competent and of general application in this type of case. Bosco does merit a brief mention in the Stair Memorial Encyclopaedia Volume 13 (Judicial and Other Remedies) at paragraph 10. Mr Reid then referred to the case of Newcastle Building Society v White 1987 SLT (Sh Ct) 81, particularly at page 86. In the course of his opinion, the Sheriff Principal specifically endorsed the practice contained in Bosco. Mr Reid then referred to the case of Salaried Staff London Loan Company v Swears and Wells 1985 SC 189 and, in particular the opinion of the Lord President at page 193. In short, and by reference to certain authorities referred to therein, the Lord President concluded that where one party is in breach of contract, the innocent party is entitled to seek implement of the contract and there must be exceptional circumstances to withhold from any party applying for it the remedy which in ordinary circumstances they would be entitled to as a matter of course. In this case they are no averments of exceptional circumstances on the part of the defender. Mr Reid did not seek to dispute the statement of general principle contained in Gloag, Gloag and Henderson and Turnbull to which Mr McMillan referred. The pursuers are only withholding performance as a result of the defender's breach of contract. It is that which entitles the pursuers to withhold performance. In those circumstances the pursuers have a choice, either to treat the defender's breach of contract as a repudiation and to discharge both parties from further performance and claim damages or to affirm the contract and seek implement. It is the latter which the pursuers seek. The defender cannot say that because the pursuers have not handed over the disposition that the defender is not in breach of contract. No issue is taken in the pleadings as to the pursuers' inability to perform their obligations. White & Carter was a very different case. It followed that the defender has not set out any relevant defence to the pursuers' claim and the court should accordingly grant decree as craved.

 

Reply by the Defender

 

[7] Whereas Mr McMillan accepted the pursuers were not to blame for the current difficulty, the law is that the pursuers were only entitled to seek specific implement failing which damages and it is that which the crave for the pursuers do not do. Mr McMillan repeated his submission that Bosco could be distinguished, principally because entry had already been given. Mr McMillan sought to derive some support for his proposition from the opinion of the Sheriff Principal in the case of Newcastle Building Society at page 86F-G.

 

Decision

 

[8] In my opinion, the starting point in this matter is an analysis of the relevant facts. They are agreed and are in short compass. The parties entered into a contract for the sale of a property at a particular price. A date for implement of the respective obligations of the parties was fixed pursuant to a mechanism established in the missives. From the averments in article 4 (and the relevant answer) prior thereto the defender's agents intimated to the pursuers' agents that the defender was not in a position to proceed with the transaction. The pursuers' agents stated that the pursuers held the defender to the bargain. There is no averment as to any action by either party prior to 23^rd December 2009. The date of entry passed. The defender did not implement his obligations pursuant to the missives. The pursuers have now raised the present action. Accordingly, it appears to me that this is a case of breach of contract rather than anticipatory breach of contract. I say this because certain of the authorities to which Mr McMillan referred (Gloag and Henderson and Walker) deal with anticipatory breach. White & Carter has also been treated as a case dealing with anticipatory breach. In terms of the remedies open to the innocent party here at the end of the day any distinction may be of little moment. In this case there is, in effect, one date for performance by both parties of their contractual obligations and it is that set of obligations which the pursuers seek here to enforce. It is not a case in which the contract calls for many and perhaps different obligations in the future. The rights of the innocent party are clear. In the course of his opinion in the Salaried Staff case the Lord President quoted with approval from the speech of Lord Reid in White & Carter :-

"The general rule cannot be in doubt. It was settled in Scotland at least as early as 1848, and it has been authoratively stated time and again in both Scotland and England. If one party to a contract repudiates it in the sense of making it clear to the other party that he refuses or will refuse to carry out his part of the contract, the other party, the innocent party, has an option. He may accept that repudiation and sue for damages for breach of contract whether or not the time for performance has come, or he may, if he chooses, disregard or refuse to accept it and then the contract remains in full effect."

In the present case, the pursuers have not sued for damages. They have not accepted the defender's repudiation. They have not rescinded the contract thus excusing parties from further performance of any obligations pursuant to the missives. On any view of the authorities that is their right.

 

[9] It seems to me that the issue in this case concerns what is meant by "implement". Again, in the Salaried Staff case, on the same page, the Lord President quoted with approval from the speech of Lord Watson in Stewart v Kennedy (1890) 17R (HL)1:-

"But in Scotland the breach of a contract for the sale of specific subjects such as landed estate gives the party aggrieved the legal right to sue for implement, and although he may elect to do so, he cannot be compelled to resort to the alternative of an action of damages unless implement is shown to be impossible...".

Further, in the passage referred by Mr McMillan, the late Professor Gloag said: "The primary rights of the creditor in a contractual obligation may be said to secure performance by invoking the assistance of the court to compel it, or, where that remedy is inappropriate, to obtain compensation and damages." In my opinion, there is a crucial distinction between "implement" and "specific implement" and it is this distinction which it seems to me the defender's argument elides. The innocent party's right to seek implement of a bargain which the other party has wrongly failed to implement is, or maybe, different from the particular remedy which the innocent party is entitled to seek from the court. A contract may contain a number of different stipulations all calling for different remedies appropriate to secure their implementation. So much was recognised by the Inner House in the Salaried Staff case. As the Lord President said: "... if an innocent party is entitled to refuse to recognise and accept a repudiation of a contract he is entitled to hold the party in breach of contract in this way to each and every obligation, but is not bound to sue for performance of all the obligations in one action."(page 191). Lord Cameron said at page 195:

"If, as I think, our law has long recognised that when there has been a breach of contract by one party, the other has a choice whether to compel implement or sue for damages then I think it also follows that it lies in the choice of that party also as to the manner and extent in which he seeks to have the contract implemented."

As the Salaried Staff case makes clear, the innocent party may not be entitled to seek implement of a particular right if there are exceptional circumstances advanced on the part of the party in breach of contract. It may also be the case that the rules relating to the remedy of specific implement provide that a particular remedy is not open to the innocent party. There may be the particular issues of a continuing nature outlined in the Salaried Staff case. However, that does not detract from the innocent party's right, in principle, to seek implement of the bargain.

 

[10] In the present case what the pursuers seek is the payment of the price. I do not think Mr McMillan was really submitting that because the pursuers had not tendered a disposition they were somehow prevented from proceeding. I agree with Mr Reid that there is no suggestion in the pleadings that the pursuers are anything other than ready to implement their part of the bargain. I consider that what the pursuers are seeking is implement of the bargain. If the defender makes payment of the price he is entitled to a disposition and entry. I do not understand there to be any dispute that payment to the price is an obligation incumbent upon the defender pursuant to the missives. In that respect all the pursuers seek is implement of an obligation to pay. I refer to the case of Newcastle Building Society and, in particular the passage from the opinion of the Sheriff Principal at page 86 upon which both parties relied. One of the features of the Newcastle Building Society case was that the pursuers sought an order for the payment of the price (it is not clear from the report exactly how the writ was framed) with an alternative crave for damages. The case proceeded to proof. The pursuers failed to prove any loss and the defender was assoilzied from the pursuers' crave for damages. One of the issues in the case was whether the pursuers could seek decree for implement (in this case payment) alone. The Sheriff Principal said:-

"There is no doubt that in actions by sellers to secure implement by purchases of missives it is established practice to crave or conclude for an order for payment of the price with payment of damages as an alternative. Moreover the practice has been authoritatively approved (see for example Bosco Design Services Limited v Plastic Sealant Services Limited 1979 SLT (Notes) 33). Nevertheless where implement is to consist only of a payment of a sum of money, a court order for such implement does not sit very happily in a system of law which will not punish for non-payment of money. Accordingly in such cases if the initial order for payment is not implemented the court will not punish the defender but will usually move on to award damages against him - assuming, that is (as is usually the case), that some amount of damages is established or not contested. In seeking implement a pursuer asserts the continuing applicability of the contract. However, in moving on to ask for damages, the pursuer impliedly first rescinds the contract on the basis that the failure to honour the original court order is a material breach of contract by the defender... It would seem that in many cases if the order for implement does not lead to actual implement it may serve the purpose of defining circumstances which can be regarded as a material breach of contract justifying rescission. It has to be noted, of course, that an order to implement a contract by paying the price against delivery of the disposition is different from a straightforward decree for payment."

I have to confess I am not entirely certain what, in the context of that case, the learned Sheriff Principal had in mind when distinguishing an order to implement a contract by paying the price as opposed to straightforward decree for payment. In any event the Sheriff Principal proceeded to uphold the competency of the pursuers' crave for decree for payment. I do not consider that the opinion supports Mr McMillan's submission. I agree with Mr Reid's submission that the decision in Bosco specifically approves the procedure which has been followed here. The ratio may be somewhat narrower, namely whether it is open to a pursuer to hold two decrees for payment, one for the price and one for the damages, but I do not think that matters. It is clear from the opinion of the Lord President that he saw no difficulties in the pursuers proceeding in the way in which they did. I do not consider that entry had already been given by the purchasers is a ground of distinction. Furthermore, if my understanding of the authorities to which I was referred is correct, the pursuers have a right to seek implement of the bargain. Whether an innocent party is entitled to a particular remedy depends on the facts of the case. In my opinion, there is no rule of law which compels the pursuers to seek an order of specific implement in the style set out in Greens Encyclopaedia or indeed at all. In the present case there is nothing on the face of the record which renders the craves incompetent. What the position might be should the defender fail to make payment of the price is not something argued and I express no view upon it.

 

[11] In summary, in my opinion, the remedy which the pursuers seek in crave one is a competent one. Faced with an admitted breach of contract on the part of the defender, the pursuers are entitled to seek implement of the contract by way of payment of the price and in this case that means seeking an order for payment.

 

[12] I shall therefore sustain the pursuers' third plea in law, repel the defender's pleas in law and grant decree de plano. I record that Mr Reid did move me to certify the matter as suitable for the instruction of senior counsel, which failing junior counsel. I shall reserve all questions of expenses and assign a hearing for that purpose.