SHERIFFDOM NORTH STRATHCLYDE AT KILMARNOCK

Case Ref: A891/10

JUDGMENT OF SHERIFF DEREK D LIVINGSTON

I In the cause

WILLIAM STUART FULLARTON, residing at 7 Castlehill Farm, Stevenston, KA20 3EA.

PURSUER

Against

FRANK ANSON SMITH and MARGARET SMITH, residing at 58 Knockrivoch Place, Ardrossan, KA22 7PZ.

DEFENDERS JOINTLY AND SEVERALLY OR SEVERALLY

Act: Lynch

Alt: Kerr

KILMARNOCK 2011

The Sheriff having resumed consideration of the cause sustains pleas in law 1 and 2 for the Defenders, repels pleas in law 1 and 2 for the Pursuer, assoilizies the Defenders from the crave and

Assigns 1 August 2011 at 9.30 am as a diet for a hearing on expenses.

NOTE

[1] This case called before me for debate on 24 May 2011. The Pursuer was represented by Mr Lynch and the Defenders by Mr Kerr.

BACKGROUND

[2] The parties entered into Missives whereby the Defenders were to purchase the house at 15 Ardrossan Road, Saltcoats with a date of entry of 4^th July 2008. Inter alia there was a clause in the Missives relating to non-payment on the date of entry. It is not necessary for me to go into the clause in full but part of it read, "In the event of the purchase price or any part thereof remaining outstanding as at the date of entry, then notwithstanding consignation or the fact that entry has not been taken by your clients[Mr and Mrs Smith], your clients shall be deemed to be in material breach of contract and further interest will accrue at the rate of 4 per centum per annum above the Bank of Scotland base lending rate from time to time until full payment of the price is made ..."

[3] A further clause in the Missives read "This offer and the Missives following hereon will form a continuing and enforceable contract notwithstanding the delivery of the disposition except in so far as fully implemented thereby. But the said Missives shall cease to be enforceable after a period of two years from the date of entry except in so far as they are founded on in any court proceedings which have commenced within the said period. A clause to this effect shall be inserted in the Disposition at the purchasers discretion".

[4] The Defenders did not take entry on 4^th July. They did not in fact take entry until 28^th November 2008. No formal amendment was ever made to the Missives. Eventually however on 18^th November 2008 the Defenders then solicitors wrote to the Pursuers then solicitors asking "In the meantime we shall be obliged if you will confirm, for the avoidance of doubt, that your clients are prepared to agree to an entry date of 28^th November 2008".

[5] Following upon this the Pursuer's solicitors wrote to the Defenders' solicitors on 26^th November stating inter alia "For the avoidance of doubt our client's position is that he is prepared to settle the transaction on 28^th November 2008 as offered by your clients for payment of the original purchase price for the subjects but on the basis that he is reserving his right to recover his losses from Mr & Mrs Smith in terms of the original missives entered into between the parties".

[6] On the following day the Defenders' solicitors wrote to the Pursuers solicitors and inter alia stated "As you are aware, our clients are now in a position to perform the contract which they have with your client, Mr William Fullarton, by payment of the original purchase price for the subjects. We confirm that you shall have a cheque for the purchase price for the subjects in terms of the missives. We confirm that we are in a position to pay the purchase price on the revised agreed date of entry of 28^th November, 2008, in settlement.

We note that your client reserves his right to recover his losses from Mr & Mrs Smith in terms of the original missives entered into between the parties and our clients acknowledge these terms of settlement."

[7] The disposition by the Pursuer inter alia included the clause "The missives of sale which I have concluded with the said Frank Anson Smith will form a continuing and enforceable contract notwithstanding the delivery of these presents except in so far as fully implemented thereby; but the said missives shall cease to be enforceable after a period of two years from the date of entry hereunder except insofar as they are founded on in any court proceedings which have commenced within the said period."

[8] The Pursuer served an action for damages upon the Defenders on 24^th November 2010 which was of course more than 2 years after the original date of entry but was less than 2 years from the date that the Defenders eventually took entry. The action was based upon the breach of missives. The Defenders position is that these proceedings are time barred.

[9] Section 2 of the Requirements of Writing (Scotland) Act 1995 ("the 1995 Act") states

" (1) No document required by section 1(2) of this Act shall be valid in respect of the formalities of execution unless it is subscribed by the granter of it or, if there is more than one granter, by each granter, but nothing apart from such subscription shall be required for the document to be valid as aforesaid.

(2) A contract mentioned in section 1(2)(a)(i) of this Act may be regarded as constituted or varied (as the case may be) if the offer is contained in one or more documents and the acceptance is contained in another document or other documents, and each document is subscribed by the granter or granters thereof.

(3) Nothing in this section shall prevent a document which has not been subscribed by the granter or granters of it from being used as evidence in relation to any right or obligation to which the document relates.

(4) This section is without prejudice to any other enactment which makes different provision in respect of the formalities of execution of a document to which this section applies."

Section 2 of the Contract (Scotland) Act 1997 states:-

" (1) Where a deed is executed in implement, or purportedly in implement, of a contract, an unimplemented, or otherwise unfulfilled, term of the contract shall not be taken to be superseded by virtue only of that execution or of the delivery and acceptance of the deed.

(2) Subsection (1) above is without prejudice to any agreement which the parties to a contract may reach (whether or not an agreement incorporated into the contract) as to supersession of the contract."

SUBMISSIONS

[10] At the beginning of the debate Mr Lynch moved to amend. After an adjournment Mr Kerr decided that he did not require to answer and instead proceeded with his attack upon the Pursuer's pleadings based upon his Rule 22.1 Note (number 12 of process). He intimated that he was no longer relying on his first point in the Note bearing in mind the adjustments which had been made since the Note was originally lodged nor upon the third point following upon the amendment that morning. He was however arguing the remaining points of his note. In summary these might be said to be

A)     There were no relevant or at least specific averments regarding variation of the contract.

B)      That the date of entry in terms of the missives was 4^th July 2008 and the two year period referred to in the missives expired on 3^rd July 2010.

C)    Even if the Pursuer proved that the missives were varied so that the date of entry was 28^th November 2008 then the Defender would not have been in breach of the contract as amended since the Defenders had made payment on the date of entry i.e. 28^th November 2008.

D)     The averments in relation to the disposition are irrelevant standing the fact that a disposition being a unilateral conveyance of heritable property does not create any contractual obligations.

[11] Addressing each of these points individually Mr Kerr firstly submitted that there was insufficient specification to support the Pursuers averments in article 5 of the condescendence that the contract between the parties had been varied. His position was that the pleadings did not indicate how or why the date of entry had become 28^th November 2008. His position was that if I was with him on that point and that the date of entry remained at 4^th July 2008 then the Pursuer was time barred from proceeding here. The right to raise proceedings had expired on 3^rd July 2010. However if the date of entry was 28^th November 2008 then the Defenders were not in breach of the missives.

[12] Mr Kerr took me through the missives and I have already referred to the salient clauses. Parties were agreed that the question of a disposition superseding missives has now been statutorily dealt with in terms of Section 2 of the Contract (Scotland) Act 1997 the terms of which I have quoted above.

[13] He then turned to the Requirements of Writing (Scotland) Act 1995. He referred to Section 1(2)(a) and to the statement that a written document complying with Section 2 is required "for the constitution of a contract or ... variation ... of a real right in land" and further that in terms of Section 2(2) of that Act which provides for the possibility of a contract being regarded as constituted or varied if the offer is contained in one or more documents and the acceptance is contained in another document or documents and each document is subscribed by the granter or granters thereof. His position was that since a disposition could not vary the obligation then, without something in writing, the date of entry remained as it originally was i.e. 4^th July 2008. He further argued that the correspondence which had been lodged did not vary the agreement. The letter of 18^th November proposed an entry date of 28^th November 2008. The letter of 26^th November 2008 simply indicated that the Pursuer was prepared to settle the transaction on 28^th November but subject to a reservation in respect of his losses and the letter of 27^th November from the Defenders agents did not vary the agreement but instead intimated that the Defenders were revising the agreed date of entry. That at no time was accepted by the Pursuer. Both the letter of 26^th November 2008 and the letter of 27^th November 2008 referred to "the original missives". His position was that the Pursuer had not averred in his pleadings how this correspondence resulted in a variation and in terms of the pleadings there was no variation.

[14] Mr Kerr then turned to his fallback position which was that, even if the agreement was varied, there was no breach due to the fact that this simply meant the date of entry was 28^th November 2008 and payment had been made on that date. The Pursuer's reservation, was referring to the original missives which provided for damages in the event payment was not made on the date of entry.

[15] He pointed out that the averment in Article five of the condescendence quoting from the letter of 26^th November 2008 was not the full quote and that the words "in terms of the original missives" was missed from the sentence "Mr Fullarton is willing to proceed to settle the transaction on payment of the original sum but reserves his right to recover his losses from Mr & Mrs Smith."

[16] In summary his position was that the date of entry remained 4^th July 2008 for the purposes of any breach. Accordingly proceedings had to be raised within 2 years. If the date of entry was 28^th November 2008 the Defenders were not in breach. The reservation referred to "the original missives" which provided for damages if payment was not made on the date of entry.

PURSUER'S RESPONSE

[17] In response Mr Lynch argued that the Defenders' interpretation of the Requirements of Writing Act was misconceived. He argued that Section 2(2) allows for variation where it is signed by the granter or granters and sub section 3 allows for unsigned documents to be utilised as evidence. His position was that the letter of 18^th November invited a variation of the missive and the letter of 27^th November which came from the Defenders agents revised the agreed date of entry. He submitted that at very least that letter was sufficient to entitle the Pursuer to enquiry and therefore a proof before answer as to whether the date of entry had been changed. He accepted that the date of entry constitutes the contractual date of entry in terms of the missives and his position was that the Pursuers had varied the contractual date with the reservation and that the letters of 26^th November and 27^th November were both evidence of the fact that the Pursuer had reserved his right. He stated that the date of entry had been contractually changed as a result of this but the Pursuers right to damages had been preserved.

[18] He pointed out that the disposition did not follow the missives in that it was in favour of Mr Smith alone but that in terms of the missives Mr & Mrs Smith as the original purchasers were entitled to nominate a disponee.

[19] He also made reference to the fact that the disposition makes reference to missives between the Pursuer and Frank Smith and stated that this was simply an error. He did however suggest that in terms of the disposition the date of entry had become 28^th November 2008 and the disposition provided additional evidence of this.

[20] Mr Lynch stated that there was sufficient averred to provide for a variation of the date of entry. Bearing in mind what the Defenders agent had stated in her letter of 27^th November 2008 regarding the date of entry having been changed by agreement the onus was on the Defender to suggest that anything else had been agreed. He stated that the Pursuers right to claim was preserved by the terms of the correspondence.

[21] He also referred to paragraph 13 of the schedule attached to the offer which provided the two year time limit and stated that this was for both the Purchaser and the Seller. His position however was that the Defenders could not have it both ways by providing in correspondence that there was a new agreed date of entry and then arguing for an old one. As he put it the Defenders could not both approbate and reprobate.

[22] Mr Lynch's position was that there was sufficient to take this matter to proof on the amended date before entry. The Pursuer had reserved his position in relation to the original date of entry. He suggested that either the Defenders' first plea in law could be deleted or that the matter could go to a proof before answer. He argued that the Defenders' second plea in law was to the merits and unless I could be satisfied on the merits I should not deal with matters on that basis.

FURTHER SUBMISSION BY MR KERR

[23] Mr Kerr in a brief response suggested that there could only be one date of entry. If a new date was agreed then the old date was extinguished. If that had happened then the court could not reach a conclusion that there was a breach. However his position was that there was no formal letter changing the missives nor was there sufficient for this.

[24] When the Pursuer had reserved his position he had referred to "the original missives" indicating a date of entry of 4^th July.

[25] He argued again that there was insufficient specification regarding the fact variation had taken place and further that the disposition could not vary the agreement.

[26] His position was that in terms of Section 2(1) the court required a document offering a variation and one accepting it. There was no averment of this.

DISCUSSION AND DECISION

[27] There is no doubt that the clause relating to non payment referred to non payment on the date of entry and failure to make payment was provided for in the missives. The question was whether as argued by the Pursuer the date of entry changed. The Defenders position is that it did not. There is of course an exchange of correspondence here but it seems to me that that correspondence does not constitute an agreement to change the date of entry which in my view has a technical as well as a practical meaning. In other words, and neither party attempted to argue otherwise, the date that a party actually pays over the price i.e. the settlement date or the date that a party actually moves in both of which might lay claim to being the date of entry will not affect the date of entry in the missives in the absence of parties agreeing same. It might be more apt to describe the date of entry as being the agreed date for the seller to deliver a disposition in return for the buyer paying over the purchase price no matter when these things actually happen. There is no doubt in this case that the date of entry was 4^th July 2008 and it seems to me that this was a contractually agreed date of entry and could only be changed by agreement and further such an agreement would have to adhere to certain formalities. It is clear to me from the correspondence that although the Defenders solicitors asked the Pursuers to agree to a new date of entry the Pursuer never agreed to that. What the Pursuer did do was agree to settle on 28^th November 2008. That does not constitute an agreement to change the date of entry. The Pursuer did sign a disposition which refers to "WITH ENTRY and vacant possession as at 28^th November 2008 notwithstanding the date or dates hereof" but it seems to me that again that does not change the date of entry but effectively uses entry in a different sense referring to the date from which the First Defender (ultimately the Disposition was taken in the name of the First Defender only) became the heritable proprietor. There is also reference in the disposition to the missives remaining enforceable for a period of 2 years "from the date of entry hereunder" but it seems to me clear that that hereunder relates to the missives and not to the Disposition and in any event the Pursuer could not unilaterally change the commencement date from which action could be taken relative to the breach of missives. I accept Mr Lynch is correct that Section 2(2) of the 1995 Act allows for evidence to be provided by unsigned documents. However there is insufficient both in the pleadings and in the correspondence from which I could infer that parties ever agreed to change the date of entry. The only other aspect of the parties' actings which left me in some doubt was the Defenders' reference in correspondence to "the revised agreed date of entry of 28^th November, 2008." However I consider that has to be considered in the context of the correspondence with the Pursuer's agents having made it clear they were adhering to the original missives re the date of entry as opposed to the settlement date the Defenders' statement that they was a "revised agreed date of entry of 28^th November, 2008" was quite simply wrong on the basis of the exchange of letters which took place and in the absence of other specific averments about such an agreement having been reached. There was no averment that the Pursuer had relied on this statement which appears to me not so much a piece of optimism at the time on behalf of the Defenders' but more a loose use of the term "date of entry". In addition it appears to me that such a variation of the missives, if indeed there was agreement to do such a thing, would have required at very least an offer and acceptance in writing and again it does not seem to me that the correspondence here constitutes that. Neither party tried to argue that the provisions of S1 (3) and(4) of the 1995 Act were applicable (acting in reliance upon or refraining from acting in reliance of an improperly constituted contract) and there was no indication of any such thing.

[28] In my view therefore that leaves the date of entry at 4^th July 2008. That in turn means that proceedings here should have been raised by 3^rd July 2010. This action was not in fact raised until 24^th November 2010 and therefore it seems to me that the Pursuer is time barred.

[29] Even if I am wrong about that in my view it is of no avail to the Pursuer. Whilst the Pursuer reserved his right to damages that in my opinion is entirely different from agreeing a new basis for damages. I entirely agree with the Defenders submission that if the date of entry was 28^th November 2008 then there has been no breach by the Defenders. In my view, for the Pursuer to have had an entitlement to damages following upon a new date of entry being agreed and having regard to the specific terms of the missives which provide for damages being payable in the event that the price is not paid at the date of entry, the Pursuer would have required to have separately entered into an agreement with the Defenders whereby the Defenders would be responsible for all losses incurred by the Pursuer between 4^th July 2008 and 28^th November 2008 as a result of the Defenders failure to pay the purchase price until that later date. That may have been what the Pursuer intended to do but he did not do it.

[30] As I have already indicated however it is my opinion that there would have been no need for him to do such a thing originally since the date of entry was never changed.

[31] Standing the views I have expressed it seems to me that the Pursuer cannot succeed in this matter since on the agreed facts he is time barred failing which the Defenders are not in breach of the missives. In the circumstances I have found the Defenders entitled to absolvitor. Parties were agreed that a hearing on expenses should be assigned.