Scottish Court of Session Decisions

The parties to this action are mother and son. In the early 1980s the pursuer, the defender and Mr Malcolm Marshall, Senior (the pursuer's husband and the defender's father) were in partnership as hoteliers at the Crown Hotel, Callendar. Mr Marshall, Senior, died in September 1986. Prior to his death the partners had agreed that the partnership be brought to an end. That agreement was in December 1987 reduced to writing by a formal Minute of Dissolution and Agreement entered in to by Mr Marshall's executors (therein referred to as "the First Party"), the pursuer (therein referred to as "the Second Party") and the defender (therein referred to as "the Third Party"). By Clause FIRST of that Minute it was provided that the partnership terminate on 1 April 1986. Clauses SECOND, THIRD and FOURTH were in the following terms:-

A plan annexed to the deed identified the location and dimensions of the site referred to, together with certain existing physical features within and adjacent to it. A number of further clauses followed, which it is unnecessary for present purposes to recite.

Contemporaneously with the execution of that deed there was executed a Minute of Agreement and Assignation to which the same persons were parties. After a narrative relating to the disposition of the estate of the late Mr Marshall, it provided -

Certain other clauses followed. There was accordingly vested in the pursuer the whole interests of the putative obligees under clauses THIRD and FOURTH of the Minute of Dissolution and Agreement.

By the first conclusion (as amended) to this action the pursuer concludes for

"payment to the pursuer by the defender of the sum of EIGHTY THOUSAND POUNDS (£80,000) with interest thereon at the rate of eight per cent a year from the date of citation until the date of payment".

Her first plea-in-law is in the following terms:

Although the ground of action relied on came into existence many years ago, no issue of prescription arises, the obligations founded on having been constituted by a probative writ.

The pursuer avers and the defender admits that the effect of the Minute of Dissolution and Agreement was to transfer to the defender the interests in the partnership of the other former partners and that pursuant to it their shares in the heritage of the hotel were conveyed to him. Neither party makes any express averment concerning the history of the site at Craigruie Farm but certain facts can be inferred from the pleadings, as supplemented by information given by counsel at the bar. It is clear that no sum of money has been paid by the defender to the pursuer under Clause THIRD or Clause FOURTH. It is also clear that there has not been conveyed to the pursuer any share or shares in any dwellinghouse with relative offices erected on the site "in accordance with Local Authority planning permissions, building warrants and others ... and with the consent and approval of [the pursuer]". It appears that the defender, who was at one time the sole proprietor of the site, at some stage made over a one-half pro indiviso share in it to his wife. There also appears to have been some building development on the site, though it is not suggested that this was with the prior consent and approval of the pursuer. Nor is there any suggestion that the defender is able and willing to make over to the pursuer in furtherance of Clauses THIRD and FOURTH the site and any subjects presently standing on it.

The defender's primary contention is that Clauses THIRD and FOURTH are unenforceable from uncertainty. Mr Menzies on his behalf submitted that the phrase "which sum shall be met" was prescriptive of the mode in which the obligations in those clauses fell to be discharged. The references to specific sums of money themselves gave rise to uncertainty but that difficulty could only be met by recognising that the parties intended the relative obligations to be ad facta praestanda. Consideration, however, of what was prescribed revealed that it was in each case so uncertain as to be incapable of enforcement. The phrase "a dwellinghouse with relative offices" was wholly vague; there was no indication of size or of type of dwellinghouse or of the nature or extent of its accommodation; the expression "with relative offices" was also wholly imprecise. While a requirement of erection in accordance with Local Authority planning permissions and building warrants was intelligible, reference to "and others" was not. In the circumstances the provision "with the prior consent and approval [of the obligee]" left it open as to whether that party's consent and approval was to be in relation to a mansion or to a cottage. A Court could not pronounce a decree ad factum praestandum in terms of either Clause THIRD or Clause FOURTH. In such circumstances there was no enforceable contract (McArthur v Lawson (1877) 4R 1134, per Lord President Inglis at p.1136). Reference was also made to Gloag on Contract (2nd Edition) p.11 and to McBryde on Contract paras.4-25/26. The defender should be assoilzied.

Mr Menzies then submitted that, if the Court were against the defender's primary contention, the pursuer was still not entitled to insist on a monetary decree. If the clauses contained enforceable provisions ad facta praestanda, then these were on a sound construction truly alternatives to the monetary provisions. In such circumstances the defender as obligant was entitled to choose the method of performing his obligation (Christie v Wilson 1915 S.C.645, especially per Lord Dundas at p.651). Reference was also made to Walker on Contracts at para.31.9. The action as framed denied to the defender the option to make such an election. If the Court sustained this contention, the appropriate disposal would be to dismiss the action.

Mr Sutherland for the pursuer moved that the defences be repelled and that decree de plano be granted in favour of the pursuer in terms of the first conclusion (as amended). He submitted that the primary obligation on the part of the defender under the Minute of Dissolution and Agreement was to pay the sums specified in Clauses THIRD and FOURTH. The phrases relative to erection and conveyance of a dwellinghouse etc provided a method, had it been adopted, of the defender discharging his monetary obligations; but the defender did not offer to prove that he was in a position to pursue that method. In these circumstances the pursuer was entitled to decree for the monetary sums. The essentially monetary character of the obligations in Clauses THIRD and FOURTH was pointed by the phrase in Clause SECOND "subject to payment of the sum hereinafter mentioned". The monetary obligations were the counterpart of the defender's entitlement to retain the whole assets of the former firm. If the intention of parties had been that erection and conveyance of a dwellinghouse on the site be the sole measure of the defender's obligations, there would have been no need to mention any sums of money. The fact that these sums were mentioned supported the view that the provision for erection and conveyance was not "prescriptive". The Court should be slow to adopt a construction which led to the agreement being held to be void from uncertainty. It was unnecessary for the Court to decide whether the provisions for erection and conveyance were or were not enforceable because of lack of definition. If they were unenforceable, then no question of an option on the part of the defender arose. It was clear from Christie v Wilson that in that case the alternative was a live one. Reference was also made to Dampskibsaktieselskapet Aurdal v Compania de Navegacion La Estrella ("The S.S.Elorrio") 1916 S.C.882. On the other hand, if the provisions were enforceable and the defender was in a position to exercise a valid option to discharge his obligation by erection and conveyance, it was incumbent on him to state in his defences his ability and willingness to perform his obligations in that way. He had not done so. Nor was there any reasonable basis for supposing that he was in a position to do so.

In my view the pursuer is entitled to decree in terms of the first conclusion (as amended). The context in which the issue for decision arises is the dissolution of the partnership among the pursuer, the defender and the late Mr Marshall and the financial arrangements made in respect of that dissolution. Under Clause SECOND of the Minute of Dissolution and Agreement the defender became entitled to retain the whole assets of the firm of whatsoever nature and the other parties assigned to him their whole respective rights, titles and interests in and to that business. The defender became entitled to carry on the business under the firm name and to have exclusive right to that name. Conveyances of the heritage in his favour duly followed. These entitlements were "subject to payment of the sum hereinafter mentioned calculated from First April, Nineteen hundred and Eighty-six" (the date agreed to be that at which the partnership was terminated). The sum referred to is thereafter, by Clauses THIRD and FOURTH identified as two specific amounts, each of £40,000. The provisions, first, that the defender's entitlement was subject to the making by him of payment and, second, that he pay specified amounts which the other parties expressly accepted in full of their (or their author's) full interest in the assets of the firm, point, in my view, to the defender's obligations being identified in the first place as monetary in character. The relative clauses go on to provide that the respective amounts "shall be met" by the defender performing certain acts. Such provisions do not, however, in my view detract from the obligations being in the first place of a monetary character. On a sound construction of the Minute read as a whole and in its context, the succeeding provisions for erection and conveyance provide, in my view, an entitlement in the defender, if he is able and willing to do so, to discharge his monetary obligations in the manner described. Mr Menzies submitted that such a construction was inconsistent with the use of the word "shall" in the phrase "shall be met"; if, he argued, the provision were to be of the nature of an option, the word "may" would have been used. I am unable to accept that submission. It may well be that as at the date of execution of the Minute the parties envisaged that the monetary obligations would in fact be met by erection and conveyance of a dwellinghouse etc but it does not follow that they are to be taken as having regarded that as the sole mode by which the obligation could be performed - particularly where the steps involved would be subject to the consent of third parties such as the Local Planning Authority. In my view, in the context of the deed as a whole, the phrase "shall be met" is not prescriptive in the sense urged by Mr Menzies but is permissive.

I do not find it necessary in these circumstances to reach a view as to whether, had the pursuer sought a decree ad factum praestandum in respect of erection and conveyance of a dwellinghouse on the site, the Court would have granted it. My impression is that, given the lack of definition as to the character and extent of the subjects to be erected, there would have been serious difficulties about obtaining such a remedy. However that may be, the pursuer does not seek such a remedy. Nor does the defender state that he is able and willing to meet any provision, enforceable or unenforceable, in respect of erection or conveyance. Had that been his position, he would, in my view, have had a clear obligation to make that plain in his defences. At no stage, despite various formulations of his position, has he done so. The only proper inference in my view is that he is unable or unwilling or both to meet any such provision. In these circumstances that part of Clauses THIRD and FOURTH which is concerned with erection and conveyance becomes of no present moment and the obligations resolve themselves into pure money obligations. Likewise there are no subsisting alternatives as between which the defender might make any effective choice.

In these circumstances I am satisfied that the defences are irrelevant. I shall accordingly sustain the pursuer's second plea-in-law, repel the defender's whole pleas-in-law and grant decree in terms of the first conclusion (as amended).