Scottish Court of Session Decisions

[1] The circumstances of this case are described in the opinion which, following an earlier debate, I issued on 19 November 1999 (now reported at 2000 S.C. 103). After dismissal of the counterclaim the defenders tendered a Minute of Amendment by which they sought to introduce an additional conclusion and to make other changes to that counterclaim. Following sundry procedure, including the granting of leave to reclaim and thereafter relatively formal procedure in the Inner House, the defenders were allowed to amend their counterclaim. The substantive effect of that amendment was, first, the addition of a new conclusion 1 in the following terms -

and, secondly, the insertion in Statement 2 of the following averments -

The letters there referred to are the formal missives of purchase and sale of the ground which is the subject matter of this action.

[2] The case came before me for further debate when Mr Kennedy for the pursuer moved me to sustain the pursuer's plea to the relevancy of the counterclaim (as so amended) and to dismiss it; if I were against him on that motion, he moved me to allow a proof before answer on the principal action (including the pursuer's application for rectification) and the counterclaim. Miss Shand, who on this occasion appeared for the defenders, moved me to allow such a proof before answer.

[3] Mr Kennedy emphasised that the sole basis on averment upon which the defenders sought rectification of the missives was the documentation comprising the missives and the prior informal correspondence. There were no averments of oral communications in any form between the parties or their agents to support any underlying agreement intended to be given effect to by the missives. To found a relevant application under section 8(1)(a) of the Law Reform (Miscellaneous Provisions)(Scotland) Act 1985 for rectification of the missives, it was necessary to aver that prior to their conclusion there was in existence some other agreement. The defenders' counterclaim was perilled on such an agreement being demonstrable from the documentation relied on by them. The only new factor was that in a question of rectification of the missives it was legitimate to have regard to the historical process by which they came to constitute the bargain, including any deletion and addition in the course of that process, a factor illegitimate for the purposes of interpretation of the concluded bargain. That historical process was manifest from examination of the missives themselves. All the process of deletion and addition demonstrated was that the defenders intended to delete the provisions in the offer referred to in the first paragraph of condition 5 of the qualified acceptance and to substitute for them the remaining paragraphs of that condition, together with any implications of law arising from the substituted terms. The qualified acceptance must be taken to mean what it said. It imported a less onerous provision in respect of warranty than that proposed in the offer. But it was not evidence of an intention to accept an even lesser burden in respect of warranty than that contained in the qualified acceptance. The effect in law of the second and third paragraphs of condition 5 of the qualified acceptance had already been considered and determined by the court (2000 S.C. at p.108 B-C). The only evidence of intention legitimately to be derived from the missives and their history was that the defenders intended to be bound in terms of condition 5 of the qualified acceptance as duly interpreted, namely, to have the benefit of the type of clause discussed in Carter v Lornie (1890) 18 R. 353. The prior correspondence had been analysed at the last debate and the court had held (at p.108 E-I) that it did not support an intention of the kind which the defenders required to establish. In these circumstances there was no relevant basis for inquiry on the defenders' counterclaim.

[4] Miss Shand stated that the defenders accepted the court's interpretation of the missives as concluded. However, they now maintained that the missives did not express accurately the intention of the parties to them. They accordingly sought rectification of them in terms of their new conclusion; if such rectification were to be granted, it would follow that the disposition would fall to be rectified to a like effect. The issue of intention was one of fact which could not be resolved without inquiry. In particular, the circumstances that the pursuer's solicitor had proposed an express warranty clause in the offer, the defenders' solicitor had responded by deleting it and the pursuer's solicitor had accepted that deletion raised the question why those steps had been taken. It was envisaged that evidence would be led from both those solicitors. It was also relevant to take into account the background correspondence, including the pursuer's uninvited approach to the defenders and the latter's response of 25 July 1996. Reference was also made to various passages in the pursuer's averments in their answers to the counterclaim. What the pursuer's solicitor believed in the course of the prior correspondence was a matter of fact to be explored in evidence. Likewise, the circumstances in which the deletion of the warranty clause had been accepted and what the pursuer and his solicitor expected and intended by way of warranty were matters of fact. Inquiry had been allowed into intention in Bank of Scotland v Graham's Trustee 1993 S.L.T. 252 and in Bank of Scotland v Brunswick Developments (1987) Ltd 1995 S.C. 272. In circumstances where no question arose about the authority of agents to act for their principals the intention of the solicitor on either side instructed in the transaction (a Mr MacDonald and a Mrs Coyle respectively) was to be imputed to their principals, though the intention of the pursuer himself and of a Mr Paton, the secretary of the defenders on whose instructions their solicitors had acted, might also be relevant. Reference was made to Bank of Scotland v Brunswick Developments (1987) Ltd 1999 S.C. (H.L.) 53, especially per Lord Clyde at pps.57-9.

[5] In my view the defenders have no relevant averments in their counterclaim to justify inquiry by way of proof. The averments added by amendment simply narrate the history and the material terms of the three missive letters and follow that by a proposition that -

That proposition as formulated adds no new factual matter but invites the court to infer from the history and terms of the missives that the common intention of the parties was as averred. The history and terms of the missives are not in dispute. In these circumstances the question whether that inference can properly be drawn requires no evidence. In so far as the defenders rely on the prior correspondence as providing the background against which the history and terms of the missives came about, no evidence is required for its interpretation. The terms of that correspondence, in so far as relevant, are not in dispute and it is not suggested that any part of it is ambiguous or otherwise requires explanation. So far as appears, there was no material communication between the parties or their agents in any other form. Having regard to the history of the missives, including the deletion and the insertion made by the qualified acceptance (which events I accept to be admissible for the purposes of rectification), all as seen against the background correspondence relied on, I am unable to see that there is on the documentation a tenable case for rectification. On that documentation the common intention of the parties appears to me to be plain, namely, that the seller's obligation of warranty be qualified to the extent that the missives, as concluded in those terms, in fact qualified it. The defenders accept that the missives were not sufficient to exclude contractually an implied warranty that the defenders owned the subjects of sale. In these circumstances the proper inference, at least prima facie, from the documentation is that the common intention of the parties was that that warranty was not to be excluded.

[6] The question whether or not there is a common intention of the parties for the purposes of section 8(1)(a) of the 1985 Act may, if the application is relevantly pled, give rise to disputed issues of fact which require proof before the question can satisfactorily be answered. But a relevantly pled application is a prerequisite to further procedure. In Bank of Scotland v Brunswick Developments (1987) Ltd the Lord Ordinary, following a procedure roll discussion, held "with very considerable hesitation" that the petitioners should be allowed an opportunity to lead evidence in support of their case for rectification. Lord President Hope (at p.279) shared that hesitation. In that case the petitioners had, against a detailed explanation on averment, specifically averred the particular intentions of the individuals (the signatories) on whose personal intentions they at that stage relied. That was a case under section 8(1)(b) where only the intention of the grantor was in issue. In a case under section 8(1)(a) the intentions of each of the parties is critical. Only when these have been identified can any common intention be identified. Particularly in a case such as the present, where nice distinctions may require to be made among various types of warranty relative to the sale of heritage, it is in my view essential to aver with precision the basis on which a relevant "common intention" is sought to be established.

[7] There was reference in the course of the discussion to a Mrs Coyle (apparently the solicitor acting for the defenders in the transaction who prepared the qualified acceptance, though not apparently the signatory of that missive) and to a Mr MacDonald (apparently the solicitor acting for the pursuer in the transaction who prepared the offer and the acceptance of the qualified acceptance and who may or may not have signed those missives). Notwithstanding the reasoning of the First Division in Bank of Scotland v Brunswick Development (1987) Ltd in the first reclaiming motion, it may well be, in light in particular of Lord Clyde's observations in the House of Lords at 1999 S.C. (H.L.) p.58 following the second reclaiming motion in that case, that the particular intentions of Mrs Coyle and Mr MacDonald are those of primary importance to this counterclaim. The defenders have no averments directed to the particular intentions of those individuals at any time. They thus have no basis for leading evidence that there was a "common intention of the parties to the agreement at the date when it was made" which was different from that reflected in the missives and, if so, what exactly that common intention was. Nor is it evident how any agreement, contemporaneous with such common intention and not accurately expressed in the missives, is said to have been made. The existence and terms of such an agreement must be averred, as well as proved (Shaw v William Grant (Minerals) Ltd 1989 S.L.T. 121, George Thompson Services Ltd v Moore 1993 S.L.T. 634, Rehman v Ahmad 1993 S.L.T. 741). In such circumstances their counterclaim is, in my view, lacking in necessary specification. Reference to the pursuer's averments does not assist in a question of the relevancy of the defenders' averments.

[8] I should add that I did not hear full argument on the question whether uncommunicated but identical intentions held by parties could constitute a "common intention of the parties" for the purposes of section 8(1)(a). I reserve my opinion on that matter. There is authority for the view that the common intention referred to is "the common intention ascertained objectively in accordance with the normal canons of construction of agreements, and in particular the rules applicable in ascertaining whether consensus in idem has been achieved, and to what effect" (Rehman v Ahmad, per Lord Penrose at p.752C). I also express no view on whether or not rectification of the missives as sought by the defenders would warrant rectification of the disposition in the terms sought - a distinction may fall to be made between a "valid" and a "valid and marketable" title.

[9] I shall grant the pursuer's motion for dismissal of the counterclaim (as amended) and of new allow a proof before answer in the principal action restricted to quantum of damages. The case will be put out By Order to discuss preparation for that proof.