Scottish Court of Session Decisions

[1] In this action the pursuers allege that they have suffered loss as a result of the breach of contract and/or the professional negligence of the defenders. The alleged breach of contract and/or negligence is attributable to the administration on behalf of the pursuers by the defenders of the farms of Fruid and Carterhope, which were farmed by the first-named pursuer as an individual until he assumed the second-named pursuer as a partner in the firm of "Robert Graham". The firm was constituted by a Partnership Agreement signed on 24 February 1993 but deemed to have commenced with effect from 1 April 1992.

[2] The particular alleged breaches of contract and the specific allegations of negligence are identical in terms and are specified in Articles XI and XII of condescendence respectively. In summary, they relate to failures (i) to lodge or obtain proof of lodging a claim on behalf of the first-named pursuer for Sheep Annual Premium Subsidy (SAPS) in 1991; (ii) to make a claim in the name of the first-named pursuer for Sheep Annual Premium Quota from the National Reserve on or before 12 January 1994 in terms of the Sheep Annual Premium and Suckler Cow Premium Quotas (Amendment) Regulations 1993, Schedule 2, Part I, Category 2(a); (iii) to submit on behalf of the partnership a claim for SAPS in 1993 on or before 20 February 1993; (iv) to apply for Sheep Annual Premium Quota for the second-named pursuer under Category 3(b) of the Regulations and (v) to lease Sheep Annual Premium Quota for the partnership for 1994 or to advise the pursuers to do so.

[3] As a result of the failure to claim SAPS in 1991, the first-named pursuer avers in Article XIII of condescendence that he has suffered loss. This forms the basis of the first conclusion for payment to the first-named pursuer of £24,839.79 and of the first plea-in-law for the pursuers. As regards the other failures specified in Articles XI and XII of condescendence, the pursuers aver in Article XIV of condescendence that the partnership has suffered loss. This forms the basis of the second conclusion for payment to the partnership of £250,000 and of the second plea-in-law for the pursuers. In the third and fourth conclusions, as an alternative to the second conclusion, the first-named pursuer and the second-named pursuer respectively seek payment to each of them as individuals of the sum of £112,338. Averments in support of the alternative claims are contained in what senior counsel for the pursuers described at the Procedure Roll hearing as his "second esto case" in Article XIV of condescendence.

[4] The case was heard by me at Procedure Roll on 7 March and the three succeeding days upon the defenders' first four pleas-in-law. The first three pleas-in-law were directed to the third and fourth conclusions of the summons and the fourth plea-in-law was a general plea to the relevancy of the action, although, at Procedure Roll, counsel for the defenders confirmed that they were not seeking dismissal of the action but rather were using this plea to highlight the deficiencies in the pleadings in the case for the second-named pursuer as an individual and also to seek the exclusion from probation of certain averments, were I to sustain their submissions based upon the weaker alternative rule.

[5] Counsel for the defenders attacked the pleadings of the pursuers particularly in so far as they related to the third and fourth conclusions. In relation to both of these conclusions the principal attack was based upon the contention of the defenders that the claim by the pursuers as individuals had prescribed. The submission by counsel for the defenders in this respect may be summarised as follows:

[6] The submissions of counsel for the pursuers, on the other hand, may be summarised as follows:

[7] Counsel for the defenders adopted the approach of considering each of the obligations specified in Articles XI and XII of condescendence as separable and that once the period of five years had elapsed in respect of each obligation, that obligation became unenforceable. Senior counsel for the defenders relied upon the opinion of Oliver J in Midland Bank Trust Co. Ltd and Another v Hett, Stubbs & Kemp 1979 1 Ch. 384. In dealing with an obligation by a solicitor to fulfil a contractual obligation Oliver J at 435C stated:

[8] Mr McNeill, for the defenders, maintained that this passage indicated that the prescriptive period commenced when a particular obligation became impossible of performance. Thus, for example, the obligation to lodge the SAPS 1993 claim form in the name of the partnership became impossible of performance after 20 February 1993, being the latest date on which it could be lodged. A similar approach could be taken in respect of the obligation to arrange for the lease of Sheep Annual Premium Quota and to apply for Sheep Annual Premium Quota from the National Reserve, each of which had their own particular time frame and deadline by which an application was required to be submitted. On the other hand, counsel for the pursuers maintained that each of these obligations was inter-related so that the pursuers were entitled to take advantage of section 11(2) of the Prescription and Limitation (Scotland) Act 1973 which provides:

In the present case the answer to the different approaches adopted by counsel for the parties is academic because senior counsel for the pursuers accepted that, even on his approach and if section 11(2) was applied in this case, the alternative cases had prescribed prior to their introduction into the pleadings in February 1999. The relevant date for the commencement of prescription, even on the pursuers' approach, was 12 January 1994. Senior counsel for the pursuers indicated that he was not relying on any continuing act, neglect or default after 12 January 1994. In view of that concession the only issue for me is whether the pursuers can avail themselves of either section 11(3) or section 6(4) of the 1973 Act.

[9] Section 11(3) of the 1973 Act is designed to provide relief to creditors who were unaware and could not with reasonable diligence have been aware that loss, injury or damage had been caused as a result of an act, neglect or default. A pursuer seeking to rely upon this provision must make sufficient averments firstly that he or she was unaware of the loss or of the fact that any loss was attributable to an act, neglect or default. Moreover even where he or she was unaware of the loss attributable to an act, neglect or default, the pursuer must also aver that he could not with reasonable diligence have become aware that such loss, injury or damage had occurred as a result of negligence. This is consistent with the approach adopted by Lord Clyde in Greater Glasgow Health Board v Baxter, Clark & Paul 1990 S.C. 237. At page 252 Lord Clyde confirmed that the onus was on the pursuers to establish that they could not with reasonable diligence have become aware that loss, injury or damage had occurred as a result of negligence. In Glasper v Rodger 1996 S.L.T. 44 the First Division approved of the approach adopted by Lord Clyde. Applying that approach to the pleadings in the present case I have concluded that they are defective by reason of lack of specification. At no point in the pleadings do the pursuers aver that they were unaware of the existence of loss or of the fact that loss was attributable to fault on the part of a third party. The pursuers aver at pages 36 and 52 of the Closed Record that they were unaware as to the implications of the problem which had arisen. They do not make any specific averment that they were unaware that they had suffered loss. Indeed it might have been difficult for them to make such an averment standing the averment at p.12B of the Closed Record that at a meeting between the first-named pursuer and one of the defenders in about November 1993 the defenders admitted that the first-pursuer had not been paid SAPS 1991. Accordingly, as at November 1993 the first-named pursuer was aware that a loss had occurred. Moreover, at the meeting it is averred by the pursuers that the defenders blamed the SOAFD for the non-payment. When that latter averment is taken along with the averment by the pursuer at p.52B, that the pursuers were unaware

it would seem that the pursuers were aware not only of their loss, as at November 1993, but also of the fact that they might have a claim against a third party. Even if the averments at pages 36 and 52 of the Closed Record could be construed as equivalent to averments that the pursuers were unaware that they had sustained loss, injury or damage as a result of an act, neglect or default, they do not aver that they could not with reasonable diligence have become aware that such loss, injury or damage had occurred as a result of negligence. Moreover, they make no averments as to what steps they took to ascertain whether they had sustained a loss or being aware that they had sustained a loss, what steps they took to ascertain who was responsible for that loss. In all the circumstances I conclude that the pursuers are not entitled to rely upon section 11(3) of the 1973 Act and the case, insofar as it is founded upon that section, is irrelevant.

[10] In relation to the reliance by the pursuers upon section 6(4) of the 1973 Act I am of the opinion that in order to succeed the pursuers require to make sufficient relevant averments to enable them to establish that they were induced to refrain from making a relevant claim as a result of error induced by words or conduct of the defenders. Moreover, they require to specify the period during which they were induced to refrain from taking such action. In the unreported judgment in the case of Arif v Levy & McRae and Others (17 December 1991) Lord Coulsfield, in considering a submission that section 6(4) of the 1973 Act applied in that case, stated at p.12:

I respectfully agree with that approach and, applying that approach to the present case, I consider that the pursuers singularly fail in pleading a relevant case. Unlike Arif, the pursuers in the present case do refer to section 6(4)(a)(ii) of the 1973 Act. However, as with the lack of awareness of the pursuers, the error of the pursuers, which is averred, is error as to the implications of the problem which had arisen (pps.36A-B and 52A-B of the Closed Record). There is no further specification of the nature of the error. Moreover, the averments in relation to the error being induced by the conduct of the defenders are confined to the defenders continuing to act on behalf of the pursuers and failing to advise the pursuers to seek separate specialist or legal advice (pps.36B-C and 52C). I consider that these averments lack specification but more importantly there is no averment that as a result of the error induced by the conduct of the defenders the pursuers were induced to refrain from making a relevant claim. I have therefore concluded that there are insufficient averments to justify the pursuers relying upon section 6(4) of the 1973 Act. For the sake of completeness, I should deal with a submission in relation to the proviso in section 6(4). If the pursuers had made sufficient relevant averments to entitle them to rely upon section 6(4), I am provisionally of the view that the burden of establishing the proviso would fall on the defenders. This is similar to the views expressed by Lord Murray in the unreported case of Thorn EMI Limited v Taylor Woodrow Industrial Estates Limited (29 October 1982). I do not consider that the obiter views of Lord Murray conflict with the approach adopted by the court in Glasper v Rodger in respect of the application of section 11(3) of the 1973 Act. The structure of section 11(3) clearly indicates that the onus is on the creditor to establish that he was not aware and could not with reasonable diligence have been aware that loss, injury or damage had occurred as a result of negligence. On the other hand the structure of section 6(4) of the Act is such that the creditor must establish fraud on the part of the debtor or error induced by words or conduct of the debtor and that either of these induced the creditor to refrain from making a relevant claim. The inclusion in the proviso, as opposed to the substantive provision, of the reference to the creditor exercising reasonable diligence shifts the onus to the defender to make relevant averments to take advantage of the proviso. However, that onus does not arise until such time as the pursuers have made sufficient relevant averments to enable them to invoke the protection of section 6(4). As I have already indicated, that stage has not been reached in this case by reason of the lack of specific and sufficient relevant averments on behalf of the pursuers. I shall accordingly sustain the first and second pleas-in-law for the defenders.

[11] Counsel for the defenders also attacked the sufficiency of the pursuers' pleadings in support of the third and fourth conclusions, although their attack was directed principally to the lack of averments in support of the fourth conclusion. Senior counsel for the pursuers seemed to accept that there were difficulties with the pleadings, especially in relation to the second-named pursuer's case, but submitted that there was "just enough at the lowest level of relevancy". Reference was made to British Railways Board v Strathclyde Regional Council 1981 S.C. 90 and to Thomas Menzies (Builders) Limited v Anderson & Menzies 1998 S.L.T. 794. In that latter case Lord Eassie, at p.798B, referred to N.V. Devos Gebroeder v Sunderland Sportswear Ltd 1990 S.C. 291 and followed the approach adopted by the Division in that case. Following these authorities it was submitted that I should adopt a practical, rather than a technical, approach to the question of relevancy. I accept that that is the proper approach and I have adopted it in my consideration of the pleadings in this case. Article I of condescendence states that the action is pursued by the first-named pursuer as an individual in respect of the first conclusion and by both pursuers as partners in the firm in respect of the second conclusion. It also avers that the action is pursued on an alternative basis by each of the two pursuers as individuals. To put this averment in context one has to have regard to Article II of condescendence. That article sets out the history of the relationship between the defenders and the first-named pursuer and thereafter the partnership from which it is clear that there is no averment of any separate relationship between the second-named pursuer in an individual capacity and the defenders. Her claim is accordingly restricted to a claim as a partner of the firm. Without the existence of the firm it is clear that the second-named pursuer has no title to sue the defenders in the absence of any specific averments about a professional relationship between them. The esto cases at pps.19C-E of the Closed Record do not assist the second-named pursuer in this regard. They are in the following terms:

In relation to the first esto case, there is a lack of specification to justify the averment that the defenders were acting, as accountants or more particularly as agents with general instructions, on behalf of the second-named pursuer as an individual. The reference in this case to "general instructions of the kind condescended upon in Article II" simply highlights the deficiencies in the pleadings so far as concerns the averments in support of the fourth conclusion. The bald averment in the second esto case that the defenders had instructions to submit applications on behalf of the second-named pursuer as an individual is clearly lacking in specification. To have a relevant case in support of the fourth conclusion, the second-named pursuer would require to make specific averments as to the date on which instructions were given to the defenders to act on her behalf as an individual and the nature of those instructions. The pleadings are remarkable by the absence of such averments. The principle of fair notice requires the second-named pursuer to make specific averments to substantiate her relationship as an individual with the defenders, otherwise the defenders cannot prepare adequately to meet the case against them at proof. As the pleadings presently stand, the second-named pursuer would be precluded from leading any evidence of specific instructions to the defenders to act on her behalf as an individual. I have reached the conclusion that the averments in support of the fourth conclusion are insufficient to justify that conclusion and I shall therefore sustain the third plea-in-law so far as it relates to the fourth conclusion.

[12] Counsel for the defenders also attacked the relevance of the averments in support of the third and fourth conclusions on the basis that it appeared that the first and second-named pursuers were claiming damages as individuals in respect of partnership assets. I agree with the submission by counsel for the defenders that it is essential for pursuers making such a claim to set out clearly on Record the basis upon which they are claiming such economic loss. If that were the basis of the alternative claims, I would have determined that they were irrelevant. However, the basis of the first and second-named pursuers' claims appear to me to be on the hypothesis that the quota belonged to them and that the partnership has not sustained any loss. The question of ownership of the quota is a question of fact or of mixed fact and law. In either event, it would be necessary for an inquiry into the facts. Accordingly I reject this particular submission by the defenders' counsel and would have allowed a proof before answer, if this had been the only issue between the parties.

[13] The final argument which was advanced by the defenders was based on the weaker alternative rule. The basis of this argument was that the pursuers were asserting different dates for the commencement of the partnership, albeit as an esto case. The defenders maintained under reference to Stewart's Executors v Stewart 1993 S.C. 427 that the weaker alternative rule should be applied with the effect that the case based upon the later commencement date of the partnership was bound to fail. Having considered the pleadings I am unable to reach such a conclusion. Even if the partnership commenced on 23 February 1993, the first-named pursuer could have transferred quota to the firm. Furthermore, after that date the defenders could have applied to the National Reserve or could have leased quota on behalf of the firm. Accordingly I am not satisfied that if the weaker alternative rule were to be applied in this case, the pursuers would be bound to fail. For that reason, I shall not give effect to this submission.

[14] In all the circumstances, I propose to delete the third and fourth conclusions, to sustain the first and second pleas-in-law for the defenders and to sustain the third plea-in-law for the defenders to the extent that it relates to the fourth conclusion, to repel the fourth, sixth, seventh and eighth pleas-in-law for the pursuers and quoad ultra to allow a proof before answer.