Scottish Court of Session Decisions

[1] This action, remitted from the Sheriff Court, is brought by two individuals who are the partners in an English partnership with the firm name of Roncal Developments. The defender is an architect and the action arises out of a proposed property development project involving the construction of houses at a farm in Fife respecting which the defender was involved in his capacity as architect.

[2] There are two craves for payment of money.

[3] The first crave is for payment of a sum which apparently represents an amount paid by the pursuers to the defender by way of fees and outlays. The pursuers seek repetition of that sum. This aspect of the action was not discussed at the procedure roll debate before me, and I would simply observe in passing that the question of any remuneration owed to the defender has already been the subject of litigation in the Sheriff Court, an action raised by the present defender against the present pursuers having been settled in 1999.

[4] The second crave in the action is for payment of a sum of £90,132 made up of various sums averred to have been expended by the pursuers in connection with the development, which, at least so far as they were concerned, did not proceed to fruition The figure craved is the total of the items listed in the closed record at page 37E-38C. There are three principal bases upon which the pursuers claim the sum sought in the second crave, namely (i) negligent misrepresentation, (ii) breaches of duty said to have been committed by the defender in his capacity as architect to the pursuers and (iii) a breach of contract by the defender as agent for the pursuers in respect that it is alleged that the defender also acted for the owner of the land in question and thus also had a client with whom there was a conflict of interest.

[5] The pleadings for the pursuers are perhaps not distinguished by succinctness or clarity, but endeavouring to summarize matters it appears to be accepted by the pursuers that the project to build a number of houses at the farm had originally been embarked upon by another entity, Tayside Properties Inc. of Fort Wayne, Indiana. Tayside Properties appointed the defender to act as their architect in connection with this project. Tayside Properties also engaged as contract managers a company known as Fastech Contracts Limited. The defender did work, and prepared a number of plans and drawings, for Tayside Properties prior to the pursuers' becoming interested in the project.

[6] It is averred by the pursuers that in March 1996 a meeting was held attended by the pursuers, the defender and a Mr Feeney of Fastech Contracts Limited to discuss potential investment by the pursuers in the project. It is averred that at that meeting a development proposal was put forward by the defender and Mr Feeney indicating a certain level of profitability. It is further averred that the defender advised the pursuers that certain amounts of grant from certain sources would be available towards the construction costs. It is later averred that subsequent to that meeting and in reliance on statements made at the meeting by the defender concerning the availability of planning permission and the availability of grant, the pursuers confirmed their agreement in principle to invest in the development. On 30 April 1996 the pursuers became the principal developer - apparently in place of Tayside Properties - accepting a certain responsibility for settling fees and outlays due to the defender for his work for Tayside Properties. Planning consent for the proposed development was eventually refused both by the local planning authority and by the Secretary of State on appeal. Planning consent was eventually granted for a smaller development but the pursuers did not proceed with it.

[7] Put briefly, the pursuers allege that the statements made by the defender at the meeting in March 1996, which they say persuaded them to take on the rôle of developer, amounted to negligent misrepresentations by the defender. It is, however, unnecessary for me further to endeavour to distil the basis of the pursuers' case on negligent misrepresentation since counsel for the defender did not suggest that it could be disposed of without inquiry, the pursuers' averments being the subject of sharp dispute in several material respects. The pursuers claim that in consequence of the allegedly negligent misrepresentation they are entitled to recover the costs subsequently expended by them in connection with furtherance of the development.

[8] Apart from the case based on alleged negligent misrepresentation the pursuers also advance a claim for damages based on alleged breach of contract by the defender. The pursuers' pleas-in-law do not discretely identify the sum sought by way of damage for breach of contract but appear to treat both the first and second crave as one. As I understood it however the claim for breach of contract related to certain of the items going to make up the second crave.

[9] The basis upon which the pursuers advance a case of liability in contract is that immediately following a site visit in early May 1996 by the second named pursuer, it was orally agreed, at a meeting at the defender's house, that the defender provide certain services to the pursuers. In particular, it is averred [Article 3 of Condescendence: Closed Record 22D ff] that:

The pursuers go on to aver that thereafter, on 15 May 1996, they proposed an "incentive scheme" for the payment of the defender and Malcolm Feeney. It is averred that the incentive scheme offered by the pursuers was not accepted by the defender. The defender's response was instead to make a counterproposal in a letter of 27 May 1996. The pursuers aver that by that letter the defender "sought to impose RIAS conditions of appointment to Work Stage L 'completion' (of works on site)". The pursuers then aver that "no such appointment was agreed by the pursuers". In the penultimate sentence of Article 3 the pursuers reiterate that the terms of the letter of 27 May 1996 were not agreed by them.

[10] Although the pursuers thus aver that they rejected the defender's proposal that he be engaged subject to the RIAS conditions of appointment, in Article 4 of condescendence the pursuers go on to set out, at some length, references to the terms of the RIAS conditions of engagement. They aver that the defender failed "properly" to perform the services set out in that document at the various "work stages" referred to in it. It is not necessary to set out the whole terms of Article 4 in detail but, by way of illustration, it is averred (Closed Record 28D) ".... the defender failed to properly perform the following 'Preliminary and Basic Services' set out in 'Part 1 : Architect's Services" of the said RIAS Architect's appointment in the following respects: he failed to assess and advise on cost increases, reductions in assessed grant, delays in obtaining permissions and grants and their cumulative effect on his initial advice on the potential profitability of the project". It is further averred that the RIAS terms of appointment "were supplemented by a RIBA publication known as 'Architect's Job Book' ...." and various averments are made of failure to perform services described in the Job Book. Again, simply by way of illustration, it is averred {Closed Record 30D) among other things that "the Book ... requires an architect to obtain from a client the project requirements, budget and timetable, to hold preliminary discussions with planning officers on development plans and other relevant planning guidelines and to discover the attitude of the planning officers towards the principle of the proposed development. It requires appraisal of the client budget and programme, and preparation of a cost appraisal. It requires preparation of an application for outline planning permission if appropriate, with preliminary discussions with planning officers if appropriate before such application".

[11] It may further be observed that also within Article 4 are to be found averments critical of aspects of the plans for the buildings prepared by the defender. Thus, again by way of illustration, it is averred (Closed Record 33B) "the panels of lead shown in [the defender's] plans exceeded the 600mm wide panel standard specified in the Lead Sheet Association's lead sheet manuals for roofs of the envisaged pitch". There is however no suggestion elsewhere in the pleadings that the plans were ever realised.

[12] Apart from what is said in Article 4 of Condescendence, one also finds in Article 6 averments of breach of contract couched in terms of the general implied duty to exercise the skill and care of a reasonably competent architect exercising ordinary care. Following a reference back to the terms of Article 2 and Article 4, the duties are further described thus: -

[13] In the succeeding article, Article 7, a case is advanced in quasi delict which, by way of indication of the alleged quasi-delictual failings simply makes a shorthand reference back to the terms of Article 6.

[14] In challenging the relevancy of the pursuers' pleadings on the breach of contract case Mr Howie, who appeared for the defender, directed his principal attack to the presence of Article 4. The principal point which he advanced was, put shortly, that on the pursuers' averments the RIAS conditions of engagement did not form part of the contract upon which the pursuers sued. The pursuers did not aver that the defender was engaged in general terms as an architect for the project by them. They averred a limited contract with the defender requiring him to do certain specific things, namely (i) to make improvements to the existing layout design, (ii) to resubmit the development - presumably the improved layout - for planning and other consents, including applications for grant assistance and (iii) to advise on the project costings and programme. The pursuers aver that they rejected the defender's proposal that he be appointed on a full engagement on RIAS terms. In view of the contract for which the pursuers contended it was nonsensical for the pursuers then to go on to contend in Article 4 that the defender was obliged to observe the terms of the RIAS engagement for all the "work stages". Article 4 of condescendence was plainly irrelevant to the case made by the pursuers and should therefore be excluded. Further, it was submitted, since Article 6 included a reference back to Article 4 the former then became irrelevant and since Article 7 - the quasi delictual case - in turned referred back to Article 6 it would also be irrelevant for that reason.

[15] In responding to this branch of the argument for the defenders, Mr Sandison, for the pursuers, accepted that the scope or content of the contract between the pursuer and the defenders was as set out in the passage at Closed Record 22B,ff quoted above. He suggested that some confusion may have arisen in respect that in rejecting the defender's proposal in the letter of 27 May 1996 he understood the pursuers to object to the extension of the engagement to Work Stage L, rather than the proposal that it be on RIAS conditions. Counsel then went on to submit that in looking to the specific, restricted tasks for which the defender was engaged, the RIAS conditions, and consequently the Job Book, would be applicable respecting those work stages of the RIAS document within which the limited tasks fell. To give fuller content to the bare oral agreement one would need to look at the scope of the work and the terms applicable to those work stages. Counsel went on further to submit that it was implied that the defender would carry out the tasks required of him under the RIAS conditions, to the standards required by those conditions, by reason of his having agreed to perform the tasks discussed and agreed upon orally. If an architect were not willing to execute his commission on RIAS terms, it was incumbent upon him to say so positively. It would be for the architect to say expressly that he was not going to do some of the things which would be covered by the RIAS terms.

[16] Counsel for the pursuers went on to submit that even if Article 4 were not relevantly included in the pleadings, there yet remained, on any view, the delictual liability contended for in Article 7. That in turn led back to Article 6. The existence of duties in delict additional to contract had been affirmed in Wessex Regional Health Authority v HLM Design Limited (1994) 40 Con.L.R.1. What was averred in Article 7 read in conjunction with Article 6 was sufficient to warrant inquiry before answer, even if Article 4 were excluded.

[17] In my opinion, in considering the relevance of a claim for breach of contract, the terms of what is averred by the claimant to have been agreed is plainly a convenient and appropriate starting point. It is clear from what is elsewhere averred that the defender had carried out work for the original developer, Tayside Properties and had prepared plans and proposals for them. Against that background the pursuers clearly aver only a limited contract whereby the defender was to perform the three things mentioned in the averments at Closed Record 22Dff, already quoted. Although the defender suggests that he was engaged on broader terms, the pursuers are plain in their denial of that wider engagement. While counsel for the pursuers at one point suggested that the pursuers' intention in rejecting the defender's letter of 27 May 1996 was confined simply to the defenders' proposal that the appointment extend to completion of the whole works and was not a rejection of the application of the RIAS conditions to earlier work stages that suggestion is not one which finds any reflection in the pleadings. There are no averments of the making of any qualified acceptance of the defender's proposal of 27 May 1996. By contrast the averments are to the effect that the proposal received no assent at all

[18] Counsel for the pursuers further submitted that the RIAS conditions ought in any event to be implied in the terms of the pursuers' engagement. I would observe that there is no averment of the implication of those terms but, that apart, since one of the usual tests were the implication of contractual terms is the "officious bystander" test namely that the terms whose implication is sought would be terms to which both parties to the contract would have agreed if the point were drawn to their attention, I do not consider that one can hold as implied what was expressly proposed but averred not to have been accepted in the present case.

[19] Counsel for the pursuers also submitted in effect that the tasks which the pursuers aver were to be done by the defender would be included amongst those tasks and responsibilities covered by an engagement on RIAS terms. That may well be so, but it does not follow, even by way of implication, that the performance of those tasks is to be treated as governed by those terms, yet alone bring with it the performance of other tasks not the subject of the oral agreement condescended upon by the pursuers.

[20] Accordingly, on examination of the pleadings for the pursuers, I consider that counsel for the defender is correct in his submission that what is contained in Article 4 of Condescendence does not have a relevant basis and should be excluded from probation.

[21] In reaching that conclusion I do not overlook that for his part the defender contends that he proceeded upon the basis that the terms of his letter of 27 May 1996 had been accepted and agreed. However, it is the pursuers who advance a claim of breach of contract and they pursue that claim on the clear averment that the defender's proposals of 27 May 1996 were rejected by them. The pursuers having adopted that approach, I do not consider that they may yet properly invoke the RIAS terms as a basis for their claim.

[22] I also do not overlook, that unrelated to the averments concerning the RIAS and RIBA documents, there are hidden away in the extensive averments in Article 4 on that topic other averments relating to the alleged deficiencies in the defender's plans and drawings (Closed Record page 33). Apart from the fact that it is not averred that the drawings in question were prepared by the defender after the constitution of a contractual relationship between the pursuers and the defender at the meeting in his house in early May 1996, it is in my view clear that the existence or absence of those deficiencies has no causal relationship with the losses claimed in this action.

[23] All of that said, while I thus agree with counsel for the defender that Article 4 of Condescendence is an irrelevance, I am not persuaded that the irrelevance of Article 4 renders the claim otherwise wholly irrelevant, at least to the extent of justifying its dismissal. The engagement of the defender on the limited terms set out by the pursuers in their averments clearly carry implied contractual duties of reasonable care as regards those limited tasks. Various duties are set out in Article 6 of condescendence and their existence, and the terms in which they are pled, was not the subject of a separate specific attack by counsel for the defender suggesting that they were not fit for enquiry. The specification of the particulars in which the defender allegedly failed in those duties is not ideally identified in Article 6, nor ideally related to the particular contractual tasks which he undertook, but Article 6 refers to Article 2 and within Article 2 the diligent reader may glean some additional insight into the pursuers' case. Since inquiry will be required in respect of the case of negligent misrepresentation I have ultimately come to the view that it would be inappropriate to dismiss the case for breach of contract, as pled in Article 6 (but without reference to the deleted averments in Article 4). The delictual case advanced in Article 7 is essentially a mirror of what is said in Article 6 and I need say no more about it.

[24] I turn now to the other principal branch of the discussion before me which relates to the claim advanced by the pursuers in terms of Article 9 and the pursuers' sixth plea-in-law.

[25] Putting matters shortly, what is contended here is essentially a separate basis of claim proceeding on an averment that throughout the period of the pursuers' involvement with him the defender was acting as an agent for the owners of the proposed development site. The defender denies that he was acting as agent for the owners of the development site, but for present purposes that allegation must be treated pro veritate. The material parts of Article 9 of Condescendence are in these terms:

Counsel for the defender submitted these averments to be irrelevant. If an agent acted for two principals he might be liable for any secret profit arising and be under a duty to account for that profit but since nothing of that nature arose, the mere averment that the pursuers would not have engaged the defender was not a relevant averment of a proper cause of their alleged losses.

[26] For his part, counsel for the pursuers stated (despite the apparently contradictory averment at closed record 13E) that he did not suggest that there was a claim for a secret profit. But, he submitted, the remedies for a breach of an agent's fiduciary duty to disclose a potential conflict of interest were not confined to a claim for a secret profit. Such a breach was an ordinary breach of contract which ought to sound in damages on ordinary principles. Reference was made to Sanders v Parry [1967] 1 W.L.R.753. The pursuers' position was that if disclosure of that potentially conflicting interest had been made to them at the outset they would not have embarked upon the series of events upon which they did.

[27] In my view counsel for the pursuers was probably correct in stating that accounting for a secret profit does not constitute the sole remedy potentially available to a principal in the event of his agent's breach of this particular fiduciary duty. Indeed, I did not understand Mr Howie to dispute that in appropriate circumstances other remedies might at least theoretically be open . However, the real question is whether, assuming the defender also to have been an agent for the owner of the land, his failure to disclose that fact was the true and operative cause of the losses now claimed by the pursuers. It may be that, if appraised of that fact, the pursuers might then have decided to select an alternative architect to carry out the tasks which they confided to the defender in the oral agreement averred by them. But I do not see that the - for present purposes, assumed - fact of the defender's also acting as agent for the owner of the land and the potential conflict of interest, averred, but not realised, can have any proper causal relationship to the particular losses now claimed by the pursuers. It is to be noted that nothing is said in the pursuers' averment to the effect that any advice given or steps taken by the defender could be in the owners' sole interest and not in that of the pursuers. I accordingly conclude that the terms of Article 9 are irrelevant.

[28] A further subsidiary matter raised in the debate should be mentioned. It concerns the averments to be found in Article 5 of Condescendence at Closed Record 35D(ff) wherein it is averred on behalf of the pursuers that the defender was instructed by them to carry out feasibility studies on wholly unrelated developments. It is complained that the fee charged by the defender (and I think paid by the pursuers) was excessive but plainly these - perhaps slightly tendentious - averments have nothing to do with the claim in the present case. Counsel for the pursuers accepted that they were of no significance and he could not complain were they to be, as he put it, "struck out".

[29] In these circumstances I accede to the defender's motion to the extent of deleting from probation the whole of Article 4 of Condescendence; the words "and 4 of" in the eighth line of Article 6 of Condescendence [Closed Record 42D-E]; the whole of Article 9 of Condescendence; and the passage in Article 5 of Condescendence commencing at line 12 on page 35 of the Closed Record - "in order to assist the defender ..." down to and including "on the drawings" at line 5 on page 36 of the Closed Record. I shall also repel the sixth plea-in-law for the pursuers as a necessary consequence of my having concluded that the claim advanced in Article 9 of Condescendence is irrelevant. Subject to these deletions I shall allow parties a proof before answer of their respective averments.