Scottish Court of Session Decisions

Alex Brewster & Sons v. Caughey & Ors [2002] ScotCS 123 (2nd May, 2002)

OUTER HOUSE, COURT OF SESSION
	OPINION OF LORD EASSIE in the cause ALEX BREWSTER & SONS Pursuers; against FRANK MICHAEL CAUGHEY & OTHERS Defenders:   ________________

 

Pursuers: Keen, Q.C., Dewar; Maclay Murray & Spens

First Defender: Tyre Q.C., MacColl; Henderson Boyd Jackson, W.S.

(for Archibald Sharp & Sons, Glasgow)

Second Defenders: Peoples Q.C., Cowie; Balfour & Manson, W.S.

(for Dallas McMillan, Glasgow)

Third and Fourth Defenders: No appearance

2 May 2002

Introductory

1. By disposition executed by her on 5 April 2001 in her capacity as executor of her late husband Mrs Agnes McKelvie, with the consent of Francis Michael Caughey, disponed to a company, Chelmwood Estates Limited, an area of ground extending to approximately 12 acres lying to the north of Dodside Road, Newton Mearns. The disposition was signed by Francis Michael Caughey as consentor on 4 April 2001. It was presented for registration in the Land Register on 10 April 2001 and registered under the title number REN105477. Francis Michael Caughey - "Mr Caughey" - is the first defender in this action. Chelmwood Estates Limited - "Chelmwood" - are the second defenders. Mrs Agnes McKelvie is called as a third defender but, while having entered appearance, she has not participated in the substantive proceedings.
2. The disposition was granted in implement of a prior contract constituted by missives passing between agents for Mrs McKelvie and Mr Caughey whose consent to the disposition in favour of Chelmwood was granted respecting his rights under those missives. Subsequent to contracting with Mrs McKelvie, the first defender entered into a minute of agreement with the pursuers in this action who are a partnership, the two partners being brothers, David and Alex Brewster. The minute of agreement related to, among others, the contract between Mr Caughey and Mrs McKelvie for the sale of the 12 acre site and, in brief summary, provided for the acquisition by the pursuers of the land which Mr Caughey had agreed to buy from Mrs McKelvie.
3. By a disposition executed on 6 April 2001 and registered in the Land Register under title number REN105549 on 20 April 2001 the second defenders - Chelmwood - disponed to another company namely Four Acres (Scotland) Limited a part of the ground conveyed to Chelmwood extending to 1.65 hectares (approximately 4.06 acres). Four Acres (Scotland) Limited are called as the fourth defenders but they have not actively participated in the proceedings since their interests have been acquired by the pursuers.
4. The primary objective sought by the pursuers in this action is the reduction of the disposition by Mrs McKelvie with the consent of Mr Caughey to Chelmwood of the larger area of 12 acres, reduction being claimed on the ground that the disposition was not obtained by Chelmwood in good faith. An alternative conclusion for reduction seeks to address the issue that, while Chelmwood were allegedly in bad faith, the four acres acquired by Four Acres (Scotland) Limited (the fourth defenders) may have been acquired innocently by the fourth defenders. For that event, reduction is sought of the disposition by Mrs McKelvie but under exception of the four acre site.
5. Failing reduction, the pursuers advance against Mr Caughey a claim for damages for breach of the contract contained in the minute of agreement but questions of damages do not presently arise at this stage in the action. For his part Mr Caughey also has a counterclaim for damages but that does not fall to be considered at this stage.
6. By way of background it appears from the evidence that Mr Caughey, who lives in Pollok Lodge, Dodside Road, Newton Mearns, has for some time seen the land lying between the M77 motorway and Newton Mearns, much of which used to be part of the Pollok Castle estates and which includes the 12 acre site, as having development potential although it has been and remains subject to greenbelt policies in the Development Plan established under the Town and Country Planning legislation. It appears that Mr Caughey was instrumental in submitting an application to the local planning authority for planning permission for a leisure development on land encompassing the 12 acres disponed by the disposition now under challenge. In connection with that application Mr Caughey entered into conditional missives for the acquisition of the land from Mrs McKelvie as executor - to whom, although executor, I shall simply refer as Mrs McKelvie. The application for planning permission - although apparently viewed favourably by the local planning authority - was called in by the Secretary of State and was refused after the holding of a local planning inquiry.
7. Thereafter, in August 1999, Mr Caughey entered into further missives with Mrs McKelvie respecting the 12 acre site. Those missives - which were subsequently amended - are to be found in 6/3, 6/4 and 6/5 of process. Putting matters briefly Mr Caughey agreed to buy the land for £1,844,500 payable on the completion date which was defined as being the earlier of (a) 21 days after the "date on which the subjects are re-zoned for leisure purposes" or (b) 31 July 2000, or such other date as might be agreed between the purchaser and seller. Provision was also made to the effect that in the event of the land "not being re-zoned by 31 July either party would be entitled to withdraw from the missives without penalty due to or by either party by giving written intimation to the other party's agents.
8. In addition to thus treating with Mrs McKelvie for her land Mr Caughey was also active in concluding contracts with owners of adjacent and nearby areas of land. By way of example, he contracted to buy a parcel of 2.1 acres from a Mrs Grier under missives which were, in effect, not conditional on any town and country planning considerations. There were also certain other conditional contracts and options. Mr Caughey however did not have the financial resources to meet the obligations, or potential obligations, which he had incurred. As he indicated in his evidence since planning permission for the leisure development had been refused standard institutional lenders were not interested in his project. He therefore sought help from his architects, namely Yeoman McAllister Architects and particularly Mr Murray Yeoman who was able to point Mr Caughey in the direction of the pursuers, to whom Murray Yeoman had also provided architects' services in the past. Discussions thereafter ensued. Those discussions produced certain heads of agreement which, having been passed to solicitors, were in turn to result in the minute of agreement 6/13 of process between the present pursuers (therein referred to as "the purchasers"), the first defender Mr Caughey (therein referred to as "the seller") and Annabel Lever who is the first defender's spouse and who is included in respect of the property known as Pollok Lodge of which she was the proprietor.

The minute of agreement

9. By way of a summary of the terms of the minute of agreement, which was executed on 4 October 1999, in respect of those parcels for whose purchase Mr Caughey had entered into an unconditional bargain the minute of agreement provided that the pursuers - the Brewsters - would pay the price at the pertinent settlement date and Mr Caughey would procure the grant of a valid title in their favour. As already indicated, the contract which Mr Caughey had concluded in respect of the 12 acre site was conditional on "zoning" and in reflection of its terms the provisions of the minute of agreement were couched in similar conditional terms. To the extent that other missives were likewise conditional, their conditional nature was reflected in the minute of agreement. Provision was also made for the transfer of Pollok Lodge to the Brewsters by Annabel Lever on certain conditions being satisfied.
10. The minute of agreement further provided, in section 8, for a division of profits arising in the event that land acquired by the Brewsters be afterwards sold, that division of profit (as defined in the minute of agreement) being in the proportion of 61% to the Brewsters and 39% to Mr Caughey. It appears from the evidence of Mr Murray Yeoman that the ratio 61:39 as opposed to a ratio of 60:40 is explained by a collateral agreement that Yeoman McAllister received 2% of the profits, payment of that 2% being however channelled through the Brewsters.
11. At the time of execution the terms of the minute of agreement relating specifically to the 12 acre site which is the subject of dispute in this action were as follows:

"3.1 The Seller has entered into missives with Mrs Agnes McKelvie, Cumnock House Farm, Newton Mearns, dated 24^th and 31^st August and 3^rd September all 1999 to purchase 11.9 acres at Dodside Road, Newton Mearns, Glasgow being the subjects outlined in red on Plans 2 and 3 annexed and signed as relative to this Agreement ("subjects 2 and 3").

3.2 In terms of said missives the Purchaser is entitled to require delivery of a duly executed Disposition of the subjects in favour of its nominees. Accordingly the Seller will procure that the Disposition to be granted at settlement in terms of said missives is granted in favour of the Purchasers.

3.3 Subject to the terms of Clauses 3.5 and 3.6 hereof the Purchasers will pay at the date of settlement to Mrs Agnes McKelvie the sum of ONE MILLION EIGHT HUNDRED AND FORTY FOUR THOUSAND AND FIVE HUNDRED POUNDS (£1,844,500) STERLING in exchange for vacant possession of the subjects.

3.4 The Seller will procure the grant of a valid and marketable title to the Purchasers of the subjects.

3.5 The purchase price will be payable on the earlier of the date which falls twenty one days after the date on which the subjects are zoned on terms satisfactory to the Purchasers or 31^st July 2000. In the event that the subjects are not zoned by 31^st July 2000 or are zoned on terms which are not satisfactory to the Purchasers then the Purchasers will be under no obligation and will incur no penalty by notifying the Seller that they do not intend to proceed with the purchase of the subjects.

3.6 In terms of the Seller's missives to purchase the subjects the Seller is required on or before 30^th September 1999 to pay to Mrs McKelvie a non-refundable option payment of ONE HUNDRED THOUSAND POUNDS (£100,000) STERLING and to pay the Seller's (sic) reasonable legal and other professional fees as outlined in said missives.

3.6.1 The Purchasers will pay to Mrs McKelvie a non-refundable option payment of ONE HUNDRED THOUSAND POUNDS (£100,000) STERLING.

3.6.2 The Purchasers will pay to the Seller a non-refundable option payment of TWENTY FIVE THOUSAND POUNDS (£25,000) STERLING.

3.6.3 The Purchasers will pay a contribution towards Mrs McKelvie's legal and other professional fees in an amount not exceeding FIVE THOUSAND POUNDS (£5,000) STERLING."

The Brewsters duly paid Mrs McKelvie and Mr Caughey the sums referred to in Clauses 3.6.1, 3.6.2 and 3.6.3. The Brewsters also paid further not insignificant sums in acquiring land respecting which Mr Caughey had concluded unconditional contracts. Thus, by way of example, £136,500 was paid on 17 December 1999 for the 2.1 acre parcel which is the subject of the provisions in section 1 of the minute of agreement.

Amendments to the missives/minute of agreement

12. As already mentioned the missives respecting the 12 acre site concluded in the late summer of 1999 between Mr Caughey and Mrs McKelvie were subsequently altered by agreement between them. First, by letter of 18 July 2000 (6/6 of process) Mr Caughey's solicitors offered to amend the missives in these terms:

"1. In condition 2b of our offer dated 24 August 1999 '31 July 2000' shall be held as delete and shall be replaced by '31 January 2001'.

2. Our client will pay your client the sum of £20,000 Sterling on 31 July 2000 as a non-refundable option payment.

3. Save as hereby amended we confirm the remaining conditions of the said missives."

In order to assist in the understanding of that proposed amendment it is appropriate to set out the actual terms of condition 2 of the offer of 24 August 1999:

"Entry and vacant possession will be given to the purchaser on the earlier of -

a 21 days after the date on which the Subjects are re-zoned for leisure purposes;

b 31^st July 2000; or

c such other date as may be agreed between the purchaser and the seller;

(such date of entry being herein called 'the completion date').

In the event of the Subjects not being re-zoned by 31^st July 2000 either party will be entitled to withdraw from the missives to be concluded hereon without penalty.

The proposed alteration was accepted by Mrs McKelvie's solicitors without qualification other than one, immaterial for present purposes, relating to the time of payment of the £20,000. That sum was in due course provided by the Brewsters.

13. A second alteration took place in late November to early December 2000 when Mrs McKelvie's solicitors wrote to Mr Caughey's solicitors (6/9 of process) offering to alter the date "31 January 2001" which had been substituted in the first alteration, to the date "9 April 2001". That offer was also met by a simple acceptance (6/10 of process). A third alteration took place in February 2001 when Mr Caughey's solicitors proposed (6/11 of process) to amend the terms of the original missives respecting the price to be payable. The amendment was to the effect that if paid on the amended completion date (9 April 2001) the price should be £1,600,000 but if paid later through fault or delay on the part of the purchaser or his agents the price would revert to the previously agreed sum of £1,844,500.
14. In parallel with the alterations being effected to those missives - and also in respect of other matters not pertinent to the present dispute - the terms of the minute of agreement were also adjusted. Accordingly, the dates in Clause 3.5 of the minute of agreement, originally 31 July 2000, were replaced by 9 April 2001. The sum payable in terms of Clause 3.3 of the minute of agreement was reduced to £1.6 million and a further provision was inserted reflecting the evident fact that the reduction in the price was for prompt payment on 9 April 2001 failing which the previously agreed price would apply.

Planning background

15. A little time before concluding the minute of agreement the Brewsters and Mr Caughey obtained through Murray Yeoman sight of a letter (6/22 of process) written by a Mr Michie of Montague Evans, Chartered Surveyors, to another party concerning the land at Dodside Road. Mr Michie noted in that letter that the Development Plan consisted of the Strathclyde Structure Plan 1995 and the Eastwood Local Plan adopted by the local planning authority in 1995 and that the reporter at the recent local planning inquiry had found both documents to be up-to-date. Mr Michie expressed the view that the site would require to be removed from the greenbelt before there was any realistic prospect of obtaining any consent for development. The impending review of the local plan, with a consultative draft expected in March or April 2000, was a vehicle to review the location of the greenbelt boundary. Mr Michie went on to say, "We understand that the Council are currently putting the draft together. Now is clearly the time to attempt to influence the content of the Consultative Draft plan. Thereafter the Council will consider the responses received on the consultation document and prepare a Finalised Plan. At best this is going to be produced towards the end of 2000. This plan will be made available for public comment and objection. Any objections received by the Council and not withdrawn would require a public local inquiry. My best estimate at this stage will be a public inquiry in early 2001."
16. Following the concluding of the minute of agreement Mr David Brewster and Mr Caughey had meetings with the officials of the local planning authority. It appears that the officials saw the areas of land covered by the minute of agreement as part of a wider area of potential release from greenbelt policies, namely an area extending from Brewster/Caughey subjects northeastwards in a crescent around the north-western and northern fringes of Newton Mearns. At a meeting held towards the end of 1999 an official of the local planning authority indicated to Mr David Brewster, Mr Caughey and Mr Yeoman that they should join a wider group or "consortium" of landowners and developers to formulate a plan for the development of that larger area, termed by the local planning authority a "development search area".
17. In consequence of the views of the officials of the local planning authority there was indeed a coming together of those interested in the areas of land encompassed within the development search area. Under the description of "The Greenlaw Partnership" they eventually produced what they termed a "master plan report" (7/9 of process) on the development search area setting forth various proposals for its development. The first meeting of the consortium was held on 28 June 2000 (c.f. minute 7/15 of process) at which officials of the local planning authority distributed a "planning brief", to which the consortium was to work. The members had evidently by then agreed upon a collective design team who eventually co-operated in the production of the master plan report to which reference has just been made. The Brewsters made payments by way of contribution to the professional fees incurred in this exercise.
18. Despite employing the nomenclature of partnership it appears that the association between the interested parties in the Greenlaw Partnership was rather loose or informal. Such agreement as was achieved was not committed to writing. While the members were willing to accept the invitation of the local planning authority to draw up a single plan for a comprehensive development of the land within the development search area they did not achieve agreement on how the financial consequences of such a single plan would be addressed. Put shortly, the master plan envisaged different land uses. Some uses such as housing would attract higher land values than others, such as public open space or community facilities. According to the evidence given by Mr David Brewster and Mr Yeoman and also implicit in Mr Caughey's evidence, the discussions within the consortium proceeded on a general understanding of a need for some compensatory mechanism recognising the contribution of the landowner to whose land might be attributed the low value uses, those low value uses however being necessary to enable the higher value uses, particularly housing, to proceed elsewhere within the development search area. Although, as I understand it, the references in the earlier discussions among members of the consortium were to some compensatory arrangement in general, what was envisaged by Mr David Brewster and Mr Murray Yeoman was that there would be agreement on equalisation of land values within the development search area, that is to say, an arrangement for reaching an average price or value per unit of superficial measure with appropriate adjustments thereafter pro rata among the interested parties. In the event no compensatory arrangement of any kind has been agreed.
19. A particular reflection of the general problem to which I have just referred was the siting of the proposed school, provision of a new school being one of the community facilities stipulated by the local planning authority in its planning brief. Some four options were suggested by the design team (c.f. minute of consortium meeting 21 September 2000, 7/16 of process) one of which involved the school's being sited on part of the Brewster/Caughey land. In the event Mr Brewster, Mr Caughey and Mr Yeoman were ultimately agreeable to the master plan containing the school on their land. In part that agreement was prompted by an estimation of the possible positive "ransom" value of having the school on part of the Brewster/Caughey land to offset the possible negative "ransom" position of that land respecting sewerage connections. There is in the evidence before me some conflict between the assessments by Mr David Brewster, Mr Murray Yeoman and Mr Caughey respectively concerning each other's enthusiasm for the proposed inclusion of the school on their territory but given the essential nature of the issue, involving inter alia a judgment of imprecise matters such as the possible balance of bargaining power, I do not find it surprising that enthusiasm for the school and the perception of the extent or lack of the others' enthusiasm may have varied at different stages of the evolution of the master plan.
20. A further element entering into the general consideration was the fact that the Brewster/Caughey land included an area previously used for tipping refuse, which would involve additional cost were development ever to receive planning permission. This was a further factor touching on the financial aspects of the consortium's proposals.
21. In the event the Greenlaw Partnership's master plan for the whole of the development search area was submitted to the local planning authority in or about early January 2001. According to the essentially undisputed evidence on this topic given by the pursuers' solicitor - Mr Norman Smith of Maclay Murray & Spens - at about that time certain proposals for a consortium agreement addressing inter alia the financial issues to which I have just referred were under discussion. The equalisation of land values approach for which Messrs Brewster hoped was not acceptable to certain others, principally the house builders, in the Greenlaw Partnership. It is accepted on all sides that no agreement was reached then or subsequently on the terms of such a consortium agreement.
22. On 1 March 2001 the local planning authority published its "finalised local plan" (7/10 of process). Of pertinence to the present case was Proposal Strat 3, on page 6, whereby the local planning authority proposed, among others, to expand the urban area of Newton Mearns by releasing from the greenbelt the area of land effectively encompassed in the development search area and covered by the Greenlaw Partnership's master plan. The proposal stated inter alia that any development "will require to contribute significant community, economic and environmental benefits to offset the loss of Green Belt. Planning permission for development in these areas will only be forthcoming if the proposals comply with master-plans for these areas approved by the council and will be subject to a Section 75 Agreement, Environmental Impact Assessment and Transport Assessment". It is, I think, not in dispute that a substantial number of objections to the finalised local plan were lodged, including in particular objections to the release of the greenbelt land adjacent to Newton Mearns, with the consequence that a public inquiry before a reporter will require to be held before the local planning authority may proceed to adoption of a new local plan forming part of the statutory development plan.

The issues

23. In order better to set in context the evidence relating to what happened after publication of the finalised local plan on 1 March 2001 it is convenient to record the essence of the parties' respective contentions in this litigation.
24. As already indicated the pursuers' primary contention is that by arranging with Chelmwood for Chelmwood to acquire the 12 acre site and in consenting to the disposition of the 12 acre site by Mrs McKelvie in favour of Chelmwood, Mr Caughey was in breach of his obligations under the minute of agreement. The pursuers further maintain that Chelmwood were not acting in good faith and hence that the disposition falls to be reduced.
25. For his part the first defender - Mr Caughey - maintains that he did not breach his contract with the pursuers contained in the minute of agreement because on three occasions in conversations conducted over the telephone Mr David Brewster allegedly intimated that the pursuers were not prepared to proceed with the transaction whereby the pursuers would acquire the 12 acre site. Those three occasions are averred to have occurred on 6 March, 9 March and 13 March all 2001 respectively. Mr David Brewster denies having given such oral intimation. The grounds whereon the averred oral telephonic intimations of a decision by the pursuers not to proceed with the transaction entitled the first defender to dispose of the property to Chelmwood (or indeed any other party) are presented on two alternative bases. The primary contention is that the averred telephonically communicated refusal to proceed constituted a repudiation by the pursuers of their future obligations under the minute of agreement or, employing slightly different terminology, an anticipatory breach of contract, which the first defender accepted, giving him in turn the right to sue for the loss sustained by him in consequence of that repudiation or anticipatory breach - a right which he seeks to exercise in his counterclaim in which he advances, and in his evidence endorsed, a claim of damages of £3,567,775. This contention is founded in turn on the proposition that the publication of the finalised local plan on 1 March 2001 constituted "zoning" of the subjects on terms satisfactory to the purchaser thereby binding the pursuers to proceed with the purchase. The sub-proposition in that contention is that the pursuers must be seen as being satisfied with that "zoning" because the terms of the Greenlaw Partnership's proposals in their master plan had been effectively been taken up by the local planning authority in that finalised local plan. The alternative basis advanced is that the averred orally expressed refusal to proceed constituted a notice in terms of Clause 3.5 of the minute of agreement that the purchaser (the pursuers) invoked the right to abandon the purchase without penalty.

Communings between solicitors

26. Throughout all the relevant events, both before and after 1 March 2001, the pursuers and the first defender were represented by solicitors namely Maclay Murray & Spens and Archibald Sharp & Company respectively. The partner of the former principally involved for the Brewsters was Mr Smith who in addition to having been a friend of the Brewsters for some years had acted for them in earlier property transactions. The individual within Archibald Sharp & Company acting for Mr Caughey was Mr James Craig of whom Mr Caughey had been a client for about 10 years, during part of which period Mr Craig had been successively employed as a solicitor by a number of other firms. In approaching the evidence of Mr Brewster and Mr Caughey, and also Mr Yeoman, concerning their direct oral communings after 1 March it is useful to set out what took place between the solicitors after that date.
27. First however it has to be mentioned that following the publication of the finalised local plan on 1 March 2001 Mr Caughey immediately obtained copies of it and through Mr Yeoman a meeting was arranged to take place later that day at the pursuers' office. It was attended by Alex and David Brewster, Mr Yeoman and Mr Caughey. The evidence of those witnesses who participated in the meeting will require more detailed exposition but for the present it may simply be mentioned that Mr Caughey indicated in his evidence that in view of the terms of the finalised local plan he told the others that he regarded that finalised local plan as great news calling only for a celebration at a public house. That optimism was not shared by the others. Mr David Brewster indicated in his evidence that he had concerns about the economics of the position disclosed in the finalised local plan in the absence of any consortium agreement providing for equalisation of land values or another satisfactory equivalent. They therefore wished to consider matters further after having sought and obtained advice from surveyors, Fuller Peiser, on the possible values of the land. There was also - putting matters neutrally for the moment - discussion of the percentage profit shares provided for in the minute of agreement. In the event that discussion became heated and the meeting ended when Mr Caughey left in a mood of displeasure.
28. Against that short summary of the meeting and reverting to the solicitors' evidence Mr Craig deponed that on the evening of 1 March he received a telephone call from his client in which Mr Caughey reported that the finalised local plan had been issued; that it was in terms of the Greenlaw Partnership master plan; that he had been to a meeting with the Brewsters who were not as happy with the planning matters as he was; that there had been talk of a sweetener and reduction of his profit share whereupon, he not finding that acceptable, he had left the meeting. In accordance with a suggestion made to and approved by Mr Caughey, Mr Craig next day (Friday 2 March) composed and dispatched the letter 6/25 of process in which, having referred to the meeting and the finalised local plan, Mr Craig wrote:

"Frank believes that the Brewsters may no longer wish to proceed with the purchase of plots 1 and 2 McKelvie [ie. the 12 acre site]. Could you please confirm to me in writing within 48 hours if the Brewsters are proceeding with the purchase of these plots. If the Brewsters are not proceeding with the purchase of these plots then Frank will purchase these plots himself.

Please return titles to me so that I can progress the conveyancing with [Mrs McKelvie's solicitors]."

Mr Smith gave evidence to the effect that on receiving this letter he faxed it to his clients for instructions and was in due course told that the Brewsters were considering their position, the indication given by David Brewster being that of reservation over the absence of an equalisation agreement to offset the proposed allocation of their proposed site to lower value uses. Mr Smith, who took the view - not disputed by counsel for the first defender - that there was no obligation on the Brewsters to decide within 48 hours whether they wished to proceed or not, informed Mr Craig by telephone of their position. It appears that on Thursday 8 March Mr Craig telephoned Mr Smith. Number 7/5 of process bears to be a typewritten note file note by Mr Craig of that telephone conversation. Mr Craig stated in his evidence that he normally noted the tenor of telephone conversations in manuscript but if the content were judged by him to be important or significant he caused the preparation of a typewritten note. This typewritten file note reads thus:

"Telephoning Norman Smith discussing my fax of 2 March 2001. Noting that he said he would send the titles and drafts to me. He also said he had no instructions as yet on my fax of 2 March."

The document 7/21 of process is a further typescript file note dictated by Mr Craig concerning a conversation on Friday 9 March. It reads as follows:

"Speaking to Norman Smith on the telephone advising him that my client had been told by Murray Yeoman that the Brewsters would not proceed unless my client reduces his profit share. Advising him that my client would not reduce his profit share."

Mr Smith stated in his evidence that he had no particular recollection of this telephone conversation, there having been a number of telephone calls passing between him and Mr Craig. On Tuesday 13 March, having communicated with his clients, Mr Smith responded to the telephone call by a fax message, copied to Mr Brewster and Mr Yeoman, in these terms (6/26 of process):

"I refer to our telephone conversation on Friday regarding the decision on plots 1 and 2 McKelvie.

I would reiterate that my clients are considering the position at the moment. They are in receipt of the finalised draft local plan for East Renfrewshire and are considering this both with their architects and planning adviser.

Whenever we have instructions following on those deliberations we will return to you."

29. On Wednesday 14 March 2001 Mr Craig sent by fax to Mr Smith the letter 6/27 of process which reads as follows:

"I refer to my letter dated 2 March 2001, our various telephone calls and your fax of 13 March 2001.

Frank Caughey advises me that he had a telephone conversation last night with your clients who told him that they were no longer proceeding with the purchase of Plots 1 and 2 McKelvie. My client has advised me that he will proceed with the purchase of plots 1 and 2 from Mrs McKelvie. Could you please forward to me any titles or other documents relating to Plots 1 and 2 McKelvie so that I can press on with the conveyancing in view of the early entry."

30. On the following day Mr Smith's assistant responded with the Brewsters' position. That response is in a fax (6/29 of process) which, after referring to Mr Craig's fax of 14 March, reads thus: "Our clients have in fact not yet made any decision in relation to this matter. They continue to consider their position and, as indicated in our previous correspondence with you, we shall be in touch as soon as a decision is made."
31. That fax message evoked the following reply, in the document 6/28 of process, dated 15 March, which contains the following:

"Our client advises us that your clients clearly told him that they were no longer proceeding with the purchase of Plots 1 and 2 McKelvie. In view of the imminent date of entry and the delays by your clients our client has instructed us to advise you that if we do not receive confirmation in writing from you by 5.00pm tomorrow that your clients are proceeding with the purchase of Plots 1 and 2 McKelvie then our client will proceed on the basis that your clients are not purchasing Plots 1 and 2 McKelvie and purchase these Plots himself"

Messrs Maclay Murray & Spens in turn replied to that time limit by a fax transmission (6/30 of Process) at 15.36 hours on the following day, Friday 16 March. After referring to Mr Craig's fax the message continues thus:

"We would refer you to the terms of the agreement and confirm our clients continue to consider the issue. We shall revert to you as soon as a decision has been reached."

32. Following that particular exchange of written material it appears that although there were telephone conversations in which Mr Smith continued to emphasise to Mr Craig that the pursuers were still considering matters the next communication in writing was a letter (6/31 of process) dated 23 March and sent by post from Mr Craig to Maclay Murray & Spens. It reads as follows:

"I thank you for your fax dated 16 March 2001 and refer to our telephone conversations this week. Despite the terms of your fax and the telephone conversations I confirm again that your clients clearly told my client that they would not be proceeding with the purchase of Plots 1 and 2 McKelvie. Your clients said that the only way they would be prepared to proceed with the purchase of Plots 1 and 2 McKelvie would be if my client reduced his percentage share of profits. My client again confirmed to your clients that he was not prepared to do this. Your clients then again stated they would not be proceeding with the purchase. Your clients' agent, Murray Yeoman of Yeoman McAllister, also confirmed that your clients would not be proceeding unless my client reduced his percentage. Your clients have, on three separate occasions, advised my client that they are not proceeding with the purchase of these Plots. My client is therefore now proceeding on the basis that your clients are not purchasing Plots 1 and 2 McKelvie and is purchasing these Plots himself."

To that letter Mr Smith replied by a letter (6/32 of Process) faxed on Tuesday 27 March 2001, the material parts of which are in these terms:

"My clients position as covered in our telephone conversations is quite clear. They have not yet made a decision as to whether they will proceed with the purchase of Plots 1 and 2 McKelvie.

There are three main issues which they are considering. The first of these is the planning position as drawn out in the finalised draft local plan. It is likely to be some two years before the finalised local plan becomes adopted and this brings with it attendant risk and cost to my clients. It is almost certain that the draft finalised local plan will go to public enquiry with the inherent risks that this brings.

Secondly, my clients are considering the implications of the master planning arrangement and the consortium agreement which follows from that. Frank is well aware of the significant difficulties which have been brought up in the early drafting for consortium agreement and given that all the financial risk in this transaction rests with my clients they are looking at this matter also.

Thirdly, in light of the changed timetables and the fact that it is my clients who are absorbing all the risk in this case they have asked Frank to reduce his percentage to 32%.

Consideration of all three of these matters will lead to a final decision by the Brewsters which decision in terms of the contract entered into between our respective clients must be made on or prior to 7 April.

I would reiterate that at no time did my clients say that they would not be proceeding with the purchase. Equally Yeoman McAllister are the Architects acting on behalf of Alex Brewster & Sons and would therefore not be in a position to comment on contract matters on behalf of Alex Brewster & Sons.

I would also stress that the contract precludes Frank from seeking to negotiate with any other parties in respect of the purchase of the Plots and I would ask you to remind him of that.

As previously advised whenever my clients have made a final decision on this matter we will communicate that decision to you and to Frank and that in writing.

Please let me have your written confirmation that Frank is not dealing with any third parties in contravention of the contract entered into between our clients."

The terms of the pre-penultimate and final paragraphs are prompted by Clause 10 of the minute of agreement and second-hand hearsay information conveyed to Mr Brewster that the first defender was "hawking the deal around the market". To that letter Mr Craig replied by a letter of 2 April 2001 (6/33 of Process) in which he wrote inter alia that in view of the contents of Mr Smith's letter of 27 March he had advised Mr Caughey that in his opinion the Brewsters were "not proceeding with the purchase of Plots 1 and 2 McKelvie".

33. At about this time Mr Smith was due to leave for a short holiday in France, departing from Scotland on 4 April. Prior to setting off on holiday he dictated on tape a letter subsequently typed up and dated 5 April 2001. It is number 6/35 of process and replies to Mr Craig's letter of 2 April. It underscores again that the Brewsters are still considering their position and awaiting input from their chartered surveyors on the valuation issues of the land. It records that it has been stressed to the Brewsters the need for immediate communication of their decision in light of the early date of entry.
34. In the event, on 4 April 2001 Mr Smith received word by mobile telephone from Mr David Brewster that in the light of the information just received from those surveyors the Brewsters intended to proceed with the acquisition. Instructions were then immediately passed to others in Maclay Murray & Spens resulting in that firm's transmission that day by fax of a letter (6/34 of process) giving formal notice of the pursuer's intention in terms of the minute of agreement to proceed to acquire the McKelvie plots. The letter also made reference to certain conveyancing matters. On 5 April 2001 Maclay Murray & Spens informed Archibald Sharp & Company that, as indeed happened, they would be placed in funds for payment of the purchase price of £1.6 million and for the stamp duty and registration dues on the following day.
35. Neither of those communications produced any response from Archibald Sharp & Company. Messrs Maclay Murray & Spens therefore made contact with the solicitors acting for Mrs McKelvie whence they learned that on 29 March 2001 Mr Caughey had assigned his rights under the missives with Mrs McKelvie to the second defenders - Chelmwood - and that Mrs McKelvie's solicitors were about to settle the transaction by conveying the land to Chelmwood. This news immediately provoked the taking by Maclay Murray & Spens of steps which are perhaps more relevant to the bona fides of Chelmwood and to which it will be necessary to revert.

The oral communings

36. Against that exposition of the communications between the solicitors I turn to the evidence given by the principals and by Mr Yeoman concerning the averred telephonic or oral communications.
37. What was said at the meeting held at the pursuer's office on 1 March 2001 is not founded upon by the first defender as either a repudiation or intimation of intention not to proceed but it nonetheless requires to be noticed. The details of how the meeting was actually arranged were the subject of some discussion and dispute in the evidence but I do not see these as being of any real consequence. In general terms it is evident that the enthusiastic reception of the finalised local plan demonstrated by Mr Caughey then and now was not wholly shared by the others. Mr David Brewster explained in his evidence that in the absence of a land equalisation agreement or an equivalent the allocation of the land uses in the Greenlaw Partnership masterplan, and hence in the finalised local plan, was not wholly satisfactory. That fact, and the amount already extended on the project (over £400,000) had led the Brewster brothers to consider persuading Mr Caughey to accept a lower share of the ultimate profit. This was discussed between Mr David Brewster and Mr Yeoman prior to the meeting on 1 March. According to Mr Yeoman the understanding was that Mr Yeoman would broach the topic at an appropriate point in the discussions.
38. There are differences in recollection concerning what was said at the meeting and the order in which things were said or discussed. To a large extent that is what one would expect. As respects the question of profit share there are however differences of account which may be of some significance. In his evidence Mr Yeoman indicated that he was about to broach the topic of profit share when Mr Caughey came out with a proposal that his share should in fact be increased to 50%. Mr Yeoman deponed that he responded by saying that it should rather be two thirds to one third because of increased funding costs. Mr Yeoman treated Mr Caughey's proposal as a serious one. The meeting thereafter deteriorated with Mr Brewster pointing out that he would need to obtain advice (from Fuller Peiser) on the potential land values. According to Mr Yeoman, Mr Caughey said that if the Brewsters would not agree to increasing his share to 50% he, Caughey, would get another to take the deal on and he referred to "Collins" as such a third party.
39. In his evidence-in-chief Mr David Brewster indicated that Mr Caughey made the first overture by asking for an increase in his share to 50% to which Mr Yeoman had responded by saying that Mr Caughey's share should be 32% because the Brewsters had been putting more money in to the project than had originally been envisaged. In cross, Mr Brewster indicated that it was as Mr Yeoman was about to propose a lower percentage share that Mr Caughey broke in with a proposal for 50% payable to him. Mr Brewster went on to say that Mr Caughey then suggested at the meeting that "anyone else would pick up this deal, even the Collins brothers".
40. In his evidence Mr Caughey presented a rather different picture. He said that he distributed copies of the finalised local plan which the others then perused. He then suggested going to the pub to celebrate. Mr David Brewster's response however was to say that he was not happy, matters had to be sorted out; it was not the deal which had been brought to them. Mr Caughey went on to depone that when he enquired what the problem was David Brewster said that it was his - Mr Caughey's - percentage share. Both of the Brewster brothers having expressed unhappiness, he was asked to go away and think about his share. According to Mr Caughey he then asked whether it would be 10%, 20%, or 50%, whereupon the others present "fell about laughing". The meeting then became heated following which he gathered up his copy of the finalised local plan and left. His reference to a 50% share had not been serious. That evening he telephoned his solicitor and told Mr Craig, among other things, that he thought the Brewsters were going to "back door" him and acquire the subjects directly from Mrs McKelvie. It was arranged that Mr Craig would write to Mr Smith.
41. According to the evidence given by Mr Caughey, no response having been received to his solicitor's letter of 2 March 2001 he elected to telephone David Brewster from his home to Mr Brewster's mobile number on Thursday 6 March. He deponed that he asked whether the Brewster's were going ahead with the deal to which Mr David Brewster said, "No". Mr Caughey added that in that conversation David Brewster invited him to think further about the percentage shares and mentioned that there were some difficulties with the bank and there was a reluctance on the part of Alex Brewster.
42. Mr Caughey further deponed that on the afternoon of Friday 9 March he again telephoned Mr David Brewster on the latter's mobile telephone knowing, he said, that David Brewster and Murray Yeoman "went for a drink on a Friday". According to Mr Caughey he spoke with David Brewster and asked him what he was doing about the deal and whether he was going ahead with it and to those enquiries, according to Mr Caughey, Brewster replied, "No" and that he would pass the telephone to Mr Yeoman. On being so transferred Yeoman indicated that he, Caughey, should think about his percentage and thereupon returned the telephone to Brewster who said nothing more of any consequence.
43. On 13 March 2001 Mr Caughey received from his solicitor a faxed copy of Mr Smith's fax of that date. In his evidence Mr Caughey said that he treated it as "a load of rubbish - there was nothing to consider". His evidence was to the effect that later that day he telephoned David Brewster and that David Brewster again replied negatively to his question whether the Brewsters were going ahead. According to Mr Caughey, he then decided that the Brewsters would not be proceeding and he started looking for other funders. He therefore started "setting out his stall" which he said involved approaching a number of parties, including a Mr Coakley whom he had first met socially some two to three weeks previously through a friend.
44. As I understood his evidence Mr David Brewster did not dispute that there were probably some telephone conversations passing between him and Frank Caughey following the meeting on 1 March. He had no recollection of any particular call on 6 March, 9 March or 13 March. He was clear that he did not in any telephone conversation tell Mr Caughey that the Brewsters had decided not to proceed. No such decision had been reached. He did not say to Frank Caughey that he would not proceed and then pass the phone to Mr Yeoman, nor did he ever overhear Murray Yeoman say by telephone that Frank Caughey should drop his percentage share. Mr Brewster accepted that he was aware that in the days immediately after the 1 March meeting Murray Yeoman had some telephonic discussion with Mr Caughey about profit share but he himself did not discuss that directly with Frank Caughey. But he was clear in his denial of having ever represented to Frank Caughey that the Brewsters would only proceed on condition of Frank Caughey's accepting a smaller profit share.
45. For his part Murray Yeoman indicated in his evidence that in early March there was more than one telephone conversation between him and Frank Caughey on the one part and him and David Brewster on the other in which the question of percentage profit share was discussed he, Yeoman, endeavouring to broker a new arrangement on percentage share. While there were such discussions the Brewsters however never said that they would not proceed at all unless Frank Caughey accepted a lower share and the question of altering the profit sharing arrangement was effectively not under active discussion after about the first week of March.

Assessment

46. In approaching this conflict of evidence I have to say at the outset that I am satisfied that at no stage between the issue of the finalised local plan and his intimation to his solicitors that the firm had indeed decided to proceed did David Brewster reach the contrary view that his firm should not proceed with the acquisition of the McKelvie plots, or indeed that they should do so only on condition that Mr Caughey agree to reduce his profit share. David Brewster explained why, in the absence of the expected land value equalisation agreement, the value of the plots in the event of development occurring in accordance with the proposals of the finalised local plan was of importance. I accept that evidence, which was not I think truly in dispute. For that reason the pursuers instructed Fuller Peiser who reported on 4 April in terms which led David Brewster to take the immediate decision to proceed. It would be odd, to say the least, for David Brewster, whose firm had already expended some substantial sums, to take a decision in advance of receipt of the advice which he had instructed in order to take that very decision. Further, if he had indeed taken a decision not to proceed it is hard to see why he should not tell his solicitors such. Yet more so if he had taken such a decision and orally communicated it to Mr Caughey. But, among others, the letter of 27 March (6/32 of process) written on instruction is quite clear that no decision had been taken and that the pursuers were still awaiting advice. A decision not to proceed was one at very least arguably open to the Brewsters in terms of Clause 3.5 of the minute of agreement. The Brewsters and their solicitors took the view that such was their option. It would be important that the exercise of that option be properly recorded in a communication between solicitors and in a passage in his evidence David Brewster explained that the decision was of an importance such that he would not convey it by telephone to the other contracting party but would wish to intimate it via his solicitors.
47. It is convenient at this point to advert to a submission by counsel for the defenders to the effect that since at that passage in his evidence David Brewster indicated that he did not regard the telephone as a method of communication for serious messages of contractual importance and, in the words adopted by counsel, did not accept that an oral telephonic statement would be contractually binding it was likely that David Brewster had used a phrase such as "the deal's off" believing such a phrase uttered on a telephone to be of no contractual effect. I have carefully reviewed that passage of the evidence occurring towards the end of cross-examination by the first defender and I do not consider that it properly justifies that submission. On my review of Mr Brewster's evidence he was simply stressing that a decision not to proceed with a transaction of the importance of the present one was not a decision which he would leave to oral telephonic communication. He did not say that he considered such an oral communication not to be valid and in any event he re-iterated that he did not say to Mr Caughey in any telephone conversation that the "deal was off".
48. The evidence given by Mr Brewster finds, in my view, a degree of support in the evidence given by Mr Yeoman. It is of course the case that Mr Yeoman was not a party to the alleged telephone conversations on 6 and 13 March. He was however present at the meeting on 1 March respecting which there is a divergence of testimony going beyond the ordinary differences of recollection and emphasis which one would expect. His evidence of that meeting is largely supportive of David Brewster and contradictory of Mr Caughey.
49. In terms of his demeanour in the witness box Mr Yeoman impressed me as being a credible witness generally endeavouring to be careful in giving his recollection of events. Counsel for the defenders offered certain criticisms of Mr Yeoman's testimony. Among others it was pointed out that he was not a wholly disinterested party since there was an understanding that he or his firm receive 2% of the possible profits. He was moreover a friend of the Brewster brothers, having a shared interest in sports such as skiing which friendship ante-dated his having acted for their firm in a professional capacity. He was due payment from the Brewsters for fees incurred in connection with this project. I naturally bear in mind these considerations - all freely accepted by Mr Yeoman in his evidence - but I do not consider that either individually or collectively they constitute in themselves a sound reason for rejecting his evidence as to what transpired at the meeting. Counsel for the defenders also founded on certain answers given by Mr Yeoman respecting matters of planning law. It was said firstly by counsel for the second defenders that an initial response to the question on the meaning of "zoning" in the minute of agreement as being allocation in the adopted local plan indicated a desire to assist the pursuers. However, in subsequent testimony when the timescale for adoption had been drawn to his attention Mr Yeoman readily departed from that viewpoint in favour of another interpretation to which I shall revert. The question of the proper construction of those provisions of the minute of agreement is perhaps a difficult one and it is not surprising that Mr Yeoman might yet change his view. I do not find in his response to questions on "zoning" anything which detracts from my impression of Mr Yeoman as a careful honest witness. Secondly, counsel for the first defenders founded on a passage in his evidence in which Mr Yeoman stated that the finalised local plan was not a material consideration in relation to the grant of planning consent which counsel for the first defender described as "giving the air of pulling the wool over the eyes of someone who would know no better". I have to say that I did not then or now have that impression. It seemed to me that the exchange was simply reflective of the discussion between counsel and a lay witness on more technical aspects of planning law. A further point advanced by counsel for the first defender in relation to Mr Yeoman's testimony related to evidence of the participants of the meeting concerning a possible reference to the "Collins brothers". This requires setting in a fuller context.
50. As already indicated, in his evidence concerning what was said at the meeting on 1 March Mr Brewster deponed that Mr Caughey had uttered words to the effect that anyone else "could pick up this deal, even the Collins brothers". While accepting that he could not recollect the exact words with precision, Mr Brewster deponed that he was fairly sure that mention had been made of the Collins brothers. It was subsequently put, in cross, that while Brian Collins (who it appears subsequently emerged as a director of the second defenders) had a brother, that brother was not engaged in property transactions and that the Patrick Collins entered in the Company House documents produced in process concerning the second defenders as a director and secretary was in fact a cousin, not a brother of Brian Collins. In passing I would observe that since no member of the Collins family gave evidence there is no direct evidence of the truth or otherwise of those assertions of fact. Be that as it may, when he came to give evidence Mr Yeoman deponed to Mr Caughey's having said that if Brewsters would not agree to a 50% share he (Caughey) could get others to take the deal and mentioned "Collins" whom he, Mr Yeoman, did not know. Mr Yeoman did not recollect mention having been made of the word "brothers". The cross-examiner then sought to put to Mr Yeoman the terms of the summary of the witness's evidence called for in terms of Rule of Court 47.12(1)(b) which referred to the "Collins Brothers". In so far as it is objectionable to use a precognition as a basis for crossing a witness in respect of an allegedly prior inconsistent statement the same applies a fortiori to a witness summary in terms of that rule of court, that summary being a further distillation of the precognition. In the event, however, far from damaging his credibility Mr Yeoman's demeanour in response to this exercise of cross-examination if anything confirmed my impression of him as a truthful witness.
51. Support for the account given by Mr Caughey of the meeting of 1 March and of the three phone calls in particular issue was sought by counsel for the defenders in the evidence given by Mr Caughey's wife. In summary, Mrs Caughey's evidence included a narration of a de recenti account given by her husband of the meeting of 1 March on his return home thereafter and of his demeanour before and after the meeting and of her presence near her husband on the occasion of each of the three telephone conversations now relied upon by the first defender.
52. In his submissions counsel for the pursuer characterised Mrs Caughey's evidence as "over well rehearsed". In my opinion that is a very apt description. It was in my view clear from her presentation and from the content of her evidence on those topics that the evidence which she was to give had been much discussed. It was given in a patently rehearsed manner including a plain intermingling of what she had been told later by Mr Caughey during the course of this dispute with such recollection as she might have had of actual events. When questioned on other matters her demeanour altered markedly and her recollection became hesitant and uncertain. I have to say that I am unable to treat Mrs Caughey's evidence as having any supportive or corroborative value and that it falls to be discarded.
53. Reliance was also placed by counsel for the first defender on the evidence of Mr Craig of Mr Caughey's reports to him of the meeting of 1 March and of the three telephone calls particularly in issue. Although, as I understood him, Mr Craig kept manuscript notes of telephone conversations none relating to telephone conversations between him and his client have been produced. The typewritten note of the call to Norman Smith on 8 March, number 7/5 of process, makes no mention of any intimation by David Brewster of a decision not to proceed. Likewise the other file note, number 7/21, also makes no such mention. Mr Craig claimed in evidence that there would probably be a reference to it in his handwritten note. I regret to have to say that I do not find Mr Craig's evidence on this matter to be entirely satisfactory. The witness accepted that if it had been reported to him that David Brewster had intimated a decision not to proceed that would have been a matter of importance. His practice was, he said, to transfer into typewritten form anything of importance, but the file notes do not contain that important information. It is additionally to be noted that though acting as Mr Caughey's solicitor in the transactions in issue Mr Craig has continued to act personally as his solicitor in the conduct of this litigation and I have the impression that the partisan exercise of preparing for and acting in the litigation may have coloured his actual recollection of events.
54. It is I think not disputed that for some years Mr Caughey has entertained both the conviction that the land to the northwest of Newton Mearns would eventually be removed from the ambit of the greenbelt policies and also the desire, if not determination, to make a profit from the development value thus created. Mr Caughey plainly saw the publication of the finalised local plan on 1 March 2001 as virtually the realisation of his hopes. It appears to me that when, at the meeting of 1 March, he found that his celebratory mood was not wholly shared and that the Brewsters were not only unwilling to increase his profit share but were proposing a reduction in it Mr Caughey became suspicious that the Brewsters might enter into some transaction directly with Mrs McKelvie to his exclusion. As Mr Caughey observed in the course of his evidence, after the meeting of 1 March he thought the Brewsters were going to "back door" him and buy directly from Mrs McKelvie. It appears to me that the continuing absence of any decision by the Brewsters over the ensuing days simply re-inforced that suspicion. As Mr Caughey remarked in evidence, by 13 March 2001 he was convinced they were "going to shut me out of the deal". Having formed that belief he set about making another arrangement.
55. However, while accepting that Mr Caughey became convinced that the Brewsters were not going to proceed to acquire the McKelvie land in accordance with the arrangements in the minute of agreement, I do not consider that it follows that he reached that view because David Brewster told him that the Brewsters had decided not to proceed. As I have already indicated, the view taken by the Brewsters and their solicitor Mr Smith was that under the minute of agreement the Brewsters had until 9 April a choice whether to acquire the McKelvie plots. Whatever position on the interpretation of the minute of agreement is now adopted by the first defender and his advisers, there is nothing in the contemporaneous correspondence which suggests to me that Mr Caughey or his solicitors had any different view. Faced with the Brewsters' comparatively lesser degree of enthusiasm and the absence of intimation of a positive commitment I conclude that Mr Caughey feared that the Brewsters would indeed exercise their option not to proceed and thereafter enter into direct relations with Mrs McKelvie thereby depriving him of a substantial amount of money. The steps taken by Mr Caughey to make alternative arrangements are explicable in terms of that fear. Having resolved to embark upon that course, in breach of the minute of agreement, it no doubt became convenient, as counsel for the pursuers put it, for Mr Caughey to rationalise matters by transforming his belief about what the Brewsters were going to do into a purported intimation by David Brewster of a decision not to proceed.
56. In these circumstances and given among other things my satisfaction that David Brewster reached neither a decision not to proceed nor a decision to proceed only subject to the condition of Mr Caughey's accepting a lower share of profit, Mr Brewster's demeanour as a witness, and the evidence of Mr Yeoman, I am not able to accept Mr Caughey's evidence to the effect that he received telephonic intimation from David Brewster of such a decision. The evidence of Mr Brewster that he made no such statement is to be preferred.
57. There are, however other factors which cast doubt on Mr Caughey's reliability as a witness respecting these central matters. The evidence tendered did not fully expose the parties truly interested in Chelmwood. The second defenders led no evidence. While recognising that absence of full information, it has to be said that on the face of matters and as presented by him in his evidence Mr Caughey's arrangements with the second defenders appear at the least somewhat curious. The amount of money which the first defender stood to gain by way of his 39% share under the minute of agreement was potentially substantial. He counterclaims for his loss of that share. The sum counterclaimed is £3,567,775 being 39% of the estimated profit on resale of the McKelvie land for £9,404,550. In his evidence Mr Caughey confirmed both that the counterclaim proceeded on his instruction and that so far as he was concerned the statements therein were correct. However it is contended by Mr Caughey that in return for the disposal to Chelmwood of his interests under the McKelvie missives (which might represent a profit of over £9,000,000) he received but £90,000 plus a further £10,000 respecting the assignation of a standard security granted by the Brewster brothers over a different plot but in security of their obligations under the minute of agreement. Given that a sum over £3.5 million is sought respecting the Brewsters' obligations under that agreement and that the value of the plot in question is undoubtedly a great deal more than £10,000 that assignation too raises obvious question marks.
58. Mr Caughey sought to explain this by saying that he was unconditionally committed to paying Mrs McKelvie £1.6 million on 9 April 2001 and would incur substantial liability in damages in the event of his not doing so. Hence his anxiety to make alternative arrangements. I have difficulty in accepting this purported rationalisation of his anxiety. If, as Mr Caughey believed, the Brewsters might cut him out of the deal by transacting directly with Mrs McKelvie the implication must be that they would be able to offer her a better price than that which he had contracted to pay. Given the value contended for in the counterclaim the implication is that Mrs McKelvie might easily realise the subjects at a higher value than that provided for in the missives between her and Mr Caughey. If anything, the advent of the finalised local plan, with the local planning authority now advocating the removal of the subjects from the greenbelt, enhanced the value of the plots. I am in no doubt that Mr Caughey, to whom the finalised local plan was nothing but good news, did not lack the astuteness to see that, even if he was unconditionally committed to buying the land, on the information available to him a successful claim for a large amount of damages was not a likely consequence of his not settling on 9 April.
59. Further, the contention now advanced that Mr Caughey was unconditionally bound to purchase on 9 April 2001 at a price of £1.6 million is at the least questionable. As will be seen from the terms of the missives which have been set out above, the original bargain with Mrs McKelvie was plainly conditional in giving the purchaser an escape if the subjects were not re-zoned for leisure purposes by the stipulated date, coinciding with the date of entry. Mr Caughey subsequently proposed a different date of entry. A missive tendering that alteration but not expressly altering the date in the sub-clause containing the escape provision was met by a simple acceptance. It was not in the interest of either the first defender or the pursuers to transform a bargain conditional on "re-zoning" into an unconditional bargain. No such counter stipulation was advanced by Mrs McKelvie. In his evidence Mr Craig claimed there had been such an intention, binding on his client, though not expressed in writing and that he for that reason nevertheless considered the missives unconditionally binding. I am unable to accept Mr Craig's evidence on this matter. In my assessment of matters it affords an example of the colouring of his evidence to which I have already referred.
60. It is also to be observed that the assignation by Mr Caughey to Chelmwood of his interests under the missives with Mrs McKelvie bears to have been executed by him on 29 March 2001 in the presence of Mr Craig as witness to that execution. Nonetheless, three days later Mr Craig writes to Mr Smith, omitting any mention of that assignation, but saying that he has "stressed to Frank his obligations in terms of his contract with Mrs McKelvie to purchase Plots 1 and 2." and confirming that "Frank is now proceeding on the basis that your clients are not purchasing Plots 1 and 2." When challenged on the candour absent from this letter and the misleading reference to obligations under missives, Mr Craig made reference to a possible liability were Chelmwood not to fulfil its obligations but I regret to have to say that both in content and demeanour I did not consider Mr Craig to provide any satisfactory answer.
61. A further pointer is to be found in the reaction (or absence of reaction) of Mr Caughey and Mr Craig to the intimation on 4 April of the Brewsters' intention to proceed, and indeed the subsequent letter confirming that they were in funds to settle. Given that proceeding with the arrangements with the Brewsters under the minute of agreement was seen as yielding a share of profits of some £3.5 million one would have thought that at least some consideration might have been given to the possibility of disentangling or reversing arrangements with the second defenders whereby, it is said, Mr Caughey was to receive only £100,000. Mr Craig admitted in his evidence that no thought entered his mind to do that, nor evidently was it ever mooted or suggested by Mr Caughey, who I am confident would have explored every avenue to avoid a result truly entailing his accepting £100,000 instead of the intended potential profit of £3.5 million.
62. When Mr Caughey decided to proceed independently of the Brewsters he and Mr Craig approached another solicitor, Mr Terence Docherty of Messrs Brunton Miller. Mr Craig explained this approach by saying that Mr Caughey had arranged funding with a Mr Coakley but a company was to be set up to act as Mr Caughey's new funding vehicle. According to Mr Craig, the reason for approaching Mr Docherty was that the company had a separate persona. This, as I understood Mr Craig, was seen by him as presenting a deontological problem. Mr Craig maintained in his evidence, as I understood it, that it was improper for a solicitor to act for a company which was borrowing money and under the control of his client. I have to say that I had some difficulty in following this.
63. According to Mr Docherty, he was introduced to Mr Caughey with the indication that his new client was to be a company, in the event, Chelmwood. He understood Mr Caughey to be acting as the agent for the company. Mr Docherty received from Archibald Sharp & Co a draft of the document number 7/2 of process, being the assignation dated 29 March 2001 by the first defender in favour of Chelmwood. He returned the draft as revised but whether any real revisal was made to it was not explored in evidence. Until that point, when he returned that draft earlier received from Mr Craig, he had not spoken to anyone other than Mr Caughey or Mr Craig concerning the affairs of the company Chelmwood which had been incorporated - apparently by company formation agents - on 14 March 2001. Mr Docherty indicated that he subsequently learned that a Mr Brian Collins had been appointed as a director of the company and thereafter he received a mixture of instruction concerning the affairs of the company from both Mr Collins and Mr Caughey. Correspondence was copied to both. The assignation of the standard security (7/23 of process) was also received initially in draft by Mr Docherty from Archibald Sharp & Company. He approved it on behalf of Chelmwood but was unclear as to the source of that authority since he thought that both Frank Caughey and Brian Collins may have been instructing him at that time in relation to these matters.
64. The foregoing all tends to confirm me in my view that, apprehending that the Brewsters might, to use his phrase "shut him out of the deal", Mr Caughey simply set about arrangements for his participation in an alternative and no doubt profitable arrangement, to the exclusion of the Brewsters. But there is a further matter at least obliquely pertinent to Mr Caughey's credibility which falls to be mentioned. Although he had maintained that he had received a total of £100,000 from Chelmwood as a consideration for the assignations of his interest under the McKelvie missives and the standard security, in the course of his evidence Mr Caughey was constrained to admit having signed a document acknowledging that he had received some £200,000 from Chelmwood as part of the proceeds of disposing of his interest. Mr Caughey denied receipt of that sum. He stated that he had signed the document so that it could be used for the purpose of persuading the Allied Irish Bank to lend money in connection with the transaction. He stated that he knew at the time of signing that the document's purpose was that of persuading the bank to lend and that its content was untrue.
65. All of these matters confirm me in the view which I have reached that Mr Caughey's evidence in relation to the telephone calls is not reliable and should be rejected. Since I thus find that it is not established that David Brewster ever intimated by telephone that his firm had decided not proceed to acquire the McKelvie land it is not necessary for me to determine whether such an intimation would constitute an anticipatory breach of contract rather than a notice under Clause 3.5. However in deference to counsel's submissions it may be appropriate that I give a brief account of my views on the issue, which effectively concerns the proper interpretation of the second sentence of Clause 3.5 of the minute of agreement, as amended, which for convenience I quote again:

"In the event that the subjects are not zoned by 9 April 2001 or are zoned in terms which are not satisfactory to the purchasers then the purchasers will be under no obligation and will incur no penalty by notifying the seller that they do not intend to proceed with the purchase of the subjects."

"Zoning"

66. The clause does not say in which document, or even in which context, the "zoning" is to take place, although it is perhaps not hard to imply that the context is that of town and country planning legislation. However, as was generally agreed by counsel, "zoning" is not a term of art employed in planning law or indeed in the statutory development plan. It is the pursuers' advisers' contention in the pleadings that the employment of the term "zoned" in this clause could have reference only to an adopted local plan forming part of the statutory development plan. There is a prima facie attraction in the view that the further implication of the clause be that the reference is to a finally adopted local plan having statutory effect and the opening words of the second sentence would indeed be consistent with that approach. However, that approach does not fit with the contracting parties' knowledge of the timescale for the adoption of a new local plan. With that particular knowledge it is thus difficult in the context of this case to say that the parties must have intended "zoned" to refer to the adopted local plan. Conversely it is also difficult objectively to relate "zoning" to any particular stage or point in the planning process. It may therefore be difficult to give content to the opening words of the second sentence. However, as was mooted in the course of the discussion of this matter in Mr Yeoman's evidence, as a matter of ordinary language the word "zoning" may simply refer to any allocation on a map or plan. In that event the focus may then shift to the remaining words, particularly the phrase "terms which are not satisfactory to the purchasers". As Mr Yeoman suggested, the intention behind the clause may be to give the purchaser an option to proceed in the event that matters have reached a stage in the planning process at which, having regard both to the status of the document and its content, the purchaser is content to advance matters. In my view that is a tenable construction of the clause and the one which has some attraction. It also means that it gives the purchaser an option not to proceed if, having regard to the status and content of the planning documents in question, he does not find the matter satisfactory and the seller an option to withdraw if nothing by way of progress on the planning side has occurred.
67. However, assuming that allocation or marking on a plan or map for planning purposes has occurred, there then arises allied the question of how the status and content of those documents are to be tested as "satisfactory to the purchasers". The proposition advanced by counsel for the first defender was to the effect that satisfaction must be viewed objectively and narrowly in the sense that since the finalised local plan reflected the Greenlaw Partnership master plan, which had previously received the consent of the pursuers, they must be deemed to be satisfied with the terms of the finalised local plan. I would reject that proposition. Whether something be satisfactory is primarily a matter of subjective judgment and a number of factors or circumstances may bear upon that judgment. In the particular circumstances of this case the pursuers and indeed the first defender participated in the Greenlaw Partnership on the assumption that there would be a compensatory or equalising financial arrangement. Satisfaction respecting that which emerges from a planning exercise cannot be judged without relevant regard to such other, evident, commercial circumstances.
68. Further, I have difficulty with the concept that the purchasers may be deemed to be satisfied with something when no expression of satisfaction has been made. It appears to me in the context of these contractual provisions that an expression of satisfaction by the purchaser is essential before the provisions may begin to operate. That applies in particular as respects the first sentence of Clause 3.5 (relating the date of entry to the date of zoning on terms satisfactory to the purchasers) which in my view could never operate in any practical way if the question whether the zoning was satisfactory to the purchasers were to be tested by some retrospective examination of whether they ought to have been satisfied.
69. In all these circumstances, had I taken the view that there had been an intimation of an unwillingness or an intention not to proceed, I would not have held that it was an anticipatory breach of contract. Rather it would be a notice in terms of Clause 3.5.

The second defenders - good faith

70. In order now to consider the position of the second defenders it is necessary to continue further with the narrative of events. As mentioned earlier, on 6 April 2001 Maclay Murray & Spens learned from Mrs McKelvie's solicitors of the existence of the assignation of the missives to Chelmwood. They also ascertained that Mr Docherty of Brunton Miller was acting for Chelmwood. Mr Smith then telephoned Mr Docherty and advised him of Brewsters' interest under the minute of agreement. According to Mr Smith, indication was given by Mr Docherty that settlement of the transaction with Mrs McKelvie had not yet occurred. In his evidence Mr Docherty confirmed receiving such a call. It was at 15.30 hours and settlement had not then taken place. The cheque in settlement was then dispatched at 15.35 hours. He, Mr Docherty, did nothing to stop or delay settlement and shortly afterwards received from Maclay Murray & Spens the fax number 6/37 of process which advised of the interim interdict granted by this Court against Mr Caughey on the preceding day. A disposition was delivered on 6 April and was thereafter presented following registration on 10 April 2001.
71. Counsel for the pursuer submitted under reference to Rodger (Builders) Limited v Fawdry & Ors. 1950 SC 483 that, while in his submission Chelmwood were not in good faith at any stage, it was sufficient to justify reduction of the disposition in their favour that they were not in bona fide at settlement and thereafter. For his part, counsel for the second defenders stated that he did not seek to suggest that his clients, Chelmwood, did not have knowledge of the Brewsters' prior right at the time of settlement. However he submitted that the stage or point in time at which bona fides was to be tested was the moment of the conclusion of the contractual relationship - in casu the delivery of the assignation. In support of that submission counsel for the second defenders cited two cases to which reference was made in Rodger (Builders), namely Petrie v Forsyth 2 R. 214 and Stodart v Dalzell 4 R. 236 and also referred to Trade Development Bank v Crittall Windows 1983 S.L.T. 510 and Smith v Bank of Scotland 1996 S.L.T. 392. Counsel submitted that in each of those cases in the particular passages referred to by him, the language employed in the opinions delivered referred to bad faith at the time of entering the contract or employed equivalent phraseology such as "the intending purchaser". Counsel also submitted that in Rodger (Builders) Lord Jamieson had employed such language. From this counsel sought to deduce the proposition that in the absence of bad faith at the time of the conclusion of the personal, contractual relationship subsequent acquisition of knowledge of a prior contract was not a ground for reducing the subsequent conveyance and the constitution of the real right.
72. It is no doubt correct that in his expression of the general principle Lord Jamieson in Rodger (Builders) referred to the good faith of the purchaser. Having noted that it was established by the evidence adduced in that case that the second intending purchaser knew of the prior bargain at the time of his contract, Lord Jamieson says, at the foot of page 499:

"In such circumstances the law is not in doubt. If an intending purchaser is aware of a prior contract for the sale of the subjects he is bound to inquire into the nature and result of that prior contract, and his duty of inquiry is not satisfied by inquiry of the seller and an assurance by him that the contact is no longer in existence. If he merely obtains such an assurance, he cannot rely on the missives or a disposition following thereon."

Thereafter, having held the first purchaser entitled on that basis to reduction of the recorded disposition in favour of the second purchaser his Lordship said this (at the foot of page 500):

"Even if I had taken a different view of the missives I would not have been prepared to hold that the disposition could stand. It was prepared in the full knowledge of Mr Bell [the second purchaser] and his advisers that the pursuers were asserting their rights, and his agents accepted a disposition drawn, contrary to the usual practice, by the seller's agents and had it registered, under threat of an action by the pursuers, for the purpose of defeating the latter's rights. In doing so, they were clearly not acting in good faith, and cannot obtain any protection from having got the disposition placed on the register."

The matter is put in perhaps more striking language by the Lord Justice Clerk (Thomson) in this very well known passage;

"The appellants [the second purchasers] assumed their title would be safe once the goal of the Register House was reached. But in this branch of the law, as in football, offside goals are disallowed. In certain states of knowledge a purchaser is regarded as not being in good faith and goes to the Register House at his peril. Where, as here, Mr Bell and his advisers knew that the prior contract had existed and that the Rodgers were asserting that it still existed, they took the risk of the Rodgers being right when they themselves went to the Register House. The Rodgers having been shown to be right, Mr Bell is not entitled to rely on the registration which in the knowledge which he possessed he succeeded in obtaining.

That is enough for the decision of the case but the same principle applies at the missives stage. Mr Bell and his advisers knew that a prior contract had been entered into. So long as that contract subsisted, any contract entered into by Mr Bell could be provisional only ..."

73. In my view the opinions in Rodger (Builders) are clear authority for the proposition that bad faith constituted by the acquisition of knowledge between the completion of a personal contractual obligation and the completion of the real right by the registration of a conveyance is sufficient to justify reduction of that conveyance. The case of Petrie was one in which the facts were such that the allegation of the acquisition of knowledge of the earlier transaction preceded the conclusion of the second contract. The case of Stodart similarly does not appear to have included any question of mala fides intervening between contract and conveyance by reason of the acquisition of knowledge after a contract concluded in good faith. Both of those decisions were of course before the Court in Rodger (Builders). Nothing that was said by the Court in Trade Development Bank or in Smith suggests to me that what was said and decided in Rodger (Builders) was wrong. Being a decision of the Inner House, the case of Rodger (Builders) is of course binding upon me. I would merely add that in my respectful view Rodger (Builders) is correct in principle. Put shortly, once a second purchaser becomes aware that there may be a prior purchaser in the same queue for Register House he must ask the latter if he be such a purchaser and in the event of a positive, correct answer yield place to him. I therefore reject the legal submission advanced by counsel for the second defenders.
74. While the foregoing conclusion is sufficient to deal with the case as advanced against the second defenders it will be noted of course that the submission of counsel for the second defenders proceeded upon the assumption that at the stage of the assignation to Chelmwood of the missives between Mr Caughey and Mrs McKelvie the company was in good faith. However, that is a very questionable assumption. I have already referred to the evidence given by Mr Docherty, particularly in his evidence-in-chief, in which he described how at the outset the person represented as being the agent of Chelmwood was Mr Caughey. Mr Caughey unquestionably had knowledge of the prior agreement with Brewsters. The very circumstance of there being set up a "funding vehicle" at short notice suggests that there must have been some prior "funding vehicle" respecting which it might be expected that the new funders might make some inquiry. That apart, it has to be noted that as part of the ostensible consideration which Mr Caughey was to receive for the assignation of the transaction to Chelmwood was the sum of £10,000 payable in respect of the assignation of the standard security. The evidence of Mr Docherty, as I understood it, was to the effect that he received from Archibald Sharp & Company at the same time as he was drafting the assignation of the missives the draft assignation of the standard security. That assignation refers to the standard security being in security of the obligations of the Brewsters under the minute of agreement with Mr Caughey. According to Mr Docherty and Mr Craig at the time of revising the assignation Mr Docherty did not have sight of that minute of agreement. One would have thought it important that he should have had sight of that minute of agreement if only at the very least to check that the references to the dates in terms of execution were appropriate. Mr Craig ultimately accepted that he had been at fault in omitting to send the minute of agreement with his draft assignation. It may be that neither thought sight of the minute of agreement to be necessary, since its existence and effect was common knowledge to them. Be all of that as it may, it appears to me that since the assignation of the standard security was part and parcel of the arrangements whereby Chelmwood acquired the assignation of the missives the inference is that they must otherwise have been aware of the existence, if not the particular terms of the minute of agreement and were therefore, in my view, at least on notice to make appropriate inquiry respecting that and in their failure to make that inquiry were in bad faith.
75. In my view that circumstance coupled with all the other circumstances to which I have already referred raises a strong inference that Chelmwood, whose other officers or agents were plainly closely linked to Frank Caughey, were well aware of the circumstances of the existence of the agreement with the Brewsters. No attempt has been made by the second defenders to lead anyone from their organisation disclaiming or disputing knowledge of those arrangements between Caughey and the Brewsters with a view to rebutting the prima facie inference of bad faith at the time of the conclusion of the initial arrangements.
76. For these reasons, I conclude that the second defenders were indeed in bad faith, in the particular technical legal sense described in Rodger (Builders), and that their ostensible title to the 12 acre site, registered on 10 April 2001, must be reduced.
77. Counsel for all of the compearing parties were agreed that rather than give effect to my findings by means of upholding or repelling pleas or making any decerniture it would be preferable that I put the case out By Order. As I understood it, this was on the view that, depending upon those findings, it might be more practical to give effect to those findings by some arrangement inter-partes. I accede to that course.