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Cite as: [2002] ScotCS 314

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Wylie v. Aitken & Ors [2002] ScotCS 314 (12 December 2002)

OUTER HOUSE, COURT OF SESSION

A2458/00

OPINION OF T G COUTTS, QC

Sitting as a Temporary Judge

in the cause

KENNETH JACKSON WYLIE

Pursuer;

against

MESSRS JEFFREY AITKEN AND OTHERS

Defenders:

________________

Pursuer: Woolman, Q.C., Robertson; Drummond Miller, W.S. (for Blair, Bryden, Glasgow)

Defenders: Stacey, Q.C., Upton; HBM Sayers

12 December 2002

When this action called for proof the pursuer was suing both as an individual and as an assignee of a company, Dealblend Limited (in liquidation). The pursuer in both capacities was alleging professional negligence against his former solicitor's firm and its partners, one of whom Mr McMaster, was his own solicitor and erstwhile friend. In his final submission senior counsel for the pursuer restricted his claim to one of damages for the pursuer as assignee of Dealblend Limited (in liquidation). The factual issues, according to pursuer's counsel, centred round two disputed telephone calls. One call was made on 25 October 1994 and the other at some uncertain date in May or June 1995. The pursuer's pleadings admit that Mr McMaster had no further involvement in "the matter" after October 1994 until June 1995. The pursuer and Mr McMaster gave different accounts of the conversations and so the issue could be simplified into which account should be accepted. The issue being one of credibility, however, it is necessary to examine carefully the whole surrounding circumstances in order to arrive at a view.

I find the following matters of fact relevant to the issue before me. The pursuer had been active in the licensed trade for some 20 years, running firstly the Railway Tavern, Bridge of Weir, thereafter the Heritage Bar, Linwood and finally the premises about which this dispute revolves, the Bridge Inn, Linlithgow Bridge. He did so through the medium of the limited company Dealblend Limited. It was said on his behalf that his strategy was to build up the trade in premises and then sell at a profit. However, while he may have made some capital profit, the accounts produced for the Heritage Bar indicate that it was being run at a loss. An offer was received for the Heritage Bar from a national brewing company and the pursuer sold at a good price. There had been some difficulties, however, involving the clientele at Linwood and these played a part in his decision to sell. These difficulties were spoken to by Mr McMaster. They were denied by the pursuer and his wife, at least to the extent Mr McMaster spoke to, but I have no reason to disbelieve Mr McMaster on that matter. I find that the desire for a move by the pursuer was comprised of the following factors: that he could obtain a good price; that he was anxious to leave the business as it had been conducted at Linwood and also that he thought that by concentrating on a food orientated business he would have an easier life in terms of the hours he required to devote to his trade. The Heritage was sold on 31 August 1994 by Mr McMaster as solicitor, and the pursuer sought out new premises. When he began to do so was unclear, but he had visited the Bridge Inn armed with sale particulars from Messrs Christie and Co in early September. He gave instructions for a survey from D. M. Hall, Chartered Surveyors; this was sent to him and was dated 7 September 1994. That survey made a point of emphasising a fact disclosed in the sale particulars i.e. that the premises were served by a septic tank.

The pursuer in his evidence-in-chief spoke to a survey which had been lodged in process dated 13 September 1994. It was by D. M. Hall and was directed to the Bank of Scotland. It was noteworthy that he said that he was not clear who had instructed the survey but that at some stage he saw the report. He could not remember if he had showed it to Mr McMaster. However in the course of his cross-examination there was produced, 6/73 of process, on his behalf, the said survey from D. M. Hall to Mr Wylie and Dealblend Limited. Mr Wylie therefore had to accept that he must have instructed the surveyors although up until that time he had given his evidence on the basis that the only survey was the one addressed to the Bank of Scotland. Originally in his evidence he had been anxious not to emphasise the advice given by Halls to make inquiry and instruct professional advice in relation to the question of sewage connection to the main sewer. At another stage in his evidence he said that he had only gone to the local authority in relation to the licence and "not for any other purpose". That is inconsistent with a letter 7/31/65 in which it was stated that he had called at the offices of the local authority Building Control Department and seen plans of the Inn there. Those plans with other documents, were sent to the projected lenders' solicitors on the pursuer's behalf by Mr McMaster on 7 October 1994.

Mr McMaster was instructed by Mr Wylie to submit a formal offer for the premises. He did so on 20 September. The discussions with the lenders, the Bank of Scotland, and the sellers had been conducted prior thereto by Mr Wylie himself.

The critical part of the Missive Offer sent on 20 September was Clause 28 which reads as follows:

"The premises are at present served by a septic tank and the Seller will, at his sole expense prior to the said date of entry, have the premises connected into the public sewage system and evidence of this would require to be exhibited to us prior to the said date of entry along with confirmation from the local sewerage authority that they were satisfied with the connection". That clause was the result of specific instructions by the pursuer.

The seller's solicitors gave a qualified acceptance, Clause 23, which reads:

"With regard to your condition 28, while our clients have already made contact with the Local Authority with regard to the installation of a connection to the public sewage system, it may be some time before this can be completed. Our clients will accordingly identify the cost of the proposed connection and in the event of the work not having been completed prior to the said date of entry, a sum equivalent to the cost of carrying our such works will be held back from the purchase price by you to be placed on a Joint Interest Bearing Deposit until the works have actually been completed. While our clients will be responsible for the negotiation and placing of the contract for the connection works, the actual works themselves will be instructed by your client who will be in day to day control of the premises. On completion of the works, the monies held on deposit will be released to meet the account. In the evidence of the monies on account not being sufficient to meet the relevant bills, our clients will remain responsible for any shortfall. Similarly if any money is left over after payment of the account, that over-provision will be repaid to our clients."

The bargain was concluded on 6 October 1994 without any further modification or qualification of either Clauses 28 or 23 and no alteration or modification thereto was recorded between the respective solicitors acting for the vendor and the purchaser. In particular there was no communication from the seller's solicitors offering, or claiming that there had been accepted, any modification to the terms of those clauses in the missives at any time thereafter.

At a meeting between the pursuer and Mr McMaster on Friday, 7 October when the pursuer was about to go on holiday for two weeks to Cyprus, a power of attorney was granted to the second defender. There was no discussion of the sewage or the sewage connection at that meeting. On that date Mr McMaster sent a letter to the seller's solicitors, 7/32/72, discussing many matters relevant to the transaction. In particular para. 6G of that letter reads:

"With reference to Condition 28 of our offer and qualification 23 of your qualified acceptance can you please advise us of the present position. We presume that your clients would have engaged the services of Professional Engineers to advise them and to obtain their quotations for the anticipated cost of the work. It will be necessary for our client to propose the proposed works and specification and we will require to identify the anticipated costs in order that monies can be retained on Deposit Receipt all in terms of your qualification 23."

In response the seller's solicitors wrote on 11 October 1994 as follows:

"(g) Our clients have had advice from professional engineers regarding the upgrading of the sewage/drainage system. We have a rough idea of the costs involved but it is possible that some grant aid may be made available by Central Regional Council. This is currently being investigated and once we have some figures we shall advise you of the details and agree the necessary retention."

While the pursuer was on holiday it was agreed that title would be taken in the name of Dealblend Limited. The Falkirk Licensing Board had to be informed of that and agree to it before they were due to meet on 26 October. On Monday, 24 October the pursuer having returned from holiday had a meeting with Mr McMaster. Nothing was discussed about sewage at that meeting and the pursuer then went to meet the seller to deal with his stock and the like. He said that nothing was there discussed about sewage. That very day, however, the seller obtained from his consulting engineers a letter, 6/5 of process, which he transmitted to his solicitors who, the following day transmitted it to Mr McMaster.

That letter merits some attention. It was addressed to the seller Mr Kinghorn, dated 24 October. The fax header appears to indicate that the consulting engineer, Goodson Associates sent it at 17.30 on 24 October. It reads "Further to our recent discussions I am pleased to advise you on the current costs of discharging foul sewage and kitchen waste from the above property". It then went on to discuss the installation of equipment which would involve a cesspool and indicated that a relaxation of the building regulations required to be sought and obtained and gave a cost for the works there indicated of £10,400. The letter does not mention any connection to the mains. There was no other evidence in the case to elucidate the "recent discussions".

It was then on 25 October that the first and major disputed telephone conversation took place. Mr McMaster having received the said letter telephoned the pursuer for instructions. The accounts of what was said are substantially different. Mr McMaster kept no note of this telephone conversation, he kept few, if any, file notes at all at that time dealing with meetings and telephone conversations. The pursuer likewise, despite his being in business, kept no note or at all events produced no note of anything which occurred at any meeting or telephone conversation between himself and Mr McMaster or indeed between himself and the seller, Mr Kinghorn. The pursuer said that Mr McMaster's purpose was to announce that the sewage connection could not be made. McMaster's exact words, the pursuer said, were that the connection could no longer be made but the seller would install a unit. He also said, "don't worry about it, there is no problem". Mr McMaster eventually sent a copy of the Goodson letter which he had read out in part to the pursuer. In cross-examination the pursuer described this telephone conversation as "a bombshell". He said he was shocked and disgusted. He then averred that Mr McMaster said "We have a problem, we can't get connection to the main sewage" but he didn't remember what his reply was. Mr McMaster had said that he had had septic tanks before and they would be as good as if not better than mains.

Mrs Wylie, who was present in the room did not hear the conversation but wished to know what it was about. She said that her husband was very relaxed. He just took it as a fact. She herself wasn't pleased and protested. This was the first time, she said (in response to the court in the course of cross-examination) that she learned that the public house wasn't connected to the main sewer. She also said that her husband was very short on the phone. There were only two sentences; he didn't discuss anything, he simply agreed and put the phone down. When she asked what it was about he said that it was a bit late to draw back. He didn't seem to be bothered; he was matter of fact about it. The pursuer told her that Innes, Mr McMaster, had assured him it would be alright.

Mr McMaster's account was that he read over the terms of the Goodson letter to the pursuer. The pursuer asked for his opinion. He said that he could not give any advice on sewage matters but that the pursuer had complete protection under the missives. The pursuer then said that provided the missives were still in place, he would proceed to settle. McMaster said that if he had been asked whether he had had any problems with septic tanks, he would have said he had not. He advised that if the retention were not sufficient, the missives provided for extra payment. He said that he was aware that Mr Wylie was "hands on" and in contact with the seller. The Goodson letter he said, did not indicate that there had to be an acceptance of any proposal. It was read out and related to the special covenant and what retention should be made.

Subsequently the transaction being settled, McMaster wrote two letters to the pursuer both dated 26 October. In the first, 7/32/140, he said "I did not know what arrangements were made between Ian Kinghorn and yourself with regard to the sewage work being undertaken and I would recommend that this be resolved at an early date. Perhaps the best course of action would be for you to liaise direct with Goodson Associates. In the second letter of the same date to Mr Wylie, 7/32/147, he enclosed the Goodson Associates letter, described as "copy estimate". Significantly however, in the letter 7/32/140 he said while dealing with the matter of retention that he had arranged for the sum of £10,400 to be "retained in a joint deposit account to await finalisation of the link up of the sewage system to the public sewer".

The only other matter before the court which might throw light on this conversation was a letter that Mr McMaster wrote to his insurance brokers which he had produced. He did not need to do so because by that stage a claim had been intimated and it was evident that the letter was written in contemplation of litigation. That letter, dated 28 June 1999 contains the following.

"The terms of an Offer were finally adjusted and submitted and it was a condition of the Offer that the seller would be responsible at the seller's expense to have the sewage system connected to the public sewage prior to the date of entry. Missives were finally adjusted. While the transaction was proceeding it became apparent that it was not to be possible for the sewage to be connected into the public system and the seller came forward with an alternative proposition that some machinery be installed. A copy of the seller's Engineers Report and an estimate from a Contractor were obtained and sent out to Mr Wylie and he agreed that this system be installed. In our opinion the mistake made by Mr Wylie was that in an effort to cut costs he did not, as per the verbal advice given to him by us take an independent opinion from his own Engineer. He was prepared to proceed on the basis of the seller's Engineers Report. It proved not to be possible for the new machinery to be installed prior to the date of entry. Again with Mr Wylie's agreement settlement took place with written confirmation that Mr Wylie would make access to the premises for the Contractor to proceed with the installation and that the seller was to be responsible for all of the costs of the installation. A certain sum of money was retained at settlement on the understanding that if the final costs were greater then the seller would make up the difference."

It should also be noted that in the letter of claim which Mr McMaster was commenting upon, Mr Scott Blair, the solicitor acting for Mr Wylie at that time, described the telephone conversation under consideration as follows:

"It was indicated to Mr Wylie that whilst the proposal from Goodson did not amount to a connection to the public sewer, it would be sufficient to protect Mr Wylie's interest. It would give him the same degree of protection afforded to him in terms of the concluded missives."

In a letter to Professor Rennie, Professor of Conveyancing, Glasgow University, from whom an opinion was obtained, it was said with reference to the facts to be placed before the Professor, according to Mr Blair, "The purchaser can't recall the exact words used", referring to the said telephone conversation. Professor Rennie's opinion was dated 22 January 1998 and he refers to this matter at para. 1.4 on page 6 of his opinion, 6/67.

After settlement and entry having been taken by the pursuer, there did not appear to be any formal communication between the pursuer and Mr McMaster. The pursuer said he phoned a few times to voice concerns but he was told that he would have no problem. That did not consist with his position as pled (see para 1). Mr McMaster, he said, did not advise consulting an engineer. Mr McMaster on this matter said that the pursuer said that on a few occasions that he had had complaints about smells but that he told the pursuer that he had to sort it out with the seller and the engineer. The pursuer said he had only one meeting with Messrs Goodson and the seller. There was no discussion of the specification of the system. He said he had been surprised when the quotation was sent to him and also that he was being asked to accept and sign for something he "wasn't involved in". He said that he telephoned and spoke to Mr McMaster about it and was told that if he didn't sign, the authorities would close him down. No reference, he said, was made by McMaster to the missives and no advice given to insist on the terms of the missives. He accepted the quotation on 29 June 1995. Mrs Wylie said that her husband had reported that conversation to her.

Mr McMaster said that the pursuer did not ask for advice or voice concern about that quotation. Mr McMaster told the pursuer that he was under no obligation to accept it that the missives were still in place and if he had misgivings he should seek advice. The pursuer replied that he did not want to go to the trouble and expense of employing an engineer and he would accept it. To the suggestion that he had advised the pursuer that the missives were not worth the paper they were written on, Mr McMaster's response was that he had been a conveyancer for 30 years and that there was no question of his having said or saying any such thing.

Thereafter numerous problems developed with the sewage system and it was plain that it was neither either operating nor being operated properly. The inadequate sewage disposal caused smell and custom was lost. By 1997 the pursuer said that really the only trade came from outside the area, since locals were not coming. The pursuer claimed that if he had been given appropriate advice he would have contacted a surveyor and insisted on compliance with the missives.

The critical matter central to the whole case is the telephone conversation of 24 October. The pursuer's account would mean that thereafter he was tied into the purchase. He said that he would not have concluded the bargain had he been properly advised. I am unable to accept as reliable the pursuer's account of that call. The pursuer, at times nearer in date to the call had stated to his solicitor, Mr Scott Blair the version noted at [14] and his solicitor had indicated to Professor Rennie that the pursuer could not recall the exact words. I consider that it is inherently improbable that a conveyancer would give advice about the suitability or otherwise of a sewage system. I find that the purpose of the telephone call was to obtain the pursuer's consent to the retention money mentioned. That Mr McMaster thought at the time that the pursuer had a protected position is clear from the terms of his letter referring to that retention and to the future connection. How the pursuer resolved his sewage problem was essentially not a matter with which Mr McMaster needed to concern himself. He had provided for a mains connection. If the pursuer were to accept something less or different from what the pursuer himself had insisted be inserted in the Missives, for whatever reason, that would be a matter for him. The pursuer in cross-examination describing the conversation as a "bombshell" contrasts with his attitude at the time as described by his wife as being relaxed and his only saying one or two things. I have carefully considered the letter of 28 June 1999 by Mr McMaster. His explanation for its content was that he had telescoped the various events. I think that is so. The pursuer had not agreed to any alternative system at the time of settlement of the transaction let alone that outlined in the Goodman letter. The only question then was what was an appropriate retention. A transaction proceeds until the missives are complied with. The retention was and remained in joint names of the parties' solicitors. Advice to get an independent opinion was not given at the time of the first telephone call but later.

In Professor Rennie's Opinion he is not only critical of Mr McMaster's absence of file notes but says "a Canadian case states that when a solicitor's file is entirely silent on a matter of communication between solicitor and client, there is a rebutable presumption that the client's version of events is correct" citing Morton v Harpe & Gray Easton A-B CLR (3d) 53. That decision, of a single judge in the British Columbian Supreme Court is noted in a textbook; Jackson & Paul, Professional Negligence, para. 10-174 as deciding that if there is a conflict between the evidence of a lawyer and his client about the terms of a retainer, the client's version is to be preferred unless the lawyer can show that the agreement was in writing. Mr Woolman did not claim that these observations on the law were sound and it may be that the authors had been misled by the rubric given to the Canadian case and have not paid attention to the actual opinion. The ratio is to be found at p. 62 where the judge said that all other things being equal where there is a conflict between the version of the client and the version of the solicitor, the version of the client is to be preferred. He went on to explain; "The true (Canadian) principle would appear to be that if a solicitor will make an agreement with a client then he must be able to show what that agreement is, and if it is not in writing then it seems to me that the client statement must be accepted". He prefaced that remark by stating: "I am putting both parties upon an equal ground of credibility". In the case of Morton the judge found that Miss Morton and the solicitors were on equal ground. Therefore while, "the onus was upon Miss Morton to prove her case on a preponderance of probability her evidence is to be preferred in the resolution of controversy about any items of the retainer". However, the absence of files notes do not raise any presumption. It is for the pursuer to prove his case and if it be thought that on any matter of fact opposing parties were on equal ground, whether or not one or other party made a note at the time, does not in my view form a proper basis for deciding a case. It is necessary to begin with a credible pursuer.

There are other indications in the case which tend to show that the pursuer is not reliable. His evidence in relation to the instruction of DM Hall on the first day of the proof was shown to be inaccurate. He had gone so far as to say in cross-examination, with reference to the survey addressed to the Bank, that he had chosen not to instruct one himself as there was no point paying someone else. Further he contrasted that with the fact that he had instructed independent surveys for the purchase of his house. Nevertheless, he plainly stated in cross-examination that he had not got any independent survey. Another indication was in the relation to the plans held by the local authority. He denied he had gone to see them but he had done so. He was, I consider, seeking to portray himself in relation to these chapters of evidence as the inexperienced purchaser who required detailed guidance from his solicitor whereas the truth was that he was perfectly capable of organising matters for himself and did so. I cannot accept that had there been advice given or a decision taken to depart from the provision in the concluded missives, that Mr McMaster would have written in the terms he did the day after settlement referring to the connection with the mains. The seller's solicitors would not have remained silent on the whole matter if it were the case that the missives had been departed from. They would have been departed from by the different form of connection being accepted. In any event, since Mr McMaster knew that he had secured for his client the strongest possible position it is improbable that he could have advised him to depart from that position for no benefit.

By the time of consideration of what alternative sewage system was to be provided, and the second telephone conversation, the pursuer had contracted to instruct and the seller to pay for whatever was to happen. The pursuer did instruct the installation of a particular system (not that described in the said Goodson letter) which proved to be unsatisfactory. He did not seek advice as to its adequacy from any independent source and to suggest, as he did, that he did not do so because Mr McMaster had told him that some particular sewage system was adequate or as he put it, better than a mains connection, is not credible. I do not and cannot accept that a solicitor would proffer such advice or that Mr McMaster did so at either of the conversations. This is particularly so since the later solution was not that described in the original Goodson letter in any event, which was the matter under consideration by Mr McMaster in October 1994.

The matter depended upon my view of the two telephone conversations. I have accepted the account of Mr McMaster. It was conceded by the panel in final submission if I were to accept Mr McMaster's account then the defenders would be entitled to absolivitor.

In the end of the day the pursuer's position on damages was that only the loss to Dealblend was appropriate. The entire assets of Dealblend had disappeared as a result of the events and decree for £125,000 was sought.

From the evidence produced I was satisfied that Dealblend Limited failed to mitigate any loss they had sustained. They were trading at a loss in any event. They failed to take advantage of the provision in the missives. They were given an estimate of £68.000 for a revised upgraded system from a firm, Hydroclear. The loss of Dealblend's assets was caused not by the fact of there not being a mains connection but amongst other trading matters because Dealblend had failed to obtain from the sellers a satisfactory system. The fact that they proceeded without taking independent engineering advice is in my view fatal to any claim for damages even if the missives were departed from. It was for Dealblend to ensure that the sellers provided them with a proper connection and they did not do so. No company could reasonably take the view that a solicitor could give sound advice about the adequacy of any particular sewage system, even if, as I hold not to have been the case, he said that the system which did not connect to the mains could be equally good. The quality of the system installed is the cause of loss. It should have been of the Hydroclear quality. It was not and accordingly Dealblend's losses need not have arisen at all.

I shall grant decree of asbsolvitor.