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Ballast Plc v. Laurieston Properties & Ors [2003] ScotCS 150 (21 May 2003)

OUTER HOUSE, COURT OF SESSION

A483/02

OPINION OF LORD McCLUSKEY

in the cause

BALLAST PLC

Pursuers;

against

(FIRST) LAURIESTON PROPERTIES LIMITED; (SECOND) LAURIESTON HOMES (STONELAW) LIMITED; (THIRD) LAURIESTON HOMES (HOWWOOD) LIMITED; and (FOURTH) MORRISON HOMES LIMITED

Defenders:

________________

Pursuers: W. J. Wolffe; Masons

Defenders: C. H. S. MacNeill; MacRoberts

21 May 2003

This is an action in which the pursuers seek payment under a number of different conclusions from four defenders. The case comes before me today on Procedure Roll in respect of the pleas-in-law referred to in the appropriate interlocutor and also in the Note of Argument for the second, third and fourth defenders.

The pleadings on both sides are, I am happy to say, models of clarity and economy and I do not find it necessary to try to summarise the averments which are so clearly made in the pleadings of both parties so far as bearing upon matters that I have to consider today.

Furthermore, the Note of Argument for the second, third and fourth defenders advances, again with economy and clarity, a clear summary of the arguments which counsel for the defenders duly advanced to me today.

In essence, the background to the matter is that the pursuers entered into contracts with the first defenders (who did not enter the Process) to provide management services in the circumstances averred in the pleadings. They began to find that payments were either not forthcoming or were late in coming from those due to make the payments, namely the first defenders. In that context they sought to take a number of steps to secure their position. These steps are narrated in the pleadings, particularly in Article 6 of the pursuers' Condescendence. They culminated at that stage in the issuing by the pursuers of a formal notice threatening suspension of the works on the Stonelaw contract, one of the two contracts referred to in earlier articles of the pleadings. That step was followed, it is averred, by the dishonouring of a cheque drawn by the first defenders in favour of the pursuers. That cheque was in the sum of £168,734.69. The pursuers complained to Jonathan Law of the fourth defenders and he assured the pursuers that he would resolve the difficulties in relation to payment. Jonathan Law is described in Article 4 of the Condescendence as the General Manager of the fourth defenders. In that same Article it is also averred that he had been appointed by the fourth defenders to assist the second and third defenders in the operation of their contracts with the first defenders and to facilitate the developments themselves. It is also "believed and averred" that, from that time on, he acted on behalf of the second and third defenders as well as the fourth defenders in connection with those contracts and in connection with the project generally. Mr Law dealt with the situation by writing a letter. Article 6 of the Condescendence narrates the terms of that letter, dated 12 June 2001, which Mr Law wrote on the fourth defenders' notepaper and sent to the pursuers. That letter narrates, first of all, that Mr Law is confirming, on behalf, it would appear, of the fourth defenders, that payment of the outstanding sum of £168,734.69 "will be paid directly into your account on Wednesday 13 June 2001". It is later averred by the pursuers that that payment was actually made. The letter continues:

"All future payments will be paid directly from the JV account and therefore to assist this process I would appreciate it if a summary of each monthly valuation could be sent directly to me at the same time as the detailed valuation is sent to Laurieston Properties."

The reference to Laurieston Properties is obviously a reference to the first defenders who were, in the first instance, liable under the contract to make the payments to the pursuers. The JV account is a reference to an account kept in respect of the join ventures referred to on Record. The pursuers aver that that letter was written on behalf of the second, third and fourth defenders. The defenders admit that the letter was written on behalf of the second and third defenders. The pursuers also aver that, in reliance on the assurance given in that letter, the pursuers continued with the works on the Stonelaw and Howwood contracts referred to in the pleadings. It is also averred that following upon receipt of that letter, no further payments were received by the pursuers from the first defenders but that all subsequent payments were made either from the bank accounts of the second or the third defenders or directly by the fourth defenders or by way of a cheque drawn on account of a body called Morrison Plc. The pleadings do not make clear who Morrison Plc is, but the pleadings do refer to the rôle of a body described as Morrison Residential Investments Limited, or MRIL. The averments are to the effect that "the Morrison group of companies" provided or procured finance for the proposed development. I need not detail the undisputed averments about the creation of the two joint ventures involving respectively the second and third defenders.

As the first paragraph of the Note of Argument for the defenders makes plain, the essential submission on the first matter was that the terms of the letter of 12 June were incapable of supporting the pursuers' submission, that the defenders were assuming a contractual liability to the pursuers in respect of the contractual liabilities of the first defenders. That paragraph also makes it plain that the submission is that these words are incapable of bearing the construction that the fourth defenders undertook to procure the happening of the events set out in Article 7 of the Condescendence.

In responding to the arguments submitted in support of this paragraph of the Note of Argument, counsel for the pursuers referred me to the well known test of relevancy in Jamieson v Jamieson 1952 S.C. (H.L) 44 and to the speech of Lord Normand at pages 49-50. I was referred to various other authorities bearing upon the construction of words in other contracts; but, apart from the fact that these other authorities illustrate principles which were hardly in dispute between the parties, I find them of little assistance in determining the matter which I have to determine. It has to be determined on a construction of the terms of the letter of 12 June 2001.

In my view it is absolutely clear that the court in approaching the proper construction of the letter of 12 June 2001 to ascertain its meaning and effect is entitled to have regard to the background circumstances which are averred. Indeed, counsel for both sides were agreed on this point. As I have indicated, these circumstances include the fact that the pursuers were threatening immediately to cease work on the contract; and that they continued only because they received the letter of 12 June 2001. The meaning to be attached to the words in that letter is the meaning that would be attached by the reasonable and independent reader. In my view, the use of the words "will be paid" in the main sentence is of the greatest importance. The words "All future payments will be paid directly from the JV account" are, in my opinion, clearly capable of supporting the pursuers' proposition that this was a contractual undertaking which was given. The use of the word "will" points strongly towards that conclusion. The mechanisms referred to in the letter are also of relevance. The payments were to be made "directly from the JV account, and summaries of each monthly valuation are to be sent to the fourth defenders' Mr Law at the same time as they are sent to the first defenders".

A question then arose as to whether or not the averments made it clear on whose behalf that undertaking was given. It appears to me that, having regard to all the averments, including those to which I have made specific reference, Mr Jonathan Law of the fourth defenders, who wrote the letter on the fourth defenders' paper, is said to have been acting on behalf of the second, third and fourth defenders. Of course I am proceeding upon the basis of the pursuers' averments. I can make no judgment as to precisely what his role was, but the averments make it plain that the pursuers intends to prove that; and in that in my view the pursuers are entitled on these averments to seek to do that. Accordingly I cannot sustain the argument which is outlined in the first paragraph of the Note of Argument under reference to the pleas-in-law referred to there.

The argument which is foreshadowed in paragraph 2 of the Note of Argument has caused me more difficulty. The background to this in the pleadings is that the pursuers aver, at page 14 in Article 6 of the Condescendence, that there had been some serious difficulties and delays in the certification and payment of monies due to them. It is then averred that these problems continued after they had first appeared and that at a meeting on 26 November Mr Law "admitted that the fourth defenders' Board had 'stretched' payments and had asked the architect and surveyor to slow down the issue of certificates". So there was a clear basis for the charge that the Board of the fourth defenders had interfered wrongly to prevent performance of the contract by the first defenders. As counsel for the defenders pointed out, however, the quantification and specification of the claims that were introduced by these averments related not to any slowing down of the issuing of certificates but to the fact that time elapsed between the last dates when payment was due under a issued certificates and the actual dates when payments were made. To this submission counsel for the pursuers relied upon two matters. First of all he referred to the averment that what was said to be admitted by Mr Law was that the fourth defenders' Board "had 'stretched' payments". That, he submitted, was sufficient to show that there had been, according to the pursuers' averments, an illegitimate interference with the contractual obligations in respect of those payments. He also referred to the fact that what the pursuers were averring was a matter which Mr Law was said to have admitted at the meeting and was not a matter directly within their knowledge. While I feel some difficulty about the lack of specification of the term "stretched" and perhaps rather more difficulty about the averment that Mr Law, or indeed the first defenders' Board, had asked the architect and surveyor to slow down the issue of certificates, it does not appear to me that it would be appropriate at this stage to exclude these averments. They relate to an alternative basis for advancing the claim which is earlier advanced on a clear basis in the pleadings. In all the circumstances, having regard to the fact that I am allowing the proof before answer on the main matter, I do not think it would be appropriate to delete these averments. In the circumstances I shall simply reserve the defenders' pleas.

I should note that the pursuers advanced no argument in respect of their plea to the relevancy of the defences. Counsel for the pursuers also undertook to correct one or two typographical errors that appeared in the conclusions and the pleadings.