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Cite as: [2004] ScotCS 106

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Safdar v. Shahid [2004] ScotCS 106 (30 April 2004)

OUTER HOUSE, COURT OF SESSION

OPINION OF

LORD MACKAY OF DRUMADOON

in the cause

MOHAMMED SAFDAR

Pursuer;

against

MOHAMMED SHAHID

Defender:

________________

Pursuer: Mure; Drummond Miller, W.S.

Defender: Fairley; MacRoberts.

30 April 2004

Introduction
[1] This is an action for payment in which the pursuer concludes for payment by the defender of the sums of (i) £56,839, (ii) £60,919, (iii) £12,762 and (iv) £2,000.

[2] In relation to the first conclusion, the pursuer avers that in or about 1985, Mohammed Akram lent the defender £56,839 to enable the defender to buy shares in a company called Gifto Fancy Goods Ltd ("the Company"). It is averred that the existence of that loan was acknowledged by the defender in a letter dated 25 April 1986, which the defender wrote to Saleem Akmal & Co. The pursuer avers that around the same time the defender, Mr Akram and Mr Ahmed, a business associate of Mr Akram's, each acquired one-third of the share capital of the Company. Whilst the defences admit that the defender purchased shares in the Company, it is denied that the defender received a loan of £56,839 from Mr Akram and, in particular, that the defender received any loan from Mr Akram in connection with any acquisition by him of shares in the Company.

[3] In relation to the second conclusion, the pursuer avers that in 1987 Mr Ahmed sold his shares in the Company. It is averred that those shares were purchased by Mr Akram and the defender and that Mr Akram lent the defender a further £60,919, to enable him to purchase some of the shares being sold by Mr Ahmed. The pursuer avers that loan was not recorded in writing. The defences admit that on 8 June 1988 one-half of Mr Ahmed's shareholding was transferred to each of Mr Akram and the defender. It is denied that the defender received any loan from Mr Akram, in connection with that transaction.

[4] In relation to the third conclusion, the pursuer avers that in 1988 the defender purchased a property at 8 Bruce Road, Pollokshields, Glasgow. The pursuer also avers that Mr Akram negotiated with the former owner of that property, Mr Shah, and induced Mr Shah to reduce the selling price by £12,762, in return for which Mr Akram agreed to release an inhibition that he had registered over Mr Shah's property. It is averred that Mr Akram and the defender agreed that, in return for this service, the defender would pay Mr Akram £12,762 and that sum would be treated as a loan. In the defences it is denied that any such loan was ever due by the defender. It is averred, on the defender's behalf, that when the property was purchased by the defender and his wife, Mr Shah was due an unspecified sum of money to Mr Akram. Mr Akram, for his part, owed another unspecified sum of money to the defender. It is averred that it was agreed that the sum to be paid by the defender and his wife to Mr Shah would be reduced by the amount of Mr Akram's debt to the defender, that Mr Akram's debt would be treated as having been repaid and that Mr Shah's debt to Mr Akram would be reduced accordingly.

[5] In relation to the fourth conclusion, the pursuer avers that in August 1988 Mr Akram and the defender purchased a property at Unit 1, West Street, Glasgow. It is averred that when that property was paid for, Mr Akram paid £2,000 of the share of the purchase price that was due to be paid by the defender. It is averred that the defender agreed to treat that payment of £2,000 as a further loan due by him to Mr Akram. Those averments on behalf of the pursuer are met with a simple denial in the defences.

[6] The pursuer avers that on 30 September 2002 Mr Akram executed a written assignation, which assigned to the pursuer all the debts that were due and payable by the defender to Mr Akram. A written assignation, dated 30 September 2002, to that effect is one of the productions lodged on behalf of the pursuer. The pursuer sues in respect of the rights which he claims were assigned to him in terms of that assignation.

[7] The action is defended on a number of bases. In the first place it is denied that any of the alleged loans ever existed. In other words, it is denied that the defender was ever due Mr Akram any of the four sums of which the pursuer seeks payment.

[8] Secondly, it is contended that in the present action, the existence and extent of the alleged loans are only provable by the writ or oath of the defender and that any proof should be restricted accordingly. In that regard, it is submitted that, although the present action was raised after the Requirements of Writing (Scotland) Act 1995 ('the 1995 Act') came into force on 1 August 1995, the provisions of that Act do not apply in the present action.

[9] Thirdly, it is averred on behalf of the defender that on 23 December 2002 Mr Akram signed a waiver in the defender's favour. The defender avers that the waiver and a number of other documents, including a Share Purchase Agreement, were signed by Mr Akram at a meeting held in solicitors' offices in Glasgow on 23 December 2002. The defender and Mr Akram were present within those offices that day. They were accompanied by their respective solicitors. Mr Akram's son and the defender's daughter were also present. The defender avers that the documentation prepared and executed, including the Share Purchase Agreement and the waiver, had as their primary purpose that there should be a complete separation of the relationship between the Mr Akram and the defender, including inter alia an end to all threats of litigation against the defender. The defender contends that the waiver discharged all and any prior liabilities of the defender to Mr Akram (save insofar as specifically preserved by the waiver of 23 December 2002), that no prior liabilities in respect of the four alleged loans were so preserved and that accordingly, if any debts were due by the defender to Mr Akram, as at 23 December 2002, in respect of the alleged loans, they had been discharged by the waiver by the date the present action was raised.

[10] That waiver dated 23 December 2003 is in the following terms:

"I, Mohammad Akram residing at 21 Langside Drive, Newlands, Glasgow, hereby waive and shall procure the waiver by each Associate of mine, of all rights (whether present, future, contingent or otherwise) in respect of all (if any) payments, compensation, expenditure, losses, claims, demands, actions, fines, penalties, awards, liabilities and expenses (including legal expenses) I and my Associates may have against you, your Associates. Bushko and Heritage Wharf other than as provided for in the share purchase agreement to be entered into between me, you and Shahzad Akram of even date herewith.

Words and expressions defined in the share purchase agreement of even date herewith between me, you and Shahzad Akram shall bear the same meaning herein."

[11] The defender avers that he first received informal intimation of the assignation by a letter dated 10 January 2003. The defender avers that by that date, all and any prior alleged liabilities forming the subject matter of the present action had been discharged by Mr Akram.

[12] The pursuer, for his part, avers that by letter dated 4 October 2002, he intimated the existence of the assignation to the defenders in the following terms:

"I have been advised to inform your good self that as of Friday September 30^th 2002, all outstanding debts to Mr M Akram from yourself have been purchased by myself."

The pursuer also avers that the defender was advised by Mr Akram, in a letter dated 8 October 2002, that the debts outstanding between Mr Akram and the defender had been assigned. However, counsel for the pursuer recognised that as that latter letter did not indicate to whom the debts had been assigned, it could not by itself constitute sufficient intimation of the assignation on which the pursuer founded. The pursuer's pleadings include other averments, relating to the actings and knowledge of the defender's daughter, Sadaf Shahid, which if proved in evidence might warrant attributing to the defender, by the time that the waiver was signed, knowledge, on his part, that debts, which had been due by him to Mr Akram, had been assigned by Mr Akram to the pursuer.

[13] The pursuer avers that the true construction of the waiver (to the extent that it covers debts) is that it waived debts arising out the business interests of Mr Akram and the defender. It is averred that the debts with which this action is concerned are of a private character.

History of the Debate
[14] The defenders sought a debate on their first plea-in-law, which is a general plea to the relevancy of the action. The debate began on 17 July 2003. During the course of his submissions, on that date, counsel for the pursuer sought leave to amend the pleadings on behalf of the pursuer. The diet of debate was adjourned to allow a minute of amendment and answers to be lodged. The debate subsequently resumed, on revised pleadings, on 30 March 2004.

Submissions for defender
[15] During the debate the defender's objectives were threefold. In the first instance he sought that the action should be dismissed, by the Court sustaining his first plea-in-law. The pursuer's averments were irrelevant (i) because they failed to aver intimation of the 'alleged assignation' to the defender, prior to the date of the waiver, in a manner required by law and (ii) in relation to the construction of the waiver itself.

[16] Secondly, and in the alternative, in the event that the action was to proceed to proof, the defender invited the Court to exclude from probation four passages in the pursuer's averments:

a. At page 13B the averment "The said letter accordingly was sufficient intimation of the said assignation",

b. The passage beginning on page 14E "At that meeting" to the words "assigned the debts to a third party." at page 15C-D,

c. The passage beginning at page 15C-D "After the discussion with Mr Shahzad Akram" to the words "without reading it." on page 16B, and

d. The passage beginning at page 16B "By agreeing to" to the words "intimation to him thereof." at page 16C.

[17] Thirdly, again in the event that the action was to proceed to proof, the defender sought proof habile modo. in accordance with the procedure approved of in Royal Bank of Scotland Plc v Malcolm 1999 SCLR 854. That particular motion was made to preserve the defender's position at proof, in respect of his averments that the alleged loans founded upon by the pursuer are provable only by the writ or oath of the defender.

[18] The submissions made on behalf of the defender fell into two principal chapters. The first chapter was to the effect that in his pleadings the pursuer did not relevantly aver that intimation of the 'alleged assignation' had been given to the defender prior to 23 December 2003, the date of the waiver. It was submitted that until intimation of any assignation had taken place, there could be no transfer of any right to the assignee and no divestiture of the cedent. In developing his submissions, counsel for the defender presented a very carefully researched and detailed argument as to what the law requires by way of intimation of an assignation to the debtor. Reference was made to the Stair Memorial Encyclopaedia, Volume 18, paras. 653-656, Bell, Commentaries II, 17, Erskine, III, v, 5, to various authorities reported in Morison's Dictionary, which are referred to by Erskine, and to McBride, The Law of Contracts in Scotland (Second Edition), para. 12-115 ff. It was argued that, in the absence of one of the forms of intimation provided for under the provisions of the Transmission of Moveable Property (Scotland) Act 1862, some other recognised method of intimation was required. Such recognised methods included (i) written intimation falling short of the requirements of the 1862 Act, which had been acknowledged by the debtor, (ii) performance (or part performance) by the debtor, (iii) production of the assignation in judicial proceedings or (iv) registration of the waiver in the Books of Counsel and Session. In the absence of any of the other recognised methods of intimation, what was required, in the circumstances of the present case, was an offer to prove that there had been some form of intimation of the 'alleged assignation' to the defender and some act of acknowledgement, on the part of the defender, of the existence of the assignation. Reference was made to Donaldson v Ord (1855) 17 D1053 and Gallemos (In Receivership) Ltd v Barratt Falkirk Ltd 1989 SC 248. It was argued that the pursuer had failed to aver that prior to the date of the waiver, or indeed prior to the raising of the present proceedings, there had been some act of acknowledgement on the part of the defender that he had knowledge of what was described during the submissions of counsel for the defender as the 'alleged assignation'.

[19] It was submitted, on behalf of the defender, that mere knowledge of an assignation, privately acquired by the debtor was not sufficient to constitute intimation of an assignation. Nor was it sufficient for the pursuer to aver that a letter had been written to the defender, advising him about the assignation, if that letter had neither been acknowledged nor responded to. The pursuer could not merely aver that the defender had knowledge of the assignation and then invite the Court to draw an inference of bad faith on the part of the defender. It was argued that if bad faith was being suggested in the present action that should be explicitly averred and the factual basis for such averment set out in the pleadings, in the clearest possible terms. In these circumstances, the pursuer's pleadings were irrelevant and the action should be dismissed.

[20] Turning to the second main chapter of his submissions, namely the correct construction of the waiver, counsel for the defender stressed that in his pleadings the pursuer admitted the terms of the waiver that had been granted by Mr Akram in favour of the defender on 23 December 2002. It was argued, however, that the pursuer's averments relating to the construction of the waiver were irrelevant. Those averments include that the waiver deals with sums due to Mr Akram and his associates, not with sums due to Mr Akram personally, and that the waiver was executed in the context of a separation of the business interests of Mr Akram and the defender and was not intended to deal with the debts with which the present action is concerned. The pursuer avers that the debts with which the present action are concerned are debts of a private character.