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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Burnett v. Dougal & Ors [2005] ScotCS CSIH_67 (24 August 2005)
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Cite as: 2005 SCLR 1061, [2005] ScotCS CSIH_67, [2005] CSIH 67
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Burnett v. Dougal & Ors [2005] ScotCS CSIH_67 (24 August 2005)
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EXTRA DIVISION, INNER HOUSE, COURT OF SESSION |
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Lord Macfadyen Lord Abernethy Lord Kingarth
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[2005CSIH67] A3725/01 OPINION OF THE COURT delivered by LORD MACFADYEN in RECLAIMING MOTION in the cause VERONA BURNETT (A.P.) Pursuer and Reclaimer; against MENZIES DOUGAL, W.S. and OTHERS Defenders and Respondents: _______ |
Act: J.A. Brown; Henderson Boyd Jackson, W.S.
Alt: E.W. Robertson; Shepherd & Wedderburn, W.S.
24 August 2005
Introduction
[1] This is an action of damages for professional negligence against a firm of solicitors. The defenders' first plea-in-law is to the effect that the pursuer's averments are irrelevant and lacking in specification. After a hearing on the procedure roll, the Lord Ordinary, by interlocutor dated 24 February 2004, sustained that plea and dismissed the action. The pursuer has reclaimed against that interlocutor.The pursuer's averments
[2] It is common ground that in about February 1997 the pursuer and one Alistair Burnett, who had agreed to be married, decided to purchase a house at 46 Swanston Avenue, Edinburgh. They instructed the defenders to act on their behalf in the purchase. The defenders accepted their instructions. The partner in the defenders with whom they dealt was Mr Gordon Lockerbie, who is now deceased. On 6 February 1997 Mr Lockerbie submitted an offer for the house. The offer was accepted. The purchase price was £90,000. [3] In Article 3 of the condescendence, the pursuer avers that after the offer was accepted but before the transaction was settled she and Mr Burnett had certain discussions about the funding of the purchase. She avers (at page 6E of the reclaiming print):"It was agreed that the bulk of the purchase price would be contributed by the pursuer. Mr Burnett was to contribute a small proportion of the price, and the balance was to come from a secured loan which Mr Burnett was to service. The pursuer was concerned to protect the investment which she was to make in the purchase of the house in the event that she and Mr Burnett subsequently separated. It was accordingly agreed between the pursuer and Mr Burnett that instructions would be given to Mr Lockerbie that certain arrangements should be made to protect the pursuer's investment. Those instructions were set out in a handwritten note of instructions prepared by Mr Burnett. ... In terms of the handwritten note of instructions, title was to be taken in the proportions four fifths to the pursuer and one fifth to Mr Burnett. There was to be a "side agreement" providing that in the event of the parties separating and the house being sold, the pursuer was to be entitled to four fifths of the proceeds of sale after deduction of the expenses of sale but before repayment of any secured loan. Mr Burnett was to be entitled to the remaining one fifth of the proceeds of sale. Mr Burnett was to be responsible for repayment of the loan from his one fifth share. He was to be responsible for any shortfall between his one fifth share and the amount required to repay the loan, and entitled to any surplus after repayment. The handwritten note of instructions was given by Mr Burnett to Mr Lockerbie on or around 18th February 1997. Prior to delivery of the handwritten note Mr Burnett told the pursuer that he would issue instructions to Mr Lockerbie that the transaction should be structured as set out in the handwritten note. At no stage did Mr Burnett advise the pursuer that he had done anything other than issue such instructions. The handwritten note was received by Mr Lockerbie and placed by him in his file. By letter dated 21 February 1997 and addressed to the pursuer and Mr Burnett he acknowledged receipt of the handwritten note. ... The pursuer does not know precisely what discussions took place between Mr Burnett and Mr Lockerbie in connection with the handwritten note of instructions. Having regard to the surrounding circumstances hereinbefore condescended upon it is believed and averred that Mr Burnett instructed Mr Lockerbie to implement the handwritten note of instructions."
Both the handwritten note and the letter of 21 February are incorporated in the pursuer's pleadings.
[4] The description of the handwritten note as a "note of instructions" is tendentious, since the note does not, in its terms, bear to constitute instructions, and it is disputed by the defenders that they were instructed to put in place the arrangements outlined in it. It is preferable to refer to it neutrally as the "handwritten note". In the handwritten note Mr Burnett and the pursuer are referred to respectively as "A" and "V". The relevant part of the note (No. 6/1 of process), which is written in block capitals, is in the following terms:"Side agreement between A & V stating that in the event of them splitting-up or house being sold V's share of net proceeds will be 4/5 and A's share will be 1/5 less total balance of mortgage then outstanding. Plus option to V to buy A's share at independent valuation, price being used to reduce/repay mortgage, any shortfall or surplus being for A's account. Agreement required because V is scared of mortgages & afraid that somehow I might do something to reduce the value of her share or even bankrupt her!
Under the above arrangements, A & V are both taking the risk that if the marriage breaks up the house may have to be sold."
"I understand that you are arranging a loan through the Halifax Building Society ... I acknowledge receipt of the notes passed to me by Alistair relating to the purchase and in particular confirming that the title is to be taken in the following proportions:
- Four fifths to Verona.
- One fifth to Alistair, with no survivorship clause. I confirm that I shall prepare the title in this manner in due course. ..."
"Implementation of the handwritten note would have required title to the property to be taken in the proportions of four fifths to the pursuer and one fifth to Mr Burnett. It would also have required preparation of a Minute of Agreement between the pursuer and Mr Burnett regulating their respective positions in the event of separation or of the property being sold. Such a Minute of Agreement would have obliged Mr Burnett to repay the entire balance due to the Halifax Building Society from the proceeds of his one fifth interest in the property, and thus to relieve the pursuer of any obligation to repay the Halifax loan. Such an agreement would also have conferred upon the pursuer an option to purchase Mr Burnett's one fifth share of the property at an independently determined price, with Mr Burnett being obliged to use the proceeds of any such sale to repay the Halifax loan."
"A solicitor of ordinary skill acting with ordinary care would have sought specific instructions from the pursuer before departing from the written instructions given to him."
There then followed detailed, and somewhat repetitive, averments about advice which such a solicitor would have tendered to the pursuer about the consequences of failing to have a Minute of Agreement executed. Such advice, it is said, would have included advice that such a Minute of Agreement was required to bind Mr Burnett effectively to relieve the pursuer of any liability for the Halifax loan; without it he would not be so bound. Such advice would have included a clear explanation of the consequences of departing from the handwritten note by not having a Minute of Agreement, and would have made it clear that the pursuer's position would be materially better with, than without, the Minute of Agreement; it would have included specific advice that structuring the transaction without the Minute of Agreement would benefit Mr Burnett at the pursuer's expense. Written advice would have been given by such a solicitor that the proposed departure from the handwritten note gave rise to a conflict of interest between the pursuer and Mr Burnett, and he would therefore have advised the pursuer to seek independent legal advice. Finally, the averments come full circle and reiterate that such a solicitor would have asked for specific instructions as to the proposed departure from the handwritten note, given on a clear understanding of the consequences of such departure. Mr Lockerbie, it is averred, did none of these things.
[11] In the course of his submissions, Mr Brown, for the pursuer, moved for leave to amend the introductory sentence quoted in paragraph [10] above. He proposed that it be re-written in the following terms:"Having received the handwritten note, a solicitor of ordinary skill acting with ordinary care would have sought specific instructions from the pursuer before departing from the arrangements set out in the handwritten note" (emphasis added).
The amendment thus sought to divorce the secondary case of fault from the acceptance of instructions in terms of the handwritten note, which the defenders dispute, and to base it instead on mere receipt of the handwritten note, which they admit. That motion was opposed by Mr Robertson for the defenders. It is unnecessary to record the submissions made on that motion at this stage. Because those submissions were intertwined with the submissions on the merits of the reclaiming motion, we reserved our decision on the motion to amend.
[12] The pursuer's approach to the computation of the loss which she claims to have suffered as a result of the defenders' negligence is set out in her averments (at page 15B of the reclaiming print) in the following way. In May 2000, by which date Mr Burnett had moved out, the house was valued by surveyors at £115,000. Mr Burnett refused to agree to any settlement which provided him with less than one fifth of the gross value of the house. He indicated that he would raise an action of division and sale unless the pursuer agreed to pay him that amount in return for a conveyance of his interest to her. In that situation, the pursuer avers, she was advised by her solicitors (a) that she would have no defence to an action of division and sale; (b) that if such an action were raised she would incur significant expense; and (c) that it was unlikely that she could rely on any agreement between her and Mr Burnett which had not been reduced to formally executed writing. The pursuer further avers that if the house had been sold, she would have had to purchase, and move to, alternative accommodation. She would have incurred expense in that connection. To avoid the need to incur such expense she attempted to negotiate a settlement which would allow her to acquire Mr Burnett's interest in the house. She could only do so by agreeing to pay him £23,000 in return for a conveyance of his interest. Those were the best terms that could be achieved by negotiation. She was advised by her solicitors to settle on those terms, and did so. If the agreement contemplated in the handwritten note had been executed, the pursuer would have been able to exercise her option to buy out Mr Burnett's interest at valuation, i.e. for £23,000. In that event, however, Mr Burnett would have been responsible for repayment of the whole of the Halifax loan, which amounted in the end to £20,315.03. Without the agreement, it is averred, the pursuer required (in order to avoid the sale of the house) to bear the whole of that repayment, and to release Mr Burnett from his obligations in respect of the loan. That liability, which would have been avoided if the contemplated Minute of Agreement had been put in place, was therefore the measure of the pursuer's loss.Issue 1 - Believed and averred
[13] The pursuer's primary case is perilled on the proposition of fact that Mr Lockerbie was instructed to implement the handwritten note, in particular by securing that there was put in place a formal Minute of Agreement conferring on the pursuer an option to buy out Mr Burnett's interest in the house at a valuation, and binding Mr Burnett to repay the whole sum owed in respect of the Halifax loan out of his share of the proceeds of sale or, if necessary, other resources of his. The critical averments on which that case is based is therefore to be found in the following passage in the pursuer's pleadings (at page 8B of the reclaiming print):"The pursuer does not know precisely what discussions took place between Mr Burnett and Mr Lockerbie in connection with the handwritten note of instructions. Having regard to the surrounding circumstances hereinbefore condescended upon, it is believed and averred that Mr Burnett instructed Mr Lockerbie to implement the handwritten note of instructions" (emphasis added).
"The use of the formula 'believed and averred' is frequent and convenient in our pleading, but its appropriate function is to aver an inference which the user seeks to draw from certain facts; and they are generally facts which are not and cannot be fully known to him. ... Where a definite averment of facts which a party must establish is necessary, the formula is quite inappropriate. Here it is an expression of hope rather than of fact; and I can read it only as an attempt to salve the conscience of the pleader."
The Lord Ordinary continues:
"It seems to me that those words can be applied to the averments at page 8B-C ... [i.e. the averments quoted at the end of paragraph [13] above]. In this case a definite averment of the instructions given to Mr Lockerbie in connection with the execution of a Minute of Agreement is necessary and, that being so, the use of the formula 'believed and averred' is quite inappropriate. That formula is in this case, as it was in the case of Brown, an expression of hope rather than of fact. It follows that the essential substratum of fact in the pursuer's case is absent and the action is bound to fail at proof. Accordingly, in my opinion, the action is irrelevant for want of specification of the necessary facts."
" ... the formula 'believed and averred' ... is one which ought to be used where the pleader is averring, as a matter of inference, a fact which was sought to be inferred from other averments of primary fact."
Reference was also made to Macphail on Sheriff Court Practice, second edition, paragraph 9.54, where the principle is formulated in the following terms:
"Believed and averred. If a material fact, which the party must establish in order to succeed in his claim or defence, is not known to him, he may aver that he believes it to be true if that is a reasonable inference from other facts known to or ascertained by him which he avers as matter of categorical assertion."
Mr Brown submitted that there was no support in authority for the proposition that certain classes of averment required to be categorically stated, and could not be put forward as a matter of inference. He accepted that one of the essential facts of the pursuer's principal case against the defenders was that Mr Lockerbie had been instructed to implement the handwritten note. It was wrong, however, to demand that that be averred as a matter of primary fact. It was sufficient to aver it as a matter of inference, provided other primary facts capable of supporting that inference were averred.
[16] In our opinion, Mr Brown's submissions on this issue were well founded. Clearly, the relevancy of the pursuer's case that Mr Lockerbie was at fault in not implementing instructions contained in the handwritten note depends on its being averred that the contents of the handwritten note were communicated to him as instructions. It is therefore essential for the pursuer to aver that Mr Lockerbie was instructed to do what was set out in the handwritten note. The pursuer seeks to do that by use of the formula "believed and averred". Her pleadings are therefore relevant only if that is in the circumstances a legitimate form of averment. The proper use of the formula "believed and averred" is described in the first sentence of the passage from the opinion of Lord Justice Clerk Thomson in Brown quoted in paragraph [14] above, and in the passages from the opinion of Lord Osborne in Strathmore Group Ltd and from Macphail on Sheriff Court Practice quoted in paragraph [15] above. In our opinion, any material fact may be pled by means of the formula "believed and averred" if there are also averments of primary fact which are capable of supporting the inference that the matter which is believed and averred is true. There is no category of fact which cannot be advanced in that way as a matter of inference. The Lord Ordinary appears to have held otherwise, on the basis of what was said by Lord Justice Clerk Thomson in Brown. That, in our opinion, discloses a misunderstanding of what the Lord Justice Clerk said. He said that the use of "believed and averred" was inappropriate "[where] a definite averment of facts which a party must establish is necessary". In our opinion, he did not mean (as the Lord Ordinary appears to have taken him to mean) that there is a category of fact so important that it always requires categorical assertion, and can never be advanced as a matter of inference. Rather, he was making the point that, in the absence of categorical averments of facts and circumstances capable of supporting the inference, the use of the formula "believed and averred" is inappropriate. A definite averment is necessary if the fact is not a matter of inference from other averred facts. But if there are averments of primary fact to support the inference, inference is always a legitimate way of establishing an essential fact, however important it may be to the party's case. [17] It follows that the relevancy of the pursuer's averment of belief that Mr Lockerbie was instructed to implement the handwritten note comes to depend on whether she has made averments of primary fact which are capable of supporting the inference that he was so instructed. It was principally on that matter that Mr Robertson, for the defenders, took issue with the pursuer. He maintained that the pursuer had not averred primary facts which could support the inference that the instructions contended for had been given. In our opinion, that contention was not well founded. The averment of belief is made "[having] regard to the surrounding circumstances hereinbefore condescended upon". It is therefore necessary to consider whether those averred surrounding circumstances are capable of bearing the inference that "Mr Burnett instructed Mr Lockerbie to implement the handwritten note". The averred surrounding circumstances (see page 7A of the reclaiming print) may be summarised as follows:- it was agreed between the pursuer and Mr Burnett that instructions would be given to Mr Lockerbie that certain arrangements should be made to protect the pursuer's investment in the house;
- those instructions were set out in the handwritten note, which is incorporated in the pleadings;
- the handwritten note was given by Mr Burnett to Mr Lockerbie on or about 18 February 1997;
- prior to delivery of the handwritten note Mr Burnett told the pursuer that he would issue instructions to Mr Lockerbie that the transaction should be structured as set out in the handwritten note;
- at no stage did Mr Burnett advise the pursuer that he had done anything other than issue such instructions;
- the handwritten note was received by Mr Lockerbie and placed by him in his file;
- by the letter of 21 February 1997 addressed to the pursuer and Mr Burnett Mr Lockerbie acknowledged receipt of the handwritten note.
In our opinion, Mr Brown's submission that those averments are capable of supporting the inference that Mr Lockerbie was indeed instructed by Mr Burnett to implement the handwritten note was well founded. It is not appropriate that we should say more, because whether the inference is held to be sound, or whether other evidence to a different effect leads to its being rejected, is a matter that can only be determined after proof. It is sufficient for the relevancy of the pursuer's pleadings, however, that the averred circumstances are capable of being held to support the averred inference.
[18] We therefore hold that the Lord Ordinary erred in taking the view that in this respect the pursuer's pleadings are irrelevant.Issue 2 - The secondary case
[19] Mr Brown submitted that the Lord Ordinary had erred in treating the pursuer's case as perilled on the "believed and averred" averment. He maintained that the secondary averments of duty (see paragraph [10] above) made a case which was not dependent on Mr Lockerbie's having been instructed to implement the handwritten note; it was sufficient to give rise to those duties that Mr Lockerbie was aware of the terms of the handwritten note. With that knowledge he came under the duties to advise her and to obtain her specific instructions before departing from the terms of the handwritten note, as elaborated in the averments summarised in paragraph [10] above. In the course of discussion of that submission, Mr Brown came to accept that the secondary case, as expressed, was tied to the proposition that Mr Lockerbie had not only received the handwritten note, but had been instructed to implement it. That was clear from the terms of the sentence quoted at the beginning of paragraph [10] above. Mr Brown therefore proposed the amendment which is set out in paragraph [11] above. If amended to that effect, the secondary case could be advanced as comprising duties arising from Mr Lockerbie's knowledge of the terms of the handwritten note, irrespective of whether he was instructed to implement it. Mr Brown's contention was thus that, whether he succeeded on the "believed and averred" issue or not, the secondary duties were, if amended as proposed, relevantly averred as incumbent on Mr Lockerbie because of his knowledge of the terms of the handwritten note. [20] Mr Robertson submitted that the amendment proposed by Mr Brown should be refused. His principal reason for so submitting was that the alternative case, if based on mere knowledge of the handwritten note, rather than instructions to implement it, was not followed through in the averments of loss. The loss which the pursuer sought to recover was the sum of £20,315.03 for which, according to her averments, she required to accept liability to the Halifax. She characterised that liability as loss caused to her by the defenders' negligence on the basis of her averment (at page 16E of the reclaiming print) that:"Had the pursuer's instructions to the defenders been acted upon, she would not have had to accept liability to repay any of the said loan."
The loss claimed was thus tied to the assertion that the defenders were instructed to implement the handwritten note. There was no averment of loss based on the secondary case.
[21] In response to that submission, Mr Brown pointed to the passage in the pursuer's pleadings (at page 9E of the reclaiming print) where, after setting out the duties said to be incumbent on Mr Lockerbie in the secondary case, it is averred:"Had Mr Lockerbie sought specific instructions from the pursuer and advised her of the import of not having a Minute of Agreement prepared, she would have insisted that the transaction be structured as set out in the handwritten note. ... It is likely that [Mr Burnett] would have agreed to execute a Minute of Agreement incorporating the terms hereinbefore condescended upon".
Thus, the pursuer's case is that, whether Mr Lockerbie had fulfilled the duty alleged in the primary case, or the duties averred in the secondary case, the result would have been the same - a Minute of Agreement would have been executed securing the pursuer's right to buy out Mr Burnett's interest and Mr Burnett's obligation to bear the repayment of the whole of the Halifax loan. The averments of loss were therefore relevantly supported by the secondary case of fault as well as by the primary case of fault.
[22] Leaving aside for the moment the issue as to the relevancy of the averments of loss generally, we are satisfied that Mr Robertson's principal ground of opposition to the pursuer's proposed amendment, namely that it should be refused because, if granted, there would be no relative averments of loss, is not well founded. We are satisfied that, having regard to the considerations set out in paragraph [21] above, the secondary case, as the pursuer proposes to amend it, would be as well supported by averments of loss as the primary case. We are therefore of opinion that it is appropriate to allow the pleadings to be amended as indicated in paragraph [11] above. That done, we are of opinion that the secondary averments of fault, as so amended, should be remitted to proof before answer along with the primary averments of fault, unless the third issue, relating to the relevancy of the averments of loss caused by the alleged negligence, is resolved in the defenders' favour and the action falls on that account to be dismissed.Issue 3 - Causation of loss
[23] The Lord Ordinary sustained the submission made by Mr Robertson for the defenders to the effect that the pursuer had made no relevant averment that she had suffered loss as a result of negligence or breach of contract on their part. He accepted as correct Mr Robertson's characterisation of the pursuer's case as saying no more than that she had bought off a litigated dispute with Mr Burnett by bearing the repayment of £20,315. She could and should have sought to enforce the agreement recorded in the handwritten note, in which event she would not have suffered loss. As the Lord Ordinary put the matter at page 41 of the reclaiming print:" ... the defenders were not liable to reimburse the pursuer for any sums which she had voluntarily paid in preference to raising proceedings to obtain her legal entitlement."
Decision
[27] In the result, therefore, we shall allow the pursuer to amend her pleadings to the effect set out in paragraph [11] above. Thereafter, we shall allow the reclaiming motion, recall the Lord Ordinary's interlocutor of 24 February 2004, and allow a proof before answer.