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Cite as: [2007] CSIH 84, [2007] ScotCS CSIH_84

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EXTRA DIVISION, INNER HOUSE, COURT OF SESSION

Lord Osborne

Lord Wheatley

Lord Mackay of Drumadoon

[2007] CSIH 84

CA97/05

OPINION OF THE COURT

delivered by LORD OSBORNE

RECLAIMING MOTION

in the cause

WILLIAM LIPPE ARCHITECTS LIMITED

Pursuers and Reclaimers;

against

JAMES INNES

Defender and Respondent:

_______

Act: C. Mackenzie; Beveridge & Kellas, SSC (for Taggart Meil Mathers, Aberdeen) (Pursuers and Reclaimers)

Alt: Alastair Clark, QC; Brodies (for David S. MacDonald, Aberdeen) (Defender and Respondent)

20 November 2007

The background circumstances

[1] The pursuers and reclaimers are the successors to the rights and obligations formerly vested in the firm of architects known as William Lippe Architects, which had a place of business at 4 St. James Place, Inverurie, Aberdeenshire, and of which the partners were William Lippe and Mrs. Anne Georgina Lippe. By an agreement entered into between that firm and the reclaimers, executed on 25 May 2004, the firm assigned the rights and obligations vested in it to the reclaimers with effect from 1 June 2004. During the period of March 2000 to June 2004, the firm carried out architectural and associated services for the respondent in relation to the intended development of part of the respondent's property known as Upperboat Farm, Inverurie.

[2 ] On 6 July 2005, the reclaimers raised two invoices against the respondent. The first of these invoices, No. 05/089, was in these terms:

"Upperboat Development

Fees to architectural and planning services, related to Local Plan, zoning and planning for above development, attending various community council, local authority, public meetings, promoting site and obtaining zoning in FALP. To preparing and submitting various applications to promote and gain consent on site.

Fees as per correspondence of 18 January 2000

3.8% x £900,000, sale value to Bancon £34,200.00

VAT @ 17.5% £ 5,985.00

£40,185.00"

The second invoice, No. 05/090, was in these terms:

"Upperboat Development

Plot 18 - retained by client

Value of 17 sold £900,000.00

Value of Plot 18 £900,000.00/

17 =

£ 52,941.00

(Note: - Open un-serviced market value estimated at £100,000)

Fee 3.8% x £52,941.00 £ 2,011.76

VAT @ 17.5% £ 352.06

£ 2,363.82"

The total of these two invoices is £42,548.82, the sum sued for in the present action, which was raised because the respondent had declined to pay the foregoing invoices.

[3 ] In their pleadings the reclaimers aver that the architectural services which form the subject-matter of the action were rendered principally by Mr. Lippe, who was, at all material times, a partner in the firm. In or about January 2000, Mr. Lippe mentioned to the respondent that part of the land comprised in Upperboat Farm, Inverurie, had the potential to be developed for residential housing. The respondent was interested in such development potential. Mr. Lippe informed the respondent that it was necessary to have the land zoned in the next Local Plan as land for residential development and thereafter to apply for planning permission. Mr. Lippe wrote to the respondent by a letter dated 18 January 2000, noting the discussions which had taken place, and making suggestions as to what would have to be done to realise the development potential of the relevant land. The reclaimers aver in Condescendence 3 that, on or about 22 February 2000, the respondent verbally instructed Mr. Lippe to provide his services for the purpose of having the relevant land zoned as land for housing development in the Aberdeenshire Local Plan, to carry out the work preparatory to an application for planning permission or the conclusion of an agreement between the respondent or any successor in title and the planning authority in terms of section 75 of the Town and Country Planning (Scotland) Act 1997, allowing the development of the relevant land for residential housing, and to make any necessary planning applications. The reclaimers aver that it was clear to Mr. Lippe and the respondent that the professional services of the firm required would be substantial and that those services would command a substantial fee. In Condescendence 4 of the summons the following crucial averments are made in this connection:

"Mr. Lippe had already suggested possible financial arrangements with regard to payment for the firm's services in the said letter dated 18 January 2000. Accordingly the parties verbally agreed on or about 22 February 2000 that the pursuer would be remunerated, in the event of planning permission allowing development of the land for residential housing being obtained, or by the firm having done all that was necessary for the respondent or any successor in title to obtain such planning permission, or for the defender or any successor in title to be in a position to enter into an agreement with the local planning authority in terms of section 75 of the Town and Country Planning (Scotland) Act 1997 allowing such development, by 3.8% of the monies received for the new residential properties sold following development of the land, or of the monies paid to the defender by a third party developer for the sale of the relevant land, plus Value Added Tax, or alternatively by the firm receiving title to the plot mentioned in the said letter of 18 January 2000.

In the events hereinafter condescended upon, namely the sale of the relevant land by the defender to Bancon Homes Limited and the retention by the defender of a plot of the land, the latter alternative became frustrated, or alternatively by such sale and the retention of a plot of the land leaving no other parcel of land available, the defender implicitly chose the payment based on 3.8% of the sale price. It was an implied term of the contract between the parties that the defender would pay said 3.8% relative to any of the land retained by him which was covered by such planning permission. The defender was to pay any fees required by the planning or any other authority."

These averments of the reclaimers are denied, although the respondent admits that Mr. Lippe suggested possible financial arrangements for payment for the reclaimers' services in the letter dated 18 January 2000.

[4 ] In Condescendence 5 of the summons the reclaimers aver that:

"The firm duly carried out architectural and other services for the defender, including inspecting the land, attending meetings, consulting and corresponding with the local authority planning and the officials thereof, drafting plans, and applying for outline planning permission. Towards the end of 2003 the granting of planning permission or the conclusion of a section 75 agreement was imminent. ... About this time the defender considered developing the land himself, but in or about January 2004 certain property developers showed an interest in purchasing the relevant land. In or about June 2004 Bancon Homes Limited ... agreed to purchase the land from the defender. By this time the defender was in a position to enter into a section 75 agreement with the planning authority to allow the development with 16 houses to proceed. In or about May 2005 the defender sold the relevant land to Bancon Homes Limited for the sum of £900,000."

The averments in Condescendence 5 also refer to the fact that the respondent retained one of the plots for his own use.

[5 ] Since the letter, dated 18 January 2000, from Mr. Lippe to the respondent featured so prominently in the course of the proof and the hearing of the reclaiming motion, it is appropriate for us to reproduce its terms in full, which we now do:

"Thank you for affording me some time recently to discuss that Upperboat Development. As discussed we believe that the site has potential for residential development and that there are various courses of action but would suggest the following.

1 We would attend Community Council Meetings, Local Authority and Public Meetings, Public and Planning Forums, Business Association Meetings, Inverurie Strategy Meeting, Local Authority Planners Local Plan Team with a view to promoting the Upperboat site for inclusion in the New Aberdeenshire Local Plan 2001 - 2006. The whole scenario of the revised local plan commences in April and will take approximately one year.

2 This alternative would be to prepare and submit a Planning Application over and above the Local Plan promotion in respect of the site, showing a general layout, roads, sub-division feus and landscaping offering planning gain incentives to the Local Authority. These are:

(i) Removal of the Piggery and therefore allowing the Council to sell off

their own land at St. James's Place for housing.

(ii) To provide them with a car park for their fishers serving the River

Don.

(iii) To provide additional amenity area and extended walkways along the

River Don connecting the Port Elphinstone and Davidson Park areas to the Golf Course walkways.

There will also be further requests for planning gain, typically in terms of financial contribution towards affordable housing, community projects, education etc. but these can only be determined upon submission and negotiation with the Planning Officers.

3 In respect of fees there are two options:-

(i) That we would carry out professional architectural services on an

hourly basis. We estimate approximately 300 hours over a one to two year period, which would equate to a fee of approximately £12,000 plus expenses and VAT and which would be invoiced quarterly.

(ii) Incentive based where the fee would only be paid upon satisfactory

zoning of the land and would be paid upon sale of the site. This is much longer term for ourselves where we also take considerable risk and based upon an unknown end value. However we have assumed that as the scheme is shown on the enclosed drawing with the riverside being developable, and would be disappointed if the land did not realise and return a value to yourself in excess of £1,000,000 and hopefully nearer £2,000,000. However the value would be very much dependent upon costs of taking infrastructure into the site, sewers, water, hydro, road construction etc., and these can only be researched and advised as part of promotion or submission of the site.

In terms of this incentive-based proposal we would suggest:

Alternative 1. A fee of 3.8% of the sale price of the land.

Alternative 2. That we receive Title to Feu No. 45 as shown on the enclosed site plan, extending to approximately 1 acre which includes the landscape, duly serviced by the developer/purchaser of the overall development site, to be used for one house for ourselves. Should the enclosed layout not be successful then an alternative site of similar size and nature to be agreed.

Should you decide to follow the route of the Planning Application then you would incur a fee payable to the Local Authority, being a planning and advertisement fee amounting to £4,900. These fees are paid directly to the Local Authority.

There may be some advantage in following this latter route particularly in relation to the planning gain issue, but would prefer to meet with yourselves to discuss this in greater detail. We trust that the foregoing is of interest to yourself but look forward to meeting to discuss how best to proceed."

[6 ] In due course, a proof was held in the present action. Evidence was given by William Kenneth Lippe, George Ramsey Moir, a joiner and building contractor, Alan Ross, a Director of Cameron Ross, Engineers and Robert Beattie, of Bancon Homes. The respondent chose not to give evidence.

The decision of the Lord Ordinary

[7 ] By an interlocutor of 30 November 2006, the Lord Ordinary repelled the first plea-in-law of the reclaimers, sustained the respondent's second plea in law and assoilzied the respondent from the conclusion of the summons. The reasons for the Lord Ordinary's decision are set forth in detail in paragraphs 25 to 27 of his Opinion, to which we refer. Against that decision the reclaimers have reclaimed.

Submissions of the reclaimers

[8 ] Counsel drew attention to the significant parts of the reclaimers' pleadings. The vital issue in the case was whether a binding agreement had been reached between Mr. Lippe, on behalf of the former firm, and the respondent for the payment of remuneration by the respondent for architectural services provided on a "no win no fee" basis. The Lord Ordinary had expressed two main reasons for his decision: (1) that the evidence did not accord with the reclaimers' case on record; and (2) that consensus in idem had not been established between the parties as to remuneration on the incentive based option. Counsel then went on to describe the background to the case, with which we have already dealt.

[9 ] The letter written by Mr. Lippe, dated 18 January 2000, was crucial. The incentive-based scheme was set forth in paragraph 3(2) of that letter. The fee would be paid only upon satisfactory zoning of the land and would be paid upon sale of the site. The fee was to be 3.8% of the sale price of the land. The evidence demonstrated that the sending of that letter to the respondent had been followed by a meeting between Mr. Lippe and the respondent at the Garden Centre in Huntly on 22 February 2000. Mr. Lippe's evidence concerning that matter appeared at page 48 and following pages of the Appendix. Two features of the situation were important. Reference was made at the meeting to the fact that the letter of 18 January 2000 had been sent. Further, the respondent had made it clear that he did not wish to incur expense in connection with the realisation of the scheme proposed. The reclaimers had offered to do the necessary work at their own risk. The incentive based scheme would enable that to be done and, under it, the respondent would not require to meet any expense, save for fees that might be payable to the local authority. The respondent had instructed Mr. Lippe's firm to "get on with it", as appeared from page 51 of the Appendix. The reclaimers' case was that the respondent had adopted the first alternative of the incentive-based proposal contained in the letter of 18 January 2000. However, if there were any doubt about that, there was no difficulty about a contract which contained alternative methods of remuneration. An obligant could choose the alternative most favourable to him, in such a situation. The position of the reclaimers was that the letter of 18 January 2000 was not itself a written contract; however, it was a component in a verbal agreement reached later at the meeting on 22 February 2000. It was worth emphasising that paragraphs 1 and 2 on the first page of that letter were not truly alternatives. While the obtaining of appropriate zoning in the Local Plan was a first step, plainly, in the end, a planning application for permission to develop was essential. The services to be performed by Mr. Lippe's firm embraced work on the zoning of the relevant area and also the submissions of a planning application, as was in fact done. In this connection reference was made to the evidence of Mr. Lippe at pages 65 to 69 of the Appendix. The respondent had in fact paid the necessary local authority fees in connection with the planning application. Summarising his submission, counsel said that the evidence showed that, at the meeting of 22 February 2000, against the background of the letter of 18 January 2000, agreement had been reached between the parties that the firm should provide architectural services as described in the letter on the basis set forth in paragraph 3(2) of the letter. That is to say, the payment of the reclaimers' fee would be on the incentive basis. It was accepted that there were alternatives involved as regards the nature of the fee, the first being a fee of 3.8% of the sale price of the land, the second being that the firm should receive title to feu No. 45 as shown on a plan which had been discussed between the parties. The evidence at pages 65 to 82 of the Appendix demonstrated the complexities that had arisen in relation to the second alternative form of remuneration on the incentive basis. The plan on which feu No. 45 appeared had not been taken forward as a basis for the development. Other plans had been formulated.

[10 ] At this stage of his submissions counsel for the reclaimers drew attention to certain authorities, in connection with his submission that, in a situation in which the respondent had chosen not to give evidence, the court should draw the inference most favourable to the reclaimers justified by the evidence which had been led. In this connection reliance was placed on O'Donnell v Murdoch Mackenzie & Company 1967 S.C. (H.L.) 63 at pages 71 and 73. Reliance was also placed on Ross v Associated Portland Cement Manufacturers Limited [1964] 1 W.L.R. 768 at pages 775 and 785; Johnstone v City of Glasgow District Council 1986 S.L.T. 50, at page 52; Richardson v Quercus Limited 1999 S.L.T. 596, at page 604 and Cordiner v British Railways Board 1986 S.L.T. 209 at page 214. A further legal principle which had to be seen as forming part of the background of the case was that, where services were rendered by a professional person, there was a presumption that payment for those services was to be made, as appeared from Wilkie v Scottish Aviation Limited 1956 SC 198 at pages 201 and 203-4. The Lord Ordinary had not mentioned the authorities referred to, although O'Donnell v Murdoch Mackenzie and Company had been cited to him.

[11] Reverting to the facts of the present case, the statement by the respondent that he did not wish to incur expense, which he made at the meeting on 22 February 2000, was significant. The inference should be drawn from that statement that, in instructing the firm to get on with the job, the instruction was that services should be provided and eventually remunerated by the incentive based method, which did not involve the making of periodical payments during the period when the work was being done, as would have had to have been made had the hourly rate basis of remuneration been adopted. There was no defence evidence to contradict that view.

[12 ] Counsel submitted that it was important to recognise that around the middle of 2003, or, it might be 2004, a meeting took place between Mr. Lippe, the respondent and Mr. Moir, described in evidence between pages 69 and 82 of the Appendix. At that meeting there had been discussion about Mr. Lippe being remunerated on the basis of a plot of land, although plot 45 on a previous plan was no longer under discussion. At the meeting the respondent had stated that, if remuneration were to be on the basis of a plot, a "top up" would be required, because the value of any plot under consideration would exceed the 3.8% of total value of the site. Counsel submitted that the respondent was thus accepting that an agreement for remuneration on an incentive basis was in being. These events demonstrated that the respondent considered that the 3.8% basis of remuneration was less onerous, so far as he was concerned, than the conveyance of a plot. In all the circumstances the court should hold that the Lord Ordinary had erred in declining to hold that the necessary consensus in idem had been established.

[13 ] Counsel then turned to consider that part of the Lord Ordinary's decision based upon the terms of the reclaimers' pleadings. The position had been that no objection had been taken on behalf of the respondent to evidence led upon the basis that it went beyond the terms of the reclaimers' pleadings. While the terms of Condescendence 4 were elaborate, they did give fair notice of the case which the reclaimers sought to make. In any event, a certain latitude toward pleadings was appropriate, especially in a commercial cause. It was always open to a party to rely upon a variation, modification or development of a case pled, provided that they did not embark upon the support of something new, separate and distinct from the case pled, as appeared from Burns v Dixon's Ironworks 1961 S.C. 102. It was quite evident from the circumstances described in evidence that all that was necessary to obtain planning permission had been done. The price of £900,000 obtained for the land in question reflected a valuation of the property with planning permission for residential development, as appeared from paragraph 4 of the joint minute entered into by the parties. There was no question before the court as regards whether the firm had performed the work which they were instructed to do. For all these reasons, the Lord Ordinary had erred in taking the view that the case which the reclaimers sought to make was not properly within the terms of their pleadings.

[14 ] While it was acknowledged that there were two alternatives referred to in the letter of 18 January 2000 as regards remuneration on the incentive basis, that was not "an agreement to agree". In this connection reference was made to Stair, Institutions, I.17.20. Reliance was also placed on Cockburn v Alexander (1848) 6 C.B. 791, at 808, 812, 815 and 816; Robinson v Robinson (1851) 1 De G.M.G. 247, at 257 to 258; Deverill v Burnell (1873) L.R. 8 C.P. 478 at 480 to 482; Abrahams v Herbert Reiach [1922] 1 K.B. 478, at pages 482 to 483; Paula Lee Limited v Robert Zehil & Company Limited [1983] 2 All E.R. 390 and McGregor on Damages, 17th edition paragraphs 8.060 to 8.064. At this point in the submissions, senior counsel for the respondent stated that no point was being taken that the "wrong alternative" had been chosen as the basis for the action. The principle being supported by counsel for the reclaimers was not in controversy.

Submissions for the respondent

[15 ] Senior counsel for the respondent began his submissions by making certain general points. First, there was no dispute between the parties that, in the absence of an express contract between them, there was a legal presumption that the profession services were not rendered gratuitously; it was implied that such services are rendered in consideration of reasonable remuneration. There were many authorities to support that position, but it was beside the point in the context of the present case. The reclaimers were not claiming the sums sued for on the basis that they were reasonable remuneration for the work done; they were claiming them upon the basis that they were due in accordance with a contractual agreement between the parties. The respondent's submission was that there never had been an express contract under which it was agreed that the firm should provide architectural services upon the basis of agreed remuneration. As regards the meeting at the Garden Centre on 22 February 2000, it was submitted that there was no consensus concerning anything. There had been merely a tacit acceptance on the part of the respondent that certain services should be provided.

[16 ] Secondly, the respondent accepted the legal principles expounded by counsel for the reclaimers relating to alternative methods of payment. However, those principles operated only where a contract had been established. As the Lord Ordinary observed at page 22 of the reclaiming print in paragraph 26 of his Opinion:

"Those authorities were concerned with the situation where, it having been established that there was a concluded agreement, that agreement provides for performance of obligations in alternative ways. ... As counsel for the defender submitted, those authorities are concerned with a different point in contractual relationships from the position of the present case, where there never has been consensus in idem regarding alternative performance."

The problem for the reclaimers was that there was no clear acceptance of any offer or proposal made by them. Upon the assumption, contrary to the respondent's submission, that a contract had been brought into being, the principles concerned would apply. In that situation there might be an issue as to which alternative method of payment was the least onerous so far as the respondent was concerned. Senior counsel stated that he rejected the argument advanced that the respondent had elected for the 3.8% of sale proceeds option.

[17 ] Thirdly, senior counsel said that he wished to look briefly at the pleadings in the action and the decision of the Lord Ordinary. This he proceeded to do. This involved an analysis of the averments made in Condescendence 4. Those averments involved a series of alternative situations in which it was claimed that the 3.8% of monies received were to be paid. Those averments differed from what had been set forth in the letter of 18 January 2000. Furthermore, it was evident from examination of the invoices upon the basis of which the present action had been raised that a charge was being made, not only upon the basis of the sum realised for the site, but also upon the basis of the alleged value of a retained plot, which latter claim appeared to be based on the alleged existence of an implied term. Yet no circumstances had been identified which would have resulted in the implication of such a term. So, on the best view for the reclaimers, the payment of the smaller sum invoiced could not be due.

[18 ] In examining the background to the Lord Ordinary's decision, it was appropriate to note that there was no written reply by the respondent to the letter of 18 January 2000; what occurred was that some 35 days after its date, the meeting at the Garden Centre took place. The evidence disclosed that there had been only a very brief reference to it at the meeting as appeared from page 57 of the transcript of evidence. What the respondent was reported to have said at the meeting was quite consistent with a desire on his part that the firm should continue to explore the possibilities of development.

[19 ] Turning to the essentials of the Lord Ordinary's decision, there were two grounds for it: (1) that the case advanced on the reclaimers' behalf had not in fact been pled; and (2) that there was no consensus in idem. Dealing with the first of these matters, senior counsel recognised that, in general, in commercial causes, detailed pleadings were not required. However, where a case depended upon the establishment of a contract, fair notice had to be given of the terms of the contract sought to be established. If that were not done, the case would not get past the stage of a legal debate. In connection with these submissions senior counsel referred to McGlone v British Railways Board 1966 S.C. (H.L.) 1, at page 12 and Morrison's Associated Companies Limited v James Rome & Sons Limited 1964 S.C. 160, at pages 189 to 190. While it was true that objection had not been taken to the line of evidence in this case, it had not been practicable to do so, since the letter of 18 January 2000 was a production. In all these circumstances, the Lord Ordinary's decision in relation to the pleadings was sound. At page 152 of the transcript of evidence Mr. Lippe had said in evidence that none of the matters set forth in Condescendence 4 had in fact been verbally agreed at the meeting of 22 February 2000.

[20 ] Turning to the issue of consensus, it had to be recognised that the respondent had attended the meeting on 22 February 2000, some weeks after the letter of 18 January 2000 had been written. In that letter several alternatives had been raised; it was not realistic to suppose that he had agreed to the specific contract that the reclaimers now contended for. Senior counsel, however, accepted that the instruction of the respondent to "get on with it" and the observation "I do not want to incur expense" could be seen as amounting to a reference to the contents of the letter. However, in contending that there was no consensus in idem established, counsel relied upon Byrnlea Property Investments Limited v Ramsay [1969] 2 Q.B. 253 at page 264; and G. Scammell & Nephew Limited v H.C. & J.G. Ouston [1941] A.C. 251. In both of these cases it was held that material said to amount to a contract did not evince any definite meaning upon which the court could safely act. That was the position here. Senior counsel posed the question of whether, if after 22 February 2000 Mr. Lippe's firm had submitted no planning application, he would have been in breach of contract. It was suggested that the answer would be in the negative. Senior counsel went on to review the decisions of O'Donnell v Murdoch Mackenzie & Company, Johnstone v City of Glasgow District Council and Cordiner v British Railways Board, relied upon by the reclaimers. They were concerned with inferences of fact from factual evidence. However, in the present case there was no place for inference; the problem was the interpretation of the respondent's statements at the meeting of 22 February 2000. They were, quite simply, too vague to enable any conclusion to be drawn that an enforceable agreement had been reached. The reclaimers' case depended essentially on speculation as to the intention of the respondent.

[21 ] Senior counsel went on to deal with a variety of miscellaneous points. In the first place, the discussions which had taken place between Mr. Lippe and the respondent relating to a "top up" were of no significance. It could not be maintained on the basis of such discussions that the respondent had elected for the 3.8% fee. It would be unsafe to conclude that the respondent had given up the idea of the conveyance of a plot. There had been no frustration of that part of any contract. The reclaimers had to show that an election had been made, before they could succeed.

[22 ] In the second place, the reclaimers' case in relation to the smaller of the two invoices appeared to depend upon the implication of a contractual term, as they acknowledged. That implied term alone could confer a right to 3.8% of the value of land retained by the respondent. However, there was no basis upon which any such term could be implied. The only possible basis would be that such a term was necessary in order to give the contract business efficacy. However, there was no averment or evidence to support such a basis. Accordingly, on the most favourable view for the reclaimers, decree should not be granted in respect of the amount of the smaller invoice.

The decision

[23 ] It is a matter of agreement, in paragraph 1 of the joint minute for the parties that, in the period from March 2000 to June 2004, the firm of William Lippe Architects carried out architectural and associated services for the respondent in relation to the development of part of his property at Upperboat Farm, Inverurie. Furthermore, as was accepted by counsel for the respondent at the proof and as is narrated in paragraph [27] of the Lord Ordinary's Opinion, William Lippe Architects would have been entitled to be paid reasonable remuneration for the work which they did. It is, of course, the case that that is not the basis upon which the reclaimers claim that they are entitled to receive payment in the present action. However, we consider that it is proper to infer from the events which have occurred and also from the evidence of Mr. Lippe that his firm and the respondent entered into a professional business relationship under which the work concerned was to be performed. The respondent must have agreed to that having been done. Otherwise it could not have been accepted on his behalf that any payment was due. In any event, it is quite clear from the evidence of Mr. Lippe that there was such agreement. Against this background, it appears to us that the principal question for decision is whether the reclaimers have established that the arrangement between William Lippe Architects and the respondent was such as to entitle them to payment upon the basis now sought in this action, that is to say, upon the 3.8% of sale proceeds incentive basis. A further ancillary question arises, in view of the opinion of the Lord Ordinary, which is whether, on their existing pleadings, the reclaimers are entitled to succeed on such a case. These are the issues which we now address.

[24 ] Before coming to the particular facts of this case, it is right to say that we accept the submission made by counsel for the reclaimers to the effect that, the respondent having chosen not to give evidence himself and having chosen not to lead evidence concerning the nature of the relationship between him and William Lippe Architects, if inferences are to be drawn from Mr. Lippe's evidence, they should be those favourable to him, as opposed to the respondent. In making that submission counsel for the reclaimers relied on several cases. It is appropriate to mention Ross v Associated Portland Cement Manufacturers Limited, O'Donnell v Murdoch Mackenzie & Company Limited, Johnstone v City of Glasgow District Council, Cordiner v British Railways Board and Richardson v Quercus Limited. So far as we can see from his Opinion, the Lord Ordinary did not take that principle into account; at least, he makes no mention of it. Turning then to the particular facts of the case, Mr. Lippe, in evidence, described how the venture with which this action is concerned came into being. The witness had himself formed the view that the land in question had a potential for residential development, because of the proximity of it to recent developments, in particular the by-pass and the golf course. Further, there were issues relating to the fact that the land was a piggery and therefore potentially a nuisance on the edge of the town. Plainly from Mr. Lippe's evidence, particularly at page 30 of the Appendix, there had been discussions between him and the respondent concerning these matters. That is also quite evident from the opening paragraph of the letter, dated 18 January 2000, which refers to previous discussion of what is described as the Upperboat Development. Against that background Mr. Lippe then wrote the letter concerned. It contains three main paragraphs. It appears to us that, in the first two of those paragraphs, a proposal is made by the writer for the undertaking of professional work by his firm. In numbered paragraph 1 he outlines steps that would be taken with a view to the promotion of the Upperboat site in the inclusion in the new Aberdeenshire Local Plan 2001/2006, which he considered would take approximately one year. In numbered paragraph 2 he then outlines work related to the preparation and submission of a planning application over and above the Local Plan promotion in respect of the site showing a general layout, roads, subdivision into feus and landscaping and offering planning gain incentives to the planning authority. That work is described as an "alternative", but it is quite clear that it cannot properly be seen as an alternative, if for no other reason, because of the use of the words "over and above the Local Plan promotion", a reference to the work to be undertaken in numbered paragraph 1, which is to be found in the second line of numbered paragraph 2. In any event, it would be a necessary sequel or adjunct to the work described in numbered paragraph 1. On any view, the obtaining of zoning for the site in the local plan as a site for residential development would achieve only part of the object to be attained. No development could actually take place there unless planning consent was obtained for it. Accordingly, we do not read numbered paragraphs 1 and 2 as, in any real sense, alternatives. It appears to us that together they constitute an outline of the work which Mr. Lippe proposed should be undertaken on the respondent's behalf.

[25 ] Numbered paragraph 3 is of crucial importance in the present context. Sub-paragraph 1 indicates that, as regards fees, there was an option for fees to be charged on an hourly basis over a one to two year period, which would be invoiced quarterly. The estimated amount of such fees was in the region of £12,000, together with expenses and Value Added Tax. Numbered sub-paragraph 2 describes an alternative option referred to as "incentive based", where the fee would only be paid upon satisfactory zoning of the land and would be paid upon sale of the site. That was an option under which Mr. Lippe's firm would take the risk that zoning of the land might not be achieved, in which situation his firm would receive no fee. The succeeding part of the letter goes into further detail regarding the fee that would be paid upon the satisfactory zoning of the land. Alternatives are indicated, first, a fee of 3.8% of the sale price of the land; secondly, that William Lippe Architects should receive a title to feu number 45 as shown on the enclosed site plan. It is evident from that particular part of the letter that, prior to its having been written, a site plan showing a number of plots had in fact been prepared by William Lippe Architects. Later in the letter Mr. Lippe also made clear that the respondent would be liable to pay the fees payable to the local planning authority for consideration of a planning application and advertisement.

[26 ] In our opinion the letter of 18 January 2000, with the associated site plan, must be seen as a detailed proposal by William Lippe Architects as to the professional services which they might render to the respondent. We would agree with the view expressed by the Lord Ordinary in paragraph 26 of his Opinion that the content of the letter could not be read as containing an unconditional offer which could be accepted without any further negotiation being required. However, it appears to us from the evidence of Mr. Lippe that there was further negotiation. A meeting was held at the Huntly Garden Centre on 22 February 2000. This is described by Mr. Lippe at page 48 of the Appendix in the transcript of his evidence and the following pages. At that meeting, as Mr. Lippe testified, the project was further discussed. The letter of 18 January 2000 was briefly mentioned as being a basis upon which William Lippe Architects would proceed, as appears from page 49. In the course of discussion at the meeting certain important points emerged. In the first place, the respondent made clear to Mr. Lippe that he, the respondent, did not wish to incur expense. As Mr. Lippe said at page 50 of the transcript: "We'd offered to do it at risk, and he didn't want to incur expense. We agreed to proceed on that basis". Having been asked what basis that was, Mr. Lippe said: "Well, as far as we were concerned, we were taking all the risk, so it was an incentive-based scheme." Secondly, in the course of the meeting, it is quite plain from Mr. Lippe's evidence that he received instructions to proceed. At page 49 he said: "It was really that he didn't want to incur expense and really just to get on as best we could in terms of proceeding with this particular area of land." At page 50 he said: " ... we agreed it was a matter of just get on with it." Asked as to Mr. Lippe's own understanding as to the basis of remuneration, at page 51 of the transcript, he said: "Well, our aim initially was to gain a site for my wife and I but, if that wasn't possible, then it was going to be a percentage of the sale value. That was our understanding." Asked whether the respondent had said anything which could have led to that belief, Mr. Lippe said:

"Well, I took it as being yes. I mean, we were then instructed basically to get on with it, yes. ... (Question): You were instructed to get on with it and you say you [sic] didn't want to incur expense? (Answer): He didn't want to. (Question): He didn't want to incur expense, so, having indicated to you that he didn't want to incur expense, then what was your ... how did you think that affected your first proposal that you'd be paid 300 hours at an hourly rate? (Answer): Basically he did not want to incur fees if there was no success in the project. (Question): What if there was success? (Answer): Then we expected to get a site or a percentage of the sale value. (Question): Did Mr. Innes know that if you achieved success, you were to get a site or a percentage of the sale value? (Answer): Yes."

At succeeding stages in his evidence Mr. Lippe was asked questions about the words actually used by the respondent at the meeting. While Mr. Lippe agreed that the respondent had not expressly and in detail agreed to the incentive-based fee proposal, we are satisfied that it can properly be concluded from the evidence which we have narrated that the respondent did in fact agree to that proposal as a means of remuneration for the work to be undertaken. Making such favourable and reasonable inferences as we are entitled to make upon the basis of Mr. Lippe's evidence, in the absence of any evidence from the respondent on this matter, we conclude that the respondent made it perfectly clear that he was not prepared to pay hourly expenses invoiced on a quarterly basis. However, he was content that William Lippe Architects should assume risk in connection with a fee and be paid on the basis of the successful sale of the site. The basis of that payment was to be the alternatives set out in the latter part of numbered paragraph 3 in the letter of 18 January 2000.

[27 ] It goes without saying that it is perfectly appropriate for contracting parties to stipulate for alternative bases of remuneration, as was accepted by senior counsel for the respondent and as appears from the various authorities cited by counsel for the reclaimers, including Stair, Institutions I.17.20, the English cases relied upon and the quotation from McGregor on Damages earlier referred to in paragraph [14].

[28 ] Having reached these conclusions, the question comes to be how the incentive-basis for payment is agreed upon is to be operated in the events which have occurred. In numbered paragraph 3 of the letter of 18 January 2000, the second alternative incentive-based approach referred to the option of William Lippe Architects receiving title to feu number 45 as shown on the related plan. It was a matter of agreement that that plan was not implemented and accordingly no plot number 45 ever came into being. In that particular part of that letter it was indicated that, should that layout not be successful in being implemented, then an alternative site of similar size and nature was to be agreed.

[29 ] It is evident from the evidence of Mr. Lippe from pages 65 onwards in the Appendix that, as the work undertaken by William Lippe Architects progressed, the respondent was kept informed of what was happening. In due course the respondent made payment to Aberdeenshire Council of the amount required in connection with the planning application which was made. A further meeting took place between Mr. Lippe and the respondent which was also attended by Mr. Moir, a local building contractor. There is some uncertainty as to the date of this meeting; it may have been in mid-2003 or mid-2004. The meeting occurred in Mr. Lippe's office in Inverurie. At that stage, there was discussion of the mode of development of the land to be developed, under reference to a plan, document 6 in the Appendix, which showed the land being developed in 16 plots. Mr. Lippe had identified plot No. 16 as the plot in which he had an interest in acquisition. In response to discussion of that matter, the respondent made the point that land values had increased and that that plot was "a lot more valuable than any percentage of the land value and that there would need to be a top-up.", as appears from page 72 of Mr. Lippe's evidence. Mr. Lippe had made clear, at page 76 of his evidence, that at that stage his preference had been to receive this plot as remuneration. However, the respondent at the meeting indicated that, in his view, a top-up would be necessary. At that stage the local plan had identified the area as suitable for a total of 20 houses, but the plan then under discussion for development identified 16 plots. At page 84 of Mr. Lippe's evidence and the following pages the subsequent history of the matter is dealt with. This is supplemented by paragraph 4 of the joint minute between the parties which agrees that on or about May 2005 the respondent sold the relevant part of Upperboat Farm to Bancon Developments Limited for the sum of £900,000, which represented a valuation of the property with planning permission for residential development, as referred to in the missives of sale. At the time of sale, planning permission had not actually been granted, since a section 75 agreement was pending. Subsequently, as appears from Mr. Lippe's evidence at page 92 of the transcript further amendment of the proposals for the development of the land in question was made so that a total of 18 houses were to be built. In the course of the history of the matter, once Mr. Lippe appreciated that the land had been sold to Bancon Developments Limited, he concluded that the option which he had previously considered was available to acquire a site on the land had ceased to available. As he stated at page 93 of his evidence, he had received no response from the respondent in connection with the making available of a site for a house, in consequence of which

"We concluded that we would just have to agree the 3.8% being the lesser amount, and that is what we eventually invoiced Mr. Innes for because we then knew the sale value of the land so we could arrive at a figure."

[30 ] At page 111 of the transcript of his evidence Mr. Lippe explained that when the sale of the land to Bancon Developments Limited was effected, the respondent had retained a plot number 18, the plan for the development then involving a total of 18 plots for houses. Mr. Lippe explained that the respondent had sold land for 17 plots and had retained plot 18 for himself. That was why the second and smaller of the two invoices had been raised.

[31 ] Against this background of fact, the conclusion which we have reached is that, by his own actions, the respondent had rendered the second alternative basis of remuneration under the incentive based scheme impossible of performance. While he has retained plot 18, as described, that was to be for his own use. There was no question of that, or any other plot, being conveyed to the reclaimers. In these circumstances, we consider that there can now be no question of the respondent electing for that alternative basis of remuneration. We therefore conclude that, subject to the remaining issue concerning the scope of the reclaimers' pleadings, they have established an entitlement to the 3.8 percentage incentive-based fee. We shall deal with the precise consequences of that at a later stage in this Opinion.

[32 ] We turn now to consider the contention that the case which we hold has been established by the reclaimers was not within the terms of their pleadings. In this connection, it is necessary to examine the terms of Condescendence 4. It is quite plain from that Condescendence that what is contended for by the reclaimers is a verbal agreement reached at the meeting on 22 February 2000, in the light of the terms proposed in the letter of 18 January 2000. In Condescendence 4, in a somewhat convoluted statement of the reclaimers' position, a series of alternative situations in which an entitlement to a fee would arise are set forth. It might well have been possible for those averments to be challenged at debate; however that was not done. Nevertheless, fair notice is given of the contention that the reclaimers would be remunerated in the event that the firm of William Lippe Architects had done all that was necessary for the respondent or any successor in title to obtain planning permission allowing development of the land for residential use. That was, of course, what was done. The averments then deal with the actual amount of remuneration. The two alternatives mentioned are of the 3.8% fee or the receipt of title to the plot mentioned in the letter of 18 January 2000. It is contended in these averments that the 3.8% fee would be derived from, in one instance, the monies paid to the respondent by a third party developer for the sale of the relevant land. Such sale has of course taken place. While these averments in Condescendence 4 leave something to be desired in terms of clarity, we are quite satisfied that there is within them fair notice of, among other things, the case which the reclaimers now contend has been established. Accordingly we reject the view that the reclaimers are not entitled to succeed on that case on account of fair notice of it not having been given.

[33 ] It now remains to consider how the reclaimers' right to remuneration is to be applied. Having regard to the fact that the respondent has now put it out of his power to elect for the second alternative of the incentive-based scheme, we conclude that the reclaimers' remuneration must be based upon a fee of 3.8% of the "sale price of the land". In our opinion, the particular application of that agreement must be seen as settled by the terms of the joint minute entered into between the parties. Paragraph 1 of that minute, which deals with the carrying out of the architectural and associated services for the respondent refers to "the development of part of the respondent's property known as Upperboat Farm, Inverurie". In paragraph 4 of the minute, it is agreed that in May 2005 "The respondent sold the said part of Upperboat Farm to Bancon Developments Limited for the sum of £900,000." We conclude that, in the application of the first alternative part of the incentive-based scheme, the reclaimers are entitled to 3.8% of £900,000, being £34,200. In addition, they are entitled and indeed bound to levy Value Added Tax on that fee, being a sum of £5,985. Thus we consider that the reclaimers are entitled to a decree for the sum of the invoice No. 05/089, dated 6 July 2005 of £40,185.00.

[34 ] In our opinion, the bargain entered into between William Lippe Architects and the respondent did not contemplate the possibility of the retention of a plot of land by the respondent for his own purposes. An attempt has been made in this action, in support of the sum claimed in the second invoice No. 05/090, to contend that there was an implied condition which entitled the reclaimers to payment of 3.8% of the value of the retained plot. What exactly that value might be is a matter of uncertainty. However, we can see no relevant basis advanced, either in averment or evidence, for the implication of any such condition and accordingly decree for that sum cannot be granted.

[35 ] In all these circumstances, we shall recall the interlocutor of the Lord Ordinary dated 30 November 2006, sustain plea-in-law 1 for the reclaimers to the extent of granting decree for the sum of £40,185.00, with interest as concluded for, repel pleas-in-law 1 and 2 for the respondent and sustain plea-in-law 3 to the extent of refusing decree for the sum of £2,363.82 sought on the basis of the invoice No. 05/090.