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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Seabourne Developments Ltd v The Shiprow Development Co Ltd [2007] ScotCS CSIH_90 (11 December 2007)
URL: http://www.bailii.org/scot/cases/ScotCS/2007/CSIH_90.html
Cite as: [2007] CSIH 90, [2007] ScotCS CSIH_90
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EXTRA DIVISION, INNER HOUSE, COURT OF SESSION

 

Lord Nimmo Smith

Lady Paton

Sir David Edward, Q.C.

 

 

 

 

 

 

[2007] CSIH 90

XA183/06

 

OPINION OF THE COURT

 

delivered by LADY PATON

 

in

 

APPEAL

 

from the Sheriffdom of Grampian Highland and Islands at Aberdeen

 

in the cause

 

SEABOURNE DEVELOPMENTS LIMITED

Pursuers and Respondents;

 

against

 

THE SHIPROW DEVELOPMENT COMPANY LIMITED

Defenders and Appellants:

 

_______

 

 

 

Act: Lake; Shepherd & Wedderburn, W.S. (Pursuers and Respondents)

Alt: Beynon; Lefevre Litigation (Defenders and Appellants)

 

11 December 2007

 

Introduction

[1] In July 2004, the appellants sold a cinema multiplex and two commercial units at Shiprow, Aberdeen, to the respondents. The price was over £11 million, and the date of entry was 27 July 2004. The cinema was the subject of a continuing lease to Vue Entertainment Limited ("Vue"). The two units were the subject of a continuing lease to A3D2 Limited ("A3D2").

[2] The missives of sale contained the following clause:

"9. Apportionments

The rateable value of the Property is as shown on the Valuation Roll and is not subject to appeal or reassessment. Rent, service charge (if any) and all other payments due in advance or in arrear to or by the Seller in respect of the Property in terms of the Leases shall be apportioned as at the Date of Entry on a daily/annual basis on the assumption (if not a fact) that all said rent and all other such payments in respect of the period prior to the Date of Entry have been paid in full. Where any rent or other payments can for any reason only be estimated at the Date of Entry the Seller and the Purchaser agree to recalculate the apportionments when the amount of the rent and other payments are finally known and to make reimbursement accordingly. The Seller shall pay to the Purchaser on the Date of Settlement all (if any) sums held on sinking fund or for anticipated expenditure in terms of any service charge provisions in terms of the Leases and any sums held as rental deposits. The Seller will not take any action against the tenants for recovery of arrears of any sums due, or implementation of obligations under the Leases either before or after the Date of Settlement save with the prior written consent of the Purchaser."

[3] Clause 12.1 provided that "Headings are inserted for reference only and shall be disregarded in interpreting this offer."

[4] Counsel were agreed that the following principles of construction applied when considering the missives and the leases:

(i) A sensible construction of the contract should be adopted with a view to ascertaining the parties' commercial objective: Bank of Scotland v Dunedin Property Investment Company Limited 1998 SC 657, at page 661; (ii) The contract should be construed as a whole: Charter Reinsurance Company Limited v Fagan [1997] AC 313, at page 384; (iii) The language of the contract should be given its natural and ordinary meaning: Glasgow Training Group (Motor Trade) Limited v Lombard Continental plc 1989 S.C. 30, at page 37; (iv) The contract should be construed in accordance with obvious commercial good sense: Mannai Investment Company Limited v Eagle Star Life Assurance Company Limited [1997] AC 749, at page 771.

[5] Applying those principles, we are satisfied that, on a proper construction of the missives and the leases, the following propositions apply in this case:

1. The obligation contained in the fourth sentence of Clause 9 of the missives (namely "The Seller shall pay to the Purchaser on the Date of Settlement all (if any) sums held on sinking fund or for anticipated expenditure in terms of any service charge provisions in terms of the Leases and any sums held as rental deposits.") relates to funds held by the appellants in Tenants' Accounts, either as rental deposits or as funds for the purpose of satisfying service charges as and when they arose. In terms of the leases (and in particular Clauses 1 and 4 of, and Parts Eight and Nine of the Schedule to, each lease), the tenant is obliged to make regular payments in advance into a Tenant's Account in order to provide the landlord with funds to meet expenditure such as landscaping, repairs and maintenance, insurance, and other service charges. At the end of the lease, the tenant is contractually entitled to demand from the landlord a repayment of any surplus funds not required for rent or service charges, and held at credit of the Tenant's Account.

2. In terms of the obligation contained in the fourth sentence of Clause 9 of the missives, the appellants were obliged, at the date of settlement, to transfer the funds standing at credit of the Tenant's Account to the respondents, who were taking over all the landlord's obligations (including any obligation to refund any surplus in the Tenant's Account to the tenant at the end of the lease).

3. That transfer did not require any apportionment between the appellants and the respondents. As Clause 12.1 confirms, the heading of Clause 9 ("Apportionments") should be disregarded when interpreting the offer. All that is required to satisfy the obligation in the fourth sentence of Clause 9 is the identification of the funds in question, and their transfer to the respondents.

4. Number 5/2 of process is a computer printout relating to Vue's Tenant's Account. The printout has been incorporated into the pleadings. The printout shows a credit balance of £82,253.30 as at 28 February 2005.

5. Number 6/8 of process is a computer printout relating inter alia to A3D2's Tenant's Account. The printout has been incorporated into the pleadings. The printout shows a credit balance of £5,012.21 as at 28 July 2004.

 

Respondents' action for payment in the sheriff court

[6] The appellants did not transfer the relevant funds in terms of the obligation contained in the fourth sentence of Clause 9. Accordingly in 2005 the respondents raised an action in the sheriff court in Aberdeen, seeking payment of certain specific sums in implement of that obligation. The respondents lodged and incorporated in the pleadings the two printouts referred to in paragraph [5] above. The appellants lodged defences, averring that an apportionment calculation required to be carried out before the obligation could be fulfilled. They further averred that their managing agents, Jones Lang LaSalle ("JLL") had yet to provide a clear accounting on the basis of which such an apportionment could be made. The appellants finally averred that the action was premature, as the necessary calculations and apportionments could only be carried out once JLL had produced the necessary information.

[7] After sundry procedure, the case came before Sheriff Cowan on 8 September 2006. The respondents submitted that the appellants' defences were irrelevant for the reasons recorded in the sheriff's note dated 30 May 2007. The respondents moved for decree de plano. The appellants argued that JLL had not yet provided the information necessary for the calculation, despite the efforts of the appellants' solicitors. They contended that the action should go no further until the figures were available.

[8] Eo die, the sheriff granted decree for certain sums. However it was accepted before us that the relevant interlocutor required to be corrected to reflect amended pleadings, and that the corrected interlocutor should take the form noted in paragraph [18] below, all as outlined in a draft tendered to the Court of Session by counsel for the respondents on 15 June 2007.

[9] The appellants then appealed the sheriff's interlocutor of 8 September 2006. The appeal was heard in the Court of Session on 22 and 23 October 2007.

 

Appeal in the Court of Session

[10] Counsel for the appellants confirmed that it was not the appellants' position that the respondents' case was irrelevant. However counsel explained that the appellants had been unable to recognise, understand, or accept the figures put forward in the respondents' pleadings and productions. The appellants' managing agents JLL had not yet divulged the necessary information to the appellants. The appellants were therefore not in a position to agree the figures sought. Counsel nevertheless accepted that the appellants were obliged to pay to the respondents the funds held at credit in the Tenants' Accounts. Essentially therefore the matter was one of quantification.

[11] Counsel submitted that the respondents had chosen to claim certain specific sums, namely £82,253.30 as first craved, £32,375.55 as second craved, and £5,012.21 as third craved, rather than opting for an action of count, reckoning and payment. Having chosen an action for payment of specific sums rather than a count, reckoning and payment, it was for the respondents to aver and prove precisely how those sums were calculated: cf. Green v Moran 2002 S.L.T. 1404. The computer printouts required some explanation. No doubt the appellants' managing agents JLL would be able to provide the explanation required. But the onus of proof and explanation fell on the respondents, not the appellants. The appellants were entitled to put the respondents to their proof. This was therefore a case where a proof was required, and the sheriff had gone too far too fast in granting the interlocutor of 8 September 2006.

[12] In response, counsel for the respondents submitted that the sheriff had not erred. The defences were irrelevant, and the granting of decree de plano was appropriate in the circumstances. The respondents' pleadings and productions provided the sheriff with sufficient material upon which to grant the interlocutor of 8 September 2006, as the test set out in Gray v Boyd 1996 S.L.T. 60, had been met. The appellants could not use the behaviour of their own agents as a defence to the action, and the appellants had made no positive averment explaining why the sums sought in the three craves were said to be excessive. The appeal should be refused.

 

Discussion

[13] Unlike the case of Green v Moran, cit. sup., this action concerns funds lying at credit in Tenants' Accounts, and not the evaluation of a resigning partner's share in a partnership. We do not therefore accept that it was necessary for the respondents to raise an action of count, reckoning and payment. Further, at all relevant times JLL were acting as agents for the appellants. In our view, it is well settled that a principal cannot disclaim knowledge or understanding of his own agents' actings and accounts: cf Gloag, Contract, 2nd ed. pages 277 to 278. Yet the appellants attempt to do so in their defences, by asserting at page 11 of the Appeal Print that certain averments of the respondents are "not known and not admitted", and by making positive averments conceding that the funds should indeed be transferred to the respondents but explaining that the funds held for the appellants by their own agents could not be ascertained until those agents gave the appellants certain information (pertaining largely to an alleged requirement to make an apportionment calculation which, on a proper construction of the contract, we have held to be unnecessary: see paragraph [5] above). We consider the appellants' averments to be wholly irrelevant in a claim such as this, namely a contractual claim for payment based upon the appellants' agents' accounts.

[14] Against that background, we deal with each crave in turn:

 

The first crave for £82,253.30

[15] In support of the first crave for £82,253.30, the respondents rely upon their pleadings, the terms of Clause 9, and the final figure denoting the total fund held at credit for Vue at 28 February 2005, as shown in a column headed "Balance" in the computer printout number 5/2 of process. The date 28 February 2005 is obviously subsequent to the dates of entry and settlement, and represents a date by which the funds held at credit of Vue's account could be ascertained and should already have been transferred to the respondents in terms of Clause 9. The appellants cannot pretend ignorance of the inference to be drawn from that computer printout, produced as it was by their own agents JLL. That being so, it is in our view for the appellants to put forward positive, substantive, reasons explaining why the final figure denoting the total fund held at credit as at 28 February 2005 cannot be relied upon as representing the fund requiring to be transferred in terms of the obligation contained in the fourth sentence of Clause 9. No such reasons are put forward. In our view, where the appellants' own account shows a final figure representing the fund held at credit for the tenant in terms of the lease, absent any contradictory explanation from the appellants, the respondents are entitled to rely on that account as showing the fund which falls to be transferred to the new landlord in terms of Clause 9. We are satisfied therefore that the sheriff was entitled to hold, on the averments as they stand, that the appellants were bound to fail in their defence in relation to the sum of £82,253.30, and that (absent any relevant averments for the appellants) the pleadings and productions provided sufficient material for decree de plano in terms of the first crave of the amended pleadings.

 

The second crave for £32,375.55

[16] By contrast, it is our view that the respondents have neither clear averments nor a clear entry in a production sufficient to justify decree de plano in terms of the second crave. All that can be found are two entries for £32,375.55 in an inner column of Vue's Tenant's Account. The inner column is headed "Gross Charges", and does not purport to show the balance of the total fund held at credit in the account. The only averments on this matter are at page 7B-C of the Record, and are in the following terms:

"The last entry on the tenant's account is a balancing entry made without justification. This figure is shown as due to the tenant in the service charge balancing report produced. This figure of £32,375.55 is the sum second craved. This sum is due to be paid to the pursuer in terms of the Contract."

The figure of £32,375.55 is not therefore the final figure representing the total fund held at credit for the tenant. The two entries in the inner column together with the averment relating to "a balancing entry made without justification" require some explanation before any view can be reached as to whether that sum is due and payable to the respondents in terms of the obligation contained in the fourth sentence of Clause 9. Accordingly, in respect of the second crave, we are not persuaded that the sheriff had sufficient material to grant decree de plano.

 

The third crave for £5,012.21

[17] In relation to the fund held at credit for A3D2 in that company's Tenant's Account, counsel were agreed that the appellants' pleadings at page 13D-E of the Appeal Print should read "Explained in respect of the sum third craved" (not the sum second craved), thus properly reflecting the amended pleadings. Counsel for the respondents also accepted that the reference to "£5,102.21" was a typographical error, and should read "£5,012.21". Thus the averments debated before us were as follows:

"Explained in respect of the [third] sum craved, that [JLL] produced a table of payments at the time of the sale of the property. This table shows a credit balance of [£5,012.21] on account for the period 9 February to 28 July 2004."

Counsel submitted that those averments established that the sum of £5,012.21 represented the total fund held at credit for the tenant at the relevant time. We agree. There is, in our view, sufficient in the pleadings and in the computer printout number 6/8 of process to entitle the sheriff to grant decree de plano as third craved.

 

Decision

[18] In terms of counsel's agreement, we shall correct the sheriff's interlocutor dated 8 September 2006 to read as follows:

"The Sheriff, having heard parties' procurators in Debate; Repels the 3rd Plea-in-Law for the defenders; Sustains the 2nd Plea-in-Law for the pursuers, thereafter Decerns against the defenders for payment to the pursuer of the sum of EIGHTY TWO THOUSAND TWO HUNDRED AND FIFTY THREE POUNDS AND THIRTY PENCE (£82,253.30) STERLING with interest thereon at the rate of Eight per centum per annum from 7th October 2005 until payment; Decerns against the defenders for payment to the pursuer of the sum of THIRTY TWO THOUSAND THREE HUNDRED AND SEVENTY FIVE POUNDS AND FIFTY FIVE PENCE (£32,375.55) STERLING with interest thereon at the rate of Eight per centum per annum from 7th October 2005 until payment; Decerns against the defenders for payment to the pursuer of the sum of FIVE THOUSAND AND TWELVE POUNDS AND TWENTY ONE PENCE (£5,012.21) STERLING with interest thereon at the rate of Eight per centum per annum from 7th October 2005 until payment; finds the defenders liable to the pursuer in the expenses of today's diet of Debate and of the Action to date, insofar as not already dealt with; Allows an Account thereof to be given in and Remits same when lodged to the Auditor of Court to tax and report."

[19] Further, we shall sustain the sheriff's decision of 8 September 2006 in relation to the first and third craves, but not in relation to the second crave. Accordingly we recall the sheriff's corrected interlocutor dated 8 September 2006. We repel the defenders' and appellants' third and fourth pleas-in-law (their first plea-in-law having been repelled on 24 January 2006). We sustain the pursuers' and respondents' first, second, and fourth pleas-in-law to the extent only of granting the first and third craves. We also sustain the pursuers' and respondents' fifth plea-in-law to the extent that we exclude from probation some irrelevant averments which might distort the focus of any proof relating to the second crave, namely:

(i) In Answer 3, at page 11A-E of the Appeal Print, from and including the words "Not known and not admitted that the defender's managing agents, Jones Lang LaSalle, issued to the tenant ..." to and including the words "service charge account was in credit to the sum of £5102.21."

(ii) In Answer 3, at page 15B-D of the Appeal Print, from and including the words "In any event, in terms of Clause 9 of the missives, the pursuer ..." to and including the words "the Managing Agent's estimated Service Expenditure for that period."

Quoad ultra, we allow a proof in respect of the second crave.

[20] We reserve the expenses of the present appeal to enable parties to address us on that matter. However in relation to the debate before the sheriff on 8 September 2006 and the other expenses dealt with in the sheriff's interlocutor of 8 September 2006, we agree with the sheriff's ruling, as we are satisfied that neither the appellants' pleadings nor their arguments as presented before the sheriff properly focused the issues. Accordingly we find the defenders and appellants liable to the pursuers and respondents in the expenses of the debate on 8 September 2006 and of the action to the date of that debate (so far as not already dealt with).

 

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