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Cite as: [2007] ScotCS CSOH_132, [2007] CSOH 132

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OUTER HOUSE, COURT OF SESSION

[2007] CSOH 132

A29/06

OPINION OF LORD GLENNIE

in the cause

HAMID KHOSROWPOUR

Pursuer;

against

MURRAY BEITH MURRAY, WS, F ADAM J MORE, RICHARD F FILLEUL, W ALEXANDER FINALYSON, W RUTHVEN GEMMELL, RODGER R HARVEY-JAMIESON, JOHN K SCOTT MONCREIFF, NIGEL J POLLOCK, HUGH P YOUNGER, MARK E STEWART, CAROLE HOPE, ANDREW J STEPHEN, DAVID W CALDER, NEIL M ADDIS and AUSTIN FLYNN

Defenders:

________________

Act: Thomson; Thorley Stephenson

Alt: Jones, Solicitor Advocate; Brechin Tindal Oatts

20 July 2007

Introduction

[1] This case came before the court on the Procedure Roll on pleas-in-law by both the pursuer and the defenders. Four main issues were canvassed. As the hearing progressed, two of those issues fell away. In respect of another issue, where each contended that the other party's averments anent Clause NINTH of the lease were irrelevant, it emerged that neither side wished to insist on such averments, which had been essentially reactive to their perception of what the other side were saying; and I need, therefore, say nothing more about that except that I shall put the case out By Order to allow both parties an opportunity of amending to delete any reference to that Clause. In the event, therefore, the only matter debated fully was on the defenders' first plea-in-law to the relevancy of the pursuer's averments.

Background

[2 ] The defenders are a firm of solicitors. In March 2000 the pursuer instructed them to act on his behalf in connection with a dispute which he had with Mehdi Khosrowpour ("MK"). He claims damages from them for professional negligence. The circumstances in which this claim arises are as follows.

[3 ] MK was the tenant of a shop in terms of a lease ("the lease") dated December 1996 and January 1997. He ran a fast food takeaway from the premises. In August 1998 the pursuer, who had been employed in the business, entered into an agreement with MK whereby he, the pursuer, would run the fast food takeaway. That agreement is referred to on Record as the "license agreement" but there is some dispute as to whether it is properly so-called. Nothing turns on that distinction for present purposes; and I shall call it that without prejudice to any issues which may in due course be raised. The license was for a period of ten years from 1 September 1998 and provided for the pursuer to pay a Licence Fee of £50,000 and weekly payments of £500. Clause 10 of the license agreement provided that

"in event that [MK] is unable to hold his tenancy of the aforementioned premises, within the period of the Agreement with [the pursuer], therefore in consequence [MK} or his estate will repay the whole of the License Fee back to [the pursuer]." [emphasis added]

The expression "unable to hold his tenancy" is at the centre of the present dispute.

[4 ] In September 1999 the pursuer bought the leased premises and became MK's landlord.

[5 ] Under the lease, MK was required to pay rent of £5,500 per year quarterly in advance on 24 March, June, September and December. He failed to pay the rent due on 24 September 1999 and again on 24 March 2000. The pursuer consulted the defenders and received advice about his entitlement to irritate the lease for non-payment. He instructed them to take steps to irritate the lease. They did so. However, their letter to MK did not give the required period of notice. Accordingly, when the defenders sent a further letter to inform MK that the lease was now at an end, they were met by a tender of payment and an action on behalf of MK for declarator that the lease remained in full force and effect. The grounds for declarator included (by amendment) reliance upon the non-compliance with the requirements of notice. In due course decree passed against the pursuer for declarator and certain agreements were entered into between the pursuer and MK consequent thereon.

[6 ] The pursuer claims damages for the defenders' negligence and/or breach of contract. Had the irritancy notice been effective and/or had the lease been validly terminated, MK would have been "unable to hold his tenancy" in terms of Clause 10 of the license agreement; and in consequence the pursuer would not have had to carry on making the weekly payments under the license agreement, and MK would have been obliged to repay the whole of the License Fee to the pursuer.

Submissions

[7 ] For the defenders, Mr Jones made his submissions by reference to a detailed Note of Submissions. He invited me to uphold his first plea-in-law and dismiss the action. He submitted that there was a fundamental confusion in the pursuer's averments leading up to his averments of loss. In Article 4 of Condescendence, the pursuer shifts between saying, on the one hand, that had the notice of irritancy been good it would automatically have brought the license agreement to an end; and, on the other, that the service of a valid irritancy notice would have enabled the pursuer to take action to terminate the lease and therefore bring the license agreement to an end. Those two ways of putting the case were not mutually supportive and the defenders were entitled to fair notice of what the pursuer's case was. In the first sentence of Article 13 the pursuer claims that, as a result of the defenders' failure to terminate the lease, the license agreement remained in force. He follows this by averring in the next sentence that "had the Defenders validly irritated the lease ... the license agreement would thereby have been terminated". However, in Articles 14 and 15 the pursuer says that no solicitor of ordinary competence would have failed to realise that, if he served a valid notice, "the Pursuer would be able to terminate the license agreement". The pursuer's case was wholly unclear. Service of a valid irritancy notice, without that being followed up by an action of removing, did not mean that MK was "unable to hold his tenancy" on a proper construction of that phrase in the context of the license agreement as a whole. There were no averments of fact supporting any case that the pursuer took or would have taken steps to remove MK after service of a valid notice. Even if, contrary to that submission, service of a valid irritancy notice without more entitled the pursuer to repayment of the Licence Fee, on a proper construction of Clause 10 it would not result in termination of the license agreement or of the obligation to make the weekly payment. The sum claimed by the pursuer in the first Conclusion (£86,000) was made up in part of the Licence Fee which the pursuer says that he would have been able to recover from MK had a valid notice been served and in part of weekly payments that the pursuer had to carry on making under the license agreement until a resolution of the dispute with MK was agreed some years later. The averments in support of that Conclusion should not be admitted to probation. Even if the pursuer's case was simply put on the basis of loss of a chance, there were no averments tying such a claim in with sum claimed in the first Conclusion. As to the correct approach to this question, Mr Jones referred me to the Opinion of the Extra Division in Kyle v P & J Stormonth Darling 1993 SC 57 at 67E-G and 68C-F.

[8] For the pursuer, Mr Thomson invited me to allow a proof before answer. The pursuer's case was that, on a proper construction of Clause 10, if a valid irritancy notice was served the tenant was "unable to hold his tenancy". The consequence would be that the pursuer was entitled to repayment of the £50,000, the license agreement would come to an end and there would be no continuing obligation on the pursuer to make the weekly payments. Had a valid irritancy notice been served, no action of removing would have been necessary, because MK was not in possession. The pursuer was in possession already by virtue of the license. The pursuer could have raised action of declarator, but this was unnecessary. In reality, it would have been for MK to raise an action of removing. In those circumstances, the pursuer's case is that the license would have come to an end automatically upon the service of a valid notice irritating the lease. Mr Thomson referred me to H.M.V. Fields Properties Ltd. v Bracken Self Selection Fabrics Ltd. 1991 SLT 31 in which the Lord President (Hope) said, in a passage beginning at p.34J, that there was no doubt that the effect of the exercise of a right to irritate is to bring the lease to an end, since it terminated the contractual relationship between the parties upon which the tenant's right to possess was founded. If the tenant remained in occupation, that might, depending on all the circumstances, give rise to an inference of waiver, but the fundamental principle was not affected. The pursuer did not need to aver any more. He sued for the loss of the chance to irritate the lease and bring the license agreement to an end caused by the defenders' negligence.

Discussion

[9 ] There is some force in the criticisms levelled at the pursuer's pleadings by Mr Jones. In particular, I consider that he is correct when he says that there is an apparent ambivalence in the pursuer's position as to whether service of a valid irritancy notice, without any further steps to secure removal of MK, would have meant that MK was "unable to hold his tenancy". However, any such ambivalence is to be found in the Articles of Condescendence setting out the pursuer's case as to what the defenders knew or ought to have known so as (i) to instruct the duties of which they are alleged to have been in breach and (ii) to inform any discussion about remoteness and foreseeability of damage. In this context, it does not seem to me to matter whether the pursuer is saying that service of a valid notice of itself would have meant that MK was unable to hold his tenancy or whether he accepts that some further action on his part would or might have been necessary. The point he is making is simply that the defenders knew the importance of serving a valid irritancy notice both from the point of view of terminating the lease and from the point of view of the license agreement; and knew the potential consequences of getting it wrong. The precise circumstances in which the license agreement would have come to an end after service of a valid notice, and the precise consequences in terms of the relationship between the pursuer and MK following thereon, will inevitably be a matter of speculation. The ambivalence to which I have referred perhaps reflects this; but may also reflect the oddity, in this case, that the pursuer was (to some extent at least) in possession even during the currency of the lease. The pursuers say that they put their case, in those circumstances, on the basis that service of a valid notice automatically brings the license agreement to an end. It seems to me that the defenders have fair notice of what case they have to meet.

[10 ] The debate was focused on the formulation of the damages claim. As was explained to me at the debate, assuming they establish breach of duty or contract, the pursuer's case - and his only case - is based on loss of a chance. Quantification of that claim is based on the settlement ultimately reached between the pursuer and MK after decree passed against the pursuer. This is to be compared, as I understand it, with the chance that, had a valid notice been served, the license agreement would have ended, MK would have repaid the £50,000 Licence Fee and the pursuer would not have had to pay any further weekly payments. I emphasise, because it was emphasised to me that this was how the case was put, the word "chance". The pursuer does not seek to prove what he would have done or what would have happened had a valid irritancy notice been served. He simply relies on the fact that the defenders' failure deprived him of the chance that a valid irritancy notice would have given him. I consider that the pursuer's case put in this way falls within the principles for such a claim summarised in Kyle v P & J Stormonth Darling; and does not fail the fair notice test. On this basis I propose, after the amendments referred to in para.[1] above have been made, to allow the pursuer a proof before answer on his averments. Although there must be a real question as to whether, on a proper construction of the license agreement, it would have terminated automatically without some further step to remove MK from his tenancy, I consider that it would be wrong to decide the construction of an essentially home-made agreement without all the relevant facts being brought out in evidence. It may be, as Mr Thomson submitted, that, in the peculiar circumstances of the pursuer being already in possession, no further action of removing was necessary. But that is for another day.

[11 ] I should, however, note that, as is made clear in Kyle at p.68E-F, the value of the claim based on the loss of a chance will have to be assessed by reference to all the material before the court. There are few, if any, averments on Record as to what would or might have happened had a valid notice been served. It will, of course, be for the Lord Ordinary who hears the proof to consider, if objection is taken to any particular line of evidence, whether there is sufficient record for it. It may be, however, that, despite my decision to allow a proof before answer, the pursuer will wish to consider amending to make averments as to what would or might have happened had a valid notice been served. That is a matter for him.

Disposal

[12 ] I shall put the case out By Order to enable both parties to make the amendments referred to in para.[1] above. If those are the only amendments proposed, I foresee no need for any Answers or period of adjustment thereafter; and I would then propose to allow a proof before answer reserving all pleas. If further amendments are put forward, it may be necessary to follow a different course.