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Cite as: [2007] ScotCS CSOH_64, [2007] CSOH 64

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OUTER HOUSE, COURT OF SESSION

[2007] CSOH 64

OPINION OF LORD TURNBULL

in the cause

BRIAN and JEAN GRAY

Pursuers;

against

WILLIAM WELSH

Defender:

________________

Pursuers: Richardson; Pinsent Masons

Defender: McIlvride; Gillespie MacAndrew

23 March 2007

Introduction

[1] In 2004 the defender was the owner of a housing development at an area known as Holmwood Park, Crossford, Lanarkshire. The development is situated at the confluence of the River Nethan and the River Clyde.

[2 ] The pursuers, who are married, entered into an agreement for the purchase of a plot and house at the development. At the time of the agreement the house had not been constructed. Their agreement was for the purchase of what was referred to in plans produced by the defender as Plot 9. In due course the pursuers took occupation of the house as constructed, with the address 5 Holmwood Park. The pursuers' plot is bounded to the north by the River Clyde. In the present action the pursuers claim damages in consequence of certain defects which they allege are present in the formation of their garden ground resulting in erosion and collapse into the adjoining river. Their claim is said to arise out of breach of contract and delict. The case called before me on the defender's first plea-in-law to the effect that the pursuers' averments were irrelevant and lacking in specification to the extent that the action fell to be dismissed.

The Pursuers' Case

[3 ] The pursuers' case as pled on record can be summarised as follows. In article 2 of condescendence the pursuers aver that they entered into Missives with the defender by letters dated 16and 21 April and 6 May 2004. They also aver that prior to the conclusion of Missives they had various discussions with a Mr Tony Munsey. It is averred that these discussions included certain variations to parts of the house and garden, including the layout of the garden to be constructed on the plot. It is averred that these variations were agreed to by Mr Munsey on 18 March 2004 by his signature on a letter from the pursuers of that date. The pursuers aver that the defender acted and allowed Mr Munsey to act in such a manner that it was reasonable for them to infer that the defenders had authorised Mr Munsey to act for him in these matters. In these circumstances the pursuers claim that the variations discussed with Mr Munsey became part of the agreement entered into between themselves and the defender.

[4 ] In article 3 of condescendence the pursuers aver that there was implied into the Missives a term to the effect that the dwelling house and any garden ground pertaining thereto would be built to reasonable workmanlike standards and free from such defects as would render it as unsafe or unsuitable for occupation as a domestic dwelling.

[5 ] In article 4 of condescendence the pursuers aver that the garden of their property and the gardens of the neighbouring properties at numbers 11, 9 and 7 Holmwood Park ("the Neighbouring Properties") were formed by the defenders from made ground to a depth which is given. This combined area is referred to thereafter as the "Made Ground". The pursuers aver that the Made Ground is defective.

[6 ] In article 5 of condescendence the pursuers aver that in about October of 2004 the Made Ground slumped down towards the River Clyde and that in about January 2005 it was further disturbed and subject to movement. They also make further averments concerning the content of the Made Ground and its stability.

[7 ] In the following articles of condescendence the pursuers make various averments concerning expert reports instructed by themselves and their neighbours and various remedial works carried out at certain locations by the defender. In article 8 they set out they way in which they say the defender has acted in breach of the Missives and in breach of duty. In article 9 they set out the quantification of their claim.

The Defender's Response

[8 ] The defender's response as pled can be summarised as follows. The defender admits that he was the owner of the plot and that he had no direct contact with the pursuers prior to conclusion of the Missives. He explains that Mr Munsey is a director of Welsh Munsey (Developments) Limited ("WMD"), and that he contracted with that company for the construction of the pursuers' house and the formation of garden ground between the house and the river. He explains that the sales and marketing for the site was carried out by WMD and that literature and site signs made it clear that WMD were carrying out the development. The defender avers that Mr Munsey acted as a director of WMD and not on his behalf. He avers that the Missives contain no obligation upon him to form garden ground and that any work to the garden ground was carried out by WMD.

[9 ] The defender goes on to accept that the gardens of some neighbouring properties to that of the pursuers were subject to movement in October 2004 and that certain remedial works to such properties were carried out. He further avers that the pursuers have suffered no loss.

The Defender's Submissions

[10 ] Mr McIlvride, who appeared for the defender, moved me to sustain his first plea-in-law. He presented three submissions in support of his motion:

i. That the pursuers had failed relevantly to aver either a breach of duty, contractual or delictual, or any damage actually resulting from any such breach of duty.

ii. That in any event the pursuers averments to the effect that the defender contracted to erect or build a garden were irrelevant and the pursuers' contractual case ought to excluded from probation.

iii. That in any event the pursuers' averments to the effect that Mr Munsey acted as the defender's agent were irrelevant and ought to be excluded from probation.

[11 ] In seeking to advance his first submission Mr McIlvride sought to emphasise that a pursuer is obliged to aver the full facts which result in the establishment of his case. In doing so he sought to identify the limited set of circumstances in which an averment as to a state of mind or belief might be relevant and to contrast those circumstances with the present pleadings. By way of example he drew my attention to the limited application of the formula "believed and averred" as explained in Brown v Redpath Brown & Company Limited 1963 SLT 219.

[12 ] Accordingly, he submitted, it was not sufficient for the present pursuers to narrate their own or anyone else's opinion on essential aspects of their case. It was necessary to aver a state of facts which they offered to prove. With this introduction Mr McIlivride then took me to various averments within articles 4, 5, 6, 7 and 8 of condescendence which he submitted were defective.

[13 ] In article 4 he referred me to the averment that:

"The Made Ground had not been formed from materials selected and compacted in accordance with conventional engineering specifications. Accordingly the Made Ground is defective."

He submitted that there was no averment as to what conventional specifications were or in what way the composition deviated from the norm. He submitted that there was no notice of what the pursuers were seeking to prove.

[14 ] In article 5 Mr McIlvride referred me to the following four passages which he subjected to criticism:

i. "In about October 2004 the gardens of the Neighbouring Properties was (sic) disturbed and subject to movement. The Made Ground slumped down towards the River Clyde."

This averment he said related to properties other than the pursuers and there was no specification of the extent to which the Made Ground was said to have slumped.

ii. "In or about January 2005, following a period of high rainfall, the Made Ground was further disturbed and subject to movement. A significant tension crack, running parallel with the River Clyde was formed in the garden of number 7 Holmwood Park. Said tension crack had the bowl shape of a circular arc failure."

Again he submitted that there was no specification as to which part of the Made Ground was further disturbed and asked whether it was the garden of number 7 as that was where the crack was said to have been located.

iii. "A number of transverse 150mm diameter plastic drainage pipes leading to the River Clyde were disturbed by the ground movement."

Again he pointed out that there was no specification as to where in the Made Ground these pipes were disturbed. He submitted that in relation to each of these averments it was to be noted that the pursuers were not offering to prove that these events were occurring in their garden.

iv. "The stability of the Made Ground is dependant upon ground water influences and on the uniformity of the engineering properties of the soils. The soils which form the Made Ground are predominately granular or have a high granular content. Said soils encourage the rapid permeation of ground water when the water level in the River Clyde is high. Accordingly the Made Ground is susceptible to river level fluctuations and other ground water influences. When the water level in the River Clyde drops rapidly and there is a slower fall in the level of ground water, the Made Ground becomes unstable."

Here Mr McIlvride explained that the defender's complaint was that the pursuers were not averring what other materials could or should have been used, what materials the reasonably competent builder would have used or in what way the composition deviated from normal standards.

[15 ] In article 6 of condescendence Mr McIlvride referred me to the averments relating to the instruction of a firm of Consulting Engineers, W A Fairhurst and Partners and to their report dated February 2005. He pointed out that what one finds in this article of condescendence is an expression of the various views which that firm arrived at concerning the Made Ground, rather than averments as to matters of fact relating to the Made Ground.

[16 ] In article 7 of condescendence there are averments relating to a second report commissioned from the same firm in August 2005. This second report dealt specifically with the condition of the pursuers' garden. Again Mr McIlvride drew my attention to the fact that the averments refer to the opinions and conclusions of the firm concerned. Within this article there are also averments relating to remedial work carried out by the defender at the garden of number 11 Holmwood Green. Mr McIlvride submitted that this appeared to be a different part of the development and submitted that it was not averred that this garden fell within the Made Ground. He explained that although the defender had carried out remedial work at various properties this was not an admission of the presence of a defect of the sort pled by the pursuers.

[17 ] Article 8 of condescendence contains the pursuers' averments of fault. They aver that the defender acted in breach of the terms of the Missives and in breach of a duty to build the House and Garden to reasonable workmanlike standards. Mr McIlvride drew attention to the following averment:

"The defender has failed to ensure that the Garden is not (sic) free from such defects as would render it unsafe or unsuitable for occupation as a domestic dwelling. A contractor building to reasonable and workmanlike standards would have formed the Made Ground from materials selected and compacted in accordance with conventional engineering specifications. The garden had not been formed from materials selected and compacted in accordance with conventional engineering specifications."

Mr McIlvride's contention was that here again no assertion is made as to what the conventional engineering specification is and no notice is given by the pursuers as to the way in which they say the defender has failed to comply with the applicable standard.

[18 ] The consequence of these submissions according to the defender's argument was that the specified averments in articles 4, 5, 6, 7 and 8 fell to be deleted as irrelevant. In any event he suggested they were insufficiently specific to give the defender fair notice of the pursuers' case and on that basis ought also to be deleted. Mr McIlvride submitted that if I was with him on either of these arguments the outcome would be that the pursuers' case would be dismissed as there would remain no relevant or specific averments of breach of duty or of loss sustained.

[19 ] The defender's second major submission was that the pursuers had failed to aver a relevant case to the effect that he had contracted to erect or build a garden. In presenting this argument Mr McIlvride focused on the terms of articles 2 and 3 of condescendence. His argument was that the Missives comprised the letters of 16 April 2004, 21 April and 6 May, numbers 6/1, 6/2 and 6/3 of process. Of these documents only the letter of 16 April had any applicable content. It comprised a letter from the pursuers' solicitors which had attached to it a pro forma offer document prepared by the defender. This was a typed document for use by customers intending to purchase any of the properties on his development. It included blank spaces into which details such as the house type and price were to be entered.

[20 ] Mr McIlvride referred me to Taylor v Secretary of State for Scotland 2000 SC (HL) 139 and Aberdeen Development Co. v Mackie, Ramsay & Taylor 1977 SLT 177 and submitted that in construing these documents the applicable legal propositions were these:

1. In construing a particular provision in a set of missives it is necessary to do so in light of the contract as a whole

2. As a general principle the seller of heritage gives no warranty as to its condition

Mr McIlvride's contention was that viewed in light of these propositions the Missives provided only for the sale of Plot 9 with the additional specified obligation of the construction of a dwelling house of the type mentioned. Since any further obligation to be incurred by the seller would have to be positively undertaken it was clear, he said, that there had been no agreement to erect or build a garden. In these circumstances he submitted that article 3 in its entirety and the references to breach of contract in articles 8, 9 and 10 fell to be deleted, with the result that the pursuers' contractual case was removed in its entirety.

[21] The defender's third major submission related to the averments in article 2 of condescendence as to the discussions between the pursuers and Mr Munsey. Mr McIlvride submitted that the pursuers' case here was one of ostensible agency. He submitted that the averments in article 2 were insufficient to establish this. His contention was that there would require to be a representation by the principle which the third party was entitled to rely on. He referred me to the opinion of Lord Reed in Ben Cleuch Estates Limited v Scottish Enterprise [2006] CSOH 35 and to what his Lordship said at paragraph 127 of his opinion.

[22] Mr McIlvride submitted that looking to the averments within article 2 the pursuers were not offering to prove anything which amounted to a representation by the defender nor anything which would justify a belief that Mr Munsey acted with the defender's authority. Accordingly the relevant passages within this article ought to be excluded.

Pursuers' Submissions

[23 ] Mr Richardson, who appeared for the pursuers, submitted that their case arose out of the purchase by the pursuers of a house and garden at Holmwood Park and proceeded upon the basis that the Missives entered into between the pursuers and the defender, as properly construed, bound the defender to construct a house and garden. He further submitted that it was an implied term of this agreement that this work would be carried out to a reasonable workmanlike standard. The pursuers, he said, were offering to prove that the defender did carry out the formation of the garden ground at their plot as part of the Made Ground. In doing so they say he failed to comply with the implied term of their agreement and was in breach of a duty of care owed to the pursuers. Although he was prepared to recognise that certain issues of relevancy might arise Mr Richardson submitted that any such issue could only be addressed after hearing evidence and he moved me to permit a proof before answer.

[24 ] Mr Richardson responded to each of the defender's submissions in turn. In relation to the first, he submitted that in article 3 of condescendence the pursuers had set out the implied term which they relied upon. He pointed out that the defender did not seek to suggest that such a term could not be implied. He submitted that within article 4 of condescendence one finds a summary of the pursuers' case. There it is explained that the defender proceeded to construct the House and form the Garden, that the Garden was formed as part of what is defined as the Made Ground and that the Made Ground was defective. He submitted that these were all positive averments of fact, not of opinion. It followed from this that it was incorrect to contend that the pursuers relied upon the conclusions of the Consulting Engineers report to plead a relevant case.

"Unless remedial steps are taken, the Made Ground will deteriorate with continuing random collapses of the Garden and the Garden will progressively erode."

[26 ] All of these averments of fact, he submitted, were linked to the averments of duty set out in article 8 and the averments of loss as set out in article 9 of condescendence. In relation to article 8 no suggestion was made that the duty of care pled ought not to be imposed. On this basis Mr Richardson submitted that the pursuers had pled a relevant case and the action ought not to be dismissed.

[27 ] Mr Richardson went on to submit that there were in any event two further reasons why the averments relating to the Consulting Engineers' Reports and their conclusions ought not to be excluded. Firstly, he argued that these averments had to be seen in light of the positive averments of fact to which they related. He pointed out that the pursuers averred that after disclosure of the February 2005 report the defender instructed various remedial work to the Neighbouring Properties and that he consulted W A Fairhurst and Partners both prior to and during the carrying out of this remedial work. Accordingly, these were averments in which the pursuers established the basis upon which the opinion of W A Fairhurst and Partners was one of relevance and acted upon by the defender. Secondly, Mr Richardson argued it was relevant to aver that the pursuers had consulted this firm and that they had certain conclusions in order to establish that the pursuers were acting reasonably.

[28 ] In these circumstances Mr Richardson submitted that the averments made on the pursuers' behalf were, according to their primary meaning, sufficient to support the conclusions sought. This was sufficient to pass the test of relevancy on the authority of Hope v Hope's Trustees (1898) 1 Fraser (HL) 1.

[29 ] In relation to specification he argued that it was perfectly clear to the defender what the pursuers' case was. He submitted that in articles 4, 5 and 7 there are definitions of both the Made Ground and the Neighbouring Properties. The pursuers' garden is accordingly seen to be part of the Made Ground. Within these articles of condescendence he submitted one sees that the composition of the Made Ground is specified, the complaint made about it is set out and an explanation is given of what happened to it and when. In addition, an explanation of what will occur if the defect is not remedied is averred. The question of what constituted conventional engineering specifications was, he submitted, a matter to be established at proof. Furthermore, he submitted, in article 6 the pursuers have made it clear what is necessary by referring to and describing the work which the defender carried out at the Neighbouring Properties, as guided by the February report from W A Fairhurst and Partners.

[30 ] In addressing the defender's second major submission Mr Richardson's position was that the matter of whether the defender had contracted to build a garden could not be resolved as a matter of relevancy as there was a dispute on the facts as to the terms of the missives. The pursuers' case as pled was that the variation agreed to by the letter of 18 March 2004 became part of the contract entered into by the defender. He pointed out that the pro forma document attached to the letter of 16 April specifically contemplated such a variation. He referred to the first paragraph of the document which was in the following terms:

"I/We hereby offer to purchase from you Plot 9 on your Estate Plan at Holmwood Park, Crossford, Lanarkshire, which plan is demonstrative only and not taxative and may be varied by you as circumstances require together with the dwelling house Type Keble to be erected by you thereon with any garden ground and all rights common, mutual or otherwise pertaining thereto at the price of Three Hundred and Forty Five Thousand Pounds (£345,000) with, in addition, the cost of any additions or variations ordered by me/us in writing and that on the following terms and conditions."

[31 ] Mr Richardson submitted that not only was the variation the subject of clear averment, but the pursuers further offered to prove that the work, as agreed, was carried out. He submitted that the pursuers were entitled to rely on an implied term that the work so carried out would be to the required standard.

[32 ] In response to the third of the defender's major submissions Mr Richardson's reply was that the pursuers averred a number of facts which, when taken together, established sufficient by way of representation on the part of the defender. These were, the formal conclusion of Missives by the defender, the fact that WMD were carrying out the sales and marketing for the site, the fact that Mr Munsey agreed to the variations set out in the letter of 18 August and the fact that the work as agreed was carried out.

Discussion

[33 ] I was satisfied that Mr Richardson was correct in saying that within articles 4, 5 and 7 one found statements of fact which the pursuers offered to prove and which are, according to their primary meaning, sufficient to support the conclusions sought. The pursuers do not plead the essential basis of their case by way of reference to opinion. The references to the report prepared by W A Fairhurst and Partners are in my opinion relevant for the purposes referred to by Mr Richardson. Accordingly on these matters, with one qualification to which I will return, I rejected the submission advanced by the defender.

[34 ] I also rejected the submission that there was insufficient specification of the pursuers' case to give the defender fair notice of what was being claimed. The submissions made by Mr Richardson, as summarised in paragraph 29 above, make it clear that the pursuers give adequate by way of fair notice. The argument advanced on behalf of the defender has a degree of artificiality about it, especially when regard is had to the surrounding circumstances. The defender has had disclosed to him both of the reports commissioned from W A Fairhurst and Partners. Article 6 of condescendence contains detailed averments as to the work which the defender instructed to the Neighbouring Properties following disclosure of the first report. Answer 6 on his behalf is in the briefest of terms and I can only read it as an admission that the work specified was carried out at his instruction. Further Mr Richardson drew my attention to particular averments in answer 4. These it was explained appeared to relate to a claim which the defender had at one stage been advancing against WMD as third parties.

The averments were in the following terms:

"The defender contracted with (WMD) for inter alia the construction of the House and the formation of garden ground between the House and the river. The formation of the said garden ground was to be carried out by infilling with upfill material to form level garden ground. The garden ground thereby formed was adjacent to the River Clyde. It required to be sufficiently specified and constructed not to be vulnerable to land slippage."

There seemed to me to be force in Mr Richardson's comment that despite the range of complaints which had been directed towards the specification of the case pled by the pursuers, the defender had been able to identify the complaint adequately for his own purposes.

[35 ] The defender's second major submission was that the pursuers had failed to aver a relevant case to the effect that he had contracted to erect or build a garden.

In my opinion it is not possible to resolve this issue as a matter of relevancy. As I understood it the pro forma document was provided by the defender. It does refer to garden ground. There may well be room for differing views as to its proper construction. What is clear however is that the document expressly acknowledges that additional or different obligations can be constituted by ordering in writing. The pursuers' contention is that they did so. The pro forma document does not restrict any such additions or variations to those ordered after the date of the offer. Indeed it might seem only prudent for a house purchaser with nothing more than a plan to work from to discuss and arrange his detailed needs in advance of formalising his financial commitment. In my judgement this whole issue is interlinked with the question of Mr Munsey's role and is dependant upon the evidence which may be led about the whole circumstances, including what work was carried out. For these reasons I rejected the defender's second submission.

[36 ] The question of any ostensible agency held by Mr Munsey arises from the averments made in articles 2 and 3 of condescendence. It may be capable of illumination by looking to the reality of the circumstances as discussed before me. In the first place it came as no surprise to hear from Mr McIlvride that the "Welsh" of Welsh Munsey (Developments) Limited is the defender and that he and Mr Munsey are co-directors of that company. The defender's position as pled appears to be that he instructed WMD to carry out the construction work at the development on his behalf. In this context it seemed to me that when one examined the content of answer 2 for the defender:

"Not known and not admitted that the pursuers has (sic) conversations with Mr Munsey, nor the content thereof."

one had to look at this in quite a strained and artificial way to see it as full and frank pleading. This view is further fortified by seeing that the defender appears to feel able to give certain explanations in answer 7 as to what WMD did and why.

[37 ] Furthermore the defender's contention as pled in answer 2 is that WMD carried out the sales and marketing for the site. He avers it was clear that WMD were "carrying out the development". In the sense that WMD performed the work of construction they may have been carrying out the development. However, the defender was the owner of the various plots which formed the development. He appears to have provided the plans showing the relevant plots on it. He provided the pro forma documentation regarding the purchase. It was with him that the pursuers contracted and it was he who undertook the obligations within the missives, including that of erecting a type "Keble" dwelling house. Accordingly, he appears to be properly regarded as the developer. How he arranged for the actual construction of the dwelling houses was a matter for him. If, as admitted, the defender had no contact with the pursuers prior to conclusion of missives how one might wonder did he go about the task of discussing with prospective purchasers what their requirements, as to for example house type, might be. The answer to this, even on his own pleadings, would seem to be that he did so through the medium of an agent. His contention is that WMD carried out the sales and marketing for the site and that this was made clear on literature and signs available on site. The only sense in which they could have done so was as agents for the owner and developer.

[38 ] Accordingly it seems clear to me that there was a representation by the defender which the pursuers were entitled to rely on. The representation was that WMD were acting as his agents in the sales and marketing of the plots which he was offering to sell and the properties which he was offering to construct thereon. For these reasons I rejected the defender's third submission.

[39 ] Within article 7 of condescendence there are averments referring to a collapse in the garden of number 11 Holmwood Green which is said to have occurred on or around 12 June 2006. Although perhaps quite near to the pursuers' property, this is within a different part of the development. It falls outwith the definition of the Neighbouring Properties and outwith the definition of the Made Ground. Accordingly I recognised that there was force in Mr McIlvride's submission that there was no link to explain how any damage to this garden could be relevant to the composition of the Made Ground and the averments as to the unsuitability of the Made Ground. For this reason I will refuse to allow the averments relating to this property to be admitted to probation. That apart, I will refuse Mr McIlvride's motion. I will instead grant Mr Richardson's motion and allow parties a proof before answer.