Scottish Court of Session Decisions

Pursuers and Appellants: Davies; Harper MacLeod

Second Defenders and Respondents: McCartney, Solicitor Advocate, Digby Brown

25 March 2009

[1] The appellants are, inter alia, licensed premises selling agents. The first defender, who had not entered appearance in the process, it is averred by the appellants, was a tenant of the bar situated at and known as the Waldorf Bar, 59 Cambridge Street, Glasgow. By an agreement, dated 13 July 2005 described as "the sole selling right agreement" (hereinafter referred to as "the agreement"), the first defender appointed the appellants as her exclusive selling agent in the sale of the said public house. The appellants aver that, in pursuance of that agreement, they marketed the premises and, in due course, introduced the first defender to a prospective purchaser, namely the Iona Club Ltd. It is averred that the said Iona Club Ltd subsequently took an assignation of the lease of the premises and acquired the business relating thereto in or about 6 February 2007.

[2] The agreement, the full terms of which are incorporated in the pursuers' pleadings, brevitatis causa, incorporates a mandate which is referred to by the appellants as operating "as a procuratory in rem and assignation upon the intimation of the Agreement to any party acting as Solicitors for the first defender in the sale of the Business". The respondents acted as solicitors on behalf of the first defender in the sale of the public house premises and associated business. The said agreement provided that the first defender authorised the respondents to pay out of money received by them, the fees requested by the appellants in any invoice submitted by them to the respondents, pursuant to the agreement, and directed the respondents not to release any proceeds arising from the disposal of the business to any person up to the amount of the invoice, until it had been paid, except for payment of mortgages and charges and the legal costs of sale. The agreement also contained an instruction by the first defender to the appellants to communicate these instructions to the respondents.

[3] In the present proceedings the appellants claim that, in terms of said agreement, they are entitled to a fee calculated in accordance with its provisions, which amounts to £7,966 which, together with VAT, brings out a total sum due to them of £9,360.05. The appellants raised the present proceedings as a commercial action in the Sheriff Court to recover the said sum.

[4] The appellants' position in the present case is that the agreement incorporating the said mandate and assignation was intimated to the respondents on or about 20 December 2006. They aver that intimation was made by recorded delivery post. The appellants further aver:

"As at 20 December 2006 there was sufficient free proceeds from the sale of the Business to make payment of the pursuers' invoice whereupon the second defenders' became liable to make payment of that sum to the pursuers".

The respondents are said to be jointly and severally liable, along with the first defender in the sum due to the pursuers, in terms of the agreement. The respondents reply to all of that is somewhat coy. While admitting that they acted as solicitors, on behalf of the first defender, in the sale of the public house and the business, they simply refer to the terms of the pursuers' letter dated 20 December 2006 and aver that it made no reference to any mandate. They, furthermore, aver that they "did not acknowledge to (sic) the appellants receipt of any mandate". A copy of the letter dated 20 December 2006 has been lodged by the appellants and its terms incorporated into their pleadings. They have also produced a copy of the accompanying invoice.

[5] The terms of the letter are as follows:

"We understand that missives have now concluded in respect of the assignation of the Waldorf Bar.

On speaking with Mrs Anne Campbell she advises us that the purchase price has been placed in joint deposit until a letter is issued confirming the assignation of the lease.

In this instance, we remit to you our fee note in respect of the assignation in advance of the consideration being released. We understand that receipt of the assignation letter from the landlord is imminent and therefore look forward to receiving payment in early course.

We look forward to hearing from you in due course."

The invoice, which is addressed to the first defender, care of the respondents, states inter alia:

"Our agency fee in accordance with our Sole Selling Rights Agreement dated 13 July 2005 in respect of the sale of the above business and property to our applicant, Iona Club Ltd, at a price of £46,000".

[6] Before the Sheriff, the respondents sought dismissal of the action insofar as directed against them on a number of grounds. In the first place it was submitted that the terms of the agreement did not include a valid assignation. The Sheriff held that the relevant wording of the agreement, quoted above, could only be read as an irrevocable order authorising the respondents to pay the appellants their fee. It was not argued, before this court, that the Sheriff was wrong in so holding. The Sheriff also dismissed an argument made on behalf of the respondents regarding lack of proper authentication of the agreement. Again, that argument has not been revived before this court. The Sheriff did, in the event, however, conclude that the action, as far as directed at the respondents, was irrelevant. He did so by concentrating on the terms of the letter of 20 December 2006. This he characterised as "the intimation" and, in doing so, at paragraph 36 of his Note he said:

"The intimation relied upon by the pursuers does not immediately convey that the debt has been transferred to the pursuers or that they are seeking payment as of right. For that to become clear would depend on further steps; namely that the defenders should have regard to the sole selling agreement, and not merely that: on doing so they should have regard to the particular part of it which constitutes an assignation. However likely it might have appear that these further steps will occur, that they should do so ultimately depends on chance".

En route to this conclusion the Sheriff, at paragraph 34 of his Note observed that counsel for the appellants' "position is that the pursuers' intimation comprises, the letter of 20 December 2006 and the accompanying invoice and a copy of the full selling rights agreement. It is certainly the case that the letter would have made it plain to the defenders that the pursuers were seeking from them payment of their invoice and moreover that they had an expectation that it would be paid, however, it does not assert any entitlement to be paid. ..."

[7] The Sheriff then at paragraph 35 continued:

(Counsel for the pursuers) "argued that the name of the defenders' firm appears prominently in the body of the agreement and that any solicitor looking at the document would be drawn to that part of it and would see the mandate. But why should any solicitor trouble to look at the agreement? As I understood it, Mr Lloyd's answer to that question was simply to assert that any competent solicitor would look at any document sent to him relating to his client. I cannot accept that."

[8] The appellants appealed to the Sheriff Principal who upheld the decision of the Sheriff. At paragraph 7 of this Note, the Sheriff Principal said, under reference to the decision in the case Libertas-Kommerz GmbH 1977 S.C. 191, a decision of Lord Kincraig, as follows:

"In my opinion whether there has been an effective intimation of an assignation will depend on the facts and circumstances of each case. It was not disputed that the second defenders would be deemed to have read the terms of the letter to them of 20 December 2006. But the letter is silent with regard to any intimation of assignation. Furthermore, there is nothing in it's terms to hint that the first defender had granted an assignation. For example, if, to meet the second stage of Lord Kincraig's test, the pursuers had referred to them having an entitlement to receive payment, that might have been sufficient to put the pursuers on notice of a potential assignation. In such circumstances it might be said that they were then under an obligation to read the Sole Selling Rights Agreement enclosed. But the letter of 20 December 2006, as Mr Lloyd accepted, is the equivalent to only a request for payment. Thus the letter does even meet the second stage of Lord Kincraig's test. There is no assertion of the pursuers' entitlement to payment. Mr Lloyd when dealing with the facts and circumstances also relied upon the terms of the pursuers' fee note which is referred to and was enclosed with the letter. The fee note narrative states: 'Our agency fee in accordance with our Sole Selling Rights Agreement ...' in my opinion the narrative does no more than indicate to a reasonable reader that the level of the fee had been calculated in accordance with the agreement between the pursuers and the first defender. It does not alert the second defenders that the communication might be more than a request for payment. The communication does not meet Lord Kincraig's test. In my opinion there has not in this case been enough to convey an intimation to the second defenders that money for which they have a duty to account to the first defender has been assigned to the pursuers. Furthermore, the letter of 20 December 2006 falls short of an assertion that the pursuers are claiming their entitlement to the money held by the second defenders. The letter is only a request for a payment and not an assertion of an entitlement to receive the money. There is nothing 'importing a demand on the debtor to hold for him' Gloag & Irvine: Rights on Security at page 486".

For the foregoing reasons the Sheriff Principal adhered to the interlocutor of the Sheriff.

[9] Before this court the motion made on behalf of the appellants was, initially, to recall the interlocutors of the Sheriff and Sheriff Principal and to allow a proof before answer. In due course, after discussion with the bench, counsel for the appellants accepted that the position adopted by him did not leave any matter that required proof. His ultimate position was that there was no relevant defence pled. He consequently moved the court to allow the appeal and to grant decree against the respondents for the sum concluded for.

[10] In presenting his submissions, counsel for the appellants emphasised that under cover of the letter of 20 December 2006 there was sent to the respondents the agreement and the appellants' invoice. The respondents had never disputed that all three documents were sent to and received by them. In that state of affairs, it was submitted, the issue was as to whether or nor there had been effective intimation of the assignation in the appellants' favour and that turned, primarily, on what the appellants had done and not on what the respondents had done or failed to do. The provisions of The Transmission of Moveable Property (Scotland) Act 1862 section 2 as regards the sufficiency of evidence of intimation of an assignation had not, it was accepted, been satisfied in the present case. Nevertheless, the common law still allowed for assignations to be effectively intimated by informal means. If the terms of the assignation were appropriately intimated to the debtor, it was, counsel submitted, not necessary that its terms be explained to the debtor - Wallace v Davies (1853) 15 D. 688 at 695. Moreover, it was not even necessary, it was contended, that the actual physical deed containing the assignation be presented to the debtor. What was required was intimation of the obligations contained therein - Donaldson v Ord (1855) 17 D 1053 at page 1069. Counsel then referred to the opinion of Lord Kincraig in Libertas-Kommerz GmbH referred to above. Both the Sheriff and the Sheriff Principal founded upon certain dicta in Lord Kincraig's opinion. The relevant facts in that case, for present purposes, were as follows. A Scottish company went into creditors' voluntary liquidation. The company had previously granted a bond and floating charge to a German person who had assigned the rights thereunder to a Swiss company. On his appointment, the company's liquidator wrote to the German to ascertain whether he had any claim, as a creditor, against the Scottish company. The German replied by letter stating that he had sold his interest in the bond and floating charge to the Swiss company. The liquidator acknowledged this information by letter. A question arose as to whether the exchange of letters between the German and the liquidator contained a sufficient intimation of the assignation. It was held by Lord Kincraig that it was. Having referred to Wallace v Davies, Donaldson v Ord and a passage from Gloag & Irvine: Rights on Security at page 486, Lord Kincraig at page 206 opined as follows:

"It seems to me that both cases show that if there has been a written intimation to the debtor of the fact that an assignation has been granted, the terms of that intimation must be considered, and if they are such, on a reasonable interpretation, as to convey to the debtor that the debt has been transferred, and that the transferee is asserting his claim to the debt from the debtor, intimation will be held to be effectual. I do not think it is necessary to refer to the details of the assignation, if otherwise the intention is clear."

Counsel for the appellants submitted that applying that passage to the circumstances of the present case, the combined effect of the sending of the letter, the accompanying invoice and copy agreement to the respondents amounted, contrary to the views of the courts below, to a valid and effective intimation of the assignation in favour of the appellants.

[11] For the respondents, their solicitor advocate moved the court to refuse the appeal. The first question, he submitted, was whether the appellants had set out sufficient averment to entitle them to the remedy they sought against his clients. That involved, in turn, asking the question as to whether the appellants' averments made a relevant case that the assignation has been effectively intimated. It was, in our opinion, of considerable significance that the respondents' solicitor advocate accepted, on behalf of his clients, that they had received all three documents, simultaneously. Equally important was the concession that he made, in the course of discussion with the bench that, had the respondents read all three documents they would have been "left in no real doubt that the appellants fell to be paid the sum in question". Notwithstanding this admission and concession, the respondents' solicitor advocate went on to submit that, in such a case as the present, there required to be, in a question between the assignee and debtor, in the absence of any private knowledge acquired by the debtor in relation to the matter,

1. a distinct written intimation putting before the debtor the nature and effect of the assignation;

2. an assertion of claim whereby the assignee claimed the rights under the deed of assignation.

What was relied upon by the appellants in the present case, it was submitted, did not meet those requirements. The respondents' solicitor advocate referred to the letter of 20 December 2006. It made no reference to the sole selling rights agreement. It merely stated that it was enclosing a fee note. It did not assert any right under the assignation. That omission of those features meant the letter fell far short of the terms of the correspondence which Lord Kincraig concluded constituted sufficient intimation in the case of Libertas-Kommerz GmbH. Nor did it come up to what was required, following what was said not only in Wallace v Davies and Donaldson v Ord, but also by the court in Gallemos Ltd v Barratt Falkirk Ltd 1989 S.C. 239. The last mentioned case was authority for the proposition that an effectual assignation had to contain words which might be construed as effecting an immediate transfer of the assigner's right against his debtor to the assignee and that the transfer was completed when intimation of the transfer was made to the assigner's debtor who then knew that the assignee had become his creditor in place of the assigner. Reference was also made to Wilson on the Scottish Law of Debt (2nd Edition) para 27.3.

[12] The solicitor advocate for the respondents conceded that the Sheriff was correct in rejecting a submission that, in any event, for there to be a fully effective intimation of an assignation, where the provisions of the 1862 Act were not met, there had to be an acknowledgement of the receipt of the intimation by the debtor. The possibility that such a requirement did exist, where the 1862 Act did not come into play, had been raised in several of the earlier authorities. That particular question is discussed in McBryde: The Law of Contract in Scotland (3^rd Edition) 12-93-12-95. The respondents' solicitor advocate, as has just been noted, disclaimed any suggestion that the appellants could not succeed in their present case because of the absence of averment that the respondents had acknowledged receipt of the letter and, if appropriate, the other documents. Nevertheless, the proper test as to whether there had been an effective intimation, it was submitted, was as set out by the Sheriff in his Note at paragraph 33 in the words which were to the following effect:

"What remains to be resolved is, whether upon a reasonable interpretation, the intimation relied upon by the pursuers conveyed to the defenders the message that such a portion of the sale proceeds as was required to pay the pursuers' fees had been transferred to them and that the pursuers were asserting their claim to be paid the debt by the defenders."

The terms of the letter of 20 December, it was submitted, did not meet that test. The Sheriff Principal's reasoning, to similar effect, at paragraph 7 of his Note was also well founded. The respondents' solicitor advocate contended that the letter should be regarded as the "predominant document" and it should have been in different terms to produce an effective intimation.

Decision
[13] We are of the opinion that this appeal must be allowed. It appears to us quite clear that both the Sheriff and the Sheriff Principal misdirected themselves by effectively focusing, exclusively, on the terms of the letter of 20 December and leaving out of their consideration the two other documents which were sent to the respondents, and received by them along with the letter. The invoice, or fee note, is referred to in the letter. On the face of the invoice, as has been seen, it was intimated that it was in respect of the appellants' fee "in accordance with our Sole Selling Rights Agreement dated 13 July 2005". A copy of the sole selling rights agreement accompanied the letter and the invoice. No rational basis was advanced to us as to why the letter should, in those circumstances, fall to be regarded as the "predominant" document. There is nothing said in the letter to deflect the respondents' attention from considering the contents of the invoice and the agreement. The respondents' solicitor advocate correctly accepted that had the respondents read all three documents they could have been left with no doubt as to who was to be paid. In terms of the assignation no reason in law, or commercial expediency or practice, for the respondents being free to concentrate solely on the content of the letter and to ignore the content of the invoice and the agreement was provided to us.

[14] We are satisfied that, apart from the means of intimation provided for by The Transmission of Moveable Property (Scotland) Act 1862, the law regarding intimation is correctly stated in Wilson on Debt (2^nd Edition) at paragraph 27.3 in the following terms:

"Generally, however, intimation can be proved rebus ipsis et factis. The terms must be such as to convey to the debtor that the debt has been transferred and that the transferee is asserting his claim to the debt from the debtor; the amount of the debt being assigned must be stated; general statements may not suffice; letters from the debtor to the intimator can be looked at".

There are no prescribed formalities beyond what is set out in that statement of principle. The word "intimate" simply means to "make known". The means of making known to the debtor the fact of the assignation, as the authorities demonstrate, may take different forms. There is no doubt, in our view, that in the present case the combined effect of the receipt of the letter, invoice and the agreement by the respondents was that the fact of the assignation was made known to them clearly. There is no requirement, in our law, that the intimation must be made by one document and one document only, which must contain all the necessary information. Where more than one document is proffered to the debtor, for the purpose of making intimation of an assignation, it would not normally be appropriate to refer to one of these documents as being "the predominant document" yet that was what the submissions made by the respondents amounted to and is what appears to be the rationale of the decision both of the Sheriff and Sheriff Principal. The question in the present case is whether or not the appellants had done all that was required to be done to bring to the respondents' attention the existence of the assignation and its terms and that they were seeking payment of the assigned debt. That they did.

[15] We should add this. As has been noted the solicitor advocate for the respondents did not seek to argue that for an effective intimation to be made, where the provisions of the 1862 Act did not apply, it was necessary in every case that the debtor acknowledged the intimation. He went further and accepted that the Sheriff's views on this point to the effect that there was no such requirement in law were correct. Standing the position adopted on behalf of the respondents, it is not, strictly speaking, necessary for us to decide the point and, in any event, we heard no submissions from counsel for the appellants in relation thereto. We would simply say that we are of the opinion that the Sheriff's views on this point appear to us to be sound and the reasons he gives for those views are compelling. As the Sheriff pointed out, in his treatment of the subject, Professor Wilson makes no mention whatsoever of there being any such requirement. It would be very strange, indeed, if that particular author had overlooked the matter. In addition, as the Sheriff also pointed out, there is no support for the existence of any such requirement in the treatment of the topic in Gloag & Irvine on Rights on Security. Professor McBryde's query as to whether there is such a requirement in our law is based, it appears, on certain obiter dicta in Wallace v Davies and in Gallemos Ltd. The objections to there being any such requirement, both having regard to principle and practice, as discussed by the Sheriff in his Note and indeed by Professor McBryde himself, to some extent, seem to us to be compelling. In short, in our view, the question is always an evidential one namely do the facts and circumstances of the particular case establish that intimation has been made?

[16] In the whole circumstances we shall allow the appeal by recalling the interlocutors of the Sheriff and the Sheriff Principal and by granting decree in favour of the appellants for the sum sued for.