EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
Lord Osborne Lord Hardie Lord Marnoch	[2010] CSIH 13 XA130/07 OPINION OF LORD OSBORNE in the cause MOHAMMED KHALIQ Appellant; against LONDIS (HOLDINGS) LIMITED Respondents: _______

Act: D Thomson; Russell Jones & Walker

Alt: Dalgleish; Harper MacLeod LLP

12 February 2010

The background circumstances
[1] In this action, raised in Glasgow Sheriff Court, the appellant sought payment by the respondents of certain sums specified in craves 1 and 2. It was made clear at the outset of the hearing before us that the sums referred to in these craves were not now sought. The first crave was no longer insisted upon and it was indicated that the sum now sought in terms of the second crave was £60,016.26, which failing, the lesser sum of £33,836.44. The background circumstances are that the appellant, who is a business man, owns two shop units at 564 and 566 Broomfield Road, Glasgow. The respondents are a symbol trading group, which operates as a wholesaler, supplying goods and offering advice and services to its members. At the beginning of 2003, the appellant operated a fast food take-away shop under the name of "Star Five In One" from his unit at 564 Broomfield Road, Glasgow. At that time, his unit at 566 Broomfield Road, Glasgow was leased to Messrs Kelly & Company, Solicitors, but they were about to vacate it. Early in 2003, the appellant decided to apply to become a member of the Londis trading group, operated by the respondents. In order to pursue this matter, he telephoned the respondents' head office. As a consequence of the telephone call, the respondents wrote to the appellant on 29 January 2003 indicating that its retail development manager, Mr Brian McCaughey, would contact him to arrange a meeting. Enclosed with that letter there was a copy of the respondents' prospectus in relation to the Londis trading group. Following that, Mr McCaughey contacted the appellant and arranged to meet him at his Broomfield Road premises. The meeting took place at the beginning of February 2003. When Mr McCaughey met the appellant, there was a discussion regarding the respondents' requirements for the appellant to become a member of the Londis trading group. Over a period of days following their first meeting, the appellant and Mr McCaughey met on two further occasions. On these occasions Mr McCaughey indicated to the appellant that, if he wished to become a member of the Londis group, he would require to utilise 564 Broomfield Road as the unit for Londis trading. He explained that that unit had a superior frontage, which would be more likely to attract trade than the other unit. In consequence, it would be necessary for the appellant to move his fast food outlet to the adjoining premises at 566 Broomfield Road. Mr McCaughey further indicated that 564 Broomfield Road would require refurbishment and that the pursuer would require to use Swallow Design & Storefitting Limited, "Swallow", for such refurbishment works. Mr McCaughey explained that the respondents periodically used that company for such works, since it was familiar with the respondents' requirements. The appellant accepted that he required to change the units 564 and 566 Broomfield Road and to use Swallow for the necessary refurbishment of 564 Broomfield Road, in order to become a Londis member.

[2] Shortly after the third meeting between the appellant and Mr McCaughey, the latter telephoned Swallow to arrange for Swallow to visit the appellant's premises at Broomfield Road, Glasgow, in order to take measurements and prepare plans with a view to undertaking the necessary renovations of 564 Broomfield Road. Mr McCaughey and representatives of Swallow visited the appellant's premises on several occasions over the following few days, in order to take measurements. On 13 February 2003, Mr McCaughey attended at the appellant's units at Broomfield Road. He gave the appellant an application form for membership of the Londis trading group, with accompanying conditions of membership. The conditions of membership (No.5/3 of process) included the following:

"1. Definitions

In these terms and conditions: 'Londis' means Londis (Holdings) Limited; 'member' means the individual or other legal entity signing below which has been accepted for membership of Londis and holds a membership account with Londis and 'membership' shall be interpreted accordingly.

...

20. Termination or notice by Londis

Londis may also terminate membership at any time and for any reason by giving a clear seven days notice in writing to the member. Londis may suspend deliveries during the notice period under this clause.

21. Rights cumulative

Any right to terminate membership shall be without prejudice to the other rights of Londis. On termination of membership for any reason, Londis shall have no further obligation under this agreement to the member and Londis shall have no liability to the member for any termination in accordance with this agreement.

...

33. Law and jurisdiction

If the member: (a) is a company registered in Scotland; or (b) is an individual domicile (sic) in Scotland; or (c) has its retail premises in Scotland and does not have a place of business in either England or Wales; this contract and all others between the member and Londis will be subject to the exclusive jurisdiction of the Scottish courts and the proper law of contract will be Scots law."

Without reading the terms of the application form or the accompanying conditions, or seeking legal advice as to their import, the appellant signed the application form. At no time was the form signed by any representative of the respondents. Mr McCaughey thereafter took the signed application form away with him. The appellant gave Mr McCaughey a cheque for £50 payable to the respondents in payment of a fee required to become a member of the respondents' trading group, in exchange for which he was to be given one share in the respondents. Mr McCaughey thereafter submitted the application form and the cheque to the respondents, who encashed the cheque.

[3] By letter dated 25 February 2003, the respondents acknowledged receipt of the appellant's application. That letter erroneously referred to the application having been received on 25 January 2003, whereas it was in fact received on 25 February 2003. The letter indicated inter alia that the appellant required to submit (1) three most recent monthly full bank statements and (2) the most recent set of audited trading accounts for the appellant's take-away business, Star Five In One, in order that a credit check could be carried out. Mr McCaughey had advised the appellant of these requirements. The appellant submitted three months bank statements and audited trading accounts to the respondents, as requested. The appellant then opened a bank account with the Clydesdale Bank, Springburn branch, Glasgow, with sort code 82-64-29 and account number 00320607.

[4] The appellant's application to become a member of the respondents "Londis" trading group was approved by them on or about 17 April 2003, subject to the conditions of membership, signed by the appellant on 13 February 2003. Mr McCaughey received an e-mail from Stuart Peskett, the respondents' new business administrator, on 17 April 2003, which stated inter alia:

"Please be advised that M Khaliq has now been passed for membership. I need Terry to sign off before opening as no cash flow enclosed. 7DD No Lockins - until 6 mths sat trading. Thanks Stuart".

On receipt of this e-mail, Mr McCaughey showed a copy of it to the appellant.

[5] Subsequently the respondents prepared a store development plan for 564 Broomfield Road, which included trading forecasts, a store plan and a related development agreement. The preamble to the development agreement stated:

"Whereas the Retailer is a member of the Londis Group and wishes to utilise the services of a Retail Development Manager for the purposes of the Londis Store owned and/or operated by the Retailer, ...".

The store development plan was submitted to the appellant who signed the development agreement on 18 May 2003 at that portion of the pre-printed form which stated "Retailer" opposite the place where the appellant signed. At no time was it signed by any representative of the respondents.

[6] On or about 6 May 2003, Swallow completed their measurements and preparation of plans for the refurbishment of the appellant's unit. The appellant instructed Swallow to proceed with the refurbishment. Swallow advised the appellant that the work could not be undertaken immediately as Swallow had a large number of shopfitting contracts to fulfil. Thereafter during 2003, the appellant arranged to move his take-away shop from 564 Broomfield Road to 566 Broomfield Road. He contracted with Modena Catering & Shopfitting to fit out 566 Broomfield Road as a take-away shop. He paid Modena Catering & Shopfitting £20,100 for this work. To enable the shopfitting works to be undertaken at 564 Broomfield Road, the appellant required to have a structural beam installed there, together with associated works including the installation of an external drain, the forming of a two-door opening toilet and the re-building of a timber and stud partition. He contracted with the firm of D & M Builders (Hamilton) Limited to undertake this work. He paid this company a sum of £4,982.35 for the work. The works were completed in March 2004, albeit that the conclusion of the contract for the works and the installation of the structural beam took place prior to Mr McCaughey advising the appellant in February 2004 that his application for membership with the respondents was not proceeding, as explained below. Between May 2003 and December 2003 Mr McCaughey regularly visited the appellant's premises at Broomfield Road and spoke to the appellant. The appellant kept Mr McCaughey advised of progress of the work being undertaken on the units. He told Mr McCaughey that he awaited a start date from Swallow for the shopfitting.

[7] In February 2004, the appellant received a telephone call from Mr McCaughey intimating that the appellant's application for membership of the "Londis" trading group was not proceeding and that the cheque for £50 which he had forwarded would be returned. He indicated that the appellant would receive a letter setting out the position. Prior to this telephone call, the appellant had received no indication from the respondents or anyone acting on their behalf that there was any problem or difficulty regarding his membership of the trading group. Within a day or so of that telephone call, the appellant received a letter from the respondents, dated 16 February 2004 which intimated that the appellant "was not proceeding with his application". That letter stated inter alia:

"We write in connection with your application for Londis Membership. We have since been advised that you will not be proceeding with your application for Londis Membership, and therefore return your cheque for £50.00. Cheque No.032215 representing the amount paid by you for a share in Londis. May we take this opportunity to thank you for your interest and look forward to hearing from you again in the near future."

Enclosed with that letter was a cheque in favour of the appellant made out by the respondents in the sum of £50.00. The appellant has not encashed that cheque. Prior to the telephone call that the appellant received in February 2004 from Mr McCaughey, the appellant had paid a deposit to Swallow for the refurbishment work to be undertaken by them. He did so by means of two cheques, one in the sum of £3,031 and one in the sum of £5,723.09. Following his receipt of the respondents' letter of 16 February 2004, the appellant contacted Swallow seeking the return of the deposit he had paid to them. He was advised by Swallow that he had a binding contract and that he was bound to proceed with it. In those circumstances the appellant took the decision to proceed with the refurbishment using Swallow to undertake the work. Swallow commenced that work in April 2004 and, on completion, the appellant paid Swallow a balance of £26,179.

[8] The appellant never received a membership or an account number from the respondents, nor did he purchase any products from them, or otherwise trade with them. The renovations made to 564 Broomfield Road remain in place. The appellant continues to trade from both 564 and 566 Broomfield Road.

[9] Against the foregoing background circumstances, the appellant advanced his claim in the present action upon two bases: (1) alleged breach of contract on the part of the respondents; and (2) alleged Melville Monument liability. The appellant's claim for damages for breach of contract was abandoned before the sheriff, since it was recognised that the intended contract between the appellant and the respondents was never signed or executed by both parties. Accordingly the claim proceeded exclusively upon the alternative basis of liability, which may be seen as formulated in condescendence 7 of the appellant's pleadings in the action. In that condescendence it is averred that the appellant was entitled to and did rely upon the implied assurances given by Mr McCaughey and other employees of the respondents, on behalf of the respondents, that there was a binding contract between them. But for those assurances, it is claimed that the appellant would not have incurred the expenditure which he did in reliance upon them. He would not have entered into a contract with Swallow for the shopfitting works which were to be carried out at 566 (sic) Broomfield Road. The appellant would not have had the various other works carried out.

[10] After a proof, on 30 July 2007, the sheriff held that the respondents had given implied assurances to the appellant that a contract existed between him and the respondents, the terms of which were contained in the conditions of membership previously referred to. However, in those circumstances and in the light of the findings-in-fact which the sheriff made, which were substantially in the terms that we have summarised, he found that the respondents were entitled to be assoilzied from the craves of the initial writ. Against the sheriff's interlocutor of 30 July 2007, the appellant has appealed to this court.

The submissions of the appellant

[11] Counsel for the appellant moved the court to recall the interlocutor of the sheriff and grant decree for a sum of £60,016.26, which failing the lesser sum of £33,836.44. That latter sum was the one referred to by the sheriff in paragraph [35] of his Note. He also moved the court to make certain amendments to the sheriff's findings-in-fact and finding-in-fact-and-law. He proposed the deletion of the whole words in the finding-in-fact-and-law from "the terms" to "process". Also, he sought the addition of two further findings in the following terms: (1) the pursuer incurred expenditure in the sum second craved in reliance upon the implied assurances given by the defender to the pursuer, and (2) that it would be unconscionable for the pursuer to be denied reimbursement of the expenditure incurred by him in the sum second craved. It was a necessary consequence of these changes that the sheriff's finding-in-law would require to be altered appropriately.

[12] The appellant had originally advanced two bases of claim, first, breach of contract and, second, Melville Monument liability. The first basis had been abandoned before the sheriff, since the contract had never been executed. The critical issue was whether the appellant had been told that he required to move his take-away shop from 564 to 566 Broomfield Road. That matter had been ventilated before the sheriff. It was important in relation to unconscionability in connection with Melville Monument liability that Mr McCaughey had in fact appreciated that the moving of the take-away business to No.566 Broomfield Road would involve substantial expenditure. That was evident from documents at pages 87 and 93 of the appendix. It was part of the appellant's position that that substantial expenditure had to be incurred by him in order to perform his obligations under the putative contract. It also had to be borne in mind that, under condition 5 of the conditions of membership, the respondents had to approve the retail premises to be used. The primary ground of appeal was that the sheriff had erred in reaching the view that the expenditure which the appellant incurred was not expenditure incurred by him in implement of his obligations under the putative contract. It was accepted that the existence of an arrangement, which was not itself a contract, was an essential pre-requisite to the establishment of Melville Monument liability. Such an arrangement had to be understood as referring to an unenforceable agreement. In the present case the reason for unenforceability was that a contract had never been signed by both parties. The sheriff had held, however, that negotiations had been completed, so that there was indeed an arrangement of the kind mentioned. There was an inherent flaw in the sheriff's approach to the matter. In findings-in-fact [9] to [11], he had concluded that the appellant had accepted that he required to move his take-away business to 566 Broomfield Road and to use Swallow for the refurbishment of 564 Broomfield Road in order to become a Londis member. In these circumstances, it was submitted that the sheriff had been in error to say what he did in paragraph [31] of his Note. The same error appeared in paragraph [34] of the Note. The sheriff was also in error in what he said in paragraph [35]. Having regard to the terms of findings-in-fact [32] and [33], the sheriff should have accepted that there was a duty on the part of the appellant to pay Swallow, with whom he had a contract for the refurbishment. On this basis, at least the appellant's alternative claim for the lesser sum of £33,836.44 was sound.

[13] At this point in his argument, counsel for the appellant drew our attention to several authorities which he contended were of assistance. The first of these was Walker v Milne (1825) 2 S. 379, the origin of Melville Monument liability. The circumstances of the case included the fact that no binding contract had been completed. There was no agreement upon the general terms of the proposed conveyance, the extent of the property to be acquired, the conditions under which it was to be held and the person in whom the feudal title was to be vested. Nevertheless, the pursuer's feuing plans had been altered on the basis that the transaction contemplated would proceed. It was this kind of liability that was founded upon in the present case.

[14] Counsel also drew attention to McBryde, Contract, 3^rd ed. 2007 at pages 99 and following, 126 and 127. The author did not say that it was only in cases of lack of formality that this type of liability existed. Counsel also relied on Dobie v Lauder's Trustees (1873) 11 M. 749, in which case re-imbursement of expenses was authorised upon the basis of a non-contractual understanding. Counsel went on to draw our attention to Allan v Gilchrist (1875) 2 R 587, particularly the observations of Lord Deas at page 589 to 591. Counsel also relied on Hamilton v Lochrane (1899) 1 F. 478. Counsel submitted that the case of Varney (Scotland) Ltd v Lanark Town Council 1974 SC 245 could be distinguished from the present case. In that action there had been a claim for recompense, which was refused because of the existence of other remedies. Counsel went on to draw our attention to Lawrence Building Co Ltd v Lanark County Council 1978 SC 30, another case in which a claim for recompense was made. Reference was also made to Evans-Jones, Unjustified Enrichment, Vol.1 para.1.98.

[15] Counsel then reverted to the original line of authority which he had been considering, drawing attention to Gilchrist v Whyte 1907 S.C. 984, in which a claim was made following abortive negotiations for a loan on certain heritable property. Expenses had been incurred in reliance on representations. The case failed because the alleged representation was no more than an expression of opinion, however, the opinion was expressed that a person who had been induced by representations of another to incur expenditure in contemplation of a contract with him, which was never concluded, was entitled to recompense. The claim bore to be founded upon Walker v Milne. Reliance was placed on what was said by Lord Stormonth-Darling at pages 988-989, Lord Low at pages 991-992 and Lord Ardwall at pages 993-994. Gray v Johnston 1928 S.C. 659 was a case in which a claim for recompense had been made arising out of a promise that the pursuer would receive benefit under the will of an individual who subsequently died, having failed to honour the promise. A claim for recompense failed, but the reasons for its failure did not resemble any circumstances of the present case. What was said by Lord Hunter at page 669 contemplated the possibility of a claim based on Melville Monument liability succeeding.

[16] Counsel went on to refer to Dawson International plc v Coats Patons plc 1988 S.L.T. 854 in which Lord Cullen considered Melville Monument liability at pages 862-866. Counsel founded upon the approach taken by Lord Cullen in that case. Lord Cullen's decision had been the subject of a reclaiming motion, the decision in which was reported in 1989 S.L.T. 655. The passages relied upon were not in point at the reclaiming motion but had not been disapproved.

[17] The subject of Melville Monument liability was again the focus of consideration in Bank of Scotland v 3i plc 1990 S.C. 215. While the pursuer's claim in that regard was dismissed as irrelevant, that was because of the nature of the averments made, rather than because, in principle, this form of liability was not recognised. Reference was made to the observations of Lord Cameron of Lochbroom, delivering the Opinion of the Court at page 225.

[18] Summarising his position, counsel for the appellant said that the exceptional basis of claim referred to as Melville Monument liability continued to exist, where the representations founded upon were not either fraudulent or negligent but "wrong" in the special sense understood. Lord Cullen and Lord Cameron of Lochbroom, in the two cases cited, had properly interpreted the earlier cases. When that reasoning was applied here, it pointed to the allowance of the appeal. There was no issue of minimisation of loss in the present case. The appellant had been committed to paying the full sum contracted for to Swallow. There was no sense in which he voluntarily decided to proceed with those works.

Submissions for the respondents

[19] Counsel for the respondents began by drawing attention to the written submissions which had been tabled in the Sheriff Court, reproduced at pages 159 and following of the appendix. That set of submissions contained a review of the relevant authorities. The genesis of those was Walker v Milne, in which what had been involved was indemnification for actual loss and damage in a situation in which no binding agreement had been concluded relating to heritable property but an informal agreement existed. The next case of relevance was Bell v Bell (1841) 3D 1201, particularly the observations of Lord Fullerton at page 1204. The nature of the agreement which was the basis of the claim was important. Dobie v Lauder's Trustees was also important. There the court emphasised that the principle operated in a situation where an arrangement had been entered into, but which could only be made legally binding by being committed to writing. It was also emphasised that the claim was for re-imbursement for actual loss. In Allan v Gilchrist, the agreement which was not obtempered was one which could only be proved by writ or oath. It was said in that case that what was recognised in Walker v Milne was not a claim for damages for breach of contract, but a claim for reimbursement of substantial loss occasioned by one party by the representations and inducements recklessly and unwarrantably held out to him by the other party. A claim of the kind in question would arise only in special circumstances. In Hamilton v Lochrane an issue of mode of proof arose; it was made clear that Melville Monument liability was not something to be sought when other routes or remedies were available, albeit more difficult. Issues of wasted expenditure, loss to the pursuer and benefit to the defender were central to any consideration of the application of this liability. In Gilchrist v Whyte the court emphasised the very limited circumstances in which a person who had been induced, by the representations of another to incur expenditure in contemplation of a contract with him, which was never concluded, was entitled to recompense. In Gray v Johnston emphasis was placed on the very special circumstances in which this type of liability could arise, often associated with the fact that an agreement was incapable of proof owing to the requirements of the law of evidence.

[20] No case of Melville Monument liability was to be found between the decision in Gray v Johnston and that in Dawson International plc v Coats Patons plc, a decision of Lord Cullen, as he then was. Counsel accepted that, in that case, Lord Cullen had undertaken a detailed examination of the authorities in this area of the law. His conclusions were to be found at page 866 A-D of the report. What his Lordship had stated was that this was an exceptional branch of the law, in which the principle required to be narrowly interpreted. Its application could not extend to cases where no agreement had been reached. Furthermore the remedy was only available where it would be unconscionable for it not to be.

[21] The final word on the topic of Melville Monument liability was to be found in Bank of Scotland v 3i plc 1990 S.C. 215. The matter was dealt with by Lord Cameron of Lochbroom at pages 225-226, where he said that the liability would arise only where the claimant had acted in reliance on the implied assurance by the other party that there was a binding contract between them, when in fact there was no more than an agreement which fell short of being a binding contract. His Lordship also opined that the law of delict would provide a remedy where there had been fraudulent or negligent misrepresentation. Where those elements existed there would be no need for the court to resort to the provision of an equitable remedy.

[22] Counsel next turned to make his submissions on the facts of the present case. He began by submitting that here there was a real issue relating to loss. The position was that there was no finding-in-fact that the appellant had suffered any loss. On a proper view of the circumstances there was no loss proved, in a situation in which the appellant had spent money on the refurbishment of his own premises, from which he continued to trade successfully. He referred to findings in fact 4 and 36. It might be said that the appellant had profited from that expenditure, in respect that he operated a successful business from the premises at 564 Broomfield Road. Thus there was no equity involved here that dictated that there should be recovery of the expenditure from the respondents.

[23] Counsel next submitted, on the subject of the necessary ingredient of an agreement, that there was in fact no agreement of the kind contemplated by Lord Cullen in Dawson International plc v Coats Patons plc. It was submitted that the sheriff had taken the view in paragraph [34] of his Note that there was no appropriate agreement for this purpose. There were no findings in fact as regards the alleged arrangement or agreement.

[24] Counsel then went on to make submissions concerning the state of the law as regards the relevant liability. He contended that the situation now was very different from that existing when the cases of Dawson International plc v Coats Patons plc and Bank of Scotland v 3i plc had been before the court. In particular, there had been passed the Civil Evidence (Scotland) Act 1988, which abolished the rule requiring corroboration in civil cases, but, more particularly, there had been passed the Requirements of Writing (Scotland) Act 1995, which had extensively relaxed the rules relating to the constitution of contracts relating to heritable property. There also had to be taken into account the fact that in recent years the law relating to negligent misrepresentation had developed to such an extent that, in appropriate circumstances, the remedy of damages was available following upon such a delict. Against this background counsel made the bold submission that the line of authority relating to Melville Monument liability was now bad law. It had been devised in circumstances when there were legal restrictions upon the manner in which contracts relating to heritable property could be constituted and in which certain other contracts of an innominate and unusual nature could be proved. Counsel accepted that Dobie v Lauders Trustees was difficult to reconcile with his submission, but nevertheless, he contended that the Melville Monument principle had outlived its usefulness. It might be that the view expressed by McBryde in The Law of Contract in Scotland, 3^rd ed., at page 126 footnote 283 was correct. Upon that basis the scope of operation of the principle would now be much restricted and would not embrace circumstances such as those existing in the present case.

The conclusion
The law

[25] I do not find it necessary to examine the whole tract of authority cited to us, which commenced with Walker v Milne. In Dawson International plc v Coats Patons plc, Lord Cullen, as he then was, undertook a detailed consideration of that tract of authority, expressing his conclusions at page 866A in these terms:

"I come now to the main issue which divided the parties. Having reviewed the cases in this field to which I was referred I am not satisfied that they provide authority for reimbursement of expenditure by one party occasioned by the representations of another beyond the case where the former acted in reliance on the implied assurance by the latter that there was a binding contract between them when in fact there was no more than an agreement which fell short of being a binding contract; cf. Lord Shand in Dobie v Lauder's Trustees. In such circumstances while the latter is within his rights in failing to implement his part without good reason, it is regarded as unconscionable that he should deny reimbursement of what has been expended by the former in implement of his. It is significant that Walker v Milne has never been explicitly recognised as an authority for reimbursement in a case in which parties had not reached an agreement. The judicial statements which were relied upon by the pursuers in support of a wider approach seemed to me to be capable of bearing the narrower interpretation. In an exceptional branch of the law it seems to me to be dangerous to attempt to derive an implication as to the scope of the remedy, as the pursuer suggested in regard to the case of Gray v Johnston. Although the opinion of Lord Justice Clerk Alness was relied upon by the pursuers I note that in 1928 S.L.T., page 510 he stated: 'There was according to the pursuer, an agreement between the parties, upon which the pursuer acted. Though the promise of the deceased cannot be proved in order to support a claim for implement and damages, it can, in accordance with the authorities cited, be proved in order to support a claim for indemnification'. That approach to the case provides in my view support for the narrower interpretation which I favour. I should add that I consider that there are sound reasons for not extending the remedy to cases where the parties did not reach an agreement. It is clear that the law does not favour the recovery of expenditure made merely in the hope or expectation of agreement being entered into or of a stated intention being fulfilled. See Gilchrist v Whyte, per Lord Ardwall at 1907 S.C., at p.994, and Gray v Johnston, per Lord Hunter at 1928 S.L.T.[499 at] p.506 and Lord Justice Clerk Alness at p.510."

[26] In relation to this formulation of the law, arrived at in 1988, it appears to me that certain subsequent developments may have gone a long way to removing the equitable justification which, in earlier times, was seen as underlying the Melville Monument principle. I have in mind, the provisions of section 1 of the Civil Evidence (Scotland) Act 1988, which abolished the rule requiring corroboration in civil proceedings, sections 1 and 2 of Requirements of Writing (Scotland) Act 1995, which relaxed the requirements of the law in relation to certain kinds of contract relating to heritable property, and the developments that have occurred in the law relating particularly to negligent misrepresentation. Thus, in an appropriate case, there may be justification for reconsideration of the raison d'être, or at least the scope, of Melville Monument liability. However, in the particular circumstances of this case, I do not find it necessary to undertake such a reconsideration.

[27] What I consider that it is appropriate to do is to proceed upon the basis that Lord Cullen's exposition of the law relating to Melville Monument liability, the only basis upon which the appellant is now pursuing his claim, is sound. The question then is to consider whether, upon the findings in fact made by the sheriff, which were not challenged before us, Melville Monument liability can arise.

[28] Looking at the sheriff's findings-in-fact several items of expenditure on the part of the appellant are dealt with. In the first place, in finding [26], it is found that the appellant incurred expenditure of £20,100 to Modena Catering & Shopfitting in respect of the fitting out of 566 Broomfield Road as a take-away shop. Further shopfitting works required to be undertaken at 564 Broomfield Road, which, as appears from finding-in-fact [27], had to be preceded by the installation of a structural beam there. The cost of that latter work paid to the firm of D & M Builders (Hamilton) Ltd was £4,982.35. The sheriff has gone on to make findings regarding payments made to Swallow for the refurbishment work to be undertaken at 564 Broomfield Road. In finding [31] it is accepted that deposits of £3,031 and £5,723.09 were paid to that firm. According to finding [33], the work by Swallow was commenced in April 2004 and, on completion, the appellant paid the balance of the cost to them of £26,179. Thus, all of the expenditure which is the subject of the claim by the appellant was consequent upon the decision by the appellant to establish the take-away business at 566 Broomfield Road and to refurbish 564 Broomfield Road as a retail outlet, which he contemplated he would operate as a Londis trader. The question then must be whether, in laying out that expenditure, the appellant acted in reliance on an implied assurance by the respondents that there was a binding contract between them, when there was not, and that the expenditure was in implement of the appellant's supposed obligations under that contract. In my opinion, that question must be answered in the negative. It is apparent, particularly from the sheriff's finding-in-fact [10], that the suggestion that 564 Broomfield Road had to be utilised as the unit for Londis training was one which came from Mr McCaughey in discussions with the appellant. If those premises were to be used for that purpose, then, as stated in that finding, the appellant would require to move his fast food outlet to the premises at 566 Broomfield Road. However, the sheriff does not find that these requirements were a consequence of any representations on behalf of the respondents that that course of action was necessitated by the supposed contract.

[29] That point is made by the sheriff, rightly in our view, in paragraph [34] of his Note, where he said:

"In my opinion the expenditure which the pursuer seeks to recover is not expenditure incurred by the pursuer in fulfilment of obligations which he believed were incumbent on him in terms of the contract he thought existed but rather were sums expended by him in the light of earlier representations made by Mr McCaughey. I do not accept that such representations formed part of the contract the pursuer thought existed and I do not consider the pleadings provide scope for a claim that there were two contracts. Accordingly I reject the argument that the facts amount [to] the paradigm of Melville Monument liability and, in the light of the losses claimed, I consider that the pursuer must fail."

As the sheriff finds in finding-in-fact [14], the appellant had been furnished with an application form for membership of the Londis trading group with accompanying conditions of membership, documents 5/2 and 5/3 of process. It is only that material that could have been supposed to demonstrate the appellant's obligations under the putative contract and that material contained nothing to cause the appellant to consider that there was a contractual obligation to undertake the work which gave rise to the expenditure which he now seeks to recover. On this basis I conclude that the sheriff's decision to refuse the appellant's claim was sound. Accordingly this appeal must fail.

[30] In paragraph [35] of his Note, the sheriff considers the consequences of the letter from the respondents dated 16 February 2004, the terms of which are set out in finding-in-fact [30]. On any view of the matter, following receipt of that letter, the appellant could not have supposed that there was any question of his having a contract with the respondents. On that view, any expenditure which he decided to incur following that date must, in my view, be seen as simply a consequence of his own voluntary decision. For that reason, I agree with the conclusions which the sheriff has reached in the latter part of paragraph [35] of his Note.

[31] A further point must be made. In undertaking the expenditure which he did, the appellant effected improvements in his own properties. The sheriff finds in finding-in-fact [36] that the renovations at 564 Broomfield Road remain in place and that the appellant continues to trade from both 564 and 566 Broomfield Road. It appears to me that, in that situation, it cannot be said that the appellant has received no benefit from his expenditure. In these circumstances, having regard to the formulation of the Melville Monument principle arrived at by Lord Cullen, I doubt whether it could ever be said that it was unconscionable that the appellant should be denied reimbursement of that expenditure. Putting the matter in another way, it is difficult to see why, in a context in which the appellant has in fact benefited from his own expenditure, it should be seen as equitable that he should recover it from the respondents.

[32] In all these circumstances, I would propose to your Lordships that we should affirm the interlocutor of the sheriff, dated 30 July 2007, refuse the appeal and remit the case to the sheriff to proceed as accords.

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
Lord Osborne Lord Hardie Lord Marnoch	[2010] CSIH 13 XA130/07 OPINION OF LORD HARDIE in the cause MOHAMMED KHALIQ Appellant; against LONDIS (HOLDINGS) LIMITED Respondents: _______

Act: D. Thomson; Russell Jones & Walker

Alt: Douglas; Harper MacLeod LLP

12 February 2010

[33] For the reasons given by your Lordship in the chair I agree that this appeal should be refused.

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
Lord Osborne Lord Hardie Lord Marnoch	[2010] CSIH 13 XA130/07 OPINION OF LORD MARNOCH in the cause MOHAMMED KHALIQ Appellant; against LONDIS (HOLDINGS) LIMITED Respondents; _______

Act: D Thomson; Russell Jones & Walker
Alt: Douglas; Harper Macleod, LLP

12 February 2010

[34] I agree with your Lordship in the Chair that this appeal should be refused but, because of the unusual nature of the case, I desire to add just a few words of my own.

[35] In my opinion, the line of 19^th Century decisions and dicta to which we were referred stemmed, for the most part, from the restrictive rules of evidence then in force. The origin and anomalous nature of the remedy granted in some of these early cases appears clearly, for example, from the following dictum of Lord Anderson in Gray v Johnston 1928 SC 659 at p.674:-

"If it be asked why the equitable remedy recognised in these decisions should be limited to reimbursement of out-of-pocket loss, the answer would seem to be that the law will not extend the exception to the effect of abrogating the rule. If proof by parole be held to be competent of general damage following on an innominate and unusual contract, this would mean that the settled rule of procedure prescribing proof of such a contract by writ or oath was no longer existent. But, whatever be the reason for the limitation of the practice recognised by the foregoing decisions, there can, in my opinion, be no doubt that, by plain implication, these decisions do impose the restriction contended for by the defender, and in the case of Allan a claim for general damages is expressly excluded."

[36] In attempting in equity to mitigate the effect of these rules of evidence, one can also detect, I think, the early gropings of the court towards what is now the fully fledged doctrine of delictual liability for both fraudulent and negligent misrepresentations. Thus, as early as 1875, in Allan v Gilchrist 2R 587 at p.590, Lord Deas categorised the nature of the remedy under discussion as being:

"a claim for reimbursement of substantial loss occasioned to the one party by the representations and inducements recklessly and unwarrantably held out to him by the other party"

and that description was referred to with approval in both Gilchrist v Whyte 1907 SC 984 and Gray v Johnston cit.sup.

[37] In light of the foregoing I am inclined to agree with counsel for the respondent that this whole line of authority, such as it is, has now been superseded by the legislation to which your Lordship in the Chair has referred and perhaps, also, by what are relatively recent developments in the common law of delict.

[38] It follows that, albeit with respect to Lord Cullen, as he then was, I, for my part, wish most distinctly to reserve my opinion on the correctness of the dicta or, it may be, the decision in Dawson International plc v Coats Patons plc 1988 SLT 854 insofar as relevant to this branch of the law. Your Lordship in the Chair has already referred to this case in some detail so I shall confine my own remarks to just two observations. First, Dobie v Lauder's Trustees 1873 11 M 749, on which Lord Cullen principally relies, is very special and quite different on its facts from all the other cases cited in this supposed line of authority. Second, in so far as Lord Cullen opines that representations need not be made by the defender "recklessly and unwarrantably" (albeit that was what was pled by the pursuers in Dawson ) he is not only at odds with a substantial body of dicta in the cases which he was reviewing but appears at the same time to have been influenced by the more recent developments in the common law to which I have referred. In my respectful opinion, however, these developments, being much later in date, cannot be used to colour or modify the true import of what the court was attempting to articulate in the 19^th Century.

[39] Be all that as it may, it is sufficient for a decision in the present case that, even accepting Lord Cullen's rationale, there was here no earlier "agreement" or even arrangement on the faith of which the pursuer's expenditure was incurred. On the contrary, there were, on the sheriff's findings, only Mr McCaughey's representations or "implied assurances" which induced a belief on the part of the pursuer that, contrary to the fact, there already existed between him and the defenders a contract the terms of which were contained in the Conditions of Membership signed by the pursuer and forming no 5/3 of process. As it seems to me, this state of affairs might well have entitled the pursuer to sue on that contract, as if it had been perfected, or perhaps even simply on the basis of negligent statements on the part of Mr McCaughey. On no view, however, do the circumstances bring the case within the ambit of Lord Cullen's supposed rationale or principle as subsequently adopted by Lord Cameron of Lochbroom in Bank of Scotland v 3i plc 1990 SC 215 and on the sole basis of which the sheriff and this court were invited to proceed.