Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2011] CSOH 129
CA14/11	OPINION OF LORD MENZIES in the cause REGUS (MAXIM) LIMITED Pursuers; against THE BANK OF SCOTLAND PLC Defenders: __________

Pursuers: Lake, QC; Balfour + Manson LLP

Defenders: R Dunlop, QC, McClelland; Shepherd & Wedderburn LLP

11 August 2011

Introduction
[1] Prior to October 2009 several companies were involved in developing the Maxim Office Park ("the Development") at Eurocentral, North Lanarkshire. Before the Development was completed these companies sold it to Tritax Eurocentral EZ Unit Trust ("Tritax"). Tritax purchased the Development using (a) funds paid to it by investors by way of subscription for units in the trust and (b) funds borrowed from the defenders. As part of the sale agreement a rent guarantee was provided to Tritax by TAL CPT Land Development Partnership LLP ("TAL CPT"). In addition a project costs guarantee was provided by TAL CPT, which company also had responsibility as development managers. The obligations in respect of the rent guarantee were covered by a sum retained on deposit with the defenders. Sums equivalent to the value of any inducement made to a tenant to encourage them to enter into a lease of part of the Development were to be drawn from the deposit. The deposits in respect of the rent guarantee and the projects costs guarantee were held in accounts by the defenders. In terms of a Facilities Agreement dated 5 April 2007 the defenders had sole signing rights in respect of the accounts in which the monies were held. The defenders' approval was required for heads of terms for proposed leases and, in particular, incentives that were to be made available to incoming tenants.

[2] The agreement for sale to Tritax imposed restrictions on the developers as to the tenants to whom the development or parts of it could be let. The agreement stipulated that a company was to be formed to take a lease of restaurant, leisure/gym, crèche and retail facilities within the development. TAL CPT HUB Company Limited ("HUB") was the company so formed. In 2008 the pursuers expressed an interest in taking a lease of part of the Development, which part required fitting out works to be carried out before it could be used. It was agreed by way of an incentive to the pursuers to take a lease that funds would be made available in respect of fit out costs. The pursuers did not meet the qualifying criteria for a tenant of the Development so it was agreed between the parties that a lease of the part of the development in question would be granted to HUB and HUB would in turn enter into a sub-lease in favour of the pursuers. In the course of negotiations there was discussion as to when the cash incentive would be paid to the pursuers. One proposal was that payment would be made on the date of entry, with the result that the pursuers would have the benefit of monies before incurring liability in respect of fit out costs. Another proposal was that payment would be made only when the pursuers commenced trading from the leased premises, with the result that the pursuers would incur all fit out costs before receiving the monies. Yet another proposal was that payment might be made upon invoices for the fit-out works being exhibited. Tritax suggested to the solicitors acting for Tritax, HUB and TAL CPT and to its property agents that monies for fit out be put into a separate account. By email dated 11 August 2009 to the pursuers' solicitors, the solicitors for Tritax, HUB and TAL CPT provided a draft letter from the defenders, which was in all material respects in the form of the letter quoted below.

[3] On 9 October 2009 the pursuers and HUB entered into an agreement for lease in terms of which it was agreed inter alia that HUB would grant a sub-lease to the pursuers of the premises. HUB was to be the tenant of the premises in terms of a head lease between it and Anglo Irish Bank Corporation (International) Plc acting as trustee of Tritax, which head lease was ultimately executed on 18 March and 7 April 2010. Under the agreement for lease, it was agreed that the pursuers would carry out fitting out works to the premises and, further, that HUB would be responsible for paying to the pursuer a capital contribution to the cost of those fitting out works in the sum of £913,172. As HUB had been interposed only to meet the requirements as to the standing of tenants, the monies to make payment of the capital contribution would come from Tritax. The circumstances in which the capital contribution was to become payable were provided for at clause 24 of the Agreement for Lease, and in terms of clause 18.8 it was agreed that on the date of entry, HUB would deliver to the pursuers a validly executed letter from the defenders in the form set out at part 16 of the Schedule to the Agreement for Lease.

[4] The defenders issued a letter dated 12 February 2010 ("the letter") to the solicitors for Tritax, HUB and TAL CPT in the following terms:

"TAL CPT Land Development Partnership LLP (TAL CPT)

We understand that Heads of Terms have been agreed between TAL CPT and Regus (Maxim) Limited for the lease of the first floor of Building 1 at Maxim.

It may assist the proposed tenant to have confirmation from us that, on behalf of the landlord (Tritax Eurocentral EZ Unit Trust) and TAL CPT, we hold the sum of £913,172 to meet the landlord's commitment to fit-out costs. These funds will be released in accordance with the drawdown procedure agreed between the parties, whereby the proposed tenant's contractors will issue monthly certificates.

This is subject always to agreement of wider commercial terms with the incoming tenant."

[5] This letter is the crux of the present action. Since it was issued the pursuers have completed the fitting out works to the premises and issued invoices to HUB which exceed the capital contribution. HUB accepts that the costs of the fitting out works have been properly incurred by the pursuers and that the capital contribution falls to be made to the pursuers. The defenders refuse to release the sum of £913,172 to the pursuers. They aver that, following an event of default under the Facility Agreement the defenders exercised a right of retention over the sum referred to in the letter.

[6] The matter came before me for debate. The pursuers maintained four broad lines of argument as follows:

(i) The letter was an undertaking in terms of which the defenders were obliged to make payment.

(ii) There is a separate underlying agreement between the defenders and Tritax/HUB in respect of which the pursuers are, by means of a jus quaesitum tertio, entitled to payment from the defenders.

(iii) That the defenders are personally barred from relying on the terms of their agreements with Tritax/the developers to resist payment to the pursuers.

(iv) That the letter contains negligent misrepresentations acted on by the pursuers to their detriment and the defenders are obliged to make reparation to the pursuers for breach of a duty of care.

[7] The defenders maintain that none of these arguments is well-founded, and that the action is irrelevant and should be dismissed. Both senior counsel helpfully provided me with full notes of argument or outline submissions (Nos 25 and 26 of process), and I have taken account of the whole content of these, together with the submissions made at the Bar. In addition, parties lodged a Joint Minute (No 28 of process) regarding the evidential value of the bundle of documents lodged as productions for the debate.

Submissions for the defenders

[8] Senior counsel for the defenders moved me to sustain the first to fourth pleas-in-law for the defenders and to dismiss the action, which failing to exclude certain averments from probation. He began by noting that the pursuers' conclusions were in unusual form; the first was an attempt to obtain a decree ad factum praestandum for the release of funds, and the second, in the alternative, was for payment of the same sum. The first conclusion was unusual and inappropriate; it suggested that the pursuers were advancing a claim about a fund held by the defenders on someone else's behalf. It was not truly a claim for payment by the defenders, but the pursuers asserting ownership of that fund. If this is correct, the appropriate mechanism was an action of multiplepoinding, not an action for payment. However, the pursuers aver that they have a right to be paid by the defenders. If they suggest that the defenders have an obligation to make payment, a decree ad factum praestandum creates difficulties as a failure to obtemper the decree would result in pseudo-criminal sanction - Macphail, Sheriff Court Practice (second edition), paragraph 21.75; White and Carter (Councils) Ltd v McGregor 1962 SC (HL) 1 at 16. If the pursuers are asserting that the funds are controlled by the defenders but held by them for others, the pursuers should be the real raisers in an action of multiplepoinding. There is a crucial distinction between the situation in which a party completely divests himself of money and puts it beyond his control (eg consignation in court), and the situation in the present case, in which the pursuers do not aver that TAL CPT divested itself of this money. The pursuers must aver either that there was divestiture by TAL CPT, in which case the appropriate procedure is multiplepoinding, or that there was no divestiture but nonetheless the defenders were personally bound to make payment, in which case a conclusion for payment as in the second conclusion is the appropriate procedure. It appears from the way in which the pursuers frame their position in paragraph 2(a) of their outline submissions that they have chosen the second of these two routes, namely the defenders were personally bound to make payment although there was no divestiture by TAL CPT.

[9] The first main issue is whether the letter was an undertaking in terms of which the defenders were obliged to make payment. Senior counsel accepted the propositions of law set out in paragraph 3 of the outline submissions for the pursuers, subject only to Lord Reed's observations in Credential Bath Street Ltd v Venture Investment Placement Ltd [2007] CSOH 208, 2008 Hous LR 2 (at paragraphs [24/5] and [36/7]). Any obligation arising from the letter would have to be a gratuitous unilateral obligation; in order for this to arise, it "is necessary that the promisor should intend to bind himself by an enforceable obligation and should express that intention in clear words" - Morton's Trustees v The Aged Christian Friend Society of Scotland (1899) 2 F 82 at 85; Lord Advocate v City of Glasgow District Council 1990 SLT 721 at 725; Kleinwort Benson Ltd v Malaysia Mining Corporation [1989] 1 WLR 379; Ballast plc v Laurieston Properties Ltd [2005] CSOH 16 (particularly at paragraphs [147] to [150]); Van Klaveren v Servisair UK Ltd [2009] CSIH 37, 2009 SLT 576. In the last case, the Extra Division emphasised that "clear words" are required for a unilateral obligation.

[10] The letter contains no clear expression of a willingness to be bound; the present case is a fortiori of either Ballast or Van Klaveren. In Ballast, the party giving the assurance was the party whose money was in issue (ie the joint venture), unlike the present case in which the defenders merely held the money for others. Neither on the face of the letter nor in the pursuers averments is it suggested that the money was the bank's money. In Van Klaveren the letter in question was written by the insurers whose liability was in issue, and the words in that case were clearer than those used in the letter in the present case, namely: "We accept that our Insured is liable for the purposes of this claim, and will pay damages ...."; these words were still not enough to suggest that a binding obligation to pay damages was undertaken.

[11] In the present case there were several factors which suggest that there was no expression of willingness to be bound in the letter, as follows:-

(i) The letter was addressed not to the pursuers or their solicitors, but to the solicitors acting for Tritax, TAL CPT and HUB. The client named in the heading of the letter is TAL CPT. What the pursuers appear to be arguing is that the defenders have undertaken a unilateral obligation to the pursuers in respect of money owed by HUB, by writing a letter not to the pursuers but to the agents for TAL CPT, without even mentioning HUB. That mechanism is not indicative of an intention to be bound regarding HUB's debt. It would be unusual to address an intention to be bound to someone other than the beneficiary of that obligation - Gloag on Contract at pages 16/17. In the normal course of events, if A intends to bind himself to B, he would normally say so to B.

(ii) The letter relates to an understanding that Heads of Terms have been agreed between TAL CPT and the pursuers for the lease of the premises - not between HUB and the pursuers. It is clear from the pleadings that the pursuers' complaint is that HUB were obliged to pay the pursuers for fit-out costs and HUB have failed to do so. It is impossible to divine from this letter a willingness on the part of the defenders to be bound in respect of HUB, of which there is no mention.

(iii)              The second paragraph of the letter opens with the words "It may assist the proposed tenant to have confirmation from us ...". This is an unusual way of expressing a willingness to be bound, as opposed to an expression of comfort. Although senior counsel accepted that it was not necessary for the word "guarantee" to be used in order to make a letter a guarantee, the absence of that word, or anything approximating to it, is relevant. Banks are accustomed to giving guarantees and undertakings - this would be a most unusual way of doing this. In answer to a question from the Court as to what is meant by a letter of comfort, senior counsel referred to Associated British Ports v Ferryways NV [2009] EWCA Civ 189, [2009] 1 CLC 350, particularly at paragraphs 16 and 24. A letter in the form of the letter in the present case is far removed from a bank stating that it was guaranteeing or undertaking that this money would be paid. It was necessary to look at the document as a whole - it was a very odd way to guarantee payment of £913,172 come what may.

(iv)             The confirmation which the defenders were giving was confirmation on behalf of the landlord - Tritax, not HUB - and TAL CPT that the defenders held the monies to meet the landlord's commitments to fit out costs. There was no mention of HUB in the letter - yet in order to succeed, the pursuers must argue that this is a confirmation of an undertaking to meet HUB's liabilities.

(v)               The next sentence compounds the pursuers' difficulties, because it indicates that the funds will be released in accordance with the drawdown procedure agreed between the parties - i.e. the pursuers and Tritax and/or TAL CPT; there is no mention of HUB. To construe this as a guarantee of the execution of HUB's obligation ignores the terms of the letter.

(vi)             The last sentence, which provides that this is subject always to agreement of wider commercial terms with the incoming tenant, is also important, particularly in the context of the first sentence which records the defenders' understanding that only Heads of Terms have been agreed. If this letter is truly an undertaking - i.e. an expression of willingness to be bound to pay come what may - what is the purpose of the last sentence? This is strongly suggestive not of an expression of willingness to be bound, but only an expression of comfort, and a description of a payment mechanism.

[12] Reading the letter as a whole, in order for the pursuers to succeed on this argument it must amount to an undertaking by the defenders to pay the money owed by HUB come what may and without any qualification. Indeed, that is how they put their case in paragraph 7 of their outline submissions. Properly construed, the letter does not amount to this - it is merely confirmation that the bank holds certain funds as at the date of the letter. The lease postdates the letter. The letter does not suggest that the funds have been put out of the control or ownership of TAL CPT - on the contrary, it states that the funds are held on behalf of Tritax and TAL CPT. There was no suggestion that Tritax or TAL CPT had divested themselves of ownership of the funds. If an arrestment had been served on the bank on the day after the letter, it would have caught these funds. If TAL CPT had gone into liquidation on the day after the letter, the liquidator would have obtained title to the funds. These consequences would have followed from the fact that there had been no divestiture of the funds - Craiglaw Developments Ltd v Wilson 1997 SC 356 at 361. Because there had been no divestiture, not only were the funds subject to arrestment or insolvency proceedings, they were subject to the defenders' right to balance accounts - In Re European Bank (1872) LR 8 Ch. App. 41 at 44; Kirkwood and Sons v Clydesdale Bank 1908 SC 20.

[13] If, as is clearly the case, there has been no divestiture by Tritax or TAL CPT of the money, the money would be arrestable or would accrue to a liquidator or would be subject to the balancing of accounts at the option of the bank. This letter cannot therefore imply a binding undertaking to pay the money come what may.

[14] There are two aspects of the context in which the letter was written which are worth noting. First, as at the date that the letter was written, HUB had no interest in the subjects - as the pursuers aver, HUB only acquired an interest when the head lease was executed in March and April 2010. Second, and again as averred by the pursuers, the pursuers had requested that the funds be placed in escrow or joint names, and this request was refused by the defenders. The defenders were therefore not prepared to agree to the divestiture of the funds. This position is inconsistent with an intention to be bound to pay out the funds - Kleinwort Benson (supra); Johnstone v Owen (1845) 7 D 1046.

[15] The pursuers refer in paragraph 9 of their outline submissions to various factors which they claim to be relevant background to the agreement for lease and the provision of the letter. However, it is not clear that all of these documents were known to the pursuers, or indeed the defenders, at the time. It is only the documents which were within the knowledge of both the pursuers and the defenders at the time which may be of relevance to the construction of the letter - BCCI v Ali [2001] UKlHL 8, [2002] 1 AC 251, particularly per Lord Hoffmann at paragraph 49. One aspect of this background information which is relevant is the fact that there was a proposal to put the money into an escrow account or into joint names, and this was rejected. This is analogous to the situation in Kleinwort Benson Ltd v Malaysia Mining in which it was held that the fact that a guarantee was asked for and refused was a relevant fact in assessing whether a guarantee was given (per Ralph Gibson LJ at 391-393). The word "will" is insufficient to amount to a guarantee or undertaking. What would a reasonable recipient do on receipt of this letter? He would ask - are we protected if TAL CPT goes into liquidation tomorrow? The answer to this would be 'no'. Are we protected against the liabilities of HUB, who are not mentioned in the letter? The answer would be 'no'. Looking at the letter as a whole, whether one looks at it in isolation or in the context in which it was written, it does not amount to a binding obligation. It is not a clear statement of willingness to be bound to pay in any circumstances. It is no more than a letter of comfort. As such, it may carry a moral responsibility but not a legal obligation. If it contains a misrepresentation, it may found a cause of action in misrepresentation, but it does not amount to a guarantee or undertaking. It provides the pursuers with information, moral comfort, and grounds for an action if there has been misrepresentation. It gives them no more than that, and does not amount to a unilateral undertaking.

[16] The second argument for the pursuers is that there is a separate underlying agreement between the defenders and Tritax/HUB in respect of which the pursuers are entitled to payment from the defenders as a result of a jus quaesitum tertio. The pursuers' averments are wholly lacking in specification as to this alleged agreement - they do not aver when, by whom, or between which parties it was entered into. The lack of specification is particularly striking given that the pursuers have been granted a commission and diligence for the recovery of documents relating to this. In any event, a jus quaesitum tertio requires a contract - see the observations of Lady Smith in Marquess of Aberdeen and Temair v Turcan Connell [2008] CSOH 103, 2009 SCLR 336. There are no averments which meet the necessary test. The only factual averments in this regard are to be found in Article 2 of Condescendence at page 9B/D of the Record (No. 27 of process), which do not meet this test. There is no basis for inferring that any agreement was contractual in nature nor that the parties intended to benefit the pursuers in the sense required to give rise to a jus quaesitum tertio - rather, the structure adopted indicates an intention to avoid creating any rights enforceable by the pursuers. Moreover, these averments are all prefaced by the words "believed and averred", which is a formula quite inappropriate in the circumstances - Brown v Redpath Brown & Co Ltd 1963 SLT 219. The pursuers' position is that the issue of jus quaesitum tertio cannot be determined before a proof - but for a proof there must be relevant and specific averments. Fundamentally the pursuers must aver that there was a contract, when it was entered into and between which parties, and facts and circumstances from which it can be inferred that the contracting parties intended to benefit the pursuers. Without such averments of fact, the averments in Article 6 of Condescendence are irrelevant, and there is no relevant case to be remitted to probation.

[17] The pursuers' third argument is that the defenders are personally barred from relying upon the terms of their agreements with Tritax/the developers to resist payment to the pursuers. This argument is misconceived because personal bar only operates as a defence, as a shield rather than a sword, and does not create any claim or positive right. It cannot be used to constitute a contract - Shaw v James Scott Builders & Co [ 2010] CSOH 68, per Lord Hodge at paragraphs [63/4]. The letter is either binding or it is not - personal bar is neither here nor there, and the case based on personal bar is irrelevant.

[18] The pursuers' final argument is based on negligent misrepresentation. (The pursuers no longer maintain their case under the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 section 10). This argument is also fundamentally flawed. What it amounts to is that the pursuers say the defenders represented to them that they were binding themselves to make payment, but if they were not binding themselves to do so, this amounted to a misrepresentation. The letter was either binding or it was not; it is difficult to see how, read fairly and objectively, it was not a binding undertaking yet at the same time it was a misrepresentation that it was binding. The argument becomes circular. This is all that the averments at Article 7 of Condescendence, at page 21B/D of the Record, amount to - that the letter was a binding undertaking, but if it was not, it misrepresented itself as such.

[19] There are several reasons why the case based on negligent misrepresentation is fundamentally flawed:

(i)                 The letter contains no misrepresentation. There is no averment that the defenders did not hold this sum to meet the landlord's commitment to fit-out costs, nor is it averred that at the time of writing the letter there was no intention that the funds would be released in accordance with the drawdown procedure. The letter contains no misrepresentation.

(ii)               The pursuers' complaint appears to be that the letter does not state that the release of the funds might be refused in certain circumstances, but there is in general no duty of disclosure - Chitty on Contract (30^th edition) 6-014. For example, there was no duty on the defenders to disclose to the pursuers that in the event of arrestment or insolvency of the account holders the release of the funds might be refused; this is a consequence arising from the operation of law, and should have been obvious to the pursuers.

(iii)              As a development of (ii), the possibility that the monies would not be released would have been obvious to any reasonable recipient of the letter; otherwise, the letter would have been in effect a guarantee, and no reasonable person would have understood it to have that effect. Any reasonable person would have understood that the funds held by the defenders were subject to arrestment, or to claims in insolvency, or to a balancing of accounts by the defenders. There is no duty to disclose that which is obvious, and any reliance on the letter was unreasonable. The defenders neither knew nor ought to have known that the pursuers would rely on the letter in this way - Caparo v Dickman [1990] 2 AC 605. This is particularly so when the letter makes no mention at all of the obligations of HUB as the party required to make payment to the pursuers.

(iv)             The words relied upon by the pursuers, namely "these funds will be released ..." are words of future intention. A statement as to future intention is not a misrepresentation unless the speaker misrepresents his intention - Royal Bank of Scotland v Davidson [2009] CSOH 134, 2010 SLT 92. There is no averment to this effect on behalf of the pursuers, nor is it any part of their case that this is a fraudulent misrepresentation.

[20] The statement that the funds will be released is either a binding undertaking or it is not (and for the reasons given above, the defenders argue that it is not). The case of misrepresentation is misconceived, and whatever else happens, it should be dismissed at this stage. There is also the question of the pursuers' reliance on the letter; they aver that they incurred expenditure in fitting out the premises and they would not have done so had the letter not been provided. However, by the time the letter was signed, the pursuers had bound themselves to carry out the fit-out works; in terms of clause 7.3 of the Missives of Let dated 9 October 2009 they were obliged, on the date of entry, to commence the works as soon as reasonably possible. The pursuers therefore need to aver how it was that in undertaking a contractual responsibility in October 2009 they relied on a letter executed in February 2010. There is no averment of any basis on which the pursuers could have refused to carry out the works.

[21] For all these reasons, senior counsel renewed his motion for dismissal. If the action was not to be dismissed, there would be a need for proof, and decree de plano should not be granted.

Submissions for the pursuers

[22] Senior counsel for the pursuers moved me to sustain their second plea-in-law and grant decree de plano in terms of the second conclusion. In the event that the court refused this motion, he moved me to allow a proof before answer without deletion of any of the pursuers' averments.

[23] The first question was whether in the letter the defenders undertook an obligation to the pursuers to make payment. This does not turn on whether or not there was any divestiture of the funds, nor on whether the defenders were guaranteeing anything - the pursuers do not submit that the letter was a guarantee or cautionary obligation, but that it is a straightforward binding undertaking to make payment. The resolution of this issue depends on a proper construction of the letter. The rules of construction are well established, are set out in paragraph 3 of the outline submissions for the pursuers, and supported by the authorities cited therein. Lord Reed's approach in Credential Bath Street Ltd was entirely consistent with these authorities; it is a question of giving effect to the words that parties have chosen, in the knowledge of the background circumstances. As was observed in Ballast plc v Laurieston Properties Ltd, in the context of a unilateral document the appropriate perspective is the meaning which the words would convey to a reasonable person in the position of the recipient. In considering the other authorities referred to, it should be borne in mind that the observations in Van Klaveren were made in the particular context of the settlement of an action. The peculiar circumstances considered in Kleinwort Benson Ltd v Malaysia Mining Corporation must also be remembered. The background facts are narrated by Ralph Gibson LJ at pages 382/3 of the Appeal Court report. These included an original request by the bank in that case for joint and several liability, and then for guarantees, both of which were refused by the defenders. The defenders then said that they would provide a letter of comfort, which was drafted by the pursuers who charged a greater percentage commission in light of this. The arguments in law for the parties were also very different from the arguments in the present case - see the summary by Ralph Gibson LJ at 388H to 389D in that case as to the intentions of the parties, including averments that even if the letter of comfort contained what would have been a contractual promise there was a separate agreement or understanding that it should not be legally enforceable. There is no such complication in the present case - the question of the legal effect of the letter is one of interpretation. In that regard it should be remembered that the "title" of a document is not determinative - the court will go beyond what the parties may choose to call a document, and will give effect to the meaning of the words used.

[24] Senior counsel considered the terms of the letter (as set out in paragraph 4 of his outline submissions). He observed that the pursuers were named in the first paragraph, and it was clear from the words in the second paragraph "It may assist the proposed tenant to have confirmation" that the defenders contemplated that the letter would be read and relied upon by the pursuers. The confirmation was being given by the defenders to the pursuers. The letter then goes on to state the factual position that the sum is being held by the defender and states that this is to meet the commitment to fit-out costs. It then goes on to state, without qualification, that the funds will be released in accordance with the drawdown procedures agreed between the parties. The last sentence notes that the letter is subject always to agreement of wider commercial terms with the incoming tenant, but neither party pleads that there are any such wider commercial terms that are relevant. The significance of this last sentence is that it is the only qualification on the statement that the funds will be released. There is no attempt to state that the funds may be withheld as a result of any arrangement between the defenders and TAL CPT or any other party.

[25] There is nothing in the terms of the letter which could reasonably be taken to mean that it is only a statement of intention or opinion. A reasonable person taking an objective view of the letter would know that the bank was routinely engaged in business decisions, and would conclude that in the absence of words limiting the import of the letter to a statement of intention or opinion, the bank had not intended the letter to be so limited. The absence of any such qualification is significant. Read objectively, the letter discloses a clear intention that the defenders provided confirmation and an undertaking to the pursuers that was not subject to any qualification. Any subjective intention which they may have had is irrelevant - obligations in undertakings, like those in contracts, are not determined by what parties think in their own minds; Muirhead & Turnbull v Dickson (1905) 7 F 686.

[26] Senior counsel turned to the context in which the letter was written (as more fully set out in paragraph 9 of his outline submissions, and following paragraphs). The defenders did hold this money at the time that they gave the letter, and this is admitted in the defences. There were negotiations about the mechanisms for payments to the pursuers for fitting out costs; various possibilities were considered (although never a guarantee), and the defenders rejected a suggestion that the funds be held on escrow and instead said that they would provide a letter to the pursuers. The defenders took an active role in the negotiations. This was apparent from several of the documents produced; for example, on 6 February 2009 Katie Collins of Tritax and TAL CPT sent Head of Terms dated 20 January 2009 to the defenders, from which it was clear that the landlord was to be Tritax, the head tenant was to be HUB, and the sub-tenant was to be the pursuers. A capital incentive to the sub-tenant was envisaged. E-mail correspondence between the solicitors for the pursuers and the solicitors for Tritax, TAL CPT and HUB indicated that the details of the contribution were dictated by the defenders' requirements. In none of this correspondence is it suggested that the defenders would not be willing to pay the money to the pursuers; there was discussion about the timing and method of payment, but no dispute about the principle of payment. By e-mail dated 3 August 2009 addressed to Tritax and the defenders, the solicitor for Tritax and TAL CPT wrote that "we have made it clear that the deposit will not be separately held in joint names but will be dealt with by way of a letter from the Bank as in previous cases confirming that the funds are available and following conclusion of missives can be drawn down during the fit-out period and that on the commencement of trade, the balance, if any, can be released to Regus". The defenders' close involvement in the incentive package is clear from an e‑mail from Matthew Reilly of the defenders dated 17 June 2009. The style of the letter which the defenders were to grant was sent by the agents for Tritax to the agents for the pursuers on 11 August 2009. Although reference was made to TAL CPT and no reference was made to HUB, it was accepted by all parties that HUB was just a fiction, and that TAL CPT would be funding the fit-out works. In an e-mail dated 21 August 2009 to the defenders' Matthew Reilly, the property agents for Tritax/TAL CPT again addressed the question of further security for the pursuers in relation to the developers' capital contribution: the defenders can have been in no doubt as to the purpose of the letter, which was to provide security for the pursuers and would be relied on by them for this purpose. By clause 18.8 of the missives dated 9 October 2009 HUB were obliged to deliver the letter on the date of entry, in the form appended to the missives.

[27] The question then arises - how would a party with knowledge of this correspondence and of the obligations imposed by the missives, and knowing that HUB's involvement was really a fiction, construe the letter? Such a party would know that although HUB was the immediate landlord, TAL CPT would be putting up the costs of the fit-out. The first sentence of the second paragraph of the letter was no more than a statement of fact, but all concerned knew that the pursuers would be relying on this. If the letter had stopped there, it would simply be a letter of comfort; however, it goes on to state that the funds will be released in accordance with the agreed drawdown procedure. Although senior counsel accepted that the word "will" does not always amount to a binding undertaking, this is its natural meaning and why should it not bear this meaning in this context? The issue was not whether the funds were going to be paid, but when. The fit-out works were going to be carried out, and the funds were going to be released.

[28] The only qualification is the reference in the last sentence to agreement of wider commercial terms, but these were already agreed by the missives dated 9 October 2009. There were no wider commercial terms still to be resolved.

[29] In the letter the bank are not offering to guarantee any other parties' obligations - that would be a secondary liability. The letter constitutes a primary liability in the bank, which undertakes to release the funds. The letter is issued by the corporate department of a large bank, clearly with the intention that its contents would be relied on. A reasonable person in the position of the pursuers would be entitled to assume that the bank intended the letter to mean what it said. It amounts to an undertaking on the part of the bank to make payment, irrespective of the fortunes of Tritax/TAL CPT. This obligation still subsists even if the landlord becomes insolvent - it is the obligation of the bank to make payment even if there are no funds in the account. The letter was acceptable to the pursuers precisely because there was no reference in it to insolvency, arrestments or the like - the pursuers accepted it as a substitute for a joint account. So long as the defenders still have the money referred to in the letter, they have the stated obligation to release it by making payment to the pursuers. They do not suggest that the money is not in their possession; in answer 4 they merely aver that they are exercising a right of retention over it. It is not open to them to do this. The obligation was not conditional on something which might or might not happen - the fitting out works were going to be carried out. The defenders knew (eg by the e-mail dated 21 August 2009) that the pursuers' concern was to have security for this sum. A letter of comfort would achieve nothing and would provide no security. The bank suffered no undue hardship as a result of granting this undertaking, because they could require the monies to be paid over to them, thereby protecting themselves and the pursuers. In answer to a question from the court, senior counsel modified his earlier submission by submitting that if the defenders transferred the funds to another account, they would still be under the obligation to pay the monies to the pursuers; however, if TAL CPT went into liquidation and the liquidator took control of the funds, the bank would be under no obligation to pay the pursuers.

[30] The defenders have fallen into error in categorising the obligation (in paragraph 1.3 of their revised note of argument) as "effectively guaranteeing payment of the money". The obligation is not a guarantee, but an unconditional undertaking to make the payment to the pursuers.

[31] Turning to jus quaesitum tertio, the averments at page 9B/D of the record on which senior counsel for the defenders focussed require to be read together with the averments about e-mail correspondence beginning at page 7D/E culminating in the averments at page 9A/B that it was agreed that the bank would provide a letter in these terms. Senior counsel acknowledged that the averments about the contract were not very specific, but the pursuers offered to prove that there was an agreement and what the content of that agreement was. This amounted to fair notice, and it was not apparent what prejudice the defenders would suffer in preparing for a proof. Although this may not be the strongest case of jus quaesitum tertio ever pled, it meets the test in Jamieson v Jamieson 1952 SC (HL) 44 - it cannot be said that if all the pursuers' averments were proved they would be bound to fail. At a proof, the defenders' witnesses can be asked about the agreement which they entered into, and this can be explored in the evidence of the solicitor acting for TAL CPT. It is surely inconceivable that he would represent (in his e-mail dated 5 August 2009) that the bank would do something if the bank had not agreed to do so. The pursuers' averments were sufficient to enable them to go to probation on their jus quaesitum tertio case.

[32] Senior counsel accepted that the pursuers' averments on personal bar stood or fell with the jus quaesitum tertio case, and he presented no arguments in support of them at this stage.

[33] Turning to the case of misrepresentation, the defenders' argument (summarised at paragraph 4.2 of their revised note of argument) that the pursuers were contractually obliged to carry out the fit-out works and so could not have acted in reliance on the letter is misconceived. The Missives must be read as a whole; the obligation in clause 7.3 is correlative to that in clause 18.8. The pursuers would not have been obliged to carry out the fit-out works if the letter had not been provided. The pursuers' reliance on the letter is plain.

[34] It was held in Royal Bank of Scotland v Davidson that the pursuers' representations were nothing more than statements of intention as to intended future conduct, but that case turned on its own facts. The court held, on the facts of that case, that the SFLG element was dependent on a change of government policy; in light of this, the terms of paragraph [20] of Lord Drummond Young's opinion were hardly surprising. The letter in the present case goes beyond a mere statement of intention, so the passage in Gloag on Contract at pages 463/4 is not in point. With regard to the defenders' criticism that it is difficult to envisage how the letter could amount to a negligent misrepresentation if it did not amount to a binding undertaking, this depends on the reason which the court may adopt for finding the letter not to be a binding undertaking. If the reason is that the word "will" in the letter does not mean that the bank is obliged to release the funds, this would be an end of the misrepresentation case. However, if the court took the view that the letter did not amount to a binding undertaking because there was no mention of HUB, or on the basis that the letter was sent to the solicitors for Tritax/TAL CPT and not to the pursuers, it would still be open to the court to hold that the word "will" imports a representation of fact.

[35] There were no words in the letter indicating that it was merely a statement of the bank's policy or intention, nor were there any words making the obligation contingent on another event. It was very different from the facts in Royal Bank of Scotland v Davidson. Although the defenders assert that the letter is merely a statement of intention, they cannot point to anything to suggest that this is so. This is the answer to the point made in paragraph 4.1.1 of the defenders' revised note of argument.

[36] Senior counsel did not dispute that there was no duty of disclosure, but the pursuers do not rely on this; they rely on the fact that the representation is not in any way qualified. The point made in paragraph 4.1.3 of the defenders' revised note of argument is not the subject of averment by the defenders, and in any event does not render the pursuers' case irrelevant - this is an issue for proof. Moreover, nothing in the letter nor the background circumstances suggests that the purpose of the letter was to give comfort regarding the obligations of HUB; both parties knew that HUB's involvement was a fiction necessitated by the need for a suitable qualifying tenant. For the reasons given in paragraphs 20-23 of the pursuers' outline submissions, the pursuers case of misrepresentation is sufficiently relevant and specific to go to proof.

[37] If the court were to take the view that the pursuers' case as a whole was irrelevant, senior counsel submitted that the appropriate disposal would be dismissal. If the court were to be satisfied that the letter amounts to a binding undertaking by the defenders, the appropriate disposal would be to sustain the pursuers' sixth plea-in-law and grant decree de plano in terms of the second conclusion, there being no issues raised by the defenders regarding quantum. If, however, the court reached a conclusion between these two extremes, senior counsel invited me to put the case out By Order to enable a discussion to take place as to what averments should be remitted to probation, and to consider expenses.

Reply for the defenders

[38] Senior counsel for the defenders disputed that the pursuers' claim was based solely on a straightforward undertaking by the bank to pay the sum stipulated. The claim is predicated on HUB becoming liable to pay the pursuers - see the averments in Article 2 of Condescendence at page 10D/E of the record, and the averments in Article 5 at page 17, from which it is clear that any obligation on the defenders to make payment is contingent upon the capital contribution (as provided for in clause 24 of the missives) becoming due to the pursuers by HUB.

[39] With regard to the submissions for the pursuers regarding the context in which the letter was written, senior counsel had three observations:-

(i)                 The majority of the documents which had been considered in the pursuers' submissions were not the defenders' documents, nor even sent to the defenders (eg numbers 9, 12 and 14 of the joint bundle); some were not even known to the pursuers (eg number 28 of the joint bundle). All parties were legally represented, and sometimes (but not always) the defenders were brought into the discussions. The letter itself is far more helpful than trying to decipher e-mail traffic, much of which was not known to the defenders.

(ii)               The pursuers argue that the correspondence shows that there was no dispute as to the principle of payment, but only about the timing. However, this takes one back to the question whether the letter was an undertaking to pay, no matter what. The process of fit-out works would take several months. Even leaving aside a situation such as insolvency or arrestment, the funds might be exhausted. Clause 24.4 provided that the capital contribution should be exclusive of VAT, but required HUB to pay VAT - so by the time about £750,000 had been paid, all the funds would have gone.

(iii)              The pursuers argue that in the economic climate in 2009 anyone dealing with property developers would require security, but this remark included especially a bank. Why would a bank assume the risk of having to pay out money even in the event of arrestment or insolvency? It was clear from the productions (eg number 17 of the joint bundle) that the defenders were trying to protect their own position.

[40] Returning to the terms of the letter, it had been accepted on behalf of the pursuers that nothing before the second sentence of the second paragraph went beyond a simple representation. Senior counsel for the pursuers categorised the second sentence of the second paragraph as an unqualified obligation to pay, regardless of insolvency or arrestment; however, the words used are not "we will pay" or "invoices will be paid". The present case falls to be distinguished from Kleinwort Benson and Van Klaveren, in each of which the alleged promise concerned the party's own funds. In the present case the words used were "these funds will be released". This can only refer back to the funds mentioned in the previous sentence, i.e. funds held on behalf of the landlord. In the event of insolvency or arrestment, these funds could not be released. So, on the primary interpretation advanced for the pursuers, it would be necessary to read in the words "and if these funds are exhausted or inaccessible we will make them good". That would amount to a guarantee, and parties are agreed that this is not a guarantee.

[41] In the course of his submissions senior counsel for the pursuers advanced a secondary and different interpretation of the second sentence of the second paragraph, namely that if TAL CPT went into liquidation and the liquidator took the funds, the bank would have no obligation to pay, but if the bank transferred the funds to another account they would still have an obligation to pay. That submission is misconceived, because it ignores the decisions in In Re European Bank and Kirkwood and Sons v Clydesdale Bank, which recognised that although funds maybe held in several accounts, in truth there is only one balance. The problem arises from the pursuers' interpretation of this sentence as amounting to an expression of willingness to be bound, but it does not meet the test for such an expression as set out in the authorities. This is a clearer case than Ballast. The words used do not amount to a clear expression of willingness to be bound.

[42] The pursuers' position on jus quaesitum tertio is no more than a request to be allowed to set off on an expedition of hope - to be allowed to go to proof on the basis that something may turn up. The letter is either a binding undertaking (in which case jus quaesitum tertio is not relevant) or it is not. If it is not, this is a strange basis for a claim of jus quaesitum tertio.

[43] With regard to misrepresentation, the pursuers have not averred what they would have done if the letter had not been received by them. Would they have rescinded the contract? Would they have required performance of it? These are important questions when considering damages for alleged misrepresentation, and it is for the pursuers to make their position clear.

[44] If a person says that he will do something in the future, and this does not amount to a promise, it can only be a statement of intention. The passage in Gloag on Contract at 463/4 is accordingly directly in point and was accepted by Lord Drummond Young in Royal Bank of Scotland v Davidson. It is, of course, possible to misrepresent one's intention, but that forms no part of the pursuers' claim in this case. The letter is either a binding undertaking or not; there is no room for a claim for misrepresentation in the present case.

Discussion

[45] There is no substantive dispute between the parties as to the principles of construction which fall to be applied in considering whether the letter amounts to a binding undertaking by the defenders. These principles are set out in paragraph 3 of the outline submissions for the pursuers, and were not challenged by the defenders. I do not consider that the observations of Lord Reed in Credential Bath Street Limited v Venture Investment Placement Limited were intended to innovate upon or extend these principles of construction.

[46] When applying these principles to the determination of whether a document amounts to the undertaking of a legally enforceable obligation, clear words are required to express the promisor's intention to bind himself by an enforceable obligation. Lord Kinnear's dictum in this regard in Morton's Trustees v The Aged Christian Friend Society of Scotland has been approved and reiterated on several occasions in the relatively recent past - see Lord Advocate v City of Glasgow District Council, and Van Klaveren v Servisair UK Ltd. In this regard, senior counsel for the pursuers accepted that the use of the word "will" does not necessarily connote the undertaking of a legally enforceable obligation. In light of the authorities I consider that this concession was well made. For example, in Ballast plc v Laurieston Properties Limited the words used were "all future payments will be paid directly from the JV account", but it was held that this did not record the undertaking of a legally binding obligation on the part of Morrison Homes, the joint venture companies, or any of them, in the circumstances of that case. In Van Klaveren v Servisair UK Ltd the insurers wrote to the pursuer's representative in the following terms:

"We accept that our Insured is liable for the purposes of this claim, and will pay damages, to be assessed when we receive details of the claim. We will also be paying your costs in accordance with the Civil Procedure Rules".

The Inner House held that this letter did not contain any clear words that indicate a binding undertaking to pay damages. Of course, each case will depend on its own facts and circumstances, but these are examples of what the court means by the requirement for clear words.

[47] Looking to the terms of the letter in this case, I cannot find such clear words expressing an intention by the defenders to accept a legally enforceable obligation to make payment to the pursuers in respect of fit-out costs "come what may". Indeed, for the various reasons relied on by senior counsel for the defenders, the terms of the letter suggest to me the contrary, and support the view that the defenders were expressing no such intention. The letter was not addressed to the pursuers, or even to their solicitors. It was clearly contemplated by the defenders that the pursuers would see the letter, and might place such reliance on it as they chose to do. However, it is surprising that if the defenders were expressing an intention to bind themselves by an enforceable obligation they did not address that expression to the beneficiaries of that obligation, or to those acting on their behalf. Instead, the letter was addressed to the solicitors acting for Tritax, TAL CPT and HUB. In this regard the passage in Gloag on Contract at pages 16/17 is relevant, and in particular the following words:

"Clearly, unexpressed intention can have no obligatory force. And it is probably equally clear law that the mere expression of an intention to make a promise or an offer, if it is not communicated to the other party concerned, cannot be binding, even although that party may have incidentally become aware of it".

[48] There is no reference in the letter to HUB, nor to any obligation by HUB to pay fit-out costs. The funds are stated to be held on behalf of Tritax/TAL CPT, but the pursuers' case on record is that in terms of the Agreement for Lease HUB would be responsible for paying a capital contribution to the pursuers (albeit that the monies would ultimately come from Tritax) - see page 10D-E and page 17B-C of the record. The response for the pursuers to the fact that there is no mention of HUB in the letter is essentially that all parties knew that HUB was merely a fiction, inserted to fill the need for a suitable qualifying tenant. That may be so, but it is still surprising that there is no mention in the letter of the party which had the obligation to make payment of the capital contribution to the pursuers. The defenders are not giving confirmation on behalf of the party with whom the pursuers were contracting, but on behalf of Tritax and TAL CPT. Indeed, it appears from the pursuer's averments and the productions referred to that when the letter was written the Head Lease by which HUB became the tenant of the premises had not yet been executed.

[49] What is clear from the letter is that the defenders hold the funds on behalf of Tritax and TAL CPT - the funds do not belong to the defenders themselves. This is accordingly a rather different situation from that considered in Kleinwort Benson, Van Klaveren and some of the other authorities, in which the monies being referred to belonged to the party which wrote the letter. In this case the defenders are merely stating that they hold the sum on behalf of others. In the second sentence of the second paragraph the defenders do not use words such as "we will pay the contractors' invoices" or "we will pay the tenant"; instead, the words used are "these funds will be released in accordance with the drawdown procedure agreed between the parties....". The reference to a procedure agreed between the parties again begs the question why the party with whom the pursuers were contracting, namely HUB, was not mentioned in the letter. To which parties were the defenders referring? But more importantly, I consider that all that the defenders were doing was to state that the funds which they held on behalf of others would be released in accordance with a given procedure. I cannot construe these words as amounting to an expression of intention by the defenders to make payment to the pursuers come what may, even in circumstances in which they no longer held any funds belonging to Tritax/TAL CPT.

[50] It is clear from the letter that there has been no divestiture of the monies: the defenders hold them on behalf of Tritax and TAL CPT. The release of the funds may therefore be prevented by intervening events. Senior counsel for the pursuers in his secondary formulation of the undertaking recognised this, and accepted that an event such as liquidation or arrestment might prevent release of the funds. However, he maintained that if an event of default occurred which caused the defenders to transfer the funds to another account, the defenders would still have an obligation to pay. I do not consider that the submission, even restricted in this way, is well founded. It ignores the defenders' right to balance accounts, and does not take into account the decisions in In Re European Bank and Kirkwood & Sons v Clydesdale Bank. Moreover, the statement that "funds will be released" presupposes that there are funds which the defenders are still holding on behalf of Tritax/TAL CPT when the proposed tenants' contractors submit monthly certificates. If by that time the defenders no longer hold any funds on behalf of those parties, I cannot construe the letter as imposing an obligation on the defenders to make payment from their own resources. The defenders may not be able to release the funds because of liquidation of the account holders, or because of arrestment, or because of a balancing of accounts by the defenders on a default event. I see no justification for the distinction between these possible events which senior counsel for the pursuers sought to make in his reformulated submission.

[51] Before leaving the terms of the letter itself, the last sentence is worth noting. Senior counsel for the defenders submitted that this is suggestive not of an expression of willingness to be bound, but only an expression of comfort and a description of a payment mechanism. I agree with him on this point. Looking to the language of the letter as a whole, I do not consider that it amounts to a clear expression by the bank of an intention to be bound by a legally enforceable obligation to pay the pursuers, even when the funds have been put out of the bank's control as a result of liquidation or arrestment, or where the funds have been exhausted following upon a balancing of accounts.

[52] There is nothing in the background circumstances or context in which the letter was written which causes me to take a different view. It is necessary to exercise some care when looking at the sequence of numerous emails and correspondence to which reference was made. Some of these productions were not known to the defenders at the time, and others were not known to the pursuers at the time. It is only the documents which were within their knowledge at the time which may be of relevance when construing the letter - BCCI v Ali. What is clear from the correspondence is (perhaps not surprisingly) that the pursuers were striving to achieve as much security for the capital contribution as they could, and to achieve as early payment as was possible, while on the other hand (equally unsurprisingly) the defenders were striving to protect their own interests and to give as little security as possible. This background does not give much assistance in the task of construing the letter, which was ultimately provided by the defenders to the representatives of Tritax/TAL CPT, and which the pursuers accepted. Such relevance as the background may have is confined to the fact that the defenders were at least kept informed of the progress and details of negotiations, and that they were not prepared to agree to the proposal that the money should be placed into an escrow account or into joint names. If anything, this is a factor which supports the view that the bank would have been less, rather than more, likely to have given a unilateral enforceable undertaking such as argued for by the pursuers. There is nothing in the background circumstances or context of the letter which suggests to me that the construction of the letter which I favour above is not commercially sensible. The letter confirms to the pursuers that the defenders hold the sum on behalf of Tritax and TAL CPT, and states that the funds will be released in accordance with an agreed procedure, but stops short of obliging the defenders to make payment to the pursuers "come what may", even if the funds do not exist when contractors' certificates are submitted. In circumstances in which the bank has already refused proposals for an escrow account or for the money to be held in joint names, this construction accords with commercial common sense.

[53] In light of all of the above, I am unable to construe the letter as amounting to a unilateral undertaking by the defenders of a legally enforceable obligation to pay the sum to the pursuers. As senior counsel for the defenders put it, it is no more than a letter of comfort, and as such, it may carry a moral responsibility but not a legal obligation. This court cannot enforce a moral responsibility where there is no legal obligation.

[54] Turning to the case based on jus quaesitum tertio, I consider that the attack by the defenders on the relevancy and specification of the pursuers' averments in this regard is justified. In order for the pursuers' case on just quaesitum tertio to be allowed to go to probation, there would need to be specific averments that there was a contract between parties other than the pursuers in terms of which those parties intended to benefit the pursuers. There are no averments as to when or by whom such a contract was concluded, nor are there are any averments of fact from which the necessary inference can be drawn that the parties intended to benefit the pursuers in the sense required to give rise to a jus quaesitum tertio. Moreover, such averments as are made are prefaced with the formula "believed and averred...". As Lord Justice Clerk Thomson observed in Brown v Redpath Brown & Co Ltd:

"The use of the formula 'believed and averred' is frequent and convenient in our pleading, but its appropriate function is to aver an inference which the user seeks to draw from certain facts; and they are generally facts which are not and cannot be fully known to him...Where a definite averment of facts which a party must establish is necessary, the formula is quite inappropriate".

[55] In the present case the pursuers have been granted a wide ranging commission and diligence in relation to this matter, but their averments are in my view so inspecific as to be irrelevant, and the use of the formula "believed and averred" is inappropriate. In saying this I make no criticism of senior counsel for the pursuers, who indicated that the averments could not properly be made more specific. He suggested that the averments at page 9B-D must be read against the background of the averments as to context, from page 7D-9B. No doubt that is correct, but even read as a whole, the pursuers' averments do not amount to a relevant case of jus quaesitum tertio. Senior counsel for the pursuers accepted that this may not be the strongest case of jus quaesitum tertio ever pled, but suggested that there was sufficient fair notice to enable the case to go to proof, at which the issue of the contract and whether and how the parties to it intended to benefit the pursuers could be explored with witnesses. I regret that I do not agree. In order for witnesses to be examined in evidence at a proof on this matter, fair notice must be given to the defenders in advance of what the pursuers' case is. Without such fair notice, it is likely to be difficult or impossible for the defenders to prepare adequately for a proof on this matter. The prejudice to the defenders is obvious: how can they meet a case of which they have not had proper notice? This is all the more so when the witness whom senior counsel hopes to question on this matter is not an employee or representative of the defenders, but the solicitor acting for Tritax/TAL CPT. In all the circumstances, and bearing in mind the test in Jamieson v Jamieson, I do not consider that the pursuers have averred a relevant case of jus quaesitum tertio such as to be entitled to go to proof on it.

[56] In light of the position adopted by senior counsel for the pursuers in relation to personal bar, I need not deal with this in detail. Suffice it to say that I am in entire agreement with Lord Hodge's observations in Shaw v James Scott Builders & Co; personal bar only operates as a defence, as a shield rather than a sword, and does not create any claim or positive right. It adds nothing to the case for the pursuers.

[57] I agree with senior counsel for the defenders that there is a circularity to the pursuers' position with regard to misrepresentation. The letter was either an undertaking of a legally enforceable obligation, or it was not. It is difficult to see how, if it was not, it amounts to a misrepresentation. It is not disputed that there was in general no duty of disclosure. The defenders were not obliged to disclose to the pursuers that circumstances might arise which would prevent release of the funds. Any reasonable recipient of the letter would have understood this. The pursuers do not aver, nor do they submit in their outline submissions, that at the time of writing the letter there was no intention that the funds would be released in accordance with the drawdown procedure. There is no case of fraudulent misrepresentation. The passage in Gloag on Contract at 463/4, which was considered by Lord Drummond Young in Royal Bank of Scotland v Davidson at paragraph [20], is relevant in this context:

"An expression of intention cannot be a misrepresentation unless the party has not in fact formed the intention he professes. A man who states his intention does not bind himself not to change his mind, and anyone who contracts in reliance on statement of intention takes his chance that the intention will be carried out. But it is a question of construction whether a statement that the party intends to do a certain thing is a mere expression of revocable intention, a promise to do the thing in question, or an offer to do it which may be made binding by acceptance. But in no event is an expression of actual intention a misrepresentation; it is either a contractual obligation, or it has no legal effect. But a man may misrepresent his intentions, and if he does so with the object of misleading another party, his act will amount to fraud".

[58] I have held that the letter does not amount to a promise to make payment of the funds to the pursuers "come what may". It is not an offer which may be made binding by acceptance. Using Gloag's categorisation, it is a mere expression of revocable intention. There is no case of fraud against the defenders. Their expression of actual intention not being a binding undertaking, for the reasons outlined above, it has no legal effect and does not amount to a misrepresentation.

[59] There was a dispute as to whether the pursuers had a relevant case of reliance on the letter to enable them to advance misrepresentation; the defenders point out that by the time the letter was signed, the pursuers had bound themselves to carry out the fit-out works by reason of clause 7.3 of the Missives of Let, which predated the letter by some months, so they could not have relied on the terms of the letter, whereas the pursuers argue that the Missives must be read as a whole, and the obligation in clause 7.3 is correlative to that in clause 18.8. There is some force in the pursuers' position on this issue, and if the dispute about the misrepresentation case had turned only on reliance, I should have been inclined to allow this aspect of the case to go to proof. However, for the other reasons advanced on behalf of the defenders and summarised above, I consider that the misrepresentation case is misconceived. Having held that the letter does not amount to a legally enforceable undertaking, there is no scope for a claim for negligent misrepresentation. In any event, it is not suggested that the first sentence of the second paragraph of the letter contains any misrepresentation, and I consider that the second sentence contains no more than an expression of future intention which is not suggested to be fraudulent. In these circumstances the misrepresentation claim must fail.

Result

[60] For these reasons I shall sustain the first plea-in-law for the defenders, repel the pleas-in-law for the pursuers, and dismiss the action.