Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION

[2015] CSOH 31

A240/12

OPINION OF LORD JONES

In the cause

TRUSTEES OF THE INTER-VIVOS TRUST OF THE LATE WILLIAM STRATHDEE GORDON

Pursuers;

against

CAMPBELL RIDDLE BREEZE PATERSON LLP

Defenders:

Pursuer:  Sutherland;  Drummond Miller LLP

Defender:  Johnston QC, Barne;  Brodies LLP

25 March 2015

Background
[1]        The pursuers in this case are the owners of three areas of ground located in the Killearn area.  These areas are referred to in the pleadings as “the main grazing field”, “the 40 acre field”, and “the 50 acre field”.   It is averred on behalf of the pursuers that, in 2003, the defenders advised the pursuers to bring to an end the then existing agricultural holdings tenancies over the three fields, in light of the prospect of changes being introduced to the agricultural holdings legislation, which might be prejudicial to the pursuers’ interests.  That advice was accepted, and the pursuers instructed the defenders to serve notices to quit on the tenant, in order that they could recover possession of the subjects.  That was done.  Each notice bore the date 8 November 2004, and was to take effect on 10 November 2005.  In each notice, the tenant was designed as “the Firm of Messrs A & J C Craig and John C Craig, sole proprietor of and trustee for said Firm”.  The tenant did not comply with the notices, and remained in occupation of the subjects.  Under cover of letter dated 9 February 2006, Anderson Strathern, solicitors, acting on the instructions of the pursuers, sent three applications to the Scottish Land Court, seeking removal of the tenant from each of the fields.

[2]        On 24 July 2008, following a hearing on evidence, the Land Court issued its decision on the applications.  The applications in respect of the 40 and 50 acre fields were refused, on the ground that, in each case, “there was a fatal flaw in the Notice to Quit.”  (Joint bundle of authorities (“JB”) 290, paragraph 60).  The court held that there had been a lease between the pursuers and the partnership referred to in the notice, but that it had come to an end on the termination of the partnership, which had occurred on the death of one of the partners, sometime before 10 November 1992.  On that date, the pursuers entered into a new agreement with John Craig, a sole trader.  The Land Court found that, for the purposes of the notice to quit, “the relevant lease was constituted by the Agreement between the Trust and Mr John Campbell Craig in 1992.”  (JB 290, paragraph 68).

[3]        The pursuers raised the present action on 17 May 2012.  They aver that, by serving defective notices, the defenders were in breach of an implied term of their contract with the pursuers, namely to exercise the degree of knowledge, skill and care expected of a reasonably competent solicitor.  (Closed record, page 26C-D).  In consequence of that breach, it is said, the pursuers have suffered loss, injury and damage.  The action is defended on the merits.  Further, the defenders’ fifth plea-in-law is to the effect that, if there was an obligation incumbent on them to make reparation to the pursuers, any such obligation has prescribed in terms of section 6 of the Prescription and Limitation (Scotland) Act 1973, and decree of absolvitor should be pronounced.  That is the issue in this case.

The Prescription and Limitation (Scotland) Act 1973
[4]        Section 6 of the Prescription and Limitation (Scotland) Act 1973 (“the Act”) provides, among other things, that if, after the appropriate date, an obligation to which that section applies has subsisted for a continuous period of five years (a) without any relevant claim having been made in relation to the obligation and (b) without the subsistence of the obligation having been relevantly acknowledged, the obligation is extinguished from the expiration of that period.  “The appropriate date” is the date on which the obligation became enforceable.  In terms of schedule 1, paragraph 1 of the Act, section 6 applies to, among other things, any obligation arising from liability to make reparation and to any obligation arising from any breach of a contract.  It is not disputed that, in this case, any obligation owed the defenders to make reparation to the pursuers is subject to the provisions of section 6.

[5]        So far as is relevant to this action, section 11(1) of the Act provides that any obligation:

“to make reparation for loss, injury or damage caused by an act, neglect or default shall be regarded for the purposes of section 6 of this Act as having become enforceable on the date when the loss, injury or damage occurred.”

Section 11(3) provides that, in a case where:

“the creditor was not aware, and could not with reasonable diligence have been aware, that loss, injury or damage caused as aforesaid had occurred, the said subsection (1) shall have effect as if for the reference therein to that date there were substituted a reference to the date when the creditor first became, or could with reasonable diligence have become, so aware.”

The preliminary proof
[6]        By interlocutor of 14 October 2014, the Lord Ordinary allowed parties a preliminary proof, restricted solely to the defenders’ fifth plea-in-law.  The case came before the court for such proof on 10 March 2015, and the three following days.  Fiona Stephen and Alasdair Fox of Anderson Strathern LLP, and William Gordon, the second-named pursuer, were called by counsel for the pursuers to give evidence.  No witness was called on behalf of the defenders.  The parties lodged a joint bundle of productions, and a lengthy joint minute, number [] of process.  Mrs Stephen and Mr Fox were questioned about their dealings with the trustees and the progress of the proceedings in the Land Court between the end of 2005 and the conclusion of the action in 2008.  Mr Gordon was asked about his dealings with the defenders from about the middle of 2003 until the end of 2005 and about the Land Court case from its commencement until its conclusion.  Both parties lodged written submissions, which are appendices 1 and 2 to this opinion.

[7]        There was no material dispute between the parties about the evidence.  Ultimately, it had little bearing on the determination of the issues in the case.  That is largely because, in terms of the joint minute and for the purposes of the diet of preliminary proof only, the parties agreed:  “the averments in articles 6 and 7 are held to have been proven.”  (Joint minute, paragraph 47)  I shall say more about these averments in the discussion section of this opinion.

Submissions on behalf of the pursuers
[8]        Counsel referred me to the terms of section 11 of the Act, and to Dunlop v McGowan's, 1980 SC (HL) 73 (“Dunlop”) and David T Morrison & Co Ltd (t/a Gael Home Interiors) v ICL Plastics Ltd & Ors (Scotland), 2014 SC (UKSC) 222 (“Morrison”).  He submitted that, following Dunlop, for the purposes of section 11(1), the relevant date in this case was 10 November 2005.  He contended, however, that the pursuers were not aware, and could not with reasonable diligence have been aware, that they had suffered a loss through breach by the defenders of an implied term of contract.  The tenant’s failure to remove does not, of itself, mean that the pursuers should have been aware as at 10 November 2005 that they had incurred a loss for the purposes of the Act.  He argued that it is:

“an understood fact of life that there will always be cases where a tenant of property decides not to remove and legal action will be required to enforce the landlord’s right to recover possession.”

The tenant may refuse to leave in the hope of gaining some advantage by, for example, negotiating some benefit for himself in exchange for giving up possession.  In this case, under reference to JB 67 and 73, the evidence disclosed that this tenant was so motivated.  Regardless of the tenant’s motivation, argued counsel, the only “loss” that the pursuers could anticipate as at November 2005 was “the inevitable irrecoverable expense incurred in future proceedings to recover possession of the land.”  He submitted that such irrecoverable expense was not a “loss” for the purposes of section 11.  He argued that:

“The loss which did arise in relation to these proceedings was that portion of the expenses of the process which would otherwise have been recovered.  Those anticipated recoverable expenses did not become loss, and the pursuers would not have been aware of having suffered that loss, until the Scottish Land Court issued its decision on 24 July 2008.”

[9]        The evidence had demonstrated that, both before and during the Land Court action, the tenant had mounted a number of challenges to the notices to quit.  From time to time, by way of adjustment to the pleadings, some were departed from, and others were added.  Counsel submitted that, simply because the defender in an action raises a number of issues on which it is asserted that the pursuer’s action ought to fail for a number of reasons, it does not mean that the pursuer is in a position to know that there has been a loss.  He contended that none of the criticisms might have any validity, in which case the action will succeed and there never was and never will be a “loss”.  What counsel referred to as “the alternative” would mean that, in order to avoid extinction of a right of action in a long running litigation:

“either party in that litigation might have to raise speculative actions against their current professional advisers founding on a point being argued against them, but without any knowledge as to whether the point might succeed or fail.”

[10]      It was submitted on behalf of the pursuers that it was clear from the evidence that the trustees personally did not have any reason to consider that the 8 November 2004 notices to quit were invalid or were likely to be found invalid.  Mr Fox had advised them that, as far as he could see, the notices were perfectly valid.  (JB 98, page 2).  Further, although Mr Gordon had complained to Mrs Stephen and Mr Fox about the defenders’ conduct, and had discussed raising proceedings against them, none of his concerns had any bearing on, or arose from any issue as to, the validity of the 2004 notices to quit.

Submissions on behalf of the defenders
[11]      Senior counsel opened his submissions with a review of the evidence.  He then addressed the topic of “the losses” and noted that those claimed in article VII of the condescendence are to be treated as having been established, in terms of paragraph 47 of the joint minute.  He observed that they consist of two main elements: (i) legal expenses and outlays paid to the defenders and other solicitors for their work in relation to the invalid notices to quit, and proceedings in the Land Court, including the expenses paid to the tenant in those proceedings and (ii) loss of the opportunity to recover vacant possession of the 40 and 50 acre fields free of secure agricultural tenancies; loss of the ability to exploit the development potential of those fields; loss of an immediate uplift in the value of those fields of £200,000; loss of the ability to enter into an options agreement for development; and loss of payments under such agreement.

[12]      Having looked at the terms of the Act, counsel submitted that the defenders’ wrongful or negligent act took place at the latest on 8 November 2004 when the notices were served.  He argued that the loss arose on 8 November 2004 or 10 November 2005 and stated no preference for either date, on the view that “it makes no difference”.  On the issue of “postponement under section 11 (3)”, counsel referred to Morrison and drew a number of “key points” from it:  section 11(3) is concerned solely with latent loss, injury or damage (paragraph 25); section 11(3) allows postponement only where the pursuer is not aware of a matter of fact, that is the existence of the loss, injury or damage (paragraphs 19, 25 and 47);  it does not cover awareness of matters of law (paragraphs 26-8, 87, and 89); therefore, there is no postponement of prescription until such time as a court determines that there has been a breach of duty (paragraph 28); and these provisions can work harshly in an individual case, but they serve a wider public interest in legal certainty and avoiding the bringing of stale claims (paragraphs 54 and 77).

[13]      Senior counsel criticised the pursuers’ approach as being inconsistent with Morrison on a number of grounds which are set out at paragraph 56 of Appendix 2.  The question is, he contended, when did the pursuers become aware that they had sustained loss, injury and damage?  With reference to paragraph 34 of the joint minute, by 17 February 2006 at the latest, the pursuers had incurred material expense in relation to the applications to the Land Court.  It is not relevant that the pursuers may not have regarded legal expenses as a “loss”.  If the issue were whether and/or when the pursuers considered that they had sustained a loss, it would introduce an additional factor of the kind that Morrison disapproves, namely knowledge, not just of the simple fact of loss, but of its characterisation as loss because it was caused by the fault of the defenders.  Further, once the pursuers knew that the tenant was not going to comply with the 2004 notices, they knew that they could not recover vacant possession as at 10 November 2005 and, on their pleadings, at that time they also sustained an immediate loss of £200,000.

Decision and reasons
[14]      As I have noted in paragraph [5], section 11(1) of the Act provides that, subject to subsections (2) and (3), any obligation to make reparation for loss, injury or damage, which I shall refer to as “loss”, caused by an act, neglect or default, which I shall refer to as “breach of duty“, shall be regarded for the purposes of section 6 of the Act as having become enforceable on the date when the loss occurred.  In Morrison, an explosion occurred in ICL’s premises on 11 May 2004.  Although it was not known at the time, the explosion was caused by ICL’s breach of duty.  The loss for which Morrison claimed reparation was damage to its neighbouring building and lost profits.  Proceedings for reparation were raised on 13 August 2009, five years and three months after the explosion.  (Lord Neuberger PSC, paragraph [40])  ICL pleaded that Morrison’s right of action was extinguished by operation of section 6 of the Act.  Morrison countered by pleading that the prescriptive period did not begin to run until long after the explosion occurred because it was not aware, and could not with reasonable diligence have been aware, that its loss had been caused by a breach of duty owed to it, until a much later date.  In that regard, Morrison relied on section 11(3) of the Act.  (Lord Reed, paragraph [2]).

[15]      In the course of his judgment, Lord Reed observed that section 11(3) is capable of being read in two different ways.  One reading is as if it provides as follows: “the creditor was not aware… that loss, injury or damage which had been caused as aforesaid had occurred.”  The creditor is only to be aware of the occurrence of loss, while the words “caused as aforesaid” connect the loss to the cause of the action.  (Paragraph [16])  The alternative reading, which, for over 25 years, the courts had regarded as expressing the correct meaning, is to read the word “aware” as referring not only to the loss, but also to the fact that it had been “caused as aforesaid”.  The creditor has to be aware (i) that loss has occurred, and (ii) that it was caused by breach of duty owed to him by the debtor.  (Paragraph [17])  In a majority decision, the Supreme Court held that the first construction was what Parliament had intended, and that section 11(3) addresses the problem which could otherwise arise where there is latent damage, namely that the creditor is unaware of the occurrence of loss.  (Paragraph [25]).

[16]      The loss sustained by Morrison included damage to its property.  As a matter of objective fact, Morrison’s loss was caused by ICL’s breach of duty.  Having regard to the terms of section 11(1), therefore, ICL’s obligation to make reparation for Morrison’s loss became enforceable on the date when it occurred, subject to the postponement provisions in section 11(3).  Since Morrison was aware that it had suffered loss on 11 May 2004, the provisions of section 11(3) did not come into play.  The damage was not latent.

[17]      In this case, it is averred on behalf of the pursuers that they “have suffered loss and damage as a result of the breach of the said implied terms of contract by the defenders.”  (Closed record page 27C-D)  The specification of such loss includes, among other things: payment of legal fees and outlays to the defenders and to other solicitors for their work in relation to the invalid notices to quit, and for raising proceedings founding upon those notices, which they would not have paid if they had been advised by the defenders that the notices did not refer to the relevant leases (closed record, page 27D-E); and loss of the benefit of “an immediate uplift in the value of those fields of £200,000” (closed record, page 29A).

[18]      In Dunlop, Lord Keith of Kinkel, with whom Viscount Dilhorne and Lords Edmund-Davies and Fraser of Tullybelton agreed, expressed the view that the right to raise an action of reparation accrues when injuria (a wrongful act) concurs with damnum (a resulting loss).  As in this case, the defenders were alleged to have served on a tenant a defective notice to quit.  Lord Keith held:

“the loss, injury and damage flowing from the [defenders’] negligent omission occurred at Whitsunday 1971 when the appellant, but for that omission, would have obtained vacant possession of the premises.”  (Page 81).

In this case, the defenders aver that the pursuers suffered loss as soon as the defective notices had been served, i.e. on 8 November 2004, failing which on the date when the tenant was required to remove from the subjects, i.e. 10 November 2005.  On the first date, failing which the second date, it is averred “there was a concurrence of damnum and injuria”.  No specification is given by the defenders in their pleadings of what loss was suffered by the pursuers on either date.  For their part, the pursuers do not, in terms, identify the date on which they suffered loss, and, as I have noted, in response to the defenders’ assertion that the action has prescribed, they plead lack of awareness that they had suffered loss, until the decision of the Land Court was issued on about 24 July 2008.

[19]      Having regard to the terms of paragraph 47 of the joint minute, for the purposes of this proof I must proceed on the basis that, had the notices to quit been valid, they would have brought the agricultural tenancies to an end on 10 November 2005, on which day, according to the pursuers’ averments which are to be taken as established, the value of the fields would have increased by £200,000.  (Closed record, pages 28D-29B)  Further, the pursuers incurred fees and outlays for services provided by the defenders and other solicitors (Anderson Strathern) which they would not have incurred but for that breach.  (Closed record, page 27 D-E)  According to the evidence, which I accept, by letter dated 10 November 2005, the defenders advised the pursuers to consult other solicitors.  (JB 85)  Anderson Strathern were in place by 8 December 2005.  (JB 98, fourth paragraph)  Any fees incurred by the pursuers for services rendered by the defenders which they would not have incurred but for the defenders’ breach of contract were incurred before 8 December 2005, at the latest.  In these circumstances, I hold it proved that the pursuers suffered loss, caused by the defenders’ breach of contract, by no later than 10 November 2005.

[20]      The question which then arises for determination is whether the defenders’ obligation to make reparation to the pursuers became enforceable on a date after 18 May 2007, i.e. within five years of the date on which this action was raised, on the view that the pursuers were not aware or could not with reasonable diligence have become aware that they had suffered loss before then.  Parties were agreed that the burden of establishing postponement of the commencement of the prescriptive period lay on the pursuers.  (See, e.g., Pelagic Freezing Scotland Ltd v Lovie Construction Ltd & Another [2010] CSOH 145, Lord Menzies, at paragraph 86).

[21]      As is noted in paragraphs [8] and [18], the pursuers contend that they did not become aware that they had suffered loss until the Land Court issued its final determination.  I agree with senior counsel for the defenders that it is not relevant that the pursuers may not have regarded legal expenses as a “loss” until that time.  That introduces a subjective consideration which has no place in the application of section 11(3).  The pursuers offer to prove that their loss included payment of money to their solicitors.  The commencement of the prescriptive period was triggered when the pursuers became liable for fees and outlays and were aware that they were so liable, not when they became aware that they had sustained a compensatable loss in the reparation sense.  That was the pre-Morrison understanding of the law.  The questions which fall to be asked in this case are:  (i) as a consequence of the defenders’ breach of contract, did the pursuers incur expense which would otherwise not have been incurred? If so, (ii) were the pursuers aware that such expense had been incurred?  If so, (iii) when did the pursuers become so aware?  Having regard to the terms of article VII of the condescendence, the answer to the first two questions is “yes”.  In answer to the third question, the pursuers were aware, well before 18 May 2007, that such expense had been incurred.  It is a matter of agreement that, by 17 February 2006 at the latest, the pursuers had incurred “material expense in relation to” the Land Court applications.  There can be no suggestion that the pursuers were unaware of having incurred such expense at the time when it was incurred.  They paid the bills.  The pursuers’ obligation to meet their solicitors’ fees and outlays was not latent damage.

[22]      I am conscious that I have made no finding on the question whether the pursuers were aware or could, with reasonable diligence, have become aware, before 17 May 2007, that they had incurred a loss on 10 November 2005, by way of a diminution in the value of the land.  There was neither evidence nor argument directed specifically to that point.  Since the onus of establishing lack of awareness, actual or constructive, lay with the pursuers, it may be said that they have failed to do so in respect of that element of loss.  I prefer, however, to rest my decision on the pursuers’ actual knowledge that they incurred expense and paid fees well before 18 May 2007.

[23]      For the foregoing reasons, I shall sustain the defenders’ fifth plea-in-law, and pronounce decree of absolvitor.  I shall award the expenses of process, except insofar as already dealt with, to the defenders.

Appendix 1

IN THE COURT OF SESSION

OUTLINE SUBMISSIONS FOR THE PURSUERS

in the cause

MS LINDA ANNE GORDON, residing at 3 Netherblane, Blanefield G63 9J, WILLIAM ANDREW STRATHDEE GORDON, residing at The Mount, 29 Craigmiller Avenue, Milngavie, Glasgow, G62 8AX, and JAMES WATSON STEEL LAING, C.A., French Duncan LLP, MacFarlane Gray House, Castlecraig Business Park, Springbank Road, Stirling FK7 7WT, as the Trustees of the Inter Vivos Trust of the late WILLIAM STRATHDEE GORDON

PURSUERS

against

CAMPBELL RIDDELL BREEZE PATERSON LLP, Solicitors, having a place of business at Floor 7, 80 St Vincent Street, Glasgow, G2 5UB

DEFENDERS

The Pursuers ask the Court to refuse the Defenders 5^th Plea-In-Law, and to allow a proof before answer in respect of the Pursuers and Defenders remaining Pleas-In-Law.

Section 11, Prescription and Limitation (Scotland) Act 1973

11.— Obligations to make reparation.

(1)   Subject to subsections (2) and (3) below; any obligation (whether arising from any enactment, or from any rule of law or from, or by reason of any breach of, a contract or promise) to make reparation for loss, injury or damage caused by an act, neglect or default shall be regarded for the purposes of section 6 of this Act as having become enforceable on the date when the loss, injury or damage occurred.

(2)   Where as a result of a continuing act, neglect or default loss, injury or damage has occurred before the cessation of the act, neglect or default the loss, injury or damage shall be deemed for the purposes of subsection (1) above to have occurred on the date when the act, neglect or default ceased.

(3)    In relation to a case where on the date referred to in subsection (1) above (or, as the case may be, that subsection as modified by subsection (2) above) the creditor was not aware, and could not with reasonable diligence have been aware, that loss, injury or damage caused as aforesaid had occurred, the said subsection (1) shall have effect as if for the reference therein to that date there were substituted a reference to the date when the creditor first became, or could with reasonable diligence have become, so aware.

(4)     Subsections (1) and (2) above (with the omission of any reference therein to subsection (3) above) shall have effect for the purposes of section 7 of this Act as they have effect for the purposes of section 6 of this Act;[...] 1

As is made clear in Dunlop v McGowan's, 1980 SC (HL) 73 [see Lord Keith of Kinkel, pages 80-81], an obligation to make reparation for loss and damage is a single and indivisible obligation. Only one action can be brought to enforce it. The right to raise the action commences on the concurrence of iniuria and damnum. The cause of action accrues when any actionable loss is sustained. If the obligation has prescribed, no action having been commenced within five years of that moment, it has prescribed for all purposes, even if some loss has occurred at a later date.  In Dunlop v. M'Gowans it was held that the date from when the obligation to make reparation first becomes enforceable for the purposes of Section 11(1) was the date from which the Pursuer was unable to get possession as per the Notice to Quit (being Whitsunday 1971).  In the present case the Defenders aver that there was a concurrence of damnum and inuria as at 8th November 2004 failing which 10^th November 2005.  It is submitted that following Dunlop v McGowan’s, for the purposes of Section 11(1) of the 1973 Act the relevant date from which the prescriptive period runs is from 10 November 2005.   The present action was served on the Defenders on 17 May 2012 [Joint Minute, paragraph 45].  The Pursuers in the present action submit that the action is not time-barred as they were not aware, and could not with reasonable diligence have been aware, that loss, injury or damage caused by an act, neglect or default had occurred (1973 Act, Section 11(3)).

In David T Morrison & Co Ltd (t/a Gael Home Interiors) v ICL Plastics Ltd & Ors (Scotland), 2014 SC (UKSC) 222 it was held by the majority that for the purposes of Section 11(3) the pursuer only has to be aware of having suffered a loss which had in fact been caused by an act, neglect or default [Lord Reed, paragraphs 16, 19, 32; Lord Neuberger of Abbotsbury, paragraph 47].

It is submitted that in determining whether the action has been raised against the Defenders within the prescriptive period allowed by Sections 6 and 11 of the 1973 Act, the appropriate starting point is still to consider what is the act that is complained of which is said to give rise to a loss (Johnston v The Scottish Ministers, 2006 SCLR 5 at paragraph 17; Warren James (Jewellers) Limited v Overgate GP Limited, [2010] CSOH 57 at paragraph 6).  It is submitted that this is a matter of logic because there cannot be a loss without a prior act which gave rise to that loss.  As it was put by Lord Keith in Dunlop v McGowan's at p. 81 - "In the present case the loss, injury and damage flowing from the respondent's negligent omission occurred at Whitsunday 1971 when the appellant, but for (emphasis added) that omission, would have obtained vacant possession of the premises."  It is submitted that this is also consistent with the decision of the Supreme Court in David T Morrison & Co Ltd (t/a Gael Home Interiors) v ICL Plastics Ltd & Ors (Scotland) [2014] SC (UKSC) 222.  Therefore under Section 11(3) a pursuer needs to have knowledge of damnum (occurrence of a loss) caused by injuria (an act).  In Morrison v ICL Plastics the pursuer was aware of the act (the injuria) being the explosion causing damage to the building, and at the same time aware of having suffered a loss (the damnum), being the damage to the building.  The pursuer therefor had 5 years to (a) investigate whether, in light of knowledge of the loss caused by the explosion, there was an obligation to make reparation arising from enactment, rule of law or breach of contract and (b) bring an action.

The Pursuers position is that they were not aware, and could not with reasonable diligence have been aware, that they had suffered a loss through breach by the defenders of an implied term of contract [Mr Gordon].  The Defenders position is that the Pursuers suffered a loss as at 10 November 2005 because (i) the Pursuers were aware that the tenant of the three fields was not going to remove and therefore would incur irrecoverable legal expenses to have him remove (Answer 8, page 44C – 45B); (ii) the fact that in the course of the Land Court proceedings the tenant challenged the efficacy of the Notices to Quit dated 8 November 2004 (Answer 8, page 45B – C, D – E); (iii) the tenant having registered notice of an interest in the three fields under Section 25 of the Agricultural Holdings (Scotland) Act 2003 (Answer 8, page 45C – D); (iv) various discussions with Anderson Strathern concerning possible claims against the Defenders Answer 8, page 46B – 47B).

The tenant’s failure to remove

It is submitted that the tenant’s failure to remove does not of itself mean that the Pursuers should have been aware at 10 November 2005 that they had occurred a loss for the purposes of the 1973 Act.  It is an understood fact of life that there will always be cases where a tenant of a property decides not to remove and legal action will be required to enforce the landlord’s right to recover possession.  The tenant’s refusal to leave might be ill-founded, or may be tactical in order to make life difficult for the landlord and to extract a concession or benefit from the landlord that could not be obtained by simply packing up and leaving as required to do.  Those possible explanations for a tenant’s refusal to leave were supported by the evidence of Ms Stephen and Mr Fox, with Mr Fox indicating that in his view this was an explanation for the tenant’s response in this particular case.  It is submitted that there is some support for that explanation in the productions, for example JB, Production 67 refers to an Opinion of Senior Counsel that the right of occupation does not rely on the Lease Agreements referred to in the 8 November 2004 Notices to Quit, there is no statement as to what the lease arrangements actually are, and instead of simply indicating that the tenant would refuse to remove and defend any subsequent proceedings to enforce removal, the tenant offers to negotiate new arrangements.  The subsequent statement that the negotiation would be from a position which is considered to be secure does not alter the fact that the tenant is seeking to open negotiations.  Subsequent developments also indicate that the tenant was looking to negotiate, for example JB, Production 73 where the tenant was looking for a new 25 year tenancy followed by tacit relocation, or alternatively payment of a sum of money.

Regardless of the tenant’s motivation, the only ‘loss’ that the Pursuers were able to anticipate as at November 2005 was the inevitable irrecoverable expense incurred in future proceedings to recover possession of the land.  This was a matter spoken to by Ms. Stephen who confirmed that even where the landlord was completely successful in such proceedings, not all the expenses of a litigation could be recovered.  It is submitted that so far as the present action is concerned this irrecoverable expense was not a ‘loss’ for the purposes of Section 11 of the 1973 Act.  The loss which did arise in relation to these proceedings was that portion of the expenses of the process which would otherwise have been recovered.  Those anticipated recoverable expenses did not become a loss, and the Pursuers would not have been aware of having suffered that loss, until the Scottish Land Court issued its decision on 24 July 2008.  Before then there was nothing more than the possibility that any expense incurred by the Pursuers would be greater than the sum they might otherwise recover if they were successful.

The challenges to the Notices to Quit

The Defenders position is that the Pursuers: (a) were warned that the tenant had advice that the Notices to Quit were not the basis on which the tenant occupied the ground [JB Production 67]; and (b) the proceedings in the Scottish Land Court were challenged, and certain arguments were allowed to proceed to a proof before answer (including a plea-in-law directed to the validity of the Notices to Quit) [JB Production 275].

As has been noted already, the notification that the tenant had been given advice which justified ignoring the notices to quit was also accompanied by an offer to negotiate a new agreement.  Where the present position was that the tenant had a secure position protected for generations to come, the early offer to negotiate a different arrangement is something that questions how certain the tenant’s position is.  That was followed up by an indication from Turcan Connell that the tenant’s position was less certain in respect of the main grazing lease [JB Productions 71, 73], which was the opposite position of the advice later received from Anderson Strathern [Mr Fox]. It is submitted that in light of the general advice the Pursuers were given they were entitled to consider that they would ultimately be successful.

It is submitted that simply because a defender in an action raises a number of issues in which it is asserted that the pursuer’s action ought to fail for a number of reasons (some of which may be very broadly stated), this does not mean that the pursuer is in a position to know that there has been a loss.  None of the criticisms raised by the defender might have any validity, in which case the action will succeed and there never was and never will be a ‘loss’.  The alternative would mean that in order to prevent a risk of prescription arising in long running litigation either party in that litigation might have to raise speculative actions against their current professional advisers founding on a point being argued against them, but without any knowledge as to whether the point might succeed or fail.  Your advisers might tell you that they believe that the point being taken is without merit, but that they cannot guarantee success in the litigation.  In such actions you would not be able to identify the correct injurious act you are founding upon because it had not yet (and might never) be identified in the current dispute as a problem, and no loss might actually be incurred.

It is submitted that it is clear from the evidence that the Trustees personally did not have any reason to consider that the 8 November 2004 Notices to Quit were invalid or were likely to be found to be invalid [Mr Gordon].  Mr Fox advised at the outset that as far as he could see the Notices to Quit were perfectly valid [JB Production 98, page 2].  When asked if he believed that there was any serious possibility that the Applications for the 50 acre and 40 acre fields would not succeed he said ‘no’, he was very hopeful that they would succeed.  In March 2006 he did not think that there was any substantive merit to any of the tenant’s defences.  He further gave evidence that in respect of the Answers lodged for the tenant, whilst there were points which caused him concern, his view was that the problematic case was the Application for the main grazing lease area (SLC/19/2006), and that he was happier about the Applications for the 50 acre field (SLC/18/2006) and the 40 acre field (SLC/20/2006).  When the tenant’s pleadings made averments challenging the validity of the Notices to Quit due to events in 1997, the Pursuers were assured that there was an answer to the points being raised about the leases [Production 156, page 2].  At no time before the penultimate day of the hearing before the Scottish Land Court (15 May 2008) did either Ms Stephen or Mr Fox consider that these applications might not succeed because the Notices to Quit were addressed to a person on the basis that they were a Trustee for a Firm which no longer existed and that the lease which gave the tenant possession must have come into being when the former Firm had come to an end.  Mr. Fox’s impression was that the tenant’s solicitor had not appreciated the point before the second last day of the hearing.  At no point had the Pursuers been warned about this being a problem [Ms Stephen; Mr Gordon; Mr Fox].

The Section 25 Notices

It is submitted that registration of these Notices cannot of themselves amount to awareness of a loss without knowledge also that the Notices were not capable of being removed from the Register of Interests in Land and the tenant would be able to have the benefit of these Notices in the future.  The Notices themselves are dependent upon the tenant being a secure agricultural tenant, and the Notices would be deleted from the Register if the tenant was found not to have a tenancy of an agricultural holding or was removed as tenant from the holding [Ms Stephen; Mr Fox].  Therefor until the Pursuers knew that the Applications in respect of the 50 acre field and the 40 acre field were unsuccessful they were not aware that they had suffered a loss.

Discussion of possible claims against the Defenders

It is submitted that the evidence shows that the Gordons’ complaints about the Defenders had nothing to do with the 8 November 2004 Notices to Quit.  They were general complaints about the way that the Defenders had handled matters previously [Ms Stephen; Mr Gordon].  In so far as they were specific, they concerned the fact that the tenancies of the 50 acre and 40 acre fields had been allowed to become agricultural holdings, that the 2003 Notices to Quit had not been served far enough ahead to allow an incontestable Notice to Quit to be served under Section 22(2)(a) of the Agricultural Holdings (Scotland) Act 1991 and that the 2003 Notices to Quit could not be enforced if they were challenged.  Once it became apparent that there was a possibility that any previous failing which gave rise to Mr. Craig having security of tenure also meant that a deal might have to be done with Mr. Craig, or that money might be required to ‘buy out’ Mr. Craig, there was a conflict of interest between the Defenders and the Trust due to Mr. McGill being both a partner in the Defenders and a Trustee in the Firm.  He therefore required to resign as a Trustee and the Defenders had to advise the Trust to look elsewhere for advice [JB Production 44, page 8 (“if as part of that negotiations any money had to change hands”); JB Production 85, pages 1-2 (“whether the initial termination notices served ... have created any difficulty terminating the leases as such”)].  None of those matters had any bearing on, or arose from any issue as to, the validity of the 2004 Notices to Quit.

Prior to, and even after the hearing itself, claims against the Defenders were being discussed in the context of what had been done or not done upto and including the 16 July 2003 Notices to Quit [JB Productions 85; 96 (pages 4-5); 98 (pages 4-5); 116 (page 2); 137 (page 3, “a negligence action in this situation would be extremely difficult for the reasons previously stated”) 201; 212; 215].

The first discussion which did take place looking at losses which arose from the 2004 Notices to Quit happened only after the hearing before the Scottish Land Court [JB Production 212].

In conclusion it is submitted that none of the matters raised by the Defenders establishes that there was any actual loss caused by a defect in the 8 November 2004 Notice to Quit which the Pursuers were aware of prior to the decision of the Scottish Land Court dated 24 July 2008.  The present action was accordingly brought within the prescriptive period permitted by Section 11(3) of the 1973 Act.