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Cite as: [2024] SACCIV 49

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SHERIFF APPEAL COURT

[2024] SAC (Civ) 49

ABE-CA11-23

Sheriff Principal N A Ross

Sheriff Principal K Dowdalls KC

Appeal Sheriff G Murray

OPINION OF THE COURT

delivered by SHERIFF PRINCIPAL ROSS

in the appeal in the cause

DAVID BOOTH

Pursuer and Respondent

against

DANIEL LEITH DONALD

Defender and Appellant

Pursuer and Respondent: Reid, advocate; Brodies LLP

Defender and Appellant: Massaro, advocate; Harper MacLeod LLP

5 December 2024

[1]

The parties are property developers. Between 2019 and 2020 they entered into talks

for the development of a site at Caldonia, Malcolm Road, Peterculter for residential housing.

The site was owned by the pursuer and respondent ("the respondent") but, owing to his

sequestration in 2013, was vested in his trustee in sequestration. In a series of meetings, the

parties agreed that a company would be registered to carry out the development. The

parties would each own 50 per cent of the company. The company, Caldonia Developments

Limited (the "Company"), was duly registered. It was agreed that the defender and

appellant ("the appellant") would fund the release of the site by the trustee. The trustee

agreed to relinquish interest in the site, and another site, in exchange for a total payment of

£1,150,000.

[2]

During negotiations, the respondent requested the trustee to transfer title to the

Company. The trustee refused, and was prepared only to relinquish his interest so that title

reverted to the respondent. The consequence, if the deal were to proceed, was that the

appellant would make payment but title to the site would remain with the respondent

pending transfer of title to the Company. In order to protect the appellant's position until

that occurred, the parties discussed the grant by the respondent to the appellant of a

standard security over the site.

[3]

The transaction proceeded. The appellant made payment to the trustee of £1,150,000.

The trustee relinquished title. The respondent granted the standard security ("the Security")

in favour of the appellant, which the appellant's agent registered. The respondent granted a

disposition in favour of the Company, and delivered it to the appellant. The further sum

due in relation to the second site was subsequently repaid. Thereafter the appellant refused

to settle the Land and Buildings Transfer Tax (LBTT) due on the transfer of ownership of the

first site to the company. He refused to register the disposition. He refused to grant a

discharge of the Security. He thereafter sought to enforce the Security.

[4]

The respondent raised this action for production and reduction of the Security by

reason of misrepresentation or, alternatively, discharge; for an order ordaining registration

of the disposition in favour of the Company; and ordaining the appellant to pay the LBTT,

and ancillary craves. Following proof, the sheriff found there had been no

misrepresentation, but ordered discharge of the Security, registration of the disposition,

payment of the LBTT, and other orders.

[5]

The basis of the decision was a finding that the parties had reached a binding oral

agreement, prior to the subsequent preparation and execution of the Security, that the

Security would be relied upon only in the event of a supervening circumstance preventing

the respondent transferring title to the site to the Company. He found there was an implied

term that the Security would be discharged upon title being transferred to the Company.

[6]

The appellant appeals, on the basis that the sheriff erred in (i) failing to give effect to

the terms of the Security; (ii) finding that there was a prior oral agreement; (iii) finding that

any oral agreement was binding, as it required to be constituted in writing, and conduct did

not amount to personal bar as an exception to that rule; (iv) finding that there was an

implied term requiring discharge of the Security; (v) failing to make critical findings in fact

relating to the defence, and (vi) in making consequential findings.

Submissions for the appellant

[7]

Counsel criticised the judgment on a wide variety of grounds. He submitted that the

sheriff erred in failing to give effect to the Security. It contained a clear personal

undertaking acknowledging a debt, which should have taken priority to any oral agreement.

The respondent was bound by what he had signed. Any variation required to be in writing.

The sheriff had distinguished between two subsequent drafts of the Security. It was illogical

to find that the oral contract related to the Security, which was not yet in contemplation.

[8]

On the evidence, the judgment did not reflect the averments. There was also

insufficient basis in evidence for the findings. Personal bar did not operate to complete an

agreement. The sheriff had not analysed the legal basis for implying terms. The sheriff's

reasoning was inadequate to support a finding of oral contract. There was no basis for a

finding that an agricultural tenancy existed.

Submissions for the respondent

[9]

Counsel submitted that the Security formed only a part of a bigger transaction. The

real controversy was on other matters: who should pay LBTT on transfer to the Company,

and whether the Company was subsequently to grant security. This transaction made sense

in context, which was to meet a temporary problem created by the trustee refusing to convey

direct to the Company. It was competent to restrict a subsequent security by the terms of a

prior agreement.

[10]

On the evidence, it was necessary to find that the sheriff reached conclusions not

justified by the evidence, and was clearly wrong. There was, in any event, sufficient

evidence which the sheriff had relied upon. The evidence which the appellant identified as

not discussed was irrelevant. There was no need for writing, as this was a contract to which

statutory personal bar applied. Although the sheriff had not discussed the authorities on

implied terms, these were clearly met where the secured title was to be disponed to another

party. The authorities showed that the bar for reducing the sheriff's decision for lack of

clarity was an extremely high one.

Decision

[11]

This appeal is taken on a number of different grounds. One ground is to dispute that

the sheriff had enough evidence to reach the conclusions he did. It is necessary to deal with

that ground first, as if there is insufficient evidence then the decision cannot stand, however

analysed.

[12]

In relying on this ground, the appellant required to address the difficult task of

proving a negative; that there was insufficient evidence. Counsel for the respondent drew

attention to certain passages which justified the sheriff's view. These included the

respondent's evidence referring to the arrangement (pages 109 to 115 of the transcript). This

evidence was that the only purpose of the Security was to give the appellant protection in

the event that the respondent did not, or could not, transfer title to the Company, due to

incapacity or being "hit by a bus". Mr Ross, his advisor, gave evidence (pages 301 to 303)

that the respondent agreed, on that basis, to sign a standard security when drafted. The

standard security was to be in place until the transfer of title between the respondent and

the Company. That evidence supports, and is capable of justifying, the sheriff's conclusion.

There was sufficient evidence.

[13]

The appellant also submitted that the sheriff erred in finding that the parties had

reached a binding oral agreement on any matter. The findings were insufficient. The

appellant sought to rely on authorities setting out the principles on which a contract is held

to have been concluded. Reference was made to Morgan Utilities Ltd v Scottish Water

Solutions Ltd [2011] CSOH 112 at paragraph 52 per L. Hodge, Rodewald v Taylor 2011 WL

1634 at paragraph 33 per L. Bannatyne, and to Spartan Specialist Services Ltd v LHP Solutions

Ltd [2024] SAC (Civ) 24. It was submitted that the sheriff had not set out these findings and

therefore could not have reached the conclusion that the parties had reached an oral

agreement.

[14]

We did not find these authorities to be of assistance, as they did not relate to the

exercise being undertaken by the sheriff. In Morgan Utilities, the court's analysis related to

assessing the intention to enter into a contract, a different question from whether the parties

had agreed enough to amount to an enforceable contract. The court carried out that

assessment separately. In Rodewald and Spartan Specialist Services Ltd, the respective courts

were deciding adequacy of notice in asserting a case on record. The parties' task of giving

fair written notice, prior to proof, is quite different from the judge's task of assessing the

evidence after it has been heard. The judge is tasked with making a decision on the basis of

whichever facts he accepts have been proved.

[15]

Here the sheriff, having identified the evidence he accepted, made findings as to the

constitution and terms of an oral agreement. These findings were in somewhat diffuse

terms for an event of central significance. It may be that the issue of fraudulent

misrepresentation, not under appeal, became the main focus. However, we have been able

to follow the sheriff's decision and the evidential basis upon which it was made. The sheriff

found that Mr Burnett, the appellant's agent, suggested at the meeting of 30 October 2020

that the respondent grant a standard security. Mr Burnett stated that it would not be

registered, on the basis that title would be more or less immediately transferred to the

Company. The respondent agreed to grant a security in the belief, based on that

representation, that it would not be registered. It was the stated intention of both parties

that the proposed standard security would be destroyed, without having been registered,

once title to the site was transferred to the Company (finding 21). It was an implied term of

the agreement that the standard security granted by the respondent would be discharged

upon repayment of a (now not relevant) sum, together with the transfer of title to the

Company (finding 26). With the knowledge and agreement of the appellant, the respondent

relied on the agreement that the standard security would be discharged once title to the site

was registered in the name of the Company. In reliance on that he granted the Security,

accepted the funds, and acquired title from the trustee at a price considerably higher than

valuation (finding 27). The appellant refuses to register the disposition (finding 28), wants

to back out of the agreement (finding 30) and has called up the Security (finding 32). Other

terms relating to the agreement are set out at findings 10, 11 and 13.

[16]

These findings are sufficient to show that the sheriff accepted that agreement was

reached, and what the terms of that agreement were. He found that the parties agreed that

the respondent would grant a standard security which would not be registered and which

would be discharged upon transfer of title to the Company. The only reason that

transaction did not subsequently complete is the appellant's decision not to register the

disposition.

[17]

We are therefore not persuaded that the sheriff did not have sufficient evidence to

justify his findings, or that he erred in finding that the parties reached a binding oral

agreement. The appellant relied on there having been no agreement on other matters critical

to the deal, such as who would pay the LBTT and whether the Company would grant a

security. That may be so, but it did not prevent agreement on the matter of the Security.

The sheriff's findings, in effect that the parties agreed the Security was no more than a

temporary device to protect the appellant, is both justified on the evidence and consistent

with the overall transaction.

[18]

The appellant thereafter submitted that, even if there were a sufficiency of evidence,

the sheriff nonetheless did not sufficiently explain his reasoning, to the extent that the

appellant is unable to follow the decision.

[19]

This ground challenges whether the decision was justified by the findings in fact and

not, as the respondent submitted, whether the findings in fact were justified by the evidence.

We therefore accept the appellant's submission that the respondent's reliance on the line of

case law about whether findings are plainly wrong and cannot reasonably be explained

(Grier v Lord Advocate 2023 SC 116 at para 109) is misconceived. Nonetheless, we do not

accept the appellant's proposition. As explained in SSE Generation Ltd v Hochtief Solutions

AG 2018 SLT 579, at paragraphs 296 to 300, a judge requires to provide adequate reasons for

a decision. A judgment must nonetheless be capable of being produced within a reasonable

time and is expected to be concise. The fact that reasoning is not as clear as it might be does

not mean it is inadequately reasoned if the reader is left in no real doubt as to the judge's

reasons for reaching a particular view.

[20]

We are not left in real doubt about the basis for the sheriff's decision. The judgment

sufficiently explains the sheriff's reasoning, against the background circumstances of the

overall commercial arrangement, in which the Security played no more than a peripheral

part. In so finding we bear in mind the court's observation in Grier that;

"An appellate court must be careful because of the limitations of the appeal process,

with its narrow focus on particular issues rather than having, as the Lord Ordinary

did, a panoramic vista of the evidence as a whole."

[21]

While Grier does not apply here, the general observation remains true. The sheriff

had an overview of the parties' arrangement, being one which did not contemplate

deliberate refusal by one of the parties to allow title to pass and calling up the Security

contrary to the parties' original intentions.

[22]

The appellant proceeded to submit that the sheriff had failed to make findings in fact

on critical matters founded upon by the defence. That argument was particularised by

reference to the omission of most of the evidence given by the respondent's advisor,

Ms Perfect. It was submitted that her evidence was that she was instructed to act on the

respondent's behalf, that she communicated with Mr Burnett about the transaction and

preparation of the Security, and that she discussed her instructions with the respondent.

That evidence is described as crucial to the appellant's case. The point raises more

fundamental issues of what was, or was not, an effective defence in the circumstances.

[23]

We do not accept that the evidence of Ms Perfect was of material importance in

relation to the central issue to this appeal, namely whether the parties reached binding oral

agreement in the meeting on 30 October 2020 about the function of the subsequent Security.

We were told during submission that Ms Perfect was not present at that meeting. The

appellant identifies as crucial the instructions given by the respondent to Ms Perfect

following that meeting. The appellant considered that the terms were to be documented,

that prior discussions were about commercial terms only, and that the only legally binding

part was the security itself. The appellant insisted that there was a loan to the respondent,

and that was advised to Ms Perfect. She knew a security would be required, and informed

the appellant. There were subsequent discussion of security terms. This led to the appellant

making certain assumptions.

[24]

The foregoing analysis does not, however, show that any of this evidence was

relevant. The sheriff was not tasked with adjudicating on the whole transaction for

acquisition of the site, but only the effect of the Security, which was no more than a

peripheral issue to the overall transaction. The fact that negotiations continued on other

matters, for example whether a security would be granted by the Company, was not

germane to the present dispute. Ms Perfect's evidence did not cover the agreement as to

how the Security would be treated, and made no difference to those findings. The sheriff

held that the parties reached a binding oral agreement, which included reference to a

security. Neither the prior nor subsequent events disturbed that, rendering Ms Perfect's

evidence on that point irrelevant. The appellant's assumptions are no more than a

subjective position. The sheriff found that he was wrong in those assumptions. Again,

Ms Perfect's evidence did not affect that. The appellant insisted that the payment was in the

form of a loan. The sheriff did not accept that evidence. The foregoing evidence, identified

by the appellant, does not demonstrate error, or even inconsistency, on the part of the

sheriff. It is consistent with his findings, and therefore cannot be a ground for disturbing

those findings.

[25]

The appellant's next submission founded on the priority of the agreements. The

appellant submitted that the sheriff ought to have given effect to the Security, not any prior

agreement. The Security was dated 6 November 2020 and post-dated the 30 October 2020

agreement. It incorporated a personal bond, in which the respondent undertook to pay to

the appellant the sum of £1,150,000 "when called upon to do so", for which the Security was

granted. The Security terms took preference to any oral agreement.

[26]

We do not agree. We accept, as did the parties, that there is no principle which

prevents a prior agreement being given precedence over a subsequent written security. That

proposition is based in the obiter remarks of the court in Societe General SA v Lloyds TSB Bank

plc (unreported, 17 September 1999, Second Division, penultimate page):

"...The letter showed that it was intended that its terms were to be given effect

notwithstanding the terms of the formal security deed. There may be a question as

to whether this would apply to a security granted after the letter...We are inclined to

the view that there is no sound reason why the same would not also apply to a later

security, provided once more that it was clear that the parties intended that it should

be treated as governed by the terms of the letter."

[27]

While obiter, the statement of principle is clear. Such an ancillary agreement is also

expressly provided for in the standard conditions under the Conveyancing and Feudal

Reform (Scotland) Act 1970, section 18(1A). That is an entire answer to this submission. It

was a matter for the sheriff to determine whether the parties reached such a prior

agreement. If they had, the prior agreement was capable of regulating the parties' rights

arising from the Security. He held that they did so agree. The oral agreement rendered the

subsequent written Security unenforceable in circumstances which did not comply with the

oral agreement. He found that the parties agreed that the Security would not be enforced as

long as the respondent transferred title to the Company. The respondent did so, at least so

far as was within his power, by delivering a disposition. The appellant refused to register

the disposition. A party cannot rely on his own breach of contract to obtain a benefit under

the contract (Crimond Estates Ltd v Mile End Developments Ltd 2022 SLT 570). While reliance

on prior oral agreement, to qualify the otherwise binding terms of a subsequent registered

security, might be considered a high-risk undertaking, the sheriff found that the respondent

successfully proved his case.

[28]

The appellant's next submission founded on the formalities of constitution of a

binding agreement. It was submitted that the sheriff failed in the application of the

Requirements of Writing (Scotland) Act 1995. Even if the oral agreement were established,

and was in terms which would otherwise prevent enforcement of the Security, there are

certain formal requirements of such agreements which the oral agreement did not meet.

There was no dispute that the creation or variation of a real right to land, such as the

Security, would require writing (section 1(2)(b)). The respondent, however, submitted that

the oral agreement that the subsequent security would not be enforced, was not such an

agreement, but was instead a contract for the creation or transfer of a real right in land

(section 1(2)(a)). That distinction meant that writing was not required (section 1(3) and (4))

if one of the parties to the contract had acted or refrained from acting in reliance on the

contract. We agree with that analysis. The question is whether the sheriff had evidence to

justify finding that such acts or refraining from acting had taken place.

[29]

He did. He found that:

"With the knowledge and acquiescence of the [appellant], the [respondent] relied on

the agreement that the title to [the site] would be registered in the name of [the

Company] and that the standard security would be discharged upon that event

occurring in doing the following..."

and listed the respondent's acts in reliance. The finding demonstrates that section 1(3) is

satisfied. Writing was not required for the oral agreement. The appellant further submitted

that section 1(3) was not available to create a prior agreement where there was none (The

Advice Centre for Mortgages v McNicoll 2006 SLT 591 at para 17; Shaw v James Scott Builders

[2010] CSOH 68 at para 64). It is evident, however, that the sheriff did not use personal bar

in that way. His references to subsequent conduct were relevant to considering what the

parties agreed on 30 October 2020.

[30]

The appellant made a further criticism of the sheriff's finding of implied terms. Such

terms are only established where they are necessary to give the contract business efficacy

and commercial and practical coherence (Marks & Spencer Plc v BNP Paribas Securities

Services [2016] AC 742). The sheriff did not set out why he considered these criteria applied.

The precise terms of the Security, as opposed to the eventual creation of the Security, were

not in the contemplation of the parties until after the meeting, and are inconsistent with the

express terms of the oral agreement. We consider that the sheriff did not err in implying the

term. It is correct that the sheriff did not, as he might have, set out how the criteria for

implication were met. However, it is also clear that they were, in fact, met. The sheriff

implied a term into the oral contract, not the Security. The term implied was that the

Security would be discharged upon payment of a sum (since paid) and title being

transferred to the Company. It was clearly necessary, as otherwise the security would cover

property the respondent no longer held and for a debt which was never his, but that of the

Company. The implied term prevented the agreement being legally incoherent.

[31]

The appellant made a related point in relation to the undertaking made by Mr

Burnett not to register the subsequent standard security. The sheriff found that the

undertaking did not relate to the (subsequent) Security, but to an initial draft standard

security for a smaller sum. The appellant submitted that this meant it was illogical to find

that the oral agreement itself applied to the Security. That, however, is to fail to give effect

to the oral agreement, which related not to any particular and identified document, but

rather recognised that a standard security, in some form or other, would be drafted and

granted. The form did not matter, because parties were in agreement that it was only a

temporary, precautionary step and did not affect the overall acquisition of the site by the

Company.

[32]

The appellant has decided, as he admitted to the sheriff, that he no longer wishes to

be part of this transaction. He has, as a result, sought to enforce the Security, a step that

neither side foresaw would occur, and indeed agreed would not. As a result, there is no

merit in the appellant's cri de coeur that he has paid to discharge the respondent's insolvency

and has nothing to show for it. His remedy is to proceed with the agreement, and to register

the disposition.

[33]

These were the points advanced by the appellant. However, the parties also drew

attention to the sheriff's finding in fact 12 which found that there was an agricultural

tenancy over the site and another site. Parties agreed that this went beyond the evidence

and the appellant invited this court to quash the finding. It does not, however, pertain to the

matters under appeal, so we will not formally interfere. It is sufficient that we note that the

fact is not soundly based on evidence and is incorrect.

Disposal

[34]

We therefore dismiss the appeal and adhere to the interlocutor of the sheriff. Parties

were unable to agree a disposal of expenses. They should attempt to do so now. If no

agreement has been reached within 21 days of this decision, the clerk will arrange a hearing.