Scottish Sheriff Court Decisions

SEMPLE FRASER v. IAN QUAYLE [2001] ScotSC 5 (31st January, 2001)

A2740/00A

Glasgow January 2001

NOTE:

The pursuers in this action, a firm of solicitors, sue for professional fees rendered to the defender. The work undertaken by the pursuers was in representing the defender's interests in an action brought by the Secretary of State for Trade and Industry in which he sought the disqualification of the defender from acting as a company director. At the time when he gave instructions to the pursuers the defender lived in Scotland. By the time the action was raised he was domiciled in England. In the course of the debate both parties took issue with some minor points of specification in the pleadings and these were dealt with by allowing both to amend their pleadings at the bar. That left two substantive issues for determination. The defender argued that this Court did not have jurisdiction because properly considered, the contract between the parties was a consumer contract and required to be raised in the Court in which the defender was domiciled. The defender also submitted that the pursuers did not give sufficient specification of how the sum sued for was made up.

Defenders' submissions on jurisdiction

The defender submitted that the contract into which the defender entered with the pursuers was a contract outside the defender's trade or profession. Accordingly in terms of Rule 3 to Schedule 8 of the Civil Jurisdiction and Judgments Act 1982 ("the Act") Glasgow Sheriff Court had no jurisdiction and the action required to be raised where the defender was now domiciled. Rule 3(1) provides;

"In proceedings concerning a contract concluded by a person for a purpose which can be regarded as being outside his trade or profession, hereinafter called the "consumer" .... jurisdiction shall be determined by this Rule if it is

1. ...
2. ...

(c) any other contract for the supply of goods or a contract for the supply of services if:-

It was accepted that the defender lived in Scotland when the contract was entered into and that condition (i) supra was met. However, said the defender, the nature of the services provided by the pursuers were such that the defender was acting outside his trade or profession. Accordingly the contract was a consumer contract. The pursuers' averments which were attacked by the defender were in the following terms:-

The defender submitted that a director was an officer of a company. He may be an employee as well as being a director but this was not necessarily so. If he was an employee he had, as such, different rights and duties from those which a director had. A director, unlike an employee, had no automatic right to remuneration for services performed. After removal from the Board a former director could remain as an employee of the company. In support of the foregoing propositions I was referred to Volume 4 of the Stair Memorial Encyclopaedia at paragraphs 403, 408 and 410 and also to the case of Kerr v Walker 1933 SC 458 at 467. Thus it was not open to the pursuers to say that the defender's "trade and profession was that of a company director." The contract between the parties was therefore a consumer contract.

I was then referred to the case of Chris Hart (Business Sales) Ltd v Niven 1992 SLT (Sh Ct) 53 to vouch the proposition that underpinning the requirement that in a consumer contract the Court of the consumer's domicile should be where any action against the consumer was raised was the desire to protect the "buyer". It was perceived that a buyer in a consumer contract was in a weaker position than the seller because the buyer was buying privately and not in the course of his trade. In Chris Hart the defenders had been the owners of licensed premises which they had run. They retained the pursuers to market the sale of the business. Sheriff Principal MacLeod held that since the defender's trade was not the marketing of licensed premises but the sale of liquor, the defender was acting privately when entering into the contract and was in a weaker economic position than the pursuers. The contract between the owners of the licensed premises and the estate agents was therefore a consumer contract.

I was then referred to the case of Lynch v Bradley 1993 SLT (Sh Ct) 2. In this case the pursuers were a firm of solicitors. The defender had engaged the pursuers to present to the Sheriff a plea-in-mitigation following upon a plea of guilty to certain criminal charges against the defender. It was held that the contract into which the parties entered was a consumer contract.

Finally, I was referred to another of Sheriff Principal MacLeod's decisions. In the case of B J Mann (Advertising) Ltd v ACE Welding and Fabrications Ltd 1994 SCLR 763 the defenders had contracted with the pursuers for the provision of publicity material in the form of golf umbrellas and t-shirts. The Sheriff Principal in finding that the contract was properly described as a consumer contract stated:-

Thus, taking these three decisions as the legal context in which the facts in the present case fell to be considered, the contract between the parties in this case was clearly a consumer contract.

In reply Mr Matheson for the pursuers accepted the propositions regarding the status of the office of director which were advanced by the defender under reference to Volume 4 of the Stair Memorial Encyclopaedia and Kerr v Walker.

He went on to submit that Rule 3 was derived from Article 13 of the Brussels Convention. Article 13 uses the same words as Rule 3, namely "In proceedings concerning a contract concluded by a person for a purpose which can be regarded as being outside his trade or profession, hereinafter called the "consumer," jurisdiction shall be determined by this section...". I was then referred to section 20(5) of the Act where provision is made that in determining the meaning or effect of the Rules set out in Schedule 8 to the Act "regard shall be had to any relevant principles laid down by the European Court in connection with Title II of the 1968 Convention and to any relevant decision of that Court as to the meaning or effect of any provision of that Title."

Reference was then made to Section 3(1) of the Act which provided that any provision of the Brussels Convention should "be determined in accordance with the principles laid down by and any relevant decision of the European Court."

Thus when considering how to interpret Rule 3 I should have regard for the jurisprudence which had been developed in the European Court which was persuasive. Likewise the decisions of former Sheriff Principal MacLeod were not binding upon me and were also persuasive only. (Macphail Sheriff Court Practice paragraph 18.08).

Mr Matheson then invited me to consider a number of European Court decisions. In the Judgment of the Court in Hans-Hermann Mietz v Intership Yachting Sneek BV, (European Court of Justice, unreported, 27 April 1999) it was held that "According to settled case law the concepts used in Articles 13 and 14 of the Convention must be interpreted independently, by reference to the system and objectives to the Convention." This, said Mr Matheson, made it clear that the Court was intent upon adopting a pan European approach to the question of jurisdiction and not leaving the matter to the individual states to interpret.

Mr Matheson then referred me to the case of Shearson Lehman Hutton v TVB Treuhandgesellschaft fur Vermogensverwaltung und Beteiligungen mbH 1993 ECR I-139. Paragraph 18 on page I-187 of the Court's Judgment, reaffirmed that Article 13 of the Convention was inspired to protect the consumer as the party deemed to be economically weaker and at paragraph 22 the Court went on to say:-

This said Mr Matheson was contrary to the decision reached in B J Mann. Regrettably, the Shearson decision had not been cited in argument before the Sheriff.

Finally, I was referred to the decision in Francesco Benincasa v Dentalkit 1997 ECR I - 3767. Dentalkit were the promoters of a chain of franchise shops specialising in the sale of dental hygiene products. They contracted with Mr Benincasa, an Italian national, for him to open and operate a shop in Munich. The agreement was entered into in Florence. The franchise agreement provided for the Courts of Florence having exclusive jurisdiction. Mr Benincasa resided in Munich. Mr Benincasa thereafter brought an action against the defender in Germany seeking inter alia a declaration that the franchise agreement was void. Mr Benincasa argued that since he was a consumer, the Courts of Germany had exclusive jurisdiction. He had not actually traded as a supplier of dental hygiene products. He had wished to start doing so and to further that intention had entered into the contract with Dentalkit. In paragraph 51 of the Advocate General's Opinion he states:-

Thus said Mr Matheson the words "outside his trade or profession" in Rule 3 should be interpreted as "unrelated to his trade or profession". Turning then to the Judgment of the Court in Benincasa one found at page I-3795 and paragraph 17:-

Thus, said Mr Matheson, if one was buying a fridge for one's own use in one's home that would be for private consumption but if one was buying the fridge for use in one's office that would be in connection with one's trade or profession. The same person could therefore contract in two different capacities.

Returning to the case of Lynch v Bradley Mr Matheson submitted that since it was decided in 1991 it predated much of the European jurisprudence on the matter and there had not been full citation of such authority as was available. Since we did not know the nature of the alleged offence in respect of which the defender retained the pursuers to represent him, it was not possible to form a view as to whether the contract should be described as a consumer contract.

Mr Matheson then referred to the decision of Sheriff Principal MacLeod in Chris Hart. He distinguished the case on its facts. In Chris Hart the defender wanted to bring his business to an end by selling it. By contrast the defender in the present case wished to remain in business and sought the services of the pursuers to secure that end. Mr Matheson invited me to consider what the position might have been had the defender in Chris Hart instructed solicitors in relation to a licensed trade application. In his submission that could not possibly be said to be a consumer contract. It would clearly have been in connection with the defender's trade or profession and therefore could not be outside it.

Turning his attention to the pleadings in this case Mr Matheson submitted that the pursuers offered to prove that it was essential for the defender's business interests that he continued to have the capacity to hold office as a director. That was his trade or profession. He was not seeking to retain that capacity for his own private consumption. The purpose in the legislation was to protect the weaker party when contracting on their own behalf for private purposes and not for when they were seeking to further their ability to earn a living. Mr Matheson also submitted that since the pursuer had no general denial of the defender's positive averments in answer 2 they could rely upon the defender's averments that the defender was a consultant in business development and that his trade or profession was that of an electronics engineer.

Decision on jurisdiction

I have come to the view that the pursuers are entitled to a proof before answer of their averments. The most telling observations from the European Court of Justice are those contained in the Opinion of The Advocate General and the Judgment of the Court in Benincasa v Dentalkit as set out supra. I accept that these decisions are not binding upon me but they are persuasive and have persuaded me that the interpretation of what constitutes "being outside his trade or profession" has been given too wide a construction in at least two of the Sheriff Court decisions to which I was referred. Sheriff Principal Macleod did not have the benefit of the Opinion and Judgment in Benincasa when he had to decide Chris Hart and B J Mann (Advertising) Ltd. There is no doubt that the jurisprudence of the European Court has developed considerably since the early part of the last decade. I suspect that the cases might have been decided differently had they come before Sheriff Principal Macleod today. I have come to the view that the test which the Court should apply when considering Rule 3 is to enquire if the purpose in entering into the contract is for the private consumption of the person to whom the goods or services are to be supplied. If the answer to the enquiry is positive then the contract will be properly categorised as a consumer contract for the purposes of the Act.

I agree with the submission that I am only bound by the decisions of my present Sheriff Principal and am therefore at liberty to take a different view from Sheriff Principal Macleod. I have noted that both the first and second editions of Macphail at paragraph 18-08 are in identical terms. Both authors are thus of the view that a Sheriff is bound by the decisions of the sitting Sheriff Principal only. The authority cited is Judicial Precedent in Scots Law by T B Smith and the relevant passage can be found at page19. There is a logic in there being a restriction in the ability of a single judge to bind another single judge. In our system it is unusual for a single judge to bind another single judge. The decisions of a Lord Ordinary sitting in the Outer House do not bind a Sheriff. However one can understand why the decisions of a Sheriff Principal, who will hear civil appeals from a Sheriff, should be binding on the Sheriffs in the jurisdiction of that Sheriff Principal. However decisions of previous Sheriff Principals are not binding on their successors in office. Thus Sheriffs equally should not be so bound.

Standing the developments in European jurisprudence I have difficulty in agreeing with what Sheriff Principal Macleod said in the case of B J Mann (Advertising) Ltd as I have quoted him supra. If one extends the line of thought which I understand the Sheriff Principal to have adopted, should the UK's largest company, Vodaphone plc with a turnover measured in billions of pounds, contract with a manufacturer of golf umbrellas, with a turnover of say 2-3 million pounds, to supply promotional umbrellas bearing the Vodaphone logo, the contract would be a consumer contract. Since Vodaphone are in the business of supplying a mobile phone network and do not deal in umbrellas they would require protection as the weaker party in the negotiating process. That does not represent what would be the real position. Most, if not all, manufacturers would be delighted to have Vodaphone plc as a customer. The Goliath in the negotiating process would be Vodaphone to the umbrella manufacturer's David and not vice versa. I doubt that Vodaphone would require the protection afforded to a consumer.

Similarly if one takes the analysis in the case of Chris Hart a little further one also reaches a position which may not reflect the true commercial position. Assume that BP decide to withdraw from petrol retailing to concentrate on other activities such as exploration, refining and chemicals. They decide to dispose of the filling station sites which they own by exposing them for sale on the open market. They wish to retain a firm of Chartered Surveyors to find a buyer. It is difficult to conceive that in negotiating with the Chartered Surveyors, who will be queuing up for the instructions, BP will require to be afforded the status of consumer for their protection. Yet on the analysis in Chris Hart, since BP are not in the business of marketing the sale of filling stations, they would be said to be acting privately in contracting with the Chartered Surveyors and accordingly be the party in need of the protection which a consumer should have. I do not think that is correct.

I agree with Mr Matheson that it is difficult to take too much from the case of Lynch & Co when one does not know the nature of the criminal charge which the defender faced and his capacity when instructing the pursuers. If, for example, a licencee was charged with an offence under, say, Section 72 of the Licensing (Scotland) Act 1976 (persons under 18 not to be employed in bars) the retention of a solicitor to represent the licencee would be in connection with his trade or profession and would thus not be a consumer contract. If, however, the solicitor was retained to represent the licencee in relation to, say, a charge of careless driving when on holiday then the retention of a solicitor would be a consumer contract as the instruction would be in connection with matters unconnected with the licencee's trade or profession.

Thus I consider that the Opinion of the Advocate General and the decision of the European Court in Benincasa should be followed by me. The test is whether the purpose of the contract is to satisfy the individual needs in terms of private consumption of the person being supplied with the goods and services. If the contract is connected or related to the trade or profession of the party in receipt of the goods or services then it cannot be said that the "consumer" is acting outside his trade or profession. Accordingly the "consumer" in such a contract is not entitled to the protection afforded by Rule 3. The purpose in making special rules regarding jurisdiction in actions involving what is defined as a consumer contract is to protect the weaker party in the negotiating process. If a wider definition to the expression "outside his trade or profession" is given than the reported Sheriff Court cases suggest, then potential absurdities such as I have sought to illustrate might be avoided. However, it has to be acknowledged that a company might well be in a considerably weaker position than the other party when negotiating the terms of a contract by virtue of the fact that the company is not accustomed to dealing in the goods or services being contracted for and the other party is. This can be so even if the company is negotiating a contract not outside its trade or profession, if one gives the expression the wider meaning which I favour. However the recent Judgments from the European Court, and in particular Benincasa, make it clear that the jurisdictional protection afforded to consumers is not to be extended to such situations. In my respectful opinion that is a sound position. Commercial entities can always seek and pay for professional advice when in the negotiating process.

Turning to the present case, the defender's purpose in wishing to retain the capacity to be a company director is difficult to reconcile with the defender's individual needs in terms of private consumption. It is not uncommon for senior members of the legal and other professions, upon retiring from their practices, to garner unto themselves a portfolio of non-executive directorships. In so doing they effectively hold themselves out as professional non-executive company directors. The pursuers also offer to prove that the defender on one occasion described his occupation as being that of "management consultant/director". Management consultants are, from time to time, called in by the shareholders of a company when the shareholders consider that the performance of the directors has fallen below an acceptable standard. Some, or all, of the existing directors are voted out of office and the management consultant, or company doctor as he is sometimes known, is then appointed to the Board and engaged to turn the company around. For a management consultant to be unable to accept appointment as a director of a company would almost certainly inhibit such an individual from obtaining work.

Furthermore, it would be very difficult for a management consultant to seek work as such and at the same time have to disclose to prospective corporate clients that such were the management skills of the consultant that he was disqualified from holding office as a director.

I therefore have little difficulty in coming to the view that in seeking to resist the action at the instance of the Secretary of State for Trade and Industry the defender might not have retained the pursuers for "private consumption" but rather in furtherance of his future business interests. Evidence will be required to establish the capacity of the defender when the pursuers were instructed.

It will by now be clear that I am prepared to take a broad view of the pursuers' pleadings and not subject them to unduly close scrutiny. On one view they do not offer to prove that the defender is a management consultant. All they say is that on one occasion he described himself as such. However taking the pleadings as a whole I think that there is enough said to allow evidence to be led to the effect that the defender holds himself out as a management consultant. After all the defender comes close to saying as much in Answer 1. However the lack of a general denial in Article 1 of condescendence gives me some difficulty. Answer 1 contains a positive averment that "The contract which forms the subject matter of this action is outside his (the defender's) trade or profession." Absent a denial of this averment it is difficult for the pursuers to say that the defender was doing other than contracting as a consumer within the terms of Rule 3. I was not however going to decide the issue on a narrow pleading point and I will put the case out by order to enable the pursuers to consider their position.

The parties' submissions on specification

The defender also attacked the pursuers' pleadings insofar as they were directed at the quantification of the sum sued for. The only specification given by the pursuers was "in all the circumstances of the case £11,195.05 plus outlays is a reasonable fee...for a commercial firm such as the pursuers in all the circumstances of the case given the importance of the matter to the defender...". The defender could not prepare for proof and was thus prejudiced.

In response Mr Matheson submitted that since the pursuers' professional account would require to be taxed, at or just before the diet of taxation was the appropriate juncture at which to provide proper specification of quantification. It was enough that the pursuers' pleadings were as bald as they were.

I disagree with the pursuers' submission. Even if taxation is the only proper forum to discuss quantification, and I am not saying that is correct, the defender is entitled to a breakdown of how the pursuers arrive at the sum sued for in order that he can assess whether he is going to incur the cost of taxation. The present defender does not even know the number of hours worked by the pursuers nor the hourly charge out rates. It may be that he is prepared to make payment of the pursuers' fee upon being informed as to how it is made up. In my opinion the defender is entitled to fair notice of the case against him and fair notice has not been given. Furthermore a client must be entitled to say to a Court that he never instructed certain work to be carried out by his solicitor. The extent of the instructions to a firm of solicitors is a matter to be resolved by the Court and not by the auditor. On the pursuers' submission a client would be unable to take such a point since the work undertaken by the solicitor would not require to be provided to the client in advance of the account being remitted for taxation. A client is entitled to be told more than that the solicitors acted on his behalf in defending an action brought by the Secretary of State for Trade and Industry. In my view the client is entitled to be told what the solicitor has done and how the account is made up. Accordingly, if the pursuers are to be allowed a proof of their averments, which is what they moved me to allow, they will require to address the issue of quantification.

I was invited to reserve the question of expenses and I will accordingly put the case out by order for a discussion to take place on expenses and further procedure.