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O.R. Humphries Partnership v. Russell, [2003] ScotSC 37 (27 May 2003) SHERIFFDOM OF GRAMPIAN HIGHLAND AND ISLANDS AT ABERDEEN

A514/01

		JUDGEMENT of SHERIFF PRINCIPAL SIR STEPHEN S T YOUNG Bt QC
		in the cause
		O R HUMPHRIES PARTNERSHIP
		Pursuers and Appellants
		against
		RONALD RUSSELL
		Defender and Respondent

Act: Mr A H Jones, solicitor, Russel & Aitken, Edinburgh

Alt: Mr K J MacDonald, solicitor, Paull & Williamsons, Aberdeen

Aberdeen: 27^th May 2003

The Sheriff Principal, having resumed consideration of the cause, refuses the appeal and adheres to the interlocutor of the sheriff dated 10^th December 2002 subject to the following amendments:

In finding in fact 7 delete the last sentence and substitute: "The parties agreed that the pursuers would be paid 6% of the contract value. No building contract was entered into by the defender".

Delete finding in fact 8.

Delete finding in fact 9 and substitute: "The defender understood that the pursuers would charge 6% of the contract value. The defender did not consider what the pursuers would charge in the event of the project not proceeding to a conclusion, nor did Mr Oliver Humphries, and no agreement was reached between them on what the pursuers' fee would be in the event that no contract was placed by the defender for the completion of the proposed works".

Delete the finding in fact and in law;

adheres also to the interlocutor of the sheriff dated 13^th January 2003; finds the pursuers liable to the defender in the expenses of the appeal and allows an account thereof to be given in and remits the same to the auditor of court to tax and to report; quoad ultra remits to the sheriff to proceed as accords.

Note

In this case the pursuers and appellants are a firm of architects. They sued the defender and respondent for payment of the sum of £10,649.02 in respect of professional fees said to be due by the defender in respect of a project to carry out alterations at his home at Bridge of Dee. It is not in dispute that the pursuers were instructed by the defender and proceeded to carry out certain work in connection with the project including preparing plans, applying for planning permission and a building warrant and obtaining tenders for the project from five separate contractors. The lowest tender was for £257,000 which was a good deal higher than the defender had originally envisaged spending on the project. He himself later received a proposal from other contractors to carry out the work at a cost of £185,000, but these contractors later withdrew after the pursuers had advised the defender against engaging them. The upshot was that the alterations were never carried out at the defender's home. On 17^th August 2000 the pursuers rendered an invoice to the defender for the sum sued for, namely £10,649.02. At the proof before the sheriff the critical issue was whether or not the pursuers had proved that they were entitled to be paid this sum.

As can be seen from their first plea-in-law (which is their only plea-in-law directed to the merits of the action), the pursuers claimed to be entitled to this sum in terms of a contract between them and the defender, and upon no other basis. In particular, they did not advance an alternative claim to payment on a quantum meruit basis (albeit that it appears clear from the evidence that it was at least partly on this basis rather than on the basis of what had been agreed that they actually prepared their invoice - see Mr Oliver Humphries at pages 45D, 73B and 82D and Mr Bennet Humphries at pages 142D and 153E). It appears that it was argued before the sheriff that, if he was not satisfied that the pursuers were entitled to payment in terms of their contract with the defender, then they should be found entitled to payment on this alternative basis. But this was rejected by the sheriff upon the ground that there was no foundation in the pursuers' pleadings for the alternative claim, and on appeal it was conceded that the sheriff had reached the correct decision in this respect. Thus at the end of the day the pursuers' case was perilled upon their having proved that they were entitled to payment of the sum sued for upon the basis of a contract between them and the defender.

It was not in dispute that there was only one conversation between the parties in the course of which the fee to be paid to the pursuers was discussed. On record, the pursuers' account of what was said in the course of this conversation is to be found in article 2 of the condescendence where it is averred:-

On 29^th October 1998 Oliver Humphries of the pursuers spoke to the defender regarding the pursuers' charges for the project. They discussed whether the project could be properly described as new work or alterations. Mr Humphries advised the defender that he was prepared to treat the project as new work and that a fee of 6% of the assumed contract value would be charged. Said charge is in accordance with R.I.B.A. fee scales. The defender indicated to Mr Humphries that he was happy with the pursuers' proposed fees. During the conversation, Mr Humphries and the defender were both aware that the defender wished to pay no more than £180,000 for the building works. Mr Humphries and the defender discussed R.I.B.A. fee scales. Mr Humphries made it clear to the defender that the pursuers intended to charge on the basis of R.I.B.A. fee scales subject to agreement on the precise percentage. It is the pursuers' normal business practice to charge on the basis of the R.I.B.A. fee scale and to render interim accounts at the completion of various work stages. The parties agreed that the pursuers would charge a fee of 6% of the assumed contract value together with V.A.T. and expenses for the work they would carry out in respect of the project. The agreed fee was less than the normal R.I.B.A. fee scale which is based on 8.3% or 12.3% of the contract value. The defender indicated to Mr Humphries that he was prepared to pay no more than £180,000 together with V.A.T. and expenses on the project. The pursuers' fee was quoted on the assumption that this would be the contract value.

These averments were met by a general denial by the defender in his answer 3. Later on in the same answer he averred:

In or around October 1998, a discussion took place between Mr Oliver Humphries of the pursuers and the defender in relation to the pursuers' proposed fees.
Mr Humphries told the defender that as it would be such a big project he would charge the defender 6% of the contract. The defender asked whether that sum included Value Added Tax and Mr Humphries said that it did not. The parties agreed that the pursuers would be paid 6% of the contract exclusive of V.A.T., plus the pursuers' expenses. The expression "contract" on the context of the parties' discussion meant that in the event that a contract was placed with a builder to carry out and complete alterations at the defender's property, the pursuers would be entitled to charge the defender 6% of the cost of the works, exclusive of V.A.T., together with their expenses. Said agreement requires to be interpreted in a way which a reasonable person would construe it. A reasonable person would construe the agreement as being an agreement to pay 6% of the cost of the works exclusive of V.A.T., together with expenses in the event a contract was entered into for said works. At this stage the defender had not received detailed costings for the alterations to enable him to decide whether any contract would be placed to carry out said alterations.

In article 4 the pursuers went on to explain how they came to render their invoice to the defender. They averred:

Having received no instructions from the defender to accept one of the other tenders, the pursuers rendered an account to the defender on 17 August 2000 for the sum of £8,100 together with expenses of £963 and V.A.T. of £1,586.02. The total sum due by the defender to the pursuers in terms of said invoice is £10,649.02. When said invoice was rendered the project had reached Work Stage H (tender stage) as described in the R.I.B.A. Terms of Appointment. At that stage, the pursuers are entitled to charge 75% of their whole fee for the project. On the basis of the original assumed contract value of £180,000 the pursuers' whole fee for the project would have been £10,800 together with expenses and V.A.T. The pursuers have charged 75% of said sum namely £8,100. The pursuers based their fee on the sum of £180,000 which was the sum the defender intended to pay on the project

In his answer 4 the defender, in short, admitted that he had received the invoice and that he had not paid the sum claimed. He said that he did not know and did not admit that when the invoice was rendered the project had reached Work Stage H (Tender Stage) as described in the R.I.B.A. Terms of Appointment, and he denied the remainder of the pursuers' averments. He added: "Explained and averred that the parties did not agree that the pursuers could render an account to the defender on the basis claimed by the pursuers".

In his interlocutor dated 10^th December 2002 the sheriff made a number of findings in fact on the subject of payment of the pursuers' fee. So far as material, these are as follows:

During a telephone conversation between Oliver Humphries of the pursuers and the defender on about 28 October 1998 the question of the pursuers' fees for their professional services was discussed. The conversation was brief. In that conversation Oliver Humphries indicated that the pursuers would charge a fee of 6% of the 'assumed contract value' of the project.

Oliver Humphries understood what the expression 'assumed contract value' meant.

9. The defender did not understand what the expression 'assumed contract value' meant.

10. The possibility of the project not proceeding to a conclusion was not discussed between the parties.

The terms of the discussion between Oliver Humphries and the defender regarding fees was never followed up in writing by the pursuers.

The pursuers never issued any standard contract form or letter of engagement to the defender in respect of the professional services being carried out by them for him.

14. The pursuers did not provide the defender with any copy of any table of fees.

29. On the 17 August 2000 the pursuers rendered an invoice to the defender for £10,649.02. No invoice had been rendered by the pursuers to the defender prior to 17 August 2000. No documentation explaining the R.I.B.A. fee scales or the basis on which the pursuers would charge of the defender (sic) was issued to the defender before the invoice was issued.

The sheriff made one finding in fact and law as follows:

The pursuers and the defender mutually misunderstood each other in respect of the price for the pursuers at services (sic) in the discussion between Mr. Oliver Humphries of the pursuers and the defender in the October 1998 and no consensus was reached between them.

The sheriff made one finding in law as follows:

The pursuers do not have a contractual entitlement as averred on Record to payment from the defender in respect of the pursuers architectural services to the defender for the proposed alterations at Drumforskie.

Having made these findings the sheriff sustained the third plea-in-law for the defender (which was to the effect that, the pursuers' averments being unfounded in fact, he should be assoilzied) and granted decree of absolvitor in favour of the defender. Subsequently, on 13^th January 2003, he found the pursuers liable to the defender in 75% of the expenses of the cause as taxed. These are the decisions which are the subject of the present appeal.

In the note appended to his interlocutor of 10^th December 2002 the sheriff rightly recognised that the onus of proof lay on the pursuers to establish the terms of the contract upon which they founded and, as I understand his reasoning, his conclusion was that there was no agreement reached between the parties as to the fee to be paid by the defender to the pursuers. Thus in paragraph 9 the sheriff said that, while he considered "that no reasonable person would accept the defender's assertion that no fee would be payable to the architect until the building contract was in place, nevertheless that does not assist in determining what was agreed between the parties regarding fees, if anything was agreed at all". Then in paragraph 13 the sheriff stated: "In my view, there was in the evidence an uncertainty about the question of what, if anything, was agreed regarding fees". And in paragraph 16 he stated: "My decision on the evidence was that no agreement was reached between the parties regarding the basis of charging of the pursuers' fees".

The sheriff went on in his note to rehearse the submissions that were made to him at the conclusion of the proof by the parties' solicitors. Towards the end of his submissions, the defender's solicitor drew attention to the decision of the House of Lords in Mathieson Gee (Ayrshire) Limited v Quigley 1952 SC (HL) 38. In that case there was evidently no agreement at all between the parties since the respondents thought that they were entering into a contract for the hire of plant and equipment whereas the appellant thought that it was a contract for the provision of services by the respondents. As Lord Normand put it at page 42: "The respondents offered one sort of contract and the appellant accepted another kind of contract". Hence there was in that case a clear lack of consensus in idem. It appears that the defender's solicitor submitted to the sheriff that a similar situation had arisen in the present case, and the sheriff was evidently impressed by this submission since in paragraph 61 of his note he wrote: "In my view, there was no consensus in idem proved between the pursuers and the defender in respect of the contract. The pursuers understood the contract to say one thing, and the defender another, or at best did not understand what was being said to him". It was no doubt in light of this conclusion that the sheriff made his single finding in fact and law to which I have already referred - albeit that it is not altogether clear to me in what particular respect the sheriff thought that the pursuers were saying one thing and the defender another or that they had misunderstood one another.

In their note of appeal the pursuers advanced six grounds of appeal as follows:

The sheriff's finding in fact and law is not supported by the evidence.

The sheriff's finding in fact and law is inconsistent with the sheriff's findings in fact.

In reaching his finding in fact and law, the sheriff failed to take into account that consensus should be tested objectively, and placed too much weight on his finding in fact that the defender did not understand what was being said to him during a conversation on 29 October 1998. In any event the evidence does not support the sheriff's finding in fact number 9 that the defender did not understand the meaning of the expression "assumed contract value".

The pursuers, therefore, respectfully submit that the sheriff's finding in law that the pursuers do not have a contractual entitlement to payment from the defender is incorrect and that the sheriff should have granted decree in favour of the pursuers.

Further, and in any event, the sheriff should not have upheld a submission by the defender on a ground which was not before the court in the Record.

Esto the sheriff was correct in granting decree of absolvitor in favour of the defender, the sheriff should not have found the defender entitled to the expenses of the action (modified to 75%) and should have found that no expenses were due to or by either party.

The defender cross-appealed on a single ground as follows:

In finding in fact number 7 there is a finding that "In that conversation Oliver Humphries indicated that the pursuers would charge a fee of 6% of the "assumed contract value" of the project". Said finding in fact is not supported by the evidence. It is respectfully submitted that the Sheriff did not have the material before him to justify this finding in fact.

At the hearing of the appeal the pursuers' solicitor devoted a large part of his submissions towards the first three grounds of appeal directed, as they were, against the sheriff's conclusion, expressed in his finding in fact and in law, that there was a misunderstanding between the parties in regard to payment of the pursuers' fee and hence no consensus reached between them. Having regard to the argument which was presented to the sheriff by the defender's solicitor in light of the decision in Mathieson Gee and the sheriff's conclusion thereon, it is I think entirely understandable that the pursuers' solicitor should have concentrated so much on the first three grounds of appeal. Nonetheless, it was perhaps unfortunate that he should have approached the matter in this way since in my view it obscured the real issue in the case which was what, if anything, was proved to have been agreed between the parties as to the fee to be paid to the pursuers in the event, not that a contract was placed by the defender for the completion of the proposed works, but that the project was abandoned by him, as in fact it was, before any such contract was placed. As the defender's solicitor pointed out during the appeal, even if the submissions for the pursuer in support of the first three grounds of appeal were well founded, it did not follow that the fourth ground of appeal was also well founded. In my opinion it was not. In a nutshell it is clear in my opinion that, notwithstanding that there was an agreement between the parties as to what the pursuers should be paid in the event that a contract was placed by the defender, there was no agreement between the parties as to what the pursuers should be paid if the project did not go ahead, with the result that the pursuers' claim to be paid on the basis of such an agreement fell to be rejected.

In the course of his submissions the pursuers' solicitor proposed a number of amendments to the sheriff's findings in fact and in law as follows:

In finding in fact 7 delete the last sentence and substitute: "The parties agreed that the pursuers would be paid 6% of the contract value. No building contract was entered into by the defender. The pursuers' fee was based on an approximate contract value of £180,000.

In finding in fact 8 delete the word "assumed".

Delete finding in fact 9 and substitute: "The defender understood that the pursuers would charge 6% of the contract value. The defender did not consider what the pursuers would charge in the event of the project not proceeding to a conclusion".

Delete the existing finding in fact and in law and substitute: "The parties agreed that the pursuers would be paid 6% of the contract value. No building contract was entered into by the defender. The pursuers are therefore entitled to base their charges on an approximate contract value at the time the parties' contract came to an end. The sum upon which the pursuers based their charges is less than the approximate contract value".

In the finding in law delete the word "not".

The response of the defender's solicitor to these proposed amendments was as follows

It was accepted that the last sentence of finding in fact 7 should be deleted since there was no basis in the evidence for the sheriff's finding that
Mr Oliver Humphries had used the expression "assumed contract value" during the telephone conversation between him and the defender about payment of the pursuers' fee. As for the additions to finding in fact 7 proposed by the pursuers' solicitor, the defender's solicitor devoted a large part of his submissions towards demonstrating that no agreement at all was reached between the parties as to the fee to be paid to the pursuers. Thus he opposed the first sentence to the effect that the parties agreed that the pursuers would be paid 6% of the contract value. But he further submitted that, even if this addition were to be allowed, there had been insufficient evidence to demonstrate what the expression "contract value" meant. There was no dispute that no building contract had been entered into by the defender, and accordingly his solicitor did not oppose the second sentence proposed to be added by the pursuers' solicitor. As for the third sentence, the defender's solicitor opposed this since there was no basis for it either on record or in the evidence.

Turning to finding in fact 8, the defender's solicitor suggested that it was very difficult to understand from his evidence what Mr Oliver Humphries meant by the expression "contract value", let alone "assumed contract value". Thus there was, so it was argued, no basis at all for finding in fact 8. But, having said this, the defender's solicitor suggested that it might be allowed to stand since it was of no significance in the context of the dispute between the parties.

The defender's solicitor opposed the revised finding in fact 9 suggested by the pursuers' solicitor. He submitted that there had been no clear evidence of what had been said or agreed between Mr Humphries and the defender during the telephone conversation in question. He further submitted that, even if this revised finding in fact were to be allowed, it did not indicate what had been agreed between the parties about the meaning to be given to the expression "contract value".

The defender's solicitor submitted that the sheriff's finding in fact and in law should be retained in its present form. Alternatively, it should be deleted and a revised finding in fact and in law substituted in the following terms: "There was no agreement reached in respect of the price for the pursuers' architectural services in the discussion between Mr Oliver Humphries of the pursuers and the defender in October 1998 and no consensus was reached between them". The defender's solicitor opposed the whole of the revised finding in fact and in law proposed by the pursuers' solicitor with the exception of the second sentence to the effect that no building contract was entered into by the defender.

Needless to say, the defender's solicitor opposed the deletion of the word "not" in the finding in law.

Upon an initial reading of the averments for the pursuers which I have set out in paragraphs
[3] and [5] above, one might be forgiven for thinking that the effect of what was agreed between the parties was that, whether or not the project went ahead, and whatever the value of any contract for the works that might be placed by the defender, the pursuers would be entitled to charge a fee of 6% of £180,000 (and no more) plus VAT and expenses. But it is perfectly clear from the evidence that this was not what was agreed at all. In my opinion what the evidence shows (and this is consistent with his averments in answer 2 quoted above) is that Mr Oliver Humphries and the defender agreed that the pursuers should be paid a fee of 6% of the contract value (not the assumed contract value) and that this meant, and was understood by both of them to mean, that the fee should be 6% of the value of the contract to be placed by the defender for the completion of the works. Thus, if this value was £180,000 then the pursuers were to be paid £10,800 (6% of £180,000), but by the same token, if the value was £260,000, then the pursuers were to be paid £15,600 (6% of £260,000) - see Mr Oliver Humphries at pages 19D, 20E, 59E, 79C, 87B, 181F/182B, and 194C and the defender at pages 250C, 264D, 266D, 268B/C, 286E, 293C/D and 298C. At the same time it is plain that there was no discussion, let alone any agreement between them, as to what the pursuers should be paid if no contract was placed by the defender - see Mr Oliver Humphries at pages 20A/B, 60A/B and 71F/72B and the defender at page 265A. Indeed, as was pointed out by
Mr Spencely at page 222E, it was not to be expected that there would be any such agreement reached between the parties during the telephone conversation in question. The matter of what the pursuers should be paid in the event that the project did not go ahead would normally have been covered in the standard form of agreement used by architects. But the difficulty for the pursuers is that this standard form of agreement was not used in the present case.

It was a recurring theme in the submissions of the pursuers' solicitor that a reasonable interpretation of the contract which was entered into between the parties, namely that the pursuers should be paid 6% of the contract value, was that the fee to be paid to the pursuers in the event that the project did not go ahead should be 6% of the approximate contract value which, as the evidence showed, would have been no less than £180,000. In my opinion this contention is unsound. Aside from the fact that it flies in the face of the positive evidence to the effect that there was no agreement between the parties as to what the pursuers should be paid in the event that the project did not go ahead, it was I think implicit in the agreement that the pursuers would be paid 6% of the contract value that a contract would be placed and hence that there would be an ascertainable figure to which the percentage could be applied (see Mr Oliver Humphries at pages 19C/D and 87B). In other words, the agreement was in effect conditional upon the placing of a contract. In this case of course no contract was placed so there was no such ascertainable figure - and here in my view it will not do to say that the expression "contract value" meant the same as the expression "approximate contract value" (whatever this last expression may itself have meant).

The defender's position was that no fee should be paid at all to the pursuers unless and until a contract was placed for the works. The sheriff, rightly in my view, rejected this assertion. But it did not follow that, the project having been abandoned, the pursuers were entitled to payment on the basis of an agreement between themselves and the defender in the absence of an admission or proof of the existence of such an agreement and its terms. They would, on the other hand, have been entitled to claim payment on a quantum meruit basis had there been a foundation for such a claim laid in their pleadings - and indeed it seems to me that this case affords a classic illustration of the circumstances in which a claim for payment on a quantum meruit basis would have been appropriate.

On the whole matter I consider that the pursuers have quite simply failed to prove that they are entitled to be paid the sum sued for upon the only basis set out by them on record. Accordingly, albeit for not exactly the same reasons, I think that the sheriff was correct to grant decree of absolvitor in favour of the defender.

It was submitted for the pursuers that the sheriff had in any event erred in granting decree of absolvitor rather than decree of dismissal. The defender's solicitor submitted that I ought not to entertain this submission since there was no basis for it to be found in the pursuers' note of appeal. That is correct, and in my opinion absolvitor was in any event the proper disposal given that the pursuers had failed to prove their claim. The concern of the pursuers' solicitor appeared to be that the effect of this would be to prevent the pursuers from raising a further action against the defender for payment on a quantum meruit basis. It would be wrong for me to express a concluded opinion on this point, and I will only say that, as presently advised, it is not immediately obvious to me that the effect of decree of absolvitor in a claim based upon the existence of an express agreement would be to bar a claim for payment on a quantum meruit basis (which necessarily assumes the absence of such an agreement).

It was submitted for the pursuers that, the defender having succeeded before the sheriff on a ground not pleaded in his defences, the sheriff ought to have found no expenses due to or by either party. But it was accepted that it would be unusual for an appeal court to interfere with an award of expenses by the sheriff, and I am not at all persuaded that in this particular case the sheriff exercised his discretion in this matter incorrectly.

The pursuers' solicitor accepted that, if their appeal was unsuccessful, they should be found liable to the defender in the expenses of the appeal.