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You are here: BAILII >> Databases >> Scottish Sheriff Court Decisions >> Stratton (Trade Sales) Ltd v. MCS (Scotland) Ltd [2005] ScotSC 22 (24 March 2005)
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Cite as: [2005] ScotSC 22
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Stratton (Trade Sales) Ltd v. MCS (Scotland) Ltd [2005] ScotSC 22 (24 March 2005)
CA324/04
SHERIFF C A L SCOTT, Advocate
STRATTON (TRADE SALES) LTD v MCS (SCOTLAND) LTD
GLASGOW, 24 March, 2005. The Sheriff, having resumed consideration of the cause, allows the record to be amended in terms of the pursuers' minute of amendment no. 11 of process; thereafter, sustains the defenders' second plea-in-law to the extent of excluding from probation the pursuers' averments to the effect that there existed between the parties an informal lease constituted by the Heads of Terms No. 5/2 of process and dismisses the first alternative of the crave; quoad ultra before answer allows parties a proof in respect of their remaining averments on a date or dates to be hereafter assigned, reserving meantime the question of liability for the expenses occasioned by the diet of debate.
Sheriff
Note
Prior to the diet of debate in this case, the pursuers' pleadings inter alia reflected the contention that the Heads of Terms, No. 5/2 of process, constituted an informal lease of the premises on the terms stated therein. It was averred that the pursuers had sustained various losses in connection with the leased premises all as set out in Article 6 of condesdencence. The pursuers maintained that the defenders were liable to make good those losses.
Shortly prior to the debate, those acting on behalf of the pursuers alerted the Court and the defenders' agents to the existence of a Minute of Amendment. In essence, that Minute sought to introduce alternative cases whereby the pursuers relied upon the doctrine of tacit relocation to substantiate an informal one year tenancy and, in any event, claimed payments, in isolation from the existence of any lease between the parties, in respect of damage to the property said to have been caused by the defenders whilst in occupation.
It was accepted by all concerned that the Minute of Amendment was no impediment to the debate proceeding although, Mr Deutsch for the defenders, conceded that its allowance would thereby foreclose any motion which he might have made for outright dismissal of the action as framed in the existing Record.
The Court has now allowed the Record to be amended in terms of the pursuers' Minute.
Defenders' Submissions
Mr Deutsch addressed the Court on the basis of the pursuers' acceptance that no writing existed which could amount to a formal lease of the subjects in question for a period of more than one year. He referred to section 1 of the Requirements of Writing (Scotland) Act 1995 and, in particular, sub-sections (1), (2) and (7). Furthermore, in terms of section 2 of the Act, the minimum requirement was for writing at the hand of both parties.
However, it was submitted that the pursuers sought to elide the difficulty which existed by founding upon what Mr Deutsch described as "the exception to the exception" in sub-sections (3) and (4) of section 1. Mr Deutsch referred to this provision as "statutory rei interventus".
Section 1(3) of the Act bore all the hallmarks of the doctrine known as personal bar. However, there were, argued Mr Deutsch, five essential elements, all as set out in the defenders' Note of Argument No. 10 of process. Primarily, the pursuers had to be able to point to the existence of an agreement or some form of consensus between the parties. In that regard, Mr Deutsch contended that the pursuers' pleadings were wholly deficient. They failed to condescend upon the setting up of an initial consensus.
Reference was made to Article 2 in the Record. Whilst there was a narrative regarding the existence of a lease involving the pursuers qua landlords, the tenant was an entirely separate legal persona from the defenders. Accordingly, this particular Article contained no more than background material.
The terms of Article 3 were read out for the benefit of the Court. Mr Deutsch suggested that, at a glance, the Court might consider that the "Heads of Terms" said to have been agreed, could be regarded as amounting to a consensus. However, Mr Deutsch invited the Court to scrutinise the document in question (No. 5/2 of process) and predicted that such scrutiny would bring the Court to the realisation that the "Heads of Terms" did not describe any form of existing consensus between the parties.
Reference to No. 5/2 of process, being a letter dated 23 July 2003 from Whitelaw Baikie Figes, Chartered Surveyors, to the defenders' Accountant, immediately disclosed that the document was:
"Not Legally Binding Subject to Conclusion of Formal Missives."
Naturally, Mr Deutsch founded upon this aspect of the document, aside from all else. He submitted that the document had "....declared itself not to represent part of a consensus." It was not something to be relied upon for the purposes of forming a contract and that according to the pursuers themselves.
Moreover, Mr Deutsch referred to the second sentence of the text. The author of the letter had set out "...the definitive terms and conditions upon which my clients would be willing to offer you a new lease."
Mr Deutsch stressed the conditional nature of the language used. He submitted that, on no view, could the letter amount to an offer to let, nor could it be characterised as describing a consensus in existence on or prior to 23 July 2003. The letter was not capable of describing a pre-existing consensus because the language in which it was expressed made it plain that such a consensus was yet to be achieved.
The Court was reminded that a lease had four cardinal elements, viz. the parties, the subjects, the rent and the duration of the lease.
In the context of negotiations between the parties, the letter of 23 July 2003 (No. 5/2 of process) clearly stated that the date of entry had yet to be agreed. Accordingly, the last of the foregoing cardinal elements was missing since the period of the lease could not be determined without the existence of a starting point.
Mr Deutsch contended that as the pursuers' pleadings stood, they were bereft of the "foundation stone" for statutory rei interventus in that they simply failed to describe any form of concluded agreement between the parties. There was no platform of averment upon which evidence could be led to demonstrate any consensus embracing the four cardinal elements of the lease. All that being so, Mr Deutsch argued that there was no basis for reliance upon sub-sections (3) and (4) of section 1 of the Act.
It was accepted, on behalf of the defenders, that it might be tempting to use subsequent actings to evidence or substantiate an agreement between the parties, in other words, "to put the cart before the horse." That, according to Mr Deutsch, would be an erroneous approach since it was quite clear that the agreement founded upon had to precede the actings. In this respect, he referred to the case of Super (Tom) Printing and Supplies Ltd v South Lanarkshire Council (1) 1999 GWD 31 - 1496 and (2) 1999 GWD 38 - 1854. After a procedure roll hearing, Lord Hamilton had afforded the pursuers an opportunity to amend their pleadings in order to satisfy the requirements of section 1(3) and (4) of the 1995 Act. When the case next called by order, the action was dismissed. The Court held that the amendments were not sufficient as the variations to the contract post-dated the actings principally founded upon.
In effect, Mr Deutsch invited the Court to excise from the pleadings the pursuers' case in its first alternative.
Pursuers' Submissions
In reply, Mr Entwhistle for the pursuers, initially focused upon the latter part of Mr Deutsch's submission. He argued that an authoritative view existed which supported the proposition that it was competent and relevant to prove an agreement founded upon, under reference to actings averred.
Mr Entwhistle referred to Professor Reid's annotations to section 1 of the 1995 Act and, in particular, the following short passage:-
"The most important change in the law is the removal, by section 11(1) of the need to prove the informal contract by writ or oath. Now there is no restriction as to proof and in many cases the actings which evidenced personal bar are likely to be used to evidence also the fact of agreement. Under the new law the oral promise in Smith v Oliver 1911 SC 103 (to make a will bequeathing money to pay for improvements to a church, which was then followed by actings) would have been perfectly enforceable."
Reference was also made to paragraph 3.04 in Sheriff Cusine's and Professor Rennie's work on "The Requirements of Writing".
Professor McBryde's observations at paragraph 5.80 in the Second Edition of his work on Contract were characterised by Mr Entwhistle as amounting to the suggestion that there must be a discernible contract before statutory rei interventus could apply. However, it was claimed that the learned author had put forward no authority in support of that "bald proposition".
Turning to the "thorny issue" of the words "Not Legally Binding" etc as they appeared in the letter of 23 July 2003, Mr Entwhistle contended that the question of whether an agreement had been reached was a matter for proof. He submitted that the document forming No. 5/2 of process, the Heads of Terms, was no more than an adminicle of evidence and referred to paragraph 3 thereof which, it was argued, was apt to demonstrate a consensus of purpose regarding continued trading by the defenders.
The Court was referred to various passages from the well-known case of Stobo Ltd v Morrison's (Gowns) Ltd 1949 SC 184. Mr Entwhistle drew attention to Lord President Cooper's remarks at page 192 and to those of Lord Carmont at page 193.
Mr Entwhistle then sought to place matters in context. He asserted, in straightforward terms, that, in the present action, the pursuers were claiming that an agreement had been reached whereas the defenders maintained that it had not. In Mr Entwhistle's submission, this somewhat acute issue should only be resolved by way of an enquiry into the facts. The pursuers had averred that the letter, No. 5/2 of process, had been issued subsequent to matters being agreed between the parties. The wording of the letter was habile of explanation by way of proof.
It was argued that the law relating to statutory personal bar existed to afford a measure of protection to landlords. Mr Entwhistle took no issue with the four cardinal elements of a lease, all as referred to by Mr Deutsch, but pointed out that a lease for a period of one year was implied where "the tenant" is in possession but where there is no finalised agreement regarding the duration of the lease. In that regard, Mr Entwhistle sought to distinguish the case of Gray and Another v Edinburgh University 1962 SLT 173. In Gray, there had been no possession, although on a reading of the report, any dicta regarding the significance or otherwise of possession appear to be obiter.
Furthermore, Mr Entwhistle suggested that leases for a period of one year can continue for a further year through the doctrine of tacit relocation. Reference was made to the case of Cinema Bingo Club v Ward 1976 SLT (Sh Court) 90.
On a broader footing, it was contended that the provisions of the 1995 Act amounted to a relaxation of the prevailing common law rule and that, consequently, it would be absurd to give effect to the position adopted by the defenders. In the case of Morrison - Low v Paterson 1985 SLT 255, emphasis had been placed upon the inference to be drawn from the parties' actings after the death of the original tenant. It was clear that the House of Lords were quite prepared to infer the existence of an agreement from those actings. Mr Entwhistle maintained that it would be folly for the Court to establish a precedent whereby behaviour subsequent to a business "relationship" being entered into could not be founded upon.
The issue for determination by this Court was whether, in order to avail himself of the statutory exception, a party required to point to an actual agreement, albeit with certain formal deficiencies, or whether, as Mr Entwhistle put it, the existence of actings could all be looked at "in the round".
Defenders' Response
Mr Deutsch was afforded the opportunity of a response. He submitted that there had to be a consensus ab initio. It was not open to the Court to use all and any relevant actings to create an agreement. Were that not so, then a logical absurdity would arise.
Any party seeking to invoke the statutory exception must, submitted Mr Deutsch, be able to condescend upon the existence of an agreement. They must aver when consensus was achieved; who was party to it; and how it was arrived at. Only then might a Court legitimately consider actings as evidence of the agreement. The pursuers, in the present case, had simply thrown the letter No. 5/2 of process "into the melting pot". That simply would not do. Professor McBryde's analysis accurately reflected the effect of section 1(3) and (4). (See McBryde, Second Edn, at paragraph 5 - 80).
Under reference to the case of Stobo, had No. 5/2 of process merely been "Subject to contract", Mr Deutsch conceded that the situation facing the Court might have been materially different. However, the Heads of Terms therein contained could not be met by any form of unqualified acceptance. That, in itself, provided the Court with a clear indication that no consensus had been reached.
Moreover, Mr Deutsch queried precisely what parole evidence would fall to be led at any proof. He submitted that the oral testimony of witnesses would only be appropriate for the purpose of resolving some sort of ambiguity. (Although Mr Entwhistle submitted that it would be perfectly open to the Court to hear evidence from the individual who sent the letter with a view to gaining confirmation that the Heads of Terms were, in fact, agreed).
In the final analysis, No. 5/2 of process was, according to Mr Deutsch, neither an offer to let nor a record of any agreement between the parties. Those failings, in his submission, were fatal to the pursuers' case, as pleaded, in its first alternative.
Decision
Whatever the pursuers' characterisation of the law as set out in section 1 of the 1995 Act, it is important to maintain a focus upon the nature and extent of their written case. At the heart of their pleadings lie the following averments:-
"Heads of Terms were agreed on or prior to 23 July 2003, conform to the letter from the Pursuers' said agents to the Defenders dated 23 July 2003, a copy of which is produced herewith and referred to for its terms, which are held to be incorporated herein brevitatis causa. The Heads of Terms constituted an informal lease of the premises on the terms stated therein."
Accordingly, I do not consider that No. 5/2 of process can merely be relegated to the status of an ordinary adminicle of evidence, all as suggested by Mr Entwhistle. On the contrary, this is the document which, the pursuers aver: "...constituted an informal lease of the premises."
As pleaded, it is an integral part of the pursuers' case that an agreement had been reached on 23 July 2003, albeit in the absence of the formalities required for a lease of more than one year.
To that extent, it is unnecessary for the Court to determine whether, under the 1995 statutory provisions, the "second type" of rei interventus, (see Lord Fraser in Morrison - Low v Paterson at 266 and Gloag on Contract, Second Edn 1929 at p 46), can still prevail. What does, however, require to be determined on the arguments presented in this case is whether the agreement upon which the pursuers' found truly amounts to a consensus between the parties. If it does not, then the pursuers' case insofar as it relies upon section 1(3) and (4) cannot succeed.
In this connection, for the reasons identified by Mr Deutsch in the course of his submission, I have concluded that No. 5/2 of process cannot be construed as amounting to a consensus between the parties. As was pointed out during the debate, the document declares itself not to be binding but, moreover, because of the language used in the opening paragraph, it is, in my view, no more than an "invitation to treat". The language is couched in the conditional tense. The author specifically records that he is "...setting out the definitive terms and conditions upon which" the pursuers would (my emphasis) be willing to offer the defenders a new lease. I construe that paragraph as meaning that an offer of a lease has yet to come but if and when it does, "these will be the terms and conditions". To my mind, the absence of an unequivocal offer to let must preclude consensus.
However, and in any event, it was beyond dispute that, for a valid contract of lease the period involved required to be specified thereby signifying the parties' consensus as to the duration of their contractual arrangement. Equally, and critically in my view, it was not disputed that No. 5/2 of process was silent as to the duration of any lease in the sense that paragraph 5 merely indicated that the date of entry was to be agreed. All that being so, one of the cardinal elements of an agreement to let premises cannot be made out and that, to my mind, also points to a lack of consensus.
Consequently, it is my opinion that, having elected to offer to prove that an agreement had been reached, and where a proper construction of the letter founded upon points to an absence of consensus, the pursuers have failed to plead a relevant case under section 1(3) and (4) of the 1995 Act. If anything, their averments in support of the crave in its first alternative disclose reliance upon what would have amounted to the "normal application of the plea of rei interventus" (see Gloag supra at page 46) under the old common law.
I also agree with Mr Deutsch's contention that any evidence to be led at the proof envisaged by Mr Entwhistle would be of little relevant value. From the standpoint of construction, I have, I believe, applied the general rule in utilising the "natural and ordinary meaning" of the salient words and phrases contained within No. 5/2 of process. I have merely interpreted what the letter actually states.
Had it been necessary to reach a finalised view as to the precise application of the personal bar provisions in section 1 of the 1995 Act, I would have favoured the approach adopted by Professor McBryde at paragraph No. 5 - 80. Section 1(3) of the Act proceeds upon the clear hypothesis that "...a contract, obligation or trust..." exists, albeit in a form which is non-compliant with section 2 of the Act. I therefore tend to the view that, for these specific statutory provisions to apply, there must be (a) an identifiable contract of some sort, followed by (b) relevant and unequivocal actings. That, straightforward, sequential approach seems to be consistent with the decision reached by Lord Hamilton in the Super (Tom) although the Greens Weekly Digest reports are not, perhaps, as detailed as they might be.
Accordingly, whilst I specifically reserve judgement on this point of statutory interpretation, I am nevertheless reasonably clear that it should not be open to the party proponing the existence of a contract to pray in aid a series of occurrences and, thereafter, to point, inferentially, to a preceding agreement. There must exist some sort of discernible bargain to entitle a party to a proof of the various actings relied upon. As it happens, in the present case, no proper foundation of that nature exists.