CA161/07
NOTE BY SHERIFF PRINCIPAL
JAMES A TAYLOR
in the cause
Christie Owen & Davies plc t/a Christie Owen & Co
PURSUERS/APPELLANTS
against
Mrs Anne Campbell
FIRST DEFENDER
and
Stephen
I Kliner and Stephen J Vallance
SECOND DEFENDERS/RESPONDENTS
My Lords,
[1] This commercial action was raised on 28 March 2007. Parties agreed that the writ and defences
sufficiently focused the issues and a diet of debate was assigned between the
pursuer and the second defenders. There
were four issues before the learned sheriff at the diet of debate. Three of them were decided in favour of the
pursuers. However, the learned sheriff
found against the pursuers in respect of one of the issues and dismissed the
action. The pursuers appealed his
decision to me.
[2] The pursuers are business agents. They marketed the lease of licensed premises
known as the Waldorf Bar, 59 Cambridge Street,
Glasgow on the instructions of a
Mrs Anne Campbell, the first defender in this action. The pursuers and the first defender entered
into a Sole Selling Rights Agreement.
Said Agreement provided, inter
alia, that the first defender authorised her solicitors, the second
defenders, "To pay out of money received" by them the fees requested
by the pursuers "pursuant to this agreement and not to release any
proceeds arising from such disposal of business to any person up to the amount
of the invoice." The pursuers found
an assignee for the lease who was prepared to pay £46,000 for the
assignation. The pursuers fee amounted
£9,360.05. By letter dated 20 December 2006 the pursuers wrote
to the second defenders in the following terms:-
"Dear Mr Vallance
We understand that missives have now been concluded in respect of the
assignation of the Waldorf Bar.
On speaking with Mrs Anne Campbell she advises that the purchase price
has been placed in joint deposit until a letter is issued confirming the
assignation of the lease.
In this instance, we remit to you our fee note in respect of the
assignation in advance of the consideration being released. We understand that receipt of the assignation
letter from the landlord is imminent and therefore look forward to receiving
payment in early course.
We look forward to hearing from you in due course.
Kind regards,
Yours sincerely"
[3] The pursuers enclosed with their letter
a copy of the Sole Selling Rights Agreement although, as can be seen, no
reference was made to this in the body of the letter. The learned sheriff held that enclosing the
Sole Selling Rights Agreement, without any further means of drawing its terms
to the attention of the defenders, was not a valid intimation of the
assignation in favour of the pursuers.
That was the issue highlighted in the pursuers' Note of Appeal to
me.
[4] At the outset of the appeal I enquired
of Mr Lloyd, solicitor for the pursuers and appellants, if he had any pleadings
to enable him to maintain an argument that the second defenders were in bad
faith as is foreshadowed in his Note of Appeal.
Mr Lloyd's position was that the learned sheriff ought to have allowed a
proof before answer. When asked what
facts were in issue between the parties and in respect of which evidence required
to be led, Mr Lloyd said that he would seek to lead evidence that the second
defenders had read the terms of the Sole Selling Rights Agreement. This would then enable the court to hold that
there had been due intimation to the second defenders. It would also mean that the second defenders
were in bad faith when they remitted sums to the first defender without first
deducting the amount of the pursuers' fee.
However I did not understand Mr Lloyd to insist upon this
submission. He had to accept that there
was no offer to prove that the second defenders had read the Sole Selling
Rights Agreement. The appeal proceeded
on the basis that the second defenders, having received the Sole Selling Rights
Agreement ought to have and were thus deemed to have read it. Since the assignation was embodied in the Sole
Selling Rights Agreement there had been effective intimation of the
assignation.
[5] Mr McCartney, solicitor for the second
defenders and respondents, referred me to a number of authorities but
ultimately agreed with Mr Lloyd that the test which the court had to apply was
that set out by Lord Kincraig in Libertas-Kommerz
Gmbh, Appellants 1978 SLT 222 at 226:
"It seems to be that both cases show that if there has been a
written intimation to the debtor of the fact that an assignation has been
granted, the terms of that intimation
must be considered, and if they are such, on a reasonable interpretation, as to
convey to the debtor that the debt has been transferred, and that the
transferee is asserting his claim to the debt from the debtor, intimation will
be held to be effectual."
Thus there is a
two stage test. Firstly, the intimation
must, on a reasonable interpretation, tell the reader that the debt has been
transferred. Secondly, the transferee
must assert his entitlement to payment.
[6] In essence I agree with the views
expressed by the learned sheriff in paragraphs [33] to [37] of his
Note. The problem for the pursuers is
that the letter of 20 December
2006 does not direct the reader to the terms of the Sole Selling
Rights Agreement. Furthermore, as Mr
Lloyd had to acknowledge, the letter only requests payment of the pursuers' fee
note from the second defenders. Had the
pursuers been asserting a right to payment the reader of the letter might have
expected to see a reflection of that in its terms. There was nothing ex facie the terms of the letter to alert the second defenders that
they were being given intimation of an assignation. The second defenders accepted that there was
enclosed with the letter a copy of the Sole Selling Rights Agreement. It is of significance that the letter of 20 December 2006 makes no reference
to it being enclosed and being of relevance in the context of a request for
payment of the pursuers' fee note. The
second defenders' attention is not directed to the Sole Selling Rights
Agreement in any way whatsoever. Recognising
this difficulty Mr Lloyd submitted that the second defenders were under an
obligation to read documents which the pursuers might choose to enclose with a
letter. The failure to refer to the
document or documents in a covering letter mattered not. Every firm of solicitors had an obligation to
read all enclosures as somewhere in one of the documents there might be
something bearing upon the rights and obligations of their clients. There was thus a presumption that people, not
just solicitors, read all documents sent to them. If the second defenders did not adopt such a
practice they must take the consequences.
The consequences in this case are that they must pay the pursuers' fee
having remitted to the first defender the proceeds obtained for the assignation
of the lease some time after receipt by them of the pursuers' letter of 20 December 2006. Although the letter of 20 December 2006 makes reference to an
assignation, Mr Lloyd accepted that this reference was to the assignation of
the lease as opposed to the assignation of money to settle the pursuers'
account. In this particular case the
document enclosed, the Sole Selling Rights Agreement, was relatively short but,
in different circumstances, the document containing the assignation need not
be. The principle advanced by Mr Lloyd
would remain the same. The assignation
might be contained in the body of a complicated arrangement for the purchase
and sale of a company. Such documents
can extend to over 100 pages.
Nonetheless taking the pursuers' submission to its conclusion, the
recipient must read the entire document, enclosed but not referred to, lest it
contain some obligation which the recipient must obtemper. In my view that is not a sound proposition. Mr Lloyd relied heavily on the case of Chaplin v Caledonian Land Properties Limited
1997 SLT 384 to support his submission.
In my opinion that case does not assist the pursuers and is not
analogous. Mr Chaplin was a tenant of
the defenders. He wished to exercise his
contractual entitlement to break the lease.
He telephoned the landlord's agents and duly informed them that he was
exercising his right. He further
intimated that following the termination he wished to enter into a new agreement
with the landlord. The landlord's agents
said that in principle this was in order but that Mr Chaplin should write to
confirm the position. The lease required
that written notice be given. Mr Chaplin
claimed that he gave written notice but the letter was not received by the
landlord's agents. After hearing
evidence the court found as a fact that Mr Chaplin had posted the letter. Lord Rodger, sitting in the Outer House,
held that once that fact was established, a presumption arose as a matter of
law that the letter was duly addressed and delivered to the landlord's agents'
offices. The presumption could then be
rebutted by evidence. Having heard
evidence, Lord Rodger held that on the facts of the case the presumption
had not been rebutted. At the heart of
the pursuers' submission in this case is a presumption that "people read
documents sent to them". It was
said that Chaplin was authority for
that proposition. I do not agree. This case does not deal with the legal
concept of a presumption that a letter once posted is deemed to have been
received by the party to whom it is addressed.
The issue in Chaplin was not
whether the landlord's agents had read a letter but whether the letter had been
received in their offices. The content
of the letter had, as a matter of admission, been fully discussed prior to the
letter being sent. The important aspect
in Chaplin was that the letter
required to be sent to conform to the terms of the lease. I am not prepared to hold that a solicitor is
under an obligation to read every document sent to him or that a solicitor is
deemed to have read all such documents.
It was not suggested that the Law Society of Scotland had any guidelines
to this effect.
[7] In my opinion whether there has been an
effective intimation of an assignation will depend on the facts and
circumstances of each case . It was not
disputed that the second defenders would be deemed to have read the terms of
the letter to them of 20 December
2006. But the letter is
silent with regard to any intimation of assignation. Furthermore there is nothing in its terms to
hint that the first defender had granted an assignation. For example if, to meet the second stage of
Lord Kingcraig's test, the pursuers had referred to them having an entitlement
to receive payment, that might have been sufficient to put the pursuers on
notice of a potential assignation. In
such circumstances it might be said that they were then under an obligation to
read the Sole Selling Rights Agreement enclosed. But the letter of 20 December 2006, as Mr Lloyd accepted, is
the equivalent to only a request for payment.
Thus the letter does not even meet the second stage of Lord Kincraig's
test. There is no assertion of the
pursuers' entitlement to payment. Mr
Lloyd when dealing with the facts and circumstances also relied upon the terms
of the pursuers' fee note which is referred to and was enclosed with the
letter. The fee note narrative states:-
"Our agency fee in accordance
with our Sole Selling Rights Agreement..."
In my opinion
the narrative does no more than indicate to a reasonable reader that the level
of the fee has been calculated in accordance with the agreement between the
pursuers and first defender. It does not
alert the second defenders that the communication might be more than a request for payment. The communication does not meet Lord Kincraig's
test. In my opinion there has not in
this case been enough to convey an intimation to the second defenders that
money for which they have a duty to account to the first defender has been
assigned to the pursuers. Furthermore
the letter of 20 December 2006
falls short of an assertion that the pursuers are claiming their entitlement to
the money held by the second defenders.
The letter is only a request for a payment and not an assertion of an
entitlement to receive the money. There
is nothing "importing a demand on the debtor to hold for him" Gloag
and Irvine: Rights in Security at page 486.
[8] I said at the beginning of paragraph [5]
that in essence I agreed with what the learned sheriff said in paragraphs [33]
to [37] of his Note. There is however
one respect in which I have to qualify that agreement. In paragraph [35] the learned sheriff rejects
a submission that any competent solicitor would look at any documents sent to
him relating to his client. The basis
for the rejection is said to be that since the advent of fee competition
solicitors are unlikely to undertake any more work than that which they have
been engaged to carry out. Perhaps that
was written in response to a suggestion, made at one time by Mr Lloyd before
me, that a solicitor has a duty, owed to whom was not altogether clear, to read
all documents sent to him. However what
is said by the learned sheriff begs a question as to what the second defenders
were engaged to do. It is not part of
their case that to have read the document would have exceeded the scope of the
work which the first defender instructed them to carry out. It also raises an issue which I doubt is
within the judicial knowledge of a sheriff.
That said however it does not alter my opinion that the learned sheriff
was correct in rejecting the pursuers' argument. The reason why the pursuers fail is that they
have not met the test which parties agreed had to be applied by the court and
which was set out by Lord Kincraig in Libertas-Kommerz
Gmbh.
GLASGOW
December 2007
