SHERIFFDOM OF GRAMPIAN HIGHLAND AND ISLANDS
AT BANFF
A199/06
JUDGEMENT
of
SHERIFF
PRINCIPAL SIR STEPHEN S T YOUNG Bt QC
in the cause
THE ABERDEENSHIRE COUNCIL
Pursuers and Appellants
against
BRUCE PLANT LIMITED
Defenders and Respondents
|
Act: Mr
Robin Taylor,
solicitor, Aberdeenshire Council
Alt: Mr
D Graeme Walker,
solicitor, Brown & MacRae, Fraserburgh
Banff:
8th February 2008
The
sheriff principal, having resumed consideration of the cause, allows the appeal
and recalls the interlocutors of the sheriff dated 5 July and 9 August
2007; repels the second plea-in-law for
the defenders and respondents and finds them liable to the pursuers and
appellants in the expenses of the appeal and of the debate before the sheriff
and allows an account thereof to be given in and remits the same when lodged to
the auditor of court to tax and to report; quoad
ultra remits the cause to the sheriff to proceed as accords.
Note
[1] In this case the pursuers and appellants
crave the court to grant decree against the defenders and respondents for
payment of the sum of £77,178.84 with interest and expenses. The defenders tabled a plea-in-law to the
effect that, their obligation to make payment having been extinguished by the
operation of prescription in terms of section 6(1) of the Prescription and
Limitation (Scotland)
Act 1973, the action should be dismissed.
After a debate on 21 May
2007, the sheriff by interlocutor dated 5 July 2007 sustained this plea-in-law and
dismissed the action. Subsequently, by
interlocutor dated 9 August 2007
she found the pursuers liable to the defenders in the expenses of the cause
insofar as not already determined. On 22 August 2007 a note of appeal was
lodged on behalf of the pursuers, and in short they maintain that the sheriff
erred in dismissing the action upon the basis that the defenders' obligation to
make payment to them had been extinguished by prescription.
[2] Section 6(1) provides inter alia that if, after the appropriate date, an obligation to
which the section applies has subsisted for a continuous period of five years
...... (b) without the subsistence of the obligation having been relevantly
acknowledged, then as from the expiration of that period the obligation shall
be extinguished. Section 6(2) provides
that schedule 1 to the Act shall have effect for defining the obligations to
which the section applies, and the effect of paragraph 1(g) of schedule 1 is
that the section applies to any obligation arising from, or by reason of any
breach of, a contract. Section 6(3)
provides in the context of the present case that the reference in section 6(1)
to the appropriate date is a reference to the date when the obligation became
enforceable. Section 10(1) provides
that the subsistence of an obligation shall be regarded for the purposes of
section 6 of the Act as having been relevantly acknowledged if, and only if,
either of the two following conditions (a) and (b) is satisfied. It is accepted that condition (a) does not
apply in this case. Condition (b) is
that there has been made by or on behalf of the debtor to the creditor or his
agent an unequivocal written admission clearly acknowledging that the
obligation still subsists.
[3] The facts of the case so far as material to
the issue of prescription are not in dispute.
Between September 1996 and September 1997 the pursuers carried out
various works on behalf of the defenders at Garvocklea, Laurencekirk,
Gardenston Meadows, Laurencekirk and Charleston
Park, Cove. These works were carried out by the pursuers
as sub-contractors to the defenders who were themselves the main contractors in
a contract in which Scotia Homes Limited were the employers. The works carried out by the pursuers were
the subject of various invoices raised by them in December 1997 and October 1998. But it is agreed that the date upon which the
defenders' obligation to make payment to the pursuers for these works became
enforceable was September 1997.
[4] There was evidently a dispute between the
defenders and Scotia Homes Limited over payments due by the latter to the
defenders in terms of the main contract.
In due course the defenders raised an action against Scotia Homes
Limited for payment of a sum in excess of £200,000. Scotia Homes Limited counterclaimed against
the defenders for payment of the sum of £473,000. One element in this counterclaim related to
the works which had been carried out by the pursuers as sub-contractors on
behalf of the defenders. It was evidently
in light of this action that the defenders disputed the amounts brought out as
due by them to the pursuers in terms of the invoices raised in December 1997
and October 1998.
[5] On 29
January 2001 the defenders' managing director, Mr Ian J Bruce,
wrote to a representative of the pursuers, namely Mr Stuart Calderwood, in the
following terms:
Dear Sir
We are in receipt of your letter of 27 December 2000.
Your ledger shows claims of £86,403.35.
We believe this
figure should be a gross of £80319.81 as per attached details. This is subject to retention of 5% leaving a
net due of £76,303.82. You have
previously been paid £36,566.83 towards this sum thus leaving a balance of
£39,736.99 due.
As you are aware we are
still suing Scotia Homes for a sum in excess of £ 200k. In this action works carried out by
yourselves form part of this claim. Scotia have hinted that they have
contra charges against both DLO and Bruce albeit we obviously contest
this.
At this moment we do not
feel comfortable passing any further payments on the basis of the above
paragraph but should you wish to discuss this further, we are willing to meet
with you and display the basis of our figures and the situation with our claim.
Yours faithfully,
It is accepted that the initials "DLO" in the
penultimate paragraph of this letter referred to the pursuers' direct labour
organisation.
[6] On 16 May 2001 the pursuers' contracts
manager, Mr Ralph Singleton, wrote to a representative of the defenders (who
appears to have been a Mr Peter Simpson) referring to a meeting which had taken
place between them on 14 May 2001. After detailing various aspects of the
parties' respective claims the writer concluded:-
To summarise, the undisputed sums are as
follows ;
Net Retn
Garvocklea 3759.18 1643.35
Gardenston Meadow 18041.71 2415.68
Charleton Park Ph 1 6043.38 1522.56
Charleton Park Ph2 39161.99 4590.99
67006.26 10172.58 77178.84
There is a further disputed sum of £33697.34
plus £1773.54 retention.
I
would be grateful if you could advise me when you will be able to pay some or
all of the undisputed sum.
[6] On 20 September 2001 Mr Bruce again wrote to Mr
Calderwood in the following terms:-
OUTSTANDING ACCOUNTS
Dear
Sir
Apologies for the delay in responding to your letter.
We
note your concerns regarding the magnitude and age of this matter. You are aware that there are various counter
claims levelled at us, which encompasses yourselves, about workmanship, levels
and regulating materials. These are
matters are not news, the only difference now being that Scotia have now been
forced to put figures to those items through the Court.
In
essence, this is repetitive, albeit some progress has been made in court, as we
outlined our position earlier in the year detailing what we believed you would
be paid pending recovery from Scotia Homes.
The
figures you quote do not tie up with those agreed with our Mr Peter Simpson
& your Mr Ralph Singleton, that being close to £ 40K.
We
take on board the position that you would like some reduction in the debt. This in itself is not a problem but defer this
until we receive a fuller response from our lawyers regarding the position
until next week when we will contact you directly by phone.
Although
we respect that this response may not be satisfactory, please do not hesitate
to contact us if you wish to clarify any of the above points in the meantime.
Yours
faithfully,
[7] On 14 February 2003 Mr Calderwood sent an email
to Mr Bruce asking for confirmation that he agreed with the calculations which
had been put forward by the pursuers in the letter of 16 May 2001. Mr Calderwood indicated that on receipt
of this confirmation he would arrange for the existing invoices to be cancelled
and fresh accounts raised on the basis of the calculations in this letter. The email ended:
I
have been requesting this since November 02 and this is now getting to be
ridiculous. It is imperative that this
matter is progressed. I think there has
been enough procrastination on your part.
All I need is a one line "reply with history" to this e-mail and I will
do the necessary.
[8] On 24 February 2003 Mr Calderwood sent a reminder to Mr Bruce
asking for an early response, to which Mr Bruce responded on 3 March 2003:-
As
we have reached an impass at the moment.
Please amend your invoices as proposed.
[9] This e-mail was acknowledged by Mr Calderwood later the same
day, and he asked Mr Bruce to keep him updated on the progress of the
defenders' action against Scotia Homes Limited.
[10] On 2 May 2003 the defenders raised four
invoices for works carried out by them at Charleston Park Phase 1, Charleston
Park Phase 2, Gardenston Meadows and Garvocklea. The total amount brought out as due in terms
of these invoices is £77,178.84 which is the sum sued for.
[11] On 22 October 2003 Mr Bruce wrote again to Mr Calderwood in the following terms:-
Dear
Stuart
With
reference to our recent discussions.
We
refer to our previous correspondence, where we highlighted the difficulty we
have in paying any monies over due to the potential contras being levied
against us in addition to monies already unpaid. This is evident in the Court Summary, of which you have a
copy. The monies agreed, circa £70K,
will be paid on a completely successful result of the case on the measured
works.
The
advice we are given is not to enter a payment scheme, even it is without
prejudice.
We
recognise your right to raise a writ but in the event of that unfortunate turn
of events we would obviously defend it on several counts as outlined
previously.
Please
find attached a copy of our Lawyers letter referring to the next Court date.
You
are in receipt of all the information regarding the case.
Yours
sincerely,
It is accepted that the
reference in the second paragraph of this letter to the "Court summary" was a
reference to the action which the defenders had raised against Scotia Homes
Limited.
[12] The present action was raised on 27
October 2006 when warrant was granted to cite the defenders. Accordingly some nine years had elapsed since
the defenders' obligation to the pursuers became enforceable.
[13] Parties were at one on the law to be applied in determining the
issue between them. It was accepted that
section 10(1)(b) of the Act required that there should have been an admission
in writing by or on behalf of the debtor, and further that this must have been
unequivocal - see Fortunato's Judicial
Factor v Fortunato 1981 SLT 277 at page 282 and Lieberman v G W Tait & Sons 1987 SC 213 at page 216. Given that the prescriptive period admittedly
began to run in September 1997 and that section 6(1) referred to a continuous
period of five years, it was accepted too that the defenders' obligation to the
pursuers had been extinguished unless both at least one of the letters sent by
Mr Bruce in 2001 and the letter sent by him in 2003 had constituted relevant
acknowledgements within the meaning of section 10(1)(b). Finally, it was agreed that, in construing
each of these letters, it was legitimate to set it in the context of the prior
correspondence between the parties, and further that it was enough that a
debtor should have acknowledged that the obligation in principle still
subsisted even if he did not acknowledge that a specific sum was due to the
creditor.
[14] In a careful note appended to her interlocutor dated 5 July 2007 the sheriff set out the circumstances of the case and
the submissions made to her in the course of the debate. She then considered various authorities which
had been cited to her and examined the correspondence to which reference has
already been made. She concluded:-
Applying the Section l0(l)(b)
requirements to these letters, they do not contain an unequivocal admission
"clearly acknowledging" the subsistence of an obligation to pay. In each letter from the Defender to the
Pursuer reference is made to ongoing litigation in the Court of Session. That litigation involves counterclaims
against the Defender. The counterclaims
relate to elements of the work carried out by the Pursuer on behalf of the
Defender. The quality of the workmanship
is a disputed issue. Any payment which
may require to be made by the Defender to the Pursuer is contingent upon the
outcome of that Court of Session litigation.
There is a distinction between an agreement on quantum on the
hypothetical successful outcome of a related litigation and an unequivocal
admission clearly acknowledging that an obligation still subsists.
It was not suggested by
either party that the email of 3 March 2003 interrupts prescription. In
any event whether read in isolation or in the context of the surrounding
correspondence it is indeed difficult to comprehend. In my view it does not meet the Section
10(1)(b) requirements.
In my
opinion the action is time-barred and should be dismissed. I shall sustain the Defender's second
plea-in-law.
[15] Opening the appeal, the pursuers'
solicitor submitted in short that the letters sent by Mr Bruce in 2001 and 2003
all satisfied the criteria set out in section 10(1)(b) with the result that the
defenders' obligation to the pursuers had been relevantly acknowledged both in
2001 and again in 2003. It followed that
there had not been a continuous period of five years between September 1997 and
October 2006 without the subsistence of the obligation having been relevantly
acknowledged, and accordingly this had not been extinguished by prescription. The appeal should therefore be allowed, the
interlocutors of the sheriff dated 5 July and 9 August 2007 recalled, the defenders' second plea-in-law
repelled and the cause remitted to the sheriff to proceed as accords.
[16] In response, the defenders' solicitor
submitted in short that in none of the three letters sent by Mr
Bruce in 2001 and 2003 had there been an
unequivocal admission by or on behalf of the defenders clearly acknowledging
that their obligation to the pursuers still subsisted. It followed that the pursuers' claim against
the defenders had indeed prescribed with the result that the sheriff's decision
should be affirmed and the appeal dismissed.
[17] In my opinion the submissions for the
pursuers are to be preferred. In order
to interrupt the prescriptive period of five years section 10(1)(b) requires in
the context of this case that both one of the letters sent by Mr Bruce in 2001
and the letter sent by him in 2003 should have constituted unequivocal written
admissions clearly acknowledging that the defenders' obligation to the pursuers
still subsisted. This begs the question
what this obligation was in the first place.
The terms of the sub-contract between the parties have not been pleaded,
nor has the sub-contract itself been produced. But for present purposes I think
that it is clear enough from the pleadings and the correspondence which has
been produced (and which was agreed) what the obligation was. In answer 3 it is admitted that between
September 1996 and September 1997 the pursuers carried out various works on
behalf of the defenders at the four sites in question on a sub-contracting
basis, that invoices were raised by the pursuers in December 1997 and October
1998 and that the defenders disputed the value of these invoices. Then in article 6 of the condescendence it is
admitted that the obligation incumbent on the defenders related to an
obligation to pay money in respect of services rendered by the pursuers to the
defenders. It is not said in the
pleadings how much the pursuers were to be paid in terms of the sub-contract,
but it is I think perfectly clear from the correspondence that they were to be
paid the measured value of the works carried out by them. In short therefore the defenders' obligation
to the pursuers as at September 1997, when it is agreed that the prescriptive
period began to run, was to pay to the pursuers the measured value of the works
carried out by them at the four sites.
So the question comes to be whether, in writing to the pursuers as he
did in 2001 and again in 2003, Mr Bruce
gave an unequivocal admission clearly acknowledging that this obligation still
subsisted. I think that he did and
indeed, if his position when he wrote these letters had been that the
obligation no longer subsisted, he had only to say this rather than go to the
length of explaining to the pursuers, as he did, why the defenders were not at
that stage prepared to make payment to the pursuers in fulfilment of the
obligation.
[18] In his letter of 29 January 2001 Mr Bruce referred to the fact
that the pursuers' ledger showed claims of £86,403.35 and he indicated that the
defenders believed that "this figure should be a gross of £80319.81 as per
attached details". He referred then to a
retention of 5% "leaving a net due of £76,303.82" and pointed out that the
pursuers had previously been paid £36,566.83 "thus leaving a balance of
£39,736.99 due". It may be asked upon
what basis Mr Bruce
supposed that this balance was due to the pursuers if it was not on account of
the obligation to make payment which the defenders had incurred to the pursuers
in terms of the sub-contract between them.
It is true that Mr Bruce went on in his letter to explain why, in light
of the defenders' continuing action against Scotia Homes Limited, they were not
willing to make any further payment to the pursuers in the meantime. It is true too that, although it is not
stated explicitly, the import of the letter was to the effect that at the end
of the day the outcome of the action against Scotia Homes Limited might be that
nothing would be paid to the pursuers.
At the same time there is no suggestion here that, if (as they evidently
hoped) the defenders were successful in their action against Scotia Homes
Limited, the pursuers would not be paid what was due to them for the works
carried out by them. In short therefore
I think that in this letter Mr Bruce was clearly saying to the pursuers that in
principle the defenders' obligation to them still subsisted, albeit that they were
not prepared to obtemper it until the outcome of their action against Scotia
Homes Limited was known.
[19] The import of the letter dated 20 September 2001 is
essentially to the same effect. I refer
here in particular to the statement in the third paragraph which reads, "..... we
outlined our position earlier in the year detailing what we believed you would
be paid pending recovery from Scotia Homes".
I refer also to the comment in the penultimate paragraph that the
pursuers "would like some reduction in the debt". In my opinion in these passages Mr Bruce was
again clearly acknowledging that in principle at least the defenders'
obligation to the pursuers still subsisted and would be obtempered provided
that the action against Scotia Homes Limited was successful.
[20] The same I think is true of the letter
dated 22 October 2003. In the second paragraph Mr
Bruce stated: "The monies agreed, circa
£70K, will be paid on a completely successful result of the case on the
measured works". Here too it may be
asked upon what basis Mr Bruce was accepting that these monies would be paid to
the pursuers if it was not that he acknowledged that at least in principle the
defenders remained indebted to the pursuers in pursuance of the original
obligation. Again I think that it is
nothing to the point that the defenders were here saying that they would defend
any action raised against them by the pursuers "on several counts as outlined
previously" or, as the sheriff pointed out, that any payment which might
require to be made by the defenders to the pursuers was contingent upon the
outcome of the action against Scotia Homes Limited. Neither of these considerations served to
undermine Mr Bruce's
clear acknowledgement that the defenders' obligation to the pursuers still
subsisted.
[21] On the whole matter therefore I am
respectfully of the opinion that the sheriff was wrong to have sustained the
defenders' second plea-in-law and to have dismissed the action. I have allowed the appeal accordingly,
recalled the sheriff's interlocutors, repelled the defenders' second
plea-in-law and remitted the cause to the sheriff to proceed as accords.
[22] It was agreed that, if the appeal were
successful, the defenders should be found liable to the pursuers in the
expenses of the appeal and also of the debate before the sheriff.
[23] In addition to the authorities which I
have already mentioned, I was referred to Greater
Glasgow Health Board v Baxter Clark & Paul 1990 SC 237, Richardson v Quercus Limited 1999 SC 278, Bradford & Bingley plc v Rashid
2006 1WLR 2066 and Harper v John C Harper
& Co 2003 SLT (Sh.Ct.) 102.
