SHERIFFDOM OF GRAMPIAN, HIGHLAND AND ISLANDS AT ABERDEEN

CA31/08

DECISION by SHERIFF J K TIERNEY in the cause STEWART MILNE GROUP LIMITED Pursuer against EWEN RITCHIE Defender __________

ABERDEEN, 26^th May 2009.

Act MacDonald

Alt Lawson

The sheriff, having resumed consideration of the cause, Repels the defender's first plea-in-law; Finds the defender liable to the pursuers in the expenses of the diet of debate; Allows an account of expenses to be given in and remits the same, when lodged, to the Auditor of Court to tax and to report; Appoints parties to be heard on further procedure in terms of Rule 40.14 and assigns 19^th June 2009 at 10.00 o'clock within Aberdeen Sheriff Court as diet.

NOTE:

[1] The pursuer has raised three separate actions under the commercial rules (OCR Chapter 40) against Allan and Catriona Cruickshank (CA19/08), Duncan Kerr (CA20/08) and Ewen Ritchie (CA31/08). Each of the actions is unrelated to either of the others, and there is no relationship of any kind among the three separate defenders. In each of the actions the pursuer seeks to have the defender ordained to implement a contract or contracts for the purchase of heritable property. In the case of Mr & Mrs Cruickshank, the action is for implement of two contracts each for the sale and purchase of one plot at the pursuer's Kepplestone Development. In the case of Mr Kerr the action is for implement of two contracts for the sale and purchase of property one at the pursuer's Abeleven Portland Street Development, and one at the Kepplestone Development. In the case of Mr Ritchie, the action is for implement of one contract for the sale and purchase of one plot at the Kepplestone Development In each case the pursuer has an alternative crave for payment of damages failing implement,.

[2] It is clear from the terms of the missives, and in particular the defenders' letters of offer and the general conditions attached to them, which have been incorporated into the pursuer's pleadings, that in each case the purchaser was offering to purchase a flat which was part of a larger building still in the course of development

[3] Each of the defenders took a plea to the competency of the action being raised as a commercial action. I appointed each of the cases to proceed by debate on these pleas whereupon the parties agreed that the issues in each case were so similar if not identical that it would be clearly in the interests of economy and efficiency that only one debate should take place. Mr Ritchie and Mr Kerr were both represented by Mr Lawson, solicitor, and Mr & Mrs Cruickshank were represented by Mr Steele, solicitor. The pursuer was represented by Mr MacDonald, solicitor.

[4] Accordingly, a single debate took place before which each of the parties lodged a written submission in process. This single note of my decision is appended to each

[5] Rule 40.1(2) provides:-

"In this chapter -

(a) "commercial action" means - an action arising out of or concerned with any transaction or dispute of a commercial or business nature including, but not limited to, actions relating to

(i)                 The construction of a commercial document.

(ii)               The sale or hire purchase of goods.

(iii)              The export or import of merchandise.

(iv)             The carriage of goods by land, air or sea.

(v)               Insurance.

(vi)             Banking.

(vii)            The provision of services.

(viii)          A building engineering or construction contract or

(ix)             A commercial lease

(b)              "commercial action" does not include an action in relation to consumer credit transactions.

[6] In the course of submissions I was referred to numerous authorities and publications including

The Compact Oxford English Dictionary and the Standard English Dictionary

Ordinary Cause Rules Chapter 40 (annotated)

The Rules of the Court of Session Chapter 47 (annotated)

Court of Session Practice Note No 6 of 2004

Court of Session Practice Section F, Lord Macfadyen

Commercial actions in the Court of Session, JLS May 1999, Lord Hamilton

The New Commercial Cause Rules, Clancy et a,l 1997 SLT (News) 45. ,

Rankin's Trustees v H C Somerville & Russell 1999 SC 166.

Semple Fraser v Ian Quaylel 31^st Jan.2001

Defenders submissions

[7] The defenders adopted each other's submissions which were in summary to the following effect

(1)              The cause did not arise out of, and was not concerned with, any transaction or dispute of a commercial or business nature, and that therefore the actions could not be raised as commercial actions and

(2)              That having been improperly raised under Chapter 40 there was no mechanism for remitting the actions to the Ordinary Cause Roll and accordingly they should be dismissed.

[8] The fundamental contention underlying these submissions for the defenders is that while the pursuers are in the business of inter alia constructing and selling residential properties and are a commercial concern the defenders are not engaged in any way in commercial business with the pursuer or in the business of building dwelling houses. They were merely customers of the pursuer. Chapter 40 was, the defenders said, intended to apply to all actions arising out of or concerned with any relationship of a commercial or business nature whether contractual or not. The pursuers' pleadings did not suggest that there was such a relationship. The Commercial Cause Rules do not and were not intended to cover disputes between commercial organisations like the pursuers and a lay purchaser like the defenders, because these transactions or disputes are not of a commercial or business nature given that they are outwith the defender's business or employment. The pursuer does not aver that the defender was engaged contractually in commerce or business with the pursuers in the normal sense of that phrase. Examples were given where the business's supply each other, or provide services to each other or accept a service or product from each other, each doing so in the course of their trade or business or in furtherance of their trade. Specifically the pursuer does not aver that any of the defenders is engaged in a line of business which is in any way connected with the pursuers' line of business in a commercial or business relationship. The defenders were in effect consumers, and the missives were consumer contracts in the sense that the pursuer was engaged in a business to which the contract referred whereas the defenders were no. To the extent that the defenders were not "consumers" in the sense of buying the subjects to live in them, their purpose of buying them to let did not amount to a trade or business but was more akin to an investment..

Pursuers' submissions

[9} Mr MacDonald for the pursuers submitted that the Rule should be construed in accordance with the ordinary use of the English language, and also had to be construed in accordance within its context. That context was the allocation of rules of procedure rather than the categorisation of contracts as a form of substantive law. He submitted that there was no antithesis between a consumer contract and the subject matter of a commercial action. A transaction could be "of a commercial or business nature" although it occurred in a consumer context. Were that not so the exception in SER 40.1(2)(d) would be otiose. It was not the nature of the relationship between the parties that was the relevant consideration, it was the nature of the transaction or dispute which should be of "a commercial or business nature". Sheriff Morrison's note clearly indicated that actions based on "consumer contracts" could competently be raised as commercial action. Lord Macfadyen expressly said in Section F of Court of Succession Practice that such an action was not necessarily prevented from being a commercial action.

[10] In each case the pursuer has a secondary position which is that they aver that each defender is buying the property not as a home but as an investment either by letting it out or allowing the property to increase in capital value with the passage of time. The pursuer contends that that indicates that from the point of view of the defenders the transaction is of a commercial or business nature and Chapter 40 applies.

Decision

[11] The context, or part of the context, in which the Commercial Cause Rules were introduced into the Sheriff Court is the fact that these rules had already been seen to be a success in the Court of Session, giving rise to a demand among practitioners and their clients for commercial matters to be dealt with a similar degree of expedition in the Sheriff Courts. Rules in their modern form were introduced in the Court of Session in 1994 following the recommendations made by Lord Coulsfield's working party on commercial causes in 1993. Lord Coulsfield reported that commercial organisations were critical of the existing civil court procedure, the chief criticisms being delay, excessive expense, and the lack of judicial expertise. ("The New Commercial Cause Rules", Ronald Clancy et al ) It was seen that there was an unmet need for a "speedy, efficient and respected procedure to resolve important commercial disputes in the Supreme Court." The absence of such a procedure was "thought to be detrimental to the development of Scots Law". at the time there was concern among practitioners that business was being lost to the well established commercial courts in England and Wales, particularly so in cases where although the dispute was Scottish the commercial client was English. (See Lord Hamilton's article)

[12] The promulgation of the new rules in the Court of Session could be seen therefore as an attempt to try to encourage Scottish litigation of a commercial nature in the Scottish Courts.

[13] The underlying purposes were the extended to the Sheriff Courts, and the scheme of the Rules in those courts can be seen to be closely based on the Court of Session Rules.

[14] Against that background it is not surprising that it has generally been considered that the scope of the definition of a commercial action is a wide one. I do not consider that the recourse to dictionaries is particularly helpful as a means of finding limits to that wide scope. In the paragraph headed "The business" i n the article referred to Lord Hamilton referred to the wide scope of the definition, including the focus on the nature of the transaction or dispute and pointing out that contractual relationships were not essential.

[15] Mr MacDonald, for the pursuer, stressed the importance of the nature of the transaction, rather than the nature of the relationship of the parties to it. He referred to Rankin's Trustees, a decision of the late Lord Macfadyen in the Outer House.

[16] The facts of the case are that the permanent trustee of a bankrupt sued the bankrupt's solicitor who had acted for her in her capacity as executrix of the estate of her late father. The trustee sought payment by the defenders of a sum equal to the debtor's share of her late father's estate on the basis that that share vested in the pursuer as permanent trustee and that the defenders had wrongfully paid the share to the bankrupt, despite having knowledge of her sequestration. The defenders pled that the action was incompetent on the basis that the action "neither arises out of, nor is concerned with a transaction or dispute of a commercial or business nature". They submitted that the question in issue was a matter of succession which did not fall within the scope of the commercial rules. The trustee submitted that the dispute in the present action was a matter of the law of insolvency, not of succession, the substantive issue turning on the interpretation and application of Section 32(6) of the Bankruptcy (Scotland) Act 1985. An issue arising out of the law of insolvency was, in the broad sense, relevant for the purposes of Rule 47.1(2) namely a dispute of a commercial of business nature.

[17] Lord Macfadyen accepted the pursuers' contention that the reference to "any transaction or dispute of a commercial or business nature" was intended to be of broad scope. He regarded the substantive issue in the case as being properly characterised as a matter of insolvency rather than of succession, and had "no difficulty in holding that a dispute which turns on an issue of the law of insolvency is likely to be in the relevant sense a dispute of a commercial or business nature, and that the substantive issue in the present case is of that nature." He therefore held that the action had been competently brought as a commercial action.

[18] The approach of Lord Macfadyen in that case carries very great weight. I accept his view on the matter. I accept Mr MacDonald's submission that the relationship between the parties to the contract is not the most important matter. The most important matter is the underlying nature of the transaction or dispute itself. Is it a transaction of a commercial or business nature? That is the criterion laid down in the Rules. Viewed from the point of view of a pursuer that is in the business of building developments of dwellinghouses and then selling the houses the missives seem to me to be very much of a commercial nature. It is in fact the central commercial purpose of its business. I do not consider that it is relevant that the defenders are not, in any way, involved either with the pursuer or on their own in the business of building housing developments or supplying materials or labour for that purpose, or in selling the houses.

[19] The construction for which the defenders contend, although they did not expressly say so, is clearly based to an extent on the definition of a "consumer contract" in Schedules 1, 4 and 8 of the Civil Jurisdiction and Judgment Act which in turn had its origin in the original Brussels Convention on Jurisdiction etc of 1968, which is effectively repeated in the Unfair Terms in Consumer Contract Regulations 1994. That definition has its origin as part of a code of jurisdiction intended to ensure uniform rules across the European community for the allocation of jurisdiction in all sorts of situations. The rule in respect of consumer contracts is intended to provide a benefit to a consumer so that he can himself sue and can ordinarily only be sued in the state of his own domicile or, within the UK, within the appropriate part of the United Kingdom or, if that part is Scotland, in the appropriate Sheriffdom. There is nothing in the rules relating to jurisdiction to indicate as a matter of substantive law there is a special class of contracts known as consumer contracts, far less that a contract falling within that class could not also be a commercial contract or give rise to a dispute of a commercial or business nature

[20] The decision of Sheriff Taylor, as he then was, in Bird Semple v Quayle to which I was referred to by the defenders was a decision on jurisdiction under the 1982 Act, not on the subject matter competency of the commercial court.

[21] It would in my opinion be a pity if the Commercial Cause Rules were seen to operate to exclude their use by individuals, not themselves in business, who had entered into contracts with large trading entities.

[22] In his note to the Court of Session Rules, Sheriff Morrison comments that "It is unlikely that a consumer contract would ordinarily be treated as a commercial action. The new procedures are not intended to resolve disputes between a commercial organisation and a lay purchaser. Such an action would probably be withdrawn from the commercial role under new Rule 47.9 if a motion were made to that effect. An exception would be where it could be demonstrated, for example, that the case turned on interpretation of a standard commercial document the construction of which was important not simply to the case in question". I consider that Sheriff Morrison was referring to the expected use of the commercial court, and was not trying to lay down definitive boundaries to the subject matter jurisdiction of the commercial judge. Although the passage I have quoted is taken from the November 2008 release of Parliament House Book, my recollection is that Sheriff Morrison's note was written well before that, and before Lord Macfadyen's comments in section F of Court of Session Practice referred to in paragraph [9] above were published

[23] I do not consider that the passage in Sheriff Morrison's commentary in any way supports the defender's contention that an action between a commercial organisation and a lay purchaser cannot competently be brought under the Commercial Cause Rules.

[24] I am satisfied that the scope of the phrase "any transaction or dispute of a commercial or business nature" is wide enough to include a claim by a person in business against a customer where the dispute arises from the pursuers' business, and equally that it would be wide enough to cover a claim brought by that customer against the commercial entity. Whether such an action, once brought, should stay there would be a matter for decision in the light of the relevant circumstances of the case.

[25] If however it is relevant to look at the nature of the defender in an action to determine whether the transaction is of a commercial or business nature or not, Mr MacDonald pointed out that in each of the three actions the pursuer offers to prove that the defender is not merely purchasing the property for the purposes of his personal use, as "a consumer" might but was buying the property in order to obtain income from it in a business sense, for what is now commonly known as "the buy to let market". These averments are admitted in the Cruikshank and Kerr cases but not by Mr Ritchie. He submitted that the nature of the use the defender intended to put the property to is commercial use in the sense that the property is to produce profit in the form of a return on investment for the purchaser. I accept that argument. I do not consider that it is open to someone to purchase a property to add to his stock of properties for the purpose of generating income in his business of letting properties (however ancillary to or divorced from his principal occupation) and then say, because that business is different from the seller's' business of building property to sell, that the transaction is not of a commercial or business nature. In the cases of Mr and Mrs Cruikshanks and Mr Kerr I consider that their proposed use of the properties whether looked at in conjunction with the pursuer's business purposes or in isolation from them forms another reason for holding that the transactions were of a commercial or business nature. Had it been necessary to do so I would, before answer, have allowed a preliminary proof on this aspect in Mr Ritchies case

[26] I also accept that there is force in Mr MacDonald's submission that the terms of rule 40.1(2)(b), namely ""commercial action" does not include an action in relation to consumer credit transactions" would not be necessary if all consumer transactions were in any event excluded.

[27] On all of the matters argued before me therefore I find for the pursuer and have repelled the defender's preliminary pleas.

[29] Had I considered that the actions had been incompetently raised as commercial actions on the grounds that they did not arise out of, or were not concerned with, any transaction or dispute of a commercial or business nature, the defenders asked that I dismiss the action. That was also the remedy sought by the defenders in the case of Rankin's Trustee v H C Somerville & Russell. In that case, Lord MacFadyen, having held that the action was properly raised as a commercial action, reserved his opinion on what the procedural consequences would have been if he had not so held.. The defenders argue as did the defenders in Rankin's Trustee under the similar RCS rule that if the action was not a commercial action within the meaning of Rule 40.1 then the provisions of Rule 40.6 which allow a sheriff to appoint a commercial action to proceed as an ordinary action simply do not apply because none of the commercial action rules are available in respect of a case which does not fall within the ambit of Chapter 4. I similarly reserve my opinion on that matter, it being unnecessary to express one. I would however observe that the remedy of dismissal seems to me to be an extreme remedy in a situation such as this. The rules in respect of commercial actions in the sheriff courts are merely part of the wider Ordinary Cause Rules. If there is merit in the defenders' argument and the actions should have been raised without the words "Commercial Action" it may be that an application could be made under the dispensing power contained in Rule 2 to put the case into the ordinary court.

[30] As the pursuers have enjoyed complete success in respect of the matter debated, I have found them entitled to the expenses of the debate.