Scottish Sheriff Court Decisions

(A200/09)

JUDGMENT OF

SHERIFF PRINCIPAL EDWARD F BOWEN QC

in the appeal

in the cause

GEORGE WIMPEY WEST SCOTLAND LTD

Pursuers and Appellants

against

ALAN JOHN HENDERSON

Act: Cheyne, Advocate, instructed by Macdonald, Solicitors

Alt: Bovey, QC, instructed by Gillespie McAndrew, Solicitors

EDINBURGH, 11 October 2010

The Sheriff Principal, having resumed consideration of the cause, varies the sheriff's interlocutor dated 1 March 2010 only to the extent of repelling the fifth plea in law for the defender in the principal action; quoad ultra refuses the appeal and adheres to the said interlocutor complained of ; reserves all questions of expenses.

Note:

1. At first sight this action appears to be a simple one in which a house builder, seeks damages from a purchaser arising out of the latter's failure to pay the purchase price for subjects known as plot 38 Ferry Village, Phase 2 Renfrew. The pursuers contend that they were able to resell the subjects only at a price substantially less then the defender contracted to pay, and seek payment of the difference (£98,000) together with a sum said to be due by way of interest.

(signed) E Bowen

2. The contractual position of the parties is, in point of fact, not quite so straightforward. It appears from what is said in the pleadings that some form of commercial relationship existed between the pursuers on the one hand and a group of investors, of whom the defender was a member, on the other. The investors purchased multiple properties from the pursuers, paying for them by way of borrowed money. It is a matter of admission by the pursuers that in December 2007 they wished to have plot 38, and other properties, appear as "sold" in their accounts. It is clear that towards the middle of that month some pressing negotiations, primarily involving e-mail exchanges, took place between a sales director of the pursuers and the defender and another member of the group of investors. The objective of the pursuers was to secure bargains for the sale of properties which at least gave the appearance of "done deals". That was achieved in respect of plot 38 by virtue of an exchange of missives between the defender's agents and the pursuers' company solicitor on 21 December 2007. Certain features of that exchange have the hallmarks of, at the very least, seasonal flurry, with consequent inattention to detail.

3. The action is founded on the missives, and the position which the defender now adopts in answer is twofold. First, he contends that the missives do not accurately, or properly, reflect the agreement between the parties. He says that the true intention of the parties was that the property was to be the subject of revaluation early in 2008 and that, in certain circumstances, the price would be revised or the transaction aborted. In the light of that he seeks rectification of the missives to reflect that understanding. He further contends that the pursuers are personally barred from seeking damages on the basis now claimed by virtue of certain indications which were given to him and in the light of which he authorised the conclusion of the bargain in terms of the missives. Following debate in which the relevancy of the defender's averments was challenged, the sheriff allowed a proof before answer.

4. Three broad submissions were advanced to the sheriff on behalf of the pursuers. First, it was submitted that the rectification sought by the defender did not reflect the common intention of the parties as indicated on a proper reading of the e-mails. Second, it was argued that the court was not entitled to have regard to the e-mails in construing the terms of the contract as set out in the missives; and third it was maintained that there were no relevant averments of personal bar because the representations contained in the e-mails did not constitute statements or assertions of fact. The sheriff concluded in respect of the first argument that the defender had "averred sufficient to justify enquiry" and that if there was to be an enquiry it would be appropriate and competent to have regard to the e-mails. He had some difficulty in understanding the third submission (a difficulty which I share) and declined to regard the averments supporting the case of personal bar as irrelevant.

5. The defender founds on the terms of three e-mails which are narrated in the pleadings. They were all sent by Michelle Logie, a sales director of the pursuers to the defender and a fellow investor. The first dated 10 December 2007 states:

"I appreciate that you are currently unable to have the 46 plots in Block B Phase 2 Ferry Village valued at the moment, primarily due to the completion dates being approximately 10 months away which I understand means that you are unable to secure funding as the date of entry is outwith the shelf life offer of loan.

With this in mind I want to give you some reassurance that should the circumstances arise that there are difficulties with the valuations we will find a resolution one way or another and I suggest that against this background I would like to have a "gentleman's agreement" that we will have the valuations carried out in the New Year with a view of having them all back early Feb which will be the basis of any negotiations (if need be). I just want to give you the comfort that in concluding missives now will still allow further negotiations should the valuation necessitate this."

On 19 December she stated that in the event that exchange bonds were not accepted but missives had been concluded:

"I would take the view of should this happen then we re-market the properties. If the question is will we come after you then I can give assurance that we won't. All I need is enough notice, ie as early in the New Year as possible to remarket. Hope this helps".

On 21 December she wrote:

We are trying to find the best way to conclude the missives for the 46 plots at FV. The statement TMG want to insert is along the lines of if all exchange bonds are not in place by the end of Jan 08 then either party can walk away - this, unfortunately, does not count as a concluded missive and as such cannot be booked as a sale. Could we agree the following to allow missive to be concluded today; if all exchange bonds are not in place by 31.1.08 George Wimpey will reserve the option to resile from the bargain on the basis of "on those plots without a bond there will be no penalties due by either party".

I can also agree the following.

Should the situation arise that all bonds are in place and should the properties not achieve the values required (that is the value or closest values to those set out in the missives within 5%) an agreement will be reached by both parties where the result could be that GW will remarket all or some of the properties, in effect we would resile from the missives at no penalty to the purchaser.

Hope this alleviates your concerns and we are able to proceed on this basis".

The fellow investor replied to Ms Logie's e-mail on 21 December stating:

"We would not have a problem with this arrangement".

6. In view of the submissions made to the sheriff and subsequently rehearsed before me, it may be important to reach at least a preliminary view as to what the terms of these representations by Ms Logie meant. In my view they contain both what might be described as an indication of the "underlying" position (or "gentleman's agreement"), and a quite distinct proposal as to the form which the missives might take in order to create the impression of a concluded bargain. It is important to bear this distinction in mind. The underlying position was simply that the property, or properties, would be valued early in 2008 and if the valuation did not produce the agreed price (within 5% of variance) the deal would be re-negotiated. That is the only reasonable interpretation of the terms of the opening e-mail of 10 December.

7. The situation becomes slightly more difficult to understand because of reference to the "exchange bonds". Whatever that term meant the availability of an exchange bond obviously depended on a valuation of the property. In consequence, there were three possible situations which might arise at the end of January 2008 viz:

(1) No valuation, therefore no exchange bond;

(2) A valuation giving a price outwith the 5% range of variance of the originally agreed, and an exchange bond "in place" to reflect that; or

(3) Valuation reflecting the agreed price, and exchange bonds "in place" based on those valuations.

The e-mails of 19 and 21 December indicate that in the event of either of the first two situations arising the pursuers would, if no revised agreement could be reached, re-market the properties.

8. It was clearly acknowledged by Ms Logie that any agreement which reflected that understanding would not fall to be regarded as a true sale. What was therefore proposed was that the bargain would appear to be conditional on availability of the exchange bonds by 31 January 2008; if they were not available the pursuers would have the right to resile. That proposal was accepted as the form in which the bargain might appear in the missives; it is a quite distinct arrangement from the "gentleman's agreement".

9. "TMG" refers to Turner McFarlane & Green, the defenders' solicitors. On 21 December 2007 they sent a formal letter to the defenders offering to purchase plot 38. That offer refers to an annexed pro forma offer which appears to be in a standard form prepared, no doubt, by the pursuers' legal department for completion by prospective purchasers. It contains a detailed list of terms and conditions. The second paragraph of those conditions makes reference to payment of a deposit on conclusion of the missives or provision of an insurance backed deposit guarantee bond. It also makes reference to "the reservation fee". Turner, McFarlane & Green's offer stated that this condition shall be deleted "with the exception of the final paragraph thereof". It proceeds to state "The purchaser shall apply for and make payment of the premium in respect of the exchange bond. The certificate in respect thereof shall be forwarded to you immediately upon receipt. In the event that the said certificate is not received by us on or prior to 31 January 2008 then the seller shall be entitled to resile from the contract to follow hereon with no penalty being due to or by either party". This offer was accepted on the same date.

10. The sheriff had some difficulty in making sense of the missives and this is unsurprising. The final paragraph of the second condition, which was not deleted, makes reference to it being an essential condition of the missives "that the said deposit or the said deposit guarantee bond is delivered to you on or before the date of the conclusion of the missives". It is wholly unclear why this remained when the first part of the condition was deleted. Moreover, the term "exchange bond" is not explained; it is not clear whether the exchange bond was meant to refer to a guarantee bond for the whole price or a guarantee bond for the deposit. It is nevertheless fair to conclude that the revised condition 2 in the offer reflected what was proposed in the e-mails as to the form in which the bargain might appear.

11. The nature of rectification sought by the defender in terms of the Crave is as follows: "For rectification of the missives for the purchase of plot 38 Ferry Village Phase 2, Renfrew dated 21 December 2007 by insertion in the letter of 21 December 2007 from Turner, McFarlane & Green after the paragraph no 1 the following: "2(a) The seller will have a valuation of the property carried out by early February 2008; (b) If the property is valued at more than 5% less than the purchase price agreed in the missives the parties must seek to re-negotiate the price; and (c) In the event that the parties cannot agree a re-negotiated price for the property the seller may remarket the property but in any event the purchaser will be released from the missives without liability to the seller".

12. The submission advanced to the sheriff, and repeated before me, was to the effect that in seeking rectification in these terms the pursuers had not addressed the issue of the need for exchange bonds to be in place. Any agreement relating to re-valuation, it was contended, was dependant upon "exchange bonds being in place"; it was only when that occurred, and the properties did not reach the required level of valuation, that the agreement to re-value took effect. The defender had not sought to reflect that in the crave for rectification and indeed did not offer to prove that an exchange bond was in place for plot 38.

13. In my judgment the sheriff was correct to reject this argument. He observed: "In effect what the defender is saying is that what I might describe as the valuation parameters were not dependent upon the exchange bonds. Whatever may have been the position as to "acceptance" of the exchange bonds, if the valuations fell out with the relevant parameters the transaction fell to be re-negotiated." In my view that states the position concisely and accurately. On my analysis of what appears to be said in the e-mails the fundamental agreement was that the property would be re-valued if the valuation level was not reached. The defender seeks rectification to reflect that, and the question of the need for exchange bonds is neither here nor there.

14. I entertain some reservations, and express no concluded view, on the question of whether a party, having agreed to enter into missives which do not accurately reflect what he contends to be the true agreement, can then seek rectification of them. The point was not argued in that form and I express no view on it. Be that as it may, the true nature of this case may well be one simply of personal bar. As the sheriff put it: "What the defender says is that the pursuers are barred from insisting upon their rights pursuant to the missives because, by sending the e-mails referred to, in the context of the commercial relationship between the parties, they have behaved in a way that is inconsistent with the exercise of the rights set out in the missives". He recorded an argument by the pursuers that the e-mails "do not contain an assertion or a statement of fact", but found difficulty in accepting that proposition. Counsel for the pursuers put the matter in a slightly form before me. He said: "There is nothing in the e-mails that can be construed as unequivocally referable to the pursuers giving up their rights to recover their loss". I have no difficulty in disagreeing with that submission. The terms of the e-mails - in particular that of 19 December - are clearly open to the interpretation that the pursuers would not "come after" the defender if the valuations fell short of the mark.

15. In all the circumstances I conclude that the sheriff was correct to allow a proof before answer in this case. It was accepted by counsel for the defender that there were no averments in support of the fifth plea-in-law in the principal action (which relates to misrepresentation) and that plea should be repelled.