Scottish Sheriff Court Decisions

SHERIFFDOM OF LOTHIAN AND BORDERS AT EDINBURGH

 

A200/09

JUDGEMENT   of   SHERIFF WILLIAM HOLLIGAN   in the cause   GEORGE WIMPEY WEST SCOTLAND LIMITED, Unit C Ground Floor Cirrus Building, Glasgow Airport Business Park, Marchburn Drive, Abbotsinch, Paisley, PA3 2SJ   Pursuers   against   ALAN JOHN HENDERSON, 4/16 Western Harbour Terrace, Edinburgh EH6 6JQ Defender

 

Act: Cheyne, Advocate, instructed by Macdonalds

Alt: Bovey QC, instructed by Gillespie McAndrew

 

Edinburgh 11^th October 2011

 

The Sheriff having resumed consideration of the cause finds in fact:-

 

[1] The parties are as designed in the instance. The pursuers are house builders. The defender is self employed.

 

[2] The defender is involved in the business of property investment.

 

 

[3] The pursuers were engaged in the construction of units at Ferry Village, Renfrew ("the development"). The pursuers had been involved in the development since 2003. The development consisted of the construction of 284 units.

 

[4] The defender and the pursuers had engaged in property investment transactions on at least three occasions prior to the one which is the subject of the present action. Of those three on at least two occasions the pursuers and the defender and/or parties on whose behalf the defender was negotiating entered into contracts for the purchase of certain units at the development. In one of those transactions the valuation of the property was such that it led to a renegotiation of the price.

 

[5] The defender and Ronald Neish were business associates. They did not enter into a formal business arrangement with each other. Together they entered into negotiations with the pursuers to purchase for themselves, or on behalf of other persons ("the investors"), units at the development. Had the negotiations proved successful the defender would have received a fee from those investors on whose behalf he was negotiating.

 

[6] At all material times Michelle Logie was employed as a sales and marketing director by the pursuers. The defender and Mr Neish dealt principally with Miss Logie. The defender had dealt with Miss Logie on previous occasions.

 

[7] At all material times Scott Colquhuon was employed as a solicitor by the pursuers. Ian Thomson was the chief executive of the pursuers.

 

[8] In late summer 2007 Michelle Logie contacted the defender and Mr Neish to inquire whether they were interested in entering into negotiations for the purchase of units at the development. The defender and Mr Neish said they were.

 

[9] Between late summer 2007 and 21^st December 2007 negotiations proceeded for the sale by the pursuers of 46 units at the development to the defender, Mr Neish and the investors.

 

[10] The defender and Mr Neish were shown a spreadsheet by Miss Logie showing prices for the sale of the units. The price for each unit was calculated by the pursuers by reference to sums paid for units on earlier occasions.

 

[11] The price for plot 38 of the units ("plot 38") was £180,000.

 

[12] The defender proposed to purchase plot 38 in his own right.

 

[13] As the negotiations involved the purchase of a number of units the parties agreed that the prices for the sale of the units would be subject to discount.

 

[14] The discount on the price for plot 38 was 20%.

 

[15] At the time of the negotiations the 46 units had not yet been built. It was anticipated they would be ready for habitation in autumn 2008.

 

[16] To the knowledge of the pursuers, this occasion was the first occasion on which the defender and Mr Neish had bought units which were not yet built ("off plan").

 

[17] To the knowledge of the pursuers, the defender, Mr Neish and the investors proposed to borrow money to finance the purchase of the units and thereafter to rent the units out. The amount they could borrow was linked to the value of the unit.

 

[18] In or about October 2007 the defender had concerns whether the price for the units was commensurate with their size in terms of the price per square foot.

 

[19] The units could not be valued by a professional valuer until they were built.

 

[20] In lieu of paying a deposit (being a percentage of the purchase price) the pursuers invited the purchasing party to make application for an Exchange Bond.

 

[21] Neither the defender, Ronald Neish nor Michelle Logie had any prior experience of the use of Exchange Bonds.

 

[22] In order to purchase a unit, the procedure to be followed required that the individual investor complete and submit a reservation form to the pursuers. It was anticipated that the purchaser would also produce an Exchange Bond prior to the completion of the missives. The pursuers would send their pro forma missive to the purchaser's solicitor. Missives would then be completed. Entry would take place when the units were completed.

 

[23] In Exchange for payment of a premium, an Exchange Bond would be issued by the Exchange Bond company ("EIC") to the pursuers. The Exchange Bond ensured a payment by EIC to the pursuers of a sum in the event that the purchaser failed to proceed with the transaction. In that event EIC would have certain rights against the purchaser.

 

[24] Agreement in principle for the sale of the 46 units was reached in or about November 2007.

 

[25] Arrangements were put in place for each investor to make application to EIC for an Exchange Bond for each property.

 

[26] The pursuers were anxious to conclude missives for the sale of all 46 units, including plot 38, prior to Christmas 2007. They put the defender under pressure to conclude missives by Christmas 2007. They wanted to do so for commercial reasons.

 

[27] During the negotiations, prior to conclusion of the missives and to the knowledge of the parties the property market was volatile.

 

[28] In or about early December 2007 the defender instructed Turner McFarlane Green, Solicitors, ("TMG") to act on his behalf in the purchase of plot 38. He had instructed them to act on his behalf on previous occasions. Sandra Whyte was allocated to deal with the transaction. At all material times she was employed by TMG as a paralegal.

[29] By letter dated 3^rd December 2007 Sandra Whyte sent to the defender a copy of the pursuers' pro forma missives (6/20/7).

 

[30] The defender and Ronald Neish had concerns as to the purchase of the units including plot 38 on account of the state of the property market and the implications of purchasing units "off plan". They were still keen to purchase the units.

 

[31] The pursuers continued to press for the conclusion of missives. By email dated 10^th December 2007 (5/10e-f) Michelle Logie wrote to the defender and Mr Neish inter alia acknowledging the difficulties for them in obtaining funding and stating that there should be a gentleman's agreement to the extent that the pursuers would arrange valuations of the units in the New Year and that such valuations would be the basis of any negotiations should negotiations be necessary.

 

[32] The defender replied to Miss Logie on 11^th December 2007 (5/10e) stating that he will be cracking on with this tomorrow.

 

[33] The defender continued with the procedure to obtain an Exchange Bond for plot 38.

 

[34] By 18^th December 2007 Exchange Bonds were not in place for all the units.

 

[35] The defender was concerned as to what would happen if Exchange Bonds were not in place for all the units. The defender and Michelle Logie exchanged emails on the subject on 18^th and 19^th December 2007 (5/10a-b). In these emails the parties agreed that, given that most of the units did not have Exchange Bonds, if a unit did not have in place an Exchange Bond then the pursuers would take the property back and remarket it without penalty to the purchaser. Miss Logie used the words that the pursuers would "not come after" the defender.

 

[36] The defender was in contact with Sandra Whyte as to the negotiations between the parties.

 

[37] Sandra Whyte was aware that the defender wanted a condition in the missives that, if an Exchange Bond was not in place for a unit by 31^st January 2008, then either party could withdraw from the missives.

 

[38] Sandra Whyte was in communication with Scott Colquhuon as to the content of the missives. She proposed an amendment to the missives in accordance with paragraph [37].

 

[39] The pursuers were not prepared to accept the condition which Sandra Whyte proposed as to the Exchange Bonds. They did not want such a condition because a condition in which either party could withdraw from the bargain would not count for the pursuers as a concluded missive.

 

[40] The pursuers wanted a condition in which, if Exchange Bonds were not in place by 31^st January 2008 for plot 38, then the pursuers would be entitled to withdraw from the transaction at their instance.

 

[41] With the agreement of the defender, that condition was accepted. It was put into the missives. Paragraph 6/8/3 is a copy of an email sent by Michelle Logie to Ron Neish. The substance of the email was to the effect that if all Exchange Bonds are not in place by 31^st January 2008 the pursuers will reserve the option to resile from the bargain on the basis that on those plots without a Bond there will be no penalties due to or by either party.

[42] In the email referred to in paragraph [41] Michelle Logie also stated that she could agree that should the situation arise that all Bonds are in place and the property has not achieved the values required (being the values or closest value to those set out in the missives within 5%) an agreement will be reached by both parties where the result could be that the pursuers will remarket all or some of the properties. She said that, in effect the pursuers would resile from the missives at no penalty to the purchaser. She expressed the hope that this would alleviate the concerns of Ronald Neish and the defender. That email was sent by Michelle Logie to Mr Neish on 21^st December 2007. It was copied to the defender.

 

[43] Ronald Neish accepted the proposal contained in the foregoing email by his email dated 21^st December 2007 sent by him on or about 17:48 (6/8/3).

 

[44] The defender sent a copy of the emails referred to in paragraphs [42] and [43] above to Sandra Whyte at 20:26 on 21^st December 2007.

 

[45] Sandra Whyte and Scott Colquhuon knew of the discussion which Michelle Logie, the defender and Ronald Neish had had as to further negotiation in the event of a valuation which did not accord with the parameters as set out in Michelle Logie's email in paragraph [42] hereof. Neither was asked to incorporate such a provision into the missives.

 

[46] By sending the three emails referred to in paragraphs [31], [35], and [42] hereof ("the three emails") the pursuers intended to, and did, encourage the defender to enter into and conclude the missives for the purchase of plot 38 before Christmas 2007.

 

[47] Notwithstanding the missives the three emails provided a mechanism for reopening negotiations between the parties as to the price for plot 38 should a valuation or valuations of plot 38 produce a figure at variance with the purchase price by more than 5%.

 

[48] Having read the three emails the defender and Mr Neish believed that, in the event that the parties were unable to reach agreement following the events set out in paragraph [47] hereof the defender would be entitled to withdraw from the bargain without penalty.

 

[49] The pursuers and the defender concluded missives for the purchase by the defender at a price of £180,000 for plot 38 by letters both dated 21^st December 2007 (5/1 and 5/2 of process).

 

[50] Pursuant to the agreement between the pursuers and the defender referred to in paragraphs [42] and [43] hereof the pursuers organised two valuations of, inter alia, plot 38. The valuations were undertaken by qualified surveyors. The valuation of plot 38 was £132,500. Both valuations were outside a figure of 5% of £180,000. 6/1 is a copy of the valuation prepared by Graham and Sibbald dated 8^th September 2008.

 

[51] In the light of the valuations and to the knowledge of the pursuers it was not possible for the defender and others to obtain finance, inter alia, for plot 38 at the price in the missives.

 

[52] Pursuant to their agreement, the pursuers and the defender and Mr Neish entered into negotiations to enable the defender to proceed with the purchase of plot 38 but at a reduced price.

 

[53] The foregoing negotiations took place between April and October 2008. Miss Logie was involved in some of the negotiations. Mr Thomson and Mr Colquhuon were involved in others.

 

[54] The negotiations involved various proposals including sales on the open market and sales at reduced prices; the pursuers taking a second charge over the various units; a price for plot 38 in the region of £90,000 or thereby. The pursuers did not reject the defender's final proposal.

 

[55] By email correspondence between the defender and EIC the defender sought confirmation from EIC that the value of the Exchange Bond was connected to the price of each plot. Given the continuing negotiations as to the price the defender instructed TMG to return the Exchange Bond to EIC pending negotiations. 6/21/15/1, 6/21/18/5 and 6/21/16/3 are copies of the relevant emails.

 

[56] By letter dated 3^rd October 2008 (6/20/12) the pursuers notified TMG that plot 38 was ready for occupation and that entry should take place no later than 17^th October 2008.

 

[57] The defender did not respond in writing to the foregoing letter and did not take entry on 17^th October 2008 or at all.

 

[58] By letter dated 17^th October 2008 (6/20/10) the pursuers notified the defender that settlement had not taken place.

 

[59] By letter dated 21^st November 2008 (6/20/8) the pursuers notified the defender that the pursuers were resiling from the missives under reservation of their rights.

 

[60] By missive letters executed in or about December 2008 (5/3 and 5/4) the pursuers resold plot 38 to a third party at a price of £82,000.

 

FINDS IN FACT AND LAW that the pursuers are personally barred from enforcing the missives between the parties in the manner craved.

 

THEREFORE in relation to the principal action, sustains the defender's 3^rd plea in law; repels the parties' remaining pleas in law; assoilzies the defender from the craves of the Initial Writ; in relation to the counterclaim sustains the pursuers' second plea in law; repels parties' remaining pleas in law; assoilzies the pursuers from the crave of the counterclaim; on the motion of the defender certifies the cause as suitable for the instruction of senior counsel; quoad ultra reserves all questions of expenses and assigns 26^th October 2011 at 9 30am as a diet therefor at the Sheriff Court, 27 Chambers Street, Edinburgh.

 

NOTE

 

[1] This action concerns missives dated 21^st December 2007 ("the missives") in which the defender contracted to purchase from the pursuers subjects known as plot 38 Ferry Village, Phase 2, Renfrew ("plot 38") at a price of £180,000. The offer and acceptance are both dated 21^st December 2007 and are 5/1 and 5/2 of process. The pursuers claim that the defender failed to proceed with the transaction timeously (no later than 17th October 2008). The pursuers say that they resiled from the bargain and resold plot 38 to another purchaser at a lower price. They seek damages from the defender following the resale. The defender denies that he is in breach of contract with the pursuers. He says that the missives do not contain the entire bargain between the parties. In his counterclaim he seeks rectification of the missives. He also says that the pursuers are personally barred from enforcing their rights pursuant to the missives. This action was the subject of debate before me. In short, I allowed parties a proof before answer leaving all pleas standing. That interlocutor was appealed to the Sheriff Principal. With one minor amendment the Sheriff Principal adhered to my interlocutor. The matter was then remitted back for proof. Given his plea seeking rectification of the missives, the defender led at the proof. Parties had agreed in advance that the proof would exclude matters relating to quantum.

 

[2] I heard evidence from six witnesses: the defender; Ronald Neish; Graeme Stephen; Scott Colquhuon; Sandra Whyte; and Michelle Logie. There was also a joint minute of admissions directed principally to the documents. On matters of credibility and reliability I accept Mr Stephen and Miss Whyte as credible and reliable witnesses. Mr Stephen's evidence was largely related to the operation of his business as it related to this matter. With no disrespect to Miss Whyte, her role was not significant in this matter. She was not involved to any significant respect in the negotiations. Whereas I can accept Mr Colquhuon as broadly credible and reliable in what he said I did get the distinct impression that he was guarded in what he said. It did not seem to me that he was keen to volunteer any information. Miss Logie is now retired. I am of the view that she was broadly credible and reliable. My impression is that she was aware of the implications of her evidence but, as I shall explain later, she was prepared to make concessions where she thought it was right to do so and in that I consider it supported her credibility and reliability. Whereas I can accept the defender as credible I cannot accept him as wholly reliable. I refer to issues as to the square footage of the units and exactly what instructions were given to Miss Whyte. However, I do not consider that either of these is crucial. Mr Neish presented as an unhappy man who has suffered commercial misfortune. His evidence was not detailed. Whereas he was credible he accepted that his recollection on details was limited. Nonetheless, his evidence did support the defender's position that there was a gentleman's agreement.

 

[3] Much of the background to this matter is not in dispute. The defender and Mr Neish were business associates. There was no partnership agreement or other formal commercial arrangement between them. They worked together in relation to the acquisition of heritable property. The pursuer described himself as self employed, working in the field of property investment. Mr Neish is no longer in business. The defender and Mr Neish purchased property in their own name but they also carried out negotiations for and on behalf of other persons for the purchase by them of property in their name. The precise nature of the relationship between the defender and Mr Neish on the one hand, and the investors on the other, was not made entirely clear. The description "investment club" was used in the evidence. Investors were described by the defender as "clients". The defender accepted that, had the transactions proceeded, he would have received a fee from the investors. I do not consider that anything of significance turns upon the defender's relationship with the investors. However, it does highlight an important feature of this case, namely that the substance of the transaction between the parties involved not just plot 38 (the subject of this litigation) but a total of 46 units of which plot 38 was one. The defender and Ronald Neish negotiated with the pursuers for the purchase of the 46 units. Some of the units were to be purchased by the defender and Mr Neish personally, others were to be purchased by other persons on whose behalf the defender and Mr Neish were negotiating.

 

[4] Plot 38 is part of a development at Ferry Village, Renfrew ("the development"). The development had its origins in about 2003 and was to comprise a total of 284 apartments. At the time of the negotiations leading up to the conclusion of the missives in December 2007, the units in which the defender and Mr Neish had an interest (and possibly more) were not yet built and indeed were not scheduled for completion until the autumn of 2008. That was well known to all parties. The date of entry in the missives was calculated by reference to the date of the completion of the unit.

 

[5] The negotiations for plot 38 and the other units were not the first time the parties had conducted business together. Michelle Logie was employed by the pursuers as a sales and marketing director. She and the defender had been involved in three separate sets of transactions with the defender for the purchase of property. At least two of the transactions had involved purchase of units at the development. The defender described the earlier transactions as involving "bulk" purchases of units, varying in number between 12 and 40. The purchases proceeded successfully although, according to the defender, in at least one case, there was some negotiation in relation to price as a result of a difference between the price contained in the missives and the value of the unit or units. No details of this transaction were given. The business relationship between the defender and Miss Logie was cordial and constructive. As I understand the evidence, as the pursuers knew, the business model of the defender was that purchases were part of a "buy to let" arrangement. The defender would obtain finance to purchase the units in which he had an interest. Those units would then be let out by the defender or the relevant investor. A key feature of the model was that, as a result of a bulk purchase of units, the parties negotiated a discount in the purchase price. The advantages of this arrangement were mutual. The pursuers had the comfort of knowing they had secured sales of a large number of units and the purchasers acquired them at a price lower than they would otherwise have paid to the pursuers.

 

[6] Having dealt with them before, Miss Logie approached the defender and Mr Neish sometime in late summer 2007 (probably late September or October) to inquire whether they would be interested in negotiating for the purchase of units at the development. They were and negotiations proceeded. There were two features which distinguished this negotiation from previous negotiations. This was the first time the defender and Mr Neish were buying units in what they described as "off plan". The units were not yet built. Secondly, this transaction was the first time in which Exchange Bonds were utilised by any of the parties to the negotiation. For "off plan" arrangements, the pursuers usually proceeded upon the basis that a purchaser would pay a deposit of 10% of the purchase price in cash. However, payment of a cash deposit by the investors was unattractive. It involved tying up significant amounts of cash which could have been used more productively elsewhere, especially when the date of entry for the units was not anticipated until autumn the following year. In order to deal with this issue the pursuers actively encouraged purchasers to make use of Exchange Bonds. Miss Logie was specifically asked by her superiors to encourage their use. The negotiations involved the purchase of some 46 units. The purchases were spread amongst the defender, Mr Neish and various investors.

 

[7] I heard evidence from Mr Graeme Stephen as to the way in which Exchange Bonds worked. Mr Stephen was one of the founders of the Exchange Insurance Company Limited ("EIC") which specialised in such Bonds. In short, the Bond involved legal obligations between the developer (the pursuers) and EIC and separately between the purchaser and EIC. 6/20/26 is a copy of the contract between EIC and the defender. On the last page of that document is a style of the Bond to be issued to the developer together with the terms and conditions applying to the Bond. EIC was regulated by the FSA. Commercially, it was modelled upon surety Bonds but seems to have been treated, for regulatory purposes at least, as an insurance product. EIC entered into a protocol with each developer in relation to the development for which Bonds would be issued. That ensured that EIC had knowledge of the particular development and bound and obliged to the developer to adhere to certain conduct.

 

[8] In relation to this development, it was necessary that there be an Exchange Bond for each of the 46 units. Each Bond had a premium to be paid by the investor. Applications were dealt with online by EIC. Once issued, a substantial quantity of documentation was sent by EIC to the developer and to the solicitor nominated to act on behalf of the purchaser. The arrangement was that if the buyer failed to settle the transaction on the due date the developer would look to EIC to recover a sum equivalent to the deposit. EIC would, in turn, have certain rights against the purchaser. At the end of the day the provision as to Exchange Bonds, other than as part of the narrative, did not assume great significance.

 

[9] Miss Logie had a spreadsheet in relation to the 46 units which contained a price for each of them. The price was calculated by reference to prices achieved for sales of similar units in the development on previous occasions. A discount was then negotiated which in the case of plot 38 was 20%. Each purchaser had to complete a reservation form for each unit. The style of form was prepared by the pursuers. The reservation forms contained details as to the plot, price, the investor and their solicitor. The reservation form was then sent by Miss Logie to her legal department who would then issue the pursuers' standard form of missive to the purchaser's solicitor.

 

[10] In terms of negotiations it would appear that an agreement in principle was reached some time in or about November 2007. By email dated 6^th November 2007 (5/8a) Miss Logie wrote to Mr Speight of EIC saying that she had "just sold 46 units" to the defender and Mr Neish. The email goes on to say that it is imperative that we "have the clients under missive" no later than 7^th December 2007. She wanted all the Bonds to be in place to coincide with a date at or before the conclusion of missives. The defender instructed Turner MacFarlane Green ("TMG") to act on his behalf. He had previously instructed them to act on his behalf in similar transactions. The transaction was dealt with by Sandra Whyte who was employed as a paralegal. As a matter of general observation there was little evidence as to much in the way of consultation and advice between the defender and Miss Whyte. The substance of the negotiations was concluded between the principal actors.

 

[11] The missives were concluded on 21^st December 2007. It was agreed that was a Friday. It is also not in dispute that the pursuers were very anxious to have the missives concluded before the end of the year. Miss Logie accepted that she was under pressure to get the units booked as a sale and that she was putting the defender and Mr Neish under pressure to conclude the missives. In practical terms, allowing for Christmas, the last date to conclude the missives was 21^st December 2007. Miss Logie was under pressure from her superiors to have the missives concluded. An email (21/6/3) from Rinske Beattie (of EIC) to Miss Logie described Miss Logie as being in a "panic", a description which Miss Logie did not dispute given the pressures she was under at the time. It was her evidence that the pursuers wanted to be able to notify the City of London of a concluded bargain. It is also clear from the defender's evidence that he too was keen to proceed with the transaction. From his perspective, at that time, it was, as he put it, a good deal. However, it is also clear that both he and Mr Neish had concerns about the state of the property market and purchasing "off plan".

 

[12] In his evidence, the defender said that the size of the units was smaller than that of the other units sold at an earlier date. By using the earlier prices as a guide the pursuers were charging more per square foot for the 46 units than they had previously done. It followed that any valuation might well produce a lower figure. Miss Logie accepted that the defender had expressed such a concern to her but she said the defender's concerns on this issue were allayed by discussions in October 2007. In none of the correspondence to which I shall refer is there any mention of this issue and I therefore conclude that, if it had been an issue of significance, it was no longer so by December 2007. Not until the email from the defender dated 19^th June 2008 (5/17a) does it re-emerge.

 

[13] In my opinion, it is clear, that on any view of the material, there were issues in relation to two major matters: Exchange Bonds and what I will describe loosely as valuation. Put shortly, the process of obtaining Exchange Bonds was taking some time to complete. Given the intention of having the Bonds in place at or before the conclusion of the missives this was proving to be a major difficulty. Each plot required to have its own Bond.

 

[14] At this point I refer to an email sent by Michelle Logie to the defender. It is dated 10^th December 2007 and was sent at 17:09. The text of the email (5/10e and f) is as follows.

"Alan and Ron,

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 of an 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 valuations carried out in the new year with a view to 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 for further negotiation should the valuations necessitate this.

 

Please let me know if you have any questions".

 

[15] There is no dispute that the email was sent to and received by the recipients. I will refer to this as the "the first email". Michelle Logie described the email as representing the position between the parties at the time. In broad terms at least, the defender took a similar position. A number of points arise. A major issue referred to by Michelle Logie was the difficulty for the defender and Mr Neish in obtaining funding because the units were not yet constructed and that any offer of loan may have expired by the relevant date. Although Michelle Logie, in particular, referred to issues of funding, neither she nor the defender discussed in evidence the issue of the "shelf life" of loans referred to in this email. Miss Logie did accept that a valuation below the purchase price would cause the defender a problem with funding. The email was goes on to offer a proposal that, on the instructions of the pursuers, the units be valued in the New Year and that if there were difficulties with the valuations there would be a renegotiation. The words used are "we will find a resolution". The pursuers offer "reassurance" and "comfort". The context in which this email was sent is important, namely that at that time, as Miss Logie accepted, the pursuers were putting the defender and Mr Neish under pressure to sign the missives. It was also clear from the evidence of both Michelle Logie and the defender that they were discussing the volatility in the housing market at the time. As Michelle Logie put it, it was not clear whether the volatility was merely a "blip" or something more ominous and long term. In cross-examination Michelle Logie accepted that, by this email, she was encouraging the defender to enter into the missives. She seemed to accept that the "gentleman's agreement" could be considered as being a "parallel agreement" to that in the missives. The defender's position is that the email had to be read in the context of the negotiations at the time. He said he had anxieties about being tied into missives involving "off plan" purchases. He said that, by this time, he had seen the pro forma missives produced by the pursuers. That would appear to accord with the file of Sandra Whyte (see her letter to the defender dated 3^rd December 2007 enclosing "a copy of the missives received from Taylor Wimpey" (6/20/7). The reassurance being offered was in response to the defender's concerns and those of Ronald Neish. In short, he wanted to know what the position would be if the valuations which were to be done produced "difficulties". He referred to previous dealings he had had with the pursuers when similar problems arose and were resolved. Both Michelle Logie and the defender accepted (as they had to) that the email says nothing about what would happen if further negotiations failed. The defender replied to the email on 11^th December 2007 at 18:23 (5/10e) by thanking Michelle Logie for the email, saying "I believe Ron has already responded to you and we will be cracking on with this tomorrow". It was the defender's evidence that he proceeded with the transaction on the strength of this email.

 

[16] Matters did proceed. On 12^th December 2007 (6/21/1) EIC acknowledged receipt of the defender's application for an Exchange Bond. The next significant Exchange of emails, relied upon by the defender, took place over 18^th and 19^th December. The emails are set out at 5/10a to 5/10b. I do not need to set out the entire Exchange. The email of 19^th December sent from the defender to Miss Logie at 8:30am made reference to a number of plots without an Exchange Bond in place. The defender asked Miss Logie how many plots she needed "to have missived by the end of the year". She replied that "as many as possible" however if there were only 32 out of the 40 she would be "okay with this". The defender then replied at 9:08am saying:

"We will get as many as possible through although some of the Bonds are still at underwriting at this stage.

In the unlikely event that they are not accepted what can we do if they have concluded a missive?"

Miss Logie responded as follows at 9:27:

"Alan,

I would take the view of (sic) should this happen then we remarket the properties. If the question is will we come after you then I can give assuarnce (sic) that we wont, all I need is enough notice, ie as early in the year as possible to remarket. Hope this helps."

I will refer to this as "the second email". The defender responded saying that he would instruct his solicitors and expressed the hope that he could get 32 units processed with the other 8 "on Friday". I have set out the text of the emails because there is a difference between the defender and Mr Neish on the one hand and Miss Logie on the other. The key passages are contained in the email from Michelle Logie dated 19^th December sent at 9:27. The matter can be put shortly. The pursuers say that, read in context, the string of emails all refer to the situation which might arise should missives be concluded for all properties but all of the Exchange Bonds not be in place. The pursuers say that, in that situation, they would remarket the properties without an Exchange Bond in place and would not pursue the purchaser. The defender and Mr Neish say that the reference to "not coming after you" was of more general application and was part of the general comfort and reassurance given to the pursuer. In cross-examination Michelle Logie accepted that a more general interpretation of "not come after you" beyond the matter of Exchange Bonds was "not unreasonable". I will return to this.

 

[17] The formal missives (5/1 and 5/2) comprise a formal letter from TMG, addressed to George Wimpey UK Limited offering to purchase plot 38. (No point was taken about this.) I will refer to this as the "covering letter". That letter incorporated terms and conditions contained in a pro forma attached thereto. That pro forma set out the pursuers' standard terms and conditions which, from other evidence in the case, was sent out by the pursuers to the solicitors for the purchaser after completion of the reservation form. The covering letter contains a qualification to condition 2 of the pro forma. The qualification deletes paragraph 1 of the condition and substitutes new text. The result of this qualification is that clause 2 reads as follows:-

"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^st 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.

I/We acknowledge that this is in addition to any reservation fee that I/We have paid you. It is 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 conclusion of the Missives. If the deposit is not paid timeously or the deposit guarantee Bond is not delivered timeously you shall be entitled at your sole discretion to treat me/us as being in material breach of Missives and to terminate the Missives and resell the said dwelling house without prejudice to any rights or claims competent to you arising from my/our breach of contract including all losses, damages and expenses sustained as a result of my/our breach of contract including interest on the purchase price, and all other sums due by me/us in terms of the missives until the contractual date of entry under any resale. No notice to this effect shall require to be sent to me/us. You will also be entitled to retain any reservation fee and apply towards the cost of loss on a resale."

 

There was no evidence as to how the covering letter was sent to the recipient or the acceptance. The covering letter contains a fax number on it. Both offer and acceptance are dated 21^st December 2007. The reply from the pursuers' solicitor, Mr Colquhuon, accepts the offer and holds the bargain as concluded. There was no evidence as to when these documents were received by the addressees. The covering letter seeks to deal with the issue of Exchange Bonds and what might happen should they not be available by a particular date but nothing is said in relation to valuation and the possibility of further negotiation.

 

[18] It is necessary to go back to the days leading up to 21^st December 2007. An important part of the defender's case is an email sent by Michelle Logie to Mr Neish and copied to the defender. The email is found at both 6/8/2 and 6/8/3 (the text in both is the same). Importantly, the email is not dated nor is there any time of transmission. I will refer to this as "the third email". The full text of the third email is as follows:-

"Hi Ron,

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 (sic) 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 values or closest value 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.

Look forward to hearing from you."

Mr Neish replied to the email on 21^st December 2007 at 17:48 in which he said (6/8/2)

"Hi Michelle,

Would not have a problem, with this arrangement, sorry for delay but just back in.

Ron".

 

[19] Before I turn to the text of the three emails themselves I return to the question of the state of mind of the relevant witnesses. It is clear from the evidence of Sandra Whyte and Scott Colquhuon that the wording in the covering letter was that proposed by the pursuers. Miss Whyte had discussed alternative wording with a solicitor in her office. They wanted wording to the effect that if the Exchange Bonds were not in place by 31^st January 2008 then either party could terminate the contract without penalty. That was not acceptable to the pursuers. Scott Colquhuon and Michelle Logie discussed the wording to be inserted. Miss Whyte and the defender accepted that they were in contact with each other by telephone. There was nothing of substance referred to or available in the file to record whatever these discussions may have been. The defender says he kept Miss Whyte up to date with the negotiations with the pursuers. There is in her file on what is 6/20/3 (the pro forma offer of the pursuers) a notation by Miss Whyte "20/12 ok to conclude". She said that was her note that on that date she had instructions from the defender to conclude the bargain. On exactly what terms was not clear and the notation comes between the second and the third email. Miss Whyte was surprised at the suggestion that she was asked by the defender to include within the missives the condition setting out the so called gentleman's agreement. She was clear that, had she been asked to do so, she would have attempted to have incorporated such a condition. She did say that she was aware of the existence of the gentleman's agreement but not of its detail. As far as the emails said to be copied to her on 21^st December she accepted that she probably would have received them. The evidence of both Scott Colquhuon was, in relation to the condition as to the Exchange Bond, broadly similar to that of Sandra Whyte. Like Sandra Whyte, he also was aware of the gentleman's agreement but he had no instructions to include that in the missives. The evidence as to exactly what Miss Whyte understood her instructions to be is unsatisfactory. The relevant file was produced but there was no evidence of any relevant file notes or record of communications as to what may have taken place. As I have said, there is limited evidence as to some attempt to adjust the missives on the issue of the Exchange Bonds but there is little, if anything, on the subject of the negotiations should valuation of the units fall outwith the figure of 5%. Given the obvious importance of the matter to the whole transaction, had Miss Whyte been given clear instructions to adjust the missives to that effect I would have expected her to have remembered it and for there to be some record of it having taken place. The defender seemed to think that he had given such instructions but I am unable to conclude that if he did so, when he did it and in what terms. I will return to the matter of the timing of the third email.

 

[20] The defender was asked whether he had ever seen a copy of the completed missives. Somewhat surprisingly, his reply was that he had done so only as part of this litigation. He also said that in previous transactions he had not seen the missives. By letter dated 21^st December 2007 (6/20/20) Miss Whyte wrote to the defender sending him a copy of the covering letter. Whereas the defender did not dispute receiving the letter he said there were no enclosures. Miss Whyte had no reason to think that she had not sent the enclosure. In any event, even if he did not receive the enclosures, there is no evidence that he ever contacted Miss Whyte to ask for a copy of the missing enclosures.

 

[21] Returning to the emails referred to in paragraph [18] above, exactly what provoked Michelle Logie to send the email to Mr Neish rather than the defender was not made clear in the evidence. I do not think anything turns upon the latter point. The evidence is to the effect that the defender and Mr Neish worked closely together and their state of knowledge was a shared one. Furthermore, the defender forwarded the email to Miss Whyte at 20.26 the same day. Although Miss Logie could not be certain, she thought she would have sent her email on 21^st December. It seems to me more probable than not that that is when she did send it. There had already been exchanges on 19^th December to which I have referred and it is clear that the reply, when it came, was sent on 21^st December. As Michelle Logie accepted, her email falls into two parts; the Exchange Bonds and what I will call the valuation issue. In relation to the first issue, the text (provided to Michelle Logie by the legal department) did find its way into the missives along the lines of that proposed by the pursuers. The second did not. Unlike the first email, the third email does make reference to a specific figure as to a fall in value namely 5%. The email ends, "hope this alleviates your concerns...". That is a reference to the concerns of the defender and Mr Neish. Again, both the defender and Michelle Logie accepted that this email says nothing as to the rights and liabilities of the parties should there be no agreement between the parties following a failure in valuation along the lines of that set out in the email.

 

[22] Miss Logie, the defender and Mr Neish were asked about these emails and what they understood them to mean. I should say that, at one point in their evidence, the defender and Mr Neish seemed to be suggesting that may have been more which had taken place by way of correspondence, meetings and phone calls to support their position. If there was, there was no evidence of it. However, they both said that the context in which the emails took place was important. At the end of the day all three witnesses accepted, as they had to standing the text, that none of the emails said, in terms, that if negotiations failed then the defender would be entitled to withdraw from the bargain at no penalty. There was a provision which allowed the pursuers to withdraw at their option should the Exchange Bonds not be in place by 31^st January 2008 but there was no such provision in relation to the valuation issue. However, it is clear from the evidence that the parties did mean something in these emails and in particular the valuation issue. Miss Logie quite fairly accepted that she was aware of the defender's business plan and his reliance upon funding; she knew the importance of valuation to such funding; she knew the defender and his investors intended to "buy to let"; this was the first project on an "off plan" basis with delayed dates of entry for units not yet built; she was also aware that the pursuers were putting pressure on the defender and Mr Neish to conclude missives; she was also aware as to the volatility in the market. In that respect, I agree with the defender and Mr Neish when they say that the context of the emails was important. Then there is the language of the emails: "gentleman's agreement"; "reassurance"; and "comfort". Miss Logie accepted that the words were designed to give reassurance to the defender and to encourage him to enter into the missives which is what he did. Both the defender and Mr Neish understood that, in the event that negotiations broke down because of the valuation issue, they would be able to walk away from the bargain without penalty. On any view of the evidence, both parties accepted that the missives did not contain the whole picture between them. Even Mr Colquhuon accepted an awareness of the valuation issue. Initially at least, Miss Logie said that, if negotiations failed then the missives would rule. However, in cross examination she modified her position. It was put to her that, from a commercial perspective, for the defender and Mr Neish to believe that, if the negotiations failed, they could walk away without penalty was a reasonable thing for them to believe. In my opinion, when confronted with the logic of the pursuers' position (namely a failure in negotiations would lead to a reversion to the missives and the price of £180,000) Miss Logie seemed less clear as to her position. In my view, she could see that such a position made no sense at all for the defender, particularly in the context which I have outlined above.

 

[23] The pursuers did arrange for valuations of the units, including plot 38. The valuations were undertaken by professional surveyors: DM Hall and Graham and Sibbald. In short, not only did the valuations for plot 38 fall outwith the 5% range, the valuation produced a figure of £132,500 which, when compared to the purchase price of £180,000, represented a difference of approximately 30% (6/1 is a copy of the Graham and Sibbald valuation).

[24] The parties did enter into negotiations following the valuations. The valuation from Graham and Sibbald was dated 8^th September 2008. There was evidence of a valuation from DM Hall but there was no evidence as to when that took place. In my view, the negotiations took place pursuant to the arrangements which had been reached in the emails. Mr Colqhoun was aware of a general understanding that there would be further discussions although he seemed less clear as to how he became aware of this. Miss Logie was clear and so much is borne out in her email to Frank Speight of EIC dated 29^th April 2008 (5/15a) in which she said "what we had agreed with the investor at the outset was that if we had a valuation issue then we would renegotiate the deal, so all is not lost". Mr Thomson referred to the "gentleman's agreement" and to further negotiation in his email to the defender of 17^th June 2008 (5/17b). The defender was a similar view.That no express reference was made to the earlier emails is, in my opinion, irrelevant. Reference was made in the evidence of the defender and, to a lesser extent, in the evidence of Miss Logie, to a series of emails and general discussions between the period from April to October 2008. (5/14b, 5/15a, 5/17a, 5/17b, 5/18b and 5/18c). I do not think it is necessary to go into detail. It is sufficient for me to say that this material and the evidence of the witnesses discloses that the parties did enter into negotiations about the purchase price for the units (not just plot 38). Both parties were aware, given that the defender and the other investors were borrowing funds to purchase the units, a significantly reduced valuation meant that they had real difficulties in raising funds. On the other hand a significant reduction in price produced difficulties for the pursuers. Various meetings took place and various proposals were exchanged. 5/17b and 5/17a , being emails exchanged between the defender and Mr Thomson illustrate the options being considered, including the pursuers taking a second charge over the units. By July, Miss Logie was proposing to the defender prices in the region of "mid to high 90's" which she understood would fit the defender's business model. The defender replied that he required more detail (5/18b). The correspondence seems to end at or about that time. Both the defender and Miss Logie accepted that negotiations continued into October 2008. The defender says he put forward a proposal based on particular figures which was never expressly rejected by the Miss Logie, something which I have her noted as accepting. There was in October mention by the pursuers of another investor who might be interested but the evidence on this was not detailed.

 

[25] Seemingly out of the blue, by letter dated 3^rd October 2008 (6/20/12) Mr Colquhuon wrote to TMG to notify them that the unit was now ready for occupation and calling on the defender to settle the transaction no later than 17^th October 2008. The date passed and no settlement took place. By letter dated 17^th October (6/20/10) Mr Colquhuon notified TMG that settlement had not taken place. By letter dated 21^st November 2008 (6/20/8) Mr Colquhuon then resiled from the missives notifying the defender that, without prejudice to the pursuers' rights, the unit would now be resold. From Mr Colquhuon's evidence the unit was sold at a price of £82,000. (5/3 and 5/4) in or about December 2008. From the defender's evidence the unit was again resold at a price of £132,000. As I am not concerned with matters of quantum I make no finding thereanent. It is notable that in all this correspondence there was nothing in the emails from the pursuers that, in the event of the negotiations failing, they would be looking to enforce the missives. Although the defender accepted that he had received copies of the various emails from the pursuers referred to above he did not instruct TMG to reply on his behalf and he continued to meet with the pursuers.

 

Submissions for the pursuers

 

[25] For the pursuers, Mr Cheyne submitted that there was no real challenge by the defender to the termination of the contract in or about October 2008 as spoken to by Mr Colquhuon. In order to avoid liability, the defender relies upon two propositions. Firstly, the contract was not to be found in its entirety in the missives. The true content is said to include the material in the three emails. As a result, the defender was entitled to resile from the bargain without penalty. To achieve that the defender requires that the missives be rectified. Secondly, the pursuers are personally barred from insisting upon their claim in the light of statements made by them in the course of the three emails. In Mr Cheyne's submission there was no merit in either proposition. Mr Cheyne referred to section 8 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 ("the 1985 Act"). Prior to the enactment of section 8 of the 1985 Act there were remedies available to a party who sought to have documents rectified but the remedies conferred at common law were found to be unsatisfactory. The 1985 Act provided more flexible remedies. Section 8 has been referred to in a number of authorities. Mr Cheyne referred in particular to the case of Renyana-Stahl Anstalt v McGregor 2001 SLT 1247, a decision of Lord MacFadyen. In particular, Mr Cheyne relied upon paragraph [35] of Lord MacFadyen's opinion which, he submitted, contained a useful summary of the elements of section 8. In Mr Cheyne's submission, the defender failed in most of these elements and, in particular, on the question of common intention. On the evidence it is clear that neither party turned their mind to what would happen if negotiations failed. Lord MacFadyen analysed section 8 as comprising a number of elements: (1) there must be a "document" which the petitioner seeks to have rectified by order of the court; (2) there must be an earlier "agreement"; (3) that agreement must disclose that "at the date when it was made" the parties to it possessed a "common intention"; (4) the document must have been "intended to express or give effect to" the agreement; and (5) rectification will be available if it is shown that the document fails to express accurately the common intention mentioned in (3) above. In this case there is a document namely the missives of 21^st December 2007. There was however no "earlier agreement". Mr Cheyne then referred in detail to certain parts of the record and the counter claim which, in his submission, highlighted a number of significant differences in formulation as to just what the defender said the agreement actually was. In relation to the evidence, the defender was rather vague. He had had previous dealings with the pursuers and Miss Logie. He was under pressure to complete the missives by the end of the year but he himself was equally anxious to buy the unit or units. Both parties were keen to conclude missives. He was not being pushed into negotiating a sale by an insistent seller. In his evidence he said that he was relying upon the three emails. There was no real evidence of any other communication by telephone or otherwise, from Miss Logie. One should therefore look at the emails to see if the defender was justified in his proposition, namely that if negotiations failed, he could walk away from the bargain without penalty. In relation to the Exchange Bonds Mr Cheyne submitted that they are really irrelevant to the case. There was some dispute in the evidence as to whether the Bonds were valid in circumstances where the valuation had decreased. In Mr Cheyne's submission the real reason why the Bond was returned to EIC by the defender was in order to terminate any liability the defender might have towards EIC. The real nub of the issue was that there was nothing in the email which suggested that if the negotiations failed then the defender would be able to walk away without penalty. Mr Cheyne did not submit that there was no obligation upon the pursuers to enter into negotiations. It was not clear in the evidence whether any fall in the value of the units had to relate to plot 38 only or all of the units. There was no evidence to suggest that the parties intended that the valuation issue should be incorporated into the missives. At best, there was a collateral agreement. The parties agreed to enter into negotiations and that is what they did. It does not appear from the evidence that either party made any express reference to the emails during the negotiations. Miss Logie did say that the negotiations proceeded pursuant to the emails. It does not matter that no reference was made to the emails themselves when the parties were negotiating. This collateral agreement was irrelevant to the missives. There was no intention on the part of either party to include the agreement into the missives. A question arises as to whether the negotiations which did take place subsequent to the conclusion of the missives derived their foundation from the emails or whether they arose simply because the parties had a common desire to continue with a business relationship to resolve the difficulties which had arisen. There does appear to have been an agreement that there would be a valuation obtained by the pursuers. If there is a collateral agreement one is then restricted to looking at that agreement itself and it is contained within the third email.

 

[26] In relation to Lord MacFadyen's fourth proposition (intended or expressed to give effect to the agreement) if it was a collateral agreement it cannot be an agreement which was intended to be incorporated into the missives. Therefore it fails the fourth test. The defender does not plead a separate or collateral agreement. In relation to the third test Mr Cheyne referred to the opinion of Lord Glennie in the case of John Brown v Rysaffe Trustee Company CI (Limited), unreported, 8^th February 2011 at paragraph [33] in which his Lordship said that an agreement may be concurrent with, rather than necessarily prior to, the execution of a document. If one looks at the three emails of 10^th, 19^th and 21^st December there was a very real question as to whether the third document, dated 21^st December, is relevant at all. It may be neither anterior nor concurrent. Sandra Whyte had noted her copy of the missive as "ok on 20/12/07". The onus rested upon the defender to demonstrate incorporation. The bargain was concluded on 21^st December 2007. Assuming that the acceptance from Mr Colquhuon was posted on the date which the letter bears to be then, in accordance with the postal rule, that was the date upon which the bargain was concluded. There was no clear indication in the third email from Michelle Logie as to when she sent the email. There is a date and time as to when Mr Neish replied to it. There is no evidence to suggest that the defender and Mr Neish conferred as to the acceptance of Miss Logie's email. Acceptance may well have been sent after the close of business. The defender sent a copy of the email to Sandra Whyte at 20:26 on 21^st December which is well after the close of business hours. The defender did not instruct Miss Whyte to incorporate this agreement into the missives. In fact there was no instruction to her at all. References to telephone conversations were vague. It was not said when the conversations took place or between which parties. Accordingly the defender had failed to prove that, on a balance of probabilities, the email sent by Miss Logie on 21^st December was either anterior to, or contemporaneous with, the date of the conclusion of the missives. Therefore the email of 21^st December cannot be part of the relevant common intention at the time. The court is therefore restricted to looking at the first and second emails. However, if one examines the second email, although it does contain what is potentially a damaging statement that the pursuers will not "come after" the defender, it is clear from the context that it was referring to the situation which might arise in the event that Exchange Bonds were not in place. The email of 10^th December has no reference to what might happen if negotiations were to fail and what the rights would be of the respective parties should that happen. The undertaking was to enter into negotiations and did not deal with the situation which might arise if the negotiations failed. The result was that if the negotiations failed then parties had to refer back to the missives. The true factual position is that neither party thought about what might happen if the negotiations failed. They simply never turned their minds to it. The parties did not provide a mechanism to deal with the situation if the negotiations failed. Accordingly there was no basis for a crave for rectification.

 

[27] In relation to personal bar there were few averments to support the plea. There is a suggestion from the defender that he relied upon representations made by Michelle Logie the effect of which is to preclude the pursuers' proceeding with an action for damages. The defender has never resiled from the missives. As with the plea of rectification, there were no actings on the part of Miss Logie to show that the pursuers were giving up their right to insist on the missives. There was no evidence upon which the defender relied other than the emails. There was no representation which caused the defender to enter into the missives. There was no representation from the pursuers that they would give up their right to pursue the defender for damages in the event that he withdrew from the missives. In any event, as a matter of fact the defender never did seek to withdraw from the missives.

 

Submissions for the defender

 

[28] In relation to the witnesses, Mr Bovey invited me to accept the defender and Mr Neish as credible and reliable witnesses. They were very much at one on the essentials of the case. He had no comment to make in relation to Sandra Whyte or Mr Stephen. He submitted that Mr Colquhuon was a less than satisfactory witness. It was submitted that he was not wholly frank in his involvement as to the agreement between the defender and Miss Logie. He gave an impression that he had only a vague idea about it. If Miss Logie was correct then he probably knew a great deal more about it than he had said. The drafting of the third email, if Miss Logie is to be believed, came from the legal department. There is no hint in his evidence about that. So far as Miss Logie was concerned, within certain limitations, she was generally a truthful witness. She was willing to accept what she had said in order to achieve the sale but she was less reliable in admitting to the consequences. Mr Bovey submitted that the third email does predate the missives. The opening words are "we are trying". Mr Colquhuon was involved in the writing of the email and he made reference to the position of TMG at the time. There is nothing sinister in the absence of a date on the email from Miss Logie. 5/7, contains an exchange of emails, one of which is from her and does not have a date on it. Miss Logie suggested in evidence that the email was dated 21^st December. There was no other evidence from anyone else. Mr Bovey accepted that the evidence was not clear as to the precise chronology of events in relation to when the instructions were given concerning the qualification concerning the Exchange Bonds. The inference from the email from Miss Logie was that it predated the missives. The nature of the document and the circumstances surrounding it suggested it predates the missives. Miss Logie's knowledge as to the position of TMG came from Scott Colquhuon. The adjustment which TMG wanted to insert was an obstacle to conclusion of the missives. The pursuers were trying to find a way around this obstacle. The pursuers had taken no evidence from Sandra Whyte or Scott Colquhuon as to when the missives were concluded. It does not necessarily follow that negotiations finished at 5pm on 21^st December. That question could have been put to Miss Logie but was not. Accordingly, there was an agreement on 21^st December and it was reached either before the missives were concluded or contemporaneously. As I understand Mr Bovey, he accepted that there was no evidence to suggest that the parties intended the agreement for which he contended was to be included within the missives and indeed it was not included in the missives. To have been included in the missives would have been inconsistent with what the pursuers regarded as an enforceable missive. However, it did affect the missives. There was an agreement which was affecting the terms and enforceability of the missives and which although not intended by the parties to be in the missives would give to the defender an opportunity to withdraw from the bargain.

 

[29] In relation to rectification, even if the third email was not included within the missives there was still the first email which referred to "valuation difficulties". Mr Bovey then went through the text of the email in more detail. The emails begged the question what was meant by "difficulties with valuation" and just what difficulties would necessitate this? The answer to these issues was to be found in the email where there is a reference to "unable to secure funding". Mr Bovey set out in his written submission the terms of the rectification proposed by him together with an alternative formulation. The alternative wording comes from the first email. The court has the power to make such order as the evidence requires. Section 8(1) of the 1985 Act refers to "doing what is necessary" to give effect to that intention. The role of the court is broad. It can tailor any remedy to the oral evidence which is led in the interpretation of the written material. The statute is intended to allow the court to do substantive justice. Reference was also made to paragraph [35] of the opinion of Lord MacFadyen in Renyana. Mr Bovey also accepted Lord MacFadyen's analysis of section 8. The formal agreement was contained in the missives. The informal agreement or arrangement was reached between Michelle Logie and the defender. Had there been no difficulty with the valuations there would be no need for rectification. There is no limitation on evidence which may be led in support of a case for rectification. So far as the pursuers' argument as to a collateral agreement was concerned it was no part of Mr Bovey's case. Returning to Lord MacFadyen's test, there was a document, namely the missives. There was also an earlier agreement. An earlier agreement can be concurrent and need not of itself be legally enforceable. On that point Mr Bovey referred to Shaw v William Grant Limited 1989 SLT 121 and Macdonald Estates Limited plc v Regenesis (2005) Ltd 2007 SLT 791 and Joscelyne v Nissen [1970] 2QB 86 at 98. In relation to common intention, Mr Bovey referred to the opinion of Lord Penrose in Rehman v Ahmad 1992 SLT at page 752-8B and McBryde on Contract (3^rd edition) at paragraph 8-03 and in particular the short dictum of Lord President Dunedin referred therein. This was an answer to the pursuers' proposition that the parties had failed to provide for a remedy in the event the negotiations failed. I should accept the evidence of the defender and Mr Neish. They understood from the emails and the discussion that if the negotiations failed both parties would be able to walk away without penalty. Miss Logie had accepted that this was a reasonable interpretation and a reasonable view for the defender and Mr Neish to take. For Miss Logie to have said that this was something she had not thought about was disingenuous on her part. Mr Bovey accepted, as I think he had to, that the emails themselves did not deal with the question of parties "walking away" and to that extent the court had to include something which the parties had not said in terms but the court could do that on the basis of common intention. The alternative would be that, if there was no agreement, then the court would have to read in a provision to the effect that the defender would be liable for the contractual price. Whether one needs to imply this or not that is a consequence of the pursuers' position. The defender's construction makes more commercial sense. The thrust of the emails was to give comfort to the defender. In effect what they are now saying is that these emails were designed to give false comfort and the consequences for the defender's case in personal bar were profound. It made no commercial sense for the pursuers to insist upon the contract proceeding in circumstances where they knew that the defender would be unable to secure funding and therefore could not pay the purchase price. Michelle Logie knew what the defender's business model was. If something had been expressly said about the consequences of failing to reach an agreement no doubt that would have frightened the investors away. The wording of the emails relates to "reassurance" and "finding a solution one way or another". A further valuation was really an empty exercise if at the end of the day the pursuers were going to insist upon the contractual price. The Bonds were relevant because they were connected both to valuation and to price. They were intimately tied together. They were tied together in the mind of Michelle Logie. The expression "not come after you" was not just limited to the question of the Exchange Bonds. In any event, the obligation in relation to the Exchange Bond was not clear. It was not obvious, in terms of the missives at least, just what the obligation was in terms of delivery of a Bond. In Mr Bovey's submission, until a price was actually agreed there could be no obligation to produce a Bond. However, the provision of an Exchange Bond was not part of the defender's case. The absence of the Exchange Bond was not a precondition to the negotiations on the price whether or not Miss Logie had linked the two together. The issue about the Exchange Bond did find itself into the missives but the valuation issue did not. The evidence was to the effect that a missive including the valuation issue would not have been regarded by the pursuers as a concluded missive. The way to obtain a concluded bargain was for the bargain to be entered into upon the terms set out together with the informal arrangement. There was a common intention evidenced by the three emails, which failing the first two emails, or even the first only. The actual agreement between the parties was that the property would be valued before or at the settlement date; if the property was outwith the 5% figure the parties would seek to renegotiate the price; in the event the renegotiation failed the pursuers would remarket the property and allow the defender to resile from the missives without incurring any liability to the pursuers. In Mr Bovey's submission it was clear that the missives were intended to give effect to the parties' agreement for the sale of the property in the broad sense and that the missives failed to express the agreement of the parties.

 

 

[30] In relation to personal bar, Mr Bovey referred to Gloag and Henderson (12^th edition) 2007 at paragraph 3.04 and Reid and Blackie on Personal Bar at paragraph 2-41. In his written submission Mr Bovey went through the application of various elements to this case. In this context the obligee, the pursuers, seek damages for breach of contract expressed in the missives. It is the exercise of that the defender (obligor) alleges is barred. There had been inconsistency on the part of the pursuers and that is to be found in the three emails. What matters is the overall impression given. That can be by words, action, inaction or body language. When Miss Logie accepted that an interpretation of the emails ("not come after you") was understandable and reasonable that is the language of personal bar. The words need to be seen against the surrounding factual circumstances. There can be representation by conduct. At the time the pursuers knew about their rights. Miss Logie knew of the standard missives which were inconsistent with her emails. The pursuers are now suing upon the missives and the exercise of this right by the pursuers will affect the defender. In light of the obligee's inconsistent conduct it would be unfair if the right were now to be exercised. The pursuers' conduct was blameworthy. They were inducing a party to contract in terms which they did not intend to honour. The defender reasonably believed that the right would not be exercised, namely that he would not be liable for the pursuers' loss on the sale. He entered into the missives which was the intended effect of the three emails and a proportionate response to the situation in which he found himself. The exercise of the right would cause prejudice to him which would not have occurred but for the inconsistent conduct. The exercise of the right will cause the defender to be liable for the sum sued for, which, but for the emails, would not have occurred. The value of the right barred is proportionate to the inconsistency. The right barred is the pursuers' loss on sale which is exactly the loss intended to be barred by the email. Mr Bovey did not accept that the issue of pursuing the defender had not been considered. The defender and Mr Neish did think about that matter. One should look objectively at the words contained in the email. The court should not accept Miss Logie's evidence that she did not think about what would happen if the negotiations failed. He submitted that Miss Logie had accepted that her behaviour had reasonably given rise to belief on the part of the defender and Mr Neish as to what might happen if the negotiation failed. So far as the defender not resiling was concerned it was the defender's evidence he believed he was still negotiating with the pursuers. Miss Logie said that she withdrew from the negotiations and Mr Thompson, her superior, took over. There was no evidence from Mr Thompson. So far as the negotiations were concerned they were not really called off until the pursuers had themselves resiled. Mr Bovey also referred to Brown, at paragraph [34] which he submitted was authority for the proposition that the court should take a broad approach to matters of rectification and should guard against compartmentalising the evidence too finely.

 

Reply

 

[31] Mr Cheyne submitted that it was for the defender to prove that the third email came at a point in which it could be incorporated into the missives. The onus lay with the defender. In relation to common intention, the defender submits that the court has to ascertain a common intention objectively. However broad an approach the court is entitled to take in the admission of evidence, it does not allow the court to add in evidence which was not there. It was submitted by the defender that the court could infer that the pursuers had given up the right to sue for damages. There is no evidence of any description which would establish that or allow the court to draw the inference that was agreed as part of the common intention of the parties. Michelle Logie had clearly said that she had no intention to interfere with the enforceability of the missives. She did not intend that the missives should be changed by anything she put in the emails. The defender goes too far when he says that the court can infer that it was the common intention of the parties that the pursuers had given up their right. That is even more the case in relation to personal bar. The case on personal bar may well be one more of waiver in which the defender is really saying that the pursuers had given up their rights after having resiled from the bargain. But what are the actings which unequivocally refer to the giving up of the rights? There are no actings and no words in any of the emails which are unequivocally referable to the pursuers giving up such rights. Reference was made to Armia Ltd v Daejan Developments Ltd 1979 SC (HL) 56. There is no evidence relied upon which instructs a case based on waiver. The agreement was that there should be negotiations if the valuation issue arose. The valuation issue did arise and the parties did enter into negotiations. There was no need to imply anything further into the agreement. The negotiations between the parties failed. The problem is that the parties simply did not provide for that eventuality and indeed never turned their minds to it.

 

[32] In relation to the question of an agreement not having to be legally enforceable, Mr Cheyne referred to the case of Shaw. The word used by Lord McCluskey was "enforceable". The fundamental principle of rectification is that there was an agreement but that it is defectively expressed. It would be a dangerous step to water down the quality of the agreement on which rectification is based. In the present case, on the crucial issue there was no common intention. That the defender has pled his crave for rectification in different ways speaks to an uncertainty on his part as to what the common intention or agreement was.

 

 

 

 

Decision

 

[33] The legal basis for the defender's case for rectification is to be found in section 8 of the 1985 Act and it is therefore to the section that one must look for what it provides and for the powers of the court. The section provides:-

 

"Rectification of defectively expressed documents

8(1) Subject to section 9 of this Act, where the court is satisfied, on an application made to it, that -

(a)    a document intended to express or to give effect to an agreement fails to express accurately the common intention of the parties to the agreement at the date when it was made...

It may order the document to be rectified in any manner that it may specify in order to give effect to that intention.

(2) for the purposes of subjection (1) above, the court shall be entitled to have regard to all relevant evidence, whether written or oral."

 

[34] In my opinion, it is important to note the heading of the section. That is the nature of the problem which the section is designed to address. By definition it is a problem involving the parties who have signed and accepted a document on the basis that it expresses their original agreement. It is not a problem which can be resolved by construction of the contract. Mr Cheyne was correct to say that the remedy of rectification existed before the enactment of section 8 but I think section 8 goes somewhere further than just providing a more flexible remedy than existed at common law. In effect, the section provides a code for rectification; it sets out the elements necessary to satisfy its application and it also sets out the extent to which evidence may be led to achieve rectification. Both parties relied upon paragraph [35] of Lord MacFadyen's opinion in Renyana -Stahl Anstalt which I now set out:-

 

"[35] In any case in which rectification of a document is sought in reliance upon section 8 of the 1985 Act, the measure of the relevancy of the petitioner's pleadings is in my opinion to be found in the first instance in the language of the section. That language is no doubt capable of being analysed in a number of ways (of which one example is to be found in the opinion of Lord McCluskey in Shaw v William Grant (Minerals) Limited 1989 SLT 121; but also see Rehman v Ahmad 1993 SLT 741 per Lord Penrose and George Thompson Services Limited v Moore 1993 SLT 634 per Lord Weir). The aspects of the statutory language which are important in the individual case will be a matter of circumstance. For the purposes of the present case, I would analyse section 8(1)(a) in the following way: (1) there must be a "document" which the petitioner seeks to have rectified by order of the court; (2) there must be an earlier "agreement"; (3) that agreement must disclose that "at the date when it was made" the parties to it possessed a "common intention"; (4) the document must have been intended to express or give effect to "the agreement" and (5) rectification will be available if it is shown that the document fails to express accurately the common intention mentioned in (3) above".

As his Lordship noted a number of earlier decisions have formulated the various elements necessary to satisfy the requirements of the section in slightly different ways. A number of the cases relate to a disconformity between missives and the subsequent disposition. In those cases there is an earlier agreement from which it is not difficult to identify a latent defect in the temporally subsequent disposition. Renyana was such a case. Rehman v Ahmad was a case about a commercial agreement. As Lord MacFadyen said, the elements of the language which are important in a particular case are a matter of circumstance. In my opinion, the crucial elements here are proof of an agreement made independently of the missives themselves and proof that the missives did not express accurately the common intention of the parties. As to proof, common intention may be proved by written or oral evidence. The question of the timing of the agreement has assumed some importance in this case. As I have said, the section is dealing with the problem of a defectively expressed document. Prior to its execution the parties must have reached an agreement which the document does not accurately express. Relevant evidence relates to that inquiry. The process has a temporal component to it. The section itself makes reference to the words "at the date when it was made". Although there is no requirement that the agreement antecedent to the document be in writing and in a concluded form, logically, there must have been a point at which agreement was reached at or prior to the execution of the document which defectively expresses such agreement. If, for example, evidence shows that final agreement was not in fact reached until after the document was executed then the document cannot be said to give defective expression to something which had not yet actually been agreed. Whether evidence of subsequent actings or conduct would be relevant evidence proving or tending to prove the earlier agreement is not something on which I require to express an opinion.

 

[35] It may almost be trite to say that, more for practical reasons than anything else, inquiry relates not to the entire agreement but to the issue which is in dispute and which is part of the agreement. In this case it is the valuation issue and at this point the question of common intention assumes some importance. In Rehman, Lord Penrose took the view that common intention requires to be considered objectively (at page 752). Returning to the facts of this case, it seems to me that on any view of the evidence, the missives did not contain the whole agreement between the parties. I understood Mr Cheyne to accept, rightly in my view, both parties had agreed that the pursuers would cause to have valuations of, inter alia, plot 38 in the New Year. If the valuations were outwith the 5% figure then they would enter into negotiations. All of this they actually did. In my opinion, what is equally clear is that the parties did not agree in terms what would happen if the negotiations failed. I return to the proposition that section 8 concerns a defectively expressed document. In this case it is said to be defective because it does not contain a provision as to what would happen if the negotiations failed. What then was the common intention of the parties on that issue? Viewed objectively, I find myself unable to say what that was. I have no doubt, with the benefit of hindsight, the defender is quite clear what he expected. However, even if Miss Logie accepted that his expectation might have been reasonable, I cannot conclude it reflects the common intention of both parties. Furthermore, I have considerable reservations as to whether the pursuers' shared a common intention that such a provision should find its way into the missives. They had already shown themselves unwilling to accept Sandra Whyte's adjustment relating to Exchange Bonds. That adjustment would have allowed either party to withdraw from the bargain without penalty and that was something the pursuers could not accept as a concluded missive. The issue is one of rectification. This does not allow the court to write into a contract provisions where it is not proved both parties shared a common intention on that particular issue. It might be open to a court to conclude that, although not expressly agreed, the parties may be said to have had a common intention on a matter which, in all the facts and circumstances, might be said to be axiomatic. However that is not the case here. Accordingly, on the evidence before me, I conclude that the defender's argument as to rectification must fail.

 

[36] That takes me to the question of personal bar. It is necessary to begin consideration of this issue by reference to the passage in Gloag and Henderson relied upon by Mr Bovey (Gloag and Henderson paragraph 3.04, 12^th Edition). Before I do so, it is also worth noting that this particular formulation of personal bar is based upon that advanced by Reid and Blackie on Personal Bar.

"In many cases the assertion of a right might conflict with ordinary conceptions of justice, either owing to the method by which the right was acquired or owing to the conduct of the party vested with it and the principle of personal bar underlies many of the established rules of law. Inconsistency on the part of the person barred, and on fairness, are therefore the fundamentals of the doctrine as expressed in the following framework. (a) Inconsistency: (1) a person claims to have a right the exercise of which the obligor alleges is barred. (2) To the obligor's knowledge, the obligee has behaved in a way which is inconsistent with the exercise of the right. Inconsistency may take the form of words, actions or inaction. (3) At the time of so behaving the obligee knew about the right. (4) Nonetheless the obligee now seeks to exercise the right. (5) Its exercise will affect the obligor. (b) Unfairness: in the light of the obligee's inconsistent conduct, it would be unfair if the right were now to be exercised....."

 

I readily accept the formulation set out above which I regard as a synthesis of the existing Scottish authorities on this issue. No issue was taken with it. Mr Bovey set out his submission in accordance with the formulation I have set out above. In my opinion, of the various elements, it is the second which is most problematic in this case, namely whether the pursuers have behaved in a way which is inconsistent with the exercise of the right. The matter is put in terms of words, action or inaction on the part of the obligee, in this case the pursuers (these words are found in the speech of the well known case of Lord Birkenhead LC in Gatty v Maclaine 1921 SC (HL) 1 at page 7). Unlike section 8 which, by definition, concentrates on what both parties actually agreed, personal bar involves what one party has done or not done. In my opinion, Mr Bovey is correct to say the rights in question are those of the pursuers in suing for damages pursuant to the missives. There was virtually no challenge to the evidence of Mr Colquhuon on the procedure followed by the pursuers in taking steps to put into effect the mechanism in the missives establishing the date of entry, and when settlement did not occur, resiling from the missives. Nor could there be. The pursuers' rights pursuant to the missives were clear. The heart of the inconsistency is the taking of these steps in circumstances when, if the defender is correct, the pursuers should not have done so. Broadly speaking, the pursuers exercised their rights from October 2008 onwards and not before. I should add that although Mr Cheyne did refer to waiver that was no part of Mr Bovey's case and I do not consider it necessary to deal with that issue. On any view of this matter, the missives did not reflect the whole commercial relationship between the parties. Not only did both parties know that but they both acted on the strength of it. The defender and Mr Neish had expressed concern about buying the plots "off plan". Both parties were aware that in December 2007 the market was volatile although just how volatile was then not clear. Both parties were keen to conclude missives but of the two, it was the pursuers whose commercial interests were best served by having the missives concluded by 21^st December. They were the ones putting pressure on the defender. The pursuers knew that the defender was dependent upon loan funds and that a valuation of £132,500 as against a price of £180,000 would be a major problem for the defender. Against this factual background Mr Bovey relied upon the three emails. It is significant that the substantive email traffic came from the pursuers. They were the ones encouraging the defender to conclude the missives. Although keen to conclude missives he still had concerns which the pursuers had to alleviate. He had to be persuaded to do enter into the missives. Of the three emails, the second email, seen in context, refers to the particular problem of the Exchange Bonds and what would happen if an Exchange Bond was not in place for a particular plot. That said, it does show that the pursuers were willing to depart from their rights pursuant to the missives. (The pursuers "will not come after you".) It also shows an awareness by the defender of the significance of concluded missives. However, the first and third emails are of a broader nature. In my opinion, the first email opens with an acknowledgement by the pursuers of the importance of valuation to the defender and Mr Neish in relation to their business plan. It goes on to offer "reassurance" that if there are "difficulties with the valuations we will find a resolution one way or another". The email does not spell out what the "difficulties" might be but in the context it seems to me to be clear, namely valuation. I note the email does not say "we may" find a resolution but "we will". Now it is clear from the evidence that at the time of that email Miss Logie anticipated that missives would be concluded before Christmas. She went on to say that there is to be a "gentleman's agreement" as to valuations in the New Year which, by definition, is after the missives were to be concluded. She said that she wanted to give the defender "comfort that in concluding missives now will still allow for further negotiation should the valuations necessitate this". In my opinion, this email clearly anticipates a commercial process to be conducted independently of the missives. That process was directly related to valuation. The language and impression conveyed by the email was an awareness of the importance of the valuations to the defender and that by concluding missives then there was still room for further negotiations. In relation to the Exchange Bonds, in the third email, it seems to me the pursuers were keen to avoid a provision in the missives which gave to anyone other than themselves the right to withdraw from the missives. I agree that the reference to Exchange Bonds is really of no great significance now. Clearly the most crucial part of the email is the paragraph which relates to valuation. One can criticise the syntax ("agreement will... result could be"). But given the whole context it seems to me that the intention was to add to the general message of reassurance that concluding the missives was not conclusive. In my opinion inconsistency falls to be considered objectively. Whether someone has acted inconsistently should not be determined by what they intended or what they thought they were doing but what they actually did or failed to do and objectively what effect that conduct had or may have had. I agree that the court needs to look at the whole factual position in which the emails were sent and consider whether the conduct of the pursuers has been inconsistent and unfair to the extent that they are barred from exercising their rights pursuant to the missives. Given the defender's business model and the valuations it is hardly surprising that negotiations between the parties broke down. Both faced a substantial loss. In many respects this case is about who should bear that loss. Nowhere is there any suggestion that if an agreement cannot be reached the pursuers will simply resort to their rights under the missives. Had there been any mention of that it is hard to see that the matter would have proceeded further and such a statement would hardly have given the defender reassurance and comfort. I find it difficult to avoid the conclusion that the actions of the pursuers in sending the three emails, in the context of the factual position known to both parties, could have done anything else than left the defender with the impression he said he had. I accept his evidence when he said that his state of mind was to the effect that, in signing the missives, there was still room for negotiation if the valuations were a problem and that if the negotiations failed he would not be held to the missives. It seems to me that such conclusion makes commercial sense and is, as Miss Logie rightly conceded, a reasonable interpretation of the emails. To leave the pursuers with the unqualified right to insist on their rights under the missives, given the defender's business model, does not make commercial sense. It would make the agreement to renegotiate the price almost meaningless.Whether the pursuers deliberately said nothing or genuinely did not turn their minds to the issue does not matter. As I have said the matter requires to be looked at objectively. The missives said one thing: the words and to some extent the actions of the pursuers conveyed to the defender something different. To that extent there was inconsistency. The element of unfairness is largely self evident.

[37] Accordingly, in my opinion the pursuers are entitled to succeed on the issue of rectification. I shall assoilzie them from the craves of the counterclaim. The defender is entitled to succeed in relation to the principal action on the grounds of personal bar. I shall assoilzie him from the crave of the Initial Writ. I shall certify the cause as suitable for the instruction of senior counsel. The matter is undoubtedly of sufficient importance and complexity to justify such a conclusion. I shall assign a hearing in relation to expenses.