Scottish Sheriff Court Decisions

2014SCGLA52

SHERIFFDOM OF GLASGOW AND STRATHKELVIN AT GLASGOW

A744/13

JUDGMENT

of

SHERIFF PRINCIPAL C A L SCOTT, QC

in the cause

Susan Strickland

Pursuer

against

Blemain Finance Ltd

Defenders

Glasgow, 12 September 2014.

The sheriff principal, having resumed consideration of the pursuer’s appeal and the defenders’ cross-appeal, refuses the latter and in respect of the former allows same in part; varies the sheriff’s interlocutor dated 30 April 2014 and that by awarding interest on the sum of Ten Thousand Pounds (£10,000) Sterling at the rate of eight per cent per annum from 1 March 2010 until payment; quoad ultra adheres to the sheriff’s said interlocutor; finds the defenders liable to the pursuer in the expenses of the appeal; allows an account thereof to be given in and remits same, when lodged, to the auditor of court to tax and to report thereon.

NOTE:-

[1]        These appeals arise out of an action raised under section 25 of the Conveyancing and Feudal Reform (Scotland) Act 1970 in which the pursuer seeks damages from the defenders on the basis that they failed to sell repossessed heritable subjects for the best price that could reasonably have been obtained.

[2]        After proof, the sheriff found the defenders liable to the pursuer in the sum of £10,000 together with expenses as taxed.  He made no award of interest on that sum.  His decision is the subject of an appeal by the pursuer and a cross-appeal on behalf of the defenders.

[3]        The sheriff had issued an ex tempore judgment.  However, the terms of that judgment are recorded in his Note dated 1 July 2014.  That Note set out the basis for his decision.  The sheriff records therein that, “to some extent”, he was influenced by the evidence given by John Dougan, chartered surveyor.  Whilst there are no notes of evidence available for the purposes of the appeal (the parties to the action had agreed to dispense with the services of a shorthand writer) the essence of Mr Dougan’s evidence was that by marketing the subjects for a longer period of time a sale price of £175,000 could have been achieved.

[4]        When it came to Mr Dougan’s evidence, no similarly qualified witness was called on behalf of the defenders and, consequently, there was no contradictor, so to speak.  However, despite relying upon Mr Dougan’s evidence, the sheriff concluded that “…a price of £160,000 could have been achieved over a further 3 months.”  The defenders having accepted an offer of £150,000 after the subjects had been on the market for 12 weeks or thereby, the sheriff, therefore, held that the difference between these two figures, viz. £10,000, should be awarded in favour of the pursuer by way of damages.

Pursuer’s submissions

[5]        In advancing the appeal for the pursuer, Mr Allison challenged the manner in which the sheriff had arrived at the figure of £160,000.  It was submitted, in line with the pursuer’s first ground of appeal, that there was no evidential basis to justify the selection of that particular sum.  Mr Allison maintained that the sheriff had indulged in speculation rather than relying upon the evidence.  Moreover, it was, he argued, clear that the sheriff had placed reliance upon Mr Dougan’s expert testimony when it came to the proposition that a sum greater than £150,000 ought to have been achievable with the passage of further time.  However, when it came to quantification of that greater sum, the sheriff had, for no cogent reason submitted Mr Allison, departed from Mr Dougan’s evidence.

[6]        Mr Allison highlighted the sheriff’s reasoning in paragraph [8] of his Note.  The sheriff had cited the effect of the recession and the adverse feedback about the condition of the property as justification for the figure of £160,000.  He also seemed to have placed weight upon the fact that the figure of £160,000 equated to the figure specified in a Market Appraisal dated 13 August 2009 prepared on behalf of Aberdein Considine.  Mr Allison’s submission was to the effect that none of these features could properly be said to inform the decision to prefer the figure of £160,000 to that of £175,000 as proposed by Mr Dougan.  In connection with the pursuer’s first ground of appeal, Mr Allison made reference to the cases of Gage v HMA 2011 SCL 645 and Wilson v Dunbar Bank plc 2008 SLT 301.  In relation to the latter authority, passages at paragraphs [17] and [18] within the opinion of the Extra Division of the Inner House were referred to.

[7]        The second ground of appeal for the pursuer concerned the sheriff’s approach to interest.  In determining that no interest should be awarded in respect of the sum decerned for, the sheriff had relied upon the fact that the sums owed to the defenders had been paid off but subject to a shortfall of £10,645.31.  There had been evidence to the effect that interest on the outstanding balance due to the defenders had been frozen by them as at the date of the sale of the subjects.  The sheriff had used that evidence to justify his failure to award interest.  (See paragraph [8] in his Note).  He had held that any entitlement to interest flowing from the wrongful withholding of £10,000 as from the date of sale, viz. 1 March 2010, ought to be deemed eliminated by the fact that the pursuer had not been called upon to pay interest (albeit, no doubt, at a differential, pactional rate) applying to the outstanding mortgage balance from 1 March 2010 onwards.

[8]        Mr Allison criticised the sheriff’s approach to interest on two levels.  Firstly, under reference to paragraph [9] in the sheriff’s Note, having explicitly precluded consideration of the shortfall for the purposes of determining the principal sum due to the pursuer, the sheriff then decided that the existence of the shortfall should be taken into account when consideration was being given to what, if any, award of interest should be made.  Mr Allison contended that that approach to matters was entirely illegitimate and that interest should have been allowed.

[9]        Secondly, Mr Allison stressed that the defenders’ pleadings were silent both as to quantum and as to the question of interest.  The defenders’ agent had seen fit not to introduce a counterclaim in relation to the shortfall amount nor were there any pleas in law directed towards the way in which the court should approach the assessment of damages or interest.  The defenders’ pleas in law exclusively concerned the merits of the action and the relevancy etc of the pursuer’s averments.  The defenders’ pleadings had been drawn up in such a way as to place in issue the existence of any statutory breach of duty under section 25 supra.  Beyond that, no further case had been made out.  Mr Allison submitted that had the issue of the shortfall and any consequences said to flow from its existence been focused in the defenders’ pleadings, that would have afforded him the opportunity to table certain discrete counter propositions in response.  As it was, he had, aside from all else, been denied that opportunity.

[10]      Ground of appeal 3 was a development of the main theme inherent in ground of appeal 2, viz. that the sheriff had erred in failing to award interest to the pursuer.  Mr Allison cited section 1(1) of the Interest on Damages (Scotland) Act 1958, as amended, and made further reference to the case of Wilson supra.  I did not understand his argument to the effect that the sheriff’s discretion in this matter was not to be taken as entirely unfettered to be the subject of any challenge.  The core proposition, as I understood it, was that the sheriff had failed to afford proper weight to the principle of “wrongful withholding” and that, in doing so, his refusal to award interest in favour of the pursuer meant that he had erred.  The fourth ground of appeal for the pursuer was not insisted upon.

Defenders’ submissions

[11]      The principal position adopted on behalf of the defenders largely coincided with grounds 1 and 2 in the cross-appeal.  Ms Hamilton, for the defenders, argued that the absence of evidence regarding what particular steps ought reasonably to have been taken by the defenders meant that there had been insufficient evidence before the sheriff to enable him to conclude that the defenders were in breach of the statutory provision in section 25 supra.  She stressed the absence of evidence from a marketing expert as to which other steps the defenders might reasonably have taken.

[12]      Under reference to the second ground of appeal for the defenders, Ms Hamilton made much of the significance of “comparables” in the context of Mr Dougan’s evidence.  Once again, Ms Hamilton sought to challenge the detail and the quality of the evidence before the sheriff in support of a submission to the effect that absent evidence suggesting that a higher offer would have been submitted to the defenders had they taken other steps, no finding could be made against them in terms of section 25.  Ms Hamilton, in particular, adhered to the penultimate sentence of the second ground of appeal for the defenders which suggested that there had been no evidence before the sheriff to support the conclusion that advertising the property in a different way or for a longer period of time or amending the price of the property in a different way would have achieved a higher price.  Accordingly, it was argued on behalf of the defenders that the pursuer, on the evidence, ought to have failed when it came to the merits of the action.

[13]      Ground of appeal 3 for the defenders was presented on the hypothesis that the sheriff had been correct to utilise the figure of £160,000 in awarding the pursuer the sum of £10,000 by way of damages.  It was submitted that the shortfall on the pursuer’s account with the defenders, following upon the sale of the subjects, ought properly to have been set against the figure of £10,000 which the sheriff was minded to award thereby, in effect, eliminating any such award.  In other words, the defenders, through Ms Hamilton, maintained that when the shortfall amount was taken into account there was, in any event, no loss and that the sheriff had, once again, erred in that regard.

Decision

[14]      In relation to the first ground of appeal for the pursuer, I am not satisfied that the sheriff erred in arriving at the figure of £160,000.  I do not accept the proposition that there was no evidential basis for that figure.  It is plain that there was evidence from Mr Dougan to the effect that the property had been sold for too little and that with marketing over a longer period it might possibly have fetched £175,000.

[15]      In reaching his decision, the sheriff mentions in his Note that he was “influenced by the evidence of Mr Dougan”.  However, in concluding that the figure of £175,000 was too high, the sheriff articulated his reasons for the selection of a lesser figure.  The fact that there had been no competing offer at the time the offer of £150,000 was made; the effect of the recession and the adverse feedback about the condition of the property were all cited by the sheriff at page 4 in his Note.  There was also reference to the price recommended by Aberdein Considine at the beginning of the sale process.  That particular feature was criticised by Mr Allison but, on reflection, I do not consider such criticism to be merited.

[16]      Mr Allison also founded upon the case of Wilson.  However, it seems to me that the approach approved of by the Extra Division of the Inner House is not dissimilar to that adopted by the sheriff in the present case.  In accordance with that approach, to my mind, the sheriff “…exercised a broad judgement as he was entitled to do in a case where the amount of damages did not admit of precise of calculation”.  (See paragraph [18] in Wilson).

[17]      In any event, in determining these appeals, I require to recognise that in presiding over the proof the sheriff had the advantage of having seen and heard the witnesses involved.  He had the opportunity to consider the evidence in its totality.  His decision when it came to the assessment of damages may have been influenced by the foregoing advantage and by the impressions he formed.  In a case where the parties themselves had agreed to dispense with shorthand notes (and, consequently, no transcript of the evidence was available for the purposes of the appeal) I would be slow to interfere with the decision of the sheriff at first instance unless it could be demonstrated, clearly, that he had misunderstood the facts, applied the wrong principles or arrived at a conclusion which was manifestly unjust (see, generally, Macphail, 3^rd Edition at paragraph 18.116).  I am not persuaded that any of these features have been made out. 

[18]      Accordingly, I reject the first ground of appeal for the pursuer.  My reluctance to interfere with the sheriff’s decision when it comes to the pursuer’s first ground of appeal is fortified by Lord Reed’s reference in the case of Liquidator of Letham Grange Development Co Ltd v Foxworth Investments Ltd & Another 2014 SLT 775 to the principles governing the review of findings of fact by appellate courts and to the earlier decision of McGraddie v McGraddie 2013 SLT 1212.  (See paragraph 58 in the Letham Grange case).

[19]      In contrast, the arguments advanced by Mr Allison in furtherance of the second ground of appeal for the pursuer were, in my view, well-founded.  The shortfall having been specifically left out of account by the sheriff, at the request of parties, it was not open to him to reintroduce it into the case when it came to the question of interest.  Any discretion vested in the court did not extend to reliance upon a factor which, for the foregoing reason, was not properly before it. 

[20]      In any event, esto the sheriff was entitled to have regard to the shortfall amount, to eliminate what would otherwise have been an appropriate award of interest particularly where the defenders’ pleadings were silent on that very issue, was, to my mind, of doubtful legitimacy. 

[21]      The principle underlying an award of interest on the sum decerned for by way of damages is that of wrongful withholding.  The award of damages is entirely separate from any indebtedness said to be due to the defenders.  In considering whether or to what extent interest should be awarded on the damages figure, I am, at best, doubtful that the court is entitled to consider arrangements which may or may not have been made in regard to the charging of interest on a discrete sum of money which is distinct from the award made by the court.  In any event, the sheriff merely records that “…the defenders had frozen the interest on the shortfall”.  There is no detail as to the date upon which interest had been frozen or as to the rate of interest involved.  These ought to have been factors considered by the court when determining whether to allow interest on the damages awarded.

[22]      At all odds, I have given effect to the proposition that the sheriff ought to have awarded interest in favour of the pursuer principally for the reasons set out in her second ground of appeal.  It might be argued that, when it comes to the issue of interest, the pursuer’s third ground of appeal is somewhat tautologous.  (It should be stressed that the fact that the assessment of damages was “at large” for the sheriff was not the subject of any challenge by the pursuer having regard to the state of the defenders’ pleadings).

[23]      The cross-appeal, in my opinion, falls to be refused in general terms because, in approaching the proof, the defenders did not see fit to place in issue the quantum of the pursuer’s claim.  There was no attempt on record to challenge the pursuer’s averments thereanent.  That much was conceded by Ms Hamilton during the course of the appeal.  In that state of affairs, it is simply not open to the defenders, on appeal, to mount a challenge directed at the court’s assessment regarding the quantum of damages.

[24]      In any event, I reject Ms Hamilton’s submissions in so far as they sought to call into question the detail and quality of the evidence before the sheriff all in terms of grounds of appeal 1 and 2 for the defenders and that for the reasons mentioned in paragraphs [17] & [18] supra.  The third ground of appeal for the defenders also fails.  There was no counterclaim.  Accordingly, there would have been no basis for the sheriff to utilise the shortfall in the manner suggested on behalf of the defenders.  Moreover, the defenders having explicitly agreed to the shortfall being left out of account (for the reasons specified at paragraph [9] in the sheriff’s Note) that agreement precludes the defenders from founding upon the figure of £10,645.31.

[25]      The cross-appeal has failed in its entirety.  The pursuer has achieved a modicum of success in terms of her appeal.  Therefore, it is appropriate that the expenses occasioned by the appeal should be awarded in favour of the pursuer.