(FIRST) WALTER SCOTT SNEDDON AND (SECOND) SNEDDON & SON, SSC AGAINST A DECISION OF THE SCOTTISH LEGAL COMPLAINTS COMMISSION
EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
[2015] CSIH 62
XA162/14
Lady Smith
Lord Bracadale
Lord Philip
OPINION OF THE COURT
delivered by LADY SMITH
in the Appeal
by
(FIRST) WALTER SCOTT SNEDDON and (SECOND) SNEDDON & SON, SSC
Appellants;
against
A decision of The Scottish Legal Complaints Commission
Respondents:
Act: Davies; TC Young Wilson Terris
Alt: Barne; Anderson Strathern LLP
12 August 2015
Introduction
[1] This is an appeal against a decision of the Scottish Legal Complaints Commission (“SLCC”) in which it upheld a complaint against a solicitor, Mr Walter Sneddon, in relation to the retention of £1,000 of the purchase price due under missives for the sale of a house in Falkirk to his clients, the complainers. SLCC concluded that the solicitor had provided an inadequate professional service and determined that his firm should waive certain fees and pay compensation.
[2] The issue for this court is whether or not the SLCC were entitled, in response to the complaint and on the facts found, to conclude that the appellants had provided an inadequate professional service. No issue is raised regarding the redress determined upon.
Background
[3] Missives for the sale to the clients of the house were concluded on 16 December 2011. The price was £370,000 and entry was to take place on 20 January 2012.
[4] Sometime during the first half of January 2012, the roof of the house suffered storm damage. By letter dated 16 January 2012, the first appellant wrote to the seller’s solicitors, stating:
“Our clients have today advised us that while passing the property at the weekend they noticed some significant storm damage to the roof. Please therefore confirm what arrangements are in hand to carry out the necessary repairs to the roof prior to settlement. Our clients have indicated they would wish the opportunity to inspect any such repairs as soon as the same have been carried out.”
In accordance with what is now normal practice in residential property transactions, the missives incorporated standard conditions. The particular conditions referred to were those contained in the Combined Standard Clauses (2011 Edition) specified in a Deed of Declaration registered in the Books of Council and Session on 22 September 2011 (“the 2011 Conditions”). Paragraphs 18(a) and (b) of the 2011 Conditions provide:
“ 18 RISK
- The Seller will maintain the Property in its present condition, fair wear and tear excepted, until the time at which settlement takes place.
- The risk of damage to or destruction of the Property howsoever caused will remain with the Seller until the time at which settlement takes place.”
and Clause 22 provides:
SUPERSESSION OF MISSIVES
22. The Missives shall cease to be enforceable after a period of 2 years from the Date of Settlement except insofar as (i) they are founded upon in any court proceedings which have commenced within the said period or (ii) this provision is excluded in terms of any other condition in the Missives.”
[5] There was, accordingly, no doubt that the repair of any storm damage caused to the roof between the date of conclusion of the missives and the date of entry was the contractual responsibility of the sellers. Further, if that responsibility had not been discharged prior to the date of entry, it would subsist thereafter subject only to parties’ agreement to the contrary or the operation of the two year time bar provided for in paragraph 22.
[6] Accordingly, the issue that the first appellant had to address was how to protect his clients’ interests given the obvious possibility of the repairs not having been carried out by the imminent date of entry. One option would have been to negotiate a reduction in the price of the property but that does not appear to have been considered. Another option was to try to have the sellers agree to the retention of a portion of the price; that was what the first appellant evidently decided to do. By letter dated 19 January 2012, he wrote to the seller’s solicitors, stating:
“Our clients have contacted us to advise that they have been in contact with your clients by email. Apparently your clients were unaware of the storm damage to the roof. We understand that your clients are arranging for the roof to be repaired next week.
In the circumstances we would propose to make a retention of £1,000 from the purchase price until the roof repairs are satisfactorily completed. Please take immediate instructions and revert to us by return fax with confirmation that this is acceptable.”
[7] The seller’s solicitor responded by letter faxed the same day, stating:
“Our clients are agreeable to a £1,000 retention in respect of roof repairs. As soon as the repairs have been carried out our clients wish immediate release of the retained funds.”
[8] The transaction settled on 20 January on which date £369,000 was paid by the clients, being the purchase price “less the agreed retention of £1,000 in respect of the roof repairs to be carried out.” (see: first appellant’s letter dated 19 January 2012). It appears that the £1,000 retention money was held by the first appellant.
[9] After the clients had taken entry, they raised concerns with the first appellant in relation to a number of matters which they considered to constitute substantial defects in the property. Their list included various problems with the roof including that there were missing slates due to storm damage. The first appellant reported their concerns to the seller’s solicitor, observing “You are obviously already aware of the damage to the roof, which is subject to a retention.” (see: first appellant’s letter dated 24 January 2012).
[10] The first appellant understood that no repairs had been carried out to the roof at all. He wrote again to the sellers’ solicitors, by letter dated 1 February 2012 stating:
“….Our clients have also advised us that no repairs have yet been carried out to the roof. As you are aware your clients agreed with our clients that the roof repairs would be carried out last week.
We therefore put your clients on notice that if your clients have not had the roof repairs carried out by Sunday 5th February, then our clients will instruct their own tradesmen to carry out the necessary repairs and use the retention of £1,000 to cover the costs therefor.”
[11] The seller’s solicitor responded promptly, the same day, by a letter which included the following:
“We have received an email from our clients confirming that the roofer was to have visited the property last week. Our clients are seeking confirmation from the builder that they instructed as to whether or not this has been done and we shall revert to you on this matter in due course. In the meantime should your clients instruct their own tradesmen to carry out any work then this is strictly on the basis that our clients do not consent to the use of any of the retention monies…………………
………………………………….
Roof
………………………………..
….in the meantime any work carried out by your clients will be carried out at their own expense without liability to our clients. In particular our clients do not consent to any of the retention monies being used for this purpose.”
[12] The ensuing correspondence between the solicitors indicates that, whatever the true position, the first appellant continued to believe that no roof repair had been carried out at the instance of the sellers at all and he continued to press them, through their solicitors, to do the repairs.
[13] He thus wrote again to the seller’s solicitor, by letter dated 19 March 2012 stating:
“Our clients require the roof repairs to be undertaken within the next 7 days, failing which they shall instruct the work themselves and apply the retention towards the cost.”
[14] On 27 March, the first appellant advised the clients that they could instruct their own contractors to carry out the roof repairs and use the retention monies to pay for those works. Then, on 28 March, he wrote to the sellers’ solicitors stating that the roof repairs had not been carried out and:
“Accordingly, our clients are now arranging for the work to be undertaken by their own tradesmen and the £1,000 retention will be applied towards the costs thereof. We enclose a copy of the estimate obtained by our clients for the roof works for your information.”
[15] It is not clear what his basis was for considering that the storm damage repair would cost as much as or more than £1,000, as is indicated by the statement that the money would be applied “towards” the cost of the repairs; the estimate provided to him by the clients indicated that it would cost considerably less than that.
[16] By letter dated 2nd April, the sellers’ solicitor advised that the roof repairs had been carried out, reiterated that they did not accept that the retention money could be applied to the cost of any repairs instructed by the purchasers and warned that, if the first appellant uplifted the £1,000 without their consent, they would report him to the Law Society of Scotland. On 3 April, the first appellant retracted his earlier advice; he told the clients that they could not in fact use the retention money to pay for any roof repairs instructed by them.
Law Society of Scotland Rules and Guidance, Division C: Conveyancing
[17] The relevant guidance issued by the Law Society of Scotland, on retention of funds in the context of a conveyancing transaction, is in the following terms:
“Where a sum of money is to be retained at settlement of a conveyancing transaction, the conditions upon which it is retained should be set out in writing at settlement. The agreement should specify the time limit for implementation. Matters should not be left to recollection of telephone conversations which may become vague with the passage of time.
If funds were retained pending fulfilment of certain conditions by the seller, they should be released when those conditions have been fulfilled in terms of the written agreement. The purchaser’s solicitor does not need to seek instructions from his or her client at that stage.
Solicitors are entitled to rely upon agreements reached with other solicitors at settlement which set out conditions on which funds will be released. If the client instructs the solicitor not to release funds there could be a conflict of interest between solicitor and client requiring the solicitor to withdraw from acting.
It may be that the conditions for release of the funds have not been fulfilled by the seller. In these circumstances if the purchaser’s solicitor produces vouching for the actual or estimated expenditure required to fulfil the conditions, the seller’s agent does not require the seller’s instructions to agree to the release of the funds as so vouched. Again solicitors are entitled to rely on the reciprocity of such agreements.”
[18] In that guidance, the Law Society of Scotland identify a number of important matters. They identify the need to put the retention agreement into writing. They identify the need to specify a time limit for performance by the seller of the relevant contractual obligation. They identify that the primary purpose of a retention clause is to put pressure on the seller to perform the obligation. They identify that it will only be possible for the purchaser to use the retention money to meet the cost of carrying out the work involved if, in terms of the conditions of the retention agreement, it is clear that the seller has not done what he is obliged to do and the seller’s solicitor agrees to the purchaser having the work done in accordance with a vouched estimate. An obvious example would be where a specified time limit has expired, where it is clear, according to the conditions of the retention agreement, that the obligation has not been performed, and where the seller’s solicitor agrees to the retention money being used.
The complaint
[19] The clients complained, the complaint was accepted by the respondents and was determined by them to be a services complaint: Legal Profession and Legal Aid (Scotland) Act 2007 sec 5(1)(b). Whilst the essence of that part of the complaint which is the subject of this appeal, as articulated by the clients, was that the first appellant changed his advice - that initially, he told them that they would be able to use the retention money to instruct their own repairs but a week later he told them that they could not do so - the respondents, once they had considered that complaint in the context of the whole surrounding facts and circumstances, analysed matters differently. They concluded that what mattered was the cause of that complaint and it was that the solicitor failed, at the outset, to ensure that the terms of the retention were adequate. In that regard, they noted that the agreement about the retention was lacking in detail; for example, it failed to identify the extent of the repairs to be carried out, failed to state who was to be responsible for instructing the repairs, failed to provide a time limit and failed to state what was to happen if the parties disagreed about the standard of the repairs carried out. Nor did it provide for the client to uplift the retention monies and carry out the repairs themselves.
[20] The respondents concluded that, in these circumstances, the clients had received an inadequate professional service and upheld this aspect of the complaint. They determined that the appellants should waive their fees in relation to dealing with the roof repair matter (£317.63 plus VAT), and pay compensation in the sum of £500.
The Appeal
[21] Section 21 of the 2007 Act provides for appeals against decisions of SLCC:
“ (1) Any person mentioned in subsection (2) may, with the leave of the court, appeal against any decision of the Commission under the preceding sections of this part as respects a complaint on any ground set out in subsection (4).”
[22] Practitioners to whom the complaint relates and their firms are included in sec 21(2). Sec 21(4) provides:
“The grounds referred to in subsection (1) are –
- that the Commission’s decision was based on an error of law;
- that there has been a procedural impropriety in the conduct of any hearing by the Commission on the complaint;
- that the Commission has acted irrationally in the exercise of its discretion;
- that the Commission’s decision was not supported by the facts found to be established by the Commission.”
[23] Leave to appeal was granted on three grounds. They were:
- The respondents erred in law by failing to take into account relevant matters namely that the advice given by the first appellant on 27 March and 3 April was, on each occasion, correct (sec 21(4)(a));
- The respondents acted irrationally in that they upheld the complaint although the advice on both 27 March and 3 April was correct and , also, they failed to explain how differently worded terms would have altered the advice or would have avoided a factual dispute about the adequacy of the roof repair (sec 21(4)(c )); and
- The respondents’ decision was not supported by the facts found; there was no evidence that the advice given was inadequate and there was good reason for the first appellant to change his advice (sec 21(4)(d)).
[24] At the heart of all three grounds of appeal was Mr Davies’ submission that the first appellant had, on each occasion, given correct advice. He thought, on 27 March, that the repairs had not been carried out. Thereafter, matters changed when the seller’s solicitor said that they had been carried out; the problem then was a different one and involved a dispute about adequacy of repairs.
[25] Mr Davies submitted that the terms and purpose of the retention were well understood and included that, in the event that the sellers failed to carry out the repairs, the purchasers were entitled to carry out the repairs themselves and apply the retention money to cover the cost. The advice given by the first appellant being correct on both occasions, it could not constitute an inadequate professional service.
[26] In any event, the terms of the retention were not inadequate if account was taken of the need to agree them in a very short space of time and without agreement to a retention, the clients would have been faced with a choice between proceeding with the settlement without protection or withdrawing from the transaction altogether. The retention agreement was in writing. It was, he said, to be interpreted as providing a one week time limit for the repairs to be carried out, which failing, a reasonable time was to be implied; in this case, a reasonable time would be one week. He also submitted that it followed from the Law Society guidance (see above) that if there was a dispute about whether or not the conditions for release of retained funds had been met, the funds could not be released until that dispute was settled. Further, in failing to state what conditions would have been adequate, the respondents did not explain what conditions would have been adequate, as they required to do.
[27] Separately, Mr Davies sought to advance a submission to the effect that the respondents had erred in law by considering and determining a different complaint from that which was presented to them. It was based on observations made by Lord Reed in the case of Law Society of Scotland v SLCC (2011) SC 94, at paras 45 and 46 and was presented as an extension of the first ground of appeal, the argument being that the respondents erred in law by failing to confine their considerations to the complaint presented to them.
[28] Mr Davies also relied on the fact that the respondent’s case investigator had recommended that this aspect of the clients’ complaint should not be upheld.
[29] For the respondents, Mr Barne observed that, unless the court was satisfied that they had erred in law, the appeal could not be upheld. It was, at the outset, important to note that the respondent’s conclusion was that, on the advice tendered, the clients had received an inadequate service. It was not about whether the advice received was correct; correct advice could, nonetheless, amount to an inadequate service such as where there was a paucity of explanation. In this case, the clients were never given adequate advice about what their rights were in relation to the storm damage and the retention. In any event, in this case, the advice was, Mr Barne submitted, incorrect. Where the retention in question is a contractual one, its operation is, he submitted, defined by the terms of the particular contract, not by the common law. The terms of this retention agreement did not support the first appellant’s initial advice. Moreover, it was unclear whether the first appellant was relying on the common law or the parties’ contract. As to the specifics of the retention agreement, Mr Barne submitted that its terms were, at best, nebulous. They failed to identify who was to instruct the repair, to what standard the repairs were to be carried out or to whose satisfaction. He did not accept that there was any express or implied time limit for the repairs. Invoking an ultimatum procedure was hopeless in the absence of an agreed time limit. Further, once the seller’s solicitors had stated, in their letter of 2 February, that the sellers did not consent to the purchaser’s use of any of the retention money, any solicitor would, thereafter, have to be very careful before he could confidently tell his clients that they could use the retention money for the roof.
[30] Regarding the submission that the respondents had determined a different complaint from that which was presented to them, Mr Barne submitted that it was not a ground of appeal and, in any event, it was misconceived. It proceeded on a misunderstanding of the case of the Law Society of Scotland v SLCC and it failed to recognise that the first appellant’s advice could not be assessed properly without consideration being given to the context in which it arose. The issue could not have been determined without the respondents having regard to the terms of the retention and how the advice given related to its terms. He drew support from what was said by Lady Hale in the case of South Lanarkshire Council v The Scottish Information Commissioner (2014) SC (UKSC) 1 at para 30 about the need to recognise that where applications come from members of the public, they cannot be expected to have expert knowledge of the law or to instruct lawyers to frame their applications for them.
[31] Regarding the recommendation of the case investigator, Mr Barne explained that the purpose of such an investigator’s report is to provide a mechanism whereby parties may be able to reach a conclusion which does not result in any formal determination and no fee or levy being incurred. If that is not possible, matters then escalate to a formal determination at which stage a determination committee considers the complaint afresh taking account of all the available information including any findings in fact made by the investigator. The investigator’s recommendation in this case followed her conclusion that she could not find it established, on the available evidence, that the clients had told the first appellant that some repairs had been done but they were inadequate, prior to his advising them they could use the retention money and that was something which she saw as being a “pivotal” matter (Investigation Report para 4.6). However, unlike the determination committee, she did not consider the terms and relevance of the retention agreement or the adequacy of the advice overall; her considerations were restricted to whether or not, on what she could find as fact, the first appellant had given advice which did not, on each occasion, fit with the facts as he saw them.
Discussion and Decision
[32] SLCC are a complaints body, established by statute for purposes which include determining whether or not circumstances have arisen in which a legal practitioner has failed to provide an adequate service, whether he should afford redress to the client in one of the ways specified in sec 10(2) of the 2007 Act and/ or whether a report ought to be made to the practitioner’s professional organisation on grounds of concerns regarding his professional competence. Once a complaint has been accepted and determined to be a services complaint, the focus is on resolution of the complaint. SLCC must investigate it and, if it cannot be resolved informally, determine it by reference to what they consider to be fair and reasonable in all the circumstances (sec 9(1)(d)). The direction to consider what is “fair and reasonable” applies as much to their consideration of whether or not the practitioner rendered an inadequate professional service as it does to what, if any, action ought to be taken if he did: see sec 11 of the 2007 Act, which provides:
“In considering what is fair and reasonable in the circumstances, the Commission is to take into account the relevant law (including levels of damages awarded by courts in similar circumstances) and relevant codes of practice, professional rules, standards and guidance.”
[33] It is clear that whilst negligence would be relevant, it is not a matter of establishing whether or not the practitioner was negligent; a lesser failing may justify the upholding of a complaint. To put it another way, a service may be inadequate without being negligent and without having caused loss. Further, we agree with Mr Barne that it is plainly within the statutory intent that a service consisting of the rendering of advice may be inadequate even though the advice provided was correct. Much will depend on the particular facts and circumstances.
[34] What these factors show is that the assessment of whether, in any particular set of circumstances, the service provided by a practitioner was inadequate is pre-eminently a matter for the judgment of SLCC, a majority of whose members are lay persons (see: 2007 Act Sch 1 para 2) and whose determination committees require to have a majority of lay members on them (see: 2007 Act Sch 3 para 1(h). Matters must be considered as much from the point of view of the lay client and lay public as from that of the legal practitioner and the legal profession. They must reach their own judgment on the basis of all the available information and are not bound by any prior recommendation of the case investigator whose report is for a different purpose, as was explained by Mr Barne. Their assessment may only be impugned if it was based on one of the errors specified in sec 21. It is not a matter of asking whether a different determination committee, another complaints body or, indeed, this court, would have reached a different view.
[35] We cannot detect any such error. We do not accept that the central tenet of the appeal, namely that the advice given was correct on each occasion, was well founded. Whatever his understanding regarding the repair works being done or not done, the first appellant required to recognise that the retention agreement was limited in effect and did not include any provision whereby his clients would, at any time, be entitled to use the retention money to carry out the repairs themselves. We do not consider that there was any room for the implication of such a provision whether at common law or on a consideration of the terms of this retention agreement.
[36] Also, importantly, the retention agreement did not include any provisions whereby failure on the part of the sellers could be pinpointed nor had the first appellant even attempted to have such provisions incorporated. What was meant by “satisfactorily completed”? Who was to instruct the repairs, given that the date of entry was the following day? What about a time limit? None of these were addressed. The retention agreement did not include a time limit. We do not accept that a one week time limit was expressly or impliedly included; the letters of 19 January in which the retention was agreed are not susceptible to any such interpretation. 19 January 2012 was a Thursday. The reference in the first appellant’s letter being to no more than an “understanding” that the sellers were arranging for the roof to be repaired “next week” - thus being capable of referring to a repair in 4,5,6,7, or 8 days time – and no time limit having been referred to at all in the selling agent’s letter, matters were left far too loose to be interpreted as an agreement to a time limit. Apart from putting something in writing, no regard appears to have been had to the important matters identified by the Law Society of Scotland in the guidance referred to above. We find that the respondents’ approach to their considerations was, in the circumstances, entirely understandable and would endorse it.
[37] In all these circumstances, it was not correct for the first appellant to state to his clients, on 27 March 2012, that they were entitled to go ahead and use the retention money to carry out the work themselves. Nor, indeed, is there any indication of him having explained to the clients the limitations to their rights under the retention agreement. It was clearly open to the SLCC to hold that the clients had not received an adequate professional service. There was no need for them to go further and, as Mr Davies seemed to be suggesting, prescribe what ought to have been in the agreement or what the first appellant ought to have sought to have included in it, particularly in circumstances where the Law Society have already provided helpful guidance. We are not, accordingly, persuaded that any of the grounds of appeal for which leave was granted are established.
[38] Turning then to the “different complaint” submission, we note that it did not form any part of the grounds of appeal for which leave to appeal was granted. That being so, if it cannot properly be regarded as an extension of the first ground of appeal, it is not competently before us. We are not persuaded that it is such an extension. It is a separate argument. In any event, we would not have been persuaded that it is well founded. The passages from Law Society of Scotland v SLCC that were founded on related to a different issue, namely the approach that SLCC require to take at the earlier “sifting” stage, when deciding whether or not a complaint is frivolous, vexatious or totally without merit. Further, Mr Davies’s submission failed to take account of Lord Kingarth’s observations at para 41 to the effect that an over technical view of what a complaint comprises should not be taken and that there may be room for wider concerns than are initially mentioned by the client. That rather chimes with the observations made by Lady Hale in the South Lanarkshire Council case, with which we would respectfully agree. Allowances do need to be made for the fact that applications such as these are made by lay persons who will know what, from their perception, has gone wrong and what has upset them but may have no inkling of the nature of the service failure to which they have been subjected. In the present case, the complaint about conflicting advice required to be considered in context. That context was the nature of the retention agreement and the extent to which the steps taken by the solicitor to afford secure protection for the client were adequate or not. Consideration of that context fell fairly and squarely within the complaint and it is not at all surprising that it was to it that the attentions of the determination committee were drawn.
[39] We will, accordingly, refuse the appeal.