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STV CENTRAL LIMITED AGAINST SEMPLE FRASER LLP (in liquidation) AND CBRE LIMITED


Submitted: 12 May 2015

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION

[2015] CSIH 35

CA151/12

 

Lady Paton

Lord Brodie

Lady Clark of Calton

OPINION OF LADY PATON

in the cause

STV CENTRAL LIMITED

Pursuer;

against

SEMPLE FRASER LLP (in liquidation)

Defender and reclaimer;

and

CBRE LIMITED

Third party and respondent:

 

Pursuer:  Non-participating party

Defender and reclaimer:  A Young QC, Gardiner;  DWF LLP

Third party and respondent:  Connal QC (sol adv);  Pinsent Masons LLP

 

12 May 2015

Introduction
[1]        The issue in this reclaiming motion is whether the defender has pled sufficient relevant and specific averments against the third party such that a proof before answer should be allowed.  After a debate, the Lord Ordinary (Lord Woolman) decided that the defender had failed to do so, and dismissed the action so far as directed against the third party.  The defender now reclaims.

 

Background
[2]        The events leading to the present litigation are summarised by the Lord Ordinary as follows:

“[1]         This case arises out of an error in a rent review clause in a lease.  The defender has admitted liability for the error and paid a substantial sum to settle the pursuer’s claim.  It now seeks a contribution from the third party.  The issue came before me for discussion on the Procedure Roll.  In seeking dismissal of the claim, the third party submitted that the defender had not made out a relevant claim under section 3(2) of the [Law Reform (Miscellaneous Provisions) (Scotland) Act 1940].   The defender maintained the contrary position.  It invited me to allow a proof before answer.

 

[2]           Between about 2003 and 2006 a consortium of companies carried out a commercial development at Pacific Quay, Glasgow.  STV Central Ltd (‘STV’) decided to relocate there from its former premises at Cowcaddens.  It instructed Semple Fraser, solicitors, and CBRE Ltd (formerly CB Richard Ellis Ltd), surveyors, to act on its behalf in securing a lease of new premises at Pacific Quay.  Negotiations about the heads of terms commenced in 2003.  The lease for the new premises was executed in May 2006.

 

[3]           The landlord agreed to STV’s request to fit out the new premises to a higher specification than was normal for that type of building.  The extra cost was reflected in the rent, which was split into two elements: (a) the initial rent, and (b) the enhanced rent.  Clause 1.1.13 set out a formula to calculate the enhanced rent over the 20 year period of the lease:

 

‘subject to review and compounded (upwards only) at each successive anniversary (“the Relevant Date”) of the Date of Entry, according to the formula R = I x A/B where R is the Enhanced Rent payable from and after the Relevant Date, I is the Enhanced Rent payable prior to the Relevant Date, A is the RPI for the date two months before the Relevant Date … and B is the RPI for the date two months before the Date of Entry.’

 

[4]        The effect of the RPI formula was to increase the sum payable in an exponential manner.  If, for example, the retail prices index increased at the rate of 3 per cent each year, STV would have been liable to pay an annual rent of £100 million in 2025.  It only became aware of the true effect of the RPI formula in November 2009.  On the advice of senior counsel, it decided against raising an action for rectification.  Instead it entered into negotiations with the landlord to attempt to resolve maters.  Following mediation in March 2012, the landlord agreed to insert a new rent formula into the lease.  In return, STV became liable to pay various sums to the landlord.

 

[5]        STV raised the present action for professional negligence against the defender shortly before Christmas 2012.  It sought compensation for the losses it had incurred on the basis of breach of contract and delict.  In February 2013, the defender admitted liability.  Subsequently it lodged a substantial tender, which STV accepted in July 2013.  Accordingly the litigation is now between the defender and CBRE.”

 

Rent review clauses
[3]        The first rent review clause, Clause 1.1.13, which deals with the enhancement of rent as a result of the higher specification of the finish of the premises, is quoted in paragraph [3] of the Lord Ordinary’s opinion (above).  “RPI” is defined in Clause 1.1.41.

[4]        The standard rent review clause (unconnected with the higher specification of the finish of the premises) is Clause 3, which extends to several pages.  It begins as follows:

“3 RENT REVIEW PROVISIONS

 

3.1  Review date

 

The term ‘review date’ for the purposes of this Clause shall mean (subject to the provisions of Clause 3.8 hereof) 29 March in the years 2011, 2016 and 2021 and the expression ‘the relevant review date’ shall be construed accordingly”

 

What follows are detailed provisions governing the standard rent and rent review operating independently of the provisions for the enhanced rent.

 

The defender’s request to the third party for advice and assistance in relation to the RPI wording
[5]        The defender requested the third party’s advice and assistance in relation to the wording and working of the RPI provision in Clause 1.1.13.  Details of the exchange between the defender and the third party are contained in e-mails referred to and quoted in Answer 5 of the defences.  The main parts of that exchange were as follows:

9 March 2004:

 

10.03  Simon Etchells (defender) asked Philip Reid (third party) “Can you comment on the RPI wording and the CAT A enhanced rent review point I make?”

 

11.38  Simon Etchells (defender) sent e-mails to both STV and Philip Reid (third party) saying “Enhanced rent – I think that the RPI provisions work but I ask that CBRE [third party] look at them”.

 

25 March 2004:

 

Keith Hutchison (third party) provided comments on the rent review provisions, focusing on Clause 3.  He did not address the wording of the RPI provision. 

 

30 March 2004:

 

Philip Reid (third party) sent a copy of Keith Hutchison’s comments by e-mail to Joanna Campbell-Smith (defender) adding “I am still waiting for one of my colleagues to let me know the new RPI wording, although most seem happy to use RPI”.

 

5 April 2004:

 

Joanna Campbell-Smith (defender) inquired of Virginia Beckett (third party) “… have your rent review colleagues yet signed off on the RPI wording in the lease?”

 

7 April 2004:

 

Virginia Beckett (third party) replied “RPI – we are happy in principle with the RPI wording.”

 

7 April 2004:

 

Joanna Campbell-Smith (defender) sent an e-mail to Virginia Beckett (third party) stating:

 

“On RPI, the real issue here is a commercial one, as to exactly how the RPI increase should work and be applied.  There are various possible scenarios:-

 

  • We have said that the RPI increase is only to be applied 5 yearly;PQ are resisting this;
  • If it is to be applied annually, should the increase be calculated each year by reference to the base rent, or
  • By reference to the rent as increased in the previous year?

 

My reading of [Shepherd & Wedderburn’s] drafting is that they are looking for the third option, but could you let me have your/your rent review colleague’s views on what we should be recommending to [STV]?”

 

It is thereafter averred in Answer 5 that “[o]ther than some further discussion on 5 May 2004 regarding whether the indexed increase would be applied annually or five yearly, CBRE provided no further advice to the defender on the working of the RPI provision within the Enhanced Rent definition”.  Accordingly there appears, on the pleadings, to have been no direct response to that final question from the defender.

 

The defender’s pleadings
[6]        In its defences to the action against it by STV (an action which has been settled, as set out in paragraph [5] of the Lord Ordinary’s opinion), the defender offers to prove inter alia that:

  • “In about January 2003 the defender was instructed by [STV] in connection with securing a lease for premises at Pacific Quay.The third party was instructed by the pursuer to act as their surveyors in the same project.It is implicit when a professional team of advisers is instructed on such a development that they will co-operate with and respond to queries from other professional advisers within the team.In particular where chartered surveyors employ a specialist in rent reviews it is expected that legal advisers charged with drafting rent review provisions will seek assistance from such specialists.The defender and third party were instructed by [STV] to negotiate and finalise a lease with the Consortium …” (Answer 3).
  • The defender did in fact seek the third party’s advice and assistance on the wording of the RPI clause, all as set out in the e-mail exchange noted in paragraph [5] above (Answer 5).
  • The defender gave express intimation to STV that it (the defender) was seeking the third party’s advice and assistance about the wording of the RPI provision:see the e-mail of 11.38 of 9 March 2004, quoted in paragraph [5] above (Answer 5).
  • The third party did not, on the defender’s averments, reject the request for advice and assistance, by, for example, sending both STV and the defender an e-mail pointing out that the wording and working of the rent review and the RPI provision were matters for lawyers.On the contrary, on the averments, by e-mail dated 25 March 2004, Philip Reid (third party) provided specific advice from the third party’s rent review specialist Keith Hutchison in relation to Clause 3.In that e-mail, Mr Reid added that he was “still waiting for one of [his] colleagues to let [him] know the new RPI wording, although most seem happy to use RPI”, thereby implicitly accepting that it was appropriate for the third party to advise and assist the defender and (indirectly) the client STV in relation to the working and wording of the RPI provision.(Answer 5).
  • The last word from the third party to the defender in relation to the working and wording of the RPI provision was, on the averments, that the third party was “happy in principle with the RPI wording” (Answer 5).
  • Thereafter the wording of the RPI provision in Clause 1.1.13 remained unaltered, and was subsequently found to “contain a drafting error concerning the indexation of rent” (STV’s averment, admitted by the defender in Answer 15).
  • In Answer 15, the defender in fact denies STV’s further averments that “Had [the defender] advised [STV] that the formula in Clause 1.1.13 provided for the Enhanced Rent (assuming annual inflation) to increase in an exponential manner in excess of inflation … [STV] would not have instructed the defender to conclude the 2004 Missives with Clause 1.1.13 in those terms.Had [the defender] advised [STV] of the true meaning of Clause 1.1.13 prior to [STV] executing the lease, [STV] would have instructed the defender to remedy the wording”.However I take the view that this denial represents a loose end in the pleading of a tripartite case, part of which has settled, and that the defender is not in a position to deny STV’s averments on those matters.
  • The defender further avers in Answer 15:“Explained and averred that esto [STV] suffered loss and damage as a consequence of breach of contract or fault on the part of this defender, any such loss was also caused or materially contributed to by breach of duty on the part of CBRE [the third party].CBRE were chartered surveyors and property agents with extensive experience in rent review matters.As [STV] was aware, CBRE had been asked by the defender to consider and comment on the RPI provision within the Enhanced Rent definition.CBRE asked their rent review specialists to consider the draft lease.They raised no concerns about the operation of the indexation provision in the definition.CBRE owed contractual and delictual duties to [STV] as professional advisers.They had a duty to exercise the standard of care reasonably to be expected of chartered surveyors and commercial property agents of ordinary competence.It was their duty to consider the terms of the Enhanced Rent definition and to advise whether the indexation provision worked satisfactorily throughout the 20 year term of the lease.It was their duty to advise if the indexation provision resulted in grossly excessive rental increases in later years.CBRE failed to do so and by said failure caused or materially contributed to [STV’s] loss and damage …”

 


Submissions for the defender and reclaimer
[7]        If the defender’s averments disclosed a relevant claim by STV against the third party (which STV could have pursued if it chose) then there was a relevant claim by the defender against the third party (section 3(2) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1940;  Farstad Supply AS v Enviroco Ltd 2010 SC (UKSC) 87).

[8]        Contract:  Contrary to the Lord Ordinary’s opinion, there was a sufficient basis for a contractual duty owed by the third party to STV in the defender’s averments relating to (i) the practice of a professional team of advisers, and (ii) the e-mails.  There was no written contract (as none had been recovered by a specification of documents), and evidence was required fully to explain both (i) and (ii) and all the surrounding circumstances.  It was not averred that the third party owed STV a duty to revise the relevant clause:  rather that it was averred that it was the third party’s duty, when asked, to consider the terms of the RPI provision and to advise thereon.  The team arrangement envisaged discussion amongst members, and then one member reporting to the client.  Accordingly the lack of specific instructions from, or advice to, STV, was not significant.  The defender had sought advice from the third party who had a particular expertise and at least one employee who was a rent review specialist.  One possible construction of the third party’s e-mails (including the “happy in principle” e-mail) was that no problem had been identified, and that the RPI wording gave effect to the heads of terms as negotiated.  Thus the third party had contributed not only to the negotiation of the heads of terms, but also to the finalising of the lease.  Further, on the averments, there was implicit reliance by the defender on the third party’s response, as the drafting of Clause 1.1.13 remained unaltered and (it transpired) erroneous.  If the third party had flagged up a problem, the defender would have revised the clause.  Thus there were averments of a breach of duty, and a causal link.  The defender could not be said to be bound to fail so far as the contractual case was concerned (Jamieson v Jamieson 1952 SC (HL) 44).

[9]        Delict:  It was not accepted that there was no clear-cut advice from the third party about the RPI provision (contrary to paragraph [15] of the Lord Ordinary’s opinion).  The e-mails, including the “happy in principle” e-mail, could be seen as clear advice and therefore amounting to an assumption of responsibility for advice.  The defender’s averments satisfied sub-heads (a) to (e) of Sir Brian Neill’s judgment in BCCI v Price Waterhouse (no 2) [1998] PNLR 564.  STV knew that the defender had asked the third party to look at the RPI wording.  The third party knew that information about the RPI wording might be routed through the defender to STV, and that STV was likely to rely on that information.  In those circumstances, the third party owed STV a duty of care ex delicto to respond competently to queries from team members in the third party’s field of expertise (thus not as wide a duty as stated by the Lord Ordinary in paragraph [18] of his judgment).  The defender was offering to prove that STV (before signing the lease) relied on the fact that the third party would give the defender proper advice.  Thus there were averments of reliance, or perhaps “dependence” (Clerk & Lindsell, Torts (21st ed) paragraph 8-113, and Spring v Guardian Assurance plc [1995] 2 AC 296).  As for causation, both the defender and the third party failed to notice a problem, and as a result STV became bound by a clause with erroneous wording, thus suffering loss.  On the averments, it was implicit that the third party’s response was relied upon by the defender and became input into the ultimate decision which was relied upon by STV (who knew that the defender and the third party had been co-operating over clause 1.1.13).  Even if it were suggested that STV was not interested in the third party’s view, and was relying upon the defender as lawyers, the fact that input from the third party filtered through to the defender and further up the chain was sufficient for the existence of a duty of care.  STV relied on joint advice from the defender and the third party.  STV averred that if it had known that there was an error in the lease, it would not have signed it.  The defender admitted an error (Answer 15 page 20A):  but if the third party had flagged up a problem, the defender would have acted on that warning.  Thus the defender had pled a relevant case against the third party in delict, a case which could not be said to be “bound to fail” (Jamieson cit sup).

[10]      Decree of dismissal should be recalled and a proof before answer allowed.  But if the court were dissatisfied with the averments relating to causation, the court was invited to consider putting the case out for a By Order hearing.  A minute of amendment might address the court’s concerns.

 

Submissions for the third party and respondent
[11]      Contract:  The pleadings were inadequate to instruct the creation or operation of a contractual obligation owed by the third party to STV in relation to the drafting of the RPI provision.  It was always open to parties to contract so as to prevent a claim under section 3 of the 1940 Act, cf Farstad Supply AS cit sup, and in this case both STV and the defender accepted that it was the defender’s function to see that the wording of the lease matched STV’s intention (page 20A and Condescendence 5).  The error in the RPI wording had in any event been obvious (not requiring specialised valuation expertise) and the defender gave no indication whether it had relied on the e-mail communications with the third party.  Communications amongst team members did not necessarily give rise to binding legal obligations.  Causative reliance had not been pled, and the material set out in the pleadings was inadequate in the circumstances to give a relevant basis for a contractual obligation.

[12]      Delict:  For an “assumption of responsibility” case, it was necessary for the defender to aver that STV actually relied upon the third party in respect of the wording of the RPI provision.  But that was not clear from the pleadings.  Indeed both STV and the defender averred that it was the defender’s responsibility to ensure that the wording in the lease was accurate.  Sub-head (d) of BCCI v Price Waterhouse (no 2) cit sup applied (i.e. there was another adviser “on whom the advisee would or could rely”).  Spring v Guardian Assurance plc cit sup did not weaken the need for reliance in an assumption of responsibility case.  The e-mail exchange ended with unanswered questions.  Thus the averments did not satisfy the essential requirement of reliance.

[13]      The reclaiming motion should be refused, and the decision of the commercial judge adhered to.

 

Discussion
[14]      In Answer 15, the defender avers that:

“ … esto the pursuer suffered loss and damage as a consequence of breach of contract or fault on the part of this defender, any such loss was also caused or materially contributed to by breach of duty on the part of CBRE [the third party].  CBRE were chartered surveyors and property agents with extensive experience in rent review matters.  As the pursuer was aware, CBRE had been asked by the defender to consider and comment on the RPI provision within the Enhanced Rent definition.  CBRE asked their rent review specialists to consider the draft lease.  They raised no concerns about the operation of the indexation provision in the definition.  CBRE owed contractual and delictual duties to the pursuer as professional advisers.  They had a duty to exercise the standard of care reasonably to be expected of chartered surveyors and commercial property agents of ordinary competence.  It was their duty to consider the terms of the Enhanced Rent definition and to advise whether the indexation provision worked satisfactorily throughout the 20 year term of the lease.  It was their duty to advise if the indexation provision resulted in grossly excessive rental increases in later years.  CBRE failed to do so and by said failure caused or materially contributed to the pursuer’s loss and damage …”

 

[15]      I accept that, in applying section 3(2) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1940, it is necessary for the court to decide whether, if the third party had been sued by STV, it would have been held liable (Farstad Supply AS v Enviroco Ltd 2010 SC (UKSC) 87).

 

Contract

[16]      No written contract is referred to in the pleadings.  Thus the nature and extent of the contractual relationship between STV and the third party requires to be proved by evidence.

[17]      In Answer 3, the defender avers that:

“In about January 2003 the defender was instructed by the pursuer in connection with securing a lease for premises at Pacific Quay.  The third party was instructed by the pursuer to act as their surveyors in the same project.  It is implicit when a professional team of advisers is instructed on such a development that they will co-operate with and respond to queries from other professional advisers within the team.  In particular where chartered surveyors employ a specialist in rent reviews it is expected that legal advisers charged with drafting rent review provisions will seek assistance from such specialists.  The defender and third party were instructed by the pursuer to negotiate and finalise a lease with the Consortium …”

 

The averments relating to the professional team were based on an expert report.

 

[18]      When those averments are read together with the averments concerning the exchange of e-mails between the defender and the third party (Answer 5), it is, in my opinion, difficult for a court at this stage to conclude that the third party’s contractual duties owed to STV did not extend to giving expert advice about rent review provisions to another member of the professional team (and thus indirectly giving such advice to the client, STV), and in particular expert advice about the wording of the RPI provision such that the heads of terms were accurately translated to and recorded in the missives and lease.  Whether such advice was to be tendered directly to STV, or to another member (or members) of the team of professional advisers acting for STV, does not in my opinion matter, in the light of the defender’s averments relating to the method of working of the team of professional advisers (paragraph [17 ] above) and also STV’s awareness that the defender and the third party were working together on the RPI provision.  Thus I do not accept that there is any significance in the fact that the defender “does not point to … any instruction or request made by STV, or to any advice proffered by CBRE to STV” (paragraph [12] of the Lord Ordinary’s opinion).

[19]      On the basis of the pleadings, I consider that the defender offers to prove that the defender and the third party were members of a team of professional advisers with the modus operandi set out in paragraph [17] above;  the defender specifically requested advice and assistance from the third party (as professionals having knowledge and experience of rent review procedures) about the wording and working of the RPI provision;  the third party did not reject the request as “not within our remit” or “not our responsibility” or “outwith our expertise”, but on the contrary offered certain advice;  STV knew that the defender and the third party were working together on the wording of the RPI provision;  the third party knew that STV had that knowledge;  when the defender eventually allowed the existing version of the RPI provision to go forward to the next stage in the transaction, STV was entitled to assume not only that the defender had approved the wording, but also that the third party had not vetoed it or objected to it or raised a warning about it (reliance);  the third party knew (or ought to have known) that that would be the case.

[20]      Thus I do not agree that it can be concluded at this stage that “[t]here is nothing to suggest that STV looked beyond the defender for advice on the terms of the lease, including the RPI formula” (paragraph [12] of the Lord Ordinary’s opinion);  or that there is “no foundation for the averment that STV instructed CBRE along with the defender ‘to negotiate and finalise a lease with the consortium’” (paragraph [19] of the opinion);  or that “there is nothing to indicate that CBRE undertook contractual liability to STV to provide [specialist advice on the RPI formula]” (paragraph [12] of the opinion). On the contrary, on the basis of the defender’s pleadings it seems to me that the defender’s contention that the third party owed STV a duty of care ex contractu in relation to Clause 1.1.13 is stateable, although the success of that contention would ultimately be dependent upon the facts found proved. 

[21]      In relation to breach of a contractual duty causing loss, it would in my view be open to a court, having heard the evidence, to conclude that the third party’s “happy in principle” reply of 7 April 2004 was, in the circumstances, the overarching advice in principle proffered by it to the defender and thus, by allowing a defective RPI provision to proceed to the next stage of the transaction, the third party caused or contributed to STV’s loss and damage. 

[22]      Accordingly, even although STV chose not to adopt the defender’s case against the third party, and even although STV has averments in Condescendence 3 concerning the respective remits of the defender and the third party which prima facie appear to assist the third party (as STV avers that it was “not the third party’s role nor responsibility to draft the rent review provision in the lease”), I consider that the defender has averred a sufficiently relevant and specific contractual case against the third party, a case which is not bound to fail.  Accordingly the test in Jamieson v Jamieson 1952 SC (HL) 44 is not satisfied.

 

Delict

[23]      I accept that “the assumption of responsibility” test as set out by Sir Brian Neill in BCCI v Price Waterhouse (no 2) [1998] PNLR 564 is the appropriate test to apply when considering whether there was a delictual duty of care owed by the third party to STV.  I also accept that the question whether there was an assumption of responsibility falls to be determined on an objective basis (Lord Goff at page 181 of Henderson v Merrett Syndicates [1995] 2 AC 145).

[24]      In relation to sub-heads (a) to (c) at pages 587-588 of BCCI v Price Waterhouse (no 2) cit sup (namely, the precise relationship between adviser and advisee;  the precise circumstances in which the advice or information or other material came into existence;  and the circumstances in which the advice was communicated, and for what purpose, and the degree of reliance which the adviser should reasonably have anticipated on its accuracy), I refer to the averments in paragraphs [5] and [6] above.  In relation to sub-head (d) (the presence or absence of other advisers), the averments make clear that there were other advisers, but (importantly) explain that the defender and the third party were members of a team of professional advisers assisting the client, STV, in the Pacific Quay project.  In relation to sub-head (e) (opportunity, if any, given to the adviser to issue a disclaimer), there was, on the averments, ample opportunity for the third party to issue a disclaimer or qualification:  none was issued.

[25]      Thus on the basis of the averments, I consider that the defender offers to prove (in parallel with the contractual case) that the defender and the third party were members of a team of professional advisers with the modus operandi set out in paragraph [17] above;  the defender specifically requested advice and assistance from the third party (as professionals having knowledge and experience of rent review procedures) about the wording and working of the RPI provision;  the third party did not reject the request as “not within our remit” or “not our responsibility” or “outwith our expertise”, but on the contrary offered certain advice;  STV knew that the defender and the third party were working together on the wording of the RPI provision;  the third party knew that STV had that knowledge;  when the defender eventually allowed the existing version of the RPI provision to go forward to the next stage in the transaction, STV was entitled to assume not only that the defender had approved the wording, but also that the third party had not vetoed it or objected to it or raised a warning about it (reliance);  the third party knew (or ought to have known) that that would be the case.  I therefore consider that the defender has pled a sufficiently relevant and specific case of the existence of a duty of care ex delicto owed by the third party to STV (cf BCCI v Price Waterhouse (no 2) [1998] PNLR 564;  Henderson v Merrett Syndicates Ltd [1995] 2 AC 145, Lord Goff at page 181;  Spring v Guardian Assurance plc [1995] 2 AC 296).

[26]      As for averments relating to breach of duty, and causation, as noted in paragraph [21] above, it would be open to a court, having heard the evidence, to conclude that the third party’s “happy in principle” reply of 7 April 2004 was its advice, and by allowing a defective clause to proceed to the next stage of the transaction, the third party caused or materially contributed to STV’s loss and damage.

[27]      In the result therefore I am persuaded that the defender’s averments are sufficient in that they support a case that the third party, if sued by STV, would (depending on the facts proved) be found liable to STV ex delicto, and accordingly that the defender has pled a relevant case in delict entitling it to contribution in terms of section 3(2) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1940.  As with the contractual case, I am unable to conclude that the defender’s delictual case is bound to fail (Jamieson v Jamieson cit sup).

 

Decision

[28]      For the reasons given above, I am persuaded that the defender has sufficient relevant and specific averments entitling it to a proof before answer against the third party.  I therefore propose that we allow the reclaiming motion, recall the interlocutor of 9 May 2014, allow a proof before answer, and remit the cause to the Lord Ordinary to proceed as accords.


EXTRA DIVISION, INNER HOUSE, COURT OF SESSION

[2015] CSIH 35

CA151/12

 

Lady Paton

Lord Brodie

Lady Clark of Calton

OPINION OF LORD BRODIE

in the cause

of

STV CENTRAL LIMITED

Pursuer;

against

SEMPLE FRASER LLP (in liquidation)

Defender and reclaimer:

and

CBRE LIMITED

Third party and respondent:

Pursuer:  Non-participating party

Defender and reclaimer:  A Young QC, Gardiner;  DWF LLP

Third party and respondent:  Connal QC (sol adv);  Pinsent Masons LLP

12 May 2015

Introduction
[29]      I have had the considerable advantage of having had sight of your Ladyships’ respective opinions in draft prior to preparation of my own.  I gratefully adopt what appears in Lady Paton’s opinion at paragraphs [1] to [13] in relation to factual background, the terms of clause 1.1.13, the e-mail exchange between representatives of the defender and the third party founded on at answer 5 for the defender, the defender’s pleadings, and the respective submissions for the defender and third party.

[30]      As your Ladyships indicate, the issue in this reclaiming motion is whether the defender has pled sufficient relevant and specific averments against the third party such that a proof before answer should be allowed.  After a debate, the Lord Ordinary answered that question in the negative and dismissed the action insofar as directed against the third party.  The defender has reclaimed.

[31]      The defender does not seek to escape all liability to the pursuer.  It specifically admits that:

“…clause 1.1.13 of the Lease contained a drafting error concerning the indexation of rent. …the defender should have identified the drafting error and advised the pursuer about it. …the defender’s failure to do so amounted to a breach of their contractual duties owed to the pursuer.”

 

What the defender seeks is a finding entitling it to recover contribution from the third party, as provided for by section 3(2) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1940.  That requires the defender to establish that had the pursuer chosen to sue the third party, the third party might have been held liable in respect of the loss or damage on which the action against the defender is founded.  The defender pleads two cases in respect of which it alleges that the third party could have been held liable to the pursuer.  One is based on contract.  The other is based on delict.  They are pled in the alternative.  The supportive averments are summarised by Lady Paton at paragraphs [6], [14] and [17] of her opinion.  I shall consider the cases separately.  I turn first to that based on contract.

 


Contract
The relevant term
[32]      That there was a contract between the third party and the pursuer is not in issue.  In answer           3 the defender avers that the third party was instructed by the pursuer to act as its surveyor in the project for securing a lease for the premises at Pacific Quay in which the pursuer was to be tenant.  That is admitted by both the pursuer and the third party.  According to both the pursuer and the third party what the third party accordingly contracted to provide to the pursuer were “commercial property consultancy services”.  The contract for the provision of these services does not appear to have been reduced to writing.  I have no reason to doubt the accuracy of the information provided by Mr Young in the course of his submissions that nothing of the nature of a contractual document had been recovered despite an attempt to do so by service of a specification, but for present purposes it is sufficient to note that while parties are agreed that there was a contract between the pursuer and the third party, no party seeks in their averments to delineate or limit the terms of that contract by reference to any written, or indeed verbal agreement.  Accordingly, when it comes to determine what the respective parties are to be regarded as having undertaken it is a matter of objective inference or imputation from the whole surrounding circumstances.  There may be specialities but, primarily, the terms will be the ordinary incidents of a contract of this sort.  In other words the third party will be held bound to provide the services which a commercial property consultant engaged for such a project usually provides.  As Lady Paton observes at paragraph [16] of her opinion that will have to be proved by evidence.

[33]      To be admissible evidence must have a basis in averment.  As I have indicated, the defender avers that the third party was instructed by the pursuer to act as their surveyors in the project and therefore as part of the professional team which included the defender.  The defender avers that the third party employed a rent review specialist.  It further avers that it is implicit when a professional team of advisers is instructed for the purposes of such a development that they will co‑operate with and respond to queries from other professional advisers within the team, and that, in particular, where chartered surveyors employ specialists in rent reviews it is expected that legal advisers charged with drafting rent review provisions will seek assistance from such specialists.  From that premise, given that the defender and the third party were instructed by the pursuer to negotiate and finalise a lease, the defender invites the conclusion, and avers, that it was part of the third party’s retainer to check the proposed wording of the lease in areas within their competence, if asked to do so by the defender.  The defender then avers that checking the terms of the rent review clause and in particular the operation of indexation, was within the competence of the third party.  Of course I have no idea whether all or any of these averments are correct, but I would agree with Mr Young’s submission that the proposition that professional advisers in a team the members of which have different expertise will cooperate and respond to queries from each other within their respective spheres of competence does not seem extravagant.  At any event, that is what the defender offers to prove.  Had the defender’s case been periled on the averment that “the defender and the third party were instructed by the pursuer to negotiate and finalise a lease with the consortium”, I would have had to agree with the Lord Ordinary that that was too inspecific to entitle the defender to proof, but that is not the position.  The defender’s case is that, as a matter of contract, the third party had assumed a role which included checking the proposed wording of the lease in areas within their competence if asked to do so by the defender.  Accordingly, while it is only the defender’s averments which are under scrutiny at this stage, it is neither here nor there to say, as the pursuer and third party do say, that the third party was not instructed to draft or revise contractual documents.  That is not the defender’s case.  It accepts that it had the contractual responsibility for drafting and because there was a drafting error it is accordingly liable for the consequences.  However, what the defender contends is that in parallel with the defender’s contractual obligations the third party also had contractual obligations.  As far as the drafting of the lease was concerned these were very limited indeed but they did go the distance of checking wording (a) in areas within its special competence and (b) if asked to do so.  For my part I would see that case as one which is coherent and sufficiently supported by averment.  Therefore, to the extent that such a conclusion is determinative, I would respectfully disagree with the Lord Ordinary when he says that there is nothing to suggest that the pursuer looked beyond the defender for advice on the terms of the lease, including the RPI formula, and that accordingly there is nothing to indicate that the third party undertook contractual liability to the pursuer to provide it.  The Lord Ordinary may be factually correct in what he says; the pursuer may not have supposed that the third party would offer any input on the wording of the clause in question, certainly, as he indicates, there is nothing to suggest any request on the matter being made by the pursuer to the third party or any advice being given directly to the pursuer by the third party.  But, as I would see it, the Lord Ordinary being factually correct does not adversely affect the case that the defender seeks to make on averment.  It is the defender’s case that, having engaged the third party, the pursuer would have been entitled to rely upon it providing the service specified in the defender’s averments.  Whether the pursuer actually relied on the third party providing the service does not matter.  What matters is that the service was requested, and that by a member of the professional team, and that it was not satisfactorily performed.  That being the situation, so the defender avers, the pursuer could have sued the third party for breach of contract, irrespective of whether the pursuer had relied on satisfactory performance by the third party or not.  The pursuer has chosen not to do so.  That does not prevent the defender, with a view to recovering contribution, making the case that the pursuer might have made.

 

Breach and causation of loss
[34]      For the proposition that the third party was in breach of its contractual obligation to check the proposed wording of the lease within the areas of its special competence the defender relies on its averments in answer 5 where an e-mail correspondence beginning on 9 March 2004 is summarised.  As a matter of generality, I would agree with Lady Clark that a debate on the relevancy should be capable of being conducted on the basis of the pleadings alone without resort to copy productions.  However, this is a commercial action.  Among the consequences of that is the application of the requirements of Rule of Court 47.6 (2), which I assume were complied with, that there be appended to the defences a schedule listing the documents founded on or adopted as incorporated in the defences and that these documents be lodged as an inventory of productions.  That being so and having regard to the flexibility in procedure in commercial actions which is encouraged by Rule of Court 47.5, I did not see it as illegitimate for Mr Young to refer to the copy e-mails lodged as productions in order to supplement what is averred in answer 5.

[35]      The e-mail correspondence is conveniently set out in paragraph [5] of Lady Paton’s opinion.  The defender’s case is that the third party’s obligation to check the wording was triggered by the defender’s request that it do so, made in the two e-mails sent by the defender to the third party on 9 March 2004.  What the third party was asked to check was clause 1.1.13, apparently drafted by the Consortium’s (that is the landlord’s) solicitors, which provided that:

“Enhanced Rent means [the enhanced rent agreed as payable at Date of Entry] subject to review and compounded (upwards only) at each successive anniversary (“the Relevant Date”) of the Date of Entry, according to the formula R = I x A/B where R is the Enhanced Rent payable from and after the Relevant Date, I is the Enhanced Rent payable prior to the Relevant Date, A is the RPI for the date two months before the Relevant Date … and B is the RPI for the date two months before the Date of Entry.”

 

In answer 3 the defender admits the pursuer’s averments that the Consortium wished the enhanced rent to increase annually in line with the retail prices index, that this was known to the defender and that the pursuer was ultimately content to agree this.  Although not admitting as much in answer 3, the third party avers at answer 5 that the Enhanced Rent “would increase in line with the retail prices index”.  There would therefore appear to have been a common understanding among the pursuer, the defender and the third party as to what clause 1.1.13 was supposed to achieve.  Just how spectacularly it failed to do so appears from the pursuer’s averments at article 4 of condescendence:

“That definition provided for the Enhanced Rent to be increased each year, not by the increase in the retail prices index over the preceding year, but by the cumulative increase in the retail prices index over the whole period from the commencement of the Lease to the Relevant Date. As a result, the Enhanced Rent would not increase in line with the retail price index. Instead it would increase in an exponential manner greatly exceeding inflation.”

 

Now, it is always easy to be wise after the event.  The defect in the draft of clause 1.1.13 was apparently not spotted at the time by a number of no doubt able and experienced people.  However, and on this I would understand that I am in agreement with Mr Connal, a view that might be available to the court after proof is that the defect in the draft was very obvious indeed, at least to anyone who was aware that “RPI” was an abbreviation for the retail price index and knew what the retail price index was.  Beyond that, identifying the defect in the clause required no specialist skills whatsoever; it was simply a question of quite basic arithmetic.  Just what a court might make of that would depend on its judgement in the light of all the evidence heard at proof but it might take the view that by communicating in the terms of the e-mails of 9 March 2004 the defender was disclosing to the third party that, egregious as that error might be, it was at risk of committing the very error which has led it becoming liable to the pursuer in the sum in respect of which the defender now seeks contribution.  I agree with Lady Clark of Calton that given that the defender accepts that it had the contractual responsibility to finalise the Lease in terms which were agreeable to the pursuer, for the defender to make a relevant case against the third party it must establish some causal connection between what it is claims to have been a breach of contract by the third party (a failure to check with a view to confirming that the draft clause did indeed provide for review of the Enhanced Rent in line with the retail price index or, if it did check, a failure to identify the defect in the draft) and the defender’s conclusion of the missives with an unrevised clause 1.1.13.  However, agreeing with Lady Paton, I would see the defender’s reliance on the exchange of e-mails set out in paragraph [5] of Lady Paton’s opinion and the subsequent conclusion of missives on 12 May 2004 with an unrevised clause 1.1.13, as a sufficient identification of breach of contract by the third party and causal connection between that breach and the relevant loss.  The defender’s e-mails of 9 March with the wording in the second of them “Enhanced rent – I think the RPI provisions work” would indicate that the defender has failed to identify any defect in the draft clause.  However, the writer has not come to a final conclusion: “but I ask [third party] look at them.”  There follows a correspondence which includes the third party’s e-mails of 30 March and 7 April in which no criticism is made of the draft clause, indeed in its e-mail of 7 April the third party indicates “RPI – we are happy in principle with the RPI wording”.  Having referred to the e-mail correspondence, the defender avers:

“At no stage during the email communications from 9 March 2004 onwards did [the third party] indicate to the pursuer or the defender that they were being asked to advise on matters outwith the contractual remit which they had from the pursuer. ...On the contrary, [the third party’s] actings from 9 March 2004 onwards, as hereinbefore condescended upon, were only consistent with their acceptance that the commercial property consultancy services which they were obliged to provide to the pursuer included providing input from their rent review specialists to the pursuer’s team on the wording of the provisions being put forward in the draft lease.”

 

As far as the pleadings disclose, whatever other revisals may have been made to the draft contracts between 9 March and 12 May 2004, no alteration was made to the draft clause, clause 1.1.13.  I would therefore read the defender’s averments as allowing the conclusion that this was because the defender had failed to identify the defect in the draft and that the third party, despite having been invited to check the clause, had either failed to do so or, if it did check the clause, had also failed to identify the defect and to advise the defender accordingly.  None of this may be established at proof but in my opinion, in what is a commercial action, the defender has averred enough to entitle it to be given the opportunity to try.

[36]      Your Ladyships both draw attention to the defender’s general denial, at answer 15, of the pursuer’s averments which are designed to instruct a causal connection between the defender’s breach of contract in failing to identify the effect of clause 1.1.13 and the pursuer’s loss.  That is illogical in that it is the defender’s case against the third party that it was the third party’s failure properly to check the wording of the clause that contributed to the error which constituted breach of contract on the part of the defender.  A denial of the causal connection averred by the pursuer amounts to a denial of part of the causal connection which the defender relies on for its case for contribution.  I would accept therefore that the defender’s averments are untidy.  However, agreeing with Lady Paton, I am inclined to regard this as a loose end rather than anything more fundamental.  It is not as if it raises any real doubt as to what the defender’s position is.  In answer 15 the defender admits breach of contract by failure to identify what it characterises as a drafting error.  It then avers that such loss and damage as the pursuer may have suffered as a result was also caused or materially contributed to by the third party and goes on to explain why in terms that make clear that the defender contends that its failure was due, at least in part, to a failure on the part of the third party.  While, strictly, it is not conceded in answer 15 for the defender that the pursuer had actually incurred loss consequent on the defender’s breach, in answer 20 it is averred that the sum of £805,788 is a reasonable estimate of the pursuer’s loss and that, the defender having paid this by way of damages to the pursuer, it looks for a contribution from the third party in respect of that sum.

 

Delict
[37]      Being pled in the alternative, the defender’s delictual case against the third party proceeds on the assumption that the third party did not have the contractual obligation to the pursuer which is averred by the defender in answer 4. Put very shortly, it is the defender’s contention under this head that by virtue of the defender’s request for assistance in its e-mails of 9 March 2004 and the third party’s apparent compliance with that request, the third party must be taken to have undertaken a duty of care (owed to the pursuer), the content of which embraced the specific duties reproduced at the final bullet point in paragraph [6] of Lady Paton’s opinion.  The nature of the claim is for pure economic loss, allegedly caused by the negligent giving of advice or, perhaps, the negligent failure to give advice.

[38]      The third party’s first plea-in-law puts in issue the sufficiency of the defender’s averments to instruct all the necessary elements of its case against the third party:  existence of the alleged duty, breach of the alleged duty and causal connection between breach and the pursuer’s loss.  I understood Mr Connal to be critical of the defender’s averments in relation to each of these elements but, supporting the approach which had been taken by the Lord Ordinary, he concentrated his fire on the defender’s failure, as he would have it, to aver the necessary reliance by the pursuer on anything done or not done by the third party.  Reliance is a necessary element because unless the defender can establish that what was done or not done by the third party was relied on by the relevant decision‑maker in concluding the missives on the basis that Enhanced Rent would be calculated in terms of the defective clause then there is no causal connection between what is said to have been the third party’s negligence and the pursuer’s loss:  cf Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 at 180F.

[39]      As stated in terms at answer 5, and acknowledged by Mr Young the defender’s case depended on “assumption of responsibility”, as discussed by Sir Brian Neill in Bank of Credit and Commerce International (Overseas) Ltd (In Liquidation) v Price Waterhouse (No 2) [1998] PNLR 564 at 584D to 588E.  Lady Paton explains at paragraphs [23] to [26] of her opinion how the defender’s averments may be taken to satisfy the “assumption of responsibility” test.  Her Ladyship addresses reliance and therefore causation at paragraph [26].

[40]      Agreeing with Lady Paton, I consider that there is enough in the defender’s averments to entitle it to put them to proof.  That is not to say that the defender’s case is free from difficulty;  on the contrary.  Among these difficulties is identifying just what the defender means by reliance and how it intends to establish it and therefore causation (a matter which of course also has a bearing on the contractual case).  However, this is not the stage for a detailed exploration of whether the defender can prove its case.  As is noted by Lady Paton, we were reminded in the course of submissions of what was said by Lord Normand in Jamieson v Jamieson 1952 SC (HL) 44 at 50:

“The true proposition is that an action will not be dismissed as irrelevant unless it must necessarily fail even if all the pursuer’s averments are proved.  The onus is on the defender who moves to have the action dismissed, and there is no onus on the pursuer to show that if he proves his averments he is bound to succeed.”

 

Applying that proposition to the present case, as I have not been persuaded that the defender’s case must necessarily fail, I would not be prepared to dismiss it as irrelevant.

 

Disposal
[41]      I would allow the reclaiming motion, recall the Lord Ordinary’s interlocutor of 9 May 2014, allow the defender proof before answer of all its averments and remit the cause to the commercial judge to proceed as accords.


EXTRA DIVISION, INNER HOUSE, COURT OF SESSION

[2015] CSIH 35

CA151/12

 

Lady Paton

Lord Brodie

Lady Clark of Calton

 

OPINION OF LADY CLARK OF CALTON

in the cause

STV CENTRAL LIMITED

Pursuer;

against

SEMPLE FRASER LLP (in liquidation)

Defender and reclaimer;

and

CBRE LIMITED

Third party and respondent:

Pursuer:  Non-participating party

Defender and reclaimer:  A Young QC, Gardiner;  DWF LLP

Third party and respondent:  Connal QC (sol adv);  Pinsent Masons LLP

 

12 May 2015

Summary
[42]      I am grateful for the opportunity which I have had of reading the opinion in draft of her Ladyship in the chair.  I am content to rely on the summary of submissions on behalf of the parties and the analysis of the legal framework which are set out therein.

[43]      This case is pled by the defender in the context of a claim under section 3(2) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1940 (“the 1940 Act”).  There is a complex legal framework, particularly in relation to the case pled in delict, but the difficulties which I consider exist for the defender do not turn upon any dispute about the applicable law.  In my opinion, the difficulties arise in the pleadings of the defender.  When I apply the Jamieson test to the pleadings, I conclude that the cases pled in both contract and delict are bound to fail.  I am unable therefore to agree with the decision of her Ladyship in the chair that the defender has sufficient relevant and specific averments to entitle the defender to a proof before answer against the third party.

 

The pleadings by the defender  and reclaimer
The contract case
[44]      The pleadings in this case which are now in issue were framed in the context of an action raised by STV Central Limited (STV) against the defender.  Following a third party notice intimated to CBRE Limited, the third party entered the action.  In response to averments by the third party, STV averred (page 6A-B) that the third party’s remit in the transaction was to identify a site and negotiate commercial terms.  The defender’s remit was to draft legal documents so that they correctly reflected the terms agreed.  As between the pursuer and the third party there is no significant dispute in the pleadings about their contractual position inter se.  That contractual position as averred does not involve any duty on the third party to revise contractual documents or contribute advice to that.  The defender’s claims are founded on averments about the nature of the legal relationship and duties between STV and the third party. 

[45]      The averments of the defender are not in my opinion set out clearly in the pleadings.  That may be because the main focus of the action has changed in that the dispute between STV and the defender has been settled.  I consider however that the pleadings of the defender must be judged as they stand with any imperfections which they may have.  In my opinion, her Ladyship in the chair correctly identifies some incoherence in the pleadings of the defender at the end of answer 15.  I regret I am unable to agree with the opinion that one should interpret this denial by the defender as representing a loose end in the pleadings of a tripartite case and assume that the defender is not in a position to deny the pursuer’s averments on these matters.  I consider that the pleadings as they stand must be taken to represent the position of parties.

[46]      On my interpretation of the pleadings, the contract case pled by the defender is not based on any averments of any express agreed contractual terms between STV and the third party.  The case is based on implied terms.  This was the position advanced by counsel for the defender in oral submission.  The main plank of the defender’s case is at page 17B-C:

“It is implicit when a professional team of advisers is instructed on such a development that they will co-operate with and respond to queries from other professional advisers within the team.  In particular where chartered surveyors employ a specialist in rent reviews it is expected that legal advisers charged with drafting rent review provisions will seek assistance from such specialists.  The defender and third party were instructed by the pursuer to negotiate and finalise a lease with the consortium.”

 

I note that at page 17D there is an averment which is crucial to the defender’s case, to the effect that it was part of the third party’s retainer to check the proposed wording of the lease in areas within their competence if asked to do so by the defender.  This appears to be an averment of a specific contractual duty owed by the third party to STV, albeit the case is founded on implied duties arising out of the arrangements within a professional team of advisers.  I am unable to understand whether this is properly to be read as an implied duty, rather than an expressly agreed duty owed by the third party to STV and whether the duty is meant to arise somehow out of the averments quoted above at page 17B-C. 

[47]      In the defender’s pleadings, reference is then made to a number of emails and meetings at page 17D‑E.  At page 18 there are further averments about the contents of emails.  I note that the terms of the emails are not incorporated brevitatis causa.  Some emails are referred to in the pleadings by date and a summary of content.  Other emails make reference to some of the wording.  No objection was taken by counsel for the third party to considering the transcripts of the emails and that exercise was carried out both before the Lord Ordinary and in this court.  In my opinion, it is important however to distinguish the pleadings and potential evidential material.  It is in the pleadings that one is supposed to find the critical averments about the basis of the case which it is sought to take to proof.  I consider it merely leads to confusion to deal with this case by considering matters extraneous to the pleading namely the full terms of the emails.  This examination of the emails may also explain why the Lord Ordinary in his opinion seems at times to drift from a discussion of the pleadings to a discussion of evidence.  I would not have been prepared to approach the pleadings in this way.  But in the absence of objection and bearing in mind the way in which the case has developed, I do not decide the case on this basis.  What I will say is that there are no averments about how any of these emails affected, if at all, the drafting by the defender of the defective rent review clause which resulted in the loss to STV.  The exercise which was carried out in court of reading the terms of the emails, distinct from the pleadings, shed no further light on this issue.

[48]      At page 20 there are averments that the third party had been asked by the defender to consider and comment on the RPI provision within the enhanced rent definition and that the third party asked their rent review specialist to consider the draft lease.  It is averred that no concerns were raised about the operation of the indexation provision.  At 20 B-C, the pleadings of the defender then set out the duties of the third party:

“It was their duty to consider the terms of the enhanced rent definition and to advise whether the indexation provision worked satisfactorily throughout the 20 year term of the lease.  It was their duty to advise if the indexation provision resulted in grossly excessive rental increases in later years.”

 

It is averred that the third party failed to do so and by said failure caused or materially contributed to the pursuer’s (STV) loss and damage.

[49]      In considering the pleadings, I note that the defender accepts that they are the legal advisers charged with drafting the rent review provisions albeit in the context of the arrangements set out at 17B-C.  It is averred that it was part of the third party’s retainer (with STV) to check the proposed wording of the lease in areas within their competence if asked to do so by the defender.  I consider that this is a bald averment unsupported by any averments to provide a foundation.  No case law was cited to vouch such a legal duty in the circumstances averred by the defender.  I consider that the Lord Ordinary was well entitled to draw the conclusions which he made in paragraph [12] of his opinion and to reject the submission by the defender.

[50]      But even if that conclusion is wrong, and assuming that the defender has relevant pleadings to aver a contractual relationship between STV and the third party which includes a specific term as set out at 17D, (or even an implied term), in my opinion the case pled by the defender is bound to fail.  That is because there are no averments to found a causal nexus between the request by the defender and the response, or lack of it, by the third party and the drafting and “signing off” of the defective rent review clause by the defender.  To explain by way of example.  Even if the third party owed a contractual duty to STV to check the wording as averred by the defender, before STV could succeed in an action against the third party there would require to be some averments that the defender, in finalising their draft and carrying out their duties, relied on the response of the third party, if that be the case, or relied on silence as support from the third party, if that be the case, or some other averments which provide an appropriate foundation for causation.  There are no such averments.  Indeed I was left puzzled by the pleadings about this.

[51]      In my opinion, STV could not succeed in an action against the third party merely on proof of averment that the third party had a duty to check and advise as set out at 20 B-C and failed to do so, in a situation where the defender accepts that they are the legal advisors charged with drafting the rent review provisions.  There would require to be some averment that the defender, in some relevant way, was affected by what the third party did or did not do and some fair notice of what was being complained about.  In other words, if the defender concluded their final approved draft and “signed it off” without any reference or reliance to the third party “advice” and did not rely in some way on what the third party said or did not say, I do not understand on what basis STV could succeed against the third party.  On this hypothesis there might be a relevant breach of duty by the third party to STV but there would be no causal connection between the act or omission by the third party with any loss suffered by STV. 

[52]      In my opinion it is irrelevant for the defender merely to plead a case by reference to certain emails, particularly when it is plain from the emails that the specific questions asked by the defender do not reflect the duties pled at 20B-C.  In any event, the specific questions asked in the last email were not answered.  There are no averments of fact to give fair notice of what case is pled and on what basis the defender avers that the breach of duty by the third party had an effect, if any, on the final drafting “signed off” by the defender.  The averments are completely silent about whether this is a case by the defender based on the defender’s reliance of the “happy in principle” email or whether they did not rely on that but somehow concluded the draft and finalised the clause without answer to their requests for specific information in the last email dated 7 April 2004 or whether they did something else.  The defender must know or should know on what information from the third party, if any, they finalised and “signed off” the draft.  If the complaint is an absence of timeous information from the third party, this should be averred.  In my opinion on the basis of fair notice alone, the defender’s pleadings are inadequate.

[53]      I also observe that neither in the averments by the defender or in the emails is there any reference to a request by the defender to the third party in terms foreshadowed in the breaches of duty specified at 20B-C.  There are no averments that questions were directed to the third party by the defender about whether the indexation provisions worked satisfactorily throughout the 20 year term of the lease, or whether the indexation provision resulted in grossly excessive rental increases in later years. 

 

The delict case

[54]      The case in delict is tacked on briefly at page 19A.  There are no separate averments by the defender in support of this case.  The delictual case is legally complex.  Counsel for the defender accepted that he required to plead himself into “the assumption of responsibility test” as set out by Sir Brian Neill in DCCI v Price Waterhouse (No 2) In my opinion the defender’s pleadings fail to achieve that.  There are no averments in this case that the defender relied on the “happy in principle” email.  Indeed I have explained my difficulty with the pleadings which give no adequate notice of what the defender relied on, if anything. 

[55]      Her Ladyship in the chair may be correct in identifying that there is a way in which the defender might be able to plead a relevant delictual case.  In my opinion however the defender has not done so.

Conclusion

[56]      For these reasons therefore I would refuse the reclaiming motion.