MOHAMMED SAFDAR v. MOHAMMED SHAHID
| OUTER HOUSE, COURT OF SESSION |
| | OPINION OF LORD MACKAY OF DRUMADOON in the cause MOHAMMED SAFDAR Pursuer; against MOHAMMED SHAHID Defender: ________________ |
Pursuer: Mure; Drummond Miller, W.S.
Defender: Fairley; MacRoberts.
30 April 2004
Introduction
[1]This is an action for payment in which the pursuer concludes for payment by the defender of the sums of (i) £56,839, (ii) £60,919, (iii) £12,762 and (iv) £2,000.
[2]In relation to the first conclusion, the pursuer avers that in or about 1985, Mohammed Akram lent the defender £56,839 to enable the defender to buy shares in a company called Gifto Fancy Goods Ltd ("the Company"). It is averred that the existence of that loan was acknowledged by the defender in a letter dated 25 April 1986, which the defender wrote to Saleem Akmal & Co. The pursuer avers that around the same time the defender, Mr Akram and Mr Ahmed, a business associate of Mr Akram's, each acquired one-third of the share capital of the Company. Whilst the defences admit that the defender purchased shares in the Company, it is denied that the defender received a loan of £56,839 from Mr Akram and, in particular, that the defender received any loan from Mr Akram in connection with any acquisition by him of shares in the Company.
[3]In relation to the second conclusion, the pursuer avers that in 1987 Mr Ahmed sold his shares in the Company. It is averred that those shares were purchased by Mr Akram and the defender and that Mr Akram lent the defender a further £60,919, to enable him to purchase some of the shares being sold by Mr Ahmed. The pursuer avers that loan was not recorded in writing. The defences admit that on 8 June 1988 one-half of Mr Ahmed's shareholding was transferred to each of Mr Akram and the defender. It is denied that the defender received any loan from Mr Akram, in connection with that transaction.
[4]In relation to the third conclusion, the pursuer avers that in 1988 the defender purchased a property at 8 Bruce Road, Pollokshields, Glasgow. The pursuer also avers that Mr Akram negotiated with the former owner of that property, Mr Shah, and induced Mr Shah to reduce the selling price by £12,762, in return for which Mr Akram agreed to release an inhibition that he had registered over Mr Shah's property. It is averred that Mr Akram and the defender agreed that, in return for this service, the defender would pay Mr Akram £12,762 and that sum would be treated as a loan. In the defences it is denied that any such loan was ever due by the defender. It is averred, on the defender's behalf, that when the property was purchased by the defender and his wife, Mr Shah was due an unspecified sum of money to Mr Akram. Mr Akram, for his part, owed another unspecified sum of money to the defender. It is averred that it was agreed that the sum to be paid by the defender and his wife to Mr Shah would be reduced by the amount of Mr Akram's debt to the defender, that Mr Akram's debt would be treated as having been repaid and that Mr Shah's debt to Mr Akram would be reduced accordingly.
[5]In relation to the fourth conclusion, the pursuer avers that in August 1988 Mr Akram and the defender purchased a property at Unit 1, West Street, Glasgow. It is averred that when that property was paid for, Mr Akram paid £2,000 of the share of the purchase price that was due to be paid by the defender. It is averred that the defender agreed to treat that payment of £2,000 as a further loan due by him to Mr Akram. Those averments on behalf of the pursuer are met with a simple denial in the defences.
[6]The pursuer avers that on 30 September 2002 Mr Akram executed a written assignation, which assigned to the pursuer all the debts that were due and payable by the defender to Mr Akram. A written assignation, dated 30 September 2002, to that effect is one of the productions lodged on behalf of the pursuer. The pursuer sues in respect of the rights which he claims were assigned to him in terms of that assignation.
[7]The action is defended on a number of bases. In the first place it is denied that any of the alleged loans ever existed. In other words, it is denied that the defender was ever due Mr Akram any of the four sums of which the pursuer seeks payment.
[8]Secondly, it is contended that in the present action, the existence and extent of the alleged loans are only provable by the writ or oath of the defender and that any proof should be restricted accordingly. In that regard, it is submitted that, although the present action was raised after the Requirements of Writing (Scotland) Act 1995 ('the 1995 Act') came into force on 1 August 1995, the provisions of that Act do not apply in the present action.
[9]Thirdly, it is averred on behalf of the defender that on 23 December 2002 Mr Akram signed a waiver in the defender's favour. The defender avers that the waiver and a number of other documents, including a Share Purchase Agreement, were signed by Mr Akram at a meeting held in solicitors' offices in Glasgow on 23 December 2002. The defender and Mr Akram were present within those offices that day. They were accompanied by their respective solicitors. Mr Akram's son and the defender's daughter were also present. The defender avers that the documentation prepared and executed, including the Share Purchase Agreement and the waiver, had as their primary purpose that there should be a complete separation of the relationship between the Mr Akram and the defender, including inter alia an end to all threats of litigation against the defender. The defender contends that the waiver discharged all and any prior liabilities of the defender to Mr Akram (save insofar as specifically preserved by the waiver of 23 December 2002), that no prior liabilities in respect of the four alleged loans were so preserved and that accordingly, if any debts were due by the defender to Mr Akram, as at 23 December 2002, in respect of the alleged loans, they had been discharged by the waiver by the date the present action was raised.
[10]That waiver dated 23 December 2003 is in the following terms:
"I, Mohammad Akram residing at 21 Langside Drive, Newlands, Glasgow, hereby waive and shall procure the waiver by each Associate of mine, of all rights (whether present, future, contingent or otherwise) in respect of all (if any) payments, compensation, expenditure, losses, claims, demands, actions, fines, penalties, awards, liabilities and expenses (including legal expenses) I and my Associates may have against you, your Associates. Bushko and Heritage Wharf other than as provided for in the share purchase agreement to be entered into between me, you and Shahzad Akram of even date herewith.
Words and expressions defined in the share purchase agreement of even date herewith between me, you and Shahzad Akram shall bear the same meaning herein."
[11]The defender avers that he first received informal intimation of the assignation by a letter dated 10 January 2003. The defender avers that by that date, all and any prior alleged liabilities forming the subject matter of the present action had been discharged by Mr Akram.
[12]The pursuer, for his part, avers that by letter dated 4 October 2002, he intimated the existence of the assignation to the defenders in the following terms:
"I have been advised to inform your good self that as of Friday September 30th 2002, all outstanding debts to Mr M Akram from yourself have been purchased by myself."
The pursuer also avers that the defender was advised by Mr Akram, in a letter dated 8 October 2002, that the debts outstanding between Mr Akram and the defender had been assigned. However, counsel for the pursuer recognised that as that latter letter did not indicate to whom the debts had been assigned, it could not by itself constitute sufficient intimation of the assignation on which the pursuer founded. The pursuer's pleadings include other averments, relating to the actings and knowledge of the defender's daughter, Sadaf Shahid, which if proved in evidence might warrant attributing to the defender, by the time that the waiver was signed, knowledge, on his part, that debts, which had been due by him to Mr Akram, had been assigned by Mr Akram to the pursuer.
[13]The pursuer avers that the true construction of the waiver (to the extent that it covers debts) is that it waived debts arising out the business interests of Mr Akram and the defender. It is averred that the debts with which this action is concerned are of a private character.
History of the Debate
[14]The defenders sought a debate on their first plea-in-law, which is a general plea to the relevancy of the action. The debate began on 17 July 2003. During the course of his submissions, on that date, counsel for the pursuer sought leave to amend the pleadings on behalf of the pursuer. The diet of debate was adjourned to allow a minute of amendment and answers to be lodged. The debate subsequently resumed, on revised pleadings, on 30 March 2004.
Submissions for defender
[15]During the debate the defender's objectives were threefold. In the first instance he sought that the action should be dismissed, by the Court sustaining his first plea-in-law. The pursuer's averments were irrelevant (i) because they failed to aver intimation of the 'alleged assignation' to the defender, prior to the date of the waiver, in a manner required by law and (ii) in relation to the construction of the waiver itself.
[16]Secondly, and in the alternative, in the event that the action was to proceed to proof, the defender invited the Court to exclude from probation four passages in the pursuer's averments:
a.At page 13B the averment "The said letter accordingly was sufficient intimation of the said assignation",
b.The passage beginning on page 14E "At that meeting" to the words "assigned the debts to a third party." at page 15C-D,
c.The passage beginning at page 15C-D "After the discussion with Mr Shahzad Akram" to the words "without reading it." on page 16B, and
d.The passage beginning at page 16B "By agreeing to" to the words "intimation to him thereof." at page 16C.
[17]Thirdly, again in the event that the action was to proceed to proof, the defender sought proof habile modo. in accordance with the procedure approved of in Royal Bank of Scotland Plc v Malcolm 1999 SCLR 854. That particular motion was made to preserve the defender's position at proof, in respect of his averments that the alleged loans founded upon by the pursuer are provable only by the writ or oath of the defender.
[18]The submissions made on behalf of the defender fell into two principal chapters. The first chapter was to the effect that in his pleadings the pursuer did not relevantly aver that intimation of the 'alleged assignation' had been given to the defender prior to 23 December 2003, the date of the waiver. It was submitted that until intimation of any assignation had taken place, there could be no transfer of any right to the assignee and no divestiture of the cedent. In developing his submissions, counsel for the defender presented a very carefully researched and detailed argument as to what the law requires by way of intimation of an assignation to the debtor. Reference was made to the Stair Memorial Encyclopaedia, Volume 18, paras. 653-656, Bell, Commentaries II, 17, Erskine, III, v, 5, to various authorities reported in Morison's Dictionary, which are referred to by Erskine, and to McBride, The Law of Contracts in Scotland (Second Edition), para. 12-115 ff. It was argued that, in the absence of one of the forms of intimation provided for under the provisions of the Transmission of Moveable Property (Scotland) Act 1862, some other recognised method of intimation was required. Such recognised methods included (i) written intimation falling short of the requirements of the 1862 Act, which had been acknowledged by the debtor, (ii) performance (or part performance) by the debtor, (iii) production of the assignation in judicial proceedings or (iv) registration of the waiver in the Books of Counsel and Session. In the absence of any of the other recognised methods of intimation, what was required, in the circumstances of the present case, was an offer to prove that there had been some form of intimation of the 'alleged assignation' to the defender and some act of acknowledgement, on the part of the defender, of the existence of the assignation. Reference was made to Donaldson v Ord (1855) 17 D1053 and Gallemos (In Receivership) Ltd v Barratt Falkirk Ltd 1989 SC 248. It was argued that the pursuer had failed to aver that prior to the date of the waiver, or indeed prior to the raising of the present proceedings, there had been some act of acknowledgement on the part of the defender that he had knowledge of what was described during the submissions of counsel for the defender as the 'alleged assignation'.
[19]It was submitted, on behalf of the defender, that mere knowledge of an assignation, privately acquired by the debtor was not sufficient to constitute intimation of an assignation. Nor was it sufficient for the pursuer to aver that a letter had been written to the defender, advising him about the assignation, if that letter had neither been acknowledged nor responded to. The pursuer could not merely aver that the defender had knowledge of the assignation and then invite the Court to draw an inference of bad faith on the part of the defender. It was argued that if bad faith was being suggested in the present action that should be explicitly averred and the factual basis for such averment set out in the pleadings, in the clearest possible terms. In these circumstances, the pursuer's pleadings were irrelevant and the action should be dismissed.
[20]Turning to the second main chapter of his submissions, namely the correct construction of the waiver, counsel for the defender stressed that in his pleadings the pursuer admitted the terms of the waiver that had been granted by Mr Akram in favour of the defender on 23 December 2002. It was argued, however, that the pursuer's averments relating to the construction of the waiver were irrelevant. Those averments include that the waiver deals with sums due to Mr Akram and his associates, not with sums due to Mr Akram personally, and that the waiver was executed in the context of a separation of the business interests of Mr Akram and the defender and was not intended to deal with the debts with which the present action is concerned. The pursuer avers that the debts with which the present action are concerned are debts of a private character.
[21]Counsel for the defender argued that the averments as to Mr Akram's subjective intentions and as to the reasons why he (and anyone acting on his behalf) had asked for certain changes to be made to the draft waiver, before the waiver was actually signed, were irrelevant to the construction of the waiver that had been executed. It was argued that the pursuer required to make relevant and specific averments of the precise facts and circumstances, which he contends justify construing the waiver so as to exclude the alleged debts with which the present action is concerned. It was submitted that the only logical construction of the pursuer's averments, taken as a whole, was that Mr Akram fully understood that in the absence of an effectual assignation, effectively and validly intimated to the defender, the debts to which the assignation related would be subject to the waiver and would be discharged by it.
[22]On the question of proof by writ or oath, the defender's position was that he was content with a proof habile modo. However, both in the defender's written submissions and in argument advanced by his counsel, it was contended that the rule requiring proof by writ or oath continues to apply to proceedings commenced after 1 August 1995, if they concern averments of events prior to that date (see Section 11(1) and Section 14(3) of the 1995 Act, Walker & Walker, (Second Edition), para. 22.1.3 and McEleveen v McQuillan's Executrix 1997 SLT (Sh.Ct.) 46).
Submissions for pursuer
[23]In responding to those submissions counsel for the pursuer advanced a number of submissions, which had been helpfully summarised in a written note of argument, similar to that which counsel for the defender had prepared, in respect of his own submissions. As far as the averments relating to the assignation were concerned, it was pointed out that the defender accepts that a recognised method of intimation is production of the assignation in judicial proceedings (see Carter v McIntosh (1862) 24 D 925. Accordingly, esto there had not been any effective intimation of the assignation, prior to the commencement of the present action, intimation of the assignation had taken place in the course of the present proceedings. It was also noted that it was a matter of concession on behalf of the defender that intimation of the assignation to the debtor can be made either by the assignor or the assignee (see Libertas-Kommerz Gmb H re Johnson 1997 SC 191).
[24]It was pointed out that the Court was being asked to consider the relevance of the pursuer's averments about intimation to the defender of the assignation and about the defender's knowledge that debts formerly due to Mr Akram had been assigned to the pursuer. Those averments included the references to (i) the defender being sent the letter dated 4 October 2002, (ii) the defender being sent the letter dated 8 October 2002, (iii) a telephone conversation between the defender's daughter and Mr Akram's son, on 7 November 2992, during which it is alleged that the defender's daughter was informed that debts due by her father to Mr Akram has been assigned to the pursuer, (iv) a further conversation between the defender's daughter and Mr Akram's son in November 2002, during which it is alleged that she acknowledged that the defender was aware that the loans had been assigned and (v) the defender being informed during the meeting on 23 December 2002 that the debts had been assigned to the pursuer.
[25]It was submitted that all of those averments were also relevant to the factual context in which the waiver was negotiated and executed and as to the nature and meaning of its terms. It was argued that whether those averments were strictly averments about an intimation of the assignation, which was recognised by the law of Scotland, or whether they related to a less formal communication to the defender of the fact that his debts to Mr Akram had been assigned, which, in the circumstances of this case, fell to be treated as being equivalent to regular intimation, was only part of the question. The effect of the assignation dated 30 September 2002 was that Mr Akram had by contract divested of himself of his claims against the defender, in respect of all four loans. No intimation to the debtor by the assignor or the assignee was needed for that to be so. As between Mr Akram and the pursuer the assignation was, by itself, effective, in transferring to the pursuer the rights to claim from the defender repayment of the debts, which were the subject matter of the action.
[26]It was argued that Mr Akram knew that as at the date of the waiver he had no claim against the defender. The pursuer offered to prove that the defender also knew by that date that his debts to Mr Akram had been assigned. It was argued that, on the basis of such averments, it would require a contorted reading of the waiver to construe the document as including, within its scope, debts which Mr Akram had knowingly divested himself of, nearly two months previously.
[27]Counsel for the pursuer stressed that the defender does not aver that the debts sued for have been paid. Nor was the written waiver a specific discharge of the debts founded upon by the pursuer. On a plain reading of the language of the waiver, Mr Akram could not be taken to have included within the scope of the deed, debts which he knew had had already assigned. It was argued that for the waiver to cover a debt, which had previously been assigned, it would have been necessary for the debt in question to have been identified by name and other details.
[28]Under reference to two of the authorities referred to by counsel for the defender, Erskine's Institutes III.v.5 at p. 822 and Leith v Garden (1703) Mor.865, counsel for the pursuer also submitted that an issue did arise as to whether the defender's knowledge of the assignation placed him in bad faith, by obtaining a discharge from Mr Akram, as the defender claimed he had done. It was argued that the best course of action would be for the Court to hear evidence relevant to the pursuer's averments and at that stage consider what the proper legal analysis was. It was pointed out that the cases of Donaldson v Ord and Gallemos Ltd (In Receivership) v Barratt Falkirk Ltd had both been decided after proof.
[29]Turning to the pursuer's averments as to the correct construction of the waiver, counsel for the pursuer again made clear that the pursuer offered a proof before answer. He submitted that the proper course of action was for the Court to hear the evidence relating to the circumstances in which the waiver was drafted, revised and executed, before deciding how the waiver fell to be construed. It was submitted that the pursuer had made sufficient averments relating to the background to the execution of the waiver on 23 December 2002 to warrant the action proceeding to proof. The Court could not decide at this stage, without hearing evidence relating to those averments, that the waiver could not be construed otherwise than as covering all of the debts founded upon by the pursuer in support of his four conclusions for payment.
[30]On the question of the proof by writ or oath, counsel for the pursuer advanced detailed submissions as to why the defender's second plea-in-law on this issue should be repelled at this stage. It was accepted, however, that, to avoid further delay in the action, it might be preferable for the case to proceed to proof habile modo, if a proof was in fact going to take place.
Discussion
[31]I have reached the view that it would not be appropriate for the first plea-in-law for the defender to be sustained at this stage. In my opinion, it cannot be said that pursuer has no prospects of proving (a) that Mr Akram assigned to the pursuer, on 30 September 2002, the four debts founded upon in the present action, and (b) that the facts averred upon by the pursuer relating to the defender's knowledge of that assignation fall to be treated as being equivalent to his having received intimation of the assignation by a recognised method. In my opinion, the pursuer has averred sufficient details as to the defender's knowledge of the assignation prior to 23 December 2202 and what happened before and on 23 December 2002 to allow the issue of intimation of the assignation to the defender to proceed to proof.
[32]Still dealing with the question of intimation of the assignation to the defender, it is accepted on behalf of the defender that one recognised method of intimating an assignation to the debtor is by production of the assignation in judicial proceedings against the debtor. Accordingly if the waiver falls to be construed as not applying to the alleged debts, then the pursuer's action may be successful if the pursuer can prove, by competent evidence, that the loans were made and had not been paid or otherwise discharged by the date the present proceedings began.
[33]Still dealing with the issue of the correct construction of the waiver, I agree with counsel for the pursuer that it should be interpreted in light of the surrounding circumstances. In my opinion that approach is entirely in accordance with the guidance to be found in cases such as Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 All.E.R.98, per Lord Hoffman at pp.115-6 and Bank of Scotland v Dunedin Property Investment Co Ltd 1988 SC 657, per Lord President Rodger at p. 665D-G. I disagree with the submission made by counsel for the defender that there requires to be some ambiguity in the terms of a contractual document, before any recourse whatsoever can be had to the factual matrix of the surrounding facts and circumstances. In my opinion, that submission is difficult to reconcile with the approach taken and the language used by Lord President Rodger in the passage from his Opinion in Bank of Scotland v Dunedin Property Investment Co Ltd to which I have referred.
Decision
[34] For these reasons, I am minded to allow a proof before answer, reserving all pleas in law of both parties.
[35]As far as the specific averments which the defender sought to have excluded from probation, it was conceded on behalf of the pursuer that the averment at page 13D "The said letter accordingly was sufficient intimation of the said assignation" was irrelevant and could not be defended. Accordingly that averment will not be admitted to probation. The defender's first plea in law will be sustained to that limited extent. Whatever criticisms may have been advanced as far as the other three passages in the pursuer's pleadings are concerned, I have reached the view that they should be allowed to remain, albeit that the matters to which they refer may be the subject of further submissions at the conclusion of the proof.
[36]On the issue of whether the existence and terms of the alleged loans required to be established by proof by writ or oath, I have reached the view that the best way to proceed is allow a proof habile modo. An important point of statutory construction undoubtedly arises in relation to the provisions of the Requirements of Writing (Scotland) Act 1995, but I see no prejudice to either party if a decision on that issue of statutory construction is deferred until the conclusion of the proof.
[37]The action will be put out By Order, on a date convenient to parties, to allow discussion of further procedure.