JOHN McGREGOR DALGLISH v. NATIONAL WESTMINSTER BANK
SHERIFF JAMES A TAYLOR
AC700/00A
JOHN McGREGOR DALGLISH v NATIONAL WESTMINSTER BANK PLC
Glasgow. 31 October 2000
NOTE:-
At the options hearing the parties agreed that the pleadings required further adjustment in some respects. There was further agreement that the arguments foreshadowed in paragraphs one and two of the defenders' Rule 22 Note could and should be debated without further attention to the pleadings. If I was with the defenders in both of these point the action fell to be dismissed.
At the debate the pursuer was represented by Mr Davidson, solicitor and the defenders by Mr McBrierty, advocate.
The pursuer had instructed a firm of building contractors to carry out work to the pursuer's private residence. Certain of the works to be undertaken by the contractor were governed by a written contract. The pursuer offered to prove it was a term of the contract that if the contractor carried out works for which no specific price was narrated in the contract, the contractors' charges should be "at a reasonable rate calculated on the basis of the time spent by (the contractors) in completing the works and the materials used...it was agreed that the work would be charged at a reasonable hourly rate, that the work would be carried out competently and the time spent on the works to be that which would be taken by a reasonably competent tradesman.". The contractors rendered a number of invoices to the pursuer which the pursuer paid by using his credit or charge card issued by the defenders. Subsequent to making payment the pursuer ascertained and offered to prove that the charges made by the contractor for work which was not specifically provided in the contract was excessive. The contractors were no longer in business. Accordingly, the pursuer raised proceedings against the defenders as issuers of the charge/credit card praying in aid the terms of Section 75 of the Consumer Credit Act 1974 ("the Act"). That section provides:-
"If the debtor under a debtor-creditor-supplier agreement falling within Section 12(b) or (c) has, in relation to a transaction financed by the agreement, any claim against the supplier in respect of a misrepresentation or breach of contract, he shall have a like claim against the creditor, who, with the supplier, shall accordingly be jointly and severally liable to the debtor."
The pursuer offered to prove that the contractors were in breach of contract when they invoiced the pursuer in a sum which was excessive for the work undertaken. He was thus entitled to rely upon the Act and look to the defenders for payment as they had a joint and several liability with the contractor in terms of the section.
In a separate crave suppported by a separate article of condescendence the pursuer also offered to prove that the contractors had agreed to supply and fit bedroom furniture, that the pursuer made an advance payment to the contractors by means of a credit/charge card issued by the defenders and that there had been no performance by the pursuer. After a minor amendment to the pursuer's pleadings moved in the course of the debate the defenders accepted that this aspect of the case should go to proof.
The defenders' submissions were that the pursuer's right of action against the building contractors was not properly characterised as a breach of contract. Accordingly the defenders had no liability to the pursuer since the pursuer could not bring himself within the terms of the Act. What the pursuer was seeking was repetition of monies paid in error. Properly analysed that was a remedy based upon the condictio indebiti. It was not founded upon breach of contract. Accordingly, the terms of Section 75(1) of the Act were not met.
In analysing the nature of the condictio indebiti I was referred to Gloag & Henderson 10th Edn at paragraph 29.4, Morgan Guarantee Trust Co of New York v Lothian Regional Council 1995 SC 151;1995 SLT 299 at 316B and Shilliday v Smith 1998 SLT 976 at p 978. As an example of the application of the condictio indebiti I was referred to the case of Balfour v Smith & Logan 4 Rettie 454. It was pointed out that the pursuer on his own pleadings did not offer to prove that there had been any defect in the quality of the workmanship. Money had been paid by the pursuer under a mistaken belief of fact that payment was due in terms of the agreement the pursuer had entered into with the building contractor. Mr McBrierty submitted that the pursuer's right of action, as pled, proceeded on the basis that the breach of contract by the building contractor was a failure to charge a reasonable rate. This could not be a correct analysis. If the case was to be based upon breach of contract the pursuer would need to establish that it had been the breach founded upon which caused the loss. In this case what caused the loss was the pursuer's act of paying the money. At the time the invoice was rendered there was no loss to the pursuer. He was under no obligation to make payment of the excessive amount specified in the invoice.
In reply Mr Davidson examined the basics of a contract. If something fell to be done under the contract and was not done or was carried out in a manner outwith the agreement, the party who departed from the contract was in breach of it. In this case there were clear averments of the basis upon which the building contractors were entitled to charge. There was a clear averment that they had departed from that basis. Accordingly, there was a breach of contract. He distinguished the case of Balfour v Smith & Logan on the basis that the claim made in that case was for repetition of money paid in error over and above the agreed contract price. It placed too much of a strain on the concept of causation to say that the pursuer in making payment had caused his own loss. Mr Davidson accepted that there was no contractual obligation on the building contractor to render an invoice but submitted that once the contractor elected to render an invoice he required to do so conform to the contractual arrangements. A further factor was that the pursuer was not in the building trade nor in the habit of instructing builders. He would not have the experience to know if the contractor's charges were excessive. Therefore there was good reason for the pursuer to insist that a term of the contract was to the effect that the charges made by the building contractors for work outside the contract should be reasonable.
Mr Davidson went on to submit that it mattered not that the basis of the claim was under the condictio indebiti. A claim under the condictio could follow from a breach of contract by the builder. He referred me to the case of the Dalmellington Iron Company & Others v The Glasgow & South Western Railway Company 16 Rettie 523. In that case the pursuers were held entitled, under the condictio, to repetition of monies paid in response to overcharges. The overcharges came about by virtue of the defenders "violating their own agreement". Accordingly, the claim could equally have been characterised as a breach of contract.
In response to the pursuer's submission regarding the Dalmellington Iron Company case, Mr McBrierty submitted that Mr Davidson was confusing a breach of contract with a claim for a breach of contract. There could well be a breach but this would not necessarily found a claim based upon breach of contract in that there need not be a loss flowing from the breach. In Dalmellington it was relevant for the court to consider whether there was a breach but only for the purpose of ascertaining if there had been an overpayment in terms of the contract. The court held that there had been a breach in consequence of which there was an overpayment and therefore the appropriate remedy was repetition based on the condictio. Neither the existence of a contract nor the breach thereof necessarily meant that a claim by one contracting party against the other was caused by that breach.
It seems to me that there can be little doubt that the pursuer's claim against the building contractor would normally be based on the condictio indebiti. "Where money is paid under a mistaken belief of an obligation to pay, there is an action for repetition of the sums paid in error" (McBryde: The Law of Contract in Scotland para 9-89). Professor McBryde goes on to say that it must be equitable for there to be repayment and that the original mistake in paying must be excusable. That analysis seems to me to be entirely consistent with the authorities and I did not understand either of the parties to say otherwise. Taking the pursuer's pleadings pro veritate it seems that he could easily plead a relevant case under the condictio indebiti.
The parties were agreed that if an action based on the condictio was the only remedy available to the pursuer against the building contractor then the pursuer's case against the defenders would fail since the pursuer would not be able to bring himself within the terms of Section 75(1) of the Act. He would not be able to point to a breach of contract. It was not argued that the payments were made by virtue of a misrepresentation by the contractor.
Would an action based on breach of contract directed against the building contractors fail? The defenders say that it must since it was not the rendering of invoices disconform to contract which caused loss to the pursuer. Viewed from their perspective it was the act of making payment of the invoices which caused the pursuer loss. Their submission therefore hinged upon causation.
Before considering causation I should say that I have little difficulty in considering it to be a breach of contract to render an invoice to a customer based upon a charging criteria materially different from the criteria specified in the contract.
I now turn to consider the question of causation. I noted with interest that it is widely accepted that the court has a discretion when considering this issue. For example, in Smith Hogg v Black Sea Insurance Company [1940] AC 997 at pages 1003 and 1004 Lord Wright said:-
"There is always a combination of co-operating causes, out of which the law, employing its empirical or commonsense view of causation, will select the one or more which it finds material for its special purpose of deciding the particular case".
In many cases when causation becomes an issue the court has to decide which of two "wrongful" acts, in the sense that the act was in breach of contract, gave rise to the loss. In this case, as I have already indicated, it is easy to characterise the rendering of invoices as "wrongful". It is less easy to say that the pursuer's actings in paying the allegedly inflated invoices was "wrongful". At the time of making payment the pursuer thought he was fulfilling his contractual obligations. We are thus not dealing with two competing "wrongful" acts. Common sense therefore suggests that the loss should be attributed to the act which was disconform to contract rather than the later act which was conform to contract. Having formed that view I was reassured by what is said by Professor McBryde at paragraph 20-19 where having analysed a number of cases the author states:-
"There is a resemblance to the rule now established in delict, that a pursuer succeeds if he can show that the fault of the defender caused or materially contributed to the injury. There may be two separate causes, but it is enough if one of the causes arose from the fault of the defender. With similar reasoning it can be said that it is enough, in the law of contract, if one of the causes of the pursuer's loss was the defender's breach of contract."
Looked at another way it could be said that the dominant or real cause of the loss, again viewed through the spectacles of common sense, was the rendering of the invoices. But for that, the loss would not have occurred. It can thus be said that the pursuer's loss has arisen naturally from the breach of contract.
I was not persuaded by the defenders' argument that the pursuer's remedy against the building contractor could not be based upon breach of contract because at the time when the invoices were rendered by the building contractor no loss had crystallised. I do not consider that the breach and the loss must be contemporaneous. For example, assume a road haulage contractor contracts to hire a lorry from a lorry hire company. Further assume that it is an express condition of the agreement that the lorry be delivered to the contractor in a roadworthy condition. If the lorry is delivered to the contractor in an unroadworthy condition the lorry hire company will be in breach of contract. However it may not be immediately apparent that the vehicle is in an unroadworthy condition. The haulage contractor may then make use of the lorry in the course of his business and ignorant of the unroadworthy condition. At the point of delivery of the lorry by the lorry hire company there has been a breach of the contract. However at that time no loss has been sustained and indeed may not be sustained depending upon when, if and the circumstances in which the lorry breaks down.
Again using the foregoing example it would be absurd to say that any loss sustained by the haulier due to the lorry breaking down was caused not by the delivery of the lorry in an unroadworthy condition but by the haulage contractor's act of using the lorry, conform to contract, once delivered to him. Thus it seems to me to be equally absurd to say that the pursuer's loss was caused not by the action of the building contractor in rendering invoices disconform to contract but by the act of the pursuer in making payment of such invoices.
Accordingly, I am of the opinion that the pursuer would be entitled to base his action against the building contractor on both the condictio indebiti and breach of contract. The remedies seemed to me to be cumulo. I am therefore of the view that the pursuer survives the root and branch attack by the defenders. He is entitled to look to the defenders for payment all in terms of Section 75 of the Act providing he can prove the terms of the contract with the building contractor and its breach.
As I indicated at the outset of the this Note the debate proceeded before me on the understanding that in other respects the pleadings still required to be developed before enquiry should be allowed and as agreed I will put the case out by order on Wednesday 8 November 2000 at 2.00pm to discuss further procedure.
SHJAT.JH.26.10