CA161/07

NOTE BY SHERIFF PRINCIPAL

JAMES A TAYLOR

in the cause

Christie Owen & Davies plc t/a Christie Owen & Co

PURSUERS/APPELLANTS

against

Mrs Anne Campbell

FIRST DEFENDER

and

Stephen I Kliner and Stephen J Vallance

SECOND DEFENDERS/RESPONDENTS

My Lords,

[1] This commercial action was raised on 28 March 2007. Parties agreed that the writ and defences sufficiently focused the issues and a diet of debate was assigned between the pursuer and the second defenders. There were four issues before the learned sheriff at the diet of debate. Three of them were decided in favour of the pursuers. However, the learned sheriff found against the pursuers in respect of one of the issues and dismissed the action. The pursuers appealed his decision to me.

[2] The pursuers are business agents. They marketed the lease of licensed premises known as the Waldorf Bar, 59 Cambridge Street, Glasgow on the instructions of a Mrs Anne Campbell, the first defender in this action. The pursuers and the first defender entered into a Sole Selling Rights Agreement. Said Agreement provided, inter alia, that the first defender authorised her solicitors, the second defenders, "To pay out of money received" by them the fees requested by the pursuers "pursuant to this agreement and not to release any proceeds arising from such disposal of business to any person up to the amount of the invoice." The pursuers found an assignee for the lease who was prepared to pay £46,000 for the assignation. The pursuers fee amounted £9,360.05. By letter dated 20 December 2006 the pursuers wrote to the second defenders in the following terms:-

"Dear Mr Vallance

We understand that missives have now been concluded in respect of the assignation of the Waldorf Bar.

On speaking with Mrs Anne Campbell she advises that the purchase price has been placed in joint deposit until a letter is issued confirming the assignation of the lease.

In this instance, we remit to you our fee note in respect of the assignation in advance of the consideration being released. We understand that receipt of the assignation letter from the landlord is imminent and therefore look forward to receiving payment in early course.

We look forward to hearing from you in due course.

Kind regards,

Yours sincerely"

[3] The pursuers enclosed with their letter a copy of the Sole Selling Rights Agreement although, as can be seen, no reference was made to this in the body of the letter. The learned sheriff held that enclosing the Sole Selling Rights Agreement, without any further means of drawing its terms to the attention of the defenders, was not a valid intimation of the assignation in favour of the pursuers. That was the issue highlighted in the pursuers' Note of Appeal to me.

[4] At the outset of the appeal I enquired of Mr Lloyd, solicitor for the pursuers and appellants, if he had any pleadings to enable him to maintain an argument that the second defenders were in bad faith as is foreshadowed in his Note of Appeal. Mr Lloyd's position was that the learned sheriff ought to have allowed a proof before answer. When asked what facts were in issue between the parties and in respect of which evidence required to be led, Mr Lloyd said that he would seek to lead evidence that the second defenders had read the terms of the Sole Selling Rights Agreement. This would then enable the court to hold that there had been due intimation to the second defenders. It would also mean that the second defenders were in bad faith when they remitted sums to the first defender without first deducting the amount of the pursuers' fee. However I did not understand Mr Lloyd to insist upon this submission. He had to accept that there was no offer to prove that the second defenders had read the Sole Selling Rights Agreement. The appeal proceeded on the basis that the second defenders, having received the Sole Selling Rights Agreement ought to have and were thus deemed to have read it. Since the assignation was embodied in the Sole Selling Rights Agreement there had been effective intimation of the assignation.

[5] Mr McCartney, solicitor for the second defenders and respondents, referred me to a number of authorities but ultimately agreed with Mr Lloyd that the test which the court had to apply was that set out by Lord Kincraig in Libertas-Kommerz Gmbh, Appellants 1978 SLT 222 at 226:

"It seems to be that both cases show that if there has been a written intimation to the debtor of the fact that an assignation has been granted, the terms of that intimation must be considered, and if they are such, on a reasonable interpretation, as to convey to the debtor that the debt has been transferred, and that the transferee is asserting his claim to the debt from the debtor, intimation will be held to be effectual."

Thus there is a two stage test. Firstly, the intimation must, on a reasonable interpretation, tell the reader that the debt has been transferred. Secondly, the transferee must assert his entitlement to payment.

[6] In essence I agree with the views expressed by the learned sheriff in paragraphs [33] to [37] of his Note. The problem for the pursuers is that the letter of 20 December 2006 does not direct the reader to the terms of the Sole Selling Rights Agreement. Furthermore, as Mr Lloyd had to acknowledge, the letter only requests payment of the pursuers' fee note from the second defenders. Had the pursuers been asserting a right to payment the reader of the letter might have expected to see a reflection of that in its terms. There was nothing ex facie the terms of the letter to alert the second defenders that they were being given intimation of an assignation. The second defenders accepted that there was enclosed with the letter a copy of the Sole Selling Rights Agreement. It is of significance that the letter of 20 December 2006 makes no reference to it being enclosed and being of relevance in the context of a request for payment of the pursuers' fee note. The second defenders' attention is not directed to the Sole Selling Rights Agreement in any way whatsoever. Recognising this difficulty Mr Lloyd submitted that the second defenders were under an obligation to read documents which the pursuers might choose to enclose with a letter. The failure to refer to the document or documents in a covering letter mattered not. Every firm of solicitors had an obligation to read all enclosures as somewhere in one of the documents there might be something bearing upon the rights and obligations of their clients. There was thus a presumption that people, not just solicitors, read all documents sent to them. If the second defenders did not adopt such a practice they must take the consequences. The consequences in this case are that they must pay the pursuers' fee having remitted to the first defender the proceeds obtained for the assignation of the lease some time after receipt by them of the pursuers' letter of 20 December 2006. Although the letter of 20 December 2006 makes reference to an assignation, Mr Lloyd accepted that this reference was to the assignation of the lease as opposed to the assignation of money to settle the pursuers' account. In this particular case the document enclosed, the Sole Selling Rights Agreement, was relatively short but, in different circumstances, the document containing the assignation need not be. The principle advanced by Mr Lloyd would remain the same. The assignation might be contained in the body of a complicated arrangement for the purchase and sale of a company. Such documents can extend to over 100 pages. Nonetheless taking the pursuers' submission to its conclusion, the recipient must read the entire document, enclosed but not referred to, lest it contain some obligation which the recipient must obtemper. In my view that is not a sound proposition. Mr Lloyd relied heavily on the case of Chaplin v Caledonian Land Properties Limited 1997 SLT 384 to support his submission. In my opinion that case does not assist the pursuers and is not analogous. Mr Chaplin was a tenant of the defenders. He wished to exercise his contractual entitlement to break the lease. He telephoned the landlord's agents and duly informed them that he was exercising his right. He further intimated that following the termination he wished to enter into a new agreement with the landlord. The landlord's agents said that in principle this was in order but that Mr Chaplin should write to confirm the position. The lease required that written notice be given. Mr Chaplin claimed that he gave written notice but the letter was not received by the landlord's agents. After hearing evidence the court found as a fact that Mr Chaplin had posted the letter. Lord Rodger, sitting in the Outer House, held that once that fact was established, a presumption arose as a matter of law that the letter was duly addressed and delivered to the landlord's agents' offices. The presumption could then be rebutted by evidence. Having heard evidence, Lord Rodger held that on the facts of the case the presumption had not been rebutted. At the heart of the pursuers' submission in this case is a presumption that "people read documents sent to them". It was said that Chaplin was authority for that proposition. I do not agree. This case does not deal with the legal concept of a presumption that a letter once posted is deemed to have been received by the party to whom it is addressed. The issue in Chaplin was not whether the landlord's agents had read a letter but whether the letter had been received in their offices. The content of the letter had, as a matter of admission, been fully discussed prior to the letter being sent. The important aspect in Chaplin was that the letter required to be sent to conform to the terms of the lease. I am not prepared to hold that a solicitor is under an obligation to read every document sent to him or that a solicitor is deemed to have read all such documents. It was not suggested that the Law Society of Scotland had any guidelines to this effect.

[7] In my opinion whether there has been an effective intimation of an assignation will depend on the facts and circumstances of each case . It was not disputed that the second defenders would be deemed to have read the terms of the letter to them of 20 December 2006. But the letter is silent with regard to any intimation of assignation. Furthermore there is nothing in its terms to hint that the first defender had granted an assignation. For example if, to meet the second stage of Lord Kingcraig's test, the pursuers had referred to them having an entitlement to receive payment, that might have been sufficient to put the pursuers on notice of a potential assignation. In such circumstances it might be said that they were then under an obligation to read the Sole Selling Rights Agreement enclosed. But the letter of 20 December 2006, as Mr Lloyd accepted, is the equivalent to only a request for payment. Thus the letter does not even meet the second stage of Lord Kincraig's test. There is no assertion of the pursuers' entitlement to payment. Mr Lloyd when dealing with the facts and circumstances also relied upon the terms of the pursuers' fee note which is referred to and was enclosed with the letter. The fee note narrative states:-

"Our agency fee in accordance with our Sole Selling Rights Agreement..."

In my opinion the narrative does no more than indicate to a reasonable reader that the level of the fee has been calculated in accordance with the agreement between the pursuers and first defender. It does not alert the second defenders that the communication might be more than a request for payment. The communication does not meet Lord Kincraig's test. In my opinion there has not in this case been enough to convey an intimation to the second defenders that money for which they have a duty to account to the first defender has been assigned to the pursuers. Furthermore the letter of 20 December 2006 falls short of an assertion that the pursuers are claiming their entitlement to the money held by the second defenders. The letter is only a request for a payment and not an assertion of an entitlement to receive the money. There is nothing "importing a demand on the debtor to hold for him" Gloag and Irvine: Rights in Security at page 486.

[8] I said at the beginning of paragraph [5] that in essence I agreed with what the learned sheriff said in paragraphs [33] to [37] of his Note. There is however one respect in which I have to qualify that agreement. In paragraph [35] the learned sheriff rejects a submission that any competent solicitor would look at any documents sent to him relating to his client. The basis for the rejection is said to be that since the advent of fee competition solicitors are unlikely to undertake any more work than that which they have been engaged to carry out. Perhaps that was written in response to a suggestion, made at one time by Mr Lloyd before me, that a solicitor has a duty, owed to whom was not altogether clear, to read all documents sent to him. However what is said by the learned sheriff begs a question as to what the second defenders were engaged to do. It is not part of their case that to have read the document would have exceeded the scope of the work which the first defender instructed them to carry out. It also raises an issue which I doubt is within the judicial knowledge of a sheriff. That said however it does not alter my opinion that the learned sheriff was correct in rejecting the pursuers' argument. The reason why the pursuers fail is that they have not met the test which parties agreed had to be applied by the court and which was set out by Lord Kincraig in Libertas-Kommerz Gmbh.

GLASGOW

December 2007