Pursuers: Primrose; Maclay Murray & Spens LLP

Defenders: Dunlop; Brodies LLP

17 March 2009

[1] John's Place is a Georgian terrace overlooking Leith Links. Behind it lies John's Lane. In 1987 Mr and Mrs Dickson purchased a building in the lane. It comprised a single storey industrial unit, which has been variously called a warehouse, a rear workshop, and a garage ("the Warehouse"). The defenders acted as their solicitors at the time of the purchase and undertook the conveyancing on their behalf. The present action centres on a simple issue of fact. Did the defenders inform Mr and Mrs Dickson about a restrictive title condition at the time of their purchase? There was also an issue relating to prescription which turned on the answer to the factual question.

[2] Mr and Mrs Dickson first became interested in purchasing the Warehouse in 1986. At the time, they were both involved in the family business of Dickson and Cairney Limited, slaters and plasterers. The pursuers already had an adjacent property in John's Lane, which was used for the purposes of the business. The Warehouse was being offered for sale by the liquidator of Tensa Construction Limited. Tensa also owned the property at 3 John's Place ("the Office").

[3] Mr Dickson instructed a valuation of the subjects from Messrs McNeill, Maguire and McCreath, Chartered Surveyors. By letter dated 19 August 1986, they valued the Office at £65,000 and the Warehouse at between £15,000 and £20,000. Mr Dickson contacted Mr Chris Lucas, a partner in the defenders' firm, with whom he had had a long business connection. Acting on Mr Dickson's instructions, Mr Lucas submitted an offer for the Warehouse in November 1986. The liquidator rejected the offer, as he wished to sell the two properties together. Mr and Mrs Dickson decided not to take matters further, as they believed that the cost of purchasing and renovating the Office would be too high.

[4] A firm called Firn Crichton was interested in purchasing the Office. Having learned about the pursuers' interest in the Warehouse, it approached them. Discussions took place, but did not ripen into agreement. Mr and Mrs Dickson were unwilling to proceed, because Firn Crichton sought a right of exit from the Office through the Warehouse as a fire escape.

[5] Subsequently, Mr Dickson had a conversation with a local business man, Andrew Strachan. The men were known to one another, but were not particular friends. Like Firn Crichton, Mr Strachan was only interested in purchasing the Office. He suggested to Mr Dickson that they make a single offer for the two properties. Mr Strachan's view was that if the liquidator thought there was only a single purchaser, he might sell at a lower price.

[6] Mr Dickson telephoned Mr Lucas to inform him of the discussion. He told him to expect an approach from Mr Strachan's solicitors, Boyd, Jameson and Young WS. He also informed him that he was prepared to go to £20,500 to secure the Warehouse. Because of the unusual circumstances, Mr and Mrs Dickson did not enter into missives in respect of the transaction with either the liquidator or Mr Strachan. A Memorandum of Agreement was, however, concluded between "Boyd, Jameson and Young WS ... acting for and on behalf of Andrew Strachan" and "A. & W. M. Urqhuart ... acting for and on behalf of Brian Dickson" ("the Memorandum"). In thirteen numbered paragraphs, the Memorandum bears to record the agreement reached between the two principals. It includes details of the subjects, the price, the date upon which Mr Dickson was to provide funds for the purchase and the interest charges to which he was subject if he did not make payment on time.

[7] The source of the present dispute can be traced to Paragraph 10 of the Memorandum. It states:

"Mr Dickson will use the garage in connection with the business of Plasterers and Slaterers operated by him and for no other purpose without first obtaining the consent of Mr Strachan. Mr Dickson will endeavour to ensure that his use of the garage does not interfere with Mr Strachan's business or the offices. A condition to this effect will be incorporated in the Disposition in favour of Mr Dickson at the request of Mr Strachan".

[8] Paragraph 11 contains a mirror image provision in respect of Mr Strachan's use of the Office. Paragraph 12 states:

"Further Mr Strachan and Mr Dickson agree to grant to each other all necessary rights of access and wayleave for the maintenance, repair and renewal of their respective subjects".

[9] Following the conclusion of the Memorandum, Boyd, Jameson and Young submitted an offer for the subjects. It was accepted by the liquidator and the pursuers provided their share of the purchase price of £20,500 to the defenders. By disposition dated 9 and 29 July 1986, the Warehouse was conveyed into the joint names of Mr and Mrs Dickson. The deed was granted by the liquidator with the consent of Mr Strachan. Certain additional burdens were inserted in the title to reflect the terms of the Memorandum. In particular, the disposition stated that:

"... the warehouse will be used in connection with our said Disponees' business of plasterers and slaterers and for no other purpose whatever without the consent of in writing of us and our successors as proprietors of the office".

[10] A disposition was also granted on the same day in favour of Mr Strachan. It contained a similar burden based upon Paragraph 11 of the Memorandum.

[11] At the conclusion of the transaction, Mr Lucas wrote to Mr and Mrs Dickson. The letter, which is dated 6 August 1987, begins "I refer to your recent discussions with my assistant, Mrs. Peppiette and confirm that the purchase of the premises at 3 John's Lane has now been completed ...". Mr Lucas stated that the price had been paid, the titles had been obtained and that he enclosed the defenders' Statement of Account, which brought out a debit balance of £550.75. He continued "I hope that you will find the enclosed Statement to be in order and look forward to receiving your cheque in settlement. Should of course you wish to discuss any of the items shown on the Statement or indeed any other aspect of the transaction please do not hesitate to contact me."

[12] The narrative of the entry describing the work done by the defenders states:

"To paid Messrs. A. & W. M. Urqhart, Solicitors, fee for taking instructions in connection with proposed purchase, liaising with Agents acting on behalf of parties interested in premises in John's Place; adjusting terms of Minute of Agreement with Boyd Jameson & Young, examining title, drafting and adjusting, then drawing up Disposition in your favour; liaising with Boyd Jameson & Young in respect of settlement of purchase, and all related matters down to the completion of the transaction, inclusive of posts and incidents".

[13] In about 1997, the defenders destroyed their files relating to the purchase of the Warehouse. They did so in accordance with their standard practice of destroying files after a period of ten years had elapsed.

[14] Between 1987 and 2000, the pursuers occupied the Warehouse for the purposes of their business. Towards the end of 2000, a local motorcycle business wished to lease the Warehouse for storage purposes. Mr and Mrs Dickson contacted the defenders and asked them to prepare a draft lease. The defenders replied reminding them that in terms of their title, any change of use required the consent of Mr Strachan. Mr and Mrs Dickson immediately contacted the defenders to say that they were unaware of any such title condition.

[15] A meeting was held in early 2001 at the defenders' offices to discuss matters. Mr and Mrs Dickson took with them their own file, which included the Statement of Account and accompanying letter. It did not, however, contain any correspondence from the defenders in the period from March to August 1987, nor did it contain copies of the Memorandum or the Disposition. On examining the pursuers' file, Mr Lucas pointed out that the Statement of Account referred to a "Minute of Agreement". It was not contained within their papers, but the Memorandum was subsequently obtained from the files of Boyd Jameson & Young. Mrs Dickson also obtained copies of the title deeds from Register House.

[16] Having discovered the title condition, attempts were made to obtain the consent of Mr Strachan to allow the proposed change of use, so that a lease could be granted. Initially he seemed amenable to the proposal, but he then raised a number of objections and parties reached deadlock. Subsequently, Mr and Mrs Dickson applied to the Lands Tribunal to discharge the title condition, which was not granted until December 2005.

[17] In the current action of damages for negligence, Mr and Mrs Dickson maintain that the defenders failed to inform them of the existence of the title condition. As matters developed in the course of the proof, it became clear that the pursuers' case rested on two pillars. First, their plain recollection that the defenders had never sought their instructions about the Memorandum or the disposition. Secondly, their confidence in the completeness and accuracy of their records about the transaction.

[18] Mr Dickson was the prime mover in relation to the transaction. Mrs Dickson was not present at any meetings with the defenders prior to the conclusion of the transaction. Accordingly, the quality and weight of his evidence was central to the pursuers' case. He agreed that the Warehouse was ideal for his business. In chief, he recollected only one meeting with the defenders. It took place a couple of months before the purchase was concluded. At the meeting, there was a discussion about the bricking up of walls and the sharing of mutual expenses. The only other matter that Mr Dickson remembered was in regard to the development potential of the site. He recalled Mr Lucas saying that the two properties had potential and that he knew people who would be interested in any such development.

[19] According to Mr Dickson, however, there was no discussion at the meeting about the title, nor any mention of any document recording an agreement between himself and Mr Strachan. Mr Dickson also stated that after the meeting, he mainly dealt with Mr Lucas' assistant, Dorothy Anderson, who also did not mention the title condition.

[20] Mr Dickson's position was straightforward. He had had only one discussion with Mr Strachan of any significance: "basically we just agreed what each party was interested in buying - him the front, me the back. After that it was a matter for lawyers to sort out". Mr Dickson's only commitment was to pay his share. The defenders did not seek his instructions about the Memorandum and in particular, did not alert him to the proposed title condition. If someone else had rights to determine his use of the subjects, his question would have been "What the blazes does he have to do with property which I own?" From the outset, he and his wife had been thinking of the site's development potential and would not have agreed to any title condition which would have compromised that potential. He pointed to the fact that they had declined to continue discussions with Firn Cotton, precisely because it had sought a restriction on the title.

[21] I found it difficult to accept the testimony of Mr Dickson for a number of reasons, which I can group into three chapters. The first one relates to the accuracy of his memory. He was very reluctant to accept that his recollection could be wrong, even although the events were some twenty-one years ago. Towards the end of cross-examination, he conceded that there was a slight possibility that he had forgotten matters. However, he qualified that answer by reiterating that he did not forget about big things. In re-examination, he characterised the chances of his having forgotten about the main issues as being "pretty slim".

[22] There were, however, a number of flaws in Mr Dickson's memory. He testified that he first spoke to Mr Strachan in late 1987, whereas their initial discussion must have occurred much earlier. Despite the opening words of the defenders' letter to him of 6 August 1987, Mr Dickson did not recollect Mrs Pepiette, nor any discussions that he had with her. There was also a question-mark in relation to the meetings with Mr Strachan. Mr Dickson recalled one or two discussions with him in John's Lane. Mrs Dickson said that there was a meeting at the pursuers' office with Mr Strachan. In addition, Mr Dickson alleged that the defenders were not diligent in sending letters and that he had been told by Heather Pearson that Dorothy Anderson was under stress at the time of the transaction. I shall return to these allegations when considering the defenders' evidence.

[23] The second chapter concerns Mr Dickson's inability to explain two key matters: (a) How was the title to the Warehouse taken in joint names, when the Memorandum stated that he was the party to the transaction? and (b) Why was there no record of a request for the settlement cheque. Mr Dickson had no recollection of how either instruction was given. In relation to (b), he accepted that the request would presumably have come in writing. When it was put to him in cross-examination that the defenders had been granted a commission and diligence and that a specification of documents had been served upon him, he replied "it would appear that I do have documents within my possession which do fall under the calls". That was a surprising and unsatisfactory reply, given that Call 1 of the specification had been in very wide terms and he had received legal advice on its terms.

[24] The third chapter relates to the answers given by Mr Dickson in cross-examination. When asked what discussions he had with the defenders regarding Mr Strachan's title, he responded that he "never really had any". That suggested to me, contrary to his earlier assertion, that there had been such discussions. My impression in this regard was strengthened in the light of several of Mr Dickson's other answers. He did not dispute that he had given instructions to the defenders regarding paragraph 7 and possibly also paragraph 9. He accepted that the Memorandum otherwise reflected his position, despite the apparent contradiction between the access provisions of paragraph 12 and his repeated assertion that he would not have accepted any such title restriction. When pressed about whether he had provided instructions about the disputed paragraph 10, Mr Dickson first stated "I wasn't aware of the ramifications of that clause". He then corrected himself and said "Sorry, I wasn't aware of the clause or its ramifications." Taken in the context of his other evidence, this raised a doubt in my mind about the reliability of his recollection.

[25] The pursuers' files were maintained by Mrs Dickson. Both she and her husband emphasised that her file keeping was very good. She stated that there were no documents on file that referred to the title condition. Indeed there were no letters at all from the defenders in the critical period from March to August 1987, far less copies of the Memorandum or disposition. While Mrs Dickson struck me as a careful witness, she could not add a great deal to the question of whether or not instructions had been sought or given.

[26] At the close of the pursuers' case it appeared to me that they placed undue reliance on the fact that they had no documents on their file. It was my view in relation to this case that absence of evidence did not amount to evidence of absence.

[27] I now turn to consider the evidence led on behalf of the defenders. Dorothy Anderson undertook the actual conveyancing on behalf of Mr and Mrs Dickson. She began by speaking about her system of working at the time. She had to obtain the client's instructions on all important matters. In this case, she remembered correspondence being sent to the pursuers in the period prior to the conclusion of the transaction, including a letter which narrated the significant aspects affecting the title. She was fairly certain that the Memorandum would have been copied, both in its draft and final versions. The title condition had clearly been explained to Mr Dickson. She wasn't sure whether it was herself or Chris Lucas who had provided the explanation, but she remembered a file note to that effect. She emphasised that she had not "dreamed up" the terms of the Memorandum.

[28] In cross-examination, Miss Anderson's position became stronger. She said that the Memorandum had been revised and re-revised and instructions taken from the pursuers. Her recollection was that Mr Dickson was willing to accept the restriction, on the basis that Mr Strachan was having a similar condition imposed upon him. She said that without instructions, she would "never" have put the disposition in joint names, nor have agreed to the insertion of paragraph 10. Mr Dickson's allegation that he had been told that Dorothy Anderson was under stress at the time of the transaction was not put to her. It was in any event denied by Heather Pearson who had no reason to give false evidence about this matter.

[29] Two of her colleagues spoke highly of Dorothy Anderson's professional abilities. Chris Lucas said that she was an "extremely good conveyancer", "meticulous" and "incredibly accurate". He said that she treated conveyancing as "an art form". Another partner in the firm at the material time, Gillian Anderson (no relation), said that Dorothy Anderson was "very thorough", "meticulous" and paid "huge attention to detail".

[30] Chris Lucas' own recollection was that at the time, Mr Dickson was desperate to purchase the Warehouse. The arrangement with Mr Strachan was a "perfect match" for both parties. Mr Lucas added: "he knew that there were going to be restrictions on title." The proposed condition was not a problem, as it did not impede Mr Dickson in using the Warehouse for storage and vehicles at the time, or indeed for a number of years afterwards. Further, he had good relations with Mr Strachan and would not expect him to cause any difficulty if any change of use was sought, particularly as there was a reciprocal condition.

[31] Chris Lucas said that Mr Dickson was not a detached client. He liked to be kept informed and expected to know what was going on. He said that it was standard practice to copy documents to clients. In particular, they would send a note on title. Extra care was taken in this case, because of the unusual nature of the transaction and the absence of missives. Chris Lucas had been kept well briefed by Dorothy Anderson as the transaction progressed. He was certain that Mr Dickson was made aware of the title condition. Mr Lucas observed that "solicitors are like mechanics, but the raw material has to come from somewhere." If the pursuers were correct, it would mean that both he and Dorothy Anderson had departed from their normal high standards. He was sure that that had not happened in this case. Mr Lucas described himself as "speechless" when the allegation was put to him that he only sent correspondence when seeking payment at the end of the year. He said that his reputation was quite the reverse. He was always concerned, not just to do the job properly, but to be able to demonstrate that. I accepted his evidence in this regard.

[32] Gillian Anderson did not think it conceivable that there would be a gap in the correspondence between March and August 1987. She would have expected to see letters regarding the basis upon which the transaction was to proceed. Even if instructions had been given by telephone, the firm would have followed that up by letter. She characterised the Memorandum as being in effect the missives in this case, upon which full instructions would have been taken. With regard to paragraphs 10 and 11 of the Memorandum, she said that it would have been the firm's practice to explain to the clients in layman's terms what obligations they were entering into. She found it "unbelievable" that Dorothy Anderson had acted in the manner suggested by the pursuers.

[33] Both Dorothy Anderson and Chris Lucas struck me as careful and reliable witnesses. Each acknowledged that they had an imperfect recollection of the details of the transaction, but each was sure that instructions regarding the title condition had been taken from Mr Dickson. Having seen and evaluated them in the witness box, I regarded them both as careful conveyancers. On disputed matters, I preferred their evidence to that of Mr Dickson. I did not accept that they failed to take instructions on the Memorandum and the terms of the disposition respectively. It seemed to me fanciful to suppose that the Memorandum, including the title condition, had been dreamt up by Dorothy Anderson. Apart from Mr Dickson's own evidence in cross-examination, I found support from the testimony of Gillian Anderson. She was convincing in relation to the general system adopted by the firm at the time and in relation to Dorothy Anderson's own high professional standards and approach.

[34] That is enough to decide this action. As I hold as a matter of fact that Mr and Mrs Dickson were informed of the title condition at the material time and agreed to its insertion in the title, then it follows that any claim in respect of this matter has long since prescribed. But even if I had preferred Mr and Mrs Dickson's account, I would still have held that the claim had prescribed. In my view, the terms of the defenders' letter of 6 August 1987 were clear. Mr and Mrs Dickson were invited to raise any query they had about the Statement of Account. They were well aware of title conditions. If they were not sure why they were being charged a fee for adjusting the terms of a "Minute of Agreement", then in my view it would have been prudent for them to ask at the time. Accordingly, in my view, the pursuers could with the exercise of reasonable diligence have become aware that the title condition existed (Glasper v Rodger 1996 SLT 44).

[35] In light of my decision on the merits, the question of damages is also redundant. In his closing submission, counsel for the pursuers submitted that this was a "no transaction" case. He invited me to make an award of £22,740, comprising: (a) the diminution in value of the subjects (£6,000); and (b) the costs of having the title defect remedied by subsequent solicitors (£16,740). He reminded me that there are no fixed rules regarding the measure of loss (Haberstich v McCormick & Nicholson, 1975 SC 1).

[36] Counsel for the defenders began by disputing that this was a "no transaction" case. He argued that on his own evidence, Mr Dickson would in any event have bought the Warehouse. I reject that approach, because if I had accepted Mr Dickson's testimony, I would have held that he would not have purchased the subjects. Next, counsel submitted that the pursuers were not entitled to both heads of loss. I agree with that argument. In my view there is a fundamental conceptual difficulty in allowing the pursuers to claim for the excess paid for the subjects at the time and the "cost of cure". That would amount to double-counting.

[37] In respect of the appropriate measure of loss, counsel for the defender argued that the proper measure was diminution in value. He said that using "cost of cure" involved giving credit to a pursuer for any incidental benefits accruing to him in the period since the breach (County Personnel v Pulver [1987] 1 WLR 916; Watts v Morrow [1991] 1 WLR 1421, 1444-5 per Bingham LJ; British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd (No 2) [1912] AC 673 at 688-9; Martin v Bell-Ingram, 1986 SC 208). As the legal costs incurred by the pursuers were more than offset by the gain in the value of the property by having the title condition discharged - a gain of between £45,000 and £60,000 - he argued that the pursuers must account for the gain rather than merely asserting a loss.

[38] I was not persuaded by that argument. In my view, if the defenders had been negligent then the direct and plain consequence was that the pursuers had to incur the cost of restoring the title to its proper position. Accordingly, if I had found in favour of the pursuers, I would have awarded them the sum of £16,740, together with interest.

[39] For the reasons given above, I shall sustain the third and fourth pleas-in-law for the defenders, repel the pursuers' pleas and grant absolvitor.