Act: Bowen QC; Drummond Miller LLP (Mitchells Robertson, Glasgow) (Pursuers and Respondents)

Alt: I G Mitchell QC, Mickel, Solicitor Advocate; Gillespie Macandrew (Hamilton Burns, Glasgow) (First defender and appellant)

11 April 2014

Introduction

[1] This is an appeal at the instance of the first defender, in his capacity as interim judicial factor on the estate of the late Mohammed Sadiq, from an interlocutor of the Sheriff Principal of Glasgow and Strathkelvin, dated 24 June 2013, refusing an appeal against an interlocutor of the sheriff dated 31 July 2012, in terms of which the sheriff had found the first defender liable in damages to the pursuers in the sums of £9683.97 and £310,000. The appeal relates to questions of recoverability and mitigation of damages in relation to the sums awarded.

[2] The pursuers' claim was litigated as a commercial action. It concerned a contract for the sale by the pursuers of commercial premises at 71 Nuneaton Street, Dalmarnock, Glasgow, to the late Mohammed Sadiq at a price of £2 million, payable on 26 June 2009. Mohammed Sadiq did not pay the price on 26 June 2009 and on 4 June 2010 the pursuers rescinded the bargain. The claim was one for damages for breach of contract on the part of the late Mr Sadiq, the breach being failure to pay the purchase price and to take occupation of the subjects of sale. Damages were sought under reference to two separate craves. Crave (1) was for the outlays and costs consequential upon the pursuers and respondents having to retain the subjects and attempt to market them, and in not having received the purchase price which would otherwise have been available to repay borrowing secured on the subjects and to fund work in relation to alternative premises to which, prior to the breach of contract, the pursuers had committed themselves. Crave (2) was for the difference between the purchase price and the price which, having regard to downward movement of the market, the pursuers were likely to receive from an alternative purchaser. The averments in support of crave (1) are to be found in the initial writ at article 4 of condescendence and the averments in support of crave (2) at article 5.

[3] The sheriff heard proof in January 2012 and a debate on the evidence on 1 March 2012. The points at issue included the quantification and remoteness of various heads of damage and the extent to which the pursuers should be held to have mitigated their damages by virtue of their having entered into short-term leases of part of the subjects of sale. As at the date of proof the pursuers had not found an alternative purchaser for the subjects. It was their contention that they were still continuing to suffer loss as a result of the late Mr Sadiq's breach of contract.

The sheriff's findings-in-fact

[4] Insofar as relevant to the present appeal the sheriff's findings-in-fact were as follows:

"1. The pursuers are the firm of S & A Kilcoyne and Derek Kilcoyne, Steven Kilcoyne and Anthony John Kilcoyne the partners in and trustees of the firm. The three partners are also the directors and shareholders of S & A Kilcoyne Ltd ("the company").

2. The first defender is Kenneth Pattullo an insolvency practitioner and interim judicial factor on the estate of Mohammed Sadiq who died on 9 January 2010. The second and third defenders are the executors nominate of Mohammed Sadiq in terms of his will dated 2 March 2006.

3. By missives dated 13 February, 18, 20, 23, 24 and 27 March 2009 (" the missives"), the pursuers agreed to sell and Mohammed Sadiq agreed to buy subjects situated at 71 Nuneaton Street Dalmarnock Glasgow G40 3JT ("the subjects"). Part of the pursuer's title to the subjects was a leasehold interest registered in the Land Register for Scotland under title number GLA 187516 and part was full ownership registered under title number GLA 203946. The missives stipulated a purchase price of £2 million payable on 26 June 2009 with interest thereon at the rate of 4% per annum above the base lending rate of Clydesdale Bank plc from time to time until payment.

...

5. In the course of April 2009 the pursuers took entry to alternative premises at Chryston without acquiring any real or personal right to do so. The pursuers and the company began operating from the Chryston premises from the 2009. The company had vacated the subjects of sale by 1 June 2009.

6. As at 26 June 2009 the pursuers were in a position to meet their whole obligations in terms of the missives.

7. Mohammed Sadiq did not pay the purchase price on 26 June 2009. On 23^rd September 2009 the pursuers received from him a cheque for £100,000 which cleared through their bank on 30 September 2009.

8. On 8 December 2009 Mohammed Sadiq's then solicitors Hardy McPhail intimated that he was not a position to proceed with the purchase of the subjects due to a lack of funding.

9. By virtue of clause 3.3 and 3.2.1 of the said letter of 18 March 2009 the missives provided that if the price with interest thereon was not paid within 14 days of the date of entry, the seller would be entitled to rescind the missives and, at the option of the seller, to seek payment of damages in respect of all loss arising out of the purchaser's failure to pay the price (which might include wasted expenditure and the cost of a bridging or other loan to enable the seller to complete the purchase of heritable property).

10. By letter dated 4 June 2010 from the pursuers' solicitors to the solicitors acting for Mohammed Sadiq the pursuers rescinded the bargain.

...

12. The pursuers incurred legal expenses in relation to the failure of Mohammed Sadiq to implement the missives and in relation to enforcement of the said security totalling £7731.

13. The pursuers have sought to remarket the subjects.

14. In remarketing the subjects the pursuers have incurred additional advertising and estate agents charges of £1655.56.

15. In order to minimise their losses the pursuers have entered into short-term leases of part of the subjects and in doing so have received rental income totalling £68,640.45 from which there falls to be deducted £600 incurred in obtaining necessary energy performance certificates.

...

18. ...the pursuers' efforts to market the subjects have failed to attract a purchaser ready willing and able to purchase them.

19. The current market value of the subjects is £1,450,000.

20. Since 26 June 2009 the pursuers have incurred insurance costs in respect of the subjects totalling £8094.36.

21. During the period 26 June 2009 until 31 March 2011 to the subjects the pursuers incurred £9066.70 in local authority rates and standing charges for gas and electricity and water.

22. After 26 June 2009 the pursuers incurred security costs in respect of the subjects in the sum of £655.80.

23. The pursuer arranged an additional loan facility with Lloyds TSB Scotland plc to enable them to complete the purchase of heritable property at Chryston in doing so they incurred an arrangement fee of £4500. Interest incurred attributable to that additional facility amounted to £13,020.83. The pursuers incurred legal fees of £4000 in relation to a standard security which they required to grant in favour of Lloyds TSB Scotland plc to secure the additional facility.

24. It was a condition of the additional facility that the individual partners of the pursuers introduce into the firm capital of £464,000 additional to that which they had agreed to subscribe. This advance was made by the partners in December 2009. Interest on the said sum from 1 January 2010 until 31 March 2011 (15 months) at 5% per annum amounts to £29,000.

25. The pursuers completed their purchase of the Chryston premises on 22 December 2009.

26. The ongoing monthly costs incurred by the pursuers in respect of the subjects of sale after 1 April 2011 have been covered by rent payable under a lease of part of the subjects."

Grounds of appeal

[5] The grounds of appeal are elaborated over a number of sub-paragraphs but, as Mr Mitchell confirmed in opening on behalf of the appellant, essentially they are two in number. The first is that, that in upholding the decision of the sheriff (as expressed at finding-in-fact 24 and paragraphs [17] to [22] of his judgment of 31 July 2012) finding the first defender liable for interest on sums advanced to the pursuer firm by its partners, in terms of section 24(3) of the Partnership Act 1890, the Sheriff Principal erred in fact and law in that: the pleadings did not give fair notice of such a claim; there had been no finding that the partners had in fact claimed or been paid interest on their advances and, in any event, there was no sufficient basis in evidence for such a claim for payment having been made; and a claim for interest under section 24(3) was too remote. The second ground of appeal is that the sheriff failed properly to apply evidence which should have been understood as indicating that the pursuers had been able to mitigate their losses over the period from 1 April 2011 until at least the date of the proof by virtue of their receipt of rent in respect of part of the premises at Nuneaton Street in terms of a lease which imposed the cost of insurance, rates, utilities and security on the tenant. Accordingly, it is the appellant's contention that the sheriff's finding-in-fact 26 (that the on-going monthly costs incurred by the pursuers in respect of the subjects of sale after 1 April 2011 have been covered by rent payable under a lease of part of the subjects) is contrary to the evidence and should be substituted by a finding-in-fact in the following terms: "The pursuers continued to receive rent from 1 April 2011 for part of the subjects, namely 71 Nuneaton Street, at the rate of £7083 per month. This is in addition to the rent referred to in finding-in-fact 15."

The first ground of appeal

[6] As outlined in the grounds of appeal and developed in the note of argument and the oral submissions of Mr Mitchell, there were a number of strands to the first defender and appellant's argument that the sheriff principal erred in upholding the sheriff's decision that the pursuers and respondents were entitled to the sum of £29,000 as part of their damages, that being in respect of the requirement imposed on the partners of the respondents by their bankers to introduce £464,000 by way of additional capital to the partnership as a condition of the loan facility to enable the purchase of property at Chryston which would otherwise have been financed by the proceeds of sale of Nuneaton Street. The sheriff quantified this head of claim by reference to the entitlement of a partner, in terms of section 24(3) of the Partnership Act 1890, to interest at the rate of five per cent per annum on any advance made to the partnership beyond the amount of capital that he has agreed to subscribe. We have mentioned the lines of argument outlined in the grounds of appeal: that the pleadings did not give fair notice of such of a claim; that there had been no finding that the partners had in fact claimed or been paid interest and, in any event, no sufficient basis in evidence for such a claim having been made; and that a claim for interest under section 24(3) was too remote. However, in his second speech Mr Mitchell introduced a further line of argument under reference to section 24(4) of the 1890 Act which we did not consider had been foreshadowed in his grounds of appeal or his previously made submissions.

[7] The starting point for Mr Mitchell's submissions were the averments in support of this head of damages which are to be found in article 4.6 of condescendence and are quoted at paragraph [16] of the sheriff's judgment:

"To enable the pursuers to secure a loan to complete the purchase of Chryston despite the fact that the failure by the defender to settle the sale of the subjects had left the borrowing over the subjects outstanding, the pursuers' bank required that the individual partners inject capital into the partnership accounts of £464,000 in December 2009. An arrangement fee of £4640 on this capital injection was incurred by the pursuers. Interest is payable on this capital payment at the rate of 1% per month. The total interest paid up to 31 March 2011 is £72,960."

The sheriff was satisfied on the evidence that sums totalling £464,000 had in fact been advanced by the partners and that the reason that they had done so was as a result of a condition of the bank loan which was required in order to complete the purchase of the property at Chryston. He was not satisfied that there was any enforceable agreement requiring the partnership to pay the partners interest on their advances at the rate of 1 per cent per month. However, he had regard to section 24 of the Partnership Act, which provides that:

"24 Rules as to interests and duties of partners subject to special agreement.

The interests of partners in the partnership property and their rights and duties in relation to the partnership shall be determined, subject to any agreement express or implied between the partners, by the following rules: -

...

(3) A partner making, for the purpose of the partnership, any actual payment or advance beyond the amount of capital which he has agreed to subscribe is entitled to interest at the rate of five per cent per annum from the date of the payment or advance."

[8] At least until Mr Mitchell's second speech, no point was taken as to whether a partnership incurring an obligation to make payment to its partners can properly be regarded as a loss such as to found a claim for damages at the instance of the partnership. No point could be taken in the present case that a claim in respect of the necessity to advance capital was not the subject of averment and that the pursuers proposed a quantification of that claim on the basis of the cost to the partnership of borrowing; that much is clear from the passage in the pleadings which was quoted by the sheriff. However, as Mr Mitchell emphasised, the claim is pled on the basis that there had been an agreement among the partners that they would be entitled to a specified rate of interest on advances. They failed to prove that. Mr Mitchell conceded that it might have been different if the pleadings had simply referred to the advances and said nothing more, but the pleadings went further and averred a particular arrangement which was then not established on the evidence. The alternative of a claim by reference to section 24(3) had been raised by the sheriff in the course of the proof. It would then have been straightforward for the pursuers to tender a minute of amendment adopting the sheriff's suggestion, at least on an esto basis. Then the application to amend could have been dealt with on its merits under reference to the familiar exercise of balancing the parties' respective interests and such prejudice to these interests as might result from either allowing or refusing leave to amend. However, the pursuers did not take that course. Thus, as far as the pleadings went, the only basis for recovery of interest in respect of advances of capital by the partners was one which positively excluded the basis upon which the sheriff chose to proceed. Moreover, there had been no evidence on the matter. It could not simply be assumed that the partnership had paid or would pay the partners 5 per cent per annum based on the statutory entitlement. In any event, submitted Mr Mitchell, this claim was too remote. He accepted, under reference to the leading cases of Hadley v Baxendale (1854) 9 Ex 341 and A/B Karlshamms Oljefabriker v Monarch Steamship Co 1949 SC (HL) 1, that what was to be regarded as arising naturally and in the ordinary course of things and which was therefore not too remote a consequence of a breach of contract, was primarily a matter of fact and thus for the sheriff to determine as a jury question. Nevertheless, to allow recovery of this specific loss where, according to the sheriff, all that could be ascribed to the late Mr Sadiq was a recognition that failure to pay the price would give rise to "a funding gap, which would require to be filled in some other fashion involving finance costs of one sort or another" was to take a step too far.

[9] When responding on the first ground of appeal, Mr Bowen for the pursuers and respondents conceded that no case had been pled in the alternative to the averments that there had been an arrangement among the partners for the partnership to pay 1 per cent per month on the advances required by the bank. There had been no need to do so, although had a motion been made at the proof to amend to introduce an alternative case based on section 24(3), it certainly would have been granted. There could be no relevant prejudice to the first defender. The sheriff had raised the matter during the evidence of Mr Derek Kilcoyne at the proof in January 2012. There was then an adjournment until March 2012 when the sheriff was addressed on the evidence. In the interim parties exchanged written submissions from which it was clear that the pursuers were relying on section 24(3). There was no question of absence of fair notice. Nor was it true to say that the basis of quantification that the pursuers had pled was irreparably inconsistent with section 24(3). As had been observed from the bench in the course of Mr Mitchell's submissions, the rule set out in section 24(3) was of the nature of a default position which applied as a matter of law in the absence of any agreement express or implied between the parties. As Mr Mitchell had conceded, it was not entirely correct to describe it as a statutory claim in the sense of something owing its origin to statute. Rather, it was of the nature of statutory rule as to what the partners are to be taken as having agreed among themselves in the absence of evidence of an express agreement to the contrary or circumstances from which contrary agreement might be implied. Fundamentally the basis of the entitlement was contractual. However, the default entitlement arose as a matter of law and therefore required no evidence to support it, merely the absence of evidence accepted by the court which was to contrary effect. As far as the suggestion that the claim was too remote was concerned, it could not be said that the sheriff had gone too far. It was a matter entirely for the sheriff's judgment. He was fully entitled to conclude that the possibility that the pursuers would require the partners to advance additional capital in order to fill the gap which had opened up as a result of the purchase price not being paid was something that a reasonable businessman, such as Mr Sadiq, must be taken to have contemplated as a natural or probable result if the contract was broken: cf A/B Karlshamms Oljefabriker v Monarch Steamship Co supra Lord Wright at 21.

[10] We were not persuaded by the points in support of the first ground of appeal which Mr Mitchell made in the course of his first speech. It did not appear to us that in order for the sheriff to allow the pursuers a claim for interest on the partners' advances of capital, there had to be express reference in the pleadings to the provisions of section 24(3). We agree with the sheriff principal that quantification by reference to the statutory rate is no more than a variation upon the claim for interest that had been pleaded by the pursuers. As an entitlement arising simply as a matter of law in the absence of agreement to the contrary, it did not require to be pled, at least not to the extent of spelling out the rule that governs the rate of interest. This is, after all, a commercial action. The point may have originally been raised by the sheriff but he having done so, the then counsel for the now appellant was given the opportunity to respond. Indeed he was given a period of months within which to consider how he should do so. We did not see the appellant as having suffered any unfair prejudice in the sheriff being prepared to entertain a claim by reference to the statutory default position. We therefore reject the lack of fair notice strand in Mr Mitchell's argument. We also reject the line of argument that there can be no recovery in respect of a section 24(3) liability where it was not pled and not proved that a claim for statutory interest had actually been made by the partners against the partnership. The liability is there, until it prescribes or is discharged, whether a claim is advanced or not. Mr Mitchell was no doubt correct when he said that partners might waive their entitlement to interest but in the absence of evidence on the matter it may be supposed that they have not done so. Mr Mitchell's submission that this head of damages was too remote to be recoverable came to be made only very faintly. He recognised that among the propositions that are vouched by the case of A/B Karlshamms Oljefabriker v Monarch Steamship Co, are that the broad general rule of the law of damages is that a party injured by the other party's breach of contract is entitled to such money compensation as will put him in the position in which he would have been but for the breach and that while, nevertheless, some consequences of breach of contract, by reason of their being outwith the reasonable contemplation of the parties and therefore too "remote", will not sound in damages, remoteness of damage is a question of fact for the judge at first instance. It is therefore not for this court, exercising an appellate jurisdiction, simply to substitute our judgement for that of the sheriff, even if we were inclined to do so which, in the circumstances of this case, we are not.

[11] As we have indicated above, during a second speech, the purpose of which we intended as an opportunity for Mr Mitchell to reply to any unanticipated point made by Mr Bowen, Mr Mitchell introduced what appeared to us as a new line of argument which had no basis in his grounds of appeal and no echo whatsoever in anything that is recorded as having been submitted to the sheriff or the sheriff principal. Mr Mitchell received no encouragement from the court to develop it, coming as it did so late in the day, and did not do so, but he did point to section 24(4) of the Act and suggested that it was to be construed as qualifying section 24(3) by making it a condition to an entitlement to interest on capital that the partnership has made profits. Therefore, continued Mr Mitchell, in the absence of proof of profits it was not open to the pursuers in the present case to recover damages in respect of their liability to the partners in terms of section 24(3). Mr Mitchell supplemented what he said under reference to section 24(4) by observations on the conceptual difficulties introduced by a partnership claiming as a head of loss its liability to pay interest to its partners, particularly where the source of the liability is a provision which bears to regulate the interests of the partners inter se. There was an element of circularity involved in a partnership recovering in respect of a debt owed to partners, where the only persons with an interest in a solvent partnership are these same partners.

[12] We do not propose to give effect to Mr Mitchell's suggestion (or submission if that is what it came to be) that, by virtue of section 24(4), section 24(3) has no effect unless it is established that the partnership has made profits. That is not simply because it came at almost the last moment, unannounced by anything which had previously been put before the sheriff, the sheriff principal, or this court. We also consider Mr Mitchell's submission to have been completely misconceived.

Section 24(4) is in these terms:

"(4) A partner is not entitled, before the ascertainment of profits, to interest on the capital subscribed by him."

Section 24(3), it will be recalled, it in these terms:

"(3) A partner making, for the purpose of the partnership, any actual payment or advance beyond the amount of capital which he has agreed to subscribe, is entitled to interest at the rate of five per cent per annum from the date of the payment or advance."

While we must accept that we have not had the benefit of argument on the proper interpretation of the sub-section, it appears to us to be tolerably clear that far from in some way qualifying section 24(3), section 24(4) is dealing with an entirely different item in a partnership's accounts and the different entitlement of a partner in respect of that item. Section 24(4) is dealing with "the capital subscribed by" the partner, whereas section 24(3) is dealing with "any actual payment or advance beyond the amount of capital which [the partner] has agreed to subscribe". The capital which a partner subscribes to the firm in terms of an agreement among the partners to do so, with the purpose of commencing or continuing the business of the firm is something different from any advance in addition to that capital that the partner may make to the firm. While the partner's share of capital and any advance that he has made must of necessity both appear in the accounts expressed in money terms, the items should be distinguished one from the other because their treatment is different. Capital is what the partner ventures (together with his skill and labour) in the partnership business. His reward for venturing capital is a share in profits and losses. In the absence of special agreement, he has no entitlement to interest on capital; hence the terms of section 24(4) (see Lindley & Banks on Partnership (18^th edition) at paras 10-66, 17-06 and 17-13). An advance beyond what the partner is required to subscribe is, in contrast, of the nature of a loan and will attract interest (unless it is expressly agreed to be interest-free) which will be payable before any profit of the partnership is struck. In the absence of agreement to the contrary, section 24(3) provides that the rate of interest to which the partner is entitled will be taken to be 5 per cent per annum. Miller The Law of Partnership in Scotland (2^nd edit) p 417 explains matters this way:

"The capital of the partnership is a term used to denote the aggregate of the sums contributed by the partners. It is thus not equiparate to the assets or property of the firm which will vary during the conduct of the business and it is really represented by the amount at credit of the partners on capital account. That amount may not, in the case of any partner, be the sum originally contributed to him as capital. He may owe money to the firm which is set off against his contribution or on the other hand he may have advanced further money to the firm not as his contribution of capital which he places at risk in the business of the firm but as a loan to the firm."

At paragraph [18] of his Note the sheriff, in the context of construing section 24(3), drew the distinction between what the partners agree to contribute at the constitution of the partnership and any extraordinary advances of capital not contemplated at the outset. We agree that that is a correct distinction. The sheriff went on to characterise the injection of capital by the partners of the pursuers in December 2009 as having the character of an extraordinary advance not contemplated at the outset. It follows that Mr Mitchell's reference to section 24(4) of the 1890 Act is simply neither here nor there. That sub-section relates to the capital that the partners agree to subscribe on constitution of the partnership in respect of which there is no entitlement to interest, in the absence of specific provision to the contrary. What is under consideration here are advances made by partners, in respect of which there is an entitlement to interest at 5 per cent, in the absence of specific provision to the contrary.

[13] We were also unmoved by Mr Mitchell's reflections on conceptual difficulties associated with a partnership recovering damages in respect of a liability incurred to its partners. In fairness to Mr Mitchell, he did not press the matter. He recognised that in Scotland, as is provided by section 4(2) of the 1890 Act, a firm is a legal person distinct from the partners of whom it is composed and thus on the face of it there is no reason why a partnership should not become indebted to its partners and liable in interest, as section 24(3) specifically provides (cf what, on a strict analysis, may be the position in England: Lindley & Banks supra at para 22-05). If that liability arises as a result of a third party's breach of his contract with the partnership we therefore see no immediate conceptual impediment to recovery of damages under that head. Whether damages should be awarded in any particular case is a different question. There may be circumstances where an arrangement among partners is regarded by the court as a contrivance, the purpose of which is to create an artificial loss, and therefore damages are not awarded. However, that is not what the sheriff found here. He was satisfied, and he was entitled to be satisfied, that the individual partners had been required, as a condition of bank funding, to advance monies to the partnership. The partners as individuals therefore suffered real loss by being deprived of the use of their monies. We see nothing unjust or anomalous in an award of damages in respect of that loss, albeit by the route of the partnership's claim in respect of the liability it incurred to the partners.

[14] Accordingly, the first ground of appeal does not succeed.

The second ground of appeal

[15] Straightforward as the second ground was when explained to us by Mr Mitchell, we have to confess that none of the members of the court had discerned the sharp point that was taken in argument when they had been considering the grounds of appeal and note of argument for the first defender and appellant in preparation for the hearing. The point certainly does not emerge from the sheriff principal's judgment. Our very strong impression on looking at the available material is that that is because that it was not articulated before the sheriff principal or at least not articulated with the clarity that Mr Mitchell (who did not appear in the Sheriff Court) was eventually able to achieve. If the precise point was argued before the sheriff principal, he did not understand it. We very much doubt that that was due to any failure on his part.

[16] The proposition underlying the second ground of appeal is that the sheriff misunderstood the evidence and, as a result, failed to have regard to the extent to which the pursuers had successfully mitigated their damages by virtue of the revenue stream produced by the rent received for the subjects at 71 Nuneaton Street at the rate of £7083 per month during the period subsequent to 31 March 2011 because, mistakenly, he considered that that revenue was more or less balanced by continuing costs which were being incurred by the pursuers as a result of Mr Sadiq's breach of contract.

[17] Mr Mitchell began his submission by accepting as common ground between the parties, and as found by the sheriff, that between 26 June 2009 when Mr Sadiq failed to pay the price and to take occupation of the subjects of sale and 31 March 2011, the pursuers had incurred the following outlays in consequence of that breach of contract: insurance - £8094.36; rates and utilities standing charges - £9066.70; and security costs - £655.80. Then, with a view to substantiating the proposition underlying the second ground of appeal, Mr Mitchell drew the court's attention to passages from the transcript of the evidence given by Derek Kilcoyne on 17, 18 and 19 January 2012. Pages from the transcript are reproduced in the appendix to the appeal print and are collated under four tabs. The court was also provided with copies of production 5/50 which is a spread-sheet prepared by the pursuers and setting out what they presented as their outstanding borrowings during the months of July 2009 to March 2011, the rates of interest applicable to these borrowings, and resulting interest payments attributable to the pursuers not having received the purchase price of the subjects during that period. Mr Kilcoyne is a partner of the pursuers and was the only witness led on their behalf in order to establish the heads of damage condescended upon in article 4 and sued for in terms of crave (1). At paragraph [6] of his Note the sheriff explains that he found Mr Kilcoyne to be a reliable and credible witness. By taking the court to his chosen passages in the transcript Mr Mitchell was able to show that, according to Mr Kilcoyne: there was a tenant in part of the subjects from the end of June 2010; the tenant was still in occupation at the time of the proof and would be in occupation until the end of February 2012; as at 15 March 2011 the total rent which had been received was £68,645.45; from March 2011 the rent was paid to the pursuers at the rate of £7083.33 per month; and such outlays and expenses as were payable in respect of that part of the subjects that was let in respect of insurance, rates, standing charges and security, were, after 31 March 2011, met by the tenant. Thus, submitted Mr Mitchell, on that state of the evidence, which came from the pursuers' own, and on this matter, sole witness, over the period from 1 April 2011 until at least 28 February 2012 the pursuers had been in receipt of rent of £7083.33 per month. All of that rent should have been found by the sheriff to have been available to mitigate the pursuers' loss (whether sued for in terms of crave (1) or crave (2)) because, according to Mr Kilcoyne, the outlays and expenses which, prior to 31 March 2011 had been incurred by the pursuers due to their enforced continued occupation of the subjects of sale were, from at least 1 April 2011, met by the tenant.

[18] In our opinion, the second ground of appeal, once understood, proceeds on an unduly selective approach to the evidence and fails to take into account how the pursuers sought to have their damages assessed and how that was responded to, by the first defender's counsel in cross-examination and by the sheriff in quantifying what was recoverable.

[19] The finding-in-fact by the sheriff which is attacked is 26: "The on-going monthly costs incurred by the pursuers in respect of the subjects of sale after 1 April 2011 have been covered by rent payable under a lease of part of the subjects". A feature of the second ground of appeal is that what is proposed to be substituted for it: "The pursuers continued to receive rent from 1 April 2011 for part of the subjects, namely 71 Nuneaton Street, at the rate of £7083 per month. This is in addition to the rent referred to in finding in fact 15", does not materially displace what the sheriff found. The sheriff appreciated that rent was being received and specifically said so. What he also found was that costs were being incurred in parallel and that income and outgoings broadly cancelled each other out. It is that cancelling out which the appellant wishes to excise. We rather doubt whether a substituted finding-in-fact simply omitting to mention on-going costs would be sufficient for the appellant's purpose, which is to reduce his total liability in damages by a sum equivalent to eleven months' rent but, be that as it may, we do not consider any interference with the sheriff's findings to be warranted. As Mr Bowen pointed out, the sheriff's finding-in-fact 26 reflects in terms answers given by Mr Kilcoyne in cross-examination (see appendix, tab 4, pages 90, 92, 98 and 100). Looking at the whole of the evidence of Mr Kilcoyne, insofar as it appears in the four tabs of the appendix, but in particular the passage over the 12 pages in tab 4, there does not appear to have been any inherent significance in the date of 31 March 2011. Rather, it simply marks the end of the period over which the pursuers had attempted a precise calculation of their damages, having regard to the extent to which they had mitigated these damages, with 1 April 2011 marking the beginning of the period over which they were prepared to take the view that their losses were more or less balanced out by their gains (in the form of the rent received for part of the subjects). This may have been as much to do with the history of the preparation of the case as anything else; it is inevitable that material produced with a view to supporting a claim for on-going losses may not be brought right up to the date of the proof in the relative action for damages. That 31 March 2011 is the end-date in the spreadsheet 5/50 of process may simply reflect when it was prepared. However, for whatever reason, when giving evidence, effectively as the representative of the pursuers, Mr Kilcoyne was prepared to take a broad view of the period subsequent to 31 March 2011 and make no claim in respect of it. That does not mean that he took the view that the pursuers had sustained no losses subsequent to 31 March 2011. He accepted that insurance, rates, standing charges and security costs in respect of the part of the subjects that had been let were no longer being incurred by the pursuers, but he drew attention to the fact that the pursuers still required to finance borrowing which would not have been necessary had they received the purchase price for the subjects (see appendix, tab 4, pages 90 and 91). Mr Kilcoyne also referred to (unspecified) administration costs (see appendix, tab 4 pages 99 and 100); hence his evidence that "the current rent equals these costs ...there wasn't a material difference between the rental income and the costs I was incurring on a regular basis" (see appendix, tab 4, page 92). We note that although part of the subjects was let out, part remained occupied by the pursuers. That may have generated costs.

[20] Now Mr Kilcoyne's evidence may not have been correct. The costs incurred subsequent to 31 March 2011 may have been less than the rents received, even when recoverable financing costs were taken into account. It is apparent from the transcript that the sheriff was alive to that possibility and that that was a case that the first defender was attempting to make (see appendix, tab 4, pages 99 and 100). Mr Mitchell drew attention to paragraph [22] of the sheriff's Note where the sheriff explains why, in finding-in-fact 24, he calculated the interest on the partners' advances only up to 31 March 2011. We shall have something more to say about what appears in paragraph [22], but we would first observe that in determining what to make of Mr Kilcoyne's assertion in evidence that the level of rent received after 31 March 2011 was more or less balanced by the level of continuing costs being incurred by the pursuers as a result of breach of contract, the sheriff was entitled to have regard to the way in which Mr Kilcoyne was cross-examined. Mr Kilcoyne was challenged on the proposition that rent equalled cost, "give or take", but only in very general terms and when challenged Mr Kilcoyne maintained his position (see appendix, tab 4 pages 92 and 93). Entirely properly, as we would see it, the sheriff put it to the cross-examiner that if he was to take the matter further the cross-examiner would have to put an alternative calculation to the witness and failure to do so would be likely to have an impact on the sheriff's assessment of Mr Kilcoyne's credibility and reliability (see appendix, tab 4 pages 93 and 95 to 97). The cross-examiner appears not to have equipped himself with the material to comply with what we would regard as the sheriff's reasonable and fair requirement. In the result, there was no specific and effective challenge to what Mr Kilcoyne had asserted. Before us Mr Mitchell accepted that cross-examination of Mr Kilcoyne had been inadequate, but submitted that this court had to do the best that it could on what it had before it. That is not quite how we would see the position, at least if what Mr Mitchell meant was that it was for this court necessarily to come to a view on what had been proved. What is in issue is a question of pure fact. It is for the court of first instance, here the sheriff, to determine all matters of fact. That is not to say that this court cannot interfere with the sheriff's findings but the basis upon which it can do so is limited. The relevant principles are very familiar. They have recently been reviewed and affirmed by Lord Reed JSC in the Supreme Court in McGraddie v McGraddie 2013 SLT 1212. Putting matters very shortly, an appellate court can intervene only it is satisfied that the judge at first instance was "plainly wrong" in the conclusion that he came to: Clarke v Edinburgh & District Tramways Co Ltd 1919 SC (HL) 35, 36-37. Thus, when as here, an appellate court is considering an appeal on a finding of fact, its function is not to review such evidence as was led in order to come to its own view as to what should have been found. To borrow an expression from one of the authorities referred to by Lord Reed in McGraddie, an appellate court is not there to duplicate the trial court's efforts. In the present case it was for Mr Mitchell to satisfy us that the sheriff's acceptance that the pursuers' on-going gains were more or less balanced out by their on-going losses was plainly wrong, if he was able to do that. We have not been so satisfied. As we have indicated, there was evidence, held by the sheriff to be credible and reliable, and challenged only ineffectually in cross-examination, which was consistent with the sheriff's finding.

[21] Mr Mitchell drew attention to what the sheriff had at paragraph [22] of his Note:

"In relation to finding in fact 24 there was no evidence before me either as to when or if the additional funding was repaid to the partners and accordingly I have limited the calculation of interest to the period until 31 March 2011 when upon Mr Kilcoyne's evidence the whole sums were still outstanding."

Given what the sheriff had to say in his Note, submitted Mr Mitchell, the possibility of loss to the partnership subsequent to 31 March 2011 by reason of entitlement to interest on the advances by the partners had been excluded. Looking to the spreadsheet, 5/50 of process, at best for the pursuers the cost of borrowing from the bank in the period subsequent to 31 March 2011 was a little less than £4000 per month. On exclusion of interest on advances by the partners, there was therefore a surplus of more than £3000 per month which the sheriff should have attributed to mitigation of damages and reduced the sums awarded accordingly.

[22] We accept neither Mr Mitchell's principal argument in support of the second ground of appeal nor his fall-back position under reference to what appears at paragraph [22] of the sheriff's Note. An explanation in a sheriff's Note is not the same as a finding-in-fact. Moreover, it is to be borne in mind that the assessment of damages need not be a very precise exercise. Indeed, very often it will be quite the opposite. It may require estimation. It may involve compromise. Essentially it is a matter of fact for the court of first instance and an appellate court should be slow to reverse the fact-finder where he had a basis in the evidence for the conclusion that he reached. Here we consider that the sheriff had such a basis. The evidence was not to subjected to well-focused and therefore effective cross-examination. In respect of the period subsequent to 31 March 2011 Mr Kilcoyne, on behalf of the pursuers, was not seeking to recover any damages because he took the view that gains and losses more or less cancelled each other out. In all the circumstances we consider that it was open to the sheriff to take the same approach. We do not see his doing so to be inconsistent with the explanation that he gave at paragraph [22] of his Note for not making an arithmetically precise interest calculation in respect of the period after 31 March 2011.

[23] This ground of appeal does not succeed.

Decision

[24] We shall refuse the appeal. We reserve all questions of expenses.