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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Moyarget Developments Ltd v. Mathis & Ors [2005] ScotCS CSOH_136 (20 October 2005) URL: http://www.bailii.org/scot/cases/ScotCS/2005/CSOH_136.html Cite as: [2005] CSOH 136, [2005] ScotCS CSOH_136 |
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Moyarget Developments Ltd v. Mathis & Ors [2005] ScotCS CSOH_136 (20 October 2005)
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OUTER HOUSE, COURT OF SESSION [2005] CSOH 136 |
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CA158/04
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OPINION OF LORD REED in the cause MOYARGET DEVELOPMENTS LIMITED Pursuers; against MRS ROVE MATHIS AND OTHERS Defenders: ________________ |
Pursuers: Borland; MacRoberts
Defenders: Sandison; Brodies
20 October 2005
Introduction
[1] In this action the pursuers, a company engaged in property development in the north of Scotland, seek payment of £527,535.05 from the defenders in respect of work which they claim to have carried out on their behalf in connection with the proposed development of a site in Dingwall. The pursuers' claim proceeds on the basis that, although they carried out work on the instructions of the defenders, they did so while the parties conducted negotiations with a view to formalising their relationship. A draft contract was proposed, and various revisions were produced, but no final agreement was ever reached. In particular, the parties did not agree the remuneration which would be paid to the pursuers for the services which they provided. In these circumstances, the pursuers maintain that a contract is implied, in terms of which they are entitled to be remunerated on the basis of quantum meruit. Alternatively, they seek payment on the basis of unjust enrichment. [2] The position adopted by the defenders in their pleadings is as follows:"Admitted under explanation to follow that in or around 2001 the pursuers were approached by John Haig, the first defender's brother, with a view to the pursuers assisting with the development of a site... Admitted that on 7 February 2002 Mr Duncan [the pursuers' managing director] met with the first defender, her husband, Mr Haig and Mr Patrick Bradley, an accountant, at the home of the first defender... [At the meeting] agreement was reached as to the circumstances in which the pursuers would be entitled to be paid for the work they were to do in facilitating the development of the site... Explained and averred that Mr Haig had been asked by the first defender to find an appropriately experienced person to examine the site, prepare suitable development plans, and submit those plans, as agreed for or on behalf of the first defender, for planning permission, all on the basis that, while that person's outlays in so doing would be met, no fee element would be payable unless and until the planning permission applied for had been obtained. The commercial rationale of the agreement from the first defender's point of view was that the rise in the value of the land which would be effected by the grant of such permission would provide the wherewithal to pay the relative fee. The pursuers' Mr Duncan orally agreed with the first defender at the meeting which took place between them on 7 February 2002 that that would be the basis upon which the pursuers would render their services in connection with the facilitation of the development of the site."
Against that background, the defenders maintain that the pursuers acted in breach of contract in a number of ways, including the submission of a planning application in terms which had not been approved by the defenders; that the defenders were entitled to terminate the pursuers' instructions, as they did; and that the pursuers are not entitled to any remuneration, the condition required for the payment of such remuneration (namely, the grant of planning permission for the site on an application to the terms of which the first defender had agreed) not having occurred. The pursuers on the other hand maintain that, even if there was an agreement such as the defenders allege (which they deny), the defenders acted in breach of the agreement by wrongfully terminating the pursuers' instructions before the planning application had progressed to the stage at which planning permission would (but for the termination of their instructions) have been granted.
[3] In these circumstances, the parties agreed that it was appropriate to determine, as a preliminary issue, the question whether any agreement was reached on or around 7 February 2002 between the pursuers on the one hand and the defenders on the other as to the basis upon which the pursuers might be remunerated for carrying out the work they were instructed to do in facilitating the development of the site at Chestnut Road/Tulloch Castle, Dingwall, and, if so, what the terms of that agreement were. Evidence in relation to those questions was led by both parties.The Evidence
[4] Evidence was led on behalf of the pursuers from Mr Gordon Duncan, Mr Patrick Bradley and Mr Mark Finlay, and on behalf of the defenders from Mrs Rove Mathis (the first defender), her husband Mr Peter Mathis, and her brother Mr John Haig. The main points in the evidence of each witness can be summarised as follows.
1. Mr Gordon Duncan
[5] Mr Duncan was the managing director of the pursuers, and of Drumness (Contract Management) Ltd ("Drumness"). The pursues were engaged in site development: they undertook design work, and the obtaining of planning permissions, building warrants and finance. Drumness were building and civil engineering contractors. Both companies were based in Inverness. In November 2001 Mr Duncan was approached by Mr Haig, whom he had known for many years. Mr Haig invited him to the Tulloch Castle site, at Dingwall, to see what the development possibilities were. Mr Haig explained that the site was owned by his sister, under a trust or some sort of arrangement involving other people. They were interested in developing the site with a view to housing. Mr Haig gave no indication of why he was approaching Mr Duncan. Mr Duncan expressed an interest. He was keen to get involved in the construction of the development. During these initial discussions with Mr Haig, there was no real discussion about fees. Mr Duncan denied in evidence that Mr Haig had made it clear from the outset that he was looking for someone to obtain outline planning permission, who would only be paid when planning permission was obtained. Fees were not discussed at that point. He did not give an estimate of his fees to the stage of obtaining planning permission. If Mr Haig had said that fees were not to be paid until the end, Mr Duncan's answer would have been no. Mr Duncan accepted however that it had been indicated early on that ready cash was a problem. That was hinted at by Mr Haig, and at a later meeting with Mrs Mathis. [6] Following his initial meetings with Mr Haig, Mr Duncan made enquiries of the Dingwall planning office to find out the planning status of the site. He then met Mrs Mathis and her husband, and Mr Haig, in December 2001 and on 18 January 2002. They discussed the potential of the site. Mr Duncan explained that he had met the planning officer. It was established that the site could be developed. There was no talk of payment at that stage. Fees were never mentioned. No estimate was given of the amount of the fees which might be incurred. [7] Following these meetings, Mr Duncan wrote to Mrs Mathis on 25 January 2002. The letter was written on Drumness's headed notepaper: Mr Duncan said in evidence that that was the company, so far as his operation was concerned, which was most active at that time. He had thought that "we" (as he expressed it) might use that company, but he was not sure where "we" would end up. "We" had the facility to operate as a one-stop shop, splitting projects into two. The design and technical end was done through the pursuers, and construction through Drumness. It appears from the notepaper that the company had two directors, one being Mr Duncan and the other being a member of his family. The letter began:"I was very please to met [sic] you and your husband again last week to discuss the proposed development of your land in Dingwall.
I would be pleased to become involved in the development of this land in whatever capacity is best suited to the mutual benefit to all parties.
However, in order to decide the best way forward, certain initial decisions have to be made in relation to:
a) the way in which the land is to be developed/sold to achieve the best result
b) the type of development to be carried out on the land e.g. commercial, residential etc. in order to prepare the Planing Application
c) the way in which the second area of land, in other ownership at present, is to be handled."
In relation to "the second area of land", Mr Duncan explained in evidence that the site comprised two adjoining areas of land: one was owned by the trust in which the defenders had an interest, and the other was owned by the Dingwall Auction Mart, subject to an option to purchase, held by the trust, which was conditional on the obtaining of planning permission.
[8] The letter continued by discussing possible legal structures for the development of the site:"It is our understanding that your preference is, to spread the realisation proceeds of the Land over a period of years... There are various ways in which this can be done but each has its disadvantages as well as its advantages, e.g.
1) Joint Venture - this would require forming a new Company, entail the moving of the land or some of it into the new Company, which would incur expense, and possibly attract tax. The profit in the new Company would be taxed, then your Dividend (the agreed value of the developed land) would then be taxed again. Moreover, all the expense of running a separate Company would have to be paid for.
2) Options - this requires a portion of the land to be sold to my Company, along with several Options to sell the adjacent parcels of land over a period of time. Although the land is being sold over a period, the Inland Revenue may take a view on the whole option deal as a single contract and claim the Tax, on day one, for the whole development.
This method also involves my Company in additional costs, etc.
3) You (or 'the Trust') Develop the land - this requires you to appoint me as your Main Contractor for the whole Development. We would undertake to obtain Planning Approval. Construct the infrastructure to develop the land, Advertise and Sell all the properties on your behalf, Build the properties. You as Developer would pay me to do this work.
This method allows the land to stay in your ownership, it gives you as much or as little involvement in the development as you wish, and also gives the flexibility to build commercial units (see later comments).
The land would require to be used as collateral for Loans from the Bank to pay for the funding of the development."
"Turning now to the proposals to Develop the land. Since we last met, I have had a further meeting with the Planning Officer for the Dingwall area in order to explore the way forward.
The existing Local Plan for the Dingwall Area is now 10 years old and is in the process of being reviewed and updated.
The First area of land is already zoned for housing and thus any proposals which we submit regarding housing, would be dealt with by the local Planning Officer. The Distributor Road indicated on the Local Plans will be required in some form or another... As there is no money in the various council budgets, this road will not be built nor funded by the Regional Council. Thus this is a cost which will have to be allowed for by the Developer.
The Second area of land is at the moment zoned as industrial, and it was anticipated by the authorities that research/call centre/office style of industrial would be situated in this area. Thus, the option which we discussed of constructing Storage type units may not be accepted by the Planning Officer.
However, as a considerable area of land for all types of Industrial Units has now been allocated at the Strathpeffer Road Industrial Park it was indicated that your area of land may now not be required as industrial...
As I see it at the moment the options which are available to us are:-
1) We could submit for Outline Permission for the first area of land. This would be for housing in what ever configuration we would consider as being the most appropriate.
This would be dealt with locally and may be relatively quick.
2) We could submit for Outline Permission for the second area of land. This could be for Industrial only, as it is presently zoned.
This would be dealt with locally and may also be relatively quick.
3) We could submit for Outline Permission for the second area of land for a change of use to whatever we decide e.g. all residential; or a mix of residential and industrial.
This approach would have to go through the Highland Council head office for discussion and approval by their Planning Officers. Once our proposals regarding the mix of housing/industrial etc. is approved, it would then be included in the Area Plan for action.
This may take some time.
4) We submit for outline permission for both areas of land. This would require us to decide as to the mix of housing together with the extent of industrial etc, which we would want. It would also allow for the option of suggesting to re-locate the industrial areas to the first area of land. My concern about this approach is that with the Industrial Park now available the planners may not be amenable to re-location of the Industrial zoning. Either the zoning stays where it is or there is no Industrial!
This approach, as in 3), above would have to go through the Highland Council head office for discussion and approval by their Planning Officers. Once our proposals regarding the mix of housing/industrial etc. is approved, it would then be included in the Area Plan for action. This may also take some time.
Options 2, 3 & 4 require clarification regarding the conditions in the missives relating to the 'buy-back' of the second area of land. Advice should be taken on this before we get too far down the line in regards to submission of proposals to the Planning Officers.
The Planning Officers are prepared for us to submit our proposals for discussion and amendment, as a means of opening up a dialogue, without us having to submit any fee. However, once it is agreed what is acceptable to all, then the fees will be required to be paid on submission of the formal application."
I note that, according to the letter, both areas of land were zoned for development: the first area was zoned for housing, and the second area was zoned as industrial, but might not be required for that purpose. I also note that Mr Duncan repeatedly used the expression "once our proposals... is [sic] approved", or "once it is agreed what is acceptable", rather than "if".
[10] The letter concluded:"I trust that the above is not too confusing and gives a fair reflection of our discussions, together with an in-sight as to the Planning Officers initial approach to our proposals. I look forward to your comments, and would be pleased to meet with you anywhere should you consider this to be appropriate."
"We were asked if we could proceed to get planning permission in outline. That's all we were talking about at that time. We said there would be costs involved in that, but we'd carry out the work on the understanding we'd be involved in the construction, in the development of the site. There would be out-of-pocket expenses which would be met as they were incurred. If at any point either party decided they didn't want to go further, I'd be paid for the work I'd done up to that point."
Mr Duncan said in evidence that there was no detail as to the fees at all. The whole discussion thereafter was to be left to the lawyers, to make an offer as it were. "We" were asked to continued with the work "we" were doing with a view to obtaining outline planning permission. The issue of fees was left on the basis that Mrs Mathis would consult her lawyers and ask them to draft a contract. Asked whether he and Mrs Mathis agreed that he would not be entitled to any fees unless and until planning permission was obtained, Mr Duncan said that that was not the way he understood it: he would not have suggested that arrangement as such. If "we" were only going to the stage of obtaining planning permission, he would be looking for payment of fees on a rolling basis, but "we" were looking at a longer-term situation. No-one had ever suggested that he would only be paid fees once planning permission was obtained. At a later stage in his evidence Mr Duncan said that the idea that fees would not be paid until planning permission was granted had been discussed, but had not been agreed. It was at that stage that he had made an offer to carry out the entire development. In return for that, he would not submit monthly fees for the work required to obtain planning permission. Mr Duncan accepted that it was possible that other people at the meeting might, in good faith, have had a different understanding of what was agreed.
[12] Following the meeting, Mr Duncan wrote to Mrs Mathis on 12 February 2002, again on Drumness notepaper. He wrote:"In order that our respective understandings of how things are beginning to develop, are in unison, I have prepared in duplicate a short Note on the meeting which covers the salient points discussed. If there is anything I have missed or if you would like to amend it in any way please do not hesitate to let me know and I shall have it amended. On the other hand if you find it acceptable you should keep the original and return the copy to me with the confirming docquet duly signed.
It was agreed at the meeting that you would provide me with a letter authorising me to continue to negotiate on your behalf in regard to matters relating to the development of the land in Dingwall and in this connection you asked if I would draft a suitable letter. This I have done and it is enclosed. Again I have to say, however that if you would like to amend it in any way please feel free to do so."
"Background
Gordon Duncan had been approached in December 2001 to establish whether or not he would have an interest in assisting Mrs Mathis to develop some land at Tulloch Castle in Dingwall. An earlier introductory meeting had been held in Inverness when Mrs Mathis had indicated that whereas it was her intention to get the best possible price for the land she would like to accomplish this in a way which would spread the realisation proceeds over a period of time. Following on this meeting Mr Duncan had, as requested, written to Mrs Mathis outlining various possibilities. The purpose of this meeting was to take matters a step further and agree on a strategy to develop the site for the mutual benefit of all parties.
The Site
The whole site comprises two areas, one of which extends to an approx. total area of 18 acres. Within this area, 6 acres are not available for development and at present 7 acres are zoned for housing, leaving an area of some 5 acres as rough ground.
GAD advised however that given time he was hopeful that the majority of this 5 acres currently categorised as rough ground could perhaps be co-opted onto the original 7 acre development. Considerable discussion with the planning people would have to take place and it would be a case of demonstrating to them that any further development would be in sympathy and would be compatible with the original development. It was however in his view an option which was worthwhile exploring but it would take time. The development would therefore have to be done on a phased basis but as this was the Trust's favoured approach this was not perceived to be a problem.
The second area of land although currently zoned for Industrial use, has apparently breached this requirement with some ten residential housing units currently being constructed in a corner of this zoned area. It was felt that discussions with the Planning Authorities would help to clarify this situation and give a clearer insight as to the best way to approach the re-zoning of this area into Residential.
The approach to the existing owners of this land, with a view to redeeming the buy-back clause in the conditions of sale, requires some consideration.
Until the position with the Planning Authorities regarding layout, density of housing, and specific requirements becomes clearer, and then some detailed survey work of the actual site to allow design work of the roads and services etc. to be completed, it would not be possible to put meaningful costs to the project at the moment.
The way in which the Development would be Financed
Although Mrs Mathis wanted to spread the realisation proceeds over the term of the development she was understandably not prepared to release any plots unless she was receiving in return the relative sale proceeds. Consequently the land would have to remain in the name of Mrs Mathis until the houses built on the individual plots were sold with the realisation proceeds of the land being received by Mrs Mathis out of the sale price of each house as the development proceeded. As a consequence of this, any borrowing against the land to finance the development would be taken in the name of Mrs Mathis. The level of borrowing required would be determined from a Cash Flow prepared from a programme of works, with periodic independent reports carried out to ensure that the level of borrowing was in line with the increased value of the development.
Management of the Development
GAD advised the meeting of the progress which he had already made in regard to Planning Permission. He advised that he was quite prepared to continue to manage the development on behalf of Mrs Mathis provided it was understood and agreed that he would have the right to decide which contractors should be allowed to build on the site which in the main would mean that it would be his own company that would undertake the building works.
Authority to Act
GAD advised that up until now he had managed to act on Mrs Mathis' behalf in regard to researching planning permission matters and related topics without the need to have any kind of authority to undertake such work. This in the main had been possible because of his local contacts but the time was now approaching when it would be better for all concerned if matters could now be put on a more formal basis. It was therefore agreed that GAD should be appointed Managing Agent for the Development."
The note ended with a space for signature, above which were the words: "I confirm that the foregoing accurately reflects the discussions which took place."
[14] Mr Duncan said in evidence that Mrs Mathis did not ask for the note to be amended, or indicate that he had failed to note an agreement concerning fees. In relation to the paragraph headed "Management of the Development", Mr Duncan said in evidence that what was stated in the second sentence ("he was quite prepared to continue to manage the development... provided it was understood and agreed...") was not agreed: it was a proposal which he had put forward at the meeting. In relation to the paragraph headed "Authority to Act", Mr Duncan said that the idea that he should be called the managing agent was part of the proposal. Notwithstanding the terms of the final sentence ("It was therefore agreed..."), that was a proposal. [15] The draft letter of authorisation enclosed with the letter of 12 February 2002 (to which the third paragraph referred) was not a production at the proof. An undated letter of authorisation, signed by Mrs Mathis and faxed to Mr Duncan on 15 February 2002, was however produced. It stated:"You have been investigating on my behalf how the land near Tulloch Castle, Dingwall could be developed with a view to releasing its maximum development potential over a period of time. In this connection we had a meeting on 7 February when you reported on what progress you had made with these investigations.
Whilst we have not yet agreed the basis upon which any development of the site would proceed you did indicate that you would be prepared to continue work on my behalf on the understanding that you or your company would have the exclusive right to decide which contractor should be allowed to build on the site, which in the main would mean that it would be your own company which would build the houses.
As I am to be out of the country for six weeks from 14 February in order to allow matters to be progressed during my absence I hereby grant you authority to investigate with the Planning Authorities their position in relation to the development of the land in question."
In relation to the second paragraph of the letter, Mr Duncan said in evidence that, at the time, he understood Mrs Mathis to be accepting the proposal which he had made at the meeting. If the development did not proceed, for whatever reason, the position in relation to fees was that "we" would be paid for what had been done up to the point of stopping.
[16] Mr Duncan subsequently received a form of contract from the defenders' solicitor, Mr Mark Finlay of Brodies. The covering letter, dated 27 November 2002, was addressed to the pursuers, and stated:"We act for Mrs Mathis and her family in connection with this matter. We understand that you have agreed to carry out certain services in connection with the obtaining of planning permission for the proposed development.
Accordingly please find enclosed a formal letter authorising you to carry out the Services specified in the schedule to the letter.
The letter is issued in duplicate so that you can acknowledge your agreement to it by signing the duplicate and returning it to me.
Please return the duly signed letter to me as soon as possible."
"On behalf of and as instructed by [the defenders] (who and whose successors and permitted assignees are referred to as ... 'the Client') we write to appoint you to carry out initial feasibility work in connection with a proposed housing development at Chestnut Road/Tulloch Castle, Dingwall shown for illustrative purposes on the Plan annexed as Part 1 of the Schedule hereto 'the Project'), on the following terms and conditions:-
1 Duties and Authority
1.1 You will act on behalf of the Client in
1.1.1 preparing and submitting to the planning authority and related organisations all necessary planning applications and supporting documents, and
1.1.2 carrying out all discussions with the planning authority and related organisations, and with any proprietor, tenant or occupier affected or likely to be affected by the Project in each case with a view to obtaining both detailed and cutline planning permission for the Project ('the Services').
...
2 Payment
2.1 The Client shall reimburse to you the statutory fees properly incurred by you in submitting applications for planning permission for the Project, and any other applications made with the prior written consent of the Client.
2.2 Such reimbursement shall be made within 21 days of the Client's receipt of a request for payment accompanied by a certified true copy of the relevant planning application, and/or such other evidence as the Client may reasonably require.
2.3 It is the intention of the parties to enter into a separate agreement for the carrying out of the Project, one of the key terms of which (yet to be agreed) is the basis of your remuneration in connection with the Project. If the parties do not enter into such an agreement, the Client shall pay to you a fair and reasonable fee for the services performed by you under this letter, not to exceed the fees payable under the RICS Scale of Fees applicable to the services performed by you.
...
4 Duration of this letter
4.1 The Client has the right to revoke your appointment at any time by two days' notice in writing to you.
4.2 Unless so revoked, your authority and obligation to proceed under this letter shall continue until full detailed planning permission for the whole Project is obtained, or until any later date which we or the Client notify you in writing.
5 Obligations on Expiry
If this instruction is revoked, or otherwise comes to an end, then:-
5.1 the Client shall only be liable for such sums as are properly payable under paragraph 2,
5.2 the Client shall owe you no other compensation for any work that you have performed or for termination of your appointment. In particular, you shall have no claim against the Client for breach of contract, loss of profit, loss of expectation or otherwise.
...
7 Provisions about this letter
7.1 Notwithstanding the date of this letter, it shall be deemed to have taken effect when you commenced the performance of any services within the scope of the definition of 'the Services'.
...
10 Acceptance
Please sign and return the enclosed duplicate of this letter as acknowledgement of your agreement to proceed on the basis outlined above."
The letter was signed by Brodies on behalf of the defenders, the firm's signature being adhibited by Mr Finlay.
[18] Mr Duncan said in evidence that this letter was not consistent with his understanding of what had been agreed at the meeting on 7 February 2002. In relation to clause 2.1, he understood that he was entitled to be reimbursed all outlays, and not only the statutory fees. In relation to clause 2.3, he had not expected the contract to be split in two. He was expecting the contract to address the building of the project, and not only the planning phase. Clause 2.3 assumed that everything was going to run through to the end: it did not cover the situation where the parties fell out part way through the work being done. Clause 4.2 obliged him to continue at least until planning permission was obtained. He did not countersign the letter to acknowledge acceptance. The pursuers continued working on the project, and held back on the letter for two or three months. They then appointed MacRoberts as solicitors to act on their behalf. They did not respond to the letter until July 2003. [19] On 28 April 2003 the pursuers submitted an invoice to Mrs Mathis in the sum of £8,400, in respect of outlays which they had incurred. The invoice was paid. It appears from the invoice that the directors, registered office, place of business and telephone number of the pursuers are identical to those of Drumness. A further invoice in respect of outlays was submitted on 9 October 2003, in the sum of £8,810. It also was paid. [20] At some point during 2003, Pitcairn 2002 Ltd ("Pitcairn") was established as a corporate vehicle for the proposed development. Its registered office was at Mrs Mathis's home address, and the directors were Mr and Mrs Mathis and Mr Haig. On 4 April 2004 Mr Haig, as a director of Pitcairn, wrote to Mr Duncan in relation to the proposed development. In the course of the letter, Mr Haig referred to the directors' intention that Mitchell house kits be erected on the site, and added:"All directors confirmed that no approach had been made to any other house builder with regard to tendering for the erection of houses at this site. However I confirm I am actively obtaining cost of materials and labour costs on various Mitchell kits to be erected on this site. For the avoidance of doubt I am also investigating the cost of site works with others... My sister hoped that you would be successful in tendering."
"Many thanks for your letter of 4th April, the contents of which are noted. In view of what you write however, a formal response is needed to ensure that no misunderstandings arise.
The transaction has to-date, progressed successfully by having meetings and discussions, but it is now becoming essential that the way forward is charted so that we do not jump ahead of ourselves and leave unattended, important issues which should have been addressed some time ago. In the light of what you write, we must take a step back and re-focus on the basic terms of the Agreement which was made with your sister.
As you know, the Agreement was - that Moyarget would provide advice and attend to all matters in regard to obtaining Planning Permission, completely free of charge. In return for being given the exclusive right to 'build out the site' or, to use Brodies phrase, 'to carry out the project'.
We totally accept that the Directors of Pitcairn 2002 Ltd are free to consider all options, but in so doing if other parties/contractors are asked to carry out any part of this project then such an act would break the terms of the Agreement with Mrs Mathis.
While we are more than happy to continue with the Project on the basis of the original agreement, we are concerned with the penultimate paragraph in your letter which indicates that we are merely to be given the opportunity to 'tender' for the work. Should this be the case, the way forward would be to submit our Fee Note - currently in the region of £200,000 - for payment by Pitcairn 2002 Ltd, on the granting of Planning Permission, and we look forward to your confirmation that this would be the case."
"We were within a few days of submitting for planning permission. I couldn't revert back and say I wanted paid before planning permission was obtained. I'd been told Mrs Mathis and the trustees didn't have a lot of money, but once planning permission was obtained they'd be able to get money on the land. The letter may be badly written."
"I do not know how closely your views coincide with those of your brother but he is now contending that he has no knowledge of the agreement which we made whereby, in exchange for waiving my fees in regard to the work involved in getting outline planning permission, I (or my company), would have the exclusive right to decide which contractor should be allowed to build on the site. This was the deal we made and a copy of your letter to me of 13th February 2002 [i.e. the letter faxed on 15 February 2002] saying precisely that is enclosed.
In the light of the foregoing, I am more than a little disappointed to read in your letter that you have asked Mr Haig to obtain other quotes for building out the site. As stated above, our agreement was that I (or my company) would have the exclusive right to build out the site. What your are proposing is in breach of our agreement.
I have to say that I was completely happy to continue with the project on the basis of our original agreement but in the light of developments it would appear that you now want to break the agreement and, in the circumstances, I would like the matter to be settled just as soon as possible. At least then we could engage our respective lawyers to resolve the termination issues as quickly and as cheaply as possible."
"My client's position is as follows:-
1. there never was any agreement that your client would be given any form of exclusivity or joint venture agreement or the like. We don't accept that the fax of 13 Feb. 2002 [i.e. the letter faxed on 15 February 2002] constitutes such an agreement or is evidence of such an agreement.
2. The earlier draft of our appointment letter that referred to the postponement of fees pending the entering into of some further agreement between our respective clients should have made it clear that your client was expected to tender along with others. I was told today that all the various individuals involved in this project from the beginning were of the same view, that all the discussions with Gordon Duncan were that if planning permission was obtained it was hoped that he would get the contract to implement the development but this was against the background of him being successful in the tender.
3. It may be that our respective clients simply have a different recollection or understanding of their various discussions. Nevertheless, my clients are pretty adamant that all that was definitely agreed was that Gordon Duncan was to run the planing [sic] application but beyond that no promises were made. My clients are in fact still considering whether or not your client should still be invited to tender for subsequent phases of the development - this has not been ruled out.
4. In the circumstances, all that we can do at the present time is finalise the contract for your clients' services in connection with the obtaining of planning permission. It would not serve either of our respective clients for that relationship to remain unregulated by a formal contract.
5. I hope that the revised draft is self-explanatory. The only points that I feel I should specifically comment on are as follows (following the clause numbering of the draft):-
Preamble - its accepted that your clients' earlier discussions were with Mrs Mathis but they did not result in any form of contract. As I understand it, the company has acquired the site and will be primarily responsible for carrying out the project (even if your client successfully tenders for it or parts of it) and it is therefore inappropriate for any of the Mathis family to be contracting parties.
...
2.3 In the circumstances, it seems to me sensible for the appointment contract just to record the parties' agreement about what fee is to be paid. As far as I am aware, the only specific agreement about fees was that if Moyarget ended up implementing the Project they would in effect be deemed to have carried out the planning phase for nothing.
Given the way things have developed it strikes me as a bit optimistic to leave this important matter on such a vague or unregulated basis & therefore I think your client should now put forward the figure that he proposes for his 'consultancy fee' for the work done to date and in pursuing the planning application to a conclusion.
In doing that it would be helpful to have a detailed breakdown of what Mr Duncan has done, time spent, etc so that my clients can sensibly consider the proposal.
2.4 & 2.6 I've been told that any discussion about fees was always on the basis that none would be billed until planning was obtained. I understand that nevertheless some payments (amounting to c. £18K) have been made. I'm checking that but perhaps your client would do so likewise.
...
I should say that the draft is subject to any input from my clients as they have not yet seen it."
In relation to what was said in the e-mail about clause 2.3, Mr Duncan said in evidence that the "agreement" to which Mr Finlay referred was merely an offer which "we" had made at the very beginning. It had not been accepted, and there had been no further talk about it. What Mr Finlay said about clauses 2.4 and 2.6 did not reflect Mr Duncan's understanding of the position.
2. Mr Patrick Bradley
[25] Mr Bradley was a former accountant and the director of a haulage company. He had at one time acted as Mrs Mathis's accountant. He became involved in the present matter when he was asked by Mrs Mathis to attend the meeting on 7 February 2002. At the meeting, there had been discussion of what the development of the site might involve, in terms of such matters as the number of houses and the relationships between the parties. There had been a discussion of the fees which Mr Duncan might charge. The discussion was to the effect that Mr Duncan would recover out-of-pocket expenses as he went along. Mr Bradley's haulage company would assist by meeting those expenses. In general terms, Mr Duncan's fees were scheduled to be paid at a later date out of the profits from the development. Mr Bradley did not understand a concluded agreement to have been reached at the meeting regarding fees: they were to go to Mrs Mathis's lawyers to get an agreement drawn up which would cover all aspects of the relationship. There had never been any doubt cast on the possibility of obtaining planning permission. There were no plans to pay Mr Duncan's fees until planning permission was obtained. It had been made clear that Mrs Mathis did not have the wherewithal to pay the fees until the land value had been raised. Finance could not be obtained until planning permission had been obtained. Mr Bradley did not however think that there had been a binding agreement except in respect of the payment of out-of-pocket expenses. There had been a discussion about the position if the project did not proceed. It had centred around Mr Duncan's being paid for the work he had done if the project did not proceed or if he did not do the development. The consensus was that the development would get planning permission and would go ahead. There was a general consensus that, if the development went ahead, it would be developed by Mr Duncan's company. Clarifying his earlier evidence, Mr Bradley said that there had been no discussion of the possibility of the development not proceeding: what was discussed was the possibility that the Mathis family might sell the land, with planning permission, and Mr Duncan's being suitably remunerated for getting the land to that position. [26] Following the meeting, Mr Bradley remained involved in the project for some time. Eventually however he came to the view that the pre-planning expenses were getting out of hand, and he withdrew from further involvement. [27] In his evidence, Mr Bradley reiterated that the ability of Mr and Mrs Mathis and their children to pay fees had been brought up at the meeting on 7 February 2002. It was made clear that they could not pay fees on a rolling basis. It was made clear that they would not be able to pay fees until planning permission was obtained. There was no finance until then. They would use the land value as security for the development, including the payment of Mr Duncan's fees. Mr Duncan had not raised any concerns about that. Mr and Mrs Mathis could see that Mr Duncan was laying out time and money. They were concerned. They brought up the question of his expenses. He said he would need to get his out-of-pocket expenses. Mr Bradley volunteered that Mr Duncan could invoice Mr Bradley's company for his out-of-pocket expenses. It was discussed that if the Mathis family sold the land with planning permission, Mr Duncan would be paid his fees. There was no discussion of the eventuality that planning permission was not granted: that possibility was not envisaged. There was no discussion of the termination of the arrangement before planning permission had been obtained.3. Mr Mark Finlay
[28] Mr Finlay was the head of the construction law unit at Brodies. He had acted for Mrs Mathis and her family in connection with the proposed development. He had first met Mr and Mrs Mathis and Mr Bradley towards the end of August 2002. He had thereafter sent the letter of 27 November 2002, with the enclosed proposed letter of appointment, in implementation of Mrs Mathis's instructions. Subsequently he had received instructions from Mr Haig, with Mrs Mathis's agreement. He had sent the e-mail of 2 June 2004 following a meeting with Mr Haig and Mr Jim Thomson, who had replaced Mr Bradley as Mrs Mathis's accountant. The e-mail was intended to reflect what he had been told by Mr Haig.
4. Mrs Rove Mathis
[35] Mrs Mathis was aged 75 at the time of the proof. She had inherited a 50 per cent interest in the land in question from her daughter in 1993. Her three other children inherited the remaining 50 per cent interest. The land was zoned for housing, so they decided to try to get planning and get some money for the children. They talked about it for a year or two, then spoke to Mr Haig. He used to be in business. Mrs Mathis herself had no experience of land development or planning, and the children had even less idea than she had. Mr Haig said that it would cost about £120,000 to get planning permission. Mrs Mathis told him that they could not afford it. He said he would try to find someone who would do it on the understanding that he would be paid when planning permission was obtained.
5. Mr Peter Mathis
[44] Mr Mathis, who was aged 71 at the time of the proof, was a retired furniture restorer. He said in evidence that he and his wife did not have any money. They were looking for someone to get planning permission: then they would be able to pay him. Mr Haig was asked to find someone to proceed on that basis. The first time they met Mr Duncan, in Inverness, they told him that they did not have any money, but that once they had planning permission they would pay him. The first thing they told him was that they could not pay him unless they got planning permission. They told him that once planning permission was obtained they would get money from the bank, and he would be paid. They asked how much it would be. He said about £100,000. That was at either the first or the second meeting. Mr Duncan did not give much of an answer to what they had said, but as he carried on with the work, Mr Mathis assumed that he was happy with what they had said. Mr Duncan said he would have out-of-pocket expenses, and it was agreed that those would be paid, as they were. Mr Duncan was adamant that there was no question of not getting planning permission. Part of the site was zoned for housing, and part for industrial development. Mr Duncan said that the industrial zoning would be easy to change. They never thought about what would happen if planning permission was not granted. [45] In relation to the note enclosed with Mr Duncan's letter of 12 February 2002, the matter mentioned in the second sentence of the paragraph headed "Management of the Development" ("He advised that he was quite prepared...") had been discussed at the meeting on 7 February but had not been agreed. Mr Mathis said that he and his wife decided that the note should not be signed. They did not know what they were going to do once planning permission was obtained: the children would have a say in that as well. [46] In cross-examination, Mr Mathis assented to the propositions that it was agreed at the meeting on 7 February 2002 just to get planning permission, and that no other agreement was reached.5. Mr John Haig
[47] Mr Haig, who was aged 69 at the time of the proof, was a retired insurance and mortgage broker. He said in evidence that in late 2001 he was asked by his sister if he could find someone suitable to investigate the possibility of obtaining planning permission for the site in question. The site comprised two fields. The top field was owned by his sister and by a trust of which her children were the beneficiaries. It was zoned for housing. The bottom field had previously been sold, subject to an option to re-purchase at agricultural value if planning permission was granted. It was zoned for light industry, but the potential for development was restricted by trees. Mr Haig's remit was to find someone to investigate the planning situation and take it up to the obtaining of permission. An architect of his acquaintance indicated that the cost would be around £120,000. Mr Haig stressed to everyone he spoke to that no payment would be made meantime: they would get paid when planning permission was granted, and his sister would then decide whether to sell the land, develop it, or sell it in parcels. The only person interested was Mr Duncan. [48] Mr Haig had known Mr Duncan for a number of years. He asked other people, but they were not interested: Mr Duncan was the only one who showed interest. Mr Haig explained to him the position in relation to fees from the outset: he was 100 per cent certain of that. Mr Haig asked Mr Duncan how much the project would cost. Mr Duncan said about £100,000, with extras of about £20,000. [49] An introductory meeting between Mr Duncan, Mr Haig and Mr and Mrs Mathis was held late in 2001. They met in the waiting room of Mr Duncan's office, then viewed houses which Mr Duncan's company had built. A second meeting was held in Mr Duncan's office. There was then the meeting on 7 February 2002. In Mr Duncan's note of that meeting, the second sentence of the paragraph headed "Management of the Development" ("He advised that he was quite prepared...") was incorrect. That was not agreed. Mrs Mathis said that, when planning permission was granted, she would then decide what to do with the site. The solicitors were going to draw up a contract which would take it up to planning. [50] At the meeting on 7 February 2002, there was specific discussion of the basis on which Mr Duncan could present a bill for his fees. Before the meeting, Mr Duncan had quoted a figure of £100,000 plus £20,000. This was gone over again at the meeting. Mr Duncan was not going to be paid until planning permission was granted, but his out-of-pocket expenses were going to be met. Mr Haig was sure there was a discussion about fees at the meeting. They did not know when planning permission was going to be granted, but when it was, Mr Duncan would be paid his fees. At the meeting, people proceeded on the basis that there would be no problem getting planning permission for either field. Mr Haig understood, from what Mr Duncan said at the meeting, that he was agreeable to not being paid until permission was granted. Mr Haig was 100 per cent sure that was said. The outlays were going to be paid in the meantime by Mr Bradley. [51] Pitcairn was registered as a vehicle for the possible development of the site. Mr Haig was asked to become a director in order to look after the children's interests. He became a director in April 2003. Mr Duncan handled everything with regard to getting planning permission. Mr Haig, Mr and Mrs Mathis and Mr Thomson felt that they were being kept in the dark. The relationship was starting to break down. Mr Haig and Mr Duncan had some fairly acrimonious meetings and letters. In relation to the letters of 4, 10 and 16 April 2004, Mr Haig never thought that Mr Duncan had an exclusive right to build the development. He was not aware of any such agreement. The only agreement he thought had taken place was the oral agreement on 7 February 2002. [52] In cross-examination, Mr Haig assented to the propositions that the meeting on 7 February ended on the basis that solicitors were to draw up a contract to take matters up to planning, and that that contract would have been the concluded written contract between Mrs Mathis and Mr Duncan.The Submissions
1. Submissions for the Pursuers
[53] On behalf of the pursuers, it was submitted that the evidence of Mr Duncan should be accepted. It was supported by the failure of Mrs Mathis to take issue at the time with the omission from Mr Duncan's letters of 25 January and 12 February 2002 of any mention of the alleged agreement concerning fees. It was also supported by the similar omission from the letter faxed on 15 February 2002. The evidence of Mr Bradley should also be accepted. He did not think there had been a binding agreement reached at the meeting on 7 February 2002, other than in relation to out-of-pocket expenses. Mr Haig similarly accepted that the meeting ended on the basis that the solicitors were to draw up a contract to take matters up to planning, and that that contract would have been the concluded written contract. Mr Mathis accepted that no agreement had been reached at the meeting, other than to get planning permission. Mr Duncan's position was also consistent with the admitted absence of agreement as to the basis on which the development of the site would proceed. As a matter of commercial reality, it was inherently unlikely under those circumstances that Mr Duncan would enter into the arrangement for which the defenders contended. Counsel said that it was accepted that the parties had been proceeding on the assumption that planning permission would be obtained.
2. Submissions for the Defenders
[57] On behalf of the defenders, it was submitted that the evidence established an agreement that the pursuers were to examine the site, prepare a suitable planning application and submit it, on the basis that their outlays would be met but no fee would be payable unless and until planning permission was obtained. Mrs Mathis was a transparently honest witness. Although her memory was not entirely reliable, her evidence was supported by that of other credible and reliable witnesses, notably her husband, her brother and Mr Bradley. Although Mr Bradley did not think that the oral agreement was binding, that was a question of law for the court. It was not clear on what basis Mr Bradley had formed that opinion. The fact that the details of the development had not been finalised by February 2002 did not mean that there could not be a concluded agreement: it was only an application for outline planning permission which was contemplated at that time.
Discussion
[62] The dispute in this case is primarily one of fact, and its resolution therefore depends primarily on an assessment of the evidence. I can begin with an assessment of the witnesses.
"But there is an important difference between cases where nothing has been done by either party to implement the alleged contract and cases where a party to the alleged contract has already provided the goods or services for which he seeks payment. It is likely to be more difficult in the former case to enforce the contract if there is no agreement about the remuneration which is to be paid, because in the ordinary case the price is one of the essential matters upon which agreement is required. Where goods or services have been provided, however, the usual rule is that there is an obligation to pay for them unless they have been provided gratuitously. So it is easier in these cases, if there is no agreement about the price or remuneration, for an obligation to pay a reasonable sum to be implied."
The court approved, at page 274, a passage in the judgment of Denning J in British Bank for Foreign Trade Ltd v Novintex Ltd [1949] 1 K.B. 623 (cited at pages 629-630):
"The principle to be deduced from the cases is that, if there is an essential term which has yet to be agreed and there is no express or implied provision for its solution, the result in point of law is that there is no binding contract. In seeing whether there is an implied provision for its solution, however, there is a difference between an arrangement which is wholly executory on both sides, and one which has been executed on one side or the other. In the ordinary way, if there is an arrangement to supply goods at a price 'to be agreed', or to perform services on terms 'to be agreed', then although, while the matter is still executory, there may be no binding contract, nevertheless, if it is executed on one side, that is, if the one does his part without having come to an agreement as to the price or the terms, then the law will say that there is necessarily implied, from the conduct of the parties, a contract that, in default of agreement, a reasonable sum is to be paid."
Reference might also be made to the judgment of Lord Denning MR in F & G Sykes (Wessex) Ltd v Fine Fare Ltd [1967] 1 Lloyd's Rep. 53 at pages 57-58.
[75] In relation to the second matter - the intention to enter into a written contract - such an intention is not necessarily inconsistent with an intention to be bound by the existing informal agreement with immediate effect. As was said by Viscount Haldane in Gordon's Executors, at page 411:"In a case such as the present it would of course have been open to those concerned to reach a definite and concluded agreement in conversation or by correspondence. Such an agreement is not the less a real one if the parties have, as part of its terms, stipulated that there is to be a further agreement embodying its substance and also other terms which they are subsequently to settle. In such a case the later agreement, when concluded and executed, will supersede the earlier one. But until then the earlier agreement stands and binds."
There may thus be a binding provisional agreement, as in the case of Rossiter v Miller (1878) 3 App.Cas. 1124, discussed in Gordon's Executors. Whether the parties intended there to be locus poenitentiae pending the execution of a formal contract, or intended to be bound in the meantime by their informal agreement is, in the absence of any express provision, a matter of inference from the terms of the agreement and the surrounding circumstances. In the present case, since services were to be provided immediately, before a formal contract had been entered into, and it was understood by both parties that the defenders were not in a position to pay for those services until planning permission was obtained, it appears to me that both parties must have intended, first, that the pursuers would be entitled to a reasonable fee for their services, and secondly, that that fee would not be payable until planning permission was obtained. If and when a written contract was executed, it would doubtless be expected to deal with the issue of remuneration in more specific terms, but in the meantime the parties were in contractual relations with an implied term that a reasonable fee would be paid on the granting of planning permission: cf. The 'Kurnia Dewi' [1997] 1 Lloyd's Rep. 552 at page 559 per Clarke J. That term is to be implied in order to make the agreement work: if the officious bystander had asked whether the pursuers were agreeing to provide their services for nothing, unless and until a formal agreement was concluded, he would have been told, "of course not"; and if he had asked whether the defenders were agreeing in the meantime to pay for the services provided prior to the conclusion of a formal agreement, he would have been told, "only if planning permission is obtained". If he had asked on what basis the pursuers were to be paid, in the event that planning permission was obtained, he would have been told, "a reasonable fee". The parties' subsequent actings, in respectively rendering and receiving services over a period of years without any written contract being executed, appear to me to be consistent with their having intended to be bound by the informal agreement entered into in February 2002, and to be difficult to reconcile with any other conclusion.
Conclusion
[76] In these circumstances, I find that agreement was reached on or around 7 February 2002 between the pursuers on the one hand and the defenders on the other as to the basis upon which the pursuers might be remunerated for the carrying out of the work they were instructed to do in facilitating the development of the site at Chestnut Road/Tulloch Castle, Dingwall. The terms of that agreement were that the pursuers were to be paid a fee in the event that planning permission was granted for the development of the site as a consequence of the pursuers' submission of an application for such permission in accordance with the defenders' instructions. I appreciate that the foregoing terms require further elaboration in order to establish, in greater detail, what further terms were implied. Issues of that kind were not however explored in any detail in evidence or in submissions. It is sufficient at this stage to state the terms of the agreement in the general language in which the parties might themselves have expressed their understanding, at the time, of what had been agreed. [77] The case will be put out for a hearing on further procedure in the light of these findings.