Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2010] CSOH NUMBER60
A566/07	OPINION (No. . 2) OF LORD BRODIE in the cause DAVID McGRADDIE Pursuer; against RODGER JOHN McGRADDIE AND LORNA ESTHER GREEN Defenders: ­­­­­­­­­­­­­­­­­________________

Pursuer: : Jonathan Brown; ; McClure Naismith

Defender: : Buchanan; ; HBM Sayers

7 May 2010

[1] I issued an opinion following proof in this action, on 3 November 2009. . I would refer to that opinion for a full account of how I determined the substantive issues in the case but, in very brief summary, I found that the pursuer made two payments to the first defender for the purpose of purchasing specified heritable properties on behalf of the pursuer, it being the pursuer's intention that he should live in these properties. . The first payment was of the sum of £ £192,703.88. . It was for the purchase of a flat 0/3 23 St Helen's Gardens, Glasgow. . The second payment was of £ £285,000. . It was for the purchase of a house at 6 6 Lochrig Court, Stewarton, Ayrshire. . The first defender made the purchases but, contrary to the pursuer's instruction, he took title to the flat at 23 St Helen's Gardens in his own name. . Title to 6 6 Lochrin Lochrig Court was taken pro indiviso with the second defender. . The transaction for the purchase of 23 St  Helen's Gardens was straightforward. . The sum of £ £192,703.88 was applied to payment of the purchase price and other necessary expenses. . The transaction for the purchase of 6 6 Lochrig Court was a little more complicated. . The contractual price of £ £290,000 was settled by payment made by the solicitors for the first and second defender to George Wimpey West Scotland Ltd of the sum of £ £280,750, the difference between these sums being explained by the selling builders giving an allowance for Stamp Duty Land Tax of £ £8,900. . The pursuer had paid a reservation fee of £ £500. . The defenders had paid recording dues. . Having regard to all the various relevant figures, it was accepted on behalf of the pursuer that there was a shortfall of £ £5,738.39 as between the sum required to to obtain title to 6 6 Lochrig Court and the £ £285,000 paid by pursuer to the first defender. . That £ £285,000 had not been applied in full to the purchase of the house at 6 6 Lochrig Court. . Rather, £ £90,000 of the price had been provided by a loan advanced by Halifax Plc and secured on the house at 6 6 Lochrig Court by way of a standard security. . The defenders had spent the balance of the £ £285,000 received from the pursuer on other things.

[2] On issuing my opinion on 3 November 2009, I pronounced no interlocutor. . Having obtained the agreement of counsel, I proposed that the case should be brought out by order with a view to discussing how best my decision should be implemented. . Perhaps unrealistically, I had hoped that parties might be able to come to a common position on that but, when the case called for a By Order hearing on 27 April 2010, I was disappointed. . Mr Mr Brown, Advocate, on behalf of the pursuer, had put forward a proposal in the form of the suggested interlocutor but Mr Mr Buchanan, on behalf of the defenders, did not have instructions to agree to that proposal or, as it appeared, anything else. . Accordingly, there was no counter proposal on behalf of the defenders. . The By Order hearing therefore became a debate on what Mr Mr Buchanan had suggested were the difficulties in the way of giving effect to the decision as expressed in my opinion without embarking on a further process.

[3] My concern was to restore the pursuer, as far as was possible and having due regard to the various interests, to the position that he would have been in had it not been for the wrongful conduct of the first offender as described in my opinion of 3 November 2009, from which wrongful conduct he and the second defender had benefited. . At best it appears that this can only be achieved imperfectly. . I gathered from what I was told at the By Order hearing that, as a result of the outcome of this litigation, the defenders are likely to be insolvent. . They will therefore be unable to meet their monetary obligations in full. . Their ordinary creditors will suffer accordingly. . For that reason, Mr Mr Brown expressed a preference for obtaining orders for the conveyance of the two properties to the pursuer. . I noted what Mr Mr Brown had to say but I express no concluded opinion as to whether the form of the court order in the pursuer's favour, to the extent that it is in respect of a purely personal right, would make any difference in the event of the competition with other creditors. . As it appears to me in the absence of further argument, the pursuer either has a real right, as I have held that he does in respect of 23 St Helens Gardens and therefore no need for the payment of damages or the reversal of unjustified enrichment arises, or he does not have such a right and any order that the court makes for payment to him does no more than constitute a debt. .

[4] With that by way of preamble, I turn to consider the discussion as to what remedies might be available to the pursuer in the circumstances of the case. . As far as the transaction in relation to the flat at 23 St Helen's Gardens is concerned, I would see matters as relatively straightforward. . I have found that the first defender is obliged to divest in favour of the pursuer when called on to do so. . He has not done that. . I shall order him to do so by granting decree in terms of the first conclusion. . This was amended at the Bar in order to meet Mr Mr Buchanan's objection that to require the first defender to provide a marketable title might be to require him to provide a better title than he had obtained from his author, the builder of the flat, with the possibility that he might not be able to get recourse on the warrandice in his favour. . While the first offender's conduct has not been such as to persuade a court to be overly tender towards his interests, I would accept that these interests must be had regard to and, in any event, Mr Mr Brown on behalf of the pursuer, was prepared to accept a conveyance of the first offender's whole right, title and interest as being sufficient. . That is what the first defender will be ordered to convey.

[5] As I have already indicated, the transaction relating to 6 6 Lochrig Court was more complicated because of the involvement of the second defender and, so Mr Mr Buchanan submitted, by reason of the facts that the pursuer had not provided a sum equal to the full purchase price and that the passage of funds in and out of the defender's solicitor's client account demonstrated that the purchase price was in part funded by an advance from Halifax Plc (an advance which had, prior to the By Order hearing, been repaid and the standard security discharged).

[6] Mr Mr Brown did not suggest that the house at 6 6 Lochrig Court was held on a bare trust with an obligation to divest in the favour of the pursuer, as was the case of the flat at 23 St Helen's Gardens. . He accepted that, whatever might be the case with the pro indiviso share held by the first defender, the pursuer's right to conveyance of the whole property was no higher than a personal claim based on his contract of agency with the first defender. . While he urged me to hold the second defender as complicit with the first defender's wrongful conduct by reason of her presence on Monday 19 February 2007 when the pursuer handed over his cheque for £ £285,000 to the first defender and my rejection of her account of the pursuer using words indicative of gift, Mr Mr Brown did not contend that the pursuer's claim against the second defender could be pitched higher than one based on unjustified enrichment. . Nevertheless, his principal position was to ask for decree in terms of the sixth conclusion ordaining both the first and second defender to convey a marketable title of 6 6 Lochrig Court to the pursuer.

[7] Mr Mr Buchanan submitted that what Mr Mr Brown proposed could not be done, consistent with principle and the position disclosed by the findings of fact which I made following upon the proof. . As far as the first defender was concerned, he had been found to be the pursuer's agent in respect of the proposed acquisition of the house at 6 6 Lochrig Court. . The pursuer had not, however, fully reimbursed or, as at the date of the end of the proof, offered fully to reimburse the first defender for the outlays associated with the acquisition. . It was accepted that there was a shortfall of £ £5,738.39. . There was no evidence that the pursuer had ever offered to make up the shortfall. . Accordingly, he could not call upon the first defender to convey the property to him: : Glendinning v Hope & Co 1911 SC SC (HL) 73 at 78. . It was not a case of losing his entitlement, rather, based on the evidence led at proof, the pursuer had simply failed to establish that he had ever been entitled to payment. . As far as the second defender was concerned, it could not be said that she had interfered with any property right which the pursuer had. . The cheque drawn by the pursuer had been credited to the first defender's account. . The property at Lochrig Court had been purchased with the assistance of a loan from Halifax Plc. . The second defender had no contractual obligation towards the pursuer. . In any event, a claim in respect of unjust enrichment is a remedy of last resort. . A party has to exhaust any other rights and remedies available to him before he can seek reversal of what is alleged to be unjustified enrichment. . Moreover, if unjustified enrichment is to be reversed; ; regard must be had to the nature of the enrichment. . If the second defender is to be regarded as having been enriched, it must be in respect of payment of money rather than the obtaining of a heritable right. . A heritable interest in the house at 6 6 Lochrig Court had been acquired by reason of implement of the missives of contract and sale. . If the second defender had never been enriched by the acquisition of a heritable right she could not be required to reverse what is said to have been enrichment by being required to confer a heritable right: : Shilliday v Smith SC SC 725 at 727 to 728. . Just as there was a difficulty in reversing what was said to be unjustified enrichment by ordering a transfer of the second defender's heritable interest in the house at 6 6 Lochrig Court, so it was not possible to reverse any enrichment by making an order for payment. . Because the sum of £ £285,000 or, at least, that part of that sum which had been applied to the purchase of 6 6 Lochrig Court, had become mixed in with other funds, it was no longer possible to trace what the second defender might otherwise be made liable to pay the pursuer: : M & I Instrument Engineers Ltd v Varseda 1991 SLT SLT 106 6 and Style Financial Services Ltd v Bank of Scotland 1996 6 SLT SLT 421. . Varney (Scotland) Ltd v Lanark Town Council 1974 SC SC 245 was a warning against generating a set of remedies simply because they appear to fit the bill; ; if there was another available remedy, it must be pursued before any resort to a claim in respect of unjustified enrichment.

[8] While it was difficult not to admire Mr Mr Buchanan's tenacity, his suggestion that no competent remedies are available to the pursuer in respect of the 6 6 Lochrigh Court transaction seemed to me to a submission born of desperation rather than a proper analysis of the authorities to which he referred. . As far as the first defender is concerned, having accepted the commission to acquire the house at 6 6 Lochrig Court, he is contractually bound to procure a title for the pursuer. . In the event of him taking title in his own name, it goes further in that, as previously discussed, he holds as trustee for his principal and can be called on to divest (and there is no reason why that principle should not apply equally to what is no more than a pro indiviso interest). . It is true that, whether looked at as an agent or as a trustee, the first defender is entitled to reimbursement of his outlays but to say, as Mr Mr Buchanan did say, that because the pursuer has not yet made provision for payment of the purchase price and associated expenses in full, he has no entitlement to require the first defender to do what he must be taken to have agreed to do (and apparently never will be become so entitled) is simply wrong, wrong on the facts and wrong in law. . As far as the facts are concerned, I am content to adopt the observations set out in the written outline submission provided by Mr Mr Brown. . The selection of the figure of £ £285,000 came, on the evidence, from the first defender. . He told the pursuer what was needed for the purchase of 6 6 Lochrig Court and the pursuer paid over what he was asked to pay. . The pursuer explained that if he had been asked to pay another sum he would have paid it. . The effective discount in the purchase price due to the seller's meeting the stamp duty obligation meant that it was by no means obvious that the pursuer should have appreciated that there was any shortfall as between the purchase price and what he paid. . As at the date of the handing over of the cheque, the associated costs of acquisition of a good title had not been incurred. . An agent is under an obligation to account to his principal and unless and until the agent reports to the principal the total costs associated with a transaction, the principal cannot come under any obligation to pay any shortfall. . Moreover, at no point has the first offender defender ever indicated a willingness to deliver a disposition subject only to indemnification as to the additional cost incurred. . He has maintained all along that there was no agency relationship, the sum of £ £285,000 being a gift. . Turning to the law, the passage from Glendinning v Hope & Co supra upon which Mr Mr Buchanan sought to rely, relates to general lien. . The right of lien it is not absolute, it is subject to equitable control: : Gloag The Law of Contract (2^nd edit) p639. . Whatever may be the position in relation to the possession of title deeds, it does not apply to heritage: : Gloag supra p632. . However, as Mr Mr Brown said, the principle of mutuality is not in question. . Where parties are under mutual obligations, one party's entitlement to performance depends on his willingness to perform his part of the bargain. . But it is sufficient if a party is seen to be willing to perform: : McBryde The Law of Contract in Scotland (3^rd edit) para para 20-47. . Mr Mr Buchanan appeared to be postulating a situation of stand-off where neither party was obliged to perform until the other one had done so. . As Mr Mr Brown's summary of the facts demonstrated, there is no question here of the pursuer being other than willing to do what may be required of him. . It is the first defender who is in breach, and obstinately so. . There is no reason why the first defender should not be required to perform what he must be taken as having obliged himself to perform.

[9] On the facts relied on by Mr Mr Brown and the second defender's her own explanation that it was she who looked after financial matters and instructed a solicitor, I take the second defender to be complicit in the first defender's misappropriation of the title to 6 6 Lochrig Court. . However, she is under no contractual obligation to the pursuer. . Such remedy as the pursuer has against her must be based on principles of unjustified enrichment. . That, Mr Mr Buchanan submitted, was of the nature of a remedy of last resort. . It was only available once it had been demonstrated that all alternatives had been exhausted. . He went the distance of suggesting that a further process may be required. . Were that last suggestion to have been well founded, I consider it would have reflected very badly on our procedure. . The object of procedure is to facilitate the implement of decisions determining substantive rights; ; not to frustrate them. . I accept, however, that the remedies associated with the principle that unjustified enrichment should be reversed only apply where other remedies are not available: : Varney (Scotland) Ltd v Lanark Town Council supra. . It appears to me that that consideration is adequately met if the first defender is given the opportunity to implement his obligation to procure title to 6 6 Lochrig Court, as concluded for in terms of the fourth conclusion . . Any failure on his part to implement decree in terms of that conclusion would demonstrate that the only suggested alternative remedy has been exhausted. . In these circumstances, having regard to the principles set out in Shilliday v Smith supra, it appears to me to be appropriate to grant decree in terms of the seventh conclusion. . The second defender can be said to have been unjustly enriched at the pursuer's expense without there being a legal ground which would justify her in retaining the consequent benefit. . I agree with Mr Mr Brown that Mr Mr Buchanan's objection that funds cannot be traced once they are inter-mixed with other funds, under reference to what was said in Style Financial Services Ltd v Bank of Scotland supra at 425K, is not apposite. . The expression "tracing" was used in that case in the technical sense of following identified funds which are held to be subject to a constructive trust. . Style Financial Services Ltd does not support the proposition that funds cannot be traced once in any way inter-mixed with other monies, rather the contrary. . What it does support is the proposition that tracing cannot take place once the funds have ceased to exist, having in that case been paid into an overdrawn account, but, more importantly, Mr Mr Brown disavowed any reliance on tracing or constructive trust in the this case. . Style Financial Services Ltd is accordingly not relevant.

[10] I do not read what the Lord Lord President said in Shilliday supra at 727I to 728C in the way in which Mr Mr Buchanan encouraged me to do. . Agreeing with Mr Mr Brown, I consider that in this passage the Lord Lord President was merely giving examples of how the right to have enrichment reversed, referred to at 727D, might be implemented. . I see no reason why the method of reversal of enrichment should necessarily mirror the method of enrichment. . I see that view as supported by what was said by the Lord Lord President supra at 728C. . Having given a number of specific examples, he concludes: : "Often, of course, the situation will be complex and the pursuer will a correspondingly sophisticated set of remedies to reverse the enrichment." There is in my opinion no reason in principle why the unjustified enrichment consequent upon the retention and misappropriation of the cheque for £ £285,000 might not be reversed by an order for conveyance of the property which was bought with the proceeds of the cheque. . In a market with rapid inflation in property prices there might indeed be good reason favourably to consider such a remedy and I would not regard the circumstance that the defenders chose to borrow on security of the property, applying the borrowing to the purchase price and using the balance of the proceeds of the cheque for other purposes as necessarily preventing such a course being followed. . On the other hand, where, as here, the initial enrichment was the result of the appropriation of a sum of money I think one must find some good reason (beyond the likely insolvency of the defenders) for reversing the enrichment other than by ordering a payment of money. . What I propose to do therefore is to ordain the first defender to deliver an executed disposition of the defenders' whole right title and interest to and in 6 6 Lochrig Court and that within 28 days of the date of the relevant interlocutor, as concluded for in the fourth conclusion, in return for payment of £5,738.39, which failing to orderfor payment by the first and second defenders jointly and severally of the sum of £ £285,000 with interest at the judicial rate from the date of decree, as concluded for in the seventh conclusion.

[11] The pursuer has two conclusions for damages, the second and the fifth. . In Mr Mr Brown's interlocutor there were provisions for payment of £ £993 and of £ £1005 with interest at the judicial rate from the date of decree. . These conclusions appear to have been overlooked in the course of the submissions at the By Order hearing and I have no note of them being discussed following the proof. . This may have deliberate. . In any event I do not have a basis upon which to award damages unless these sums are conceded. . I did not have the impression that Mr Mr Buchanan was conceding anything. . I shall therefore do nothing about these conclusions, it being open to parties, if so advised, to bring the matter to the attention of the court by way of motion. .

[12] Mr Mr Brown moved for a joint and several award of expenses against the first and second defenders, as taxed on an agent and client basis. . He also moved for allowance of an additional fee in terms of Rule of Court 42.14, paragraphs (a), (b), (e), (f) and (g). . I shall award the expenses of process to date, except insofar as not otherwise dealt with, to the pursuer, but payable by the defenders jointly and severally on the basis of party/party taxation. . I shall refuse the motion for an additional fee. .

[13] In awarding expenses it is open to the court to specify the method of taxation. . If nothing is said the implication is that taxation will be on a party/party basis. . That is the basis adopted in the overwhelming majority of cases. . It is unlikely to achieve full recovery of a party's outlays in paying the reasonable fees of his legal advisers. . For that, or something approaching that, taxation must be on an indemnity or agent and client basis. . While the court may, in the exercise of discretion, order agent and client taxation it usually will only do so where it is intended to mark disapproval of the way in which a party has conducted a litigation. . Here, with one qualification which I will mention, while the defenders' conduct might be regarded as reprehensible and I did not find them credible witnesses, there was nothing unreasonable that I detected about the conduct of the litigation. . Half a day was lost due to Mr Mr Buchanan's proposal to amend but I would not consider that in any way blameworthy. . The qualification that I would make to the view that there was nothing exceptionable about the litigation is the obduracy of the first defender in resisting the claim for transfer of the title to 23 St Helens Gardens. . Notwithstanding Mr Mr Buchanan's strenuous efforts (which involved a shift in the defence away from what had been pled), even on the first defender's evidence, there was nothing to be said in answer to the pursuer's claim for a conveyance of the flat. . Yet even after that evidence was led, the position taken on the first defender's behalf was that the pursuer should not get title to what on no view was the first defender's property. . That said, this could not be said to have made litigation necessary or prolonged it materially, given the dispute on fact over 6 6 Lochrig Court. . I was not satisfied that this was a case for agent and client taxation. .

[14] Neither was I persuaded that this was a case for an additional fee. . Regrettable as the circumstances of this litigation undoubtedly are, I cannot regard it as sufficiently out of the ordinary to warrant an additional fee under reference to any of the paragraphs founded on. . Paragraph (a) relates to the complexity of the cause and the number, difficulty or novelty of the questions raised. . This was essentially a relatively simple dispute of fact requiring a competence in the law on the part of solicitors and counsel but no more than what is to be expected from Court of Session practitioners. . As far as paragraph (b) was concerned Mr Mr Brown relied on the urgent measures taken to verify what had appeared in the two newspapers with a view to challenging the evidence of the second defender. . I cannot regard this relatively brief episode as deserving the description of exceptionally urgent steps. . While, looking to paragraph (e), I accept that the cause will have been important to the pursuer and no doubt emotionally exhausting, that is true of the majority of litigations and the majority of parties. . I cannot view this case as out of the ordinary in this respect. . The value of the properties involved, which is the paragraph (f) factor, is by no means out of the way for the Court of Session and, while I would accept that the proof was conducted efficiently and a number of matters were agreed, this was not a case where the paragraph (g) factor persuaded me that an additional fee was appropriate. . I note that Mr Mr Buchanan drew my attention to an offer on the part of the defenders to submit to mediation, the offer being refused by the pursuer.