Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2012] CSOH 37
CA50/11	OPINION OF LORD MALCOLM in the cause MOHAMMED AMEEN MIRZA Pursuer; against MRS FOZIA ASLAM or SALIM (A.P) Defender: ­­­­­­­­­­­­­­­­­________________

Pursuer: J Mitchell QC; Beveridge & Kellas

Defender: R Skinner, advocate; Drummond Miller LLP

6 March 2012

[1] The pursuer seeks damages from the defender in respect of an alleged wrongful application for and use of interdict ad interim. The parties are respectively landlord and tenant in respect of shop premises in Glasgow. They are both successors in title to the original parties to the lease. The land owned by the pursuer includes an adjacent yard. In 2006 he obtained planning permission to build a supermarket on the yard. He states that he invested approximately £300,000 on building works. He received an offer from the Co-operative Group Limited to lease the premises for the purpose of licensed grocers. However on 27 February 2008 the defender obtained interdict ad interim from the sheriff at Glasgow against the pursuer using or occupying the yard or the premises built upon it. That was on the basis that her lease included the yard. By judgment dated 18 August 2009 the sheriff at Glasgow granted decree rectifying the lease in terms of section 8 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 by removing the reference to the disputed area of ground from the lease. The sheriff held that the terms of the lease did not reflect the agreement of the original parties. As a result the interdict fell. The pursuer now claims that it was obtained erroneously and in bad faith. He seeks damages for losses occasioned thereby. The action is defended, essentially on the basis that, until rectification of the lease, the defender was entitled to found on its terms which granted her exclusive possession of the yard.

[2] The pursuer has lodged a specification of documents for the recovery of which a commission and diligence is sought. The only call which is opposed is call 3. It is in the following terms:

"All files, notes, letters, reports, telephone notes, notes of meetings and other documents (electronic or otherwise) held by or on behalf of Mellicks solicitors, Glasgow or Roderick McIlvride, advocate, and relating to the defender's lease at 398 Cumbernauld Road, Glasgow or the action at the defender's instance CA51/08, in order that excerpts may be taken there from at the sight of the commissioner of all entries therein showing or tending to show (i) the nature and extent of the pursuer's knowledge and belief, or the advice given to the pursuer by her said solicitors and counsel, on or before 18 August 2009 as to the extent of the heritable property forming the subjects of the lease assigned to her by Suriya Khan; (ii) the pursuer's reasons for seeking interim interdict in that action; (iii) whether she was in good faith in seeking interim interdict in that action; (iv) the nature and extent of any negotiations on behalf of the defender concerning the offer from Scotmid referred to on record or the defender's acceptance of that offer: so that excerpts may be taken there from at the sight of the commissioner of all such entries."

Messrs Mellicks and Mr McIlvride acted for the defender in respect of her action in the Sheriff Court, and initially in the present action. They withdrew from acting when it became clear that there was a potential conflict of interest. The ground of opposition is that the information sought is confidential as being subject to legal professional privilege. The pursuer responds to the effect that the defender has impliedly waived her claim to confidentiality in that recently she has added averments to her defences in the following terms:

"Esto the defender is liable to the pursuer in damages (which is denied), she is entitled to relief from Messrs Mellicks ("the third parties"), the solicitors acting for her in the Sheriff Court action, who failed to act with the skill and care reasonably to be expected of solicitors of ordinary competence practising in the field of commercial litigation in Scotland. The third parties made the defender aware at the outset that if she was unsuccessful in any action raised against the current pursuer she would likely become liable for the whole expenses of the action. However, at no time either prior to the obtaining of interim interdict or thereafter did the third party advise the defender that said interim interdict would be granted periculo petentis and that, if her action against the pursuer did not succeed, she ran the further risk of a subsequent action being raised against her for wrongful diligence at the instance of the current pursuer. At the time that they advised the pursuer to obtain interim interdict, the third parties were aware that the current pursuer was engaged on the building of a supermarket on the adjacent ground. They were aware (or ought to have been aware) that the obtaining of interim interdict would hold the development of the land and would be liable to result in the present pursuer suffering loss, which loss had the potential to be substantial. Further, during the course of the Sheriff Court litigation, senior counsel for the present pursuer reminded the third parties (via counsel) that action was likely to be raised by his client if he succeeded in his defence in the Sheriff Court action. In the circumstances no reasonably competent solicitors acting in the field of commercial litigation and acting with ordinary care would have failed to advise the defender that she ran the risk of further action being raised against her if she obtained interdict ad interim and did not ultimately succeed in the action. Had the third parties done so the defender would not have accepted the risk of further action against her and would not have instructed them to raise action and to obtain and maintain interdict ad interim."

The defender has added a plea-in-law to the following effect:

"Esto the defender is liable in damages to the pursuer (which is denied) she is entitled to relief from the third party."

Service of a third party notice upon Messrs Mellicks has been authorised by the court.

Submissions for the pursuer

[3] For the pursuer Mr Mitchell QC sought approval of call 3 upon the basis that, by virtue of introducing her solicitors into the present action as a third party, the pursuer has impliedly waived the legal professional privilege which otherwise would have allowed her to resist disclosure. Mr Mitchell explained that, on one view of the law, issues of good and bad faith may be relevant regarding the alleged wrongful interdict. He categorised the defences as involving a contention that the defender presented a true case to the sheriff. It was submitted that the sheriff granted rectification because he was not persuaded that the defender had any true belief that she had obtained rights in the yard, and furthermore she had not exercised possession of it. Mr Mitchell made reference to answer 5 and to the third party claim in answer 6.

[4] In support of his submission Mr Mitchell made reference to Lillicrap and Another v Nalder & Son [1993] 1 WLR 94; Paragon Finance Plc and Others v Freshfields [1999] 1 WLR 1183; and Scottish Lion Insurance Co Ltd v Goodrich Corporation and others 2011 SC 534. Mr Mitchell submitted that had the defender put before the sheriff at the interim interdict stage the facts as ultimately found by the sheriff, she could not have obtained interim interdict. It was submitted that there is an overlap between the issues between the pursuer and the defender and those arising in respect of the defender's claim against her former solicitors. Messrs Mellicks are likely to assert that the defender was aware of the risks in seeking interim interdict, not least given the terms of the Sheriff Court pleadings. Any advice given would have been based upon the information provided by the client. Mr Mitchell suggested that it is "inevitable" that all that passed between the defender and her agents will come into the public domain in the course of this proof given that she has now waived her privilege against the solicitors. She cannot complain if her former solicitors lodge their files. The pursuer's claim against the defender is intertwined with her claim against her former solicitors. Prima facie there will be one proof and counsel for the pursuer will be entitled to cross-examine the third party's witnesses. The pursuer wants to establish what the defender said to her solicitors in relation to the facts of the matter. For example did she say to her solicitors that she had possession of the disputed ground, or was this "a concocted afterthought"?

[5] In his Note of Argument counsel for the pursuer submitted that:

"In the defences as adjusted, the defender expressly puts in issue the communication between herself and her former legal advisers. She avers her state of mind, her belief and knowledge, in the light of that advice. She avers what advice she was given. She avers that she was not advised on other matters which are central to this litigation. She complains that the advice she was given was inadequate. In her third party claim against her former solicitors, she relies on the privileged information as part of her case, as is indeed inevitable. In the circumstances she has waived any claim of privilege on this material. As a matter of fairness, it ought to be disclosed. The sooner this is done the better."

Submissions for the defender

[6] On behalf of the defender Mr Skinner relied upon the general rule that communications between client, solicitor and counsel are privileged. There are very few exceptions. Reference was made to B and others v Auckland District Law Society and another [2003] 2 AC 736. It is important that a client should be able to consult a solicitor confident that what passes will remain between them. Mr Skinner observed that the defender is not entitled to trawl through the pursuer's solicitor's file in respect of his good or bad faith. At the time of the interim interdict, and until rectification of the lease, the defender was entitled to exclusive possession of the disputed ground. So far as the third party proceedings are concerned, any right to defeat privilege introduced by this recent development in the case lies with the third party, not the pursuers. The former solicitors may admit liability or may not refer to the files at all. Their position may be that it is not negligent to have failed to advise the pursuer as to the periculo petentis nature of an interdict ad interim. The authorities vouch the proposition that any implied waiver of legal professional privilege would only entitle Messrs Mellicks to disclose information which is necessary in order to allow them to resist and resolve the claim made by their former client. Only Messrs Mellicks can raise waiver, and only regarding relevant issues, such as whether advice was or was not given, and whether they informed the defender as to the potential risks of obtaining interim interdict. The introduction of the third party does not entitle the pursuer, who has no direct interest in the claim against the third party, to have sight of the documents sought to be recovered in terms of call 3. Mr Skinner posed the question, why, simply because the defender has sued her former solicitors, should the pursuer be entitled to look through Mellicks files, but the pursuer's solicitor's files remain closed?

The sheriff's decision of 18 August 2009

[7] The sheriff found that the original tenant's husband, Shocket Khan, came to believe that the lease extended to the yard to the rear of the shop premises. The current defender's family became interested in acquiring the shop business carried on by Shocket Khan on behalf of his wife. Shocket Khan showed the defender's husband the disputed area of ground "as in some fashion" associated with the shop. Certain correspondence at or around the time of the assignation of the tenancy made it clear that, so far as the then landlord and his agents were concerned, the lease was to extend only to the shop itself, and not to any adjacent ground. The current defender took occupation of the premises. Thereafter on 14 March 2002 her agents, Messrs Holmes McKillop, wrote to her indicating that the then landlord's agents had stated that the lease extends only to the shop. The letter stated that this was incorrect since the lease extended to "the whole premises registered under the landlord's title...Thus the lease includes the shop and the adjacent ground." The writer advised the defender not to raise this with the landlord at the moment in case he withdrew his cooperation in respect of the assignation, "but I draw it to your intention in case you wish to raise the matter with the landlord at some future date, particularly since the billboard appears to be erected on the adjacent ground." In due course the assignation of the tenancy was concluded between the current defender and the previous tenant. Thereafter the original landlord, and subsequently the current pursuer as his successor in title, received payments for licensing the advertising hoardings on the disputed ground. The sheriff found that neither the pursuer nor anyone on her behalf had exercised possession of the disputed ground.

[8] The current defender did not object to her landlord's application for planning permission for the construction of commercial premises upon the land. On 28 September 2006 Messrs Holmes McKillop wrote to the now pursuer's agents stating that the disputed ground formed part of the subjects leased to the tenant. The pursuer was required to stop the project until the expiry of the lease. Nonetheless he continued with the construction of the premises.

[9] The sheriff found in fact and law that the original lease of 26 May 1999 failed to express accurately the common intention of the original parties in that it erroneously included the disputed ground as falling within the subjects of the lease. The sheriff also found that the current defender had neither acted nor refrained from acting in reliance upon either the description of the premises contained in the lease or the scope of the premises as shown on the title plan of the subjects registered under GLA 117001 such that her position had been altered to a material extent. Therefore the landlord (the current pursuer) was entitled to rectification of the lease in terms of section 8 of the 1985 Act with effect as if it had always been so rectified.

[10] In his Note the sheriff explained that at a debate the landlord's principal argument had been that, on a proper reading of the lease, it extended only to the shop premises. However that argument was rejected. It was clear that the lease covered "the whole subjects registered in the Land Register under title number GLA 117001." As a result the proof concentrated on the issue of rectification. The sheriff heard evidence from the tenant and from members of her family. He found them to be credible, but unreliable in certain respects. The sheriff was not impressed by the landlord's evidence. He was not straightforward and "at times he was evasive and inconsistent." The sheriff indicated that upon the evidence of Shocket Khan, and of the pursuer and her family, he had concluded that from his conversations with Khalil Ahmed (the original landlord) Shocket Khan had come to believe that the lease extended to the ground to the rear of the shop premises. Later in December 2001 he had shown the same area to the pursuer's husband as in some fashion associated with the shop.

[11] For the landlord Mr Mitchell QC argued before the sheriff that the agreement to which the lease gives effect is contained in what were referred to as the first missives. The informal discussions between Shocket Khan and Khalil Ahmed took place before the missives and were not legally binding. The common intention of the parties was to be measured objectively - the best evidence of the parties' intentions being the terms of the missives drawn up by their solicitors. The sheriff agreed with that submission. The first missives were a complete expression of the contract between Suriya Khan and Khalil Ahmed, and provided a better guide to their intentions at the time than their memories many years later. Still less should one rely on what a husband or one of the parties said later to third parties in the course of negotiations regarding a subsequent assignation. Given the terms of the first missives there was no difficulty in identifying a prior agreement. The missives contemplated being given effect to in a formal lease. In the event the lease covered the whole of the registered title, whereas the missives extended only to the shop premises. The landlord's case under section 8 was made out.

[12] The sheriff then considered whether the assignee of the original tenant, the current defender, was entitled to protection as a third party under section 9 of the 1985 Act. The question was whether she had acted or refrained from acting in reliance on the terms of the lease, and that as a result her position had been affected to a material extent. The sheriff noted that she knew that the terms of lease extended to the disputed ground, but did this cause her to act differently from how she would have acted but for that knowledge? She said to the sheriff that the terms of the lease allowed possible expansion of the shop or the creation of a car park, and gave her the power to stop development on the ground, thus this was a material element in her decision to take the assignation of the previous tenant's interest. The sheriff accepted that the tenant and her family had come to believe that this was the case, however he rejected her evidence in this regard. He proceeded upon the, as he saw it, more reliable evidence contained in the contemporary conveyancing files of Messrs Holmes McKillop. The first offer from the then pursuer in connection with the assignation of the tenancy referred only to a lease of the shop. The file shows that the earliest date when the pursuer and her family became aware of the inclusion of the disputed ground in the lease was on receipt of the aforesaid letter of 14 March 2002. By then it was clear that they intended to proceed with the transaction. Indeed on 2 March 2002 the pursuer and her family took occupation of the shop. The sheriff considered that the whole background as revealed in the file shows that at entry the inclusion of any part of the disputed ground was not material to the tenant's decision to take an assignation of the lease. The then pursuer's father viewed the information that the landlord's agents were in error as to the terms of the lease as "information to be stored away and perhaps used in the future to secure some as yet unclear commercial advantage against the landlord. That would be consistent with the fact that the billboards were tolerated and no attempt was made to secure payment from the advertisers." Given that the sheriff concluded that the pursuer was not a person to whom section 9 applied, any prejudice she might suffer because of rectification was not a relevant ground for refusing rectification. The sheriff considered that he had no general discretion to refuse rectification.

Discussion

[13] It is against this background that the pursuer seeks damages from the defender for wrongful interdict ad interim. To satisfy such a claim he must show that the interdict was unjustified and amounted to an invasion of his rights. In the present case, as both counsel recognise, an important factor is that until the retrospective rectification of the lease in August 2009, the current defender was the tenant of the disputed ground and thereby, on the face of it, had the right and title to stop the development. No doubt in recognition of the potential difficulties which this may cause for the pursuer's case, Mr Mitchell was at pains to stress aspects in which it is claimed that the defender acted in bad faith when obtaining the interim interdict. It would seem that counsel has in mind considerations similar to those discussed in cases such as Kennedy v Fort William Police Commissioners (1877) 5R 302 and Glasgow City and District Railway v Glasgow Coal Exchange Co (1885) 12R 1287. The defender relies upon the terms of the lease, which she claims entitled her to the interim interdict unless and until the lease was rectified or set aside, and that until that rectification the landlord had no entitlement to develop the site, and thus no right on his part was infringed. (Similar considerations were discussed in John Macdonald Limited v Lord Blythswood 1914 SC930). The particular feature of the present case is the retrospective rectification of the lease, which removed the property right under-pinning the grant of interdict.

[14] During the hearing on the disputed specification Mr Mitchell repeatedly stressed the importance, as he saw it, of the findings in fact made by the sheriff and his concern that, as yet, the defender has not agreed to their inclusion in a joint minute of admissions in the current process. As noted earlier, the sheriff found that, at least initially, the defender and her family intended to take a lease over the shop, but, in the course of the completion of the formal assignation of the former tenants interest in the lease they were told that the lease extended to the area to the rear of the shop; that the landlord and his agents were unaware of this; and that it would be a good idea to keep quiet about this in case it interfered with the landlord's cooperation in respect of the assignation. Thereafter the defender allowed the current pursuer to continue to use the disputed ground for advertising hoardings, but intervened when he began to erect a supermarket upon the land. The key issue in the case is whether, in all these circumstances, including the subsequent rectification, the obtaining of interdict ad interim renders the defender liable in damages for any loss caused thereby to the pursuer.

The pleadings

[15] Turning to the pleadings the pursuer avers that the defender took on the lease on the basis that it did not include the yard. (Of course the sheriff's judgment shows that this is not the whole story - she was told by letter from her solicitors dated 14 March 2002, which was before completion of the assignation, that in fact the lease did cover the yard.) The pursuer avers that had the "true facts" been before the sheriff, the interdict would never have been granted. Presumably this is a reference to the facts found by the sheriff in his judgment of 18 August 2009. The defender, or her then agents, Messrs Mellicks, are blamed for this state of affairs. The pursuer avers that, as disclosed by the sheriff's judgment, the defender "had never been entitled to interdict against the present pursuer using or occupying the yard or the premises. She had no right in the yard or the premises, as indeed she had recognised before bringing that action, and in particular when taking on the lease. That was conclusively determined by the judgment." No doubt it will be disputed that the sheriff's judgment had that conclusive effect, but that is the pursuer's case.

[16] The pursuer then avers that the interim interdict interfered with the landlord's rights as a proprietor in possession. It is stressed that the judgment altered the lease retrospectively. It is asserted that the defender was well aware that the facts were such that the pursuer (the then defender) was entitled to rectification. "She did not act in good faith, but in any event she was well aware that her Land Certificate was liable to be rectified retrospectively." It is averred that she falsely asserted before the sheriff that she acted in reliance on the unrectified description of the lease subjects, otherwise she would not have accepted the assignation. She falsely denied that throughout the landlord had possession of the ground. She must have so informed her then agents and counsel in order that these facts could be averred in the Sheriff Court pleadings. The defender did not act in good faith in seeking and obtaining interim interdict. On the other hand, it is averred that in constructing the supermarket the present pursuer acted in the bona fide belief "which was true" that he was entitled to the exclusive possession of the yard. "He did not know that his own Land Certificate disclosed that the defender was entitled to insist on the exclusive use and occupation of the yard." It would seem that the pursuer's case is predicated upon the proposition that matters are to be judged by reference to the retrospectively rectified state of affairs. Furthermore he is offering to prove that when she obtained interdict, the defender (the then pursuer) knew that in due course the lease would be rectified by removal of the reference to the yard.

[17] Turning to the defences, the defender avers:

"The solicitors acting for Mr Khan (perhaps this should be Mr Ahmed?) suggested to the defender's solicitors that the subjects of let comprised only the shop premises. The defender's solicitors examined the content of the lease and the Land Certificate relating to the subjects. They advised the defender, as was then the case, that the subjects of let included both the shop premises and the yard. Accordingly at the time of the conclusion of missives for the assignation of the lease i.e. on 18 April 2002, the defender was aware that the land leased included the disputed ground".

Reference is made to the whole terms of the sheriff's judgment. The defender avers that throughout the period of the interim interdict remaining in force a Land Certificate recorded that the subjects let to her included the yard, and that the pursuer's title revealed that his interest in the yard was subject to the tenancy. The husband of the previous tenant told the defender that the yard was part of the lease. Subsequently he told the defender's father that the yard was part of the subjects of lease. Reference is made to the letter of 14 March 2002. The defender avers that this letter confirmed "her understanding of the position." "The evidence she gave in the sheriff court action was accurate and given in good faith." She was entitled to interim interdict up to and until the rectification of her lease. Until then she was the proprietor in possession by virtue of her registered title. "No right of the pursuer was invaded by the interdict." In June 2008 an application for recall of the interim interdict was refused on the basis, amongst other things, that "the lease clearly includes both the shop and the adjacent land" and that "as matters presently stand it is the (present defender) who has title to possess."

[18] It is averred that the pursuer developed the land without the consent of the defender in the knowledge that his own Land Certificate disclosed that the defender could insist upon the exclusive use and occupation of the land. The pursuer's agents were so advised by Messrs Holmes McKillop by letter of 28 September 2006. When he entered the ground the pursuer was well aware that he had no right to do so, and in so doing he acted in bad faith. When challenged by the defender's family, the pursuer said that the new shop would be for them. His agents wrongly maintained that on a proper construction of the lease it covered only the shop premises. "The interdict was the proper and just judgment regulating the possession of the yard pending the outcome of the defender's action and the pursuer's counterclaim." The defences then include the recent introduction of the case against the third party referred to earlier.

Decision

[19] Against this background I now assess the submissions of the parties in respect of the disputed call in the specification of documents. Mr Mitchell's main proposition is that by seeking relief against her former solicitors by way of third party procedure in respect of an alleged claim of professional negligence on their part, the defender has impliedly waived any privilege which she might otherwise have maintained against the pursuer in respect of the information sought under the specification. Before dealing with this, I note that from time to time Mr Mitchell mentioned the full circumstances of the case as disclosed in the pleadings and the allegation of bad faith on the part of the defender, all in support of his application. Though the case was not cited, Mr Mitchell might have sought assistance from the discussion in Conoco (UK) Limited v The Commercial Law Practice 1997 SLT 372, per Lord Macfadyen at 378/9. In the particular and unusual circumstances of that case the Lord Ordinary was prepared to extend the "fraud" exception to the general rule of legal professional privilege to allow Conoco to obtain information from a solicitor as to the identity of the solicitor's client. However the facts in that case were far removed from the present. On any view the defender and her agents can point to the terms of the unrectified lease and Land Certificate as a justification for seeking interdict. Assuming for the moment that there has been no implied waiver, nothing said by Mr Mitchell, nor anything in the pursuer's pleadings, has persuaded me that the general rule should be set aside. Other than his submission concerning implied waiver, Mr Mitchell did not draw attention to any of the established exceptions to the rule.

[20] All the cases cited by Mr Mitchell related to implied waiver. From the authorities mentioned earlier I derive the following:

1. A litigant will impliedly waive a right to plead legal professional privilege if he has acted in such a way that he is taken to have given up his right to resist the disclosure in question, either generally or in a particular context (Scottish Lion Insurance, para 43).

2. Conduct may be inconsistent with the maintenance of confidentiality, either generally or for a limited purpose (Scottish Lion Insurance, para 48).

3. By virtue of service of the third party notice in respect of her former solicitors the defender has waived any right to claim the protection of legal professional privilege in relation to any communications between her and her former solicitors "so far as is necessary for the just determination of (her) claim" against the third party (Paragon Finance, page 1188E-F); in other words, to enable justice to be done in respect of that claim (Lillicrap at page 101).

4. The purpose of the implied waiver in cases of this kind is to ensure that the solicitors are not unfairly restricted in their ability to defend the claim made against them by their former client.

5. Absent any exception to the general rule, the court has no residual discretion to override legal professional privilege which is a fundamental condition of the proper administration of justice (B v Auckland District Law Society).

[21] In the present case the question comes to be - is the introduction of the claim against her former agents inconsistent with the defender's insistence on privilege when resisting the pursuer's claim to the information sought in the disputed call? By making a claim for relief against her former solicitors, has she released them from an obligation of confidentiality in respect of the request from the pursuer for disclosure of the communications between them and the defender during the Sheriff Court action; that request being made in furtherance of the pursuer's claim for damages against the solicitor's former client? In my opinion the correct answer to these questions is no. There has been no general waiver - it is specific and limited to the context of the defender's claim against the third party. The extent, if any, to which the proper defence of the claim will require them to disclose otherwise confidential information is unknown. Even in respect of the solicitors, they are released from the obligation of confidence only to the limited extent necessary for the purpose of the proper conduct of their defence to the defender's claim. I can detect nothing in the authorities relied upon by Mr Mitchell, nor in the general principles upon which this exception to legal professional privilege is based, which would entitle the pursuer to a commission and diligence in which the commissioner will be allowed to inspect the defender's former solicitor's files for information of the kind specified in the disputed call. In my view there is no necessary inconsistency between the defender making the current claim for relief against her solicitors yet, at the same time, maintaining legal professional privilege in a question with the pursuer.

[22] In any event, and if one leaves aside these considerations, I would have concluded that it would be premature to grant the pursuer's application, at least until the solicitors have entered the process and the full extent and nature of the dispute between them and the defender is known. This would also afford the third party the opportunity to consider the specification of documents and, if so advised, present submissions thereon to the court. However, for the reasons expressed above I shall simply refuse the pursuer's application.