David Maguire Against 5pm Ltd And 6 Others
| Jurisdiction | Scotland |
| Judge | Sheriff Principal C.A.L. Scott Q.C. |
| Court | Sheriff Court |
| Date | 20 May 2015 |
| Docket Number | B1599/12 |
| Published date | 01 June 2015 |
SHERIFFDOM OF GLASGOW AND STRATHKELVIN AT GLASGOW
B1599/12
2015SCGLA40
JUDGMENT
of
SHERIFF PRINCIPAL C A L SCOTT, QC
in the cause
David Maguire
Respondent
against
5 pm Ltd & 6 Others Appellants
Glasgow, 20 May 2015.
The sheriff principal, having resumed consideration of the appeal, adheres to the sheriff’s interlocutor dated 31 July 2014 and refuses the appeal; certifies the appeal as suitable for the employment of junior counsel; finds the appellants Charles Shaw and Ronald Whitelaw Somerville liable to the respondent in the expenses of the appeal; allows an account thereof to be given in and remits same, when lodged, to the auditor of court to tax and to report thereon.
NOTE:-
Introduction
[1] In the context of interdict proceedings, the sheriff was called upon to deal with a dispute arising from a settlement agreement. The matter came before the sheriff by way of minute and answers procedure. The agreement was entered into between the respondent in this appeal, David Maguire and the appellants, Charles Shaw and Ronald Whitelaw Somerville. (For ease of reference in this note, I shall refer to the respondent as “DM” and to the appellants as “S & S”).
[2] As the sheriff narrated in his own introduction, it was a term of the settlement that DM bound himself to sell his shareholding in the company 5 pm Ltd to S & S at a valuation price to be determined by an expert engaged for that purpose. Sally Longworth of Grant Thornton UK LLP (hereinafter referred to as “GT”) was the chosen expert. Inter alia her letter of engagement provided that:
“During the course of the engagement we may show drafts of our report(s) to you. In any event, prior to our final determination, we will exhibit to parties a final draft. This is done on the basis that they (sic.) are subject to revision and alteration and no reliance should be placed on any draft document without our prior written consent. You will bring to our attention any issue in the draft report(s) that you wish to have clarified prior to the report(s) being finalised. A document remains ‘draft’ for these purposes until it has been manually signed by a Grant Thornton UK LLP partner.”
[3] On 16 July 2013, Sally Longworth produced a report in which she determined the valuation price of DM’s shareholding to be £266,875.00 (the first valuation). DM objected to that report on the grounds that it had not been issued in the first instance as a final draft. He gave notice that he considered the expert to have been in material breach of the terms of the letter of engagement and that he was rescinding the contract.
[4] On 9 August 2013, the expert directed the parties to treat her original report as a draft and invited comments. On 22 August 2013 (the second valuation), the expert wrote to the parties informing them that her determination remained as stated in her report of 16 July 2013.
[5] Whilst certain of the submissions in the appeal advanced on behalf of S & S, varied significantly from those argued at first instance, the summary by the sheriff at the end of paragraph [4] in his note as to the issue for the court to determine, broadly speaking, remains correct, viz. “Essentially the issue is whether either of the valuations has any validity and is binding upon the applicant such as to require him to implement his obligations under the settlement agreement.” (The “applicant” being DM).
[6] The sheriff concluded that the first GT valuation was neither valid nor binding and that prior to the issue of the second valuation DM had validly rescinded the contract created by the letter of engagement. He sustained DM’s first plea in law to the effect that the averments in the minute brought by S & S were irrelevant et separatim lacking in specification and that, accordingly, the minute fell to be dismissed.
[7] The change in approach adopted by senior counsel for S & S on appeal did not affect his client’s overall contention that the sheriff’s decision was wrong as a matter of law.
Submissions for Messrs Shaw & Somerville
[8] Senior counsel utilised the note of appeal to provide some structure for his oral submissions. The arguments for S & S embraced four propositions. Paragraph 8.1.1 in the note of appeal recorded the first proposition, viz. “…if a valuation is invalid on an application of the valuation test (see paragraph [11] infra) and so is set aside by the court, the consequential remedy which it is generally appropriate for the court to grant is to remit to the valuer to carry out a fresh valuation which does comply with the instructions.”
[9] I was informed by senior counsel that it was common ground that S & S’ first proposition was the most important when it came to the issues in hand. Senior counsel also accepted that these four propositions were not advanced before the sheriff. However, they were, he submitted, propositions of law which did not depend upon the making of further averments.
[10] In summarising S & S’ first proposition, senior counsel maintained that a material failure by an expert valuer in following instructions was not a material breach of contract such as would entitle one of the parties instructing the valuer to terminate the contract. It was also suggested that the contrary proposition underpinned the approach to be adopted on behalf of DM and was the proposition which ultimately found favour with the sheriff.
[11] It was submitted that where there had been a material failure by a valuer, the correct remedy was a remit back to the valuer unless (a) that was inappropriate or (b) the valuation machinery had broken down. In the circumstances of this case, it was contended on behalf of S & S that the purported termination by DM was invalid and that the second GT valuation was valid. Senior counsel referred to the validity test set out in the case of Veba Oil Supply & Trading GmbH (2011) EWCA civ. 1832. That was whether a valuer had failed in a “material “respect to comply with the instruction for the valuation. Senior counsel highlighted the fact that the sheriff’s finding that the first valuation was invalid was accepted by S & S and that for the reasons set out in paragraph [37] of the sheriff’s note. It was also accepted that the sheriff had applied the correct test when it came to assessing the validity of a valuation. (That test being the validity test derived from the Veba case supra).
[12] Under reference to paragraph 8.3 in the note of appeal, senior counsel saw merit in expressing the first proposition in the negative ie “where a valuation is set aside by the court, the valuer’s failures are not to be treated in law as a material breach of contract, which gives one of the parties seeking the valuation the right to terminate the contract.”
[13] Senior counsel maintained that there was a danger in “getting confused” over the use of the word “material”. It was, he submitted, crucial to an understanding of the issue in hand to acknowledge that failure in a material respect did not translate to material breach of contract.
[14] Senior counsel contended that the first proposition for S & S, in effect, amounted to a term which fell to be implied as a matter of law into any valuation contract. Beyond the second sentence in paragraph 8.4.1 of the note of appeal, which reads:
“The term is a secondary term of the contract, which precludes the general rules which would otherwise apply on a material breach of that contract.”,
the implied term line of argument seemed to be unsupported by authority or by any other form of justification.
[15] However, a discrete categorisation of senior counsel’s core first proposition involved him, in turn, in submitting that the rules on breach themselves restricted the right to terminate for a remediable breach. In that regard, he referred to McBryde on the Law of Contract, 3rd Edn, at paragraphs 20.103 and 20.122 to 20.127.
[16] Senior counsel also relied upon the cases of Lindley Catering Investments Ltd v Hibernian Football Club Ltd 1975 SLT (Notes) 56 and Charisma Properties Ltd v Grayling (1994) Ltd 1996 SC 556. He argued that a valuer had an opportunity to remedy a failure to comply with instructions before the general rules on breach would apply. (See note of appeal paragraph 8.4.2).
[17] A passage from Kendall on Expert Determination (4th Edn) at 14.18.3 was also founded on in support of S & S’ first proposition. The statement that “The usual consequence of a material departure from instructions is that the expert must come to a new decision in accordance with the instructions, as clarified by the court, and it is not usually appropriate for the court to fill the gap by ordering an inquiry.”, was praised for its clarity. Senior counsel submitted that it required to be read in conjunction with the validity test and that given such a strict test it was reasonable that the law would normally provide for a remit back to the valuer in order to remedy the situation.
[18] Various authorities were cited by senior counsel in support of his argument, viz. John Barker Construction Ltd v London Portman Hotel Ltd (1996) 83 BLR 31 at 62H to 64C; Sudbrook Trading Estate Ltd v Eggleton (1983) 1 AC 444 at 484B-C; Macro v Thompson (1997) 2 BCLC 36 at 69; Barclays Bank plc v Nylon Capital LLP (2011, Vol 2) LLR 347 at paragraph 71; Ackerman v Ackerman [2011] EWHC 3428 (Ch) at paragraph 390 et seq; Jones v Jones (1971) WLR 840; Dean v Prince (1953) Ch 590 at 600; and Campbell v Edwards (1976) 1 WLR 403 at 407A-B. Senior counsel submitted that when these authorities were analysed in the round, they all served to throw up a pattern which senior counsel claimed to be supportive of his client’s first proposition.
[19] Finally, the first proposition was hailed as producing a sensible result in policy terms. It was reflective of practical common sense, argued senior counsel who reminded the court of the decision in the Macro case. He asserted that the de...
To continue reading
Request your trial