Stewart Hill And Another V. Stewart Milne Group
| Jurisdiction | Scotland |
| Judge | Lord Eassie,Lord Wheatley,Lord Brodie |
| Neutral Citation | [2011] CSIH 50 |
| Date | 03 August 2011 |
| Published date | 03 August 2011 |
| Court | Court of Session |
| Docket Number | XA120/10 |
| EXTRA DIVISION, INNER HOUSE, COURT OF SESSION | |
| Lord Eassie Lord Brodie Lord Wheatley | [2011] CSIH 50 XA120/10 OPINION OF THE COURT delivered by LORD BRODIE in the Appeal in the cause STEWART WELLS HILL and ROBERT THOMSON HILL Pursuers and Appellants; against STEWART MILNE GROUP First Defenders and Respondents: and GLADEDALE (NORTHERN) LIMITED (FORMERLY BETT LIMITED) Second Defenders and Respondents _______ |
Act: Bartos: Balfour + Manson LLP, Solicitors, Edinburgh (for Ness Gallagher & Co, Motherwell) (Pursuers & Appellants)
Alt: Cheyne: Lindsays, Solicitors, Edinburgh (for Macdonalds, Solicitors, Glasgow) (First and Second Defenders & Respondents)
3 August 2011
Introduction
[1] This is an appeal at the instance of the pursuers from a judgment of the Temporary Sheriff Principal of South Strathclyde, Dumfries and Galloway, sitting at Hamilton, recalling an interlocutor of the Sheriff dated 12 February 2010, sustaining the defenders' first plea-in-law and assoilzing the defenders from the crave of the writ.
[2] The substantive crave of the initial writ in the action is, at present, for payment of the sum of £35,000 (the pursuers have intimated an intention to amend to substitute a higher sum). The basis upon which the pursuers sue the action is an obligation contained in a Minute of Agreement among the parties dated and registered in the Books of Council and Session on 28 February 2007. The issue between the pursuers on the one hand and the defenders on the other, is focused by the defenders' first plea-in-law which is as follows: "The contractual provision providing that the First and Second Defenders are to make payment to the Pursuers constitutes a penalty and is unenforceable and accordingly Decree of Absolvitor ought to be granted with a finding in expenses in favour of the First and Second Defenders."
The Minute of Agreement
[3] The Minute of Agreement contemplated the development by the first defender (referred to therein as "SMG") and the second defender ("Bett") of subjects of which they were to become proprietors at Morningside, Wishaw (the "MTS site") and the development by the pursuers ("the Hill Family") of nearby subjects of which they were proprietors (the "Hill Family Site").
[4] The Minute of Agreement provided, inter alia, as follows:
"Further Considering that to facilitate the development of the MTS Site, Bett and SMG are to install a sewage system which will connect the MTS Site with the public sewage system in Newmains by way of a pipe, the line of which is shown coloured red on the plan number 1 annexed and executed as relative hereto.
Further Considering that it has been agreed that to facilitate the development of the Hill Family Site, the Hill Family will be entitled to connect to the said sewage system at no cost to them.
Bett and SMG confirm that the said sewerage system will comply in all respects with the requirements of North Lanarkshire Council as planning authority, Scottish Water and any other interested Statutory authority that the said sewerage system will have the capacity as at the date of installation of the said systems to serve the development being not more than forty, two storey residential units to be erected by the Hill Family on the Hill Family site and in the event of any alteration, upgrading or improvement of the said sewerage system as proposed is required in order to provide said capacity as at the date of installation of the systems, all costs incurred in that regard will be the sole responsibility of Bett and SMG and the Hill Family shall have no responsibility whatsoever for any such costs incurred.
Further Considering that to facilitate the development of the MTS Site, Bett and SMG will be installing a surface/storm water drainage system in their respective parts of the MTS Site.
Further Considering that to facilitate the development of the Hill Family Site, the Hill Family will be entitled to connect to the said surface/storm water system at no cost to them.
...
Bett and SMG undertake that they will use all reasonable endeavours to ensure that both the sewerage and surface/storm water systems will be completed and commissioned by 28th March 2008 ("the Longstop Date"); But declaring that the Longstop Date shall be extended to take account of any delays caused to the said programme as a result of force majeure. In the event that Bett and SMG have not completed the said works by the Longstop Date, as such date may be extended as aforesaid, then the Hill Family shall be entitled to receive payment from Bett and SMG, jointly and severally, of a penalty of Five Thousand Pounds (£5,000) per calendar month until the said systems are completed and commissioned".
The final paragraph, which we have emphasised by italics is the particular provision of the contract upon which the action proceeds.
The action
[5] The parties came to be in dispute over completion of the sewerage and surface/storm water systems and the consequential obligation, if any, of the defenders to make payment under the Minute of Agreement. The pursuers raised the action in the Sheriff Court at Hamilton. Warrant to cite was granted on 31 March 2009. The Record was closed on 30 July 2009.
[6] In the Closed Record as amended, the pursuers aver that the sewerage and surface/storm water systems were not completed by the Longstop Date of 28 March 2008 and that payment fell due. They aver that payments were made up to and including December 2008 but not thereafter and that therefore the defenders are liable to make payment to them of a sum computed at the rate of £5000 per month until completion in terms of the Minute of Agreement. The crave in the sum of £35,000 therefore reflects what the pursuers maintain was the position as at July 2009. Counsel at the hearing of the appeal advised that it is the position of the pursuers that the system has not been completed even yet and that it would be his intention to seek leave to amend the pleadings to increase the sum sued for accordingly, should the pursuers succeed in the appeal. In their pleadings the defenders accept that the system was not completed by the Longstop Date. They do not accept that it was not completed as at December 2008. However, irrespective of whether that is so, consistent with their first plea-in-law the defenders make this averment in the penultimate sentence of Answer 6: "Explained and averred that the terms of the Minute of Agreement providing that the First and Second Defenders are to make payments of £5000 per month to the Pursuers constitute a penalty and as such is unenforceable." As was emphasised by counsel for the pursuers in the course of the argument before us, that penultimate sentence of Answer 6 contains the only averments made by the defenders in relation to the provision being an unenforceable penalty. By way of reply the pursuers deny that the provision constitutes a penalty. They aver that the sum of £5000 is based on a genuine pre-estimate of the pursuers' loss, that it is not extravagant and that it is not in terrorem. They go on to aver as follows:
"In negotiating the payment of £5,000 per month in advance of signing the Minute of Agreement hereinbefore condescended upon, the Pursuers reasonably estimated that upon the sale of the 'Hill Family site', a minimum price of £1,500,000 would be achieved. The Pursuers reasonably estimated a rate of return on investing that sum of money of 4%. At that time, the Pursuers had investments with the Royal Bank of Scotland receiving a return of 5%. A copy of a letter from Royal Bank of Scotland to Mr R T Hill dated 23rd July 2009 is produced in process and referred to for its terms. A rate of return of 4% on £1,500,000 achieves a figure of £60,000 or £5,000 per month. The 'Hill Family site' was marketed for sale by the Pursuers with Whyte and Barrie Commercial, Chartered Surveyors, 32 Campbell Street, Hamilton, in November 2007. The property was marketed at offers over £1,500,000. The Second Defenders...
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Stewart Wells Hill And Robert Thomson Hill Against Stewart Milne Limited; Gladedale (northern) Limited (formerly Bett Limited)
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