The Inter-Vivos Trust of The Late William Strathdee Gordon v Campbell Riddle Breeze Paterson LLP [2015] ScotCS CSOH_31 (25 March 2015)

[ Home ] [ Databases ] [ World Law ] [ Multidatabase Search ] [ Help ] [ Feedback ] [ DONATE ] Scottish Court of Session Decisions You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> The Inter-Vivos Trust of The Late William Strathdee Gordon v Campbell Riddle Breeze Paterson LLP [2015] ScotCS CSOH_31 (25 March 2015) URL: https://www.bailii.org/scot/cases/ScotCS/2015/[2015]CSOH31.html Cite as: [2015] CSOH 31, [2015] ScotCS CSOH_31 [ New search ] [ Help ] OUTER HOUSE, COURT OF SESSION [2015] CSOH 31 A240/12 OPINION OF LORD JONES In the cause TRUSTEES OF THE INTER-VIVOS TRUST OF THE LATE WILLIAM STRATHDEE GORDON Pursuers ; against CAMPBELL RIDDLE BREEZE PATERSON LLP Defenders : Pursuer: Sutherland; Drummond Miller LLP Defender: Johnston QC, Barne; Brodies LLP 25 March 2015 Background [1] The pursuers in this case are the owners of three areas of ground located in the Killearn area. These areas are referred to in the pleadings as “the main grazing field”, “the 40 acre field”, and “the 50 acre field”. It is averred on behalf of the pursuers that, in 2003, the defenders advised the pursuers to bring to an end the then existing agricultural holdings tenancies over the three fields, in light of the prospect of changes being introduced to the agricultural holdings legislation, which might be prejudicial to the pursuers’ interests. That advice was accepted, and the pursuers instructed the defenders to serve notices to quit on the tenant, in order that they could recover possession of the subjects. That was done. Each notice bore the date 8 November 2004, and was to take effect on 10 November 2005. In each notice, the tenant was designed as “the Firm of Messrs A & J C Craig and John C Craig, sole proprietor of and trustee for said Firm”. The tenant did not comply with the notices, and remained in occupation of the subjects. Under cover of letter dated 9 February 2006, Anderson Strathern, solicitors, acting on the instructions of the pursuers, sent three applications to the Scottish Land Court, seeking removal of the tenant from each of the fields. [2] On 24 July 2008, following a hearing on evidence, the Land Court issued its decision on the applications. The applications in respect of the 40 and 50 acre fields were refused, on the ground that, in each case, “there was a fatal flaw in the Notice to Quit.” (Joint bundle of authorities (“JB”) 290, paragraph 60). The court held that there had been a lease between the pursuers and the partnership referred to in the notice, but that it had come to an end on the termination of the partnership, which had occurred on the death of one of the partners, sometime before 10 November 1992. On that date, the pursuers entered into a new agreement with John Craig, a sole trader. The Land Court found that, for the purposes of the notice to quit, “the relevant lease was constituted by the Agreement between the Trust and Mr John Campbell Craig in 1992.” (JB 290, paragraph 68). [3] The pursuers raised the present action on 17 May 2012. They aver that, by serving defective notices, the defenders were in breach of an implied term of their contract with the pursuers, namely to exercise the degree of knowledge, skill and care expected of a reasonably competent solicitor. (Closed record, page 26C-D). In consequence of that breach, it is said, the pursuers have suffered loss, injury and damage. The action is defended on the merits. Further, the defenders’ fifth plea-in-law is to the effect that, if there was an obligation incumbent on them to make reparation to the pursuers, any such obligation has prescribed in terms of section 6 of the Prescription and Limitation (Scotland) Act 1973, and decree of absolvitor should be pronounced. That is the issue in this case. The Prescription and Limitation (Scotland) Act 1973 [4] Section 6 of the Prescription and Limitation (Scotland) Act 1973 (“the Act”) provides, among other things, that if, after the appropriate date, an obligation to which that section applies has subsisted for a continuous period of five years (a) without any relevant claim having been made in relation to the obligation and (b) without the subsistence of the obligation having been relevantly acknowledged, the obligation is extinguished from the expiration of that period. “The appropriate date” is the date on which the obligation became enforceable. In terms of schedule 1, paragraph 1 of the Act, section 6 applies to, among other things, any obligation arising from liability to make reparation and to any obligation arising from any breach of a contract. It is not disputed that, in this case, any obligation owed the defenders to make reparation to the pursuers is subject to the provisions of section 6. [5] So far as is relevant to this action, section 11(1) of the Act provides that any obligation: “to make reparation for loss, injury or damage caused by an act, neglect or default shall be regarded for the purposes of section 6 of this Act as having become enforceable on the date when the loss, injury or damage occurred.” Section 11(3) provides that, in a case where: “the creditor was not aware, and could not with reasonable diligence have been aware, that loss, injury or damage caused as aforesaid had occurred, the said subsection (1) shall have effect as if for the reference therein to that date there were substituted a reference to the date when the creditor first became, or could with reasonable diligence have become, so aware.” The preliminary proof [6] By interlocutor of 14 October 2014, the Lord Ordinary allowed parties a preliminary proof, restricted solely to the defenders’ fifth plea-in-law. The case came before the court for such proof on 10 March 2015, and the three following days. Fiona Stephen and Alasdair Fox of Anderson Strathern LLP, and William Gordon, the second-named pursuer, were called by counsel for the pursuers to give evidence. No witness was called on behalf of the defenders. The parties lodged a joint bundle of productions, and a lengthy joint minute, number [] of process. Mrs Stephen and Mr Fox were questioned about their dealings with the trustees and the progress of the proceedings in the Land Court between the end of 2005 and the conclusion of the action in 2008. Mr Gordon was asked about his dealings with the defenders from about the middle of 2003 until the end of 2005 and about the Land Court case from its commencement until its conclusion. Both parties lodged written submissions, which are appendices 1 and 2 to this opinion. [7] There was no material dispute between the parties about the evidence. Ultimately, it had little bearing on the determination of the issues in the case. That is largely because, in terms of the joint minute and for the purposes of the diet of preliminary proof only, the parties agreed: “the averments in articles 6 and 7 are held to have been proven.” (Joint minute, paragraph 47) I shall say more about these averments in the discussion section of this opinion. Submissions on behalf of the pursuers [8] Counsel referred me to the terms of section 11 of the Act, and to Dunlop v McGowan's , 1980 SC (HL) 73 (“ Dunlop ”) and David T Morrison & Co Ltd (t/a Gael Home Interiors) v ICL Plastics Ltd & Ors (Scotland) , 2014 SC (UKSC) 222 (“ Morrison ”). He submitted that, following Dunlop , for the purposes of section 11(1), the relevant date in this case was 10 November 2005. He contended, however, that the pursuers were not aware, and could not with reasonable diligence have been aware, that they had suffered a loss through breach by the defenders of an implied term of contract. The tenant’s failure to remove does not, of itself, mean that the pursuers should have been aware as at 10 November 2005 that they had incurred a loss for the purposes of the Act. He argued that it is: “an understood fact of life that there will always be cases where a tenant of property decides not to remove and legal action will be required to enforce the landlord’s right to recover possession.” The tenant may refuse to leave in the hope of gaining some advantage by, for example, negotiating some benefit for himself in exchange for giving up possession. In this case, under reference to JB 67 and 73, the evidence disclosed that this tenant was so motivated. Regardless of the tenant’s motivation, argued counsel, the only “loss” that the pursuers could anticipate as at November 2005 was “the inevitable irrecoverable expense incurred in future proceedings to recover possession of the land.” He submitted that such irrecoverable expense was not a “loss” for the purposes of section 11. He argued that: “The loss which did arise in relation to these proceedings was that portion of the expenses of the process which would otherwise have been recovered. Those anticipated recoverable expenses did not become loss, and the pursuers would not have been aware of having suffered that loss, until the Scottish Land Court issued its decision on 24 July 2008.” [9] The evidence had demonstrated that, both before and during the Land Court action, the tenant had mounted a number of challenges to the notices to quit. From time to time, by way of adjustment to the pleadings, some were departed from, and others were added. Counsel submitted that, simply because the defender in an action raises a number of issues on which it is asserted that the pursuer’s action ought to fail for a number of reasons, it does not mean that the pursuer is in a position to know that there has been a loss. He contended that none of the criticisms might have any validity, in which case the action will succeed and there never was and never will be a “loss”. What counsel referred to as “the alternative” would mean that, in order to avoid extinction of a right of action in a long running litigation: “either party in that litigation might have to raise speculative actions against their current professional advisers founding on a point being argued against them, but without any knowledge as to whether the point might succeed or fail.” [10] It was submitted on behalf of the pursuers that it was clear from the evidence that the trustees personally did not have any reason to consider that the 8 November 2004 notices to quit were invalid or were likely to be found invalid. Mr Fox had advised them that, as far as he could see, the notices were perfectly valid. (JB 98, page 2). Further, although Mr Gordon had complained to Mrs Stephen and Mr Fox about the defenders’ conduct, and had discussed raising proceedings against them, none of his concerns had any bearing on, or arose from any issue as to, the validity of the 2004 notices to quit. Submissions on behalf of the defenders [11] Senior counsel opened his submissions with a review of the evidence. He then addressed the topic of “the losses” and noted that those claimed in article VII of the condescendence are to be treated as having been established, in terms of paragraph 47 of the joint minute. He observed that they consist of two main elements: (i) legal expenses and outlays paid to the defenders and other solicitors for their work in relation to the invalid notices to quit, and proceedings in the Land Court, including the expenses paid to the tenant in those proceedings and (ii) loss of the opportunity to recover vacant possession of the 40 and 50 acre fields free of secure agricultural tenancies; loss of the ability to exploit the development potential of those fields; loss of an immediate uplift in the value of those fields of £200,000; loss of the ability to enter into an options agreement for development; and loss of payments under such agreement. [12] Having looked at the terms of the Act, counsel submitted that the defenders’ wrongful or negligent act took place at the latest on 8 November 2004 when the notices were served. He argued that the loss arose on 8 November 2004 or 10 November 2005 and stated no preference for either date, on the view that “it makes no difference”. On the issue of “postponement under section 11 (3)”, counsel referred to Morrison and drew a number of “key points” from it: section 11(3) is concerned solely with latent loss, injury or damage (paragraph 25); section 11(3) allows postponement only where the pursuer is not aware of a matter of fact, that is the existence of the loss, injury or damage (paragraphs 19, 25 and 47); it does not cover awareness of matters of law (paragraphs 26-8, 87, and 89); therefore, there is no postponement of prescription until such time as a court determines that there has been a breach of duty (paragraph 28); and these provisions can work harshly in an individual case, but they serve a wider public interest in legal certainty and avoiding the bringing of stale claims (paragraphs 54 and 77). [13] Senior counsel criticised the pursuers’ approach as being inconsistent with Morrison on a number of grounds which are set out at paragraph 56 of Appendix 2. The question is, he contended, when did the pursuers become aware that they had sustained loss, injury and damage? With reference to paragraph 34 of the joint minute, by 17 February 2006 at the latest, the pursuers had incurred material expense in relation to the applications to the Land Court. It is not relevant that the pursuers may not have regarded legal expenses as a “loss”. If the issue were whether and/or when the pursuers considered that they had sustained a loss, it would introduce an additional factor of the kind that Morrison disapproves, namely knowledge, not just of the simple fact of loss, but of its characterisation as loss because it was caused by the fault of the defenders. Further, once the pursuers knew that the tenant was not going to comply with the 2004 notices, they knew that they could not recover vacant possession as at 10 November 2005 and, on their pleadings, at that time they also sustained an immediate loss of £200,000. Decision and reasons [14] As I have noted in paragraph [5], section 11(1) of the Act provides that, subject to subsections (2) and (3), any obligation to make reparation for loss, injury or damage, which I shall refer to as “loss”, caused by an act, neglect or default, which I shall refer to as “breach of duty“, shall be regarded for the purposes of section 6 of the Act as having become enforceable on the date when the loss occurred. In Morrison , an explosion occurred in ICL’s premises on 11 May 2004. Although it was not known at the time, the explosion was caused by ICL’s breach of duty. The loss for which Morrison claimed reparation was damage to its neighbouring building and lost profits. Proceedings for reparation were raised on 13 August 2009, five years and three months after the explosion. (Lord Neuberger PSC, paragraph [40]) ICL pleaded that Morrison’s right of action was extinguished by operation of section 6 of the Act. Morrison countered by pleading that the prescriptive period did not begin to run until long after the explosion occurred because it was not aware, and could not with reasonable diligence have been aware, that its loss had been caused by a breach of duty owed to it, until a much later date. In that regard, Morrison relied on section 11(3) of the Act. (Lord Reed, paragraph [2]). [15] In the course of his judgment, Lord Reed observed that section 11(3) is capable of being read in two different ways. One reading is as if it provides as follows: “the creditor was not aware… that loss, injury or damage which had been caused as aforesaid had occurred.” The creditor is only to be aware of the occurrence of loss, while the words “caused as aforesaid” connect the loss to the cause of the action. (Paragraph [16]) The alternative reading, which, for over 25 years, the courts had regarded as expressing the correct meaning, is to read the word “aware” as referring not only to the loss, but also to the fact that it had been “caused as aforesaid”. The creditor has to be aware (i) that loss has occurred, and (ii) that it was caused by breach of duty owed to him by the debtor. (Paragraph [17]) In a majority decision, the Supreme Court held that the first construction was what Parliament had intended, and that section 11(3) addresses the problem which could otherwise arise where there is latent damage, namely that the creditor is unaware of the occurrence of loss. (Paragraph [25]). [16] The loss sustained by Morrison included damage to its property. As a matter of objective fact, Morrison’s loss was caused by ICL’s breach of duty. Having regard to the terms of section 11(1), therefore, ICL’s obligation to make reparation for Morrison’s loss became enforceable on the date when it occurred, subject to the postponement provisions in section 11(3). Since Morrison was aware that it had suffered loss on 11 May 2004, the provisions of section 11(3) did not come into play. The damage was not latent. [17] In this case, it is averred on behalf of the pursuers that they “have suffered loss and damage as a result of the breach of the said implied terms of contract by the defenders.” (Closed record page 27C-D) The specification of such loss includes, among other things: payment of legal fees and outlays to the defenders and to other solicitors for their work in relation to the invalid notices to quit, and for raising proceedings founding upon those notices, which they would not have paid if they had been advised by the defenders that the notices did not refer to the relevant leases (closed record, page 27D-E); and loss of the benefit of “an immediate uplift in the value of those fields of £200,000” (closed record, page 29A). [18] In Dunlop , Lord Keith of Kinkel, with whom Viscount Dilhorne and Lords Edmund-Davies and Fraser of Tullybelton agreed, expressed the view that the right to raise an action of reparation accrues when injuria (a wrongful act) concurs with damnum (a resulting loss) . As in this case, the defenders were alleged to have served on a tenant a defective notice to quit. Lord Keith held : “the loss, injury and damage flowing from the [defenders’] negligent omission occurred at Whitsunday 1971 when the appellant, but for that omission, would have obtained vacant possession of the premises.” (Page 81). In this case, the defenders aver that the pursuers suffered loss as soon as the defective notices had been served, i.e. on 8 November 2004, failing which on the date when the tenant was required to remove from the subjects, i.e. 10 November 2005. On the first date, failing which the second date, it is averred “there was a concurrence of damnum and injuria ”. No specification is given by the defenders in their pleadings of what loss was suffered by the pursuers on either date. For their part, the pursuers do not, in terms, identify the date on which they suffered loss, and, as I have noted, in response to the defenders’ assertion that the action has prescribed, they plead lack of awareness that they had suffered loss, until the decision of the Land Court was issued on about 24 July 2008. [19] Having regard to the terms of paragraph 47 of the joint minute, for the purposes of this proof I must proceed on the basis that, had the notices to quit been valid, they would have brought the agricultural tenancies to an end on 10 November 2005, on which day, according to the pursuers’ averments which are to be taken as established, the value of the fields would have increased by £200,000. (Closed record, pages 28D-29B) Further, the pursuers incurred fees and outlays for services provided by the defenders and other solicitors (Anderson Strathern) which they would not have incurred but for that breach. (Closed record, page 27 D-E) According to the evidence, which I accept, by letter dated 10 November 2005, the defenders advised the pursuers to consult other solicitors. (JB 85) Anderson Strathern were in place by 8 December 2005. (JB 98, fourth paragraph) Any fees incurred by the pursuers for services rendered by the defenders which they would not have incurred but for the defenders’ breach of contract were incurred before 8 December 2005, at the latest. In these circumstances, I hold it proved that the pursuers suffered loss, caused by the defenders’ breach of contract, by no later than 10 November 2005. [20] The question which then arises for determination is whether the defenders’ obligation to make reparation to the pursuers became enforceable on a date after 18 May 2007, i.e. within five years of the date on which this action was raised, on the view that the pursuers were not aware or could not with reasonable diligence have become aware that they had suffered loss before then. Parties were agreed that the burden of establishing postponement of the commencement of the prescriptive period lay on the pursuers. (See, e.g., Pelagic Freezing Scotland Ltd v Lovie Construction Ltd & Another [ 2010] CSOH 145 , Lord Menzies, at paragraph 86). [21] As is noted in paragraphs [8] and [18], the pursuers contend that they did not become aware that they had suffered loss until the Land Court issued its final determination. I agree with senior counsel for the defenders that it is not relevant that the pursuers may not have regarded legal expenses as a “loss” until that time. That introduces a subjective consideration which has no place in the application of section 11(3). The pursuers offer to prove that their loss included payment of money to their solicitors. The commencement of the prescriptive period was triggered when the pursuers became liable for fees and outlays and were aware that they were so liable, not when they became aware that they had sustained a compensatable loss in the reparation sense. That was the pre- Morrison understanding of the law. The questions which fall to be asked in this case are: (i) as a consequence of the defenders’ breach of contract, did the pursuers incur expense which would otherwise not have been incurred? If so, (ii) were the pursuers aware that such expense had been incurred? If so, (iii) when did the pursuers become so aware? Having regard to the terms of article VII of the condescendence, the answer to the first two questions is “yes”. In answer to the third question, the pursuers were aware, well before 18 May 2007, that such expense had been incurred. It is a matter of agreement that, by 17 February 2006 at the latest, the pursuers had incurred “material expense in relation to” the Land Court applications. There can be no suggestion that the pursuers were unaware of having incurred such expense at the time when it was incurred. They paid the bills. The pursuers’ obligation to meet their solicitors’ fees and outlays was not latent damage. [22] I am conscious that I have made no finding on the question whether the pursuers were aware or could, with reasonable diligence, have become aware, before 17 May 2007, that they had incurred a loss on 10 November 2005, by way of a diminution in the value of the land. There was neither evidence nor argument directed specifically to that point. Since the onus of establishing lack of awareness, actual or constructive, lay with the pursuers, it may be said that they have failed to do so in respect of that element of loss. I prefer, however, to rest my decision on the pursuers’ actual knowledge that they incurred expense and paid fees well before 18 May 2007. [23] For the foregoing reasons, I shall sustain the defenders’ fifth plea-in-law, and pronounce decree of absolvitor. I shall award the expenses of process, except insofar as already dealt with, to the defenders. Appendix 1 IN THE COURT OF SESSION OUTLINE SUBMISSIONS FOR THE PURSUERS in the cause MS LINDA ANNE GORDON, residing at 3 Netherblane, Blanefield G63 9J, WILLIAM ANDREW STRATHDEE GORDON, residing at The Mount, 29 Craigmiller Avenue, Milngavie, Glasgow, G62 8AX, and JAMES WATSON STEEL LAING, C. A., French Duncan LLP, MacFarlane Gray House, Castlecraig Business Park, Springbank Road, Stirling FK7 7WT, as the Trustees of the Inter Vivos Trust of the late WILLIAM STRATHDEE GORDON PURSUERS against CAMPBELL RIDDELL BREEZE PATERSON LLP, Solicitors, having a place of business at Floor 7, 80 St Vincent Street, Glasgow, G2 5UB DEFENDERS The Pursuers ask the Court to refuse the Defenders 5 th Plea-In-Law, and to allow a proof before answer in respect of the Pursuers and Defenders remaining Pleas-In-Law. Section 11, Prescription and Limitation (Scotland) Act 1973 11.— Obligations to make reparation. (1) Subject to subsections (2) and (3) below; any obligation (whether arising from any enactment, or from any rule of law or from, or by reason of any breach of, a contract or promise) to make reparation for loss, injury or damage caused by an act, neglect or default shall be regarded for the purposes of section 6 of this Act as having become enforceable on the date when the loss, injury or damage occurred. (2) Where as a result of a continuing act, neglect or default loss, injury or damage has occurred before the cessation of the act, neglect or default the loss, injury or damage shall be deemed for the purposes of subsection (1) above to have occurred on the date when the act, neglect or default ceased. (3) In relation to a case where on the date referred to in subsection (1) above (or, as the case may be, that subsection as modified by subsection (2) above) the creditor was not aware, and could not with reasonable diligence have been aware, that loss, injury or damage caused as aforesaid had occurred, the said subsection (1) shall have effect as if for the reference therein to that date there were substituted a reference to the date when the creditor first became, or could with reasonable diligence have become, so aware. (4) Subsections (1) and (2) above (with the omission of any reference therein to subsection (3) above) shall have effect for the purposes of section 7 of this Act as they have effect for the purposes of section 6 of this Act;[...] 1 As is made clear in Dunlop v McGowan's , 1980 SC (HL) 73 [see Lord Keith of Kinkel, pages 80-81], an obligation to make reparation for loss and damage is a single and indivisible obligation. Only one action can be brought to enforce it. The right to raise the action commences on the concurrence of iniuria and damnum . The cause of action accrues when any actionable loss is sustained. If the obligation has prescribed, no action having been commenced within five years of that moment, it has prescribed for all purposes, even if some loss has occurred at a later date. In Dunlop v. M'Gowans it was held that the date from when the obligation to make reparation first becomes enforceable for the purposes of Section 11(1) was the date from which the Pursuer was unable to get possession as per the Notice to Quit (being Whitsunday 1971). In the present case the Defenders aver that there was a concurrence of damnum and inuria as at 8th November 2004 failing which 10 th November 2005. It is submitted that following Dunlop v McGowan’s , for the purposes of Section 11(1) of the 1973 Act the relevant date from which the prescriptive period runs is from 10 November 2005. The present action was served on the Defenders on 17 May 2012 [Joint Minute, paragraph 45]. The Pursuers in the present action submit that the action is not time-barred as they were not aware, and could not with reasonable diligence have been aware, that loss, injury or damage caused by an act, neglect or default had occurred (1973 Act, Section 11(3)). In David T Morrison & Co Ltd (t/a Gael Home Interiors) v ICL Plastics Ltd & Ors (Scotland) , 2014 SC (UKSC) 222 it was held by the majority that for the purposes of Section 11(3) the pursuer only has to be aware of having suffered a loss which had in fact been caused by an act, neglect or default [Lord Reed, paragraphs 16, 19, 32; Lord Neuberger of Abbotsbury, paragraph 47]. It is submitted that in determining whether the action has been raised against the Defenders within the prescriptive period allowed by Sections 6 and 11 of the 1973 Act, the appropriate starting point is still to consider what is the act that is complained of which is said to give rise to a loss ( Johnston v The Scottish Ministers , 2006 SCLR 5 at paragraph 17; Warren James (Jewellers) Limited v Overgate GP Limited , [2010] CSOH 57 at paragraph 6). It is submitted that this is a matter of logic because there cannot be a loss without a prior act which gave rise to that loss. As it was put by Lord Keith in Dunlop v McGowan's at p. 81 - " In the present case the loss, injury and damage flowing from the respondent's negligent omission occurred at Whitsunday 1971 when the appellant, but for (emphasis added) that omission, would have obtained vacant possession of the premises ." It is submitted that this is also consistent with the decision of the Supreme Court in David T Morrison & Co Ltd (t/a Gael Home Interiors) v ICL Plastics Ltd & Ors (Scotland) [2014] SC (UKSC) 222 . Therefore under Section 11(3) a pursuer needs to have knowledge of damnum (occurrence of a loss) caused by injuria (an act). In Morrison v ICL Plastics the pursuer was aware of the act (the injuria) being the explosion causing damage to the building, and at the same time aware of having suffered a loss (the damnum), being the damage to the building. The pursuer therefor had 5 years to (a) investigate whether, in light of knowledge of the loss caused by the explosion, there was an obligation to make reparation arising from enactment, rule of law or breach of contract and (b) bring an action. The Pursuers position is that they were not aware, and could not with reasonable diligence have been aware, that they had suffered a loss through breach by the defenders of an implied term of contract [ Mr Gordon ]. The Defenders position is that the Pursuers suffered a loss as at 10 November 2005 because (i) the Pursuers were aware that the tenant of the three fields was not going to remove and therefore would incur irrecoverable legal expenses to have him remove (Answer 8, page 44C – 45B); (ii) the fact that in the course of the Land Court proceedings the tenant challenged the efficacy of the Notices to Quit dated 8 November 2004 (Answer 8, page 45B – C, D – E); (iii) the tenant having registered notice of an interest in the three fields under Section 25 of the Agricultural Holdings (Scotland) Act 2003 (Answer 8, page 45C – D); (iv) various discussions with Anderson Strathern concerning possible claims against the Defenders Answer 8, page 46B – 47B). The tenant’s failure to remove It is submitted that the tenant’s failure to remove does not of itself mean that the Pursuers should have been aware at 10 November 2005 that they had occurred a loss for the purposes of the 1973 Act. It is an understood fact of life that there will always be cases where a tenant of a property decides not to remove and legal action will be required to enforce the landlord’s right to recover possession. The tenant’s refusal to leave might be ill-founded, or may be tactical in order to make life difficult for the landlord and to extract a concession or benefit from the landlord that could not be obtained by simply packing up and leaving as required to do. Those possible explanations for a tenant’s refusal to leave were supported by the evidence of Ms Stephen and Mr Fox, with Mr Fox indicating that in his view this was an explanation for the tenant’s response in this particular case. It is submitted that there is some support for that explanation in the productions, for example JB, Production 67 refers to an Opinion of Senior Counsel that the right of occupation does not rely on the Lease Agreements referred to in the 8 November 2004 Notices to Quit, there is no statement as to what the lease arrangements actually are, and instead of simply indicating that the tenant would refuse to remove and defend any subsequent proceedings to enforce removal, the tenant offers to negotiate new arrangements. The subsequent statement that the negotiation would be from a position which is considered to be secure does not alter the fact that the tenant is seeking to open negotiations. Subsequent developments also indicate that the tenant was looking to negotiate, for example JB, Production 73 where the tenant was looking for a new 25 year tenancy followed by tacit relocation, or alternatively payment of a sum of money. Regardless of the tenant’s motivation, the only ‘loss’ that the Pursuers were able to anticipate as at November 2005 was the inevitable irrecoverable expense incurred in future proceedings to recover possession of the land. This was a matter spoken to by Ms. Stephen who confirmed that even where the landlord was completely successful in such proceedings, not all the expenses of a litigation could be recovered. It is submitted that so far as the present action is concerned this irrecoverable expense was not a ‘loss’ for the purposes of Section 11 of the 1973 Act. The loss which did arise in relation to these proceedings was that portion of the expenses of the process which would otherwise have been recovered. Those anticipated recoverable expenses did not become a loss, and the Pursuers would not have been aware of having suffered that loss, until the Scottish Land Court issued its decision on 24 July 2008. Before then there was nothing more than the possibility that any expense incurred by the Pursuers would be greater than the sum they might otherwise recover if they were successful. The challenges to the Notices to Quit The Defenders position is that the Pursuers: (a) were warned that the tenant had advice that the Notices to Quit were not the basis on which the tenant occupied the ground [ JB Production 67 ]; and (b) the proceedings in the Scottish Land Court were challenged, and certain arguments were allowed to proceed to a proof before answer (including a plea-in-law directed to the validity of the Notices to Quit) [ JB Production 275 ]. As has been noted already, the notification that the tenant had been given advice which justified ignoring the notices to quit was also accompanied by an offer to negotiate a new agreement. Where the present position was that the tenant had a secure position protected for generations to come, the early offer to negotiate a different arrangement is something that questions how certain the tenant’s position is. That was followed up by an indication from Turcan Connell that the tenant’s position was less certain in respect of the main grazing lease [JB Productions 71, 73 ], which was the opposite position of the advice later received from Anderson Strathern [ Mr Fox ]. It is submitted that in light of the general advice the Pursuers were given they were entitled to consider that they would ultimately be successful. It is submitted that simply because a defender in an action raises a number of issues in which it is asserted that the pursuer’s action ought to fail for a number of reasons (some of which may be very broadly stated), this does not mean that the pursuer is in a position to know that there has been a loss. None of the criticisms raised by the defender might have any validity, in which case the action will succeed and there never was and never will be a ‘loss’. The alternative would mean that in order to prevent a risk of prescription arising in long running litigation either party in that litigation might have to raise speculative actions against their current professional advisers founding on a point being argued against them, but without any knowledge as to whether the point might succeed or fail. Your advisers might tell you that they believe that the point being taken is without merit, but that they cannot guarantee success in the litigation. In such actions you would not be able to identify the correct injurious act you are founding upon because it had not yet (and might never) be identified in the current dispute as a problem, and no loss might actually be incurred. It is submitted that it is clear from the evidence that the Trustees personally did not have any reason to consider that the 8 November 2004 Notices to Quit were invalid or were likely to be found to be invalid [ Mr Gordon ]. Mr Fox advised at the outset that as far as he could see the Notices to Quit were perfectly valid [ JB Production 98, page 2 ]. When asked if he believed that there was any serious possibility that the Applications for the 50 acre and 40 acre fields would not succeed he said ‘no’, he was very hopeful that they would succeed. In March 2006 he did not think that there was any substantive merit to any of the tenant’s defences. He further gave evidence that in respect of the Answers lodged for the tenant, whilst there were points which caused him concern, his view was that the problematic case was the Application for the main grazing lease area (SLC/19/2006), and that he was happier about the Applications for the 50 acre field (SLC/18/2006) and the 40 acre field (SLC/20/2006). When the tenant’s pleadings made averments challenging the validity of the Notices to Quit due to events in 1997, the Pursuers were assured that there was an answer to the points being raised about the leases [ Production 156, page 2 ]. At no time before the penultimate day of the hearing before the Scottish Land Court (15 May 2008) did either Ms Stephen or Mr Fox consider that these applications might not succeed because the Notices to Quit were addressed to a person on the basis that they were a Trustee for a Firm which no longer existed and that the lease which gave the tenant possession must have come into being when the former Firm had come to an end. Mr. Fox’s impression was that the tenant’s solicitor had not appreciated the point before the second last day of the hearing. At no point had the Pursuers been warned about this being a problem [ Ms Stephen; Mr Gordon; Mr Fox ]. The Section 25 Notices It is submitted that registration of these Notices cannot of themselves amount to awareness of a loss without knowledge also that the Notices were not capable of being removed from the Register of Interests in Land and the tenant would be able to have the benefit of these Notices in the future. The Notices themselves are dependent upon the tenant being a secure agricultural tenant, and the Notices would be deleted from the Register if the tenant was found not to have a tenancy of an agricultural holding or was removed as tenant from the holding [ Ms Stephen; Mr Fox ]. Therefor until the Pursuers knew that the Applications in respect of the 50 acre field and the 40 acre field were unsuccessful they were not aware that they had suffered a loss. Discussion of possible claims against the Defenders It is submitted that the evidence shows that the Gordons’ complaints about the Defenders had nothing to do with the 8 November 2004 Notices to Quit. They were general complaints about the way that the Defenders had handled matters previously [ Ms Stephen ; Mr Gordon ]. In so far as they were specific, they concerned the fact that the tenancies of the 50 acre and 40 acre fields had been allowed to become agricultural holdings, that the 2003 Notices to Quit had not been served far enough ahead to allow an incontestable Notice to Quit to be served under Section 22(2)(a) of the Agricultural Holdings (Scotland) Act 1991 and that the 2003 Notices to Quit could not be enforced if they were challenged. Once it became apparent that there was a possibility that any previous failing which gave rise to Mr. Craig having security of tenure also meant that a deal might have to be done with Mr. Craig, or that money might be required to ‘buy out’ Mr. Craig, there was a conflict of interest between the Defenders and the Trust due to Mr. McGill being both a partner in the Defenders and a Trustee in the Firm. He therefore required to resign as a Trustee and the Defenders had to advise the Trust to look elsewhere for advice [ JB Production 44 , page 8 (“ if as part of that negotiations any money had to change hands ”); JB Production 85 , pages 1-2 (“ whether the initial termination notices served ... have created any difficulty terminating the leases as such ”)]. None of those matters had any bearing on, or arose from any issue as to, the validity of the 2004 Notices to Quit. Prior to, and even after the hearing itself, claims against the Defenders were being discussed in the context of what had been done or not done upto and including the 16 July 2003 Notices to Quit [ JB Productions 85; 96 (pages 4-5) ; 98 (pages 4-5) ; 116 (page 2) ; 137 (page 3, “ a negligence action in this situation would be extremely difficult for the reasons previously stated ”) 201; 212; 215 ]. The first discussion which did take place looking at losses which arose from the 2004 Notices to Quit happened only after the hearing before the Scottish Land Court [ JB Production 212 ]. In conclusion it is submitted that none of the matters raised by the Defenders establishes that there was any actual loss caused by a defect in the 8 November 2004 Notice to Quit which the Pursuers were aware of prior to the decision of the Scottish Land Court dated 24 July 2008. The present action was accordingly brought within the prescriptive period permitted by Section 11(3) of the 1973 Act. Appendix 2 IN THE COURT OF SESSION NOTE OF SUBMISSIONS FOR THE DEFENDERS in the cause MS LINDA ANNE GORDON, residing at 3 Netherblane, Blanefield G63 9J, W ILLIAM ANDREW STRATHDEE GORDON, residing at The Mount, 29 Craigmiller Avenue, Milngavie, Glasgow, G62 8AX, and JAMES WATSON STEEL LAING, C. A., French Duncan LLP, MacFarlane Gray House, Castlecraig Business Park, Springbank Road, Stirling FK7 7WT, as the Trustees of the Inter Vivos Trust of the late WILLIAM STRATHDEE GORDON PURSUERS against CAMPBELL RIDDELL BREEZE PATERSON LLP, Solicitors, having a place of business at Floor 7, 80 St Vincent Street, Glasgow, G2 5UB DEFENDERS MOTION The court is invited to sustain the defenders’ fifth plea-in-law and to assoilzie the defenders. The court is also invited to award the expenses of the action against the pursuers. OUTLINE The defenders’ submissions will be set out follows: A: REVIEW OF THE EVIDENCE The 2003 Notices Legal and factual complexity surrounding the leases Period after 2004 Notices served Land Court proceedings Land Court decision Proceedings against the defenders B: SUBMISSIONS The losses Prescription and Limitation (Scotland) Act 1973 The date of the negligent act The date the loss arose: section 11(1) Postponement under section 11(3) The pursuers’ approach The defenders’ approach Two wider considerations A: REVIEW OF THE EVIDENCE (i) The 2003 Notices In understanding the advice that was tendered in relation to a potential claim against the defenders, it is important to understand the background to the 2003 notices to quit (“the 2003 Notices”). The genesis of the 2003 Notices can be found in the letter dated 28 th May 2003 from Max McGill to Mr Gordon (JB8). It is clear from the letter dated 10 th July 2003 (JB10) that Mr McGill advised Mr Gordon that any notices to quit that required the tenant to vacate at the natural ish of the 40-acre and 50-acre leases would not provide sufficient notice in terms of the Agricultural Holdings (Scotland) Act 1991 (see also JB15). Nevertheless, Mr Gordon specified (JB228) that notices should be served specifying an ish date of 10 th November 2003. Mr McGill complied with that request (JB11). It ought therefore to have been clear to Mr Gordon –and it certainly was to Anderson Strathern (cf. Mr Fox’s and Ms Stephen’s evidence)– that the Trust would have no cause of action against the defenders in relation to any defects in the 2003 Notices. They were served in the hope that the tenant would not take legal advice and would remove at the specified date. As was known to the Trust and Anderson Strathern, they would not provide the basis for a court order to remove. It is also of note that the 2003 Notices (JB1 1) were addressed to and served on John Craig as an individual and that counter-notices were served on behalf of Mr Craig as an individual (JB 12). (ii) Legal and factual complexity It is clear that the manner in which the leases over the three fields were originally created and then continued made clear legal and factual analysis of the situation in 2003 and 2004 extremely difficult. The Trust sought advice from both junior and senior counsel in relation to how the tenant might be removed (see JB23, JB24, JB25, JB26, JB31, JB34, JB50, JB56, JB62). Not only were the 2003 Notices defective, notices to quit dated 4 th November 2004 were prepared and served (JB33), but these were also subsequently considered to be defective. As a result, new notices dated 8 th November 2004 were served (“the 2004 Notices”). The difference between the two sets of notices in 2004 appears to be the deletion of the words “the term” – see JB60. Mr Fox explained in his evidence that notices to quit can fa il on issues of detail. This lack of legal and factual clarity gave rise to a number of issues: How had the original leases or lets been continued? Was there security of tenure of each or any of the fields? What parts of the fields had been sold off or resumed? Who was the landlord? Were there joint landlords? Were the landlords infeft (see, e.g., JB155)? Who was the tenant? A firm or an individual? What earlier notices to quit had been served and had the tenant vacated the holdings? Had rent been accepted after the leases had purportedly come to an end? 12. It can be seen that some, if not all, of these issues related to the four cardinal elements of a lease: rent, duration, subjects and parties. The issues also related to Form H2 per the Ordinary Cause Rules, which is in the following form: “FORM H2 Form of notice for removal To ( insert name, designation and address of party in possession ). You are required to remove from ( describe leases ) at the term ( or if different terms, state them and the subjects to which they apply ), in terms of lease ( describe it ) [or in terms of your letter of removal dated ( insert date ) [or otherwise as the case may be]. Date ( insert date ) Signed ( add designation and address )” 13. These, and other, issues were raised in the context of the Trust’s attempt to remove the tenant on the back of the 2004 Notices. Any one of these issues had the potential of rendering the 2004 Notices invalid or inept. Indeed, by the time of submissions after proof, many were still outstanding. At paragraph 33 of the Scottish Land Court’s decision (JB290), senior counsel summarizes the issues covered by his “heads of argument”, and these were stated to be: “1. Parties Ð identity of landlord JB49 (p2) : Mr Gordon is recorded as having raised the issue of prescription JB83: Mr Gordon raised an issue about the prescriptive period. JB137: he did not want to compromise the claim against Mr Craig in case that had a knock-on effect on any claim he might have against the defenders. B: SUBMISSIONS (i) The losses 42. The losses the pursuers claim in article 7 of condescendence (which for purposes of the preliminary proof are accepted as having been established: Joint Minute §47) consist of two main elements, briefly summarized as follows: Legal expenses and outlays paid to the defenders and other solicitors for their work in relation to the invalid Notices to Quit and proceedings in the Scottish Land Court, including the expenses paid to the tenant in the Scottish Land Court proceedings. Loss of the opportunity to recover vacant possession of the 50 and 40 acre fields free of secure agricultural tenancies; the ability to exploit the development potential of those fields; an immediate uplift in the value of those fields of £200,000; and the ability to enter into an options agreement for development and payments under such an agreements. (ii) Prescription and Limitation (Scotland) Act 1973 Parties Ð identity of tenant The lease Ð what is it? Form of Notice to Quit Infeftment Recklessness and oppression”. 14. Even after the debate, some time was spent sorting out a challenge that had arisen late on, based on the non-infeftment of the trustees. And after the proof, the acceptance of rent issue still required to be dealt with (e.g. JB204), including by means of the Trust proferring a minute of amendment on the issue (JB205, JB206, JB207). 15. In light of these numerous issues, it is submitted that the Court should treat with caution any evidence led by the pursuers to the effect that there was a high degree of confidence and optimism that the tenant would remove as at 10th November 2005 or, at the very least, would succeed in the Scottish Land Court. The lawyers involved gave cautious advice to the Trust and they were right to do so. The failure to serve counter notices was prima facie a helpful point for the Trust; however, that would not prevent a challenge to the validity of the notices, particularly in circumstances where the factual background to the leases was unclear. 16. This point is amplified by the extent to which previous counsel had been involved in giving detailed advice in relation to the leases and the drafting of the notices to quit. Indeed, Mr Gordon suggested the reason that he left the defenders was that he lacked confidence in their ability as agricultural lawyers. 17. It is also amplified by Mr Fox’s evidence in which he accepted that a lack of detailed knowledge of what had happened in the past rendered the 2004 Notices vulnerable (e.g. there was an “Achilles heel” and there was doubt about the identity of the tenant – see below). (iii) Period after 2004 Notices served As at 1 st December 2004 (JB44), the Trust knew that the defenders considered that they had a conflict of interest in continuing to represent the Trust in relation to its land interests in Killearn and that independent advice should be sought (pages 8 and 9). The Trust raised the issue of prescription in relation to any claim the Trust may have had against the defenders (JB49, p2). Mr Gordon was forwarded a Note by Senior Counsel dated 16 th December 2004 (JB50) which confirmed that, “Failure to serve a Counter Notice does not of course prevent arguments that the Notice to Quit was for some reason ineffective or that there was no right under the lease to bring it to an end at the chosen date”. Senior counsel’s advice of 18 th March 2005 (JB56) suggested there was something to be said “for drawing out the tenant’s arguments prior to November this year so further consideration might be given as a fallback if necessary to further notices to quit”. Following senior counsel’s advice, steps were taken to flush out the tenant’s position(JB57). By letter dated 5th July 2005, the tenant’s agents had indicated that the tenant had taken senior counsel’s Opinion. On the basis of that Opinion, it was stated in the letter that, “our client considers that his right of occupation does not rely on the Lease Agreements in respect of which Notices were issued in November of last year. If in fact, as Counsel advises, our client is in a secure position then the termination of these Leases is not relevant.” This is essentially what the Scottish Land Court determined. By letter dated 29 th September 2005 (JB70), Mr Leggett of the defenders wrote to Mr Gordon indicating it was clear that a negotiated settlement did not seem to be possible and that he would instruct senior counsel to institute the necessary proceedings. Soon afterwards, Mr Hansen of Savills contacted the defenders on behalf of the tenant “looking for development uplift” (JB70 and JB71). He was described as being “bullish about both types [of lease] but on further discussion may be less bullish as regards the grazing lease”. Mr Kermack of Turcan Connell then contacted the defenders. Evidence was given by Mr Fox and Ms Stephen that both Mr Kermack and Turcan Connell are well respected in the field of agricultural law. Mr Kermack is a accredited by the Law Society as a specialist in agricultural law. Mr Kermack was described as being very “bullish” and “more confident of their position so far as the 40 and 50 acre leases are concerned” (JB74). The level of compensation being discussed at that stage for Mr Craig was “one half of the difference between vacant possession value of the land and tenanted value.” (JB74, p2). By letter dated 1st November 2005 (JB75) Turcan Connell intimated section 25 notice applications on the defenders. The defenders considered this to be a defining point that necessitated their withdrawal from acting for the Trust (JB79, p1). The defenders wrote to Mr Gordon (JB85) withdrawing from acting, again raising the potential conflict of interest and referring to Mr Gordon’s “concerns regarding our firm”. A call took place between Mr Gordon and Linda Gordon and Mr Fox on 8 th December 2005 (JB96). Mr Fox explained that the 40- and 50-acre fields had probably “slipped into” agricultural holdings at some point in the past. It is also recorded that, “The only question on which AGF was not clear about was who was, in fact, the tenant, whether it was the Craig Partnership or Mr Craig as an individual. He thought it likely to be Mr Craig as an individual.” The issue of a claim in professional negligence against the defenders was also raised. Mr Fox expressed the view that the real issue was not the 2003 Notices because “the position had been compromised in relation to the 40 and 50 acres to the extent that, on the argument he had put forward earlier, the tenant had already acquired a full tenancy by the time the notices had been served”. Mr Fox then provided detailed advice by letter dated 9 th January 2006 (JB98). He flagged up the uncertainty about the lease arrangements over the 40- and 50-acre field leases, suggesting the later Minutes of Agreement might be regarded as sham arrangements. The inept notices in 2003 were not the problem. Mr Fox provided advice that it was “open” to the Trustees to argue that the 40 and 50-acre leases had been brought to an end by the serving of the 2004 Notices and the failure to serve counter-notices. He then went on to say: “you will, I’m sure, appreciate that nothing is certain in this life and I cannot, of course guarantee that the argument that the tenancies have been terminated will, at the end of the day, succeed; and, indeed, even though the tenant did not serve counter-notices in order to invoke the jurisdiction of the Land Court, it would still be open to the tenant to challenge the validity of the Notices to Quit, as such.” Mr Fox then confirmed his view that the 2004 Notices were valid and that on a balance of probability he would expect the Land Court to declare that the tenancies had come to an end as at 10 th November 2005. However, in his evidence, Mr Fox accepted that there were a number of legal and factual uncertainties that had arisen in the context of the 2004 Notices which had caused him concern. (iv) Scottish Land Court proceedings Answers to the Applications were received in March 2006 (JB1 13): “Each set of answers contests the validity of the Notice to Quit and one says the Lease was a sham.” Mr Fox confirmed that the purpose of appointing an agricultural consultant (JB1 17, p2) was to develop a case on abandonment and/or to obtain a certificate of bad husbandry as a fall-back position in the event that the 2004 Notices were invalid or had been departed from. Mr Fox also confirmed that the decision to employ senior counsel (JB124) had been made on the basis that the matter was not straightforward. Mr Gordon was anxious for senior counsel’s view as to whether or not the applications were worth fighting and, if they were “completely hopeless”, he would take a view (JB 125). The untainted optimism that Mr Gordon expressed in the witness box about his prospects is not reflected in the advice he was given or in the documents produced. The possibility of negotiating with the tenant in order to reach a compromise was something that was promoted by both the Trust’s agents and counsel throughout (JB126, p2; JB137, passim; JB138, p3; JB140; JB200; Mr Fox in cross-examination). Shortly before a hearing was due to take place, Turcan Connell intimated that they wished to introduce new averments challenging the validity of the 2004 Notices on various different grounds, including on the basis that the leases were terminated in 1996/7 and that the notices did not comply with the Sheriff Courts (Scotland) Act 1907 (see JB 131, JB 133). Another challenge was that the sale of parcels of land meant there were joint landlords. An important consultation took place on 10 th October 2006 at which the latest adjustments were considered. It was confirmed at that consultation that Mr Craig senior had died in the late 1 990s. At the consultation, senior counsel is recorded as saying that he thought the Trust should perhaps negotiate with Mr Craig. Mr Fox suggested offering a Limited Duration Tenancy. Mr Gordon did not want to negotiate. There was a discussion about the claim against the defenders. It is clear that the potential claim against the defenders at least encompassed the 2004 Notices. Mr Fox referred to the tenant’s argument on validity as being “a real Achilles heel” and to the “doomsday scenario” of cementing the tenant to the land in the event of failure. In the follow -up letter to the trustees (JB 138), reference is made to what would be involved in an attempt to remove the tenant on the basis of a certificate of bad husbandry. The advice was still that there were “reasonable prospects of being successful”, but that there were “no guarantees”. The letter at page 3 also makes it clear that the discussion of proceedings against the defenders was in relation to the 2004 Notices. After the adjustments, there was a diet of debate. The Trust was seeking decree de plano (JB 151) but this was refused. Two arguments were found by the Land Court to be appropriate for proof (JB275): the attack on the validity of the 2004 Notices and the proposition that the Trust had departed from the 2004 Notices by accepting rent. The respondent’s pleas in law can be found at JB265, including “The purported notices to quit, having failed to correctly describe the lease are therefore invalid and of no effect.” After the debate an issue arose as to whether or not the Trust was infeft at the time of the 2004 Notices. This was addressed by ensuring infeftment had taken place before the proof. Had infeftment not taken place before decree, effect would not have been given to the 2004 Notices. Further adjustment took place after the debate. There was no clear evidence as to when those adjustments were received by Anderson Strathern. The adjustments are dated “April 2007” and stamped as received by the Land Court on 7 th June 2007 (JB279). Ms Stephen’s evidence was that adjustments in relation to at least some of the applications had been intimated to them before they had been lodged with the Land Court. The further adjustments (JB279) contained further arguments attacking the validity of the leases, including the proposition that, “the parties to the 1992 Minute of Agreement were different from the parties to the 1983 Lease and the 1988 Minute of Agreement in that the Applicant alone was the tenant and not the firm of Messrs A&J C Craig” (page 3) and that “the notice to quit dated 8 th November 2004 is not a valid notice to quit, or alternatively, it is an inept notice to quit. Said notice does not comply with form H2 in the Schedule to the Sheriff Court (Scotland) Act 1907”. (v) Scottish Land Court’s decision It is important to note that the Scottish Land Court’s decision is not based on the fact that the notices to quit identify the incorrect tenant. All three of the 2004 Notices were addressed in the same way. The Notice relating to the grazing lease was upheld. The Scottish Land Court therefore did not hold the designation itself to undermine the validity of the 2004 Notices. The point the Scottish Land Court relied on was that the leases identified in the 2004 Notices relating to the 40- and 50-acre fields were not the leases that, as a matter of law , operated – see paragraphs 60 to 62 of the decision. This is because, standing the dissolution of the partnership, the original lease, which was granted to a partnership, could not have continued and tacit relocation could not have operated. This means that the plea-in-law included in the respondent’s pleadings since October was precisely in point: “The purported notices to quit, having failed to correctly describe the lease, are therefore invalid and of no effect”. It is unclear precisely the manner in which Mr Kermack came to frame his submission: Ms Stephen referred to an objection in the evidence, Mr Fox mentioned the point being made in final submissions. Either way, the Scottish Land Court took the view that the tenant’s pleadings were sufficient to allow the evidence to be led and the argument made. Indeed, Ms Stephen confirmed that the Scottish Land Court took a relatively relaxed approach to pleadings. In the decision on expenses after the proof (JB236), no discount is made by the Scottish Land Court in the expenses awarded against the Trust on the basis that the argument that succeeded had not been properly before the Court or had only been rate towards the end of proof. ( vi) Proceedings against the defenders The defenders had been the Trust’s solicitors since the time of Mr Gordon’s grandfather . Clearly, only in the face of something having gone seriously wrong would the defenders have decided to withdraw. Indeed, when Mr Gordon was first advised to obtain independent legal advice he chose not to. Mr Gordon gave evidence that the defenders had “done wrong”. His complaint was general: he wanted the tenant off the land and, it would seem, he held the defenders responsible for any difficulties in the way of getting him off the land. As was noted in the defenders’ letter to Mr Gordon dated 1 st December 2004 (JB44), “The present difficulties with all three leases arose due to circumstances arising prior to service of the Notices and well before the development with Walker Holdings was contemplated.” That letter goes on to suggest to Mr Gordon that he required to take independent legal advice because, “The practical and professional difficulty is that if we are asked to negotiate with Walkers and if as part of that negotiation any monies require to be settled on Mr Craig in order to achieve vacant possession that in turn may place my firm in a position of conflict of interest”. The possibility of the Trust raising proceedings against the defenders was raised early on and was a constant theme, even before the Scottish Land Court issued its decision . See: JB116 (pp1, 2), JB123, JB135 (p2); JB137 (p2) ; JB138 (p2); JB201; JB202; JB204 (p3); JB212, JB213, JB214, JB215, JB216, JB218. Indeed, instructions were given to raise proceedings before the outcome of the Scottish Land Court proceedings was known (e.g. JB201). Although it is not always clearly specified what the basis of the action against the defenders was to be, it is clear that the discussions that took place in the October 2006 consultation encompassed the 2004 Notices. In particular, at the consultation on 10 th October 2006 and in Anderson Strathern’s letter following it (JB 137, 138), it is clear that the claim against the defenders was being discussed in the context of Notices against which no counter-notices had been served: those can only have been the 2004 Notices. It is clear that Mr Gordon in particular had a degree of sophistication in relation to legal matters: The pursuers’ claim for these losses is founded on the defenders’ breach of contract: article 6 of condescendence (for purposes of the preliminary proof these averments are also accepted as having been established: Joint Minute §47). 44. The following propositions should be uncontentious: The obligation on which the pursuers’ claim is founded is subject to the five-year prescription in terms of section 6(2) of, and Schedule 1 paragraph 1(g) to, the Prescription and Limitation (Scotland) Act 1973 as an ‘obligation arising from, or by reason of any breach of, a contract or promise…’. That obligation began to prescribe, by virtue of section 6(3) of the 1973 Act, when it became enforceable: ‘In subsection (1) above the reference to the appropriate date, in relation to an obligation of any kind specified in Schedule 2 to this Act is a reference to the date specified in that Schedule in relation to obligations of that kind, and in relation to an obligation of any other kind is a reference to the date when the obligation became enforceable.’ An obligation to pay damages for breach of contract becomes enforceable on the date when the loss injury or damage occurred, as provided by section 11(1) of the 1973 Act: ‘(1) Subject to subsections (2) and (3) below, any obligation (whether arising from any enactment, or from any rule of law or from, or by reason of any breach of, a contract or promise) to make reparation for loss, injury or damage caused by an act, neglect or default shall be regarded for the purposes of section 6 of this Act as having become enforceable on the date when the loss, injury or damage occurred.’ The date on which such an obligation becomes enforceable is postponed if the pursuer is able to bring himself within section 11(3) of the 1973 Act: ‘(3) In relation to a case where on the date referred to in subsection (1) above (or, as the case may be, that subsection as modified by subsection (2) above) the creditor was not aware, and could not with reasonable diligence have been aware that loss, injury or damage caused as aforesaid had occurred, the said subsection (1) shall have effect as if for the reference therein to that date there were substituted a reference to the date when the creditor first became, or could with reasonable diligence have become, so aware.’ (iii) The date of the negligent act In essence, the pursuers’ claim set out in article 6 is to the effect that the defenders failed in their contractual duties to ensure that the 2004 Notices correctly identified the lease and tenant of the subjects of let; and to serve 2004 Notices in the correct terms. The 2004 Notices were served on 8 th November 2004. They required the tenant to remove at 10 th November 2005. Had the Notices to Quit been valid, the pursuers would have been entitled to recover possession of the subjects on 10 th November 2005. Accordingly, the defenders’ wrong or negligent act took place at latest on 8 November 2004. (iv) The date the loss arose: section 11(1) Leaving the issue about the pursuers’ knowledge until section (v), the defenders submit that the date on which the pursuers sustained loss - and therefore the date on which the defenders’ obligation to make reparation to them began to prescribe, was 8 th November 2004 – or, alternatively, 10 th November 2005,Since these dates are both well over five years before the summons in the present action was served – 17 th May 2012 per Joint Minute §45 – for the purposes of the argument on prescription it makes no difference which of these dates the court prefers. th November 2004 : this is the date on which the pursuers were tied into loss through their reliance on the 2004 Notices, which were invalid because they referred to leases which no longer existed. Loss followed on the defenders’ wrongful act when the notices were served: at that point the pursuers were relying on the notices to attempt to secure the tenants’ removal; on the evidence, it is clear that the tenant had no intention of removing voluntarily. This being so, once the defective notices were served, the pursuers were bound to sustain loss, at the very least to the extent of the legal expenses in trying to uphold the validity of the notices, in other words loss and damage of the kind for which the pursuers conclude in the present action. th November 2005 : this is the date on which, had the 2004 Notices not been invalid, the pursuers would have been able to recover possession. If the court were not satisfied on the evidence that, as at 8 th November 2004, it was clear that the tenant did not intend to remove voluntarily, then at any rate on 10 th November 2005, the date at which the tenant was required by the 2004 Notices to remove, it was beyond doubt that the pursuers had no option but to resort to legal proceedings to remove him. Such proceedings would inevitably involve an element of irrecoverable legal expense for the Trust, in other words loss and damage of the kind for which the pursuers conclude in the present action. Dunlop v McGowans 1980 SC (HL) 73 is a decision with some factual similarities, notably that the landlord was unable to recover possession of leased subjects on a particular date because the Notice to Quit had not been served in time. The House of Lords held that it was on the date when the landlord ought to have been able to recover vacant possession (i.e. the date on which the Notice required the tenant to remove) that the loss occurred. The court rejected any distinction between ‘pecuniary’ or actual loss and ‘potential loss’ and held that time ran from the date when a quantification of loss could be made, even although at that date only an estimate of the loss was possible (pp 79, 81). (v) Postponement under s 11(3) If the pursuers establish that the date on which they first became, or could with reasonable diligence have become, aware that loss, injury or damage had occurred was a later date than the one identified under section 11(1), prescription runs from that later date. The onus is on the pursuers to establish this later date. This does not appear to be in dispute and is consistently vouched in the authorities, such for example as Pelagic Freezing Scotland Ltd v Lovie Construction Ltd & Another [2010] CSOH 145 per Lord Menzies at § 86: ‘… In the present case the parties are agreed that in relation to factors which might delay the running of the prescriptive period by reason of section 11(3) or section 6(4) of the 1973 Act, the onus rests with the pursuers. This agreement appears to me to be well-founded, and is consistent with the language of the sections and with authority such as Glasper v Rodger [1996 SLT 44] and Britannia Building Society v Clarke [2001 SLT 1355].’ The defenders note that the pursuers have sought to discharge this onus by leadings evidence from only one of the trustees of the Trust. There were four trustees over the relevant period, being Mr McGill, Mr Gordon, Ms Gordon and Mr Laing. While the evidence shows that Mr Gordon took the lead in seeking to have the tenant removed and in dealing with the Trust’s various legal advisers, the court has not been provided with any evidence about what the other trustees knew about the Trust’s losses or when. (It might be noted that an averment is made on page 32 of the closed record that, “The pursuers have also been put to a considerable amount of inconvenience, worry and concern, and personal expense arising from the fault and negligence of the defenders.” JB80 and JB1 19 demonstrate some of the worry and concern experienced by Ms Gordon.) 53. In Morrison v ICL 2014 SC (UKSC) 222 the Supreme Court carried out a fundamental re-examination of section 11(3). Key points emerging from the case include the following: S 11(3) is concerned solely with latent loss injury or damage: § 25 S 11(3) allows postponement only where the pursuer is not aware of a matter of fact, that is the existence of the loss, injury or damage: §§ 19, 25, 47 It does not cover awareness of matters of law: §§ 26-8; 87, 89 (dissent) Therefore there is no postponement of prescription until a court determines that there has been a breach of duty: § 28 It is true that provisions on prescription can work harshly in the individual case, but they serve a wider public interest in legal certainty and avoiding the bringing of stale claims: §§ 54, 77 . ICL was concerned with a case of physical loss in the shape of a building damaged by an explosion. In the present case the issue is how the authoritative construction of s 11(3) set out in ICL applies to a case of economic loss. (vi) The pursuers’ approach To judge from article 8 of condescendence and the evidence led by the pursuers, their approach to s 11(3) is to say that what matters is awareness of the particular legal ground on which the 2004 Notices were held by the Land Court to be invalid. Accordingly, they plead that they did not know the 2004 Notices were invalid owing to the original leases having come to an end. Hence, they had the necessary awareness only when the decision of the Scottish Land Court was issued on 24 th July 2008. 56. This analysis is inconsistent with ICL on a number of grounds: The pursuers invoke s 11(3) on grounds that go beyond awareness of the existence of loss, injury or damage. ICL makes clear that s 11(3) is not concerned with matters of law; and that is why prescription is not postponed until there has been a determination by a court. This being so, the question when the pursuers knew the precise legal ground on which the Notices to Quit were held to be invalid cannot determine when prescription starts to run against their claim. Nor can the pursuers’ perceptions about the risks or prospects of litigation determine that question. For example, it was at one point thought that the application in relation to the grazing lease was the weakest of the three (see e.g. JB177, and the evidence of Mr Fox). That turned out to be wrong. But if the pursuers had lost all three applications, the pursuers’ perception of risk could not mean that the date on which prescription started to run was earlier for the lease in relation to which they had received pessimistic advice and later for the others. The pre- ICL case law explained the rationale of s 11(3) as meaning that time did not start to run until a pursuer knew that there was loss and that it had been caused by negligence: the 5 years were for the pursuer to identify the person concerned and bring his claim: see e.g. Dunfermline DC v Blyth & Blyth 1985 SLT 345. Following ICL , those 5 years will be for the pursuer to identify the existence of fault, who is responsible, and bring his claim: cf. ICL § 55. In the present case, 5 years are not needed from the date of the decision of the Scottish Land Court for the pursuers to investigate any of these essential elements of liability for their loss. (vii) The defenders’ approach Third, if the court is not satisfied that the appropriate date is 10 th November 2005, the court ought, it is submitted, to conclude that not later than 10 th October 2006 the pursuers were, or could with reasonable diligence have become, aware that loss injury or damage had occurred. The discussion at the consultation on that date indicated, among other things (JB 137, 138) that: Following ICL , the question is when the pursuers became aware that they had sustained loss injury and damage. As already noted, their losses as pleaded fall into two main categories. Legal expenses and outlays paid to the defenders and other solicitors . As noted in §34 of the Joint Minute, by 17 th February 2006 at latest, the pursuers had incurred material expense in relation to the applications to the Land Court (cf. also JB3 18 disclosing expenses of £34,724.19 as at 17 May 2007). In fact, once the pursuers knew that the tenant was not going to comply with the 2004 Notices (at latest 10 th November 2005), they knew they were going to sustain legal expense in proceedings to remove him, some of which would be irrecoverable. The pursuers may object that they did not regard the expenses as ‘loss’. The defenders submit that that is not relevant. If the issue were whether and/or when the pursuers regarded this as ‘loss’, it would introduce an additional factor of precisely the kind that ICL disapproves, namely knowledge not just of the simple fact of loss but of its characterization as ‘loss’ because it was caused by the fault of the defenders (as opposed, for example, to arising in the ordinary course of business). For essentially the same reason, while it is true that the pursuers might have sustained legal expenses even if there had been no negligence on the part of the defenders, that is not relevant. In suing the defenders for legal expenses, the pursuers thereby characterize them as ‘loss’. Loss of the opportunity to recover vacant possession of the fields; loss of an immediate uplift in the value of those fields of £200,000 together with future development potential . Once the pursuers knew that the tenant was not going to comply with the 2004 Notices, they knew that they could not recover vacant possession as at 10 th November 2005, and on their pleadings at that time they also sustained an immediate loss of £200,000. There is a single breach of duty in the present case, from which all the pursuers’ claimed losses flow. There is therefore a single date from which the prescriptive period begins to run, albeit the losses claimed are of differing character: see Dunlop v McGowans (above). Accordingly, in relation to all losses for which the pursuers conclude, the obligation on which the pursuers found in their claim began to prescribe on 10 th November 2005, for the reasons which have just been outlined and which are developed in the following paragraph. 62. While it is not for the defenders to establish the date on which the pursuers first became, or could with reasonable diligence have become, aware that loss injury or damage had occurred, they make the following submissions in relation to that date: First, that date is clearly not the date of issue of the decision of the Scottish Land Court. Even on the pursuers’ own evidence (Fiona Stephen), clear instructions had been given to raise proceedings against the defenders before that date (JB201). Second, as at 10 th November 2005 the pursuers could have raised an action against the defenders, concluding for damages on the basis that the defenders’ negligence had put them to expense and prevented them from recovering vacant possession as at 10 November 2005. It may be that, as in Dunlop v McGowans (above), at the date an exact and complete quantification of the pursuers’ losses could not have been made. But the starting date for prescription is not postponed until exact quantification is possible. This date is supported by the consideration that on it, as a matter of fact, the pursuers had actual awareness of the existence of material loss. While this date may seem early, it needs to be borne in mind that the defenders had since 1 st December 2004 known of the existence of a possible claim against the defenders in relation to their handling of the matter of securing removal of the tenant (JB 44). o The pursuers knew that the validity of the Notices to Quit was contested on substantial grounds. o They were advised that the Scottish Land Court proceedings were not straightforward and the stakes were high if they lost, and they were accordingly being encouraged to settle with the tenant. o They knew –and had since 1 December 2004 known– of a possible claim against the defenders, and their overall strategy was being considered in light of that possible claim (as confirmed by the evidence of Messrs Gordon and Fox). o They could at this time have raised a protective action, concluding for damages on the basis that the defenders’ negligence had put them to expense and prevented them from recovering vacant possession as at 10 November 2005. On these facts, it is legitimate to conclude that not later than 10 th October 2006 the pursuers were, or could with reasonable diligence have become, aware that loss injury or damage had occurred. (viii) Two wider considerations First, the broad purpose of s 11(3) is to prevent a pursuer losing his claim owing to the operation of prescription before he knows of its existence. The paradigm case for s 11(3) is latent damage in buildings. The pursuers’ pleaded losses cannot properly be described as ‘latent’. The pursuers knew that they had sustained them. Second, the defenders acknowledge that the plea of prescription may seem to involve unfairness in depriving a pursuer of his claim. Of course, he may well have another remedy available to him. But quite apart from that, as the Supreme Court recalled in ICL , prescription serves a wider public interest in legal certainty and in avoiding the bringing of stale claims. Indeed, ICL is a particularly striking case inasmuch as the court held that the courts had until then adopted an excessively broad and generous interpretation of s 11(3). The Supreme Court determined that the scope of s 11(3) was in fact narrower, even although it was aware that this would inevitably affect the rights of those who had relied on the interpretation of s 11(3) that had hitherto been generally accepted. BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII URL: https://www.bailii.org/scot/cases/ScotCS/2015/[2015]CSOH31.html