Renyana-Stahl Anstalt v MacGregor & Anor [2001] ScotCS 78 (29 March 2001)

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[1] In this petition the petitioners primarily seek rectification under section 8(1)(a) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 ("the 1985 Act") of a disposition which they granted in favour of the respondents in 1997. They also seek declarator on a related matter. The respondents plead that the petitioners' averments are irrelevant and lacking in specification. On that basis they seek dismissal of the petition. They also plead that the prayer for declarator is incompetent. On that basis they seek dismissal of that part of the prayer. The petitioners plead that the answers are irrelevant and lacking in specification, and that accordingly the prayer of the petition should be granted de plano. They also plead that certain passages in the answers are irrelevant and lacking in specification, and should be excluded from probation. The petition called before me for a hearing, and submissions were made in support of those pleas.

[3] It is convenient before turning to the circumstances on which the petitioners rely in making their application for rectification to note certain background circumstances which are disclosed in the pleadings and in respect of which the parties are not in dispute. The petitioners, who are a company incorporated under the laws of the Principality of Liechtenstein, are the owners of Drumlean Farm, Drumlean Estate, Aberfoyle. The disposition which the petitioners seek to have rectified was a disposition of subjects known as Glenclelland Bungalow, which was part of Drumlean Estate. The planning permission for the construction of Glenclelland Bungalow was conditional upon an agreement under section 50 of the Town and Country Planning (Scotland) Act 1972 providing that the occupant of the bungalow was to be "wholly or mainly employed in the management of Drumlean Estate". The respondents are husband and wife. The first respondent was employed by the petitioners as manager of Drumlean Estate. That employment came to an end in April 1999.

[4] The petitioners aver, and the respondents admit, that by missives of sale and purchase dated 9 May, 25 June, 8 August and 3 September 1996, as amended by further letters dated 19 February and 9 April 1997, the petitioners agreed to sell and the respondents agreed to purchase certain ground and the bungalow thereon known as Glenclelland Bungalow, at Drumlean Estate, Aberfoyle. The missives are Nos. 6/1-6 of process, and are incorporated in the petitioners' pleadings.

[5] The dispute between the parties arises out of the terms of clause (f) of the letter of 9 May 1996, which was in the following terms:

[6] It is further averred by the petitioners, and admitted by the respondents, that the respondents' agents prepared a disposition, which was forwarded to the petitioners' agents and thereafter engrossed; that the Disposition was duly executed in Germany on 14 April 1997; that the Standard Security was executed by the respondents on 10 March 1997; and that both deeds were recorded in the Division of the General Register of Sasines for the County of Perth on 12 May 1997. The Disposition is No. 6/7 of process, and it too is incorporated in the petitioners' pleadings.

[7] The passage in the Disposition with which the application for rectification is concerned was in the following terms:

There then follows a declaration that the provision quoted is to be a real burden. The passage quoted contains a number of obvious misprints. It seems clear to me that the word following "disponees" in the second line should be "or"; that the word following "effects" in the sixth line should be "on"; and that in the sentence dealing with the determination of market value some words (perhaps "provided that failing mutual agreement the appointment") have been omitted after the words "mutually appointed". These errors are, however, immaterial for the purposes of the issue debated before me.

[8] The petitioners aver, in article 3 of the statement of facts in the petition, that:

[9] The respects in which the petitioners seek to have the disposition rectified are identified in averment in article 4, and those averments are echoed in branch (1) of the prayer. In the first place the petitioners seek to have the disposition rectified by the deletion of the passage quoted in paragraph [7] above. In the second place, they seek to have inserted, immediately before the entry clause, the following:

[11] The respondents make one other averment about the terms of the missives on which reliance was placed in the course of argument. They quote Clause 13 of the Schedule to the letter of 9 May 1996, which was in the following terms:

and add the following averment: "The Missives accordingly cease (sic) to have any contractual effect prior to the raising of this action".

[12] The context of this aspect of the pleadings is the second part of clause (f) of the missive letter of 9 May 1996, which bears to bind the respondents to sell the subjects to the petitioners on certain terms "if [the first respondent] leaves [the petitioners'] employment prior to repayment of the sums due under the ... Standard Security". An obligation to substantially the same effect (although somewhat differently expressed) forms part of the passage which the petitioners seek to have added to the disposition by rectification. In branch (2) of the prayer of the petition the petitioners seek: "declarator that the said Alasdair MacGregor left his employment with the petitioners on 16 April 1999 within the meaning of the said Disposition as so rectified".

[13] The petitioners' averments about the termination of the first respondent's employment are to be found partly in article 5 of the petition, and partly in article 2. In article 5 it is averred that:

In article 2 there are a number of averments to the effect that the first respondent's performance of his duties was unsatisfactory. In particular, it is averred:

[14] The respondents answer those averments with an averment (in answer 5) that the first respondent did not leave his post as estate manager voluntarily, and (in answer 2) the following fuller account:

[15] The first submission made by Mr Clancy on behalf of the respondents (paragraph 1(a) of the respondents' Note of Argument) was that the petitioners' averments in support of their prayer for rectification were irrelevant, because, in the averment in Article 4 at page 13B-C, they founded on the common intention of the parties "at the time of executing the Disposition", whereas section 8 refers to "the common intention of the parties to the agreement at the date when it was made". The relevant issue for the purpose of rectification was thus the common intention of the parties at the time when the agreement was made, i.e. in this case when the missives were concluded, not the common intention at the time of execution of the disposition. The point, it was submitted, was not one of mere formality. There was room for the common intention to change between the date of the missives and the date of the disposition. The court should not rectify a recorded deed lightly. It was therefore incumbent on the petitioners to set out the basis of their prayer for rectification with clarity and precision. The essential elements of a case under section 8(1)(a) included (i) an averment that the antecedent agreement at its date expressed the common intention of the parties, (ii) precise averments as to what that common intention was, (iii) an averment identifying the document which failed to give expression to that common intention, and (iv) precise identification of the respects in which it so failed (c.f. Shaw v William Grant (Minerals) Ltd 1989 SLT 121, per Lord McCluskey at 121H). The petitioners had failed to address the essential question of common intention at the date of the missives by focusing in their averments on common intention at the date of the disposition. That concentration on the wrong date could not be overlooked. It was not appropriate that in an application of this sort pleadings should be given the latitude afforded to pleadings in, for example, an action of damages for personal injury.

[16] Mr Clancy's second submission (Note of Argument, paragraph 1(b)) was that in any event the petitioners' averments (at page 13B-C) of common intention at the date of the disposition were irrelevant, because they had averred elsewhere (Article 3, page 11B-D) that the signatory of the disposition, Mr Brach, had been in error as to its terms, and that the petitioners did not agree to the terms of the disposition as executed and recorded. I have to confess that I find this aspect of the submissions difficult to follow.

[17] The next submission that Mr Clancy advanced (elaborating on paragraph 2(b) of the Note of Argument) was to the effect that the petitioners' pleadings were irrelevant because, if the disposition was intended to give effect to the missives, the proposed rectification set out in the prayer did not accurately reflect the terms of clause (f) of the original offer. This submission fell into a number of parts.

In general, Mr Clancy submitted, the formulation of the rectification proposed could be characterised as an attempt to re-write the parties' bargain in a form more favourable to the interests of the petitioners.

[18] Next, Mr Clancy submitted (paragraph 3 of the Note of Argument) that there was no justification for deleting by rectification the passage in the disposition providing for the determination of value by an independent surveyor. It was not enough to justify rectification by deletion merely to point to the fact that the provision in question was not in the antecedent agreement. Some rationale for deleting it would require to be pled. The petitioners had offered no averments addressing that issue. Moreover, if rectified to that effect, the disposition would be left in a form which made no provision for determination of value in the event of a dispute. The provision for valuation was necessary for the validity of the option, since otherwise it would be unenforceable on the ground of uncertainty. Although the missives had suffered from the same defect, the court should, in the exercise of its discretion, refuse to rectify the disposition to such destructive effect.

[19] Under reference to paragraph 4 of the respondents' Note of Argument, Mr Clancy then argued that it was no longer open to the petitioners to seek to rely on the missives for the purpose of rectification. Clause 13 of the Schedule to the original offer (quoted in paragraph [11] above) provided that the missives would form a continuing and enforceable contract notwithstanding the delivery of the disposition, but would cease to be enforceable after a period of two years from the date of entry. Given the broad meaning given to such clauses in Smith v Lindsay & Kirk 2000 SC 200, it was not possible, once the missives had become unenforceable in terms of Clause 13, to place reliance on the missives as the antecedent agreement for the purpose of an application for rectification. Mr Clancy relied, in particular, on the following passages from the opinion of Lord President Rodger in that case:

Given that such was the effect of Clause 13, Mr Clancy submitted, the terms of section 8(2) - "the court shall be entitled to have regard to all relevant evidence, whether written or oral" - were insufficient to open the way to reliance on the terms of the missives for the purpose of rectification. In making his submission on the basis of Smith v Lindsay & Kirk, Mr Clancy accepted that there was an indication to the opposite effect to be found in Bank of Scotland v Brunswick Development (1987) Ltd 1997 SC 226, in which Lord President Rodger said (at 231A-B):

[20] Finally, Mr Clancy turned to his submission as to the incompetency of the prayer for declarator (Note of Argument, paragraph 5). Rule of Court 73.2 provides:

There is no provision in the Rules authorising in general terms the inclusion of an application for declarator in the prayer of a petition. In these circumstances the application for rectification had been properly and competently made by petition, but the application for declarator in that petition was incompetent. Mr Clancy referred to Lord President Rodger's explanation of the appropriateness of petition procedure for an application for rectification (Bank of Scotland v Brunswick Developments, at 231B-C). He acknowledged that the respondents had suffered and would suffer no prejudice as a result of the claim for declarator being made in a petition, but submitted that the incompetency of proceeding in that way was not elided by the absence of prejudice. He therefore submitted that in respect of the part of the prayer of petition seeking declarator the respondents' second plea-in-law should be sustained and decree of dismissal pronounced.

[21] Mr Lindhorst for the petitioners responded to the first of Mr Clancy's submissions by saying that it was necessary to look at the petitioners' pleadings as a whole. Mr Clancy had concentrated on what was said in Article 4 at page 13B-C to the exclusion of the rest of the petitioners' pleadings. In Article 2 the petitioners averred that by the missives the petitioners agreed to sell and the respondents agreed to purchase the subjects, and incorporated the terms of the missives into the petition. In Answer 2 the respondents admitted that averment and referred to the missives for their terms. It was common ground, in the course of the hearing, that I was entitled to have regard to the terms of the missives produced as Nos. 6/1-6 of process. It was therefore common ground between the parties that they had contracted in the terms set out in the missives. There was thus no dispute that at the date when they were concluded the missives expressed the intention which was then common to the parties. It was clear from the whole tenor of the petitioners' pleadings that they were relying on the missives as the antecedent agreement for the purpose of section 8(1)(a). The petitioners went on in Article 3 to aver that the disposition was executed on 14 April 1997 in Germany. That was only five days after the conclusion of the missives on 9 April. It was the petitioners' position that the disposition was intended to give effect to the common intention expressed in the missives. It was in order to support that contention that they averred (at 13B-C) that "at the time of executing the Disposition ... the common intention of the parties [was] as reflected in the missives". The point being made at that stage in the pleadings was not the one mentioned in section 8(1)(a), namely that there had been an antecedent agreement expressing the common intention of the parties at the time it was made, but rather that at the date of execution of the disposition that remained the common intention of the parties, and that the disposition was thus a document of the sort contemplated in section 8(1)(a), namely one which was intended to give effect to the antecedent agreement contained in the missives. When regard was had, in that way, to the whole of the petitioners' pleadings, it became clear that Mr Clancy's argument involved taking one part of the pleadings out of context.

[22] Mr Lindhorst's submission was that, properly understood, the petitioners' case was a very simple one. The missives were an agreement between the parties. Their terms were not in dispute. The disposition was a document intended to give effect to the agreement contained in the missives. Its terms were not in dispute. The disposition failed to express the common intention shared by the parties when the missives were concluded. That was a simple matter of comparing the terms of the disposition with those of the missives. In particular, the disposition bore to reflect the part of clause (f) of the original offer which conferred on the respondents an option to compel the petitioners to repurchase the subjects, but not to reflect the part which conferred on the petitioners an option to compel the respondents to allow them to repurchase the subjects. That was a relevant case for rectification.

[23] In response to that relevant case, Mr Lindhorst submitted, the respondents had put forward no relevant defence. Their position appeared to be that the disposition was not intended to give effect to the missives. The points from which they sought to draw that inference were (i) that the disposition as executed had been revised and approved by the petitioners' agents, and (ii) that Herr Brach saw and read the disposition before signing it. They also averred that that the disposition superseded the missives in other respects, instancing the date of entry. Those circumstances did not relevantly support a case that the disposition was not intended to give effect to the missives. The disposition was signed only five days after the conclusion of the missives. The natural inference, where a formal contract for the sale of heritable subjects was concluded, and those subjects were a few days later disponed by the seller to the purchaser at the price mentioned in the contract, was that the conveyance was intended to be on the terms contracted for. The onus lay on the party contending otherwise to show that a discrepancy between the contract and the disposition was the result of a change of mutual intention rather than mistake. In the absence of averments offering some rational explanation for a change in mutual intention, the mere fact that the disposition had been adjusted and signed did not point to change of intention rather than mistake. Mr Lindhorst sought to support his submissions by reference to Aberdeen Rubber Ltd v Knowles and Sons (Fruiterers) Ltd 1995 SC (HL) 8, 1994 SC 440 (Inner House). That was not a rectification case, but rather a case in which the sellers sought partial reduction of a disposition on the ground that an additional piece of land, not sold in terms of the missives, had been included in the disposition by error. Mr Lindhorst submitted, however, that a similar approach was appropriate in cases of rectification. He referred to various passages in the opinions of Lord President Hope and Lord Weir in the Inner House, and in particular to the passage (at page 13F) in the speech of Lord Keith of Kinkel in the House of Lords, in which, after reviewing the circumstances, he concluded:

In the present case Mr Lindhorst pointed to the very short lapse of time between the conclusion of the missives and the execution of the disposition. He pointed out that the price was the same in the missives and in the disposition, and submitted that that suggested that there had been no change of intention so as to include the option favouring the respondents while deliberately omitting the option favouring the petitioners; such a change, if intended, would have been likely to be reflected in an adjustment of the price. He accepted that the date of entry in the disposition was different from that in the missives, but submitted that in the absence of explanation no inference could be drawn from that circumstance. The fact that Clause 13 of the Schedule to the original offer, which contemplated that the missives would remain enforceable for two years after the delivery of the disposition, was not reflected in a clause to the same effect in the disposition was also neutral. In contrast to Aberdeen Rubber, in the present case the subjects conveyed by the disposition were those sold in terms of the missives. Given the undisputed existence of the Section 50 Agreement prohibiting occupation of the subjects otherwise than by a person involved in the management of the estate, it was difficult to understand why the petitioners should have agreed to omit from the disposition the option provided for in the second part of clause (f) of the original offer, dealing with the eventuality of the first respondent leaving the employment of the petitioners and enabling them to take the initiative in that event. The circumstances as a whole supported the inference that the disposition was intended to implement the missives. Revisal of the disposition by the petitioners' agents did not go to displace that inference; what mattered was the intention of the petitioners, not that of their agents (Shaw v William Grant (Minerals) Ltd at 121I). Equally, signature of the disposition by Herr Brach did not go to displace that inference; it was the intention of the principal, not of the signatory, that mattered (Bank of Scotland v Brunswick Developments 1999 SC (HL) 53 per Lord Clyde at 58D). The averments about protracted negotiations before the missives were concluded (page 8D) were not relevant to explain the discrepancy between the missives and the disposition, because they were superseded by the missives (Aberdeen Rubber). The fact that the date of entry in the disposition differed from the one provided for in the missives did not support the inference that the disposition was in any other respect not intended to give effect to the missives. The respondents' averments as a whole were insufficient to set up the existence of some agreement other than that expressed in the missives as the one to which the disposition was intended to give effect (George Thompson Services Ltd v Moore 1993 SLT 634; Baird v Drumpellier & Mount Vernon Estates Ltd 2000 SC 103). In all these circumstances the respondents had averred nothing to displace the inference that the disposition was, at its date, intended to give effect to the missives.

[24] Mr Lindhorst then submitted that the respondents' averments in response to the prayer for declarator were irrelevant and lacking in specification. They did not dispute that the first respondent left the employment of the petitioners. Their contention was that he did not leave that employment voluntarily; that his services were dispensed with by Herr Brach. The context of the part of clause (f) dealing with the eventuality of the first respondent leaving the petitioners' employment was, however, the Section 50 Agreement. Continued occupation of the bungalow by the first respondent after he left the employment of the petitioners would be as much a contravention of the Section 50 Agreement if he was dismissed as it would be if he left voluntarily. There was therefore no ground for reading clause (f) as if it included the word "voluntarily", which it did not. The averment that the first respondent did not leave the petitioners' employment voluntarily, but was dismissed, was therefore not a relevant defence to the prayer for declarator. In any event, it was evident from the letter of 1 June 1999 (No. 6/8 of process) referred to in article 5 of the statement of facts in the petition, that the first respondent accepted that he had left the petitioners' employment on 16 April 1999.

[25] Turning to Mr Clancy's submissions on the matters focused in paragraph 2(b) of the respondents' Note of Argument, Mr Lindhorst dealt first with the question of whether the provisions of clause (f) of the original offer contemplated real or personal obligations. The petitioners averred that the common intention was to create "mutual rights personal to the parties". That that was so was clear from the language of the clause, which referred to "our clients" and "your clients" without any mention of singular successors, and in particular from the second half of it, which was conditional on the first respondent's leaving the employment of the petitioners. The terms of the prayer were not at variance with that contention. The references to "our said disponees" and "our disponees" were to be construed as references to the respondents, and as not including singular successors. In the disposition, when reference to singular successors was intended, the phrase used was "our said disponees and their foresaids". Although he did not seek to amend to that effect, Mr Lindhorst suggested that if, contrary to his primary submission, there was any ambiguity in the reference in the prayer to disponees, it could readily be cured by the insertion of the respondents' names. Mr Lindhorst also made the point that the passage which he sought to have inserted into the disposition by way of rectification was to be inserted after the declaration that certain burdens were to be real, and therefore in a position which made it clear that the options were to be personal to the petitioners and the respondents.

[26] Mr Lindhorst met a number of the objections taken by Mr Clancy to the terms of the prayer by proposing an amendment, to the effect of deleting the words "that our said disponees exercise their option as agreed between us by serving notice upon us requiring us" at page 17D-E of the Closed Record and substituting the words "of our said disponees requesting us". That motion was not opposed by Mr Clancy, and I granted it. In consequence, points (2) and (3) of Mr Clancy's argument recorded in paragraph [17] above are superseded.

[27] So far as point (4) recorded in paragraph [17] above was concerned, Mr Lindhorst submitted that the language used in the prayer to express the proposed rectification gave effect to the substance of the point made in clause (f) about ignoring the effect of the Section 50 Agreement on value. The rectification did not have to echo the precise words of the antecedent agreement. It was sufficient if they were to the same substantive effect. The same answer applied to points (5) and (6).

[28] In response to the argument which Mr Clancy put forward on the basis of paragraph 3 of the respondents' Note of Argument, Mr Lindhorst submitted that the option was valid without the introduction of the provision for valuation by a surveyor. A dispute about value could be determined by the court. It was appropriate that the rectification should restore the disposition to a form which gave effect to, and did not innovate upon, the antecedent agreement. The passage in the disposition which the petitioners sought to delete went beyond introducing a valuation procedure which had not been agreed upon; it also introduced a timetable for payment which had not been agreed. It was proper to remove those unwarranted additions in the course of rectification.

[29] In response to Mr Clancy's submission that Clause 13 of the schedule to the original offer made it impossible for the petitioners now (after the expiry of more than two years from the date of delivery of the disposition) to rely on the terms of the missives in support of the prayer for rectification, Mr Lindhorst submitted that the petitioners were not in any sense seeking to "enforce" the missives. The reliance which the petitioners sought to place on the missives was simply as evidence of an historical fact, the common intention of the parties at the date of the disposition. Smith v Lindsay & Kirk did not extend the meaning of "enforce" so far as to cover reliance for the purpose of rectification.

[30] So far as the competency of the prayer for declarator was concerned, Mr Lindhorst submitted that Rule of Court 73.2(1) required an application for rectification to be made by petition. The prayer for declarator was ancillary to the prayer for rectification. There was nothing in the Rules to prohibit such an ancillary prayer. The respondents suffered no prejudice as a result of the inclusion of that ancillary prayer in the petition. The distinction between actions and petitions was historical, but there was never an absolute rule rendering it incompetent to include a prayer for declarator in a petition. Reference was made to Maxwell, The Practice of the Court of Session, page 433:

(c.f. Maclaren, Court of Session Practice, page 832, which is to the same effect, except that the examples are omitted). Reference was also made to Merry v Monkland Canal Co (1826) 4 S 707, Cuningham v Dickson (1839) 1 D 362 and Clerk, Petitioner (1870) 8 M 904. Mr Lindhorst submitted that the reason for refusing to allow reduction or declarator to be sought in petition processes in those cases was the summary nature of the petition process. Here, in contrast, the petition had followed ordinary procedure, with a record being made up, adjusted and closed. There was therefore no practical reason for refusing to allow the prayer for declarator to be included in the petition. Mr Lindhorst also made fleeting reference to Article 6(1) of the European Convention on Human Rights, submitting that the respondents' position on the competency of the prayer for declarator was contrary to the petitioners' Convention rights under that Article. He did not, however, elaborate on that submission.

[31] Certain aspects of Mr Clancy's submissions were only developed in response to those made by Mr Lindhorst, and it is more convenient to summarise them now than as part of my earlier summary of the submissions for the respondents. The lack of clear averments by the petitioners as to when the common intention on which they found was formed was, Mr Clancy submitted, important in light of the unusual way in which the missives had developed. He pointed out that there had been a concluded bargain as at 3 September 1996, on the basis of Nos. 6/1-4 of process. Then, after a lapse of time, the bargain had been opened up again to increase the purchase price from £62,000 to £64,000, and the instalment repayments to be made (Nos. 6/5 and 6 of process). There was also doubt about whose intention was being founded on. Given that the petitioners founded on the assertion that in terms of the missives the common intention was that the options created by clause (f) would be personal rather than real, was it the petitioners' position that Herr Brach understood that distinction, or were they really relying on the intention of their solicitors (in the way contemplated by Lord McCluskey in Shaw at 121I-J)?

[32] Turning to Mr Lindhorst's attack on the relevancy of the answers, Mr Clancy argued that the reliance which had been placed on Aberdeen Rubber was misguided. The discrepancy there between the disposition and the missives was of the clearest possible sort - the inclusion in the disposition of an area of land not sold in terms of the missives. The decision was special to the facts of the case (see per Lord Weir at 452A (IH)). It was only as a matter of circumstance that the Inner House and the House of Lords were able to hold that there was no possible explanation of the discrepancy other than error. At the heart of the basis for the decision was the rule against the admission of evidence of prior informal communings once a formal contract had been concluded. It was that rule that prevented reliance on the informal correspondence about inclusion in the bargain of the extra parcel of land once formal missives not including that parcel in the subjects of sale were concluded. Here the respondents' case that the disposition was not intended to give effect to the missives was based not on evidence of informed correspondence dating from before the conclusion of the missives, but on a change of intention after conclusion of the missives but before execution of the disposition. Mr Clancy did, however, seek to place reliance on the fact that missives had originally been concluded in September 1996. The later alteration was confined to the matter of price. It was in the missives as concluded in September 1996 that agreement on clause (f) of the original offer had been finalised. The change of intention relied upon by the respondents therefore did not necessarily occur in the five days between the conclusion of the missives on 9 April 1997 and the execution of the disposition, but might have occurred at any time after September 1996. In the context of a petition for rectification (as distinct from a partial reduction such as in Aberdeen Rubber) account had to be taken of section 8(2) of the 1985 Act which, Mr Clancy submitted, might be regarded as provided a statutory exception to the full force of the rule excluding evidence of prior communings. Moreover, in seeking to resist rectification on the ground that the disposition was not intended to give effect to the missives, the respondents were not in the same position as a party seeking to set up a prior agreement as the basis for rectification. George Thompson Services Ltd and Baird were therefore not in point. The respondents had said enough to put relevantly in issue the question whether the disposition was intended to give effect to the missives.

[33] In relation to the relevancy of the averments in support of the prayer for declarator, Mr Clancy submitted that the words "leaves your clients' employment" in clause (f) were open to construction. To make clear the construction they contended for each party had to add words. The respondents said "leaves" meant "leaves voluntarily". The petitioners said it meant "leaves for any reason". At best for the petitioners the phrase used was ambiguous, and it was therefore necessary to look to the surrounding circumstances. The existence of the Section 50 Agreement was one such circumstance, but it was not determinative. It could not be said that if the respondents' construction were correct there would inevitably be a contravention of the Section 50 Agreement if the first respondent's employment came to an end by dismissal. In such a situation the solution might lie in the respondents' option to compel the petitioners to repurchase the subjects. Other matters which would require to be considered in interpreting what was meant by "leaves your clients' employment" included the circumstances in which the first respondent came to be employed by the petitioners, and the whole "employment package" including the arrangements for the purchase of the house and the financing of that purchase. The correspondence referred to in Article 5 could not be taken into account at this stage, since it was not admitted. The whole issue could not be resolved without proof before answer.

[34] I propose to discuss the issues raised in the course of the debate in a number of chapters. These are: (i) the relevancy of the petitioners' averments in support of their prayer for rectification; (ii) the relevancy of the answers to the prayer for rectification; (iii) the terms of the prayer for rectification; (iv) the competency of the prayer for declarator; and (v) the relevancy of the answers to the prayer for declarator.

[35] In any case in which rectification of a document is sought in reliance upon section 8 of the 1985 Act, the measure of the relevancy of the petitioner's pleadings is in my opinion to be found in the first instance in the language of the section. That language is no doubt capable of being analysed in a number of ways (of which one example is to be found in the Opinion of Lord McCluskey in Shaw at 121G-I; but see also Rehman v Ahmad 1993 SLT 741 per Lord Penrose, and George Thompson Services Ltd, per Lord Weir). The aspects of the statutory language which are important in the individual case will be a matter of circumstance. For the purposes of the present case, I would analyse section 8(1)(a) in the following way:

[36] The petitioners in their pleadings in the present case identify the disposition as the "document" which they seek to have rectified. They further identify the missives (Nos. 6/1-6) as constituting the antecedent "agreement" on which they rely. There is nothing in their pleadings to suggest that the antecedent agreement is to be found anywhere other than in the missives. Where, as here, the antecedent agreement founded on is a written contract, the common intention of the parties to the agreement at the date when it was made is to be ascertained objectively by construction of the contract (Rehman v Ahmad, per Lord Penrose at 752A). In the case of an agreement which evolves through an exchange of correspondence until the bargain is finally held to be concluded, as missives for the sale of heritage typically do, the date at which the agreement is made is in my opinion the date of the last element in the correspondence. Here, the agreement was made when the missives were concluded on 9 April 1997. It is, in my opinion, of no moment that the petitioners' averments do not expressly say that the missives disclose the common intention of the parties at the date on which they were concluded. The common intention which the parties possessed at that date can be gathered objectively from the terms of the missives. It is, in my view, plain from any fair reading of the petitioners' pleadings that they proceed on the basis that the disposition was intended, when it was executed, to give effect to the common intention expressed in the missives. It seems to me to be clear that it is in support of that element of the case, namely that the disposition was the "document" intended to give effect to the "agreement" constituted by the missives, that the petitioners make the averment (at 13B-C) that: "at the time of executing the Disposition, it was the common intention of the parties, as reflected in the Missives, that ...". Mr Clancy was in my opinion wrong in submitting in effect that that averment betrayed a failure on the petitioners' part to address the terms of the statute, because it concentrated on common intention at the date of the disposition to the exclusion of identifying the common intention at the date of the antecedent agreement. On the contrary, I see that averment as an affirmation that the common intention expressed in the missives at the date when they were concluded remained the common intention of the parties at the date of the disposition. It is thus a relevant averment to support the statutory requirement that the document should have been intended to express or give effect to the antecedent agreement. The averments at page 11B-D, which Mr Clancy also attacked as irrelevant, are in my opinion a relevant response to the respondents' contention that Herr Brach's signature of the disposition discloses that the disposition was not intended to give effect to the missives. In my view there is no substance in the respondents' attack on the relevancy of the petitioners' case for rectification. The petitioners have in my opinion set out in their pleadings a relevant basis on which to invite the court to rectify the disposition to the effect of bringing it into accordance with the terms of the missives.

[37] The separate submission advanced by Mr Clancy in reliance on Clause 13 of the Schedule to the original offer was also in my opinion unsound. The broad interpretation given to the concept of enforcement of missives in Smith v Lindsay & Kirk is not in my opinion broad enough to result in its being impossible to rely on the terms of the missives in support of an application for rectification after the expiry of the period for which the missives are declared to remain enforceable. If Mr Clancy's submission were correct, logic would suggest that in a case where there was no non-supersession clause, and the missives were superseded by the disposition as soon as it was executed and delivered, rectification of the disposition by reference to the missives would be precluded from the outset. In my opinion the correct view of the matter is that rectification of a disposition by reference to the missives which it was intended to implement does not involve "enforcement" of the missives (Bank of Scotland v Brunswick Development, per Lord President Rodger at 231A-B). The missives are simply evidence of what is by then an historical fact, namely the common intention of the parties to the missives when they were entered into. The expiry of a non-supersession clause therefore in my opinion has no effect on the relevancy of reference to the missives in support of an application for rectification. This branch of the respondents' attack on the relevancy of the petitioners' averments therefore fails.

[38] In considering the relevancy of the defence which the respondents put forward in respect of the application for rectification, it is appropriate to begin by noting the extent to which the essentials of the petitioners' case are admitted. The respondents admit that by the missives concluded on 9 April 1997 they agreed to purchase Glenclelland Bungalow from the petitioners. They admit that the disposition was executed on 14 April 1997. They do not dispute that Nos. 6/1-6 and No. 6/7 of process are respectively the missives and the disposition. The common intention of the parties at the date of conclusion of the missives is a matter to be ascertained by objective construction of the missives. The extent to which and respects in which the disposition fails to express accurately that common intention are matters to be ascertained by comparison of the documents. Any issues as to what the common intention expressed in the missives was, or whether and if so how the disposition failed to express that common intention, can therefore be resolved by debate, on the pleadings and the agreed documents. The only other issue that arises is whether the disposition was intended to express or give effect to the agreement constituted by the missives. The respondents seek to maintain that it was not.

[39] The only matters to which the respondents refer in support of the contention that the disposition was not intended to give effect to the missives are (i) that the disposition was revised, and approved in the form in which it was executed, by the petitioners' solicitors, (ii) that the disposition was read by Herr Brach before he signed it on behalf of the petitioners, and (iii) that the terms of the disposition were, in other respects than those which the petitioners seek to have rectified, different from the terms of the missives, e.g. in respect of the date of entry. In order to assess the relevancy of those averments as a defence to the prayer for rectification, it is in my view necessary to consider them in the context of the inferences to be drawn from the admitted circumstances and the undisputed documents.

[40] There is, in my opinion, an initial onus on the party seeking rectification, where it is disputed that the document was intended to give effect to the agreement, to establish a prima facie case that it was. In the present case, I am of opinion that the admitted circumstances and undisputed documents take the petitioners to the position of having established a prima facie case that the disposition was intended to give effect to the missives. It is admitted that the petitioners and the respondents had entered into a binding contract for the sale by the petitioners to the respondents of Glenclelland Bungalow. By reference to the missives, the price can be seen to have been £64,000. It is admitted that a mere five days later the petitioners executed a disposition of Glenclelland Bungalow in favour of the respondents. The disposition records that the price was £64,000. At the date of execution of the disposition the petitioners and the respondents each remained bound to implement their respective parts of the bargain constituted by the missives. The natural inference, in those circumstances is, in my opinion, that the disposition was intended to be in implement of the missives. It is admitted that the disposition departed from the terms of the missives inter alia in respect that it omitted to give effect to the option conferred by clause (f) of the missive letter of 9 May 1996 on the petitioners to purchase the subjects from the respondents in the event of the first respondent leaving the employment of the petitioners. No explanation is offered suggesting a reason for the petitioners to have given up that option. Still less is there any explanation offered for their doing so without demanding any other adjustment to the terms of the sale. Moreover, against the admitted background of the Section 50 Agreement, such omission is particularly puzzling. I am therefore of opinion that, on the basis of the admitted averments and the undisputed documents, the petitioners would, in the absence of anything more put forward by the respondents, be entitled to a finding that the disposition was intended to give effect to the missives, and accordingly entitled to have the respects in which it failed to do so made good by rectification.

[41] The relevancy of the answers therefore depends on whether they contain material which, if proved, would overturn the prima facie inference that the disposition was intended to give effect to the missives. The first two factors identified by the respondents in their pleadings are not, in my opinion, capable of achieving that. The fact that the solicitors for the petitioners revised the disposition and approved its terms are as consistent with mistake or oversight on their part as with a change of mutual intention on the part of the petitioners, involving acceptance on their part that they should not have the option which clause (f) secured for them. Equally, the assertion that Herr Brach read the disposition before signing it is at least as consistent with his having failed to appreciate that it did not properly reflect the terms of the missives as it is with his having agreed on the petitioners' behalf to grant the disposition in terms different from those contracted for. In the absence of positive averments by the respondents that between the date of conclusion of the missives and the date of execution of the disposition there had been either a substitute agreement superseding the missives or a decision by the petitioners to give up the option secured to them by the latter part of clause (f), I am of opinion that the averments which the respondents do make about revisal and signature of the disposition do not make a relevant case that at the date of execution it was no longer the common intention of the parties that the disposition should give effect to the missives. They are not, in my view, relevant to displace the natural inference discussed in paragraph [39] above.

[42] I do not consider that Mr Clancy can gain any support for the relevancy of the answers from the fact that missives were originally concluded in September 1996 and then amended in April 1997. If the respondents' case were that in the interval between those dates the terms of clause (f) were re-negotiated, that would, in my opinion, require specific averments about the negotiations. There are no such averments. Moreover, it would not, in my opinion, be open to the respondents to rely on such re-negotiation without seeking to rectify the missives as finally concluded in April 1997. Any re-negotiation in the period between initial conclusion and amendment ought to have been reflected in the amended missives. If it was not, in the absence of an application for rectification of the amended missives, evidence relating to the re-negotiation would in my opinion be inadmissible on the same ground as the informal correspondence about the extra parcel of land was inadmissible in Aberdeen Rubber. Section 8(2), entitling the court to have regard to all relevant evidence, whether written or oral, in dealing with an application for rectification, would not, in my opinion render admissible, in support of a defence that the disposition was not intended to give effect to the missives, evidence about negotiations which antedated and were superseded by the final conclusion of the missives.

[43] There remains for consideration the fact that the entry clause in the disposition back-dates entry to 1 May 1995, whereas the missives provided that the date of entry would be two weeks after the conclusion of missives (see clause 1 of No. 6/2 of process). Neither party offers any explanation for that discrepancy. The petitioners do not seek to rectify it. I find it impossible to regard it by itself as affording relevant support to the inference that by the date of the disposition it was in any general sense no longer the parties' intention that the disposition should give effect to the missives.

[44] In the result I am of opinion that, having regard (i) to the admitted facts and the undisputed documents, (ii) to the inferences that naturally arise from them, and (iii) to the neutral character of the factors put forward by the respondents, the respondents have in principle no relevant defence to the application for rectification of the disposition so as to bring it into accord with the terms of the missives. Subject, therefore, to the issues that remain to be discussed concerning the form of the prayer for rectification, I am of opinion that an order for rectification of the disposition should be granted de plano.

[45] In terms of section 8, the power of the court is to order the document to be rectified "in any manner that it may specify in order to give effect to that intention", i.e. the common intention of the parties at the date of the agreement which the document was intended to express or to which it was intended to give effect. The broad issues raised in Mr Clancy's submissions directed against the terms in which the petitioners seek to have the disposition rectified are whether the rectification must be expressed exactly as the antecedent agreement was expressed, and whether, if there is not exact correspondence, the party seeking rectification must set out in averment a justification for the difference. Of the six points taken by Mr Clancy (see paragraph [17] above) only points (1), (4), (5) and (6) remain for consideration, since the amendment which Mr Lindhorst moved in the course of his submissions (see paragraph [26] above) removed the basis of the submissions made by Mr Clancy in respect of points (2) and (3).

[46] Dealing first with point (1), I am of opinion that Mr Lindhorst was right in construing clause (f) of the original offer as contemplating rights and obligations personal to the petitioners and the respondents, rather than real rights and obligations that would affect their singular successors. That is, in my view, so in relation to the whole of the clause, but it is particularly clear in relation to the second part of it, which confers the option on the petitioners in the event of the first respondent leaving their employment. The question therefore arises whether the rectification proposed would accurately reflect the personal character of the rights and obligations. The proposal is that the passage in the disposition which partially reflects clause (f) and adds to it should be deleted, and that there should be substituted a passage which the petitioners submit more accurately reflects clause (f). It is to be noted, however, that the substitute passage is to be differently positioned in the disposition from the passage which it replaces. The passage which is proposed for deletion came immediately before, and was thus affected by, a declaration that the foregoing burdens and conditions were to be real burdens. It is proposed that the substitute passage be inserted after that declaration, in which case it would not be affected by it. Nevertheless, Mr Clancy submitted that the use of the phrases "our said disponees" and "our disponees" in the substitute passage meant that there was reference to the respondents' singular successors, because the dispositive clause is expressed as being in favour of the respondents and "their ... respective executors and assignees whomsoever". I do not consider that that submission is well founded. At least in the second part of the substitute passage, it is, in my view, quite clear that the references to "disponees" are references to the respondents personally. For the avoidance of doubt, however, I take the view that it would be preferable that the words "Alasdair MacGregor and Maureen MacGregor" should be inserted after the words "our said disponees" where they first appear in the substitute passage, and that the reference to "our disponees" should be altered to "our said disponees". So modified, the proposed substitute passage would remove any suspicion that the first option might be available to the respondents' singular successors. I take the view that in petition proceedings (see the last clause of the prayer) and in light of the terms of section 8 ("in any manner that it may specify") it is open to me to make ex proprio motu those minor alterations, the possibility of which was discussed in the course of the debate.

[47] So far as point (4) is concerned, it is clear that the language of the proposed new passage is different from clause (f) in its formulation of the relationship between the assessment of the market value of the subjects and the subsistence of the Section 50 Agreement. Clause (f) is obscurely expressed. The substitute provision is an improvement, but not, it seems to me, an alteration of the substance of the provision. I have no difficulty in construing clause (f) as expressing, very clumsily, the proposition that, in the assessment of the market value of the subjects, any effect of the subsistence of the Section 50 Agreement is to be ignored. The substitute provision also, in my view, expresses that proposition. So far as point (6) is concerned, the addition of the words "then in force" makes no difference, because if there was no Section 50 Agreement then in force, there would be no need for a provision requiring the effect of such an agreement on value to be ignored. In these circumstances, the correspondence of the proposed rectification in these respects with the antecedent agreement can be seen as a matter of construction of the respective documents. There is, in my opinion, no need for the petitioners to aver that the modified wording has the same substantive effect as the original wording, when that matter can be judged simply by comparison of the documents.

[48] So far as point (5) is concerned, it seems to me that there may be some force in what Mr Clancy said. The introduction of the words "and notwithstanding the foregoing" may arguably alter the relationship between the two parts of the option clause. I express no concluded view on that matter. Nothing, however, is said by the petitioners to justify the additional words, and I therefore take the view that they should be deleted from the proposed substitute passage.

[49] The rectification proposed includes the deletion of the provisions in the disposition for (i) determination of market value by a chartered surveyor, and (ii) payment of the price within 180 days of the option notice. At least so far as the first of these was concerned I initially saw some attraction in Mr Clancy's submission that the petitioners should not be allowed to remove from the disposition a useful provision simply because it was not provided for in the antecedent agreement. On the other hand, I do not regard as sound his more extreme submission that without that provision the option would be void for uncertainty. I see no difficulty in any dispute about the market value being resolved by the court if necessary. The second provision was, however, more clearly an unwarranted addition which is potentially against the interests of the petitioners, and they are, in my view, entitled to have it removed. On reflection, I consider that the same applies to the first provision.

[50] Since the terms of the proposed rectification were altered by amendment in the course of the debate, and have been further modified by me, it is appropriate that I should set out in full the terms in which I shall order rectification. I shall order that the disposition be rectified by deletion of the passage identified in branch (1)(i) of the prayer and by the insertion at the point identified in branch (1)(ii) of the prayer of the following passage:

[51] The question as to the competency of including in the prayer of a petition for rectification an ancillary prayer for declarator is not directly answered by the Rules of Court, but Rule 73.2 provides the context in which the issue requires to be addressed. The primary provision, in Rule 73.2(1), directs that an application for rectification shall be made by petition. That provision is, however, expressly made subject to paragraph (2). Paragraph (2)(a) permits an application for rectification to be made in a summons or counterclaim in a commercial action, whether alone or as a conclusion ancillary to other conclusions. Paragraph (2)(b) permits an application for rectification to be made in any other action, by a conclusion in a summons or in a counterclaim. The effect of those provisions, it seems to me, is that when an application for rectification is made on its own, it must be made by petition (unless it is made in a commercial action). Where, however, rectification is sought along with some other remedy, the appropriate form of process (unless it is raised as a commercial action) is an ordinary action commenced by summons. It seems to me that Rule 73.2(2)(b) permits the claim for rectification to be made in a summons in any case in which other remedies appropriate to an ordinary action are also sought. I see no reason to construe paragraph (2)(b) as confined to the case where the rectification is ancillary to the other remedies sought, and as excluding the case where the other remedy is ancillary to the rectification. It therefore seems to me that Rule 73.2 provides for the situation which arises in the present case, but prescribes that the application should proceed by summons.

[52] As Mr Lindhorst pointed out the distinction between a summons and a petition is an historical one. Having regard to the nature of rectification proceedings (see Bank of Scotland v Brunswick Development per Lord President Rodger at 231A-B), it is unsurprising to find that the Rules provide primarily for rectification to be obtainable by petition procedure (Rule 73.2(1)). It is equally unsurprising to find that when contemplating proceedings in which both rectification and some other remedy or remedies are sought, the Rules prescribe the adoption of ordinary procedure by summons. That is the appropriate procedure in which to seek remedies such as reduction or declarator. The purity of the historical distinction has, of course, been blurred in a number of instances. Examples which spring to mind are (i) judicial review, in which declarator, reduction and other ordinary remedies are obtainable by petition (Rule 58.3(1) and Form 58.6), and (ii) applications under section 459 of the Companies Act 1985, which are made by petition, but in which the court has, in terms of section 461, a broad discretion as to the form of relief, which would permit the granting of remedies ordinarily sought by summons. Conversely, suspension of diligence, which formerly required a separate application by petition, can now be sought by conclusion for suspension in a summons for reduction (Rule 53.1). Despite those innovations, however, I am of opinion that, in the absence of an applicable provision to the contrary, declarator remains a remedy to be obtained by summons. In my opinion the passage from Maxwell, The Practice of the Court of Session, page 433, quoted in paragraph [30] above remains a correct statement of practice. There is in my view some force in Mr Lindhorst's submission that the rationale for the rule given in the early cases which he cited is diluted somewhat by the fact that this petition process has in fact proceeded in broadly the same way as an ordinary action. I take the view, however, that when the Rules provide expressly for the competency of applying for rectification by summons when other remedies are also sought, I should not innovate to the opposite effect on the established practice by permitting an application for declarator to be incorporated in a petition for rectification.

[53] I am reinforced in that view by the consideration that it does not seem that the proposed declarator, if granted in this process, would necessarily bring the dispute between the parties to an end. There is therefore no very strong argument of expediency to the effect that by overlooking the technical rules it would be possible to bring the dispute to a more expeditious end. Nor, in my view, is there any merit in Mr Lindhorst's attempt to rely on Article 6(1) of The European Convention on Human Rights. A rule of procedure requiring a particular claim to be made by a particular form of process does not, in my opinion, entail any contravention of the petitioners' Convention rights under Article 6(1). I therefore take the view that the part of the prayer in which the petitioners seek declarator that the first respondent left their employment (within the meaning of the rectified option clause in the disposition) on 16 April 1999 is incompetent in this petition process.

[54] In view of my conclusion that the prayer for declarator is incompetent, this issue does not now arise, but it is appropriate that I should briefly record my views on the submissions that were made. It is not disputed by the respondents that the first respondent's employment with the petitioners came to an end on 16 April 1999. It follows that, if the petitioners are correct in their submission that the reference in the relevant provision of the disposition to his "leaving" their employment is properly to be construed as applying to any termination of his employment, the petitioners would, in an appropriate process, be entitled to declarator in the terms sought. If attention were focused exclusively on the language of the provision, I would be inclined to hold that a reference to a person leaving the employment of another is prima facie neutral, and capable of applying both to the case where the employee voluntarily brings the employment to an end, and to the case where the employee is dismissed. It is necessary, however, to construe the disposition in light of the surrounding circumstances, and these include the fact that the option relates to subjects the occupation of which is restricted by Section 50 Agreement to a person engaged in the management of the estate. That circumstance seems to me to reinforce the petitioners' construction, because a contravention of the Section 50 Agreement would arise if the respondents continued to occupy Glenclelland Bungalow after the termination of the first respondent's employment on the estate, irrespective of whether he was dismissed or left voluntarily. On the other hand, the Section 50 Agreement is only part of the surrounding circumstances. The respondents make averments about the circumstances in which the first respondent came to be employed on the estate, and the circumstances relating to the arrangement to sell the bungalow to the respondents and the arrangements for financing that transaction, which, it is said, included an arrangement that the first respondent's salary would remain static for a period. While it is not immediately obvious to me how those circumstances might be relied upon to support the proposition that the option falls to be construed as exercisable only in the event of the first respondent leaving the petitioners' employment voluntarily, and not in the event of his dismissal, I would, if I had not decided to dismiss the prayer for declarator as incompetent, have decided to allow a proof before answer on that issue.

"(1)	Subject to section 9 of this Act, where the court is satisfied, on an application made to it, that -
	(a)	a document intended to express or to give effect to an agreement fails to express accurately the common intention of the parties to the agreement at the date when it was made; ...
	it may order the document to be rectified in any manner that it may specify in order to give effect to that intention.
(2)	For the purpose of subsection (1) above, the court shall be entitled to have regard to all relevant evidence, whether written or oral".

"(1)	Subject to paragraph (2), an application to which this Chapter applies [i.e. an application for rectification under section 8] shall be made by petition.
(2)	An application to which this Chapter applies may be made -
	(a)	in an action to which Chapter 47 (commercial actions) applies, by summons or by a conclusion ancillary to other conclusions in the summons or in a counterclaim; or
	(b)	in any other action, by a conclusion in a summons or in a counterclaim."

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	Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Renyana-Stahl Anstalt v MacGregor & Anor [2001] ScotCS 78 (29 March 2001) URL: http://www.bailii.org/scot/cases/ScotCS/2001/78.html Cite as: [2001] ScotCS 78

Scottish Court of Session Decisions