Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2009] CSOH 62
P438/09	OPINION OF LADY CLARK OF CALTON in the Petition of MANUS GREGOR Petitioner; For Suspension and Interdict and Recall of Inhibition ­­­­­­­­­­­­­­­­­________________

Act: McShane; Morton Fraser, solicitors

Alt: Howlin; Burness LLP

6 May 2009

Introduction

[1] In this case the petitioner raised a petition in a personal capacity for suspension and interdict and recall of inhibition in respect of three charges for the payment of money which were served upon him on behalf of Mark Emlick who is the respondent. The petitioner is also a director and sole shareholder of Gregor Homes Limited.

[2] A motion by the petitioner was made in the following terms:

"On behalf of the Petitioner to grant interim suspension, interim interdict in terms of the Prayer of the Petition."

The motion came before me in the Recess Court. The motion was opposed on behalf of the respondent. The matter was urgent. I gave an extemporary judgment refusing the petitioner's motion and advised that full reasons would be issued in a written opinion.

The background to the dispute

[3] The background is set out in some detail in the petition under reference to a variety of documents which are produced in the four Inventories of Productions for the petitioner. It may be helpful if I give a brief summary of the history which counsel for the petitioner developed in his submissions.

[4] In 2006 a company involved in property development, namely Mansecourt Limited, entered into missives with the respondent in which the respondent agreed to purchase plots 8 and 9 Belford Lodge in a development at Sunbury Street, Edinburgh (6/1 of process). In January 2007 further missives were agreed between the same parties in which the respondent agreed to purchase an additional plot, plot 5 (6/2 of process). Sometime thereafter Mansecourt Limited changed its name to Gregor Homes Limited. In 2008 Gregor Homes Limited and the respondent agreed a significant amendment to the aforesaid missives in missive letters dated 1 and 8 May, 13 and 9 August 2008 (6/3 of process). In particular, in the letter of 1 May 2008, paragraph 3, the parties by agreeing the amendment provided for the first time a mechanism for identifying the date when the purchase price was to be payable by the respondent. The mechanism was a somewhat complicated arrangement. In paragraph 6 of said letter of 1 May 2008 there was further set out as between Gregor Homes Limited and the respondent provisions in relation to "a guarantee". Detailed submissions were made about the provisions in these documents, and I will return to these matters.

[5] Following on the amendment of the missives, to which the petitioner was not a party as an individual, the petitioner executed three personal bonds. Copies of these bonds are contained in 6/16 to 6/18 of process. Sums of money as set out in the said amended missives (with certain minor further amendments irrelevant for present purposes) were paid by the respondent to the petitioner on 8 May 2008, 7 July 2008 and 13 August 2008 in the amounts of £250,0000, £100,000 and £110,000. Work on the said plots continued. It was submitted by counsel for the petitioner that Gregor Homes Limited were attempting to complete the properties and bring themselves within Clause 3 of the letter of missives of 1 May 2008 (6/3 of process). I was also informed that there were various disagreements between the Gregor Homes Limited and the respondent about the works and about procedures but Gregor Homes Limited and the respondent were apparently still making efforts to advance and cooperate in respect of the contractual conditions until at least November 2008. It appears however from submissions made by counsel for the petitioner and from the affidavit of Peter Paul La Greca sworn 6 April 2009 that certain tensions developed in the relationship between Gregor Homes Limited and the respondent. That is to describe the matter in a neutral way.

[6] It was submitted on behalf of the petitioner that Gregor Homes Limited issued a Certificate of Practical Completion on 20 October 2008. The respondent, in terms of Clause 3.2 of the amended missives, thereafter on 24 October 2008 identified works which he said required to be performed prior to the issue of the Certificate of Practical Completion. This was disputed by solicitors for Gregor Homes Limited by letter dated 31 October 2008. It is averred by the petitioner that Gregor Homes Limited nevertheless did carry out further work on the properties thereafter. On 14 November 2008 according to the petitioner, Mr Rutherford, acting as the representative of the respondent, attended a further inspection of the property. A document bearing to be a certificate of practical completion signed by Mr Rutherford and on behalf of Gregor Homes Limited was issued (6/9 of process). By 20 November 2008 it is averred by the petitioner that there was a dispute by the respondent's (legal) agents about a number of matters including whether there has been practical completion. That dispute was intimated within 5 working days of 14 November 2008. Averments about the dispute and setting out the position of Gregor Homes Limited, as understood by the petitioner, are set out in paragraphs 11 to 13 of the Petition. It was plain from ex parte statements that there was no agreed history about these matters and a number of important issues of fact and law are in dispute between Gregor Homes Limited and the respondent.

The amended missives (6/3 of process)

[7] According to the petitioner's counsel the amended missives are critical to the dispute between the parties which is the subject of the present litigation. I set out in some detail the main clauses. The missive letter of 1 May 2008 was sent by the solicitors of the respondent to the solicitors of Gregor Homes Limited (formerly Mansecourt Limited). Clause 1 makes provision for a schedule of works specified in the missives as "specific works" to be carried out as additional works and makes provision in relation to the standard of works. Clause 2 provides that the cost of the specific works less any credit as stipulated in the schedule shall be added to the purchase price and shall be payable on the date of entry (as after defined). Clause 3 defines the date of entry:

"3. Entry Date: The date of entry ("Date of Entry") when the purchase price (less the Retention afterdefined) and the costs of the Specific Works as above shall be paid shall be the date 7 days after later of (a) the date of the Seller giving a statement confirming that the Works have been completed in accordance with the Missives and this letter and confirming that the subjects and the Works have been completed to the standard required as set out in the Missives and this letter and including any works to communal areas eg Lift, common entrance, parking or others that are reasonably required for the use of the subjects having regard to the luxury nature of the development and the subjects (such date being the "Date of Practical Completion" and such certificate shall be the "Certificate of Practical Completion" (which shall not be issued any earlier than the date when the subjects have received local authority habitation and a ZURICH cover note is issued) and (b) the date when the Certificate of Practical Completion shall be deemed to have been properly given under clause 3.2 below.

3.1 The Seller shall give to the Purchaser no less than ten Working Days notice of the date and time upon which the Seller proposes to carry out the inspection of the Works for the purposes of issuing the Certificate of Practical Completion unless a shorter period shall be agreed between the Purchaser and the Seller. The Purchaser or the Purchaser's Representative if he is absent from the U.K. at the time shall be obliged to accompany the Seller in such inspection(s) of the Works. The Purchaser or the Purchaser's Representative shall be afforded the opportunity to discuss with the Seller the Seller's proposal to issue the Certificate of Practical Completion and the contents of any list of defects or outstanding matters the Seller proposes to incorporate in such certificate.

3.2 If the Purchaser or his representatives acting reasonably at all times shall not be satisfied that the Works have been carried out in accordance with the provisions of the Missives and this letter such that Practical Completion should not have occurred (notwithstanding the issuing of the Certificate of Practical Completion) then within 5 Working Days after the date of the inspection the Purchaser shall give notice to the Seller specifying in what respects the Certificate of Practical Completion ought not to have been issued and what works the Purchaser considers require to be carried out in order to reach the stage when the Certificate of Practical Completion ought to be issued. The Seller shall use all reasonable endeavours to procure the carrying out of such works, and on completion of those works, the Purchaser will be deemed to have accepted the Certificate of Practical Completion subject to the terms of clause 5 below."

Clause 4 provides for retention monies. Clause 5 provides in some detail for a mechanism of dispute resolution. Clause 6 provides:

"6. Guarantee. The Purchaser agrees to pay over the following sums to Manus Gregor, Director of the Seller Company, namely:-

6.1 the sum of £250,000 within 3 working days of the date of your acceptance of this letter.

6.2 the sum of £100,000 on or before 30^th June 2008;

6.3 the sum of £100,000 on or before 30^th July 2008.

6.4 the sum of £50,000 on or before 30^th August 2008.

These sums will be held by Manus Gregor as key money pending satisfactory completion of the obligations of both parties under the missives as hereby amended. In exchange for each payment specified in 6.1 above Manus Gregor will execute and deliver to the Purchaser a Personal Bond in terms of the draft annexed and executed as relative hereto with the figure to be inserted on each occasion being the amount so paid.

On the date of entry any sums paid in terms of this clause shall be paid by Manus Gregor to the Seller Company to account of the purchaser price and the Purchaser shall forthwith return the executed Personal Bond to Manus Gregor."

[8] It should be noted that in terms of clause 6 it is agreed between Gregor Homes Limited and the respondent that Manus Gregor, the petitioner, will execute and deliver to the purchaser (the respondent) a personal bond in terms of the draft annexed. The draft annexed is in the following terms:

"THIS IS AN IMPORTANT DOCUMENT. YOU SHOULD TAKE INDEPENDENT LEGAL ADVICE BEFORE SIGNING AND SIGN ONLY IF YOU WANT TO BE LEGALLY BOUND.

I MANUS GREGOR OF 35 Melville Street, Edinburgh

(hereinafter referred to as "the Obligant") hereby undertake to pay to MARK ANTHONY EMLICK of Apartment 4211, Grosvenor House, Dubai (hereinafter referred to as "the Creditor", which expression includes its successors and assignees whomsoever) not later than 14 days after written demand by the Creditor the sum of £..................; with interest at the rate of 1% below the base lending rate of The Royal Bank of Scotland plc from the date of demand on such sums if any as remain outstanding after the date of demand

DECLARING THAT;

(1) the interest hereinbefore referred to shall be payable at such dates as may be so agreed or determined by the Creditor;.....

......(4) the sums due by the Obligant shall be conclusively ascertained by a statement under the hand of an official or manager of the Creditor (save for manifest error or fraud);......"

[9] It should be noted that the personal bonds signed by the petitioner which are to be found in 6/16 to 6/18 of process are in accordance with the terms of the draft which I have set out. These productions also contain copies of the charges for payment.

Submissions by counsel

[10] Counsel for the petitioner made a lengthy submission setting out the history. He made it clear that he was acting on behalf of Manus Gregor as an individual and that he had no instructions to act on behalf of Gregor Homes Limited

[11] Counsel for the petitioner accepted that Manus Gregor as an individual had signed three personal bonds in favour of the respondent (6/16 to 6/18 of process). The three charges which the petitioner seeks to suspend are charges which relate to Manus Gregor as an individual. Counsel for the petitioner did not seek to reduce the personal bonds granted by the petitioner. As I understood his legal submission it was to the effect that properly interpreted and on a proper understanding of the facts and circumstances which have occurred, the respondent had no legal right to retain and found upon the personal bonds granted by the petitioner because in terms of the contract conditions between Gregor Homes Limited and the respondent, the date of entry was 21 November. That was a date seven days after the issue of the certificate of practical completion in terms of Clause 3. As submitted by the petitioner's counsel it was therefor the respondent's duty to account for the purchase price to Gregor Homes Limited and "forthwith return the executed personal bonds" to the petitioner in terms of the last clause of paragraph 6 of the letter of missives of 1 May 2008.

[12] Counsel conceded that the petitioner was not a party as an individual to the contractual arrangements agreed between Gregor Homes Limited and the respondent. Counsel stated that the petitioner held the sums of money given to him by the respondent in a fiduciary capacity for both the respondent and Gregor Homes Limited. It was submitted that he did so only until the entry date, at which date, his duty was to pass said sums of money to Gregor Homes Limited. It was stated that the petitioner duly handed over the said sums to Gregor Homes Limited on 21 November. There was some reference made by the petitioner's counsel to the concept of jus quaesitum tertio but this was not developed under reference to any authority. There was some discussion as to whether there might be personal bar on the part of the respondent but no submissions were developed in relation to this.

[13] The submissions on behalf of the respondent were brief. In summary, counsel for the respondent submitted that the petitioner had signed valid personal bonds in favour of the respondent with no limitations in respect of time and no reference to any other contractual arrangements. The wording of the bonds had been intended to protect the respondent who had paid over substantial sums of money in the event of a dispute arising between Gregor Homes Limited and the respondent. These parties had contracted with the terms of the bond agreed between them. The petitioner did not seek to reduce the personal bonds and the court should give effect to the relevant terms thereof. It was not disputed that the respondent had given fourteen days notice for repayment and that repayment had not been made. The contractual arrangements in the missives were between Gregor Homes Limited and the respondent. These parties had made a contract which referred to the petitioner in his individual capacity. The petitioner was not bound by the missives and he was not obliged to sign the personal bonds. He had chosen to do so and he should be held to their terms. It was submitted that no grounds had been made out for the interim orders sought.

Discussion

[14] As I understood the petitioner's submissions, there have been no proceedings raised by the petitioner except the present action. Counsel for the petitioner conceded as a matter of law that standing the terms of the personal bond signed by the petitioner, it would have been open to the respondent to seek repayment in terms of the bonds prior to the date of entry, that is prior to 21 November 2008.

[15] Counsel for the petitioner submitted that the date of entry was 21 November 2008 and it followed from the terms of the contract between Gregor Homes Limited and the respondent that it was the respondent's duty to pay the sums due in terms of the contract and to return the personal bonds. In the absence of any reference to such an obligation by the respondent to the petitioner in the personal bonds, counsel made some reference to jus quaesitum tertio. I am of the opinion that even if such a submission was well founded, the petitioner could not be entitled to a legal right more extensive than was provided in the missives between the respondent and Gregor Homes. In the missives it is provided that "these sums will be held by Manus Gregor as key money pending satisfactory completion of the obligations of both parties under the missives as hereby amended" It is not disputed by the petitioner that, as at the date of 21 November 2008, there was no satisfactory completion of the obligations of both parties under the missives. Indeed by that date there was dispute between the parties. The petitioner avers that by April 2009 there was still no satisfactory completion of obligations and avers that the respondent has not paid sums due under the missives to Gregor Homes Limited.

[16] In addition there is a serious dispute, yet to be determined, about whether or not the date of entry was in any event triggered.

[17] I accept that matters are still at an early stage in the dispute between the parties and I am of the opinion that matters should not be judged finely. Relevancy cannot be finally determined at such an early stage and without proof. Nevertheless it is plain that there are clear written obligations in terms of 6/16 to 6/18 of process binding the petitioner in terms of the personal bonds without any limitations. The obligations to repay flow in my opinion from the plain terms of the personal bonds. The principal obligation in each of the bonds is expressed in the most general terms. It is an obligation for repayment by the petitioner not later than fourteen days after written demand by the respondent. Provision is made for interest. Paragraphs 2 and 3 of the bonds appear to be in somewhat unusual terms but it was not submitted that this in any way affected the primary obligation. The personal bonds executed by the petitioner in favour of the respondent were in terms of the provisions in the bonds recorded for preservation and execution.

[18] Both counsel advanced their submissions on the principle that the test for suspension was the same as for interim interdict. Prima facie case and the balance of convenience were put forward for my consideration. I have reservations about these submissions in relation to suspension bearing in mind the decision of the First Division in Dickson v United Dominions Trust Limited (No 2) 1982 S.L.T. 502 which was not cited to me. That decision suggests a stricter test exists in relation to suspension and that averments or at least ex parte statements averring clearly and unequivocally total extinction and satisfaction of the debt is required. The respondent in the present case gave substantial sums to the petitioner and the petitioner undertook payment on demand in terms of the bonds. It is not averred that the respondent has been repaid. My decision, however, does not turn on this because in any event I am not persuaded by the submissions advanced by counsel for the petitioner that in all the circumstances there is a prima facie case that the charges are wrongful and should be suspended ad interim. In my opinion, the charges ultimately proceed upon the basis of personal bonds, which can be and have been called up by the respondent. There are no relevant limitations included in the bonds. For the same reasons, I am not satisfied that the petitioner has established a prima facie case for interim interdict.

[19] In relation to the balance of convenience, I accept that there may be difficulties for the petitioner and I am informed that he is a director of several companies. Nevertheless the petitioner has freely undertaken liabilities in terms of the personal bonds. I take into account that the petitioner and respondent are professional men involved in business and that the personal bonds entered into by the petitioner were part of his wider business activities. The personal bonds state clearly that independent legal advice should be taken before signing. The respondent is entitled to rely on the bargain he concluded in the personal bonds. I also take into account that if there has been wrongful diligence adversely affecting the petitioner, he may have other remedies both at law or by way of commercial negotiation between parties. I am not persuaded that the balance of convenience in all the circumstances lies with the petitioner.

[20] I refused the petitioner's motions.