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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Groenius B.V. & Ors v Smith & Ors  ScotCS 269 (08 October 2002)
Cite as: 2002 SCLR 1084,  ScotCS 269
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OUTER HOUSE, COURT OF SESSION
OPINION OF LORD CLARKE
in the cause
GROENIUS B.V. AND OTHERS
NORMAN A. SMITH AND OTHERS
Pursuers: K. Campbell; Henderson Boyd Jackson
First Defender: Kinnear; Maclay Murray & Spens
Second to Seventeenth Defenders: Mrs Lake; Morisons
8 October 2002
"Players United Limited
The Melfort Maritime Company Limited."
The terms of the letter are as follows:
"I refer to the above and act on behalf of a Scottish Registered Company under the name of Players United Limited. That company has entered into a Contract with a second Scottish Registered Company, the Melfort Maritime Company Limited to purchase the yacht known as the 'Poit Dhubh'. 'Poit Dhubh' is presently under construction in Holland under the Contract between the Melfort Maritime Company Limited and the Company or Firm known as Dutch Yacht Design whose Principal is a Mr Johan Elsenga.
Difficulties have been encountered with this Contract and the Melfort Maritime Company Limited have instructed a Mr Van Der Meulen to represent their interest. Mr Van Der Meulen did not feel able to represent the interests of both the Melfort Maritime Company Limited and Players United Limited and recommended your services to us. I understand that Mr Van Der Meulen has prepared Court Documents to raise proceedings against Mr Elsenga and Dutch Yacht Design with regard to their failure to complete the terms of their Contract with the Melfort Maritime Company Limited, to build and complete 'Poit Dhubh'.
Players United Limited have made payments in the sum of £199,000 Sterling to the Melfort Maritime Company Limited as stage payments towards completion of the 'Poit Dhubh'. The Contract entered into with Melfort Maritime Company Limited provides that upon payment of such instalments ownership of the yacht to the stage completed passes to Players United Limited. Accordingly we feel that our clients have an interest to be represented in the current proceedings and I would ask you to undertake on our clients' behalf such proceedings as are necessary to conjoin our clients to the action which has been taken against John Elsenga and Dutch Yacht Design for our clients' interest as owners of the boat so far completed.
The 'Poit Dhubh' was due to be completed and delivered by 1 April 1990. Mr Van Der Meulen can I think more fully explain the nature of the contractual dispute between the Melfort Maritime Company Limited and Dutch Yacht Design and it would be helpful for me if you can give me a full explanation of the contractual position in Holland.
Ideally my clients would wish to remove the yacht immediately from both Dutch Yacht Design and the Melfort Maritime Company Limited and arrange to have the Contract completed elsewhere. The yacht however, is however, (sic.) I understand not completed up to the stage to which payments have been made. A particular concern is that the mast and sails have been paid for but have not been delivered by Dutch Yacht Design.
I should be grateful if you would take this case on for my clients and I should be grateful if you would give whenever possible an outline of your initial costs in this matter.
I look forward to hearing from you as soon as possible."
The pursuers go on to aver that Mr Groenewegen's firm "accepted these instructions and duly provided legal services in relation to the said dispute". They then aver that in due course it became apparent that it would be necessary for the "Poit Dhubh" to be sold at auction. Under reference to correspondence dated 20 May, 22, 24 and 27 June 1994, whose terms are incorporated into the pursuers' pleadings, they aver that it was agreed that "the sums due to GBV in respect of their fees, costs and outlays would become due and payable on the date of auction and that interest would run on the outstanding fees from 1 January 1994 onwards." GBV is a reference to the name of the Dutch firm. The pursuers sue, as previously noted, in respect of the invoice issued to the defenders' dissolved firm. These invoices are produced and their terms are incorporated into the pursuers' pleadings. They are numbers 6/4 to 6/9 of process and bear to relate to services provided and expenses incurred from 1 July 1991 to 31 December 1995. The sum first concluded for is the balance said to be outstanding in respect of these invoices. The pursuers' second conclusion is for interest said to be due on that sum.
"In professional relations between members of Bars of different Member States, where a lawyer does not confine himself to recommending another lawyer or introducing him to the client but himself entrusts a correspondent with a particular matter or seeks his advice, he is personally bound, even if the client is insolvent, to pay the fees, costs and outlays which are due to the foreign correspondent....".
As well as relying directly on that provision, for the assertion that the defenders were personally bound to pay GBV's fees, costs and outlays, the pursuers make the following averments in relation to it:
"In any event, it was an implied term of the provision of legal services by the defenders that the defenders would comply with the terms of all professional practice and conduct regulations applicable to solicitors in Scotland and in particular that they would comply with the 1989 Rules. It was an implied term that the defenders would comply with para.5.7 of the 1989 Rules. The effect of that implied term was to confer upon the Pursuers' predecessors GBV, and therefore the pursuers, a right of action against the defenders."
The pursuers go on to aver that repeated requests for payment have been made to the defenders but have been refused. They furthermore aver that matter was reported to the Law Society of Scotland whose Complaints Committee, following an investigation, concluded that the actings of the first named defender, in failing to pay GBV's fees amounted to unprofessional conduct to be deplored. The pursuers' substantive pleas-in-law in support of their claim are as follows:
"3. The sum first concluded for being professional fees incurred by the defenders to the pursuers' predecessors in title, decree should be pronounced accordingly.
4. The sum second concluded for representing accrued contractually agreed interest, decree should be pronounced accordingly."
First Defender's Submissions on Relevancy
"Subject to sub-sections (2) and (3), the Council may, if they think fit, make rules for regulating in respect of any matter the professional practice, conduct and discipline of solicitors and incorporated practices."
The reference to "the Council" is a reference to the Council of the Law Society of Scotland the sub-section then goes on to set out various matters which might be covered in such rules. Section 34(2) then provides as follows:
"The Council shall before making any rules under this section.....
(a) send to each member of the Society a draft of the rules; and
(b) thereafter submit the draft rules to a meeting of the Society; and
(c) take into consideration any resolution passed at that meeting relating to amendments to the draft rule."
Section 34(3) provides:
"Rules made under the section.... shall not have effect unless the Lord President, after considering any objections he thinks relevant, has approved the rules so made."
Section 34(4) provides:
"If any solicitor fails to comply with any rule made under this section that failure may be treated as professional misconduct for the purposes of Part IV," of the 1980 Act.
The 1989 Rules themselves, by introductory para.4 thereof, provide:
"A solicitor conducting cross-border practice shall observe and be bound by the terms of the Code at all times."
The code referred to is the Code of Conduct for lawyers in the European Community adopted by the Bars of Law Societies of the European Community on 28 October 1988. The full provisions of that Code are attached as a Schedule to the 1989 Rules. "Cross-border practice" is defined in terms of the Rules as:
"(a) all professional contacts with lawyers of Member States of the European Community other than the United Kingdom; and
(b) the professional activities of a solicitor in a Member State of the European Community other than the United Kingdom, whether or not the solicitor is physically present in that Member State."
Para.6 of the Rules provide that breach of the Rules may be treated as professional misconduct for the purposes of Part IV of the 1980 Act.
"it may be stated as a general rule that law agents are not personally liable for obligations which they undertake in name and on behalf of their clients, provided they do not exceed their authority express or implied."
The only exceptions to that general rule, as noted by Begg, are as follows:
"A law agent is, however, liable to persons whom he employs on his own credit, such as clerks and printers. He is also primarily liable for such fees and charges as are generally disbursed by legal practitioners, for example, fees of officers of court, fees of advocates' clerks, and the expenses of witnesses and havers adduced by him....".
As to the general rule, counsel for the first defender referred me also to Gloag on Contract, 2nd ed. at p.135, where the learned author states:
"If an agent contracts avowedly on behalf of a named principal the general rule is that he incurs no liability. Every agent avowedly contracting for a disclosed principal is presumed to bind his principal and not himself, unless the contrary is proved by the party maintaining the liability of the agent. Thus a law agent in Scotland employing a solicitor in England, and disclosing his client's name, is not liable for the English solicitor's account."
Counsel for the first defender submitted that while, as Professor Gloag, himself, recognised at p.138 of his work, it was possible that the custom of a particular trade or profession may impose personal liability on an agent, even when he contracted expressly in that capacity, in the present case, the pursuers did not plead their action on the basis of such a custom. In Scots law, if a custom of trade or profession was to be relied upon for creating binding legal obligations, it had to be specifically averred and proved. I was referred, in this connection, to the case of Livesey v Purdom & Sons (1894) 21 R.911. In that case an English solicitor sued a Scottish law agent for payment of an account for professional services rendered by him to a client of the Scottish law agent in the conduct of a litigation in England. In so doing, he relied on the custom of English law that a solicitor employing another solicitor for a client was personally liable to the solicitor employed for costs. It was held, after a proof, that the pursuer had failed to prove that the custom extended to the case of an English solicitor employed by a Scottish law agent. That case demonstrated, it was said, the need to aver and prove a custom if the application of the general rule governing the position of an agent for a disclosed principal was to be avoided. Moreover, to establish a relevant claim based on custom it was necessary to aver and prove that the custom was "certain, uniform, reasonable and notorious." I was referred, in this connection, to what is said in McBryde, Contract 2nd ed., para.9.61 and the cases cited therein. Nothing of this kind was averred by the pursuers in the present case.
"Where the agent discloses both the existence and the identity of the principal, the general rule is that the agent will not incur any personal liability, provided that the agent has acted within his authority."
At para.132 it was recognised that an exception to that general rule may arise by reason of custom of a particular trade or profession. The pursuers, it was submitted, had simply failed to aver a relevant basis for any exception to the general rule being applied in the present case. The pursuers' action should therefore be dismissed.
First Defender's Submissions on Prescription
"If, after the appropriate date, an obligation to which this section applies, 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,
then as from the expiration of that period the obligation shall be extinguished."
Para.1(g) of Schedule 1 of the 1973 Act provides that section 6 applies to "any obligation arising from, or by reason of any breach of, a contract or promise...". The pursuers, in the present case, were suing for payment of sums arising out of a contract. They sued, in particular, on reliance of the invoices 6/3 to 6/9 of process, which had been rendered to the first named defender on various dates in the period from 11 May 1993 to 6 March 1996 and which bore to relate to services rendered and expenses incurred during the period from 1 July 1991 to 31 December 1995. On the face of things, counsel for the first defender submitted, the obligation to pay the sums in question became enforceable on the date of each invoice. The present action was served on the first defender on 28 September 2001. Prima facie, therefore, the obligation to pay the various sums had been extinguished by virtue of the five year prescriptive period having expired before the raising of these proceedings. The pursuers seemed to recognise the difficulty they faced in that respect and, apparently, sought to get round it by averring, as they did, in Article 3 of condescendence that, notwithstanding the dates of the various invoices, the date for due payment was, by agreement, altered to the date whenever the vessel was to be auctioned which, in the event, it is averred, was 3 October 1996. The agreement upon which the pursuers rely, in this respect, is averred by them, to be embodied in certain letters passing between GBV and the first named defender, Nos.6/16 to 6/19 of process, and their terms are incorporated into the pursuers' pleadings. Counsel for the first defender pointed out that the only part of these letters which appeared to relate to the question of payment of Mr Groenewegen's bills were as follows. In 6/16, which is a letter from the first named defender to Mr Groenewegen dated 20 May 1994, the first defender in the third paragraph thereof, wrote as follows:
"Secondly, my clients are aware that there are outstanding accounts due to both yourself and to Mr De Vries Stadelaar. My clients hope that as the boat is now complete and hopefully a sale can be affected very quickly that they will be able to meet all of your own outstanding costs and those of Mr De Vries Stadelaar from the sale proceeds."
In his reply to that letter Mr Groenewegen, in a letter dated 24 June 1994, 6/18 of process, stated, inter alia, as follows:
"4. Outstanding accounts
I agree with the proposal of clients to pay me from the sale proceeds, but only on the condition that an interest of 6% will be paid on my outstanding fees from January first 1994.
I certainly expect it will not be necessary to appeal for the international rules on fees of foreign colleagues."
On 27 June 1994 the first named defender wrote to Mr Groenewegen, 6/19 of process, under reference to his letter of 24 June and stated:
"With regard to your outstanding account I think your proposal is very fair and I have recommended it to my clients."
Counsel for the first named defender submitted that the content of the letters, just referred to, did not amount to a concluded agreement that the date of any obligation to pay the invoices had been altered from the date they bear to a later date. What was being set out in the correspondence was that a source of funds for the payment of the sums had been identified, namely the sale proceeds of the vessel. Even if the letters could be read as amounting to an agreement, having the effect contended for by the pursuers, it could only affect the liability of the clients, as principals, and not any separate and independent liability of the agents, apparently relied upon by the pursuers in this case. The first named defender, and his firm, were not parties to any agreement to vary the date of the obligation to pay the sums owed. Counsel for the first named defender also drew my attention to the language of the letters 6/16 and 6/18 of process in referring to "outstanding accounts". The statement by Mr Groenewegen in his letter, 6/18 of process, that he agreed with "the proposal of clients to pay me from the sale proceeds", took matters no further than acknowledging that the clients were hoping to source payment of their outstanding obligations to him from the sale proceeds of the vessel. Counsel for the first named defender pointed out, furthermore, that Mr Groenewegen's stated condition that interest of 6% will be payable on outstanding fees from 1 January 1994, hardly squared with an agreement that enforcement of any obligation in respect of the fees was to be postponed to a significantly later date. There was also no averment that Players United Limited had themselves ever agreed to that condition. The whole tenor of the correspondence was that the first named defender's clients were seeking an indulgence, which Mr Groenewegen was prepared to grant, provided his condition regarding interest was met. The correspondence did not create new obligations. The clients were simply seeking, through the first defender, time to pay. In Article 3 of condescendence the pursuers aver as follows:
"That the date for payment of the pursuers' fees was postponed in this way by agreement between the parties, however, is confirmed by the terms of a letter dated 9 February 1995 from the first named defender to a ship valuer engaged by him, Mr De Vries Stadelaar."
That letter is produced (6/20 of process) and its terms are incorporated into the pursuers' pleadings. In it it is stated as follows:
"The arrangements we have entered into with Mr Groenewegen is that all his outstanding fees and outlays will be met from the sale of the boat together with an element of interest for the outstanding period."
That statement, counsel for the first named defender, submitted was inconsistent with there having been a concluded agreement that the date of payment had been re-negotiated and would run from the date of the sale of the vessel, but simply referred to an accommodation that the outstanding fees would be met out of the proceeds of the sale of the boat. Counsel for the first named defender then pointed out that the pursuers were suing on the invoices. The last three of the invoices were dated 27 February 1995, 21 June 1995 and 6 March 1996. It was difficult to see, he submitted, how anything that may have been agreed by virtue of Mr Groenewegen's letter of 20 May 1994, 6/16 of process, with regard to the invoices outstanding, at that date, could affect these later invoices, rendered after that date. As counsel for the first named defender put it, this indeed demonstrated that there had been no agreement to alter the date when payment of sums due to GBV became enforceable to an uncertain date, sometime in the future, when there might be sale proceeds arising out of the auction of the vessel. If there had been such an agreement, what was the purpose of these later invoices? Counsel for the first named defender accepted that it might be said that they were simply statements of accounts, but, if so, he contended, one would have expected to see this being said in definite terms and, in particular, one would have expected to see these invoices being in different terms from those rendered before the alleged agreement regarding the date upon which payment would become enforced.
Submissions of Second to Seventeenth Defenders
Pursuers' Submissions on Relevancy
"It is clear from the letter, and was not in dispute, that the defenders were acting as agents for disclosed principals. It is well settled that if such an agent signs a contractual document without qualifying his signature, there is a presumption that he is contracting personally. In order to avoid this it must be apparent from the other parts of the document that he did not intend to bind himself to perform. See Stewart v Shannessy, per Lord Kinnear at (1900) 2 F., p.1293 and Lindsay v Craig, per Lord Cullen at 1919 S.C., p.146; 1918 2 S.L.T. p.325. English law is to the same effect. See Bowstead on Agency (15th ed.), p.445; and Cooke v Wilson. It follows, as is well recognised, that a solicitor grants a letter of obligation in what both parties referred to as the normal or standard form, in which there is no qualification either of the signature or within the body of the letter, is held to have undertaken a personal obligation to perform."
It did not, therefore, seem to me that the reliance placed by counsel for the pursuers in this case did really advance his position as to the effect of the letter, 6/1 of process. His submission, nevertheless, was that the letter made the identity of the principal apparent. There was no suggestion in it that the Dutch agents should contract with the client directly. It was clear from the final two paragraphs that the intention was that there would be a continuing relationship between the first defender and his firm and the Dutch agents. It was not simply a case where the Scottish solicitors were referring a client to the Dutch agents. There was no express disclaimer by the first named defender in respect of any liability for fees or charges payable to the Dutch agents. Counsel for the pursuers submitted that a solicitor, who introduced a client to another lawyer, in this way, was liable for the fees incurred by the client in the absence of any disclaimer. That submission, it appears, had to amount to saying that there was an implied promise to be found in the letter, 6/1 of process, on the part of the first named defender, and his firm, made to the pursuers' predecessors, that, in the event, that the pursuers' predecessors did act for the client, the first defender and his firm would be responsible for the fees and charges of the pursuers' predecessors.
"Further, the instructing lawyer may at any time limit his personal liability to the amount of fees, costs and outlays incurred before intimation to the foreign lawyer of his disclaimer of responsibility for the future."
Counsel for the pursuers maintained, however, that the position was that all that was included in para.5.7 was now "potentially incorporated into contracts of this kind".
Pursuers' Submissions on Prescription
"3. The sum first concluded for being professional fees incurred by the defenders to the pursuers' predecessors in title, decree should be pronounced accordingly.
4. The sum second concluded for representing accrued contractual agreed interest, decree should be pronounced accordingly."
The third plea-in-law would appear to suggest that the defenders were due to pay the sums in question, not in an accessory capacity, but as principals themselves. Be that as it may, I consider that the general rule of agency remains in Scots law, as stated in the Stair Memorial Encyclopaedia Vol.1, para.127, namely that where the agent discloses both the existence and identity of the principal, the agent will not incur any personal liability, provided that the agent has acted within his authority. As the passages from Begg on Law Agents and Gloag on Contract, cited by counsel for the first named defender demonstrate, where the agent in question is a solicitor he may, by custom be found to be personally liable for certain fees and charges. The case of Livesey v Purdom, however, is clear authority that no such custom exists in relation to the fees incurred by a lawyer acting in another jurisdiction instructed by a Scots lawyer to act on behalf of his client. Counsel for the pursuers did not contend that the pursuers' case was reliant on establishing any such custom having developed since the decision in the case of Livesey and no such case is averred in any event.
"The Council shall have the power to waive or modify any of the provisions of these rules as they apply to a solicitor in any particular case."
Nor am I satisfied that it is, as was contended for by counsel for the pursuers, necessary to imply such a term into contractual arrangements whereby the services of foreign lawyers are engaged. It may be highly desirable, from the point of view of the foreign correspondent, that such a term should apply but it is not, in my judgment, necessary to give the contract "business efficacy". I can, however, quite see that because of (a) the existence of the rules, (b) their dissemination and (c) the fact that the practice has developed that Scottish solicitors now regard themselves as bound to guarantee the payment of the fees and charges of foreign correspondents they engage on behalf of clients and (d) invariably act accordingly, it may be possible to advance a case, based on custom, which has contractual consequences, but no such case has been pled in the present action. Paragraph 5.7, might well embrace what is to be regarded as honourable conduct, but the rules are just that, rules as to conduct made under a Code of Conduct. The Code of Conduct, in question, was the outcome of many years of discussion and negotiation between the bars and law societies of the European Community, with the purpose of setting a common approach for these bodies, with regard to questions of professional conduct. Their incorporation into the law of this country by the way of the 1989 Rules did not, per se, in my judgment, alter the law of contract of this country. The consequences of failure to observe them is simply, as stated in introductory para.6, namely that "breach of the rules may be treated as professional misconduct for the purposes of Part IV of the Solicitors (Scotland) Act 1980." While the failure, by the defenders, to observe the provisions of para.5.7 in this case, might be deplored as unprofessional conduct, as it was by the Law Society of Scotland's Complaints Committee in their ruling which forms 6/12 of process, and whose terms are incorporated into the pursuers' pleadings, I am satisfied, for the reasons given, that reliance on the Rule, in the way the pursuers aver matters in the present case, does not provide a relevant basis of legal liability attaching to the defenders for payment of the sums in question. I, accordingly, consider that the action, as pled, is irrelevant and falls to be dismissed.