Ling Deng

The court can be very accommodating to a party whose case is expressed in slightly opaque terms. The recent judgment of Lord Braid in CSG Commercial Limited v AJ Capital Partners LLC [2022] CSOH 60, however, highlights the continued importance of written pleadings in court and lawyers being able to properly express the precise factual basis on which their client’s case rests giving their opponent fair notice of the argument to be made.

In CSG the pursuer introduced the defender to Macdonald Hotels Ltd and the defender purchased three hotels from Macdonald. The case was originally raised as one for damages for breach of a joint venture agreement. The pursuer had plead that the parties had entered into the contract orally in April 2019. The alleged breach of contract was the pursuer’s exclusion from the joint venture. The pursuer’s case was later amended to include a claim for sums due under an agreement between the parties in terms of which the defender had undertaken to pay the pursuer an introduction fee in respect of hotels the defender subsequently purchased. The pursuer claimed that it was entitled to £912,000 as an introduction fee due to the agreement between the parties or on the principles of delictual liability or recompense; and was also entitled to £169,923 due to the time and resources the pursuer expended in advancing the acquisition.

In his judgment, Lord Braid looked at the pursuer’s pleadings under three broad headings: first, a contract case (introduction fee agreement and joint venture agreement); secondly, a delictual case (breach of the joint venture and negligence); and thirdly a case based on recompense (unjustified enrichment).

The court then went on to discuss each of these separate heads of claim. The pursuer’s pleadings were brief but that, in itself, wasn’t an issue, despite criticisms about the brevity of their pleadings having been made by the defender. The problem for the pursuer was that their case was formulated as being based on a number of different legal principles without sufficiently explaining what its case was really about or how the pleadings related to the sums sued for. It was unclear from the pleadings whether the first payment of £912,000 was sought in respect of the defender’s contractual obligations or as damages for breach of contract, in delict or for unjustified enrichment.

In relation to the contract case, Lord Braid accepted that the pursuer’s case was reasonably clear. It plead that an agreement was entered into between the parties in February 2019 to pay a one per cent introduction fee on hotels to be purchased outwith the joint venture. This gave fair notice to the defender of what the pursuer alleged was agreed and when. However, the case simply stopped there and there was no specification as to the precise terms agreed nor how that agreement was modified by the joint venture agreement.

The court then looked at the delictual case, where the pursuer plead that the defender’s statement that the pursuer would be remunerated for the work it carried out was made negligently causing the pursuer to do work which it otherwise would not have done. The sum sued for in respect of this head of claim was also the £912,000 which was said to be in respect of the introduction fee. However, if the alleged negligence statement had not been made then the pursuer would have done no work and would certainly not have been entitled to the introduction fee.

Lord Braid explained that the correct approach to quantification of loss would be to ascertain and plead what the pursuer would have done had the defender not made any statement regarding remuneration. Thereafter, to value the work it carried out in relation to those hotels which were ultimately purchased. However, the pursuer had no averments (let alone relevant averments) of misrepresentation. Certainly, it could not be said that a future intention to pay remuneration was a relevant misrepresentation. Lord Braid referred to Gloag on Contract (2nd edition, at page 464) which provides “…in no event is an expression of actual intention a misrepresentation; it is either a contractual obligation, or it has no legal effect”. Far from pleading a misrepresentation, the pursuer’s pleadings had the opposite effect. They stated that the defender changed its mind with regard to the pursuer’s involvement in the joint venture because Macdonald’s intervention. This change of mind, the court said, “[was] not redolent of a representation which was false from the outset”.

Finally, the pursuer plead a recompense case in relation to the second sum sued for. This head of claim also raised the question of jurisdiction given the defender is an American company. The pursuer’s pleadings in relation to recompense were simply that it had carried out work which the defender had benefitted from, thus it was entitled to £169,923. However, the court found that given the intention to form a joint venture, the purser did not simply carry out work for the defender’s benefit but rather for its own benefit as well. It could not seek payment from the defender just because an incidental benefit had been conferred on the defender. Further, even if the pursuer had never intended for its work to be gratuitous, it did not provide a breakdown of that work specifying how much work related to the joint venture and otherwise.

Turning to the point of jurisdiction, as the defender is an American company, the only basis for a claim to be raised in Scotland against them is in matters relating to a contract (section 20(1) and rule 2(b) of schedule 8 of the Civil Jurisdiction and Judgments (Scotland) Act 1982. However, there was ample authority to the effect that claims for recompense (being based on unjustified enrichment) did not relate to a contract, subject to certain exceptional cases. In the present case the pursuer contended that the parties had entered into contract for the payment of an introduction fee, but their recompense claim was based on the fact that there was no contract. If the pursuer was successful in demonstrating that there was a contract, then the court would have jurisdiction. However, if it was not successful then there was no contract and no jurisdiction. As Lord Braid put it, “Ultimately the pursuer’s argument rests on there being some form of nebulous hinterland between the realms of contract and no contract such that there can be said to be a contractual relationship between them even through there is no contract. I do not consider that such a hinterland could, or does, exist. To have a contractual relationship with someone necessarily entails that there is a contract.” Accordingly, in respect of the recompense case, the court held that it had no jurisdiction.

The court did not dismiss the entire case as it felt that there was some merit in the introduction fee case. The pursuer has been afforded another chance to amend its pleadings in light of Lord Braid’s judgment. This case acts as a reminder to all legal practitioners that while legal pleadings can be brief and abbreviated pleadings are encouraged in court, they must still be capable of being readily understood and relevant. It is reassuring that the court is still willing to hold parties to a proper standard of pleading and avoid unnecessary expense of proof where it is not clear what the issues for proof actually are.

Ling Deng is a senior solicitor at Morton Fraser