RWilson v. Dunbar Bank Plc [2006] ScotCS CSOH

OUTER HOUSE, COURT OF SESSION

[2006] CSOH 105

A13/00

OPINION OF C. J. MacAULAY, QC

Sitting as a Temporary Judge

in the cause

RONALD EVAN WILSON

Pursuer;

against

DUNBAR BANK PLC

Defenders:

________________

Pursuer: Haddow, QC; D. Davidson; Drummond Miller, WS

Defenders: Sandison; DLA

11 July 2006

Introduction

[1] At the time leading up to the events giving rise to this action, the pursuer was the heritable proprietor of property at Fernieside Avenue, Edinburgh. He had carried out a development of six residential flats at that location. The construction of the flats was completed by about April 1995. He obtained financial help in connection with that development from the defenders.

[2 ] Because of the pursuer's inability to repay the borrowing he had obtained from the defenders, the defenders served a calling-up notice on him on 3 June 1996. The defenders then took possession of the subjects in September 1996 and a sale of the subjects subsequently took place.

[3 ] The essential issue raised in this action was whether the defenders were in breach of the duty they were under in terms of Section 25 of the Conveyancing and Feudal Reform (Scotland) Act 1970 (the "Act"). As a separate issue, the defenders counterclaim for a sum which they contended was still outstanding in connection with the finance they provided to the pursuer.

[4 ] In the course of the proof before answer evidence was led from the pursuer himself. On behalf of the pursuer, evidence was also led from the following witnesses:

a. Anne Marie Balcombe - At the relevant time Miss Balcombe was employed by DM Hall as a sales negotiator. She dealt with properties on a day to day basis. She worked under the direction of Mr Nisbet.

b. George Stewart Watt - In 1996 Mr Watt was the senior partner in CRGP Robertson, Chartered Surveyors. He was a Fellow of the Royal Institution of Chartered Surveyors.

c. George Leonard Maguire - Mr Maguire was a Fellow of the Royal Institution of Chartered Surveyors and a partner in the firm McNeill Maguire & McCreath from 1999-2003.

d. David Thomson - Mr Thomson was an enrolled solicitor and, since 1May 2000, a partner in the firm of DLA. From 1 May 1997 to 30 April 2000 he was a partner in Bird Semple Solicitors.

e. Robert Bolevant - When he gave evidence Mr Bolevant was a self employed property consultant but from July 1968 until about 2002 he was employed by the Bank of Scotland. In 1996 he was the manager of the West End Edinburgh branch of that bank.

f. John Urquhart - Mr Urquhart was an enrolled solicitor and a partner with Morton Fraser Solicitors in Edinburgh. He was admitted as a solicitor in 1970. From 1986 to 1998 he was employed as head of the Nationwide Building Society Scottish Legal Department. He served as convenor of the Conveyancing Committee of the Law Society of Scotland from 1996 to 1997. He was Chairman of the Scottish Committee of the Council of Mortgage Lenders from 1995 to 1997.

[5 ] On behalf of the defenders evidence was led from the following witnesses:

a. Brian Alan Dennison - Mr Dennison was an enrolled solicitor and when he gave his evidence he was employed by Boyds Solicitors. From 1979 to 1997 he was a partner in Bird Semple.

b. Lynn Joan McWilliams or Mearns - At the relevant time Mrs Mearns was known as Miss McWilliams and as the relevant documentation bears to be in the name of Miss McWilliams hereinafter I shall refer to her by her maiden name. Since October 1991 she has been employed by the defenders. When she gave her evidence she was the regional loans manager of the defenders. At the relevant time she was an assistant manager based at the Glasgow branch of the defenders.

c. James Murray Crozier - At the date of the giving of his evidence, Mr Crozier was an associate director of the Bank of Scotland. He had been in the employment of the Bank of Scotland since 1996. At the relevant time he was manager of the West End branch of that Bank. He was Mr Bolevant's predecessor.

d. George Nisbet - George Nisbet was a partner in DM Hall Chartered Surveyors and had been since January 1991. He was a chartered surveyor and had been a Fellow of the Royal Institution of Chartered Surveyors since about 1992/1993.

e. John Duncan Macpherson Dalby - At the date of the giving of his evidence Mr Dalby was a director of Deutsche Bank. From 1991 to 2003 he was employed by the defenders. During that period he was a director in property lending based in the Glasgow branch.

[6 ] Mr Maguire was called to give evidence because in March 1996 he had provided the Bank of Scotland with a report providing a valuation of one of the flats constructed by the pursuer. At that time the pursuer's son intended to buy the flat. The purpose of his report was to provide the Bank with some guidance as to how much to lend to the pursuer's son in connection with his proposed purchase of the flat. Ultimately his evidence had no real bearing on the case.

[7 ] Mr Bolevant and Mr Crozier were called to give evidence in order to speak to their dealings with the pursuer and the defenders. The pursuer had two accounts with the Bank of Scotland, a personal account and a business account. The business account was in the name of Waverly Contract Interiors Limited, a business that was being run by the pursuer prior to the development of the flats. The pursuer had a personal liability under a letter of guarantee in respect of the business account. The Bank of Scotland had also provided some funding for the development. The Bank of Scotland held a postponed Security over the development.

[8 ] Mr Dennison of Bird Semple acted for the defenders for part of the time covered by the events that give rise to this action. He left Bird Semple in about March 1997 and at that time Mr Thomson took over.

[9 ] Evidence was led in connection with proposals for the development of the Moredun area generally. The flats constructed by the pursuer were in that locality. This evidence may have been designed to raise the spectre of an enhanced development value and whether the defenders and DM Hall knew about the proposals, but it did not seem to lead anywhere.

[10 ] In the course of the proof a great deal of evidence was led about the valuation of the flats by DM Hall. There was also a dispute about how it came to be that the pursuer initially advertised the individual flats at about £1000 more than DM Hall's valuations. I also heard evidence about other events such as the pursuer's interaction with the defenders prior to the defenders' repossession of the Harriers. Ultimately, much of that evidence had no real bearing on the essential question whether the defenders were in breach of their duty under Section 25 of the Conveyancing and Feudal Reform (Scotland) Act 1970 after they had taken possession of the flats. That question turned upon the way in which the flats were marketed once in the possession of the defenders.

[11 ] The company run by the pursuer, Waverly Contract Interiors Limited, had operated from the location at Fernieside Avenue that the pursuer used in the construction of the six flats. It had ceased trading. The building at that location had formerly been occupied by Edinburgh Southern Harriers. That is why the development became known as "the Harriers".

[12 ] The pursuer's company had been involved in the refurbishing of pubs and hotels. It ran into financial difficulties. In particular a large overdraft was incurred with the Bank of Scotland for which the pursuer was ultimately responsible. It was against that background that the pursuer looked to the development of the Harriers as the way of solving his financial difficulties.

Funding
[13 ] Some finance for the project was provided by the Bank of Scotland (see paragraph [7]) but the major part of the funding was provided by the defenders. As a condition for receiving such funds, the pursuer granted a standard security dated 6 December 1993 over the Harriers to the defenders.

[14 ] On 23 March 1994 the defenders made a loan facility offer to the pursuer of £114,000, which he accepted. In January 1995 the pursuer applied to the defenders for further finance in relation to the completion of the development. By letter dated 18 January 1995 the defenders offered to increase the pursuer's borrowing facility from £114,000 to £144,000. The pursuer accepted this offer. The extra funding enabled the pursuer to complete the project in 1995.

[15 ] In funding the construction of the Harriers, the defenders relied on reports provided to them by Mr Nisbet of Messrs DM Hall. These reports provided the defenders with guidance as to valuation.

The Pursuer's Attempts to Sell the Harriers

[16 ] Throughout much of 1995 and up to about May of 1996, the pursuer attempted unsuccessfully to sell the six flats of the Harriers as individual residential flats. There had been considerable interest shown in the flats. In that period the pursuer made extensive efforts to market the flats.

[17 ] A crisis point was reached in May 1996. The pursuer had effectively run out of money and was unable to finance any further realistic advertising of the Harriers.

[18 ] At a meeting on 29 May 1996, the defenders decided to invoke the Calling-Up procedure sanctioned by the Act. Mr Dalby, Mr Nisbet, Mr Dennison and Miss McWilliams were present at the meeting. The note of the meeting recorded that the lack of sales was thought to be due to a slightly high asking price, and also insufficient marketing. Certainly by then there was virtually no marketing taking place because of the pursuer's financial difficulties.

[19 ] By letter dated 3 June 1996 Messrs Bird Semple wrote to the pursuer intimating a notice of default dated 30 May 1996 in respect of the principal sum then outstanding of £167,247.55. Payment of that sum and outstanding interest was required within a period of 2 months. No payment was made. After the expiry of the Calling Up period, in September 1996 the defenders took possession of the Harriers.

The Defenders' Strategy for the Marketing of the Harriers

[20 ] The defenders instructed Mr Nisbet of DM Hall to put forward marketing recommendations in connection with the proposed sale of the Harriers. Mr Nisbet responded to that request with a report dated 28 August 1996 (hereinafter the DM Hall Report).

[21 ] The DM Hall Report contained a number of detailed recommendations. The salient marketing considerations were set out in the following manner:-

"1. Property Particulars

Property particulars will be prepared which will describe the subjects and the terms of their availability. It will be our intention to market the subjects as being available either as one lot or individually ...

They shall be distributed by means of a direct mailing exercise to the undernoted parties:- (a) all local solicitors, surveyors, estate agents and other property professionals active in the market on their own and client's behalf, (b) local developers/builders, (c) property companies and investors.

These will be identified from our existing mail shot database and also from appropriate publications such as the Yellow Pages, Thompsons Directory and such like ...

2. Advertising Boards/Stickers
We would recommend that a 5 foot by 4 foot, V angle board, describing the development and the available units and giving our telephone number and logo be erected on post to the front, at the most visible position ...

3. Press Advertising

We would recommend that the availability of the Subjects be brought to the attention of the wider market by means of an aggressive press advertising campaign.

The appropriate media would be the Scotsman but on different days to appeal to different sectors of the market ...

A series of four initial adverts should be placed, programmed over the next 6 weeks and the position regarding response monitored thereafter.

4. Timing
The market should be returning to a more normal level of activity following the holiday period and we would recommend the immediate implementation of the above mentioned measures.

We normally try to have the first advertisement coinciding with the erection of the advertising board and the implementation of the first mail shot. This can often serve to enhance the impact of marketing the property and, given the nature of marketing to date anything which can be done to enhance profit should be undertaken.

10. ESPC
There is no doubt that, in Edinburgh, the residential market is controlled principally by the legal profession who publish the Edinburgh Solicitors Property Guide. This is the most widely residential property bulletin and, if the units are to be effectively marketed individually, it will be necessary to effect inclusion within the ESPC. We are unable to organise this and we would recommend that you seek assistance from your solicitors, Bird Semple, who have already indicated that they would be in a position to help ...

We are confident that we will be in a position to effectively market the subjects as a "unum quid" to the builder/developer market but in the case of individual sales we feel that the bank's best interests would be served if the ESPC publication can be used...

12. Owner Occupier Market
There is no doubt that the residential market in Edinburgh is becoming increasingly active and a substantial level of activity taking place, principally for good quality properties, in good locations.

We therefore feel that provided an aggressive marketing campaign is implemented, at sensible prices, there is a strong probability of satisfactory sales being achieved. It should however be borne in mind that it may still take a not inconsiderable period of time to effect a sale of all six units.

14. Asking Prices

Notwithstanding the content of our letter of 16 November 1995 wherein we apply values of £48,500 for each of the ground floor units and £50,500 for each of the first floor units, we consider that in order to encourage interest and generate activity, pricing should be slightly below these figures and we would suggest seeking offers in excess of £47,500 and £49,500 for the ground and first floor units respectively...

On the basis of a disposal of the subjects as a "unum quid", we would draw your attention to our original report of 11 March 1993 wherein we applied a "unum quid" value in the order of £210,000. Given the fact that prospective purchasers of this nature are likely to negotiate back from the asking price we would recommend pricing the subjects at offers in excess of £250,000 for the development as a whole ...

15. General Remarks

...

We consider that the subjects are likely to have two distinct and separate markets which must be approached on a different basis.

The owner occupier market for individual properties must be aggressively attacked via the ESPC and your solicitor contacts in conjunction with our own involvement.

The developer/investor market should be approached on the basis of different particulars and marketing techniques as outlined above. We do consider that from the bank's point of view, the most sensible approach would be to attempt a disposal of subjects as a whole for the reasons outlined earlier in this report.

Given an aggressive and co-ordinated marketing programme we would be confident of achieving a satisfactory disposal of the subjects on the Bank's behalf within a reasonable time period ..."

[22 ] By letter dated 29 August 1996, Mr Nisbet was instructed by the defenders to "undertake the procedures outlined within your report ...". The author of the letter (Miss McWilliams) also indicated that she had spoken with Mr Dennison of Bird Semple, and that he had confirmed that he would take the necessary steps to have the property advertised in the ESPC (Edinburgh Solicitors Property Centre). Mr Nisbet was asked to contact Mr Dennison directly in order to make the appropriate arrangements.

[23 ] The DM Hall Report and the bank's formal instructions to Mr Nisbet to proceed in terms of the report represented the marketing strategy proposed by the defenders in relation to the sale of the Harriers.

CRGP Robertson's Report
[24 ] The defenders also instructed CRGP Robertson, Chartered Surveyors for a second opinion on the value of the Harriers and marketability. A report dated 24 September 1996 set out CRGP Robertson's advice. Mr Watt was the author of that report. One of the reasons advanced in the report as to why none of the flats had sold was that the asking price had been too high.

[25 ] In his report Mr Watt valued the aggregate open market value of the six flats, if sold individually, at £267,000. On the basis that the sales were carried out in a limited timescale he put forward an "estimated restricted realisation price" of £243,000. In effect that valuation represented a "forced sale" value.

[26 ] Broadly echoing the advice given in the DM Hall Report, Mr Watt in his report suggested that "the subjects be vigorously remarketed at realistic prices". He also expressed the view that he expected the majority if not all of the flats could be disposed of within three to four months "provided there is a vigorous marketing campaign including extensive advertising".

Mr Watt on Advertising

[27 ] In his evidence Mr Watt explained that the circulation of property particulars is important to the advertising of residential property. They provide the first link between the potential buyer and the property. Properly presented they play an important part in attracting interest to the property.

[28 ] In relation to the direct mailing exercise described in the DM Hall Report Mr Watt explained that such an exercise would be normal and good practice. In such an exercise he considered it would be important to retain a record of to whom property particulars were circulated so that they could subsequently be contacted to enquire whether they might be interested in the property.

[29 ] Under particular reference to the press advertising proposed in the DM Hall Report, Mr Watt was of the view that the recommendations made were sensible. Also, in relation to the timing of any marketing he agreed that such timing was of significance, because traditionally July/August and December/January were the quieter months of the year for the property market.

[30 ] The proposal made in the DM Hall Report regarding advertisement of the Harriers in the ESPC Mr Watt also described as being very sensible. He also agreed that the erection of boards at the property itself was normal practice.

[31 ] Mr Watt was of the view that the extent of press advertising that had occurred while the property was in the possession of debtor should not be relied upon when considering press advertising. His view was that if results had not been achieved in the past you should start afresh because the market did not remain static. He considered newspaper advertising to be "the core of any advertising campaign". He regarded press advertising, particularly at the time when the Harriers were being exposed for sale by the defenders, to be the main method of letting potential purchasers know that the property was for sale. Also, advertising in newspapers had a relatively short life-span, about 24 hours. That meant that it had to be refreshed.

[32 ] Mr Watt gave his evidence in a careful and measured way and I accepted his evidence as summarised in paragraphs [24] to [31].

Viewing

[33 ] According to DM Hall's records the Harriers were viewed by Alan Daly and Max Craimer on 24 October 1996.

[34 ] In the comments section of a property contact sheet relating to Mr Daly the following remarks were made: "Reilly McGinley/Conroy McInnes. Digrasmart Ltd ..."

[35 ] In the comments section of the same property contact sheet associated with Mr Craimer a note has been made "Very interested will offer on the closing date".

[36 ] No other parties viewed the Harriers.

The Receipt of Offers

[37 ] Messrs Reilly McGinley Conroy McInnes, Solicitors, Glasgow submitted an offer dated 31 October 1996 on behalf of Digrasmart Limited ("Digrasmart"). The price was £205,000 and the date of entry was set out as being 10 January 1997. In paragraphs [111] to [115] I look at the position of Digrasmart Limited.

[38 ] The offer made on behalf of Digrasmart was expected. By letter dated 30 October 1996 Miss Balcombe of DM Hall wrote to the defenders intimating that an offer of £205,000 for the Harriers was about to be submitted. That letter made the following observations:

"Further to our telephone conversations of this week I write with regard to the above subjects and developers, who have been to view the premises and intend to offer on the property. I have spoken with John and believe that he is in direct contact with the developers involved. Mr Daly has intimated that he will be offering £205,000 for the development."

[39 ] Digrasmart was not mentioned in Miss Balcombe's letter of 30 October 1996. The reference to "John" was a reference to Mr Dalby of the defenders. Mr Dennison said in evidence that he was of the view that the bank (the defenders) had told Mr Murray or Mr Daly about the Harriers. Mr Murray also came to be associated with Digrasmart. At that particular time Mr Daly was a client of Mr Dennison. Mr Dalby did not demur from the suggestion that it may have been him who told Mr Daly about the availability of the Harriers. I was satisfied that the offer made on behalf of Digrasmart was prompted by contact with the defenders rather than with any marketing campaign conducted on behalf of the defenders by DM Hall.

[40 ] Another offer for the Harriers dated 8 November 1996 was also received from Leslie Wolfson & Co, Solicitors, Glasgow on behalf of H&M Developments (Scotland) Limited. The price was £190,000 and the date of entry was stipulated as 17 January 1997. The Max Craimer who had viewed the Harriers on 24 October 1996 was associated with H&M Developments (Scotland) Limited.

[41 ] Once again it was the defenders who had told Leslie Wolfson & Co, and in particular Mr Silver of that firm, that the Harriers was on the market. By letter dated 4 November 1996 from Leslie Wolfson & Co, signed by Mr Silver and addressed to Mr Dalby of the defenders, Mr Silver indicated that a preliminary inspection of the Harriers had taken place and that an offer was to be made. He also thanked the defenders for "putting this proposal to us". Mr Dalby said in evidence that he knew Mr Silver and that it was possible that he had told him about the availability of the Harriers. He said it was common practice for the defenders to circulate prospective sales to Solicitors known to have clients who were in the development market. Also, by letter dated 23 October 1996 Miss Balcombe wrote to Miss McWilliams saying that interest in the property had been expressed from a Mr Max Craimer "to whom I believe John has sent sales particulars". The "John" referred to in that letter was Mr Dalby.

[42 ] The interest in the Harriers expressed in the offers from the two firms of Glasgow Solicitors was prompted by the defenders and not by any marketing carried out by DM Hall.

[43 ] A closing date was fixed for 8 November 1996. The decision to fix a closing date was triggered by the offer submitted on 31 October 1996 on behalf of Digrasmart.

The Marketing Process

[44 ] DM Hall's marketing proposals are set out in paragraph [21]. The proposals included the preparation of sales particulars, advertising boards, press advertising, advertising in the ESPC and a direct mailing exercise. DM Hall's proposals were designed to attract interest from the investor and residential markets.

Sales Particulars

[45 ] By letter dated 18 October 1996 the defenders wrote to DM Hall intimating that,

"Bird Semple will also need the specifications of the property in order to place the details in the ESPC, as advised in the strategy report prepared by DM Hall on 28 August 1996".

Subsequently on 21 October 1996 a fax was sent from DM Hall to a firm called Genesis. Genesis was engaged in the printing business. The subject of the fax was described as "Urgent Particulars". Part of the fax bore to be a draft set of particulars for the Harriers.

[46 ] By letter dated 23 October 1996 Miss Balcombe of DM Hall wrote to Miss McWilliams of the defenders "enclosing two sets of sales particulars for the above property". The sale particulars for the Harriers were not available for dissemination to prospective purchasers until about that particular date.

For Sale Boards

[47 ] The sales particulars produced in evidence disclosed that "for sale" boards had been erected on site, albeit not of the size specified in the DM Hall Report. It is not clear when they were erected but they must have been erected prior to the preparation of the particulars since they can be seen in the photograph displaying the Harriers in the particulars.

Press Advertising

[48 ] No press advertisement of the Harriers took place prior to 7 November 1996. On that date, which was a Thursday, the Harriers was advertised in the Scotsman. The property section of the Scotsman on a Thursday is primarily directed at the residential market, Tuesday being the day when property is advertised for the investor market.

[49 ] On 8 November 1996 two further advertisements of the Harriers appeared, one in the Daily Express and the other in the Dunfermline Press. It follows therefore that the press advertising in relation to the Harriers took place, firstly, on the day before the closing date and, secondly, on the date of the closing date itself.

[50 ] The advertisement in the Scotsman of Thursday 7 November 1996 described the Harriers as a development of six individual flats, but only a global "offers over" figure of £250,000 was mentioned. The advertisement did say that the flats were available individually with "prices on application". The closing date was said to be Friday 8 November at 12 noon. The advertisement in the Express of 8 November 1996 was in similar terms.

[51 ] The advertisement in the Dunfermline Press of 8 November 1996 had the incorrect address - "Fernside Avenue" - instead of "Fernieside Avenue". The details in relation to price and availability as individual units were similar to the details given in the advertisements in the Scotsman and the Express. There was no mention of the closing date in the Dunfermline Press advertisement.

[52 ] Advertisements disclosing only a global price for the whole development are primarily directed at the investor market rather than the individual residential market.

ESPC

[53 ] No documentary evidence was produced to show that advertising of the Harriers in the ESPC had taken place. Such advertising could not have occurred prior to the preparation of the sales particulars in late October 1996. DM Hall had to liaise with Mr Dennison on this issue and there was no indication in the documents produced that that had occurred.

[54 ] The proposal to advertise in the ESPC was not implemented.

The Direct Mailing Exercise
[55 ] A direct mailing exercise to persons including solicitors, surveyors and estate agents was one of the key recommendations made in the DM Hall Report. This type of exercise involves sending particulars of the property in question on what was described in evidence on a "cold basis" and on the assumption that the recipients of the particulars were people who might be interested in the property concerned. The sending of property particulars to selected recipients was described as "mailshots".

[56 ] Miss Balcombe was unable to give any assistance as to whether or not any direct mailing exercise had taken place. Perhaps not unsurprisingly, she had very little recollection of this particular transaction. She had only been employed by DM Hall from February 1996 to March 1998. At the time of the proof she was self employed as a childminder. She had no recollection of a list containing names of local solicitors, surveyors, estate agents and other property professionals active in the market to whom particulars of this type of property might have been sent.

[57 ] In his evidence Mr Nisbet maintained that unless specifically instructed not to carry out the direct mailing exercise, DM Hall would always carry out such an exercise. He saw the direct mailing exercise as a fundamental and inherent part of the marketing process. When asked directly whether the direct mailing exercise had taken place his response was that "As far as I am aware, yes". DM Hall had no record of such an exercise taking place in this case but Mr Nisbet's position was that at that time a record was not kept. Mr Nisbet explained that it would be the office juniors who would be directly involved in the exercise and that he himself would not be involved in the actual preparation or issuing of the mail shots. Without a record he himself would have no way of checking that the exercise had in fact been carried out.

[58 ] In paragraph [94] to [99], I deal with Mr Nisbet's credibility and reliability as a witness.

[59 ] The direct mailing exercise had to include sending the particulars relating to the Harriers to the chosen recipients, and as I have already set out in paragraph [46], the particulars were not available until about 23 October 1996. Two offers were received but as I find in paragraph [42] these offers were not prompted by any direct action on the part of DM Hall. Furthermore, the fixing of the closing date for 8 November 1996 was triggered by the offer of 31 October 1996 made on behalf of Digrasmart Limited and not by interest from any other source.

[60 ] Apart from Mr Nisbet's supposition that direct mailing had taken place there was no evidence to suggest that the direct mailing exercise had taken place. To the extent that Mr Nisbet's evidence amounted to a positive assertion that direct mailing had taken place, I did not accept it. (See paragraphs [94] to [99] in relation to Mr Nisbet's credibility and reliability). I had little difficulty in concluding that the direct mailing exercise had not taken place.

Advice on Offers

[61 ] By letter dated 11 November 1996 DM Hall suggested to the defenders that it might be in their best interests to accept the offer of £205,000 with an entry date of 10 January 1997. There is no suggestion in DM Hall's letter of 11 November 1996 that the aggressive and co-ordinated marketing programme set out in the Report of 28 August 1996 had not been carried out.

[62 ] The letter of 11 November 1996 containing DM Hall's advice on the offers contained the following observations:

"Turning to the question of selling the property individually, such is obviously more difficult in that six individual purchasers would require to be found whilst still accommodating ongoing marketing and security costs. Our on site experience has indicated that given the level of time on the market some potential purchasers are genuinely concerned that they would possibly be residing in isolation for a considerable period of time."

The only record of on-site experience was that relating to Mr Daly and Mr Craimer (see paragraphs [33] - [36]). Both these individuals were property investors. There was no on-site experience with the residential market. The remarks just quoted from DM Hall's letter of 11 November 1996 were grossly misleading. .

[63 ] The defenders also sought advice from Mr Watt of CRGP Robertson. Initially he responded by letter dated 5 November 1996 saying that he found the offers "somewhat disappointing" and that even on a "job lot" basis he would have expected an offer perhaps in the region of £230-240,000. In that letter Mr Watt indicated that "before finally commenting on this matter it would be useful to have the views of the selling agents". He also asked if DM Hall could provide a report on their efforts to attract suitable purchasers.

[64 ] Mr Watt wrote again to the defenders on 12 November 1996. At that time, Mr Watt had before him the letter of 11 November 1996 containing the advice of DM Hall. He assumed that the kind of advertising set out in the DM Hall's Report had indeed taken place. In his letter of 12 November 1996 Mr Watt repeated that he considered the offer of £205,000 "somewhat disappointing". However he considered that in view of the "deteriorating circumstances of this case clearly expressed by DM Hall in the letter to you it would appear that you really have no option but to adhere to DM Hall's advice and accept the offer of £205,000 ..."

Conclusion of Missives

[65 ] A qualified acceptance of the offer submitted by Messrs Reilly McGinley Conroy McGuiness was not sent until 9 December 1996. The price of £205,000 was accepted but the date of entry was changed to 30 January 1997. A number of other qualifications were proposed.

[66 ] The Missives for the sale of the Harriers were not concluded under 9 October 1997. The agreed purchase price was reduced to £195,000 and the agreed date of entry was 10 October 1997.

Reasons for Reduction in Price

[67 ] When the defenders took possession of the Harriers in early September 1996, the pursuer's son was in occupation of one of the flats. That remained the position until December 1996. By being in occupation of one of the flats he was performing a security function.

[68 ] In a letter of 2 October 1996 to Miss Balcombe, Miss McWilliams acknowledged that the pursuer's son was performing such a security function. She went on to say,

"However, Brian now feels that if DM Hall can provide effective security arrangements, it would be prudent to make arrangements for Mr Wilson's son to vacate the flat."

[69 ] In a letter of 7 October 1996 to Miss Balcombe, Miss McWilliams set out that she thought it "would be sensible to allow Mr Wilson's son to remain on site for the time being". Subsequently in her letter of 18 October 1996 to Miss Balcombe, Miss McWilliams wrote in the following terms,

"Brian Dennison requires confirmation of the security details in order to revert to our client's solicitors and inform them that we have full control over security arrangements and therefore no longer consider that Mr Wilson's son's occupation of one of the flats is necessary for that purpose."

[70 ] In her reply of 23 October 1996 Miss Balcombe indicated that in relation to security measures she was awaiting a quotation from Burns Security with regard to placing a night watchman at the property. She also indicated that she was awaiting quotations from a company with regard to specialised perplex sheeting which could be placed over the windows. Miss Balcombe wrote again on 30 October 1996 sending Miss McWilliams a quotation from the Security Company.

[71 ] When the pursuer's son came to vacate the premises in December 1996, the Harriers had not suffered any damage of any significance. Of course at that time it was anticipated that entry was to be taken at the end of January 1997.

[72 ] Mr Dennison who was dealing with the conveyancing on behalf of the defenders left Bird Semple in about March 1997 and the transaction was then taken over by Mr Thompson. One reason for the delay was that Digrasmart did not obtain an offer of funding from the Clydesdale Bank until April 1997. DM Hall had stipulated in their marketing strategy that prospective purchasers had to produce evidence of funding at the outset. The unsuccessful bidder, H & M Development Ltd, did provide such evidence but Digrasmart did not. Also, an issue arose in relation to the validity of the title. Mr Urquhart explained it was the type of title issue that could easily be resolved by obtaining defective title insurance. That indeed was how the problem was ultimately resolved, but not until October 1997 shortly before conclusion of missives on 9 October 1997.

[73 ] The delay from the date of the qualified acceptance to the conclusion of the missives resulted in a deterioration of the property. It became the target of vandalism. Boilers were removed from some of the flats and that could only have occurred by DM Hall releasing the keys which were in their possession.

[74 ] The final settlement of the transaction was only achieved by the defenders agreeing with the purchasers that the price could be discounted by £10,000 to take account of the repairs that required to be carried out to the Harriers. That reduction was agreed on the recommendation of DM Hall that such a reduction was reasonable.

[75 ] On 16 December 1997 Mr Dalby wrote to Mr Nisbet indicating that when the sale of the Harriers was finally concluded in October 1997 for £195,000, the defenders were now in a "loss situation". The purpose of the letter was to set out why the defenders considered they were in that situation and to request that DM Hall refrain from invoicing them in order to avoid further losses for the defenders.

[76 ] The damage to the Harriers appears to have been caused by vandalism but also because according to what was said in Mr Dalby's letter, at least two boiler systems had been removed. There was no evidence of break-ins and at the time in question the keys were under DM Hall's control. In his letter Mr Dalby went on to say,

"You can imagine that replacement of these boilers contributed greatly to the £10,000 allowance that was subsequently negotiated with the purchaser prior to agreeing to complete the sale."

[77 ] In his evidence Mr Dalby said that he considered that replacement of the boilers made a significant contribution to the defenders' position in relation to the £10,000 discount.

Payment

[78 ] The purchase price of the Harriers was credited to the pursuer's account with the defenders on 14 October 1997. By then his account was overdrawn in the sum of £193,412.22. The crediting of the purchase price to his account at that time meant that he had a credit balance of £1,587.78. As at 27 February 1998, the pursuer had a debit balance of £8,172.44. It is in respect of that sum that the defenders counterclaim. His account was in that position because the defenders had debited to the pursuer's account the costs associated with the sale of the Harriers, some other miscellaneous costs and bank charges. Had the price not been reduced from £205,000 to £195,000, the pursuer's account would not have been overdrawn in February 1998.

The Evidence of Mr Nisbet

Introduction
[79 ] Mr Nisbet was an experienced chartered surveyor (see paragraph [5]d). He was the senior commercial partner in DM Hall and was responsible for the operation of the commercial department of DM Hall throughout Scotland. In particular, he was in charge of the specified dedicated asset management realisation department of DM Hall. That department was involved in a significant amount of recovery work for heritable creditors, receivers and trustees. Mr Nisbet had been closely involved in acting for heritable creditors in the recovery and sale of properties throughout his career.

[80 ] Mr Nisbet explained that he first became involved in the proposed development of the Harriers in January 1993. It was then that DM Hall were instructed by the defenders to provide an appraisal report and to give advice in respect of the proposals being put forward by Mr Wilson for the development of the Harriers. An appraisal report is designed to give the prospective lender advice as to the financial viability of the proposed development. He provided the bank with a report dated 12 March 1993.

[81 ] Mr Nisbet provided the defenders with another report dated 27 January 1995, again providing valuation advice. Whereas the DM Hall Report of 12 March 1993 had produced an aggregate valuation of £255,000 the Report of 27 January 1995 provided the defenders with an aggregate valuation for the six flats of £306,000 "for bank mortgage purposes". The Report of 12 March 1993 provided a unum quid valuation of £180,000. No unum quid valuation was provided in the Report of 27 January 1995.

[82 ] In relation to the DM Hall Report (the Report of 28 August 1996 tendering the marketing recommendations), Mr Nisbet explained that that report contained a mixture of stock and specific advice. He meant by that description that, although tailored towards the particular case of the Harriers, certain aspects of the advice tendered would generally be tendered in such circumstances.

[83 ] Mr Nisbet maintained that at the time of the preparation of the DM Hall Report he was in no doubt that the Harriers would only be sold as a unum quid and not as six individual properties. He said that in his experience heritable creditors were never successful in generating individual sales of properties of this kind.

[84 ] Mr Nisbet also said that when he prepared the DM Hall Report he did not have any specific information as to how the property had been advertised before that date. He said that it was only after he was instructed that he became aware that the Harriers had been widely and exhaustively advertised in the past.

Repossession Stigma

[85 ] In his evidence, Mr Nisbet repeated the importance of avoiding what he described as "repossession stigma" in the sale of properties on behalf of heritable creditors. In the DM Hall Report Mr Nisbet had put the position in this way:

"... Accordingly, if prices are to be maximised it would be imperative to avoid any question of repossession, and the borrower's co-operation will therefore be required if this goal is to be achieved."

[86 ] He went on to say in his evidence that this goal was not achieved during the marketing of the Harriers.

[87 ] According to Mr Nisbet, during the marketing of the Harriers, the pursuer regularly turned up at the property and "engaged anybody willing to listen" with suggestions that the bank had acted incorrectly. In his evidence in chief Mr Nisbet maintained that this information was available from records and file notes kept by DM Hall.

[88 ] In cross examination Mr Nisbet was taken to task in relation to his assertion that it was the pursuer's interference at the site of the Harriers that disclosed to prospective purchasers that the Harriers had been repossessed. He was reminded that at a Commission Hearing for the recovery of documents on 24 November 2003 he had produced documents relating to the sale of the Harriers. It was pointed out to him that there was nothing in the documentation produced to support his allegation that records had been kept detailing the pursuer's alleged interference.

[89 ] Mr Nisbet looked decidedly uncomfortable when giving this part of his evidence. He then maintained that there was "anecdotal information" on this matter given to him by his staff and that he may have been "possibly confused and mistaken" when he used the phrase "file notes". At one point he said that there was correspondence and notes on file indicating that in December 1996 when one of the joiners appeared at the property to undertake some boarding-up works "he was approached by an individual and to be perfectly honest we assumed it was Mr Wilson who questioned everything that had been done".

[90 ] Finally, in his cross examination when asked directly whether he had any recollection even from files notes which had not been produced about information about Mr Wilson engaging prospective purchasers in discussions Mr Nisbet replied by saying that if he used "the word prospective purchasers I was incorrect. We have no records of that".

[91 ] This issue was revisited in the re-examination of Mr Nisbet. When asked to elaborate upon what he meant by "anecdotal evidence" Mr Nisbet suggested that the source was one of his partners whose brother-in-law lived in Gatehouse of Fleet where he understood Mr Wilson to have a caravan. Mr Nisbet suggested that the information that he had become aware of was that Mr Wilson was "making no secret of his displeasure to anybody who was listening there" and there is no reason not to expect that that would be the same at the Harriers.

Press Advertising

[92 ] When asked about the recommendations made in the DM Hall Report on press advertising Mr Nisbet accepted that such advertising did not take place in accordance with what was set out. He appeared to justify that on the basis that interest had been received from interested parties "presumably from our direct mailing exercise and the provision of the advertising boards". He said that when the competing interests had appeared and "a pre-emptive" offer had been received that in order to identify prospective purchasers there was no need to follow the press advertising recommendations because a unum quid sale would be achieved. He said that DM Hall were confident that they could identify prospective purchasers who had acquired this type of repossessed property from their own database and information sources.

[93 ] In so far as the placement of the advertisements on 7 and 8November 1996 were concerned, Mr Nisbet explained that there were two reasons for carrying out that particular exercise. He said the principal reason was to comply with the terms of repossession sales whereby if a clear title is to be granted, the Keeper of the Registers must be satisfied that the property had been advertised on at least one and ideally two occasions prior to a closing date "or on a closing date". The second reason he described as being a much less important reason and he referred to it as "a sweep-up" to see if there was any other party who might have had an eye on the property without having actually identified himself.

Mr Nisbet's Credibility and Reliability

[94 ] Mr Nisbet blamed Mr Wilson for causing the Harriers to become "an obvious repossession case" but it became clear particularly in the course of his evidence which I have summarised in paragraphs [85] to [91] that he had no justification for doing so. When faced up with the fact that there was no documentation to support his position he became uncomfortable in evidence and tried to explain away his position in other ways, culminating in his position in re-examination summarised in paragraph [91]. It was clear to me that Mr Nisbet deliberately sought to mislead the Court in relation to this particular issue.

[95 ] In paragraph [62] I looked at the details of the advice given by DM Hall to the defenders on 11 November 1996. The letter setting out this advice suggested that "Our on site experience has indicated that ... some potential purchasers are genuinely concerned that they could possibly be residing in isolation ..." That letter was signed by Miss Balcombe and although Mr Nisbet said he may not have seen this letter he agreed that he would have discussed its contents with Miss Balcombe. The reference to potential purchasers in the context of on site experience was wholly misleading. The only evidence of potential purchasers related to the two investors who eventually were behind the offers that were made.

[96 ] Mr Nisbet maintained that at the time of the preparation of the DM Hall Report he did not know the extent of previous marketing carried out by the pursuer, and that it was sometime after the Report had been submitted that he became aware of the extensive advertising that had been carried out by the pursuer. However, the covering letter sent with the DM Hall Report went on to say:

"This is a few days later than I would have hoped, but you will gather that I do feel that there are a number of aspects which must be fully explored, and it is for this reason I thought it would be better to take a little more time and provide a comprehensive report."

In the body of the report itself reference is made to previous marketing in this way "... given the nature of marketing to date, anything which can be done to enhance the profit should be undertaken".

[97 ] It would be extremely surprising if a surveyor of Mr Nisbet's experience had not made himself fully aware of the track record of any marketing strategy before recommending his own marketing proposals. I did not find Mr Nisbet's evidence credible on this issue. I formed the view that he sought to use the pursuer's extensive marketing of the Harriers as an excuse for DM Hall's failures in marketing. Nor did I accept his contention that he only ever expected a unum quid sale. In the DM Hall Report, he had put forward detailed proposals for the advertising of the Harriers to the residential market. His position was not supported by Mr Watt who considered that sales on the residential market were a realistic option. Again, I formed the conclusion that Mr Nisbet's insistence upon a unum quid sale being the only realistic option was designed to mitigate DM Hall's obvious failure to advertise the Harriers adequately to the residential market.

[98 ] When it was put to Mr Nisbet in cross examination that the failure to properly advertise the Harriers to the residential market was a significant departure from the recommendations in the DM Hall Report Mr Nisbet sought to evade the question but eventually accepted that it was a significant departure.

[99 ] On the whole I was of the view that Mr Nisbet was not a credible and reliable witness. In relation the issues that were of importance in this case I concluded that, unless his evidence was independently supported by other credible and reliable sources of evidence, I could not accept his evidence.

The State of the defenders' Knowledge on Marketing

[100 ] By letter dated 2 October 1996 Miss McWilliams wrote to Miss Balcombe enquiring about "the latest sales strategy". Subsequently by letter dated 7 October 1996 Miss McWilliams wrote to Miss Balcombe saying that she looked forward to "receiving a reply to my letter of 2 October in due course". Again by letter dated 18 October 1996 Miss McWilliams wrote to Miss Balcombe making reference to her letters of 2 and 7 October. That letter went on to say

"Bird Semple will also need the specifications of the property in order to place the details in the ESPC, as advised in the strategy report prepared by DM Hall on 28^th August 1996.

In addition I am required to keep our Recoveries Department in London informed of marketing/sales progress (as outlined in the before mentioned DM Hall Report) on a regular basis."

[101 ] Paragraph [45] sets out that a fax was sent on 21 October 1996 to Genesis from DM Hall with the subject "Urgent Particulars". It was only with the letter dated 23 October 1996 that Miss Balcombe on behalf of DM Hall sent two sets of sales particulars to Miss McWilliams.

[102 ] Miss McWilliams accepted in evidence that by early November 1996 she had but recently received the sets of particulars. She also agreed that she could not recall any advertisements of the Harriers having appeared by then.

[103 ] In his evidence Mr Dalby said that he was not aware what was happening on the marketing side on a day to day basis.

[104 ] By letter dated 14 November 1996 Mr Dalby wrote to the pursuer telling him that two offers had been received in respect of the Harriers. The letter began in the following way:

"As you were aware, following your own extensive marketing since the properties above were completed, DM Hall have been widely marketing the units, and advertised them twice in the press last week."

The letter went on to say that based on the advice being given, the defenders had instructed their solicitors to accept the offer of £205,000 with a date of entry at early January 1997.

[105 ] When asked in evidence about the reference in the letter of 14 November 1996 to DM Hall "widely marketing the units" Mr Dalby said that he was not aware of the detail of what DM Hall had been doing. He did say that he had been aware that the Harriers had been advertised in the press the week prior to his letter. He thought that the defenders had copies of the advertisements at that time.

[106 ] In relation to the direct mailing exercise, Mr Dalby believed that in early November when consideration was being given to the offers that had been made that that exercise had taken place. As at November and under reference to the DM Hall Report Mr Dalby had expected that an aggressive press advertising campaign was to be carried out. He considered that the type of advertising proposed by DM Hall was standard.

[107 ] In cross examination a letter from Miss McWilliams to Mr Dennison of 4 November 1996 containing the following passage was put to Mr Dalby:

"John Dalby has spoken with Anne Marie Balcombe of DM Hall and ascertained that the property will be advertised twice this week in the Edinburgh press with a closing date for offers of Friday 8 November 1996."

Mr Dalby accepted that it did in fact appear that there had not been any press advertisements of the Harriers until that particular time. In his cross examination Mr Dalby agreed that a delay from the end of August 1996 to the first week of November 1996 was an inordinate delay in relation to advertising in newspapers.

[108 ] In relation to the advertisement placed in the Express and Dunfermline Press of 8November 1996 Mr Dalby agreed that they were useless in relation to seeking interest from individual purchasers. He held a similar view in relation to the advertisement placed in the Scotsman of 7November 1996.

[109 ] Mr Dalby's position was that if he had known there had been no ESPC advertising and no press advertising before the closing date was fixed he would have been concerned that DM Hall had not advertised the properties properly.

[110 ] I would summarise the state of the defenders' knowledge on marketing in the following way. The defenders knew no press advertising had taken place prior to 7November 1996. They knew that as at late October particulars could not have been circulated to prospective purchasers. They knew from the DM Hall Report that the direct mailing exercise could not take place without the sales particulars. As at early November 1996 the defenders knew that very little had been done to implement the proposals that they had instructed DM Hall to carry out in their letter of 29 August 1996.

Digrasmart Limited

[111 ] Digrasmart was ultimately the purchasers of the Harriers.

[112 ] Digrasmart was incorporated on 31 May 1996. At that time the directors were companies controlled by Bird Semple, the defenders' Agents. These companies were respectively known as Quill Serve Limited and Quill Form Limited. These companies resigned as directors on 10 December 1996. On 6 December 1996 Mr Daly became a director of Digrasmart and Mr Murray became the Secretary.

[113 ] It follows that at the date of the offer made on behalf of Digrasmart on 31 October 1996 the directors of that company were companies in the control of Bird Semple. Also, at the date of the qualified acceptance of 9 December 1996 the Bird Semple companies were still directors of Digrasmart.

[114 ] In his evidence, Mr Dennison explained that Digramsart was a shelf company in the ownership of Bird Semple. He explained that it was a company which was being set aside for Mr Daly and Mr Murray for use in connection with a particular project that had not in fact materialised. In relation to the offer made on behalf of Digramsart for the Harriers, Mr Dennison insisted that no member of Bird Semple had been involved in the decision to offer for that property. In the period between May and December 1996 it was Mr Daly and Mr Murray who were making any decisions in relation to Digrasmart. The Bird Semple companies, Quill Form Limited and Quill Serv Limited were simply nominees and played no part in the substantive decisions made on behalf of Digrasmart.

[115 ] In paragraph [39], I expressed the view that Mr Daly had been told about the availability of the Harriers by Mr Dalby of the defenders. Mr Daly was a client of Mr Dennison but he also used other legal firms in his property dealings. The offer made on behalf of Digramsart was made by Messrs Reilly McGinley Conroy McGuiness.

The Evidence of Mr Urquhart

[116 ] Mr Urquhart's experience is set out at paragraph [4]f.

[117 ] In connection with this action Mr Urquhart prepared a report (6/213 of Process). He had been asked to

"form an opinion as to whether the procedures adopted by the bank and by the surveyors and solicitors instructed by the bank, were sufficient to comply with those obligations which are imposed on the bank as heritable creditor to protect the interests of the heritable proprietor, in particular the obligations imposed under Section 25 of the Conveyancing and Feudal Reform (Scotland) Act 1970."

[118 ] In his report and also in his evidence, Mr Urquhart sought to inform the Court on matters of conveyancing practice in relation to the marketing of property for purposes of Section 25 of the Act. He also sought to inform the Court on conveyancing practice in dealing with the sort of title problem that arose in this particular case.

[119 ] In his report and evidence, he drew certain inferences and formed a conclusion that the facts and circumstances surrounding this transaction gave rise to a suspicion that the interests that were being pursued were perhaps Digrasmart's interests to the detriment of the pursuer's interests.

[120 ] In so far as Mr Urquhart sought to inform the Court in relation to conveyancing practice, I found his evidence helpful. However in relation to any inferences he sought to draw from the facts and circumstances as he saw them, he transgressed into what was essentially the Court's function and, in so far as that evidence was concerned, I disregarded it.

[121 ] So far as advertising was concerned, Mr Urquhart's prime focus was on the press advertising carried out by DM Hall. He explained that, although Section 25 of the Act does not mention that advertising must be press advertising, it was by press advertising that almost invariably heritable creditors sought to comply with their obligation under that section. He explained that solicitors acting for a purchaser from a heritable creditor normally expect to see certificates of press advertising as confirmation that the "statutory procedures" have been followed. Although to advertise on one occasion only cannot always be said to be inadequate, Mr Urquhart's view was that the common practice was to advertise on at least two occasions - those occasions being a week apart, and often longer.

[122 ] In relation to the choice of media for press advertising, Mr Urquhart explained that the appropriate choice for the property developer investor market was the commercial property pages of the Scotsman, and to target the West of Scotland market, the Herald.

[123 ] Mr Urquhart pointed out that, as it turned out, the offers made for the Harriers were on behalf of West of Scotland based companies. The property had been advertised on the "residential day" in the Scotsman. There was no press advertising targeting the developer/investor market price to the closing date of 8 November 1996.

[124 ] In relation to the owner/occupier market, he said that the choice of the Scotsman residential section was appropriate as was the Express. The fact that the advertisements in these newspapers did not disclose the prices of the individual flats would tend not to generate owner/occupier interest. He thought that the choice of the Dunfermline Press as an appropriate medium for this type of advertisement was "bizarre". That was a local newspaper with a geographically restricted circulation and such an advertisement did not represent an appropriate targeting of either the commercial or owner/occupier markets.

[125 ] Mr Urquhart regarded the timing of the advertisements in the different newspapers as being incomprehensible. Advertising on 7 and 8 November 1996 and specifying a closing date of 8 November 1996 in the Scotsman and Express advertisements meant that any prospective purchaser would conclude that it was too late to respond. Any such purchaser at a minimum would require to view the property, instruct a survey or at least a valuation, wait for that survey to be carried out, assess its conclusions, ascertain the availability of funding and instruct a solicitor to make an offer.

[126 ] In his cross examination, Mr Urquhart accepted that in general terms it would be reasonable to take into account previous marketing efforts when dealing with a property that was not being exposed fresh to the market for the first time. However, he went on to make the point that for purposes of Section 25 of the Act, the advertising that is taken into account in terms of determining whether the heritable creditor has fulfilled his duty under that section, is advertising by the heritable creditor.

[127 ] As far as Mr Urquhart was concerned, the conveyancing transaction that ultimately took place after the Digrasmart offer was provisionally accepted was inordinately protracted.

The Final State of the Pursuer's Account with the Defenders

[128 ] By letter dated 16 March 1998, Miss McWilliams wrote to the pursuer confirming the state of his account with the defenders after the application of the sale proceeds of £195,000 and the deduction of interest and of fees paid to Bird Semple and DM Hall in connection with the sale of the Harriers. She informed the pursuer that his account was showing a debit balance of over £8,000. She indicated that "It is anticipated this will be written off by the Dunbar Bank ... and that a final statement will be sent to you showing that the account has been closed."

[129 ] Previously, by letter dated 10 March 1998, Miss McWilliams had written to Mr Thomson of Bird Semple providing information in relation to the pursuer's account. She informed Mr Thomson that when fees, outlays and interest were taken into account "this left Dunbar Bank with a shortfall of £8,172.44 which has now been written off by the Bank".

[130 ] It was not for Miss McWilliams to decide whether or not the pursuer's debt could be written off. Notwithstanding her expectations, no formal decision was made by the defenders to write off the pursuer's debt.

[131 ] The fees and outlays referred to by Miss McWilliams were those incurred by Bird Semple and DM Hall. Bird Semple's fees and outlays amounted to £5,150.81 and that was paid by the defenders. DM Hall's fees and outlays amounted to £7,477.34 but the defenders only paid for DM Hall's outlays of £2,834.40. The defenders were unhappy with the service provided to them by DM Hall during the period when the vandalism and removal of boilers took place and refused to pay their fees.

Submissions

Submissions on behalf of the Pursuer

[132 ] On behalf of the pursuer Mr Haddow QC advanced four propositions. Firstly he argued that the defenders owed the pursuer a duty to take all reasonable steps to ensure the price received for the subjects was the best that could have been reasonably obtained. That proposition was not disputed by Mr Sandison. Secondly, he argued that that duty was not satisfied merely by taking advice and entrusting the sale to DM Hall and Bird Semple, unless these agents also acted to ensure that the price was the best that could be reasonably obtained. Thirdly he argued that in the circumstances of this case, the onus was on the defenders to establish that they and their agents acted in a way that ensured the price received for the subjects was the best that could have been reasonably obtained. Fourthly, he submitted that the value to be looked at was not a knock down figure sufficient to pay off the loan but the proper market value of the subjects. Mr Sandison did not disagree with that fourth proposition.

[133 ] Mr Haddow submitted that when considering the duties upon a heritable creditor, there was no difference to be drawn between statute and common law. Mr Sandison in his submissions agreed with that proposition.

[134 ] In developing his position Mr Haddow submitted that there were two routes open to the pursuer. The pursuer had a direct claim against the defenders because of their own failures, but in any event an indirect route because of, in particular, the failures of DM Hall, the defenders' agents.

[135 ] So far as the indirect route was concerned, Mr Haddow placed reliance upon Cuckmere Brick Co v Mutual Finance Limited 1971 1 Ch. 949; Commercial and General Acceptance Limited v Nixon and Another 1983 152 CLR 491 and Bissett v Standard Property Investment plc 8 July 1999, (Unreported) to support the proposition that a heritable creditor would be liable under Section 25 of the Act for the negligence of his agents even if reasonable care had been taken to choose competent agents.

[136 ] Mr Haddow's essential position was that the marketing of the Harriers was wholly inadequate. With particular regard to the press advertisement that had taken place Mr Haddow submitted that that advertisement had not been conducted in terms of Section 25 of the Act. The purpose of advertisement was not simply to be in a position to say that advertisement had taken place. It was necessary to consider the ultimate aim of the statutory provision, the aim being to ensure that the sale price was the best that could reasonably be obtained. Reference was made to Highland Regional Council v British Railways Board 1996 SLT 274. What took place was a "sham". Mr Haddow submitted that as at early November 1996 the defenders knew, or ought to have known, that DM Hall had failed to carry out their instructions on marketing and that the marketing of the Harriers was inadequate. The defender therefore bore a direct responsibility. In any event the defenders were liable for DM Hall's failures.

[137 ] In submitting in support of his third proposition that the onus was on the defenders to establish that they and their agents had acted in accordance with the terms of Section 25 of the Act, Mr Haddow argued that there had been collaboration between the bank, Bird Semple and DM Hall to secure "a lucrative deal" for Digrasmart/Mr Daly. He submitted that the guiding object was not the realisation of the best price for the subjects but rather to achieve a result that did not disadvantage the bank but would advance Mr Daly's interests. Reliance was placed upon Tse Kwong Lam v Wong Chit Sen 1983 1 WLR 1349.

[138] On the issue of damages, Mr Haddow submitted that Mr Watt's evidence provided a basis upon which an appropriate assessment of the pursuer's loss could be made. Mr Watt had valued the Harriers at an aggregate figure of £267,000. The pursuer's level of borrowing as at 31 December 1996 should be used when applying the appropriate set-off since that would represent a time at which it was reasonably anticipated the Harriers could have been sold. At that time, the pursuer was overdrawn in the sum of £176,601.08. In broad terms Mr Haddow submitted that I should grant decree in the sum of about £88,000.

[139 ] So far as the defenders' counterclaim was concerned, Mr Haddow submitted that the evidence disclosed that the sum outstanding after the proceeds of sale had been applied had been written off by the defenders. He argued that such a conclusion was a reasonable inference from the evidence. In any event, it was the delay which occurred in the settlement of the transaction and the damage caused during the period off that delay that generated a situation in which the outstanding indebtedness had not been wholly paid off by the proceeds of the sale. Mr Haddow submitted that the defenders and their agents were responsible for that delay.

Defenders' Submissions

[140 ] Mr Sandison agreed that there was a duty on a heritable creditor to take all reasonable steps to ensure that the price in which the subjects are sold is the best price that could be reasonably obtained but he argued that the pursuer had failed to prove that the defenders were in breach of duty. His position was, so far as the defenders themselves were concerned, that there was no evidence that they failed in their duty under Section 25 of the Act. In relation to the position of DM Hall, Mr Sandison submitted that the heritable creditor in possession complied with the duty under Section 25 by engaging apparently competent agents and taking their advice. He submitted that that was what had occurred in this particular case.

[141 ] In exploring the nature of the duty on a heritable creditor in possession in such circumstances Mr Sandison placed particular reliance on Dick v Clydesdale Bank plc 1991 SLT 678. He argued that absent some specific averment that DM Hall ought not to have been appointed then the pursuer could not succeed. In Scotland the heritable creditor in possession in exercising his power of sale is in the position of a quasi-trustee for the debtor and accordingly the creditor sufficiently performed his duty if he employs competent agents to market the subjects.

[142 ] On the assumption that Scots law did treat the heritable creditor as responsible for his agents, liability could only arise if the agents had been negligent. He referred to Cuckmere Brick Co v Mutual Finance Limited (supra) and Routestone Limited v Minories Finance Limited 1997 1 EG 123. Mr Sandison argued that the evidence fell short of establishing that DM Hall and Mr Nisbet in particular had been negligent.

[143 ] In relation to the attack made by the pursuer based upon collusion and conspiracy Mr Sandison pointed out that there was no plea-in-law to support such an approach. In any event he submitted that the pursuer had failed to establish the degree of connection required to justify a reversal of onus. Reference was made to Hallsbury's Laws of England, 4^th edition, Volume 32, paragraph 659 and 660, Morgan and Morgan v Lloyds Bank plc 1981 Lloyds Law Reports: (Banking) 73 and Newport Farm Limited v Damesh Holdings Limited (2003) UKPC 54.

[144] Mr Sandison placed reliance on the fact that a point was reached when two offers for the Harriers were received and submitted that even if it could be said there had been a breach of duty there was no evidence to establish any loss or causally link any loss to any breach of duty. He highlighted the fact that Mr Watt had also recommended acceptance of the price of £205,000.

[145 ] Under specific reference to Dick v Clydesdale Bank plc (supra) Mr Sandison argued that there was no averment or proof that anyone was in the market willing to pay more than had been paid by Digrasmart. It was not enough to prove a breach of duty. The pursuer had to prove that in fact at the time of the sale there was someone in the market who would have paid a higher price and it was the defenders' breach of duty that caused that person to fail to pay that price. He also relied upon Davidson v Clydesdale Bank plc 2002 SLT 1088 and Parker-Tweeddale v Dunbar Bank plc 1991 Ch. 12.

[146 ] In relation to the delay in the settlement of the transaction, the issue was whether the fact that the transaction took a long time to settle was as a result of negligence on the part of the defenders or their agents. He submitted that everyone involved was doing what could be done at the time.

[147 ] When dealing with the defenders' counterclaim Mr Sandison pointed out that there was no dispute that the pursuer's account was overdrawn in the sum of £8,172. Mr Sandison submitted that the critical question was whether the pursuer's obligation to pay that debt had come to an end. In the absence of prescription there could be no presumption that such an obligation would come to an end. The onus was on the pursuer to prove that the obligation had indeed come to an end. The only intimation to the pursuer was that it was "anticipated" that the loan would be written off but that in fact had not happened. In the circumstances the pursuer required to prove waiver and that involved proving that the communication to him caused him to conduct his affairs on that basis. There were no averments and there had been no evidence in support of waiver. Reference was made to Moodiesburn House Hotel Limited v Norwich Union Insurance Limited 2002 Scots Law Times 1069.

The Pursuer's Reply

[148 ] In dealing with Mr Sandison's criticism that there was no evidence that DM Hall had acted below the relevant standard of care, Mr Haddow submitted that there was unanimity that the kind of advice given by DM Hall in the DM Hall Report was the sort of advice that would be expected in the circumstances. Furthermore, in this case the issue was not simply whether there was negligence in marketing. In the circumstances of this case the defenders specifically instructed DM Hall to proceed in terms of the DM Hall Report. DM Hall failed to follow these instructions.

Discussion

Duty on the Defenders under Section 25 of the Act

[149 ] Section 25 of the Act provides as follows:

"A creditor in a standard security having right to sell the security subjects may exercise that right either by private bargain or by exposure to sale, and in either event it shall be the duty of the creditor to advertise the sale and to take all reasonable steps to ensure that the price at which all or any of the subjects are sold is the best that can be reasonably obtained."

Is a Heritable Creditor Responsible for an Agents' Actings?

[150 ] Later I shall set out my reasons for concluding that the defenders were directly at fault in relation to the manner in which the Harriers was advertised. However, in deference to the arguments presented to me, and in the event that I am wrong in my views on the defenders' own actings, I propose first to consider whether a creditor in a standard security is liable for the negligence of his agents..

[151 ] In Cuckmere Brick Company Ltd v Mutual Finance Limited a mortgagee was held liable for a loss on the sale of property caused by the fault of the auctioneers. When the case went to the Court of Appeal counsel for the mortgagee for the first time argued that a mortgagee could not be liable for the negligent failure of his agents. The Court of Appeal refused to allow the point to be raised because it had not been taken in the Court below. However Cross LJ said that in any event he rejected the argument. He set out his position (at page 973B-E) in the following way:-

"It may well be that this point is not open to him in view of the way the argument proceeded below - but in any case I do not accept the submission. In support of it, counsel pointed out that a trustee is not liable for the default of an agent whom it is reasonable for him to employ. But the position of a mortgagee is quite different from that of a trustee. A trustee has not, qua trustee, any interest in the trust property, and if an agent employed by him is negligent his right of action against the agent is an asset of the trust. A mortgagee, on the other hand, is not a trustee and if he sues the agent for negligence any damages which he can recover belong to him. Of course, in many cases, the mortgagee may suffer no damage himself by reason of the agent's negligence because the purchase price, though less than it should have been, exceeds what is owing to the mortgagee. In such circumstances it may be that nowadays the law would allow the mortgagor to recover damages directly from the agent although not in contractual relations with him; but that was certainly not so a hundred years ago when Woolff v Vanderzee (1869) 20 LT 353 was decided. In those days the only way to achieve justice between the parties was to say that the mortgagee was liable to the mortgagor for any damage which the latter suffered by the agent's negligence and to leave the mortgagee to recover such damages, and also any damage which he had suffered himself, from the agent. I do not think that we can say that the mortgagee used to be liable to the mortgagor for the negligence of his agent but that that viability disappeared at some unspecified moment of time when the law had developed enough to allow the mortgagor to sue the agent himself."

[152 ] The other two members of the Court (Salmon LJ and Cairns LJ) did not express a concluded view but Cairns LJ, under reference to the earlier case of Tomlin v Luce (1889) 41 ChD 573 where the argument that mortgagees were not liable for the blunder of their agents was rejected, indicated that he would need more argument to satisfy him that what was said in that case was wrong.

[153] Mr Haddow in his submissions placed particular reliance on the case of Commercial & General Acceptance Limited-v Nixon. That was a decision of the High Court of Australia. In that case the mortgagors fell into default in relation to payments due under a mortgage and the mortgagees entered into possession of the property and instructed solicitors to proceed to sell the property. Estate agents were engaged to advertise the property for sale and to conduct an auction sale. By the time the case was being dealt with in the High Court, there was no dispute that the estate agents had been negligent in respect of the manner in which they had advertised the property. The question for the Court was whether the mortgagees were liable to the mortgagor for the consequences of the negligent conduct of their agents.

[154 ] The relevant statutory provision under consideration in the Australian case was Section 85(1) of the Property Law Act 1974-1976. That subsection was in the following terms:-

"It is the duty of a mortgagee, in the exercise after the commencement of this Act of a power of sale conferred by the instrument of mortgage or by this or any other Act, to take reasonable care to ensure that the property is sold at the market value."

The language of that provision and in particular the description of the duty to be one to "take reasonable care to ensure that the property is sold at the market value" is not significantly different from the language of Section 25 of the Act.

[155 ] At page 495 Gibbs CJ expressed his opinion on the duty of a mortgagee exercising a power of sale in the following way:-

"The duty of a mortgagee exercising a power of sale in Queensland is clear; it is to take reasonable care to ensure that the property is sold at market value. It may be accepted that in the present case the appellant took reasonable care to choose competent agents, and then left the conduct of the sale in their hands. In my opinion this does not mean that the appellant thereby discharged its duty under Section 85(1). The duty of the mortgagee is not merely to take care to ensure that the sale is carried out by competent agents. It is to take reasonable care to ensure that the property is sold at the market value. The duty to take reasonable care is one that the mortgagee is bound to perform, and he cannot escape liability for a breach of that duty by delegation to another. In other words, generally speaking at least, a mortgagee does not discharge his duty to take reasonable care simply by choosing a competent agent and then entrusting the conduct of the sale entirely to him. A reasonable man, selling his own property by auction, and wishing to obtain the market value, would not allow the auctioneers a freehand to advertise in whatever manner they thought fit; he would make reasonable endeavours to ensure that the advertising proposed as adequate. It is not unduly burdensome to require a mortgagee to exercise similar care."

He went on to consider the case of Cuckmere Brick Co. Ltd v Mutual Finance Ltd and in particular the observations by Cross LJ set out at paragraph [151]. He went on (page 498) to conclude:-

"I consider that the words of the subsection impose on a mortgagee exercising a power of sale a duty higher than merely to select a proper person to carry out the sale. The duty is to take reasonable care to ensure that the property is sold at the market value, and the mortgagee does not discharge that duty simply by delegating it to another, whether that other be an agent or an independent contractor."

[156 ] In supporting that position Mason J. (page 503) explained:-

"There are a variety of reasons to sustain this liability. The power is exercised primarily on behalf of and for the benefit of the mortgagee by his agent in whose selection the mortgagor has no say. The agent acts in accordance with the instructions of the mortgagee and has no independent discretion to exercise except insofar as the mortgagee may choose to leave arrangements for the sale in the hands of the agent. It is not unfair or unreasonable in this situation that the mortgagee should have the responsibility for the taking of reasonable care to ensure that the market value is obtained, including the responsibility for adequate advertising of the sale. He should satisfy himself that the property has been advertised in accordance with his instructions - that, after all, is what a prudent vendor would do in the circumstances."

[157 ] Under reference to what was said by Cross LJ in Cuckmere Brick Co. Ltd v Mutual Finance Ltd Mason J. said that the position of a mortgagee could not be equiparated with that of a trustee because unlike the trustee who has not qua trustee any interest in the trust property a mortgagee does have an interest in the property. There were therefore sound reasons for imposing on the mortgagee a stronger duty than that imposed on a trustee. At page 505 he went on to say:-

"It is the mortgagee who has the most direct relationship with the mortgagor and who should be expected to have a clearer perception of his obligations to the mortgagor than the agent. If the negligent acts of the agent bring about a breach of the duty owed by the mortgagee to the mortgagor it will be consistent with the general principle agency that the mortgagee as his principal be liable to the mortgagor for that negligence even though the act leading to the breach is that of the agent ... In the end we come back to the question whether the statutory duty is sufficiently performed by the mortgagee's appointment of an agent reputed to be competent and by leaving the arrangements for the sale entirely to him. The answer to this question depends on the interpretation of Section 85(1) in the light of the considerations already mentioned. The duty imposed by the subsection is specific. It requires 'reasonable care' to be taken 'to ensure' that the property is sold at the market value; it is not a mere duty to take reasonable care in a general sense. In this context the concept or standard of 'reasonable care' is not satisfied by the mortgagee's delegation of the function to a real estate agent reputed to be competent. In the circumstances the standard of reasonable care expected of the mortgagee extends to the making of such arrangements as will ensure that the sale is properly advertised."

[158 ] At pages 515-516 Aitkin J. emphasised the difference between a mortgagee and a trustee in the following way:-

"It must be borne in mind that a mortgagee is not a trustee, nor is his position similar to that of a trustee. A mortgagee has for his own protection a power of sale but in its exercise he must not sacrifice the interests of the mortgagor or of subsequent incumbensors. If his agent is negligent in the conduct of the sale he may recover any loss suffered by him but he recovers on his own account, not on account of the mortgagor, and could not claim more than his own loss. As a matter of policy these considerations demonstrate that the mortgagee is in a very different position from a trustee and he should be responsible for his agent's negligence insofar as it affects the mortgagor, an obligation for which he would be entitled to indemnity from his agent."

The other judges (Wilson J. and Brennan J.) delivered concurring judgements.

[159 ] In his submissions Mr Sandison placed particular reliance on Dick v Clydesdale Bank plc. That case concerned security subjects made up of two pieces of ground, one used for commercial purposes and the other for agricultural purposes. The creditors sought to exercise their right to sell the subjects and instructed professional advisors to act for them in the marketing of the security subjects. The security subjects were sold in the open market after a period of advertisement. The pursuer made no challenge of the competence of the professional advisors who were selected by the defenders. Nor did he suggest that the defenders did not accept the best offer which was in fact received. The primary focus of the action was that the pursuer maintained that he had suffered loss because the sale of that part of the subjects made up by the agricultural land had been without regard to "hope value" of the land for development. In relation to that particular issue the pursuer criticised the way in which the property was marketed. The pursuer's point was that the defenders ought to have instructed their estate agents that that land was to be marketed not only as agricultural land, which was how it was described in the advertisements, but also with reference to its proper value and potential development value. The Lord Ordinary (Morison) on the procedure roll allowed a proof before answer and the defenders reclaimed.

[160 ] When the case was heard by the First Division, the Court took the view that the pursuer's averments that a better price could have been obtained for the land were so unsatisfactory that no good reason would be served by allowing the case to go to proof before answer. In dealing with the argument that the defenders had done all that is required of them by instructing competent professional advisors the Lord President (Hope) (page 681 E-F) made the following observations:

"There is no doubt that the defenders were entitled to employ professional advisors to market the subjects and in particular to advertise them in an appropriate manner in order to attract purchasers. The purpose of the exercise is to obtain as much competition as possible in the open market, this being essential if a fair price in that market is to be achieved. In the ordinary case the creditor may be required as having fulfilled the duties imposed upon him in regard to the marketing of the subjects if he takes and acts upon appropriate professional advice."

In these obiter remarks, it is to be noted that the Lord President did not go so far as to say that creditors are completely absolved if they employ competent professional advisors to market subjects.

[161 ] At page 682 H-K Lord Cowie set out his position in the following way:

"In my opinion if the creditor in a standard security has the right to sell the security subjects and employs competent agents to market them, the creditor can only be said to have failed in his statutory and common law duties to obtain the best possible price for the subjects if the agents have to the knowledge of the creditor made a serious blunder resulting in a large diminution in the price realised: Halsbury's Laws of England (4^th ed.) Vol.32, 'Mortgage' para. 729. I appreciate your Lordship's point that the authority for that proposition is English and that no cases were cited to us on it, but it seems to me, with respect, that the statement in Halsbury is entirely consistent with the principles of Scots law. It would be strange indeed if a person who employs experts to market the security subjects should be held to have failed in his duty to obtain the best possible price if no criticism is levelled at the experts. That is the position in the present case. There is not a single averment by the pursuer and respondent either criticising the choice of agents or anything they have done and in particular, there is no averment that the agents have made a serious blunder or to put it in a more legalistic way, the agents have failed to do something which agents of ordinary skill would have done if they had been taking ordinary care."

[162 ] The position as set out there by Lord Cowie is of course different to this case. Here, DM Hall are criticised by the pursuer for their failure to properly market the Harriers. Also, Lord Cowie places a gloss over the passage from Halsbury upon which he relies when he suggests that for liability to exist the creditor must have knowledge of the agents' "blunder". The passage in Halsbury makes no reference to knowledge and the footnote associated with the passage makes reference to Tomlin v Luce and Cuckmere Brick Co. Limited v Mutual Finance Limited. It is also to be noted that neither Cuckmere Brick Co. Limited v Mutual Finance Limited nor Commercial and General Acceptance Limited v Nixon were specifically referred to in arguments presented to the First Division in Dick v Clydesdale Bank plc.

[163 ] In Bisset v Standard Property Investment plc, the pursuers sued the defenders for damages for an alleged breach of the duty imposed by Section 25 of the Act. The pursuer had formerly been the proprietors of heritable property at the Bridge of Orchy Hotel, by Glencoe, Argyll. That property comprised (i) the hotel itself and (ii) two areas of ground lying on the opposite side of the A82 Road. In consideration of certain advances made or to be made to them, the pursuers granted the defenders a standard security over the whole property. The pursuers ran into financial difficulty and endeavoured to sell the security subjects without success. The defenders took possession of the security subjects and instructed estate agents to sell. Certain steps were taken to market the security subjects and subsequently instructions were given for their exposure to sale by public roup. At the auction no offers to purchase the subjects were received. A small area of ground forming part of the security subjects was sold to a local authority and the remainder of the subjects were again exposed to sale by public roup. The security subjects were sold at auction at the reserve price to a company connected with the defenders. The pursuers sued the defenders for damages for alleged breach of the statutory duty imposed by Section 25 of the Act. They criticised the manner in which they security subjects had been marketed and the conduct of both auctions. Criticism was directed against the defenders personally and also at their agents, both the estate agents and the auctioneers for whose acts and omissions the pursuers contended that the defenders were responsible.

[164 ] The case came before Lord Hamilton for debate in respect of certain challenges by the defenders to the relevancy and specification of the pursuers pleadings. One of the arguments which Lord Hamilton had to address was whether a security creditor could be liable for failures by reputably competent professional advisors engaged by him. In the course of the arguments, reference was made to Dick v Clydesdale Bank plc, Commercial and General Acceptance Limited v Nixon, and Cuckmere Brick Co. Limited v Mutual Finance Limited.

[165 ] In his Opinion Lord Hamilton makes detailed reference to the observations made in Commercial and General Acceptance Limited v Nixon. At page 8 he went on to say:-

"So far as drawn to my attention, the effect of a failure of an agent of a heritable creditor to perform tasks entrusted to him relative to a sale has never been the subject of express decision in Scotland, whether by reference to Section 25 or otherwise. An analogy between the position of the heritable creditor and a trustee has sometimes, it is true, been drawn. Professor Halliday in the Conveyancing and Feudal Reform (Scotland) Act 1970 (2^nd edition) at para. 5-11, under reference to the older authorities, comments in relation to Section 35(1) of the Act (which makes in respect of a bond and disposition in security analogous provisions to those in Section 25 relative to a standard security) - 'it may be regarded as broadly stating the existing principle that a heritable creditor in exercising his power of sale is the position of quasi-trustee for the debtor'......

Lord President Hope refers to this comment in Dick v Clydesdale Bank plc. Some of the older authorities lend support to the analogy. In Beveridge v Wilson (1829) 7 S.279 the consultant judges at p.281 observed:-

'...[the creditor] is, to a certain degree, trustee for the common debtor, and of course for his representatives; and therefore when he exercises his rights, he must do so in a way beneficial and not hurtful to those concerned.'

(See also Rimmer & Another v Thomas Usher & Son Limited per Lord Thompson at p.8.) However none of these observations were made in the context of a discussion as to whether failures by an agent charged by a heritable creditor with the carrying through of a sale were to be imputed to his principal. In relation of a quasi trustee "the quasi-trustee" (which is to be distinguished from a trustee proper) may have its place to reflect the obligations owed by the creditor to the debtor. But the analogy should not in my view be taken too far. The reasoning of the Australian judges albeit directed to a statute that in slightly different terms, is very persuasive. I prefer the approach indicated there (that the duty remains throughout on the creditor to secure the statutory result) to that indicated in the pursuer's pleadings (that the defenders are vicariously liable for the failures of the agents). The appropriate analysis at common law may be otherwise."

[166 ] Like Lord Hamilton in Bisset v Standard Property Investment plc, I find the reasoning of the Australian judges very persuasive. The duty imposed upon the creditor under Section 25 of the Act requires that "all reasonable steps" are taken "to ensure" that the best price that can be reasonably obtained is indeed obtained. Normally in the carrying out of that duty the creditor in the Standard Security will require that others such as estate agents or solicitors perform acts which are necessary for that purpose. Nevertheless the duty in terms of Section 25 of the Act remains upon the creditor. Performance of that duty requires that the best price that can reasonably be obtained is indeed obtained. If, as a matter of fact, because of the negligent actings of an otherwise competent agent the best price is not obtained then the duty has not been performed. In my opinion Mr Sandison sought to make too much of the analogy made in Dick v Clydesdale Bank plc between the heritable creditor and a quasi trustee. Unlike a trustee, the creditor in a Standard Security acts in rem suam. Use of the label "quasi trustee" emphasises that even although he is acting in rem suam, the creditor is not in the position of an absolute owner selling his own property. He must act prudently when exercising his power of sale, and act with proper regard for the debtor's interests.

[167 ] In Cuckmere Brick Co. Limited v Mutual Finance Limited, Cross LJ expressed the view that the mortgage was liable for the negligence of his agent even although the mortgager may have had a direct claim for damages against the agent (973C). However, over the period of in excess of thirty years since the Cuckmere decision, the law in relation to delictual claims for economic loss has undergone significant change and may still be evolving. It is far from certain that the pursuer in this case, if precluded from pursuing the defenders for the negligent acting of their agents, would have a direct claim against the agents. The uncertainties surrounding the issue whether the pursuer could pursue a delictual claim for economic loss against DM Hall directly in my view reinforces the desirability of holding the person with whom he does have a direct relationship, the creditor, liable for the negligence of agents.

DM Hall's Marketing

[168 ] In paragraphs [44] to [60], I have set out my findings in relation to the steps taken on behalf of the defenders to comply with their duty under Section 25 of the Act. DM Hall's reaction to the instructions given to them by the defenders to proceed in terms of the Report of 28 August 1996 was one of almost total inaction. The DM Hall Report recommended that a co-ordinated and "aggressive press advertising campaign" be put in place, and went on to detail the manner in which it was proposed that such a campaign should be implemented. DM Hall palpably failed to carry out their own recommendations. Mr Sandison argued, quite correctly, that DM Hall's failure to carry out the instructions given to them based upon their recommendations did not necessarily mean that they had performed their duties to their clients the defenders, in a negligent way. However, the position here is that DM Hall failed to implement the mailshot exercise. They failed to advertise in the ESPC. The press advertising of 7 and 8 November 1996 was, as Mr Dalby agreed in his evidence, a useless exercise if intended to generate interest in the Harriers. Mr Haddow in his submissions described the press advertising exercise as a "sham" and that is a description with which I would agree. The interest generated in the Harriers was not prompted by DM Hall but by the defenders and that in itself reflects the extent of DM Hall's failures over the period of about two months following upon the defenders' instructions. Standing my conclusions that all that was done to market the Harriers to the public prior to the closing date was the erection of "for sale" signs on site and an advertisement in the Scotsman of 7 November 1996 and having regard to Mr Watt's evidence as to what would normally be expected in relation to press advertising in such circumstances (see paragraphs [27] to [31]) I have no hesitation in concluding that DM Hall's marketing fell well below what would be expected of the reasonably competent surveyor. Consequently there was a failure adequately to advertise the Harriers for sale and all reasonable steps that required to be taken to ensure that the price at which the Harriers was sold was the best that could be reasonably obtained were not carried out.

The Defenders Themselves

[169 ] In paragraphs [100] to [110], I set out my findings in relation to the state of the defenders' knowledge on the marketing carried out by DM Hall prior to their decision to accept the offer made on behalf of Digrasmart. I think it is fair to say that at the time when the advice to accept the offer was given by DM Hall, the defenders were misled as to the number of potential purchasers that had shown interest in the Harriers (see paragraph [62]).

[170 ] Nevertheless Miss McWilliams knew by early November 1996 that very little had been done to implement the DM Hall proposals. She had only received the particulars in late October and was not aware, at that time, of any press advertising having taken place. She ought to have realised at that time that without sales particulars, no direct mailing could have taken place. She knew when she wrote to Miss Balcombe on 18October 1996 (see paragraph [45]) that no advertisement had taken place in the ESPC. At that time she was pressing DM Hall to provide information on marketing progress. She never received a satisfactory response. The fact that the sales particulars were not available until late October 1996 and that press advertisements did not appear until 7/8 November 1996, provided sufficient warning of DM Hall's failures to implement the defenders' instructions. At the time of receipt of offers, against that background of knowledge, she ought to have satisfied herself that adequate marketing had indeed taken place. Also, having regard to Mr Dalby's evidence he is taken to have known that no press advertising had taken place before 7 November 1996.

[171 ] In my opinion, the defenders can be faulted in failing to take account of the obvious signs that the marketing of the Harriers had not taken place as originally proposed. It remained incumbent upon the defenders in the circumstances to satisfy themselves that reasonable steps had been taken to ensure that the best price that could be reasonably obtained had been obtained. They failed to do so.

Onus
[172 ] I have set out the competing submissions on the question of onus at paragraphs [137] and [143]. I agree with Mr Sandison that the charge of collusion and conspiracy was a serious one and ought to have been focussed in an appropriate plea-in-law. The charge was disputed by Mr Dalby, Mr Dennison and Mr Nisbet. It seems to have been based on suspicions raised in the mind of Mr Urquhart and based upon certain inferences he was prepared to make after his examination of the files relevant to this particular case. At the heart of the charge lay the involvement of Digrasmart.

[173 ] It was somewhat unfortunate that when the offer for the Harriers was made on behalf of Digrasmart and the qualified acceptance received, Digrasmart was in the apparent control of Bird Semple. However, as Mr Dennison explained (see paragraph [114]) Digrasmart was truly being controlled by Mr Daly and Mr Murray. I accept that at the relevant time, the fact that Bird Semple had legal control of Digrasmart was a pure coincidence.

[174 ] On the whole I accept the evidence given by Mr Dalby, Mr Dennison and Mr Nisbet that they did not conspire to sacrifice the pursuer's interests in favour of Digrasmart. I agree with Mr Sandison that on this issue the pursuer has failed to establish the degree of connection required to justify a reversal of onus and I have approached the case on the basis that the onus of proof has remained on the pursuer.

Damages
[175 ] The thrust of Mr Sandison's submissions on damages was that even if the defenders were in breach of duty the pursuer had failed to prove any loss. The essence of his position was that the pursuer had to lead evidence from someone who would in fact have paid more than was actually obtained. In advancing that proposition he placed particular reliance on Dick v Clydesdale Bank plc. In that case the Lord President (page 682 E-F) made the following observations:

"The creditor is to be criticised for not taking further steps to attract an appropriate purchaser only if there is evidence to show that had these steps been taken a better bargain would have been achieved. So it would only be if the pursuer is in a position to prove that there was somebody in the market at the time who could be reached by advertisement in the manner described by him and who was willing to pay an enhanced value to reflect the hope of development that his case can get off the ground."

It is worth recalling that in that case the pursuer had made no averments that there was anyone in the market who may have been prepared to pay more than the agricultural value of the land - the so called "hope value". In that context I take the Lord President's remarks to mean that the essential failure was one of identifying an available market, which, if approached by way of appropriate marketing, would have been likely to generate a better price than was in fact achieved.

[176 ] In my opinion it is not necessary for a debtor to lead evidence from an individual or a number of individuals that he/they would have paid more than was actually achieved in a sale by a creditor in a Standard Security. The critical questions are whether there is sufficient proof of the existence of an available market, which as a result of breach of duty on the part of the creditors, has not been approached, and which, if approached, would have been likely to have produced a better price than was in fact achieved. I see no reason why the existence of an available market and of the prices achievable in that market cannot be established through the medium of expert evidence.

[177 ] In this case, DM Hall's failures meant that the Harriers was not adequately exposed for sale to either the investor market or the residential market. It was evident from the DM Hall Report that both markets were markets available for the Harriers. Mr Watt made it clear that there were reasonable prospects of the flats being sold individually on the residential market. The offer made by Digrasmart was made in the context of inadequate marketing to the investor market, but in any event, the marketing to the residential market was, in practical terms, non-existence. There was no dispute that sales on the residential market were likely to generate a larger sum than a sale of the Harriers to an investor as a unum quid.

[178 ] In my opinion the evidence given by Mr Watt as to what might have been achieved had adequate marketing to the residential market taken place, provides a sound basis for the quantification of the pursuer's loss.

[179 ] Furthermore, in assessing the pursuer's loss as a result of the defenders breach of duty, I consider that an appropriate yardstick is the acceptable evidence on what the flats of the Harriers could have realised in the residential market if adequate marketing had been put in place.

[180 ] Mr Watt was satisfied when he gave his advice to the defenders in September 1996 that there was a residential market for the Harriers. At that time he produced an aggregate valuation of £267,000 and an estimated restricted realisation price of £243,000. On the basis that there was a vigorous marketing campaign he expected that the majority if not all of the flats could be disposed of within three to four months. To take account of the possibility of the minority of the flats taking a longer period to sell, and in exercising a broad judgement, I propose to use a mid-point figure between £267,000 and £243,000 as the appropriate starting point, namely, £255,000.

[181 ] In order to ascertain the pursuer's loss in the main action, it is also necessary to have regard to the level of borrowing that existed at a time when he might have expected, had the appropriate advertising campaign been put in place, for the majority of the flats to have been sold. The pursuer's level of borrowing as at 31 December 1996 was £176,601.08. That would be a time some three to four months after it had been anticipated that the Harriers was to be marketed, and it seems to me to be the appropriate set-off figure in calculating the pursuer's loss.

[182 ] Furthermore, and although I was not addressed specifically on this matter, in ascertaining the pursuer's true loss, account has also to be taken of the costs that might have been associated with successful sales. In paragraph [131] I set out the actual costs incurred in the sale of the Harriers to Digrasmart. Having regard to those figures, in my view an appropriate deduction to represent the costs that might have been incurred in sales would be in the region of £12,000.

[183 ] On the basis of the analysis set out in the preceding paragraphs, in the principal action, the pursuer is entitled to a decree in the rounded up sum of £66,400. (£255,000 - (176,610 + £12,000)).

Counterclaim

[184 ] The defenders' counterclaim depends upon (a) whether the pursuer's debt was written off; (b) whether the defenders were bound by the intimation made to the pursuer that it was anticipated that his debt was to be written off and (c) where ultimate responsibility lies for the sum represented by the counterclaim.

[185 ] I agree with Mr Sandison that the pursuer's outstanding indebtedness to the defenders after receipt of the purchase price for the Harriers was not written off by them. It was anticipated that the loan would be written off but in fact that had not happened. In these circumstances I agree with the submission made by Mr Sandison that the pursuer required to prove waiver. There were no averments in support of waiver and no evidence had been led in support of it.

[186 ] The real issue in my opinion in relation to the counterclaim is whether or not the defenders bear responsibility for the delay in settlement with Digrasmart during which time the damage to the Harriers was caused and consequently the reduction in the price. On that issue I find Mr Urquhart's evidence totally convincing. The title problem that arose and seemed to the principal cause of delay could have been easily resolved much sooner in the manner in which it was ultimately resolved. The proposed date of entry was 30 January 1997 and I see no reason on the evidence why a date closer to that proposed date of entry could not have been achieved. The damage caused by vandalism and the removal of the boilers occurred during the period when the settlement of the transaction was being unnecessarily delayed and at a time when DM Hall were in control of the property. In my opinion the defenders require to bear responsibility for that loss.

[187 ] Furthermore, and in light of my conclusions in the principal action, had the defenders not been in breach of their duty under Section 25 of the Act, the issues raised in the counterclaim would not have arisen at all.

Conclusion

[188 ] In the principal action I shall sustain the first plea-in-law for the pursuer, repel the defenders' pleas and grant decree in favour of the pursuer in the sum of £66,400. In the counterclaim I shall sustain the second plea-in-law for the pursuer and repel the defenders' pleas. The case shall be put out by order so that I can be addressed on questions of expenses and on any other matters that the parties may wish to raise.

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	Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> RWilson v. Dunbar Bank Plc [2006] ScotCS CSOH_105 (11 July 2006) URL: http://www.bailii.org/scot/cases/ScotCS/2006/CSOH_105.html Cite as: [2006] ScotCS CSOH_105, [2006] CSOH 105

Scottish Court of Session Decisions