Wright, Johnston & Mackenzie Solicitors

They think it's all over – it's not.

With the recession nearing to a close and some banks announcing profits and large bonuses to bankers, the large banks were probably thinking things were beginning to look up for them. However one problematic issue from the recent past has reared its ugly head again; bank charges.

The media, legal commentators and the banks all thought that the recent Supreme Court ruling had put the bank charges issue to bed and the banks even began issuing standard letters to all their affected customers happily declaring that they now had no legal basis to reclaim their charges. However as we pointed out in November 2009’s issue of Lawsuit, the Supreme Court had noted that there might be a potential challenge to the banks’ charges on different grounds than those chosen by the OFT, specifically under regulation 5 of the Unfair Terms in Consumer Contract Regulations (UTCCR).

This anticipated challenge has now emerged in the case of Jennifer Sharp v Bank of Scotland at Glasgow Sheriff Court on 19 February 2010, the bank customer represented by Govan Law Centre successfully recalled and amended her frozen claim.The bank had opposed the move, arguing it would be “improper” to allow the claim to be amended in this way. A full evidential proof hearing has now been fixed for 11 June 2010.  In addition, the bank consumer added a further claim under the new section 140A of the Consumer Credit Act (CCA). The CCA enables bank consumers to attack charges on the grounds that they are “excessive in price” and crucially the onus of proof is on the bank to show the charges were fair. The Sheriff Court case could be of considerable importance as the CCA may entitle consumers to challenge future charges.

It will be interesting to see whether the Bank of Scotland settle the case or decide to defend the action; perhaps millions of frozen bank claims might be about to thaw…

For more information, contact Neil Morrison: .(JavaScript must be enabled to view this email address)

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Protective Expenses Orders - the start of a new trend?

We are all aware that the costs of an action before the Court of Session can be substantial and may well act as a deterrent to any party considering bringing proceedings.

On 20th January 2010, Lady Dorian granted the first protective expenses order in Scotland in the case of McGinty v Scottish Ministers [2010] CSOH 5.Although, in 2005, Lord Glennie determined that protective expenses orders were competent in Scotland in the case of McArthur v The Lord Advocate, he decided not to grant such an order in that case as the criteria for an order had not been satisfied.

What is a Protective Expenses Order? A protective expenses order is an order regulating liability for expenses made in advance of any substantive hearing. The idea is that the liability of the petitioners for expenses is restricted, and they are aware of their maximum exposure for expenses before litigating the merits of an action.

There are various criteria that have to be satisfied before a protective expenses order can be granted. These were set out in the case of Regina (Corner House Research) v Secretary of State for Trade and Industry 2005 1 WLR 2600 and are reflected in McArthur. The criteria are as follows: -

(1) the issues raised are of general public importance;
(2) the public interest requires that those issues should be resolved;
(3) the applicant has no private interest in the outcome of the case;
(4) having regard to the financial resources of the applicant and the respondent and to the amount of costs that are likely to be involved, it is fair and just to make the order;
(5) if the order is not made, the applicant will probably discontinue the proceedings and will be acting reasonably in doing so.

McGinty v Scottish Ministers was a petition for judicial review of the Scottish Ministers’ adoption of the National Planning Framework 2 relating to a new coal fired power station at Hunterston, and in particular to whether the public consultation process was sufficient to comply with certain statutory and European Law requirements.

Mr McGinty had been refused legal aid and could not fully support the action financially. The petition was being supported by donated funds, but these were likely to be exhausted early on in the proceedings. The petitioners argued that if some form of order was not made, then Mr McGinty would require to discontinue the proceedings and would be acting reasonably in doing so.

Lady Dorrian was satisfied that the criteria set out above had been established. However, she also felt that it would not be equitable to make such an order specifying that the petitioner, if unsuccessful, should bear no part of the respondents’ expenses.

An order was made to the effect, that if the Scottish Ministers were to succeed, the petitioner would only be responsible for the Scottish Ministers’ legal expenses up to a cap of £30,000. Furthermore, in the event that the petitioner was to succeed their recovery should be limited to that of a solicitor and one senior counsel acting without a junior.

Following this decision, perhaps we shall see an increase in the use of such orders in Scotland.

For more information, contact Lyndsey Cavanagh: .(JavaScript must be enabled to view this email address)

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Reject while the carburetor is hot!

In November 2004, Mr Douglas agreed to purchase an Audi car from Glenvarigill, who were formerly known and traded as Edinburgh Audi. The car was delivered in February 2005 and the remaining balance paid.

Mr Douglas’ new car developed many faults over time and in May 2006 he took the car into Edinburgh Audi to find out what was wrong but was given no proper answer. In September 2006, Mr Douglas was told the car had been repaired but it broke down and was returned to the garage. Mr Douglas verbally told the garage manager in November 2006 that he wished to reject the vehicle but the garage refused and dropped it off at Mr Douglas’ house.

Mr Douglas kept the vehicle in his own garage and it was little used. Eventually in June 2007 he decided to reject the vehicle on the basis that the numerous faults amounted to a material breach of contract. However Glenvarigill did not accept the breach and so Mr Douglas firstly brought an action for declarator, to declare the existence of his right to reject the car and secondly sought repayment of the price and damages for the loss that he suffered as a result of Glenvarigill’s breach of contract.

There were three legal issues in dispute in this case. Firstly, whether the defenders were in breach of contract at the time the car was sold by them to the pursuer; in particular was the car of satisfactory quality at that time? Secondly, was the pursuer entitled to reject the car, or is he confined to other remedies that are available under the Sale of Goods Act and the European Consumer Sales Directive?  The third issue was in respect of any damages to which the pursuer may be entitled.

On hearing evidence from two expert witnesses, the Court decided the most reasonable inference is that the defect existed from the date of delivery. There was nothing to cause it to arise at a later date and interference of any sort was very unlikely.

However, because serious problems did not arise until approximately 13 months after delivery and rejection did not take place until 15 months after delivery, the Court was of the opinion that it was too late to reject the goods. The Court explained that in the case of complex machinery such as a car, it is to be expected that it may be used for a period of weeks or even months before rejection becomes impossible, because it may take a significant period of use before the defect becomes apparent.

Ultimately, however, the remedy of rejection becomes unavailable through “the lapse of a reasonable time”, if the buyer retains goods without intimating rejection. The Court felt that that “reasonable” period cannot begin from when the defect manifests itself because Section 35(4) of the Sale of Goods Act 1979 seems clearly to relate to a period running from the date of delivery. Had it been intended that the period should run from the appearance of a defect that would have called for express wording.

Furthermore, rejection is a rather drastic remedy, in that it involves the return of the goods and the whole of the price. At a certain stage, a commercial closure is required, to permit the seller in particular, but also the buyer to some extent, to arrange his affairs on the basis that the goods have been effectively sold. Alternatively, damages remain a remedy, therefore the buyer is not left without any recourse to the seller.

Until the serious defect occurred in March 2006, Mr Douglas had uninterrupted use of the car. Minor faults appeared but they were nothing that a trip to the garage could not put right. Even after the first major fault appeared in March 2006, Mr Douglas waited until it reappeared in April or May before taking the car back to the garage for detailed investigation. Based on the facts and circumstances of this case, the Court felt that the right to reject had been lost through implied acceptance of the car.

It appears that rejection is a relatively short-term remedy, and is simply not available when a latent defect manifests itself for the first time more than a year after delivery; in no reported case has rejection been permitted after such a period. Although Mr Douglas lost his right to reject the Court awarded damages for his loss.

The right to reject is a simple, convenient remedy, which inspires consumer confidence. The only problem with the remedy is the uncertainty over how long it lasts. This case suggests that you have to be quick of the mark intimating rejection of the purchased good or risk losing your right to reject. 

For more information: contact Neil Morrison - .(JavaScript must be enabled to view this email address)

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Edinburgh -The new destination for international arbitration?

Scots law has enshrined and celebrated arbitration for hundreds of years yet Scotland was one of the few countries in the developed world lacking a modern domestic arbitration statute…until now! The shiny new Arbitration (Scotland) Act 2010 has managed to turn Scotland’s old, uncertain, piecemeal statutory provisions and ancient case law dating back to 1207 into a modern, user-friendly piece of legislation. The new Act also pinches some of the best features of our southern neighbour’s Arbitration Act 1996. 

There are several main arbitration dispute centres around the world, places like London and Stockholm, so why should parties choose Scotland to arbitrate their dispute? I shall summarise below the key features of the new Scottish Act:

·The Act has a confidentiality clause ensuring the dispute remains private unless parties agree otherwise.

·An oral agreement to arbitrate is recognised (subject to issues of proof).

·To reduce unnecessary Court challenges, the new Act also limits appeals from the Outer House of the Court of Session. There is no appeal to the Supreme Court of the United Kingdom.

·Scottish Ministers can immediately amend the Act by a simple order when changes are made to the UNCITRAL keeping Scotland’s arbitration law and rules bang up-to-date.

·The arbitration clause in a contract survives even if the contract is void under the “separability” principle. So if the contract was entered into in error for example that would not render the arbitration clause void and any dispute could still be referred to arbitration.

·If parties to an arbitration clause that has its seat in Scotland, i.e. the venue of the arbitration is to be Scotland, and they do not specify the law governing the arbitration, then Scots law will be the default law.

·Any arbitration “seated” in Scotland will be governed by the Scottish Arbitration Rules (“SAR”) unless the parties agree otherwise.

·The SAR are either “mandatory” rules which are compulsory on the parties even if they are in agreement that they don’t wish to be subject to a particular rule or the SAR can be “default” rules which can be modified or disapplied if the parties agree they don’t want the rule.

·If an arbitration agreement exists and one of the parties has not agreed to the litigation then the Court action must be sisted pending the final outcome of the arbitration proceedings unless the other party has waived their right to arbitrate by their actings.

·The award is the equivalent of an extract registered decree bearing a warrant for execution granted by the Sheriff Court or Court of Session.

·A Scottish judge may act as an arbitrator where the dispute appears to the judge to be of commercial character and the Lord President of the Court of Session having considered the state of the Court’s business, has authorised the judge to so act. The Scottish Ministers will decide the fee to be paid for the judge’s services, payable to the Court of Session. 

For more information on arbitration: contact Neil Morrison, .(JavaScript must be enabled to view this email address)

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From the Archives (1971): Diesen v Samson

If there is a breach of contract, can a Court award damages for injury to feelings? The immediate answer from most people would be a blunt no. Various legal authorities and Scottish text writers such as Gloag have all said mental distress would not be in the contemplation of parties when the contract was agreed and does not come within the scope of the contract so that no damages may be recovered.

In Diesen v Samson , a professional photographer agreed to take photographs at a wedding but then failed to appear at the church and consequently was in breach of contract. The poor distraught bride had no photographs of her wedding and to add insult to injury, many of the guests including the bridegroom had specially worn Norwegian national costumes on account of their nationality. She sued for damages for the distress caused by the photographer’s failure to attend the wedding and the loss of a pictorial record of her wedding.

It might have seemed such a claim was bound to fail. However legal text writers asserted although the general rule was that damages could not be recovered in contract for injury to feelings, there may be room for exceptions to this rule. The particular exception that the tearful bride relied on was that contracts, which do not affect commercial business interests but instead affect personal, social or family interests, may entitle the innocent party to damages. If the exception applies and the Court thinks that in the particular circumstances, the parties to the contract contemplated that mental distress could arise from the contract then damages may be awarded.

The wedding photograph contract was exclusively concerned with the bride’s personal, social, family interests and specifically with her feelings. The Sheriff held that what both parties obviously had in their contemplation was that the bride would be able to enjoy the pleasure of recollecting the event from the photos. He further asserted that the opportunity to gain pleasure from photos was permanently denied to her by the photographer’s breach of contract and so the case was fit for an award of damages.

How do you assess damages to the bride’s injury to feelings? The loss will differ depending on the person and their subjective thoughts. Also it should be remembered that not all marriages are happy ones and the photos would lose value if the married couple were to divorce later on. On the other hand if the marriage is happy then the loss may be compensated by the happiness. The damages award was assessed to be £30 by the value of the pictorial record of the ceremony that had been lost.

The case remains important as it demonstrates that where a breach of contract is not primarily of a commercial nature and has a personal element then damages for injury to feelings may be awarded. Wedding photographers would be well warned to make sure they remember their appointments or face not only a furious bride but a damages claim too!

1971 S.L.T. (Sh.Ct.) 49

More information from Neil Morrison, .(JavaScript must be enabled to view this email address)

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Ask WJM!

QUESTION

Dear Sirs, 

We were in Spain on holiday and got to know a local bar owner quite well. We liked the bar and he offered to sell it to us for 30,000 Euros, which we agreed verbally with him. We returned to Scotland and decided we would go back out to Spain to complete the deal in a month.

Before we were due to fly back to Spain, we heard that the bar had been sold to another bar owner.

Can we do anything?

We would be grateful for any assistance.

WJM ANSWER

The Spanish legal position is clear, where one person makes an offer, which is accepted by the other person, there is a contract that is legally binding. This can be done either in writing or verbally.

However the problem with verbal contracts is the evidential burden – you have to prove what was said and the terms of the verbal contract. A Spanish Court is unlikely to enforce a verbal contract if there are no independent witnesses willing to tell the Judge that an offer was made by the local bar owner and that you accepted the offer. 

I’m afraid if there are no independent witnesses then your chances of enforcing the contract are slim. In future transactions, to avoid this scenario happening again, it would be sensible to have a written contract drafted in Spanish and English with all the agreed terms stated and formally signed by both the seller and the buyer.

Ask WJM

If you have a question for WJM, we may publish the answer to your question in our “Ask WJM” section of our Lawsuit! E-zine; you can email your questions to .(JavaScript must be enabled to view this email address)

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You Couldn't Make It Up...

CRIMINAL PUNISHMENT MEXICAN STYLE!

A Mexican judge has been sacked for trying to punish a teenage graffiti artist by spray painting his buttocks.
Fernando Perez Hurtado, from San Juan Del Rio, was dismissed for abusing his authority after he tried to impose the “humiliating” sentence on the 13 year-old, the Daily Telegraph has reported.

Police said the teenager, who has not been named, was caught “tagging” on walls of public buildings and homes in the town.

After he was arrested and charged, he faced court where the judge imposed the bizarre punishment instead of forcing his parents to pay a fine.

Despite protests from parents and other court officials, the judge ordered the young artist to pull down his trousers before attempting to paint his buttocks with the same spray paint the teenager had used during his crimes.

The judge, who is facing a three year ban from public office and a fine, was prevented from the touching the child after concerned officials stepped in, local media reported.

The town’s mayor, Gustavo Nieto later confirmed he had fired the judge, whose job it was to impose penalties for petty crime, after he had “humiliated” the teenager.

He said the judge had abused his authority, because he should have notified the boy’s parents to force them pay a fine for the clean-up, not punish him directly.

The mayor said: “The report I have is that the judge told him to drop (his) trousers and spray paint (his) buttocks.”

WJM would like to acknowledge the source of this news article, which was from Scottish Legal News.

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