Chartered Brands Ltd v. Elmwood Design Ltd [2009] ScotSC 11 (15 May 2009)

A435/07 SHERIFFDOM OF LOTHIAN AND BORDERS AT EDINBURGH

JUDGMENT OF SHERIFF FRANK RICHARD CROWE

In causa

CHARTERED BRANDS LIMITED,

a company incorporated under the Companies Acts (Company Number SC231229) and having its registered office at Exchange Tower, 19 Canning Street, Edinburgh EH3 8EH

PURSUERS

Against

ELMWOOD DESIGN LIMITED,

a company incorporated under the Companies Acts (Company Number 02360152) and having its registered office at Elmwood House, Ghyll Royd, Guiseley, Leeds LS20 9LT and having a place of business at 40-44 Thistle Street, Edinburgh, EH2 1EN

DEFENDERS

Act: McBrearty, Advocate instructed by HBJ Gateley Wareing, Solicitors, Glasgow

Alt: Upton, Advocate instructed by Levy and McCrae, Solicitors, Glasgow.

EDINBURGH 15^th May 2009 The sheriff having resumed consideration of the cause, repels the Defenders' preliminary plea at para 2.1.2 of the Note number 22 of process, as unnecessary in light of the deletion at page eight of the Record, number 23 of process as specified in the interlocutor of 4 November 2008, repels the Defenders' preliminary plea at para 2.3.2 of said Note in light of the deletion at pages 32-34 of the Record as specified in the said interlocutor, allows parties, before answer, a proof of their respective averments on dates to be afterwards fixed, reserves the Defenders' preliminary pleas at paras 2.1.1, 2.2.2, 2.2.3, 2.3.1 and 2.3.4 of said Note meantime, quoad ultra repels the Defenders' remaining preliminary pleas for want of insistence, ex propria motu certifies the cause as suitable for the employment of counsel, reserves the question of expenses meantime.

Introduction

[1] This is an action for damages of £50,147 arising out of a failed joint venture between the parties to market a new brand of tea. The Pursuers alleged that following a breakdown in discussions between parties the Defenders proceeded to market a tea based on services provided by the Pursuers. The Pursuers seek recompense and allege that the sum sued for is the amount by which the Defenders have been unjustifiably enriched.

[2] Proceedings were raised in Edinburgh Sheriff Court in February 2007. After sundry procedure a diet of debate was fixed, the Pursuers having offered a proof before answer. After various adjournments, debate took place on the Defender's preliminary pleas on 3 and 4 November 2008.

Authorities

[3] I was referred to a great many authorities and I am grateful to the Defender's agents for presenting them in a tabulated, chronological volume. This saved considerable time in court and was of assistance in preparing my judgment. The debate was keenly contested by parties with the result that the volume of authorities increased by 50% during the course of argument.

[4] The authorities cited by parties were as follows:-

Cases

1. Binning v. Brotherstone, 1676 M. 13401;

2. Walker v. Milne,(1823) 2 S. 379;

3. Magistrates of Selkirk v. Clapperton, (1830) 9 S. 9;

4. Thomson v. Fowler, (1859) 21 D. 453;

5. Paterson v. Greig, (1862) 24 D 1370;

6. Anderson v. Anderson, (1869) 8 M. 157;

7. Fernie v. Robertson, (1871) 9 M 437;

8. Watson v. Shankland, (1871) 10 M. 142;

10. Nelson v. Garden, (1874) 1 R. 1093;

11. Buchanan v. Stewart, (1874) 2 R. 78;

12. Reedie v. Yeaman, (1875) 12 S. L. Rep. 625;

13. Stewart v. Steuart, (1878) 6 R. 145;

14. Landless v. Wilson, (1880) 8 R. 289;

15. Walker v. McKnight, (1886) 13 R. 599;

16. Rankin v. Wither, (1886) 13 R. 903;

17. Patmore & Co. v. B. Cannon & Co., (1892) 19 R. 1004;

18. Cran v. Dodson, (1893) 1 S.L.T. 354;

19. Renfrew Brothers v. Stewart, 1892 SLR 179;

20. Brown v. Meek's Trustees, (1896) 4 S. L.T. 46;

21. Wallace v. Braid, (1900) 2 F. 754;

22. Gilchrist v. Whyte, 1907 S.C. 984;

23. Edinburgh & District Tramways Co. v. Courtenay, 1909 SC 99;

24. Edinburgh Life Assurance Co. v. Balderston, 1909 2 SLT 323;

25. Morgan v. Morgan's Judicial Factor, 1922 S.L.T. 247;

26. Newton v. Newton, 1925 SC 715;

27. Gray v. Johnston, 1928 S.C. 659;

28. Jamieson v. Jamieson, 1952 S.C. (HL) 44;

29. McDonald v. Glasgow Western Hospitals, 1954 S.C. 453;

30. Mohammed v. Mohammed, 1954 S.L.T. (Sh. Ct.) 93;

31. Exchange Telegraph Co. v. Giulianotti, 1959 SC 19;

32. Gouws v. Jester Pools (Pty.) Ltd, 1968 (3) S.A. 563;

33. T Docherty Ltd. v. Monifeith Town Council, 1970 SC 200;

34. Microwave Systems Ltd. v. Electro-Physiological Instruments Ltd., 1971 S.C. 140;

35. Ellon Castle Estates Co. Ltd. v. Macdonald, 1975 S.L.T. (Notes) 41;

36. Site preparations v. Secretary of State for Scotland, 1975 S.L.T. (Notes) 41;

37. Varney (Scotland) Ltd. v. Lanark Town Council, 1976 S.L.T. 4;

38. Foxley v. Dunn, 1978 S.L.T. (Notes) 35;

39. Lawrence Building Co. Ltd. v. Lanark C. C., 1978 SC 30;

40. Lossie Hydraulic Co. v. Ecosse Transport Ltd., 1980 S.L.T. (Sh. Ct) 94;

41. N.V. Devos Gebroeder v. Sunderland Sportswear Ltd., 1990 S.L.T. 473;

42. Walford v. Miles, [1992] 2 A.C. 128;

43. Grieve v. Morrison, 1993 S.L.T. 852;

44. E.R.D.C. Construction Ltd. v. H.M. Love & Co., 1994 S.C. 620;

45. Morgan Guaranty Trust Co. of New York v. Lothian Regional Council, 1995 SC 151;

46. Dollar Land (Cumbernauld) Ltd. v. C.I.N. Properties Ltd., 1996 S.C. 331;

47. Shilliday v. Smith, 1998 SC 725;

48. Property Selection & Investment Trust v. United Friendly Insurance, 1999 S.L.T. 975;

49. Morris v Sutherland, (unreported) Selkirk Sheriff Court 10 August 2000;

50. Urquhart v. Sweeney, 2004 SCLR 796;

51. Transco p.l.c. v. Glasgow City Council, 2005 S.L.T. 958;

52. Satchwell v. McIntosh, 2006 SLT (Sh. Ct.) 117;

Legislation

53. Law Reform (Husband and Wife) (Scotland) Act 1984 c. 15;

Texts

54. Birks, Unjustified Enrichment Chapter 2, 9 &10 (2005)

55. Erskine, Institutes, II, 1, 9-10; (1871)

56. Evans-Jones, Unjustified Enrichment, (2^nd Edtn.)Vol. 1 pp. 276-279; (2003)

57. Evans-Jones, Causes of Action & Remedies in Unjustified Enrichment; (2007) 11

Edinburgh Law Review, 105;

58. Gloag, Contract (2nd edtn.) p. 19 & Chapter XVIII; (1929)

59. Gloag & Henderson, Law of Scotland (12^th edtn.), cap.25;

60. Green's Encyclopaedia, Vol. XII, pp. 138-146; (1933)

61. Kames, Principles of Equity, (3^rd edtn.), pp. 138-146; (1778)

62. Macphail, Sheriff Court Practice (3^rd edtn.) para. 9-67 (2006)

63. McBryde, Contract (3^rd edtn.), paras. 5-57 to 5-66 & 9-44 to 9-45; (2007)

64. Stair, Institutions, I, 7, 7 (1693)

65. Trayner's Latin Maxims, (4^th edtn.) pp. 377 to 378 & 632 (1993)

Submissions for the Defenders

[5] Mr. Upton explained that the parties had worked together between October 2005 and September 2006 to invent and sell a brand of tea which it was intended would be marketed under the name "Make Mine a Builders" (hereinafter M.M.A.B.). Parties contemplated creating a joint venture limited company in which the Pursuers would be granted 25% of the share capital and 8% of the values of sales of the product.

[6] In the event the arrangements broke down and the Pursuers did not proceed with the venture. The Defenders ultimately incorporated a company to sell tea under the name of the planned brand M.M.A.B. The Pursuers were alleging the work they had put into developing the abortive venture had been of benefit to the Defenders and sought damages of £50,147 by way of recompense for work done albeit there had been an intention had the venture proceeded that the Pursuers would not have been paid for any development costs incurred by them but would receive reward from a split in the proceeds of sales and a share in the proposed joint venture company as narrated in para [5].

[7] The Defenders departed from their first plea-in-law regarding jurisdiction at an earlier stage of the proceedings and withdrew their insistence on their second plea-in-law of forum non conveniens. This left seven areas of challenge regarding lack of specification of the Pursuer's averments. These were as follows:-

1. Paragraph 2.1.1 of the Rule 22 Note (No. 22 of process) that there was a lack of fair notice of detail of the "instructions" that the Pursuers alleged they were working under from the Defenders.

2. Paragraph 2.2.3 of the Note which challenged the averments that the Pursuers were working on behalf of the Defenders which would imply the existence of a contract and would thereby exclude a claim under unjustified enrichment.

3. Paragraph 2.1.2 of the Note which alleged a lack of notice in Condescendence 3 where it is averred "the Defenders advised [them] that they .... were only acting on instructions" without giving further specification of when this was said to whom and whether the Pursuers accepted or demurred from that advice.

4. Paragraph 2.2.2 of the Note which alleged a lack of candour in Condescendence 3 in that the Pursuers appeared to accept in the absence of a contract with the Defenders they had no entitlement to payment which was inconsistent with the present claim. Similarly it was inconsistent, it was alleged, to aver that even though the parties concluded no contract the "Defenders knew that the Pursuers had no intention to provide these services gratuitously".

5. Paragraph 2.3.1 of the Note which alleged the claim was irrelevant since the Pursuer's averments of benefit to the Defenders:-

(a) by proceeding with the brand avoiding the need to pay anyone else for services of the type given by the Pursuers and

(b) "the profits derived from the brand"

had no value placed upon them so could not be the measure of the claim.

6. Paragraph 2.3.2 of the Note stated that:-

"For the purposes of the law of recompense neither the cost of alternative provision nor a reasonable rate of payment for service rendered was as such either a benefit to the putative debtor nor [sic] a relevant measure of quantum." The Pursuers required to prove the Defenders were enriched not that they had to pay someone else to carry our work which could have been done by the Pursuers.

7. Paragraph 2.3.4 of the Note alleged that the action as a whole is irrelevant because recompense is not available where the pleadings disclose the Pursuers were working for their own benefit to secure a contract but when events did not progress as proposed they withdrew from the proposed joint venture. No obligation of payment arose from work or services carried out by a party for his own benefit.

[8] As regards the first head of challenge I was directed to Condescendences 3 and 4 which sets out the basis of the claim and which averred that parties worked jointly as potential business partners to develop and market the M.M.A. B. brand. This was to lead to the formation of a company to market the brand and the Pursuers would receive a substantial shareholding in this company and a proportion of the revenue generated by sales of the product. In this context it was averred that the Pursers worked:-

"on behalf of the Defenders, conform to the Defender's instructions."

Page 4 of the Record (No. 23 of Process) referred to potential business and page 5 of the pleadings the steps taken to form the brand. Page 6 described the actions taken by the Pursuers to identify suppliers of tea which could be used to market the brand. Page 8 describes the services allegedly provided by the Pursuers to develop the specification of the product including packaging types of tea bag and blend of tea.

[9] Pages 9 and 10 of the Record averred the roles undertaken by the Pursuers to develop the brand. It was averred that in each and every role the Pursuers acted on instructions of the Defenders and "in the belief that they would obtain benefit for the work undertaken." Page 11 of the Record narrates that in March 2006 the Pursuers advised the Defenders the proposed joint venture was not commercially viable at this stage because of the volatility of tea prices on the wholesale market. Work however continued in an attempt to sell the idea to another company and discuss buying tea from a wholesaler.

[10] Page 12 of the Record asserted that the Pursuers continued to supply information to the Defenders with a view to the ultimate launch of the M.M.A. B. brand. Counsel~~Mr. Upton~~ criticised the lack of detail about the nature of the supplying relationship "to whom and when". If that was so then the Pursuers were working as the Defender's agents. There were no averments to that effect however.

[11] I was referred to Condescendence 5 which alleged unjustified enrichment on the part of the Defenders and Condescendence 6 which seeks to quantify this claim. At page 30 no rates of pay are suggested that the Defenders would have had to pay had the services provided by the Defenders been obtained from an alternative source. The Pursuers then set out the costs that their staff incurred working on the abortive project as forming the basis of the claim.

[12] Counsel~~Mr. Upton~~ said that the background narration that parties had worked together in contemplation of setting up a joint venture company which would reward the Pursuers if successful was at variance with their claim for payment on a "time and line" basis for abortive work carried out on the project. No fair notice was given of which of the two cases was advanced and the case was not pled on an esto basis.

[13] It was argued that on at least 9 occasions in the pleadings the Defenders averred they were working on the instructions of the Defenders without there being specification of the means by which such instructions were issued, to whom, by whom and the relevant details. While reference is made from page 8 of the pleadings onwards to a Mr. Gower from the Defenders Company who was appointed to act as Managing Director for the M.M.A.B. project, Counsel~~Mr. Upton~~ stated that there was nothing in the pleadings about the nature of any such instructions given and how the Pursuers are thereby entitled to the sum sued.

[14] Counsel~~Mr. Upton~~ concluded this chapter of his argument by stating that the Defenders need information about the alleged instructions to meet the case against them. Fair notice requires reference to documents and individuals who could be precognosced. The pleadings contained much business jargon but relatively few dates names and places which could be investigated and checked.

[15] As regards the second leg of the third plea-in-law (summarised at [7] 2 above), Counsel~~Mr. Upton~~ suggested that if the parties were working under a contract or implied contract this would exclude a claim for unjust enrichment. If the Pursuers were instructed in terms of such a contract they could sue under that contract for remuneration based on the intended shareholding of the joint venture and the percentage agreed for sales. Alternatively the Pursuers could raise an action for specific implement to secure shares or damages to the value of such shares and any profits arising from these shares. Instead the Pursuers are suing on a time and line basis for the value of services said to be provided. Whereas Condescendences 3 and 4 conclude seeking recompense for services provided, Condescendence 6 concludes for payment for work done on a quantum lucratus basis. Prior to the joint venture breaking down a draft shareholder's agreement and a draft management service agreement were exchanged by parties. If remuneration not agreed and it was a contract for services with no agreement regarding remuneration the claim would be on a quantum meruit basis.

[16] In that connection I was referred to McBryde at para. 9-44 which begins: -

"If there is a contract an entitlement to remuneration is implied." Para. 9-45 commences: - "Where there is a contract for services but no agreement on the amount of remuneration the entitlement to payment is quantum meruit. I was then referred to Gray v. Johnston Lord Hunter at page 670: -

"I think the pursuer's averments fail to establish a case under this head. He has not based his case on a claim for quantum meruit in respect of services rendered. No suggestion is made that the services were rendered in respect of a promise of remuneration, or even in the expectation that they would be remunerated. The only explanation which he gives for his actions is that he expected to be made the deceased's heir. I may add that the record appears to me to contain no material for determining what, in any event, would have been fair remuneration for such services as the pursuer rendered to the deceased".

[17] In ERDC Construction Ltd. v. HM Love & Co. at page 632 Lord Justice-Clerk Ross at page 632 quoting from Trayner's Latin Maxims states:-

"Quantum meruit means "as much as he has earned" and the doctrine rests upon an "implied obligation on the part of the employer to pay a fair remuneration according to the extent and quality of the work done"

In Gloag and Henderson at para 25.23 entitled "Unjustified Enrichment and Contract" the authors state that unjustified enrichment "is not a plea which is open to someone who has done work under a contract and has the right to sue the other party for the contract price." See Dollar Land (Cumbernauld) Ltd. v. C.I.N. Properties Ltd. and the other cases referred to at footnote 181. It was Counsel's~~Upton's~~ contention that the Pursuers either had a contract based upon a 25% equity share and 8% of the profits on sales of the product or a claim under quantum meruit which would require a different type of action to the one raised. Gloag and Henderson again at para. 25.23 "a claim for payment for extra work done under a contract must, it is conceived, be founded on an express or implied agreement to pay, not on the principle of unjustified enrichment."

[18] In N.V. Devos Gebroeder v. Sunderland Sportswear Ltd. Lord President Hope at page 477L stated:-

"In my opinion there is no doubt that an obligation to pay the price due under a contract and an obligation to make recompense are based upon different principles of law."

In Gloag ~~The Law of Contract~~ at page 320 the paragraph entitled "Express Contract Excludes Recompense" commences by stating:-

"It is not easy to state the limits within which a claim for recompense may be advanced, but it is conceived that if the relations of parties are regulated by a contract of which there is competent evidence, neither can ignore it and obtain better terms by framing his case as a claim for recompense." And concludes:-

"Recompense, it is submitted, is a remedy available only where there is no contract, or where, if there is one, action upon it is in some way precluded."

[19] In concluding this submission I was referred to Gray v. Johnston at page 674 where Lord Anderson states:-

"By his third plea-in-law the pursuer attempts to justify his claim on the legal ground of recompense. The conclusive answer to this plea seems to be that it is not a true alternative to the legal ground proponed in his other pleas. It is inconsistent with his other pleas, and so is unmaintainable. Remuneration for services on the basis of recompense is only maintainable where no other basis has been or can be suggested. But the main case of the pursuer is that another basis was arranged, to wit, that the pursuer, in return for his services, was to be made the heir of the deceased. The pursuer's counsel conceded that this consideration excluded a claim on the basis of quantum meruit. By parity of reasoning it seems to me to exclude also a claim on the basis of quantum lucratus. On this ground the third plea for the pursuer must be repelled; and, as this is sufficient for the disposal of that plea, it is unnecessary to consider whether or not this is one of the cases of alleged recompense in which it is necessary to have an averment that the pursuer sustained loss under error."

[20] The third argument is summarised at [7] 3 above. I was directed to page 8 of the Record and the reference to verbal and written instructions allegedly given by the Defenders to the Pursuers. Counsel~~Mr. Upton~~ said that the pleadings lacked detail about when, by whom and to whom the instructions were given and their detail; it was not even clear whether the Pursuers acted upon them. The pleadings indicate that the Pursuers were to be remunerated in the proposed joint venture by receiving 25% of the share capital in the company and 8% of the value of sales. This can be contrasted with the statement at page 10 of the pleadings that "the Pursuers acted on instructions from the Defenders and acted in anticipation of ultimately obtaining benefit in return for services provided."

[21] The lack of detail in this context was criticised since had such detail been provided it could have shown a contract or implied contract existed and that would have been fatal to the Pursuer's claim the Defenders were unjustifiably enriched.

Counsel~~Mr. Upton~~ said it was vital that the Defenders had fair notice about who had provided these instructions to the Pursuers. In that context I was referred to the remarks made by Lord President Cooper in McDonald v. Glasgow Western Hospitals at page 465:-

"The plea of lack of specification finds its proper application in a case where a defender does not know the case to be made against him and objects to being taken by surprise at the proof."

[22] The fourth ground of challenge concerning a lack of candour in the Pursuer's pleadings is summarised at para. [7] 4 above. I was directed to the answers to Condescendence 3 at pages 19 and 20 of the Record. If the Pursuers made the statements in e. mails attributed to them they could be construed as a basis for recompense in the absence of contract as they did not have a claim to payment. The answer narrated work carried out between April and September 2006 by the Pursuers which is relevant to the claim regarding an entitlement to payment. The pleadings are relevant to an equitable reward of recompense as actions may have barred this, if one was to consider the statements were made on that basis the pursuers did not have any assurance of a quantifiable return for their work. By contrast in Condescendence 3 at page 7 the Pursuers merely acknowledge the existence of the e. mails but offer no construction of them. In that connection I was referred to Macphail at para.9.67 which deals with the responsibilities of parties when referring to documents in pleadings. The Pursuers had not lodged the relevant e. mails to support their case whereas the Defenders had lodged the e .mails to support their answers.

[23] At page 7 of the pleadings in Condescendence, where the Pursuers referred to the terms of e. mails from Mr. Gribbon of their company to Mr. Gowar of the Defender's. Counsel~~.Mr. Upton~~ said that if that reference was an admission of the terms of the e. mails, then the Pursuer's seem to accept that in the absence of a contract they had no prospect or entitlement to payment but did not intend their services to be given gratuitously. In their answers at page 14 the Defenders have conceded "Believed to be true that the pursuers acted in anticipation of ultimately obtaining benefit, under explanation that they would have done so in return for their performance of their part of the proposed joint venture, assuming that it had been made sales" (sic)

[24] I was referred to the case of Ellon Castle Estates Co. Ltd. v. Macdonald quoted with approval in Foxley v. Dunn by Lord Stott :-

"A defender is under a duty to answer on matters which are clearly within his knowledge and he cannot, as counsel for the pursuer put it, duck the issue by simply ignoring the averments made against him. Defenders should honestly answer the case made and it would, I think, make a mockery of our court proceedings if defences of this kind were remitted to probation, "

[25] Counsel~~M. Upton~~ concluded that unless and until the Pursuers made their case clear in their averments there was no basis for proof on Record.

[26] The fifth area of challenge is summarised at para [7] 5 above. At Condescendences 5 and 6 of the Record the Pursuers averred benefits which had accrued to the Defenders, Mr. Upton submitted that these averments were irrelevant. The effect of the Pursuers' averments was to say that the Defenders had been enriched and therefore had benefited. This was brought out in the Pursuers' third and fourth pleas-in-law which both concerned on enrichment. It was submitted these pleas-in-law took different approaches, the fourth plea-in-law being an attempt to quantify the benefit

[27] Counsel~~Mr. Upton~~ pointed out that at page 3 of the Record there were averments relating to trademarks and trade secrets but no further specification of these matters. At page 12 of the Record in the last paragraph there was reference to the Defenders having in M.M.A.B. acquired a brand. At page 13 it was averred that had the Pursuers not provided services to the Defenders, they would have required to have obtained them from an alternative source.

[28] At page 27 of the Record the Pursuers averred:-

"Each and every action undertaken by the Pursuers to develop the brand was essential to the Defenders in ultimately branding and selling M.M.A.B. and has accordingly benefited the Defenders." Counsel~~Mr. Upton~~ submitted that this averment suggested that none of the work carried out by the Pursuers had been unnecessary or superfluous. In fact had the proposals proceeded as originally envisaged the Pursuers would only have received a quarter share of the equity of the joint venture company and 8% of the values of any sales. Now it appeared the Pursuers sought time and line payment for all work said to have been carried out on the project and sought no profit from any sales. No attempt had been made to define the alleged benefits accruing to the Defenders and how they had become lucratus through the promotion of the M.M.A.B. brand and sales.

[29] Counsel~~Mr. Upton~~ said that the Pursuers had instead simply alleged that the Defenders would have had to pay for all of the services provided by an alternative source to develop the brand and as such had been unjustifiably enriched, as averred at the start of Condescendence 5 at page 29 of the Record. Thereafter the Pursuers had quantified the cost of their input to the project regardless of what the benefit might have been. Counsel~~Mr. Upton~~ said that this approach was objectionable as the Pursuers simply quantified their expenditure and alleged this would be the cost of provision of the branding services from another source. If this approach was allowed the Pursuers would not need to prove what the Defenders earned from the brand or the value of the brand. The Pursuers would however have to prove the open market rate for providing services of the type given by the Pursuers.

[30] I was referred to Condescendence 6 at page 30 of the Record where the Pursuers sought to quantify the cost of their input to the project. This averment however simply gave the number of days and cost per day of eight of the Pursuer's employees. The Pursuers then averred the benefit to the Defenders was not to have to pay someone else" to employ a similar organization to undertake the tasks carried out by the Pursuers" (see foot of page 32 of the Record). To that amount the Pursuers had added a 10% charge based on "normal rates within the Pursuers' industry and on the reasonable costs met by the Pursuers, Standard Practice in the Pursuers' industry..."

[31] Counsel for the Defenders had three objections to the way the Pursuers' case was pled in this context:-

(i) The Pursuers aver a benefit obtained by the Defenders regardless of the ultimate performance of the brand marketed by the Defenders

(ii) Even if the Pursuers had ascertained the actual cost of providing similar services to the Defenders this would have been irrelevant in determining whether the Defenders had been enriched. No value had been place upon the profits the Defenders were said to have derived from the brand.

(iii) It was averred that the Defenders owned trademarks arising from the project; this would take a substantial amount of time to establish by evidence. Even if that was done it would not of itself shown the Defenders had obtained a benefit.

[32] The sixth area of challenge is summarised at paragraph [7] 6. above. Counsel ~~for the Defenders~~ submitted that the averments relating to alternative provision and a reasonable rate for payment for services rendered were irrelevant in the context of a claim for recompense. Even if such averments were proved the claim must fail; Jamieson v. Jamieson per Lord Normand at page 50 and Lord Reid at page 63.

[33] Counsel submitted that the Pursuers in terms of their pleadings sought to establish from other sources what the industry rates for the work carried out would have been and to these costs would have required to be added the 10% industry norm for expenses. The resultant figure however could not be said to represent the cost of any benefit to the Defenders. Instead what the Pursuers would require to establish for a claim of recompense would be to estimate whether the Defenders were better off as a result of work carried out by the Pursuers in relation to M.M.A.B. tea.

[34] I was referred to Fernie v. Robertson. In that case tradesman sued the heir-at -law of the deceased for payment of accounts for repairs carried out on the deceased's house amounting to about £134. The court found against the heir in so far as he had been lucratus by the repairs. At page 439 the trial judge, Lord Gifford said:-

"Although the whole expenditure is proved to have been prudent and beneficial, it is plain that the property is not thereby increased in value to the defender to the full amount of the expenditure, and ...the defender is only liable in quantum factus est locupletior, the Lord Ordinary has been obliged to make a jury estimate of the extent of the defender's lucrum. He thinks the sum of £80 is very moderate, taking everything into account".

[35] At appeal Lord Cowan at page 442 said:-

"I have rather some difficulty in seeing why this is a case for applying the principle of recompense merely, and not considering it one of contract; on which footing the heir would be liable for the whole amount of the accounts, and not merely for meliorations. But, at all events, we see that the heir has taken possession of the estate, and therefore he must pay for the meliorations, the benefit of which he is enjoying, so far as they are really beneficial."

Lord Neaves concurred and said at page 443:-

"I do not say that tradesmen in such circumstances would be entitled to execute extravagant repairs; but that reasonable repairs, such as were here executed, should not be paid for in so far as beneficial, would seem to me to be equally repugnant to law and justice."

[36] I was next referred to Watson v. Shankland Lord President Inglis said at page 152:-

"If a person contract to build me a house, and stipulate that I shall advance him a certain portion of the price before he begins to bring his materials to the ground, or to perform any part of the work, the money so advanced may certainly be recovered back if he never performs any part, or any available part, of his contract. I shall be bound in equity to allow him to credit to the extent to which I am lucratus by his materials and labour, but no further; and if I am not lucratus at all, I shall be entitled to repetition of the whole advance, however great his expenditure and consequent loss may have been."

Counsel submitted that the effect of these remarks was that the Pursuers were not entitled to the cost of their time and effort but a valuation of the result of what they had done to the extent that the Defenders had been enriched.

[37] Counsel then referred me to Stewart v, Steuart which involved a claim for recompense by way of water rates by the owner of an estate against one of the feuars. Lord Deas summarised the issue at page 150:-

"The foundation of the claim, therefore, is, and must be, the benefit which the defender, and others, has enjoyed from the water for the period...But I do not see any allegation that the defender really reaped any benefit from the water. It is said that his tenants used the water, but it is not said that he got one sixpence more rent from them in consequence."

[38] The next case Counsel referred me to was Morgan v. Morgan's Judicial Factor. In that case the pursuer sought to recover insurance premiums paid by her on a policy over the life of her late husband. Lord Hunter concluded at page 248 that the pursuer's case was based on the doctrine of recompense. At page 250 his Lordship stated:-

"There appear to be two limitations to the practical application of the doctrine of recompense. First, the person making the expenditure cannot claim a profit, and second, he cannot claim from the person benefited a sum in excess of the increased value of the subject arising from his expenditure. I was inclined to think that the pursuer might be limited to the actual amount of her outlays without interest thereon; but as Lord Mackenzie in the case of Edinburgh Life Assurance Co. [v. Balderston, etc.] allowed the claim for interest, I propose to follow the same course in this case. The value of the trust subject apart from the pursuer's expenditure will be ascertained by taking the surrender value at the time when the pursuer started to pay the premiums with any bonus accrued thereon, and adding yearly interest up to the present time. I shall pronounce a finding that the pursuer is entitled to repayment of the premiums paid by her, with interest, provided that the amount so recoverable is not to exceed the difference between the amount recovered under the policy and the present value of the trust subjects on the assumption that no premiums had been paid by her,"

[39] Finally under this heading of argument Counsel referred me to the case of Shilliday v. Smith. Parties had lived together in a cottage belonging to the pursuer. The defender then purchased a house in need of repair and the parties discussed getting married. The pursuer paid for materials and remedial work carried out on the house. The relationship came to an end and the pursuer sought repayment of the sums expended.

Lord President Rodger (as he then was) summarised the circumstances of the case and provided a helpful discussion of the law and authorities in this context at pages 726 to 731. He upheld the pursuer's claim for recompense based on the defender's enrichment enjoyed by him as a result of the outlay incurred by her. The pursuer also succeeded in a claim for repetition for money paid by her to the defender to pay for materials and work carried out on the house. Both legs of claim fell within the condictio causa data causa non secuta. Lord Rodger indicated at page 727 that:-

"Discussions of unjust enrichment are bedeviled by language which is often almost impenetrable."

[40] Reference was made to Evans-Jones Volume I at page 278 paragraphs 9.16 & 9.17 where the author helpfully summarises the approach taken by Lord President Inglis in Watson v. Shankland and Lord Rodger in Shilliday v. Smith. Counsel's contention was that in the pleadings the Pursuer vacillated between the cost of getting someone else to provide the services they had and the value of the brand M.M.A.B. Only the second aspect could be relevant as a basis for recompense but it had not been properly pled.

[41] At a later stage Counsel referred me to the unreported case of Morris v. Sutherland in this context. Sheriff Drummond QC had dismissed an action at debate where a claim had been made for recompense in relation to livestock owned by the defender which had been in the custody of the pursuer for a period. It was claimed that the livestock increased in value during this period and a claim was made for the sums expended upon their maintenance during this period. Reference was made inter alia in the sheriff's decision to the cases of Binning v. Brotherstone ~~1676 M.13401~~, Magistrates of Selkirk v. Clapperton ~~(1830) 9 S. 9~~, Paterson v. Greig ~~(1862) 24 D. 1370;~~ at page 1379, Fernie v. Robertson (supra) at page 439, Nelson v. Gordon ~~1874 1 R. 1093~~, Renfrew Brothers v. Stewart ~~1895 S.L.R. 179;~~ at page 182 and Anderson v. Anderson. ~~(1869) 8~~ ~~M. 157.~~ The sheriff's reasoning for dismissing the action are set out at pages 11 and 12 where he states:-

"The pursuer neither offers to prove a date when a valuation is to be applied nor does he address the issue of any "natural increment" in the valuation of the livestock. The defender is placed in a position where he has no notice of the case which he requires to meet beyond a claim by the pursuer for his expenditure in maintaining the livestock while it was in his possession....The pursuer's averments do not set out relevant averments which identify the benefit said to have been gained by the defender."

[4241] The last ground of objection is contained in paragraph 2.3.4 of the Defender's preliminary pleas and it is summarised at paragraph [7] 7, above. In short it was submitted that the whole action was irrelevant in that the facts which the Pursuers offer to prove are insufficient on which to base a plea of recompense.

[4342] In Condescendence 3, pages 2 and 3 of the Record, the Pursuers admit that they carried out work in contemplation of a corporate joint venture with the Defenders which in the event was not established. In Condescendence 6 at page 32 the Pursuers aver how they would have profited from this venture. They admit that they never intimated any proposed rates of payment to the Defenders as they hoped to profit from the joint venture. In Condescendence 5 at page 29 the Pursuers aver:-

"Had the Pursuers not provided theses services to the Defenders, the Defenders would have required to pay for all of them from an alternative source."

However at Condescendence 3, page 6 of the Record the Pursuers admit that in September 2006 they told the Defenders they would not proceed with the proposed joint venture and contract. Furthermore in November 2006 the Pursuers sent the Defenders an invoice for a named sum, followed by a solicitor's letter demanding payment of a different sum.

At page 11 of the Record the Pursuers make averments in relation to contacts made with a view to involve Typhoo tea in the venture:-

"Despite contractual uncertainty and concern in relation to the commercial viability of the M.M.A.B. brand, the Pursuers continued to do work in good faith on behalf of the Defenders."

Despite all of this Counsel maintained that the Pursuers walked away from the venture and gave no explanation for so doing. He submitted that a claim for recompense does not materialize where a party withdraws. The Pursuer's remedy would have been to have gone ahead with the joint venture.

[4443] Counsel next focused on what he regarded as the problem with the Pursuer's case. In Condescendence 3 at page 2 the Pursuers narrate how they worked prior to the execution of a contract and how lengthy negotiations were involved in relation to such a contract between parties. Inherent in the joint venture was a share of profits and losses. Had the joint venture been formalised the Pursuers would have received 25% of the equity and 8% of the values of sales. It is clear from page 3 of the Record that the contract was not finalised and Counsel submitted that the relationship broke down when the Pursuers walked away from the proposals.

[4544] At page 4 of the Record the Pursuers aver that all of the services provided by them were "provided in contemplation of the parties ultimately reaching an agreement whereby they would both benefit from the launch of the M.M.A.B. brand". The joint venture proposals were discussed from 25 October 2005 onwards as narrated at pages 4 and 5 of the Record. Parties exchanged a draft shareholders' agreement in January 2006 and exchanged a draft management services agreement in March 2006. Page 6 of the Record narrates activities carried on by parties on the venture until about August/early September 2006.

[4645] Counsel next took issue with the averments at page 10 of the Record commencing:-

"In each and every specific role undertaken by the Pursuers as hereinbefore condescended upon, the Pursuers acted upon instructions from the Defenders and acted in anticipation of ultimately obtaining benefit in return for services provided."

I was then referred to page 11 of the Record and the reference to tea price fluctuations which were said to have been occurring in the commodity markets:-

"With the rise in price of tea imports, the agreed objectives and targets of the joint venture could not be met. The Pursuers suggested other proposed courses of action ought to be considered."

From there I was referred to Condescendence 4 at page 24 of the Record and the sentence:-

"The Pursuers advised the Defenders of legal considerations relating to how to structure the set up of the M.M.A.B. brand with a legal entity."

Thereafter I was taken to page 26 of the Record:-

"Glen Gribbon of the Pursuers attended two of the Defenders' board meetings on 20 February 2006 and 4 September 2006 in the Defenders' offices in Guisley, Leeds."

Counsel moved on from that part of the Record to the top of page 33 where after detailing what work they had carried out the Pursuers averred:-

"They will therefore benefit from all of the profits derived from the brand and have benefited from all of the services provided by the Pursuers."

Further averments are made on page 33 suggesting that the M.M.A.B. brand would have been operated in Edinburgh by the Pursuers.

[4746] Counsel referred me to the case of Cran v. Dodson (reported in note form) which involved a loan of money by the defender for a stevedore to purchase plant. It was a condition of the loan that the defender would retain ownership of the plant until the debt was satisfied. The stevedore became bankrupt and the pursuer, who had repaired the plant sued for payment of his account. The pursuer claimed that the defender being lucratus, must pay to the extent of the benefit he had received. In disposing of the case Lord Kyllachy said:-

"There can be no doubt that the defender was lucratus. But there is no such doctrine in the law of Scotland as that every person who has profited by the work done under a contract is to be liable for the work so done."

[4847] Counsel then referred me back to the case of Fernie v. Robertson and the statement of Lord Neaves at page 442:-

"The general views as to the law of recompense which have been urged on us may be correct, but have no application here. A man who at his own hand executes operations on a property, partly for himself and partly for another, has no claim against that other."

[4948] Counsel also referred in this context to Rankin v. Wither. In that case it was decided that a husband had no claim against the heir-at-law for recompense for rebuilding a house at his own expense which belonged to his late wife. Lord Justice-Clerk Moncreiff said at page 909:-

"The money was expended by the husband for the benefit of his wife, and no doubt in the expectation, which certain eventualities might have justified, that it would be for his own benefit ultimately. But it is quite certain that these were the only considerations which led to it being expended. That being so, I think the husband must be taken, as Lord Neaves said in the case of Fernie to have been "acting in suo,"-in fact, to have expended the money on the property for his own benefit. That is the general view I take of the matter. The cases, no doubt, run into many subtleties, and it is not very easy to reconcile them all."

I was also referred to Lord Young at pages 907 and 908. On the latter page he states:-

"I quite agree with the statement of the principle of recompense laid down by Lord Neaves in the case of Buchanan v. Stewart, namely, that where a man, in the honest, although erroneous, belief that the subject is his own, spends his money and makes improvements upon it, the party who shall finally make good his title to the property shall not be entitled to take the benefit of these meliorations without making recompense....Lord Neaves distinguishes, and distinguishes properly, the case of the party who honestly believes that the property is his own, and makes some meliorations on it from the case of one who is in possession, on a good but limited title, and makes alterations upon the subject for his own convenience and comfort. In the latter case there is no error at all, and error is essential to success in a case under the law of recompense."

[5049] Next I was referred to Edinburgh and District Tramways Co., Ltd. v. Courtenay. This case involved an earlier incarnation of Edinburgh trams and an action raised by the operators against an advertising contractor who had been given the right to advertise on the trams. Under the advertising contract the defender undertook to supply the necessary fittings for holding the adverts. New tramcars were however supplied with the necessary fittings which the defender utilsed. At page 104 of the report Lord President Dunedin~~Inglis~~ described one of the fittings on the new cars as being:-

"a decency board, and also no doubt served purposes of safety, because it would prevent a child slipping through the somewhat wide bars."

Unlike the more rudimentary older tramcars adverts could be placed on the newer vehicles with little effort and at minimal cost.

At page 106 his Lordship states:-

"the thing done was as much for the benefit of the man who did it as for the other person."

And at page 107, his brethren concurring, Lord President Dunedin~~Inglis~~ concluded:-

"I have no hesitation in coming to the result that there is no relevant claim for recompense, because the facts do not raise it, and that accordingly, contract also having failed, the defender ought to be assoilzied."

[5150] Counsel then referred me to Gray v. Johnston. The pursuer in that case raised an action against the executor of a farmer who had died intestate. The deceased had encouraged the pursuer to look after him, manage the farm and reside with him on the understanding he would become heir to the farm. When no will was made in the pursuer's favour and the deceased died intestate and action was raised for material loss or alternatively recompense for the amount the estate had benefited due to the pursuer's efforts.

The Lord Ordinary, Lord Murray identified the claim as a case of recompense "founded on the general brocard nemo debit loculetari aliena jactura." At pages 664 and 665 his Lordship states:-

The services he rendered were given with his eyes open in what he conceived or calculated to be his own interest, and, as put by Lord Justice-Clerk Moncreiff in Rankin's case, "no doubt in the expectation, which certain eventualities might have justified, that it would be for his own benefit ultimately."

The only mistake he made was not a mistake as to his position, but was his own calculation of his chances. In short, the pursuer was content to remain outside of contract, and, in the hope that things would end to his advantage, "took the risk." This will not found a claim for recompense-Patmore & Co., (1892) 19R. 1004, at p.1007."

[5251] Lord Hunter said in Gray v. Hunter at page 670 said:-

"I think the pursuer's averments fail to establish a relevant case under this head. He has not based his case on a claim for quantum meruit in respect of services rendered. No suggestion is made that the services were in respect of a promise of remuneration, or even in the expectation that they would be remunerated. The only explanation which he gives for his action is that he expected to be made the deceased's heir. I may add that the record appears to me to contain no material for determining what, in any event, would have been fair remuneration for such services as the pursuer rendered to the deceased. In my opinion the Lord Ordinary was right in dismissing the action, "

Lord Ormidale was of a similar view at page 672:-

"There appeared to me at first to be more force in the plea of recompense, but I have come to the conclusion that there are no averments relevant to support it as a distinct and separate ground of action. It is not a true alternative. The two grounds are confused and interdependent, the shadow of the contract which is not susceptible of proof obscuring both. It was admitted that there was no room for quantum meruit, and there appears to me to be just as little for quantum lucratus. Any services rendered by the pursuer were deliberately rendered to promote the realisation, if possible, of his expectancy of becoming the deceased's heir, and, in the circumstances disclosed by him (as I read his averments), I can find no warrant for holding that he is entitled to claim from the deceased's estate a sum as solatium for his disappointed hopes; for that, and not recompense, is really what his claim amounts to."

Lord Anderson gave similar reasoning at page 674 and stated:-

"Remuneration for services on the basis of recompense is only maintainable where no other basis has been or can be suggested."

[5352] Counsel did point out that Lord Justice-Clerk Alness dissented and suggested the pursuer be offered a proof before answer. At page 682 he concluded:-

"It would thus appear that all the elements of a claim based on recompense concur in this case. The pursuer had no intention of making a donation to the deceased; the latter gained by his services; the pursuer sustained loss; and, if this be necessary-which I take leave to doubt-the pursuer's services were given on an erroneous assumption."

[5453] From there I was referred to the case of Varney (Scotland) Ltd. v. Burgh of Lanark. In an action by building contractors against the local authority claiming reimbursement of the cost of constructing sewers for a housing development they had built, Lord Justice-Clerk Wheatley said at page 47:-

"The first of the controversial factors was whether the operation was carried out by the pursuers for their own benefit. There is no doubt that by undertaking the work themselves instead of waiting for the defenders to do it or by taking legal proceedings to compel the defenders to do it (it being now accepted by the defenders that it was their statutory duty to do it, as was decided in the case of Docherty ~~[1970 S.C. 200]~~, the pursuers may have expedited the completion and sale of the houses....The pursuers did the work because they thought they had to do it, and that was the view of the defenders as well. The pursuers did it on the basis that it was the defenders' legal obligation to pay for it. The whole situation arose from the defenders' failure or refusal to perform their statutory duty. That is not in my view a case of operation in suo."

At page 50 Lord Kissen noted the delay which might have arisen if a summary petition for specific performance of a statutory duty had been raised:-

"It is, I think clear from the reported cases that, on this matter, it is the intention, actual or presumed, of the person claiming recompense for his loss which is important. The fact that there was some incidental benefit to him is, I think, irrelevant. Applying that test here, the pursuers' intention was simply to do the construction work at the defenders' expense. To put the matter in another way, the pursuers were only doing what the defenders were bound by statute to do and it is difficult to see how that can be a benefit to the pursuers in the sense in which that word is used in the doctrine of recompense."

Lord Fraser, at page 52, concurred with his brethren:-

"The second question was as to whether the pursuers, in proceeding to construct the sewers, were acting in a relevant sense in suo. I have felt some doubt on this point. In one sense the pursuers were acting in their own interests, as they deliberately chose to go ahead to avoid possible delay when their house had been completed. But the occasion for the pursuers' action and indeed the occasion for them to come to any decision at all on the point, arose from the defenders' failure to perform their duty. In these circumstances I have reached the opinion that the pursuers were not acting in suo in a relevant sense. Accordingly, in my opinion, the defenders' argument on this point fails.

For these reasons I would allow the reclaiming motion, sustain the first plea-in-law for the defenders [that the pursuers' averments were irrelevant and lacking in specification] and dismiss the action."

[5554] I was then referred to the case of Lawrence Building Co. Ltd. v. Lanark County Council. This was a case in similar vein to Varney (Scotland) Ltd. v. Burgh of Lanark albeit it was distinguished from in the judgment. The pursuers in Lawrence raised an action against the local authority claiming payment for the construction of sewers to service houses they had built for private sale. The court allowed a proof before answer since they were of the view there were sufficient averments which if supported by evidence, could give a claim for recompense. Lord President Emslie at page 43 said:-

"It may be that in a straightforward case like the Edinburgh and District Tramway Co. case or that of Gray v. Johnston in which someone clearly does no more than to incur expenditure in suo or to render services to another in the mere expectation or hope that someone else will ultimately meet the bill or provide some other kind of compensating benefit, it would be unreasonable to admit in equity a claim of recompense."

Lord Cameron concurred and at page 53 after quoting Lord President Dunedin in Edinburgh and District Tramways v. Courtney at page 105 with approval says of recompense:-

"The essential elements are familiar-work done which has involved a claimant in loss or expense which is not work done in suo, that is, on his own property or for his own benefit or with a view to his own profit or benefit. The expense or loss incurred must be to the profit or gain of the party against whom a claim is asserted and who is alleged to have been lucratus thereby and the work done must have been done without the animus donandi."

[5655] I was then referred back to Shilliday v. Smith Lord President Rodger at page 730H:-

"The cases denying recovery involve situations where the only basis for the pursuer's claim for recompense is that he expended money or has done work from which the defender has derived an incidental benefit. The law rejects the claim: a defender is not regarded as being unjustly enriched just because he enjoys an incidental benefit from expenditure or work which a pursuer has made or carried out for his own purposes."

Counsel contrasted that statement of his Lordship's with Condescendence 3 of the Record at page 10 which avers:-

"In each and every specific role undertaken by the Pursuers...the Pursuers acted upon instructions from the Defenders and acted in anticipation of ultimately obtaining benefit in return from services provided...The Pursuers acted on specific instructions in the belief that they would obtain benefit for the work undertaken, At no time did the Pursuers undertake work with the intention of donation."

I was then referred to passages in Shilliday from Lord Caplan's opinion at 734E, 735C and D respectively:-

"No question of recompense, restitution or repetition can arise, however, if the intention of the person who was the source of the benefit was to gain some personal material advantage and any benefit enjoyed by another was purely incidental to this."

"The sheriff has found the reason why the pursuer expended a large portion of her capital in order to develop the house then in the name of the defender was not because she was seeking lodgings in his house but because she was expecting to marry him. She was prepared to employ her capital to enhance what she expected would be her married home, which she and the defender would share as man and wife, which was the sine qua non of her decision to apply her capital as she did."

"Thus, to suggest that the reality was that she was contributing to the house for no other reason than to provide herself with lodgings is to overlook the basis on which she acted and is simply not consistent with the factual findings of the court."

[5756] I was then referred to the Law Reform (Husband and Wife~~Miscellaneous Provisions~~ ) (Scotland) Act 1984 section 1 (1)~~1982~~ which abolished actions of breach of promise of~~re-states in statutory form the common law bar on suing for breach of contract when~~ marriage:-

"No promise of marriage or agreement between two parties to marry one another shall have effect under the law of Scotland to create any rights or obligations and no action for breach of any such promise or agreement may be brought in any court in Scotland, under the law applicable to promise or agreement"

~~was contemplated but did not take place.~~ By contrast , Counsel said, in the commercial context, parties are of course free to enter an agreement in the form of a contract .If matters proceed without the benefit of a contract they must look out as they may not be protected by the law for expenditure incurred etc.

[5857] Counsel then referred me to Professor Evans-Jones' article which analysed the judgment in the case of Satchwell v. McIntosh where after parties stopped living together the pursuer sought to recover money paid to the defender which was put towards the purchase of a house in which they co-habited and further sums expended on improvements to this property. The action proceeded primarily on the basis of the condictio causa data causa non secuta. At page 107, the author in alluding to Lord President Rodger's opinion in Shilliday v. Smith at page 729G states:-

"when a party confers a benefit in anticipation of marriage this is conceived as having been done "on condition that they married". However although perfectly legal, an agreement on the terms "I give you X on condition that you marry" is not capable of contractual expression because of its content: a person cannot be bound in the law of contract to marry. This is the point that is made by Lord Rodger: the condictio causa data causa applies to extra-contractual arrangements that are not "conditional in any technical [i.e. contractual] sense" If there is a contract any claim for the recovery of benefits should proceed in terms of the law of contract and not of the law of unjustified enrichment."

[5958] Counsel next referred me to the opinion of Lord Macfadyen in Property Selection & Investment Trust Ltd. v. United Friendly Insurance plc. In this case the pursuers were re-developing a site adjacent to Debenham's in Edinburgh. During construction works it was discovered that four rock anchors on the adjoining site protruded onto the site being redeveloped. The defenders were notified of the encroachments by the pursuers who requested permission for their engineers to remove them. This proved problematic and the pursuers claimed damages in reparation for the delay on the part of the defenders in permitting the removal of the encroachment. They also sought damages in recompense for the loss they had suffered in removing the encroachment, which they argued ought to have been borne by the defenders. The pursuers had based their case on the proposition that the encroachments were the property of the defenders. At page 978F his Lordship said:-

"For the reasons already elaborated in the context of the reparation plea [this proposition] was unsound. The recompense case for that reason was irrelevant.

Moreover, five elements were required, counsel submitted to make a relevant case of recompense. These elements were:

(i) the pursuer must have suffered loss;

(ii) the pursuer must have had no intention to make a gift to the defender;

(iii) the defender must have gained as a result of the pursuer's loss;

(iv) the pursuer must not have carried out the operation for his own benefit (in suo); and

(v) except in special circumstances, the pursuer must have, and have had, no other legal remedy (Gloag and Henderson, The Law of Scotland (10^th ed), para 29-13.

In this case, elements (ii) and (v) were missing." (See also page 985B.)

[6058] Counsel next took me to the case of Transco Plc. v. Glasgow City Council, where Lord Hodge discusses unjustified enrichment at paragraphs [12] to [14] at page 961:-

" The Scots law of unjustified enrichment has been redefined in recent years principally in three cases, Morgan Guaranty Trust Co. of New York v. Lothian Regional Council, Shilliday v. Smith and Dollar Land (Cumbernauld) Ltd. v. CIN Properties. In particular, in Dollar Land, pp 98H-I and 99D-E, Lord Hope of Craighead stated:-

"The event which gives rise to the granting of the remedy is the enrichment. In general terms it may be said that the remedy is available where the enrichment lacks a legal ground to justify the retention of the benefit. In such circumstances it is held to be unjust...I think that Lord Rodger stated the matter correctly in the present case at page 353D when he said that the pursuers must show that the defenders have been enriched at their expense, that there is no legal justification for the enrichment and that it would be equitable to compel the defenders to redress the enrichment."

In the redefinition effected by these three cases, causes of action such as recompense are now treated as remedies which apply in various situations where redress of unjustified enrichment is sought.

In my opinion the redefinition of the law of unjustified enrichment has not superseded the old rules relating to the law of recompense such as the general rule that the remedy is not available where a pursuer had a legal remedy whether under the common law or under statute and had chosen not to exercise it. If, as it appears to be the case, the law is developing towards the position that an enrichment is unjustified where there is no legal basis for it rather than because there exist specified "unjust factors", there may be a need for robust defences to a claim to reverse unjustified enrichment (see Peter Birks, Unjustified Enrichment (2^nd Edtn.. 2005), chaps 2, 9 and 10) Similarly there mat be a need to preserve preconditions before a pursuer's own acts may ground a claim for recompense. Other inequitable results may follow. Thus I consider that counsel were correct in this case to advance their arguments on the basis that the general rule and that the exceptions thereto remained good law.

In this case the remedy which the pursuers seek is recompense for the performance of an obligation which the pursuers assert was that of the defenders. Parties were agreed that for the remedy of recompense, five elements must occur:"

His Lordship then referred to Lord Macfadyen's formulation quoted at para [5957] above.

[6159] Counsel then referred to a South African case Gouws v. Jester Pools (Pty.) Ltd. (see pp 571 and 574) These references are summarised thus in Gloag and Henderson at para 25.05 entitled "Indirect Enrichment":-

"So, where C performs work or services under a contract "his intention is to further his own interests by performance of his contract" with the other party B and, where no guarantor is involved, C will usually rely on the faith or credit of B. Where B does not pay, C's loss is due to B's breach of contract and, if A has the benefit of C's work, C cannot claim compensation from A."

[6260]Counsel referred to the present case where the Pursuers had no contract and no contingency of benefit that would arise had there been such a contract. The in suo rule was relevant here just as it was under the law of Landlord and Tenant. The tenant had a limited title and was presumed to have acted for his own benefit when carrying out improvements to the property during the term of the lease even although the Landlord might be able to rent the improved property subsequently for a higher rent. This was because the tenant was assumed to have acted for his own benefit and as such recompense would be excluded. In that regard I was referred to the passage in Gloag at page 325 entitled "Temporary Titles":-

"If a party makes improvements on subjects to which he has a valid but temporary title there is a strong presumption that he made them for his own benefit, hoping to be recouped while his title lasted, and therefore that no claim for recompense will arise on the expiry of that title, though in circumstances in which the expectation of the maker of the improvements has been disappointed. On this principle a tenant has no claim at common law for his improvements on the subjects let, even although the landlord, by taking advantage of an irritancy, has brought the lease prematurely to an end."

.These propositions were vouched for by reference to the following cases; Thomson v. Fowler, Walker and others v. McKnight, Reedie v. Yeamans and Wallace v. Baird as examples where tenant claims against landlords said to have been enriched by meliorations were unsuccessful as there had been nothing in the circumstances to overcome the presumption that the tenants had been acting for their own benefit.

[6361] I was then referred to Gilchrist v. Whyte which dealt with abortive negotiations for a loan on heritage. In the course of loan negotiations the pursuer said that a condition of the loan would be that the subjects were free from certain obligations. The defenders replied that they anticipated no difficulty on this issue. When the transaction fell through the pursuer claimed damages for breach of contract to take a loan, or otherwise, recompense for loss and expense incurred in reliance on the defender's representation that the bond would be granted and the condition implemented. The court dismissed the action on the grounds that there was no relevant allegation of a completed contract and that the alleged representation by the defenders was no more than an expression of opinion. Lord Low said at page 992:-

"I am not surprised that the pursuers feel aggrieved that they should have sustained so considerable a loss without any corresponding benefit,...the pursuer's losses are of a kind which a person negotiating a loan of money upon heritable security has always, in a greater or lesser degree, to face, and the fact that the loss has been perhaps unusually heavy in this case is simply due to the peculiar circumstances to which I have alluded."

Lord Ardwall concurred at page 992 and added:-

"damages are sought for expenses incurred in connection with an inchoate contract which has never been completed. I think that as such an action does not proceed on contract, it must proceed on one of two grounds, either on wrongdoing more or less flagrant, or on the ground which is expressed in the brocard nemo debet ex alieno damno lucrari."

After referring to various authorities his Lordship continued at pages 993 and 994:-

"an action of damages founded on the ground of recompense for loss caused through the failure to complete or carry out a contract, but where there has been no breach of contract, will only be entertained by the Court in very special circumstances indeed, and for the most part only in cases where

(1) loss has been wrongfully caused by one of the parties to the other, excluding, however,

loss or expense incurred as part of the abortive negotiations between the parties;

(2) where the wrong has been done without any excuse;

(3) where the losing party is in no way to blame for the loss......

My impression is that the pursuers were unnecessarily anxious and troublesome regarding the settlement of the transaction in which it was in the defender's interest as well as their own that there should be no forfeiture of the feu, and where, as far as I can see, there were no important practical difficulties in the way of the loan being concluded, except those raised by the pursuers themselves."

[6462] I was then referred to Microwave Systems (Scotland) Ltd. v. Electro-Physiological Instruments Ltd. which involved two companies who had been negotiating with a view to a merger. They agreed during the negotiations that one should move into the other's premises and make use of certain services and facilities provided there. After several months the negotiations broke down, the first company removed from the premises and the second company sued the first for payment in respect of the services and facilities provided, on the grounds of recompense and an implied term of their agreement that the services and facilities would be paid for in the event of the negotiations not being successfully concluded. Lord Thomson decided that the pursuer's claim for recompense was irrelevant and it was impossible to infer an implied term of the type suggested. I was referred to the opinion of Lord Thomson at page 144:-

"It is in my view plain from the pleadings that the intention was that the arrangement and the services rendered thereunder would benefit, not the defenders, but the company to be created by the merger. I was referred to no authority, and can find none, to suggest that in such circumstances a claim for the value of services is maintainable on the principle of recompense."

And at page 145:-

"In the present case, where the services were carried out in expectation of a concluded merger, I do not think it is at all possible to infer that both parties must be held to have agreed that, in the event of negotiations breaking down, the defenders should reimburse the pursuers for the services which had been rendered with a view to benefiting the company to be formed by the merger, even although the defenders may have benefited incidentally therefrom."

[6563] Counsel again referred to the statement in Condescendence 3 at page 10 of the Record:-

"At no time did the Pursuers undertake work with the intention of donation."

It was submitted that as a result the Pursuers fell foul of the in suo rule in recompense. The Pursuers had not acted for altruistic motives; they had been involved in the proposed joint venture for financial reward on the basis of 25% of the share capital and 8% of the sales generated. In fact the Pursuers had been acting for the ultimate benefit of the potential joint venture company-a situation which was on all fours with that described by Lord Thomson when refusing the claim in the Microwave Systems case referred to above.

[6664] The next case I was referred to was Site Preparations Ltd. v. Secretary of State for Scotland, an Outer House case dealt with by Lord Kincraig. He dismissed an action by the pursuers for recompense after the pursuers had made an unsolicited approach to the Department regarding the development of a harbour. The pursuers were hopeful of securing the re-development contract and produced plans and attended meetings. In the event the Department decided to develop the site themselves. At page 42 Lord Kincraig said:-

"The case of Rankin seems to me to be authority for the proposition that recompense is excluded when expenditure is incurred in the expectation of benefit to the spender....

Counsel for the pursuers sought to distinguish the present case from the case of Rankin on the grounds that in this case there was no intention on the part of the pursers to benefit the first defender, and that he has taken the benefit through his own actions and not through events over which he has had no control. In support of this supposed distinction he cited only the case of Landless v. Wilson and particularly the opinion of Lord Shand in that case. In my judgment the alleged distinction is unsound."

His Lordship explained the circumstances where:-

"an architect prepared plans for the erection of buildings by the defender. The buildings were not erected but the defender used the plans to effect an advantageous bargain with the purchaser of the ground. The architect sued for payment of his account. The defender pled that the plans were furnished on the basis that there was a competition among architects for the work. After a proof it was established that the architect gave his services on the footing that the defender intended to build on the ground and that if the architect's plans were adopted he would be paid in the usual way. It was held that the architect was entitled to be paid for his account because the defender had failed to prove that the employment was gratuitous....[Counsel] relied on the opinion of Lord Shand, which was admittedly obiter. Lord Shand's reasons for allowing the claim are stated in the second paragraph of p. 293 of the report. His Lordship then proceeds: "I should not be very careful to enquire whether the legal principle underlying this case is that of recompense or of implied obligation."

For various reasons stated at page 42 Lord Kincraig casts doubt on the opinion of Lord Shand and the sources he relied upon. His Lordship concluded:-

"Further the case of Landless is prior to date to Rankin v. Wither, and is not truly a claim quantum lucratus but one for payment measured on the principles of quantum meruit."

[6765] Counsel emphasised that in the present case the Pursuers had withdrawn from the project and accordingly recompense could not arise unlike in Site Preparations where the defender had withdrawn fro negotiations. The present case was even weaker than the one the pursuers had lost in Site Preparations. At page 3 of the Record the Pursuers aver:-

"But for the breakdown in the relationship, the Pursuers would have benefited from the launch of the brand by having a shareholding in that company and by obtaining a percentage of the value of sales. As a result of the breakdown of the relationship between the parties, the Pursuers have received no payment or other benefits in respect of the services carried out relating to the branding of M.M.A.B."

Counsel suggested that for "breakdown" the word "withdrawal" would be more appropriate. In any event it was notable that no attempt was made to aver the Pursuer's needed to withdraw as the Defenders were unreasonable or had gone back on an earlier agreement. There was no explanation on Record why the Pursuers had unilaterally pulled out of the joint venture. It was submitted that if one looked at the equity of the matter it was sufficient to see in terms of the Pursuers' actions there was no claim for recompense.

[6866] In this context I was referred to the House of Lords case of Walford v. Miles. The opinion of the Court is given in the speech of Lord Ackner. Their Lordships decided that since the agreement between parties contained no term as to the duration of the obligation to negotiate and made no provision for the defender to determine the negotiations , that a duty to negotiate in good faith was unworkable in practice and inherently inconsistent with the position of a negotiating party, since while the parties were in negotiation either of them was entitled to break off the negotiations at any time and for any reason and accordingly the agreement lacked certainty and was unenforceable as a bare agreement to negotiate. (See Lord Ackner's speech at page 138D-G:-

"How can a court be expected to decide whether, subjectively, a proper reason existed for the termination of negotiations? The answer suggested depends upon whether the negotiations have been determined "in good faith." However the concept of a duty to carry on negotiations in good faith is inherently repugnant to the adversarial position of the parties when involved in negotiations. Each party to the negotiations is entitled to pursue his (or her) own interest, so long as he avoids making misrepresentations. To advance that interest he must be entitled, if he thinks it appropriate, to threaten to withdraw from further negotiations or to withdraw in fact, in the hope that the opposite party may seek to reopen the negotiations by offering him improved terms. Mr. Naughton, of course, accepts that the agreement upon which he relies does not contain a duty to complete the negotiations. But that still leaves the vital question - how is a vendor ever to know that he is entitled to withdraw from further negotiations? How is the court to police such an "agreement?" A duty to negotiate in good faith is as unworkable in practice as it is inherently inconsistent with the position of a negotiating party. It is here that the uncertainty lies. In my judgment, while negotiations are in existence either party is entitled to withdraw from those negotiations, at any time and for any reason. There can be thus no obligation to continue to negotiate until there is a "proper reason" to withdraw. Accordingly a bare agreement to negotiate has no legal content."

[6967] Counsel submitted that the very nature of negotiations was that a party was free to withdraw at any time without further consequence or good reason. I was then referred to Gloag at page 19 where the learned author refers to the case of Gilchrist v. Whyte:-

"it was held that so long as parties were in the stage of negotiation for a contract, and no offer or promise had been made, either might break off the negotiations without incurring any liability for the expenses which the other might have incurred, unless his conduct in the matter amounted to a wrong."

[7068] I was then referred to Gloag and Henderson at pp 523 and 524, para 25.04 where the heading is "Expenditure Leading Incidentally to Another's Enrichment":-

"A person who has expended money for a particular purpose which has been attained cannot appeal to the enrichment principle in support of a claim for payment from a party who has incidentally gained by the expenditure in question. If somebody does something for his own benefit which also incidentally confers a benefit on another, the former probably suffer no relevant loss; the latter's benefit does not cause him any extra expenditure."

The learned authors vouch for this proposition in their footnote with the Microwave Systems case and Exchange Telegraph Co. v. Guilianotti. Counsel submitted that the Court was in a position to say whether if the Pursuers prove their averments recompense would be equitable. This was the question of law which required to be determined at debate as Lord Thomson had done in the Microwave Systems case by dismissing the pursuers' action. In that case the defenders had pulled out of the proposed merger whereas in the present case it was the Pursuers who had no seen through the joint venture and had pulled out-the remedy had been in the Pursuers' hands, namely to complete the project unless they could provide a reason why this was not possible, however no such reason had been put on record. In Stewart v. Steuart the Court had pointed out that the pursuer's remedy had been to divert the water supply away from the defender's land to prevent an unintentional benefit rather than to seek recompense.

[7169] I was then referred to McBryde at page 125 where at para 5-57 the Cost of Pre-Contract Negotiations is discussed. After stating the law arising from Walford v. Miles the author states:-

"One party may give the other false expectations and act in a way which is commercially immoral, but is the absence of a general doctrine of good faith in negotiations there may be no remedy. Negotiations may break down after one party has incurred expense. There may be an attempt to recover that expense because reliance was placed on the attitude of the other party. There are several possible answers under the present law, in the absence of a general concept of good faith applying to negotiations."

Professor McBryde lists six considerations in this context namely, implied contract or promise, Melville monument liability, negligent or fraudulent misrepresentation, recompense, error and equitable reimbursement. With regard to recompense the author states at page 127 para 5-62;-

"When parties have acted in good faith, it appears very difficult in this context to have a successful case based on recompense. The tendency has been to assume that the mere cost of negotiation is something which a person risks as part of the commercial endeavour."

Professor McBryde concludes this aspect at page 129, para 5-67:-

"The end result is that in the absence of some agreement or promise, or implementation of an assumed agreement, the remedies of the party sustaining the loss from the break off of negotiations are likely to be very limited in scope or non-existent."

For these reasons Counsel urged me to hold the action as a whole to be irrelevant or alternatively not to admit the specific averments which have been challenged.

Submissions for the Pursuers

[7270] Mr. McBrearty urged me to refuse the Defenders' motion and allow a proof before answer and repel the Defenders' first and second pleas-in-law for want of insistence. He undertook to deal with Mr. Upton's seven areas of objection and proposed dealing with these matters in five chapters;-

(i) a summary of the argument,

(ii) the basis of the Pursuers' case in contrast to the Defenders' last ground of objection to the action as

a whole,

(iii) tackling the 1st and 2nd areas of objection by the Defenders

(iv) the valuation of enrichment in contrast to the Defenders' arguments under heads (v) and (vi) above,

(v) misconceptions arising from heads (iii) and (iv) of the Defenders' case.

[7371] Counsel set out what he regarded as matters of fact, firstly that the Pursuers aver both parties entered a joint venture agreement which would benefit both parties, not merely the Pursuers. Both parties would be stakeholders and the enterprise would be to the mutual benefit of both parties.

[7472] Secondly, the agreement was not focused. The Pursuers provided services for the purposes of launching the brand of tea and in contemplation of that joint venture going ahead.; such services were essential to the launch of the brand M.M.A.B.

[7573] In the event the Defenders launched a brand on their own. The Defenders had benefited from the services provided in contemplation of the brand going ahead as the joint venture and to have launched the brand as they had done they would have required services of the type supplied by the Pursuers from an alternative supplier.

[7674] The Pursuers claim was founded on unjust enrichment, not contract. The Pursuers' claim proceeded upon the condictio causa data causa non secuta. This remedy was available where services had been provided in contemplation of a future event where a party played a part in the event not materialising. The remedy was not based on blame or fault but was based upon enrichment. The Pursuers' recovery was based on the work carried out for his own benefit. Counsel did not dispute the in suo rule. He accepted such a claim was barred where worked carried out for one's own benefit where another had been incidentally enriched. The position differed where mutual benefit was contemplated. The Pursuer would have benefited through the mutual benefit brought to both parties; the enrichment would have pertained to both parties.

[7775] The valuation of the claim was properly set out at page 31 of the Record. The claim of recompense could arise in a variety of situations as Mr. Upton had shown. The Pursuers' case did not involve remuneration for the use of property or that of recompense in quantum lucratus but on the ground of quantum meruit for remuneration of services. All of the services provided by the Pursuers were essential to promote the brand.

At page 31 of the Record the Pursuers set out the proper rates for the work carried out by the various members of staff. If the Pursuers had not carried out this work the Defenders would have required to secure the services of other persons with the requisite skills to develop the brand and would have faced similar costs. Counsel asserted that the averments pled were the proper way to value the services provided. Since it had been a joint venture it was impossible to value matters by reference to sales of the brand and the costs of marketing it.

[7876] Moving on to his second chapter of argument Counsel began by saying that the Pursuers' case was based upon a matter of principle in contrast to the arguments advanced by the Defenders in their seventh and last ground of objection. I was referred to Gloag and Henderson at Chapter 25 which deals with "Unjustified Enrichment" and in particular to pp 521 and 522, para 25.01:-

"Now, thanks to decisions of the First Division of the Court of Session and the House of Lords between 1995 and 1998, Scots law has moved to a position where, in principle, an enrichment at another's expense is unjustified and should be reversed if its retention is supported by no legal ground. The underlying principles are the same in the various spheres with repetition, restitution and recompense being only the remedies with which an enrichment, once found to be unjustified may be reversed. The remedies may be combined to achieve this end."

The decisions alluded to in these remarks are the triumvirate of cases quoted by Lord Hodge in Transco (see para [60 ] above.

[7977] I was referred to the speech of Lord Hope of Craighead in Dollar Land at page 98H-I which I have quoted above at paragraph [60]. Counsel also founded upon pages 523 and 524, paragraph 25.04 of Gloag and Henderson which I have quoted above at paragraph [70] and made reference to the opinion of Lord Thomson in Microwave Systems and the decision in Shilliday v. Smith as being of importance in this context.

[8078] Counsel directed me to the opinion of Lord President Rodger in Shilliday at page 727A-731E. Lord Rodger had referred favourably to the Dollar Land case and these cases could be said to have developed the law clarifying the ground of action that a party might have where another had been enriched as a result of acts done by the first party in contemplation of an event which does not materialise. Contemplation of marriage had been involved in Shilliday v. Smith and the court ordered repayment of sums to the pursuer for work carried out and materials purchased for what was to be the marital home but had been owned by the Defender who had been lucratus. I was directed Lord Rodger's opinion at page 728C:-

"It follows that, despite what was said by both counsel in argument, in Scots law the term condictio causa data causa non secuta is being used, not to describe a remedy, but to describe one particular group of situations in which the law may provide a remedy because one party is enriched at the expense of the other. A pursuer whose case falls into that group has a ground of action under our law, That being so, although both parties were agreed that the pursuer's ground of action in the present case fell under the heading of the condictio causa data, it is necessary to identify the remedy which the pursuer seeks....it really breaks down into two distinct elements."

His Lordship went on to describe payments made for repairs and materials used to repair the defender's house and cash paid to the defender to purchase materials used for work on the house.

At 728I and 729A Lord Rodger continues:-

"Although each of the two aspects of the pursuer's claim can be distinguished in this way, none the less for each of them she relies on the same ground of action, which falls under the rubric of the condictio causa data. On the other hand the pursuer says she paid money to the defender in contemplation of marriage, on the other hand she says that she expended money on his house in various ways in contemplation of marriage."

[8179] I was referred to Lord President Rodger's opinion in Shilliday at 730C where he states:-

"Counsel was therefore correct to argue that there was no need for the pursuer to point to any kind of contract between the parties under which the pursuer paid then various sums on condition they married. Nor need the pursuer prove that her expenditure was conditional in any technical sense. The passage from Stair [ ~~edn~~1 vii 7] shows that it would be a relevant ground for saying that the defender was unjustly enriched if the pursuer had expended the sums "in contemplation of" the parties' marriage and the marriage had failed to materialise."

After further discussion of the authorities his Lordship says at page 731A:-

"The pursuer's case is wholly different....The pursuer points, rather, to a particular factor which makes the enrichment unjust. Where such a relevant factor exists, that factor, rather than the mere fact of expenditure by the pursuer and benefit to the defender, constitutes the ground of action."

[82] Counsel quoted from Lord President Rodger's opinion in Shilliday at pages 730F-731. His Lordship refers to the in suo rule etc. see para [55] above. On page 731 Lord Rodger states:-

"The pursuer's case is wholly different... The pursuer points, rather, to a particular factor which makes the defender's enrichment unjust. Where such a relevant factor exists, that factor, rather than the mere fact of expenditure by the pursuer and benefit to the defender, constitutes the ground of action."

After referring to the case of Newton v. Newton, (which turned upon error), at page 731C, Lord Rodger says:-

"In the present case also the pursuer does not simply rely on the fact that she paid money to the defender and spent money on the defender's property from which he has benefited. On the contrary, the critical factor in her ground of action is that she acted as she did in contemplation of the parties' marriage, which did not take place."

Counsel submitted that the Pursuers' averments in this case were in keeping with that statement of principle. The Defenders obtained a benefit from the Pursuers' services.

[83] Counsel said that in relation to the condictio causa data causa non secuta the Shilliday case says that a claim for recompense is barred if the services were provided for the pursuer's own benefit for which the defender gets incidental benefit. In the present case, Counsel submitted, the Pursuers' actions were designed to achieve success and the Pursuers would have benefited in part for that success. There was a difference when operating as a contractor for one's own benefit. In the present case the actions were leading to a joint union of two entities for joint corporate benefit. As Lord Rodger had stated in Shilliday at page 728B:-

"If A is unjustly enriched by having had the benefit of B's services, the enrichment can be reversed by ordering A to pay B a sum representing the value of the benefit which A has enjoyed. An action of recompense will be appropriate."

[84] Counsel said that he had three issues with the Defenders' arguments:-

Firstly he challenged the contention that an analogy cannot be made with cases involving contemplation of marriage. Counsel maintained the Pursuer has no other remedy such as contract and is entitled to pursue the claim for recompense. Shilliday and Evans-Jones provide the basis for the claim whereas the earlier cases provide little support. In Professor Evans-Jones' article at page 107 he refers to the case of Satchwell and says in relation to that case;-

"the first point of difficulty was that, although the parties had been living together, there was, according to the defender, no agreement or mutual understanding to get married. In addressing this issue the sheriff, whose view was affirmed on appeal, held that it was unnecessary to establish a "mutual understanding" where it was the state of mind of the pursuer which was critical in determining whether benefits were transferred in contemplation of a particular event. The thought seems to have been that, as it was the pursuer who conferred the benefits, it was sufficient if he had in mind a marriage that, in the event, did not take place."

Lord Morison's opinion in Grieve v. Morrison as regards the requirement of a "mutual understanding" was disapproved. His Lordship had stated in that case at page 855 J-K:-

"in order that the condictio should apply, the transfer must be subject to a mutually agreed understanding, either express or to be implied from the circumstances, that it is made for the consideration which later fails."

Evans-Jones at page 106 concludes;-

"In Satchwell, this view was seen as at variance with the recent, definitive statement in Shilliday v. Smith of the terms of application of the condictio causa data. "

Professor Evans-Jones refers back to the statement of Lord Rodger in Shilliday at page 730 C-D quoted at para [80] above.

Accordingly Counsel submitted there did not need to be mutual understanding between parties. The services were not provided on condition but in contemplation of the joint venture. It was clear that in the present case there was a mutual understanding.

[85] Secondly Counsel challenged the point made that there could be no claim for unjustified enrichment due to the Pursuers' withdrawal from the joint venture. Reference was made to the record at pp 6 and 11. At page 6 and admission is made that:-

"in September 2006 the Pursuers told the Defenders that they would not proceed with the proposed joint venture and contract."

At page 11 of the Record are given for pulling out. In brief these are that a target price had been set for tea for the brand but this became unviable when tea import prices rose and began to fluctuate. Efforts were made to interest a major manufacturer to buy the brand or become partners but this was unsuccessful. The pleadings continue:-

"Despite contractual uncertainty and concern in relation to the commercial viability of the M.M.A.B. brand, the Pursuers continued to do work in good faith on behalf of the Defenders."

Even in September 2006 it is suggested (at page 12 of the Record) the Pursuers still carried out work for the brand, "despite a breakdown in relations between parties."

Counsel submitted that there was no suggestion in Shilliday that the pursuer would have lost the remedy of recompense if she had pulled out of the marriage. He suggested that the trigger of a right to recovery arose in contemplation of the event which does not materialise and the other party is thereby enriched.

[86] Thirdly in relation to the own benefit rule, Lord Rodger was of the view in Shilliday that it could not be said the defender's enrichment was incidental, but there was a "particular factor which makes the defender's enrichment unjust." (see page 731A. Counsel submitted that the cases involving in suo referred to by the Defenders in the present case turned on their own circumstances and could therefore be distinguished from.

[87] Counsel said that Wallace v. Braid involved a liferentrix who had spent money on repairs for the property but the court held there was nothing in the pursuer's averments to overcome the presumption that the repairs had been carried out for his own benefit. Similarly in Thomson v. Fowler a tenant without a lease had no claim against a landlord to recover the cost of meliorations. The same result occurred in Walker v. McKnight where the tenant's claim against the landlord was refused. In Rankin v. Wither the pursuer's claim also failed after he rebuilt his wife's house who died intestate and had no claim for recompense against her heir-at-law. In Stewart v. Steuart the pursuer failed to recover water rates from tenants said to have benefited from a supply of water, where the court said the proper remedy was to divert the source of supply. Counsel submitted these cases were not analogous to the present case.

[88] As regards Edinburgh & District Tramways Co. V. Courtenay, Counsel submitted that there was no question of intended mutual benefit, the party had been acting in his own interests and was not due the pursuer any recompense in addition to the rent already paid under the lease.

[89] Counsel then turned to the cases which were not in the in suo category. He submitted that Cran v. Dodson and Gouws v. Jester Pools (Pty.) Ltd. where the pursuers were unsuccessful involved the defender becoming indirectly enriched. He referred to Gloag and Henderson at para 25.05 where the learned authors opine at page 525:-

"While the underlying principles are not worked out fully in the judgments of the courts, it is clear that there is no doctrine in the law of Scotland that every person who has profited by work done under a contract is to be liable for that work."

[90] Counsel referred to Gilchrist v. Whyte and in particular the pursuer's claim narrated at page 986 for damages for breach of contract. He submitted that the case did not involve unjust enrichment. There was an alternative claim for recompense and reliance was placed on representations made by the defender. However these were held to be no more than mere expressions of opinion. Lord Stormonth-Darling:-

"The action was originally laid on breach of contract alone (though specific implement was never demanded), but since the appeal was brought the pursuers have amended their condescendence and pleas by founding alternatively on their having incurred expense and sustained loss by their reliance on the representations of the defender. In other words they rely alternatively on the class of cases of which Walker v. Milne (the Melville Monument case), is the best known example."

Counsel contended that this case did not involve unjustified enrichment and therefore was of no assistance here.

[91] Counsel then referred to Walford v. Miles, this involved a breach of contract or an agreement to negotiate which the defenders pulled out of. The case concerned the extent of the obligations parties had entered and the court held that it could not be expected to decide whether, subjectively, a proper reason for terminating the negotiations existed, unless misrepresentation had been made. Once again Counsel said this case did not involve unjustified enrichment.

[92] On the other hand Counsel said there were three cases that were of assistance, firstly Site Preparations v. Secretary of State for Scotland. In that case there had been an unsolicited approach by the pursuers which had been speculative on their part and the expenditure they occurred was for the purposes of obtaining a benefit for themselves and accordingly none of the features in respect of a claim of recompense arose.

[93] Secondly Counsel referred to Microwave Systems (Scotland) Ltd. v. Electro-Physiological Instruments Ltd. which he considered closest to the present case. The steps which were taken by parties negotiating a merger were for the benefit of both parties, albeit that in that case the pursuers were unsuccessful. Counsel quoted from Gloag and Henderson at para 25.04:-

"recovery has been allowed in cases of mixed motives, where the pursuer acted partly in her own interest and partly in that of the defender. The purpose of the expenditure must therefore be seen as merely a factor which can-but need not-be relevant in considering whether or not resultant enrichment is at the expense of the pursuer. After all, if the expenditure was intended to benefit the pursuer, may point as much to donation as to unjustified enrichment."

[94] In relation to the Microwave case Lord Thomson said at page 144:-

"In my opinion there are here no averments relevant to support a claim based on the principle of recompense. The services in respect of which the claim is made were rendered by the pursuers to the defenders in fulfillment of an agreement between the parties. They were, it is true, rendered in the common expectation that the negotiations would be satisfactorily concluded, whereas in fact negotiations broke down. In my view it is plain from the pleadings that the intention was that the arrangement and the services rendered thereunder would benefit, not the defenders, but the company created by the merger. I was referred to no authority, and I can myself find none, to suggest that in such circumstances a claim for the value of the services is maintainable on the principle of recompense....The nearest case I have been able to find is Dobie v. Lauder's Trustees."

Lord Thomson distinguished from Dobie, disapproving of Lord Neaves obiter remarks at page 755 but approved of Lord Justice-Clerk Moncreiff's words also at page 755:-

"is there a claim for indemnity? I entertain no doubt, both in principle and on authority, that there is-that the arrangement necessarily included the condition that if the arrangement was terminated it should not be to the loss of one party." (See also page 759).

[95] Counsel said with reference to Shilliday v. Smith and the Dollar Land case in the present action the Defenders were 100% shareholders in the company developing the brand M.M.A.B. and therefore were enjoying enrichment which was not merely incidental to the Pursuers' actions and input. By contrast the Microwave Systems case was that of a single Outer House judge and while persuasive was not binding. Counsel maintained that there had been no change in the law since that judgment in 1971, but recent decisions had made the law a little clearer. Counsel suggested that Lord Thomson had not taken a structured approach to the pleadings in that case and it appeared the judgment had been delivered ex tempore, immediately after a Procedure Roll discussion, (see page 143).

[96] Counsel then discussed Gray v .Johnston where the pursuer had made a claim after looking after a childless widowed farmer for sixteen years in the expectation of inheriting his estate. There appeared to be some similarities with the present case. While there were the hallmarks of contract such an approach was untenable. An action had been raised against the executor after the farmer had died intestate. The pursuer claimed to be indemnified for his loss or alternatively to be recompensed in so far as the estate had benefited from his services.

Counsel founded upon the passage in Lord Hunter's opinion at page 670 which I have quoted above at para [16], which dealt with one aspect of the pleadings. He then referred to Lord Ormidale's opinion at page 672, which I have quoted at para [52] above. Counsel suggested that the defective pleadings in that case and the "disappointed hopes" referred to by Lord Ormidale could be distinguished from the present case where the Pursuers had had a legitimate expectation. Counsel turned to Lord Anderson's opinion at page 674 and the passage to which I have briefly alluded at para [52] above:-

"By his third plea-in-law the pursuer attempts to justify his claim on the legal ground of recompense. The conclusive answer to this plea seems to be that it is not a true alternative to the legal ground proponed in his other pleas. It is inconsistent with his other pleas, and so is unmaintainable. Remuneration for services on the basis of recompense is only maintainable where no other basis has been or can be suggested. But the main case of the pursuer is that another basis was arranged, to wit, that the pursuer, in return for his services was to be made the heir of the deceased. The pursuer's counsel conceded that this consideration excluded a claim on the basis of quantum meruit By parity of reasoning it seems to me to exclude also a claim on the basis of quantum lucratus. On this ground the third plea for the pursuer must be repelled; and, as this is sufficient for the disposal of that plea, it is unnecessary to consider whether or not this is one of the cases of alleged recompense in which it is necessary to have an averment that the pursuer sustained loss under error. It is also unnecessary to determine whether or not the averments of the pursuer disclose that his actings were in suo."

Counsel then took me to the dissenting opinion of the Lord Justice-Clerk Alness at pages 680-682, to which I have alluded at para [53] above:-

"I now pass to consider the pursuer's alternative claim, which is based on the doctrine of recompense. That doctrine has been thus expressed by Lord Stair: "Hence arises the action in law de in rem verso, whereby whatsoever turneth to the behoof of any makes him [liable for recompense], though without any engagement of his own" (I. viii. 7). And Erskine (Inst. III. i. 11) says: "Another kind of obediential obligations mentioned by Stair is that of recompense, by which a person who is made richer through the occasion, or by the act of another, without any purpose of donation, is bound to indemnify that other ... As this obligation is strongly founded in natural equity, the laws of all civilised nations have adopted it." The doctrine enunciated in these passages received a recent illustration in the case of Mellor[ v. Beardmore 1927 SC 597] , which was, like the present, a case relating to services rendered. The doctrine was also expounded in the case of Stewart v. Steuart, in which (at p. 149) the Lord President [Inglis] says this: "Now, recompense is a remedial obligation well known to the law, but that obligation is founded on the consideration that the party making the demand has been put to some expense or some disadvantage, and by reason of that expense or disadvantage there has been a benefit created to the party from whom he makes the demand of such a kind that it cannot be undone. The best and most familiar example of that is the case of one building on another's land. But in every case there must be, in order to ground the claim, the loss to one party resulting in a benefit to the other." The doctrine appears to me to be apposite to the present case, and to warrant the pursuer's alternative claim.

What is said against that view? It is said, in the first place, that the claim made by the pursuer on this ground is inconsistent with, and indeed contradictory of, the claim made by him on the first ground, viz., that the deceased undertook to make the pursuer his heir. It is argued that the doctrine of recompense can only apply where there was no express arrangement regarding the reward for services rendered. Here it is said that the pursuer's services are alleged to have been given on a definite footing, and that he must succeed on that ground or not at all. I am not satisfied that that view is sound. It is common practice to plead a case on alternative and even inconsistent grounds. I have known in practice a case laid on breach of promise of marriage, in which the defence was (1) that no promise was given, and (2) that, if there was, the defender was, in the circumstances libelled, justified in breaking it. In any event, I can see no inconsistency or impropriety in the pursuer maintaining that he rendered services to the deceased on the footing that the latter should make him his heir, and then going on to say, "if the defender, by pleading a rule of evidence which excludes me from proving the full measure of my claim, seeing that I have no writing to vouch it, defeats that particular claim, then I shall have to rest content with what may be a lesser remedy, viz., the value of my services to the deceased, as the Court may assess it."

Again it is said, and the Lord Ordinary seems to have adopted this view, that error is an essential ingredient of a claim based on the ground of recompense. Now, in the first place, I do not subscribe to the view that in all cases of this type that is so. I can find no trace of the suggested limitation in the institutional writers on the subject of recompense. But esto that it is so, there was, I think, in any reasonable sense of the term, error on the pursuer's part in this case. The pursuer gave his services on the express promise by the deceased that he would make him his heir, and he was entitled to assume that the deceased had taken, or would take, steps to secure that end. The pursuer says that assurances were given him by the deceased that the necessary steps had, in point of fact, been taken. These assurances were, as the event proved, without foundation in fact. Thus a clear case of error on the part of the pursuer is disclosed. His services were given to the deceased on a mistaken assumption.

Again, it was argued for the defender that the pursuer's operations were in suo, and that his claim for recompense is accordingly excluded. I do not agree. No doubt when time or money is expended by a liferenter or tenant on property of which he is liferenter or tenant, the doctrine of in suo applies, and a claim for recompense will not lie. But I think an essential of the application of that doctrine is that the person against whom it is pleaded should have a present interest in the subjects concerned. It does not necessarily apply in a case where a person may obtain an ultimate benefit from the subjects. Here, if the defender is right, the pursuer will obtain no benefit at all. The pursuer's services were rendered to the deceased. The pursuer got no quid pro quo for these services. They were rendered, not in suo, but under an obligation conceived for the benefit of the deceased. In these circumstances I am of opinion that the in suo, doctrine has no application to the claim made by the pursuer. I refer to the case of Reedie, and in particular to the observations of Lord Young in dealing with the pursuer's third ground of claim (p. 628). It would thus appear that all the elements of a claim based on recompense concur in this case. The pursuer had no intention of making a donation to the deceased; the latter gained by his services; the pursuer sustained loss; and, if this be necessary-which I take leave to doubt-the pursuer's services were given on an erroneous assumption.

Reviewing the case as a whole, I reach the conclusion that it would be unsafe to turn it out of Court without inquiry. I offer no opinion as to what the result of that inquiry may be, but I think that the proper course at this stage is to allow the pursuer a proof before answer. As, however, your Lordships take a different view, the Lord Ordinary's interlocutor will be affirmed and the action dismissed."

Counsel was of the view this opinion was of note although the case was not precisely analogous. The general principle which supports the Pursuers' case is that where a party provides services partly for his own benefit has been allowed recovery under the claim of recompense. Counsel founded upon Gloag and Henderson at para 25.04 and the cases where the pursuer had had mixed motives but had succeeded in a claim of recompense, namely Shilliday v. Smith and Newton v. Newton, the latter being a case decided in favour of the pursuer by the same bench who considered Gray v. Johnston.

[97] Counsel then turned to the case of Reedie v. Yeamans where the pursuer failed to recover a house he had conveyed to his wife but did gain recompense for the money he had spent improving the property. The Court held that as the husband's reasonable expectations of having the property conveyed back to him on the death of his wife in terms of a mutual disposition, and having been disappointed by his wife's secret revocation of the mutual settlement, he was entitled to recompense from the disponee taking the property for value in so far as beneficial. Lord Mackenzie, the Outer House judge who dealt with the case said at page 628:-

" The defenders maintain that here there is no specialty, because the settlement was to the pursuer's knowledge revocable, and was in fact revoked, and the question arising is, in view of it, both novel and difficult .The result of my consideration of it is, that the fact of the settlement , though revocable and revoked, does create a specialty in respect of which the pursuer is entitled to recompense; for although the settlement created no immediate title, and in the result created none at all, it certainly gave the pursuer a reasonable prospect of a title. His wife was a liberty to disappoint this hope, and did so, but it required an active proceeding on her part, namely, the execution of another deed for this purpose,. Now I think it is reasonable to impute to her the knowledge that in making the expenditure on her property the pursuer was acting in the hope which she had thus created by deed, and which stood so firmly at least that it could only be disappointed by the execution of another deed. When she executed such other deed, viz., the conveyance to the defenders, she no doubt, in the exercise of her right, voluntarily gave them on death the benefit of the pursuer's expenditure, made, as she knew, in the hope which she so disappointed in the defender's favour. I confess that it is, at least so far as I know, a new case for the application of the doctrine of recompense; but my opinion is that it falls within the principle of the doctrine and the equitable considerations up which it rests. The defenders, by their mother's voluntary deed in their favour, made to the disappointment of the hope on which she knew the pursuer had reasonably acted in expending money, take the property increased in value by that expenditure, and I think it is according to the equity of the doctrine of recompense that they shall reimburse him; and I am unable, on the question of recompense as it presents itself, to distinguish between the use by him, for the purpose of making improvements of money, which he had by the jus mariti, and any other funds."

Counsel's submission was that there claim was not without support from authority as a result and contrary to the Defenders' arguments.

[98] Counsel then moved to his third area of argument taking issue with the Defenders' first and second areas of objection. These issues related to an alleged lack of fair notice of detail and averments suggesting the existence of a contract which would of course exclude a claim of unjustified enrichment. Counsel conceded that if there was a contractual remedy then a case based on unjustified enrichment was difficult if not incompatible. If there is an implied contract situation remuneration could be sought on a quantum meruit basis.

Counsel submitted that the Pursuers' averments were not inconsistent with unjustified enrichment. On nine occasions in the pleadings the Pursuers had mentioned receiving instructions from the Defenders. These were not instructions in the technical contractual sense but reflecting the situation that the Pursuers were working with the Defenders as partners. Counsel contended that the averments can be fairly read in light of the background. Counsel submitted that it would be unfortunate and inequitable if the claim were to be dismissed at this stage- he suggested that it was a matter for proof to ascertain the exact nature of the instructions said to have been given. There was fair notice that such instructions were essential as to the day-to-day nature of the relationship between parties.

[99] Counsel then moved on to his fourth ground of argument, placing a value on the claim and responding to the Defenders' fifth and sixth areas of challenge. The Pursuers had averred that the Defenders would have required to have obtained alternative services before they could have marketed the brand. This was the only basis upon which the claim of recompense for unjustified enrichment was pled. The Defenders had gone on to market the brand after the Pursuers had withdrawn from the joint venture. I was referred to pages 12 and 13 of the Record where the actions of the Pursuers in developing the brand are specified. At page 30 the Record the Pursuers set out the value of work carried out by them, the staff involved and their costs and at page 33 the Pursuers claim entitlement for work carried out which had been instructed by the Defenders. Counsel conceded that it was difficult to evaluate the benefit obtained by the Defenders. He referred me to Evans-Jones Vol. 1 at para 9-16 where the author quotes Shilliday v. Smith and states:-

"The value of benefit to the defender may correspond with its cost to the pursuer but this will often not be the case."

Thereafter he quotes the passage from Lord President Inglis in Watson v. Shankland which was referred to by the Defenders' Counsel at para [36] above. At para 9.17 Evans-Jones states:-

"The central consequence of Lord President Inglis' approach is that the measure of recovery against a defender who was in receipt of services is the extent by which he was objectively enriched by the service. Where a benefit like money has been conferred in exchange for the service (a mutual restoration situation) it will be recoverable in full notwithstanding part-performance of the service if the part-performance had no objective value to the pursuer for the money. Even if costs were incurred in the performance of the service nothing is recoverable in respect of that service unless the defender was objectively enriched by the expenditure."

Furthermore the author states at para 9.18:-

"Where the benefit is a pure service the measure of enrichment is judged in terms of its objective market value to the defender at the time it was received. If the service was to manufacture an end product, whether it was received in full or only in part, the measure of the enrichment is again the value of what was received but this time the valuation is not part of the service, but of the end product. The distinction is representative of the difference between an evaluation of the benefit received from locatio conductio operarum and locatio conductio operas faciendi."

Counsel submitted that this was the proper approach to quantify the Defenders' enrichment. Counsel took issue with the case of Morris v. Sutherland which he submitted was of no assistance, he suggested that I could disagree with it as it was short on reasons when the pursuer's case was dismissed.

[100] Counsel now turned to the last part of his argument where he took issue with points made in the Defenders' third and fourth areas of challenge. After deletion a sentence of the pleadings at page 8 of the Record, Counsel tackled the suggestions that there was a lack of candour in the e mails referred to in the Record at pages 7, 19 and 20. He submitted that this was a minor criticism. In the latter section of the Record he submitted the Defenders were trying to plead evidence, but ultimately the e mails were a matter of interpretation.

[101] As regards Ellon Castle Estates Co. Ltd. v. Macdonald, Lord Stewart had rightly been critical of the lack of candour in the pleadings where a long an important condescendence was met with a terse statement, quoad ultra denied. In pronouncing decree de plano Lord Stewart said:-

Our whole system of pleading and of disposal of cases upon preliminary pleas must depend upon each party stating with candour what are the material facts upon which he relies and admitting the facts stated by his opponent which he knows to be true....It is destructive to the whole concept of our system of civil pleading for a defender to continue to maintain a blanket denial of pages of relevant averments and to adopt the attitude that she is entitled to make the pursuers prove every fact which they aver"

Counsel submitted this was a totally different situation to that which prevailed here where the Pursuers' case was fully stated and the e mails were admitted but the construction of their contents was a matter of dispute.

[102] As regards equity Counsel submitted that it was not a ground for dismissal at this stage. It was not for the Pursuers to prove equity but for the Defenders to show that it was inequitable for redress to occur. Equity was a matter for proof not debate. Where the Pursuers pulled out of the joint venture where was the equity, counsel submitted, in the Defenders going on to market the brand using services they had not paid for?

So far as the valuation of these services is concerned Counsel relied upon the schedule contained in the Record at page 31 and the basis for these figures averred in Condescendence 6.

[103] Counsel referred to the case of Exchange Telegraph v. Guilianotti where a bookmaker arranged to obtain an unauthorised supply of telegraphic racing information from another bookmaker who obtained the information from the pursuers by a contract which precluded supply to non-subscribers. While the pursuers were entitled to interdict from obtaining the information the pursuers failed to recover the cost of a subscription to the service for the period where information was obtained without permission. Lord Guest stated at page 26:-

"There was no case on recompense quoted which even remotely resembles the present.... The fact that the defender by obtaining the news service from other subscribers incidentally benefited did not involve the pursuers in any extra expense. In my opinion the claim of the pursuers based on quantum lucratus fails."

That was not the position in the present case.

[104] Finally, Counsel referred to the case of Anderson v. Anderson in relation to the attack on the value of services. Should it be the cost of services or the value of services that was recoverable? In that case the court allowed a reasonable remuneration. This was what the Pursuers claimed in the present action.. In all the circumstances Counsel urged me to repel the motion and allow a proof before answer.

Response by the Defenders

[105] Mr. Upton's first point was that cases on contract were of no authority in relation to recompense. Here the parties were considering entering a contract but the Pursuers decided not to do so. Accordingly the Site Preparations case was particularly in point. In that case parties had been contemplating entering an arrangement of mutual benefit. The same could be said of any commercial contract, namely that parties negotiate with a view to their mutual benefit. In general terms if the contract does not materialise one party cannot sue the other for the costs involved to that point. In the present case the Pursuers were working on a speculative basis and that was recognized in the Site Preparations case.

[106] Counsel referred to Lord Rodger's opinion in Shilliday v. Smith and the general principles of recompense expressed there (at page 727D and F) which he said have to be read in the matrimonial context in which they were made. There was no discussion in Shilliday of Gray v. Johnston, Site Preparations v. Secretary of State for Scotland or Microwave Systems Ltd. v. Electro-Physiological Instruments Ltd. In the Transco plc v. Glasgow City Council case, Lord Hodge had said at para [13] that:-

"the redefinition of the law of unjustified enrichment has not superseded the old rules relating to the law of recompense,"

[107] I was referred to the new approach spoken to by Lord Hope of Craighead in Dollar Land (Cumbernauld) Ltd. v. CIN Properties Ltd at page 98H-I, which is quoted with approval by Gloag and Henderson at para 25.01, page 522:-

"that the pursuers must show that the defenders have been enriched at their expense, that there is no legal justification for the enrichment and that it would be equitable to compel the defenders to redress the enrichment."

This Counsel submitted represented a broad overview of the law but not detailed rules.

As Lord Rodger had said in Shilliday v. Smith at the end of para 727D:-

The significance of one person being unjustly enriched at the expense of another is that in general terms it constitutes an event which triggers a right in that other person to have the enrichment reversed."

[108] Counsel re-iterated that it had been the Pursuers who had walked away from the proposed joint venture and thereby brought negotiations to an end. He suggested recompense was not available to someone who had apparently abandoned his rights in the matter. He referred again to the case of Morgan v. Morgan's Judicial Factor which I have quoted from at para [38] above. Counsel submitted that in that case the pursuer had been seeking enrichment from the life policy which had been taken out on her late husband. In the event the court held she was entitled to repayment of premiums she had paid and interest, assuming such amount did not exceed the present value of the trust. The effect of this was that the pursuer was not entitled to any profits arising on the policy.

[109] Counsel founded upon Lord Rodger's opinion in Shilliday v. Smith at page 728B where his Lordship suggests enrichment can be reversed by the enriched party paying a sum representing the benefit received for services obtained. Counsel noted that in Lord Rodger's opinion at page 731B his Lordship had referred to Newton v. Newton but it had proceeded on the basis of error. Counsel did accept that there was nothing in the Shilliday case to suggest a special leeway in cases where marriage was contemplated. In the marriage context parties were looking towards the future and in the commercial context parties were looking towards a contract and mutual benefit. Counsel submitted that if the court found in favour of the Pursuers in this case then it would follow that it was saying that the decisions in Site Preparations and Microwave Systems were incorrect.

[110] Counsel turned to Professor Evan-Jones' article on Satchwell v. McIntosh. At page 108 the author states:-

"Nonetheless, the old understandings of the law of unjustified enrichment continue to be reflected in the most recent case law" A footnote links to the Transco case as vouching this proposition.

Counsel submitted that nowhere in this recent analysis of the law does it suggest that cost of services provided in contemplation of a contract would be recoverable following the provider's unilateral withdrawal from the arrangements. It was not sufficient for the Pursuers in their pleadings at pages 10 and 11 to simply suggest contractual uncertainty as a basis for withdrawing from the venture.

[111] Counsel was content in light of the Pursuers' arguments to set aside the cases of Thomson v. Fowler, Stewart v. Steuart, Walker v. McKnight and Rankin v. Wither, since they concerned the in suo rule, and to some extent detract from the general principles set out in Shilliday v. Smith. On the other hand in Edinburgh and District Tramways Co. Ltd. v. Courtenay, Lord President Dunedin at page 106 discusses the concept of mutual benefit:-

"So there, again, you have the same element that went to the decision of some of these cases, [including Rankin v. Wither and Buchanan v. Stewart] that the thing done was as much for the benefit of the man who did it as for that of the other person."

Gouws v. Jester Pools (Pty) Ltd. shows that the in suo principle is applied elsewhere. The third party had benefited but since they were not in a contractual situation they were not liable to pay. Similarly in Cran v. Dodson Lord Kyllachy said:-

"But there is not such doctrine in the law of Scotland as that every person who has profited by the work done under a contract is to be liable for the work so done."

[112]Counsel then referred to Gilchrist v. Whyte which he said was not a case of recompense at all, the court having dismissed such a claim as being irrelevant. He referred again to the opinion of Lord Ardwall which I have quoted at para [63] above. Counsel submitted that his Lordship's discussion of the law of recompense could be regarded as referring to unjustified enrichment by another name. Lord Ardwall referred to the concept at page 992 as:-

"the ground which is expressed in the brocard nemo debet ex alieno damno lucrari." (No one should be enriched out of the loss or damage sustained by another.)

Counsel noted that Lord President Dunedin referred to recompense in Edinburgh & District Tramways at page 105 as:-

"an equitable doctrine, and the basis of the equitable doctrine, I think, lies upon the old brocard nemo debet locupletari ex aliena jactura." (No one should be enriched at another's cost or loss). Lord President Dunedin's approach was followed in Gray v. Johnston (see Lord Hunter at pp 669 and 670) where the court affirmed the decision of the Lord Ordinary, Lord Murray (who I note at page 664 refers to:-

"the equitable principle of recompense, founded on the general brocard nemo debit locupletari aliena jactura." (which means the same thing as Lord President Dunedin's "old brocard".)

[113] Counsel referred again to the Site Preparations case which differed as it arose out of an unsolicited approach and provision of services by the pursuer. Reference was made again to the Microwave Systems case and the opinion of Lord Thomson, the salient parts of which I have quoted at para [64] above. Counsel submitted that the law in this context has not altered since that case was decided in 1971.

[114] Counsel contended that the Defenders did not enjoy a benefit. The nature of what the Pursuers did in contemplation of a successful brand. It was only if they had stayed in the joint venture that they might have been enriched. Counsel submitted that Gray v. Johnston was correctly decided. The pursuer in that case had no more than a hope or expectation. Counsel submitted that that was not the same as being in contemplation. This was an important difference. Counsel again referred to the opinion of Lord Ormidale at page 672 which I have quoted at para [52] above. Lord Justice-Clerk Alness dissented and at page 682 said of the services given by the pursuer:-

"They were rendered not in suo but under an obligation conceived for the benefit of the deceased. In these circumstances I am of opinion that the in suo doctrine has no application to the claim made by the pursuer."

Counsel said that his Lordship did not discuss the mixed motives the pursuer had in the case then referred to Reedie v. Yeaman which involved the secret revocation of a document. The relevant passage in the opinion of Lord Mackenzie is quoted at para [97] above.

[115] Counsel then referred to the case of Fernie v. Robertson and the opinion of Lord Cowan which I have quoted at para [ 35] above where his Lordship wondered if the case involved contract rather than recompense.

Counsel suggested that this quandary was not surprising given the language and phrases used in the pleadings of some of the cases involving recompense arguments and the present case. Sometimes particular words and phrases seem to be ambiguous and could be questioned at proof. In the present case the Pursuers' claim for unjustified enrichment seemed to involve mixed motives- see pages 32-34 of the Record.

[116] Counsel then turned to the question of measuring enrichment and referred to the passages in Evans-Jones Volume 1 paras 9.17 & 18 quoted at para [99] above. Counsel's observations were that the former paragraph highlighted the need to measure the extent to which the defender was objectively enriched by the services, not simply the cost of providing services. So far as the latter paragraph was concerned the author's statement was unsupported by authority. The Pursuers had been unable to specify what the profit was that had enriched the Defenders. What was the value of the brand? The Pursuers suggested their services were a sine qua non in assessing the value of the brand.

[117] Counsel referred to Morgan v. Morgan's Judicial Factor and the opinion of Lord Hunter at page 250:

"There appear to be two limitations to the doctrine of recompense. First the person making the expenditure cannot claim a profit, and second, he cannot claim from the person benefited a sum in excess of the increased value of the subject arising from his expenditure."

[118] Counsel referred then to the case of Morris v. Sutherland where the pursuer had not provided a figure for the supposed increase in the value of the livestock during the period the pursuer looked after them. I was referred to page 8 of the sheriff's note in that case where there is a discussion as to whether the pleadings disclose a relevant case on recompense.

[119] Counsel concluded his remarks by saying that the present case on Record did not disclose an equitable claim, accordingly there was no unjustified enrichment and as a result the case should be dismissed. So far as the case of Anderson v. Anderson was concerned Counsel submitted that it turned upon error and therefore was of no assistance in the present case.

Discussion

[120] I too have found this area of law a complex one. Counsel for the Defenders quoted authority extensively and comprehensively but as Lord Roger indicated in Shilliday v. Smith at page 727A:-

"Discussions of unjustified enrichment are bedevilled by language which is often almost impenetrable."

There are mixed messages too as to whether the law in this context has developed in recent years or simply has been more clearly defined. The Pursuers quite properly from their point of view have simply claimed recompense and seek the sum sued "being a reasonable estimate of the extent to which the Defenders have been enriched" -Record page 38.

[121] Counsel for the Pursuers very thoroughly covered all categories of recompense but ultimately it became clear that the present claim is based on the condictio causa data causa non secuta. As has been helpfully summarised by Professor McBryde at paras 5-58 to 5-67 there a number of situations outwith a formal contract where a claim may lie. Mr. McBrearty made it clear that the claim in the present case was for recompense on the basis of quantum meruit in respect of services provided to the Defenders during the period that work was ongoing on the proposed joint venture to produce the M.M.A. B. brand of tea.

[122] A claim for recompense only arises in specific circumstances and is very much a last recourse when other perhaps more direct and conventional means are not open to an aggrieved party. Recompense in this context has variously been described as:-

"the brocard nemo debet ex alieno damno lucrari" -per Lord Ardwall in Gilchrist v. Whyte at page 992,

"the old brocard nemo debet locupletari aliena jactura"-per Lord President Dunedin in Edinburgh & District Tramways v. Courtenay at page 105 and

"the general brocard nemo debit (sic) loculetari aliena jactura"- per Lord Murray in Gray v. Johnston at page 664.

Fortunately Traynor at page 377 confirms these various brocards mean the same thing.

[123] As regards recompense there are the classic definitions:-

Lord President Dunedin in Edinburgh & District Tramways v. Courtenay at page 105 which I have quoted at para [112] above.

The five elements listed by Lord Macfadyen in Property Selection & Investment Trust v. United Friendly Insurance at page 978F which I have quoted at para [59] above.

Lord Rodger in Shilliday v. Smith at page 353D quoted above at para [60].

[124] In Shilliday v. Smith at page 731A Lord Rodger highlights the particular factor of unjust (my emphasis) enrichment:-

"rather than the mere fact of expenditure by the pursuer for benefit to the defender"

as constituting the ground of action. Similarly action in contemplation of the parties' marriage which did not, in the event take place, was seen as a critical factor by Lord Rodger in Shilliday at page 731C. Lord Hope of Craighead in Dollar Land at page 98 in a similar vein said:-

[125] It seems clear in the present case that there was no contract between the parties, nor an implied contract; indeed, the Pursuers withdrew from the proposed joint venture. Unlike the Site Preparations case the Pursuers' actions in working on the joint venture had not been unsolicited, not were parties negotiating a proposed merger as occurred in Microwave Systems. In that case if the negotiations had been successful a new company would have been created out of the assets of the parties which I consider differs from the situation where parties are in contemplation of marriage or as we have here a proposed joint venture company. In the latter situations the parties still retain their individual persona whereby they can assess the success of otherwise of the venture and whether they have been enriched. In any event the element of injustice and the potential for equity must be present before the court can consider recompense.

[126] If the court moves forward to consider the value of enrichment, Lord President Inglis in Watson v. Shankland at the foot of page 152 highlights the need for the defender to have been objectively enriched by the expenditure occasioned by the pursuer. In this context I find the passage by Professor Evans-Jones at para 9.18 referred to by me at para [99] above of assistance.

[127] On the other hand it could follow from that statement that the best valuation in the present case would be to ascertain what profits, if any, the Defenders had accrued in selling tea under the M.M.A.B. brand. The Defenders have complained about a lack of fair notice in a number of respects but one must bear in mind the dicta behind such a preliminary plea; Macdonald v. Glasgow Western Hospitals, Lord President Cooper at page 465.Has there been a lack of specification that the Defenders do not know the case against them and can object to being taken by surprise at the proof?

[128] Since the promotion by the Defenders of a brand of tea called M.M.A.B. was not in dispute any information about profits arising from the brand would be facts within the knowledge of the Defenders. At page 36 of the Record the Defenders averred:-

"The brand nonetheless has not earned the Defenders a profit." There may well be difficulties about trying to establish a quantum lucratus claim but there may be scope for a quantum meruit one. As the authorities show the Pursuers are entitled to sue for the cost of services on that basis.

[129] In light of the large number of authorities quoted in this case I consider it necessary to indicate those I found helpful and those I can disregard in the special circumstances of this case. The in suo cases are of little assistance other than to alert that if such actings are apparent on the pursuer's part the case must fail. Accordingly I feel that I can ignore the following cases Thomson v. Fowler, (which involved meliorations completed during the lease of premises), Anderson v. Anderson, (where there was an element of error, which does not feature in the present proceedings), Stewart v. Steuart (where the court indicated the pursuer had a more practical remedy than recompense), Walker v. McKnight, Rankin v. Wither (where the pursuer's wife had died intestate) c.f. Reedie v. Yeamans where the pursuer's wife had secretly revoked a mutual settlement which had been in the pursuer's favour and his reasonable expectations had been disappointed. I can also exclude Wallace v. Braid where a liferenter sought recompense for repairs on a property.

[130] In a similar vein the cases where a third party was incidentally enriched are of no help in the present case. I can therefore exclude from my consideration Cran v. Dodson, Gouws v. Jester Pools (Pty) Ltd. and Exchange Telegraph Co. Ltd v. Giulianotti I accept that a party is not entitled to recover expenditure incurred in negotiations but beyond that I do not find that Gilchrist v. Whyte and Walford v. Miles assist me here.

[131] Gray v. Johnston is a difficult case, where the pursuer appears to have been duped and the facts read more like the plot of a Thomas Hardy novel. It is clear however that the case was poorly pled and periled on recompense when other avenues might have been more fruitful (see Lord Murray at page 663). The pursuer had an "expectation of testamentary benefit" which was a "mistake..in his own calculation of his chances" and he "was content to remain outside of contract, and in the hope that things would end to his advantage "took the risk" (Lord Murray at pages 664 and 665). By contrast in the present case the Pursuers averred that they sought a contract but this was never concluded.

[132] Varney v. Burgh of Lanark can be distinguished from since a statutory remedy was available to the pursuers, albeit perhaps a less attractive one commercially. Nevertheless on the basis that recompense is only available as a remedy when no other form of claim can be raised, I can exclude this case from my consideration. By contrast in Lawrence Building Co. Ltd v. Lanark County Council the circumstances pled were different and the court considered there were sufficient averments in the case which if supported by competent evidence could give rise to a claim in equity to recompense.

[133] I did not find the case of NV Devos Gebroeder v. Sunderland Sportswear Ltd of assistance either since there had been a contract between parties and a claim for recompense was something of an afterthought. Similarly I did not find the case of Grieve v. Morrison helpful as it appeared to turn on its own facts which were established after proof.

[134] I consider that I can distinguish the circumstances of the present case from those in Morris v. Sutherland. The claim appears to have been based upon quantum lucratus rather than quantum meruit. The pleadings were found to be defective as the pursuer could not show how the value of livestock had increased during his care of them. Given the subject matter of the claim it might well have been possible to secure valuations of the livestock both before and after the pursuer had intromitted with them based upon available market trend information; there were no averments to enable that exercise to be done (page 9 of the report). By contrast in the present case it is not possible for the Pursuers to carry out a similar exercise. The Pursuers can only put forward the costs of their services and it is a matter within the knowledge of the Defenders to counter, as they have done the extent of any enrichment. This will have to be clarified at proof.

[135] The final matter for consideration at this stage is whether the law of unjustified enrichment has developed to favour pursuers more than in the past. The judges in the triumvirate of important recent cases, Morgan Guaranty, Dollar Land and Shilliday v. Smith are careful to say they are simply clarifying the claim to recompense rather than widen it. The opinion of Lord Hodge in Transco at para [12] is especially helpful in deciding whether the claim may be relevant.

Decision

[136] Obviously at this stage of proceedings I have simply to rule on the relevancy of the proceedings as pled taking account of the deletions made by the Pursuer in the course of debate at page 8 and from the foot of page 32 to page 34 at the end of Condescendence 6. I have come to the view that the Pursuers' pleadings do aver facts which if established may support a relevant claim for recompense. The circumstances of the present case differ from those in the authorities presented. As I have indicated above, I consider the proposed joint venture which parties worked towards for a significant period to be a stronger situation and more amenable to a claim for recompense on disappointment than the agreement to negotiate towards a merger of parties which was the situation in Microwave Systems. The Site Preparations case arose out of an unsolicited approach by the pursuers so can readily be excluded from consideration when the pleadings in the present case speak of a period where parties were freely engaged in working towards a common venture.

[137] A critical feature of a case of this type where there is no contract and apparently no implied contract is whether the pursuer carried out acts in reasonable contemplation of an event which did not take place, (Lord Rodger in Shilliday at page 731C). The Pursuers intentions seem to be well expressed in the pleadings and once again it would seem appropriate to allow a proof before answer to ascertain if evidence supports these contentions.

[138] Another area of concern is the Pursuers' withdrawal from the proposed joint venture; while this does not assist the Pursuer's case, I do not consider it necessarily to be fatal. I accept Mr. McBrearty's arguments in this context. There are reasons given for these actions and I consider the critical element in this corner of the case to be the understanding of the Pursuer at the time. Accordingly I prefer the decision in Satchwell v. McIntosh to the views expressed by Lord Morison in Grieve v. Morrison as regards the requirement of a mutual understanding. I have no doubt however that his Lordship having found a commonality of understanding by the parties at proof reached the correct decision in the circumstances established in that case. Similarly in the present case it appears necessary to hear evidence on this aspect before making a definitive ruling.

[139] Finally on general relevancy the subsequent actings of the Defenders in relation to marketing the brand are another crucial aspect of the case, whether they were unjustly enriched and whether they could have marketed the brand without the services of the Pursuers and the significance or co-incidence of marketing a brand with the exact name that had been the cornerstone of the failed joint venture. The elements for a relevant case of recompense appear to be contained in the pleadings. Taking Lord Macfadyen's helpful checklist from Property Selection & Investment Trust Ltd all of the features are pled but clearly some require to be properly established at proof if the claim is to progress. There are averments of loss, that the services were not donated, that the Defenders have benefited quantum meruit in that it is alleged other specialist services would have required to have been deployed before the Defenders could have launched a brand of tea, the averments that the Pursuers were acting in the reasonable expectation of reward under a joint venture company and averments that no other remedy is available. Obviously a fair body of evidence will require to be led and facts established to form the basis of the claim.

[140] Having concluded in general terms that there may be a relevant case after proof, I now turn to the other criticisms made by Mr. Upton to the Pursuers' case. I do accept that the case might have been better expressed. There is the use of otiose phrases such as "going forward" at page 11 of the Record and other inelegant examples of business jargon rather than more clear and concise pleading but I do not regard the criticisms in this context to be fatal to the proceedings or to require exclusion from proof. I do not regard the use of the word "instructions" necessarily indicative of a contractual relationship. The Pursuers aver they were offering their expertise and were to be junior partners in the joint venture. There may have been an imbalance in the relationship as the details of the joint venture were being worked out-but these are matters for proof. There seems adequate specification of meetings and e mails and different considerations may be a factor once evidence is heard. Sufficient detail seems to have been given for the Defenders to fairly meet the case. Despite reference to the Ellon Castle case, the 39 page Record in the present proceedings is some distance removed from skeleton pleadings. It will also be a matter for proof whether the Pursuers' pleadings about "each and every specific role undertaken by the Pursuers" will be a matter for consideration after proof.

[141] For the above reasons I reserve the Defenders preliminary pleas which remain outstanding and allow a proof before answer. The question of expenses was expressly excluded at Debate but should be considered in light of my decision when the case next calls in court.

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You are here: BAILII >> Databases >> Scottish Sheriff Court Decisions >> Chartered Brands Ltd v. Elmwood Design Ltd [2009] ScotSC 11 (15 May 2009) URL: http://www.bailii.org/scot/cases/ScotSC/2009/11.html Cite as: [2009] ScotSC 11

Scottish Sheriff Court Decisions