Pursuer’s action against two defenders for ‘separate wrongs’ based on joint and several liability dismissed as ‘incompetent’
A property developer which sued two separate companies for breaches of contract after both failed to complete the purchase of an area of land has had an action based on joint and several liability dismissed as “incompetent”.
A judge in the Court of Session observed that in order for joint and several liability to arise the wrongs allegedly committed by various defenders should be “connected”.
Lord Tyre heard that the pursuer SDG Tulloch Homes Limited, which owned of an area of land at Glebe Street in Inverness, concluded missives for sale of the land in 2007 to the first defender, European Development Company (Hotels) Limited, for the sum of £2.9 million.
However, the first defender failed to pay the price and after going through an “ultimatum” procedure at the end of which in February 2011 the price remained unpaid, the pursuer rescinded the contract over the first defender’s admitted “material breach”.
The pursuer later concluded missives for sale of the land in 2013 to the second defender,Carlton Rock Limited, for the sum of £1.5m, but having been called upon to pay the price the second defender intimated that it resiled from the missives, following the pursuer rescinded the contract itself.
Then, in 2015, the pursuer sold the land to Tulloch Homes Limited, a company in the same group as itself, for the sum of £800,000, and it subsequently sued the first defender for payment of £1.6m and the first and second defenders jointly and severally for payment of £805,000.
In relation to the first defender, the pursuer claimed to have sustained losses as a consequence of breach of contract consisting of the difference between £2.9m and £800,000, plus re‑marketing and reselling expenses, increased funding costs and interest on a shareholder loan.
So far as the second defender was concerned, the pursuer claimed to have sustained losses as a consequence of breach of contract consisting of the difference between £1.5m and £800,000, plus re-marketing and reselling expenses and increased funding costs.
There was “no connection” between the first and second defenders and the action came before Lord Tyre for debate on the issue of whether the action so far as laid against both defenders was competent.
On behalf of each of the defenders it was submitted that the action as directed against the second defender was “incompetent” as it was “not competent to pursue an action against separate defenders for two disconnected breaches of contract”.
The second defender submitted that the admitted breach of contract by the first defender had caused the “entirety of the pursuer’s loss” and the fact that the sale to the second defender, had it proceeded, might have mitigated the loss sustained by the pursuer “did not justify a finding of joint and several liability”.
The “wrong” on the part of the first defender was a breach of contract in which the second defender played no part, thus the issue was accordingly determined by the rule established in cases where it was held “incompetent to sue two defenders for separate and distinct wrongs for each of which only one was responsible”.
On behalf of the pursuer, it was accepted as a matter of general principle that two wrongdoers could not be sued jointly and severally for disconnected wrongs.
But it was submitted that, properly understood, the authorities demonstrated that joint and several liability arose where the “wrongs contributed to the same loss” and the mere fact that the alleged breaches were of different contracts did not exclude joint and several liability.
The pursuer offered to prove that the separate breaches of the 2007 missives and the 2013 missives combined to produce one loss, represented by the difference between the price to be paid under the 2013 missives and the price eventually received on sale in 2015.
However, having considered the authorities, the judge observed that a single wrong resulting from various defenders’ breaches was required before joint and several liability could arise.
In a written opinion, Lord Tyre said: “Applying this analysis to the facts of the present case, it seems to me to be clear that the pursuer seeks to sue the defenders jointly and severally for two disconnected breaches of contract. The first ‘wrong’ consists of the admitted breach of contract in 2011 by the first defender. The second ‘wrong’ consists of the alleged breach of contract in 2014 by the second defender.
“There is no averred connection between these two events other than that if the first had not occurred the pursuer would not have owned the land in 2013 and thus could not have contracted to sell it to the second defender. It is not enough, in my opinion, to render a joint and several claim competent that the pursuer can claim to have suffered a single overall loss consisting of the aggregate of losses from two disconnected breaches.
“The pursuer has failed relevantly to aver a single common result – or single wrong – and the action in so far as based upon joint and several liability in respect of both alleged breaches is incompetent.”
The judge put the case out by order for discussion of further procedure.
He added: “It may be that the pursuer will wish to amend to direct the present claim against the first defender alone, and to consider whether to institute separate proceedings against the second defender for any loss sustained as a consequence of the latter’s alleged breach of contract.”