Developer’s legal action against two companies for breaches of contract dismissed as ‘incompetent’



Court_of_SessionA 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”.

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, EDC Hotels failed to pay the price and after going through an “ultimatum” procedure at the end of which in February 2011 the price remained unpaid, Tulloch rescinded the contract over the company’s admitted “material breach”.

Tulloch 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 company intimated that it pulled out of the agreement.

Then, in 2015, SDG Tulloch Homes Limited 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 EDC Hotels for payment of £1.6m and EDC Hotels and Carlton Rock jointly and severally for payment of £805,000.

In relation to EDC Hotels, Tulloch 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 Carlton Rock was concerned, Tulloch 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.

A judge in the Court of Session dismissed the action after ruling that there was “no connection” between the first and second defenders and that it was “not competent to pursue an action against separate defenders for two disconnected breaches of contract”.

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.”



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