The Pursuer was a director and shareholder of Coulter Property Limited ("CPL"). In February 2018, he was summarily dismissed from his role as director. In terms of CPL's Articles of Association, dismissal of a director triggered a mandatory sale of that director's shares to the remaining shareholders.
The Articles provided a mechanism for the assessment of the value of the company. The Defenders, a firm of Accountants, were appointed and valued the Pursuer's shares at £74,949. The Pursuer argued that his shares, properly valued, were worth considerably more than that sum.
The Pursuer maintained that the value of his shares ought to have been calculated with reference to earnings basis, rather than on a net asset value. He alleged that the Defenders were fed misleading information by the directors of CPL and were acting in collusion with CPL.
The Pursuer sought to recover losses of just over £500,000 from the Defenders. The case called for a Debate before Lord Braid in the Outer House of the Court of Session.
Decision
Dismissing the action, Lord Braid concluded that the Pursuer's pleadings were irrelevant and that his action was bound to fail. Although Lord Braid held that there was a duty of care owed by the Defenders to the Pursuer, its scope fell to be governed by a limitation of liability cap in the Defenders' letter of engagement with CPL.
At the debate, the Defenders denied acting unethically, negligently or that they owed a duty of care to the Pursuer. They also sought to rely on a limitation of liability clause in their letter of engagement, issued to CPL, the effect of which was to limit their liability to CPL to £45,000, being ten times their fee for determining and certifying the fair value of the shares held by the Pursuer.
The Defenders also sought to argue that the Pursuer did not relevantly aver any case that a duty of care, in respect of his economic loss, arose in Scots law. Counsel for the Defenders noted the lack of precedent in Scotland that a professional expert valuer, engaged contractually by a company, owed a duty of care to avoid economic loss being suffered by a third party.
In relation to the limitation of liability clause, Counsel for the Defenders submitted that if the Pursuer was able to establish the existence of a duty of care, the law should not impose upon a professional a duty to avoid economic loss to a third party which was greater than the duties owed under the appointment which engaged the professional in the first place. It was submitted that any liability to the Pursuer, therefore, must be limited in the same way as the Defenders’ liability to CPL would have been limited, that is capped at £45,000. The Pursuer's Counsel submitted that the limitation of liability clause had no relevance whatsoever.
Lord Braid stated that, on the pleadings, there were no other factors which the Pursuer offered to prove which could have any bearing on the scope of the duty. The only factor which the court could take into account after proof would, therefore, be the limitation of liability clause. Lord Braid concluded that the Defenders were entitled to rely on the limitation of liability clause, capping any liability at £45,000, to which there was no challenge, as a factor bearing upon their scope of duty.
Lord Braid was particularly critical of the Pursuer's pleadings. He said that, even according their averments with a due degree of latitude, recognising that this was a commercial action, he concluded that their pleadings, read fairly and as a whole, were irrelevant and that the action as pled was bound to fail. It was for this reason that Lord Braid dismissed the action. He also went on to say that the Pursuer fell short of averring that any negligence on the part of the Defenders caused him any loss.
Lord Braid reminded parties that, even a commercial action, where abbreviated pleadings were encouraged, required that fair notice be given by each party of the facts relied upon and in respect of which evidence will be led. He went on to say that the ethos of the commercial court was that a pursuer should have all the expert reports required before an action was raised rather than wait until the last date for lodging productions in accordance with a proof timetable.
