Busy autumn in Parliament House

A number of interesting decisions have been coming out of the Court of Session since the new term began in September, for example on contract, constructive trusts, and even database rights.

This note will not attempt a detailed critique of the various decisions but simply draw attention to points of interest.  Exchange Communications Ltd v Masheder [2009] CSOH 135, a decision of Temporary Judge Morag Wise QC, is the one dealing with database rights.  The story was one of a departing employee who, it was claimed by the erstwhile employers, had extracted from their database contact details for a potential customer, and details of the telephony and related equipment to be offered to that customer along with prices and discounts.  The ex-employee had entered the employ of a competitor which had subsequently won the contract with the prospective customer.  The pursuers' averments did not however detail the precise means of the extraction which would constitute infringement of the database right, and the defender therefore argued that the case on this point was irrelevant, i.e. should not be allowed to go to proof.  Temporary Judge Wise QC, although thinking the issue "finely balanced" (para 45), sent the case for proof.  Quoting the leading ECJ cases on database right (British Horse Racing Board v William Hill [2005] 1 CMLR 15, Direct Media Publishing GmbH v Albert-Ludwigs-UF [2009] 1 CMLR 7 and Apis-Hristovich EOCD v Lakovda AD, 5 March 2009) for the proposition that the concept of "extraction" is to be approached widely, the judge noted: "The clear aim of the Regulations and the Directive they implement is to protect those who have applied time and resources and effort to collating data often with significant commercial importance" (para 48).  The case also discusses the enforceability of restrictive covenant and confidentiality clauses which were in the employee's contract.

Commonwealth Oil & Gas Co Ltd v Baxter [2009] CSIH 175 (fiduciary duties and constructive trusts) and R & D Construction Group Ltd v Hallam Land Management Ltd [2009] CSOH 128 (agreements to agree, contractual uncertainty, "best endeavours" clauses) have already been the subject of comment in other Edinburgh Law School blawgs here and here.  On the Baxter case, Scots Law News notes that the constructive trust claim actually failed, on the basis that the third party recipient was not guilty of "knowing receipt".  The Lord President says (at para 20) that "knowing receipt appears to me to be, primarily at least, a restitutionary remedy", although earlier he has said that the "foundation [of the doctrine] lies in the law of trusts" (para 16).  It is not clear how significant these remarks are meant to be, and whether there is a hint here that the approach should be through unjustified enrichment rather than trusts.

Lord Hodge refers to his analysis of "best endeavours" clauses in the R & D Construction case in his opinion in Beaghmor Property Ltd v Station Properties Ltd [2009] CSOH 133, which concerned breach of a "lock-out" agreement between two parties negotiating the sale of land in the Old Town area of Edinburgh.  The agreement required the seller to act in good faith and use "all reasonable endeavours" to enter the transaction with the purchaser.  It was conceded, under reference to the notorious English House of Lords decision Walford v Miles [1992] 2 AC 128, that the agreement to act in good faith was unenforceable, but Lord Hodge, applying his reasoning in the R & D case, that the rest of the clause might be: "where the parties intended the lock-out agreement to be a legally binding contract, the court should strive to give effect to their agreement", at least where the negotiations carried out under the agreement had themselves reached the stage where the parties were agreed on the essential terms of their deal (para 22).  He also held that the pursuers' claim to damages based on their loss of profit from their projected development and resale of the site (put at £4 1/2 million) was relevant for proof, rejecting an argument from the recent remoteness decision of the House of Lords, Transfield Shipping Inc v Mercator Shipping Inc [2009] 1 AC 61, that damages should be confined to wasted expenditure.  This last strikes Scots Law News as a fairly radical decision; legal systems recognising liability in pre-contractual negotiations usually confine damages to the reliance or negative interest rather than the expectation or performance one. 

Still in the area of contract formation, the case of Park Petititoners [2009] CSOH 122 attracted media attention and some critical comment from the legal profession (or at least solicitors' firm Tods Murray).  The essence of the case is whether in a contract requiring formal writing it suffices for the conclusion of a contract that the formal offer and acceptance have been faxed by the parties to each other.  Temporary Judge Malcolm Thomson QC held not, rejecting arguments that the requirements of form did not apply to the means by which parties communicated formal documents to each other.  The Tods Murray news release on Park, made although the firm does not seem to have been involved in the case, says that the decision runs counter to established practice amongst solicitors: "our culture dictates immediacy and we have all come to rely on and respect fax and email communications … [T]his case means that it will not be possible to conclude a transaction online and as well as increasing the length of time it takes to conclude a deal, it adds a very real nuisance factor.  Speed is so often the essence in these deals as buyers or sellers are working to very precise timescales or financial imperatives."  Scots Law News would add the comment that if no contract was concluded by the faxed exchange of missives, it is also not clear that one was achieved by the subsequent posting of them either.  It seems that the posted offer did not arrive with the offeree until 3 September 2007, while the posted acceptance arrived with the offeror on 1 September.  Even if the postal acceptance rule applies, the offer which must necessarily precede any acceptance was not effective until communicated on 3 September, and thus the purported acceptance which arrived before the offer must be ineffective too.  This reasoning of course exposes further the artificiality of not giving the faxed communication any legal effect even as a communication.

Finally, a nice case in which the doctrine of forum non conveniens was unsuccessfully argued by two defenders sued by the Royal Bank of Scotland in the Court of Session on guarantees which the former had given in support of the indebtedness of their company (Royal Bank of Scotland v Davidsons [2009] CSOH 134).  The company  traded from Berwick-upon-Tweed, by rights really a Scottish town but over 500 years lying within the jurisdiction known as England & Wales; the defenders however were domiciled in Scotland, although precisely where is not revealed.  When the bank raised its action on the guarantees in Scotland, the defenders pleaded forum non conveniens; that is, that the action should be determined in the English courts; amongst other things the guarantees bore to be governed by English law.  Lord Drummond Young gives a useful overview of the forum doctrine before rejecting the argument.  The company was not a party to the action, while the bank which had dealt with it was prepared to litigate in Scotland; so there was no inconvenience to the parties, given that the defenders were domiciled in Scotland.  The guarantee being subject to English law was a significant but not decisive factor; if it were, the doctrine would apply wherever a contract was subject to another legal system, and that had never been the case.  The defenders wanted to plead a defence based on misrepresentation; but, said Lord Drummond Young, "the basic concepts used in dealing with misrepresentation … dod not differ significantly between Scots and English law … [E]ven to the extent that English law differs from Scots law, a Scottish judge should not have great difficulty in understanding expert evidence on the matter" (para 9).