THE UNIVERSITY COURT OF THE UNIVERSITY OF ST ANDREWS AND ANOTHER , RECLAIMING MOTION BY v HEADON HOLDINGS LIMITED AND OTHERS [2017] ScotCS CSIH

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	Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> THE UNIVERSITY COURT OF THE UNIVERSITY OF ST ANDREWS AND ANOTHER , RECLAIMING MOTION BY v HEADON HOLDINGS LIMITED AND OTHERS [2017] ScotCS CSIH_61 (10 October 2017) URL: http://www.bailii.org/scot/cases/ScotCS/2017/[2017]_CSIH_61.html Cite as: [2017] ScotCS CSIH_61

THE UNIVERSITY COURT OF THE UNIVERSITY OF ST ANDREWS; and ANOTHER

Pursuers and reclaimers: Sandison QC; Burness Paull LLP (First pursuers) and Gillespie

First, third and fourth defenders and respondents: Cormack (sol adv); Pinsent Masons LLP

[1] In this action, the pursuers (St Andrews University and the trustees of the

Strathtyrum Trust) seek reduction of a joint venture agreement on the grounds of

non-disclosure and misrepresentation. On 20 August 2015, the action was dismissed as

irrelevant. The pursuers reclaimed, contending that they are entitled to a proof before

[2] As was explained in Jamieson v Jamieson 1952 SC (HL) 44 at page 50:

“ … an action will not be dismissed as irrelevant unless it must necessarily fail even

if all the pursuer’s averments are proved. The onus is on the defender who moves to

have the action dismissed, and there is no onus on the pursuer to show that if he

The question is, therefore, whether the pursuers “must necessarily fail even if all [their]

averments are proved”, and not whether the pursuers are “bound to succeed”.

[3] The following outline is based upon the pursuers’ pleadings and represents what

[4] Certain areas of land to the west of St Andrews have development potential.

Negotiations took place involving Mr Joe Headon and certain parties who owned some of

those areas, in particular St Andrews University, the trustees of the Strathtyrum trust, and

Mr and Mrs Cuthill, farmers. The discussions focused upon contributing land to a joint

project and using the resulting larger area in order to achieve satisfactory zoning, primarily

for residential and commercial purposes; also planning consent; and subsequently the sale

of the areas of land at a considerably enhanced profit. Mr Headon controlled a group of

companies, including Headon Holdings Limited, Headon Properties Limited, and

Pollpledge Limited, whose objects included property development. It was envisaged that

[5] On 1 December 2000, the Cuthills granted a feu disposition of part of their land

(specifically excluding two “ransom strips”) – “the Cuthill land” – to Headon Holdings

Limited (“HH”), the holding company of the Headon group. The burdens section of the

“(Three) my said disponees and their foresaids shall be prohibited from the sale,

transfer, lease or any alienation of the said subjects hereby disponed other than to a

Limited Company as listed in the first schedule to Minute of Agreement between us

and Headon Properties Limited dated Twentieth and Twenty second September Two

thousand, or such other Company or Organisation as may qualify as being under the

control of Members of the Headon Family or the Family Companies so listed, but

that such transfer shall only be with the consent of us as proprietors of the said

adjoining subjects, which consent shall not be unreasonably withheld …”

[6] On 2 October 2003, a formal joint venture agreement was concluded. There were

five parties to the agreement, namely Pollpledge (designated “the developer”), and four

landowners namely the university, the trustees, the Cuthills (having a continuing interest as

a result of the two strips of land) and HH. Those four landowners were designated “the

joint venturers”. The joint venture agreement has been lodged as a production and details

are set out in the pleadings. What follows is a brief and selective summary.

[7] In an introductory section, under the heading “Assumptions”, it was stated that:

“ … the Joint Venturers have title to the Development Land and that title is a good

and valid and marketable title without any conditions which would be materially

Clause 1.3 set out the objects of the joint venture, including obtaining zoning and planning

consent, a master plan for development, optimising the sale value of the land, and selling

“1.4 The Joint Venture is limited to the objects set out in clause 1.3, and, except where

provided to the contrary in this Agreement, no Joint Venturer may hold out that the

Joint Venture extends to any other property or business of the Joint Venturers.”

“1.5 The Joint Venturers will forthwith apply to the Commissioners of Customs and

Excise for registration under section 45 of the Value Added Tax Act 1994 as persons

carrying on business in partnership with respect to the Joint Venture, and will

endeavour to satisfy the Commissioners that they intend to make taxable supplies at

such date as is mentioned in paragraph 5 of Schedule 1 to that Act.”

Clause 2.2.1 set out certain matters numbered (i) to (x), about which the unanimous consent

of the joint venturers was required: for example, the format and content of the planning

application; the terms of sale and purchase of land; the terms of appointment of a third

party expert (although failing unanimity, a majority would suffice: clause 2.2.2); and what

constituted default on the part of the developer. Clause 3 set out the duties of the developer,

including the production of the development appraisal; negotiation with the relevant local

authority and any other relevant third parties; and lodging and diligently pursuing the

planning application until zoning was obtained. Funding for the developer in the exercise

of its duties was achieved by “the Developer’s Contribution” (£250,000 exclusive of VAT as

set out in the definitions section) and clauses 3.3 and 7.6 (the provision of further sufficient

funds). Clause 4 was headed “Mutual duties of the Joint Venturers and the Developer” and

included duties of co-operation and good faith, full disclosure of relevant information, an

undertaking not to enforce rights over another joint venturer’s land to the prejudice of the

joint venture, and an undertaking to execute all necessary deeds. Clause 5 and part 1 of the

schedule regulated the sale of the development land and the distribution of the sale

proceeds amongst the joint venturers. Clause 6.1 gave the university the option to keep land

for educational purposes, and clause 6.2 provided for additional payment to joint venturers

in the event of obtaining planning consent for a more profitable development than had been

[8] In about October 2012, zoning for the land was achieved. However disputes arose.

Litigation and mediation followed. In their averments, the pursuers offer to prove that

in 2014, in the course of a mediation, the university became aware for the first time of the

content of a Minute of Agreement dated 20 and 22 September 2000 (“the back-minute”). A

copy of that back-minute has been lodged in process as a production (number 5/2 of process)

and parties referred to that production during both the debate and the reclaiming motion.

[9] An examination of the back-minute prima facie discloses several matters, including

the following: (i) the contracting parties were the Cuthills and Headon Properties Limited,

no other party was involved; (ii) the back-minute was not a standard conveyancing missive

of sale of heritable property; and (iii) the back-minute was not registered in the Books of

Council and Session for preservation and execution, and therefore was not prima facie open

to public inspection as it would have been if it had been on a public register.

[10] The back-minute contained inter alia an agreement for the sale of an option relating to

the Cuthill land to Headon Properties Limited. In clauses 1 and 2, the Cuthills agreed that,

in exchange for a “deposit” of £249,000, they would grant a feu disposition of that land to

Headon Properties Limited. By feu disposition dated 1 December 2000 the Cuthills duly

disponed the Cuthill land to HH, not to Headon Properties Limited (copy feu disposition

[11] The back-minute contained other conditions, prima facie continuing to bind the

parties for a period of eleven years after the grant of the feu disposition. Clause 2(iii)

provided that the Cuthill land could only be transferred by the purchaser to a company

within the Headon group (listed in the first schedule). Clause 3 provided for a possible

re-conveyance to the Cuthills, with appropriate monetary adjustment. Clause 5 provided

that the whole profits arising from the further sale of the Cuthill land for development was

“5. If the subjects are sold at any time to a third party in accordance or not in

accordance with any agreement that is reached between the Land-owning Parties the

entire proceeds will subject to such agreement (if any) be paid to the Seller and the

Seller will repay to the Purchasers any balance of the deposit still outstanding

namely if the sale is within twelve months of payment of the deposit the entire

deposit, if within twenty four months 9/10th of the deposit and so on until the expiry

of the 11th year. Declaring that for the purposes of this clause and in connection with

the sale of the subjects to a third party as in the whole course of this agreement, the

Purchaser and their successors under Clause 2(iii) above shall act as Trustees for the

Seller and hold the title of the subjects until the date of Registration or infeftment of

the Third party and the proceeds of sale thereof until disbursed to the Seller as

Trustees for the Seller who alone is beneficially entitled thereto.”

[12] The pursuers in their averments offer to prove that, having learned of the content of

the minute of agreement for the first time in 2014, it was only then that they appreciated that

HH stood to make no profit or gain from the joint venture. With that newly-acquired

understanding, the pursuers’ position as pled on record is that they found that they had

been dealing with one of the joint venturers (namely HH) on a basis which turned out to be

false. The pursuers’ position as pled on record is that they only then realised that HH did

not qualify as a “beneficial owner”, a phrase used by the drafter of the pursuers’ pleadings

in the current action of reduction, defined in Article 2 of Condescendence as meaning an

“ … enjoyed the beneficial interest in whatever profit or return might be made from

[13] The pursuers’ reaction to this discovery, and the background to that reaction, are set

“CON 5 In the negotiations leading up to the agreement to enter into the joint

venture, each prospective joint venturer owed every such other a duty to disclose all

facts of which it had knowledge and of which the other negotiating parties might not

be aware, and which it knew or ought to have known would or might be material to

those others in their decisions as to whether to enter into the proposed joint venture

and, if so, on what terms. In particular, given that the purpose of the joint venture

was to secure the mutually-advantageous development of separate parcels of land

which each joint venturer was contributing to the joint venture, it was the duty of

each prospective joint venturer to disclose fully and frankly to each other the precise

nature of the interest which it held in the land it was so contributing, so that that

information could be considered by the other prospective joint venturers in making

CON 6 At no point in the course of the negotiation of the joint venture, or at any

point before 28 April 2014, did the first or second defenders [i.e. HH or the Cuthills]

disclose to the pursuers that the interest of the first defender in the land which it

appeared to be contributing to the proposed joint venture and which is described in

the Minute of Agreement as the Lands of Headon Holdings Limited differed in any

way from that enjoyed by the beneficial owner thereof. On the contrary, at a meeting

attended by representatives of the pursuers at Headon Park House on 31 May 2000

the late Mr Cuthill told the meeting that Mr Headon had acquired land from him and

would wish to be a landowner participant in the proposed development. At a

meeting at the Old Course Hotel, St Andrews, on 23 October 2000 Mr Headon made

a presentation on behalf of the first defender at which the other parties to this action

were present or represented and stated that his ‘company had acquired land from

Bill Cuthill’ and that he (Headon) ‘like the other parties here today [had] a great

interest in seeing this land obtain development status’. He stated that ‘We would all

like to get the maximum value for our own land’ and that ‘At the end of the day each

landowner will receive the full value of his land less the appropriate costs’. He

described himself as being present at the meeting ‘as a fellow landowner’. He stated

that ‘Headon Developments’ incentive for this to work is great as we have purchased

CON 7 Had the pursuers been aware of the true nature of the interest held by the

first defender in the Development Land, as condescended upon, they would not

have admitted that defender to the proposed joint venture, and would not have

entered into the pretended Minute of Agreement. No party was admitted to the

society of joint adventurers other than as the beneficial owner of land being

contributed for the purposes of the joint venture. The interests of a beneficial owner

of Development Land were not the same as, and in various instances conflicted with,

the interests of the Developer. In particular, the interests of those parties in relation

to the maximisation of the value of the Development Land differed markedly.

Provision was made in the Minute of Agreement to ensure that any purchaser of

Development Land from a joint venturer while the objects of the joint venture had

not been obtained should himself become a joint venturer. The effect of the first

defender being admitted to the joint venture was that it received privileges as a joint

adventurer which it would not otherwise have been accorded, in particular a right to

participate and vote in the councils of the joint adventure, and to block (subject to a

cumbersome and expensive third party dispute resolution procedure) agreement on

a wide range of important issues in terms of clause 2.2.1 of the Minute of Agreement,

such as the nature of the planning consent to be applied for, the terms for the sale of

the land, and the existence of circumstances calling for renegotiation of the joint

venture agreement. The pursuers would not have been prepared to accord such

rights within the joint venture to any party who was not the true beneficial owner of

the Development Land. They would, in any event, not have been prepared to accord

such rights to a party who was not the true beneficial owner of Development Land,

but who was closely connected to the Developer. [But for the non-disclosure and the

misrepresentation, the first defender] would not have been able to vote as a joint

venturer on matters directly affecting the rights of its sister company, the third

defender [Pollpledge], as Developer in terms of the Minute of Agreement, such as the

extent of Development Costs, the purchase of Developer’s Land, whether the

Developer fell to be regarded as being in default, and the appointment of a substitute

Developer. The third defender is unlikely to have been appointed as Developer in

the first place had the first defender not been able, as a prospective joint venturer, to

[14] The university and the trustees raised the present action seeking reduction of the

joint venture agreement, declarator that any purported right or interest held by the third and

fourth defenders (Pollpledge and its nominee) arising out of the agreement was void, and

interdict of the first, third and fourth defenders from taking any further action in terms of

For the pursuers and reclaimers (the university and the trustees)

[15] Senior counsel submitted that the interlocutor of 20 August 2015 dismissing the

action should be recalled, and a proof before answer allowed, all pleas standing.

[16] Disclosure: The pursuers’ contention was that, in the context of negotiations for the

conclusion of a partnership, there was a duty to disclose matters which a party knew or

ought to have known might be material to the decision whether or not to enter into the

partnership and on what terms. The parties’ agreement, although termed a “joint venture”,

was (or could be) a partnership: Mair v Wood 1948 SC 83, Lord President Cooper at page 86.

The joint venturers clearly regarded themselves as in partnership (clauses 1.4 and 1.5). The

obligations which they undertook pointed to a partnership (clause 4). The raison d’etre of the

joint venture was to maximise the value of the various landholdings. Even if section 2(1) of

the Partnership Act 1890 (concerning common property) was relevant, joint or common

property was in itself a neutral factor. The question which the Lord Ordinary should have

addressed was not whether, on the pleadings, the relationship was a partnership, but

whether, taking matters at their highest for the pursuers, they were bound to fail in their

[17] If the pursuers succeeded in proving the existence of a partnership, that was a

contract uberrimae fidei. It was then arguable that there was, as a matter of law, a duty

during pre-contract negotiations to disclose facts which a party knew or ought to have

known might be material to the decision whether or not to enter into the partnership and on

what terms (Helmore v Smith (1887) 35 Ch D 436, Bacon LJ at page 444; Bell v Lever Brothers

[1932] AC 161, Lord Atkin at page 227; Conlon v Simms [2008] 1 WLR 484, paragraphs 127

and 128; Gloag, Contract (2nd ed) page 507). Against that weight of authority the Lord

Ordinary appeared to rely on some observations critical of Gloag in Miller, Partnership

(2nd edition) at pages 158-160. But senior counsel submitted that those observations did not

in fact criticise or undermine the other authorities cited above. Questions as to whether a

fact was a material one which should have been disclosed during pre-contract negotiations,

whether a party knew or should have known that the fact was material, and whether the fact

was discoverable, should be explored in a proof before answer (cf the Lord Ordinary’s

Opinion paragraph [19]). The Lord Ordinary should have allowed a proof before answer to

determine whether a partnership existed, whether there was a duty to disclose material

[18] Misrepresentation: The interest of the developer (Pollpledge) was to obtain the land

at as low a price as possible. By contrast, the interest of the landowners was to obtain as

high a price as possible. The pursuers had agreed that Pollpledge and HH should be parties

to the joint adventure agreement on the understanding that HH was a landowner wishing to

maximise the value of its land (even although HH belonged to the same group of companies

as the developer). The verbal representations made at the meetings all as set out in the

averments gave that impression. The fact that the representations might literally be true was

not determinative (Peek v Gurney (1873) LR 6 HL 377 Lord Chelmsford at page 447,

Lord Cairns at page 402; Aaron’s Reefs Ltd v Twiss [1896] AC 273, Lord Halsbury LC at

page 281; Gluckstein v Barnes [1900] AC 240, Lord Macnaghten at page 250; Park’s of

Hamilton (Holdings) Ltd v Campbell [2008] CSOH 177). The correct question (which the Lord

Ordinary had not addressed) was “were the representations incapable of conveying a false

impression to the hearer?”. The joint venture had been entered into, and the various powers

(including powers to vote and to veto) given, on the basis of the understanding outlined

above. The pursuers offered to prove that the subsequent discovery of the content of the

back-minute changed matters significantly, and that the defenders knew that the

arrangements in the back-minute were material and would make a difference to the other

parties entering into the joint venture. The arrangements in the back-minute showed that

the basis upon which the pursuers had agreed to the matrix of rights and interests set up by

the joint venture agreement had been false. The pursuers offered to prove that they would

not have been prepared to give HH a vote in the councils of the joint venture had they

known that it would not benefit from the profit to which it would be entitled from the sale of

its land. Voting by joint venturers was required on various important matters, including the

type of planning application for zoning (for example, whether residential, commercial, or

amenity, all of which could affect value.) The pursuers offered to prove that they would not

have agreed to the appointment of Pollpledge as developer had they been made aware that

HH would not retain any profit made from the zoning and sale for development of its land,

all the while being part of the group of companies which included the developer.

[19] For the purposes of reduction of the agreement on the ground of misrepresentation,

it was not necessary for the pursuers to prove either fraud or negligence (cf Ferguson v

Wilson (1904) 6 F 779, and paragraph [20] of the Lord Ordinary’s Opinion). But fraud or

negligence might be relevant in a question of damages or other remedies which might yet be

sought. In any event, there were sufficient averments inferring either fraudulent or

negligent conduct such that the pursuers were entitled to a proof before answer on those

[20] The materiality of any matters upon which misrepresentations had been made was a

matter for a proof before answer (cf paragraph [19] of the Lord Ordinary’s Opinion in the

section dealing with disclosure, although a contrary view appeared to be adopted in

paragraph [22] in the section dealing with misrepresentation). The pursuers were entitled

on the averments to lead evidence about matters which they regarded as material and about

which they contended they were misled. Obviously the court might ultimately take a

different view, but materiality was a matter which required inquiry into the facts.

[21] The Lord Ordinary erred in holding that the averments relating to the nature and

content of the representations, and their effect on the other contracting parties, were

irrelevant, without an inquiry into the facts. The case should be remitted to a different Lord

Ordinary for a proof before answer, as the decision reclaimed against demonstrated that the

For the first, third, and fourth defenders (HH, Pollpledge, and Pollpledge’s nominee)

[22] Disclosure: The pursuers’ case rested solely on the terms of the joint venture

agreement. The matter was therefore properly one for debate, rather than a proof before

[23] The concept of “beneficial owner” was irrelevant. Any subsequent division of the

profits was unimportant. The only relevant question was a landowner’s ability to commit

[24] In terms of clause 3.1 the developer was to use its best endeavours to achieve zoning

equivalent to that set out in the development appraisal (part 2 of the schedule to the

agreement). There was no scope therefore for the developer to attempt to “devalue” the

land. If some discrepancy arose, clause 6.2 provided for payment to parties of any uplift in

value achieved through (say) increased density of units or an alternative use of the land.

Also in the introductory definitions section, open market value was to be as agreed or as

assessed by an expert. Thus there was no question of the developer managing to achieve

[25] The back-minute between HH and the Cuthills had not been secret. The back-minute

was referred to in the burdens section of the feu disposition granted by the Cuthills.

[26] There was no warranty in the joint venture agreement – indeed nothing in the

agreement – about beneficial ownership. It was not a term of the joint venture agreement

that a joint venturer should be a “beneficial owner”. There was no prohibition against

representative ownership. There were no averments that the pursuers asked whether all the

[27] As for the question of a partnership, the Lord Ordinary was correct not to

characterise the relationship as a partnership. There were no averments of other activities

beyond the joint venture agreement which would satisfy the test of partnership (cf Lindley,

Partnership (19th ed) paragraph 2-12). In essence, it was an agreement to pool land in order to

achieve favourable planning permission. Because parties had joined together, resulting in a

whole site being available for development, they had agreed to equalise the value of the

land per acre, so that there was no distinction between industrial land and other land. The

ability of one party to cause disruption was controlled by clauses 2.2.1 and 2.2.2. The key

duties in respect of zoning were placed on the developer, and the remaining parties had few

duties. Clause 4 of the agreement (“Mutual duties of the Joint Venturers and the

Developer”) contained standard provisions and did not support an analysis of partnership.

There were no provisions for sharing losses, and no powers to bind others.

[28] HH had purchased land from the Cuthills before the joint venture agreement was

entered into, as Mr Headon’s concern had been to ensure that when he approached the

various landowners with the “pooling of land” proposition, he would not be cut out of the

deal. The development appraisal (prepared by Mr Headon) had been agreed by the joint

venturers. The parties with votes were the university, the trust, HH, and Mrs Cuthill.

[29] Each contracting party knew that Mr Headon had a group of Headon companies, of

which HH, Pollpledge and Headon Properties were three. It was known that HH and

Pollpledge had an association. It was also known that HH had acquired land from the

Cuthills. There were provisions (“an overage arrangement” or an “anti-embarrassment

provision”) such as clause 6.2 ensuring that the Cuthills, for example, would receive a fair

payment in the event of any uplift in value of the development land. The price paid to the

Cuthills for the sale of their land to HH was on a public register for all to see. The existence

of the back-minute between HH and the Cuthills was referred to in the burdens section of

the feu disposition. The minute made it clear that there were continuing rights and

obligations as between the Cuthills and HH. The inference from the arrangements was that

it would make no sense for the Cuthills to dispone the land at a “bare land value”, but

equally it would make no sense for HH to have purchased the land at a “hope value” price.

[30] Mr Sandison QC for the pursuers was correct to acknowledge that clause 4.2 (duty of

frank disclosure during the joint venture) did not provide a basis for the pursuers’

argument. Equally the information about the minute was not something which required to

be disclosed during the joint venture, as it did not affect the objects of the joint venture.

Clause 4.4.4 explicitly envisaged that the joint venturers might have rights over each other’s

land (for example, servitudes or contractual rights). Clause 4.4.5 obliged the joint venturers

to execute such conveyances and deeds as were necessary: that provision emphasised that

the venture was not dealing with common property. Clause 7.1 made provision for a

situation where the assumptions in the joint venture agreement (relating to title and the

development appraisal) were established to be incorrect to the extent that there was

“material prejudice”: either unanimous agreement of the joint venturers on this matter was

required, or a third party expert would decide. The university had sought to invoke

clause 7.1, and the matter had been referred to a third party expert.

[31] In all the circumstances, this was not a situation where the pursuers were exposed to

risk arising from an inequality of knowledge. The Lord Ordinary correctly summarised

matters at paragraphs [16] and [18] of his Opinion. There had been no inequality of

knowledge which was material and relevant. The fiduciary duty contended for by the

pursuers was too wide: it went beyond the circumstances of a partnership, and sought to

protect the position of parties negotiating the commercial terms on which they would be

willing to enter into a joint venture. There was no authority for such a broad duty. The

Lord Ordinary was correct in paragraph [16] to distinguish Conlon v Simms, which involved

non-disclosure on a matter which went to the heart of a legal partnership, focusing on the

affairs of the partnership. The circumstances of the present case were also very different

from those in cases such as Smith v Bank of Scotland 1997 SC (HL) 111, where the interests of

[32] The Lord Ordinary had not erred in his conclusion on disclosure.

[33] Misrepresentation: There had been no misrepresentation, express or implied. It was

not represented that HH was the “beneficial owner” in the sense used by the pursuers. The

statements simply described the operation of the joint venture agreement. The pursuers’

position was an extreme one, which went beyond the operation of the joint venture and into

the private affairs of each joint venturer (for example, the particular circumstances in which

a joint venturer would be obliged to pass on all or most of the sale proceeds to someone else,

whether because of trust obligations, or remuneration to employees of the joint venture, or

[34] It was not averred that, in the course of the negotiations leading to the joint venture

agreement, anyone had stipulated that beneficial ownership was important. It was not

averred why the defenders knew or ought to have known that beneficial ownership was

important. There was no mention of beneficial ownership in the contract, and the lack of

such a mention was relevant when assessing the pre-contract negotiations (Cramaso LLP v

[35] Fraud and negligence: Mr Sandison QC submitted that the pursuers did not require

to prove either fraud or negligence. But fraud and negligence were pled, and there were no

averments to support either. It could only be assumed that an attempt was being made to

set up a fraud or negligence claim with a view to preserving any right to claim damages.

The pleadings relating to fraud and negligence were irrelevant and lacking in specification.

[36] Conclusion: The reclaiming motion should be refused. However, if a proof before

answer were to be allowed, it was unnecessary to remit the case to another judge.

[37] Senior counsel for the second defenders adopted the submissions made on behalf of

the first, third and fourth defenders, and made the following further submissions.

[38] Misrepresentation: The late Mr Cuthill had been a retired farmer. The Cuthills

found it convenient to enter into the minute of agreement with HH and to receive money.

They retained a degree of control and interest in the joint venture by means of the ransom

[39] In relation to the alleged representation on 31 May 2000 when Mr Cuthill “told the

meeting that Mr Headon had acquired land from him and would wish to be a landowner

participant in the proposed development” (Article 6 of Condescendence), that

representation had been made about an individual (Mr Headon) and not about a corporate

concern (such as HH). As Mr Headon was not a contracting party to the joint venture

agreement, the pursuers could not allege that the representation had induced them to enter

[40] As for the meeting at the Old Course Hotel on 23 October 2000, all that was averred

in Article 6 of Condescendence was that Mr Cuthill remained silent when Mr Headon made

a representation that his “company had acquired land from Bill Cuthill” followed by

comments about the desire to achieve the maximum value for the land. Nothing inaccurate

was said which required correction by Mr Cuthill. As the minute of agreement between the

Cuthills and Headon Properties Limited was concluded on 22 September 2000, and as no

title deed was granted by the Cuthills until 1 December 2000, it was indeed the case that as

at 23 October 2000, one of Mr Headon’s companies had a personal right to obtain a feu

disposition, but was not yet infeft. Thus nothing was said which could induce the belief that

HH had “beneficial ownership” of the land in the sense used by the pursuers, leading them

to enter into the joint venture agreement in that mistaken belief.

[41] Furthermore, the joint venture agreement, to which Mr Headon was not a party, was

not concluded until some three years later on 2 October 2003, and there were no averments

about negotiations during these years (particularly no averments about any negotiations

[42] In conclusion, there were no relevant averments about any misrepresentations on the

part of the Cuthills, and certainly not any fraudulent or negligent misrepresentations.

[43] Disclosure: Senior counsel submitted that a pre-contract duty of disclosure arose

only in paradigm cases such as partnership, insurance, marriage and separation. In

insurance contracts for example, the proposer was privy to all the information which the

insurer might require concerning health, or previous bad conduct. That was indeed a

contract of utmost good faith. In England, the concept of uberrimae fidei applied to a limited

class of cases: insurance, separation in a family situation, proper partnership, and divorce

agreements. The present case did not concern a partnership, but rather a contract of a lesser

[44] Registering with the VAT authorities was something which had to be done, and

using the partnership avenue was the nearest one could come to being a legal persona: but

such registration was not determinative in law. The Lord Ordinary was correct to conclude

that the personality for VAT purposes was not conclusive. Mr Cuthill had nothing to do

[45] There was no partnership in the present case. The joint venture had no independent

legal persona. There was no provision in the detailed contract for joint and several liability

for debts. There was no provision creating mutual agency. The majority of the work was to

be done by the developer. An individual joint venturer could sell his or its interest, whether

or not the others agreed (clause 4.5), whereas non-assignability and delectus personae were

normally features of a partnership. The agreement was simply an agreement to pool

[46] Thus the Lord Ordinary was correct to reject the argument that there must be

disclosure in the circumstances of this case. A decision in favour of the pursuers would

result in the extension of a duty of disclosure to a wide range of commercial contracts.

[47] Disclosure: The pursuers’ case was that a partnership had been created, giving rise

as a matter of Scots law to a pre-contract duty of disclosure. No reliance was placed on any

more general duty of good faith, or duties arising from an imbalance of bargaining power or

[48] “Business” covered virtually any activity or venture of a commercial nature,

including a one-off transaction (Lindley, Partnership paragraph 2-02). In the present case, the

parties chose to describe themselves as carrying on a business. As for mutual agency, if

there was a partnership qualifying in terms of section 1(1) of the 1890 Act, then there would

be mutual agency and liability for the debts of the partners (Lindley paragraph 2-13). In any

event, a partnership could exist although the partners did not undertake liability for debts.

In relation to non-assignability, the parties had foreseen this issue and had provided for it,

and section 31 of the 1890 Act dealt with a partner assigning his share of the partnership.

[49] It was being suggested that the reference to the back-minute in the burdens section of

the feu disposition amounted to disclosure of the agreement between HH and the Cuthills

that any profit made out of the land deal would be handed back to the Cuthills. But (i) as a

matter of fact, the parties had agreed that an examination of title would be carried out by

one adviser only on behalf of all the parties. As it happened, it was HH’s solicitor who did

the noting of title for all the joint venturers. (ii) It was not the law that a duty to disclose

would be satisfied by providing a party with the means of finding out what should have

been disclosed (Parks of Hamilton (Holdings) Ltd v Colin Campbell [2008] CSOH 177). (iii) If it

were assumed that the feu disposition had been actively considered by those advising the

university and the trust, the inferences argued for could not necessarily be drawn from the

price of £249,000, for several reasons. First, the sale was far from a straightforward sale. The

land was carved up by ransom strips, which provided the Cuthills with considerable power.

Anyone noting the price of £249,000 would take that factor into account. Secondly, HH was

prohibited from selling outside the joint venture. Thirdly, the content of the back-minute

was truly “private information”, not known to either the university or the trustees.

Fourthly, the pursuers offered to prove that the information was material in the sense that it

“might influence the mind of a prudent contractor” (Lord Atkin at page 227 of Bell v Lever

Brothers, emphasis added). Fifthly, the pursuers offered to prove the effect of the discovery

of the information on the pursuers, all as set out in Article 7 of Condescendence. It was

averred that the pursuers realised that HH was not the same as the other landowners, that

HH had no interest in the value of the land, and that HH was in effect a “cuckoo in the

nest”. Had there been disclosure of the content of the minute of agreement, HH would not

have been admitted to the joint venture at all, and certainly not on the terms it was. The

court could not, without hearing evidence, conclude that the information, had it been

disclosed, was not capable of persuading the pursuers as prudent persons to alter their

position. Sixthly, many features of the joint venture agreement indicated that the newly

discovered information was material. For example, the need for unanimity of the voters in

relation to certain important matters (clause 2.2.1). Mr Cormack had suggested that the

developer could not make any change which might be prejudicial to the interests of the

landowners without their consent: however that was not so. The development appraisal

was an item not listed in clause 2.2.1: the developer could make changes to the appraisal

which the joint venturers either had to approve or disapprove: if the former, they could not

later claim “material prejudice”; if the latter, they could claim “material prejudice” but

would have to request a renegotiation of contract terms. Also it was arguable that the back-

minute breached the introductory assumption that HH had a good title without any

conditions that would be materially prejudicial to the joint venture. Other contractual

provisions which pointed to the materiality of the information contained in the back-minute

included the prohibition against selling land to someone outside the joint venture. In

conclusion, the question “What would a prudent person do, had the truth been known?”

could not be answered by reference to what that person did in ignorance of the truth.

[50] Misrepresentation: The terms of the joint venture agreement could not be treated as

a guide to what a contracting party might have done had the truth been known. The proper

question was whether the issue might have caused a prudent person (assessed objectively)

not to contract at all, or to contract on different terms. In paragraph [20] of his Opinion, the

Lord Ordinary did not criticise the averments relating to misrepresentation, or fraud or

(1) Partnership is the relation which subsists between persons carrying on a

[52] A joint venture may, as a matter of law, constitute a partnership. As Lord President

“ … A joint adventure is simply a species of the genus partnership, differentiated by

its limited purpose and duration (which necessarily affect the extent of the rights and

liabilities flowing from the relationship), but in all other essential respects

indistinguishable from any other partnership. ‘A joint adventure … differs in no

respect except its transient nature … from an ordinary mercantile partnership’

(More, Notes to Stair, p, xcviii). ‘A joint adventure is as proper a partnership as any

other’ (Bell’s Illustrations, vol I, p 264). I may also refer to Bell’s Principles, section

392; Commentaries, (7th ed) vol ii, p 538; and Maclaren’s Practice, p 270. So far from

expressly departing from these common law doctrines, the Partnership Act, by

[53] The question whether or not a partnership exists must, in my view, depend upon the

particular facts and circumstances of the case. At one end of the range of possible

circumstances might be a situation where one farmer invites his neighbour to maximise the

value of their respective landholdings by lodging a joint planning application covering both,

and by agreeing upon the appointment of certain professionals to help them achieve their

goal. Such a situation might well not qualify as “carrying on a business in common with a

view of profit”. However different or more complex circumstances might, in law, amount to

[54] In the present case, the pursuers offer to prove inter alia the following:

(i) A carefully negotiated formal joint venture agreement: A 36-page formal agreement

involving five parties (one developer and four landowners/joint venturers) was

entered into. The parties’ rights and duties are set out in considerable detail. The

parties have signed the agreement, consenting inter alia to registration for

“The Joint Venturers hereby enter into a joint venture established for the Joint

(ii) A declaration for the purposes of VAT: In clause 1.5, the parties agreed:

“The Joint Venturers will forthwith apply to the Commissioners of Customs

and Excise for registration under section 45 of the Value Added Tax Act 1994

as persons carrying on business in partnership with respect to the Joint

Venture and will endeavour to satisfy the Commissioners that they intend to

make taxable supplies at such date as is mentioned in paragraph 5 of

Section 45 is headed “Partnerships”, and provides inter alia:

Clause 1.5 is at the very least an indicator that the landowners/joint venturers

regarded themselves as carrying on a business in common with a view of profit. It

would be odd if a business relationship were to be classified as a partnership for

VAT purposes, but to be regarded as something else for other purposes.

(iii) Further references to the “business” of the joint venture: Clause 1.4, by excluding

“any other … business” of the joint venturers from the ambit of their agreement, again

suggests that the parties regarded themselves as carrying on a business in common

with a view of profit in the context of the development of land to the west of St

Andrews. That impression is reinforced by clause 2.4.1, which refers to meetings of

the joint venturers and/or the developer “for the dispatch of business of the joint

(iv) Contributions noted, objects described, necessary consents defined, and powers and duties

allocated: Other clauses in the agreement record the contributions to be made by the

joint venturers, the objects of the joint venture, the consents that might be required,

and the parties’ powers and duties. For example, clause 1.3 sets out the objects of the

joint venture, including obtaining zoning, planning consent, and a master plan for

the development land; optimising the sale value of the development land; and

selling the development land to the developer or its nominees. The developer (the

third defender) is given certain powers and duties with a view to achieving the

objects (clauses 3 and 4, together with the definition of “the Developer’s

Contribution” in the introductory section). The unanimous consent of the joint

venturers is required for certain matters such as the average value per acre of the

development land, the format and content of the application for planning consent,

the development costs, and the question whether or not the developer is in default

(v) Ability to refer to a third party expert: The agreement contains dispute resolution

procedures, including reference to a suitably qualified expert (for example, the

(vi) Sale and division of the sale proceeds: There are detailed provisions concerning the

sale of the development land and the division of the proceeds amongst the joint

(vii) Material prejudice: In the introductory section, the definition of “material

prejudice” (which might lead to the termination of the joint venture or a

renegotiation of its terms) refers to “the interests of the Joint Venturers as a whole”,

indicating that the parties intended the arrangement to be one where individual

interests were to be subsumed into a greater common whole, tending to indicate a

[55] Standing the nature of the arrangements in the joint venture agreement, the overall

object of achieving the commercially best profit from the land for the various joint venturers,

the nature and number of parties involved in the project, and the circumstances surrounding

the entering into of the joint venture agreement, I consider that the question whether or not

a partnership had been formed cannot be decided at the stage of debate, but requires

investigation into the facts. In my view the pursuers’ averments provide a relevant basis for

an argument that the landowners/joint venturers did indeed enter into a “relation …

between persons carrying on a business in common with a view of profit”.

[56] I note the points made in paragraph [17] of the Lord Ordinary’s Opinion, said to

indicate that a partnership had not been constituted. Addressing each in turn:

(i) It seems to me that the meaning and effect of the VAT provision registering the

project as a “partnership” (clause 1.5) should not have been discounted by the

Lord Ordinary at the stage of a debate without some explanation concerning this

complex area of law. Also clauses 1.4 and 2.4.1 (referred to in paragraph [54] above)

(ii) An objective of “exploitation of land” may easily be one of the objects of a

(iii) The joint venturers undertook a considerable number of duties and functions in

order to achieve the objects set out in the joint venture agreement. They were to

“control the management of the joint venture” (clause 2.1), inter alia making decisions

about the important matters listed in paragraph [62] below. They were to participate

in joint venture meetings convened under clause 24 (clause 4.4.1). They were to

execute conveyances and other deeds as necessary (clause 4.4.5), provide the

developer with all reasonable and necessary assistance (clause 4.4.6), and if necessary

be parties to actions to achieve the joint venture objects (clause 4.4.7). They were to

allow the developer and authorised persons to enter their land for investigations

such as bore holes (clause 4.4.9). I cannot, at least at this stage, endorse the Lord

Ordinary’s observation that the joint venturers “did not commit themselves to doing

much by way of positive action towards achieving the object” (paragraph [17]).

(iv) The absence of any express provision binding the parties in respect of liability for

debts or losses is not necessarily determinative. If a partnership is held to exist, the

Partnership Act 1890 would supply the necessary provisions. In any event, it seems

to me that there are at least some provisions in the joint venture agreement binding

the joint venturers in respect of a liability, namely clause 3.4 (liability to repay to

Pollpledge the Developer’s Contribution in the event of Pollpledge being dismissed);

clause 7.7 (any additional funds unanimously agreed to be required by the

developer, to be paid in pro rata shares); and clause 10.1.3 (liability for fees and

expenses of any third party expert). It is also perhaps significant that the agreement

takes the trouble expressly to exclude joint liability in certain circumstances (for

example, clause 7.6 which allocates any environmental costs specifically to the

(v) Similarly if a partnership were held to exist, the 1890 Act would regulate matters

in the absence of any express provision authorising the parties to bind each other in

(vi) A partnership may exist despite the lack of common property. Section 2(1) of the

Partnership Act 1890 provides that common property does not of itself create a

partnership; but equally, common property is not a prerequisite of a partnership.

The facts in Hamilton v Allied Domeq plc 2006 SC 221 were, in my view, very different

[57] Thus I do not agree with the Lord Ordinary that these points have the effect that the

pursuers would be “bound to fail” on the issue of the existence of a partnership, even if they

proved all their averments. Contrary to the Lord Ordinary’s view, I consider that the

pursuers are entitled, on the basis of their averments read as a whole, to a proof before

[58] If the pursuers succeeded in proving that the joint venturers were in partnership,

there would be a stateable argument that the pre-contract negotiations, leading as they did

to a contract uberrimae fidei, required the parties to disclose to each other anything of

significance or materiality which might affect a party’s willingness to enter into the

partnership and/or to do so on certain terms. As was said by Bacon VC in Helmore v Smith

“… If fiduciary relation means anything I cannot conceive a stronger case of

fiduciary relation than that which exists between partners. Their mutual confidence

is the life blood of the concern. It is because they trust one another that they are

partners in the first instance; it is because they continue to trust one another that the

Lord Atkin in Bell v Lever Bros [1932] AC 161 at page 227 observed:

“… Ordinarily the failure to disclose a material fact which might influence the mind

of a prudent contractor does not give the right to avoid the contract. The principle of

caveat emptor applies outside contracts of sale. There are certain contracts expressed

by the law to be contracts of the utmost good faith, where material facts must be

disclosed; if not, the contract is voidable. Apart from special fiduciary relationships,

contracts for partnership and contracts of insurance are the leading instances. In

such cases the duty does not arise out of contract; the duty of a person proposing an

insurance arises before a contract is made, so of an intending partner …”

The same approach, adopted by Lawrence Collins J, was approved by the Court of Appeal

“127 In my judgment there can be no doubt that the principle of caveat emptor does

not apply to the making of a partnership agreement, and that in negotiating such an

agreement a party owes a duty to the other negotiating parties to disclose all material

facts of which he has knowledge and of which the other negotiating parties may not

be aware. This was made clear as long ago as 1932 in the passage from the judgment

Gloag, Contract (2nd ed) at page 507, adopts a similar, if somewhat more tentative, approach.

I am not persuaded that the comments in Miller, Partnership (2nd ed) pages 159-160 detract

from, or undermine, authorities such as Helmore v Smith and Bell v Lever Bros, nor am I

persuaded that the approach to the existence or otherwise of a duty of disclosure in

pre-contract negotiations leading to a partnership should necessarily be different in Scotland

Whether the content of the back-minute was, in the circumstances, a material fact which should have

[59] Whether an issue would, or would not, be material or significant in this particular

case for the parties entering into the joint venture agreement, is in my view eminently a

matter for proof before answer: cf the views of the Lord Ordinary in paragraph [19] of his

“ … Had I held that the defenders, or any of them, were under a duty to disclose the

nature of the first defender’s interest to the pursuers, I would have accepted the

pursuers’ submission that these, along with the pursuers’ averment that they would

not have entered into a joint venture agreement on the terms they did, were matters

“Had the pursuers been aware of the true nature of the interest held by the first

defender in the Development land, as condescended upon, they would not have

admitted that defender to the proposed joint venture, and would not have entered

into the pretended Minute of Agreement … The effect of the first defender being

admitted to the joint adventure was that it received privileges as a joint adventurer

which it would not otherwise have been accorded, in particular a right to participate

and vote in the councils of the joint adventure, and to block (subject to a cumbersome

and expensive third party dispute resolution procedure) agreement on a wide range

of important issues in terms of clause 2.2.1 of the Minute of Agreement, such as the

nature of the planning consent to be applied for, the terms for sale of the land, and

the existence of circumstances calling for renegotiation of the joint venture

agreement. The pursuers would not have been prepared to accord such rights within

the joint venture to any party who was not the true beneficial owner of Development

Land. They would, in any event, not have been prepared to accord such rights to a

party who was not the true beneficial owner of Development Land, but who was

closely connected to the Developer … (Article 7 of Condescendence)”

[61] The pursuers’ averments that they would not have admitted the first defender to the

joint venture were criticised as “a mere assertion”. However in my view, on a reading of the

pursuers’ pleadings as a whole, there is at least a stateable argument that parties seeking to

achieve the best possible price for their land might be content to enter into a written joint

venture agreement with a power structure drafted on the basis that all the participating

landowners had a common interest (i.e. achieving the best profit) and were thus likely to

constitute a coherent group controlling and managing the developer (whose interests would

not necessarily be aligned with those of the landowners/joint venturers). Provisions relating

to policies, decisions, consents, votes, and vetoes would be based on that premise. A

subsequent discovery that one landowner/joint venturer was in a sense a “front” or a

“façade”, who stood to make no profit or loss from the sale of its particular land, but was, as

the holding company of a group of companies which included the developer company,

prima facie a party whose interests were wholly aligned with the developer’s, might be

shown in evidence to be significant or material to the landowners when deciding who

should be permitted to join the venture and/or when adjusting the checks and balances to be

[62] The voting structure in the joint venture agreement, to which the pursuers agreed on

the basis of the information they had, tends to support the pursuers’ contentions. The

agreement gives a vote on significant matters to each of the four joint venturers/landowners

(namely, the university; the trust; the Cuthills; and HH). No vote is given to the developer

Pollpledge. Thus the landowners/joint venturers form a “bloc” of voters, with power to

appoint the developer (clause 2.3), and to meet with the developer as often as necessary “for

the dispatch of business of the joint venture” (clauses 2.4.1 and 3.1.1). The bloc of voters is

 the format and content of the application for planning consent (clause 2.2.1(iii))

 the average value per acre of the development land (clause 2.2.1(i))

 whether the assumptions in the development appraisal were incorrect, leading to

 additional developer’s contributions (clauses 7.2, 7.6, 7.7)

 whether the developer was to be treated as “in default” (clauses 2.2.1(xii) and 8),

whether the developer should be excluded from the project (clause 8.2) and

whether rights against the developer should be exercised (clause 8.3)

 the terms of appointment of a third party expert (clauses 2.2.1 and 2.2.2)

[63] The pursuers, in their averments, offer to prove that in 2003 they entered into the

joint venture agreement on the understanding that the bloc of voters were landowners who

sought to maximise the profit to be made from their respective plots of land, and who inter

alia appointed, and to some extent controlled and supervised the developer, ensuring that

the joint venture was being conducted in their interests. The pursuers offer to prove that

this understanding, which was the basis upon which they entered into the agreement, was

subsequently in 2014 demonstrated to be false when they learned of the existence and

content of the back-minute, and appreciated that the bloc of voters in fact contained one

landowner who stood to gain nothing by way of profit from its plot(s) of land but on the

contrary had interests which were apparently wholly aligned with those of the developer. I

therefore consider that the voting structure in the agreement lends support to the pursuers’

Whether the content of the back-minute was in any event available or in the public domain

[64] On behalf of the first, third and fourth defenders, it was submitted that on the facts

as averred in the pleadings no duty of disclosure arose in any event as all the necessary

material facts relating to the content of the back-minute were in the public domain. For

example, it was known that the developer company Pollpledge was part of the Headon

group of companies of which HH was the holding company. Accordingly it was known that

there was a connection and, in all likelihood, a degree of co-operation between them.

Furthermore, the feu disposition by the Cuthills in favour of HH was easily examinable as it

was in the public registers. Not only did the disposition contain a price suggestive of the

existence of an “anti-embarrassment” arrangement between HH and the Cuthills, but there

was specific reference to the back-minute in the feu disposition. The pursuers had only to

read the disposition and request sight of the back-minute to be in full possession of all the

information they required. They could have taken those steps prior to finalising the joint

[65] Those submissions have not persuaded me that it is unnecessary to have a proof

before answer. At this stage it seems to me arguable that an obligation to disclose material

or significant matters in the course of negotiating the terms of a contract uberrimae fidei

would not necessarily be fulfilled by an assertion that the matter was discoverable by the

other contracting party if he undertook certain inquiries and/or made certain requests, all of

which might or would uncover the necessary facts (cf Park’s of Hamilton (Holdings) Ltd v

Colin Campbell [2008] CSOH 177). Such an argument appears all the stronger where the

entry in the feu disposition specifically relates only to the prohibition of the further transfer

of land by HH to anyone other than a Headon company as listed in the schedule to the back-

minute (i.e. a question of delectus personae) and not to any arrangement for the payment over

of the sale profits by HH to the Cuthills. The circumstances surrounding the back-minute,

its terms, its availability to joint venturers other than HH and the Cuthills, and the state of

knowledge of those other joint venturers, would in my view be appropriate matters for

[66] In the result it is my opinion that it cannot be said that the pursuers’ action as pled

on the issue of disclosure “must necessarily fail even if all [their] averments are proved”. I

should add that I do not accept the defenders’ general submission that the pursuers seek to

found their position on the terms of the joint venture agreement, and thus all issues can be

decided at a debate without the need for a proof. On the contrary, it seems to me that the

pursuers rely upon all the circumstances of the case, requiring evidence about meetings,

correspondence, statements (oral and written), documents, and parties’ personal knowledge,

perceptions, and reactions – in other words, all the circumstances of and surrounding the

joint venture agreement. The pursuers are therefore entitled to a proof before answer on the

issue of disclosure. I should also add that I do not consider that any decision in this case,

reached after a proof before answer, would necessarily provide a precedent in other cases

where parties negotiated the commercial terms on which they would be prepared to enter

into a joint venture. Each case would depend upon its particular facts.

[67] I accept that there may be misrepresentation by omission or by partial statements,

depending upon the circumstances (cf Peek v Gurney (1873) LR 6 HL 377, Lord Chelmsford at

page 447, Lord Cairns at page 402; Park’s of Hamilton (Holdings) Ltd v Colin Campbell

[2008] CSOH 177, Lord Hodge at paragraph [18]). I agree with senior counsel for the pursuers that

the pursuers’ averments relating to representations (summarised in paragraph [8] of the

Lord Ordinary’s Opinion), cannot at this stage be said to be incapable, in the contexts

averred, of being held to be misleading. The evidence may demonstrate that the statements

referred to caused some participants to take certain decisions on the basis of a

misunderstanding or a mistaken view of the role of HH in the joint venture and the nature

and extent of the interests of HH, the Cuthills, and the developer. I also accept that what

was said, or not said, in relation to those matters might, in a proof before answer, be

demonstrated to be “material” misrepresentations in that other contracting parties might not

have entered into the contract on the terms they did, had they known the full facts. The

materiality of any particular unknown fact would, in my view, be a matter to be explored in

a proof before answer (cf the Lord Ordinary’s approach in paragraph [19] of his Opinion,

although apparently differing from his approach in paragraph [22]).

[68] Again therefore, on the issue of misrepresentation, it is my opinion that it cannot be

said at this stage, without any inquiry into the facts, that the pursuers “must necessarily fail

even if all [their] averments are proved”. There is sufficient averred on record to entitle the

pursuers to a proof before answer on the issue of misrepresentation.

[69] Finally, I considered the question whether any averments of allegedly fraudulent or

negligent misrepresentation should be excluded from probation as irrelevant. I note that

“ … given (a) that the first and second defenders [HH and the Cuthills] were fully

aware of the true nature of that interest [i.e. HH’s interest in the development land

which it was contributing to the joint venture]; (b) that they were aware of its likely

effect on the willingness of the other prospective joint venturers to admit the first

defender to the society of joint adventurers; (c) that the content of the 2000 Minute of

Agreement was not made a matter of public record; and (d) that the first defender’s

directing mind, Joseph Headon, refused to answer questions put to him about the

nature of the agreement once suspicions about its existence had been raised; the

misrepresentation in question was made fraudulently with a view to inducing the

pursuers to act as they did, or at least negligently to that effect …”

In my view, those averments, taken with the pursuers’ other averments and read as a whole,

cannot be said at the stage of a debate to be clearly insufficient to support allegations of

fraud and/or negligence. Ultimately I propose that the pleadings be allowed to proceed to

proof as they stand. It may be that some averments will not be proved. No doubt any

degree of divided success may be reflected in awards of expenses.

[70] For the reasons given above, I propose that the reclaiming motion be allowed; that

the Lord Ordinary’s interlocutors of 20 and 26 August 2015 be recalled; that a proof before

answer, all pleas standing, be allowed; and that the case be remitted to the Outer House (the

[71] As evidence has still to be led, it is not necessary that the case should come before the

same Lord Ordinary. For the avoidance of any possible future difficulty, the case should be

THE UNIVERSITY COURT OF THE UNIVERSITY OF ST ANDREWS; and ANOTHER

Pursuers and reclaimers: Sandison QC; Burness Paull LLP (First pursuers) and Gillespie

First, third and fourth defenders and respondents: Cormack (sol adv); Pinsent Masons LLP

[72] I have had the advantage of reading in advance the Opinions of Lady Paton and

Lord Malcolm and I am content to concur with them. I did consider that there was some

force in the submissions made by senior counsel for the second defenders relating

specifically to the averments about alleged misrepresentation by the late Mr Cuthill. I have

concluded however that taking into account the complexity of the facts and circumstances it

is not possible at this stage, in the absence of evidence, to conclude that there were no

THE UNIVERSITY COURT OF THE UNIVERSITY OF ST ANDREWS; and ANOTHER

Pursuers and reclaimers: Sandison QC; Burness Paull LLP (First pursuers) and Gillespie

First, third and fourth defenders and respondents: Cormack (sol adv); Pinsent Masons LLP

[73] I have had the advantage of reading a draft of the judgment of your Ladyship in the

chair. I agree with it and with your Ladyship’s view that the appeal should be upheld. The

case should be remitted to the commercial roll for further procedure in accordance with our

decision. I wish to add the following observations on some of the issues discussed at the

[74] The first matter discussed by the commercial judge concerned a pure question of law

– what disclosure duties, if any, are owed by parties to each other when negotiating a

partnership agreement? The judge’s reasoning is set out in paragraph 16 of his judgment,

“… a duty incumbent on a prospective partner to disclose every fact that he knew or

ought to know would or might be regarded as material by the other prospective

partner seems to me to go further than necessary to protect the interests of persons

negotiating a commercial agreement, even one that will result in them owing

fiduciary duties to one another after the partnership has been entered into.”

It may be that the commercial judge expressed no definitive view as to the law, but it is clear

that he favours a restrictive approach. The court was told that this is first time that the issue

[75] The position south of the border is not in doubt – see Bell v Lever Bros Ltd

“Ordinarily the failure to disclose a material fact which might influence the mind of a

prudent contractor does not give the right to avoid the contract. The principle of

caveat emptor applies outside contracts of sale. There are certain contracts expressed

by the law to be contracts of the utmost good faith, where material facts must be

disclosed; if not, a contract is voidable. Apart from special fiduciary relationships,

contracts for partnership and contracts of insurance are the leading instances. In

such cases the duty does not arise out of contract; the duty of a person proposing an

insurance arises before a contract is made, so of an intending partner.”

Lord Atkin’s observations were applied by the Court of Appeal in Conlon v Simms

[2008] 1 WLR 484 at paragraphs 127-8. The careful reasoning of the judge at first instance,

[76] In Scotland it is established that once parties are partners, they have agreed to a

contract which demands “the utmost good faith inter socios; staked on the absence of

misrepresentation and concealment” – Erskine, Principles, 21st ed 393. Bell describes the

contract as one of “exuberant trust”, Principles,10th ed 358. Gloag, Contract 2nd ed 496, says that

each partner is entitled to repose confidence in the other; thus a failure to disclose known

material facts is a ground for reduction of the contract. For a relatively recent example of this

principle in operation, reference can be made to Ferguson v Patrick & James WS 1984 SC 115.

“The law expects and requires that the conduct of the partners towards each other

shall be characterised by the most scrupulous good faith, that they shall zealously act

and co-operate for the common good, and that they shall not place their individual

The reason for all of this is explained by Bacon V-C in Helmore v Smith [1887] 35 Ch D 436 at

“If fiduciary relation means anything I cannot conceive a stronger case of fiduciary

relation than that which exists between partners. Their mutual confidence is the life

blood of the concern. It is because they trust one another that they are partners in the

first instance; it is because they continue to trust one another that the business goes

[77] In my view, the considerations which have led to pre-contractual disclosure duties in

England and Wales apply with equal force north of the border. If a party is withholding

material information, for example, a highly relevant past act of dishonesty, it would make

little sense if the obligation to reveal it arose only once the contract was agreed. As the Vice-

Chancellor made clear, mutual trust and confidence is a cause of the contract, not a result of

it. The commercial judge cites a passage in Miller, Partnership, 2nd ed, at pages 156-161;

however there is nothing said in it which leads me to doubt the above The author is anxious

to avoid the importation of what he considers to be disruptive doctrines from the law of

England and Wales, namely the notion of contracts uberrimae fidei (contracts of utmost good

faith). A passage in Professor TB Smith’s Short Commentary is cited, where doubt is

expressed as to the need for Gloag’s list of contracts of utmost good faith. Professor Smith

states that “bona fides is fundamental in the Scottish law of contract in a way which it is not

in the law of England”, and thus the introduction of the superlative adjective may be

“The negotiations preceding a contract uberrimae fidei do not create a situation in

which a man should be more honest than on other occasions, but one in which an

[78] A duty of disclosure can arise simply from a fiduciary relationship, for example,

trustee and beneficiary, parent and child, and partner to partner. In other cases, the duty

arises in advance of a completed bargain because of the nature of the proposed contract,

with insurance being a classic example – see Life Association v Foster [1873] 11 M 351,

Lord President Inglis at 359. When negotiating a standard arm’s length commercial

agreement, both sides are expected to understand that they must look out for their own

interests, and, in general, cannot complain if in due course they learn that the other

possessed more accurate information. However, in the case of negotiations to enter a

partnership, as with insurance, it is the nature of the contemplated relationship which

requires each party to state any known circumstances which could influence the other.

Another possible way of looking at this would be to identify a fiduciary relationship once

[79] The commercial judge returned to the subject at paragraph 18 of his judgment. He

“no inequality of knowledge in the sense that any party was in possession of private

information that another party could not ascertain prior to contractual commitment.

The situation is therefore different from that of a proposal for insurance or a

subscription for shares in reliance upon information in a company prospectus. In my

opinion the imposition of a duty of disclosure in the circumstances of this case would

be an innovation supported by neither principle nor precedent. I therefore hold that

the pursuers’ case based upon uberrima fides and a duty of disclosure is irrelevant.”

[80] The reference to “the circumstances of this case” injects an element of uncertainty as

to the scope of the judge’s decision. It is at least possible that he was suggesting that, if the

issue of beneficial ownership was so important, enough was known about the purchase of

the Cuthill land to place a burden on the reclaimers to make their own inquiries. That is

indeed a possible outcome of the present case, though I consider it could only be reached

after evidence had been heard. I note that in an insurance case, Lord Esher MR said that it

“The rule is satisfied if he discloses sufficient to call to the attention of the

underwriters in such a manner that they can see that if they require further

information they ought to ask for it.” (Asfar & Co v Blundell 1896 1 QB 123 at 129)

[81] There may be a concern that a partner, who is keen to escape from what is perceived

to be a bad bargain, might cast around for a pretext based on an alleged breach of a pre-

contractual duty of disclosure. In itself that would not be a reason for rejection of the duty.

In any event, there are important constraints. The undisclosed fact must be shown to be a

material fact, in the sense that, objectively, it could influence the judgment of a reasonable

and prudent person in the position of the other party. The non-discloser must be aware of

the particular fact, and of the circumstances which render it material to the bargain. And

before the contract will be reduced, the undisclosed fact must be both material and

operative; the latter in the sense that an erroneous belief, which would have been corrected

by compliance with a disclosure obligation, caused the party concerned to enter into the

contract. Counsel for the reclaimers argued for something akin to a need for “informed

consent.” I would reject that submission. Absent inducement, the agreement is not

[82] In discussing the issue of whether the joint venture agreement (JVA) resulted in a

relationship of partnership, it can be noted at the outset that counsel for the reclaimers

disclaimed any argument that, even if the JVA is not a partnership, nonetheless a duty of

disclosure arose. The main factors which influenced the commercial judge’s view that the

JVA is not a partnership were (i) its purpose; being the exploitation of land; (ii) the view

that the bulk of the positive duties fell on the developers, not on the joint venturers; and

(iii) that there was no common property, no provision for liability for debts, and none for

[83] The reclaimers’ submission was that the question should be answered after proof. I

agree with that submission. At this stage, the only question is that set out in Jamieson – in

effect, are the reclaimers bound to fail in the offer to prove this part of their case? The

respondents contend that they are bound to fail, and this because the only relevant

averments concern the terms of the JVA, which speaks for itself in favour of the judge’s

conclusion. Even if it was appropriate to adopt such a narrow focus, I would not be

persuaded that the correct position emerges so clearly from the terms of the JVA that

nothing is to be gained from evidence. If nothing else, it would help to put the agreement

into its proper context in terms of the background and its purposes.

[84] According to section 1 of the Partnership Act 1890, partnership is “the relation which

subsists between persons carrying on a business in common with a view to profit”.

Section 2 provides that “business” includes “every trade, occupation or profession”. There

is clear authority that a joint venture of limited purpose and duration can amount to a

partnership – Mair v Wood 1948 SC 83, Lord President Cooper at 86. The statutory definition

is sufficiently vague and open-ended that there have been many attempts to put some flesh

on the bones. For example, Greens Encyclopaedia, vol 11 para 13, talks of two or more persons

placing their property, labour or skill, or some of them, to lawful commerce or business,

dividing profits and losses in certain proportions. Lindley (19th ed 2-02) states that “virtually

any activity or venture of a commercial nature, including a single ‘one off’ trading venture,

[85] In the present case it seems likely that the key question will be whether the activity

pursued by the joint venturers can properly be described as a business. Plainly it is not a

social or sporting association, nor a charitable enterprise. So what is it? The view of the

commercial judge was that it involves the exploitation of land. That is certainly true, but in

itself, does not necessarily point away from a business or commercial activity. Many

businesses are concerned with the exploitation of the potential value of land. No doubt the

mere realisation of capital assets is not, in itself, a trading activity (Glasgow Heritable Trust v

Inland Revenue 1954 SC 266, Lord President Cooper at 284). However, this decision, and

other tax cases, demonstrate how sensitive these issues are to the particular facts and

circumstances. A distinction might be drawn between a mere enhancement of value, and a

gain arising from the operation of a business aimed at making profit. One might ask

whether the profit is derived from activities characteristic of a business venture? Was

money, time and effort expended with a view to marketing the land at a profit? Another

question might be as to whether the division of labour, etc, as between the joint venturers

and the developers has a significant impact on the nature of the association formed between

the joint venturers. It can also be noted that the provisions in the JVA relating to the

equalisation of land values distinguish the present from combinations designed to maximise

individual profitability. There is a degree of “pooling” or commonality of benefits.

[86] The proper answer to such questions might be as much a matter of impression, and

similarly in respect of the ultimate decision on whether the relationship can properly be

categorised as one of partnership. If so, this would support the reclaimers’ submission that,

for a fully and properly informed decision, evidence should be allowed.

[87] In summary, I do not consider that the broad objective of the exploitation of

ownership of land necessarily points away from a business activity. Nor does the absence of

common property. The judge correctly noted the absence of express provision on certain

topics, but the Partnership Act often fills in such gaps. In any event, it would be a mistake to

assume that common features of a partnership are pre-requisites to the satisfaction of the

statutory definition. The reclaimers have pointed to certain parts of the agreement which it

is said support an intention to carry on a business in partnership, for example clauses 1.4, 1.5

and 2.4.1. Certainly these are factors to be taken into account, however the issue is

[88] Since the disclosure case is being remitted for a proof before the question is answered,

it would be sensible to do likewise in respect of the averments as to misrepresentations. The

commercial judge noted the absence of any averment of a misrepresentation to the effect that

the first and second defenders were beneficial owners of the Cuthill land. It was factually

accurate to say that the first defenders had purchased the land and owned it. It was

considered relevant that there was nothing in the JVA to support the proposition that

[89] In my respectful opinion, the commercial judge’s conclusion that there were no

relevant averments as to any misrepresentation was based upon an overly restrictive view as

to the nature and scope of the reclaimers’ pleadings on this part of the case. The pleadings

are summarised at paragraph 8 of his judgment. They go beyond assertions of

landownership, and offer to prove that Mr Headon gave the impression that his financial

interest in maximising the development value of his company’s holding was the same as

that of the others, when it was not. In effect, the suggestion is of half-truths, and of being

“economical with the truth”, both of which can, depending upon the circumstances, amount

to misrepresentations, as indeed can silence in certain circumstances. It is generally the case

that less emphasis is placed upon pleadings in the commercial court. However I would not

place decisive weight on this, not least where detailed pleadings have been provided, and

the context is of misrepresentations characterised as either fraudulent or negligent.

However, it is important to bear in mind that the case can only be dismissed if the court is

satisfied that, even if the reclaimers prove all they offer to prove, their case must fail. I am

[90] At paragraph 22 of his judgment the commercial judge expressed the conclusion that

whether the first defenders would enjoy the ultimate profit on the sale of the land was not

mutually regarded as material when the agreement was entered into. It seems likely that

this was influential in his decision to dismiss the case, since proof of mutually understood

materiality is a necessary element for the success of both the non-disclosure and the

misrepresentation grounds of reduction. Again the commercial judge was heavily

influenced by the terms of the JVA. However, as may already be clear, I do not consider that

the issues in the case turn only upon the provisions in the agreement. As to the materiality

of any proven misrepresentation, or indeed any non-disclosure, and whether it was

operative in the sense that it induced a party to enter the bargain under a material

misapprehension, thereby rendering the agreement defective, I would not encourage such a

narrow focus, at least not in the circumstances of the present case. As it happens,

throughout the discussion at the appeal hearing, my impression was that counsel for the

reclaimers struggled to give a clear and convincing explanation of the basis for the

propositions that (a) all parties would have understood the importance of the financial terms

of the agreement between the first defenders and the Cuthills, and (b) that, had the

reclaimers been aware of the full circumstances, they would not have entered into the JVA.

On the face of it, the financial terms were much as might have been expected. And it is not

immediately obvious why the developers’ holding company would wish to depress the

development value of the land, not least given that the bulk of it could be bought at less than

full value. However, whatever reservations I might have on these matters, they are not

sufficient to persuade me that the Jamieson test for dismissal is met.

Scottish Court of Session Decisions