Appellant Matthew Chyla, the defender in an action raised by respondent Graham McAteer, argued he had been misled as to the true profitability of the company and sought in his defences to have the contract rescinded based on a letter from his solicitor dated 24 August 2023 or alternatively reduction ope exceptionis. The respondents argued that the sheriff was correct to hold that the appellant’s averments were not fit for enquiry and gave no fair notice of his case.

The appeal was heard by Sheriff Principal Gillian Wade KC, with Appeal Sheriffs Derek O’Carroll and Linda Nicolson. J McKinlay, advocate, appeared for the pursuer and respondent and J Brown, advocate, for the defender and appellant.

Ought to allow time

On 23 June 2023 the respondent and his wife Heather entered into an SPA with the appellant for the purpose of allowing him to acquire share capital in Nicol Valentine Ltd. In return for the shares, the respondent averred that the appellant agreed to make a series of payments to him and Mrs McAteer totalling £350,000. The initial payment of £125,000 was made and was followed by the first in a series of what were averred to be monthly instalments towards a sum of £108,333.33, but no further payments followed.

In his defence to the action, the appellant averred that he had rescinded the SPA by way of a solicitor’s letter dated 24 August 2023, which was not produced for the court, and separately the SPA ought to be reduced on the grounds of fraud and misrepresentation. A counterclaim was raised seeking reduction of the SPA, but was abandoned after the appellant conceded that, as Mrs McAteer was not a party to the action, it was incompetent.

Following the abandonment of the counterclaim, the sheriff determined that there was no basis for a hearing in regard to the appellant’s plea-in-law seeking reduction ope exceptionis.  The appellant’s defences, alleging fraudulent misrepresentations by the McAteers, were determined to be lacking in relevancy and specification, as were his averments on restitution. After the appeal was lodged, the appellant raised a separate action at Aberdeen Sheriff Court for the reduction of the SPA, which had not been sisted in light of the appeal proceedings.

It was submitted for the appellant that the sheriff erred in proceeding to consider the respondent’s challenge to the relevancy and specification of the appellant’s averments, having determined that reduction ope exceptionis was not available, again on the basis that Mrs McAteer was not a party to the action. The sheriff ought to have allowed for Mrs McAteer to be convened as a party to the action via amendment to allow for a competent counterclaim, or to allow time for a separate action of reduction as was later raised.

Worthless enquiry

Delivering the opinion of the court, Sheriff Principal Wade noted that appellant’s counsel had been on the back foot after the counterclaim’s dismissal, saying: “The sheriff was constrained to deal with the pleadings before him and the criticisms of them which had been made by the respondent. The appellant seems to be suggesting that rather than allowing the debate to continue to its conclusion, the sheriff, having identified the legal difficulties in which the appellant found himself as a result of his own deficient pleadings, ought also of his own volition to have given the appellant time to put matters right.”

She continued: “We do not accept this submission. Such a course would have been contrary to the interests of justice and contrary to the sheriff’s duties to adjudicate on the matters before him. The purpose of debate is to enable all points of relevancy to be disposed of without spending time and money on a worthless enquiry. It is not open to the sheriff to assist the losing party by providing him with a way out. As it happened counsel for the appellant continued to defend his pleadings at the debate. In those circumstances, it is unarguable that the sheriff erred in any way in proceeding to determine the matter which was squarely put before him by the parties.”

Considering the sheriff’s dismissal of the averments on rescission, the Sheriff Principal said: “If a document is to be founded upon it must be produced, described and its provisions specified or incorporated brevitatis causa. If not, it cannot be looked at by the court. This was made clear to counsel for the appellant in the course of the appeal when he invited us to do just that, despite the fact that the letter has never been lodged as a production in this process.”

She concluded: “As matters stand the respondent is left in the dark as to how or by what means he is to be put back in the position he was in if the SPA were to be reduced. This would lead to inevitable objection in the course of a proof if a witness were to offer a range of proposals as the respondent, as a matter of practicality, would have had no opportunity to investigate whether any of these mechanisms could in fact be achieved or whether there were any barriers to these proposals either in law or in fact. Accordingly, we agree that in the circumstances, where the route to restitution is far from clear and would require to be explored at proof, averments providing fair notice of the potential means by which this could be achieved are essential.”

The appeal was therefore refused.