OUTER HOUSE, COURT OF SESSION [2009] CSOH 108
A263/09	OPINION OF LORD CARLOWAY in the cause NEIL STEWART LESLIE McCULLOCH Pursuer; against DUNEDIN INDEPENDENT plc Defenders: ­­­­­­­­­­­­­­­­­________________

Pursuer : JJ Mitchell QC; Thompsons

Defender: Logan; Aitken Nairn WS

2 July 2009

[1] This litigation follows on from the Outer House decision in an earlier case between the same parties ([2007] CSOH 49). That decision, which was taken after a proof, granted decree ordaining the defenders to implement a compromise agreement entered into between the parties. That agreement had been concluded by the parties during complaint proceedings initiated by the pursuer against the defenders before the Personal Investment Authority. The complaint related to negligent advice given to the pursuer by the defenders' managing director, Yuill Irvine, to transfer his interest in an occupational pension scheme with his employers, Scottish Television, into a personal pension scheme, notably the Scottish Life Talisman Plan.

[2] At one point during the course of the complaint proceedings, the defenders had maintained that they had not been acting on their own behalf but only as representatives of another company, CA Independent Financial Services. The pursuer had, therefore, also complained against that company. He had applied to the Financial Services Compensation Scheme for compensation in respect of advice tendered by CAIFS. It was not disputed at the proof that:

"[16] ...The FSCS calculated the pursuer's loss at £185,754.78... The FSCS offered him the statutory maximum compensation available of £48,000. This was accepted in July 2006...and that sum was paid to him by the FSCS. It was agreed between the pursuer and the FSCS that the pursuer retained his right to pursue the defenders and that he would repay the FSCS the £48,000 should he succeed in recovering that sum from the defenders. In that respect, an e-mail of comfort which the defenders had secured from the FSCS in August 2006...concerning the assignation of the pursuer's claim turned out to be incorrect".

By the time of the proof, therefore, the pursuer had already received £48,000, but he was under an obligation to repay it in the event of success in his pursuit of the defenders. It was a condition of receipt of the compensation, and in particular of the FSCS not taking an assignation of the pursuer's rights against the defenders, that:

"4 ...after the deduction of your reasonable legal costs, incurred in pursuing the claim against [the defenders], the proceeds of the claim whether received at or after trial or other determination, after settlement, or otherwise, shall first be applied in repayment to FSCS of the sum of compensation of £48,000 (together with interest on the sum of £48,000 from the date of payment to you by FSCS at a daily rate equivalent to the base rate of HSBC Bank plc from time to time" (see no 6/2 of process; 6/85 in the original process).

The proof, and the decision which followed thereon, proceeded upon that basis.

[3] The Outer House decision required the defenders to implement the agreement by, amongst other things, purchasing on behalf of the pursuer an annuity providing him with an income of about £15,000 per year within a period of fourteen days; which failing, to pay to the pursuer the sum of £279,268. The decision was reclaimed. However, on 4 June 2008, on the eve of the hearing in the Inner House, the parties settled the cause in terms of a Minute of Agreement (no 6/1). This provided that the defenders would pay to the pursuer £200,000 but that:

"3) i) The defenders accept sole liability to make payment to the Financial Services Compensation Scheme ("FSCS") of the sums due to the FSCS in terms of the agreement between the pursuer and the FSCS described in no 6/85 of process; and further shall indemnify the pursuer in respect of his obligations thereunder. Whether by way of payment of principal sum, interest, or expenses...

ii) In the event that the FSCS makes any claim upon the pursuer, the pursuer shall notify that claim to the defenders forthwith and the defenders shall meet that claim, so far as well founded, forthwith...

iii) In the event that, for whatever reason, the pursuer makes any payment to the FSCS in terms of that agreement, whether by way of payment of the principal sum, interest, or expenses, the defenders shall forthwith reimburse that payment to the pursuer...".

[4] It is the pursuer's position that the FSCS now require him to pay the £48,000 plus interest. This is confirmed in a letter from the FSCS's law agents dated 16 April 2009 (no 6/3) which is, in effect, a demand for payment of the principal sum plus interest as at that date of £5,837.92; i.e. a demand for £53,837.92. In the present action, the pursuer concludes for implement of the agreement and, failing implement, payment of the latter sum. The pursuer has moved for summary decree on the basis that the answers disclose no defence to the action. Indeed, in submissions, the pursuer described them as "unintelligible". At this stage, the pursuer only asks the Court to sustain the first plea-in-law (in the summons) that the defender is bound to implement the agreement and to grant decree for implement.

[5] The defence put forward is that, before entering into the agreement, the defenders' managing director:

"discussed the case with officers of the FSCS who had stated that in the event of the case between the pursuer and the defenders settling with the payment of agreed sums by the defenders to the pursuer they would not seek payment under the agreement with the pursuer. This agreement was entered into on or about 26^th January 2007, immediately before the proof...and is binding on the FSCS".

The defenders founded upon Henderson v 3052775 Nova Scotia 2006 SC (HL) 85 and maintained that their answers raised a matter of fact requiring proof. The defenders had entered into an agreement, having been assured by a third party that no money would be payable. This was a defence (McLaughlin, Petitioner [2009] CSOH 49); the terms of the agreement being akin to a cautionary obligation (Smith v Bank of Scotland 1997 SC (HL) 111, Lord Clyde at 117). Any claim by the FSCS against the pursuer was not, in terms of the agreement, "well founded". Therefore, there should be no summary decree. In any event, it was maintained that the conclusion for implement was lacking in precision (Munro v Liquidator of Balnagown Estates Co 1949 SC 49, Lord President (Cooper) at 55).

[6] As the House of Lords observed in Henderson v 3052775 Nova Scotia (supra at para [18]), the provision for summary decree (RCS 21.2) "serves the interests of justice and helps to make the legal system work more efficiently". If there is no defence disclosed, including no matters of disputed fact requiring resolution, decree may be pronounced. There is no defence to this action. The defenders entered into an agreement with the pursuer to indemnify him if the FSCS made a claim against him for repayment of the compensation. The FSCS have made such a claim and the defenders are bound to implement that part of the agreement dealing with that indemnity. The fact that the defenders may have an agreement with the FSCS that the latter will not make a claim is, in a matter between the pursuer and the FSCS or between the pursuer and the defenders, res inter alios acta. If the FSCS have breached any agreement with the defenders, the defenders can take such action against them as they deem appropriate. Meantime the FSCS's claim against the pursuer is unanswerable as is the relative claim by the pursuer against the defenders. In that regard, the duty owed by the defenders in the agreement is not akin to a cautionary obligation.

[7] The first plea-in-law for the pursuer must be sustained. It is doubtful whether the pursuer requires a conclusion for implement in this situation; given that ultimately he will simply be seeking payment of a particular sum plus interest. But there is no reason why decree, in what are standard general terms for implement, should not be granted pending a determination of exactly what sum may now be due (Munro v Liquidator of Balnagown Estates Co (supra), Lord President (Cooper) at 55). Summary decree is accordingly granted. Since that decree cannot be enforced to exact payment, and a further order may be required for that purpose, leave to reclaim has been refused. Should the pursuer seek a further summary decree for payment, the issue of leave to reclaim can be re-visited.

Postscript

[8] It may be of some value, at least as a historical footnote, to record what happened after the House of Lords allowed the appeal in Henderson v 3052775 Nova Scotia (supra). The case returned to the Adjustment Roll of the Outer House and, on 16 February 2007, it was sent to the Procedure Roll on the defenders' motion, the pursuer having offered a proof before answer. The case was later withdrawn from the Procedure Roll and, on 11 September 2007, a proof before answer was allowed. A four week diet of proof was fixed for 6 January 2009. By letter dated 27 November 2008, the defenders' law agents intimated that they were withdrawing from acting.

[9] On 19 December 2008 a motion to discharge the diet of proof was made by the defenders. Counsel, who had been instructed for the proof, had had his instructions withdrawn in September 2008. The pursuer resisted the motion, stating not unreasonably that it had to be assumed that, before launching upon their appeal to the House of Lords, the defenders' legal representatives must have been satisfied from the documents and precognitions already in their possession that the defenders did have a defence underpinned by relevant and competent evidence. The motion to discharge the diet of proof was refused. At the diet of proof, the defenders did not appear. Decree by default was granted against them.