Scottish Sheriff Court Decisions

HAMILTON SHERIFF COURT
Sheriff Principal B A Lockhart	A71/11   JUDGMENT OF SHERIFF PRINCIPAL B A LOCKHART   in causa   BRANDON HIRE LIMTIED Pursuers, Respondents and Cross Appellants   against   GARY SHARP Defender. Appellant And Cross Respondent

 

Act: Mr U Tariq, Advocate

 

Alt: Mr D Thomson, Advocate

 

 

_____________________________________________________________________________

HAMILTON: 15 May 2013

The Sheriff Principal, having resumed consideration of the cause, allows the cross appeal at the instance of the pursuers to be received and argued; on the motion of the defender sists the appeal and the cross appeal to allow the defender to bring an action of reduction in the Court of Session in the case of Brandon Hire Limited v Simply Construct Limited; finds the pursuers liable to the defender in the expenses of the hearing before the Sheriff Principal on 2 May 2013; refuses to certify the appeal as suitable for the employment of counsel; quoad ultra continues all questions of expenses to a date to be afterwards fixed.

 

 

 

 

 

NOTE:

Background to the appeal

[1] In this case on 20 December 2012 the Sheriff issued an interlocutor following a debate. He repelled the pursuers' third plea-in-law relating to personal bar and sustained the defender's plea-in-law but only to the extent of excluding from probation the pursuers' averments anent personal bar. He allowed parties a proof before answer. The defender lodged a Note of Appeal against the Sheriff's interlocutor. The pursuers on 2 April 2013 lodged a cross appeal. The appeal hearing which took place before me on 2 May 2013 was restricted solely to the issue of whether the pursuers cross appeal should be allowed to be argued.

 

[2] On or around 15 May 2008 the defender signed a Trade Credit Account Application Form incorporating a personal guarantee. The personal guarantee provided as follows:-

"I (the undersigned) agree that all transactions of hire or sale entered into by my company (known as "the customer") shall be subject to Brandon Hire Plc's Conditions of Hire and Sale, as the case may be, operative at the time of any contract of hire or sale. I will make full settlement of all monies due within one month from the date of Brandon Hire's Invoice and I have answered all questions on this application form truly and fully. I hereby personally guarantee payment in respect of all sums due by my company ("the customer") to Brandon Hire Limited, together with all ancillary costs incurred. I have retained a copy of this form for my records."

 

[3] The application and personal guarantee was signed by the defender with a view to obtaining credit on behalf of Simply Construct Limited, a company incorporated under the Companies Act as having a place of business at 82 West Nile Street, Glasgow from the pursuers. The defender was the sole director of Simply Construct Limited. He signed the personal guarantee in his personal capacity and undertook to personally guarantee payment of any debts arising under the agreement between the and Simply Construct Limited.

 

[4] On or around 31 March 2009 the pursuers raised an action against Simply Construct Limited for payment of outstanding sums due by Simply Construct Limited. On 11 June 2010 the Sheriff at Glasgow Sheriff Court granted decree against Simply Construct Limited for payment to the pursuers of the sum of (i) £5819.10 with interest at 13.25% per annum from 30 March 2009 until payment and (ii) £70. Said sums constitute the first and second sums sued for. The said decree also included a decerniture for expenses as taxed. On or around 4 October 2010 the Sheriff at Glasgow Sheriff Court granted decree against Simply Construct Limited for payment to the pursuers of the sum of £5393.26 in respect of the said award of expenses. The said sum constitutes the third sum sued for. It is accepted that that decree was granted against Simply Construct Limited by default, their solicitors having withdrawn from acting and Simply Construct Limited not being represented at a peremptory diet on 11 June 2010. Decree was not pronounced following any substantive judicial determination of the merits of the pursuers' claim. The decree, however, was a decree in foro.

 

[5] On 24 January 2011 the pursuers raised the current action against the defender to recover from him the sums for which decree was obtained by the pursuers against Simply Construct Limited on 11 June 2010. The defender appealed the Sheriff's interlocutor of 20 December 2012 on 10 January 2013.

 

[6] The cross appeal was lodged on behalf of the pursuers on 2 April 2013. It is in the following terms:

"The learned Sheriff respectfully erred by reserving the pursuers' first preliminary plea-in-law and appointing the parties a Proof before Answer on the remaining averments. It is admitted that the decree upon which the pursuers rely in this action is a decree in foro. This is pronounced in a cause which has been litigated by both parties. The only remedy available to a party against whom decree in foro has been granted is to appeal, or if that is not possible, to seek reduction of that decree. Decree in foro is otherwise described as absolutely final and it cannot be impugned by the parties. The pronouncement of decree in foro has the effect of novating the original obligation into a new obligation founded on the decree. The effect of novation is to extinguish the original obligation and to replace it with a new obligation. The pursuers in this action rely on the obligation constituted by decree in their favour against the principal debtor. Therefore the proper question for this Court to determine is as follows - what are the defences available to the principal debtor in respect of this obligation constituted by decree in foro? Once those defences have been identified, the cautioner is able to advance those defences including those which were omitted by the principal debtor. The only available defence is one of reduction of the decree. However, in the absence of the defender seeking to reduce the decree, the defender has no relevant defence to the obligation constituted by decree in foro. It is not open to the defender to ignore the existence of decree in foro in the present action or to look behind its terms without seeking reduction of the decree. The learned Sheriff concludes at paragraph 15 that the defender was entitled to advance the defence that no liability existed on the basis of the alleged compromise agreement notwithstanding the terms of the decree pronounced. It is respectfully submitted that this defence is irrelevant. For these reasons, the learned Sheriff ought to have sustained the pursuers' first plea-in-law and pronounced decree as craved. For the avoidance of doubt, the pursuers do not cross- appeal the learned Sheriff's interlocutor insofar as repelling the pursuers' third plea-in-law and sustaining the defender's second plea-in-law to the extent of excluding from probation the pursuers' averments anent personal bar."

 

[7] Both parties were represented by counsel at the appeal hearing which took place before me when the only issue was whether this cross appeal should be allowed to be received and argued.

 

Submissions for the Pursuers and Cross-Appellants

 

[8] Counsel for the pursuers submitted that in this action the pursuers sought to enforce the personal guarantee and seek payment of the sums due to them in terms of the decree all as set out in paragraph 4 hereof. The defender resists payment. His argument is that the defender has no liability to make payment under the personal guarantee as the principal obligations between the pursuers and Simply Construct Limited have been extinguished as a result of a compromise agreement. This is denied by the pursuers. The defender accepts that ordinarily a cautioner cannot stand in a better position than the principal debtor. However it is argued that as the decree obtained by the pursuers against the company in the first action was a decree by default, the defender in the present action is entitled to advance a defence which had been available to the company but was omitted in the first action (namely the compromise agreement). In particular, it was said on behalf of the defender that, where the cautioner was not called, where there has been fraud, omission or neglect on the part of the principal debtor and where decree did not flow from the courts adjudication upon sworn testimony, the cautioner is entitled to advance a defence which is available to the principal debtor notwithstanding the existence of a decree against the principal debtor.

The Sheriff held that these submissions by the defender were well founded and "that the defender is entitled to advance the defence which he avers was available to but omitted by the principal debtor."(Paragraphs 14 and 15 of the Sheriff's Note).

 

[9] It was the basis of the cross appeal that the defender could not advance this defence without first seeking to reduce the decree obtained against Simply Construct Limited. This court could not look behind a decree in foro. It was submitted the decree fixing the liability of Simply Construct Limited was a matter which was final and could not be impuned. It was said that the court could not entertain the defence as currently pled as doing so would ignore the decree in foro against Simply Construct Limited. The substance of the cross appeal is that the defence is irrelevant as the pursuers have not offered to reduce the decree obtained in foro. Counsel understood that the position of the defender was that, if the cross appeal was allowed to be argued, a motion would be made to have this appeal sisted in order to raise an action of reduction in respect of the decree held by the pursuers against Simply Construct Limited in the Court of Session.

 

[10] I was referred to MacPhail St Ct Practice Paragraph 18.13 where the learned author stated:

"In the civil courts in Scotland there is no general rule that an appeal may not be based on a new point which has not been argued or explored at first instance: the question whether a new point will be entertained on appeal is not one of competency, but of discretion. An appellate court may consider a question of competency which strikes at the whole root of the proceedings, whether or not it was argued in the court below. Legal arguments on matters other than competency, which were not canvassed before the Sheriff, are frequently adduced before the appeal court; but if a fresh argument cannot properly be advanced without the addition of amendment or by an appropriate plea-in-law, the allowance of the amendment is within the discretion of the appeal court, who will have regard to considerations of fairness and prejudice to the other side. Further, the appellate court may regard as unacceptable the introduction of a new point on which it does not have the benefit of the opinion of the Judge of first instance; and an appellant who succeeds on an argument advanced for the first time in the appeal court may not be awarded the full expenses of the litigation..."

 

[11] It was submitted that this indicated that there was no general rule against the introduction of a new point on appeal. Indeed MacPhail notes that new legal arguments are frequently adduced before the appeal court. Whether the matter should be received was one for the discretion of the court having regard to considerations of fairness and prejudice. In this case no amendment was required. The pursuers already had a plea-in law- in place attacking the relevancy of the defence. The fact that there was no note on this issue from the judge at first instance was of little moment as this was a question of law. This was not a question which arose after enquiry into the facts.

 

[12] Counsel submitted that he should be allowed to argue that the defence was irrelevant. The only way in which a decree in foro could be challenged was by an action of reduction in the Court of Session. He submitted this was not an entirely new point. Parties had known about the point at the time of the debate from the pleadings. Counsel for the pursuers before me accepted that the counsel who had represented the pursuers at the debate before the Sheriff (not himself) had sought to raise the point. He did accept that it was not in the pursuers' Rule 22 Note. I was referred to paragraph 8 of the Sheriff's judgement;

"I mention for completeness that at one time counsel also submitted, briefly, in connection with the proposition that the cautioner could not be placed in a better position than the principal debtor, that the remedy the defender should have pursued lay by way of an action of reduction, by the principal debtor, of the decree granted in the first action, as that decree, being a decree in foro, could not be reponed.

This line of argument was objected to by counsel by the defender on the basis that it was not foreshadowed in the pursuers' written Note of Argument. Rule 21.1(1) of the Ordinary Cause Rules is in the following terms 'A party intending to insist on a preliminary plea shall, not later than three days before the options hearing under rule 9.12 or the procedural hearing under rule 10.6-A lodge a note of process of the basis for the plea and intimate a copy of it to every other party.' Rule 22.1(4) states at any proof before answer or debate, parties may on cause shown raise matters in addition to those set out in the note mentioned in paragraph (1) or (2).' Counsel for the pursuers accepted that the proposition objected to was not foreshadowed in the pursuers' written note of argument. She did not at any stage seek leave of the court to raise the issue and did not attempt to show cause upon which the matter could be raised. In the end, I did not understand her to insist upon this particular aspect of her submission and accordingly I have taken no account of it in reaching my decision."

 

[13] It was submitted the point had obvious substance. If the submission in the cross appeal was correct, the defender must first reduce a decree which had been obtained by the pursuers against Simply Construct Limited before this court could look behind the terms of it. For the Sheriff in this action to give the defender the remedy he sought and dismiss the action, the Sheriff would be obliged to turn a blind eye to the existence of the decree in foro in the case between the pursuers and Simply Construct Limited.

 

[14] Counsel accepted that the cross appeal should be allowed to be argued was a discretionary decision for me and I required to take into account considerations of fairness and prejudice. Consideration of these issues should result in my permitting the pursuers the accommodation which they sought. It was in the interest of fairness that the pursuers should be allowed to argue this obvious point. The pursuers would suffer prejudice if I exercised my discretion against them. Counsel moved me to allow the cross appeal to be received and argued.

 

Submissions for the Defender and Cross-Respondent

 

[15] In inviting me to refuse to allow the cross appeal to be argued counsel for the defender made two headline points;-

(a) It required to be acknowledged that the pursuers were seeking an indulgence from the court as they were seeking permission to raise a new and fundamental argument which was not properly before the Sheriff at first instance.

(b) If the pursuers wish to criticise the relevancy of the defences, it is for the pursuers to tell the defender and the court the nature and extent of that criticism. The pursuers had failed to lodge a Rule 22 Note setting out the matter which they currently sought to introduce. I was referred to the well-known case of Thomson v Glasgow Corporation 1961 SLT 237, which is the report of the case before the Inner House, the Lord Justice Clerk stated at page 245;

"It is an essential feature of the judge's function to see that the litigation is carried on fairly between the parties...The litigation is in essence a trial of skill between opposing parties conducted under recognised rules, and the prize is the judge's decision. We have rejected inquisitorial methods and prefer to regard our judges as entirely independent. Like referees at boxing contests they see the rules are kept and count the points."

 

It follows from this that a party to a litigation is entitled to conduct it on the footing that the rules will be observed and that they will not be altered while the contest is in progress. Rules of procedure of some sort are essential to the conduct of litigation on this basis. It is by the rules that the essential feature of fairness between the parties is maintained. It was the pursuers' position that they now wish to advance an argument in respect of relevancy. It was not raised in the recognised and fair way, namely in a Rule 22 Note before the Sheriff. It was submitted that, the pursuers not having raised the matter in a Rule 22 Note as a matter of relevancy, the defender was entitled to conduct the litigation on the basis that no such relevancy point was being taken.

 

[16] It was the defender's position that it was too late to raise this issue now. This action had been on-going since 24 January 2011. More than 2 years after the action had been raised, the pursuers sought to raise this relevancy point. There had been ample opportunity for the pursuers to raise the point, either in the Rule 22 Note before the debate, or indeed at the debate formally before the Sheriff. However the counsel at the debate before the Sheriff did not press the point and the Sheriff was not asked to opine upon it.

 

[17] It was submitted that issues of fairness and prejudice favoured the defender. If permission was given by me to allow the cross appeal to be argued, this would require at this late stage the defender having to proceed with an action of reduction of the decree in favour of the pursuers against Simply Construct Limited in the Court of Session. This would be very expensive. The pursuers had been given opportunities to raise this point earlier, namely in a Rule 22 Note and at the Debate, but had failed to take these opportunities. This litigation was expensive as far as the defender was concerned. In addition it was said that the court did not have the benefit of the views of the Sheriff who heard the debate on this point.

 

[18] Counsel urged me to refuse to allow the cross appeal to be argued.

 

Decision

 

[19] In my opinion the point which the pursuers now seek to argue in the cross appeal is a very obvious one. It is of note that the pursuers did not seek to raise this point in their Rule 22 Note, and did not insist on the point at the debate before the Sheriff. The Sheriff specifically records in his Note that he did not understand counsel for the pursuers to insist on this point at the debate. Although I am concerned by this course of events, I think that the point raised in the cross appeal is such an obvious one that it would be unfair to the pursuers and they would suffer prejudice if they were not allowed to argue it. In my opinion issues of fairness and prejudice on this occasion favour the pursuers. I am accordingly prepared to exercise my discretion in favour of the pursuers and allow the cross appeal to be argued. Having done so, I am prepared to grant the motion made on behalf of the defender, in the event of me taking that course, to sist the cause in order that the defender may proceed with an action of reduction in respect of the decree in foro at the instance of the pursuers against Simply Construct Limited in the Court of Session.

 

[20] The fact that this point arises at this stage when clear opportunities existed to make the point at earlier stages in the proceedings, means that substantial extra expense has been incurred by and on behalf of the defender. At this stage I have only heard argument from parties as to whether or not the cross appeal should be received and argued. I have not heard argument on the appeal or the cross appeal. In these circumstances, as far as expenses are concerned, I am only prepared to deal at this stage with the expenses of the hearing before me on 2 May 2013. I have no hesitation in awarding these expenses to the defender. There would appear to be little doubt that there is a compelling argument that other expenses should also be laid at the door of the pursuers. However, as I have not heard parties on the merits of the principal appeal or the cross appeal, I consider the appropriate course is for me to reserve all questions of expenses at this stage, apart from the hearing before me on 2 May 2013.

 

[21] Counsel both submitted that I should certify the appeal as suitable for the employment of counsel. I am not prepared to do so. On the information before me, this is not a complicated case - the issues are very clear. The sum sued for is modest. This substantial extra expense of involving counsel is not in my opinion justified. If one or both parties wish to be represented by counsel that is a matter for them.