Scottish Court of Session Decisions

[1] This matter has a long and complicated history with a complicated background.

[2] In the late 1980s the pursuer was the director of an American company, DRX. The defenders were a merchant bank. A civil action was raised by the pursuer against a number of defendants which included the present defenders in the United States District Court in the district of Delaware ("Delaware No. 1") seeking a number of orders relating to and surrounding what was effectively a board room argument between directors of DRX which, according to the pursuer, was designed to unseat him. In that action the pursuer also asserted that the defenders had been approached by representatives of a major share holder in the relevant company DRX in relation to the directors dispute. The matters material to the present action surrounded whether or not a loan which was due by a mining company in which the pursuer had an interest to the defenders had been verbally renewed as the pursuer avers and asserts. The loan was supported by a pledge of DRX shares and a guarantee by the pursuer. It was asserted that the mining company would default and thus the pursuer would be exposed in respect of his DRX shares. A further issue, according to the pursuer, related to the disclosure by two officials of the bank defenders, Mr Adamson and in-house counsel, Mr Hall of an non-renewal letter which information the pursuer asserts was passed to a Mr Webster who had been a former associate of the pursuer.

[3] By a judgment dated 1 February 1991, Judge Farnon, of the Delaware Court, (No. 1) on these specific matters, did not accept as credible the pursuer's assertion that he had been told the loan would be renewed and accepted the evidence of Hall and Adamson against that of Webster that they had not disclosed the contents of the non-renewal letter.

[4] Having failed in that action, the pursuer raised a further action against the present defenders and Messrs Hall and Adamson as defendants, initially in New York State but the case was transferred back to Delaware (Delaware No. 2). In that action the pursuer alleged what amounted to a fraud on a court in Delaware No. 1 by Messrs Adamson and Hall, as part of the conspiracy to unseat him, to give perjured evidence all in turn part of the conspiracy to undermine the pursuer's position and remove him from the Board of DRX. In its judgment on 30 December 1994, the Delaware Court ruled that this was an attempt to retry the previous issue which had been determined as a matter of credibility and effectively estopped the pursuer from proceeding with the action, which therefore also failed. Thereafter the defenders pursued the mining company for the loan and certain other costs in the State of Colorado where there was jurisdiction and in due course that State Court pronounced orders in favour of the present defenders by a judgment dated 31 October 1995 and by a further judgment dated 11 July 1996.

[5] In the meantime the pursuer brought the matter to London, issuing a writ in 1994 against inter alia the defenders seeking declarations of the non-liability of the present pursuer and the mining company under a guarantee given by the pursuer and a facility given by the defendants in relation to the loan to the company. That case was finally disposed of by the Court of Appeal by a judgment dated 17 May 1996 which effectually rejected the pursuer's claims as being an abuse of process. In the meantime, the defenders had raised an action in the Court of Session which I shall describe as the "decree conform action" to recover the cost orders they had obtained in Delaware. That action was abandoned on 29 May 1998, but both parties accept that it was abandoned under the statute and it is therefore still open to the defenders to pursue the pursuer for the monetary orders standing against him in relation to both principal sum under the guarantee and costs. This gives rise to the present action now raised by the pursuer seeking the declarators set out in the conclusions as now amended. In that latter respect the pursuer's senior counsel obtained leave to amend the conclusions in terms of a minute of amendment yet to be tendered which would have the effect of restricting the orders as regards enforceability to the single means of an action of decree conform.

[6] The case called before me on procedure roll at the instance of the defenders who were seeking dismissal. I heard a debate over four days involving four speeches which ranged over a number of issues.

[7] Before turning to them specifically, both parties drew certain conclusions or inferences from the background I have narrated.

[8] The defenders submitted essentially in this context that the matter had gone on long enough and this was yet a further attempt to re-open the issues which had been settled in the American Courts. The Court of Appeal in England had proceeded on the basis of an abuse of process and that was equally applicable to the present action upon the basis that a failed litigant should not be permitted to continue to raise the same issue before this court.

[9] For the pursuer, however, it was submitted, particularly by senior counsel that the issue which the pursuer was were now trying to raise in this action and had raised by way of defence in the decree conform action was essentially an allegation of a fraud on the Delaware Court in as much that the conclusions reached by that Court as to the credibility, respectively, of Hall and Adamson, and the unreliability of Webster and the pursuer were based on a conspiracy to give perjured evidence. That issue, said Mr Jones, had never been litigated since in the initial case the issue was only assertions of fact and thereafter in the subsequent litigations the decisions had been based on either estoppe or an abuse of process and not on the substance of the allegation now being made.

[10] In opening, junior counsel for the defenders, whose submissions were adopted by his senior argued firstly, that there was no legal wrong capable of being interdicted where all that was being threatened was the legal right to enforce a foreign decree by an action of decree conform and if there was no legal wrong there was no jurisdiction in the Scottish Courts since such could only be obtained by means of a relevant and competent claim for interdict asserting such a wrong. He referred to Burn Murdoch at page 187 and 194 and to Young v Barclay 8D. 774 as an example of where an interdict might be permitted if there was a risk of double jeopardy in relation to court proceedings, but here there was no exception to the general rule which allowed to freedom of access to the courts to any person, only if a legitimate right was being asserted. The Civil Jurisdiction and Judgment Act 1982 could not be used since none of the itemised matters in the relevant schedule were covered by the declarators, if interdict did not give jurisdiction.

[11] He went on to submit that the declarators were incompetent since they sought to challenge the validity of foreign decrees. What was being sought was an attempt to give validity to what was really a defence to an action of decree conform which was required to await such an action being represented.

[12] He submitted, albeit fairly faint-heartedly an argument that all parties had not been called to this action, particularly Messrs Adamson and Hall who had an interest in the matter.

[13] He then turned to deal with the question of relevancy of the averments of fraud which strike at the heart of the case in Condescendence 7. He said if the court had any jurisdiction to entertain as a matter of competency and relevancy an attack on a foreign decree by reason of fraud, that fraud had to be extrinsic to the substance of the case and not intrinsic (MacIntosh's Trustees v Stewart's Trustee 1906 8  F. 467 and in particular at 473-474. The averments at best instructed only a case of intrinsic fraud within the confines of the action and that excluded the only means whereby a foreign decree could be attacked. On that basis, therefore, even if competent the action was irrelevant and fell to be dismissed.

[14] Mr Summers for the pursuer opened on the question of jurisdiction. He pointed to the terms of article 18 of the Third Schedule of the 1982 Act and submitted that the plea to jurisdiction which was only added in 1999, the action having been raised in October 1997, had not been timeously taken While there was room for the view that it was competent under the Convention to plead both jurisdiction and the defence to the merits of the case at the same time, it was not competent to plead a defence and then subsequently take up issue on the question of jurisdiction. Having lodged the defence not taking the plea, the opportunity to take it was lost. He referred to Elefanten Schuh Gmbh v Pierre Jacqmian (Case 150/80 in the European Court) the judgment being dated 24 June 1991. He further pointed to the fact that jurisdiction was admitted in the original record in this action, that admission now having been apparently withdrawn. He referred also to Kurts v Stella Musical GMBH 1992 Ch. 197, Strathaird Farms Ltd v G A Chataway & Co 1993 S.L.T. 36 and McLeod v Tancred Arrol & Co 17 R. 514. He paused to observe that this case had already been to the Division on a question of interim interdict where no question of jurisdiction had been ventilated.

[15] Counsel then turned to the question of the competency of the declarators and submitted that where a person could properly plead certain facts by way of defence, he may seek to have those facts established by declarator provided he can show legitimate interest. In the present case the substance mirrored the defence to the decree conform and therefore met that test. It did not amount to res judicata if the issue was extraneous or extrinsic to the original actions (Boe v Henderson 1857 20 D.11, Gladstone and Others v Lindsay 1868 S.L.R. 71). He referred to Stair, Institutes at page 831, (paragraph 47 in title 3) and to the Edinburgh and Glasgow Railway Co v Meek and Others 1849 12 D. 153. The issue in England had not determined the matter since it had been decided on the preliminary question of abuse of process. The Scottish Court had a jurisdiction to consider the competency of questions before it so long as they were not hypothetical (McNaughton v McNaughton 1953 S.C. 387). It was also competent for a declarator to seek a negative (North British Railway Co and Others v Birrell 1913 S.C. (H.L.) 33 McLaren on Court of Session Practice also supported the position at pages 383 and 386. In the present case properly understood the pleadings instructed a case of extrinsic fraud by means of collusion or conspiracy and that was sufficient to open the door to a defence which could be competently stated by declarator. Both the English and Scottish courts recognise that fraud on the court raises relevant issues in respect of the enforceability of foreign decrees (The Administration Austrian Property v Salvesen 1926 S.C. 598, Owens Bank Ltd v Bracco and Others 1992 2 W.L.R. 621 and cases cited therein). That the court would interfere also by means of interdict was clear from the case of Ellerman Lines Ltd v Read 1928 K.B. 130. He argued strongly that the element of justice featured strongly in the equation in as much that if this defence was legitimate and excluded, a gross injustice would have been done to the interests of the pursuer. There was no double jeopardy and Young and Barclay supra was therefore no obstacle. In these circumstances the action was both competent and relevant.

[16] As I have indicated, senior counsel for the defenders adopted his junior's submissions but focused strongly on certain aspects of them. He submitted that if the interests of justice were looked at properly, the interests of the defenders were such that they were out of a very substantial amount of money legitimately obtained in a competent court in America. The issue of perjury was intrinsic to that question and not therefore something that could be re-tried to achieve a different result simply because the pursuer had failed to get the correct result. He also referred to McIntosh Trustees v Stewart's Trustees supra. It was, he submitted, perfectly clear that the pursuers here were seeking to arm himself with a weapon which he could then use in other jurisdictions presumably to attack the validity of the original decree. In interest of comity between nations, it was necessary to have stability in a litigation system which denied continued retrials. There was need for judicial finality. Furthermore, he was concerned as to the breadth of the conclusions but this point was removed by the subsequent offer to amend by Mr Jones.

[17] On the question of jurisdiction, he accepted that it had not been pleaded at the outset but that did not preclude the point being taken as a matter of competency as well as jurisdiction in the sense that unless the interdict was aimed at perceived legal wrong, there could be no jurisdiction. Schedule 3C of the 1982 Act by article 5 did not cover the issues raised in the declarator. These declarators he submitted were incompetent in as much as so far as the authorities referred to went, they were concerned only with an injustice stemming from procedural irregularities by reference to the phrase "irregularly and improperly". Under reference to Erskine Principles 4.1.26 he posed the question what right is actually being violated or threatened given that all that was being aimed at by the defenders was the enforcement of a legitimate right. He went further however than his junior in submitting under reference to McNaughton that the court had almost a discretion to determine whether an issue of competency could stand or fall, by making a judgment of the issues raised. If that test was applied the same conclusion had to be reached. The fact that for reasons good to them which were explained to me, the liquidators of the defenders had chosen to abandon the action decree conform albeit under reservation was nothing to the point.

[18] Turning to relevancy, Lord Mackay accepted that if there were relevant averments in an appropriate action involving the enforcement of a decree from a foreign court suggesting extrinsic fraud on the court as having played a part in obtaining it then that would be a relevant issue for inquiry or defence. He submitted however, that the averments here came nowhere near meeting such an extrinsic test. At the highest the averments were simply intrinsic to the obtaining of the decrees in America. This was supported particularly, he maintained, by the Von Lorang supra and the Owens Bank case with the cases cited therein. He also referred me to a Scottish case Perrin 1950 S.L.T. 51 and the House of Spring Garden v Waite 1991 Q.B 241 and Owens Bank v Etoile Commerciale 1995 1 W.L.R. 44. He did not shrink from the notion that the idea of an abuse of which succeeded in the English case could equally not apply in the Scottish one.

[19] Finally, Lord Mackay turned to the question of the interdict which he said did not meet any of the established rules that might apply to such in legal process as set out by Burn Murdoch at page 202. In particular there was an alternative remedy namely a defence to an action of decree conform if it was taken again. Elherman supra should be regarded properly as a case of breach of contract.

[20] Before proceeding further, I am required having to record an unfortunate disagreement of fact between the parties which is compounded in the opinion of Hobhouse LJ in the English case namely whether or not the three witnesses whose evidence is said to support the averments of fraud which have now come forward or been discovered were or were not known to the pursuer at the time of the Delaware action (No. 1). As far as the English action so states, Mr Jones submitted to me that that was simply a mistake or in any event was wrong. In so far as counsel for the pursuer was said to have made the relevant concession in the hearing before the Second Division as suggested by Lord Mackay's notes, Mr Jones simply maintained that I should proceed upon the averments which were in accordance with his instructions, namely that the existence of the witnesses was not known at the material time and thus therefore they were not available for the original hearing. I propose to proceed on that last proposition which has the effect of focusing the issue raised in this case, apart from questions of relevancy and competency, on an assertion that new evidence is available, not yet tested in any court which supports the allegation of fraud upon the court.

[21] Mr Jones, however, emphasised the importance of the credibility of the two relevant witnesses, Hall and Adamson since a proper examination of the Delaware No. 1 judgment indicated that the crucial findings of the judge with regard to the credibility or lack of it of the pursuer and Webster depended upon his believing and accepting the evidence of Hall and Adamson. If, submitted Mr Jones, they were shown to have been perjurers at the very least the whole decision of the court was tainted and suspect since the plank upon which the credibility assessment were made had been destroyed. That was the task that the pursuer was now attempting by way of the averments in this action and the declarators that followed from them. It was not therefore sufficient or apt for the defenders to maintain "enough is enough" since in fact the issue now sought to be ventilated had never been tried in any court, that is to say the issue of conspiracy to commit perjury.

[22] Mr Jones also offered certain reassurances as to the motivation of the pursuer. It was not, he maintained, the pursuer's intention to use the decrees of declarator if he achieved them in any foreign jurisdiction. He wished to live in Scotland and he wished to clear his name and remove the threat of legal proceedings. There was therefore a real and practical reason for bringing these declarators, now that the action for decree conform had been abandoned, to prevent the matter being raised again in Scotland.

[23] Against that background, Mr Jones renewed his junior's submission that jurisdiction was established by reason of the failure of the point to be taken by the defenders' original defences. In any event, the Convention applied since the Article in question amounted to the prorogation of jurisdiction if defences were lodged.

[24] In reiterating his junior's submissions with regard to the general law of fraud on a court, he maintained essentially that the position was that a person seeking to enforce a decree from a foreign court within this jurisdiction had to come with clean hands and Ellerman supra was the classic example of the courts reaction to a situation where that plainly did not apply. The important passage was from Lord Justice Atkin at page 155. The general question of interdicts in relation to foreign proceedings had been considered extensively by Lord Abernethy in Shell UK Ltd v Innes 1995 S.L.T. 807. There the Scottish court was exercising legitimate control over litigants before it in relation to a casualty within Scotland which had no connection with America whatsoever. Effectively, here it was in the interests of justice that the pursuer's orders were obtained. This contrasted with Castanho v Brown & Root 1981 A.C. 557 where the real connection was with America and the British proceedings were therefore accordingly stopped. Comity features in the matter in as much as it is necessary between nations that an appropriate connection rule be applied if there was to be interference with any process abroad.

[25] Mr Jones submitted that the declarators conformed to the general statement there anent by McLaren Court of Session and Practice at 386. The pursuer was taking legitimate action to protect himself. In the interests of justice which fundamentally required that a fraud cannot be relied upon, it would be unjust and oppressive to enforce a decree by fraud and he returned once again to Young v Barclay supra. In the interests of justice, the pursuer should be allowed to take his averments at least to a proof before answer. The interdict being sought here was confined to Scotland and as now amended to one method of enforcement which, if permitted, would proceed on a fraud. That was at least sufficient threat to the pursuer to allow him to take interdict proceedings on the basis of a perceived wrong, not least on grounds of oppression and injustice.

[26] I turn first to the issue of jurisdiction.

[27] For reasons which I will give later, I incline to the view that what the pursuer, all other things being equal, is attempting to do by means of the interdict, is to prevent a wrong being perpetrated upon him in the sense that, if he is correct in regard to the fraud, he would suffer a manifest injustice by reason of the fact that a decree would be enforced against him which has not been properly obtained. If that is so, then jurisdiction is established by reason of a threatened wrong in Scotland. However, my substantive view on this question is that it is settled by, first of all, the admission in the pleading, albeit that has been withdrawn, in my view, not properly. Secondly, by the fact that it was not pleaded at the beginning of the action and, thus consistent with the admission, the defenders could have been taken to have consented or prorogated jurisdiction and thirdly, that in terms of the European Court decision in Elefanten while it is legitimate in terms of article 18 of the Convention to plead both no jurisdiction and a substantive defence, it does not seem to me to plead a substantive defence and then take up the issue of jurisdiction later accords with common sense. The latter position, in my view, would create a manifest unfairness since until actually pleaded the pursuer or plaintiff would be entitled to assume that jurisdiction was accepted either voluntarily or in terms of the Article. In these circumstances I consider that the defenders' current attack upon the pursuer's right on a matter of jurisdiction to come to this court on this issue fails.

[28] Turning to the substantial matters, I am satisfied that as a matter of general law, both Scotland and England recognise it is a relevant defence to an attempt enforce a decree in a foreign court to allege extrinsic fraud or other deceit which is directly linked with obtaining of the decree. The English courts have essentially settled the matter within their own jurisdiction in Owens Bank Ltd v Bracco supra while in Scotland McIntosh's Trustees v Stewart's Trustees supra appears to go down the same line. I therefore consider it inconceivable that if a Scottish case such as this raising the same point proceeds to the House of Lords, the latter would not apply Owen Bank which although dealing with the statute, does not seem to me to raise any particular aspect peculiar to English law so long as the common law of both jurisdictions appears to be the same as I hold it to be.

[29] It is, however, important to understand the rationale behind this whole approach and that is best found in part of the judgement of Lord Justice Atkin in Ellerman supra where he says at page 155

[30] That passage seems to me to encapsulate both the thinking behind the availability of a remedy but also its scope in as much that it is dealing purely with activities within the Court's own jurisdiction and not seeking to interfere with that of a foreign court. This can be contrasted with the position in Shell UK v Innes supra although properly understood, that case seems to me to be a blatant one of forum shopping.

[31] In these circumstances, assuming the pursuer's averments instruct a case of extrinsic fraud capable of going to proof in the sense that the averments were at least capable of yielding an inference of a conspiracy or collusion I consider that would be a relevant issue to try as a defence to an action of decree conform in respect of a foreign decree.

[32] Before however dealing with the issue of relevancy on the pleading, I have to consider the competency of the bare declarators.

[33] I have found this the most difficult issue in the case since on one view, they are not necessary to protect the legal rights of the pursuer if he has a relevant defence to an action of decree conform once such is brought and he is not at financial risk until that is done. However, the authorities and particularly McLaren appear to support the position that declarator can be used in either a positive or negative sense to assert a matter which could competently be a defence to another action. Assuming therefore the relevancy test is passed, it seems to me that is precisely what the pursuer is trying to do in this case. There is a practical and real reason for this process and I am prepared to accept that it is legitimate for the pursuer to seek protection from oppression or an injustice in this jurisdiction if such is perceived to exist, at his own hand, and not to be required to wait, at the whim of the defenders, to discover whether they ever intend to raise another action of decree conform. I therefore consider the use of the declarators in this process is competent.

[34] In the final analysis therefore, the issue to be determined at this stage is one of relevancy against the well known Jamieson test which I immediately decide in favour of the pursuer. Without offering any positive view I cannot at this stage possibly hold that the averments that are made with regard to the allegations of perjury under a conspiracy involving Adamson and Hall stemming now apparently from various pieces of evidence available from the other witnesses named in the pleadings, which I am prepared to accept ex facie of them was not available earlier, could not yield the necessary inferences of collusion or conspiracy. Such in my opinion would properly to be regarded as extrinsic to the substance of litigation albeit bearing very substantially on it. If that fraudulent scheme is established, the impact upon the decision of the judge in Delaware No. 1 has to be immense.

[35] In these circumstances I consider the pursuer instructs a relevant case at least for proof before answer given the general view of the law I have already stated.

[36] By way of postscript, I was not impressed by the argument of all parties not called. The relevant contender has to be the bank defender by reason that it holds the decree. The other parties are merely witnesses.

[37] Equally, I do not regard the English case as helpful, not least because it proceeded on the basis of an abuse of process and appears to have misunderstood some of the facts. More importantly I consider in the overall issue of justice between the parties, the substance of the issue now being raised by the pursuer basing his declarators has not been litigated in any other court anywhere and so far therefore for the defenders being re-exposed to the particular issue they are in fact exposed to it for the first time or if for the second time, only by reason that the first time was the defence in the action of decree conform, which they themselves brought.

[38] Finally, on the issue of interdict, if I am correct in my approach that the whole of this case is perilled upon assertions of a question of injustice for the reasons given, it seems to me where the enforcement being challenged is threatened in Scotland it is wholly inequitable not to allow in principle the remedy of interdict to be available to prevent such enforcement. I accept Mr Jones' submission that such is necessary to prevent, even if the declarators were in existence, the defenders regurgitating the action of decree conform. The presence of the interdict would give the pursuer an immediate remedy and its existence would be sufficient, one would hope, to prevent the defenders in fact taking the action in the first place. I do not consider simply because if such an action were brought now, the same defence could be taken that that necessarily precludes the pursuer from seeking the interdict as a protection for his declarators if such are obtained. I should reiterate that this whole approach is based upon the notion of an equitable jurisdiction. It seems to me that Ellerman more than supports the pursuer's position.

[39] In the foregoing circumstances, I shall repel pleas-in-law 1, 2, 3, 4 and 5 for the defenders and quoad ultra allow a proof before answer, all other pleas standing.