Scottish Court of Session Decisions

This action which came before me on procedure roll is concerned with an attempt to reduce part of an interlocutor issued by Lord Macfadyen on 23 April 1999. That interlocutor was pronounced in the petition proceedings raised by the defenders; it was a necessary pre-requisite to their being able to raise an action against the pursuers who were removed from the Register of Companies in 1990.

The present defenders seek to pursue the company in an action for reparation for the death on 22 February 1996 of the late Robert Benson following his exposure to asbestos. The petition for restoration in terms of section 651 of the Companies Act 1985 was presented on 11 September 1998. The interlocutor complained of was not pronounced until 23 April 1999. The present pursuers being struck off, could not participate in that action but their interests were all along represented by insurers. The present pursuers' insurers did not seek to enter the process. The interlocutor bore to have been granted after submissions were heard on behalf of the petitioners; it purports to be an exercise of discretion under section 651(6) of the Companies Act.

Section 651 allows the Court to restore the name of the company to the Register provided appropriate proceedings are brought within two years except in the case of an application under 651(5) which provides that an application may be made at any time for the purpose of bringing proceedings against a company for damages in respect of personal injuries. However, the sub-section proceeds "but no order shall be made on such an application if it appears to the Court that the proceedings would fail by virtue of any enactment as to the time within which the proceedings must be brought".

Section 651(6) provides, curiously, that nothing in sub-section (5) affects the power of the Court in making an order under this section to direct that the period between the dissolution of the company and the making of the order shall not count for the purposes of any such enactment. No provision conferring any such power upon the Court is to be found elsewhere in the Companies Act but sub-section 6 seems to assume its existence.

The pursuers draw attention to the fact that the present interlocutor and direction would have the effect of denying them a time-bar defence. It was pronounced in a process which is not connected with the action to be raised for reparation.

Section 651(5) and (6) was the subject of discussion in the Court of Appeal in England in Re Workvale Ltd 1992 2 AER 627. In that case a judge restored the company to the Register despite the fact that the limitation period had expired on the ground that it could not be said that proceedings would fail on limitation because of the provisions of the English Limitation Act, section 33; roughly the equivalent to section 19A of the Prescription and Limitation (Scotland) Act 1973. The Court of Appeal said that since it was apparent in the case before them that a section 33 order was "well arguable", the appeal against restoration would be dismissed. It was further stated,

It is apparent from the report in Re Workvale Ltd that full argument was addressed to the first instance judge on the matter of restoration. The facts were the same as or similar to the present case save that the pursuers did not choose to be represented. In the present case, by the time the Lord Ordinary was asked to make his order, the primary limitation period had expired.

There is not and could not have been any objection to restoration to the Register but the issue for the Court is whether it was competent for the Lord Ordinary to add the direction he did with the effect it had.

The defenders challenged the relevance of the pursuers' pleadings in relation to the projected reduction. They said, although they did not aver, that the terms of the motion which was granted was intimated to the pursuers' insurers and that accordingly they had an opportunity to object.

The only averments in the pleadings which relate to the challenge to the Lord Ordinary's actings are as follows. Plea-in-law 3 states,

The only supporting averment is 'a direction under section 651(6) can be made only when the Court is satisfied that an application based upon section 19A of the 1973 Act would succeed. Without consideration of section 19A and whether in the circumstances it was equitable to allow an action to be brought, an order under section 651(6) is incompetent'.

The defenders' position is that while that may or may not be an accurate statement of law, there is no factual basis pled upon which the pursuers can found to support that contention. There are no averments that the Lord Ordinary did not consider section 19A and its effect. No averments indicate, in short, that what he did was not simply an exercise of discretion about which views could differ, but was positively incompetent.

In response the pursuers say that they were not present at the hearing and they call on the defenders to specify the nature and extent of the submissions and whether they were made under reference to section 19A.

It appears to me that I am being asked to assume that the Lord Ordinary did not have before him sufficient material to entitle him to exercise his discretion in the way he did. I am asked to assume that he did not have section 19A in mind, or that it was not a matter brought before him, despite his having heard submissions on the motion enrolled.  I cannot make that assumption in the absence of specific averments. There are no averments of fact which indicate in what respect the Lord Ordinary is alleged to have failed. I am fortified in that approach by the consideration that the interlocutor complained about could have been reclaimed or that it could have been asserted that there were no circumstances in the present case under which any Lord Ordinary acting reasonably could have pronounced the declaration he did. I was informed not by way of pleadings but through the mouth of counsel, that, prior to the petition being brought, there had been an admission of liability. Such an admission of itself would have been sufficient given the other circumstances of the application for the Lord Ordinary when exercising his discretion to consider that he should not require that there be any further inquiry into matters which would allow the pursuers to invoke section 19A in the reparation action. In the present case accordingly I do not consider that the pursuers have averred sufficient to entitle them to the serious remedy of reducing part of a properly pronounced interlocutor by a Lord Ordinary.

It may be that the Court should as a matter of generality not grant direction in the terms complained of, except in the rare circumstances where it can be satisfied that an application under 19A would succeed. In other circumstances the proper course is that the company be restored to the Register and the injured party thereafter has to persuade the Court that 19A is applicable. It is, however, plainly competent to make a declaration and therefore reduction cannot be granted unless there are proper averments of error of the Court being misled. In the present case, according to the defenders' counsel, the pursuers' insurers did not avail themselves of the opportunity of being represented at the time of the application which was intimated to them. The lack of specification noted above is solely due to their failure to be present and make representation at the appropriate time. They did not seek to appeal or have the interlocutor complained of recalled.

In the whole circumstances, there being no relevant averments as to the respect in which the Lord Ordinary so erred as to make his interlocutor incompetent, I shall dismiss the action.