Scottish Court of Session Decisions

[1] On 20 December 2000 the pursuers caused a summons to be signetted, which concludes for payment by the defender of £9,765. The sole plea-in-law reveals that the action is one of repetition based upon unjust enrichment. The factual basis for the plea is that the defender was, until 20 June 2000, an executive director of the pursuers. In terms of his contract he was entitled to an annual bonus for the year 1998/99 "dependent upon the percentage growth in the pursuers' audited earnings per share compared with the previous financial year". The audited accounts entitled the pursuer to a bonus in the sum sued for and this was paid to him. However, the pursuers aver that the executive directors of the pursuers artificially increased "the profit and earnings per share" by "deliberately not applying" certain accounting policies relative to the calculation of profit on long-term contracts. Although not linked to any plea-in-law, there are also averments about certain duties incumbent upon the defender as a director, which he is averred to have breached. According to the pursuers, the audited accounts have been "recalculated and restated in accordance with the company's stated accounting policies" and this has revealed a loss. The pursuers maintain that because of this recalculation, the defender must return his bonus because it was made "under an error of fact as to the true financial position". They say that it is "just and equitable that the pursuers should be entitled to repetition" of the sum paid as a bonus.

[2] The summons was not served until 15 May 2001. Service was accepted on that date by a law agent acting on the defender's behalf. A week or so later, a trainee of the agent telephoned the pursuers' agents to ask when they intended to lodge the summons for calling. The pursuers' agents were unable to say when that would be. Two days later (25 May) the defender's agent wrote to the pursuers' agents referring to that telephone call and formally requesting to be told when the summons was to be lodged for calling and seeking further information and documentation. On the same day, the pursuers' agents telephoned the defender's agent and informed a trainee that the summons would be lodged upon the expiry of the induciae. That information, vague as it was, was not passed on to the defender's principal law agent by the trainee. The expiry of the induciae occurred on 6 June 2001, when the summons was duly lodged for calling. The defender's agent did nothing about this as he was still, he thought, awaiting a response to his letter of 25 May. He did not enter appearance or lodge defences, which were due by 14 June. On 19 June, the pursuers' agents enrolled for decree in absence. They did not intimate that motion to the defender's agent. As it turned out, the motion was dropped because of the absence of a Minute of Election in relation to expenses, which is a requirement of the Rules of Court. That problem was remedied and the motion was re-enrolled on 27 June. This motion was also not intimated. On 29 June 2001, decree in absence was granted. On 10 July, several days after the expiry of the time limit in which to enrol for decree (infra), the pursuers' agents wrote to the defender's agent informing him that they had taken a decree in absence. They had still not replied to the letter of 25 May. On 16 June, the present motion was enrolled to recall the decree in absence and allow defences to be received late.

[3] Chapter 2 of the Rules of Court concerns relief from non-compliance with the Rules. Rule 2.1 states :

"(1) The court may relieve a party from the consequences of a failure to comply with a provision in these Rules shown to be due to mistake, oversight or such other excusable cause on such conditions, if any, as the court thinks fit."

Chapter 19 deals with decrees in absence. Rule 19.1 provides that a pursuer may enrol a motion for such a decree where the defender has failed to enter appearance or lodge defences. Subject to certain formal requirements, the Court is bound to grant that motion. Rule 19.2 states :

"(1) A decree in absence may not be reclaimed against.

(2) A defender may, not later than -

(a) 7 days after the date of a decree in absence against him...

apply by motion for recall of the decree and to allow defences to be received.

(2) Where a defender enrols a motion under paragraph (2) he shall -

(a) at the same time lodge defences in process;

(b) have paid the sum of £25 to the pursuer; and

(c) lodge the receipt for that sum in process.

(4) On compliance by the defender with paragraphs (2) and (3), the court shall recall the decree against him and allow the defences to be received; and the action shall proceed as it the defences had been lodged timeously."

The defender had, by the time of the motion, paid the £25 and lodged the appropriate receipt in process. He had also lodged relatively brief defences in which he stated that he did not "knowingly overvalue the profits and earnings in the pursuers (sic) accounts. Nor was he aware of or participate (sic) in any scheme to do so." The sole plea-in-law was simply the negative of the pursuers' plea.

[4] At the hearing before me, a fuller set of defences was tendered. These included a preliminary plea to the relevance of the pursuers' case and pleas to the merits also based upon alleged factual errors in the pursuers' case and upon it being inequitable to order repetition of the bonus amount. The defences averred that the defender had been a marine director and had no operational responsibility for the preparation of figures. The figures had been prepared by a finance team and audited internally and by a firm of chartered accountants. He had not solicited the bonus but had received it in good faith as part of his contractual entitlement. In June 2000 he had been told by a co-employee that the finance team had been working with inflated figures and reported this to a non-executive director and the chairman. He was subsequently dismissed.

[5] The case raised two broad issues. The first was whether it was competent to invoke the dispensing power in rule 2.1.(1) to overcome the 7 day time limit set in Rule 19.2.(1). It was argued by the pursuers' solicitor that it was not competent because Rule 19.2.(1) was itself a provision granting relief from the consequences of a failure to lodge defences or enter appearance. By holding that the general dispensing power was available, the provisions of rule 19.2.(1) would be circumvented or usurped. A specific Rule of relief ought not to be overridden by a general power (see Robertson v Robertson's Trs 1991 SLT 875, Lord Weir at 875; not commented adversely on by the Division in the sequel Robertson v Robertson's Ex 1991 SC 21, SCLR 190). Counsel for the defender argued that the use of the power was competent. Section 23 of the Court of Session Act 1868 (31 & 32 Vict. c 100) was a predecessor of rule 19.2.(1) and provided for the recall of decrees in absence within ten days. However, it was said that recall could still be granted "in special circumstances" even when reduction was an alternative (Mackay : Manual of Practice p 620 under reference to Whyte v Whyte (1891) 18 R 469). Under the Rule in force immediately before 19.2.(1) (89 (f) of the 1965 consolidation), although Lord Weir had decided one way, Lord Maclean had favoured the competency of a late motion for recall in Thomson v Omal 1994 SLT 705 at 706. That was also the approach of the Division in Graham v John Tullis & Son (Plastics) 1992 SLT 507 in relation to the time limits for the marking of appeals. In one case, Lord Eassie had allowed a late recall of a decree in absence although no opinion had been issued (Findlay v British Railways Board, 6 July 2001, unreported).

[6] Secondly, it was submitted by the pursuers that even if it were competent to use the general dispensing power, that ought to be done only in very exceptional circumstances (Thomson v Omal (supra) Lord Maclean at 706; McGee v Matthew Hall 1996 SLT 399, Lord Caplan at 399). This is because rule 19.2.(1) is in itself a relieving provision and the alternative remedy of reduction remained open to a defender (Thomson v Omal (supra) Lord Maclean at 706-7). Reduction was an accessible remedy albeit that the onus would be upon the defender to prove that the decree in absence was not merited in fact or law having regard to all the facts and circumstances (Robertson's Ex v Robertson 1995 SC 23, Opinion of the Court delivered by Lord McCluskey at 29-31; SLT 429 at 433; Nunn v Nunn 1995 SLT 182, Lord MacFadyen at 183-186). The present motion attempted to circumvent the requirement to prove a basis for reduction. In this case, it was submitted first that no exceptional circumstances had been made out. The only reason advanced for seeking the use of the dispensing power was the defender's agents' own oversight and that was not extraordinary or exceptional. This was so even although the pursuers' solicitor acknowledged that it would have been in accordance at least with professional courtesy, albeit not a requirement of the Rules of Court, for a motion for decree in absence to be intimated to an agent known to be acting for a party. Secondly, the defender still had the remedy of reduction available to him. Thirdly, the defender had not pled a relevant defence. The solicitor for the pursuers maintained that the facts that the pursuer had no responsibility for or knowledge of the pursuers' earnings figures and had himself brought the attention of the board to the problem did not constitute a defence to the claim. For these reasons, it was said, the motion should be refused.

[7] Counsel for the defender argued that the motion should be allowed for four reasons. First, this was not a case of wilful non-compliance or recklessness but of oversight as a result of the trainee not passing on a message. The principal agent was entitled to await the response to his letter in the absence of any other information. Secondly, it would be inequitable to allow the pursuers to take advantage of the defender's failure given the request in that letter. Thirdly, this was an unusual claim on its face and against which a relevancy plea had now been taken. Although the defender might have alternative remedies by way of an action against his agent or reduction, neither of these provided a certain course of action. In all these circumstances the motion ought to be granted.

[8] On the matter of competency, the Court's discretionary power under Rule 2.1.(1) arises if two circumstances coincide. The first is that there is a failure by one party to comply with a provision of the Rules. In this case, the defender seeks recall of a decree in absence and permission to lodge defences . The Rules permit him to do that but stipulate that he must make his application within seven days of the decree. He has failed to comply with that provision. In that sense, the first circumstance has happened. The second is that the reason for this failure must be due to mistake, oversight or other excusable cause. Had the defender's agent been aware of the decree in absence at the time it was pronounced, then no doubt he would have taken timeous steps to have it recalled. He did not know of the decree or of the lapse of time for the reasons given above, i.e. his mistaken understanding that he was still to be told when the case was going to be lodged for calling and the oversight of the trainee in failing to communicate the telephone message to him, upon which, no doubt, he would have acted. The second circumstance is also met in that the failure was due to that mistake and oversight. In these circumstances, I am satisfied that the motion is a competent one and in that regard I agree with Lord Maclean in Thomson v Omal (supra) and disagree with Lord Weir in Robertson v Robertson's Trs (supra).

[9] I should add that I do regard the defender's agent's failure as excusable especially in light of the pursuers' agents' failure to intimate to him (twice) that they were enrolling for decree in absence. The pursuers' agents knew that the defender had an agent acting for him since that agent had been accommodating enough to accept service on the defender's behalf. They knew that the defender intended to defend the action because of the content of the defender's agent's letter of 25 May, which was never formally replied to. In these circumstances, given that state of knowledge, although it was not required in terms of the Rules, it would have been in accordance not only with professional courtesy but also good practice for the pursuers' agent to have intimated the motion for decree in absence to the defender's known agent and, indeed, to have replied formally in writing and in good time to the request in the letter to specify when the case was to be lodged for calling.

[10] In relation to whether, in any event, I should grant relief in terms of Rule 2.1.(1), it is of note that the Rule is not qualified by any words such as "exceptional or extraordinary circumstances" and I would be reluctant to read any such words into it. The Rules of Court are devised to regulate litigation and, in that regard, to assist both the parties and the Court in arriving at a just conclusion in accordance with the law as expeditiously as is reasonable in all the circumstances. As a general principle, parties must, of course, abide by the rules and the sanctions, which attach to any failure to do so. The dispensing power is, however, one which is nevertheless designed to enable the Court to do substantial justice between the parties where, because of some failure to abide by the Rules, that justice would not be secured. In this case, I am satisfied that such justice would not be done as between the parties if the decree in absence were allowed to stand unrecalled.

[11] Were the decree to be allowed to stand then the pursuers would have secured a decree simply because of the defender's agent's mistake and oversight in circumstances in which the pursuers and/or their agents must have known that it was the defender's intention to defend the case. The defender would then have two courses of action open to him. The first would be to sue his own agent, a step that he may, for many reasons unrelated to this case, be reluctant to take. He might well prove negligence in respect of the agent's failure to peruse carefully the calling lists but that proof might not be inevitable given what I have said above about what might be expected in relation to good practice and professional courtesy. In order to secure payment of the sum, which, meantime, he may have had to pay to the pursuers, he would have to demonstrate that he would have succeeded in his defence. He might well do that also (see infra) but success in the case would be far from assured. The second would be to raise an action for reduction of the decree. Again, if he succeeded in persuading the Court that he had a defence on the merits then, against the procedural background, which permitted the decree, he might well win his case but, if the various reports in the cases of Robertson (supra) are a guide, this may take a very long time. On the other hand, if the decree were to be recalled now (and so far as I am aware no steps have been taken to extract or enforce it) then the action would proceed as it ought to have done in ordinary course and be resolved as between the parties in the normal way. Neither party would be prejudiced.

[12] In determining that justice requires recall of the decree, I have had regard also to the nature of the action and the proposed defence. I express no concluded view at all on the merits of either. However, I note that the pursuers are seeking "repetition" of monies paid over to another party in terms of a specific contractual provision. The basis of the claim is "unjustified enrichment" yet the payment made was made under that provision. What has occurred, according to the pursuers, is that they have had occasion to revise the audited figures, which triggered the payment. In these circumstances, it would seem that the defender has at least raised a colourable defence to the case against him as a matter of relevancy. Furthermore, given the equitable nature of the remedy sought, the facts averred by the defender concerning his ignorance of the calculation of the sums may, if they are proved, convince a Court that the equities are balanced in his favour. There is therefore a real issue to try as between the parties and justice requires that that issue be tried in the normal manner.

[13] In all these circumstances, I will recall the decree and allow the defences to be received. Although the defender has succeeded with his motion today, that motion was necessitated by his agent's failure to enter appearance and lodge defences in terms of the rules. In the circumstances, I will find no expenses due to or by in respect of the motion.