Scottish Court of Session Decisions

10 October 2001

[1] The petitioners are a French company. Their petition seeks registration under the Civil Jurisdiction and Judgements Act 1982 of a Judgment of the Cour d'Appel de Bordeaux dated 29 January 2001. That Judgment was pronounced in legal proceedings in France, in which the petitioners are the pursuers and respondents and the respondents in the present petition, William Grant & Sons Limited and William Grant & Sons International Limited, the defenders and appellants.

[2] In this petition, the petitioners have lodged an Affidavit sworn by Maitre Jean-Yves Dupeux, an avocat of the Paris Bar. That Affidavit provides full details of the Judgment of the Cour d'Appel de Bordeaux. Most of those details are not relevant to the motion for the recall of arrestments that is before me. It is sufficient for me to note that in terms of the Judgment against the respondents, they have been ordered to pay the petitioners inter alia FF110,101,000, together with interest on the sum of FF100,000,000, compounded annually and at the legal rate, from 30 December 1994 until payment. Under French Law the legal rate of interest is fixed by decree, for each calendar year. In correspondence, to which I refer later, the solicitors acting for the parties agreed that the sums specified in the Cour d'Appel's Judgment, as being payable jointly and severally by the respondents, amount to a total figure, which will not exceed £10.5 million or 18 million EUROS by 19 September 2002.

[3] The Judgment of the Cour d'Appel de Bordeaux is currently under appeal to the Cour de Cassation. According to the Affidavit sworn by Maitre Dupeux such an appeal does not suspend enforcement of the Judgment in France. Counsel for both parties understand that the hearing before the Cour de Cassation may not take place until the end of 2003.

[4] In the present petition, Lord McEwan pronounced an Interlocutor dated 1 May 2001, which registers the Judgment of the Cour d'Appel de Bordeaux.

[5] The respondents have appealed against that Interlocutor. They have lodged grounds of appeal that raise a number of issues. In the first place the respondents contend that recognition of the Judgment of the Cour d'Appel de Bordeaux would be contrary to public policy in terms of Article 27 of the Brussels Convention. They contend that in the French proceedings William Grant & Sons International Limited suffered an infringement of their right to a fair trial, as guaranteed by Article 6(1) of the European Convention on Human Rights ("EHCR"). It is suggested that, if there is doubt as the relationship between the Brussels Convention and the ECHR, a reference to the Court of Justice of the European Communities may be required. The respondents also seek to stay these petition proceedings, in terms of Article 38 of the Brussels Convention, to await the outcome of their appeal to the Cour de Cassation. I was informed that the appeal against Lord McEwan's interlocutor is to be heard before another Lord Ordinary. A hearing in that appeal has been fixed for 18 and 19 October 2001. If, at that hearing, or in any subsequent reclaiming motion against the Lord Ordinary's interlocutor following that hearing, the respondents are successful in having a question of law referred to the Court of Justice of the European Communities, these petition proceedings could last for a further three or four years and possibly longer.

[6] The interlocutor of Lord McEwan granted the petitioners warrant to arrest on the dependence. Thereafter various arrestments were laid by the respondents. I was informed by the respondents' senior counsel that only one of those arrestments had been successful. That was an arrestment in the hands of Freightliner Limited. On 28 September 2001, Lady Paton granted a motion recalling that particular arrestment, upon consignation of £70,000.

[7] The respondents have enrolled a motion seeking "recall of all arrestments on the dependence of the action in respect that a guarantee providing full security for the petitioners' claim by The Royal Bank of Scotland has been executed and delivered to the petitioners". Before I turn to the grounds upon which that motion was argued, I should refer to two productions that are central to the submissions I heard. The first is a Guarantee by the Royal Bank of Scotland dated 20 September 2001 (No. 7/1 of Process). The respondents arranged for their bankers, The Royal Bank of Scotland plc, to grant that Guarantee, which is in favour of the petitioners. The operative terms of the Guarantee are as follows:

[8] The respondents, for their part, have granted an irrevocable Letter of Undertaking in favour of the petitioners (No. 7/2 of Process). That document is also dated 20 September 2001. Its terms are as follows:

[9] On 24 September 2001, McGrigor Donald, the firm of solicitors that act for the respondents, delivered the principals of the Guarantee and the Letter of Undertaking to Dundas and Wilson, the firm of solicitors that act for the petitioners. Those principal documents were subsequently returned to the respondents' solicitors. They are now lodged in process, as productions Nos. 7/1 and 7/2 for the respondents.

[10] The motion enrolled does not seek recall of the warrant to arrest on the dependence that Lord McEwan granted. Counsel for the respondents explained that was because the petitioners could not in good faith lay any further arrestments under the warrant to arrest on the dependence, so long as they hold the benefit of the Guarantee by The Royal Bank of Scotland plc (or any successor guarantee).

[11] Senior counsel for the respondents sought recall of the arrestments under three broad headings. In the first place he argued that the Guarantee and the irrevocable Letter of Undertaking provided sufficient security for the petitioners. Secondly he argued that, acting through their respective solicitors, the parties had reached an agreement that the arrestments would be recalled, upon delivery to the petitioners of a 12 month Guarantee granted by the Royal Bank of Scotland and an irrevocable Letter of Undertaking granted by both respondents, in the terms that are to be found in Nos. 7/1 and 7/2 of Process. As a subsidiary argument under this second heading, it was argued that the petitioners were personally barred from contending that a concluded agreement had not been reached. Under the third heading, it was argued that the alternative security offered by the respondents was the best that it was practicable for the respondents to offer. There was evidence before the Court that it was the policy of the Royal Bank of Scotland not to provide guarantees of their clients' obligations for periods longer than 12 months ("open-ended" or "rolling" guarantees as they are sometimes referred to). On the basis of such evidence, that a major Scottish bank would not provide the replacement security the petitioners were seeking, it was argued that the Court should hold that the respondents had done all that was practicable to provide alternative security and that in those circumstances the arrestments laid should be recalled.

[12] As I have indicated the Guarantee granted by the Royal Bank of Scotland plc is for sums due in terms of the Judgment of the Cour d'Appel de Bourdeaux up to a maximum figure of 18 million EUROS. It is a matter of agreement between the parties that in the event of the Judgment being enforced in Scotland during the period to 19 September 2002, the sums payable to the petitioners will not exceed 18 million EUROS. Likewise it is a matter of agreement that the parties will be able to calculate, if necessary, the extent to which that figure of 18 million EUROS would increase, during successive twelve month periods following 19 September 2002. Such calculations can not yet be carried out, because the legal rate of interest in France changes for each calendar year.

[13] Senior counsel for the respondents submitted that the respondents had provided alternative security that should be regarded as sufficient to replace the arrestments that had been laid. For the twelve month period to 19 September 2002, the petitioners would have the security of a Guarantee in their favour for 18 million EUROS. On the expiry of the current Guarantee, the provisions of the Letter of Undertaking would come in play. It was submitted that the Letter of Undertaking had been granted by two substantial Scottish companies. Having regard to the assets of both respondents, as disclosed in their published accounts, there was a very high probability that the respondents would be able to put in place a successor guarantee for each successive twelve month period, until the present petition proceedings were concluded. William Grant & Sons Limited is the holding company of William Grant & Sons International Limited. Reference was made to the accounts of William Grant & Sons Limited for the year to 30 December 2000 (No.7/22 of Process). Those accounts indicate that, for that period, the group trading profit, after taxation, of the holding company and its 53 subsidiaries was in excess of £22.5 million. Those accounts also record the total assets less current liabilities of the group, as at 30 December 2000, at a figure in excess of £121 million. Reference to the accounts of William Grant & Sons International Limited for the same period (No.7/21 of Process) discloses total assets less current liabilities, as at 30 December 2001, at a figure in excess of £38 million. It was submitted that having regard to the nature of the business carried on by the two companies, with the group's principal activities being the distillation, blending, bottling and distribution of alcoholic drinks, the figures from both sets of accounts indicate that there was a high probability that both respondents will continue trading and that their bankers will be willing to grant further guarantees for periods of twelve months, for as long as the present proceedings run. It was argued that the Court should not be looking for certainty, standing the fact that the Court is entitled to exercise its discretion in deciding whether or not to recall arrestments. The respondents' businesses were being inconvenienced by the arrestments that had been laid. That was why the respondents wished all the arrestments recalled, despite the fact that only one arrestment had been successful. I was informed that the respondents knew that if they did not have a successor guarantee in place by 20 September 2002, the petitioners would be able to carry out further arrestments under the warrant to arrest on the dependence that would remain in existence. These further reasons for the Court being persuaded that there was a high probability that the respondents would obtemper the undertaking they have given and for the motion to be granted.

[14] Senior counsel for the petitioners contended that the alternative security offered was insufficient to warrant the recall of the arrestments. It fell short because of the need for renewal of the Guarantee. I was informed that there had not been "enthusiastic compliance" with previous judgements that the petitioners have obtained against the respondents. Those previous judgements are referred to in the affidavit of Maitre Dupeux. There was no great mutual trust between the parties. The petitioners were not confident that the respondents would do all they could to arrange any successor guarantees that might be required, during the currency of the present proceedings. It was submitted that the alternative security offered by the respondents carried various risks for the petitioners. Even if the respondents were to make every effort to arrange successor guarantees, they might be unable to do so. The respondents might be taken over, resulting in a change of personnel from those who had agreed to and had executed the Letter of Undertaking. There might be movement of assets amongst members of the group of companies of which William Grant & Sons Limited is currently the holding company and William Grant & Sons International Limited is one of numerous subsidiaries. The relevance of that particular risk was illustrated by Taylor Woodrow Construction (Scotland) Limited v Sears Investment Trust Limited 1991 SLT 421 (see the Opinion of the Court delivered by Lord Justice Clerk Ross at pp. 425K - 426C). Senior Counsel for the petitioners conceded that in Taylor Woodrow Construction (Scotland) Limited v Sears Investment Trust Limited the defenders had not been the ultimate holding company. Indeed in that case the pursuers had indicated that they would accept as alternative security a guarantee from the ultimate holding company. It was argued, nevertheless, that the possibility of assets being redistributed was a factor of relevance. A further difficulty highlighted was the limited nature of the remedies open to the petitioners, in the event that the respondents failed to have a successor guarantee in place by 19 September 2002 or on the expiry of subsequent twelve month guarantees. As successor guarantees are to be produced by a third party, an action of implement against the respondents would be unlikely to achieve anything. Were an action of damages to be raised, it would be difficult, if not impossible, to quantify any damages, until the present petition proceedings had run their course. Senior counsel for the petitioners submitted that if the respondents failed to arrange a successor guarantee, the only course of action open to the petitioners would be to lay further arrestments, the effectiveness of which could be reduced by company reorganisation or the redistribution of assets.

[15] I am not persuaded that the alternative security offered by the respondents is sufficient to warrant the recall of the arrestments that have been laid. Whilst a comparatively small sum has been caught by the arrestments, there is, in my opinion, force in all of the criticisms made by senior counsel for the petitioners as to the adequacy of the alternative security offered. Obviously during the period to 19 September 2002, the Guarantee granted by The Royal Bank of Scotland plc will provide all the security that the petitioners are entitled to. Indeed the level of security will be substantially more than the petitioners have been able to achieve thus far, by the laying of arrestments. It is what may happen after 19 September 2002 that is important. By accepting the Royal Bank of Scotland's Guarantee, the petitioners will be prevented, for the duration of the Guarantee, from exercising the warrant to arrest on the dependence. That might well be to their prejudice, if they had reason to believe that a successor guarantee was not to be put in place. They might reach such a view were the respondents' trading fortunes to slump or were the holding company, William Grant & Sons Limited, to become the object of take-over proposals. In the light of these factors founded on by the petitioners, I have reached the view that the alternative security offered by the respondents would not be sufficient to warrant the recall of all the arrestments laid, even when account is taken of the fact that only one of those arrestments has attached funds, the inconvenience the arrestments are causing to the respondents and the current financial standing of the respondents.

[16] The second ground advanced, as justifying recall of the arrestments, was that the parties had reached an agreement to do so. It was submitted that the petitioners had agreed to release all the arrestments laid, on delivery to them of a bank guarantee and letter of undertaking in the terms of the Guarantee by The Royal Bank of Scotland Limited plc and the Letter of Undertaking in the name of both respondent companies, which constitute Nos. 7/1 and 7/2 of Process. Both these documents are dated 20 September 2001, although there was no information before me as to precisely when they were executed.

[17] Senior counsel for the respondents submitted that the existence and terms of such an agreement were clear from the E-mails and letters that had passed between Dundas & Wilson, the solicitors for the petitioners, and McGrigor Donald, solicitors for the respondents. Those documents are to be found in No. 6/4 of Process. The earliest document is dated 20 August 2001 and the latest dated 24 September 2001. It is clear from those E-mails and letters that in negotiations, which began prior to 20 August 2001 and continued in the weeks thereafter, the two firms of solicitors discussed possible bases upon which the petitioners would agree to loose the arrestments laid and be provided with alternative security by the respondents. It appears that initially the petitioners sought an "open-ended" guarantee, or a series of "rolling" guarantees, to a value of the decree of the Cour d'Appel de Bordeaux. Subsequently, the two firms of solicitors adjusted the terms of a bank guarantee in the name of The Royal Bank of Scotland plc and an irrevocable letter of undertaking in the names of the two respondents. By 18 September 2001, the two firms of solicitors had adjusted draft documents which, apart from certain formal dates to be included therein, were in terms identical to the terms of the Guarantee and Letter of Undertaking, that constitute Nos. 7(1) and 7(2) of Process.

[18] On 19 September 2001, McGrigor Donald delivered to Dundas & Wilson the principal copies of a Guarantee by The Royal Bank of Scotland plc and a Letter of Undertaking in the names of both respondents. Those principal documents had been extended by or on behalf of the respondents. Both documents were intended to be in the terms of the drafts that had been adjusted and agreed on by the two firms of solicitors. Both documents bore to have been executed on 19 September 2001. The two documents were delivered to Dundas & Wilson, together with McGrigor & Donald's letter of 19 September 2001, which sought confirmation that the arrestments lodged by the petitioners had been loosened.

[19] The following day, 20 September 2001, the two principal documents were checked by Dundas & Wilson. Both were found to contain errors. The terms of those errors were intimated to McGrigor Donald by an E-mail timed at 11.04. on 20 September 2001. Attached to that E-mail was a style for letters to be addressed to all of the named arrestees, which Dundas & Wilson stated " will be issued as soon as (we) have both documents duly corrected and signed". The named arrestees were those in whose hands the petitioners have laid arrestments in the present petition.

[20] The E-mail timed at 11.04 was responded to by McGrigor Donald the same day, by an E-mail timed at 13.26. McGrigor Donald attached to their E-mail drafts of the Guarantee and Letter of Undertaking, which were intended to demonstrate the correction of the errors that had been identified in the two principal documents delivered the previous day. Dundas & Wilson responded to the E-mail timed at 13.26, with a further E-mail timed at 15.51 on 20 September 2001. The E-mail timed at 15.51 began "Thank you - the attached versions are in order." The E-mail went on to indicate how Dundas & Wilson wished the Letter of Undertaking to be executed and pointed out to McGrigor Donald that in each document the date of expiry of the Bank Guarantee should be specified as being 12 months ahead of the date of the Bank Guarantee. On 20 September 2001, Dundas & Wilson also sent McGrigor Donald a letter that stated they looked forward to receiving the duly corrected and executed Guarantee and Undertaking.

[21] At 19.18 on 20 September 2001, Dundas & Wilson sent McGrigor Donald a further E-mail in the following terms:

[22] The following day McGrigor Donald responded to the E.mail timed at 19.18 on 20 September 2001. In an E-mail to Dundas & Wilson, timed at 10.00 on 21 September 2001, they asserted that the respondents had departed from what they had agreed. Subsequently on 24 September 2001 they delivered to Dundas & Wilson the Guarantee and Letter of Undertaking dated 20 September 2001 (Nos. 7/1 and 7/2 of Process) and also intimated this motion for recall of all the arrestments on the dependence.

[23] As I have indicated, senior counsel for the respondents contended that by 20 September 2001, at the latest, the parties, acting through their solicitors, had agreed that upon the respondents delivering a Guarantee and Letter of Undertaking, in the terms of Nos. 7(1) and 7(2) of Process, the petitioners would loose all the arrestments they had laid. The response of senior counsel for the petitioners to such a line of argument was simply put. He argued that all that the exchange of E-mails and letters demonstrated was that the petitioners had expressed the intention of releasing the arrestments, in the event that a Guarantee and Letter of Undertaking were delivered to them. They had not, however, agreed to do so. There was nothing in the correspondence between the firms of solicitors to indicate that the solicitors for either party intended their clients to be bound at any time prior to delivery of the Guarantee and Letter of Undertaking, in acceptable terms and duly executed. No such delivery had taken place, before the petitioners had given notice of a change of intention on their part, in the E-mail timed at 19.18 on 20 September 2001.

[24] In support of his submissions, senior counsel for the petitioners referred to the Opinion of the Lord Ordinary, Lord Mackay of Clashfern, (as he then was), in Comex Houlder Diving Limited v Colne Fishing Co. Limited 1986 S.L.T. 250 at pp. 258E - 259 K. Although Comex HoulderDiving Limited was appealed to the House of Lords, that part of Lord Mackay's Opinion was never challenged on appeal. In that part of his Opinion, Lord Mackay obtained guidance from a passage in the speech of Viscount Haldane in Gordon's Executor v Gordon 1918 1 S.L.T. 407 at p.411, upon which senior counsel for the petitioner placed particular reliance. The relevant passage is in the following terms:

[25] On this issue, I have reached the view that the submissions on behalf of the respondents are to be preferred. In my opinion, by the time that Dundas & Wilson dispatched the E-mail timed at 15.51 on 20 September 2001, the parties, acting through their solicitors, had reached an agreement in terms of which the petitioners were bound to release all the arrestments they had laid, upon delivery to them of a Guarantee by The Royal Bank of Scotland plc and a Letter of Undertaking in terms such are to be found in Nos. 7(1) and 7(2) of Process. In my opinion, adopting the approach advocated by Viscount Haldane of considering the entirety of the process of what passed between McGrigor Donald & Dundas & Wilson, the existence of an agreement is established by the contents of the correspondence and E-mail messages lodged in process and the actings of the parties over the period leading up to 20 September 2001, which that documentation vouches. Apart from the terms of the E-mails and the letter dated 20 September 2001, to which I have already referred, Dundas & Wilson's E-mail timed at 16.47 on 14 September 2001 and McGrigor Donald's E-mail response timed at 13.32 on 18 September 2001, are also indicative that, prior to Dundas & Wilson sending the E-mail timed at 19.18 on 20 September 2001, the parties had agreed that if the respondents procured and delivered to the petitioners a Guarantee and Letter of Undertaking in terms of the adjusted drafts, the petitioners for their part would loose the arrestments.

[26] It was obviously open to the parties to enter into a binding contract in terms of which the petitioners bound themselves to loose all the arrestments they had laid, upon delivery to them of a Bank Guarantee for 12 months and an irrevocable Letter of Undertaking by the respondents to procure replacement guarantees. Equally, it was open to the parties to conclude such an agreement, either during the course of correspondence between their respective solicitors or upon the execution of a formal written agreement by the petitioners and the respondents.

[27] In my opinion, it is perfectly clear from the correspondence lodged that the parties never intended that the arrangements for the recall of the arrestments should be incorporated in one formal document, which the petitioners and both the respondents would all sign and thus become legally bound. The factual situation in the present case is accordingly different from that to be found in Gordon's Executors and Comex Houlder Diving Limited v Colne Fishing Co. Ltd. In both of those cases, it was proposed that a document, incorporating all the terms of the intended agreement between the parties, should be prepared and executed by all the parties involved. That having been proposed, it was to be presumed that the parties did not intend to be bound, until the proposed document was prepared and executed by them. No such document was ever mooted in the present case. On the contrary, it is clear from the productions lodged in the present case that the parties intended that formal documentation would implement, rather than constitute and record, the agreement between them. It was for The Royal Bank of Scotland plc alone to grant the Guarantee to be delivered to the petitioners. It was for the respondents alone to execute the irrevocable Letter of Undertaking to be delivered to the petitioners. As far as the petitioners were concerned, they, for their part, indicated that each of the arrestees would be given written notice that the particular arrestment laid against them had been loosed and was no longer of any effect. Here again the further documentation envisaged was to be signed by only one party. In my opinion, it is clear from the correspondence and E-mails before me that the petitioners and the respondents had gone further than merely forming an intention of agreeing to the recall the arrestments, once further documentation was executed and delivered. By the time the terms of the Guarantee and Letter of Undertaking were finalised, the parties had reached an agreement as to the basis upon which the petitioners would loose the arrestments.

[28] Standing the conclusion that I have reached as to the existence of a binding agreement, it would not be appropriate that I say anything about the respondents' subsidiary argument that the petitioners are personally barred from contending that no such agreement existed.

[29] Likewise, there is no requirement for me to deal with the submissions advanced on behalf of the respondents to the effect that it was not practicable for them to have produced an "open-ended" or "rolling" guarantee, of the nature the petitioners now seek to protect their position until the current proceedings are concluded. Those submissions were supported by letters from The Royal Bank of Scotland plc and HSBC Bank plc indicating that is not the practice of either bank to provide such guarantees for their clients. The absence of evidence of the practice of the other major banks in Scotland and the United Kingdom would have been one reason why I would not have been inclined to find for the respondents under this heading of their submissions.

[30] For the reasons that I have given, I have decided to grant the motion. The parties were agreed that were I minded to grant the motion, I should order that release of the funds consigned following upon Lady Paton's interlocutor of 28 September 2001. I shall so order.