Scottish Court of Session Decisions

Rodger v. C & J Contracts [2002] ScotCS 260 (13 September 2002)

OUTER HOUSE, COURT OF SESSION
A103/00	OPINION OF LORD PHILIP in the cause HENRY WYSE RODGER (AP) Pursuers; against C & J CONTRACTS LIMITED Defenders:   ________________

 

 

Pursuers: Haldane, Balfour & Manson (for McKenzies, Kirkcaldy)

Defenders: J L Mitchell, Q.C.; Simpson & Marwick, W.S.

13 September 2002

1. In this case the pursuer claims damages against the defenders for loss, injury and damage sustained by him as a result of an accident which occurred on or about 3 October 1997. He avers that at the time he was employed as a general manager by the defenders and that his duties extended beyond the supervisory and required him to become involved in construction work along with other employees of the company. He further avers that the accident occurred while he was working, as instructed by the defenders supervising and assisting with the construction and cladding of an extension to a farm building. When the accident happened he was involved in fixing cladding to the roof of the extension. While moving about on the roof he over-balanced and fell approximately 4.5 metres on to a concrete floor and sustained injury. In their answers the defenders aver that the pursuer was not their employee and further, that he entered into a fraudulent scheme with the defenders' principal, his son, Craig Rodger, to represent the circumstances of the accident as falling within the defenders' employers liability insurance cover and so obtain reparation from the defenders and their insurers.
2. The case came before me on the procedure roll when Miss Haldane for the pursuers argued in support of her first plea-in-law that the defenders averments of fraud on the part of the pursuer and his son were irrelevant and lacking in specification and should not be remitted to probation.
3. The averments in question were in the following terms:

"Further explained and averred that the Pursuer's representations (a) that he was an employee of the Defenders, and (b) that at the time of the accident he was working in a supervisory and non-manual capacity, are part of a fraudulent scheme by him, in conjunction with Craig Rodger, to recover reparation from the Defenders and their insurers ostensibly in circumstances which would fall within the terms of the Defenders' employers' liability insurance cover. At the time of the accident the Pursuer was not employed by the Defenders. The history recorded upon his attendance at Edinburgh Royal Infirmary on 3^rd October 1997 is of a 47 year old man, who had recently recovered from a nervous breakdown, who was assisting in his son's roofing business. For at least two years prior to the accident the Pursuer was involved with his son in the business of C & J Contracts. Suppliers of that firm supplied materials to the order of the Pursuer. The Pursuer held himself out as a partner of, or at least someone with authority to order goods on behalf of C & J Contracts. The Defenders' records have been found to contain a copy (but not the original) of an alleged letter which bears to be dated 18^th September 1997, from Craig Rodger to the Pursuer in the following terms:

'Further to your recent interview with this company, it gives me great pleasure in advising you that your job application has been successful.

Please find attached for your information details of your contract of employment. Your date for starting work will be 1^st October 1997, I trust this will be acceptable to yourself.

May I take this opportunity to welcome you to our company and wish you every success in the future.'

Said records have also been found to contain a copy (but not the original) of an alleged contract of employment. The contract bears to be dated 30^th September 1997. It specifies that the Pursuer would be paid the sum of £25,000 per annum with bonuses paid yearly. The Defenders could not have paid any such salary or bonuses to the Pursuer at the time of the accident. The Defenders were incorporated on 10^th September 1997 by Craig Rodger, who carried on business as a sole trader under the firm name of C & J Contracts. The assets of the firm of C & J Contracts were never transferred or sold to the Defenders. No bank account was set up for the Defenders. A petition was presented for the liquidation of the Defenders. On 5^th March 1998 J D Lawrie of Messrs Cork Gully was appointed provisional liquidator. On 28^th May 1998 the petition for liquidation was dismissed on the application of the liquidator on the basis that there were no assets in the liquidation. Craig Rodger was sequestrated on 11^th March 1998. Further there is no record of the Defenders ever having paid the Pursuer a salary. No returns were submitted by the Defenders for PAYE purposes in respect of any employees for the period 1997/98 or 1998/99. Said alleged letter and contract of employment were prepared by, or on the instructions of, Craig Rodger and the Pursuer after the accident in furtherance of the fraudulent scheme condescended on. The Pursuer is called upon to specify the circumstances in which he applied for a job with the Defenders, the date of his interview with the Defenders, and the identity of those conducting the interview. His failure to answer these calls will be founded upon. Further explained and averred that the contract between the Defenders and their employers' liability insurers in force at the time of the accident was concluded on the basis that the Defenders employed only clerical staff, all other forms of labour, including manual labour, being hired on a sub-contract basis. The Defenders paid a reduced insurance premium of about £500 per annum which reflected the restriction on their employers' liability cover to work of a non-manual nature. At the time of the accident the Pursuer was carrying out work of a manual nature. He was helping a self-employed roofer, Thomas Birrell, to fix proofing panels onto the structure of a new cattle shed at Nisbet Farm. Mr Birrell and the Pursuer had been on site for between two and three days. They were the only people on site. The system of work which they usually employed was that Mr Birrell fetched and carried the roofing panels while the Pursuer did the actual fixing. The employers' liability report for the accident signed by Craig Rodger was not submitted until 1^st December 1997. It included a description of the accident which erroneously asserted that the Pursuer had attended Nisbet Farm on the morning of 3^rd October 1997 and subsequently climbed onto the roof 'to inspect some cladding work which had been carried out by a sub-contracting squad'. In November 1998 the Defenders' insurance underwriters received an anonymous phone call during the course of which they were advised by a female voice that the Pursuer's claim was 'a sham'".

4. Miss Haldane submitted that where fraud is alleged the averments supporting such an allegation must attain a high degree of clarity and specification. In the passage quoted the necessary degree of clarity and specification had not been attained and fair notice of the substance of the allegations had not been given. Reference was made to The Royal Bank of Scotland Plc v Holmes 1999 SLT 563 at 569K-L, Wright v Cotias Investments Inc. 2000 SCLR 324 at 343B-C, and Stewart Buchanan Gauges Ltd v BEC (Scotland) Ltd &c 19 January 2001, unreported. Counsel submitted that the averments in question, whether they were read individually or as a whole, did not admit of a prima facie inference of fraud. In particular, the averments relating to hospital records and the pursuer's involvement with the defenders' predecessors gave no support for the allegation that the pursuer was not employed and so were irrelevant. Mere reference to the letter and contract of employment followed by a conclusion that they were prepared in furtherance of a fraudulent scheme were not sufficient to enable a inference of fraud to be drawn. An averment that the documents were composed after the date of the accident was not sufficient. It was necessary to aver circumstances which could be relied on as yielding an inference that the production of these documents was fraudulent. There were a number of acceptable reasons why the letter could have been written after the accident. Similarly the averments relating to the defenders' lack of assets did not yield the necessary inference. There was no averment that the pursuer was aware of the extent of the insurance cover held by the defenders. Miss Haldane's second submission was that, even if the averments under attack were sufficiently specific, they were irrelevant. They were properly the subject of a separate litigation or the basis of repudiation of indemnity by the defenders' employers' liability insurers.
5. In response Mr Mitchell QC, for the defenders, accepted that the law was as contended for on behalf of the pursuer and that averments of fraud must attain a high degree of clarity and specification. He submitted however, under reference to Stewart Buchanan Gauges at paragraph [13] that it was not necessary for the defenders' averments to go into any more detail than was necessary to give fair notice of the case. The defenders' position was that the pursuer was not an employee and at the time of the accident was carrying out manual work. In order to advance the case that the pursuer was not an employee, the defenders were entitled to prove the averments under attack so that a complete picture of the true nature of the pursuer's relationship (or lack of it) with the defenders could be made clear.
6. I shall deal first with the pursuer's second argument, on the relevancy of the averments. The pursuer's only case is that he was an employee of the defenders and in that capacity was owed a duty of care by them. The defenders deny that he was an employee. There is accordingly an issue between the parties on that question. The defenders seek to elaborate on their denial by averring material which they say indicates the true nature of the relationship between them and the pursuer. In my view, they are entitled to do so. The averments they make, if proved, could give support to their contention that the pursuer was not their employee. The hospital records of 3 October 1997 to which they refer are capable of being interpreted as indicating that the pursuer did not regard himself as their employee. The defenders' lack of assets and the absence of any PAYE returns or of any evidence of wages having been paid to the pursuer could point in the same direction. The alleged preparation of an offer and contract of employment in favour of the pursuer after the accident, when looked at along with other factors, such as the restricted nature of the defenders' employers' liability cover and the delay in submitting an accident report might also be consistent with the absence of an employer/employee relationship at the time of the accident. I do not consider that the defender should be prevented from leading evidence on these matters which, looked at as a whole, are capable of giving support to their position on the issue of employment. In these circumstances, I reject the argument that the averments under attack are irrelevant.
7. I turn now to the submissions made by Miss Haldane for the pursuer in relation to the adequacy of the specification of the averments. She relied on the cases cited in support of the proposition that averments of fraud must attain a high degree of clarity and specification. The authorities cited were all, without exception, concerned with cases in which one party claimed that he had been induced to enter into a contract by fraudulent misrepresentations made by the other. In those cases proof of fraud was fundamental to success for the party seeking to set aside the contract. That is not this case. In this case the defenders make averments of fraud as background to and in support of their denial that the pursuer was an employee. Proof of the alleged fraud is not essential to success for the defender in this action. They may be able to establish that the pursuer was not an employee without it. In these circumstances I do not consider that the cases cited necessarily deal with the situation which arises in this case.
8. Nevertheless, it can hardly be disputed that, where fraudulent activity is averred, fair notice should be given and the nature of the fraud should be clearly specified. I take the view that the defenders' averments of a fraudulent scheme are sufficiently specific having regard to the purpose for which they are intended - as background to and support for their denial of an employer-employee relationship. It is not appropriate to examine each averment individually in order to determine whether it is capable of yielding an inference of fraud. The correct approach, in my view, is to consider whether the averments, looked at as a whole, are capable of yielding such an inference. For the reasons I have already set out I consider that they do.
9. In arguing that the averments under attack did not admit of a prima facie inference of fraud, Miss Haldane submitted that it was not enough to aver a set of facts from which fraud might be inferred. It was necessary to make averments from which fraud must necessarily be inferred. In my view that submission is ill-founded. In Drummond's Trustees v Melville (1861) 23 D. 450 at page 462 Lord President McNeill said:

"It is not enough to allege - you said something which led us to believe so and so. That is not enough. If an action is laid upon misrepresentation, the misrepresentation itself must be set forth; and then, when the misrepresentation is set forth, we will see whether it is such a statement as goes at all to support the conclusion of the action, yea or nay; and the party who is said to have made the representation will have an opportunity of explaining it. The words may admit of other meaning. They may not be such as ought to have led the parties to draw any such inference; and no person accused of fraudulent misrepresentation can be bound to go to trial, unless he is told what the fraudulent misrepresentation is that he is said to have made. Nothing can be more settled than that."

It is clear from that passage that it is only necessary to make averments which are capable of admitting of an inference of fraud. In my opinion the defenders' averments pass that test. I shall allow the defenders a proof of their averments.