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Cite as: 2002 SCLR 993, [2002] ScotCS 348

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Shaw v. Performing Right Society Ltd [2002] ScotCS 348 (09 July 2002)

OUTER HOUSE, COURT OF SESSION

A3442/01

OPINION OF LORD MENZIES

in the cause

HUGH SHAW FORMERLY TRADING AS THE VENUE

Pursuer;

against

PERFORMING RIGHT SOCIETY LIMITED

Defenders:

________________

Pursuer: Higgins; Hasties, S.S.C.

Defenders: Carruthers; Simpson & Marwick, W.S.

9 July 2002

[1] This is an action for reduction of a sheriff court decree granted on 16 January 2001 and extracted on 31 January 2001, whereby the Court granted decree by default for payment by the present pursuer to the present defenders of the sum of £47,357.62. The pursuer also seeks suspension of a charge on said decree dated 6 February 2001, and interdict and interim interdict against the defenders from doing further diligence upon said decree.

[2] According to the pursuer's averments, he formerly traded as "The Venue" from premises at Calton Road, Edinburgh. He leased the premises to others, usually for use by them as a night-club or discotheque. He sold his business on about 3 January 2001. In October 2000 the defenders raised an action against The Venue in Edinburgh Sheriff Court, seeking payment of a "royalty" in respect of a purported licence granted by the defenders to The Venue for the period October 1999 to October 2000. The initial writ in this action was dealt with on behalf of the present pursuer by a Mr Sinclair, who was employed by the pursuer as his general manager. He was responsible for all matters of day to day management at the premises, including the payment of bills and other debts. The pursuer avers that Mr Sinclair did not inform him that the initial writ had been served. Mr Sinclair completed a notice of intention to defend, on which he named Messrs Hasties as his solicitors. As a result, Messrs Hasties received a form P5 from the sheriff court. When they contacted Mr Sinclair about this, he informed them that he was using another solicitor. Messrs Hasties accordingly forwarded the form to him in order that he could pass it to his agent. Thereafter, Mr Sinclair passed the papers to a Mr James McDonald, who held himself out to be a solicitor practising in Stirling, in order that Mr McDonald might deal with the matter. Mr McDonald did not do so. Indeed, the pursuer now avers that Mr McDonald is not a solicitor and has no legal qualifications. Defences were never lodged, and in January 2001 the defenders enrolled a motion seeking decree by default. This motion was intimated to Messrs Hasties, who contacted the pursuer, who suggested that they speak to Mr Sinclair as Mr Sinclair had informed the pursuer that he already had a solicitor instructed to deal with this matter. Messrs Hasties contacted Mr Sinclair, who asked them to fax the intimation of motion to Mr McDonald. Mr McDonald did not mark opposition to the motion, and decree by default was granted on 16 January and extracted on 31 January 2001. A charge was served on 6 February 2001. The pursuer goes on to aver that "following service of the charge, the pursuer became aware for the first time of the court action at the instance of the defender" (although the pursuer's counsel accepted that standing the earlier averments quoted above, this averment could not be accurate). The pursuer goes on to aver that for a period of months prior to January 2001 Mr Sinclair had been removing money from the business for his own purposes, and that the pursuer has obtained decree against him for about £96,000 in respect of unpaid debts due to him by Mr Sinclair.

[3] The pursuer goes on to aver that in these circumstances he has not had an opportunity to state a defence to the action. He disputes his liability to make payment of the sum sued for in the action, and maintains that he had a good defence to it along the lines (a) that there was no contract between the defenders and the pursuer, (b) that the pursuer has never played music in public at the premises, (c) that the invoices relied on in the initial writ relate to periods which extend beyond the specified period in the writ, and (d) that some of the sums sought fell outwith the five year prescriptive period.

[4] The action came before me on the procedure roll, at which time Mr Carruthers for the defenders moved me to dismiss the action and sustain the defenders' first plea-in-law. He emphasised that reduction of an inferior court decree was a remedy which does not exist of right, and will only be granted in exceptional circumstances and where no other means of review is available. In support of this submission he referred me to the speech of Viscount Dunedin in Adair v Colville & Sons 1926 SC (HL) 51 at 56:

".... It is a remedy which does not exist of right and must be most carefully applied... generally speaking, it is certainly not competent when other means of review are prescribed, and these means have either been utilised or the parties have failed to take advantage of them."

He also referred me to the decision of the Second Division in Philp v Reid 1927 SC 224, and to the passage in the Opinion of the Lord Justice Clerk at p. 229-230:

"Now two things are apparent with regard to the decrees which are under challenge. The first is that they are appealable decrees, and the second is that they are implemented decrees. With regard to the first point, it is manifest that for many months an appeal was open to Mr Burns' client against the decrees of which he now complains; and it is equally obvious that he neglected to avail himself of the opportunity of taking an appeal. ... With regard to the second ground, namely, that a good excuse has been tendered, the only excuse is that the appeal was not taken per incuriam. That would merely seem to amount to an admission of slackness, veiled, no doubt, by resort to another language."

Mr Carruthers submitted that the decree which is the subject of the present action was open to appeal, and appeal is the remedy which the pursuer ought to have sought, rather than reduction.

[5] Mr Carruthers submitted that the pursuer could not avoid responsibility for the actings of his agent, Mr Sinclair. He might well have a remedy against Mr McDonald for falsely holding himself out as a solicitor and for failing to take steps to protect the pursuer's position; he might also have an action against Mr Sinclair. These were the remedies now open to the pursuer - the remedy which he seeks against the defenders is incompetent. He referred me in this regard to Forsyth v A F Stoddard & Co Ltd 1985 SLT 51.

[6] Mr Carruthers went on to submit that the pursuer in the present case was the author of his own misfortune. He had neglected to take care of his own business - he ignored invoices, his employee dealt with this sheriff court action incompetently, and a person who was not a solicitor was instructed to deal with it. If ever a man should take blame for his own actings, it was Mr Shaw. In this regard he referred me to Gehlan v Saeed 1987 SCLR 668, which bore similarities to the circumstances of the present case. In that case landlords of shop premises served an action on the tenant for recovery of possession of the premises. The writ was accepted by the manager of the shop who was employed by the tenant. Solicitors were instructed and defences lodged, but eventually the solicitors resigned agency on the basis that they were unable to get instructions from the tenant, who was then resident in Newcastle. An interlocutor ordering a peremptory diet was served on the shop premises and accepted by the manager, who failed to tell the tenant of the position. The landlords took decree by default and served a charge. The tenant petitioned the Court for reduction of the decree. In a motion for recall of interim suspension Lord Jauncey stated that

"Against this background I have to consider whether this is a case in which it might in the end of the day be appropriate to grant decree of reduction. I make the assumption that the petitioner had a stateable defence to the sheriff court action. The remedy of reduction of a properly pronounced decree is not to be granted lightly and it would be quite wrong to assume that reduction is available as an alternative general remedy to a party who has failed to make use of other remedies, such as appeal, which were available to him. It is clear from the authorities that it is a remedy to be exercised sparingly and only in exceptional circumstances."

He went on to observe:

"Where it appears that a party may have suffered substantial injustice as a result of a granting of a decree by default against him in circumstances over which he had no direct control, it may be that it would be appropriate to afford to him the remedy of reduction. It does not, however, follow that such a remedy should be available to a party who is substantially the author of his own misfortune".

He observed that in the circumstances of that case the responsibility for the tenant's lack of knowledge of events must rest squarely with the tenant herself.

[7] In the present case Mr Carruthers submitted that the pursuer was entirely negligent in failing to ensure that his manager was dealing with this action effectively, and in failing to ensure that a solicitor had been instructed to act on his behalf in defence of the action. He referred me to Brown v Sinclair (1835) 2 Sh. & MacL. 103 (HL), and in particular to the speech of Lord Brougham at p. 143; Kirkwood v City of Glasgow Council 1988 SLT 430 and Stewart v Lothians Construction (Edinburgh) Limited 1972 SLT (Notes) 75. In Kirkwood, Lord Weir observed that:

"The law is well settled to the effect that while the Court of Session has power to reduce the decrees of a subordinate court, this remedy does not exist as a matter of right but is only available in exceptional circumstances as a means of avoiding injustice .... It should also be said that where there have been acts and omissions on the part of a party's agents affecting procedure in court, the pursuer has to bear the responsibility for such acts and omissions."

In Stewart, Lord Stott dealt with a failure to lodge a timeous appeal and held that this was not a circumstance which would warrant reduction of a decree:

"The logical result would otherwise be that at any time within the prescriptive period the defender in a sheriff court action might bring a reduction of the decree in the Court of Session and all he would have to say would be that per incuriam he did not proceed by way of appeal."

On the question of a party's responsibility for the actings of his agent, he observed that:

"It is difficult to see any reason in principle why a party whose solicitor has failed to lodge any defences at all should be in a more favourable position vis a vis his opponent than one who has been the victim of some procedural slip up in the course of an inquiry, and no trace of such a distinction is to be found in any of the judgments.... I respectfully agree with the view expressed by Lord Mackintosh in Brennan v Central SMT Company 1947 SLT (Notes) 4, from which it appears that a failure to take a timeous appeal from a sheriff court interlocutor would not in his Lordship's opinion have founded an action of reduction unless the pursuer had been prepared to go on to prove that the failure had been brought about through a departure by the sheriff from the ordinary practice of the Court on which a party and his agent were entitled to rely".

There was no hint of such a departure in the present case. In all the circumstances Mr Carruthers moved me to dismiss the action.

For the pursuer Miss Higgins accepted that the pursuer must be deemed to have had knowledge of the existence of the sheriff court action against him by virtue of his manager's acceptance of, and subsequent dealings with, the initial writ. Indeed, she accepted that the present pursuer had actual knowledge of this action and what was happening with it, because it is averred on his behalf (at p. 9A of the Closed Record) that in about January 2001, after the motion for decree by default was intimated to Messrs Hasties, they contacted the pursuer who suggested they speak to Mr Sinclair, as Mr Sinclair had informed the pursuer that he already had a solicitor dealing with this matter. The defender therefore not only had personal knowledge of the existence of the action, but also some knowledge of what steps Mr Sinclair had taken to deal with the matter. He also must have known that the present defenders were seeking decree by default. She therefore accepted that the sentence at page 9C of the Closed Record "following service of the charge, the pursuer became aware for the first time of the court action at the instance of the defender" was factually incorrect. She also conceded that if the pursuer had investigated the position promptly to ascertain if decree by default had been granted, it would have been open to him to avail himself of the normal appeal procedures.

[8] Miss Higgins submitted that there were two tests which the court required to consider before granting decree of reduction of a decree of an inferior court - (1) there must be exceptional circumstances in order to justify reduction, and (2) reduction must be necessary in order to produce substantial justice. In support of this submission she referred me to Johnstone & Clark (Engineers) Limited v Lockhart 1995 SLT 440 at 445B to C. The pursuer in the present action may have a right of action against Mr McDonald, who held himself out to Mr Sinclair as being a solicitor, but that is a separate matter from the current proceedings, in which the pursuer is challenging the defenders' entitlement to decree. Under reference to Spence v Davie 1993 SLT 217, she conceded that reduction would, except in exceptional circumstances, only be granted where no alternative remedy was available to the pursuer. In this context she also referred me to Zannetos v Glenford Investment Holdings Limited 1982 SLT 453. In considering whether there was an alternative remedy available to the pursuer, it was necessary to consider whether proceedings against other parties (such as Mr McDonald) might result in inequity as between the parties or might be exceptionally onerous. In support of this she referred me to J & C Black Limited v Alltransport Limited 1980 SC 57 at 63, and Bain v Hugh L S McConnell Limited 1991 SLT 691, particularly the Opinion of the Lord Ordinary at 694G-H. She submitted that in cases where it would be exceptionally onerous to require a party to seek a remedy against a third party (such as a solicitor) the Court may be more ready to grant the remedy of reduction.

[9] Miss Higgins accepted that the pursuer requires to show exceptional circumstances which would justify him in not availing himself of the prescribed appeal procedure. In this regard she cited as an example the case of Mitchell Construction Company (Scotland) Limited v Brands Transport & Demolition Limited 1975 SLT (Notes) 58. This was a case in which decree had been granted by a sheriff in contravention of a practice note and furthermore in contravention of the practice of the sheriff court at that time. Miss Higgins accepted that neither of these elements featured in the present case. However, she submitted that the authorities showed that there was a distinction between cases where the defender in the sheriff court process knew that decree had been granted, and those cases where he had no such knowledge. The pursuer in the present action fell into the category of one who had no such knowledge. He had sold his business on 3 January 2001. Decree was granted on 16 January 2001. While he was aware of the existence of the action, and of the impending motion for decree by default, the normal course for a party to such an action would be to assume that his agents were dealing with the matter properly, and he did not in fact know that decree by default had been granted. She conceded that if Mr McDonald had been a solicitor, and the matter had been passed to him to deal with, and he had allowed decree to pass, then in that event the case would fall within the category of cases where reduction would not be granted on the basis that a party or his agent has not availed himself of the right of appeal. However, Mr McDonald was not a solicitor, and Mr Shaw did not in fact know that decree had been granted against him until it was too late to appeal. As he was wholly unaware of the decree until it was too late to do anything about it, this case falls within the category of cases in which the Court has been prepared to grant reduction because the defender in the inferior court was unaware of the existence of a decree. In support of this she referred me to Zannetos (supra) at 456 and J & C Black (supra) at p. 60/61. In the latter case Lord Allanbridge felt able to distinguish the circumstances before him from the case of Stewart v Lothians Construction (Edinburgh) Limited (supra). He remarked that:

"If the pursuers can prove that the first time both they and their solicitors knew of the granting of the decree by default was after it was extracted, then they had no other remedy of review open to them by the time they first learnt of it. Such a situation would clearly distinguish it from the facts in the case of Stewart."

Another example of exceptional circumstances in which the Court was prepared to grant decree of reduction was Johnstone & Clark (supra), in which Lord Osborne accepted that exceptional circumstances were required, but held that substantial justice demanded that the remedy should be granted in the circumstances of that case, and he distinguished the case of Kirkwood v City of Glasgow District Council. She submitted that the circumstances of the present case were indeed exceptional, and that substantial justice demanded that reduction should be granted.

[10] Miss Higgins accepted that Gehlan v Saeed (supra) does not support the distinction which she sought to draw between a case in which a party knows of a decree having passed against him, and a party not knowing that decree had passed against him. She invited me not to follow this authority, as it is not in accordance with the rest of the authorities to which I had been referred. However, if I was prepared to look to Gehlan, it is only authority for the proposition that reduction should be denied where the pursuer seeking reduction is substantially the author of his own misfortune. In the present case the pursuer had acted entirely reasonably - on being advised that a motion for decree by default was to be enrolled, he suggested that this fact should be intimated to his business manager, Mr Sinclair, knowing that Mr Sinclair had instructed a solicitor to deal with the matter.

[11] (For the sake of completeness, I should indicate that I was addressed by both counsel about the relevancy of the averments regarding the merits of the defence to the original initial writ, and also about the relevancy of the averments at page 10A-B of the Closed Record in which it is averred that the pursuer believes that Mr Sinclair had been removing money from the business for his own purposes. On the first of these matters I agree with Miss Higgins that the averments in Article 5 of Condescendence are relevant, and Mr Carruthers in response accepted that they might perhaps be relevant. I am not satisfied about the relevancy of the averments at page 10A-B. However, as neither of these matters affects my determination of the principal points before me, I do not propose to rehearse the arguments about them in more detail.)

[12] In reply to the submissions for the pursuer, Mr Carruthers reiterated that a party must bear responsibility for the actings and omissions of his agents. Solicitors' mistakes are normally inexcusable; Mr McDonald was not even a solicitor, and it was obviously negligent to entrust the conduct of the defence of a sheriff court action to someone who was not a solicitor. There were no averments that Mr McDonald has been referred to the Law Society, nor that criminal proceedings had been instituted against him for holding himself out as a solicitor, nor that it was particularly onerous to sue Mr McDonald.

[13] I am not persuaded that the circumstances in the present case are sufficiently exceptional to justify the granting of the remedy of reduction. I am of the view that Mr Shaw was substantially the author of his own misfortune in this matter. He was being sued as an individual for payment of a not insubstantial sum of money. He was aware that the action existed, and appears to have been content to allow his business manager to make arrangements for the conduct of his defence to the action without any form of supervision or control by Mr Shaw himself. He was aware that Mr Shaw had instructed somebody other than the firm of solicitors named on the notice of intention to defend to act on his behalf, but he makes no averments that he took any steps to ascertain whether that person was competent to be entrusted with the conduct of his defence. His employee, Mr Sinclair, dealt with the sheriff court action incompetently by instructing a person to act on behalf of Mr Shaw who was not a solicitor. Mr Shaw must in my view accept responsibility for his employee's incompetence in this regard. He must also take responsibility for Mr McDonald's incompetent conduct (or lack of conduct) of the case. While the circumstances of every action for reduction are likely to be unique, it appears to me that the circumstances of this case are closer to those in Gehlan, Kirkwood and Stewart than they are to many of the other cases to which I was referred. There is no question in the present case of the sheriff having acted in a way which was contrary to practice or was incompetent, nor are there any averments to indicate that an action against either Mr Sinclair or Mr McDonald (or both) would be unduly onerous.

[14] With regard to Miss Higgins' argument that a distinction falls to be drawn between cases in which a defender to an action knows nothing about the fact that decree has passed against him, and those cases in which he is aware that decree has passed against him, while I accept that in many cases such a distinction will be important, it does not appear to me that it can avail the pursuer in the present action. Not only was he aware of the existence of the sheriff court action, and something about the arrangements for its defence, but he was advised in January 2001 that a motion had been enrolled seeking decree by default. All that he did in response was to suggest that this information should be passed to Mr Sinclair. There are no averments to the effect that he enquired of Mr Sinclair as to why such a motion might be enrolled, nor as to the state of the conduct of his defence to the action. It is not averred that he made any enquiries as to whether the motion for decree by default had been granted. Miss Higgins submitted that it was reasonable for him to rely on his business manager to deal with matters competently, and to make no further enquiries. I do not agree. When a defender is told that pursuers are enrolling a motion for decree by default against him, I am of the view that a reasonable and prudent defender would take steps to ascertain how such a situation had come about, to instruct that the motion should be opposed and to see to it (to the best of his ability) that those instructions were carried out, and to ascertain if decree by default had indeed been granted. If Mr Shaw had done any of these things, it may be that decree by default would not have been granted, and a properly stated defence to the action could have been made. Even if decree by default was granted, he would have been in a position to avail himself of the normal appeal procedures.

[15] In all the circumstances, I do not consider that it is now open to the pursuer to seek reduction of the sheriff court decree when he failed to avail himself of the appeal procedures. It will not do, in my opinion, for him to state that he was not aware of the fact that decree had passed against him until it was too late to appeal against that decree. He was only unaware of the decree because he failed to take the normal steps which any prudent person would take to protect his interests. Having been told of the impending motion for decree, he cannot claim lack of knowledge when his lack of knowledge arises merely from his "hiding his head in the sand". His failure to avail himself of the appeal procedures renders reduction in these circumstances incompetent.

[16] In any event, even if reduction is competent, I do not consider that the present circumstances constitute exceptional circumstances which would justify the granting of the remedy. The situation in which the pursuer finds himself is one which has been caused by his own willingness to allow Mr Sinclair to deal with the whole matter unsupervised, together with the incompetence of Mr Sinclair and that of Mr McDonald. In my view the pursuer must bear responsibility for the failings of his agents. This is not a case in which a party to a litigation was unaware of the existence of the litigation until it was too late to do anything about it. If the averment at page 9C of the Closed Record that "following service of the charge, the pursuer became aware for the first time of the court action at the instance of the defender" had been accurate, my decision might have been different. However, as the pursuer's counsel conceded, that averment was not accurate. The pursuer not only knew of the existence of the action, but that Mr Sinclair was dealing with it and that he had instructed someone other than Messrs Hasties to deal with it. He also knew that a motion for decree by default had been enrolled. These factors distinguish the present case from cases such as J & C Black (supra) and Johnstone & Clark (supra). There is no suggestion in the present case that the sheriff acted ultra vires, so this case falls to be distinguished from Bain v McConnell (supra). There are no averments that proceedings against Mr Sinclair or Mr McDonald would be exceptionally onerous. No criticism can be made of the present defenders in their conduct of the sheriff court proceedings. Everything points to the pursuer being the author of his own misfortune - either at his own hand, or at the hand of those for whom he was responsible. I can find nothing which would amount to exceptional circumstances justifying the remedy of reduction.

[17] For these reasons I repel the first plea-in-law for the pursuer (as substituted at the Bar), and sustain the first plea-in-law for the defenders and dismiss the action.