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OUTER HOUSE, COURT OF SESSION
[2006] CSOH 53
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A1744/02
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OPINION OF LORD WHEATLEY
in the cause
LINK HOUSING
ASSOCIATION LIMITED
Pursuers;
against
(FIRST) PBL
CONSTRUCTION LIMITED; (SECOND) THE GRAY AITKEN PARTNERSHIP LIMITED;
(THIRD) GEMMELL HAMMOND AND PARTNERS; (FOURTH) J R QUEENAN PARTNERSHIP
LIMITED; (FIFTH) HUGH BROWN carrying on business as
HBM SITE SERVICES
Defenders:
ญญญญญญญญญญญญญญญญญ________________
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Pursuer:
Howie, QC; Harper
MacLeod
First Defenders: Borland; MacRoberts
Second Defenders: Wolffe; Simpson & Marwick, WS
Fourth Defenders: Walker; Bishops
Fifth Defenders: Erroch; Drummond Miller, WS
31 March 2002
[1] Link
Housing Association Limited is an industrial and provident company with its
registered office in Edinburgh. It seeks reparation from the various
defenders following a contract for the construction of thirty flatted
dwellinghouses in Ferguslie Park,
Paisley. The
contract was entered into between a company called GAP Housing Association and
the first defenders, who are a construction company, in May 1996. The first defenders thereafter appointed the
second defenders as architects and the third defenders, who are no longer concerned
in this action, as engineers. The fourth
defenders were appointed by GAP Housing Association as the Employer's Agent in
April 1996 and the fifth defenders were appointed as Clerk of Works also in
April 1996.
[2] The
first defenders' contract with GAP Housing Association incorporated the
conditions of the Scottish Building Contract with Contractors' Design 1981
(revised September 1995). The second
defenders entered into a Collateral Warranty Agreement with GAP in respect of
the professional services to be provided by them in May and June 1997. Among other conditions, this agreement
contained a provision in the following terms:
"9. No action or proceedings for any breach of
the agreement shall be commenced against the Firm after the expiry of the 5
years from the date of practical completion of the premises under the building
contract."
[3] The
fourth and fifth defenders had no such prescriptive agreement with GAP Housing
Association, nor had the first defenders in terms of their contract.
[4] The
building works in terms of the contract were done in 1996 and 1997, and it is
agreed that the practical completion date on the contract was 10 July 1997. Accordingly, in terms of clause 9 of the
second defenders' agreement with GAP Housing Association, the prescriptive
period of five years ended on 10 July
2002. Defects were said to
have been found in the buildings and an action was signetted against the
present defenders on 8 July 2002
and served on the following day. The
defects alleged were substantial, and the building subsequently appear to have
been demolished.
[5] In
the meantime GAP Housing Association Limited transferred the whole of its
stock, property and other assets and all its engagements to Link Housing
Association Limited by a transfer document dated 14 November 2000.
Link Housing Association Limited are the company whose title appears as
the pursuers in the present instance.
Both GAP Housing Association and the Link Housing Association Limited
were industrial and provident societies and the registration of the transfer
under the Industrial and Provident Societies Act 1965 was completed on 6 December 2000. Then, on 7 September 2001, again in terms of the Act, Link Housing
Association Limited changed its name to Link Group Limited, and this new title
was duly registered with the registrar of companies on 29 March 2001.
I understood from submissions that Link Housing Association Limited
nonetheless continued to retain some form of corporate identity.
[6] The
present action was therefore signetted on 8 July 2002 in the name of Link Housing Association
Limited, although as indicated, by that time the company had changed its name
to Link Group Limited. Following the lodging
of the summons, the Record was then closed in February 2004. It is fair to say that the closed record
contained averments for the pursuer which gave merely a brief outline of the
factual history of the contract, and then a series of general averments of
duties of care against each of the defenders.
[7] In
April 2004 the second defenders lodged their note of arguments, and I
understand that the other defenders did the same. Thereafter, a procedure roll hearing was
fixed for February 2005. Just before
that hearing, the pursuers indicated that they wished to lodge a minute of
amendment in response to these notes of argument, and the procedure roll was
discharged. The minute of amendment at
the instance of the pursuers was subsequently lodged, answered and
adjusted. The minute of amendment on the
pursuers' part expanded significantly on the averments of fact and added a
number of detailed averments of duties of care against each of the
defenders. In addition, the minute of
amendment sought to change the pursuers' name from Link Housing Association
Limited to Link Group Limited; as indicated earlier, the change of name had
taken place in November 2001, before the present action had been raised in July
2002.
[8] In
these circumstances, Mr Wolffe, Q.C., who appeared for the second defenders,
argued firstly that the detailed averments contained in the minute of amendment
came far too late and should be refused, and secondly that in terms of the
contractual time bar contained in clause 9 of the Collateral Warranty Agreement
between the pursuers and his clients, the introduction of a new company as the
pursuers in the action was out of time; it was too late for the pursuer to seek
to amend its own designation once the time bar had expired. In respect of his second argument, which he
took first, counsel for the second defenders submitted that this was not an
attempt to correct an error in terms of Rule of Court 24.1(2)(b)(v), but rather
a deliberate attempt to replace one company, with another. Link Housing Association Limited, as a
separate company had still been in existence at the time the action was
raised. It appeared that they had
earlier transferred the operations part of their business to Link Group
Limited. Accordingly, the purpose of the
minute of amendment was to exchange one company as pursuer in the action for another. The statutory provisions which related to the
industrial and provident societies made it clear that the precise description
of the identity of the company was important.
The same was true in general terms of companies in terms of the
Companies Acts. It was therefore a
matter of some substance; the pursuers must have been aware of their corporate
identity at the time they raised the action.
They must be held to have acted deliberately in raising the action in
the name of Link Housing Association Limited.
Accuracy, Mr Wolffe maintained, is the foundation of procedure, as Lord
Justice Clerk Thomson observed in The
Overseas League v Taylor 1951 SC 105.
[9] Counsel
submitted that because of what therefore amounted to a statutory requirement
for accuracy in these matters, there should be a presumption that the Link
Housing Association Limited must have known that they had received the transfer
of assets and engagements from the GAP Housing Association Limited in 2001. They must also have known that they had
transferred their rights and obligations to another company before the action
was raised. Accordingly, the pursuers
would have to produce some very compelling explanation to persuade the court to
allow the identity of the pursuers to be changed at this stage. Counsel also submitted that the minute of
amendment should not be allowed because it contains a large amount of new material
at a point now distant in time from when the building work was started.
[10] For the first defenders, Mr Borland indicated that as his
Collateral Warranty Agreement did not contain a prescriptive clause such as was
found in clause 9 of the second defenders' Agreement, he could not put forward
an argument on time bar or title to sue, but he supported the second defenders'
submissions that the substantial alterations to the pursuer's case contained in
the minute of amendment now came far too late.
For the fourth defender, Mr Walker, who also did not have the benefit of
the prescriptive clause available to the second defenders, nonetheless
indicated that he wished to argue that the substantive claim made against the
fourth defenders had prescribed. He
submitted that the complaints about the defects found in the building had first
of all been made to the fourth defenders in 1999, and so had plainly been known
about at that time. It was therefore too
late to introduce these complaints into the action in 2005; they were excluded
by the operation of prescription in terms of the Prescriptions and Limitation (Scotland)
Act 1973. Mr Walker also argued that the
new averments in the Minute of Amendment came too late. For the fifth defenders Mr Errogh also found
that no prescriptive agreement was available to him but offered his support to
the submissions made by the other defenders that the detailed amendment came at
a point in time where they it should no longer be allowed.
[11] For the pursuers, Mr Howie, Q.C. maintained that the
substitution of the pursuer's title which he now sought was competent, and
whether it should be allowed lay within the discretion of the court. There could be no prejudice to the defenders
should this part of the proposed amendment be allowed, and none was suggested
by any of the defenders. The change in
the name from Link Housing Association Limited to Link Group Limited was an
internal company arrangement, and the only real mistake in the original
description of the pursuers' name in the instance of the summons was that the
words "Housing Association" were introduced instead of the single word "Group". While it was important that companies
properly identified themselves at all times, this did not mean that the court
could not grant leave to correct a party's title in misdescription cases. The defenders should have known about the
pursuers' name change from an early stage and they had not raised any objection
in the pleadings as they originally stood to the pursuers' title. The defenders could never have been in any
doubt about who was trying to get money from them, or why. In groups of companies, clear distinctions
about the exact company title under which a particular operation is carried out
within the group are not always in the minds of those employed. The present situation was simply a case of
mistaken identity. What was clear was
that the pursuers were the party in whose interest and for whose benefit the
transfer of assets took place. At the
time when the action was raised, Group Housing Limited did not exist. The instance of the summons therefore
contained a misdescription; it could not be anything else. This was precisely the sort of error that the
Rules of Court contemplated when considering the question of the court's
discretion to allow amendment in the interests of justice. There would be substantial prejudice to the
pursuers if they were to lose at this time their rights to prosecute their
claim against the defenders.
[12] Mr Howie also submitted that, in terms of the fourth defenders'
submissions, again no complaints of prejudice were made. The pursuers did not accept that their
complaints about the fourth defenders' failures in respect of the contract were
affected by any prescriptive period which ended with the lodging of the minute
of amendment. In these circumstances the
fourth defenders' arguments on time bar could not be disposed of at this
stage.
[13] As far as the general objections to the late introduction of
the material contained in the Minute of Amendment was concerned, Mr Howie
submitted that this was a case which was raised timeously but from its nature
there were bound to be delays in the character of the complaints becoming
clear. The delay was far from one-sided;
the defenders had also contributed to the lack of progress in the case thus
far.
[14] The law on the question of prescription as it applies in this
case is well settled, at least in principle, as Mr Wolffe demonstrated in a lucid
and brief explanation. It appears to be
accepted that either in terms of the statutory provisions of Section 19A of the
Prescription and Limitation (Scotland) Act 1973 for actions to which that
statute refers, or at common law where there is a contractual agreement on time
bar, the court has a discretionary power to override these statutory or
contractual provisions where they apply to the out of time introduction of a
new party or cause of action. Broadly
speaking, this discretion may be exercised if the alteration sought is one of
form rather than substance. In other
words, when a time limit, however constituted, operates against the raising of
an action at the instance of, or against, a new party, or the introduction of a
new cause of action, the court has a discretion to relieve the pursuers of the
consequences of the prescriptive provisions if the introduction of the new
party is simply a formal correction of the description of the party who has
properly raised the action before the time limit has expired, or the new cause
of action is sufficiently related or connected to any cause of action timeously
intimated. So long as no real prejudice
is caused to the other side by the introduction of such new material the court
will normally encourage the accurate description of the real issues between the
true parties.
[15] As Mr Wolffe suggested, the normal starting point in cases of
this kind is Pompa's Trustees v Edinburgh Magistrates 1942 SC 119. In that case the pursuers brought in error an
action against the Magistrates of Edinburgh instead of the town clerk and tried
to bring the latter official into the action after the expiry of the relevant
statutory time limit. In allowing the
pursuers so to amend, the Lord Justice Clerk (Cooper) said at page 125:
"It is well
recognised that, where a statute prescribes a special method for enforcing a
statutory right or liability, the general rule is that no other method of
enforcement can be resorted to (Maxwell
on Statutes, pp.339-40 and cases there cited). Further, our reports contain many decisions
showing that the court will not in general allow a pursuer by amendment to
substitute the right defender for the wrong defender, or to cure a radical
incompetence in his action, or to change the basis of his case if he seeks to
make such amendments only after the expiry of a time limit which would have
prevented him at that stage from raising proceedings afresh. But I consider that in the special
circumstances of this case the appellants are entitled to claim that they are
not truly infringing any rule of general application in seeking our authority
to make the amendment which they propose.
So far from resorting to a remedy different from the prescribed
statutory remedy, they have expressly invoked the proper section, although they
have failed to comply with its exact requirements. So far from seeking to substitute the right
defender for the wrong defender, all they ask is that one representative of the
right defender should be replaced by a different representative of the right
defender. The admitted error in their
action as originally raised does not involve a radical and fundamental incompetence,
but a mistake in detail which, as it happens, now possesses no real
significance. The basis of their case,
if the amendment is allowed, will remain the same as before."
[16] This entirely sensible and pragmatic decision determined from
an early stage that the principle to be applied in any attempt to alter the identity
of a party to an action after the time bar has expired is that the court will
refuse such applications where they seek to introduce an entirely different
party in place of the one originally designed; but if the alteration seeks
simply to describe accurately the true party, then such an amendment will be
allowed. The emphasis is placed on
allowing the true identification of the party to the action to be settled, and
not to allow the substitution of a wholly different and unconnected party or
cause of action outwith the prescribed time limits. In that way, the requirement of accuracy as
an essential part of procedure on the one hand, and the need to provide
protection from the prosecution of litigation outwith the prescriptive period on
the other, are both preserved. In terms
of what was said by the Lord Justice Clerk in Pompa's Trustees as applied to the present case, all that the
pursuer seeks to do is to substitute the correct title of the company within
the defender's group of companies, rather than the incorrect one, as opposed to
substituting the right defender for the wrong one. This is not a mistake of fundamental
incompetence, but an error in detail which was not shown to have any real
significance and the basis of the action remains as before.
[17] None of the subsequent cases cited really advanced the matter
much further. In McCulloch v Norwest Socea Ltd
1981 SLT 201 the pursuers were advised in advance of service of the summons
of the true title of their opponents but still served the action on the wrong
defenders. Nonetheless, the court
allowed an amendment to describe the defenders in the proper way on the basis
that although the proposed change was more than a formality, the discretion of
the court should be exercised in favour of allowing the amendment in the
interests of justice and because no significant delay or prejudice would be
caused. In Richards & Wallington
(Earthmovings) Ltd v Watlings Ltd 1982
SLT (N) 66 the court refused an amendment to cure a problem raised by an action
raised in the wrong name of a company, but I consider this case to be of little
assistance here as it was exclusively concerned with the question of arrestments. In Watson
v Frame 1983 JLS 421, an
amendment was allowed to design correctly the name of the defenders outwith the
prescriptive period on the grounds that the proposed change was one of form
rather than substance, and the correction of a misdescription rather than the substitution
of a new defender. In Orkney Islands Council v S and J D Robertson & Co Ltd 2003
SLT 775, much the same view was formed.
In all these circumstances, it appears from these various authorities
that the present minute of amendment could only be refused if a different and unconnected
entity was sought to be introduced as a party to the action, or an entirely new
cause of action were to be substituted from that originally pled. In the present case, neither of those
situations obtain.
[18] In practical terms, it should in my view be a matter of complete
indifference to the defenders that the pursuers have so misdescribed
themselves; so long as the proper design is in place before the matter becomes
critical, and no substantial prejudice appears to be involved, there is no
reason why the court should not allow parties to focus correctly on who is
involved in the dispute. No doubt it is
regrettable that companies should change their title without informing those
who should know that they have done so; but wherever arcane reason prompts this
apparently common practice, I have no doubt that the net result is, as Mr Howie
submitted, that everybody knows who the real parties are. The fact that the Link Housing Association
Limited continued to exist after it had transferred its assets and engagements
to Link Group Limited seems to me to be of little moment. What happened in the present case was clearly
a blunder, and a matter of form rather than substance. No prejudice of any kind was suggested by the
defenders; not even that to allow the amendment would deprive them of an
opportunity to take advantage of the blunder and escape liability for any
misdoings that might be proved against them. On the question of the correct designation of
the pursuers I therefore can find no reason to refuse the Minute of Amendment.
[19] Also, I have no doubt that in a complex matter of this kind, any
defects will inevitably take some time to emerge. That they did not all become obvious in a
complete and true sense prior to the lodging of the summons is
understandable. The suggestion that the
pursuers knew something of the existence of the defects more than five years
before describing them more fully in the pleadings is not, in my view, a
convincing reason for excluding all reference to such problems after the
prescriptive period has been completed.
It would be surprising if the pursuers had been able to describe completely
all of the problems which this contract
has caused them at any particular
point prior to the expiry of the prescriptive period. They have indicated within the appropriate
time limits the general nature of the complaints which they make against the
defenders. It would, in my view, be unrealistic
to require them to provide full details of those complaints in a matter of this
sort from the outset, or to prevent them from expanding on the detail of these
general averments as such detail becomes apparent and the action progresses
beyond the expiry of the prescriptive period.
In these circumstances I propose to allow the minute of amendment for
the pursuers as answered by the defenders and thereafter adjusted. The action will then be put out by order
in order to determine further procedure.
