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EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
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Lord Eassie
Lady Paton
Lord Emslie
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[2008] CSIH 55
XA158/08
OPINION OF THE COURT
delivered by LORD EASSIE
in
Appeal from the Sheriffdom
of Glasgow and Strathkelvin at Glasgow
in the cause
ASC ANGLO SCOTTISH
CONCRETE LIMITED
Pursuers and Respondents;
against
GEMINAX LIMITED
Defenders and Appellants
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Act: Reid, Solicitor Advocate; Maclay Murray & Spens
Alt: Davies; Harper Macleod, LLP
10 October 2008
[1] This action
was commenced on the commercial roll in Glasgow Sheriff Court.
By an interlocutor dated 25 June 2008 the sheriff granted summary decree
against the defenders for the payment of the sum of £30,155.26 and this
appeal is taken by the defenders against that interlocutor.
[2] The defenders
are building contractors. The pursuers
are manufacturers and suppliers of ready mixed concrete. Since 2005 the parties have had a
continuing business relationship whereby the pursuers have sold and supplied concrete,
and hired pumps associated with that supply, to the defenders. It appears that the practice followed by the
parties was for the defenders to order what they required by telephone or fax
and thereafter the concrete, or the pumps, would be delivered to the particular
building site at which they were required by the defenders. At intervals, the pursuers sent an invoice or
statement to the defenders for payment of a number of deliveries, or hires, or
both.
[3] In a
statement dated 9 May 2008, sent to the defenders, the pursuers
intimated a claim for payment of £42,856.15, representing their charges
for the supply of various quantities of concrete, and pump hire charges,
spanning the period between 29 January 2008 and 16 April
2008. Some five days after the statement date,
namely on 14 May 2008, the pursuers raised the present
action for payment of that sum of £42,856.15 and arrested monies owed to
the defenders by third parties. On 23 May
2008 the
defenders tendered defences and a motion was made at the Bar for recall of the
arrestment. That motion was refused in hoc statu. On 12 June 2008 an interlocutor was issued fixing a
"Case Management Conference for 25 June 2008 at 10.45am before Sheriff Deutsch, by way
of conference call."
[4] The purpose and
scope of a Case Management Conference is indicated in these provisions of
rule 40.12 of the Ordinary Cause Rules 1993:
"40.12.-(1) At the Case Management
Conference in a commercial action the sheriff shall seek to secure the expeditious
resolution of the action.
(2) Parties shall be prepared to provide such
information as the sheriff may require to determine -
(a)
whether, and to what extent, further specification of the claim and defences is
required; and
(b)
the orders to make to ensure the expeditious resolution of the action.
.....
(3)
The orders the sheriff may make in terms of paragraph 2(b) may include but
shall not be limited to -
(a)
the lodging of written pleadings by any party to the action which may be
restricted to particular issues;
(b)
the lodging of a statement of facts by any party which may be restricted to
particular issues;
(c)
allowing an amendment by a party to his pleadings;
(d)
disclosure of the identity of witnesses and the existence and nature of
documents relating to the action or authority to recover documents either
generally or specifically;
(e)
the lodging of documents constituting, evidencing or relating to the subject
matter of the action or any invoices, correspondence or similar documents;
(f)
the exchanging of lists of witnesses;
(g)
the lodging of reports of skilled persons or witness statements;
(h)
the lodging of affidavits concerned with any of the issues in the action;
(l)
the lodging of notes of arguments setting out the basis of any preliminary plea;
(j)
fixing a debate or proof, with or without any further preliminary procedure, to
determine the action or any particular aspect thereof;
(k)
the lodging of joint minutes of admission or agreement;
(l)
recording admissions made on the basis of information produced; or
(m)
any order which the sheriff thinks will result in the speedy resolution of the
action (including the use of alternative dispute resolution), or requiring the
attendance of parties in person at any subsequent hearing.
......
(5)
The sheriff may continue the Case Management Conference to a specified date
where he considers it necessary to do so -
(a)
to allow any order made in terms of paragraph (3) to be complied with; or
(b)
to advance the possibility of resolution of the action".
[5] After the
issue of the interlocutor appointing a case management conference by telephone,
those acting for the pursuers intimated to the solicitors for the defenders
that they had enrolled a motion for summary decree. They did so at about 1500 hours on 23 June
2008. That intimation was in fact less than the
48 hours stipulated in Rule 40.11 were the motion to be heard on 25 June
2008, but in
the event no point was taken about it.
Notwithstanding that, if granted, such a motion for summary decree
results in a final decree and is not of the procedural nature of the orders
catalogued in Rule 40.12, the sheriff entertained the motion and decided
it adversely to the defenders on the strength of what transpired at the
telephone conference call which took place on 25 June
2008. No hearing in open court took place.
[6] At this point
it is appropriate to note the terms of the defences which had been
tendered. The principal line taken in
those defences was that the parties' agreement - which might perhaps be
described as a "framework agreement" - was to the effect that 90 days
were allowed for payment and so on any view the action was premature. In response the pursuers contended for payment
terms of 30 days, which they said was to be found in the terms of a credit
application form submitted by the defenders in October 2004. (Quantum
valeat, the copy of the credit application form, so far as reproduced in
the appendix to the appeal, does not appear to contain such a provision. Within the appendix certain schedules are
produced respecting the defenders' payment record. These suggest a general practice more
consistent with 90 day payment terms than 30 day payment terms). In consequence of this aspect of the dispute
the motion for summary decree was restricted to £30,155.26 being the
aggregate of those sums in the statement appearing to have been outstanding for
more than 90 days from the date of supply.
[7] While the
defences so tendered were thus limited in their scope - but equally they
could not be said to be purely skeleton defences - there was in the
background a concern on the part of the defenders about the strength of the
concrete supplied by the pursuers to a particular site, namely an underground
car park at Dowanhill, Glasgow, at various dates during the period covered by
the statement. These concerns had
apparently been indicated to the pursuers prior to their hasty initiation of
these proceedings. However, as was
explained to us by counsel for the defenders, the solicitor for the defenders
did not consider that, at that stage, he could properly aver in the defences
that the concrete was defective because the defenders were still awaiting the
requisite technical report on the core samples which had been taken from the
concrete used in the car park in question.
[8] At the
telephone case management conference on 25 June 2008 the defenders'
solicitor, Mr Lloyd, in opposing the motion for summary decree told the
sheriff, inter alia that the
defenders had been investigating their suspicion that the Dowanhill site
concrete was not conform to contract;
that he, Mr Lloyd, now had a technical report from the laboratory
which had tested samples of the concrete used in the construction of the car
park; that the terms of the report
confirmed what the defenders had suspected;
that a further period of adjustment was sought; and that the defenders intended to lodge a
counter-claim for the loss suffered.
(Although not recorded in the sheriff's note as having been submitted by
Mr Lloyd in the course of that telephone conversation, it is evident that
the disconformity to contract might also constitute a defence to the pursuers'
claim for the price of the concrete in question). The appendix to the appeal contains the
report and counsel for the appellants duly tendered a note of proposed
adjustments to the defences introducing the defence of breach of contract and
indicating the making of a counterclaim.
[9] The sheriff's
view of what was conveyed to him by Mr Lloyd, including the intimation
that the defenders wished to lodge a counterclaim, is expressed by him in these
terms:
"As
matters presently stand the pleadings do not disclose any defence to the
invoices which are older than 90 days, however, I consider that in dealing
with a motion for summary decree the court may look beyond the pleadings and
consider any assertion of fact made at the bar.
The question for me to address was whether what had been said by
Mr Lloyd was sufficient to show that there were issues which should be
investigated at a proof. I was not
persuaded that Mr Lloyd had placed enough material before me to raise a
triable issue. He had not lodged the
technical report which he said was before him nor had he copied it to
Ms Anwar [the pursuers' procurator].
When I inquired as to when it was that he received the report it emerged
that it had been in his possession for at least a week. He claimed that pressure of business had
prevented him from using the report to prepare a counterclaim. That did not appear to me to excuse the fact
that the report had not been lodged or intimated. More importantly it did not seem to me that a
lack of time was likely to have been Mr Lloyd's principal difficulty in
preparing further pleadings. There was
no suggestion that he had available to him an engineer's report condemning the
structure nor that he had any basis for assessing quantum. Mr Lloyd did not attempt to provide
specification of the alleged breach of contract by reference to purchase
orders, instructions or the like.
The
power to grant summary decree allows the
court to deal with a party who tries to use his written pleadings not to
present a real defence but to throw up a smokescreen of supposed fact behind
which he can delay the progress of an action, or part of an action, which he is
bound to lose. On the other hand
Rule 17 must not be applied in a way
that would cause injustice by denying a defender the opportunity to prove
averments which could provide a defence to the whole or any part of a claim
against him.
For
the reasons advanced by Ms Anwar there were indications that the defender
was employing delaying tactics. In the
first instance it had been said that the action was premature and, now that
this could no longer be argued in relation to the largest part of the claim, there
was advanced in its stead a wholly unspecific assertion that there was a
counterclaim available to the defender.
The information provided by Mr Lloyd was insufficient to persuade
me that he was or would soon be in a position to make averments which if proven
would provide a defence. I did not consider that to grant summary decree
created an injustice for the defender.
If it emerged that the defender had a colourable ground of action for
seeking damages for breach of contract in regard to the supply of concrete then
it would be open to the defender to raise a separate action."
[10] In the
submissions before us there was little real dispute as to the legal principles
guiding consideration of a motion for summary decree. Counsel for the defenders, and Mr Reid,
the solicitor for the pursuers, both referred to the decision of the House of
Lords in Henderson v 3052775 Nova Scotia Ltd 2006 S.C. (H.L.) 85. Mr Reid also took us to the Outer House
decision in Frimokar (UK) Ltd v Mobile Technical Plant (International) Ltd 1990
S.L.T. 180.
[11] Plainly,
before a court may proceed to grant summary decree, an essential requirement is
that it is satisfied, on the basis of all the materials and information
available to it, that there is no defence to the action. The two cases to which we were referred were
cases in which the pleadings had been fully developed and the record had been
closed. What is said in the opinions
delivered in those cases must naturally be read with that in mind. In particular, where reference is made therein
to issues requiring to be resolved at proof these must be read with that
procedural background in mind. Where
however a motion for summary decree is moved at a very early stage in the
proceedings, when the pleadings have by no means been settled, the court must have
that fact in mind and, in our view, cannot lightly or perfunctorily dismiss any
submission by the defending party's legal advisor that he has come to have
information which will enable a defence to be advanced. Put in other terms, whether the court may be
satisfied as respects the key issue, namely that there is no defence to the
action, is naturally dependent upon the stage at which the proceedings have
reached and the information or material then available. Particularly at the early stages of litigation,
the latter includes information, not just directly before the court, but
information as to the existence of a basis for a possible defence.
[12] In our view, which
we have reached without difficulty, the sheriff erred in deciding that, notwithstanding
what was said by Mr Lloyd during the telephone conference call on 25 June
2008, he was
nonetheless in a position to conclude that there was no possible defence to the
action. No proper account was taken by
the sheriff of the early procedural stage which these hastily raised
proceedings had reached. No proper
account was taken of the primary purpose of the case management conference,
which was the only matter which the defenders required to address prior to the
intimation of the motion on the afternoon of 23 June 2008.
The natural purpose of the case management conference, from the
defenders' solicitor's standpoint, would be to intimate his intention to adjust
the pleadings and lodge a counterclaim in the light of the report which he had
received. There was plainly no obligation
upon the defenders' solicitor to lodge the report, in advance of the case
management conference, since it was only at that conference that he would
expect to intimate its receipt, and his consequent intention to adjust and
lodge a counterclaim. [13] More fundamentally, criticism of any lack of
diligence or immediacy on the part of the defenders' solicitors in intimating
the technical report or in drafting adjusted defences or a counterclaim within
the 43 hours of the intimation of the motion for summary decree, when the case
management conference was to be conducted over the telephone cannot, in our
view, be equiparated with circumstances demonstrating the absence of a relevant
defence. The jump which the sheriff
appears to make between, on the one hand, criticism of the defenders' solicitor
for not immediately lodging the report prior to the telephone discussions, and,
on the other hand, a conclusion that there was no relevant defence to the claim,
is so obviously mistaken as effectively to require no further exposition.
[14] We would add
that, from the terms of his note, the sheriff seems to have accepted the
contention advanced by the pursuers' solicitor that in granting summary decree
the defenders would suffer no prejudice, since the defenders could later raise
proceedings for breach of contract. If
the sheriff did indeed make that acceptance, that is, in our view, a further
error on his part. Disconformity with
contract is obviously an arguable answer to a claim for the price in a contract
of sale. But, more widely, the ability
to retain payment of the price as a security for a claim of damages arising out
of a breach of contract is a valuable right in practical terms, not least
because the solvency of the party against whom the right of retention is
maintained cannot be assumed. The fact
that the sheriff bears to have accepted this submission from the pursuers'
solicitor is in our view a further indication that he did not truly approach
this matter on a proper footing.
[15] Mr Reid,
for the pursuers, did his best to defend the sheriff's decision. Put briefly, he submitted that the
information conveyed over the telephone by Mr Lloyd was so imprecise, and lacking
in detail, that the sheriff was justified in concluding that there was no issue
requiring proof and that there was no triable issue. He submitted, therefore, that the first
hurdle, namely the absence of any proper defence had been overcome. The matter then became one for the sheriff's
discretion and that exercise of discretion could not be attacked. However, for the reasons which we have
indicated, we consider that the sheriff could not properly conclude that at
this stage of proceedings that first hurdle had been overcome. Accordingly no issue as to the exercise of
discretion arises.
[16] Mr Reid
also pointed out that the cumulo sum
claimed by the pursuers included supplies to sites other than Dowanhill. There was, he submitted, no right to retain
the sums due in respect of those other supplies against any liability of the
pursuers for deficiencies in the Dowanhill supply. So there was, he said, no defence as respects
those other supplies. But, whatever the
soundness of that proposition - as respects which we say no more -
the fact is that the motion for summary decree was moved and granted on a very
different basis, involved no attempt to separate out Dowanfield invoices from
the remainder. So that aspect of
Mr Reid's submission also falls to be rejected. It is not for this court to enter into a
discussion of rights of retention respecting issues never raised before the
sheriff.
[16] Finally, we
must record our distinct impression that much - if not all - of the
difficulty which has arisen for consideration in this appeal flows from the
sheriff's willingness to deal with an opposed motion for summary decree by
means of a telephone conference call discussion appointed for a very different
purpose. The practical problems of
dealing with such a motion by that means are manifest. It is impossible for any party to tender any additional
document; it is impossible to make any
useful or effective reference to authorities;
it is very difficult even to have regard to the terms of documents which
have been lodged. We are aware that in Jackson v Hughes Dowdall [2008]
CSIH 41, 8 July 2008, a differently constituted division of
the Inner House remarked on the constitutional issues arising from the
practice, in Glasgow, of transacting court business by private
telephone conference calls and noted some of the practical issues arising. For our part, we express concern that the
sheriff should have thought it appropriate to deal with an opposed motion for final decree in the
private and, in practical terms, highly unsatisfactory, circumstances of a
telephone conference call.
[18] For these
reasons we therefore allow the appeal, recall the interlocutor of the sheriff
of 25 June 2008, and remit to the sheriff to proceed as accords.
