Act: Johnston, Q.C; Gillespie Macandrew, LLP (for Hutchesons, Solicitors, East Kilbride)

Alt: Murphy, Q.C.; HBM Sayers

15 July 2009

The circumstances

[1] In this action the pursuers seek reparation from the defenders, a firm of solicitors, one of whose partners, a Mr John Buchanan, acted for the pursuers from in or about April 1995. Prior to that date the pursuers had contracted with a Mr James Glen, a builder, for the construction of a dwellinghouse. They subsequently formed the view that the construction was in a number of respects defective. In this action they aver that, in the course of two meetings held at the defenders' premises in April 1995, they instructed Mr Buchanan to initiate legal proceedings against Mr Glen and to arrest and inhibit on the dependence. They aver that Mr Buchanan was made aware that the reason for seeking arrestment and inhibition was that Mr Glen intended to sell his dwellinghouse and relocate to Greece.

[2] As at April 1995 and for some months thereafter, Mr Glen was the sole proprietor of a dwellinghouse in Airdrie but on or about 26 July 1995 he conveyed that property to his wife. At the time of its conveyance it had a value, it is averred, of approximately £110,000. By that date no proceedings had been instituted against Mr Glen; nor consequentially was any inhibition in place. An initial writ was ultimately warranted at Airdrie Sheriff Court on 9 October 1996. Notice of Letters of Inhibition was thereafter registered and the inhibition itself registered on or about 11 February 1997. By these dates, it appears, Mr Glen was no longer the proprietor of any heritage in Scotland.

[3] The proceedings directed against Mr Glen were initially defended but ultimately decree by default was obtained against him on 17 May 2001 in the sum of £116,392.46. The pursuers aver that, despite having engaged agents who conducted various searches and enquiries, they have been unable to obtain satisfaction of that decree. The use of arrestments secured only the sum of £67.50.

[4] The defenders, while accepting that Mr Buchanan was instructed by the pursuers in or about April 1995 in connection with a claim against Mr Glen, deny that instructions were then given to raise proceedings against him or to use diligence on the dependence. They aver that the first pursuer on 13 June 1995 asked the defenders to start proceedings against Mr Glen and an architect who had also been involved in the construction project. They further aver that instructions to effect inhibition and arrestment were first given on 20 September 1996.

[5] The present action was commenced in Airdrie Sheriff Court on 14 May 2004. The defenders tabled a plea of prescription, contending that any obligation incumbent on them to make reparation to the pursuers had been extinguished.

[6] It is not in dispute that, on the pursuers' averments, the defenders' omission to take steps to have an inhibition in place before 26 July 1995 constituted an act, neglect or default by them; but the defenders contend that the obligation to make reparation became enforceable on or about 26 July 1995 and, the present action not having been commenced until 14 May 2004, the obligation has been extinguished in terms of section 6 of the Prescription and Limitation (Scotland) Act 1973. That contention proceeds on the basis that "the loss, injury or damage occurred" on that earlier date (section 11(1)).

The proceedings

[7] The case was first argued at debate before the sheriff who on 26 July 2007 repelled the defenders' plea of prescription and allowed to parties a proof before answer of their averments - presumably except in so far as directed to that plea. The defenders appealed to the sheriff principal who on 27 November 2007 allowed the appeal, recalled the sheriff's interlocutor of 26 July, sustained the defenders' plea of prescription and dismissed the action. [The defenders' plea based on prescription, as then formulated, sought that disposal.]

[8] The pursuers then appealed to this court. The case was first heard on 9 December 2008. At the end of the discussion the court made avizandum but, having given further consideration to the arguments, formed the view that the appeal could not satisfactorily be disposed of without first giving to the parties an opportunity to amend their pleadings. A minute of amendment was subsequently lodged on behalf of the defenders, followed by answers thereto by the pursuers. After adjustment, amendment was allowed in terms of the minute and answers (as adjusted) and the case put out for further argument. That was heard on 4 June 2009.

Submissions of parties

[9] Mr Johnston for the pursuers and appellants submitted that the issue was when there first was a concurrence of iniuria and damnum (Dunlop v McGowans 1980 SC (HL) 73, per Lord Keith of Kinkel at page 81). The pursuers contended that such concurrence had not occurred until at least 17 May 2001 when decree had been obtained against Mr Glen and the pursuers had been unable to obtain satisfaction of it. Until then there was no certainty that any loss had occurred as a result of the defenders' negligence. As at 26 July 1995 the loss was not certain but only potential. An inhibition was only a prohibitory diligence; it in no way operated as a transfer of the possession or property of the subject to the inhibitor (Graham Stewart, Diligence page 551). It was only effectual once decree was obtained (op.cit., page 553). Such a factual and legal circumstance was different from where, as a result of negligence, a property had become encumbered by a mortgage. Reference was made to Forster v Outred & Co [1982] 1 W.L.R. 86 and the interpretation of it in Law Society v Sephton [2006] 2 AC 543, especially per Lord Hoffmann at paras. 17-18 and Lord Mance at para. 70. Reference was also made to Osborne & Hunter Limited v Hardie Caldwell 1999 S.L.T. 153 and Jackson v Clydesdale Bank plc 2003 S.L.T. 273. The pursuers had suffered no measurable loss as at 26 July 1995. The sheriff principal had been in error in equiparating the present circumstances to those in Forster. The onus of averring and proving prescription rested on the defenders. Despite the opportunity given to them to amend, they had introduced no relevant or sufficiently specific averments in support of their plea. There were no averments by them as to Mr Glen's asset position (otherwise than his ownership of the house) as at 26 July 1995; nor as to his asset position in May 2001. There was a bald assertion, unsupported by relevant particulars, that the claim against Mr Glen had a value as at 26 July 1995 and would have had an enhanced value if the pursuers had had the benefit of an inhibition prior to that date. The cases relied on by the defenders (Bell v Peter Browne & Co [1990] 2 Q.B. 495 and Moore v Ferrier [1988] 1 W.L.R. 267) were readily distinguishable. The appeal should be allowed and the sheriff's order restored.

[10] Mr Murphy for the defenders and respondents submitted that the issue was whether any loss caused by the alleged negligence had occurred prior to 14 May 1999 (five years prior to the commencement of the present action). Inhibition on the dependence was a personal legal remedy which, if put in place timeously, preserved a defender's heritage for the pursuer's use. It had an effect prior to decree being obtained. It was clear that the pursuers had sustained some loss, injury and damage by the alleged failure of the defenders to put in place an inhibition against Mr Glen prior to 26 July 1995. That loss was capable of estimation by the depletion of Mr Glen's estate by the conveyance of the dwellinghouse to his wife, being a depletion which would not have taken place but for the allegedly negligent omission (capped by the sum likely to be or actually obtained in the action against him). Alternatively, one could estimate the value of the claim with, as against without, the security of the inhibition. One could say, albeit with the benefit of hindsight, that the claim had a value. While the claim had to have a value as at 26 July 1995, its value need not be quantifiable at that stage. An inhibition, by prohibiting voluntary alienation, had an immediate effect (Stair, Institutions IV.20.28, 50.4 and 50.23; Bell, Commentaries (7^th ed) pages 136-7). Any loss would do (Dunlop v McGowans 1979 S.C. 22, 1980 SC (HL) 73). Reference was made to Forster v Outred & Co, per Stephenson L.J. at page 95 and Dunn L.J. at pages 98-9, to Moore & Co v Ferrier, per Bingham L.J. at page 279 and to Law Society v Sephton. One could sustain a loss in the absence of any immediate financial detriment. It was important to bear in mind that, on the pursuers' averments, this was an express instruction case: the defenders, it was alleged, had failed against express instructions to secure for the pursuers the advantage of the inhibition. Immediately upon that failure the pursuers might have raised an action against the present defenders. The pursuers' claim had a value. Reference was made to Kyle v P & J Stormonth Darling WS 1993 SC 57 at page 68 and to Yeoman v Ferries 1967 S.C. 255. The appeal should be refused.

Discussion

[11] When Dunlop v McGowans was in the Court of Session Lord Justice Clerk Wheatley said of the phrase "loss, injury or damage" at page 33:

"It covers all kinds of damnum. As soon as any form of loss, injury or damage occurs following a breach of legal duty or obligation (the injuria) the concurrence takes place. There can only be one point of concurrence and this is it."

An argument that each item of pecuniary loss was properly to be regarded separately as rendering enforceable, in respect of that particular item, the obligation to make reparation was roundly rejected by the House of Lords. The loss in that case was the loss, by reason of a failure to give timeous notice to tenants to quit at a particular term of the lease, of the practical advantages which unfettered use of the premises would have given to the landlord. The loss occurred at that term, at which point a quantification of the loss was capable of being made, notwithstanding that it would necessarily have had to be made on the basis of estimation (per Lord Keith at 1980 S.C. (H.L.) page 81).

[12] An inhibition is "merely a negative and prohibitory diligence ... It in no way operates as a transfer of the possession or property of the subject to the inhibitor, vests no real right, and gives no title to rank with those who have acquired a real right by voluntary security or adjudication." (Graham Stewart, Diligence page 551). It prohibits the proprietor from alienating his property voluntarily and, if duly registered, renders that proprietor's heritable property, if any, "litigious" - thus discouraging prospective purchasers from him. Where inhibition is used on the dependence of an action, its efficacy in competition with other diligences or securities is dependent entirely on decree being obtained in the action in which it is used (op.cit, page 553; Bell, Commentaries page 138). In that sense its value as a diligence is wholly contingent on decree being obtained.

[13] The obtaining of a warrant for inhibition and its subsequent registration have, of course, practical effects: the prohibition on voluntary alienation and the discouragement of prospective purchasers. But, unless the claim which founds the action can be said at that time to have a value, the failure to secure these practical effects cannot, in our view, be said to amount to an occurrence of loss to the person on whose behalf these effects might have been secured. If the claim is valueless, an inhibition secures, even prospectively, nothing of value; an omission to inhibit in such a situation causes no loss.

[14] The hypothesis upon which this debate proceeds is that the pursuers have a relevant case against their former solicitors. The latter have raised a plea that that claim has been extinguished by prescription. It is for them to make good that plea.

[15] Mr Murphy submitted that, for the purposes of determining whether as at July 1995 the pursuers' claim against Mr Glen had a value, it was legitimate to found upon the circumstance that in May 2001 decree in the sum of £116,392.46 had passed against him. But in the circumstances of this case such retrospective valuation is, in our view, without foundation. The decree which passed in May 2001 was a decree by default, Mr Glen having initially defended the action but subsequently failed to maintain that defence. An unopposed decree cannot provide a basis for the contention that the claim truly had a value either then or at any earlier time.

[16] Passing reference was also made to Yeoman v Ferries, where Lord Avonside, sitting in the Outer House and determining after proof the amount of damages recoverable by a workman whose solicitors had failed to raise an action for personal injuries timeously against the workman's employer, addressed the question as to how the claim against the employer, which ex hypothesi had not been brought, might be valued. He said at page 264:

"In my opinion, it cannot be said that the pursuer would have failed in his action [against his employer] and, on balance, I think the odds are that a jury would have given him a verdict. In addition, and apart from that, I am of opinion that the employer would have been advised to make an offer, and that not a derisory or 'nuisance value' offer, in the circumstances I have outlined. I am at a loss to see why, in the appropriate case, that factor should not be taken into account. As Lord Strachan pointed out in Robertson v Brannigan [1965 S.C. 20], it is a matter of judicial knowledge that it is very usual for reparation actions to be settled before trial, and, it might be added, more are settled than go to trial. I would respectfully agree with him, and this seems to accord with what was said in Kitchen [Kitchen v Royal Air Force Association [1958] 1 W.L.R. 563], that this is a matter of real and definable value to an intending pursuer and that he may well recover something in settlement, although he might not have succeeded had a trial gone on."

[17] These observations were made, as we have said, in the context of discussion of a claim for personal injuries - and one which at that time would ordinarily have been adjudicated upon by a civil jury. They do not, in our view, justify a conclusion that every claim of whatever nature has a value. In particular, they do not justify an inference, unsupported by relevant particulars, that a claim by an individual against a builder in respect of allegedly defective work of its nature has a measurable value.

[18] As we have recorded, the court after the initial discussion, allowed to parties, including the defenders, the opportunity to expand upon their averments. The defenders introduced the following, among other, averments:

"The failure of the defenders to register an Inhibition timeously and to obtain the preference which they ought to have obtained, caused loss and damage to the pursuers. The loss and damage consisted of loss of security for the sum craved and loss of the damages eventually ascertained as due in so far as that loss would have been satisfied by enforcement of said security. Furthermore a right of action, secured by competent diligence, is of greater value and utility to a litigant than a bare right of action without security. In any event, standing that the said subjects were conveyed on 26 July, 1995 the pursuers lost the opportunity of obtaining a significant advantage or sustained damage by way of detriment. ... As at 26 July, 1995 the pursuers' prospects of obtaining a full and effective remedy against Mr Glen had materially decreased. According loss and damage occurred on 26 July, 1995 when the obligation to make reparation became enforceable."

[19] It can be seen that no attempt was made to offer to prove that in the particular circumstances the claim against Mr Glen had, as at July 1995, a value - either because Mr Glen would at that time have been prepared to make an offer in settlement or that a third party would have been prepared to make a payment for an assignation of the pursuers' claim. In the absence of averments of that kind no proper basis is, in our view, laid for the contention that loss and damage was sustained either by the loss of security or by the loss of any opportunity. Further, in the absence of a basis for the claim having itself a value, it could not have an increased value had an inhibition been put in place.

[20] It remains only to note certain other authorities to which we were referred. In Osborne & Hunter v Hardie Caldwell it was observed (at page 156D) that each case of alleged prescription depends on its particular facts. In that case substantial monies had been handed over without security or written acknowledgement to a company which was even at that time in financial difficulties. It was not difficult to conclude that damnum had been suffered at that time. Jackson v Clydesdale Bank plc involved rather special circumstances, but again there was a clear disadvantage by reason of receivers having sold the assets of a company at an undervalue in breach of their duties to take proper steps to obtain the best price available (Lord Eassie at page 280B-C). It is not difficult to see that loss occurred then.

[21] We were also referred to a number of cases from England. There the issue, under the Limitation Act 1980, was whether a cause of action had accrued by a particular date or event. That in turn depended on whether [actual] damage had by that date been sustained. The decision in Forster v Outred & Co requires to be considered in light of the analysis of that case made by the High Court of Australia in Wardley Australia Limited v State of Western Australia (1992) 175 C.L.R. 514, as approved by Lord Hoffmann in Law Society v Sephton at para. 18. The distinction was drawn between losses which were, at the date in question, contingent and those which involved the sustaining of a measurable loss at that date quite apart from a contingent loss which threatened at a later date (see Law Society v Sephton, per Lord Hoffmann at para. 17). The latter would trigger the limitation; the former would not. The cases, including Forster v Outred & Co, Moore & Co v Ferrier and Bell v Peter Browne & Co were analysed by Lord Mance in Law Society v Sephton at para. 67. For the reasons he gives each of those involved a person's legal position having been altered "to his immediate, measurable economic disadvantage". These cases are clearly distinguishable from the present.

[22] The sheriff principal was in error in seeing (para. 48 of his judgment) a strong analogy between this case and Forster v Outred & Co. Nor do we find persuasive the imaginary conversation mentioned by him at para. 50. The "fatal blow" or "disaster" occurred, in our view, only on perfection of the contingency by the obtaining of decree for a substantial sum.

[23] In these circumstances we shall allow the appeal, recall the sheriff principal's interlocutor of 27 November 2007, repel the defenders' first plea in law and quoad ultra allow a proof before answer. Once expenses have been dealt with in this court, we shall remit to the sheriff to proceed as accords.