Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2012] CSOH 80
PD220/11	OPINION OF LADY CLARK Of CALTON in the cause ELIZABETH ANTON & ANOTHER Pursuers; against SOUTH AYRSHIRE COUNCIL & ANOTHER Defenders: and NORTH AYRSHIRE COUNCIL Party Minuter ­­­­­­­­­­­­­­­­­________________

Pursuers: Marshall, solicitor-advocate, Christine; Thompsons

Defenders: (1st Defender): Mackay QC, Watson, solicitor-advocate; Simpson & Marwick

(Second Defender): Forsyth; Andersons, Solicitors

(Party Minuter): Wilson; Brodies L.L.P.

11 May 2012

Summary of the case and the issues in dispute
[1] In this personal injuries action, the first named pursuer is the executor dative and widow of John Anton ("the deceased") who was employed during the period between 1948 until 1975 by Ayr County Council. The second named pursuer is the brother of the deceased. The pursuers aver that during the deceased's employment with Ayr County Council between 1948 and 1971 he was employed as a joiner in the construction, maintenance and repair of prefabricated housing at locations in Ayrshire. It is averred that in the course of this work up until 1971 the deceased was exposed to asbestos dust but that the deceased did not develop symptoms until about October 2007. Statement 5 of the record sets out the development of the symptoms leading to the diagnosis of mesothelioma which was confirmed by a post mortem examination. The pursuers aver, that as a result of the deceased's exposure to asbestos, the deceased developed mesothelioma.

[2] Ayr County Council ceased to exist as a result of local government reorganisation on 16 May 1975 in terms of the Local Government (Scotland) Act 1973 S.1(5), (the 1973 Act). Had Ayr County Council still remained in existence, I understood there was no dispute between the parties that the pursuers would have been able to aver a relevant case against Ayr County Council for damages in respect of the loss, injury and damage suffered as a result of the breach of common law and statutory duties by Ayr County Council to the deceased.

[3] The problems which underlie the disputes in the present case relate to the transfer of functions and liabilities of Ayr County Council consequent upon local government reorganisation. In relation to the reorganisation under the 1973 Act, provision was made in delegated legislation for inter alia the transfer of liabilities in The Local Authorities etc (Miscellaneous Provision) (Scotland) Order 1975 (SI 1975 No 629). There was further reorganisation following the Local Government (Scotland) Act 1994 (the 1994 Act). There was no dispute that if liability for the subject of the pursuers' action transferred from Ayr County Council to a successor council in 1975, there was a further transfer in the reorganisation which took place in 1996 in consequence of the 1994 Act as a result of the Local Government (Transitional Financial Provisions) (Scotland) Order 1996 (SI 1996 No 682).

[4] As a result of the local government reorganisation which took place in 1975, functions, rights, liabilities and obligations which had been the responsibility of Ayr County Council were transferred in part to Strathclyde Regional Council. That transfer was not the focus of this case. Functions, rights, liabilities and obligations were also transferred to four new district councils. These four district councils were (1) Cunninghame District Council, (2) Kyle and Carrick District Council, (3) Cumnock and Doon Valley District Council and (4) Kilmarnock and Loudoun District Council.

[5] Further reorganisation took place in 1996 following the 1994 Act. As a result of this reorganisation certain functions, rights, liabilities and obligations of Cunninghame District Council transferred to North Ayrshire Council (the minuters). A similar transfer from Kyle and Carrick District Council was made to South Ayrshire Council (the first defenders). A similar transfer from Cumnock and Doon Valley District Council and Kilmarnock and Loudoun District Council was made to East Ayrshire Council (the second defenders). This complicated transfer is represented in a diagram in Appendix A which I have adopted from material prepared by counsel in the written submissions.

[6] Following local government reorganisation in 1975, the pursuer might have had his employment transferred to any of the four new district councils which were successors to Ayr County Council. His employment was in fact transferred to Cunninghame District Council.

[7] There are two main issues in dispute. I frame the issues in this way. The first issue is: is any successor local authority responsible in damages for fault and negligence and breach of employers' statutory duty to the deceased as a result of his then employers, Ayr County Council, exposing the deceased to asbestos during the period to 1971 which caused the deceased to develop symptoms in 2007 due to mesothelioma? The second issue is: esto a successor local authority is so responsible which of one or more local authorities is responsible?

[8] The solicitor-advocate for the pursuers explained that, on his interpretation of SI 1975 No 629, there was a transfer of liability. In respect of that the pursuers sued the successors of Kyle and Carrick District Council in relation to the Mossblown area, namely South Ayrshire Council (the first defenders) as the deceased had been exposed to asbestos in said area by Ayr County Council. The pursuers also sued the successors of Cumnock and Doon Valley District Council namely East Ayrshire Council (the second defenders) as the deceased had been similarly exposed to asbestos in areas within the boundaries of Cumnock and Doon Valley District Council, namely, Drongan, Dalrymple, Patna, Dalmellington and Auchinleck. The pursuers did not sue the minuters as he did not consider that the minuters were a relevant successor local authority.

[9] The defenders and party minuter submitted that no liability transmitted to any successor authority in this case. The second part of the defenders submission (not supported by the party minuter) was that esto there was a transmission of liability, the liability transmitted not to the defenders but to North Ayrshire Council (the minuters) as the successor council to Cunninghame District Council, the employer of the deceased.

Procedural history
[10] When the case first called before me for procedure roll discussion, the

minuters had recently been allowed to enter the action. They had raised disputed factual matters at short notice which had the potential to cause difficulties in resolving the procedure roll debate. As a result it was agreed that the first issue in dispute should be considered separately and submissions were directed to that issue. By the third day of the procedure roll debate, there had been some clarification of the employment situation of the pursuer as between the pursuers and the minuters. It was therefore possible to proceed with all outstanding matters which parties wished to debate. I record this to explain the course of proceedings. Although the issues in dispute were addressed separately by the parties and are dealt with on that basis in this opinion, the issues are connected. The determination of the disputed issues depends upon the proper interpretation of SI 1975 No 629.

[11] I am grateful to the solicitor-advocate and counsel for all parties for their written outline submissions which they incorporated in their oral submissions.

SI 1975 No 629
[12] The Local Authority etc (Miscellaneous Provision) (Scotland) Order 1975 regulation 3 provides:

"(1) All rights, liabilities and obligations which, immediately before 16^th May 1975, were rights, liabilities and obligations of an existing local authority shall on that date, by virtue of this order, be transferred to and vest in the new authority by whom the functions to which such rights, liabilities and obligations relate become exercisable on and after that date by virtue of Act.

(2) Without prejudice to the generality of the foregoing provisions of this Article, where by the operation of any of those provisions any right, liability or obligation vests in a new local authority, that new authority and all other persons shall, on and after 16^th May 1975, have the same rights, powers and remedies (and, in particular, the same rights as to the taking or resisting of legal or other proceedings) for ascertaining, completing or enforcing that right, liability or obligation as they would have had if it had at all times been a right, liability or obligation of the new authority.

(3) Any legal or other proceedings to which an existing local authority are a party and which are pending on 16^th May 1975 shall be continued on and after that date as if the new authority (by whom the function, to which the said proceedings relate, becomes exercisable as aforesaid) instead of the existing local authority, had been a party thereto.

(4) In this article "existing local authority" includes a joint committee, joint board, river purification board and a water board."

The first issue
Submissions on behalf of the first defenders
[13] The written submissions by counsel for the first defenders are 34 of process and supplementary submissions 35 of process.

[14] Senior counsel for the first defenders sought absolvitor. He submitted that on a proper interpretation of SI 1975 No 629, no liability had transferred to the first defenders as that order acted to transfer liabilities which were in existence as at the date of transfer namely, 16 May 1975. It was submitted that there was no liability in existence at that date because there had been no concurrence of injuria and damnum. On the pursuer's pleadings, the earliest date of concurrence is 2007.

[15] Senior counsel for the first defenders set out the statutory structure introduced by the 1973 Act. He drew attention to the provisions which were made in the Local Authorities (Staff Transfer and Protection) (Scotland) Order 1975, (SI 1975 No 703) and SI 1975 No 629.

[16] He submitted that paragraph 3(1) of SI 1975 No 629 is clear in its terms. Paragraph 3(1) makes provision for the transfer of "rights, liabilities and obligations" which were in existence immediately prior to 16 May 1975. He submitted that there must be a liability in existence prior to that date before it could be transferred and, in the absence of an existing delictual liability as at that date, there was nothing to transfer. As no delictual liability existed, there was nothing to transfer to successor authorities thereafter as a result of the 1994 Act and the transfer provisions in the Local Government (Transitional Financial Provisions) (Scotland) Order 1996, (SI 1996 No 682).

[17] For the purposes of procedure roll discussion, senior counsel accepted that the deceased had been exposed to asbestos dust prior to 16 May 1975 during his employment with Ayr County Council. He submitted that the difficulty for the pursuers was that there are no averments that the deceased suffered any injury prior to the date specified in SI 1975 No 629 namely 16 May 1975. Senior counsel submitted that in order for there to be a delictual liability there must be concurrence of injuria and damnum. He relied on Rothwell v Chemical & Insulating Co Ltd & Another (2008) 1 AC 281 in particular the speeches of Lord Hoffman paragraphs 1, 2 and 7; Lord Hope paragraphs 36-39, 42‑49; Lord Scott paragraph 64; Lord Roger paragraphs 78, 83-88. Senior counsel submitted that Rothwell was highly persuasive in the circumstances of the present case and that the decision had been followed in Scotland by Lord Uist in Wright v Stoddard Internatial Plc (No 2) 2002 REP LR 37. Senior counsel also referred to the recognition of the concurrence of injuria and damnum in prescription cases under reference to Paterson v George Wimpey & Co Ltd 1999 SLT 577 and Renfrew Golf Club v Ravenstone Securities Limited 1984 SC 22.

[18] Some reference was made by senior counsel to examples of legislation in which it was made plain that liabilities covered those which subsequently accrue. He pointed out that such a wider definition is given in the definition section in the 1889 Act. The definition in the extended terms provided in the 1889 Act is absent from the 1973 Act. It was submitted that the absence is significant.

[19] In anticipation of the submissions which might be made on behalf of the pursuers, there was some discussion about the concept of "contingent liability". Senior counsel submitted that this was not a concept known to delict. He submitted that the concept was used in the contractual or commercial sense under reference to Liquidator of Ben Line Steamers Ltd, at 2011 SLT 535, in re T & N Ltd and Others (2006) 1 WLR 1728 and Grimshaw v Bruce (2011) CSOH 212.

[20] Senior counsel submitted that to the extent that the pursuers sought to rely on Watson v Fram Reinforced Concrete Co (Scotland) Ltd 1960 SC (HL) 92, Grant v Australia Knitting (1936) AC 85, and Cartledge v E Jopling & Sons Ltd (1963) AC 758, such reliance was misconceived. None of these cases provided authority for the proposition that a contingent liability existed in delict.

[21] With reference to Downie v Fife Council 2001 SC 793 and Higson v Aberdeen City Council 1999 SCCR 708, these authorities did not assist the pursuers. The defenders in this case did not contend that delictual liabilities did not transfer under the 1975 Order. The submission was that there was no delictual liability to transfer in this case because there was no concurrence of damnum and injuria at the critical date 16 May 1975. That issue was not addressed in these cases.

[22] Senior counsel submitted that Walters v Babergh DC (1983) 82 LGR 235 was of no assistance as the case was based on English legislation and there was no attempt to analyse the nature of or basis for the existence of a contingent liability in delict.

[23] The submissions on behalf of the first defenders were adopted on behalf of the second defenders and minuter. The written submissions of the second defenders are 36 of process and were prayed in aid by counsel for the second defenders. They are clear in their terms and I do not summarise them.

Submissions on behalf of the pursuers
[24] The written submissions are set out in 32 and 33 of process.

[25] In developing his primary submission (paragraph 2 of the written submissions) the solicitor-advocate sought to put the Local Government (Scotland) Act 1973 in its historical statutory perspective. His starting point was the Local Government (Scotland) Act 1889 ("the 1889 Act"). S.105 of the Act provides:

"In this Act, if not inconsistent with the context the following terms have the meaning herein-after respectively assigned to them; that is to say...

the expression "liabilities" include liability to any proceeding for enforcing any duty and all debts and liabilities to which any authority are or would be, but for the passing of this Act liable or subject, whether accrued due at the date of the transfer by this Act, effected or subsequently accruing, and including any obligation to carry or apply any money to any sinking fund or to any other particular purpose."

[26] I was then referred to the Local Government (Scotland) Act 1929 (the 1929 Act). S.77(1) provides:

"In this Act, unless the context otherwise requires - ...

'property' and 'liabilities' have the same meaning as in the Local Government (Scotland) Act, 1889."

[27] I was invited to consider the Local Government (Scotland) Act 1947 (the 1947 Act) which was a consolidation statute. No definition of liabilities is set out in the1947 Act. S.379 of the 1947 Act redefines "property" but "liabilities" are not redefined. My attention was drawn to schedule 14 of the 1947 Act which makes certain repeals, including repeals to the 1889 Act and the 1929 Act. I was advised that the definition section (S.105) of the 1889 Act and S.77 of the 1929 Act were not repealed in the 1947 Act and that the definition of "liabilities" in the 1889 Act was still extant and in force at the date when SI 1975 No 629 came into force and continued in force thereafter.

[28] There is no definition of the word "liabilities" in the 1973 Act or in SI. 1975 No 629. I was invited to take account of the history and purpose of the statutory enactments dealing with local government since 1889. The submission was made that as the definition of liabilities, to which I have referred in the 1889 Act and the 1929 Act, were still extant at the relevant date in 1975, the definition of liabilities in the 1889 Act applied to the 1973 Act and to SI. 1975 No 629. Accordingly I was invited to interpret the word "liabilities" as meaning not only liabilities which existed at the relevant date, but liabilities to which "any authority are or would be, but for the passing of this Act liable or subject, whether accrued due at the date of the transfer by this Act, effected or subsequently accruing...".

[29] I was also referred to Downie v Fife Council 2001 SC 793, and provisions in England which were said to be similar, under reference to Walters.

[30] The solicitor-advocate then submitted that esto the 1889 Act does not govern the interpretation of SI. 1975 No 689, Scots Law does recognise that liabilities in delict may exist before they become enforceable. He developed this submission in the following way: He said that the concept of potential or contingent liability in Scots Law extends from the contractual to the statutory and to the delictual under reference to Erskine, Institute, 3^rd Edn, III.1.6, Gloag on Contract, 2^nd Edn, pp 270-272, In re Sutherland 1963 AC 235 per Lord Reid at pages 247-251 and Lord Guest at pages 262-263, Liquidator of Ben Line Steamers, Noter 2011 SLT 535, Prescription and Limitation (Scotland) Act 1973 Part I and schedule 1.

[31] It was submitted that the deceased's exposure to asbestos before 1971 in consequence of the breaches of duty by Ayr County Council gave rise to a potential or contingent liability to pay damages in the event of harm which subsequently occurred as a result of that exposure under reference to Grant v Australian Knitting Mills [1936] AC 85 at pages 103-105, Watson v Reinforced Concrete Co (Scotland) Ltd 1960 SC (HL) 92 per Lord Reid at pages 109-110 and Lord Keith of Avonholm at page 113.

[32] The solicitor-advocate submitted that the position of the deceased is a fortiori in the position of a consumer of defective goods because (a) the duties were owed to him and (b) he inhaled asbestos dust at the time the breaches of duty occurred. The concept has been recognised in England specifically in relation to the future development of asbestos related disease under reference to In re T&N Ltd & Ors [2006] 1 WLR 1728. Accordingly it was submitted that although no harm had occurred giving rise to a cause of action in delict prior to 16 May 1975 or 1 April 1996 a potential or contingent liability existed as at that date.

Discussion of the first issue

[33] There was no dispute by the parties that the resolution of the first issue depended on the proper interpretation of regulation 3(1) of SI 1975 No 629. There was also no dispute that no action exists in delict for a wrong which has not resulted in some element of loss, injury or damage, that was reasonably foreseeable and for which the claimant can sue. This is the principle expressed by Lord Hope of Craighead in Rothwell paragraph 36. In other words, injuria and damnum must coincide before there is a cause of action in delict. On the pleadings in the present action, the earliest date for that coincidence was October 2007. That was the date which according to the pleadings the deceased suffered the first symptoms of injury.

[34] If the word "liabilities" in SI 1975 No 629 is interpreted as referring to an existing cause of action in delict against Ayr County Council, I would have no difficulty in accepting that the analysis by senior counsel for the first defenders is correct. Plainly there was no existing cause of action in delict for the deceased immediately before 16 May 1975, to transfer as at that date, as there was no coincidence of injuria and damnum.

[35] The response by the solicitor-advocate for the pursuers was to try to persuade me that, in the absence of any definition of "liabilities" in the 1973 Act or in SI 1975 No 629, I should apply the definition of "liabilities" which first appeared in the 1889 Act. That definition had not been repealed at the date SI 1975 No 629 came into force.

[36] I was somewhat perplexed by this bold submission. The definition of "liabilities" in the 1889 Act in its terms limits the application of the definition to the 1889 Act. A similar limitation is made in the 1929 Act when the definition of "liabilities" from the 1889 Act is adopted. Thereafter in subsequent Acts the definition is not adopted. The mere fact that various Acts, including the 1973 Act, relate to local government does not in my opinion assist the pursuers. It is plain to me, even on a cursory examination of the historical development of local government reorganisation, that the developments and structures of local government were comprehensively changed over the period from 1889. In particular the changes which were introduced by the 1973 Act were the result of a major restructuring exercise which followed the Wheatley Royal Commission. Despite my request, the solicitor-advocate for the pursuers was unable to provide any precedent for approaching statutory interpretation in the way which he proposed. He made some reference to the reasoning of Lord Reid in Watson v Fram Reinforced Concrete Co (Scotland) 1960 S.C. (H.L.) at p107-108. That is of no assistance to the pursuers. The present case does not deal with a situation where words in an old statute have been interpreted by the courts in a particular way and then the words have been used again in a later Act. It was in that situation that Lord Reid stated the words should be interpreted in the same way. Lord Reid was not referring to a situation, as in the present case, where Parliament has provided a particular definition for a term to apply in a particular Act. Senior counsel for the first defenders, at my request, dealt with this in his supplementary written submissions 35 of process. He made reference to Macbeth v Chislett [1910] AC 220. I accept that case does not support the approach of the pursuers.

[37] In my opinion there is no justification or case authority to support using the definition provided for the purposes of the 1889 Act and applying it to delegated legislation under the 1973 Act. I consider that the main submission of the pursuers is not well founded.

[38] That brings me back to the terms of SI 1975 No 629. What is meant by "all rights, liabilities and obligations..." in the context of this delegated legislation under the 1973 Act? I consider that the submission by senior counsel for the first defenders in effect interprets "liabilities" as meaning the same as "obligations". If injuria and damnum had coincided prior to the effective date in 1975, one might analyse the situation by stating that there had been created an obligation on Ayr County Council for their delict or breach of statutory duty which encompassed an obligation to make reparation for loss, injury and damage caused by their delictual acts or omissions. Where injuria and damnum coincide, I consider that an analysis in terms of obligation may be appropriate.

[39] I note also that the wording in SI 1975 No 629 is not limited to liabilities in delict. In my opinion it is intended to cover inter alia contractual matters. In a case of contract there may well be contingent liabilities. In my opinion the word "liabilities" in regulation 3 of SI 1975 No 629 does not necessarily or obviously have the restricted meaning of liabilities which could be sued upon. If it did contractual contingent liabilities would not be transferred.

[40] The case of Downie is of considerable interest to me. This is the only case to which I was referred which dealt with the interpretation of SI 1975 No 629 regulation 3 and the equivalent 1996 regulations following the 1994 Act. The pursuer in Downie raised an action against a successor council for loss and damage associated with the progressive lung condition which he contended was caused by exposure to asbestos during periods of employment with two predecessor authorities. Fife Council contended that they were not liable for any breach of any obligation which may have been committed by their predecessors. The submission made on behalf of Fife Council was to the effect that the delictual obligations of the predecessor authorities were not transferred effectively by the regulations in 1975 or in 1996.

[41] This submission was rejected by the Lord Ordinary (Penrose). He referred to S.215(1) of the 1973 Act which "conferred a wide ranging power to make regulations inter alia to ensure continuity in the relationships of local authorities with third parties." In paragraph 11, referring to regulation 3 of SI 1975 No 629, he was of the opinion that on its terms it is capable of transferring liability for a prior breach of obligation to the new authority, and he did not accept that there is any reason for construing it otherwise. He commented that the argument for Fife Council had the unattractive consequence that if there had been an action in court against a predecessor authority for breach of an obligation of care owed to an employee, Regulation 3(3) would have continued that action against the successor authority, but if the action had not been raised until after the operative date it could not be maintained against the successor because liability for the breach had not been continued. In his opinion such an inconsistent effect of reorganisation would be "at least surprising". In his opinion, Regulation 3 was capable of transferring "to Dunfermline District Council any liability of the Burgh Council to make reparation for loss and damage caused by any negligent omission to take steps to protect the pursuer from exposure to asbestos products or caused by any relevant breach of statutory duty in that regard" (paragraph 11). In Downie, the Lord Ordinary dealt with the 1996 regulations in paragraphs 17 and 18 and reached a similar conclusion.

[42] Senior counsel for the defenders stated that I should not place much reliance on Downie as the specific problems about the non-occurrence of injuria and damnum before the effective date were not raised and addressed in the case. I note however from the closed record in Downie (31 of process), which was provided by the solicitor-advocate for the pursuers, that the last period of exposure to asbestos of Mr Downie ceased in 1987. The averments about Mr Downie's loss injury and damage commence at page 27 of the Closed Record. The averments are that Mr Downie became breathless in 1997 and asbestos was thereafter diagnosed. The date of 1997 is the earliest averment of injury. In Downie therefore there was no injury averred until 1997. That date post dated both the 1975 and the 1996 regulations which effected a transfer to successor councils. I observe that against that factual background there was no concurrence of injuria and damnum as at the effective date of the 1975 regulations or the 1996 regulations. I accept that the point was not specifically raised by counsel in Downie but the concurrence of injuria and damnum is not a new point which was suddenly identified and developed in Rothwell. The necessity for the concurrence of injuria and damnum before a delictual wrong of the type raised in the present action and in Downie is actionable is a concept fundamental to Scots law. It is described by Lord Hope of Craighead in paragraph 36 of Rothwell as the "...most basic, principle of the law of negligence". As the first defenders' submissions are based on such a basic principle, it is perhaps surprising that the point was not noted by the Lord Ordinary (or parties) in Downie in the course of the analysis of the two sets of regulations. That case is based on pleadings where no injury is averred until after the effective dates for transfer as set out in the regulations. One explanation may be that the Lord Ordinary considered the non coincidence as irrelevant to the issues before him. In my opinion if the defenders are correct in their submissions it would follow that the decision in Downie was wrong in law on the facts of that case.

[43] A similar but not identical problem was raised in England in Walters. I accept that the wording of the delegated legislation was different. Woolf J. required to consider, in the context of the English statutory provisions, the meaning of "liabilities" in relation to delegation legislation under the Local Government Act 1972. The point taken by the defenders in that case was similar to the point taken by the defenders in the present case. The submission was that the successor council did not succeed to the liability of a predecessor council for breaches of statutory duty or acts of negligence committed before the effective date of transfer but in respect of which no damage resulted until after the date of transfer. The defendants submitted that if a cause of action did not exist at the date of reorganisation, the potential liability of the authority that ceased to exist died with that authority and the successor authority were under no liability in respect of the damage suffered in consequence of a breach of duty when the damage occurred. Woolf J. stated:

"I cannot forbear from pointing out the obvious, that if (the local authority) on the assumptions set out in the issue are not under liability there has been a sad, nay deplorable, failure on the part of those who are responsible for the legislation involved in the reorganisation of local authorities to ensure that the public will not be prejudiced by such reorganisation by being deprived of the remedy in damages which they would otherwise have". (page 238).

[44] In the course of his consideration Woolf J. agrees with the general statement about the meaning of "liabilities" to this effect:

"I do not think that the meaning of the word can be limited ... to a present, enforceable liability, excluding any contingent or potential liability. Used simpliciter, the word seems to me to be fully capable of embracing the latter form of liability ...".

Woolf J. states that he regards the word "liabilities" as capable of having "amplitude of meaning" and wide enough to apply to contingent or potential liabilities. Woolf J. considers that he has a fair choice between the meanings submitted and has no hesitation in choosing an interpretation which in his view makes sense of the delegated legislation rather than leaving a large gap between obligations and causes of action which have accrued (pages 242-243).

[45] As I have said it has long been established in Scots law that a coincidence of injuria (in the sense of what is contrary to law, a breach of duty) and damnum (in the sense of resultant loss injury or damage) is necessary before a delictual obligation is created. One consequence of that is that one might reasonably assume that Parliament must have been aware that there may be cases where there is a gap, and perhaps a very long gap between the coincidence of injuria and damnum. Senior counsel for the first defenders suggested that Parliament may have intended at local government reorganisation to have some clarity and finality in relation to what was transferred. That may be so but that means there must have been a deliberate decision by Parliament to leave no remedy to some persons negligently exposed to harm not only by Ayr County Council but by any local authority. Another explanation might be that the problem was overlooked by parliamentary draftsmen and is a casus omissus. These are possibilities but I do not find them compelling. I agree with the observations expressed by Woolf J. at p 238 and by the Lord Ordinary in Downie at p797 F-9 to which I have referred.

[46] Senior counsel for the first defender submitted that there was no concept of potential liabilities or contingent liabilities in delict. There was either an existing delictual liability or no existing delictual liability and the liability did not come into effect until there was a concurrence of injuria and damnum. He accepted that the term contingent liability was recognised in contract but not delict.

[47] I have summarised the submission in response by the solicitor-advocate for the pursuers in paragraphs 30-32. I find this case law of limited assistance in the context of the present case. The passages relied on by the pursuers in the various cases cited are dealing with conceptual issues focussed in relation to the particular difficulties in these cases. In these cases however one can detect an acceptance and understanding that the nature of the legal relations which are created are difficult to define in the situation where there is a time gap between the injuria and damnum.

[48] I consider that the simplest way to describe the concept is to describe the exposure of the deceased to asbestos by Ayr County Council in breach of their duty as employers to take reasonable care for the safety of the deceased as creating a potential liability in delict.

[49] But I also consider that the concept might be described as a liability for injuria albeit in some cases no loss injury or damage may result and no delictual obligation will ever arise. Another way of considering the matter is to bring into the analysis the concept of liability as meaning that a party is under a liability in the sense which Hohfeld defined. On this analysis Ayr County Council by exposing the deceased to asbestos over many years became subject to a liability that in the event of the deceased suffering damage, they would become under a duty to pay damages in delict when injuria and damnum concurred. Although I raised the subject of Hohfeld and his jurisprudential analysis as set out in Fundamental Legal Conceptions, there appeared little enthusiasm by parties to pursue this jurisprudential analysis. In my opinion it does provide some assistance in disentangling liability and obligation (in the sense of duty). On both said analyses there is a liability and not merely a potential liability.

[50] The focus of discussion before me was the proper interpretation of SI 1975 No 629. It was not submitted that the wording of the delegated legislation which implemented a transfer in consequence of the 1994 Act namely the Local Government (Transitional Financial Provisions) (Scotland) Order 1996 made any significant difference. I understood that it was accepted that if there was a transfer of liability in the present case in terms of the 1975 regulations, there was also transfer in terms of the 1996 regulations. In these circumstances I do not consider that it is necessary to deal further with the 1996 regulations.

Conclusions re the first issue

[51] In summary, I consider that the meaning of the word "liabilities" in the context of the 1975 regulations is not the same as "obligations". It has a wider meaning. I have no difficulty in construing the word to include contingent liability in the contractual sense. I do not think that there is a recognised use of the words "contingent liability" in delict as the analysis is not usually made in these terms. But I consider that the concept of potential liability in delict has a comprehensible meaning in a situation where it is well established in law that loss, injury and damage may occur separate in time from injuria. I also consider that the word "liabilities" has a wide meaning which is certainly wide enough in scope to cover potential liabilities. If I am wrong about that I consider that in any event there is a liability (with or without the assistance of Hohfeld's analysis) which is not potential and which is transferred by SI 1975 No 629.

[52] When I consider the matter generally and look to the purpose of the 1973 Act and the delegated legislation, I consider that the construction which I prefer makes sense. If one considers the purpose of this delegated legislation, it is to transfer a range of legal rights, liabilities and obligations in addition to a range of property rights which are transferred under separate provisions in the 1973 Act to the new authorities. The purpose is not to relieve the new local authorities from the effects of legal rights, liabilities and obligations which have been incurred by predecessor authorities. The reorganisation of local government was a complicated statutory exercise but it was no part of the purpose of the resultant legislation to take away remedies from individuals which they would have had but for the reorganisation. In the present case, but for the reorganisation, the pursuers would have had a remedy against Ayr County Council for the death of the deceased if that local authority had not ceased to exist as a result of local government reorganisation.

[53] I have also considered the effect and implications of the conflicting interpretations which have been put before me by the defenders and the pursuers. The result of the defenders' interpretation is that the pursuers would have no remedy against anyone for the exposure of the deceased by Ayr County Council to asbestos over many years. I consider that outcome unacceptable. I draw some comfort from the fact that Woolf J. and Lord Penrose were also very critical of such an outcome. In my opinion the wording of the delegated legislation does not lead me to any such inevitable outcome.

The second issue
[54] The main submission was made by counsel for the second defenders which was adopted by senior counsel for the first defenders. The written submissions for the second defenders are 36 and 37 of process.

[55] Counsel submitted that it could not be disputed that the concurrence of injuria and damnum in this case leading to actual liability for the successors of Ayr County Council did not arise until 2007. He submitted that at best for the pursuers if there was a transfer, what was transferred on 6 May 1975 under SI 1975 No 269 was a "potential liability" which might or might not become an actual liability in the future. He submitted that on a proper analysis, the breaches of duty which underpinned the "potential liability" as of 16 May 1975 were breaches of duty at common law and under statutory regulations relating only to the existence of the employer/employee relationship. He submitted that the potential liability to be transferred as of 16 May 1975 therefore is created and underpinned only by the employer/employee relationship. The exercise of another local authority function involved in the maintenance and repair of housing did not per se create any right in delict for the deceased. It was the duties owed to the deceased by Ayr County Council as an employee that created "a potential liability and obligation". When one considers the terms of the Order it is plain that the function to which such potential liability related at the relevant date of 16 May 1975 for Ayr County Council was the function of Ayr County Council as the employer of the deceased. That transferred to Cunninghame District Council. Thereafter following reorganisation in 1996, the functions and liabilities of Cunninghame District Council as employer transferred to North Ayrshire Council. The defenders therefore are not the relevant statutory successors.

[56] Counsel submitted that the pursuers in failing to sue the successors who took over the employment function had sued the wrong party. The defenders were therefore entitled to decree of absolvitor.

[57] Counsel also made reference to the Local Authorities (Staff Transfer and Protection) (Scotland) Order 1975 and the Local Authorities (Staff Transfer Schemes) (Scotland) Order 1975. He emphasised that the statutory provisions make provision for continuity of employment. That was also achieved at the later reorganisation under and in terms of Local Government etc (Scotland) Act 1994 with the Local Government (Transitional Financial Provisions) Order 1996.

[58] Focussing on the interpretation of SI 1975 No 629, counsel submitted that the function of the local authority that relates to "liabilities" is different from the function by which staff transfer might be determined. The former relates only to the employer/employee situation in the present case. It was submitted that the pursuers were wrong in law to focus on the housing function of Ayr County Council. Counsel submitted that the housing function merely related to the exposure of asbestos and did not relate to liabilities whether actual or potential. It was submitted that the pursuers were in error in their argument that potential liability for exposure to asbestos would transfer according to where the injuria or wrongful act leading to the injury was located. Potential liability in delict can never be founded upon where an injury occurred and so the housing function is irrelevant for this purpose. The locus of the injury is irrelevant. What is relevant is the relationship and identity of the person who has committed the breach of duty because of the employer/employee relationship.

[59] Counsel submitted that the logic of the pursuers' submissions is that the legislator must have intended that the "potential liability" in delict would be transferred according to the geographical location of the injuria element of the delict. The logic of that would be that if the deceased had worked throughout the boundaries of Ayr County Council there would be a transfer of liability to four district councils and perhaps wider if the deceased had worked for Ayr County Council but outwith the boundaries of Ayr County Council.

Submissions on behalf of the pursuers
[60] The solicitor-advocate for the pursuers under reference to written submissions 33 of process, submitted that the liability for the loss, injury and damage suffered by the deceased and his family is a liability of the local authority which was incurred in the performance of the housing function. That liability has transferred to and should be met by the local authority now responsible for the housing function in the areas where the liability was incurred, that is in the areas where the deceased was exposed to asbestos. He submitted that it is not relevant that after the deceased ceased to be exposed to asbestos, the deceased continued in the employment of Ayr County Council and that employment was transferred to Cunningham District Council with effect from 16 May 1975. He submitted that the deceased's employment at the time he was negligently exposed to asbestos is relevant only to indicate the nature of duty which was owed to him by Ayr County Council at that time. The liability which flows from the breach of duty attaches to the function which the deceased was performing and not to his continued employment.

[61] The solicitor-advocate for the pursuers set out in some detail the statutory structure of the Local Government (Scotland) Act 1947. He emphasised the importance of functions in the statutory structure and submitted that nothing in the statutory scheme suggests that use of the word "function" includes the employment of staff for its own sake. He traced the statutory developments in the legislation up to 1973. He then analysed the statutory scheme under the 1973 Act. This analysis is all set out at paragraph 4 of his written submission and it is not necessary to summarise it.

[62] Against that statutory background, the solicitor-advocate for the pursuers focused on SI 1975 No 629. The use of the word "function" or "functions" in article 3(1) and (3) must have the same meaning as in the 1973 Act. The rights, liabilities and obligations of the existing local authorities transfer by function to the new local authorities who have the responsibility for performing those functions.

[63] I was invited to consider the problem by considering to whom any right, liability or obligation transferred in an employers' liability action raised, but not completed, before transfer if the employee in question was no longer employed. If employment was the relevant function, it would be impossible to determine which local authority would have the function if the employee had ceased to be employed before the transfer date. In the case of Ayr County Council a former employee who ceased employment prior to 16 May 1975 might, if he had remained in employment until the transfer date, have become the employee of one of five new authorities. If proceedings had been commenced, as contemplated by article 3(3), there would be no way of ascertaining which authority was to carry the liability or meet any liability. He submitted that it cannot be correct that a different transferee authority is identified depending on whether or not the employee is or is not continuously employed before and after the transfer. The interpretation of SI 1975 No 269 makes more sense if the same answer is reached whatever the employment status of the employee at the date of the transfer. That can only be achieved by attaching liability to the function in the sense contended for by the pursuers. This makes further sense since the financial burden would fall on the authority which had responsibility for the expenditure in the performance of that function and on whom the continued performance of that function lay.

[64] It was submitted therefore that the liability for the pursuers' loss, injury and damage devolves on the authority or authorities who are the successors firstly under SI 1975 No 269 and thereafter at the reorganisation under the 1994 Act under article 19 and schedule 1 of the Local Government (Transitional Financial Provisions) (Scotland) Order 1996 to the local housing authority or authorities which succeeded to the liabilities of Ayr County Council as housing authority, namely the defenders.

Submissions on behalf of the minuters
[65] The minuters supported the submissions on behalf of the pursuers that it was the defenders and not the minuters to whom the relevant liabilities had transferred. The written submissions are 38 of process. Counsel submitted that on a proper interpretation of the SI 1975 No 629 it is necessary to consider not the nature of the potential liability but the function to which that potential liability relates. In his submission it related to the housing function of the former Ayr County Council. He submitted that SI 1975 No 629 was not concerned with the type of rights, liabilities or obligations but it was concerned with the function to which the rights, liabilities and obligations related. The submission on behalf of the defenders that the relevant function for these purposes is employment is incorrect and it is plain that housing is the correct function. Counsel submitted that employing staff is something that local authorities do to enable them to carry out their statutory functions. Employment per se is not a function of the local authorities.

[66] Counsel set out the statutory background. With reference to part 8 of the 1973 Act, he submitted that housing was a function. There is no reference in any part of the act to employment being a function. He accepted that there was a strange reference in S.159 of the 1973 Act to employer's liability which is set out under the heading of Miscellaneous Functions in part 8 of the 1973 Act. He was unable to explain this reference but submitted that it did not undermine his submission. He submitted that with effect from 16 May 1975 under and in terms of section 130 and schedule 12 of the 1973 Act, housing became a function of the district council formed with effect from that date. There was no provision for the transfer of liability for previous breaches of duty by previous employers to an employee to the transferee authority. That was not done but rather the subordinate legislation dealt with the matter through the transfer of functions. This reflects the whole scheme by which local government reorganisation was carried into effect in the legislation, including how employees in general were transferred. Throughout the provisions governing transfer of staff reference is made to their function. Section 64 of the 1973 Act provides in effect that staff are appointed by the local authorities to enable the staff to discharge the functions of the local authorities. The structure of the 1973 Act is reflected in the related subordinate legislation.

[67] Counsel also made reference to Downie v Fife Council at page 794E and MacPhail v Cunninghame District Council at page 152.

[68] In conclusion, counsel submitted that the correct approach is to look at the functions to which the deceased's employment was related rather than to interpret function as referring to the contract of employment itself. The relevant function is housing not employment. He submitted that the interpretation put forward on behalf of the defenders does not reflect either the wording of SI 1975 No 629 or the legislative structure in which the local government reorganisation was carried out in terms of the 1973 Act and subordinate legislation. In this case the exposure of the deceased to asbestos predated the reorganisation. The exposure occurred while the deceased was working with Ayr County Council in the course of carrying out work being undertaken by Ayr County Council exercising their housing functions. All four successor authorities to Ayr County Council carry out a housing function post reorganisation. He submitted that there was a significance to the geographical location in which any exposure occurred.

Discussion of the second issue

[69] I am indebted to the solicitor-advocate for the pursuers for setting out in detail the structure of the 1973 Act. He drew attention to the importance of the functions of local authorities and the way the concept of functions permeates the structure of the Act. There is no general definition of functions in the 1973 Act. There is a definition of function in S.80 which is limited to the circumstances referred to therein. Under the general heading "Functions" in Part 8 of the 1973 Act reference is made to many functions including education, housing and others. There are other references to functions, for example, planning functions in schedule 22. It would appear therefore that Part 8 is not definitive of functions. Within Part 8 there is provision in S.159 that the council shall not require to effect any insurance under the Employers Liability (Compulsory Insurance) Act 1969. This section appears under a sub-heading commencing at S.146 entitled "Miscellaneous Functions" in which reference is made inter alia to police, local weights and measures, co-operation and assistance regarding public transport, aerodromes, ferries, piers and harbours and various other functions.

[70] The transfer of property is dealt with inter alia in S.222 and 223 of the 1973 Act. Provision is made for the making of an order and the transfer of property is made by such delegated legislation. It should be noted also that specific provision is made for a Property Commission for Scotland in S.224 to assist with this process.

[71] Provision is also made in S.215 about certain written agreements, licences etc. Provision is made in S.215(4) for the situation if there is any doubt as to the identity of a local authority to whom any particular functions are so transferred. That provision is limited however to resolution of matters in relation to S.215.

[72] There is also provision in S.216 about the transfer of officers which includes employees. S.218 provides for the appointment of a staff commission to help resolve difficulties.

[73] It was plainly envisaged in the 1973 Act that the various transfers which were an inevitable result of the legislation might cause some difficulty. Unfortunately in relation to the transfers covered by SI 1975 No 629 no provisions were made to assist with difficulties which may arise about the identity of the successor authority or authorities to whom a transfer was made. The difficulties which arise are illustrated in this case. It is perhaps odd that there is no guidance in case law. I think it is unlikely that this is the first case in which such difficulties have arisen. I understand from the discussion at procedure roll that there have been some informal arrangements between some authorities to resolve such difficulties without resort to the courts. I was not given any details of these arrangements. It was however plain from the discussion at procedure roll that the interpretation and effect of SI 1975 No 629 is far from clear. This leaves litigants such as the pursuers in a very difficult position. Local authorities may also have difficulties but they are better placed than an individual seeking to sue in delict to resolve such matters.

[74] The interpretation of SI 1975 No 629 would not cause any difficulties in a situation where there was a transfer of rights, liabilities and obligations of one local authority to one new successor local authority. In other situations where more than one new local authority is involved, difficulties become apparent immediately there is a dispute about what is "a function". Such difficulties are illustrated in this case where a function, the housing function, is transferred not to one authority but to four authorities. In the course of discussion it became clear that there were a number of practical difficulties about the interpretation advanced on behalf of the pursuers (and supported by the minuters) and the interpretation advanced by the defenders. I have set out their submissions in detail and it is not necessary to repeat them.

[75] For example, on the pursuers' submissions, it is not clear who would be the successor authority in a situation where the injured person was a clerk at headquarters carrying out an administrative task in relation to all the employees who carried out the different functions of Ayr County Council. The solicitor-advocate for the pursuers seemed to suggest that some inquiry might have to be done about where the budgetary responsibility lay. It was not clear whether the answer to the question of who was the successor authority would vary depending on whether the employee was taking correspondence to the housing department or the roads department at different locations in their county council and was injured by fault of the employer in one of these locations. It was accepted on behalf of the pursuers that if the deceased had worked in all areas within the constituency, the liability would transfer to all four successor authorities of the housing function. There appeared to be some attempt by the pursuers to identify the locus where the deceased worked because that related in some way to the asset, i.e. the housing stock which would be properly transferred to the successor council. But in many cases there would be no such asset or property. It merely happens in this case that there was a property housing stock which might transfer separately.

[76] I consider that there is an immediate attraction to the defenders' submission in that there is an identifiable employer and only one employer. The defenders' analysis however quickly broke down when the defenders' counsel was asked what would happen in a situation where the employee because of retirement, death or some other reason, did not have his employment transferred to a successor authority. In these circumstances I understood senior counsel to accept that the liability would transfer to all four successor authorities. It was not clear whether that was on the basis that they were successor authorities to Ayr County Council as employer or whether they were successor authorities to the housing "function". The analysis of the defenders also had the difficulty in that there is an issue as to whether or not employment is a function for the purposes of the 1973 Act. Obviously if it is not, the defenders' analysis fails ab ante.

[77] Let me turn therefore to the wording of SI 1975 No 629. On the assumption that there is a transfer, the transfer of the rights, liabilities and obligations is to "...be transferred to and invest in a new authority by whom the functions to which such rights, liabilities and obligations relate become exercisable on and after that date by virtue of the Act". I pause to observe that the word "functions" is in the plural. The word used is "relate".

[78] I am not persuaded that employment is a function within the meaning of the 1973 Act. If it is, I consider that it must be regarded as secondary to primary functions such as housing, social work etc. Despite the very wide references to functions in the 1973 Act, and despite the various provisions relating to employment and continuity of employment, there is no reference to employment per se as a function. Even the reference in S.159 of the 1973 Act is in very restricted terms, restricted to insurance. I cannot read this as implying that employment is a function. It is similar to the restricted terms which appear in relation to various specific statutory functions such as S.140 which relates to allotments and the various specific statutory responsibilities in relation to public health set out in S.142.

[79] Obviously local authorities have the power to employ staff to carry out their various functions. I consider however that the submissions on behalf of the pursuers and minuters are correct to the effect that this Act does not encompass within the concept of functions, employment of persons such as the deceased. I also note the wording which refers to "liabilities ... be transferred to and vest in the new authority by whom the functions to which such ... liabilities relate became exercisable ....". On the analysis of the defenders, the liabilities arise out of the employment relationship. They are not secondary to that in the sense of relating to it. I have no such difficulty with the use of the word "relate" in relation to a description of the transferred rights, liabilities and obligations relating to housing or social work or other functions which Ayr County Council carried out.

[80] If I am wrong about that, I consider that the wording of SI 1975 No 629 is wide enough to encompass the liabilities relating to both housing and employment functions. In my opinion if employment is a function, the liability in this case may properly be described as relating to housing and employment function.

[81] The only other issue is whether the pursuers and minuters are correct to identify and narrow the identification of local authorities by reference not only to function but also by reference to the locus where the breach of duty occurred. I consider that the defenders' criticisms of this locus issue have some merit for the reasons expressed by senior counsel for the defenders. That does not necessarily assist the defenders in my opinion. I consider that the pursuers have made their task more difficult than required. I am of the opinion that liabilities in respect of the housing function of Ayr County Council transferred not to one successor council but to the four successor councils. This may seem odd but it is less odd than some of the other results which were canvassed in relation to the various transfer theories put forward in submission. It also has the merit of simplicity bearing in mind the liabilities transferred may not be associated with any asset to which they relate.

Conclusion

[82] For the reasons given, I consider that the pursuers should be allowed to proceed with the action. I therefore appoint the case to the By Order roll to discuss further procedure and reserve all questions of expenses.

Appendix 1

UP TO 1975

(Local Government (Scotland) Act 1973, s.1 & Sch 1, re-organisation as of

16^th May 1975)

1975 to 1996

	CUNNINGHAME DISTRICT COUNCIL Mr Anton transferred to their employment as of 16/05/75, and worked there until retirement in 1994- 'potential liability' re Mr Anton with CDC

(Also e.g. roads to Strathclyde Regional Council N/A for Mr Anton)

(Local Government etc. (Scotland) Act 1994, s.1 & Sch 1, re-organisation as of

1^st April 1996)

1996 to date

	NORTH AYRSHIRE COUNCIL (Minuters) Present successors of employer's liability re Mr Anton - not sued		South Ayrshire Council (1st Defenders)		East Ayrshire Council (2nd Defender)