Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION

[2014] CSOH 163

CA154/14

OPINION OF LORD WOOLMAN

In the case

LITTLE CUMBRAE ESTATE LTD

Pursuers;

against

ROLYAT 1 LTD

Defenders:

Pursuers:  D Thomson;  Simpson & Marwick

Defenders:  Roxburgh;  Balfour & Manson

27 October 2014

Introduction
[1]        On 2 October 2014, the pursuer obtained decree in absence against the defender for £180,000.  The pursuer has extracted the decree and served a charge for payment.  On 24 October the matter came before me on a motion to recall the decree.  The defender invited me to exercise the dispensing power to overcome its failure to observe the seven day time limit for recall.  In opposing the motion, the pursuer submitted that it is incompetent.  It also argued that if the motion is competent, the circumstances do not justify the application of the dispensing power.

Facts
[2]        The pursuer is the landlord and the defender is the tenant of commercial premises in Glasgow.  The lease runs from 2010 until 2020.  Clause 3 of the lease states that the defender can only carry out structural alterations with the pursuer’s consent.  In April 2012 the defender sought consent to create a coffee shop in the basement.  The proposed works included the removal of two escalators.  Although the pursuer did not give consent in terms of clause 3, the defender undertook the works.

[3]        The pursuer raised the present action for breach of the contract of lease.  It concluded:  (i) for decree for implement requiring the defender to reinstate the premises, or (ii) alternatively, for decree for payment of £180,000.  The summons was signetted on 7 August 2014 and on 14 August messengers at arms effected service at the defender’s registered office, which is the office of its accountants.

[4]        There were a number of email communications about the action between the parties’ solicitors.  Simpson & Marwick acted for the pursuer and Curle Stewart acted for the defender.  Their correspondence took place against a background of negotiations.  On 1 August Simpson & Marwick informed Curle Stewart that it had instructions to raise proceedings and asked whether Curle Stewart would accept service of the summons.  On 12 August Simpson & Marwick sent an intimation copy of the summons to Curle Stewart and stated that it would shortly be served on the defender.

[5]        On 4 September Curle Stewart made a settlement proposal.  Simpson & Marwick replied the following day and stated that it was taking instructions on the proposal.  It also stated, however, that it was lodging the summons for calling and that it expected to receive the defences in the usual timescale.  Curle Stewart replied by return stating that it would be premature to proceed with the action while there were continuing negotiations.

[6]        Curle Stewart did not lodge defences on behalf of its client and on 26 September, Simpson & Marwick enrolled a motion seeking decree in absence in terms of the second conclusion of the summons.  It did not intimate the motion to Curle Stewart.  On 2 October, the court granted decree for payment of £180,000, together with the expenses of the action.  The pursuer extracted the decree on 13 October and served a charge on the defender on 15 October 2014.

[7]        On 17 October the defender paid £25 to the pursuer’s agents and enrolled a motion asking the court (a) to exercise the dispensing power in terms of rule of court 2.1 of the Rules of the Court of Session and to waive the failure to enrol the motion within seven days of decree in absence being granted as required by rule 19.2;  and (b) to recall the decree and allow defences to be received.

[8]        At the motion roll hearing, Mr Thomson appeared on behalf of the pursuer.  He said that he had not seen Curle Stewart’s email of 5 September until immediately before the hearing.  He did not dispute that it had been received by Simpson & Marwick, but he understood that Curle Stewart were told by telephone on 9 September that the pursuer did not accept the settlement proposal and was not prepared to delay matters.

[9]        Miss Roxburgh, who appeared on behalf of the defender, mentioned three further factors by way of background.  First, the defender’s solicitor, Mr Philip Curle, specialises in commercial property and is unfamiliar with court procedure.  Second, at the same time that he was communicating with Simpson & Marwick, he was also in correspondence with Wright Johnston and Mackenzie, whom the pursuer had instructed to deal with all non‑litigation matters.  Third, the service copy summons had not been forwarded to the defender by its accountants.

[10]      Miss Roxburgh submitted that there is a substantive defence to the action.  The defender contends (a) that it did not require consent for the alterations;  (b) that at a site meeting in October 2013, a director of the pursuer had stated that the alterations would be acceptable, provided that the defender obtained and exhibited the relevant building consents and warrants;  and (c) that the cost of reinstatement was reasonably estimated at £60,000.  All these points are set out in the defences.  Miss Roxburgh said that if the action proceeds, the defender will revise its pleadings to aver that the pursuer does not intend to reinstate the premises.

Rule of Court 19.2
[11]      Rule 19.2 provides:

“(1)      A decree in absence may not be reclaimed against.

(2)        A defender may, not later than-

(a)        7 days after the date of a decree in absence against him, or

(b)        the last day of the period for which extract of the decree has been superseded,

apply by motion for recall of the decree and to allow defences to be received.

(3)        Where a defender enrols a motion under paragraph (2), he shall-

(a)        at the same time lodge defences in process;

(b)        have paid the sum of £25 to the pursuer; and

(c)        lodge the receipt for that sum in process.

(4)        On compliance by the defender with paragraphs (2) and (3), the court shall recall the decree against him and allow the defences to be received; and the action shall proceed as if the defences had been lodged timeously.

…

(7)        The recall of a decree under this rule shall be without prejudice to the validity of anything already done or transacted, of any contract made or obligation incurred, or of any appointment made or power granted, in or by virtue of that decree.”

Competence
[12]      Mr Thomson contends that the present motion is incompetent.  Not only have the days of recall expired, but the decree has been extracted and diligence done:  Graham Stewart Law of Diligence page 291.  He pointed out that if the decree is recalled, the service of the charge would remain valid:  rule 19.2 (7).  He suggested that would be a “bizarre state of affairs”.

[13]      Rule 19.2 can be regarded as a type of error correction mechanism.  Its central feature is rapidity.  When a court grants a decree in absence, the defender must act promptly in seeking recall.  Normally the issue of an extract decree will prevent recall.  Subject to any right to reclaim, it marks the end of the litigation phase and the beginning of the enforcement procedure.  The extract decree provides messengers at arms with the authority to carry out diligence:  McLaren Court of Session Practice page 1098.

[14]      Lord McCluskey has, however, decided “with some hesitation” that it is competent to recall a decree in absence that had been extracted:  Strain v Byers 2005 SCLR 157.  He did so in the light of several special factors in that case:  (a) the motion was not opposed, (b) there were two defenders and the court had already recalled the decree against the other defender outside the time limit, and (c) the pursuer did not contemplate using diligence.

[15]      Rule 19.2 does not state that recall becomes incompetent at any particular point.  The court must examine the circumstances of each case to determine whether recall or reduction is the appropriate remedy.  I do not regard the fact that diligence has been done as decisive.  Service of the charge is a preparatory step.  The pursuer can only execute diligence after the days of charge expire, which in this case will take place on 29 October 2014:  section 90 of the Debtors (Scotland) Act 1987.  Accordingly, as yet there is no nexus over the defender’s property.

[16]      Against that background I hold that the motion for recall is competent.  No irrevocable step has been taken in relation to enforcement.  It follows that the key issue is whether the dispensing power in rule 2.1 should be applied to relieve the defender of its failure to comply with the time limit in rule 19.2

The dispensing power
[17]      A line of Outer House authority queries whether rule 2.1 can be used:  Robertson v Robertson’s Trs 1991 SLT 875.  It has been suggested that it would require "exceptional” or “extraordinary” circumstances:  Thomson v Omal 1994 SLT 705, McGee v Mathew Hall Ltd 1996 SLT 399.

[18]      More recent cases adopt a different approach.  In Semple Cochrane plc v Hughes 2002 SLT 1121, a decree in absence had been granted, but not extracted.  Lord Carloway declined to read any qualifying words into rule 2.1 and granted recall.  He stated that the rule is designed to do substantial justice between the parties.  Accordingly where there is a real issue to try, it should be tried in the normal way.  The Inner House has taken a similar line regarding reduction of a decree in absence:  Royal Bank of Scotland v Matheson 2013 SC 146.  It did so even though it found that there was “little real excuse” for the errors and omissions of the solicitors in that case.

[19]      On receipt of the service copy summons in the present case, the defender should have entered appearance and lodged defences.  I hold, however, that its conduct was excusable for two reasons.  First, there were on-going negotiations, in which the defender offered to purchase the premises.  If that had occurred, then the dispute would have instantly resolved.  There was no hint or suggestion that the defender consented to decree.

[20]      Second, the pursuer did not intimate the motion for decree in absence.  Lord Carloway stated in Semple Cochrane plc that a pursuer should do so, both as a matter of professional courtesy and of good practice.  Lady Paton has suggested that such intimation should be made by way of a recorded delivery letter on a fourteen day period of notice Wallace v Keltbray Plant Ltd 2006 SLT 428.

[21]      I shall therefore exercise the dispensing power, recall the decree and allow defences to be lodged.  In doing so I make two observations.  First the defender acted with alacrity when it appreciated the position.  Second, it would be time‑consuming and cumbersome for the defender to raise proceedings for reduction and also (possibly) against its solicitor.

Decision
[22]      In granting the motion, I shall award the pursuer the expenses of the motion for recall, the motion for decree in absence and the costs associated with the service of the charge.