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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> OUR GENERATION LIMITED AGAINST ABERDEEN CITY COUNCIL [2019] ScotCS CSOH_16 (19 February 2019)
URL: http://www.bailii.org/scot/cases/ScotCS/2019/[2019]_CSOH_16.html
Cite as: 2019 GWD 7-87, [2019] CSOH 16, 2019 SLT 243, [2019] ScotCS CSOH_16
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OUTER HOUSE, COURT OF SESSION
[2019] CSOH 16
CA3/18
NOTE OF LADY WOLFFE
In the cause
OUR GENERATION LIMITED
against
ABERDEEN CITY COUNCIL
Pursuer
Defender
Pursuer’s Counsel: MacColl QC et Turner; Eversheds Sutherland (International) LLP
Defender’s Counsel: Mure QC; Morton Fraser
19 February 2019
Introduction
The pursuer’s action
[1] In this commercial action the pursuer sought declarator that it had validly terminated
each of the Site Agreements in respect of roof-mounted photovoltaic systems (“the equipment”)
on properties owned and operated by the defender. After a procedure roll debate, I upheld the
defender’s plea to the relevancy of the pursuer’s action and dismissed it. That opinion may be
found at [2018] CSOH 124.
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2
The defender’s counterclaim
[2] There was no discussion at debate of the defender’s counterclaim. The counterclaim
proceeded on the factual hypothesis that the pursuer’s termination notices had been
ineffectual; that the pursuer was in material breach of contract and, further, that the
defender had itself subsequently rescinded the Site Agreements by reason of the pursuer’s
repudiatory and material breach of contract.
The pursuer’s motion for leave to reclaim
[3] The pursuer enrolled a motion for leave to reclaim the dismissal of its action,
although its primary position was that leave was not required. If leave were required, the
pursuer’s position was that it should be granted. By contrast, the defender argued that leave
to reclaim was required but that leave should be refused. The principal basis for the
defender’s position that leave was required was the subsistence of its counterclaim.
[4] Parties presented submissions on the question of whether or not leave of the
commercial judge was required for the pursuer to reclaim to the Inner House and they
referred to several authorities. By reason of what was said to be the uncertainty on this
issue, I was asked to produce a short Note reflecting my decision at the hearing on the
motion to refuse leave as unnecessary. This Note does not address the pursuer’s other
motion, for caution under section 726 of the Companies Act 2006 in respect of the defender’s
counterclaim.
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3
Was leave to reclaim required?
The Rules of the Court of Session 1994
[5] In terms of rule 38.3(6) of the Rules of the Court of Session 1994 (“the Rules”), leave
to reclaim is required from the commercial judge unless the interlocutor reclaimed makes a
disposal as is mentioned in rule 38.2(1). Rule 38.2(1) refers to an interlocutor
“disposing, either by itself or taken along with a previous interlocutor, of –
(a) the whole subject matter of the cause; or
(b) the whole merits of the cause whether or not the question of expenses
is reserved or not disposed of”.
Parties proceeded on the basis that subparagraph (b) was the relevant part of rule 38.2(1).
[6] Mr MacColl QC, who appeared on behalf of the pursuer, submitted that, as the
pursuer’s action had been dismissed in its entirety, leave was not required. Other than to deal
with expenses, nothing more remained for the commercial judge to resolve in the pursuer’s
action. He referred to the observation of Lord Hope in Buchanan v Alba Diagnostics Ltd 2004
SC(HL) 9 at paragraph 39. He submitted that the defender’s analysis that leave was required
was incorrect. This was because the defender’s counterclaim raised a separate question
between the parties. The pursuer wished the question of leave to be ventilated before the
Commercial Judge so as to preclude any suggestion that the reclaiming motion before the
Inner House was incompetent.
[7] If leave were required, it was expedient to grant this. The reclaiming motion was
likely to take no more than one day. On the other hand, if leave were required and refused,
this would mean that the pursuer could only reclaim against the interlocutor dismissing its
action after proof on the defender’s counterclaim were heard, which was likely to be many
months hence. If it transpired that the pursuer’s challenge to the court’s decision to dismiss its
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4
action were correct, then the time and expense taken to litigate the defender’s counterclaim
would all have been wasted. That course would also take much longer.
[8] Mr Mure QC, who appeared on behalf of the defender, submitted that the issues in the
defender’s counterclaim were intimately bound up with the pursuer’s principal action. He
refused a reclaiming motion as incompetent in the absence of leave (which had not been
obtained). He founded, in particular, on the observation of Lord Hope in Apollo Engineering Ltd
paragraph 24), that the word “cause” was a word of “wide ambit”.
[9] Mr Mure QC ultimately accepted, correctly in my view, that the pursuer’s action and
the defender’s counterclaim raised separate questions and that the validity of the termination
notices (which was the subject matter of the debate) did not depend on the issues in the
counterclaim. He also accepted that the court was not functus, as it had preserved the
question of expenses.
Discussion
Absence of express stipulation in the Rules
[10] As noted above, doubt about the necessity of leave only arises because of the
subsistence of the defender’s counterclaim. But for that factor, the pursuer would be entitled
to reclaim against dismissal of its action without leave. There was no express provision in
the Rules dealing with leave from a commercial action in which there was also a subsisting
counterclaim. All of this was common ground between the parties.
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The cases cited
[11] Turning to the cases cited to me, in Martin and Co (UK) Ltd the petitioner company had
secured an order for recovery of documents under section 1 of the Administration of Justice
(Scotland) Act 1972. When the commissioner attended to execute the order, however, two
individuals obstructed the commissioner’s efforts. Those circumstances led the petitioners to
ask the court to find one of those individuals to be in contempt of court. Before that question
was determined, the respondent reclaimed to the Inner House against an adverse finding on
expenses, notwithstanding that the Lord Ordinary had refused leave. The petitioners
successfully challenged the competency of the respondent’s reclaiming motion.
[12] In holding that the respondent’s reclaiming motion was incompetent, Lady Smith
noted Lord Hope’s observation (in Apollo Engineering Ltd at para 23) that “cause” was a word
“of wide ambit”. She found the reclaiming motion to be incompetent on two bases: first,
because the question of the respondent’s contempt of court had not been resolved and,
secondly, because of the “interdependency” between the contempt issue and the original
subject matter of the petition. She expressly rejected the argument that one determined
whether or not an interlocutor disposed of the whole subject matter of the cause by asking
whether any further order was “necessary”, as the respondent had contended (see para 13 in
Martin and Co (UK) Ltd).
[13] It should be noted that in Apollo Engineering Ltd Lord Hope in fact preferred the
narrower reading (that “cause” encompassed the Inner House proceeding, but not the ongoing
arbitration process from which the action had originated). He regarded the proceedings before
the Inner House as separate from those before the arbiter. He also approached the question of
finality in a practical, not formal, sense. He considered whether an interlocutor “was final in
substance” and found, in that case, that it was because “[a]ll of the issues that were in
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controversy before the Court of Session were disposed of when the stated case was dismissed.
The interlocutor was in substance a final interlocutor because the proceedings were brought to
an end by it”: at paragraph 22.
[14] In Buchanan, the inventor of the patent sued the defender for alleged infringement.
The defender denied this and lodged a counterclaim seeking revocation of the pursuer’s
patent. The Lord Ordinary heard a proof restricted to the issue of ownership of the patent and
infringement. The Lord Ordinary found in favour of the defender. The Inner House refused
the pursuer’s reclaiming motion. The pursuer appealed, without leave, to the House of Lords.
Toward the end of his speech, Lord Hope addressed the question of whether or not the
pursuer required leave to appeal to the House of Lords. This question involved a
consideration of section 40(1) of the Court of Session Act 1988, which made it competent to
appeal from the Inner House to the House of Lords without leave against a judgement inter
alia “on the whole merits of the cause”. Lord Hope concluded that the Lord Ordinary’s
decision could not be described as an “interlocutory” judgement, as all the issues which were
the subject of the pursuer’s action against the defender had been disposed of. As he put it (at
paragraph [39]), “[o]n those issues the interlocutor which he pronounced was a final
interlocutor”. He went on to observe:
“it is possible to imagine cases where the disposal of all the conclusions in a
counterclaim is necessary in order to determine the question which was in controversy
between the parties. If that is so, and they had not been disposed of by the judgment
which is to be appealed, it may be possible to say that the whole merits of the cause
have not been disposed of. But in this case the questions which were in controversy
[the pursuer’s] right to pursue [the defender] for infringement of [the patent] and, if he
was, whether the manufacture and sale of [the defender’s] implement was an
infringement of it. The question of whether [the pursuer] is liable in damages to [the
defender] is a separate question. It did not have to be answered in order to dispose of
the whole merits of [the pursuer’s] action against [the defender]. In these
circumstances the leave of the Inner House was not required.”
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Did the subsistence of the counterclaim preclude disposal of the whole merits of the
principal action?
[15] The critical word used in subparagraphs (a) and (b) of rule 38.2(1) is “cause”, which is
defined in rule 1.3 of the Rules as “any proceedings” and clearly encompasses both ordinary
actions (ie initiated by a summons) and petitions. (Parenthetically I note that Lord Hope’s
approach in Apollo Engineering Ltd to the meaning of “cause”, as confined to the proceedings
in the Court of Session, and separate from the arbitration, accords with the definition in the
Rules.) For present purposes, the distinction made in subparagraphs (a) and (b) of rule 38.2(1)
– and which concerns whether expenses have also been dealt with - is of no relevance.
(Neither party suggested that the fact that the question of expenses was as yet unresolved
affected the argument.)
[16] As is clear from the observations of Lord Hope and Lady Smith, the question of
whether the “whole subject matter of the cause” has been disposed of is approached in a
practical, not technical, way. I propose to follow that approach for the purposes of rule
38.2(1)(b), in respect of “the whole merits of the cause”.
[17] In this case, I dismissed the pursuer’s action after debate. The subsequent interlocutor
pronounced dealt with the whole merits of the pursuer’s action, save expenses. (Had the
interlocutor dealt also with expenses, it would have disposed of the “whole merits of the
cause”.) The issue which divided the parties was whether the subsistence of the counterclaim
altered the position. It may be helpful to recall that the rationale for permitting a defender to
lodge a counterclaim was one of expediency, not least to avoid separate cross actions. When
first permitted, in the 1930s, the procedure then was to allow the defender to state its claim as
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part of the defences to the pursuer’s action: see the discussion in Thomson and Middleton’s
Manual of Court of Session Procedure (1937) at page 78. The current practice of prescribing that a
counterclaim be made by a separate writ and lodged as a step of process dates from the 1965
rules. This is suggestive that, strictly, there are two actions or separate causes but which, for
expediency, are dealt with together (and which, prior to the allowance of counterclaims, might
have been achieved by conjoining the actions). The modern procedure treats a counterclaim
as free-standing in the sense that disposal of the principal actin is not necessarily
determinative of the counterclaim. So, for example, if the pursuer abandoned the principal
action, the defender’s counterclaim would nonetheless proceed. Accordingly, the disposal of
the principal action does not per se affect any counterclaim.
[18] What next falls to be considered is whether there is, as Lady Smith put it, such
“interdependency” between the defender’s counterclaim and the subject matter of the principal
action that it cannot be said that the whole merits have not been disposed of. As noted above,
both parties accepted that the counterclaim and the principal action raised separate questions.
Indeed, the two actions proceed on mutually exclusive hypotheses (the principal action asserts
that the termination notices were effective, whereas the counterclaim is predicated on their
inefficacy). While there may be cases where the disposal of the counterclaim is necessary in
order to determine the question in controversy, as figured by Lord Hope in Apollo Engineering
Ltd, the instant case is not such a case.
Decision
[19] For these reasons I prefer the submissions of the pursuer and, accordingly, refuse its
motion for leave as unnecessary. For completeness, I should record that were leave necessary,
in light of the factors recorded in paragraph [7] above, I would have readily granted leave. As
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for parties’ desire for more general clarification, I respectfully suggest that it is not possible to
articulate a test with any greater degree of precision than that of “interdependency”
articulated by Lady Smith in Martin and Co (UK) Ltd. In cases of doubt, therefore, it remains
prudent for a pursuer wishing to reclaim a commercial action in which there is a counterclaim
first to seek leave from the commercial judge, as the pursuer has done here, so as to avoid any
issue of incompetency being first raised or determined against it in the Inner House.