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Cite as: 2021 GWD 1-4, 2021 SLT 35, [2020] CSOH 96, [2020] ScotCS CSOH_96

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OUTER HOUSE, COURT OF SESSION

[2020] CSOH 96

CA163/19

OPINION OF LORD CLARK

In the cause

ROBERT GORDON KIDD

Pursuer

against

(FIRST) LIME ROCK MANAGEMENT LLP; (SECOND) LIME ROCK MANAGEMENT LP;

(THIRD) LIME ROCK PARTNERS V, LP; (FOURTH) HAMISH HECTOR LAWRENCE

ROSS; (FIFTH) JASON SMITH; (SIXTH) LEDINGHAM CHALMERS LLP; (SEVENTH)

MALCOLM LAING; and (EIGHTH) RODNEY ALPHONSIOUS MAGILL HUTCHISON

Defender

Pursuer: Smith QC, Johnston QC, MacLeod; Harper MacLeod LLP

First to fifth defenders: McBrearty QC, McKenzie; Gilson Gray LLP

Sixth to eighth defenders: Dunlop QC, Paterson; CMS LLP

27 November 2020

Introduction

[1] In this action, the pursuer claims damages in the sum of $210m for loss said to have

been suffered as a result of actings by the defenders, including an alleged conspiracy to

facilitate a breach of fiduciary duty by another individual. At the material time, that

individual was a solicitor and member of the firm Paull & Williamsons LLP (“P&W”) which

later merged with another firm an d became Burness Paull LLP (“BP”). In a previous action,

the pursuer sued P&W and BP for $210m in damages, for loss said have been suffered as a

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result of the conduct of that individual. The action against P&W/BP was settled. In the

present case, among other things, the defenders contend: firstly, that the current action is

incompetent, on the basis that the previous claim was for the same loss and a settlement was

reached in full satisfaction of that loss; secondly, that the pursuer’s averments on the alleged

wrongdoing are lacking in specification and are irrelevant; and, thirdly, that the pursuer’s

claim has been extinguished by prescription and there are no relevant averments contesting

that position. The action called before me for a debate on these three issues.

Background

The transaction

[2] The pursuer was formerly the sole shareholder of ITS Tubular Services (Holdings)

Limited (“ITS”), a company incorporated in Scotland. ITS and its subsidiary companies

operated in the oil industry. In 2007, the pursuer resolved to sell part of his shareholding.

ITS then employed two new directors, one of whom was Mr Jeff Corray, who was appointed

as CEO of the company on 1 October 2007. Mr Corray was authorised to identify potential

investors. In February 2008, the pursuer and ITS jointly instructed P&W to represent their

interests in negotiation of the terms and implementation of any agreement reached with any

proposed investor. P&W accepted instructions to act for both. Mr Kenneth Gordon, a

solicitor and member of P&W, dealt with the matter. In due course, the Lime Rock Group

(“Lime Rock”) expressed an interest in purchasing shares from the pursuer. On

26 September 2009 the pursuer sold part of his shareholding in ITS to a company (the third

defender in the present action) within Lime Rock. Following the completion of the share

purchase transaction, the operational performance of ITS deteriorated. On 19 April 2013, ITS

went into administration.

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The pursuer’s action against P&W/BP

[3] For some time prior to 2009 entities within Lime Rock had been clients of P&W and

in particular of Mr Gordon. The pursuer was not aware of the relationship between P&W or

Mr Gordon and Lime Rock. In December 2012, P&W entered into the merger, noted above,

and BP was created. In 2015, the pursuer raised a commercial action against P&W and BP.

The background to the case and the parties’ respective contentions are set out

comprehensively in the Opinion of Lord Tyre: Kidd v Paull & Williamson LLP 2018 SC 221.

The pursuer contended that there had been fraudulent misrepresentation, breach of

fiduciary duty and professional negligence. In broad terms, the claim proceeded on the

basis that Lime Rock, like the pursuer and ITS, was a long-standing client of P&W and its

predecessor. The pursuer averred that it was not open to P&W to act for Lime Rock in

respect of the proposed transaction. He averred that Mr Gordon was at all times aware of

the improper nature of his conduct, and for that reason acted covertly, taking active steps to

conceal what he was doing from the pursuer and ITS . In particular, it is said that he

arranged for solicitors from Ledingham Chalmers to "front" the negotiation on behalf of

Lime Rock, while himself providing advice, so as to convey the impression that Lime Rock

were being advised by (and only by) Ledingham Chalmers, and so as to conceal the fact that

Mr Gordon was advising them. The pursuer sought $210m in damages or as equitable

compensation. After a debate, Lord Tyre held that the averments alleging fraudulent

misrepresentation were irrelevant. A diet of proof was fixed on the remaining issues.

Shortly prior to the proof, the defenders in the action produced documents which the

pursuer alleged showed that Mr Gordon intended to act on both sides of the proposed

transaction and that he had concealed this and acted (as had been referred to in an email

from Mr Gordon) as “unofficial counsel” to Lime Rock. The defenders denied substantial

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parts of the pursuer’s averments but, following upon production of the documents,

nevertheless accepted that the actions of Mr Gordon caused a conflict of interest. In relation

to causation and loss, the pursuer averred inter alia that under Lime Rock’s management the

business of ITS deteriorated and he lost the entire value of his interest in ITS. Had he been

made aware of the conflict of interest, he would not have proceeded with the transaction

and the value of his interest would not have been impaired. As a result:

“…the pursuer would have achieved an exit at full value of about $220m no later

than the end of 2011 (or, but for the involvement of Lime Rock, for substantial value

at any point in time prior to the appointment of the administrators) . But for the

involvement of Lime Rock, ITS would not have been placed into administration, and

the pursuer would have concluded a voluntary sale of the company at a price

reflective of its unimpaired value.”

Under the transaction (in which he transferred 34% of his shareholding to Lime Rock) he

had received a cash payment of $10m. Deducting that from the market value of his whole

shareholding, now said to have been lost, resulted in the claim for $210m.

The settlement agreement

[4] In February 2018 a settlement agreement was reached between the pursuer, P&W

and BP. The pursuer had also raised separate proceedings against Mr Corray, in a

commercial action and a petition . The action against Mr Corray sought damages in the sum

of $210m, for the same loss, alleging breaches of fiduciary duty and negligence in his

capacity as an agent for the pursuer. The petition was brought under section 1 of the

Administration of Justice (Scotland) Act 1972 seeking recovery of documents and in addition

to Mr Corray the respondents included the first and fourth defenders in the present action.

[5] The relevant provisions of the “Confidential Settlement Agreement” between the

pursuer, P&W and BP are as follows:

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“WHEREAS:-

1. The Pursuer has raised proceedings against the Defenders at the Court of

Session, Edinburgh, under Court reference number CA211/2015 (hereinafter

"the Primary Action")

2. The pursuer has also raised proceedings against Jeffery Corray (hereinafter

"Corray") at the Court of Session, Edinburgh, under (i) Court reference

number CA9/16 (hereinafter "the Corray action") and (ii) P826/15 (hereinafter

"the Corray petition").

3. Parties have agreed to terms for the full and final settlement of the Primary

Action and wish to record the terms of settlement on a binding basis in this

Settlement Agreement.

AGREED TERMS

1. DEFINITIONS AND INTERPRETATION

In this Settlement Agreement, unless the context otherwise requires, the following

words and expressions have the following meanings:

"Close Family Members" means the Pursuer's wife, sister, brother in law, children

and the spouses or civil partners of his children

"Related Parties" means in respect of any party to this Settlement Agreement any

parents, subsidiaries, affiliated entities, all related corporate and operating entities,

successors, transferees, representatives, principals, agents, officers, partners,

members, employees or directors of that party.

"The Parties" means the pursuer, the first and second defenders, and the former

partnership of Paull & Williamsons and the various partners thereof from time to

time.

"The Proceedings" means the Primary Action, the Corray Action and the Corray

Petition.

2. SETTLEMENT TERMS AND RELEASE AND AGREEMENT NOT TO SUE OR

APPEAL

2.1 Without any admission or acceptance of liability on the part of the Parties or

any of their Related Parties, the following settlement terms have been agreed,

in particular in return for the release and agreement not to sue set out in this

clause.

2.2 Subject to the terms of clause 2.6, the Defenders will pay to the Pursuer the

sum of £19million, such payment to be made by same day bank transfer to

the client account of the Pursuer's solicitors, Levy & McRae Solicitors LLP .

Payment will be made by 21st February 2018, failing which interest will run

thereon from that date at the rate of 8% a year.

2.3 The Pursuer and Defenders will share equally between them the cost of the

instruction of McNeill & Cadzow relative to the preparation of the electronic

bundle to be used at the proof in the Primary Action.

2.4 No other sum of money, whether referable to damages, interest, expenses or

otherwise, is payable as between the Parties. In particular, to the extent that

they have not already been paid, any awards of expenses in favour of any

party hereto are hereby waived irrevocably. For the avoidance of doubt no

party shall be obliged to repay any sum already paid in respect of an award

of expenses.

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2.5 This Settlement Agreement is entered into in full and final settlement of, and

the Parties hereby irrevocably release and forever discharge, all and/or any

actions, claims, rights, demands and set-offs, whether in this jurisdiction or

any other, whether in law or equity and whether or not presently known to

the Parties which the Parties and/or their Related Parties or any of them ever

had, may have or hereafter can, shall or may have against each other, arising

out of or connected with the Proceedings and/or the underlying facts relating

to the Proceedings (all of which are hereinafter referred to as the "Released

Claims").

2.6 The Parties warrant and represent to each other that they have not assigned

or transferred of [sic] any action, claim, right or demand or other matter

relating to the Released Claims, and they hereby acknowledge that the

warranty and representation made under this clause 2.6 by the pursuer is a

condition precedent to the Defenders obligation to make payment to the

Pursuer in terms of clause 2.2. For the avoidance of doubt, the Pursuer shall

be at liberty to assign the right to payment arising under clause 2.2 hereof.

3. PURSUER WARRANTIES AND UNDERTAKING

The Pursuer hereby warrants and undertakes that

3.1 he is not presently aware of having any claims or rights of action against the

Defenders or the former partnership of Paull & Williamsons and the various

partners thereof from time to time;

3.2 without prejudice to his entitlement to negotiate with Corray on the terms

relating thereto regarding the question of expenses, he will not further pursue

the Corray Action or the Corray Petition and rather will abandon or

otherwise bring to a conclusion same by no later than 10th July 2018 without

any demand for payment being made of or accepted from Corray, and will if

requested to do so exhibit such documents as may reasonably be required to

vouch that he has done so.”

The agreement goes on to deal with other matters, including confidentiality, the terms of a

press release, severance, an entire agreement clause, costs, governing law and jurisdiction.

These further provisions are not of any particular relevance for present pu rposes.

The present action

[6] In this action, raised in December 2018, the pursuer seeks damages in the sum of

$210m from the eight defenders, who are said to be jointly and severally liable for the

pursuer’s loss. The key elements of the pursuer’s main averments on alleged wrongdoing

are referred to in the section below dealing with relevancy and specification . At this stage, it

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suffices to note that the first to fifth defenders are entities and individuals involved in the

Lime Rock Group. The sixth defender, Ledingham Chalmers LLP, is said to have been

procured by Mr Gordon to act for Lime Rock relative to the negotiations and proposed

transaction in early 2009 and the seventh and eighth defenders were partners in that firm.

The pursuer avers that all of the defenders were aware that Mr Gordon was acting in breach

of his fiduciary duty to the pursuer (and indeed to ITS) and that they conspired to facilitate

that breach, to deceive the pursuer by the false representation that each side was being

independently advised and to procure, by such fraudulent means, the completion of the

transaction. Other related allegations are noted below. In the debate, the arguments were

presented for and against the first to fifth defenders, as one group, and the sixth to eighth

defenders as another group; no point was taken as to any distinct features of the case against

any particular individual defender within either of these groups. In relation to loss and

damage, the pursuer avers:

“As a result of the Defenders conspiring to commit a fraud, the Pursuer has suffered

loss and damage. The Pursuer was induced by the wrongful conduct of the

Defenders outlined above to complete the transaction. Had they not acted in the

wrongful manner condescended upon, he would not have completed the transaction.

At the time of completion of the transaction, the Pursuer’s shareholding in ITS had a

value of at least US $220m. Upon completion of the transaction, his remaining

shareholding was virtually worthless on account of the immediate loss of rights…As

condescended upon above, the only cash benefit that he had obtained was payment

upon completion of the transaction of the sum of US $10m…His losses are therefore

measured by the difference in value of his shareholding from the time immediately

prior to completion of the Transaction to the time immediately following its

completion, less the US $10m he received as cash. That sum is no less, but probably

significantly more, than US $210m.”

In respect of this alleged loss, the pursuer seeks reparation or, in the alternative, equitable

compen sation .

[7] At the debate, senior counsel for each group of defenders moved to delete averments

and parts of their pleas-in-law alleging abuse of process. On behalf of the pursuer, the court

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was advised that the averments on section 11(3) of the Prescription and Limitation

(Scotland) Act 1973 were no longer relied upon and should be deleted. These unopposed

motions were granted.

Issue 1: Competency

Submissions for the first to fifth defenders

[8] The action was incompetent, because the pursuer had received full satisfaction for

the loss he claims to have suffered at the hands of the defenders, via the settlement

agreement, with the result that his cause of action against the present defenders has been

extinguished. Reference was made to Erskine’s Institute of the Law of Scotland III.i.15; Balfour v

Baird & Sons 1959 SC 64; Jameson v Central Electricity Generating Board 2000 1 AC 455; and

Heaton v Axa Equity and Law Life Assurance [2002] 2 AC 329. Jameson and Heaton were relied

upon by the Inner House in Duncan v American Express Services Europe Ltd 2009 SLT 112. The

approach to contractual construction was well-recognised, Reference was made to several

authorities on that matter.

[9] The following factual and legal context was of relevance. Firstly, the pursuer’s claim

in the action against P&W/BP was for $210m, but the defenders in that action contended that

nothing was due, on the basis of various arguments as set out in the pleadings. Secondly, as

both parties knew, the pursuer had commenced litigation against Mr Corray, also for $210m,

relating to Mr Corray’s involvement in the transaction. P&W/BP were at risk of a

contribution claim being made against them by Mr Corray if that action had been able to

continue. Thirdly, again as both parties knew, at the time of the settlement the pursuer was

in possession of the key documents (“Inventory Z”) and had been since October 2016.

Fourthly, there was no suggestion that the pursuer had raised any proceedings or made any

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claims against anyone other than Mr Corray in relation to the circumstances in which he had

entered into the transaction.

[10] Considered in that context, it was clear from the plain wording of the settlement

agreement that the parties to it intended that the sum paid was to be in full satisfaction of

the pursuer’s claim. It was entered into in “full and final settlement” of the P&W/BP action.

That was consistent with the sum paid being in full satisfaction of the pursuer’s claim, not

partial satisfaction of it. The actual amount of the settlement was not a relevant

consideration, because it will have involved concessions on both sides. The pursuer’s

subjective intention, afterwards expressed, was not relevant . The pursuer agreed not to

continue with his action against Mr Corray, the only other person at the time against whom

he had made a claim relating to the circumstances in which the transaction was concluded,

thereby protecting P&W/BP from a possible contribution claim. This was consistent with the

sum paid being in full satisfaction. If the pursuer’s interpretation was correct, the defenders

could then seek contribution from P&W/BP (and perhaps others) . The net result would be

that P&W/BP would be involved in litigating in relation to the very same factual issues

which they agreed to end their litigation with the pursuer over . That was not a

commercially sensible interpretation.

[11] In the absence of any averments as to the factual matrix, no evidence was requir ed

for the purposes of properly construing the settlement agreement. That exercise should be

done in the context of the pleadings in the earlier action and in the current case. The nature

and extent of the loss sought in the earlier action was exactly the same as sought against the

present defenders, calculated in exactly the same way. That loss was being sought on the

basis that the present defenders are joint wrongdoers alongside Mr Gordon, contributing to

the same loss. This was precisely in the same territory as in Jameson.

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[12] The pursuer’s suggestion that the reference in the settlement agreement to Mr Corray

points to an intention to continue with claims against other parties had no merit . Further,

the absence of an all-encompassing indemnity by the pursuer did not assist. While in one

sense it was otiose to include the reference to the claim against Mr Corray, one could

understand why, pragmatically, the parties wanted to do so. In Heaton there was a known

claim against another party and the absence of a mention of that party in the settlement

agreement was significant, but the only known claim here was tied-up and dealt with. If

anything, the present circumstances were stronger than Jameson, which involved concurrent

wrongdoers; here they are alleged to be joint wrongdoers.

[13] The pursuer’s position that the sum accepted was woefully inadequate when

compared to the $210m claimed was of no relevance: Carrigan v Duncan 1971 SLT (Sh Ct) 33.

The pursuer’s points that in the action against P&W/BP a limitation clause was pled and that

there were difficulties in relation to causation were also of no relevance. The pursuer’s only

answer was to ask the court to interpret the settlement agreement as amounting to particular

satisfaction of his loss, that is, the part of it for which the defenders in the P&W/BP actions

were responsible. But the agreement did not bear that interpretation. It was for full and

final settlement of the same loss as now claimed.

Submissions for the sixth to eighth defenders

[14] On the pursuer’s averments the defenders were joint wrongdoers with Mr Gordon.

By the settlement agreement the pursuer discharged inter alia Mr Gordon from any claims

arising out of or connected with the proceedings, on the basis of payment accepted in full

and final settlement of the losses claimed therein. In the present action the pursuer seeks

damages for the same loss claimed by him in the P&W/BP action and indeed, the pursuer

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seeks to prove his loss by reference to expert evidence obtained for the purposes of the

P&W/BP proceedings. Having obtained full satisfaction for his loss in the P&W/BP

proceedings, the pursuer may not now pursue the defenders in the present action for the

same loss. Reference was made to Erskine, III.i.15; Clark v Urquhart and Stacey [1930] AC 28

and in particular to Jameson v Central Electricity Generating Board. In that case, Lord Hope

had cited, with approval, a line of Scottish authority, including Balfour v Baird & Sons and

Carrigan v Duncan. The issue fell to be determined by the interpretation of the settlement

agreement in its relevant factual context. The losses claimed in the P&W/BP proceedings

and the instant case are the same; they are coincident and indivisible. This was in contrast to

the position in Heaton.

[15] There was nothing within the settlement agreement to suggest that what the pursuer

agreed to accept was in partial satisfaction only of his claim for damages. On the contrary,

in terms of paragraph 3 of the preamble, it was confirmed that the settlement was a “full and

final settlement of” the P&W/BP action. The pursuer, P&W and BP were settling on a “full

and final” basis all claims arising out of or connected with that action or the underlying facts

relating thereto. The pursuer’s averred position that the present action is “based on a

different legal basis to that advanced in the first claim” was nothing to the point. If these

defenders conspired with Mr Gordon in a breach of fiduciary duty they are jointly and

severally liable for the pursuer’s loss. If that loss has been repaired, no claim remains. The

pursuer also averred that “BP/P&W neither sought nor obtained the release of any other

person”. Again, that did not assist the pursuer. The pursuer did not expressly reserve any

claim in the settlement agreement (see Dillon v Napier, Shanks & Bell 1893 1 SLT 55). The

pursuer had not averred that any other claim or litigation was known to the defenders in the

P&W/BP action and thus played any part in the settlement negotiations. The absence of

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such knowledge meant those defenders could only expressly provide for the action and

petition in respect of Mr Corray. Absent any reservation of right by the pursuer (which

would no doubt have been resisted by P&W/BP) the settlement agreement had the effect of

discharging those jointly and severally liable for the pursuer’s loss. Reference was made to

Jameson and the views expressed by Lord Clyde (at 474-475).

[16] The pursuer quite plainly agreed to accept what he stipulated as being full

compensation for the value of his claim, so as to exhaust any right to pursue it further in any

direction. In return, P&W/BP and Mr Gordon were discharged from any possible liability in

contribution. Were it otherwise, the result of the raising of this action would be an

entitlement on the part of the defenders to seek contribution from P&W/BP and Mr Gordon

such that the peace obtained, at substantial cost, from the settlement agreement would count

for nothing. The pursuer’s averments that the settlement agreement was a negotiated

settlement “for significantly less than the true losses sustained by the pursuer” created a non

sequitur. If the pursuer received full satisfaction it follows that he received what his claim

was worth. The pursuer’s ex post facto protestation that his claim was worth more was

nothing to the point: Carrigan v Duncan. The pursuer relied upon Steven v Broady Norman &

Co Ltd 1928 S.C. 351 but that case did not cover the current situation. The pursuer’s claim

was thus extinguished when he settled the P&W/BP proceedings and that rendered the

present action incompetent.

[17] The submissions on behalf of the other defenders were adopted. Now putting

forward a claim for fraudulent conspiracy, in which one of the conspirators was Mr Gordon,

did not square with clause 3.1 of the settlement agreement. A defender does not have to

obtain an indemnity against a claim in circumstances which are not known and may be

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unknowable. Heaton did not involve any departure from Jameson but involved matters that

were distinguishable.

Submissions for the pursuer

[18] The primary position for the pursuer was that he retained the right to proceed with

his claim against the current defenders notwithstanding the settlement with P&W/BP. The

only issue remaining was whether the settlement was in fact for full value of the claim and

not whether it was intended to be for full value. That issue could only be determined after

the court considers what the full value of the claim actually is and then gives credit for the

principal sum already paid over to the pursuer. If, and only if, the full value of the claim

was less than the sum already paid could it be said that the claims against the current

defenders were barred. In support of that primary position, particular reliance was placed

upon Steven v Broady Norman & Co Ltd and reference was made to Duncan v American Express

Services Europe Limited. Applying that approach, the fact that the pursuer had obtained a

settlement sum in the P&W/BP action by agreement was an irrelevance and failed to address

the true issue. The terms of the settlement agreement were nothing to the point. The parties

to the present case were in agreement that the current defenders are claimed by the pursuer

to be joint and several wrongdoers. As to whether there was in fact payment of the full

amount of the losses or even whether there was intended to be complete satisfaction of the

debt, there is a clear dispute of fact that cannot be determined without proof: the question

could only be answered once it is known how much the pursuer’s claim is actually worth. It

was acknowledged that if a settlement fully compensates an individual for his losses, he

cannot sue another party for that loss. There was no dispute, therefore, with the proposition

in Erskine, III.i.15, which must be read as a whole. It supported the view that if, and only if,

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the damage suffered is in fact compensated fully, the pursuer is barred from making a

further claim. That was the view taken in Steven v Broady Norman & Co Ltd. In the present

case the defenders were seeking to introduce into Scots law a rule, derived inter alia from

Jameson v Central Electricity Generating Board and Heaton v Axa Equity & Law Life Assurance

Society, that is inflexible and based upon English procedures. Carrigan v Duncan could be

distinguished as being difficult to reconcile with the other authorities.

[19] If that primary submission was not accepted, a useful description of the position in

England is contained in Foskett on Compromise (9th ed., para 69 et seq). Reference was also

made to Watts Count Nikolai Tolstoy-Miloslavaski v Baron Aldington [1999] L & TR 578 and

Ansari v Knowles [2012] EWHC 3137. In the present case the agreement to settle was

confidential as between the parties. At no time were the current defenders involved in

negotiation of the agreement. The specific reference to abandonment of the action against

Mr Corray pointed to consideration being given to the rights of third parties and co-

delinquents, but not to those of the current defenders. If the defenders were correct, had the

wrongdoing of Mr Gordon been discovered after settlement of the claim against P&W/BP,

the pursuer would be unable to sue the joint and several delinquents for a delinquency of

which he was unaware. That would be manifestly unjust and wrong and would result in

him being barred from making a claim on the basis of waiver of a right he did not know he

had. It was clear that in light of both Jameson and Heaton the courts in England focus upon

the question of whether the settlement obtained was intended to be compensation for the

full extent of losses. The injustice that Heaton mentioned was to avoid a claimant obtaining

his losses twice (see Wright v Barts Health NHS Trust [2016] EWHC 1834 QB; and Appleby v

Northern Devon Healthcare NHS Trust [2012] EWHC 4356).

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[20] In the present case, if the court adopted the approach from the English case law, it

was plain that the pursuer could not have intended that the settlement was in full

satisfaction of his claim to the exclusion of all others. On any view, the settlement sum was

woefully inadequate in comparison to the sum sued for and that was supported by expert

evidence. The pursuer avers that Lime Rock itself valued the company at over $160m in

equity value and in excess of $300m for enterprise value. Moreover, as a matter of

contractual interpretation, it was clear that the settlement agreement does not extend to

provide a contractual release of the defenders from their liabilities as joint and several

delinquents. The defenders are not parties to the compromise and other joint and several

delinquents are given an express release; the parties were aware of the contents of Inventory

Z, which implicated the defenders as delinquents. In addition, the defenders’ position failed

to take into account the reality that a negotiated settlement has regard to a number of factors

that affect the decision to settle. P&W/BP argued that there was a limit on their liability,

albeit that was disputed by the pursuer. The extent of insurance cover was unknown.

Causation was in issue as were a number of other matters. The court could not, without

proof on such matters, take the view the sheriff had reached in Carrigan that the intention in

settlement of the first action was the exclusion of all other defenders from later claims. The

absence of a reservation of the right to sue others was not relevant. Nothing could be taken

from it to suggest that it was intended to discharge the current defenders from claims which

could otherwise have been made. It was correct that in answering the question as to

whether the pursuer has had his losses met, one should concentrate on what the settlement

agreement means. It was absolutely clear that it was designed to regulate rights in personam

and not in rem. It was an illegitimate exercise to ask why P&W/BP would have agreed if it

meant they could be drawn back into litigation. The basic rules of construction should be

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applied. If it was a bad bargain for P&W/BP, it was a good bargain for Mr Kidd. In terms of

context, a party who suffers loss can keep suing until his losses are made good, proceeding

against all joint wrongdoers. That was the first basic rule. If he obtains a decree against one,

then until that is satisfied in full he is entitled to pursuer the joint wrongdoers. When

dealing with settlement, it is if (and only if) the agreement can be taken as either expressly or

by clear implication fixing the losses and denouncing any right to claim against a third party

that it can be held to be in full satisfaction.

[21] The reasoning in the case of Jameson had to be seen in light of the decision in Heaton.

A party may accept a limited sum for a number of reasons. If the defenders were correct

then the pursuer had given up a substantial right. There were parts of the agreement which

clearly indicated that all Mr Kidd was doing was settling his differences with the defender

and he was not fixing his loss and barring himself from suing any other party for that loss.

The recital made clear that this was just a settlement of the former action and not of all

claims the pursuer may have for his losses. In the definitions section there was no reference

to co-delinquents or co-tortfeasors or anything of that kind. Section 2 made clear that the

settlement was in the sum of £20m, to include the £1m interim payment ordered by Lord

Tyre. It was simply unknown how this assessed Mr Kidd’s loss. The £20m was partly for

expenses and for that reason alone one could not say that was discharging his claim. There

was no split between losses and expenses. Clause 2.5 was of critical importance. The

emphasis is on “each other”. It could have said “against any party or co-delinquent” or just

left out the reference to each party but it did not. This was just a settlement between these

parties and not a measure of the pursuer’s loss. As was pointed out by Lord Bingham in

Heaton (para [9]) there are a number of ways in which the defenders could have protected

themselves, not included here. If there had been an indemnity that would point to the

Page 17 ⇓

settlement agreement not being about all losses. But there was a warranty and if the present

defenders sought a contribution from P&W/BP then P&W/BP could use the warranty. If this

agreement was to settle all the claims then the warranty is superfluous. Further, if the

claims had been settled in their entirety there would be no need to abandon against

Mr Corray. The reference to that matter was because the pursuer had a valid claim against

him. This recognised that there was a residual claim and was a direct pointer to the

agreement not settling the entire loss of Mr Kidd. The opportunity to take the same point

regarding others was not taken.

Reply for the first to fifth defenders

[22] The pursuer’s position, that this was an inter partes agreement that did not discharge

claims against co-delinquents and the pursuer should not be taken as impliedly having

given up any right, was a fallacy, as it concentrated upon the giving up of a right. The point

for the court was to conclude on a proper consideration of the agreement whether the

pursuer obtained full satisfaction. One would not expect to see these defenders mention ed

at all. In Heaton Lord Bingham was not saying that the very existence of an indemnity

meant there is not full satisfaction. There must be a competent further action and a defender

in a settlement agreement may want to protect itself from even an incompetent further

action. The existence of such a clause did not mean that the settlement was not in full. In

the present case, an undertaking was agreed, relating to the single party against whom a

claim had been made, Mr Corray. It would be an absurd outcome that there might be

another action in respect of which the defenders in the earlier action could be brought back

in. The parties had done everything possible to tie down any claims known at the time of

settlement agreement. The contribution point was just about testing the commercial

Page 18 ⇓

purpose or common sense, not the subjective intention. The court must interpret the

agreement as a whole and take into account the commercial purpose of the agreement.

There was no requirement for evidence and in particular nothing was needed on the true

value of the claim. The question was not whether the pursuer had given up his right; it was

whether he has obtained full satisfaction. There was a full and final settlement of the

primary action which sought the loss and those words are effectively conclusive.

Reply for the sixth to eighth defenders

[23] The submissions of senior counsel for the other defenders were adopted. The

suggestion by senior counsel for the pursuer that the pursuer could keep on suing in serial

litigations did not represent the law. It was accepted by the pursuer that serial litigation is

not competent if preceded by decree after a proof and it is also not permissible if the decree

is after acceptance of a tender. But there was no material difference between a tender and a

settlement agreement. There was nothing in the case law suggesting that the court should

consider whether the settlement agreement involved renouncing any right to claim against a

third party. The only question was whether there has been full satisfaction of the loss. The

argument for the pursuer that because the settlement agreement included expenses the plea

to competency could never be a good one involved a non sequitur. The pursuer could not

avoid the jurispruden ce by saying that the settlement sum was inclusive of expenses. The

emphasis placed upon the words in clause 2.5 “against each other” was a wrong analysis .

The question was about full satisfaction. As to the indemnity, one explanation of why there

is none is because it was not needed. The parties have settled on a full and final basis and

there is no possibility of anyone claiming against anyone else. All that clause 3.1 did was to

say there is nothing beyond the primary action. The authorities did not support the

Page 19 ⇓

pursuer’s position that £19m was inadequate. There was no basis for an inquiry into alleged

inadequacy, although the defenders in the case against P&W/BP had an expert report that

Mr Kidd had suffered no loss. The argument that there is no express or implied

abandonment or waiver again looked at matters the wrong way round.

Issue 1: Decision and reasons

Relevant legal principles

[24] In the primary submission for the pursuer it was argued that the position in Scots

law is set out in Steven v Broady Norman & Co Ltd, where particular views were expressed

that ran counter to the position in English law. The defenders here were said to be seeking

to introduce into Scotland an inflexible rule which is based upon English procedures and

derived from Jameson v Central Electricity Generating Board and Heaton v Axa Equity and Law

Life Assurance. I find serious difficulties with that contention. While Jameson and Heaton are

English cases, those decisions were approved of and applied by the Inn er House in Duncan v

American Express Services Europe Limited. Of itself, that suffices to show the relevance of the

English cases. Moreover, when one looks at the full picture of how the law has developed,

the same result is reached. In Steven there was reference to, and reliance upon, the principle

expressed by Erskine at III.i.15, which emphasises whether satisfaction of the claim has been

achieved. The central point in Steven was that a decree in absence, which was unsatisfied,

did not preclude a second action based upon vicarious liability for the actings of the

defender in the first action . Thus, there was no satisfaction of the claim that could bar the

second action. The case did make clear that merely because the defender in the second

action was a joint wrongdoer did not of itself result in the second action being incompetent.

It is principally in that regard that Steven sought to deviate from the position in England at

Page 20 ⇓

that time.

[25] In Balfour v Baird & Sons, the Lord Ordinary and the Inner House reached the

opposite result to that in Steven, but under reference to that case and by application of the

same principle: in the first action the pursuer had received full satisfaction of his loss and his

claim was therefore extinguished. The decision in Carrigan v Duncan proceeded on that

same basis, although it involved the acceptance of a tender in the first action, which was

viewed by the court as being in full satisfaction of the claim, thus rendering the second

action incompetent. In Jameson, Lord Hope of Craighead (at 475C et seq) cited Carrigan, with

approval, and explained how it applied the proper principle. In Heaton Lord Rodger of

Earlsferry referred to the criticisms of the decision in Jameson in Foskett, The Law and Practice

of Compromise, (5th ed., para 6-49) and by the New Zealand Court of Appeal in Allison v

KPMG Peat Marwick [2000] 1 NZLR 560 but noted that in the case before the court both sides

proceeded on the basis that Jameson was correctly decided. That was clearly the view of all

of the judges in Heaton. In reaching his conclusions, Lord Rodger cited with approval a

number of the Scottish cases referred to above. For these reasons, I reject the contention for

the pursuer that Scots law takes a different approach from that in Jameson and Heaton and I

do not require to examine the earlier cases in any greater detail, given that the legal position

is fully set out in those two authoritative decisions.

[26] In Jameson, the court made clear that the circumstances were not within the territory

of the English joint tortfeasors’ rule. The deceased had developed mesothelioma and had

sued his employer. He claimed to have been exposed to asbestos at various premises, two of

which were occupied and run by CEGB. He settled his claim against the employer for

£80,000, the agreement stating it to be a full and final settlement . It was not in dispute that

£80,000 was below the full extent of liability if the court had awarded damages. His widow

Page 21 ⇓

then sued the other concurrent wrongdoer, CEGB, in respect of loss caused in the same

period of exposure. The question was whether the settlement agreement barred that second

action. The conclusion was that in properly construing the settlement agreement he had

obtained full satisfaction, even though he had settled below the full liability, and so his

cause of action against CEGB was extinguished.

[27] On the reasoning of the House of Lords in Jameson and Heaton the basis for a

settlement agreement barring further action is not that it is to be taken as discharging the

other wrongdoer. Rather, the question is whether the claimant is to be understood as having

received full satisfaction for the loss. It is not necessary for me to set out in detail the

reasoning in Jameson, as it suffices to note how it was dealt with in Heaton. In that case, Lord

Bingham (at para [4]) made it clear that when an action is settled by a compromise

agreement “If £x is agreed or taken to represent the full value of A’s claim against B, A

cannot thereafter maintain an action against C in tort in respect of the same damage…”. The

reason was that in any action against C, A could not allege or prove any damage, an d

damage is of course a necessary ingredient in an action of this kind. However, a sum agreed

to be paid under a compromise agreement may or may not represent the full measure of B’s

liability to A, so that:

“While it is just that A should be precluded from recovering substantial damages

against C in a case where he has accepted a sum representing the full measure of his

estimated loss, it is unjust that A should be so precluded where he has not” (para

[5]).

Lord Bingham went on (at para [9]) to say:

“In considering whether a sum accepted under a compromise agreement should be

taken to fix the full measure of A’s loss, so as to preclude action against C in tort in

respect of the same damage…the terms of the settlement agreement between A and B

must be the primary focus of attention, and the agreement must be construed in its

appropriate factual context. In construing it various significant points must in my

opinion be borne clearly in mind:

Page 22 ⇓

(1) The release of one concurrent tortfeasor does not have the effect in law of

releasing another concurrent tortfeasor…

(2) An agreement made between A and B will not affect A’s rights against C unless

either (a) A agrees to forgo or waive rights which he would otherwise enjoy against

C, in which case his agreemen t is enforceable by B, or (b) the agreement falls within

that limited class of contracts which either at common law or by virtue of the

Contracts (Rights of Third Parties) Act 1999 is enforceable by C as a third party.

(3) The use of clear and comprehensive language to preclude the pursuit of claims

and cross-claims as between A and B has little bearing on the question whether the

agreement represents the full measure of A’s loss. The more inadequate the

compensation agreed to be paid by B, the greater the need for B to protect himself

against any possibility of further action by A to obtain a full measure of redress.

(4) While an express reservation by A of his right to sue C will fortify the inference

that A is not treating the sum recovered from B as representing the full measure of

his loss, the absence of such a reservation is of lesser and perhaps of no significance,

since there is no need for A to reserve a right to do that which A is in the ordinary

way fully entitled to do without any such reservation.

(5) If B, on compromising A’s claim, wishes to protect himself against any claim

against him by C claiming contribution, he may achieve that end either (a) by

obtaining an enforceable undertaking by A not to pursue any claim against C

relating to the subject matter of the compromise, or (b) by obtaining an indemnity

from A against any liability to which B may become subject relating to the subject

matter of the compromise.”

Lord Bingham then stated that, for the reasons given by Lord Mackay of Clashfern, on

construing the terms of the compromise agreement it could not be taken as representing the

full measure of the respondents’ loss. As a result, the compromise agreement in that case

did not extinguish or exhaust the claims which were being pursued.

[28] Lord Mackay (at para [40]) made reference to Jameson, noting that the agreement in

that case stated that it was “in full and final settlement and satisfaction of all the causes of

action in respect of which the plaintiff claimed in the statemen t of claim”. If a person sued

in that action was liable for causing the disease, his liability was for the full extent of the

damage which Mr Jameson suffered. While the House of Lords had by majority held that

Page 23 ⇓

Mr Jameson’s agreement in the settlement precluded a claim by him against the defendant

(Lord Browne-Wilkinson and Lord Hoffmann having agreed with Lord Hope), Lord Clyde

supported that result but on somewhat different grounds. Lord Mackay said (at para [41]):

“I read the majority decision as authority for the proposition that where an action is

founded on specified damage suffered by the claimant and the existence of that

damage is essential to the success of the action, if the claimant has entered into an

agreement under which he accepts a sum as full compensation for that damage, the

action cannot proceed. Whether a particular agreement has that effect is a question

of construction of the words, in the light of all the relevant facts surrounding it.”

He went on to note that in Jameson, if the employer had responsibility for the damage caused

by exposure to asbestos, the employer was responsible for the whole of that damage and

that damage was the sole basis of the claim. In the case before him, the damage claimed

against the appellants was not coincident with the damage claimed in the earlier case which

was the subject of the settlement and so the second action was not precluded.

[29] Lord Rodger of Earlsferry under reference to Jameson, noted (at para [79]) that:

“whether a sum accepted in settlement of a claim is intended to fix the full measure

of a claimant’s loss so as to preclude any further proceedings depends on the proper

construction of the particular compromise agreement in the light of all the relevant

facts surrounding it.”

Developing the point, he observed (at para [81]):

“In considering whether a settlement agreement has this effect, the proper question

is whether, when construed against the appropriate matrix of fact, the terms of the

settlement show that the parties intended that the agreed sum should be in full

satisfaction of the wrong done to the claimant. In that connection, an indication in

the agreement—whether express or implied—that the claimant envisages the

possibility of further proceedings against another wrongdoer may, of course, be of

significance—but only as a pointer to the conclusion that the parties did not intend

that the agreed sum should be in full satisfaction of the harm suffered by the

claimant. Equally an indication in the agreement to the opposite effect will be a

pointer that the parties intended that the agreed sum should constitute full

satisfaction. In either event, the court will draw the appropriate conclusion as to the

effect of the agreement on any claims against another wrongdoer.

While the language used by the parties must always be carefully analysed for any

light that it throws on their intention, the language of a settlement agreement will

Page 24 ⇓

only rarely be entirely fresh, with every word selected for the particular proceedings.

More often, such an agreement will incorporate language derived from a form of

settlement used on previous occasions by the advisers of one or other of the parties .

In Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251, 269, para 38

Lord Hoffmann alluded to the variety of possible formulae, of greater or lesser

complexity and prolixity, which are to be found in such agreements. Since the

defendant’s advisers will wish to do everything to eliminate the risk of any further

proceedings against their client and since the plaintiff will not usually be

contemplating any further proceedings against that defendant, the language chosen

to express the finality of the settlement between the parties will often be fairly

comprehensive, as in the present case. Moreover, a settlement agreement is likely to

contain much the same kind of language irrespective of whether or not the

settlement is, objectively, favourable to the defendant or to the claimant. Indeed, the

worse the settlement from the claimant’s point of view, the more the defendant may

feel the need to use sweeping language to protect himself against possible future

proceedings. For these reasons, the background matrix of fact may often be

particularly important when interpreting a compromise agreement and deciding

whether the parties intended the agreed sum to be in full satisfaction of the damage

to the claimant. The present case and Cape & Dalgleish v Fitzgerald [2002] UKHL 16

illustrate the point.”

Having regard to the relevant circumstances surrounding the settlement agreement, Lord

Rodger concluded that it should not be interpreted as having been intended to be in full

satisfaction of the respondents’ loss and damage.

[30] As is well-known, the principles in relation to construction of contracts are set out in

Rainy Sky v Kookmin Bank Co Ltd [2011] 1 WLR 2900, Arnold v Britton [2015] UKSC 36 and

Wood v Capita Insurance Services Ltd [2017] UKSC 24, and these have been endorsed by the

Inner House (see eg HOE International Ltd v Andersen 2017 SC 313 and Ashtead Plant Hire

Company Limited v Granton Central Developments Limited [2020] CSIH 2). Commercial or

business common sense can be an important factor (see eg Midlothian Council v Bracewell

Stirling Architects [2018] PNLR 25). As Lord Hodge explained in Luminar Lava Ignite

Limited v MAMA Group plc 2010 SC 310 (at para [42]) while evidence of prior negotiations is

generally inadmissible, evidence of the factual background to the contract is relevant where

]the facts are known to both parties and those facts can cast light on either (a) the

Page 25 ⇓

commercial purpose or purposes of the transaction objectively considered; or (b) the

meaning of the words which the parties used in their contract. As Lord Hodge further

explained, the two cases very often overlap, because the ascertained commercial purpose

may give meaning to particular words or phrases. The task is therefore to identify the

intention of the parties by reference to what a reasonable person having all the background

knowledge which would have been available to the parties would have understood them to

be using the language in the contract to mean . It was also made clear in Arnold v Britton (per

Lord Hodge at para [74]), that there is much to be said for t he practice of requiring parties to

give notice in their written pleadings both of the nature of the surrounding circumstances on

which they rely and of their assertions as to the effect of those facts on the construction of

the disputed words (under reference to Lord Drummond Young in MRS Distribution Ltd v

DS Smith (UK) Ltd at para [14]; see also HOE International Ltd v Andersen at para [26]).

Application of these principles

The factual matrix

[31] I begin by considering whether in this case there is any need to hear further

evidence, over and above what is already before the court, in order to reach a view on the

proper construction of the words in the settlement agreement . It was submitted for the

pursuer that on the question of whether there was in fact payment of the full amount of the

loss, or even whether there was intended to be complete satisfaction of the debt, that could

only be answered once it is known how much the pursuer’s claim is actually worth. I see no

force in that submission. The authorities do not support the proposition that, settlement

having been agreed on specific terms, the true actual value of the claim is a relevant factor

(see eg Jameson per Lord Hope at 475H).

Page 26 ⇓

[32] The pursuer also referred to evidence having been required in Duncan v American

Express Services Europe Limited. The relevance of the factual matrix to the question of

construction of the settlement agreement is abundantly clear from the authorities noted

above, but the key cases were decided without the need for proof, largely because the court

was aware of the relevant background. It is therefore necessary to look more closely at

Duncan in order to discern why proof was seen to be required. Put very broadly, the

pursuer sought damages from his credit card supplier (Amex), on the ground that an

unauthorised individual had been permitted to make payments from the credit card

account. The pursuer had earlier sued the Clydesdale Bank, in relation to the same

unauthorised individual having withdrawn sums from the bank and paid them into the

credit card account. That earlier case was settled. The court noted (at para [48]) that counsel

for the pursuer submitted that the losses claimed from Clydesdale were entirely separate to

those claimed from Amex and the court went on to address that point, before concluding (at

para [50]): “while there may well be an overlap between the claims against Amex and

Clydesdale, the two are by no means identical”. The court then said:

“[51] In the passages quoted above, Lord Hope said in Jameson v Central Electricity

Generating Board that the answer would be found ‘‘by examining the terms of the

agreement and comparing it with what has been claimed’’, and Lord Bingham in

Heaton and others v AXA Equity and Law Life Assurance Society Plc said that ‘‘the

agreement must be construed in its appropriate factual context’’. These passages

support the view we have come to, which is that it is not possible to construe the

agreement in the present case without proof of its factual matrix, in particular the

losses suffered by the pursuer on each of the Amex and the Clydesdale accounts, and

the details of the claim made by him against Clydesdale, as referred to in recital (b)

in the preamble to the agreement… It may be that the terms of the pursuer’s initial

claim against Clydesdale and any ensuing correspondence will serve to resolve this

dispute.

[52] …there are, in our view, sufficient uncertainties in relation to the background to

suggest that evidence should be led before any answer could confidently be given.”

Page 27 ⇓

Thus, the losses suffered on each account were relevant to the crucial issue about whether

the claims were for the same loss. There was also a need to identify whether the loss dealt

with by the settlement agreement overlapped with the loss claimed in the case against

Amex. Very importantly, the details of the claim made against the bank were not before the

court. Here, it is clear that the claims are for the same loss and the court has the full details

of the claim made in the earlier action and the relevant circumstances surrounding the

settlement agreement. We are thus in a similar position to that in Jameson, Heaton and

Carrigan which were all decided without evidence being led.

[33] In Heaton (para [5]), Lord Bingham explained that:

“Where a sum is agreed which makes a discount for the risk of failure or for a

possible finding of contributory negligence or for any other hazard of litigation, the

compromise sum may nevertheless be regarded as the full measure of B’s liabilit y”.

However, he went on to add that the settlement sum may be fixed for other reasons than

being the full measure of A’s loss. He gave these examples:

“it may be known that B is uninsured and the £x represents the limit of his ability to

pay; or A may wish to pocket a small sum in order to finance litigation against other

parties; or that it may be that A is old and ill and prefers to accept a small sum now

rather than a larger sum years later; or it may be that there is a contractual or other

limitation on B’s liability to A”.

In the pursuer’s Note of Argument in the present case reference is made to the averments of

the defenders in the case against P&W/BP on limitation of liability and it is also said that the

extent of insurance cover was unknown and that causation was in issue, as were a number

of other matters. However, in the present case there are no averments that the agreed sum

gave a discount for any particular matters, nor are there any averments of facts or reasons

known to both parties supporting the fixing of a sum less than the full measure of the

pursuer’s loss. Subjective intentions are of course irrelevant. Further, there is no wording in

the settlement agreement that is averred by the pursuer to have a particular meaning

Page 28 ⇓

because of what was known to the parties at the time of the agreement . For example, there

is simply no suggestion in the pleadings that the clause relied upon by P&W/BP as resulting

in a limitation was a relevant factor for the purposes of construing words in the agreement

(and indeed there was no actual submission that this had in any way affected the fixing of

the sum).

[34] In any event, it was simply not made out in the submissions for the pursuer that

these issues were of any relevance. The defenders in the P&W/BP action contended that

consequential loss was excluded and that a limitation clause restricted liability to £5m. The

pursuer contested the limitation clause on several grounds. Also, it was accepted by those

defenders that insofar as the pursuer had sustained loss and damage as a result of deliberate

and wilful breach of duty (which appears to have become the admitted position) the

limitation of liability had no application. In relation to causation, the defenders’ averments

in the P&W/BP action give reasons for the decline in the business of ITS and the value of its

shares, which would have arisen even if the shares had not been sold. These causation

issues, if they are of any substance, would not affect only the claim in that action but would

arise in a claim against any defender for the loss in value of the shares. No issue of

causation specific to the P&W/BP action and which could have resulted in a discounted

figure being agreed was identified. The pursuer’s averment about Lime Rock’s view of the

value of ITS at the time of the transaction relates to the actual value of the claim and is not

argued to be linked to the meaning of any language in the agreement. The exercise of

construing the settlement agreement falls to be carried out against the relevant background,

including the pleadings in the earlier action . The issue before me is about the meaning of

relatively straightforward language in the settlement agreement, as arose in cases such as

Jameson and Heaton. As the case law, including Duncan, makes clear, there may be

Page 29 ⇓

circumstances in which further evidence of the factual background is required but I have

been given no basis in the pleadings and no other reason to conclude that the present case is

within that category.

Suggested pointers

[35] It appears to me that several of the contentions made by the parties, like certain of

the points referred to by Lord Bingham, are more or less neutral rather than being pointers

in favour of one party’s position on construction. The reference in the settlement agreement

to claims by the pursuer against Mr Corray being excluded, but there being no such

exclusion of claims against the present defenders, is relied upon by the pursuer as inferring

that such other claims have not been foregone or waived. The defenders argue that the only

known other claim at the time of the settlement agreement was that against Mr Corray, in

circumstances in which the pursuer had known for some fourteen months prior to the

settlement agreement of the contents of Inventory Z, now founded upon against the present

defenders. Thus, it is argued, the opportunity was there to have made a claim against these

defenders and in the absence of any such claim it was quite understandable that no

reference to them was made and indeed the exclusion of the only other live claim pointed

towards all other claims for the same loss being excluded. In my opinion, it is not

appropriate to construe the exclusion of the only other live claim as deliberately intending to

leave open further claims for the same loss against others, such as the present defenders, nor

is it appropriate to see it as inferring the exclusion of all other potential claims. It is plainly

correct that it was open to the parties to the settlement agreement to deal with as yet

unknown, but perhaps potential, future claims as well as the known claim, but the absence

of any such wording (whether to exclude or leave open claims of that nature) is not a pointer

Page 30 ⇓

in either direction. Part of the context is of course that both parties were obviously aware of

the Corray action and that it was for the same loss. There must have been some reason why

the pursuer agreed to abandon his claim in the only other live action and it may be difficult

to see why he wished to do so if the settlement was for a lower sum than the actual loss and

if there was a desire on his part to leave open claims against others (including persons not

yet identified). If the defenders here are correct that there was full satisfaction then the

reference to giving up the Corray claim was not actually necessary, but it may simply be an

added provision consistent with full and final satisfaction and the defenders may have

wised it to be included out of an abundance of caution. Arguably there is some difficulty in

seeing how the abandonment of the Corray claim fits with the settlement not being full and

final; no reasons for giving it up are pled and in any event subjective intentions are of course

not relevant. Overall, however, I do not view this as a clear pointer. In my view, this part of

the language of the settlement agreement is broadly neutral.

[36] The settlement agreement makes clear that it is not just a full and final settlement of

the action but that it includes release of claims in any way related to the proceedings or their

underlying facts. This was viewed by the defenders as indicating complete freedom of

P&W/BP from further claims, but of course it doesn’t expressly exclude a claim for

contribution by P&W/BP made by a different defender. The absence of a right of indemnity

against the pursuer in favour of P&W/BP, should they be drawn into a later claim, can point

in either direction: on the pursuer’s approach, this factor fits with the parties to the

settlement agreement not having sought to deal with the consequences of later claims; on

the present defenders’ approach, this factor was not needed if the settlement was in full

satisfaction and hence its absence supports that position. If there was knowledge on the part

of each side (derived for example from Inventory Z) about a potential claim against others, it

Page 31 ⇓

would be surprising for P&W/BP not to seek an indemnity. However, these points are again

rather neutral and I attach no material significance to them.

[37] I also see no particular weight in the pursuer’s point that the settlement agreement

was confidential as between the parties; that will very regularly be the position but it does

not assist in the construction of its terms. On the matter of the settlement sum having

included expenses, I again do not see that as having any real relevance; the parties are

highly likely to have had some insight into the matter of expenses and factored that in when

agreeing the settlement sum. It is, of course, true that this was a settlement between the

parties to the P&W/BP action and there is no reference to the present defenders, but as Lord

Rodger said in Heaton one would not expect to see the defenders in a second action

mentioned at all. I accept that if these defenders could seek a contribution from P&W/BP

that might be taken as unlikely to be something to which P&W/BP would have agreed and

arguably against commercial common sense; but on other hand it is trite that bad bargains

are sometimes made and so I do not take that as a pointer in favour of the meaning

contended for by the defenders.

[38] Accordingly, bearing in mind Lord Bingham’s points in considering the terms of the

settlement agreement, I take nothing of any material significance from the absence of

specific things in the agreement and (leaving aside for the moment the terms of what I view

as the key clause for present purposes, clause 2.5) I find no free-standing point which of

itself points in a particular direction.

[39] While it is correct that in Jameson the sum to be paid was “in full and final settlement

and satisfaction of all the causes of action in respect of which the plaintiff claims in the

statement of claim”, the use of the word “satisfaction” does not appear to have added

anything to the reasoning of Lord Hope. Indeed, in a passage in his speech (at 473-4) he

Page 32 ⇓

appears to use “satisfaction” and “settlement” as effectively synonymous terms. The point

he views as being the most significant is whether the claim that was made and now settled

was for the whole amount of the loss. In Heaton (at para [83]) Lord Rodger also emphasises

the importance of the nature of the first claim. Both Lord Clyde in Jameson and Lord Rodger

in Heaton express the view that the natural and ordinary meaning of the terms of a

settlement agreement may be rather unclear. While Lord Clyde then applied a particular

approach, that was not endorsed by the other judges and I do not consider it as forming part

of the ratio decidendi in that case. However, I see real force in the approach taken by Lord

Rodger in Heaton as to the use of standard expressions in agreements of this kind and the

resulting significance of the nature of the claims made in the first and second actions. In that

case, the damage claimed in the actions differed and was described as not coincident. Here,

it does not differ and plainly is coincident.

The key provisions of the settlement agreement

[40] Turning back, then, to the key provisions of the settlement agreement, the preamble

refers to the parties having agreed terms for the “full and final settlement” of the action and

their wish to record the terms of settlement on a binding basis. In clause 2.5, the words “full

and final settlement” are again used. While that clause refers to a release and discharge of

all and any claims and the like “against each other”, these are all claims “arising out of or

connected with the Proceedings and/or the underlying facts relating to the Proceedings” . As

I have noted, the claim for loss in that action was for loss allegedly caused as a result of the

transaction entered into for the sale of part of the pursuer’s shareholding . The agreement is

therefore for a full and final settlement of all claims for that loss. Clause 3.1 appears to me to

be of no significance because it is a warranty and undertaking about not having any claims

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or rights of action against the defenders in that action or their predecessors. As the loss

claimed in the action is dealt with by the settlement agreement, clause 3.1 can really only be

about other claims or losses. Clause 3.2 deals with abandonment or ending the Corray

action and the Corray petition “without any demand for payment being made of or accepted

from Corray”. As I have noted, this is not a clear pointer but, for what it is wort h, is

consistent with all of the losses having been settled by P&W/BP.

[41] Distilling this reasoning, the meaning of the settlement agreement is that the pursuer

reached a full and final settlement, with one joint wrongdoer, of the loss claimed in the

action against that joint wrongdoer. On the basis of Jameson and as is also accepted in

Heaton, that precludes an action against other joint wrongdoers for that same loss. The

nature and extent of the loss sought in that earlier action is the same as is now sought

against the present defenders, calculated in the same way. The present action proceeds

upon the basis that the present defenders conspired with, and hence are joint wrongdoers

alongside, Mr Gordon, contributing to causing the same loss. The pursuer avers that the

present action is “based on a different legal basis to that advanced in the first claim”.

However, if the present defenders are jointly and severally liable for the pursuer’s loss, but

that loss has been satisfied, then no claim remains. In line with the position in Carrigan,

there is no indication at all that the payment agreed was not to be regarded as in full

satisfaction of the pursuer's claim for all the loss which he sustained as a result of the

wrongdoing alleged in that action. The settlement in Carrigan was “in full settlement of the

conclusions of the action”, in substance no different from the settlement agreement here.

The defenders in the action against P&W/BP had responsibility for the loss caused to the

pursuer by having entered into the transaction to sell his shares and that damage was the

sole basis of the claim that was settled.

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[42] I therefore conclude that the pursuer’s claim is incompetent and falls to be dismissed.

It is, however, appropriate that I also deal with the other issues.

Issue 2: Relevancy and specification

Submissions for the first to fifth defenders

[43] Intention to injure is an essential ingredient of a claim based on unlawful means

conspiracy: Crofter Hand Woven Harris Tweed Co Ltd v Veitch 1942 SC (HL) 1; Lonrho plc v

Al-Fayed (No. 1) [1992] 1 AC 488. It is enough that the defender ought to have known that

injury to the pursuer would ensue. But incidental harm is not enough: JSC BTA Bank v

Khrapunov [2018] 2 WLR 1125 (at paras [13] and [14]). The pursuer made no relevant

averment of intention to injure on the part of the first to fifth defenders. A distinction

required to be made between the “harm” which the pursuer avers he suffered, namely

depriving him of the knowledge required to realise that he could not place his trust in P&W,

and the allegedly deleterious effect of the transaction on the value of the pursuer’s shares .

What made the transaction bad for the pursuer, according to his averments, was that he did

not get what he wanted out of the deal. But nowhere did the pursuer aver any proper basis

for the notion that the defenders knew or ought to have known that the terms of the deal

were something other than what the pursuer wanted them to be or that they were not in

accordance with his instructions to P&W. The essence of the pursuer’s allegation was that

the defenders created a false impression of an arm’s length transaction. The pursuer avers

that he was not advised by P&W that it was disadvantageous, but that is not claimed to be

part of the conspiracy. There was no suggestion that the activities of any of the defenders

were intended to prevent communications between P&W and the pursuer, including the

taking and giving of instructions on the terms of the transaction and advice in relation

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thereto. In short, the conspiracy alleged in the pleadings did not result in loss where the

conspiracy did not involve preventing the pursuer from obtaining the legal advice from

P&W. The pursuer’s case of conspiracy was therefore irrelevant and should be dismissed.

Submissions for the sixth to eighth defenders

[44] The fraudulent conduct averred was a conspiracy to deceive the pursuer. Fair notice

is required of the basis for that allegation: Marine & Offshore (Scotland) Ltd v Hill 2018 SLT

239 (at para [16]). Accordingly, the pursuer’s averments ought to clearly and specifically

identify: (i) the act(s) or representation(s) founded upon; (ii) the occasion(s) on which the

act(s) was/were committed or the representation(s) made; and (iii) the circumstances relied

upon as yielding the inference that that act(s) or representation(s) was/were fraudulent:

Royal Bank of Scotland v Holmes 1999 SLT 563 (per Lord Macfadyen at 569K-L). The pursuer’s

averments did not do so and were irrelevant and lacking in material specification .

[45] The requirements of a claim based on conspiracy were made clear in the case law

referred to on behalf of the first to fifth defenders. The pursuer does not offer to prove that

the defenders intended to or obj ectively knew that they would cause harm to the pursuer . It

was clear that the case about conspiracy was predicated on the suggestion that where

solicitor A acts in a transaction knowing that his opposite number therein, solicitor B, is in a

position of conflict, that means that A and B are involved in a conspiracy. That proposition

was outlandish and unvouched by authority. These defenders owed no duty of care to the

pursuer to point out any shortcomings on the part of his representatives: Gran Gelato Ltd v

Richcliff (Group) Ltd [1992] Ch 560; Steel v NRAM Ltd 2018 SC (UKSC) 141. That being so, it

would be strange to find that a failure to advise the pursuer of the conflict experienced by

Mr Gordon and P&W, not actionable in the law of negligence, never theless thereby rendered

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liable these defenders on the basis of conspiracy. The reference to knowledge of a breach of

a professional obligation was irrelevant and added nothing. Frank Houlgate Investment Co

Ltd v Biggart Baillie LLP 2015 SC 187 was readily distinguishable. In that case the solicitor

was held liable as an accessory to the fraud perpetrated by his client . He was not sued as a

co-conspirator with the fraudster. The pursuer did not explain how these defenders became

aware of the fraud. Absent such an averment, his case fell foul of the rule requiring proper

particularisation of the serious accusation of fraudulent conduct (here on the part of a

solicitor).

[46] The pursuer avers that the harm suffered by him was to deprive him of the

knowledge required to realise that he could not place his trust in P&W. But the pursuer’s

loss is said to have resulted from the terms of the transaction which, the pursuer avers

rendered his shareholding worthless or substantially worthless. The pursuer did not aver

that the defenders were aware, or should have been aware, of the harmful nature of the

transaction. Absent any such averment, the pursuer’s pleadings were irrelevant. It is the

inveigling of the pursuer in the entering into of the contract that completes the delict of

fraud, not the hiding from him that Mr Gordon was acting in conflict. For the same reason,

the pursuer’s averments did not satisfy the requirements for a case in fraud as explained in

Bradford Third Equitable Benefit Building Society v Borders [1941] 2 All ER 205 (at 211). In

particular, the pursuer’s averments did not disclose an intention on the part of these

defenders that the false representation should be acted upon by the pursuer in the manner

which resulted in loss to him. Absent such an averment, the pursuer’s case on fraud was

irrelevant: Kidd v Paull & Williamson LLP 2018 SC 221 (per Lord Tyre at para [33]). In that

case the fraud claim was about hiding or failing to reveal Mr Gordon’s transgressions. Here

the fraud claim is said to be assisting in that deception . It would be very odd that if these

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defenders were deemed to be joining Mr Gordon in his conduct they are deemed fraudsters

when Mr Gordon is not.

[47] The pursuer also avers that these defenders took no steps to ensure that he became

aware of the wrongdoing committed by the first to fifth defenders. However, the pursuer

did not explain what wrongdoing ought to have been disclosed to him by the sixth to eighth

defenders. Moreover, he did not explain the legal basis upon which such a duty arises. The

basis for his averment that these defenders “failed to take proper professional care for the

pursuer’s interests” was not explained. These defenders had no professional or other

relationship with the pursuer. These averments were plainly irrelevant.

Submissions for the pursuer

[48] In the pleadings, the pursuer had made abundantly clear what he offered to prove on

fraud. A realistic assessment of what is required to plead a case of fraud had to be taken,

when by its very nature the fraud alleged was concealed from the pursuer. Reference was

made to Marine & Offshore (Scotland) Ltd v Hill. A fraud case was sufficiently stated if it

alleges a “machination or contrivance to deceive”, as put in Erskine III.i.16. Here, the

transaction was stripped of all its commercial value as a consequence of the concealment by

the sixth to eighth defenders that Mr Gordon was providing information to them and the

fact that the first to fifth defenders partook in that and instructed the sixth to eighth

defenders in the knowledge that Mr Gordon was doing so. The deception was that the

pursuer’s solicitors were in essence working along with Lime Rock. If the pursuer had

known that he would have been “off like a shot”. The suggestion that the pursuer required

to aver that he was induced to enter into the transaction on bad terms because of the

representation was incorrect. The fact that he was induced to enter into any contract

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because of the machination or contrivance to deceive was sufficient. The harm caused to the

pursuer and known by the defenders was that the pursuer was not receiving independent

advice from solicitors who were honest and obeying their professional obligations. The

liability of the defenders arose, inter alia, from their conduct not only as actors, but as

accessories to the wrongs committed by the pursuer’s solicitors. Reference was made to the

Opinions in Frank Houlgate Investment Co Ltd v Biggart Baillie LLP [2010] SLT 527 (Lord

Drummond Young); [2013] SLT 993 (Lord Hodge); 2015 SC 187 (Lord Menzies) and Cairns &

Others v Harry Walker Limited and anor 1914 SC 51. It was not necessary that to be party to

the fraud the solicitor had to act dishonestly. His knowledge of the fraud sufficed, even

without any intention to cause harm or to act in a dishonest manner.

[49] The defenders’ submission, that the absence of averments that they intended that the

fraud be acted upon makes the pursuer’s case irrelevant, was ill-conceived and based upon a

misunderstanding of the operation of such a rule. The rule applied where the issue is

whether a party was fraudulently induced to enter into a contract and either seeks damages

or an order nullifying the contract. But where the fraud is committed as is averred in this

case, to facilitate a wrong on the pursuer, the rule was of no application. The use of the

phrase “dishonest assistance” (and for that matter, the language of "conspiracy") in the

pleadings was not intended to present a separate delict. These averments merely described

the role of the parties in the fraudulent scheme. The pursuer’s further case against the sixth

to eighth defenders was that a solicitor who is aware of a breach of professional obligations

and fraud by the counterparty’s solicitor on his own client has a duty not to partake in that

scheme (in which event he becomes party to the fraud). Indeed as a matter of law he has a

duty to draw that wrongdoing to the attention of the counterparty: Frank Houlgate Investment

Co Ltd v Biggart Baillie LLP. A solicitor may not owe a duty of care to the other party but

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does owe that party a duty not to participate in any fraud. If the fraud is being perpetrated

inter alios by the counterparty’s solicitor, it was plain that the duty arising upon a solicitor is

to advise the counterparty directly. The obligation arises from the assumption that any

person is entitled to make: that a solicitor is acting honestly in his work. Otherwise a

solicitor could act dishonestly, to assist the commission of a fraud, and to do so without any

obligation of disclosure of that fraud to the party who is to be defrauded.

Reply for the first to fifth defenders

[50] Senior counsel for the pursuer had failed to answer the question of how a relevant

case on fraud can be made when in Kidd v Paull & Williamson LLP Lord Tyre found that a

case of fraud in essentially the same terms was irrelevant. That case was the same as pled

here. No answer was given as to why it would be relevant now when it was irrelevant

before.

Reply for the sixth to eighth defenders

[51] The submissions for the pursuer ignored the decision of Lord Tyre in the previous

case. The pursuer merely avers that there was a deception . As was explained in the other

cases discussed by Lord Tyre, the fact that there was deception does not make good the

claim. Just as the pursuer could not make good that allegation in his averments in that

earlier case against the primary wrongdoer, he cannot make it good against a person who is

said to have failed to reveal that wrongdoing.

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Issue 2: Decision and reasons

The pursuer’s averments

[52] It is clear from the pursuer’s averments that the primary wrong said to have been

committed by P&W and Mr Gordon was a breach of fiduciary duty; there are repeated

references to this in the pleadings. It is not expressly averred in this case that the conduct of

Mr Gordon was fraudulent, although that appears to be implicit . In the case against

P&W/BP, there were averments made to allege fraudulent misrepresentation, but these were

held to be irrelevant.

[53] In the present case, the conspiracy to defraud and the intention behind it is expressed

thus (in Article 18):

“All of the Defenders were aware that Mr Gordon was acting in breach of his

fiduciary duty to the Pursuer (and indeed to ITS). They conspired to facilitate that

breach, in order to procure the completion of the transaction, and so caused the

Pursuer to suffer the loss and damage hereinafter condescended upon.”

Other averments indicate that this conspiracy comprised two main elements, namely

creating a false impression or representation and concealing certain key matters (Article 20):

“The Defenders conspired to induce the Pursuer to enter into the transaction on a false

basis, in that they created a false impression of an arm’s length transaction between

counterparties each with independent legal advisers, whilst concealing from him that

he was not being independently advised and that the transactional counter -party was

receiving confidential information and guidance from Mr. Gordon.”

In relation to the false impression, it is averred (Article 13) that:

“The engagement of the Sixth Defender firm by Lime Rock Group was indeed a

“front” designed to obscure the truth, that truth being that P&W were acting in breach

of their duty to the Pursuer. The Sixth Defender firm accepted instructions from ITS

and the Pursuer, as did the Seventh and Eighth Defenders in the knowledge that

Mr Gordon was in breach of his duty of undivided loyalty to the Pursuer (and indeed

to ITS). They thereby conspired with the First to Fifth Defenders to deceive the

Pursuer by that false representation and procure, by such fraudulent means, the

completion of the transaction. They did so to cause harm to the Pursuer by depriving

him of the opportunity of discovering the breach of fiduciary duty by Mr Gordon, of

allowing him to have the knowledge to terminate the relationship with P&W and

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indeed the Lime Rock Group, and then obtain separate and truly independent

advice”.

It appears that the reference to accepting instructions from ITS and the pursuer is an

erroneous expression of the facts, given that the sixth to eighth defenders accepted

instructions from Lime Rock. However, it is clear that the alleged intention was to deceive

the pursuer and procure the completion of the transaction.

[54] Further allegations are made elsewhere in the pleadings. The first to fifth defenders

are alleged to have “allowed and joined with Mr. Gordon to put his plan into execution”

(Article 9). Mr Gordon is then said to have acted far beyond his remit and the sixth to

eighth defenders:

“in breach of their own duty to act with honesty and integrity, allowed that to occur

and became accessories to the wrongs being committed by the [first to fifth]

defenders”.

It is further averred in Article 9 that the sixth to eighth defenders took no steps to ensure

that “the pursuer would become aware of that wrongdoing, as they ought to have done as

honest solicitors” and “failed to take proper professional care for the pursuer's interests”.

Their actions “were contrary to normally acceptable standar ds of honest conduct” (Article

19) which goes on to include that they:

“knowingly and dishonestly assisted Mr Gordon by accepting those instructions to

represent the Lime Rock Group, knowing that Mr Gordon was acting in breach of his

obligations owed to the Pursuer”.

[55] In relation to harm, additional averments are made (in Article 20), in similar terms to

those quoted above:

“The harm suffered by the Pursuer was to deprive him of the knowledge required to

realise that he could not place his trust in P&W, and that he required (but would not

receive from P&W) independent legal advice…The transaction concluded without

P&W providing to the Pursuer proper advice, whilst being misled by the Defenders

into him thinking that they were acting honestly in his dealings with them.”

As to the consequences of the alleged wrongs, it is averred (in Article 22):

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“Those actions throughout led the Pursuer to believe that legal advice was being

provided to him regarding the transaction at an arm’s length basis, untainted by

breaches of duties by any of the solicitors…”

and (in Article 24):

“The Pursuer was induced by the wrongful conduct of the Defenders outlined above

to complete the transaction. Had they not acted in the wrongful manner

condescended upon, he would not have completed the transaction.”

[56] The first plea-in-law refers to the pursuer having suffered loss and damage through

the fraudulent conduct of the defenders and being entitled to equitable compensation from

them therefor and the second plea-in-law is in the same terms, except that reparation is

sought rather than equitable compensation. Submissions were made on whether the

pursuer’s averments provided a basis for equitable compensation, but in the context of the

third issue, prescription, dealt with below.

Conspiracy

[57] In making the allegations of conspiracy, I am of the view that the pursuer identifies

with sufficient precision the acts and representations of the defenders that are founded

upon. The occasions or timing can readily be inferred from the pleadings, as continuing

over the period when the relevant information was known to the defenders to the point in

time when Inventory Z was recovered. As to the circumstances relied upon as yielding the

inference that those acts and representations were fraudulent, these include the alleged

creation of the false impression of an arm’s length transaction between the counterparties

and allegedly concealing from the pursuer that in fact he was not being independently

advised and, further, that the transactional counterparty was receiving confidential

information and guidance from Mr Gordon. The allegation of conspiracy is therefore not

based simply on knowledge of the conflict of interest, but rather on knowledge of active

Page 43 ⇓

steps being taken to cause the counterparty to be given an unfair advantage. The

requirements of a claim based on conspiracy include an intention to harm the pursuer and

that the pursuer suffered loss as a result: Crofter Hand Woven Harris Tweed Co Ltd v Veitch;

Lonrho Plc v Al-Fayed (at 465-468). As regards the second criterion, the defenders should

know that injury to the pursuer will ensue: JSC BTA Bank v Khrapunov [2018] 2 WLR 1125

(para [13]), citing with approval the judgment of the Supreme Court of Canada in Canada

Cement LaFarge Ltd v British Columbia Lightweight Aggregate Ltd [1983] 1 SCR 452. In the

averments set out above, the pursuer avers the nature of the allegedly fraudulent conduct

and that the defenders intended to, or objectively knew that they would, cau se harm to the

pursuer. I accordingly conclude that the requirement for an averment of a “machination or

contrivance to deceive” (Erskine III.i.16) or false pretence and the tests for relevancy

identified in the case law, including Marine & Offshore (Scotland) Limited v Hill & another and

the authorities on conspiracy, are met.

Fraudulent misrepresentation

[58] The key proposition for the pursuer in the present case is that the defenders

conspired to make a false representation that this was an arm’s length transaction with each

side having independent professional advice. The approach taken by Lord Tyre in Kidd v

Paull & Williamson LLP was based upon the absence of averments on certain key matters.

Lord Tyre held that there was no averment that the representation that the first defender

(P&W) in that case would not act in conflict of interests was made with the intention of

inducing the pursuer to enter into the transaction to sell part of his interest in ITS to Lime

Rock. Nor was there any averment (and in Lord Tyre’s view it was not easy to see how

there could be) of direct connection between the representation regarding absence of conflict

Page 44 ⇓

of interest and the pursuer’s decision to enter into the sale agreement. The pursuer’s

assertion that, if he had been made aware of the conflict of interest, he would have

withdrawn his instructions from the first defender and ended the negotiations with Lime

Rock was not the same as an averment that the representation, whether express or implied,

that the first defender was not acting in conflict of interest, materially influenced the pursuer

in his decision to enter into the contract. Lord Tyre concluded that it could not therefore be

presumed that th e representation was material.

[59] In the present case, the pursuer’s averments, as noted above, include a reference to

the defenders conspiring to facilitate the breach of fiduciary duty “in order to procure the

completion of the transaction”. This averment does therefore identify the alleged intention.

In relation to the connection between the implied representation and the pursuer’s decision

to enter into the transaction, it is averred that he was “induced by the wrongful conduct of

the Defenders outlined above to complete the transaction” and that if they had not so acted

he would not have completed the transaction. In light of the express reference to being

induced and to what he would have done had he not been so induced, I am of the view that

the pursuer’s averments here can be taken as asserting that the representation materially

influenced him in his decision to enter into the transaction (however difficult that may be to

actually establish in evidence). In short, the pursuer has in this case made sufficient

averments of the kind that Lord Tyre in the earlier case properly identified as necessary for a

relevant case based upon fraudulent misrepresentation. The defenders’ conduct did not

prevent P&W or Mr Gordon giving the advice the pursuer claims should have been given,

but they are all said, in effect, to have acted in concert to reach that result. I therefore

conclude that the argument for the defenders that the pursuer’s case here is irrelevant for

the same reasons as in the earlier case falls to be rejected.

Page 45 ⇓

Further alleged duties of the sixth to eighth defenders

[60] In Frank Houlgate Investment Co Ltd v Biggart Baillie LLP the claim against the

defenders was that a solicitor had acted in furtherance of a fraud by his client. Dealing

firstly with the issue of implied representation, Lord Menzies concluded that in the

circumstances of that case the solicitor gave a continuing implied representation to the

solicitor for the other party that he was not aware of any fundamental dishonesty or fraud

which might make the transaction worthless. Lord Menzies also concluded that the solicitor

was under an obligation to tell the pursuer’s solicitors immediately after he became aware of

the fraud. Dealing next with the other principal issue in the reclaiming motion (whether the

solicitor had acted as an accessory to the fraud by the client), Lord Menzies observed that

there is no Scottish authority for the proposition that it is necessary for an accessory to have

the same intent as the fraudulent principal. The absence of any subjective dishonest intent

on the part of the solicitor was irrelevant. Lord Menzies held that the Lord Ordinary was

correct to draw an analogy with an accessory to a crime. In accepting and acting on the

client’s instructions not to tell the pursuers of the fraud when he himself knew of it, the

solicitor became accessory to the fraud. He was privy to and assisted in carrying out the

fraud. The fact that the solicitor was actively involved in the transaction was a relevant

factor. Lord McEwan agreed with Lord Menzies on these two issues, for similar reasons.

Lord Malcolm reached the same conclusion on the first point, albeit based on slightly

different reasoning, but on the second point did not consider that the solicitor was an

accessory to the fraud without having, to some degree, the mental element necessary for

commission of the wrong itself.

[61] In the present case, plainly the first to fifth defenders are not solicitors and it is

difficult to see how this authority assists in identifying any liability on their part for an

Page 46 ⇓

implied representation or acting as an accessory to a fraud. As noted above, they are

however alleged to be direct conspirators, acting in combination with Mr Gordon. But in

respect of the sixth to eighth defenders, I conclude that this decision of the Inner House

supports the relevancy of the pursuer’s averments against them about the implied false

representation and their actions as an accessory to the unlawful conduct on the part of

Mr Gordon. As I understand the pursuer’s averments, the sixth to eighth defenders are sued

as alleged accessories to the unlawful conduct perpetrated by Mr Gordon and also as co-

conspirators with him. While in Frank Houlgate Investment Co Ltd v Biggart Baillie LLP the

solicitor was liable in respect of knowledge of, and being accessory to, the unlawful actings

of his client, the present case against the sixth to eighth defenders is based upon their

knowledge of, and actings as accessory to, the conduct of the counterparty’s solicitors.

However, I do not consider that the facts are so plainly distinguishable as to render this

aspect of the case bound to fail. Here the sixth to eighth defenders were, it is averred,

actively involved in the transaction. Their alleged awareness of, and actings as accessory to,

the unlawful conduct of the pursuer’s solicitors, in circumstances where their own clients

are also alleged, to their knowledge, to be parties to the conspiracy, arguably gives rise to

similar legal obligations as those held to exist in Frank Houlgate Investment Co Ltd v Biggart

Baillie LLP.

[62] It was submitted on behalf of the sixth to eighth defenders that the pursuer does not

explain how they became aware of the fraud. But the pursuer makes averments about the

provision of legal advice by Mr Gordon to these defenders, intending that it be passed on to

Lime Rock, and the sending to them of sensitive and commercially confidential information

relating to both the pursuer and ITS, which again was then communicated to Lime Rock . It

is also averred that they accepted the instructions to represent Lime Rock, knowing that

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Mr Gordon was acting in breach of his obligations owed to the pursuer. Sufficient

averments of awareness are therefore made. It was also submitted for the sixth to eighth

defenders that the pursuer does not explain what wrongdoing ought to have been disclosed

to him by them and does not explain the legal basis upon which such a duty arises. It is, in

my view, tolerably clear from the averments that the undisclosed wrongdoing was that of

Mr Gordon and the first to fifth defenders. The legal basis for the duty to disclose could

arguably arise from Frank Houlgate Investment Co Ltd v Biggart Baillie LLP, as discussed

above. The pursuer’s averment that these defenders “failed to take proper professional care

for the pursuer’s interests” also relies upon that decision .

[63] For these reasons, I reject the submissions for the defenders that this part of the

pursuer’s case, as averred and taken pro veritate, would have been bound to fail.

Issue 3: Prescription

Submissions for the first to fifth defenders

[64] The submissions for the sixth to eighth defender on prescription were adopted. The

point about equitable compensation being a remedy for breach of trust or breach of fiduciary

duty meant that the case against the first to fifth defenders, which was not based on any

such breach by them, had prescribed.

Submissions for the sixth to eighth defenders

[65] The pursuer’s reliance upon section 6(4) of the 1973 Act was misconceived. He

averred that he was induced to refrain from making a claim on account of error induced by

the defenders’ conduct, namely a pretence that “the transaction was being conducted in a

professionally proper, honest and arm’s length fashion”. Yet, on the pursuer’s averments,

Page 48 ⇓

his own agents, P&W and also others including Mr Corray and Mr Milne, were aware that

was not so. Their knowledge as agents fell to be imputed to the pursuer as principal: Adams

v Thorntons WS (No.3) 2005 1 SC 30 (at para [65]); Chapelcroft Ltd v Inverdon Egg Producers Ltd

1973 SLT (Notes) 37; and Johnston, Prescription and Limitation (2nd ed., para. 6.89). Moreover,

that alleged pretence must have ended, at the very latest, by the time that the pursuer raised

proceedings against his former agents, P&W. The summons in that action was signetted and

served on 22 September 2014, more than five years prior to the raising of the present

proceedings. By the time the present action was raised in December 2019, prescription had

operated. The defenders should therefore be assoilzied.

[66] It was accepted that where the agent is fraudulent there is no attribution of

knowledge. However, participation in the fraud is required. Fraud is personal. One could

not attribute knowledge across the firm of P&W in general. So the fraud exception would

exclude only the knowledge of Mr Gordon. The pursuer instructed Mr Corray and

Mr Milne and on his authority they instructed P&W. They were all agents of the pursuer.

There were averments about knowledge on their part in 2008 and 2009. The involvement of

Mr Gordon was therefore within the knowledge of other agents who were not said to be

fraudulent. At all material times authorised agents were aware of the actual position.

Accordingly, the pursuer failed to put himself in the territory of section 6(4) and the case

was out of time.

[67] As there was no relevant claim for equitable compensation, vicennial prescription

did not apply, although it was not in any event clear that an obligation to make equitable

compensation actually fell within that period, rather than the quinquennium: Heather Capital

v Levy & McRae 2017 SLT 376. But equitable compensation was not a remedy that a party is

simply allowed to elect; on the contrary, it only applies in certain constraining

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circumstances. It is a remedy for breach of trust and, arguably, for breach of fiduciary duty.

While the notion of equitable compensation is not entirely clear, it does require a breach of

that nature. In the present case the only cause of action was fraud. The remedy for fraud is

simply damages. In the pursuer’s case against P&W/BP equitable compensation was sought

on the basis of breach of fiduciary duty. However, the present defenders were not involved

in a relationship with the pursuer that gave rise to any fiduciary duty . There was simply no

place for a claim of equitable compensation.

Submissions for the pursuer

[68] In relation to section 6(4), reference was made to BP Exploration Operating Co Ltd v

Chevron Shipping Co 2002 SC (HL) 19. It was accepted that an agent’s knowledge when

acting in the course of his agency is to be imputed to his principal, but that is simply the

ordinary rule. In Adams v Thorntons WS (No.3) there was no suggestion of the kind of

conduct of which the present pursuer complains, namely that his agents were acting not on

his behalf but in the interests of others. It was no part of the agency of Mr Gordon or indeed

his firm, that he or it should commit wrongful acts upon the pursuer. Accordingly, to the

extent that a principal is “clothed with” the knowledge of his agent, that is only true if the

agent is acting within his authority. Moreover, whether the knowledge of an agent should

be imputed to the principal depends on the context: Bilta (UK) Ltd (in liquidation) v Nazir (No

2) [2016] AC 1. Here there were compelling arguments in the factual context and the nature

of the present claim why no such imputation is appropriate. Further, recent cases made the

policy of s 6(4) clear. It is in essence about the equity (or otherwise) of a defender relying on

the passage of time, given what he has said or done, or failed to say or do, in relation to a

pursuer’s claim. The provision does not require a positive act on the part of the defenders

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but is also satisfied by an omission: Rowan Timber Supplies (Scotland) Ltd v Scottish Water

Business Stream Ltd [2011] CSIH 26; Heather Capital v Levy & McRa e.

[69] The basis of the pursuer’s claim is fraud and conspiracy. The ground for relying on

section 6(4) is that the pursuer knew nothing about that cause of action until 7 October 2016 .

This was the typical situation of the victim of fraud not knowing that he is a victim. The

contention for the sixth to eighth defenders that knowledge of the pretence must have come

to an end when proceedings were raised against P&W in 2014 was irrelevant. This case is

concerned with the present defenders and their conduct, including causing the pursuer not

to claim against them. These defenders committed a fraud and concealed it successfully

until October 2106. The pursuer’s pleadings were therefore a relevant invocation of section

6(4) for a period sufficiently long that the five-year prescriptive period has not been

completed since the cause of action arose in 2009.

[70] Turning to the issue of equitable compensation, such an obligation did not fall under

any of the sub-paragraphs of Schedule 1, paragraph 1, to the 1973 Act and was therefore not

amenable to the five-year prescription. A claim for equitable compensation is not a claim for

damages: AIB Group (UK) plc v Mark Redler & Co [2015] AC 1503; Kidd v Paull & Williamsons

LLP (at paras [37]-[46]); Hobday v Kirkpatrick’s Trustees 1985 SLT 197 (at 199). It was correct

that a pursuer cannot just choose or elect to use equitable compensation. There had to be a

fiduciary content. The pursuer’s position was that there is no binary choice between fraud

or breach of fiduciary duty. Here the facts pled disclosed a breach of fiduciary duty in the

context of fraud. Breach of fiduciary duty is a breach of its own kind and is not the same as

a claim based on delict or contract. The authorities made it clear that there is no sense in

drawing a sharp line between a trust in the strict sense and a fiduciary duty in the other .

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There was a valid claim for equitable compensation. It was accepted that the precise

boundaries of that remedy are difficult to define. However, the fundamental proposition

behind such a claim is that if it is based on a duty of honesty then there can be equitable

compensation. The sixth to eighth defenders were under an obligation not to act when they

knew there was a breach of fiduciary duty; it was unconscionable to do so . The question

that arose was whether there is a duty arising from the professional nature of a party’s

position to not just distance himself from what is going on but to tell the other party. If a

solicitor engages in a fraud, equitable compensation is an available remedy.

Reply for the first to fifth defenders

[71] On equitable compensation, whatever the pursuer has to say regarding the sixth to

eighth defenders as solicitors does not arise regarding the first to fifth defenders, who were

parties on the other side of a commercial transaction and there could be no breach of

fiduciary duty or anything of that sort by them. There could be no claim of equitable

compensation and for these defenders the whole issue of prescription had to turn on the

question of section 6(4).

Reply for the sixth to eighth defenders

[72] Dealing with section 6(4), in relation to Mr Allan, he was not said to have been

implicated in Mr Gordon’s wrongdoing and so the pursuer had not pled a means of

excusing the knowledge of Mr Allan. As to Mr Corray and Mr Milne, the pursuer made

averments about their awareness of actual conflict. On equitable compensation, there was

no case about breach of fiduciary duty. A fraudster is not a fiduciary. None of the

defenders was in a fiduciary relationship with the pursuer and no such relationship is pled.

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If the only case for the pursuer is fraud he cannot ask for equitable compensation.

Accordingly, this case fell within the quinquennium.

Issue 3: Decision and reasons

Section 6(4) of the 1973 Act

[73] Section 6(4) of the 1973 Act provides:

"(4) In the computation of a prescriptive period in relation to any obligation for the

purposes of this section -

(a) any period during which by reason of-

(i) fraud on the part of the debtor or any person acting o n his behalf, or

(ii) error induced by words or conduct of the debtor or any person acting on his

behalf,

the creditor was induced to refrain from making a relevant claim in relation to the

obligation, and

(b) any period during which the original creditor (while he is the creditor) was under

legal disability,

shall not be reckoned as, or as part of, the prescriptive period:

Provided that any period such as is mentioned in paragraph (a) of this subsection

shall not include any time occurring after the creditor could with reasonable

diligence have discovered the fraud or error, as the case may be, referred to in that

paragraph.”

In considering how these provisions operate, I have had regard to what was said in BP

Exploration Operating Co Ltd v Chevron Shipping Co. On this matter the pursuer avers, in

Article 24:

“Furthermore, the Pursuer refrained from making a claim against the Defenders on

account of error induced by their conduct. That conduct was such that they

pretended that the transaction was being conducted in a professionally proper,

honest and arm’s length fashion when as is averred above it was not and maintained

that pretence after the transaction was completed. Reference is made to the terms of

section 6(4) of the Act of 1973.”

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[74] The defenders seek to refute the existence of this alleged error as unsustainable, on

the ground of knowledge of the pursuer’s agents being imputed to him. The agents whose

knowledge is relied upon by the defenders are Mr Allan (a partner in P&W at the material

time), Mr Corray and Mr Milne. As ever in the law of agency, the scope of the agent’s

authority is a relevant consideration. It is not appropriate to impute to the principal

knowledge on the part of the agent that was obtained when acting outwith his authority, or

for an ulterior motive against the interests of the principal. On the pursuer’s averments,

these persons were not acting within their authority or on his behalf when the information

alleged was made known to them. I also note that in Adams v Thorntons WS (No.3) two of

the three judges reserved their opinion on the question of whether section 6(4) applied to

imputed rather than actual knowledge. Moreover, whether the knowledge of an agent

should be imputed to the principal depends on the context. In Bilta (UK) Ltd (in liquidation) v

Nazir (No 2) Lord Neuberger repeatedly emphasised the importance of the nature and

factual context of the claim in question. In the context averred here by the pursuer,

imputing knowledge is not appropriate. While the pursuer refers to the inducement of the

error for the purposes of section 6(4) as resulting from the defenders “pretending” that the

transaction was properly conducted, I accept the submission that such a pretence does not

require a positive act on the part of the defenders but is also satisfied by an omission to

disclose the true position: Rowan Timber Supplies (Scotland) Ltd v Scottish Water Business

Stream Ltd (at para [9]); Heather Capital v Levy & McRa e (at paras [63]-[64]). I reject the

defenders’ position that as knowledge of the pretence was known to the pursuer in 2014

when the P&W/BP action was raised, that means the action has prescribed; the issue here is

about the conduct of the present defenders. I conclude, taking the pursuer’s pleadings pro

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veritate, that the defenders have not established that the pursuer’s reliance upon section 6(4)

is bound to fail.

Equitable compensation

[75] The defenders did not seek to contest the pursuer’s position that an obligation to

make equitable compensation does not fall under any of the sub-paragraphs of Schedule 1,

paragraph 1, of the 1973 Act and is not therefore amenable to the five-year prescription. The

issue focused upon was whether a relevant claim is made for equitable compensation. In

that regard, I was taken to a number of key authorities in relation to elements that make up

such a claim, including the nature of the relationships involved, how the concept compares

with the structure of a claim for damages based on negligence and the mode of its

application (in particular, AIB Group (UK) plc v Mark Redler & Co and Kidd v Paull &

Williamsons LLP). However, I was not referred to any authority on the precise scope or

limits of the concept of equitable compensation, particularly in Scots law.

[76] The central point made by the defenders, on the assumption that breach of fiduciary

duty can give rise to equitable compensation, is that there are no averments of such a wrong

on their part. While it is correct that the pursuer’s case proceeds upon the basis of a

fraudulent conspiracy on the part of the defenders, it is clearly averred that the conspiracy

was aimed at facilitating the breach of fiduciary duty on the part of Mr Gordon. In my view,

while the case law focuses on breach of trust and the related concept of breach of fiduciary

duty as constituting grounds for equitable compensation, I am not able to conclude that the

authorities preclude equitable compensation where the alleged wrong is conspiring to

facilitate a breach of fiduciary duty. The additional case made against the sixth to eighth

defenders under reference to Frank Houlgate Investment Co Ltd v Biggart Baillie LLP if

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successful could also, at least arguably, permit equitable compensation. The precise

structure and scope of the principles in Scots law on equitable compensation in this context

are not yet fully developed. In light of the pursuer’s averments and given the lack of

absolute precision in our jurisprudence on the boundaries of the concept of equitable

compensation, I am therefore unable to conclude that the pursuer’s case based on that

ground is bound to fail. Once again, if the case had not otherwise been dismissed, the

appropriate course would be to determine this issue at a proof before answer .

Conclusion

[77] For the reasons given, I accept the argument for the defenders on competency, but I

reject the defenders’ contentions on relevancy and specification and on prescription.

Disposal

[78] I shall sustain the first plea-in-law (as amended) for the first to fifth defenders, along

with the first plea-in-law (as amended) for the sixth to eighth defenders, and dismiss the

action. In the meantime, I reserve all questions of expenses.