SHERIFFDOM OF GRAMPIAN HIGHLAND AND ISLANDS AT TAIN

SA8/08

JUDGEMENT of SHERIFF PRINCIPAL SIR STEPHEN S T YOUNG Bt QC in the cause MONO SEAL PLUS LIMITED Pursuers against COLIN YOUNG Defender

Act: No appearance

Alt: Mr D J Swarbrick, solicitor, Munro & Noble, Inverness

Mr George Edwards in person

Tain: 23^rd February 2009

The sheriff principal, having resumed consideration of the cause, answers question 5 in the stated case in the affirmative and the first part of question 3 and question 6 in the negative, finds it unnecessary in the meantime to answer questions 1, 2, 4 and 7, allows the appeal and recalls the interlocutor of the sheriff dated 31st July 2008; continues consideration of the defender's incidental application made at the bar on 27th January 2009 (a) to allow the designation of the pursuers in the summons to be amended to read "Mono Seal Plus Limited, a company registered in Scotland and incorporated under the Companies Acts under company number SC 267365 and having its registered office at 1A Cluny Terrace, Buckie, AB56 1AH, formerly having a place of business at Railway Terrace, Buckie, Moray AB56 1HQ" and (b) thereafter to find the pursuers liable to the defender in the expenses of the action; appoints the defender to intimate this interlocutor and the ensuing note to the pursuers as so designed within fourteen days of the date hereof and to lodge a certificate of intimation in process; and appoints parties to be heard further on this incidental application within chambers at Inverness Sheriff Court, The Castle, Inverness on Friday 27th March 2009 at 9.30 am.

Note

[1] This action was raised as a small claim on 25th January 2008. The claim was for payment of the sum of £2,700 with interest and expenses in respect of work said to have been carried out by the pursuers at the defender's property in Alness. In addition it was narrated in box 4 on page 1 of the summons that;

Further interest is claimed under EU Directive 2000/35 effective 7th August 2002, the Late Payment of Commercial Debts (Interest) Act 1998 Chapter 20 under reasonable debt recovery costs intimated.

Attached to the summons was a document which bore to show a calculation of the total amount due to the pursuers by the defender including the interest claimed under the EU Directive. This total amount was said to be £3,597.43 inclusive of £611.43 due under the EU Directive.

[2] In box 2 on page 1 of the summons the pursuers were said to be "Mono Seal Plus Limited, Railway Terrace, Buckie, Moray AB56 1HQ", and in box 5 "Mr George Edwards, Private Finance Consultant, Woodside Financial Solutions, Woodside, Seafield Avenue, Keith, Moray, AB56 5BS" was identified as the pursuers' authorised lay representative. Although it was not stated in the summons, copies of an estimate and various invoices which were submitted by the pursuers to the defender (and which were lodged as productions by the latter) indicate that the pursuers were a registered company with the number 267365.

[3] In response to the summons the defender lodged a form of response, written defence and counterclaim for payment to him by the pursuers of the sum of £1,300.

[4] At the first hearing on 27th March 2008 Sheriff Sutherland presided. Mr Edwards was present as was a local solicitor instructed on behalf of the defender. The sheriff allowed the pursuers fourteen days within which to lodge answers to the defender's counterclaim and assigned a hearing on evidence to take place on 23rd May 2008. It appears that he also made a finding in terms of rule 2.1(3) of the Small Claim Rules 2002 that Mr Edwards was not a suitable person to represent the pursuers. The effect of this, according to the rule, was that Mr Edwards was thereupon obliged to cease to represent them.

[5] In spite of the sheriff's decision, on 1st April 2008 a document incorporating a typed response to the defender's written defence and counterclaim was lodged with the sheriff clerk on behalf of the pursuers. It was signed by Mr Edwards and below his signature and designation were typed the words "Agent/Representative for the Pursuer". The document itself is undated, but attached to it is a compliments slip signed by Mr Edwards and dated 31st March 2008. Moreover, on 16th May 2008 he signed a document which bore to be in Form 11 but which I think may more accurately be described as an incidental application by the pursuers. In short it incorporated an invitation by them to the court to dismiss the claim against the defender. On this occasion below Mr Edward's designation were typed the words "Agent/Authorised Representative of Pursuer".

[6] There is no date stamp on this document to indicate when it was received by the sheriff clerk. It is not clear whether it was available to Sheriff Sutherland when the case called for the hearing on evidence on 23rd May 2008. The defender was represented that day by his principal solicitor but there was no appearance for the pursuers. The upshot of the hearing was that the sheriff pronounced an interlocutor in the following terms:

The sheriff, on the motion of the defender, in terms of rule 15.2(2) of the Small Claim Rules, remits the cause to the summary cause roll, thereafter, assoilzes the defender from the crave of the principal action; in terms of the counterclaim, decerns against the pursuer for payment to the defender of the sum of £1,300 Sterling, with interest thereon at the rate of 8% per annum from 17th March 2008 until payment, quoad ultra, continues the cause to the summary cause roll of 16th July 2008 at 11 a.m. to allow the agent for the defender to lodge and intimate an incidental application dealing with all matters relating to the expenses of the cause.

In pursuance no doubt of this interlocutor an incidental application for the defender was lodged with the sheriff clerk on 23rd June 2008. It read as follows:

Swarbrick for the defender craves the court to find the pursuers' representative named in paragraph 5 of the summons, Mr George Edwards, Private Financial Consultant, Woodside Financial Solutions, Woodside, Seafield Avenue, Keith, Moray, AB56 5BS liable to the defenders of £1,516.69 in respect of the expenses of the action as set out in the defender's account of expenses, a copy of which is attached to this application.

[7] On 1st July 2008 Mr Edwards lodged a typed response to the defender's incidental application. Much of what he said in this was directed against the sheriff's decision on 27th March 2008 to find that he was not a suitable person to represent the pursuers, and for present purposes I need say no more about this. But in addition he did make it clear that he opposed the defender's incidental application.

[8] The incidental application was duly considered by Sheriff MacFadyen at the hearing on 16th July 2008 which had previously been assigned by Sheriff Sutherland. The defender was again represented by his principal solicitor and Mr Edwards appeared on his own behalf. The sheriff evidently took time to consider his decision, and on 31st July 2008 he issued an interlocutor in terms of which, in short, he found Mr Edwards personally liable to the defender in the expenses of the cause as assessed by the sheriff clerk. To this interlocutor he appended a characteristically clear and comprehensive note explaining his decision. This speaks for itself and it is unnecessary to set it out in full here. In a nutshell, it appears that the defender's solicitor advanced various grounds upon which he maintained that Mr Edwards ought to be found personally liable in expenses to the defender. The sheriff rejected all these grounds with one exception. This was that Mr Edwards had raised the action without any proper foundation in as much as the pursuers' case had been founded on a contract supposedly made between the parties in 2006 at a time when the company designed as pursuers in the summons had not existed, having only been incorporated in September 2007, more than a year after the completion of the works in question. The sheriff observed therefore that, whoever the defender had contracted with, it had certainly not been the pursuers with the result that the action had been bound to fail, there never having been any attempt to amend the statement of claim. In these circumstances the sheriff concluded that, as the author of the summons and having assumed responsibility for the conduct of the litigation, Mr Edwards should bear personal liability in the expenses of the cause to the defender.

[9] The sheriff reached this conclusion upon the basis of representations which had been made to him by the defender's solicitor and which the sheriff summarised in paragraphs 10 and 11 of his note in the following terms:

10. In moving the application Mr Swarbrick confirmed that, notwithstanding its terms (referring to the unassessed account of expenses attached to the incidental application), he would be content with a finding against Mr Edwards of personal liability in expenses as assessed on the summary cause scale. Mr Swarbrick intimated that since the lodging of the defence and counterclaim he had discovered that the pursuer company had not been incorporated until 20 September 2007 with a registered office at 17 Queensgate, Inverness, that its number was SC331246 and that Mr Graham Lappin had never been a director. This was in contrast to the averments in the summons which indicated that the work had been carried out by the pursuer between 14 February and 22 July 2006. That was impossible given the date of incorporation of the pursuer. In those circumstances the pursuer was bound to fail from the outset. It appeared that the company had now been sold and the prospect of recovery of the counterclaim and any award of expenses against the company were remote and quite possibly unfair on the new shareholders of the company.

11. In any event the company number of Monoseal Plus Limited was SC331246, yet the estimate and invoice issued by the pursuer claimed that it was a registered company with the number 267365.

[10] It will be apparent from the terms of the defender's incidental application that Mr Edwards was given no notice in advance of the hearing before Sheriff MacFadyen that the correct identity of the company with whom the defender had contracted would be an issue at that hearing, and at the hearing of the appeal he confirmed that he had been totally unaware that this issue would be raised. It appears from what the sheriff says at paragraph 28 of his note that Mr Edward's position before him was that he had been duped and effectively misled as to the identity of the party with whom the defender had contracted. In other words, he appears to have accepted at that stage that the representations which had been made by the defender's solicitor to the sheriff were correct.

[11] The story did not end there. On 11th August 2008 a note of appeal by Mr Edwards against Sheriff MacFadyen's decision was lodged with the sheriff clerk. This included the following two paragraphs;

1. Mr George Edwards maintains that the presiding sheriff who heard the incidental application at Tain Sheriff Court on 16th July 2008 ........ was misinformed and ill-advised as to the legitimacy of the company Monoseal Plus Limited, company number SC 267365 by the defender's solicitor, Mr D J Swarbrick.

2. Monoseal Plus Limited was incorporated as a private limited company and registered at Companies House under serial number 267365 on the 4th May 2004 contrary to the information supplied to the court by Mr D J Swarbrick, solicitor acting for the defender. A copy of the certificate of incorporation is attached to this document.

Attached to the note of appeal was a copy of the certificate of incorporation of Monoseal Plus Limited as narrated in the second of these paragraphs.

[12] The sheriff duly prepared and issued a stated case. In paragraph 1 he explained that the note of appeal raised only one issue, namely his decision to find Mr Edwards personally liable in certain of the expenses of the cause, that evidence had never been led, that in this event it was inappropriate to record any findings in fact and that he had nothing substantial to add to the record of proceedings and reasoning for his decision already set out in the note to his interlocutor dated 31st July 2008. He therefore annexed to the stated case copies of his interlocutor and note. In paragraph 2 of the stated case he went on to say:

2. The note of appeal raises the same arguments as those presented by Mr Edwards before me on 16 July 2008. The detailed assertion in numbered paragraph 2 that Monoseal (sic) Plus Limited was incorporated as a private limited company on 4 May 2004 under serial number 267365 was not made in court and prior to the lodging of this note of appeal I had not been shown any certificate of incorporation thereof. If what is asserted in paragraph 2 of the note of appeal is correct, then it would appear that the action was correctly brought in the name of Mono Seal Plus Limited and no fault attaches to Mr Edwards on that account. In that situation I would not have found Mr Edwards personally liable in the expenses of the cause.

The stated case concludes with seven questions of law. The first three of these were evidently proposed by the sheriff himself and read as follows:

1. Was it competent to award expenses personally against an authorised lay representative?

2. In the circumstances known to me at the time, was I correct to do so?

3. If the pursuer did exist at the time of the contract being entered into between the parties, at the time of its execution and at the time of the raising of the action, should that award of expenses against Mr Edwards personally stand and in its place an award be made against the pursuer?

The remaining four questions were proposed by the defender and for present purposes it is necessary to notice only that numbered 5 which reads:

5. Whether the appeal is competent having regard to section 38(a) of the Sheriff Courts (Scotland) Act 1971?

[13] The stated case was issued by the sheriff clerk to the parties under cover of a letter dated 18th September 2008. On 3rd September 2008, while it was still the subject of adjustment, the defender's solicitor lodged an inventory of productions which included copies of two certificates of incorporation on change of name. Both were dated 21st May 2008. The first related to company number 267365 and stated that Monoseal Plus Limited, having by special resolution changed its name, was now incorporated under the name of At Home Construction Limited. The second related to company number 331246 and stated that At Home Construction Limited, having by special resolution changed its name, was now incorporated under the name of Monoseal Plus Limited.

[14] At the hearing of the appeal Mr Edwards appeared on his own behalf and submitted in short that the appeal should be allowed, the defender's solicitor having misled Sheriff MacFadyen in asserting, as he had, that the company with whom the defender had contracted had not been the pursuers.

[15] In response, the defender's solicitor explained that at the hearing on expenses he had put before Sheriff MacFadyen a document which demonstrated that Monoseal Plus Limited had only come into existence after the contract with the defender had been made. He acknowledged that it now appeared that At Home Construction Limited and Monoseal Plus Limited had exchanged names two days before the proof on 23rd May 2008, and he accepted that when the action had been raised Monoseal Plus Limited had indeed existed as the company numbered 267365. He emphasised (and I may add here that I had no reason to doubt) that his mistake had been genuinely and honestly made.

[16] The defender's solicitor nonetheless went on to argue that the appeal was incompetent in so far as it related to question 3 in the stated case and so should be rejected and that, if I were against him on this, I should hold (a) that the sheriff had been correct to find that it had been competent to find Mr Edwards personally liable in expenses to the defender, and (b) that Mr Edwards should indeed be found personally liable on various grounds which he proceeded to specify and which were largely repetitions of the grounds which had been advanced before the sheriff and rejected by him.

[17] Turning to the competency of the appeal, the defender's solicitor drew attention to section 38 of the Sheriff Courts (Scotland) Act 1971 which, so far as material, provides:

In the case of -

(a) any summary cause an appeal shall lie to the sheriff principal on any point of law from the final judgment of the sheriff .....

(b) .........

but save as aforesaid an interlocutor of the sheriff or the sheriff principal in any such cause shall not be subject to review.

The defender's solicitor submitted that the effect of this section in this case was that on appeal the court was obliged to consider only the facts of the case as they had been known to the sheriff when he had made his decision on the issue of expenses and that the facts as they were now known to be should therefore be ignored. Question 3 in the stated case was not a competent question in light of section 38 since it required the court to reopen the issue on the facts of the case after the sheriff had made his final judgment on the matter of expenses. An appellant in a case such as this was not entitled to argue on appeal that the sheriff's decision should be overturned on the basis of facts of which he had previously been unaware or in respect of which he had previously been mistaken. Question 3 was a hypothetical question which proposed that the factual circumstances were different from those which had been known when the sheriff had made his decision on the issue of expenses. The effect of section 38 was that the factual matrix could not be reopened on appeal. The sheriff's decision could only be reviewed on a point of law and in order to succeed an appellant had therefore to demonstrate that the sheriff had misapplied the law. As far as question 3 was concerned an appeal would only be competent if an issue had been raised about the application by the sheriff of the dispensing power, and this had not been done in the stated case. Reference was made here to Rediffusion Ltd -v- McIlroy 1986 SLT (Sheriff Court) 33, Webster Engineering Services -v- Gibson 1987 SLT (Sheriff Court) 101, City of Edinburgh District Council -v- Robbin 1994 SLT (Sheriff Court) 51, Mackie -v- East Ayrshire Council (Court of Session, 10th October 2000), Cairns -v- Torq Partnership Limited (Glasgow Sheriff Court, 23rd March 2000) and Macphail's Sheriff Court Practice (3rd Edn) at paragraph 18.18.

[18] It was perhaps not surprising that, being a layman in these matters, Mr Edwards did not seek to address these particular submissions when he responded to the defenders's solicitors's submissions as a whole. But he did not concede that the appeal was incompetent. For present purposes I think that it is sufficient to say that in my opinion this appeal does indeed raise a point of law which can be reviewed on appeal under section 38 and which is posed, albeit somewhat obliquely, in question 3 in the stated case. The true question here which arises from the judgment of the sheriff (and which is one of law) is whether he erred in the exercise of his discretion in finding Mr Edwards personally liable to the defender in expenses given that the pursuers did indeed exist when the contract was entered into with the defender and the work was carried out on the roof of his property. The answer to this question is that the sheriff plainly did err, albeit wholly inadvertently, in as much as he found Mr Edwards personally liable on the basis of a representation of fact which had been made to him by the defender's solicitor and which, it is now acknowledged, was not true. It would have been a different matter altogether if the sheriff had had to decide whether the representation was true or not. That would have been a question of fact and the sheriff's decision on that question would not normally have been open to appeal under section 38(a). I say "not normally" since I can see that nice questions would arise in the event that a sheriff made a finding in fact in a stated case which was subsequently conceded on appeal to be incorrect notwithstanding that the sheriff had been entitled to make it in light of the evidence before him at the proof. But in this case the sheriff did not make a finding in fact about the status of the pursuers at the time the contract between the parties was entered into and it is plain that he did not consider, let alone decide as a matter of fact, what their status was at that time. He simply accepted as true the representation which had been made to him by the defender's solicitor (and of which, as indicated, Mr Edwards had had no prior notice and so was not in a position at the time to refute) and on this basis proceeded to consider the question whether he should find Mr Edwards personally liable in expenses to the defender. I have accordingly answered question 5 in the stated case in the affirmative.

[19] The sheriff having fallen into error here, albeit through no fault of his own, the question whether Mr Edwards should be found personally liable to the defender in expenses is at large on appeal. On the assumption that it was competent to find an authorised lay representative personally liable in expenses, the defender's solicitor advanced three grounds upon which he maintained that Mr Edwards should be found personally liable. The first was that he had brokered an agreement between the parties to the effect that the pursuers would carry out remedial works at the defender's property in return for payment by him to the pursuers of the sum of £500. This he had paid but the pursuers had failed to carry out the works and had instead raised the action in circumstances in which they were personally barred from doing so in light of the agreement. It had, so it was said, been an abuse of process to raise the action when it had thus had no prospect of success. In the second place, it had been a misuse of process to raise the action as a small claim for payment of the sum of £2,700 which included also a claim for payment of interest under the EU Directive so that the total sum claimed had been £3,597.43. In this situation Mr Edwards had used the small claims procedure as a device by which to extract this larger sum and in which his clients would be protected by the rules about expenses in small claims. And thirdly, there had been an abuse of process on the part of Mr Edwards in lodging answers to the defender's counter claim on 31st March 2008 and then in enrolling the incidental application dated 16th May 2008 to have the claim against the defender dismissed. This incidental application had not been intimated to him (the defender's solicitor). The lodging of the answers on 31st March 2008 had led him to believe that Mr Edwards was still acting in the case and, if he had not done this, he (the defender's solicitor) would have taken steps before the date of the proof to ascertain whether the pursuers were insisting upon their claim against the defender.

[20] In response, Mr Edwards opposed the proposition that he should be found personally liable in expenses to the defender. For present purposes I do not think that I need to rehearse in detail what he said since I am in any event far from being persuaded that this is a case in which a finding of personal liability in expenses against him would be appropriate on any or all of the three grounds advanced by the defender's solicitor.

[21] Sheriff MacFadyen dealt with the first of these grounds at paragraphs 23 to 25 of his note, and I see no reason to differ from what he said there. As for the submission that the action should have been raised as a summary cause rather than a small claim, I am by no means sure that this is correct given that the small claim procedure is to be used, inter alia, for actions for payment of money not exceeding £3,000 in amount (exclusive of interest and expenses) - see paragraph 2(a) of the Small Claims (Scotland) Order 1988 as amended (the emphasis is mine). It is perfectly clear from the original statement of claim in this case that the principal sum sued for was £2,700 and that it was the additional interest sought under the EU Directive (namely £611.43) which took this figure over £3,000. At all events the point is not free from doubt, and I think that it would be quite wrong to penalise Mr Edwards if he was wrong here (and I do not say that he was). As for the third ground, having heard Mr Edwards' explanation why he lodged the response to the defences and counterclaim, namely that he had understood at the hearing on 27th March 2008 that Sheriff Sutherland was giving him fourteen days within which to do so (he having offered to do so that very day), I do not think that he can be criticised for having proceeded to do this. And, even if it be the case that he was wrong in his understanding of what the sheriff had said and that he lodged the document knowing that he should not have done so, it seems to me to be altogether excessive to propose that he should thereby be made personally liable to the defender for the whole expenses of the action. At most it might have been appropriate to find him personally liable for the expenses of preparation for the proof (which I was not asked to do), and even here it seems to me quite likely that the defender would have had to prepare for the proof in any event and that his solicitor arguably could have done more than he did to ascertain what the pursuers' position was in the action in advance of the date fixed for the proof. It was unfortunate that the incidental application lodged on 16th May 2008 was not intimated to the defender or his solicitor. But here too I do not see how this would merit a finding of personal liability in expenses against Mr Edwards.

[22] In view of what I have said so far, it is unnecessary that I should express any opinion on the soundness or otherwise of the proposition that an authorised lay representative may be found personally liable in expenses in the same way as a solicitor may be.

[23] The defender's solicitor submitted finally that, whatever the outcome of the appeal, I should allow the designation of the pursuers in the summons to be amended as indicated in the foregoing interlocutor and that, if the appeal by Mr Edwards were to be allowed, then I should find the pursuers liable to the defender in the expenses of the action. Since the pursuers as so designed have had no intimation of this I do not think that it would be appropriate to give effect to this submission without giving them an opportunity to be heard on the matter. It will be seen that I have fixed a hearing accordingly for 27th March 2009, and it should be noted that this will take place within chambers at Inverness Sheriff Court.

[24] In addition to the authorities already mentioned, I was also referred to Mulholland -v- Macfarlane's Trustees 1928 SLT 251, Bremner -v- Bremner 1998 SLT 844, Blyth -v- Watson 1987 SLT 616, Stewart -v- Stewart 1984 SLT (Sheriff Court) 58 and Macphail's Sheriff Court Practice (3rd Edn) at paragraph 2.19.