SHERIFFDOM OF TAYSIDE CENTRAL AND FIFE

 

A917/00

 

JUDGMENT OF SHERIFF PRINCIPAL

R A DUNLOP QC

 

in the cause

 

ISABELLA PRIMROSE SMITH LEIGHTON or HARDIE

Pursuer and Appellant

 

against

 

CATHEL H MORRISON and JOHN H FERRIS, the whole sometime partners in the now dissolved partnership of Anderson & Menzies, CA

Defenders and Respondents

 

__________________

 

 

Act: Mr Francis, Advocate, instructed by Gibson & Spears, Dow & Son, Solicitors, Kirkcaldy

Alt: Mr Bartos, Advocate, instructed by Smith & Grant, Solicitors, Leven

 

 

KIRKCALDY, 10 July 2012. The Sheriff Principal, having resumed consideration of the cause, refuses the appeal and adheres to the sheriff's interlocutors of 5 October and 2 November 2011 complained of; certifies the appeal as suitable for the employment of junior counsel; finds the pursuer and appellant liable to the first defender and respondent in the expenses of the appeal; allows an account thereof to be given in and remits the same, when lodged, to the auditor of court to tax and report.

 

 

 

 

 

NOTE:

[1] This is an appeal against the sheriff's interlocutor dismissing the action in terms of Ordinary Cause Rule 15.7. OCR 15.7, so far as material, provides as follows:-

 

"(1) Any party to an action may, while that action is depending before the court, apply by written motion for the court to dismiss the action due to inordinate and inexcusable delay by another party or another party's agent in progressing the action, resulting in unfairness.

(2) ......

(3) ......

(4) In determining an application made under this rule, the court may dismiss the action if it appears to the court that -

(a) there has been an inordinate and inexcusable delay on the part of any party or any party's agent in progressing the action; and

(b) such delay results in unfairness specific to the factual circumstances, including the procedural circumstances, of that action.

(5) In determining whether or not to dismiss an action under paragraph (4), the court shall take account of the procedural consequences, both for the parties and for the work of the court, of allowing the action to proceed."

 

[2] The action was raised in October 2000 and, following the lodging of brief defences, was sisted at the instance of the first defender on 19 January 2001. There was no further procedure in the case until a motion was lodged by the pursuer on 16 May 2011 seeking recall of the sist, restoration of the cause to the adjustment roll, the allowance of certain adjustments to be received and thereafter the grant of summary decree.

 

[3] In the action the pursuer seeks payment of capital due to her deceased husband as a former partner in a firm of accountants. As appears clear from the pursuer's pleas in law her claim is primarily, though not exclusively, founded on contract. The late Mr Hardie had resigned as a partner in 1989 and was entitled to repayment of his capital account in the firm. However at that time there was a concern about a claim against the firm, which might have been uninsured and which the partnership might therefore have to settle itself. In view of this uncertainty the pursuer entered into an agreement with the firm, whose partners were then the defenders. The agreement was reduced to writing in a Minute (no 5/2 of process) dated 7 May 1993. At that time the balance due to the late Mr Hardie was stated to be £70,000. In terms of the Minute of Agreement a deposit account was to be opened into which this balance of capital was to be paid to await resolution of the outstanding claim and subject to satisfactory legal assurances being given. It appears that in fact no such account was opened but instead the sum of £10,000 was placed in the client account of the firm. Thereafter further partners were assumed into the firm, the defenders retiring therefrom in 1995.

 

[4] The sheriff notes that it appeared that the claim which had been made against the firm was resolved although the exact basis of settlement was not clear nor was its effect on the sum due to the late Mr Hardie's estate. The claim appears to have been dealt with by Mr Black, one of the assumed partners, who in turn retired at some later stage and whose precise whereabouts have not been discovered. As the sheriff noted, Mr Black was clearly an important witness, having dealt with the uninsured claim and with the pursuer regarding the capital repayment and as such was the person best placed to assist the court in relation to the merits of the action.

 

[5] In addressing himself to the provisions of OCR 15.7(4)(a) the sheriff remarked that a delay of over ten years was on any view "inordinate" and noted that no excuse or explanation for that delay had been put forward by the pursuer. On the question whether the delay had resulted in unfairness specific to the factual circumstances of the action, he stated that it could not be said with certainty whether the claim against the firm had in fact been resolved or that the necessary legal assurances required in terms of the Minute of Agreement had been given. Specifically he stated that these questions could not be decided on the strength of the documentary evidence alone and that in all probability a proof would be required. He referred to the likely further delay were the action to proceed, particularly if, as seemed likely, there was third party procedure to introduce the assumed partners in the firm. He was plainly concerned at the difficulties of examining witnesses and evaluating their evidence on matters which had occurred so long ago. Reviewing the whole factual circumstances the sheriff concluded that the requirements of OCR 15.7(4)(b) had also been made out. Finally, in addressing the provisions of OCR 15.7(5), the sheriff considered the procedural consequences both for the parties and for the work of the court of allowing the action to proceed and found no positive reasons in support of that course of action.

 

[6] In response to this judgment the pursuer lodged a note of appeal, the scope of which was significantly compressed in the course of the appeal hearing. I do not think I do any injustice to the submissions of counsel for the pursuer and appellant in stating that his argument was in large measure confined to the proposition that the obligation of the defenders to account for the sum of £10,000, which had been placed in the client account of the firm in name of the pursuer, was an imprescriptible obligation and that, in the absence of circumstances amounting to personal bar, it could never be said that an action to enforce such an obligation could not be insisted upon even where there has been delay causing unfair prejudice to the defenders. The short proposition was that there can never be inordinate delay within the meaning of OCR 15.7(4)(a) where the obligation to be enforced is imprescriptible. It should be noted that this argument does not appear to have been addressed to the sheriff.

 

[7] In elaborating this argument counsel for the pursuer made reference to Birkett v James 1978 AC 297 at 320 ff, Tonner v Reiach & Hall 2008 SC 1 and Hepburn v Royal Alexandra Hospital 2011 SC 20. In support of his submission that the sum at client account was a fiduciary holding and that the defenders were trustees he referred to Bennett Millar on Partnership 2^nd edition at page 404 and the citation therein to Bell's Commentaries II.501, Council of the Law Society of Scotland v McKimmie 1991 SC 355 at 359, Jopp v Johnstone's Trustees (1904) 6F 1028 and the Scottish Law Commission Discussion Paper on Supplementary and Miscellaneous Issues relating to Trust Law (April 2011) para.5.10. He submitted that, given the nature of the obligation, it fell within the provisions of paragraph (e) of schedule 3 to the Prescription and Limitation (Scotland) Act 1973 which defined those obligations which were imprescriptible for the purposes of sections 7 and 8 and schedule 1 of the Act.

 

[8] Counsel mounted a subsidiary argument directed to the sheriff's conclusion that the issue between the parties could not be resolved on the basis of the documentary evidence alone. He submitted that, had the sheriff properly analysed the documents, he would have concluded that the claim against the partnership had been settled and that accordingly, in relation to the claim for payment of the sum of £10,000 in the client account, any condition precedent in the Minute of Agreement had been purified with the result that that sum ought now to be paid over to the pursuer.

 

[9] In support of this argument counsel referred to documents within a fourth inventory of productions for the pursuer which bore to show that the claims against the partnership had been settled by a payment by insurers with the uninsured element of the settlement amounting only to £2,500. This amount appears to have been repaid to the insurers by the pursuer and the first defender. It should be noted however that this fourth inventory of productions was not before the sheriff and counsel conceded that it could only be looked at in the event that it could be demonstrated that the sheriff had exercised his discretion wrongly so that the matter was at large for my decision.

 

[10] The second defender has been sequestrated and took no part in the appeal proceedings. For all practical purposes the pursuer and first defender are the interested parties in the appeal. In responding to the appeal counsel for the first defender submitted that the objective of OCR 15.7 was the avoidance of delay in progressing an action and that there was no reason to distinguish between imprescriptible and prescriptible obligations in that regard. In any event it was submitted that, before the sheriff, counsel had not taken any issue with the proposition that OCR 15.7(4)(a) had been established (see paragraphs 18 and 28 of sheriff's note).

 

[11] In relation to the broader questions raised in the note of appeal counsel for the first defender drew attention to the fact that the pursuer's appeal was confined to that part of the claim relating to the sum of £10,000 on client account. The argument advanced in this regard had not been raised before the sheriff and if the action were allowed to continue on the strength of this argument there would be prejudice to the defender with regard to the larger contractual claim in relation to which the pursuer offered no criticism of the sheriff's analysis. Looking at the claim for payment of the sum of £10,000 it was pointed out that the first defender had a plea to the relevancy of that claim, the point being that this client account had passed from one partnership to another so that, upon their resignation, the original partners had ceased to be responsible for that client account. If that legal proposition were unfounded nevertheless there would potentially be a right of relief and it would be necessary to involve successor partners which in turn would require consideration to be given to the transfer agreement from one partnership to another. However investigation of that aspect of the case would be difficult given that the partnership papers had been destroyed before the action was raised and a direct recollection of what might have been in those documents was likely to have dimmed with the passage of time. These were all factors to which the sheriff was properly entitled to have regard and it could not be said that he had exercised a wrong judgement in his treatment of them.

 

[12] In relation to the pursuer's contention that the sheriff had erred in concluding that the issue could not be determined on the basis of the documentary evidence alone counsel for the first defender supported the sheriff's view and pointed out further that no issue had been taken by the pursuer with the other factors upon which the sheriff relied in paragraphs 28, 29 and 30 of his note.

 

Discussion

 

[13] For present purposes I proceed on the hypothesis that the sum of £10,000 held on client account is a fiduciary holding and that the first defender's obligation to account to the pursuer for that sum and to make it over to her is imprescriptible. Be that as it may it does not follow that the provisions of OCR 15.7 have no application to an action which seeks to enforce such an obligation. As counsel for the first defender pointed out, correctly in my view, OCR 15.7 is directed to avoiding delay in the progress of an action once raised and there is nothing in the terms of the rule which suggests that one should exclude from its ambit those actions in which the obligation seeking to be enforced is imprescriptible. In saying that I recognise that in Birkett v James Lord Diplock expressed the opinion that delay before the expiry of the limitation period could not be seen as "inordinate". This approach was developed in Trill v Sacher 1993 1 WLR 1379 (referred to at paragraph 39 of the court's opinion in Tonner v Reiach & Hall). In Trill, Neill LJ set out a series of principles and guidelines, the eighth of which is the proposition that save in exceptional circumstances an action will not be struck out for want of prosecution before the expiry of the relevant limitation period. He then goes on as follows:-

 

"It is not altogether clear how this rule is best explained. It may be that before the limitation period has expired that delay cannot properly be regarded as "inordinate". Alternatively, it may be that, though the delay is both inordinate and inexcusable, the court would not in the ordinary case exercise its discretion to strike the action out if a fresh writ could be issued at once. To do so would only delay the trial."

 

In Tonner v Reiach & Hall however the court cautioned against seeking to apply the Trill criteria too closely as they were developed in a different procedural context (see paragraph 133). The difference is highlighted in paragraph 143 of its opinion where the distinction is drawn between dismissal and absolvitor, a distinction which is apparently not made in England. In the final analysis the court in Tonner chose to adopt its own wording to describe the criteria which ought to apply rather than adopt the language used in the English authorities, while emphasising as the most important principle that the power of dismissal must be exercised in each case in the light of its own facts and circumstances.

 

[14] In large measure OCR 15.7 codifies the approach set out in Tonner and in my view there is nothing in either that case or the terms of the rule which suggests that there can never be inordinate delay in an action in which the prescriptive period has not yet expired. There plainly can be inordinate and inexcusable delay in progressing an action whatever the nature of the obligation sought to be enforced and whether imprescriptible or not. Counsel for the first defender posed the rhetorical questions why should the court lists be clogged up with actions which are not being pursued and why should defenders be out of pocket for expenses which have been laid out in an action which is not brought to a conclusion. These are relevant questions which among others point to the true purpose of the rule and it seems clear to me that in appropriate circumstances delay can properly be described as inordinate and inexcusable within the meaning of OCR 15.7(4)(a) notwithstanding that the obligation in question may be imprescriptible.

 

[15] That is not to say however that the fact that an obligation is imprescriptible may not have a bearing on the question whether such delay results in unfairness. Generally speaking, while circumstances will vary from one case to another, it is at least a relevant question to ask whether it would be unfair to allow an action to proceed when dismissal would not preclude the raising of a further action to which no objection could be taken on the ground that the obligation had prescribed. Such an approach would consist with the alternative explanation suggested by Neill LJ in Trill for the rule set out in his eighth principle referred to above but in any event would also consist with the approach in Tonner that emphasises the importance of the particular facts and circumstances of each case. Accordingly the fact that an obligation is imprescriptible may be one consideration among others which will inform the court's decision about whether the power under OCR 15.7 should be exercised or not.

 

[16] In that context it is important to notice that the claim in relation to the sum of £10,000 is a small part only of the total claim made by the pursuer and counsel for the pursuer did not discriminate between the different parts of the action in inviting me to overturn the sheriff's interlocutor and in effect to allow the whole action to proceed. Since OCR 15.7 is directed to the progress of an action, and absent any abandonment by the pursuer of the other aspects of her claim, it seems to me that the issue of unfairness has to be judged by reference to the action as a whole. Approaching the matter in that way it is important to emphasise that, excepting his argument based on the documentation, counsel for the pursuer did not mount any attack on the sheriff's reasoning insofar as it related to the unfairness of allowing the action to proceed in respect of the larger part of the pursuer's claim. This is consistent with counsel's explicit statement that a "critical" feature of his whole argument was that the obligation to pay the sum of £10,000 was imprescriptible. Quite apart from the fact that this may be seen as recognition that without that consideration his appeal must fail it also highlights the fact that any claimed unfairness in not allowing the action to proceed relates only to a small part of the overall claim. Counsel claimed that the sheriff had omitted to have regard to the detriment which would accrue to the pursuer if she could not proceed with the present action. It seems to me self evident from the sheriff's approach that he must have had that in mind even if he did not explicitly say so but in any event it is plain that any prejudice to the pursuer in respect of her claim for £10,000 is mitigated by the fact that, on the hypothesis that the obligation is imprescriptible, she can raise a fresh action for that sum. In these circumstances it does not seem to me that the argument mounted in the appeal has any material effect in undermining the sheriff's approach in his consideration of OCR 15.7(4)(b) when looking at the action as a whole.

 

[17] Turning to a consideration of the sheriff's conclusion with regard to the documentation in the case it is important to recall that the fourth inventory of productions was not before him. Looking at the matter from the perspective of those documents which were available to him I do not think that he can be faulted for his conclusion that the case could not be decided on papers alone. While the new inventory of productions may advance the position somewhat in relation to the claim for £10,000, it is difficult to see how the sheriff can be faulted for a discretionary decision founded on material which was not placed before him. Suffice it to say that I am not persuaded that counsel's attack on this aspect of the case can be sustained.

 

[18] Looking at the sheriff's note as a whole it is clear that he has addressed the correct legal test. He has identified what seem to me to be the relevant factors bearing on the question of unfairness and has reached a careful and balanced view based on these factors. In circumstances in which the appeal is essentially founded on an argument and on documents which were not put to the sheriff I do not consider that I would be justified in interfering with his judgement, particularly since, on the hypothesis indicated, the pursuer will not be precluded from raising a fresh action for the restricted sum of £10,000 which was effectively the only claim which counsel for the pursuer sought to vindicate in the appeal.

 

[19] It follows that the appeal must be refused. Counsel were agreed that the appeal should be certified as suitable for the employment of junior counsel and that, in the event of the appeal being refused, the pursuer and appellant should be found liable in expenses.