Scottish Sheriff Court Decisions

2015SCGLA63

 

SHERIFFDOM OF GLASGOW AND STRATHKELVIN AT GLASGOW

 

CA107/12

JUDGMENT

of

SHERIFF PRINCIPAL C A L SCOTT, QC

in the cause

Avondale Coaches Ltd

Pursuers

against

 

Strathclyde Partnership for Transport

Defenders

_____________________

 

Glasgow, 2 October 2015.

The sheriff principal, having resumed consideration of the appeal, refuses same; adheres to the sheriff’s interlocutor dated 3 November 2014; finds the defenders liable to the pursuers in the expenses of the appeal; allows an account thereof to be given in and remits same, when lodged, to the auditor of court to tax and to report thereon; and certifies the appeal as suitable for the employment of junior counsel.

 

NOTE:-

Background

[1]        This appeal arises from an action of damages raised by the pursuers against the defenders.  As the sheriff mentions at the outset of her note, the dispute between the parties concerned the termination of a contract for services.

[2]        In June 2005, the defenders contracted with the pursuers for the provision by the pursuers of bus services.  It was a demand responsive transport service known as “dial a bus”.  The service provided buses to a vulnerable client group who because of age or other infirmity were unable to access other transport services.

[3]        The action proceeded under commercial court procedure and was the subject of active case management.  Ultimately, a proof before answer having been allowed, evidence and submissions were heard over a 7 day period.

[4]        As the sheriff narrates in her note, the contract allowed the defenders to issue warnings following upon breaches of contract by the pursuers.  It is clear that the proof before answer proceeded on the basis that the application of the warning system required the defenders to exercise their discretion honestly and in good faith.  Furthermore, there was a requirement that their discretion ought not to be exercised arbitrarily, capriciously or unreasonably.

[5]        The sheriff, inter alia, determined that the defenders had exercised their discretion in an arbitrary, capricious and unreasonable manner.  In the note of appeal, that determination was challenged in the first of four grounds of appeal.

[6]        Two weeks prior to the commencement of the appeal hearing, and some 2 months after the appeal was lodged, the defenders sought an adjournment of the appeal in order to facilitate full transcription of the evidence recorded at proof.  The defenders also founded upon the unavailability of the solicitor responsible for conducting the appeal.

[7]        That motion to adjourn was opposed and refused on the basis that it came too late and that the sheriff had, in any event, dealt clearly and comprehensively with the evidence in the case.

[8]        When the appeal hearing commenced, counsel instructed on behalf of the defenders moved to lodge new productions which had not been before the sheriff during the proof.  That motion was objected to on behalf of the pursuers.  The productions were said to relate to collateral and, consequently, irrelevant material concerning a finding made by a traffic commissioner.  In the course of the proof, the sheriff had upheld an objection to the material in question being admitted.  I refused the motion on the basis that it was made too late, coming as it did on the morning of the appeal.

[9]        Counsel for the defenders then moved to discharge the appeal hearing itself.  It was submitted that the “statutory framework” was highly relevant and that the court required to be addressed on it.  There was a suggestion that the case of Compass Group UK & Ireland Ltd v Mid Essex Hospital Services NHS Trust [2012] EWHC 781 as mentioned by the sheriff at paragraph [76] in her note had been re-visited since the proof and, therefore, required to be considered anew on appeal.  Counsel for the defenders submitted that a discharge of the hearing would best serve the interests of justice.

[10]      In opposing the motion for a discharge, counsel for the pursuers pointed out that the appeal having been marked in November of 2014, the defenders had had more than enough time to present this novel position to the court and that to do so on the morning of the appeal hearing was reprehensible.  The grounds of appeal in the note lodged in November did not reflect the line which was now being taken on behalf of the defenders.  Counsel for the pursuers argued that the motion was simply an attempt to introduce material and arguments which had not been canvassed in the pleadings and had not been put to any witness in the course of the evidence.  Nor had any submission along the lines now foreshadowed by counsel for the defenders been placed before the sheriff in the course of the closing arguments following the proof.  For completeness, counsel for the pursuers maintained that the case of Compass was, in any event, fact specific and whether the decision in that case had since been overturned would not have affected the sheriff’s decision in the circumstances of the present case.

[11]      In considering the defenders’ motion to adjourn the appeal hearing at such a late stage I found favour with the arguments presented for the pursuers.  To my mind, the fact that the motion was presented on the morning of the appeal hearing was inexcusable.  I did not consider that the interests of justice would be served by granting the motion.  I concluded that by deferring consideration of the appeal, the pursuers would be unfairly prejudiced.  Had it been the defenders’ position that the grounds of appeal required to be altered, amended or expanded, that was something which ought to have been attended to well before the commencement of the appeal hearing itself.  Accordingly, the motion was refused.

[12]      In these circumstances, therefore, the appeal hearing eventually proceeded with counsel for the defenders addressing the court at length.  On the following (second) day of the appeal, counsel for the defenders tendered written submissions (retained with the process).  The defenders’ counsel then concluded his submissions.  However, counsel for the pursuers was, perhaps, understandably, unable to present a full reply in the time remaining.  Notwithstanding opposition from the defenders at that stage, the appeal hearing was adjourned to a future date or dates.

[13]      Over 2 months following the adjournment, the defenders enrolled a motion to allow two supplementary grounds of appeal to be received though late.  Counsel for the defenders appeared to move the motion.  It was accepted that the sheriff’s decision turned to a large extent on the credibility and reliability of witnesses who gave evidence during the course of the proof.  Counsel, in particular, referred to the witness Alexander Scott, who had been called on behalf of the defenders.  The sheriff had found him to be incredible and unreliable.

[14]      Further reference was made to the involvement of a traffic commissioner and to the evidence of the witness Christopher Irving.  Counsel for the defenders highlighted certain passages within that witness’ evidence.  Counsel’s main proposition, as I understood it, was to the effect that the witness Mr Scott had in some way been precluded from explaining his position in relation to certain background events.  Counsel submitted that “to hear both sides fairly” the sheriff ought to have allowed Mr Scott to give evidence about these issues.

[15]      In opposition to the motion, counsel for the pursuers explained that the pursuers’ witness, Mr Irving, had not been challenged under cross-examination.  Indeed, in respect of the subject matter connected to the proposed addition of supplementary grounds of appeal, none of the pursuers’ witnesses had been challenged during their evidence.  The business of the traffic commissioner’s involvement, whatever that might have amounted to, had not been put to any of the pursuers’ witnesses.  In the course of submissions, it had been accepted on behalf of the defenders that the issue in question was restricted to the use of taxis.  Whilst the witness Mr Scott had, at proof, been intent upon introducing extraneous, collateral material, that approach had been correctly prevented by the court.

[16]      Being afforded a right to respond to counsel for the pursuers’ submissions opposing the motion, counsel for the defenders was forced to concede that, indeed, the substance of the matters which he was seeking to introduce by way of supplementary grounds of appeal had not been put to any of the pursuers’ witnesses during the course of the proof.  That, to my mind, was an end of the matter.  I was clearly of the view that where the defenders had failed to challenge the pursuers’ evidence in certain respects and particularly the evidence given by the witness Irving, they could not now be permitted to introduce a challenge to that evidence via a subsequent appeal.  For reasons which were, to my mind, obvious, that would be entirely unfair and, indeed, unworkable without, in effect, re-opening the entire proof.  Accordingly, the motion for supplementary grounds of appeal to be allowed was refused.

[17]      The remaining submissions in the appeal were heard about one month later.

 

Defenders’ submissions

[18]      As counsel for the defenders’ submissions developed on day one of the appeal, it became clear that what was being challenged was the sheriff’s assessment of the evidence and her assessment of witness’ credibility and reliability.

[19]      Counsel sought to criticise the sheriff’s approach within paragraph [52] of her note.  The court was urged not to accept the sheriff’s treatment of the evidence together with the sheriff’s conclusion that the defenders’ computer programme had no scope for override thereby, in effect, excluding the exercise of any discretion.

[20]      Reference was made to passages within the evidence of the defenders’ witness Linda Gold.  In this context, counsel also sought to criticise the sheriff’s treatment of the evidence given by Alexander Scott.  Counsel referred to paragraph [26] in the sheriff’s note.  At the beginning of that paragraph, the sheriff had characterised Mr Scott’s evidence as being to the effect “that the problem was about frequency of breakdowns”.

[21]      By referring to a part of Mr Scott’s evidence and to certain productions, counsel, in effect, sought to place a different slant on Mr Scott’s testimony all coupled with the proposition that the sheriff had incorrectly assessed Mr Scott’s evidence.

[22]      Counsel for the defenders made reference to the fact that the sheriff had been satisfied that the defenders’ conduct showed an inconsistency in their approach to the use of taxis.  (See paragraph [75] in sheriff’s note).  She went on to refer to Mr Scott’s “dogged adherence to the strict terms of the contract”.  Counsel submitted that the defenders’ position had been that there was a contract for services which provided for two vehicles together with a replacement vehicle.  Their position was that only in very exceptional circumstances should a taxi have been used.

[23]      In contrast, the pursuers, as counsel put it, doggedly adhered to the argument that it was open to them to use taxis where their buses broke down although, at the same time, they accepted that that did not meet the specification within the contract.

[24]      Counsel for the defenders referred to various passages appearing in the transcript from day 5 of the evidence at pages 27 through to 34.  From these passages within Mr Scott’s testimony, counsel for the defenders drew out the conclusion that the witness accepted that taxis could be used in breakdown situations and that a key consideration in the operation of the contract was the welfare of the passenger group.  Counsel also highlighted certain passages at page 96 within the same portion of the transcript.  He submitted that, on Mr Scott’s evidence, the use of taxis was intrinsically bound up with vehicle breakdowns.

[25]      Counsel went on to submit that the sheriff had been guilty of a major error.  This concerned the question of delay in warnings being issued by the defenders.  At paragraph [39] in her note, the sheriff had concluded that the issue of five separate warning letters in the course of 11 August 2009 had, in itself, been unreasonable.  Counsel submitted that there was no basis for her to take that view.  It was argued that such a conclusion involved the importation of some form of implied condition into the contract whereas no such condition existed.

[26]      Under reference to paragraphs [40] and [41] in the sheriff’s note, counsel for the defenders, in turn, cited clause 19(b) within the parties’ contract.  It dealt with an obligation upon the pursuers to maintain appropriate records.  That was to be distinguished from the passenger schedule.  Counsel submitted that there had been no time limit for warning letters to be issued and, similarly, there was no time limit regarding any appeal by the pursuers flowing from the issue of a warning letter.  Therefore, counsel maintained that it was not open to the sheriff to reach the conclusion that the defenders had issued warnings to the pursuers on timescales which prevented them from making investigation into the incidents reported.

[27]      The witness, David Gold, who gave evidence on behalf of the pursuers at the commencement of the proof, testified that he had been a transport manager for some 15 years.  Therefore, concluded counsel for the defenders, he was no novice when it came to public transport contracts.  If, counsel submitted, the pursuers had failed to keep appropriate records that factor should not have been held against the defenders.  In contrast, it should have counted against the pursuers.  Counsel referred to the general evidential presumption mentioned within Dickson on Evidence, Volume 1, at page 100.07.  There was an obligation upon the pursuers to challenge the validity of any warning letter.  The question of the circumstances in which warning letters were issued was, counsel pointed out, one of the factors which the sheriff relied upon in holding that the defenders’ conduct was capricious and arbitrary.

[28]      Reference was made to Mr Gold’s evidence at pages 44 and 66 within day 1 of the transcript and at pages 198 to 199 within the day 2 transcript.  Counsel for the defenders submitted that it appeared on the evidence that the pursuers had available to them some other recorded material which they might utilise in reacting to or responding to any warning letter.

[29]      Paragraph [44] in the sheriff’s note, concerned warning 1753 dated 3 September 2009.  Counsel for the defenders submitted that, contrary to the view held by the sheriff, it was not the case that “there was no evidence from which it could be concluded that the appeal received full consideration and its rejection was fair and reasonable.”

[30]      Once again, passages from Mr Scott’s testimony, during cross-examination, were referred to, all within day 5 of the transcript at page 215 onwards.  Counsel also made reference to certain email traffic at tabs 18 and 33 respectively within the inventory of documents relied upon by the defenders.

[31]      Counsel observed that one required to pose the question:  “What is going on here?”  There was no set format within the contract.  However, it was, he submitted, not correct for the sheriff to conclude that there had been no evidence regarding the appeal receiving full consideration etc.  Counsel queried what amounted to “full consideration” in all the circumstances.  He argued that the appeal had been considered as fully as it might have been.  The sheriff had provided no definition as to what she meant by “full consideration”.

[32]      Paragraph [60] in the sheriff’s note opened with the observation that the evidence had shown that prior to the meeting between the parties on 21 September 2009, the defenders had, in fact, invited tenders for the contract, viz. contract 9551C.  She concluded the paragraph with the observation that the evidence about a new contractor being in place so quickly was “food for thought”.  Counsel for the defenders queried what weight or relevance ought to be attached to the sheriff’s observation.  On no view of matters ought the defenders’ conduct on this matter to have been questioned by the court he submitted.

[33]      It was maintained on behalf of the defenders that, in inviting tenders, they had acted prudently and that it was no more than their contractual right.  Reference was made to clauses 8 and 9 within the parties’ contract.  There had been an entitlement to look to the future.  The sheriff’s position on this matter as disclosed within paragraph [60] casted doubt upon her assessment of Mr Scott’s evidence.  Counsel contended that the sheriff’s assessment simply could not be “rational”.  Mr Scott’s evidence, after all, had been that it was important for the defenders to avoid any break in service to the public.

[34]      Counsel for the defenders also placed paragraph [64] in the sheriff’s note under scrutiny.  The sheriff had preferred a version consistent with the letter dated 16 October 2009 (5/67 of process) setting out suggested revised minutes as being a more accurate record of the meeting which had taken place on 21 September 2009 as opposed to the defenders’ record, No 5/70 of process.

[35]      As I understood it, counsel’s purpose in referring to paragraph [64] was to suggest that the sheriff had misunderstood the defenders’ position regarding the circumstances in which taxis might be used.  Counsel submitted that the sheriff ought to have explained her preference for a version inserted some 3 weeks after the event.

[36]      As a general proposition, counsel for the defenders submitted that it had been the duty of the pursuers to fulfil the contract requirements.  He argued that the sheriff appeared not to have paid regard to the scale of the defenders’ operations or resources and to the fact that the operative obligations under the contract lay with the pursuers.  This line of argument was advanced in connection with paragraph [65] in the sheriff’s note.  Reference was made to Mr Scott’s testimony within the transcript at day 5, page 63 onwards.  Counsel for the defenders maintained that the sheriff had not been entitled to draw the inference which she did.  The contractual obligation lay with the pursuers not the defenders.

[37]      Counsel indicated that he had two further points to make regarding the sheriff’s assessment of Mr Scott’s credibility.  At paragraph [33] in her note, there had been discussion about a conversation which allegedly took place between Mr Scott and the witness Mr Irving in the spring of 2009.  The sheriff’s conclusion was that “It was impossible to believe Mr Scott about this conversation”.  Counsel for the defenders criticised the foregoing observation as an “injudicious comment” and suggested that it was an indication of the imbalanced approach taken by the sheriff.  No reason for her conclusion had been given apart from the apparent lack of any timeframe regarding the occurrence of the conversation.  Moreover, counsel for the defenders queried in what way the evidence given by Mr Scott under cross-examination about the conversation had not been consistent with his evidence in chief.  The sheriff had failed to specify what she meant.

[38]      On the second day of the appeal hearing, counsel for the defenders, as indicated supra, tendered written submissions for the defenders.  In prefacing his remaining oral submissions, he submitted that, generally, when it came to the assessment of witnesses, demeanour alone was not determinative. 

[39]      In returning to an analysis of paragraph [75] within the sheriff’s note, counsel dealt with the issue of inconsistency of approach by the defenders in regard to the use of taxis.  It was his submission that, in contrast to the sheriff’s conclusion, the defenders’ conduct had been consistent.  It was, counsel argued, important to look at the parties’ contract and to establish what was meant to happen under and in terms of that contract.  The nature of vehicles to be used had been specified having regard to, for instance, disability requirements.  David Gold had accepted that taxi vehicles would not necessarily benefit from any disability ramp.  In practice, the defenders’ call centre had been contacted by telephone where a de facto need existed to utilise a taxi.  Counsel submitted that the defenders had had no option but to authorise the use of a taxi in such circumstances given their need to afford due respect to the interests of passengers.

[40]      Counsel submitted that the foregoing approach fell to be distinguished from any notion of the defenders legitimising the use of taxis.  The contract provided for an appeal within 14 days of the receipt of a warning letter.  Counsel submitted that the onus lay with the pursuers to explain circumstances justifying any departure from the contract specification regarding vehicles.  As counsel put it, the sheriff “had fallen into the extreme camp occupied by the pursuers, ie taxi or no taxi” and, as such, she had erred.

[41]      Naturally, counsel for the defenders invited the court to give due consideration both to his oral submissions and to those which had been committed to writing.  He pointed out that the first six pages of his written submissions dealt with grounds 1 and 2 in the note of appeal.  Ground 3 was either no longer insisted upon or had, in reality, “withered on the vine”.  Ground 4 was taken up at page 7 within the written submissions and it was to that ground which counsel then turned.

[42]      He submitted that ground 4 was not a challenge to the calculation of quantum.  Instead, it constituted the adoption of an esto argument on the part of the defenders.  In other words, were the appeal (grounds 1 and 2) to succeed on its merits, ground 4 did not require to enter the court’s contemplation.  However, were the court to take the view that there had been no error on the part of the sheriff when it came to matters concerning breach of contract etc it would still be open to the court to find the sheriff’s decision flawed regarding the point in time and circumstances in which the contract might have been legitimately terminated by the defenders.  Counsel maintained that the defenders could have terminated the contract legitimately within a week of 22 September 2009.

[43]      Reference was made to paragraph [83] onwards within the sheriff’s note.  In characterising the sheriff’s conclusion, counsel for the defenders submitted that she had determined that the later, legitimate termination of the contract did not apply.  Reference was made specifically to paragraph [86].  Counsel submitted that the defenders only required to establish that, on the balance of probabilities, the contract might legitimately have been terminated subsequent to the termination viewed as having been illegitimate.

[44]      He maintained that it was evident that the contract would have been terminated (legitimately) and that on the balance of probabilities, all due to the pursuers’ continued failures in adhering to the specification and to the contract terms.

[45]      Counsel for the defenders referred to the table which appeared at page 7 within the defenders’ written submissions.  In his submission, it would have been open to the defenders to terminate the contract in respect of the material set out within the table and in light of the evidence which emerged in the course of the proof.  Counsel suggested that it was of note that the sheriff did not, as he put it, in any way challenge the substance of what had taken place in the run up to the termination giving rise to the litigation.  In contrast, it was the defenders’ perceived reaction to the substance of matters which had influenced the court’s decision.

[46]      Counsel observed that six of the warnings issued by the defenders throughout 2009 had not been the subject of an appeal by the pursuers.  In that connection, counsel suggested that the onus lay with the pursuers.  He returned to the evidence of Mr Gold.  He had testified that after receipt of the warning dated 21 September 2009 on 8 October the pursuers “didn’t even look at the warnings that were received at that point”.  In other words, submitted counsel, the circumstances relating to these warnings were not investigated.  Counsel criticised the pursuers’ approach which seemed to be along the lines of the contract having been terminated, therefore, why bother to investigate the remainder of warnings?

[47]      Part 2, clause 3(c) of the parties’ contract dealt with the requirement to keep the drivers’ record for six months after the date of the contract.  In counsel’s submission, the pursuers were, accordingly, dealing with a contract wherein it had been agreed that certain records would be retained well after the contract itself had come to an end.  Therefore, argued counsel, it was not sufficient for the pursuers to claim that since the contract had ended, they could be excused the necessity of investigating the circumstances of warnings received.

[48]      At the end of paragraph [72] within the sheriff’s note, she indicated that she did not find favour with the defenders’ suggestion that they had terminated the contract in reliance upon the lack of appeals which precluded the pursuers from thereafter challenging the warnings in the case.  Counsel for the defenders argued that the sheriffs’ approach was incorrect and that the contract terms were clear regarding the process to be adopted in connection with warnings.  Moreover, he submitted that the onus of proof remained upon the pursuers and that to prove that the warnings had been wrongly issued.

[49]      Counsel for the defenders focused upon the final two sentences within paragraph [86] in the sheriff’s note.  Counsel submitted that the sheriff’s comments effectively disclosed an inversion of the onus which, in reality, truly lay with the pursuers.  The pursuers were, after all, endeavouring to persuade the court that an award of damages should be made in respect of the defenders’ alleged breach of contract.  Counsel maintained that it was for the pursuers to satisfy the court that the rationale of the Mihailis Angelos case did not fall to be applied.  It was not for the defenders to have to satisfy the court as to the consequences or otherwise of the “concerted campaign” found to have been established.

[50]      Under the topic of cancellation and suspension (see page 8 in written submissions for the defenders) counsel stressed that there was an absolute contractual right vested in the defenders to terminate the contract in circumstances in which the pursuers had failed to observe the terms and conditions of the contract, failed to execute with due diligence anything necessary for the proper performance of the contract or acted to undermine the good repute of the defenders.  Counsel took the court to tab 6 within the inventory of documents and consequently to page 17 within the contract conditions dealing with cancellation and suspension.

[51]      Counsel suggested that paragraphs (a) and (b) were not relevant for present purposes.  Paragraph (c) was a standalone provision.  It was submitted that on the basis of the terms of this paragraph alone the defenders would have been entitled to terminate the contract in an entirely legitimate manner.  The terms of paragraph (c) are as follows:

“If the Operator or any employee, agent or representative of the Operator fails to observe the terms and conditions of this or any other Contract or fails to execute with due diligence and expedition anything necessary for the proper performance of a Contract or Contracts, or acts in any way to undermine the good repute of SPT or any principal on behalf of which SPT acts as agent.”

 

[52]      Counsel then posed the question as to whether there would have been a legitimate basis to terminate the contract.  He submitted that under clauses 8 and 9 there would have been such a basis.  He highlighted the fact that clause 9 was expressly said to be additional to any other right to cancel.  It was also maintained that clause 16 would separately have afforded the defenders an entitlement to terminate.

[53]      At page 25 of the conditions, provision was made as regards the “weighting” of warnings.  Counsel for the defenders submitted that these amounted to absolute contractual rights vested in the defenders.  He contended that the discretionary part in the process only engaged at paragraphs (3), (4) and (5) but that, in any event, it was subject to the final three lines which were in the following terms:

“Should more than 3 warnings of an analogous nature be issued, warnings 4 to 6 will then be allocated the next level of points, ie significant or major as appropriate as the breach will be regarded as having greater adverse effect on users of the Contracted Service.  All subsequent warnings will be allocated 5 points.”  (See clause 8(a) within part 2 of the contract conditions).

 

[54]      Counsel submitted that the sheriff had failed to scrutinise the contract terms and to ask herself where it was that the defenders had acted capriciously, unreasonably or arbitrarily.  Reference was made to the Court of Appeal decision in the Compass case [2013] EWHC 200.  Counsel submitted that a similarity in language existed as between that case and the present.  At paragraph 35 within the judgment, “Service Failure Points” were dealt with.  Paragraph 74 onwards reflected what counsel for the defenders characterised as the operative part of the Court of Appeal judgment.    Further reference was made to paragraphs 81 through to 92.

[55]      Counsel submitted that when it came to making a decision in implement of any contract, it did not follow that the decision maker was exercising some form of discretionary function in contrast to exercising what in reality amounted to an absolute contractual right.  In the present case, the defenders were not obliged to carry out vehicle maintenance checks on the pursuers’ fleet.  That lack of obligation, submitted counsel, fell into sharp contrast with the adverse inference drawn by the sheriff in that connection.

[56]      With regard to clause 8 in the second part of the conditions, following three warnings of an analogous nature being issued, the weighting provisions applied.  Counsel submitted that the defenders’ contention that frequency of breakdowns was the key issue was thereby borne out.  In the present case, once warning letters had been issued and not successfully appealed, what remained was not a discretion but instead a contractual requirement or absolute right.  Counsel closed his principal submissions by querying which of the provisions within the contractual conditions was associated with the implied term in the present case.  In summary, he invited the court to find that the sheriff had erred in concluding that the defenders had acted in an arbitrary, capricious and unreasonable fashion.  He submitted that the sheriff had erred in disregarding the express terms of the contract in relation to vehicle specification and use of taxis rather than the contracted for vehicles.  On the hypothesis that the sheriff had not so erred in relation to the termination of the contract by the defenders, counsel maintained that she had erred in concluding that the defenders were not entitled to terminate the contract shortly thereafter in any event with the consequent reduction in the quantum of the award of damages.  The court was invited to allow the appeal, to sustain the defenders’ second plea in law and to dismiss the action.

 

Pursuers’ submissions

[57]      In presenting his submissions, counsel for the pursuers sought broadly to follow a similar order as to that which appeared in the defenders’ written submissions.  Counsel for the pursuers also tendered written submissions and these have been retained with the process. 

[58]      The court was invited to refuse the appeal.  Counsel submitted that, individually and cumulatively, the grounds of appeal failed to “call into question” the sheriff’s decision at first instance.  In so far as an attack had been made upon the sheriff’s assessment of witnesses’ evidence, that attack, counsel submitted, was unfounded.

[59]      Counsel for the pursuers stressed that it was important to have regard to the totality of the evidence and to the manner in which the proof had been conducted before the sheriff.  It was obvious that the sheriff had benefited from seeing and hearing the various witnesses give evidence.  Counsel observed that her assessment of the credibility or reliability of witnesses appeared to have been arrived at as a result of having such an advantage.  He submitted that an appellate court should, therefore, be very slow to countenance a different conclusion on the evidence.

[60]      It was also argued that the sheriff had not materially misinterpreted or misunderstood the terms of the contract.  On the contrary, she had, maintained counsel, demonstrated the correct approach as evidenced by her decision.

[61]      In so far as the third ground of appeal was still insisted upon, counsel for the pursuers contended that the court should not lightly interfere with the exercise of the sheriff’s discretion.  In this instance, that discretion related to allowing a late inventory of productions to be lodged.  In any event, there was no controversy here in the sense that the defenders’ legal representative at the proof had not insisted upon her opposition.  Naturally, the sheriff was keen to commence the proof and indicated that further time would be allowed to consider the documentation prior to cross‑examination being commenced.

[62]      In any event, counsel for the pursuers pointed out that there had been only one document which the defenders now claim was prejudicial to their case in terms of it being allowed to be received late.  However, that document was one which was already in their possession being a letter from the pursuers to the defenders requesting that the minutes of the Service Review Meeting be amended.

[63]      Given the attention paid to paragraph [75] within the sheriff’s note during the course of the defenders’ submissions in the appeal, counsel for the pursuers sought to address the various criticisms levelled at the sheriff’s approach within said paragraph.  In regard to the “dogged adherence” of the witness Mr Scott and to the inconsistency of the defenders’ approach, counsel maintained that Mr Scott’s “dogged adherence” was well vouched having regard to the evidence.  That evidence required to be considered as a whole and not just by, for instance, pointing to a segment of examination in chief where, as counsel put it, the witness may have given an impression of rationality.

[64]      For his part, counsel for the pursuers made reference to various excerpts within the evidence whilst submitting that the sheriff’s approach to Mr Scott’s evidence could not be called into question.  The various excerpts are listed at paragraph 2.12 in the pursuers’ written submissions.

[65]      Counsel pointed out that it was clear that the sheriff did not believe the witness Mr Scott.  She had given compelling reasons for refusing to do so including that he had effectively lied to the court.  Separately, the sheriff had clearly explained what was meant when she had described the defenders’ conduct anent the use of taxis as having been inconsistent.  Counsel stressed that this was not tied in with any argument about implying a term allowing the use of taxis per se.  The defenders’ contention to the contrary arose from a misunderstanding of the way in which the case was presented and handled at first instance.  What the sheriff was doing was setting out the proposition that it was unreasonable for the defenders repeatedly to consent to the use of a taxi on being asked to do so whilst, thereafter, issuing a warning in respect of that taxi use.

[66]      With regard to the five warnings issued on 11 August 2009, counsel submitted that the sheriff had been perfectly entitled to come to the view, on the evidence, that to issue so many warning letters all at once on one day was in itself unreasonable although counsel suggested that she had not gone as far as to say so.  Counsel submitted that the sending of warning letters notwithstanding the existence of outstanding appeals relating to the same subject matter was also a theme of legitimate concern in the context of the sheriff’s whole approach.  It was, he submitted, akin to the “poisoning of the relationship” spoken of in the Compass case.

[67]      Counsel referred to Mr Irving’s evidence about being “bombarded” with warning letters and about the effect on him and his staff.  He submitted that at paragraph [39] in her note, the sheriff was doing no more than setting out why she accepted Mr Irving’s evidence about those features.  She was not in any sense implying a term into the contract as would now appear to be suggested by the defenders on appeal.

[68]      Counsel for the pursuers also dealt with unreasonable delay in the issuing of warnings and delay when it came to dealing with appeals.  He submitted that the defenders’ argument conflated two separate and quite distinct requirements within the contract in relation to the preservation or destruction of records.

[69]      “Worksheets or passenger schedules” all as referred to by the sheriff at paragraphs [40] – [41] were to be distinguished from the sort of documentation envisaged by clause 19 in the contract.  At proof, counsel for the pursuers indicated that the evidence was uncontroversial and meant that any records identifying passengers or their contact details and addresses would be destroyed within a relatively short timeframe for data protection reasons.  It was precisely those documents which the evidence suggested would have enabled the pursuers to identify and respond to the defenders whenever an issue arose in terms of the service provided.

[70]      Where the defenders unreasonably delayed issuing warnings, the pursuers could therefore be placed at a significant disadvantage when it came to responding.  Moreover, counsel maintained that there was evidence before the sheriff from which it might be inferred that the appeals made by the pursuers in response to warning notices had not been properly considered by the defenders.  Counsel for the pursuers’ full written submissions regarding the issue of delay quoad warnings and the handling of appeals are to be found at paragraph 2.3 within the pursuers’ submissions.

[71]      The sheriff had found that the defenders vacillated about the requirement for livery.  Counsel for the pursuers criticised the defenders’ submissions on this point.  He maintained that it distorted the sheriff’s findings.  The sheriff had been referring to conduct between January 2009 and July 2009 and not as at September 2009 by which time she had taken a different view of the defenders’ actions.  Counsel made reference to tabs 17 and 20 in the inventory of productions against the background of tabs 35 to 37.

[72]      In regard to conduct in the lead up to and after the meeting in September of 2009, counsel for the pursuers submitted that, even on the defenders’ approach, viz. that all the sheriff had to decide was whether or not the warnings were properly issued under the contract, the sheriff, counsel argued, had plainly done that and decided that they had not been properly issued.  The fact that the sheriff had considered the defenders’ conduct (ie via Mr Scott) throughout, as meeting the arbitrary, capricious and unreasonable threshold was no more than a reflection of Mr Scott’s evidence which was, on any view counsel contended, incredible.

[73]      Counsel argued that the definition of the Service Review Meeting that the pursuers were called to with Mr Scott (conditions, part 2, clause 10) had to be borne in mind.  In addition to the tendering process having been commenced, the court had heard evidence from Mr Scott about the defenders’ internal decision to scale back independent operators’ contracts at the level the pursuers were operating at (see tab 21 in inventory of productions).  The proposal to have the defenders purchasing buses themselves and leasing these buses to operators who would be responsible for their maintenance was said by Mr Scott to have been considered and it was decided that it made business sense.  It was brought into effect on contracts shortly after the parties’ contract was terminated and was thereafter widely in use.  Counsel submitted that all this informed the sheriff’s reference to “food for thought”.  The sheriff had given ample reasoning at paragraph [65] as to why she accepted the pursuers’ recollection of the Service Review Meeting.

[74]      In dealing with the defenders’ criticism of the sheriff’s assessment of witnesses, particularly Alexander Scott and Linda Gold, counsel for the pursuers submitted that the sheriff’s approach was entirely justified when the evidence was viewed as a whole.  For instance, there was, counsel submitted, neither evidence nor record to support the assertion made by Mr Scott that he had concerns about the road worthiness of the pursuers’ vehicles.  That, taken along with the defenders’ failure to exercise their contractual powers to ensure compliance with vehicle maintenance and repair together with their resort to the issuing of warning letters all tended to undermine Mr Scott’s credibility.  Counsel for the pursuers made extensive reference to various excerpts from the transcript of evidence.  (See paragraph 2.6 in pursuers’ written submissions).

[75]      Moreover, counsel for the pursuers stressed that any assertion to the effect that the use of taxis was bound up with the issue of breakdowns was to misunderstand the way in which the proof had been conducted.  Evidence had been given by all parties that a taxi would be required in a number of circumstances to prevent the service from coming to a halt.  Examples given included the late running of a vehicle due to traffic, road works, flooding, helping passengers to board and to alight the vehicles with shopping and, of course, breakdowns.

[76]      In regard to the witness Linda Gold, counsel maintained that the sheriff had been entitled, on the evidence, to conclude that Ms Gold was an unhelpful witness.  The sheriff had made the observation that the witness seemed proud of the fact that she could not remember detail and had not prepared for the giving of evidence.  That, of course, counsel submitted, meant that Ms Gold was simply unable to assist the court on those issues which really mattered.  For example, when attempting to reconcile the schedule of warning letters printed from the computer (which the witness had herself done) she could not assist in regard to the obvious anomaly which arose when it came to the ratcheting up warning points system.

[77]      Counsel contended that what was clear from the document at tab 26 in the inventory, was that the defenders were still exercising their discretion in relation to the level of points imposed for each warning, even if the system then took over and “ratcheted” that level upwards.  (cf. “significant” attracting 3 points and then 5).  Counsel submitted that the sheriff had not misunderstood Ms Gold’s evidence.  The difficulty was that Ms Gold was the only person who could operate the system and yet she could not explain the obvious difficulties with it as highlighted in tab 26 supra.  She confirmed that there was no override to the system which taken with tab 26 demonstrated the obvious unfairness in the system.

[78]      In relation to the fourth ground of appeal, counsel for the pursuers acknowledged that the argument presented on appeal did, indeed, appear to be advanced on an esto basis.  However, it was his position that the defenders did not even reach the stage of being able to put forward the argument regarding the sheriff’s approach to the pursuers’ loss.  In any event, counsel submitted that the sheriff had adequately dealt with the evidence in so far as it concerned the pursuers’ loss at paragraph [80] et seq within her note.

[79]      In so far as the defenders, in the context of this appeal, had sought to suggest that the decision of the Court of Appeal in the Compass case operated in some way to exclude the implied term forming the basis of the sheriff’s decision in the present case, counsel for the pursuers rejected the validity of such an approach.

[80]      He dedicated the final pages of the pursuers’ written submissions to this particular issue.  (See pages 11 - 15).

[81]      Those written submissions noted the terms of the first ground of appeal and also noted that the argument therein had been repeated in the defenders’ written submissions at page 8.  The argument was, observed counsel for the pursuers, consistent with the closed record, the sheriff’s decision at the earlier debate, the notes of submissions made by the defenders’ then legal representative following the evidence at proof and the sheriff’s findings in fact.

[82]      Counsel reminded the court that it had at all times been accepted that there was an implied term of the contract and that that was important when one came to consider the Court of Appeal decision in the Compass case.  He pointed out that the decision of the Court of Appeal was, of course, available at the time of the proof before answer and at the time of the debate which preceded it but that it had not been referred to by parties.  The obvious reason for that, counsel submitted, was that the Compass case was entirely distinguishable from the present dispute and thereby provided little assistance to parties.

[83]      The reference made by the sheriff to the first instance decision in Compass was, counsel submitted, simply to set out the general principle applicable in cases of this kind and to demonstrate its applicability in modern times.  As the defenders’ then legal representative had submitted to the sheriff at the close of the proof, the decision in Compass provided “affirmation that Abu Dhabi applies today” (Abu Dhabi National Tanker Company v Product Star Shipping Company Ltd [1993] 1 Lloyd’s LR 397).  Counsel for the pursuers submitted that nothing in the Court of Appeal decision in Compass disturbed the general principle set out in the foregoing Product Star case.

[84]      Counsel for the pursuers further argued that the proof and the appeal in the present litigation had been prepared and presented on the basis that the sheriff had been entitled to conclude that the implied term not to act arbitrarily, capriciously or unreasonably existed in the contract between the parties.  Any contrary argument fell outwith the ambit of the note of appeal.  Whilst an appellate court might not, thereby, be prevented from considering the argument, counsel for the pursuers maintained that, in all the circumstances, there was no good or proper reason to do so.  In any event, he reiterated the proposition that the Compass case simply fell to be distinguished.  Properly understood, that decision concerned calculation and not imposition.  The opposite was true when it came to the present case.  (See sheriff’s note at paragraph [90]).

 

Decision

[85]      Standing the background procedure narrated at paragraphs [6] to [17] supra, it is important not to lose sight of the actual grounds upon which the defenders seek to rely in advancing this appeal.  The first ground of appeal is in the following terms:

“The Sheriff was in error when she accepted the Pursuer’s submission that the procedure and systems in place for issuing warnings were arbitrary, capricious and unreasonable and that because:-  (1) of the Defender’s lack of knowledge of the contract terms; (2) the Defender’s inconsistent approach; (3) the deliberate and targeted approach of the Defender between 11 August 2009 and 21 September 2009; (4) the failure to follow the contract in terms of the termination fairly; and (5) the allocation of points by the computer which cannot be overridden.  The court should not lightly interfere with the exercise discretion specifically given to a party.  The court should only interfere if no reasonable administrator of the contract would have come to the decision reached by the Defender or the decision was so perverse no reasonable body would have reached the view, properly directing itself.  The question in the case here is whether the steps taken by the Defender were reasonable.  The Sheriff ought to have concluded that the steps taken by the Defender were not arbitrary, capricious or unreasonable.”

 

[86]      Taking counsel for the defenders’ submissions as a whole, what, in my view, is being challenged on appeal is the sheriff’s approach to the evidence, particularly in the context of her determination that the defenders acted arbitrarily, capriciously and unreasonably.  Inherent in her approach to the evidence were her views regarding the credibility and reliability of the defenders’ witnesses Alexander Scott and Linda Gold.

[87]      The onerous nature of the task involved in challenging the decision of a judge at first instance based on a consideration of the evidence led before that judge has long been recognised.  (See, for example, Clarke v Edinburgh & District Tramways Co 1919 SC (HL) 35 (Lord Shaw of Dunfermline at 37) and Thomas v Thomas 1947 SC (HL) 45 (at 59)).  These dicta were referred to in Lord Reed’s observations in the more recent case of Henderson v Foxworth Investments 2014 SC (UKSC) 203 and those observations, in turn, have been adopted in subsequent cases.  (See, for example, the opinion of the court delivered by the Lord Justice-Clerk in HS v FS [2015] CSIH 14).

[88]      In the present case, the sheriff made numerous findings in fact and findings in fact and law.  I did not understand counsel for the defenders to mount any specific challenge towards the findings in fact nor did he do so in regard to the findings in fact and law.  However, the broad thrust of his submissions clearly suggested that the latter, particularly in relation to actings characterised by the sheriff as “arbitrary, capricious or unreasonable”, were, indeed, the subject of challenge. 

[89]      In my opinion, there can be no doubt that an abundance of evidential material existed from which the sheriff was entitled to reach her own conclusions regarding the defenders’ actings and the manner in which they had exercised their discretion.  Those conclusions were, in turn, informed by the sheriff’s assessment as to the credibility and reliability of witnesses called to give evidence by both parties.

[90]      Where a judge disbelieves the evidence of any particular witness or finds fault with the reliability of testimony in a case, it is the judge’s duty to reflect such failings in a party’s case when it comes to the court’s overall, decision-making process.  In the present case, the sheriff fulfilled that duty.  The resultant outcome of the case at first instance no doubt gave rise to dissatisfaction on the part of the defenders.  However, in the course of the appeal hearing, counsel for the defenders’ attempts to rehabilitate the witness Mr Scott’s credibility at worst failed outright; at best failed to provide any proper basis for interfering with the sheriff’s assessment of that witness’ evidence.

[91]      From the defenders’ approach to matters from the marking of the appeal onwards and prior to the commencement of submissions in the appeal, I gained the distinct impression that, from their perspective, and with the benefit of hindsight, the defence case might have been presented at first instance on a materially different basis.  Moreover, the nature of the submissions advanced on behalf of the defenders also tended to suggest that the defenders were seeking to conduct a review of the evidence and procedure before the sheriff rather than an appeal.  That, of course, is an illegitimate approach to matters.

[92]      In the course of the appeal, a degree of focus was placed upon the terms of paragraph [75] in the sheriff’s note.  In that paragraph, she summarised her approach to “…the factors which led me to conclude that the defenders in this case have not exercised their discretion reasonably.”  Much of counsel for the defenders’ submissions, both written and oral, were taken up with trying to persuade the court (on appeal) that the sheriff’s portrayal of Mr Scott’s evidence was inaccurate or that the impressions which the sheriff formed from the whole evidence were afforded undue weight in so far as these impressions impacted adversely upon the defence case.

[93]      The defenders were inviting the court, in effect, to reverse the sheriff’s conclusion regarding the exercise of their discretion, particularly in respect of the sheriff’s findings in fact and law.  The Inner House, in the case of HS, expressly confined interference by an appellate court in such a context “…to situations where it can categorise the findings as incapable of being reasonably explained or justified”; “mere disagreement with the findings at first instance will not suffice.”  (See paragraph [23] in HS).

[94]      Notwithstanding counsel for the defenders’ detailed and well-prepared submissions, looking to matters as a whole, it cannot, in my view, be said that the sheriff’s findings were “incapable of being reasonably explained or justified”.  Counsel for the defenders was, of course, labouring under a disadvantage in the sense that he had not been involved in the proof.  On the other hand, counsel for the pursuers had conducted the proof on their behalf and was, therefore, much better placed to challenge the defenders’ arguments when they strayed into territory which conflicted with the manner in which the parties had presented their respective cases in front of the sheriff.

[95]      In respect of the first two grounds of appeal which, in the context of the defenders’ submissions, tended to run together, I preferred the submissions advanced by counsel for the pursuers.  I am satisfied that, particularly standing the way in which parties originally “joined issue” before the sheriff, a retrospective, selective analysis of certain parts of the evidence cannot and does not lead to the conclusion that the sheriff’s findings on the evidence were flawed.

[96]      Before passing on to the fourth ground of appeal, I require to deal with the Compass case.  In so far as counsel for the defenders purported to rely upon this authority and, more acutely, the fact that Mr Justice Cranston’s decision at first instance had been departed from by the court of appeal, to my mind, it amounted to the equivalent of a red herring.  With due respect, the sheriff’s decision on the evidence quoad the arbitrary, capricious and unreasonable nature of the defenders’ conduct was not influenced by the Compass case.  Indeed, by the conclusion of paragraph [75] her decision and the rationale for it had already been articulated.  Thereafter, the sheriff merely mentioned, in passing, the Compass case as “another example of the operation of this implied term.”

[97]      In any event, it must be recorded that the defenders’ argument founding upon the court of appeal decision in Compass emerged entirely from the direction of “left field”.  Nowhere in the defenders’ note of appeal was it suggested that the sheriff had in any way erred when it came to her application of any term implied into the contract.  For that reason alone, any argument for the defenders relating to the Compass decision falls to be disallowed.  Beyond that and given the submissions on this point, as presented by counsel for the pursuers, I was not, in any event, satisfied that the case of Compass was truly in point.

[98]      With regard to the fourth ground of appeal, to an extent, I share the difficulty experienced by the sheriff.  The argument presented on behalf of the defenders at first instance was “…that in a situation where the termination of the contract was pre-destined, the pursuers, even if successful, should be entitled to nominal damages only.”  (See paragraph [82] in the sheriff’s note).

[99]      To my mind, there are certain difficulties attaching to the re-presentation of this argument on appeal by counsel for the defenders.  Firstly, as the sheriff points out (see paragraph [80] in her note), there was minimal cross-examination of or challenge to the pursuers’ witnesses (Gold and Irving) when it came to the issue of the pursuers’ loss. 

[100]    Secondly, in so far as that loss was the subject of cross-examination, no challenge was raised and no suggestions were made about causation or remoteness.

[101]    Thirdly, the position adopted by the defenders’ witness, Mr Scott, (albeit that his evidence was found to be incredible), was entirely at odds with the approach underpinning the ground of appeal.  He had sought to suggest that termination of the contract was not pre-destined.  I agree with the sheriff (see paragraph [86] in her note); the defenders cannot have it both ways.  They cannot actively present evidence in support of one inference on the facts and then seek to found upon the opposite inference (not being part of their case) merely because it suits their purpose on appeal.

[102]    Fourthly, the sheriff’s reliance upon the case of The Mihalis Angelos [1971] 1 QB 164 and the rationale she took from it were not criticised on appeal.  That rationale was to the effect that, in assessing loss, an earlier illegitimate termination may fall to be disregarded where it is superseded by a later legitimate termination.

[103]    Fifthly, and most significantly, the sheriff determined that the later warnings were also part of what she found to be a concerted campaign against the pursuers.  Accordingly, she was not satisfied, on the facts established, that were a subsequent termination to have followed, it would have been legitimate.  To that extent, it simply was not proved that a legitimate termination was inevitable.

[104]    I did not accept counsel for the defenders’ submission that the onus, here, lay with the pursuers.  It is, of course, correct to say that any party seeking to establish a loss is initially burdened with the task of proving that loss to the court’s satisfaction.  However, where the opposing party seeks to introduce a discrete, hypothetical impediment to the loss claimed being established (in this case, the notion that termination of the contract was pre-destined) the onus of proof, in my view, shifts to that party.

[105]    Therefore, it was for the defenders to lead evidence to support the proposition that, on the particular facts and circumstances of the case, the rationale of The Mihalis Angelos case did, indeed, fall to be applied.  It is worth observing that, given the nature of Mr Scott’s testimony, they set themselves a difficult task in establishing that proposition.

[106]    Once again, it is, in any event, necessary to return to the specific terms of the defenders’ note of appeal.  Ground 4 is in the following terms:

“The Sheriff erred in failing to give proper weight to the Defender’s submission that the basis for the loss calculated by the Pursuer is so vague and unspecific in the pleadings.  Further and in any event, the Sheriff erred in holding that the findings in fact supported the Pursuer’s calculation of loss.”

 

[107]    It will be seen that the foregoing ground of appeal makes no reference to the esto argument advanced by counsel for the defenders.  (Paragraph [42] supra refers).  His submissions were not directed towards the first sentence in the ground of appeal, viz. concerning the vague and unspecific nature of the pursuers’ pleadings.  Moreover, the second sentence in the ground of appeal is so nebulous as to preclude its adoption as a basis for counsel’s argument.

[108]    The marking of an appeal against the sheriff’s decision after proof was obviously a significant step for either party to the litigation to take.  The defenders having taken that step, intimate acquaintance with the basis upon which the court’s decision was to be challenged was to be assumed.  In the interests of fair and full notice to the respondents and to the court the grounds of appeal to be relied upon required to be framed with sufficient detail and precision.

[109]    In this instance, such detail and precision were lacking.  Accordingly, the defenders’ fourth ground of appeal falls to be rejected on the basis that it failed to foreshadow the nature and extent of the argument presented at the appeal hearing.  However, even if that rejection were said to be unjustified, for the reasons enumerated above, I have concluded that the fourth ground of appeal is without merit.  It is predicated upon a factual matrix which was not established at proof and it is difficult to avoid the conclusion that the defenders were attempting to have “a second bite at the cherry”.  Nothing said by counsel for the defenders, in my opinion, impacted upon the sheriff’s findings in fact and findings in fact and law.

[110]    It follows that, for all of the foregoing reasons, the appeal in its entirety must be refused.  The pursuers having successfully resisted the defenders’ appeal the expenses occasioned by the appeal procedure fall to be awarded in their favour.  I have also certified the appeal as suitable for the employment of junior counsel.