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ANDERSON FLOOR WARMING LIMITED AGAINST ANTRIM ELECTRICAL & MECHANICAL ENGINEERS LIMITED


OUTER HOUSE, COURT OF SESSION

[2015] CSOH 164

 

A246/14

 

OPINION OF LORD MATTHEWS

In the cause

ANDERSON FLOOR WARMING LIMITED

Pursuer;

against

ANTRIM ELECTRICAL & MECHANICAL ENGINEERS LIMITED

Defender:

Pursuer:  E  M Campbell;  Harper Macleod LLP

Defender:  M I H  Hamilton;  Brodies LLP

4 December 2015

Introduction
[1]        In this action the pursuers seek reduction of a decree for payment granted by the sheriff at Glasgow on 28 February 2014 at the instance of the defenders and suspension of a charge following upon the decree. 

[2]        The pursuers are a firm of heating contractors while the defenders provide electrical and mechanical engineering services.  In early 2012 the defenders were contracted to carry out certain works by Henry Brothers (Scotland) at Kylemore Childrens Care Home in Greenock.  The defenders subcontracted the supply and installation of underfloor heating at the site to the pursuers.  Once the pipes were installed by the pursuers, a screed, similar to a watery cement, was poured over the pipes.  As I understand it, the screed was poured by another firm subcontracted to the pursuers, the plan being that once the screed dried and became hard a floor covering would be laid on it, using adhesive.  The adhesive failed and the defenders sued the pursuers.  I need not go into the details of the claim.  Suffice to say at this stage that decree by default was granted at an options hearing on 28 February 2014 in circumstances which I shall narrate later in this opinion.  A charge dated 7 April 2014 followed on from the decree. 

 

The facts
[3]        The initial writ sets out the details of the claim against the instant pursuers.  I heard some evidence as to the answer to that claim.  Broadly speaking it is to the effect that the damage was the responsibility of a third party.  Although it is not averred in the instant action, there also appears to be a dispute as to certain figures.  I express no opinion as to the merits of the defence since that is not my function in these proceedings but I find that the defence is prima facie substantial and it is obviously one which has not yet been adjudicated upon. 

[4]        I turn now to the circumstances in which the sheriff court action was dealt with.  The initial writ was served on or about 27 September 2013.  Mr Michael Anderson, the sole director of the pursuers, had never been involved in defending court proceedings before.  Neither had the company.  Mr Anderson was surprised to receive a writ and advised Damian John Winters, a heating engineer employed by the pursuers, to contact Building and Engineering Services Association (“BE&S”), a trade association.  They had a legal department and the pursuers paid an annual fee to them which entitled them to legal advice and other services.  Mr Anderson was aware that Mr Winters was in contact with an English solicitor employed by B&ES, a Mr Driscoll, although he was not fully aware of the detailed discussions.  It was intended to defend the action and Mr Anderson thought they could do it themselves.  He discussed the matter with Mr Winters and concluded that they did not need to instruct solicitors as yet.  Mr Winters assured him that everything was in hand and that he was obtaining advice from Mr Driscoll.  On 27 November 2013 Mr Winters sent an email to Mr Driscoll setting out the background to the claim.  He asked for advice on the best course of action and went on as follows: 

“In the first instance, would I be correct in understanding that we can complete the associated forms as attached to confirm our wish to lodge a defence and return to the court along with payment of the £87.00 fee required to do so? 

 

Do we then seek representation, either Yuill & Kyle, a solicitor recommended by your contact (named) or A.N. other solicitor?” 

 

[5]        There had been some previous correspondence with Mr Driscoll about the matter but I need not go into that. 

[6]        Mr Driscoll replied by email of 29 November 2013.  He confirmed what should be done with the notice of intention to defend and, in answer to the question about representation replied as follows:

“Yes – seek representation, either from Yuill & Kyle (if experienced in construction), or a solicitor recommended by (named individual)”. 

 

The email went on as follows: 

“Before the 24 December you must lodge your Defence which should be based on the attached (Scottish drafting is significantly different from English litigation) so this should be confirmed by your Scottish representation.” 

 

[7]        Mr Driscoll attached what purported to be draft defences but which were not in a proper form. 

[8]        Mr Winters and Mr Driscoll had a number of telephone conversations discussing the action.  Mr Winters understood that a notice of intention to defend would be required as well as the payment of a fee and that thereafter the “defences” would be lodged.  He understood from speaking to Mr Driscoll that a formal court document would be sent, as he put it, formalising procedures.  He did not remember if the name of the document was mentioned but understood now that it was the record.  He thought that that would outline everything that they had to do.  It would outline the allegations and the defence and indicate that the pursuers had to come to court for a particular day.  He thought that was the case because of the way that Mr Driscoll had indicated to him that an official court document would be sent out by the court.  He did not think he had to do anything else and that receiving the record would be the next step.  A notice of intention to defend the action (7/1 of process) was lodged on 6 December 2013.  By a letter of the same date (7/2/1 of process) the sheriff clerk intimated to the pursuers that 31 December 2013 was the last day for lodging defences, that 14 February 2014 was the last day for making adjustments to the defences and that 24 February was the last day for intimating, together with the grounds, a note of any preliminary pleas.  It was also intimated that 28 February at 2pm was the date and time of the options hearing.  It should be noted also that the letter carried a footnote to the effect that failure to comply with the terms of the notice or certain of the ordinary cause rules might result in decree by default.  It went on: 

“If you are uncertain what action to take you should consult a solicitor.  You may be eligible for Legal Aid depending on your income, and you can get information from any Citizens Advice Bureau or other advice agencies.” 

 

[9]        On or about 20 December 2013, Mr Winters wrote a letter to the court which contained, in gremio, what purported to be the defences, as drafted by Mr Driscoll.  No advice had been taken from any Scottish solicitor. 

[10]      By letter, dated 9 January 2014 (7/5/1 of process), the defenders’ solicitors wrote to Mr Winters with a copy of the initial writ as adjusted to that date (7/5/2 of process). 

[11]      By letter dated 26 February 2014 (7/6/1 of process) the solicitors wrote to the court to advise that, due to the answers and pleas in law not being in the correct form, it had not been possible for the defenders to lodge a closed record and indicating that the defenders wished to address the sheriff on the matter at the options hearing.  A copy of that letter was sent to the pursuers by fax.  Mr Winters was not sure whether or not he read this letter before 28 February but I am satisfied on the evidence that he read it at or about that time.  He explained that he was not surprised, when he read it, that the defences were not in correct form since he had submitted them himself but other than that the letter did not mean a great deal to him.  He was still waiting for the official court document.  He always intended to get legal advice but was waiting for that document before doing so.  It was always his intention to defend the action.  If he had known that he was in error then he would have instructed solicitors a lot sooner.  He thought the options hearing would be a hearing where options were discussed.  He did nothing in connection with the hearing because he was still awaiting an official court document.  He did not know that they needed to attend the hearing.  He said that the office was being refurbished and the IT system had been affected by a virus.  The hearing had been put in the calendar when the court timetable had been received. He was asked in terms if it was planned to go to the hearing but he said they did not have a plan because they were still waiting for the court document.  I am satisfied that it was never the intention of Mr Winters to attend the options hearing and that the virus is irrelevant. 

[12]      The hearing took place on 28 February 2014.  The pursuers did not appear and were not represented and decree by default was granted on the defenders’ motion made at the bar.  No appeal was taken within the 14 days which were available.  Decree was extracted on 21 March 2014 and a charge for payment was served on 7 April 2014. 

[13]      When the sheriff officers came to the office with the charge it was handed to Mr Winters.  He did not think that the pursuers ever received the extract decree.  He had not been giving the action much thought between getting the letter in February and the arrival of the sheriff officers.  The sheriff officers told him to contact the clerk of court who would tell him what to do.  He did that by email (6/5 of process), dated 8 April 2014, indicating that the pursuers understood that decree had been granted in their absence and requesting a recall of decree.  A representative of the sheriff clerk sent an email in reply on 9 April 2014 (6/9 of process) advising that a reponing note should be lodged.  That is understandable since the tenor of the email from Mr Winters was to the effect that the decree was in absence.  The email from the sheriff clerk also strongly suggested that the pursuers seek legal advice.  Mr Winters drafted a reponing note himself and sent it to Mr Driscoll, who said that it looked alright to him.  It was submitted and Mr Winters was told that it was incompetent.  He considered getting a solicitor at that point but Mr Anderson was on holiday and, according to Mr Winters, he was not in a position to instruct one.  He knew now that a reponing note was incompetent.  He did not know that it was open to a party against whom decree by default had passed to appeal it but in any event he had not known about the grant of decree until the sheriff officers appeared.  He accepted now that it would have been sensible to instruct solicitors at an early stage but the main reason for not doing so was that he understood that he would be getting an official court document.  He always intended to defend the action but wanted to do as much as possible himself to save costs.  He did not appreciate that he had to attend or be represented at the options hearing. 

[14]      Mr Anderson’s position was that Mr Winters had reassured him that he had everything in hand and he was content that the latter was dealing with the matter.  Mr Winters was a responsible employee who ran substantial projects.  In retrospect Mr Anderson accepted that he should have exercised more supervision of him.  He did not see the various items of correspondence at the time. 

 

The test
[15]      Some time was spent in discussing the approach which should be taken when the court is deciding whether or not to reduce a decree in foro. 

[16]      In a nutshell, it was argued for the pursuers that there was no precise test.  One simply had to consider all the circumstances and if substantial justice required reduction then it should be granted.  There was no test of “exceptional circumstances”.  The position of the defenders, on the other hand, was that unless there were exceptional circumstances reduction of a decree in foro was incompetent.  Assuming that there were such circumstances the court still had to consider whether the justice of the case required that the remedy should be granted.  In other words, there was a two stage test.  I turn now to outline those submissions in more detail. 

 

Submissions for the pursuers
[17]      Mr Campbell examined a number of authorities from Forrest v Dunlop (1875) 3 R 15 to Royal Bank of Scotland Plc v Matheson 2013 SC 146 as well as MacLaren, Court of Session Practice, pages 594 to 596.  He submitted that when these authorities and the development of the law was properly understood there was no test of exceptional circumstances before reduction could be granted. 

[18]      In Forrest, decree of absolvitor was pronounced in an action of damages because of the pursuer’s failure to deliver two printer’s proofs of the record.  The pursuer did not reclaim but before the reclaiming days had expired he raised another action in the same terms.  The defender’s plea of res judicata was sustained by the Lord Ordinary and the pursuer reclaimed.  The Lord Justice-Clerk, in refusing the reclaiming note, pointed out that a decree by default was a decree in foro.  He went on: 

“It may be taken out of the way by reclaiming note, and in the event of the reclaiming days being allowed to expire through inadvertence, a remedy is provided by the 16th section of the Act 48 Geo III c. 151.  It is also open to the party to bring a reduction of the decree on the ground that it was obtained through inadvertence, in which case the Court, although it will require a strong statement of facts to support such an application, has the power to award substantial justice.  But that is not the question here.  It is whether, after decree of absolvitor has been pronounced and extracted, it can be ignored and a new action brought as a matter of course.  I am clearly of the opinion that it cannot, and that the interlocutor of the Lord Ordinary should be adhered to.” 

 

[19]      Mr Campbell said that inadvertence could be an oversight, an error or a mistake and fault would not necessarily be a barrier to reduction.  He relied heavily on the Lord Justice‑Clerk’s reference to the Court’s power to award substantial justice. 

[20]      He then turned to Adair v Colville & Sons 1926 SC (HL) 51.  He conceded that that case might be seen as against his contentions. 

[21]      The parties in an action of damages in the sheriff court had agreed that no note of the evidence would be taken in shorthand.  In receiving answers from the jury to questions which he had proposed the sheriff assoilzied the defenders.  The pursuers appealed but that was dismissed as incompetent in respect that there was no record of the evidence.  They then brought an action of reduction of the verdict and the sheriff’s decree on the ground that he had failed properly to formulate the pursuer’s case and that therefore a miscarriage of justice had resulted.  It was held that while it might have been competent to reduce the decree had it been clearly demonstrated that a miscarriage of justice had taken place, the absence of a record of the proceedings rendered it impossible to arrive at any conclusion on the matter.  Mr Campbell referred to the very well-known ditca of Viscount Dunedin in his speech at pages 55 and 56 to the following effect: 

“That the remedy of reduction may be competent to set aside a judgment, when other means of review are not, is true.  Instances can be found where it has been so utilised, but it is a remedy which does not exist of right;  and must be most carefully applied.  I shall not attempt, for I think such attempt would end in failure, to define categorically the cases in which reduction is competent.  One obvious instance would be where a judgment had been obtained by reason of some fraud practised on the Court;  but, generally speaking, it is certainly not competent when other means of review are prescribed, and these means have either been utilised or the parties have failed to take advantage of them.” 

 

At page 58 he went on as follow: 

“As to a miscarriage of justice which the Lord Justice Clerk thinks has occurred, Lord Hunter is equally sure that there was no miscarriage.  Speaking for myself, I cannot come to either the one conclusion or the other.  I do not know.  But of this I am certain that, unless a miscarriage of justice is affirmatively and clearly shown, there is no room for reduction, quite apart from the views that I have already expressed on the terms of this statue… While, therefore, I cannot help seeing that the way in which the Sheriff conducted the proceedings was eminently suited to embarrass and confuse the jury, I am unable to say that it has been affirmatively proved that there was a miscarriage of justice.” 

 

[22]      Mr Campbell submitted that Viscount Dunedin did not lose sight of the importance of substantial justice.  The case was potentially unhelpful to the pursuer since Viscount Dunedin said that reduction was not available if other remedies were and had not been utilised.  Other cases had clarified the position however.  Furthermore, the parties in that case had taken a positive decision to agree that no notes would be kept, knowing that that would remove the right of appeal.  No such positive decision to restrict the remedies open to them was made by the pursuers in the instant case.  Neither was an appeal available to them because they did not know that decree had passed.  In addition Viscount Dunedin did not define the categories of case in which reduction might be competent.  Mr Campbell then referred to McKelvie v The Scottish Steel Scaffolding Company Limited 1938 SC 278.  This was not an action of reduction but an appeal from the sheriff court.  The defenders (who were the appellants in the Court of Session) were not represented at a diet fixed for adjustment of the record and the sheriff‑substitute appointed intimation to be made to them in order that they might be represented at the next diet, under certification.  They failed to appear and were unrepresented at the next diet when decree was granted as craved.  The sheriff adhered to the sheriff‑substitute’s interlocutor.  The appeal was dismissed but Mr Campbell relied heavily on certain dicta of the Lord President and Lord Moncrieff.  At page 280 the Lord President said the following: 

“I should be extremely reluctant that a decree pronounced against any defenders should become final where there was a substantial defence which had never been heard, and, although the decree was granted by default after certification – a course which the Sheriff‑substitute probably could not have avoided – I should have been willing to consider whether the interlocutor should not be recalled if the case as pleaded before us had disclosed any substantial defence.” 

 

[23]      At page 251 Lord Moncrieff said the following: 

“I am of the same opinion.  I also would be most reluctant, in any case in which prima facie there appeared to be a proper defence put forward, to allow decree to pass against the defender without investigation of that defence.  Even if carelessness on the part of the defenders or others for whom he had been responsible had delayed the course of the procedure of the action, I should, in such a case, always be willing to entertain an application for relief.  I regard the present case, however, as wholly exceptional.” 

 

[24]      The explanation for the default was that the managing director of the company had been ill but, whatever the merits of that, there was no substantial defence.  Mr Campbell submitted that while that was not a case of reduction the ratio had been relied on in such a case namely J & C Black (Haulage) Ltd v Alltransport International Group Ltd 1980 SC 57. 

[25]      In that case decree by default was granted in the sheriff court because the solicitors for J &C Black, owing to an oversight, missed the tabling of the action and did not lodge defences.  They sought reduction of that decree, averring that at no time before the decree was extracted were they aware that it had passed against them.  They also averred that they had a substantial defence to the sheriff court action.  It was contended by Alltransport International Group Ltd that the action of reduction was inappropriate since there were no special circumstances warranting it and other remedies were available.  Decree had been extracted. 

[26]      Lord Allanbridge, at page 60, said the following: 

“I am of the opinion that the remedy of reduction of a Sheriff Court interlocutor is one which is competent in certain circumstances.  It is one which will not normally be granted when another method of review is open to the party seeking to reduce a decree, or has at one time been open and that party has failed to take advantage of it.” 

 

[27]      He then quoted the speech of Lord Dunedin and went on: 

“The present case is exceptional in that the pursuers not only aver that their solicitors missed the tabling and failed to lodge defences but also were unaware that decree by default had been granted by the Court on 29th March 1978 and extracted on 13th April 1978.  It was only when a charge was served on the pursuers on 19th April 1978 that the pursuers first became aware that their defence to the action was not being presented.  By that time it was too late to appeal against the decree of default as the defenders had already extracted the decree.” 

 

[28]      He went on to quote with approval the case of Stewart v Lothian’s Construction (Edinburgh) Ltd 1972 SLT (Notes) 75.  In that case the pursuer’s solicitor had raised an action for reduction, having started out by attempting to repone against the decree by default and those circumstances were such as to render unwarranted the reduction of the decree. 

[29]      He went on to distinguish that case, however, he found that if the pursuers could prove that the first time they and their solicitors knew of the granting of decree was after it was extracted then they had no other remedy of review open to them.  That would distinguish it from the facts of Stewart.  He quoted McKelvie and went on, at page 62: 

“Whilst I appreciate that the case of McKelvie arose out of an appeal from the Sheriff to the Court of Session and was not an original action of reduction in the Court of Session, I consider these observations by these two judges of the First Division, with which the third judge, Lord Carmont, agreed, indicate that a Court should be slow to allow decree to pass against a defender without investigation of his defence where that defence can be shown to be substantial.  In the present case I am satisfied that the averred defence is substantial and that in the special circumstances of this case the pursuers have relevantly averred that no other mode of review is or was open to them once they knew of the existence of the decree by default.

 

I have kept in mind Lord Stott’s observations in the case of Stewart, supra, at page 75, that in his opinion it was difficult to see any reason in principle why a party whose solicitor has failed to lodge any defences at all should be in a more favourable position vis-a-vis his opponent than one who has been a victim of some procedural slip up in the course of an inquiry, and that no trace of such a distinction is to be found in any of the judgments.  However, I think the observations of the Court in McKelvie supra to which Lord Stott was not referred, indicate the importance the Court now places on a defender being given the opportunity of having his defence investigated.  Furthermore, whilst I accept that an action of reduction is a remedy which does not exist of right and must be most carefully applied, I have come to the conclusion that if justice is to be done between the parties in this case I should not dismiss this action now, but afford the pursuers an opportunity of proving, if they can, that at no stage before the extract were they aware that decree by default had passed against them.” 

 

[30]      While Lord Allanbridge referred to special circumstances, Mr Campbell submitted that justice was put at the forefront, even though it was acknowledged that carelessness or inadvertence had led to the failure to be aware of the right to appeal.  He compared that with the situation in the instant case.

[31]      In Zannetos v Glenford Investment Holdings Ltd 1982 SLT 453 the solicitors for the defender in a sheriff court action consented to decree without his authority.  The time for appealing against the decree elapsed without his discovering that decree had passed against him and he eventually raised an action of reduction, the defence averred being that the dispute had been settled extrajudicially.  Lord Ross held that the actings of the solicitors amounted to grounds on which the court would have discretion to grant reduction but the grounds of the defence had been advanced in the action of reduction and not proved.  Reduction was therefore refused.  Lord Ross considered the authorities and at page 456 indicated that it was recognised that reduction would not be allowed if the pursuer had failed to utilise other means of redress open to him.  He went on: 

“At the same time, when considering whether or not reduction is competent, it is necessary to consider whether the pursuer had a substantial defence to the action in which decree has been pronounced (J&C Black (Haulage) Ltd v Alltransport International Group Ltd).  There would be no point in reducing the decree and so allowing the original action to proceed, if the pursuer (as defender in that action) had no substantial defence to the claim made in that action. 

 

From the foregoing authorities, it appears to me to be clear that in a case like the present one where a solicitor has consented to decree without the authority of his client, it is a matter of discretion whether or not the decree should be reduced, whereas the decree should be allowed to stand if it would be contrary to justice to reduce it.” 

 

Once again Mr Campbell relied on this dictum but it must be pointed out that at page 455 Lord Ross had also said that it was recognised by both parties that it is only in exceptional circumstances that reduction of a decree will be justified.

[32]      Mr Campbell then turned to the case of Bain v Hugh LS McConnell Ltd 1991 SLT 691. 

[33]      At page 695 the Lord Justice-Clerk, delivering the opinion of the court, quoted the speech of Viscount Dunedin and went on: 

“In our opinion however, it is important to observe that in the passage which we have quoted from Viscount Dunedin, he prefaced his remarks with the words ‘generally speaking’.  The use of these words must mean that there are exceptions to the rule which he was propounding.  Indeed in his speech Viscount Dunedin was at pains to point out that it was not possible to define categorically the cases in which reduction was competent.  He also stressed the importance of there being a miscarriage of justice if reduction was to be justified.  ‘But of this I am certain that, unless a miscarriage of justice is affirmatively and clearly shown, there is no room for reduction’ (p.593.)  Likewise in the same case Lord Carson makes it plain that reduction will be competent if the pursuer can ‘establish that there was such a miscarriage of justice as renders the whole proceedings fundamentally null’ (p.599). 

 

In our opinion that is just the sort of case which the pursuer in the present case is seeking to make.  He has averred that in pronouncing the interlocutor of 9 October 1985 which is thought to be reduced, the sheriff acted ultra vires of his powers.  Those averments of the pursuer are admitted by the defenders.  Accordingly by admission of the parties this is a case where the pronouncing by the sheriff of the interlocutor in question was ultra vires;  it must therefore have constituted a miscarriage of justice which rendered the whole proceedings fundamentally null.  In our opinion, it is incorrect to read the dictum of Viscount Dunedin as meaning that reduction will never be competent where other means of review have been prescribed, and these means have either been utilised or parties have failed to take advantage of them.  It is, in our opinion, well established that a decree may be reduced in exceptional circumstances if reduction is necessary to produce substantial justice.” 

 

[34]      The Lord Justice-Clerk went on to quote from Forrest v Dunlop.  However, Mr Campbell submitted that once again there was a focus on substantial justice, albeit the circumstances in that case were in fact exceptional.  I have to say that it seems to me that the dictum of the Lord Justice-Clerk is a clear indication that exceptional circumstances are indeed required.  Where an interlocutor is fundamentally null, that is but one instance of an exceptional circumstance. 

[35]      In any event Mr Campbell submitted that the circumstances of the present case were in fact exceptional.  It was not normal to have such a fundamental misunderstanding of the process as a result of a conversation with a solicitor who had been used in the past. 

[36]      In the case of Johnstone & Clark (Engineers) Ltd v Lockhart 1995 SLT 440 Lord Osborne followed Bain and said the following at page 445: 

“Thus, it appears to me that it is necessary to examine the circumstances of each case and to reach a conclusion as to whether there exist exceptional circumstances and whether reduction is necessary to achieve substantial justice.  I believe that both parties in this action recognise that petition.” 

 

He had previously indicated that the approach which had to be taken in relation to a claim for reduction of decree had been authoritively explained in Bain.  (Pages 444 to 445.)  He held that the circumstances averred by the pursuer could be described as exceptional and allowed a proof before answer but Mr Campbell submitted that the case should not be taken to mean that only in exceptional circumstances should reduction be allowed.  Cases which had said so had gone too far.  Bain did not support the conclusion that exceptional circumstances were required.  Lord Osborne held that the circumstances in Johnstone & Clark were exceptional but it did not mean to say that a decree could not be reduced if they were not.  It seems quite clear to me, however, that Lord Osborne held that exceptional circumstances were required as indeed did Bain

[37]      Mr Campbell then turned to the case of Royal Bank of Scotland Plc v Matheson 2013 SC 146. 

[38]      That case was an action of reduction of a decree in absence.  The defender had sued the bank for damages, representing himself after being initially represented by solicitors.  The fact that the action was in the calling list was overlooked by the bank’s solicitors as were various references to the action in emails from the defender.  An unopposed motion was believed to be a motion to remit the action to the sheriff court but was in fact a motion for decree in absence.  It was granted on 1 March 2011 and decree extracted two weeks later.  The Lord Ordinary granted decree of absolvitor, laying emphasis on the degree of fault in allowing decree to pass.  An extra division held that the approach to be adopted in relation to reduction of a decree in absence was a consideration of the whole circumstances bearing upon the justice of the case.  The Lord Ordinary misdirected himself by attaching predominant weight to the errors and admissions.  The overriding consideration was that a substantial defence was put forward when decree was allowed to pass without investigation of it.  Justice required that reduction be granted. 

[39]      In paragraph 25, Lord Philip, delivering the opinion of the court, said the following: 

“Senior counsel for the bank submitted that the test for reduction of a decree in absence was based on a consideration of the whole circumstances of the case.  It was different from the test for reduction for a decree in foro, which required the existence of exceptional circumstances.” 

[40]      In paragraph 31 it is recorded that senior counsel for the defenders submitted that there was: 

“… no precise test for the exercise of discretion in reducing a decree in absence.  All the circumstances had to be taken into account with a view to achieving substantial justice.  However, in assessing the whole circumstances the fault of a party or his agents was an important consideration.  One of the factors to be considered was the reason why a party had to seek reduction in the first place.” 

 

[41]      At paragraph 34, Lord Philip said the following: 

“The parties were agreed that the decision in Robertson’s Exr v Robertson set out the correct approach to be adopted in determining whether reduction of a decree in absence should be granted.  The court should look at the whole circumstances of the case… That the substantial justice of the case should be the overriding consideration in deciding whether or not to grant reduction of a decree in absence or in foro is borne out by the short judgment of the Lord Justice‑Clerk in Forrest v Dunlop (p.16), which related to a decree by default.” 

 

[42]      His Lordship then quoted from the opinion of Lord Justice-Clerk in Forrest, adding emphasis to the words “has the power to award substantial justice”.  At paragraph 35 he went on: 

“The theme of doing substantial justice in the individual case seems to us to underlie the opinions of Lord President Normand and Lord Moncrieff in McKelvie v Scottish Steel Scaffolding Co Ltd…” 

 

[43]      His Lordship then quoted from these opinions and went on:  “The cases of Forrest v Dunlop and McKelvie both dealt with reduction of decree by default in which the test for reduction is higher than in cases of decree in absence”. 

[44]      At paragraph 36 and 37 he went on as follows: 

“[36] More recently Lord Osborne in Johnstone and Clark (Engineers) Ltd v Lockhart (p.445 D), citing Lord President Normand in McKelvie v Scottish Steel Scaffolding Co Ltd and Lord Allanbridge in J &C Black (Haulage) Ltd v Alltransport International Group Ltd, adopted a similar approach: 

 

‘What does emerge from such cases, in my view, is that the court is normally reluctant that a decree pronounced against the defenders should be treated as unassailable in circumstances where there existed a substantial defence to the claim concerned, which had never been heard’.

[37] In our view therefore the approach to be adopted by the court in a reduction of a decree in absence is more accurately stated as consideration of the whole circumstances bearing upon the justice of the case.  In his opinion the Lord Ordinary referred to Robertson’s Exr v Robertson for the proposition that the exceptional circumstances test did not apply in relation to decrees in absence, and that the court would exercise its discretion in light of all the circumstances of the case.” 

 

[45]      Lord Philip went on to refer to the Lord Ordinary’s opinion that the matter came down to an assessment of the degree of fault in allowing decree to pass but said that what was absent from his opinion was any indication that he had applied his mind to the broader question of the substantial justice of the case. 

[46]      Mr Campbell relied heavily on this case and also referred to MacLaren, at page 596, which pointed out that a reduction may be brought on the ground of inadvertence, relying on Forrest v Dunlop.  He submitted that the circumstances were not completely irrelevant but ordinarily most weight should be given to the defence, which could trump other factors.  The fact that there had been some fault on the part of the pursuers was not the overriding consideration.  Substantial justice was the test. 

[47]      Mr Campbell submitted that even if he was wrong about that the circumstances here were exceptional.  Mr Winters had made a genuine error formed after conversations with Mr Driscoll.  He had been given signals that he was proceeding under a misapprehension and had opportunities to correct the position but the original error, which resulted in his waiting for the record, was a constant thread.  Due to the strength of his misunderstanding he did not instruct solicitors earlier.  Mr Anderson said that the intention was to go without representation but if Mr Driscoll had told him to instruct solicitors he would have done.  A genuine error of his employee was the source of the problem.  They always intended to defend the case.  Some of the authorities had allowed reduction in cases where there was an error, depending on the circumstances.  The defence had not been heard and it was a substantial one.  The matter for which the pursuers were being blamed was not their responsibility.  It was a logical and strong defence.  Reduction of the decree would not create any true prejudice to the defenders.  If the decree was reduced and the matter remitted to the sheriff court the pursuers were content to be found liable for the defenders’ expenses in the sheriff court.  The pursuers would have no remedy against anyone else if reduction were not granted.  The defenders on the other hand would have got a windfall. 

[48]      Mr Campbell went further and indicated that an offer had been made to pay the defenders’ expenses of the sheriff court proceedings on the agent and client scale, as agreed or as taxed. 

 

Submissions for the defenders
[49]      Ms Hamilton moved me to sustain the first, second and fourth pleas for the defenders and to repel the pursuers’ first plea in law.  She submitted that there were two categories of case in which reduction would be competent.  The first was where there were exceptional circumstances that led to a party’s failure to appeal and the second was a sub-category of that, namely where there had been a miscarriage of justice such as to render the proceedings fundamentally null.  An example of that was Bain.  If there were exceptional circumstances then the court should ask itself whether or not to exercise its discretion to grant the remedy.  It was at that stage where the question of whether there was a substantial defence came into play.  The court would not allow reduction to serve the purposes of an ordinary appeal.  See Walker, Civil Remedies at page 176 and Adair v Colville, pages 55, 56 and 67. 

[50]      In Philp v Reid 1927 SC 224 the reason for pursing an action of reduction was stated to be that “per incuriam” an appeal against the sheriff’s interlocutor had not been taken timeously.  It was made plain by the Lord Justice-Clerk in that case that it was not open to a party to appeal or raise an action of reduction as he chose.  At page 230 he went on as follows: 

“… the only excuse is that the appeal was not taken per incuriam.  That would merely seem to amount to an admission of slackness, veiled, no doubt, by resort to another language.  If there was any doubt about the matter, it seems to me to be set at rest by, if I may say so, the very apposite words of Lord Justice Clerk Hope in Baillie v McGibbon, where his Lordship puts it as plainly as language can express it that the view that an option exists, and that a litigant can sue an action of reduction when an appeal is opened to him which he has neglected, is an inaccurate representation of his rights.  I also refer to the passage cited by Mr Considine from Lord Dunedin’s speech in Adair v Colville, in which I apprehend his Lordship was dealing with accidents of reduction in the widest sense, and in which he imposes a distinct limit upon their use.” 

 

Lord Ormidale and Lord Hunter agreed, while at page 233 Lord Anderson said that:  “reduction was not per se incompetent as a process of review but it was only competent in exceptional circumstances”.  Slackness was not a good ground for the remedy.  The pursuers in this case said they did not know about the time limits for appealing since they did not know that decree had been granted but that was no more than an excuse.  The pursuers were the authors of their own misfortune. 

[51]      In Stewart v Lothians Construction (Edinburgh) Ltd, Lord Stott refused to grant decree of reduction where the pursuers’ solicitor had taken a wrong view of the law and had pursued a reponing note rather than an appeal against a decree by default.  His Lordship made it clear that reduction was a remedy available only in exceptional circumstances and was not to be regarded as simply an alternative form of appeal.  It was not enough for the pursuer to aver that there had been no investigation of their defences in the sheriff court action. 

[52]      Ms Hamilton submitted that something exceptional must have happened to lead to the failure to follow the procedures for appeal.  Remissness on the part of a party or his solicitor did not fall into that category.  There was nothing exceptional in the instant case.  There was nothing outwith the control of the pursuers or which was ultra vires.  There was a mistake but it was not a reasonable one to have made in the circumstances and was therefore not exceptional.  The pursuers had had several opportunities to make themselves aware of the circumstances and had failed to take advantage of them. 

[53]      Lord Allanbridge’s decision in J &C Black was doubted by Lord Weir in Kirkwood v Glasgow District Council 1988 SC 169, but even so Lord Allanbridge had accepted that exceptional circumstances were required.  Lord Allanbridge had referred to McKelvie but that was not an action of reduction.  The comments in McKelvie were in a reclaiming motion and reduction was not a substitute for appeal.  In Kirkwood Lord Weir also held that there had to be exceptional circumstances and found in that case that the pursuer bore the responsibility for the acts and admissions of his agents.  Under reference to the case of Gehlan v Saeed 1987 SCLR 668, Ms Hamilton submitted again that the pursuers were the authors of their own misfortunes.

[54]      In that case Lord Jauncey found that the petitioner must have known that an action was likely to be raised against her within a short time but she made no effective arrangements for the conduct of any such action in her absence.  A writ was accepted by an employee who instructed Edinburgh solicitors to defend the action and defences were lodged but the solicitors resigned agency on the basis that they were unable to get instructions from the petitioner.  An interlocutor ordering a diet was served on the petitioner’s shop and was accepted by her employee but he failed to tell her of the position.  Decree by default was granted and a charge was served.  His Lordship pointed out that it was clear from the authorities that reduction was a remedy to be exercised sparingly and only in exceptional circumstances.  He went on: 

“Where it appears that a party may have suffered substantial injustice as a result of a granting of a decree by default against him in circumstances over which he had no direct control, it may be that it would be appropriate to afford to him the remedy of reduction.  It does not, however, follow that such a remedy should be available to a party who is substantially the author of his own misfortune.” 

 

[55]      A similar conclusion was reached in the case of Shaw v Performing Rights Society Ltd 2002 SCLR 993.  In that case the pursuer was aware that an action existed and was content to allow his business manager to make arrangements for the conduct of the defence without any form of supervision or control.  He was aware that the manager had instructed someone other than the firm of solicitors named in the notice of intention to defend to act on his behalf.  That person was not a solicitor and there were no averments that the pursuer took any steps to ascertain whether he was competent.  Lord Menzies held that the pursuer had to accept responsibility for his employee’s incompetence and for the incompetence of the individual intrusted with the conduct of the case. 

[56]      In Johnstone & Clark (Engineers) Ltd v Lockhart there were exceptional circumstances and the court applied a two stage test.  Substantial justice was only considered in relation to the second stage.  In Bain v McConnell the circumstances were very special and were far removed from those in the instant case.  The whole proceedings had been rendered a nullity but no such averments were made here.  So far as Royal Bank of Scotland Plc v Matheson was concerned, any remarks about decrees in foro were obiter and in any event the court recognised that the test for reduction of a decree in foro was higher than for a decree in absence.  It was not authority for the proposition that the overriding question was substantial justice as far as decrees in foro were concerned and it did not change the proposition that there had to be exceptional circumstances in such a case or some miscarriage of justice rendering the proceedings fundamentally null.  The court was saying that the question of substantial justice was relevant to the discretionary element of the court’s decision.  In Forrest v Dunlop the court was not saying that substantial justice was the overriding test and in any event the dicta were obiter.  The case of McKelvie was not an action of reduction. 

[57]      Finally Ms Hamilton referred to a recent decision of Lord Jones in the case of Nova Scotia Limited v Henderson [2015] CSOH 126 in which the Royal Bank of Scotland case was cited.  At paragraph 37 Lord Jones made the following comments: 

“A consistent thread running through the relevant authorities is that, notwithstanding the existence of an alternative remedy of which a litigant has not availed himself, the court has the power to reduce a decree by default, in exceptional circumstances, if reduction is necessary to produce substantial justice.  (Bain, page 695J.)  (It is appropriate to note at this point that, although cases concerning the reduction of a decree in absence were cited during argument, in such cases it is unnecessary to establish the existence of exceptional circumstances.  (See Robertson’s Executor v Robertson 1995 SC 23.))” 

 

[58]      The facts in the instance case were such that the threshold of exceptional circumstances had not been met.  There had been a consistent and continuing course of careless and unreasonable conduct on the part of the pursuers resulting in decree and failure to identify that the appeal days were running.  Even if the circumstances could be said to be exceptional, substantial justice required that reduction be refused. 

[59]      By virtue of the letter of 6 December 2013, number 7/2 of process, the pursuers were made aware or ought to have been aware that there were certain things that had to be done and deadlines that had to be met.  They were aware of the options hearing.  The letter advised the time and date of that hearing.  Mr Winters accepted that he had read the warning about decree by default if certain things were not done on time.  He accepted that the letter notified him that legal advice should be sought if he was uncertain what to do.  Despite that, he relied on his discussions with Mr Driscoll from which he understood he would receive a record.  Mr Driscoll was not qualified, being an English solicitor, and he advised Mr Winters to obtain Scottish representation. Mr Winters ignored that advice. 

[60]      Mr Winters did not act reasonably.  His conduct was careless and slack.  Mr Anderson, the director of the pursuers, had relied on Mr Winter’s reassurances that everything was in hand but he was not made aware of the advice and accepted that Mr Winters had exercised poor judgement.  Mr Winters accepted that the defences were probably confusing but he did nothing more to develop the position of the pursuers until after decree had passed.  He ignored the further correspondence from the defenders’ agents.  The letter of 26 February, (number 7/6/1 of process), was an obvious clue that action had to be taken.  Even if there was any doubt as to when Mr Winters read that letter there could be no question but that it was received at the pursuers’ offices on the afternoon of 26 February.  Reference was made to numbers 6/4, 7/10 and 7/11 of process.  Mr Winters did not remember if he saw it before 28 February, the date of the options hearing, but even if he did not he made no attempt to find out what had happened at the hearing.  Any reasonable person would have attempted to find out. The computer virus would not have affected receipt of the fax of 28 February and was a red herring.  Even if the diarised date for the options hearing was not accessible that made no difference since Mr Winters had no intention of going in any event.  But for his lack of effective action someone would have turned up and decree would not have passed or at least he could have found out about the passing of the decree in time to appeal.  He even ignored the advice on the charge to seek legal advice.  By that stage of course the appeal days had already elapsed but it was further evidence of his consistently careless attitude.  In accordance with the case of Shaw the pursuers had to bear the responsibility for the actions of their employee.  In terms of Philp the fact that an appeal was not taken per incuriam or slackness was not good enough and lack of effective action did not constitute exceptional circumstances.  See Gehlan

[61]      Even if the circumstances were exceptional, decree should not be granted.  Any prejudice to the pursuers was caused by their own actions and omissions.  There was no suggestion that the defenders had acted inappropriately.  On the contrary, they consistently communicated matters to the pursuers.  Had an appeal been taken the appeal court would have looked at the defences lodged in the action.  They were not in proper form and if reduction were allowed the pursuers would find themselves in a better position than if they had taken an appeal.  Some two years had now elapsed since the initial proceedings and there would be inevitable dilution of the quality of the evidence.  No concession had been made as to the expenses of the Court of Session proceedings.  That was a relevant factor. 

 

Reply for the pursuers
[62]      It had been clear in Adair v Colville that it was not possible to define the circumstances where reduction was competent.  Forrest v Dunlop and McKelvie did not mention exceptional circumstances.  In Malcolm v Park Lane Motors Ltd 1982 SLT 1252, the court did refer to exceptional circumstances but the overriding consideration was substantial justice.  It made sense that, since this was an equitable remedy, substantial justice was the overriding consideration.  The circumstances in Philp v Reid were far removed from the current ones.  Mr Campbell accepted that if the pursuers knew that decree had passed and did not appeal then it was likely this action would not have been raised but they did not know about it.  Mr Anderson instructed solicitors as soon as he knew that something had gone wrong.  He would have appealed the decree had he known about it.  While Lord Weir had taken a different approach from Lord Allanbridge, the latter’s approach was supported in Johnstone & Clark (Engineers) Ltd v Lockhart. 

[63]      Even if exceptional circumstances were required, contrary to Mr Campbell’s submission, they were made out in this case.  In Gehlan the petitioner was aware of the matter at hand and was under no error or misunderstanding, but despite that she did nothing. Royal Bank of Scotland Plc v Matheson, Johnstone & Clark (Engineers) Ltd v Lockhart, J and C Black (Haulage) Ltd and Zannetos were all inconsistent with Lord Weir’s approach.  In Shaw the pursuer had been told there was a motion for decree by default and did not take adequate steps to deal with it.  There was no prior intimation of a motion for decree by default in the instant case. 

[64]      In the Nova Scotia Ltd case Lord Jones did not say that exceptional circumstances were the only circumstances in which decree by default could be reduced.  The court in the Royal Bank of Scotland case accepted that what was said in McKelvie was relevant to actions of reduction.  The test of substantial justice made sense considering the number of ways in which decrees could pass.  In the instant case the decree in foro was not very far from being a decree in absence, ineffective defences having been drafted by a limited company seeking to represent itself.  Very little prejudice would be suffered by the defenders if decree were granted.  The pursuer on the other hand would suffer prejudice if it were not. 

[65]      The circumstances were exceptional.  The pursuers wanted to defend the action and took some limited steps to do so.  As a result of error they did not take all the necessary steps.  The employee Mr Winters was at fault.  According to Lord Osborne in Johnstone & Clark exceptional simply meant not normal.  The pursuers could have appealed but for the fact that they did not know about the decree.  Mr Anderson did eventually instruct a solicitor when things were not going properly. 

Discussion
[66]      Until Mr Campbell’s valiant attempt to persuade me otherwise I had never considered that the test for reduction of a decree in foro might be anything other than that for which Ms Hamilton contended, that is that there had to be demonstrated exceptional circumstances.  Even if those were demonstrated, before the court would exercise its discretion in favour of reduction, it had to be satisfied that substantial justice required such a remedy.  Nothing in Mr Campbell’s argument has caused me to think otherwise. 

[67]      In every case where the matter has been considered the court has proceeded on the basis that exceptional circumstances had to be demonstrated.  The authorities on which Mr Campbell principally relied are of no assistance to him.  The discussion in Forrest v Dunlop was in the context of a plea of res judicata and the Lord Justice-Clerk was merely explaining the differences between the effects of a decree in absence and a decree in foro.  He did not discuss in detail the test which was required for reduction of the latter. 

[68]      McKelvie was not an action of reduction but an appeal and Royal Bank of Scotland Plc v Matheson related to a decree in absence.  In any event, in that case it was accepted that a higher test was required for decrees in foro.  The cases were there had been a fundamental nullity because of some defect in procedure are not relevant for present purposes.  

[69]      In J & C Black Lord Allanbridge accepted that exceptional circumstances were required, even if the actual decision is that case has been the subject of some debate. 

[70]      Not only do the authorities speak with one voice but as a matter of principle one can see why they should do so.  An action of reduction is an exceptional remedy and parties do not simply have a choice as to whether or not to proceed by reduction or appeal.  If Mr Campbell’s arguments were correct then anyone with a substantial defence would be able to reduce a decree in foro, ignoring the time limits for appealing, and that is obviously not the law. 

[71]      I am satisfied therefore that the pursuers require to aver and prove that there are exceptional circumstances in this case and in addition that substantial justice requires that I grant them the remedy they seek. 

[72]      If I were with them on the first point I would be prepared to grant reduction.  I am satisfied that there is a prima facie defence on the merits, as I have indicated.

[73]      The difficulty for the pursuers is that I am not satisfied that the circumstances can properly be described as exceptional. 

[74]      When the initial writ was received, Mr Anderson, the sole director of the company, intrusted the handling of the dispute to Mr Winters.  The pursuers have to bear the brunt of his acts and omissions in defending the action.  Cf Gehlanv Saeed and Shaw v Performing Rights Society Ltd

[75]      Mr Winters endeavoured in the first instance to obtain advice and, in response to a specific inquiry from him, was advised to seek Scottish representation.  This was as early as 29 November 2013.  He ignored that advice. 

[78]      He also ignored the advice to seek representation in the letter from the sheriff clerk, dated 6 December 2013, which set out the dates for various steps in procedure.  He did nothing when the defenders’ agents intimated their first inventory of productions by letter dated 9 January 2014 or when they intimated their adjustments to the initial writ by letter of 14 February 2014.  Whether or not he saw the letter dated 26 February before the options hearing I am in no doubt that he must have seen it within a day or two thereafter at the latest.  Even if a virus affected the computer systems in the office there had been a number of indications as to the date of the options hearing and Mr Winters did not even take steps to find out what had happened. 

[79]      It is entirely appropriate, as Ms Hamilton suggested, to find that the pursuers were the authors of their own misfortune.  Despite all the warning signs, Mr Winters, to whom the handling of the case was delegated, persisted in his belief that a record would be sent and that nothing further need be done until that happened.  I have no reason to think that this mistake was made in anything other than good faith but the various failures which I have outlined make it clear to me that his misapprehension and inaction were wholly unreasonable. 

[80]      In the circumstances, I am satisfied that this action is incompetent and irrelevant.  There are no circumstances averred or proved which would justify reduction. 

 

Disposal
[81]      I shall repel the first plea in law for the pursuers.  The second plea in law is superseded.  I shall uphold the first, second and fourth pleas in law for the defenders and I shall grant decree of absolvitor. 

[82]      I shall reserve meantime all questions of expenses.  Unless parties can agree the matter I expect that an appropriate motion will be enrolled in due course.