Background
The opinion of Lord Woolman in the recent case of Little Cumbrae Estate Limited v Rolyat 1 Limited [2014] CSOH 163 explored the boundaries of the rule on recall. The pursuer, in that case, had obtained decree in absence against the defender for payment of £180,000. It had also obtained an extract decree and served a charge for payment on the defender. The decree had been granted during negotiations between the parties. The defender's agent had made a settlement proposal to the pursuer's agent. The pursuer's agent wrote to the defender's agent telling it that it was taking instructions but also making it clear that the summons was to be lodged for calling and so defences were expected within the usual timescale. The defender's agent replied saying that it would be premature to lodge the summons for calling while negotiations were ongoing. The pursuer's agent (clearly not agreeing with that sentiment) lodged the summons for calling. No defences were lodged and so it moved for decree in absence. It did not intimate the motion to the defender's agent.
Once a charge for payment was served on the defender, its agent sprung back into life. It enrolled a motion seeking recall of decree under Rule 19.2. But, by that time, it was outwith the 7 day time period for doing so and, therefore, it also enrolled a motion under Rule of Court 2.1 asking the Court of Session to exercise its dispensing power and waive the failure to enrol the motion timeously. Counsel for the defender explained that there were four factors relevant in the present case - (a) that the defender's agent specialised in commercial property and was unfamiliar with court procedure; (b) that he was in correspondence with another firm of solicitors whom the pursuer had instructed to deal with all non-litigation matters; (c) that the service copy summons had not been sent to the defender by its accountants; and (d) that there was a substantive defence to the action.
Competence
Lord Woolman started his analysis by looking at the competence of the motion given the stage at which enforcement of the decree had reached. Counsel for the pursuer argued that the motion was incompetent because the decree had already been extracted and diligence had been done on it. The service of the charge would remain valid even if recall was granted and so the motion should not be entertained. Against that, however, it was pointed out that Rule 19.2 is not prescriptive in the sense that it does not state that there is a particular point at which recall becomes incompetent. Further, Lord Woolman explained that Lord McCluskey had, in the case of Strain v Byers 2005 SCLR 157 held that it was competent to recall a decree in absence that had been extracted. Ultimately, Lord Woolman did not regard it as decisive that diligence had been done. Service of the charge, he held, was simply a preparatory step and the pursuer could only exercise diligence once the days of charge expire. Accordingly, on that basis and on the basis that no irrevocable step had been taken in relation to enforcement, Lord Woolman held that the application was competent.
The dispensing power
Lord Woolman then moved on to address the next question which was whether the dispensing power could be used in these circumstances. Early authorities had been against the idea but more recent authorities took a different approach and the Lord Justice Clerk, in the case of Semple Cochrane plc v Hughes 2002 SLT 1121 had held that the point of the dispensing power was to do substantial justice between the parties. Lord Woolman also relied, to an extent, on the fact that the pursuer's agent did not intimate the motion for decree in absence to the defender's agent. In the same case, the Lord Justice Clerk had suggested that a pursuer should do so as a matter of courtesy and good practice. Lady Paton had added to these sentiments in Wallace v Keltbray Plant Ltd 2006 SLT 428 by suggesting that the appropriate intimation would be on 14 days' notice by recorded delivery post. Accordingly, for all of these reasons Lord Woolman accepted that the dispensing power could be used and he allowed the motion and the defences to be lodged. In doing so he noted two things (a) that the defender had acted quickly once it realised the mistake; and (b) the alternative remedy was reduction which would be cumbersome and time-consuming in the circumstances.
Comment
In relation to the competency of the motion there is certainly room to differ with the Court. The main issue that arises is the nature of the charge for payment. While in some respects the service of a charge is a preparatory step, it is difficult not to see it as part of the diligence done against the defender. The nature of the charge for payment is put into sharper focus where the defender is an individual because the expiry of it makes the individual apparently insolvent. Once a charge is served, an individual can only escape apparent insolvency by raising an action for suspension and interdict. If the charge is not suspended within the 14 days, then apparent insolvency arises. That is not directly applicable in the present case because the defender was a limited company, not an individual but it would be odd if a company could escape the effects of a charge more easily than an individual. However, in either case, the charge is much more than just a demand for payment. As Counsel for the pursuer pointed out, in terms of the relevant rules of court, the charge would remain valid even if the decree was recalled which was a "bizarre state of affairs".
It is also doubtful that the Court was correct to hold that the pursuer could only execute diligence after the days of charge expire. The service of a charge for payment may be a necessary (or at least sensible) pre-cursor to a liquidation petition but the pursuer could have done diligence on the extract decree without a charge for payment being served. Inhibition, arrestment and attachment of the defender's property were all possible absent service of a charge. It is interesting to reflect on whether the Court's decision would have been different had one of these steps had been taken rather than a charge having been served. Indeed, on one view, these steps are no less revocable than service of a charge for payment because inhibitions, arrestments and attachments can all be recalled.
The Court also relied on Lord McCluskey's decision in Strain v Byers. There are two points that can be made about that reliance. First, in that decision, the decree had been extracted but no charge had been served so there could be no doubt at all that diligence had not been commenced against the defender. Secondly, despite the defender's motion being unopposed Lord McCluskey was still only willing to grant it "with some hesitation". Lord McCluskey also went onto say that "If a pursuer in possession of an extracted decree were to use that decree in order to obtain diligence, or otherwise to enforce it, then the defender who considered that the decree should not have been granted, would be entitled to stop the use of the diligence…by means of process of suspension and interdict". As outlined above, that process would usually be the remedy open to the pursuer once a charge for payment had been served.
Lord Woolman's treatment of the dispensing power is less controversial given recent authorities but is still quite lenient on the defender's agent. The defender's agent was a commercial property lawyer dabbling in a dispute; he was expressly told that the summons was being lodged for calling; and he was told that the pursuer's agent expected to receive defences in the usual way. No doubt, however, the fact that these were failings of the agent rather than the defender itself had a bearing on the matter and the decision is not unjust to the pursuer because the pursuer was compensated for all the unnecessary procedure by way of expenses. Nonetheless, given the existence of other remedies available to the defender, the decision leaves you with the feeling that it (and its agent) got off lightly.
