A recent decision of the Sheriff Court at Edinburgh amounts to a precedent on the discrete but important question of when decrees in absence become decrees in foro contentioso (i.e. in a contested action) and thus res judicata (i.e. a bar to relitigation between the same parties on the same topic) on the questions which were referred for judicial determination by a pursuer.
Background - the Law & the Case
Ordinarily, a decree obtained in the absence of a defence is not considered "decided" against a defender to a court action. The defender never presented a defence and therefore the court has not had a chance to consider the matter fully - the question was not litigated and was not therefore decided.
An exception to the general rule was introduced in the Rules of Court (both in the Sheriff Courts and in the Court of Session) in the 1860s and 1870s. The current rule states that a decree in absence may convert into a decree in foro upon the expiry of six months from the decree being granted, provided that either the initial writ (or summons) or any charge for payment under it was served on the defender personally (Rule 7.5 of the Ordinary Cause Rules 1993 and Rule 19.1 of the Court of Session Rules 1994). The rules in question do not go as far to say that such decrees become res judicata against the defender, but as we successfully argued at the legal debate, it is difficult to see what other intention Parliament might have had when altering the common law in the 19th century.
In the court action, the background was that our client had raised a prior court action in 2019. The company which our client sued at the time was owned by and under the control of some of the defenders to the current action. Overall, the interests of the current defenders and the company in the antecedent court action were aligned. That company went into liquidation shortly after a decree in absence was passed against it. Under an assignation of claims, our client pursued the current court action. At the debate we argued that the decree had converted into a decree in foro and that the pleadings in the initial writ were statements which were res judicata against the defenders. It was not open to the defenders to raise arguments which were contrary to the propositions advanced in the initial writ of the antecedent court action (which the defenders attempted to do). On behalf of the defenders, it was argued that a decree in absence can never be res judicata as no defences had been presented and therefore the matters in question where never litigated.
The Decision
Sheriff O'Carroll, however, did not accept this argument. In his judgment, he found that the plain meaning of the words in Rule 7.5 have the effect that, provided the requirements of the provision are met, a decree in absence is converted into a decree in foro and becomes res judicata (so long as the other requirements of the plea were satisfied - which was the case in this action). He held that "the intention of the rule is so that if certain conditions are satisfied, the party holding decree may have certainty and finality in the litigation where the other party has not joined in the proceedings."
It is interesting to note that the Sheriff distinguished the leading authority on the matter Esso Petroleum Company Ltd v Law 1956 SC 33 as not being on point - the decision dealt with what we would today describe as decrees by default and not decree in absence. In that case Lord Carmont, delivering the decision of the Division (i.e., Appeal Court), made the following obiter comments: "Unless it is made out that the antecedent decree is one that satisfies the requirement of having been pronounced in an action in which there had been at all events the minimum requirement of some tabled defence, the plea [of res judicata] cannot be sustained." It is our view that this statement is plainly wrong applying the logic the Sheriff employed in reaching his decision. Though it was not necessary for the Sheriff to make that determination in his decision, the presence or absence of a defence is only relevant where the requirements of Rule 7.5 are not engaged. However, if the provision's requirements are satisfied, the plea of res judicata would become available so long as the plea's other components are in place - that was the purpose for which the common law was altered.
Food for Thought
The decision has important ramifications in the context of post-insolvency recoveries. Often directors/parent companies will allow a company to be wound-up where there had been a prior court decision against the company. This would be done in the expectation that the decree would never be enforced against them. But where such enforcement is possible, Sheriff O'Carroll's judgment is clear that the decision not to defend a prior action can have significant consequences for any future litigation. Directors and shareholders should therefore seek legal advice before deciding not to defend court proceedings. To borrow the Sheriff's turn of phrase, decrees in absence can "bite" and serious thought should be paid before deciding to ignore them.
