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	Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> James Scott Ltd v Apollo Engineering Ltd & Ors [2000] ScotCS 18 (24 January 2000) URL: http://www.bailii.org/scot/cases/ScotCS/2000/18.html Cite as: [2000] ScotCS 18

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This litigation has a protracted history arising out of a sub-contract in relation to a Government contract to provide a facility for RNAD at Coulport. The pursuers were the main sub-contractor on the project and the defenders their sub-contractor in respect of provision of certain services. Claims arose upon completion of the contract at the instance of the defenders principally with regard to non-payment of the full price and damages. The present litigation was sisted by Lord MacLean in 1993 to enable those claims to go to arbitration. That arbitration process has not been completed, although in the meantime the defenders have gone into liquidation. The liquidator originally appointed, Frank Blin, sought to achieve a compromise with the pursuers but this is not acceptable to the creditors of the defenders and, unusually, he was removed from office and replaced by the current second defender.

The present liquidator entered into an assignation with a company called Adquest ("the Minuters") whereby for consideration he agreed to assign the claims competent to the bankrupt company under the contract. The latter company has lodged a Minute of Sist seeking to add themselves as defenders in the action on the basis of that assignation. The matter came before me on the opposed motion roll at the instance of the Minuters to achieve that result, since the pursuers were not prepared to consent to the asisgnation.

The nature of the outstanding claims are narrated in the Minute, the details of which are not important or relevant to the present issue save they comprise, as I have indicated, claims for both damages and price. They are purely monetary.

The contract between the parties in relation to the original works was in standard form and contained the following clause:

The debate before me turned upon the issue as to whether or not that clause prohibited the assignation to which I have made reference having any effect without the pursuers' consent, and thus the pursuers opposed the motion for sist of the Minuters into the process.

Before me counsel for the Minuters proceeded on the simple proposition that generally debts and other similar monetary claims were assignable, unless gratuitous in a question with the assignor's creditors. He referred to Gloag on Contract 2nd Edition, page 414 and the case quoted there Kerr's Trustee v Justice 1866 5 M.4. He submitted that the clause in the contract barring assignation was designed to deal with performance and was understandable upon that basis since the pursuers would wish to have control of the identity of the party with whom they had made the contract, in respect of the performance of it. This did not apply, however, he said to debts once constituted under the contract which were merely assets assignable by their owner, who in this case was now the liquidator. The issue of the liquidation was important, he submitted, because of the general power granted to a liquidator to dispose of the assets of the bankrupt company which should not be fettered in any way, he submitted, although he recognised that the appearance on the scene of the liquidator at all amounted to a statutory assignation of the assets and liabilities of the company.

Counsel also submitted that given the mutuality of the contract with obligations on both sides, it was not open to the pursuers to rely upon the prohibition in question when it was being alleged that they themselves were in breach of the contract. Finally counsel submitted that in any event to uphold the prohibition against assignation was contrary to public policy, but he offered no authority in support of this proposition.

Counsel for the pursuers maintained that there was no general rule in the law of Scotland that prevented or struck at purported prohibitions of assignations of contractual rights. While he accepted that debts could be assignable, equally the law indicated that such assignation could be prevented by the terms of the contract which gave rise to them. He referred to two cases in support of that proposition, namely Grierson v Fordyce Maxwell 22R 812 and Berlitz v Duchene 6F 181. Counsel submitted that the mutuality point was of no significance since the pursuers were not seeking to enforce the contract but merely to apply a term of it to prohibit or restrain the actions of the other party, to which they did not consent.

However the main thrust of his argument depended upon a recent decision of the House of Lords, namely, Linden Garden Trust Ltd v Lenesta Sludge Disposals Ltd and others 1994 1A.C.85. The facts of that case are complicated but counsel submitted that its reasoning was on all fours with the position he was adopting in seeking to deny the right on the part of the defenders to effect the assignation by reason of the prohibition in the contract.

I refused the motion to sist the Minuter as defenders since I was quite unable to find any real distinction between the present case and Linden, its general facts and its particular reasoning.

The contracts in question in Linden were not precisely on all fours with the contract in the present case since the relevant prohibition was simply as follows:-

Thus the phrase "'this contract" was in that context different from the phrase "the benefit of the contract" which is to be found in the contract with which I am concerned and I will return to this point.

The facts of Linden are complicated but it is sufficient to say that what was purported to be assigned were various contractual claims open to the original lessee of the relevant premises in question to his successor. There was no question of assignation of a contract where work was still to be performed.

What is important, however, is that Lord Browne-Wilkinson who gave the leading speech with which Lord Keith particularly agreed, specifically addressed the issue placed before me by counsel for the Minuters, namely whether in construing a purported prohibition of an assignation of a contract there was a distinction to be drawn between assignation of obligations for future performance and assignation of accrued rights such as a claim for damages. At pages 104-105 of the report Lord Browne-Wilkinson eschews that that is a relevant distinction. The determining issue he states is simply one of construction of the contract in question to examine the scope of the purported prohibition. His Lordship then goes on to give reasons why he considers that if the contract is construed as prohibiting only the assignment of rights to future performance, there is a serious risk of various complications developing. He therefore construes the relevant contract in the Linden case as a prohibition unless consented to of assignation of all rights arising out of the particular contract.

It will thus therefore be seen that Linden destroys the validity of the main argument by counsel for the Minuters in making this distinction between assignation of obligations for future performance which cannot be assigned competently because of the prohibition and accrued debts which can, despite the prohibition, all again in the absence of consent. Unless I can find some reason not to follow this case, I consider it therefore decides the issue before me.

The reasons put forward in this context were first of all the obvious one that it is a matter of English law and not Scots law, secondly that in the present context a liquidator is involved which was a different situation from that arising between the contracting parties, and that the terminology of the contract was not the same.

I do not find any of these attempted distinctions convincing. There is nothing to indicate that the House of Lords was considering a peculiar question of English law. They were simply construing the contract, and in my opinion would be bound to take the same line if the present contract was before them. Secondly I see no reason to give special status to a liquidator who takes his rights and obligations tantum et tale. Finally, the distinction in the wording to my mind does not assist save possibly to suggest that the word "benefit" is more precise in indicating that it could cover rights to money emerging from the contract as opposed to the phrase "the contract" which might admit a construction limited only to performance.

In these circumstances although not technically binding upon one, I regard Linden of the highest persuasive authority and indistinguishable from the present case.

I consider that there is nothing in the point about mutuality since if there was, it would bar the assignation of any claim to damages which obviously depends upon an allegation of breach of contract by the party asserting the prohibition as the pursuers do here. They are not therefore enforcing an obligation but merely taking a position that what is proposed by the Minuter is not competent under the contract.

Finally on the question of public policy as I have indicated counsel could offer me no authority in support of the proposition. An examination of Linden however indicates that it was considered, again by Lord Browne-Wilkinson, on pages 106-107 and he finds no reason to find that in general terms a prohibition would be contrary to public policy.

In these circumstances as I have indicated I refused the motion but granted leave to reclaim since the point is not without importance.