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OUTER HOUSE, COURT OF SESSION
[2008] CSOH 135
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A183/08
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OPINION OF LORD
GLENNIE
in the cause
GBF FINANCIAL
MANAGEMENT COMPANY LIMITED
Pursuer;
against
(FIRST) STEVEN
WORRALLO; (SECOND) RHODA WORRALLO and (THIRD) ISLAND
OF LITTLE CUMBRAE LIMITED
Defenders:
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Pursuer:
No appearance
Defenders: Kinroy, Q.C.; McKay & Norwell, W.S.
11 September 2008
[1] In
this action, the pursuer, a financial management company incorporated in the
state of Delaware, USA, seeks declarator that "in terms of telephone
conversations between Hendrikus van Bilsen [the President of the
pursuer] and Steven Worrallo [one of the defenders] on 21 November
and 11 and 21 December 2007, the defenders entered into a contract with
the pursuer for the sale to the pursuer of all of the shares of the third
defender at a price of г2.65 million."
The third defender is the Island of Little Cumbrae Limited and its main
asset, as I understand it, is the island itself.
[2] On
19 March 2008 the
pursuers sought and obtained interim
interdict, in effect preventing the defenders from seeking to sell their shares
in the company to anyone else and from alienating the island
of Little Cumbrae. The defenders reclaimed and on 11 June 2008 the Inner House
allowed the reclaiming motion and recalled the interim interdict. No
Opinion was issued by the Inner House but I am informed that one of the
principal reasons for allowing the reclaiming motion was that the pursuer could
not show a prima facie case on the
merits.
[3] Since
that time, the only procedure of substance has been a motion by the defenders
to transfer the cause to the Commercial Court
and to require the pursuers to sist a mandatory. Before that motion could be heard, the
pursuer's solicitors had intimated that they had withdrawn from acting. Accordingly, at the hearing of the defenders'
motion, I pronounced an order in terms of Rule of Court 30(2) ordaining the
pursuer to intimate whether or not it intended to proceed with the cause under
certification that if it failed so to intimate the Court might grant such
decree or make such order or finding as it thought fit. The notice sent to the petitioner enclosing
the interlocutor has on it, in bold, the words:
"If you do not write to the Deputy Principal Clerk and inform him what
you intend to do the Court may make an order or a finding or both against you
as mentioned in the interlocutor attached."
[4] It
appears that there was some difficulty in serving the notice on the
pursuer. Nonetheless, on 31 July 2008 the pursuer
returned the appropriate form signed by Mr van Bilsen. It was in the following terms:
"I am insisting
in the above cause. My new solicitor's
name and address is: N/A - Still in
process of obtaining."
The words from "N/A" onwards were
in manuscript.
[5] A
further two months have elapsed but the pursuer has still not appointed
solicitors to act on its behalf in these proceedings.
[6] It
is trite law that a company cannot appear or take any step in legal proceedings
except by a solicitor. For a company
merely to return the form attached to the Rule 30(2) notice stating that it
intends to proceed with the cause achieves nothing unless and until a solicitor
is appointed. It amounts to saying: I intend to proceed, but I am not taking any
step in the action or putting myself in a position to take any step. I would question the competency of such a
response to a Rule 30(2) notice but I do not found my decision in this case on
that. At the very least, it seems to me
that a party who responds in this way to a Rule 30(2) notice must take steps
promptly to appoint a solicitor. It must
be in a position to comply with orders of the Court and to attend Court when
required to do so. It cannot do this
without appointing a solicitor.
[7] In
light of the pursuer's lack of action, the defenders have asked for this case
to come out By Order. The By Order
hearing duly appeared on the Rolls of Court.
That is the normal way in which notice is given of such hearings. If the pursuer had instructed a solicitor, as
it should have, it would have had proper intimation of the hearing.
[8] As
it is, the pursuer has obtained notice of the hearing by an informal
route. Nonetheless, it has not
instructed a solicitor on its behalf.
Strictly, therefore, it has not appeared at this By Order hearing. However, Mr Van Bilsen himself has attended
and has sent a letter to the Court in which, in addition to insisting in its
case on the merits, he states that the pursuer is in the process of finding a
solicitor versed in financial and commercial matters and company buy outs. No solicitor has yet been found. In answer to questions from the Court,
Mr van Bilsen accepted that the search for a solicitor since the
beginning of July had been "patchy" due to the pressure of the company's other
business and the fact that it was "summertime".
[9] Mr Kinroy
QC, for the defenders, submitted that the pursuer is in default and he asked me
to pronounce decree of absolvitor in
terms of Rule of Court 20.1. That rule
provides, so far as material, as follows:
"(1) Without prejudice to the power of the
Court to grant decree by default in other circumstances, where a party fails to
attend before the Lord Ordinary on the calling of a cause -
(a) on the By Order roll ...
that party shall be in default.
(2) Where a pursuer is in default under
paragraph (1)(a) ... the Court may grant decree by default against him with
expenses."
The rest of that Rule is irrelevant
for present purposes.
[10] I was referred to two authorities on the exercise of
discretion in a case such as this.
Mr Kinroy accepted that they were not directly employed but he
submitted that they were indicative of the general approach. They were Saleem
v Hamilton District Licensing Board
1993 S.C. 175 and Munro & Miller
(Pakistan) Limited v Wyvern Structures Limited 1997 S.C. 1. The latter is helpful as indicating that, in
an appropriate case, decree of absolvitor
may be granted.
[11] In support of his motion, Mr Kinroy submitted, in
summary: (i) that the pursuer has failed to appear at the
By Order hearing and is therefore in default;
(ii) that the pursuer has failed
to instruct agents for some two months since returning the Rule 30(2)
form; (iii) that the pursuer's case is unstateable, or
"ludicrous" to use his precise language; and (iv) that the defender is suffering prejudice by
reason of the pursuer's failure.
[12] To amplify point (iii) Mr Kinroy pointed to a number
of changes of position in the pursuer's case.
In the summons, it avers a contract for the sale and purchase of all the
shares in the third defender at a price of г2.65 million. Earlier this year, so I am told, the
defenders, while not accepting that there was a contract, were prepared to go
along with it if the pursuer came up with the money, but it was said that it
could not then pay. Then, at the time of
the reclaiming motion, the defenders, having put the pursuer on notice that
they required it to pay within a reasonable time, rescinded the alleged
contract (if there was one) for failure to pay - and there has been no answer to that
rescission. Finally, in a letter from
the pursuer' solicitors dated 6 June 2008,
a copy of which was shown to the Inner House at the reclaiming motion,
the deal is described in a way which makes it clear that there was at that time
no intention to be bound, no more than an agreement in principal.
[13] In amplification of point (iv), Mr Kinroy said that
the defenders had a number of creditors who were pressing but had held back in
the light of their success on the reclaiming motion. There was another buyer in the wings but he
was reluctant to go ahead whilst the pursuer's claim was outstanding and he had
notice of it. In the ordinary course,
said Mr Kinroy, he would have been able to seek leave to add a
counterclaim for declarator that there was no binding agreement and then move
the Court for summary decree on that counterclaim. However, the pursuer's failure to appoint
solicitors to take part in the action made that course difficult if not impossible.
[14] As Mr van Bilsen was present, I asked him, since it
was relevant to the question of prejudice which the defenders claimed to be
suffering, whether the pursuer was both willing and able now to put up the
alleged purchase price of г2.65 million.
His response was, in effect, "No", though he did not put it in that
way. He said that the pursuer still
required to do due diligence; and further that it wanted to discuss the method
of payment - he mentioned possible loans or guarantees - and the structure of
the deal. This, to my mind, was the
clearest possible confirmation that there was no realistic possibility of the
pursuer establishing, or even seeking to establish, that there was a binding
agreement. Whatever arrangement may have
been made can have amounted, at best, to no more than an agreement in principle
subject to due diligence and discussion as to the method of payment.
[15] Further, since the pursuer was not able to put up the
г2.65 million which it alleges is the price that it had agreed to pay for
the shares, there is no way in which I can see the prejudice to the defenders
being alleviated by my granting any indulgence to the pursuer.
[16] In those circumstances, I am satisfied that the pursuer is in
default by not appearing at the By Order hearing and that there is no
reasonable excuse advanced for the failure to appear by a solicitor. I consider it appropriate that I should grant
decree by default. I am satisfied that
it would be unfair to the defenders in the particular circumstances of this
case to leave the case hanging over them.
Decree of dismissal, therefore, is not adequate to do justice in the
present situation. The circumstances
justify decree of absolvitor.
[17] I shall grant decree of absolvitor
and award the defenders the expenses of the action.
