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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Perth & Kinross Council v Scottish Water Ltd & Anor [2015] ScotCS CSOH_138 (20 October 2015)
URL: http://www.bailii.org/scot/cases/ScotCS/2015/[2015]CSOH138.html
Cite as: [2015] ScotCS CSOH_138, 2015 GWD 34-547, 2015 SLT 788, [2015] CSOH 138

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OUTER HOUSE, COURT OF SESSION

[2015] CSOH 138

 

A87/15

NOTE BY LORD STEWART

In the cause

PERTH & KINROSS COUNCIL

Pursuers;

against

(1)  SCOTTISH WATER LIMITED and (2)  MILLGLEN (GLASGOW) LIMITED

Defenders:

Pursuers:  Smith QCClyde & Co

First Defenders:  Revie;  BLM

Second Defenders: no appearance

20 October 2015

[1]        The pursuers have sued a water company in delict for reparation for flood damage caused to a pre‑school centre.  The damage happened on 21 July 2007.  The damage was allegedly caused by flooding from a defective public sewer.  There is no contractual relationship between the pursuers and the water company.  The summons assumes that the water company have responsibility for public sewers.  The ground of action is negligent failure to discharge the statutory obligation to “inspect, maintain and repair” public sewers in terms of the Sewerage (Scotland) Act 1968 section 2.  Unconnected contractors who conducted piling work at a nearby housing development in 2006 are convened as second defenders.  The claim against the second defenders alleges that the defect to the sewer was originally caused by the second defenders’ fault at common law.  The sum sued for is £738,685.66.

[2]        The pursuers have now decided—correctly—that they have made a mistake about the name or designation of the water company convened as first defenders; the pursuers have directed the action against “Scottish Water Limited” when they should have convened “Scottish Water”;  and the pursuers have sought leave to amend the summons by changing “Scottish Water Limited” to “Scottish Water” in the instance for the first defenders with consequential changes to article 1 of condescendence.

[3]        The motion to amend came before me as vacation judge on 11 September 2015.  The motion had been intimated and enrolled but for some reason did not appear on the roll.  The first defenders (more of whom below) did not object to the motion being heard.  The motion is opposed.

[4]        I have decided to allow the amendment and to dispense with re‑service.  My decision is made on the basis of brief submissions and an impression as to the correct course of action.  The first defenders have now marked an appeal by reclaiming motion against my decision and asked for a note of reasons.  My reasons are set out in what follows.

 

The discretionary power of the court and its limits
[5]        Amendment of pleadings can be authorised under various heads of RCS 24.  The potentially applicable provisions are RCS 24.1(2)(b)(i) and 24.1(2)(d).  Rule 24.1(2)(b)(i) gives the court power to allow amendment “to correct or supplement the designation of a party to the cause”.  Rule 24.1(2)(d) provides power to allow amendment “where it appears that... the cause has been directed against the wrong person...” with the effect of substituting the right person and directing the existing averments and pleas against the right person.

[6]        Both parties agree that the matter is one for the discretion of the court.  The first defenders qualify the submission by saying that the court’s discretion has to be exercised in accordance with the practice as laid down in Gray Aitken [Gray Aitken Partnership Ltd v Link Housing Association Ltd 2007 SC 294; for some of the after-story see, among others, Link Housing Association Ltd v PBL Construction Ltd 2009 SC 653].  This is the submission notwithstanding that the five‑year or quinquennial prescriptive period has expired.  The quinquennial period is conceded by the pursuers to have expired five years after the flooding, on or shortly after 21 July 2015. The effect of prescription is to extinguish the claim unless, to put it shortly, a summons has been served on the alleged wrong‑doer before the expiry date [Prescription and Limitation (Scotland) Act 1973 section 6].  On this basis the pursuers are too late to serve a new summons.

[7]        I imagine that all courts reserve the power to put process mistakes right.  As a generality this court deploys its discretionary power to put right such errors and omissions if there is a reasonable excuse and where the balance of prejudice favours excusal taking a broad view of the interests of justice:  but there are limits.

[8]        The teaching of Gray Aitken and the tract of authority on which it builds is as follows:  in terms of RCS 24 it is competent both to correct the details of a party and to substitute one party for another while time is still running; once claims have become time-limited or time‑expired it remains competent to correct the details of a party but the court does not ordinarily have power to allow one party to be substituted for another.  When I say “the Court does not ordinarily have power” I am paraphrasing Gray Aitken.  In the circumstances of Gray Aitken the Lord President favoured the view that whether or not to allow amendment was an issue about the propriety of exercising the RCS 24 discretion.  The alternative view is that it is an issue of competency.  For present purposes the distinction does not matter because, in the absence of power to waive or extend time limits, which was the position in Gray Aitken and is the position in the present case, the result is practically the same [cf Mccullough v Norwest Socea Ltd 1981 SLT 201].  The time bar in Gray Aitken was a five‑year contractual limitation.  A fortiori of Gray Aitken, I would have thought, the discretion is not available or should not be exercised where the effect of substitution would be to defeat the statutory extinction of a claim by prescription, as in the present case.  So the essential question is whether what the pursuers propose is to be characterised as correction or substitution.

 

Scottish Water and Scottish Water Limited
[9]        Scottish Water is a body corporate established by and in terms of the Water Industry (Scotland) Act 2002 section 20 and schedule 3.  The power to promote subsidiary companies is given by section 25.  Scottish Water Limited, a private company limited by shares under the Companies Act, is a wholly owned subsidiary of the statutory corporation Scottish Water. There are three ordinary shares of £1, paid up, all owned by Scottish Water.

[10]      The registered office of Scottish Water Limited is at Castle House, 6 Castle Drive, Carnegie Campus, Dunfermline KY11 8GG.  Apart from the registered office Scottish Water Limited has no offices, “establishments”, places of business, assets or staff.  It does not carry on business.  It is dormant.  This is what I am told.

[11]      Scottish Water on the other hand is an operating entity with net assets valued at £5,000,000,000, a workforce of thousands, hundreds of installations and many staffed establishments.  These things are a matter of public record.

[12]      Scottish Water has a claims department at its establishment at Fairmilehead in Edinburgh.  Simpson & Marwick, the solicitors acting for the pursuers’ insurers, intimated a claim on 4 January 2013 to “Scottish Water, Claims Department, Fairmilehead, 55 Buckstone Terrace, Edinburgh EH10 6XH.”  A reminder was addressed to “Scottish Water Limited, Claims Department” at the same address on 25 February 2013.  Another reminder letter was sent to “Scottish Water Limited, Claims Department” at the same address on 12 June 2013.  This apparently elicited an email letter response of 22 July 2013.  The pursuers’ solicitors followed this up with another letter to “Scottish Water Limited”, same address as before, dated 19 August 2013.  The summons was signetted on 12 February 2015.  The summons convened as first defenders “Scottish Water Limited” and as second defenders the piling contractors.  The summons was not served until 8 July 2015. Service of the summons against the first defenders was effected on “Scottish Water” at Castle House, Castle Drive, Carnegie Campus, Dunfermline KY11 8GG, according to the certificate of postal service.

[13]      BLM solicitors, Edinburgh, responded to service by letter to the pursuers’ solicitors dated 14 July 2015.  Their letter was headed “Perth & Kinross Council v Scottish Water & [second defenders]”.  Below the heading, the letter stated:  “We are instructed to act for the first defenders in the above action…”  The summons was lodged for calling on 19 August 2015.  Defences were intimated to the pursuers’ agents on 31 August 2015.  The defences put the position in plain terms:

“The first defenders have no duty to inspect, maintain or repair sewers in terms of section 2 of the 1968 Act. The responsibility for inspection, maintenance and repair of sewers in terms of the 1968 Act rests with Scottish Water established under Section 20 of the Water Industry (Scotland) Act 2002, having their principal office at Castle House, 6 Castle Drive, Carnegie Campus, Dunfermline. Scottish Water Limited is a separate legal entity from Scottish Water.”

 

What the defences state about responsibility in terms of the Sewerage (Scotland) Act 1968 section 2 is correct as far as Scottish Water Limited are concerned.  The Water Industry (Scotland) Act 2002, which established Scottish Water, amended the 1968 Act to make Scottish Water responsible for the obligations previously incumbent on local sewerage authorities.  By the time the defences were intimated it was too late to serve a new summons; and the only way of putting things right is by amendment.  The defences were lodged at the bar on 11 September 2015.  They were allowed to be received although late on the motion of the first defenders unopposed.

[14]      The issue for determination is, first, whether the court’s power to allow amendment can be exercised in a case like the present and, assuming the answer is in the affirmative, secondly, whether the power should be exercised in this particular case.  This brings us back to Gray Aitken, the authoritative decision on the matter.

[15]      The Lord President described the Gray Aitken issue as a narrow one.  I would say the same about the issue in the present case.  I would also say that while Gray Aitken fell on one side of the line, this case ought to be distinguished from Gray Aitken; and that the points of distinction put this case on the other side of the line.  There are several points of distinction.

 

Gray Aitken:  facts and reasoning
[16]      Before I note the points of distinction I should say something about the facts in Gray Aitken and about the reasoning in that case.  Gray Aitken was about a mirror image situation involving the application of RCS 24.1(2)(b)(v), which allows the substitution of a new pursuer or petitioner.  In Gray Aitken the pursuers, in a sense, got their own name wrong.  To put it another way—to put it in the way in which the court ultimately approached matters—the wrong legal entity asserted a claim which belonged to another legal entity in the group.  The story goes back to 1996 when GAP Housing Association Limited entered into a design‑and‑build contract in terms of which architectural design services were provided by Gray Aitken Partnership Limited, architects.  The architects gave a collateral warranty which was subject to a five-year limitation starting with the date of practical completion.  The build was practically completed in 1997.  In 2000 there was a merger whereby GAP Housing Association Limited transferred everything it had, including contractual engagements, to Link Housing Association which, because they were a registered provident society, were known as Link Housing Association Limited.  Meanwhile defects in the contract works had become apparent.

[17]      In 2001 Link Housing Association Limited changed their name to Link Group Limited, also a registered provident society (now a registered “community benefit” society).  In 2001 Link Group Limited incorporated an entity with the name Link Housing Association Limited, not a registered provident society this time but a company limited by shares incorporated under the Companies Acts.  In 2002 an action against the architects and others was raised in the name of Link Housing Association Limited when it should have been raised by Link Group Limited.  At the point in time when the action was raised the only Link Housing Association Limited in existence was the limited liability company which obviously was a different entity from the provident society in whom the contract with the architects had once vested.  In 2005, when the pursuers tried to “correct” their name by amendment, the architects took the point that the amendment would substitute new pursuers; and that the substitution would defeat the five‑year contractual limitation in the contract that had passed down to Link Group Limited.

[18]      It appears from Gray Aitken that whether an amendment is, or is to be treated as, a correction as opposed to a substitution depends on the nature of the error to be corrected and is both a subjective matter and an objective matter.  It is a subjective matter insofar as it depends on the perceptions of the parties themselves and on their knowledge and intentions, actual and imputed.  At paragraph [12] the Lord President referred to the “supposed intention” of those involved, their “knowledge”, “awareness”, “appreciation” and so on.  There is also reference to “clerical error”, defined as “an error in the mechanical process of writing or transcribing” being, by definition, an unintended error.

 

Correction or substitution:  distinguishing Gray Aitken
[19]      Objectively Scottish Water and Scottish Water Limited, like Link Group Limited and Link Housing Association Limited, are different legal entities and different kinds of legal entity.  However, in the first case the only difference in names is the designatory suffix “Limited”.  This is the first point of distinction.  Secondly—and this follows on from the first point—unlike the Lord President in Gray Aitken I am unable to rule out clerical error.  Since Gray Aitken we have authority for a wider conception of “clerical error”, a meaning which is better suited to the reality of working in the copy‑and‑paste age:  clerical errors in the wider sense are mistakes “arising out of office work of a relatively routine nature” [Marley v Rawlings (SC(E)) [2014] 2 WLR 213 especially at paragraps 74—82 per Lord Neuberger of Abbotsbury with whom the other justices agreed;  at paragraph 92 per Lord Hodge under reference to Lord Reid’s opinion in the case of Anderson v Lambie 1954 SC (HL) 43].  The drafting error in the present case was made by a named in-house solicitor advocate who copied the details of the first defenders from the pre‑litigation correspondence without checking or re‑checking.  This is what I am told by the individual concerned through counsel.  The underlying error was on the part of the unnamed individual who started addressing letters to “Scottish Water Limited” in the pre‑litigation correspondence back in 2013 without any apparent reason for doing so.  I deduce that the person concerned was not a lawyer.  While the letters were addressed in that way, the substance of the copy correspondence that I have been shown was all about “Scottish Water” and their liability.

[20]      The pre‑litigation correspondence offers insights of a kind that do not feature in the Gray Aitken discussion.  In the present case both sides got mixed up about the name; and this is the third point of distinction.  The letter of 12 June 2013 sent to “Scottish Water Limited, Claims Department” elicited a response which can only have come from Scottish Water since Scottish Water Limited had no presence at the address to which the letter was sent and no staff to answer letters.  Although the summons in due course ran against “Scottish Water Limited”, it was served on “Scottish Water”.  It reached Scottish Water’s solicitors, BLM, who intimated, by the terms of their letter-heading of 14 July 2015, that they were instructed to act for “Scottish Water” in defending the action; and they did and do so (as discussed below) notwithstanding that the action was and is, on the face of it, directed against “Scottish Water Limited”.  The same individual lawyer who wrote that his firm had instructions to act for “Scottish Water”, initials “IL”, entered appearance and signed the defences for “Scottish Water Limited”.  It might be said that a utility monopoly with the privilege of statutory incorporation has a duty to correct misconceptions about its legal identity or designation.  I think the truth is that Scottish Water and their lawyers were just as careless, in the fullest sense, about the name as the pursuers’ solicitors were.

[21]      A further point of distinction, the fourth point, is that Gray Aitken was about the terms of a private bargain.  Ultimately it came to be understood that a stranger to the contract, Link Housing Association Limited incorporated under the Companies Acts, had asserted the claim and continued to do so until after the contractual quinquennium had expired.  However, there was nothing in principle to stop Link Housing Association Limited having title to sue on the contract provided the engagements had been transferred to them before suit.  In the present case the claim is based on a statutory duty which rests with, has only ever rested with and can only ever—short of legislative intervention—rest with Scottish Water.  There cannot have been confusion about this on the part of “the first defenders”.

[22]      And so to the fifth and last point which involves posing the question: who has instructed the defence of the present action and the opposition to the motion to amend?  It can only be Scottish Water acting as if they are Scottish Water Limited because, apparently, Scottish Water Limited have no earthly existence beyond Companies House and the formalities maintained at their registered office.  I very much doubt that Scottish Water Limited, a dormant £3 company, are insured; and anyway the effect of the amendment will be to allow Scottish Water Limited out of the action.  So why is there opposition to the motion to amend?  The opposition to the motion is presented on the basis that Scottish Water will suffer prejudice, namely the loss of a cast-iron defence offered by a plea of prescription.  I must infer that this opposition is presented on behalf of Scottish Water.  If the statutory corporation Scottish Water are already in the action, in reality if not precisely in name, and the shared understanding is that they were meant to be in the action, then the rational conclusion in all the circumstances of the case is that amending the details of the first defenders by deleting the word “Limited” is a matter of “correction” rather than “substitution”.  On that basis it is open for me to exercise my discretion in terms of RCS 24.1(2)(b)(i).

[23]      For completeness, when RCS 24.1(2)(b)(i) refers to correcting or supplementing “the designation of a party to the cause” I take the rule to refer to “designation” in the broad sense of all identifying details including the name and not just to the rank, juristic character, representative standing, special capacity or occupation and address, which is the narrow usage [Riach v Wallace (1899) 1 F 718; A Mackay, The Practice of the Court of Session (Edinburgh, 1877) vol 1, 387; G Watson ed., Bell’s Dictionary and Digest of the Law of Scotland, 7th edn (Edinburgh, 1890), 320, “Designation”;  J McLaren, Court of Session Practice (Edinburgh, 1916) 248, 293].

 

Exercising discretion in terms of RCS 24.1(2)(b)(i)
[24]      The excuse in this case is that the experienced in‑house solicitor advocate who drafted the summons copied the name of the first defenders from the pre-litigation correspondence without checking or re‑checking.  In my view this is a reasonable excuse.  If this is a reasonable excuse there is no point in being censorious.  No doubt the mistake was one which is actionable in negligence: but counsel on the other side does not take the point that the pursuers have an alternative remedy against their solicitors.  In any event a secondary claim against negligent solicitors is a second‑best option.  It is not ideal for a party to have to sue confidential advisers who have been handling the claim which is the subject of the suit.

[25]      If the amendment is not allowed the claim against Scottish Water will be lost.  The only prejudice asserted in relation to Scottish Water is that they will lose the benefit of the unanswerable plea of prescription which would be theirs if the pursuers had to issue a fresh summons.  Undoubtedly so: but the hypothetical lost advantage is aptly described by pursuers’ counsel in this case as a “windfall benefit”.  I agree that little weight should be given to its loss.  The situation is artificial.  The prejudice suffered by the nominal first defenders Scottish Water Limited if amendment is allowed is zero.  Indeed, they will benefit.  They will be let out of the action.  No other prejudice is suggested.  For example it is not suggested that Scottish Water are prejudiced in presenting their defence to the merits of the claim.  Such procedural prejudice as there is can be put right by an award of expenses.

[26]      I am satisfied that it is fair and reasonable and in the interests of justice to allow the amendment.  Re‑service can be dispensed with because the summons has already been served on Scottish Water and because they are, I infer, the real first defenders anyway.  Dispensing with re-service is not opposed.  The first defenders are entitled to their expenses.


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