Forrest v Hendry
| Jurisdiction | Scotland |
| Judgment Date | 23 November 1999 |
| Docket Number | No 15 |
| Date | 23 November 1999 |
| Court | Court of Session (Outer House) |
OUTER HOUSE
Lord Macfadyen
PracticeRes judicataPursuer previously sued by former partner in respect of value of former partner's interest in dissolved firmAction settled extra-judicially with pursuer's reserving right on behalf of dissolved firm to seek payment of sums including goodwill in respect of former clientsParties having agreed that former partner would continue to act for clients of former firm and account to pursuer in respect of pre-dissolution client feesPursuer later suing as representing former firm for pre-dissolution client fees and goodwill as represented by clients taken by former partnerWhether identity of partiesWhether identity of subject matterWhether res judicata
PartnershipDissolutionPartners dissolving firm and pursuer purchasing former partner's interest in firmPursuer suing former partner for pre-dissolution client fees and goodwill in capacity as representing former firmWhether pursuer suing as continuing partner of dissolved firmPartnership Act 1890 (cap 39), sec 381
The pursuer and the defender had been in practice together as solicitors until the dissolution of the firm. The pursuer, on an averment that he was suing as the continuing partner of the dissolved firm, raised an action concluding for payment or sums representing the goodwill of the dissolved firm in respect of certain clients taken over by the defender and fees allegedly due to the dissolved firm from clients of the firm who, by agreement between the parties at the date of dissolution, the defender had taken with him on the understanding that he would collect the pre-dissolution fees from the clients as they became due. The action was the second one arising out of the dissolution of the firm. The previous action had been at the defender's instance and had sought payment of a sum representing his share of the partnership. Neither party in that action had been designed as suing or being sued in a special capacity. The principal dispute in the previous action had been concerned with the method to be used to value the defender's share of the partnership. In the pursuer's defences in the previous action the pursuer had specifically reserved his right to bring separate proceedings in respect of fees recovered from certain former clients of the dissolved firm. The previous action was settled extra-judicially. The pursuer's minute of tender had been accompanied by a letter which reserved his entitlement to seek payment of certain sums including goodwill in respect of former clients of the dissolved firm. The defender pleaded res judicata in the second action on the basis of the decree pronounced in the previous action.
Held (1) that it was fallacious to equiparate the pursuer's claim against the defender with a claim against a third party who had taken an asset of the dissolved firm, as claims by and against partnersinter se were of a different nature (p 122AB); (2) that the dissolved firm was not a party to the agreement between the pursuer and the defender as to the dissolution arrangements and accordingly the pursuer's claims were made by himself as an individual and not as representing the dissolved firm (p 122CD); (3) that the plea ofres judicata therefore did not fail for want of identity of parties
(p 122E); but (4) that the goodwill aspect of the pursuer's claim had not been put in issue in the previous action, a conclusion confirmed by both the terms of the reservation in the pleadings in the previous action and the letter accompanying the minute of tender (pp 122I, 123C, 123HI); and plea repelledRobert K Forrest brought an action for payment against James M Hendry under the commercial cause rules in the Court of Session concluding for sums allegedly due to him following the dissolution of a partnership in which both parties had been partners.
The full circumstances and averments of parties are adequately set forth in the opinion of the commercial judge (Lord Macfadyen).
The cause called before the commercial judge for debate on the defender's plea of res judicata and the pursuer's pleas to the relevancy of the defences.
Cases referred to:
Edinburgh and District Water Trustees v Clippens Oil Co LtdUNK (1899) 1 F 899
Glasgow and South Western Railway Co v Boyd & Forrest 1918 SC (HL) 14
Grahame v Secretary of State for ScotlandSC 1951 SC 368
Hynds v HyndsSC 1966 SC 201
Short's Trustee v ChungSCSC 1998 SC 105; 1999 SC 471
Textbook referred to:
Macphail, Sheriff Court Practice (2nd ed), paras 2.1042.109
At advising, on 23 November 1999, the commercial judge, inter alia, repelled the defender's plea of res judicata.
LORD MACFADYEN'SOpinionThe pursuer and the defender are solicitors who formerly carried on practice in partnership together under the firm name Forrest & Hendry. The firm was dissolved on 31 March 1998. This action is the second of two arising out of the dissolution. Since the issue which came before me for debate involves discussion of both actions, and since the present pursuer was the defender in the previous action, I shall, for the avoidance of confusion, refer to the parties by name, as Mr Forrest and Mr Hendry. In this action Mr Forrest concludes for payment to him by Mr Hendry of the sum of 59,929.93, with interest thereon at the rate of 8 per cent a year from 31 March 1998 until payment. He avers that he sues as the continuing partner of the dissolved firm. In the previous action (CA5/14/1999) Mr Hendry concluded for payment to him by Mr Forrest of the sum of 117,034 with interest at the rate of 8 per cent a year from 31 March 1998 until payment. In that action decree was granted on 18 June 1999, in respect of a minute of tender and acceptance, for payment by Mr Forrest to Mr Hendry of the sum of 85,000. In the present action Mr Hendry pleads, inter alia, as follows: 5. In respect that the respective rights and liabilities of the parties arising out of the dissolution of the former partnership have been determined by the decree pronounced on 18 June 1999 in favour of the defender in the previous action between them (CA5/14/1999), the liability of the defender to the pursuer for the sum sued for in the present action is res judicata, and the defender should be assoilzied. Mr Forrest responds by stating two pleas in law, his second and third, challenging the relevancy of the defences. In the present action Mr Forrest's claim relates in part (ie to the extent of 19,929.93) to fees and outlays said to be payable in respect of the period prior to the date of dissolution by clients taken over, following the dissolution, by Mr Hendry; and in part (ie to the extent of 40,000) to a claim for the value of the goodwill in respect of those clients. When the present case called before me for a continued preliminary hearing on 24 September 1999, it was intimated that the parties were in discussion in relation to the aspect of the case dealing with fees and outlays. The part of Mr Forrest's claim relating to goodwill was not, however, the subject of negotiation. The case was therefore appointed to debate in respect of Mr Hendry's plea of res judicata (so far as relating to the claim for goodwill) and Mr Forrest's pleas to relevancy (so far as bearing on the averments ofres judicata).
There was little dispute between the parties as to the test which should be applied in determining whether the plea of res judicata has been properly invoked. In this case as much as in the one in which the observation was first made (Grahame v Secretary of State for Scotland, per Lord President Cooper at p 387), the difficultyis not in stating the principle but in applying it. It is therefore convenient to discuss that test before turning to the question of its application to the circumstances of the present case.
The solicitor-advocate who appeared for Mr Forrest submitted that five requirements had to be satisfied before a plea of res judicatacould succeed, namely: (1) there must have been a prior determination by a court of competent jurisdiction; (2) the prior determination must have been pronounced in foro contentioso; (3) the subject matter of the two actions must be the same; (4) the media concludendimust be the same; and (5) the parties to the second action must be identical with, or representative of, the parties to the first action, or have the same interest (Macphail, Sheriff Court Practice(2nd ed), paras 2.1042.109). He accepted that in the present case there had been a prior determination by a court of competent jurisdiction, namely this court; and that that prior determination, albeit a decree pronounced in terms of a minute of tender and acceptance, was a decree in foro. The issue therefore turned on whether Mr Hendry had relevantly averred identity of subject matter, ofmedia concludendi and of parties.
There was some discussion in the course of the debate about the respective scope of the requirements that there be identity of subject matter and of media concludendi. Reference was made toHynds v Hynds, per Lord Cameron at p 203;Short's Trustee v Chung, per Lord Johnston at p 108; Grahame v Secretary of State for Scotland,per Lord President Cooper at p 387; Edinburgh and District Water Trustees v Clippens Oil Co Ltd; andGlasgow and South Western Railway Co v Boyd & Forrest, per Lord Justice-Clerk Scott Dickson at pp 1920. The matter has most recently been considered inShort's Trustee v Chung in the Inner House, where the following observations were made (at pp 476F477H): It is not disputed that in principle, the basis of the plea [of res judicata] is public policy, its purpose being to prevent repetition of litigation between parties. The fundamental question is accordingly this: what are the common features which will lead the courts to hold that a second action would entail this unacceptable "repetition" of litigation? The familiar answer is that the parties, the subject matter and the media concludendi must be the same....In Grahame v Secretary...
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