Gabriel Politakis Against John Despenser Spencely And James Scott Limited
| Jurisdiction | Scotland |
| Judge | Sheriff Fiona Lennox Reith, QC |
| Neutral Citation | [2016] SC EDIN 27 |
| Court | Sheriff Court |
| Docket Number | A53/15 |
| Date | 06 April 2016 |
| Published date | 06 April 2016 |
SHERIFFDOM OF LOTHIAN AND BORDERS AT EDINBURGH
[2016] SC EDIN 27
A53/15
JUDGMENT OF SHERIFF FIONA LENNOX REITH, QC
in the cause
GABRIEL POLITAKIS
Pursuer:
against
JOHN DESPENSER SPENCELY
Defender:
and
JAMES SCOTT LIMITED
Party Minuter:
Act: Party
Alt: Manson, Advocate; BTO, Solicitors, Edinburgh
Party Minuter: Ellis QC; MacRoberts, Solicitors, Edinburgh
____________
EDINBURGH, 6 April 2016
The sheriff, having resumed consideration of the cause, sustains the first, second, third, fifth and seventh pleas-in-law for the defender and the first, second, third and fourth pleas-in-law for the party minuter; repels the fourth plea-in-law for the defender as being unnecessary; grants decree of absolvitor; finds the pursuer liable to the defender and the party minuter in the expenses of the action; allows an account of expenses to be given in and remits the same to the auditor of court to tax and to report; further, sanctions the employment of counsel by the defender and senior counsel by the party minuter for the purpose of the proceedings.
NOTE
Introduction
[1] The action came before me for debate on 28 and 29 January 2016. The background is that in about 1990 Apollo Engineering Limited (“Apollo”), of which the pursuer was a director and shareholder and from which the pursuer now claims to be the assignee of the claim for damages in the present proceedings, entered into a subcontract with the party minuter. In terms of that subcontract Apollo were to supply specialist fabrication and installation services in connection with pipework required in the construction of an explosives handling floating jetty at Coalport. The jetty was to service nuclear submarines and some of the pipework was to convey toxic waste from the submarines. The value of the work was almost £4M and it was estimated initially that it would take 18 months, and later over two years, to complete. The parties fell out and, by the end of September 1991, the subcontract was at an end. The party minuter sued Apollo for recovery of materials which they maintained belonged to them but which were in Apollo’s possession. This was met with a counterclaim for £2M, Apollo claiming that the party minuter had failed to pay them for work completed and that they were liable to them in damages for failing to provide the necessary drawings to enable them to carry out the contract works on time. Apollo maintained that the party minuter had repudiated the contract. On 24 June 1993, the Court of Session sisted the action, upon the party minuter’s plea, pending arbitration in terms of the subcontract. After the action was sisted, Apollo went into liquidation. In 2001, the then liquidator, Duncan McGruther, proposed that Apollo enter into a company voluntary arrangement (CVA). The liquidation proceedings were sisted in 2002.
[2] An arbitration was commenced, but the arbiter later resigned on the ground of his advancing age. Apollo and the party minuter required to select a new arbiter. On 1 and 11 July 2005, Apollo and the party minuter executed a joint deed of appointment of a new arbiter, who is now the defender in the present proceedings. It was agreed that the arbiter would have power (a) to award payment of any funds due and payable under the subcontract and (b) to award damages due in respect of any breach of the subcontract. Although requested to do so by the defender, Apollo and the party minuter failed to agree any set of procedural rules to govern the conduct of the arbitration. It, therefore, proceeded at common law. The procedure which was adopted by Apollo and the party minuter was similar to that of an ordinary action in the Court of Session. Apollo lodged their claim. On 31 August 2005, there was an initial meeting with the defender who had the assistance of a legally qualified clerk. The defender set a timetable for a response to the claim, adjustment of the claim and answers and the lodging of supporting productions and expert reports. Apollo had originally stated that they would not be relying on expert testimony but, by the end of 2005, that position had changed. By that time also, the adjustment period had been completed, but the defender allowed Apollo time to amend their claim thereafter. There then ensued a prolonged period of adjustment of the consequent minute of amendment and answers. After sundry procedure the defender heard a debate over a period of some five days in February 2007, followed by written submissions. The defender produced his draft opinion on 28 March 2007. This became a “Final Draft Option” in May 2007. In short, the defender dismissed almost the whole of Apollo’s case other than a declaratory crave and a monetary crave regarding retained site accommodation. The content of the defender’s final draft opinion was the subject of a stated case for the opinion of the Court of Session under section 3 of the Administration of Justice (Scotland) Act 1972 in 2007. However, Apollo’s funds ran out. As a result, the pursuer enrolled a motion in the Court of Session seeking that he be allowed to represent Apollo in any future court proceedings and in particular in relation to the stated case procedure. This motion was refused. He sought leave to appeal to the Supreme Court. This was refused. He also invited the Court of Session to allow him to be sisted in place of Apollo in the action by the party minuter against Apollo and in the arbitration proceedings or, alternatively, to sist the pursuer as a party to the action and arbitration. These motions were refused.
[3] In the meantime, an account of expenses in respect of the amendment procedure in the arbitration proceedings had been made up and submitted to the Auditor of the Court of Session for taxation. On 30 May 2007 the Auditor taxed the account at the sum of £195,497.05. The defender issued his decerniture for expenses in this sum on 22 June 2009. On or about 11 December 2014 the defender issued a part award in terms of his final draft opinion.
The Pleadings
[4] The pursuer’s craves are as follows:
“1. To find and declare that by his arbiter’s part award the defender dismissed Apollo Engineering Limited’s £5 million claim in bad faith by pretending it was irrelevant.
2. To find and declare that in bad faith the defender decerned against Apollo Engineering Limited for payment of £195K of claimed expenses against a Minute of Amendment knowing that said expenses were mostly misallocated to the Minute of Amendment.
3. To grant decree for repayment to the pursuer by the defender of fees paid to him amounting to £40,000 sterling with interest thereon at the rate of 8% per annum from the date of payment of said fees or at such other rate and from such other date as the court shall consider proper until payment.
4. To grant decree for payment to the pursuer by the defender for damages directly relating to lawyer’s fees paid in relation to Arbitration amounting to £300,000 inclusive of VAT sterling or thereabouts with interest thereon at the rate of 8% per annum from the date said damages were incurred or at such other rate and from such other date as the court shall consider proper until payment.
…
6. Such further Orders or Decrees as may seem to the court to be just and reasonable in all the circumstances of this particular case”.
[5] The pursuer avers in article 1 of condescendence that he is the assignee of the claims for damages now advanced in the present proceedings and that the assignor is Apollo, that Apollo were the claimants in the arbitration against the party minuter and that the now defender was the arbiter. The pursuer then avers:
“… The pursuer understands that this court has jurisdiction on matters relating to claims for damages. The pursuer seeks damages resulting from the defender’s bad faith actings reflected in his Arbiter’s Part Award (APA) by which he inflicted substantial injustice to Apollo when dismissing Apollo’s £5M claim against the minuter (sic) by pretending it was irrelevant. The damages claim raised in this action directly relates to the narrow legal issue whether Apollo’s various craves were irrelevant and if so, did the defender act in bad faith in declaring them irrelevant. Given that the craves, and in particular the craves relating to the £2.2M claimed for payments due to Apollo for completed performance, were indeed irrelevant then the defender has no case to answer. However, the pursuer will provide cogent documentary evidence that the craves couldn’t possibly be irrelevant and the defender simply embarked upon a campaign of serious and malicious misrepresentation of Apollo’s pleadings in order to falsely pretend said craves were irrelevant. The pursuer understands that the defender, acting as arbiter, served as a private judge under the auspices of the Deed of Appointment which in turn is a creature of contract…”
[6] In article 15 of condescendence the pursuer avers inter alia :
“…As Arbiter, the defender’s virtually unchallengeable procedural discretion did not extend to implementing substantial injustice by finding so heavily against Apollo by falsely pretending Apollo’s £5M claims were irrelevant. Given the defender’s actings were in bad faith, he is not gifted immunity from prosecution for damages in his quasi-judicial capacity during his tenure as arbiter. The pursuer seeks a civil remedy by way of damages which directly relate to said bad faith and intentional misrepresentations employed in his APA so that he could pretend Apollo’s £5M claim was irrelevant. Said damages are quantified as the £40,000 advanced to the defender in instalments to cover his fees, plus legal costs of circa £250,000 + VAT both of which directly relate to the Arbitration presided upon by the defender… In relation to the £250K (before VAT) the pursuer clearly specifies that this sum directly relates to the Spencely Arbitration and corresponds to fees for law agents, counsel and expert reports incurred by...
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