Petitions Of Hooley Ltdfor Declarator Re The Validity Of Actions Of The Administrator Of The Victoria Jute Company Ltd, The Samnuggur Jute Factory Ltd And Titaghur Plc
| Jurisdiction | Scotland |
| Judge | Lord Tyre |
| Neutral Citation | [2016] CSOH 141 |
| Court | Court of Session |
| Published date | 11 October 2016 |
| Docket Number | CA51/15, |
| Date | 11 October 2016 |
OUTER HOUSE, COURT OF SESSION
[2016] CSOH 141
CA51/15, CA52/15 & CA53/15
OPINION OF LORD TYRE
In the Petitions of
HOOLEY LIMITED
Petitioner
for declarator re the validity of actions of the Administrator of
THE VICTORIA JUTE COMPANY LIMITED
THE SAMNUGGUR JUTE FACTORY LIMITED
and
TITAGHUR PLC
and in the causes
HOOLEY LIMITED
Pursuer
against
THE VICTORIA JUTE COMPANY LIMITED and others
Defenders
HOOLEY LIMITED
Pursuer
against
THE SAMNUGGUR JUTE FACTORY LIMITED and others
Defenders
and
HOOLEY LIMITED
Pursuer
against
TITAGHUR PLC and others
Defenders
Petitioner and Pursuer: Sandison QC, O’Brien; Maclay Murray & Spens LLP
Respondent and Defender (Ganges Jute Private Limited): Sellar QC, Roxburgh; HBJ Gateley
11 October 2016
Introduction
[1] In these three petitions, the petitioner (“Hooley”) seeks declarators concerning its rights under Scots law arising out of contracts entered into with an individual (“the Administrator”) acting as administrator of three companies incorporated in Scotland but carrying on business in India, namely The Victoria Jute Company Limited (“Victoria”), The Samnuggur Jute Factory Limited (“Samnuggur”), and Titaghur plc (“Titaghur”). Until August 2001, Victoria and Samnuggur were subsidiaries of Titaghur. The three actions at the instance of Hooley respectively concern the same substantive issues as the three petitions, and were raised in response to a challenge to the competency of seeking declarator in a petition. Ganges Jute Private Limited (“Ganges”), who entered the petition processes as respondent and lodged defences to the actions, is a creditor of Victoria, Samnuggur and Titaghur.
[2] The background to these proceedings is complex. Each of the three companies is subject to an order of the (Indian) Employees’ Provident Fund (“the Indian authority”) seizing its entire assets in connection with an alleged failure to meet its obligations to pay contributions to employers’ pension funds. Various orders have been made by the High Court of Kolkata (“the Indian court”) in respect of Victoria and Samnuggur, including orders made in 1990 prohibiting them from dealing with or granting charges over their assets. Since about 1998, the business of Victoria and Samnuggur has been carried on by a licensee of special managers appointed by the Indian authority; the purpose of that arrangement, as I understand it, is to generate business profits to apply in payment of the debts due to the employers’ pension funds. Titaghur’s shares in Victoria and Samnuggur were sold by the Indian authority in 2001. Titaghur is subject to liquidation proceedings in India. It was ordered to be wound up by an order of the Indian court dated 12 December 2006. A petition to wind up Samnuggur is also pending before the Indian court. Hooley challenges the validity of various orders pronounced by the Indian court in relation to Titaghur, Victoria and Samnuggur, including the winding‑up order in respect of Titaghur. Litigation in India is continuing.
[3] The Administrator was appointed, so far as Victoria and Samnuggur are concerned, on 24 October 2011 by Hooley as the holder of floating charges granted by these companies in favour of a company called Aurburn Properties Limited on 11 July 2001 and registered in the (UK) Register of Charges on 27 July 2001. The benefit of those charges was assigned to Hooley on 25 May 2005. As regards Titaghur, the Administrator was appointed by an order of this court (Lord Hodge) dated 16 March 2012 on Hooley’s application. Ganges avers ‑ and for present purposes I proceed on the basis ‑ that when Lord Hodge was asked to pronounce this order he was not informed of the winding-up order by the Indian court. The validity of all of the floating charges is disputed by Ganges.
[4] On 7 November 2011, the Administrator offered to sell, and Hooley agreed to purchase, the whole business and assets of Victoria and of Samnuggur. Supplemental agreements were entered into on the same day. On 11 April 2012, the Administrator offered to sell, and Hooley agreed to purchase, the whole business and assets of Titaghur. A supplemental agreement was entered into on 11 and 13 April.
[5] In each of the present proceedings, Hooley seeks declarator:
- that it contracted by missives of sale to purchase such right, title and interest as the company in question had and could transfer in and to its business, together with a list of assets;
- that, having paid the consideration provided for in terms of the missives of sale, it has acquired such right, title and interest in those assets as is transferred by operation of the contract constituted by the missives in terms of the law of Scotland; and
- that the Administrator was, as a matter of the law of Scotland, entitled to enter into the missives of sale in terms of paragraph 60 of Schedule B1 and paragraph 2 of Schedule 1 to the Insolvency Act 1986, and that, in terms of the law of Scotland, any such sale does not require the subsequent approval of the Scottish courts.
Ganges challenges the competency of the granting of declaratory orders in Court of Session petition procedure. It further contends that, in any event, this court ought not to grant any of the declarators sought. In its defences to the three summonses, Ganges has stated a plea of lis pendens.
[6] Lord Jones heard a debate of the competency, lis pendens and certain substantive issues on 2 and 3 July and 12 October 2015 and made avizandum. His Lordship unfortunately died before issuing his opinion. By interlocutors dated 1 July 2016, the Inner House remitted all six processes to a judge of the Commercial Court to listen to the digital recording of the diet of debate, to consider the notes of argument of the parties, and to otherwise proceed as he or she thought fit. Having listened to the recording and considered parties’ notes of argument, I intimated to parties certain matters upon which I invited supplementary submissions. Both provided written responses for which I am grateful; these were amplified at a by order hearing on 21 September 2016.
Competency of declaratory orders
Argument for Ganges
[7] On behalf of Ganges it was submitted that, subject to certain limited (and inapplicable) exceptions in the Rules of Court, it was incompetent to seek a declaratory order in a petition process. Reference was made to the opinion of Lord MacFadyen in Renyana-Stahl Anstalt v MacGregor 2001 SLT 1247 at paragraph 52, approving the statement in Maxwell, The Practice of the Court of Session at page 433 that “it is incompetent to raise by way of petition legal questions for which there are other and more appropriate processes, such as reduction or declarator”. McLaren, Court of Session Practice at page 832 was to the same effect. That remained the position. The authorities relied upon by Hooley explaining the reasons for the differences between ordinary action and petition procedures served only to bolster Ganges’ case. The point might seem to be an arid one but it was nonetheless sound.
Argument for Hooley
[8] On behalf of Hooley it was submitted that the petitions were competent. The distinction between ordinary action and petition procedures was explained in Scottish Lion Insurance Co Ltd v Goodrich Corporation 2011 SC 534, under reference to the Report of the Royal Commission on the Court of Session (1927 Cmnd 2801) at 49-50:
“The object of the summons is to enforce a pursuer’s legal right against a defender who resists it, or to protect the legal right which the defender is infringing; the object of a petition, on the other hand, is to obtain from the administrative jurisdiction of the court power to do something or to require something to be done, which it is just and proper should be done, but which the petitioner has no legal right to do or require, apart from judicial authority”.
Reference was made to remarks to similar effect by Lord Keith in Tomkins v Cohen 1951 SC 22 at 23 and by Lord President Rodger in Bank of Scotland v Brunswick Developments (1987) Ltd 1997 SC 226 at 231. In the present case the petitioner was not seeking to enforce any legal right against anyone or seeking relief from infringement of its own legal rights: rather, it was applying to obtain from the administrative jurisdiction of the court a formal declaration that a certain state of affairs existed, which it would then present to the Indian court. The substantive rights of Ganges were in no way affected by the decision of the court. In these circumstances, petition procedure was appropriate. If Lord MacFadyen had intended in Renyana-Stahl to affirm that the appropriate form of process was determined by the form of relief sought, that would be incorrect. Taken out of context, the observation relied upon by Ganges was too broadly stated. Similarly, if Chaudhry v Advocate General 2013 SLT 548 (a decision of mine) proceeded on the view that there existed a rule of law that certain forms of remedy were not available in petition procedure, that reasoning was erroneous. The ground of division into appropriate forms of procedure was one of substance, not form of remedy sought.
Decision
[9] The statement in Maxwell approved by Lord MacFadyen in Renyana-Stahl (above) might at first sight appear to treat the form of remedy sought (such as declarator) as the basis for determining the competency of proceeding by way of a petition rather than a summons. In my opinion, however, it has a broader base. It follows upon an explanation by the author of the different purposes of ordinary procedure and petition procedure which is similar to that quoted above from the 1927 Royal Commission Report, under reference to authorities including Tomkins v Cohen. The reason why the remedy of declarator has been held to be incompetent in petition procedure is that, by its nature, it consists of enforcing or protecting a right asserted by the applicant to exist, rather than seeking from the court a power to do something that could not...
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