Note By Lady Wolffe Centenary 6 Limited Against (first) Robert Caven And (second) Kevin Mawer In Liquidation Of Centenary Holdings Iii Limited
| Jurisdiction | Scotland |
| Judge | Lady Wolffe |
| Neutral Citation | [2017] CSOH 95 |
| Date | 29 June 2017 |
| Docket Number | P194/16 |
| Court | Court of Session |
| Published date | 11 July 2017 |
OUTER HOUSE, COURT OF SESSION
[2017] CSOH 95
P194/16
NOTE BY LADY WOLFFE
CENTENARY 6 LIMITED
Noter
against
(FIRST) ROBERT CAVEN AND (SECOND) KEVIN MAWER
Respondents
In the Liquidation
of
Centenary Holdings III Limited
Noter: McIlvride QC; Ower; TLT LLP
Respondents: Borland QC; CMS Cameron McKenna Nabarro Olswang LLP
29 June 2017
Introduction
[1] By interlocutor dated 5 May 2017:
(i) I refused to accept an after the event (“ATE “) policy (No 47 of process) (“the ATE Policy”) as a method of security in place of a bond of caution;
(ii) I refused to accept the deed of indemnity (No 48 of process) (“the Deed of Indemnity”) as a suitable bond of caution;
(iii) I refused the noter’s further motion (made at the bar) for more time in which to obtain caution; and
(iv) I also refused the prayer of the note following the noter’s failure to provide caution or any suitable alternative, as previously appointed to do by interlocutors of 14 December 2016, 15 February 2017 and 5 April 2017.
[2] I also dealt with sundry motions for expenses. The focus of the submissions at the hearing on 29 March and 5 April concerned whether the ATE Policy tendered by the noter constituted sufficient security in lieu of a bond of caution. The focus of the submissions at the hearing on 5 May 2017 concerned the adequacy of the Deed of Indemnity.
[3] The noter has reclaimed the interlocutor of 5 May 2017. The grounds of appeal have not yet been formulated.
[4] The purpose of this Note is to set out the reasons why I did not accept that the ATE Policy or the Deed of Indemnity proffered by the noter satisfied the requirements of rule 33.4 of the Rules of the Court of Session (“the RCS”). As a consequence of the noter’s failure to lodge caution, I refused the prayer of the noter’s note. I also refused the noter’s further motion to allow further time. As this last matter involved an exercise of the court’s discretion, it is necessary also to set out the relevant procedural history, which is not inconsiderable.
Prior order for caution
[5] The noter is the sole shareholder, and hence contributory, of Centenary Holdings III Limited (“the Company”). The Company went into liquidation in 2005 and Robert Caven and Kevin Mawer were in due course appointed as joint liquidators of the Company. The joint liquidators are the respondents to the noter’s application to this court for an order under section 212(3) of the Insolvency Act 1986. The sum sought is in excess of £22,000,000. The noter asserts breaches of a variety of duties by the respondents.
[6] In December 2016 the respondents sought caution for expenses in terms of section 726(2) of the Companies Act 1985 (“the Companies Act”). By interlocutor dated 14 December 2016 (“the December interlocutor”) the Commercial Judge, having been satisfied by credible testimony that there was reason to believe that the noter would be unable to pay the respondents’ expenses if successful in resisting the noter’s claim, ordered caution in the sum of £100,000 and sisted the proceedings pending the lodging of that caution. However, no time-limit for the lodging of caution was imposed in the December interlocutor.
Chapter 33 of the RCS
[7] Chapter 33 of the RCS governs orders for caution and security. The issue of caution had been determined by the December interlocutor. The central issue in the several hearings before me was whether the ATE Policy tendered (and, latterly, the Deed of Indemnity) satisfied the requirements of chapter 33 and, if not, whether further time should be afforded to the noter to provide a bond of caution. Accordingly, it is only necessary to set out those parts of Chapter 33 governing the procedure where caution is found and the consequences of a failure to find caution.
“Methods of finding caution or giving security
33.4. - (1) A person ordered-
(a) to find caution, shall do so by obtaining a bond of caution; or
(b) to consign a sum of money into court shall do so by consignation under the Court of Session Consignations (Scotland) Act 1895(c) in the name of the Accountant of Court.
(2) The court may approve a method of security other than one mentioned in paragraph (1), including a combination of two or more methods of security.
(3) Subject to paragraph (4), any document by which an order to find caution or give other security is satisfied shall be lodged in process.
(4) Where the court approves a security in the form of a deposit of a sum of money in the joint names of the agents of parties, a copy of the deposit receipt, and not the principal, shall be lodged in process.
(5) A bond of caution or consignation receipt lodged in process shall be accompanied by a copy of it.
Cautioners and guarantors
33.5. A bond of caution or other security shall be given only by a person authorised to carry on a regulated activity under section 31 of the Financial Services and Markets Act 2000.
Form of bonds of caution and other securities
33.6.-(1) A bond of caution shall oblige the cautioner, his heirs and executors to make payment of the sums for which he has become cautioner to the party to whom he is bound, as validly and in the same manner as the party and his heirs and successors, for whom he is cautioner, are obliged.
Sufficiency of caution or security and objections
33.7.-(1) The Deputy Principal Clerk shall satisfy himself that any bond of caution or other document, lodged in process under rule 33.4(3), is in proper form.
(2) A party who is dissatisfied with the sufficiency or form of the caution or other security offered in obedience to an order of the court may apply by motion for an order under rule 33.10 (failure to find caution or give security).
Failure to find caution or give security
33.10. Where a party fails to find caution or give other security (such a party being in this rule referred to as "the party in default"), any other party may apply by motion-
(a) where the party in default is a pursuer, for decree of absolvitor; or
(b) where the party in default is a defender or a third party, for decree by default or for such other finding or order as the court thinks fit. “
[8] It should be noted that, by virtue of rule 33.6(1), a cautioner’s obligation is co‑extensive with that of the principal obligant on whose behalf he is providing caution. Furthermore, the receipt of a bond in process is clearly without prejudice to a party dissatisfied with the sufficiency or form of caution to bring that matter before the court by motion. This is the manner in which the respondents proceeded, in their several motions heard on 15 February, 29 March, 5 April and 5 May 2017.
The ATE Policy
[9] The ATE Policy produced is comprised of:
(i) a two-page “Policy Schedule for Quotation” (“the Policy Schedule”), and
(ii) a twenty-page standard form document, entitled “Commercial After the Event Legal Expenses Insurance Policy-Scotland: Policy Document” (“the Policy Document”).
In terms of the Policy Schedule the limit of cover was £300,000, subject to special condition 1, and the commencement date was stated to be 27 February 2017. (There do not appear to be any special conditions contained in the Policy document.) Payment was deferred to the “Policy ends”. The signature bears to be effected by a stamp of the Elite Insurance Company Limited (“Elite”), the insurers.
[10] I do not here set out the terms of the Policy Document. Nothing turns on the precise wording of its terms. Parties made extensive reference to the Policy Document in the course of their submissions and it suffices to note its terms from those submissions, which I record below.
Procedural history
Interlocutor of 15 February 2016:
[11] No caution was produced by the noter following the December interlocutor. In the absence of any time-limit being stipulated in the December interlocutor, the respondents enrolled a motion in mid-February 2017 inter alia to recall the sist and for specification of a date by which caution was to be lodged. The noter opposed this motion quoad certification. By interlocutor dated 15 February I required caution to be lodged within 28 days, that is by 15 March and of new sisted the proceedings meantime, in accordance with section 726(2) of the Companies Act. There was no mention at that time that the noter was considering obtaining an ATE Policy in lieu of a bond of caution.
Respondents’ motion in March 2017 for absolvitor:
[12] On 16 March 2017 the respondents enrolled a motion for, among other things, absolvitor in terms of RCS 33.10(a) by reason of the noter’s failure to lodge caution. This was opposed and the matter called again before me on 29 March 2017. Mr Duthie appeared on that occasion for the respondents, as he had done at the hearing on 14 December 2016. The noter was represented by Mr McIlvride QC, who appeared on behalf of the noter at all of the hearings referred to in this Note.
[13] The focus of the discussion at the hearing on 29 March 2017 was whether the ATE Policy intimated by the noter’s agents to the respondents on 14 March (and whose provisions I have summarised above) satisfied the requirements for caution. The respondents contended that it did not. After outlining the background, Mr Duthie referred to the ATE Policy produced by the noter. If this was tendered as an alternative to caution, no motion had been enrolled in terms of r 33.4(2). The noter’s agents had given no indication that it was proposing to satisfy the December interlocutor by the provision of the ATE Policy, until this was intimated to them on 14 March 2017. Reference was made to correspondence from the noter’s agents, TLT LLP (responding to chasing letters sent by the respondents’ agents, CMS Cameron McKenna LLP): in TLT’s letter of 12 January 2017 they explained that the client was based in Australia and they would revert with “the estimated delivery date of the caution to be lodged” and in TLT’s letter of 24 January 2017, they referred to discussions with third party legal...
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Centenary 6 Limited Against Tlt Llp
...The section 212 Note was refused as the consequence of the pursuers’ failure to lodge caution (Centenary 6 Ltd v Caven and Mawer [2017] CSOH 95, [2018] CSIH 27). In this action, the pursuer sues its former solicitors 2 for breach of contract and professional negligence in respect of the fai......