Zurich Gsg Limited V. Gray & Kellas+john Peter Shaw Gray+caroline Jane Davis+graham Morrison+fiona Margaret Barker+john Robert Simpson Hardie
| Jurisdiction | Scotland |
| Judge | Lord Brodie |
| Neutral Citation | [2007] CSOH 91 |
| Court | Court of Session |
| Docket Number | A733/06 |
| Published date | 30 May 2007 |
| Date | 30 May 2007 |
| Year | 2007 |
| OUTER HOUSE, COURT OF SESSION [2007] CSOH 91 | |
| A733/06 | OPINION OF LORD BRODIE in the cause ZURICH GSG LIMITED Pursuer; against GRAY & KELLAS, and JOHN PETER SHAW GRAY, CAROLINE JANE DAVIS, GRAHAM MORRISON, FIONA MARGARET BARKER and JOHN ROBERT SIMPSON HARDIE Defenders: ________________ |
Pursuer: Eric Robertson; Brodies LLP, Solicitors
Defenders: David Johnston QC; Lesley A Gray, Solicitors
30 May 2007
Introduction
[1] An executor-dative, other than a spouse who has right to the whole estate by virtue of prior rights, must find caution as a condition of confirmation: Confirmation of Executors Act 1823 section 2, as amended by the Law Reform (Miscellaneous Provisions) (Scotland) Act 1980 section 5. This requirement does not apply to an executor-nominate.
[2] The pursuer in this action, remitted from Aberdeen Sheriff Court, is an insurance company. On 22 November 2002 the pursuer granted a bond of caution ("the Bond") in terms of which it bound itself that the estate as contained in the confirmation-dative of the deceased John George Watson Murdoch, wherein David Murdoch had been decerned and was to be confirmed executor-dative qua son to the deceased, should be made free and forthcoming to all parties having interest therein.
[3] The pursuer sues the defenders, a firm of solicitors, for damages for reparation on the basis that the pursuer was induced into granting the Bond "as a result of the defenders' fraudulent et separatim negligent misrepresentations".
[4] The action came before me for debate on Procedure Roll for discussion of the first and second pleas-in-law for the defenders and the first plea-in-law for the pursuer. Mr Robertson, Advocate, appeared for the pursuer. Mr Johnston QC appeared for the defenders. Both parties had lodged Notes of Argument to which they referred. When he opened his submissions, Mr Robertson's primary motion was for decree de plano but his position came to be that I should allow a proof, having excluded certain of the defenders' averments from probation. Mr Johnston's primary motion was for dismissal.
[5] Mr Johnston began. He developed his submissions in what he described as six chapters. In his first chapter Mr Johnston set out the factual background as disclosed in the averments. In each of his five subsequent chapters he put forward a separate argument. In so doing he both advanced criticisms of the pursuer's pleadings and, in the light of the pursuer's Note of Argument, responded to anticipated criticisms of the defenders' pleadings. Mr Robertson followed this structure when he came to respond but added a further chapter in which he indicated how the pursuer's pleas should be dealt with, having regard to his previously developed arguments. When recording and discussing counsels' respective submissions I too shall broadly follow this structure.
The factual background as averred in the pleadings
[6] As I have already indicated, the pursuer is cautioner in terms of a bond of caution granted on 22 November 2002 by which it bound itself that the estate of the deceased John Murdoch, to the extent of £82,000 as contained in the relative confirmation-dative, be made free and forthcoming to all parties having an interest. The executor-dative of John Murdoch was his son, David Murdoch. David Murdoch died on 15 March 2003. The executor of David Murdoch was Carol Murdoch. The defenders are a partnership of solicitors and the individual partners thereof.
[7] David Murdoch initially instructed Messrs Matheson Ritchie, solicitors in Glasgow, in relation to the administration of John Murdoch's estate and on 7 June 2002 David Murdoch was decerned as executor-dative of his late father on a petition drafted by Matheson Ritchie. However, on or about 20 September 2002 David Murdoch instructed the present defenders to deal with any matters relating to the estate of the deceased John Murdoch. The defenders were provided with a copy of the petition and correspondence from Matheson Ritchie.
[8] Ms Alison Merson, an unqualified legal assistant employed by the defenders', was given the responsibility of carrying out the work involved in winding up John Murdoch's estate.
[9] On 18 November 2002 Ms Merson completed a copy of the pursuer's bond of caution application form. In that form there was entered information about the executor-dative, the estate and the beneficiaries, which information Ms Merson had verified with David Murdoch. The form was signed by David Murdoch as applicant in the presence of one of the partners of the defenders, Mr Graham Morrison. The form included a "Solicitor's Certificate" which confirmed, inter alia, that:
"We are not aware of any fact or circumstance that would render the information set out in this form untrue or inaccurate. We have been instructed to advise and act in all matters concerning the administration of the Estate. We will advise you promptly of any claim or dispute affecting the Estate ..."
Mr Morrison signed the Certificate, appending the defenders' partnership name.
[10] The application form included the question: "Are the proposed Executors or their solicitors aware of any claims or disputes affecting the Estate". The answer given was "No". That answer had been provided to Ms Merson by David Murdoch. To David Murdoch's knowledge that answer was false in that he was aware that the British Nursing Association, otherwise Nestor Healthcare Limited ("Nestor"), had intimated a claim in respect of an alleged debt owed by the estate in the sum of £43,255.50. Neither Ms Merson nor Mr Morrison was aware of this fact at the time of completing the application form and signing the Certificate. However, another partner of the defenders, Mr John Hardie, may be taken to have been aware of it. In July 2002, prior to the defenders being instructed by David Murdoch to act in relation to the estate, Lorraine Murdoch, the sister of David Murdoch, had instructed the defenders in relation to a potential claim to the Criminal Injuries Compensation Authority relating to injury sustained by John Murdoch. Mr Hardie acted for Lorraine Murdoch in relation to that matter. By letter dated 16 July 2002 Mr Hardie wrote to Messrs Ness Gallagher, the solicitors of the late John Murdoch, requesting details of John Murdoch's claim to the Criminal Injuries Compensation Authority. On 29 July 2002 Messrs Ness Gallagher wrote to Mr Hardie in terms that included the following: "With reference to the late Mr Murdoch's case ... We would advise that an outstanding liability to the BNA in excess of £40,000 exists."
[11] Also aware of this claim was at least one person who was an employee or partner of the firm of Messrs Matheson Ritchie. The British Nursing Association Legal Department had written to Messrs Matheson Ritchie noting their interest in John Murdoch's estate by letter dated 16 August 2002. As I have already notedmentioned, the pursuer avers that the defenders were provided with a copy of the petition and correspondence from Messrs Matheson Ritchie but, so the averments continue, the defenders did not "request any papers from Messrs Matheson Ritchie in this regard". The pursuer further avers that although David Murdoch was the executor-dative, Lorraine Murdoch was the defenders' principal contact in relation to the administration of the estate and that the defenders accepted instructions from both Lorraine Murdoch and David Murdoch in connection with the estate.
[12] The defenders, acting for the executor, distributed the estate to the beneficiaries by payments made on 25 February and 2 June 2003. By letter dated 10 July 2003 solicitors acting for Nestor intimated a claim against the estate to the defenders for payment of £43, 255 in respect of services provided to the late John Murdoch. On 21 December 2004 Nestor raised an action for payment of £43, 255 against, first, Carol Murdoch as executor dative of the late John Murdoch and, second, the pursuer as cautioner for the executive-dative. The pursuer settled the action against them by making a payment of £20,000. It incurred legal fees and outlays of £14,895.02. It is these two sums that the pursuer seeks to recover by way of damages in the present action.
Section 16 of the Partnership Act 1890
[13] Section 16 of the Partnership Act 1890 provides:
"Notice to any partner who habitually acts in the partnership business of any matter relating to partnership affairs operates as notice to the firm except in the case of fraud on the firm committed by or with the consent of that partner."
[14] In developing the first chapter of his argument, Mr Johnston explained that, as appeared from its Note of Argument, the pursuer relied on section 16 of the 1890 Act to impute the knowledge of Mr Hardie to the firm and therefore to Mr Morrison, as a partner of the firm, with a view to characterising Mr Morrison's signing of the Certificate on behalf of the firm as a fraudulent misrepresentation. Mr Johnston submitted that this approach was to adopt too broad an interpretation of section 16. He accepted that notice to a partner was the equivalent of notice to the firm and he did not seek to distinguish the expression "notice ...of any matter" from the giving of information or imparting knowledge of a fact (cf Lindley & Banks On Partnership (18th edit) para 12-26) but, so he submitted, it was not the case that the giving of any information to any partner, irrespective of the nature of that information, necessarily had the result that the information was to be imputed to the firm as a whole. This was a case where information was scattered over the defenders' organisation. Subject to the effect of section 16, it could not be imputed to the defenders unless it had been received by a person able to appreciate its significance: Malhi v Abbey Life [1996] Lloyds Reinsurance Law Rep 237 at 242. Turning to the effect of section 16, a limitation had to be read into its ex facie broad terms in order to accommodate the overriding...
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