Sheriff’s judgment on disputed indemnity was ‘completely inadequate’, appeal court rules

The Sheriff Appeal Court allowed a proof before answer after ruling that the sheriff’s judgment was “completely inadequate” in that it failed to properly explain the rationale behind his decision.

Sheriff Principal Craig Scott QC , Sheriff Principal Iain Abercrombie QC, and Sheriff Principal Marysia Lewis heard that the defender and appellant William Lindsay had signed an indemnity favour of the pursuers and respondents Outlook Finance Limited, in terms of which the pursuers were seeking payment of almost £266,000.

By way of counterclaim the defender sought to have the indemnity reduced on the basis that he “signed it in error” and on the basis that the pursuers had not acted in “good faith” in securing his signature.

However, the sheriff sustained a plea-in-law for the pursuers in the principal action, and that being so, the counterclaim by the defender was found to be irrelevant and decree de plano was granted.

The sheriff found that the defender had simply failed to read the document he signed, which was “clear in its terms” and he was therefore “bound by it”.

On appeal, the defender and appellant’s case centred around the proposition that the pursuers’ admitted failure to mention the requirement for an indemnity to the defender at any stage prior to the presentation of the document for signing “equated to the concealment of facts” which in turn amounted to “misrepresentation”.

Allowing the appeal, the appeal sheriffs observed that the sheriff’s note, which ran to approximately 55 pages containing 110 paragraphs, and the sheriff’s judgment, “obscured any proper articulation as to his actual view on the applicable law and the rationale upon which his decision is based”.

Delivering the opinion of the court, Sheriff Principal Scott said: “The length of the note is largely due to the sheriff’s habit of quoting substantial passages, sometimes several pages at a time, from the authorities cited by counsel during the debate. Aside from all else, that sort of approach is, to our mind, unhelpful in the sense that it results in an entirely unfocused summary of the submissions advanced for each party.

“In reading the sheriff’s note we were repeatedly faced with great difficulty in identifying which particular passage within an authority had been relied upon and in recognising any discrete legal proposition being put forward. This sort of approach to the formulation of a judgment, in our view, is not to be commended and, in any event, must be viewed as an unjustified drain on valuable time and resources.”

The sheriff stated that he did not regard the failure to mention an indemnity as a misrepresentation, but the appeal sheriffs described that “unexplained assertion” as “completely inadequate” and therefore the decision could not be supported.

Sheriff Principal Scott said: “There is no doubt that the terms of the document signed by the defender were clear nor is there any doubt about the fact that the defender did not read the document before signing. All that is nothing to the point, however, when it comes to the arguments presented by counsel for the defender regarding misrepresentation and, indeed, a lack of good faith.

“In these unhappy circumstances and where there is no meaningful reconciliation as between counsel’s submissions and the court’s application of the law as it applies to the facts which the defender offers to prove in the counterclaim, we are bound to conclude that the sheriff’s decision cannot be supported.”

The court also observed that the test of the relevance of a party’s averments – namely, whether even if all of the party’s averments were to be proved the party would still fail to achieve the remedy sought – was not alluded to by the sheriff in his note.

The defender claimed that he had “no reason” to anticipate that the documents he was signing would include an indemnity, while the respondents argued that the appellant’s pleadings were not sufficient to set up a case to support his pleas in law and counterclaim, but the appeal sheriffs disagreed and remitted the matter back to the sheriff.

“At all odds, we do not agree with counsel for the respondents’ submission to the effect that the averments advanced by the appellant, even if proved, would mean that the appellant would be bound to fail,” Sheriff Principal Scott said.

He added: “We consider that the appellant has pleaded what amounts to a relevant case and that, in all the circumstances, he is entitled to have the matter determined by way of a proof before answer… We shall recall the sheriff’s interlocutor repelling those pleas and granting decree de plano in the principal action and instead we shall allow a proof before answer with all pleas left standing.”