Scottish Court of Session Decisions

An action was raised in the Sheriff Court of Forfar by John Kerr, plater, against the Montrose Shipbuilding and Engineering Company, Limited, craving for decree against the company for £500, in name of damages for injury sustained by him through an accident occurring in the company's yard. The Sheriff-Substitute on 26th February 1895 found that damages to the amount of £150 were due to the pursuer, and that he was entitled to expenses.

An appeal was taken to the Sheriff on behalf of the company, and he on 30th March 1895 dismissed the appeal with additional expenses. The defenders appealed to the First Division, who on 18th July 1895 dismissed the appeal and found the pursuer entitled to expenses in the Court of Session. The company were insured against liability for accidents to their workmen in the Employers Liability Assurance Corporation, Limited, 75 George Street, Glasgow, conform to policy dated 30th January 1892. By the policy it was provided that the Assurance Corporation should “(subject to the endorsed condition No. 2 A) pay to the employers all sums for which such employers shall become liable under or by virtue of the Employers Liability Act 1880, or at common law, as and for compensation for personal injuries caused to any workman in their services while engaged in the employer's work in either of the occupations and at any of the places in the schedule hereto, such payment to be made within one calendar month of the receipt by the directors of the corporation of evidence satisfactory to them of such liability; provided always that this policy and the covenant to indemnify herein contained are subject to the conditions endorsed hereon, which are hereby agreed to be conditions precedent to the right of the employer to sue or recovery hereunder. “

Condition No. 2 endorsed on the policy was in the following terms — “A. The corporation shall pay to the employer all sums for which he shall become liable under the Employers Liability Act 1880, or at common law, up to the amount of three years' wages, as defined and expressed in the Employers Liability Act 1880, as well as the costs and expenses hereunder mentioned, if any, and no more in any event. B. On receiving from the employer notice of any claim, the corporation may take upon themselves the settlement of the same, and in that case, the employer shall give them all necessary information and assistance for the purpose. The employer shall not, except at his own cost, pay o. settle any claim without the consent of the corporation, but if any proceedings be taken to enforce any claim in respect of which such notice shall be given, the corporation shall, if and for so long as they shall so desire, have the absolute conduct and control of the defences, in the name and on behalf of the employer, and shall, subject to the terms of the within policy, indemnify the employers against all costs and expenses of and incident upon any such proceedings incurred while they retain such conduct and control thereof, and the employer shall, at the cost of corporation, render them every assistance in his power to enable them to resist any claim, wholly or in part, or to defend any such proceedings. “

An action was raised by John Kerr against the Assurance Company for payment of the sums of £55 and £32, being the amount of his expenses in the above-mentioned action in the Sheriff Court and Court of Session, with interest from the dates of the respective decrees.

The pursuer averred that the present defenders had been duly notified by his employers of the claims and of the raising of the action, and that they “thereupon undertook the conduct and control of the defence to the pursuer's action, “ that the defenders “were the true domini litis in the said action, and had the whole control and direction of the whole proceedings therein so far as regards the defence thereto. “

The pursuer further averred that he had not been successful in recovering from the Montrose Shipbuilding Company payment of the sums decerned for against them, that the company was insolvent and in liquidation, and that the present action was therefore necessary.

The defenders averred that the pursuer had throughout regarded the Montrose Shipbuilding Company as the real defenders in the action, and had relied upon them as his true debtors, and that he had lodged a claim in the liquidation.

They denied that they had had the absolute control of the defence, and pleaded — “(4) The pursuer having extracted decree against the Montrose Shipbuilding Company for the whole amount of the expenses incurred by him in the original action, the present action is incompetent. (6) The pursuer having no claim on the defenders for expenses incurred by him in establishing a claim against the Montrose Shipbuilding Company, the defenders should be assoilzied, with expenses. (7) The Montrose Shipbuilding Company having retained control of the original action they only are liable for the expenses of that action. “

The Lord Ordinary ( Kyllachy) allowed the parties a proof, the import of which sufficiently appears in his Lordship's note, infra.

On 24th December 1898 the Lord Ordinary pronounced an interlocutor by which he decerned against the defenders in terms of the conclusions of the summons, and found the pursuer entitled to expenses.

Opinion. — “This is an action for expenses as against an alleged dominus litis. The original lis was an action brought by the pursuer claiming damages for personal injuries against his employers the Montrose Shipbuilding Company, now in liquidation. The action was defended (nominally by the company), but after litigation in the Sheriff Court and Court of Session the pursuer obtained decree for a sum of damages, and also for his taxed expenses. His decree for damages is, unfortunately for him, worthless, owing to the hopeless insolvency of the company; but he claims to have now discovered that the action was

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truly defended by the present defenders, an Insurance Corporation, and accordingly he brings this action against them, claiming that, as regards the expenses incurred by him, he has right to recover against them as the true domini litis in the litigation.

Upon the matter of fact, it does not appear to me that there is any doubt. It seems to be established beyond dispute that, in terms of a right expressly enforced on them by the contract of assurance, the defenders' corporation claimed and obtained from the assured company the absolute conduct and control of the defence to the suit; and also that they did in the company's name conduct and control the suit to its termination.

It seems also established, and is indeed not disputed, that they so conducted and controlled the suit in respect of having under their contract of assurance a direct interest in its subject-matter —an interest partial or total according to the result, but yet an interest quite direct and immediate.

Nor does it seem to detract from the importance of those facts that —the Sheriff-Substitute and the Sheriff having decided for the pursuer, and the corporation's advisers having appealed to the Court of Session — the assured company became bankrupt and went into liquidation, and its liquidators refused to allow their names to be used in prosecuting the appeal. It may be that, as between the company and the corporation, this liberated the latter from their obligations under the policy; but I fail to see what effect that can have on the present question, which relates exclusively to the expenses incurred by the pursuer during the period while the corporation were still in control and were litigating for their own interest in the company's name. It would of course have been different if the liquidators had intervened and carried on the liquidation on the company's account. But that did not happen. Neither they nor the company in fact intervened at all. The whole expenses now sued for were due to the opposition of the present defenders.

The question therefore is, whether, the defenders' relation to the suit being what I have stated, the case comes within the doctrine of dominus litis. Now, I do not propose to resume the authorities upon that doctrine. I had occasion to do so in the comparatively recent case of Fraser v. Malloch, 23 R. 619, to which I refer. But it seems to me that whatever difficulties may sometimes arise in applying that doctrine, the present case stands clear of most of those difficulties. Indeed, I should be disposed to say that the present is a typical case for the application of the doctrine. In particular it seems to me to satisfy to the full the conditions figured by Lord Rutherfurd in the case of Mathieson v. Thomson, 16 D. 19, where, reviewing the whole authorities, his Lordship puts the matter thus — ‘That a dominus litis is a party who has an interest in the subject-matter of the suit, and through that interest a proper control over the proceedings in the action.’

Accordingly I should, I confess, have disposed of the case at once had it not been for an able and ingenious argument originally presented by Mr Moncrieff and afterwards by Mr Dewar —an argument founded on some observations of my own in the case of Fraser v. Malloch. That argument, as I understood it, was of this nature. Assuming, it was said, that the law of dominus litis is just a chapter of the law of principal and agent, and that the ground of liability is that the dominus is just an unknown principal, litigating in the name of another person who is ad hoc his agent, —so assuming, the result, it was said, is that the alleged dominus litis is in the same position as any other undisclosed principal, and being so, cannot be sued, after his agent who has appeared as principal, has been sued to judgment. This, it was at first said, followed from principles established in England and recognised in Scotland under the doctrine of election. But as ultimately presented, the case was put, not as one of election, but of absolute bar —the unknown principal, whether discovered before judgment or not, being always entitled to plead that judgment having gone out against the agent, no further action could lie on the same cause of action against him (the principal), or indeed against anybody else. This was said to be the result of the decision, and particularly of Lord Cairns' judgment in the case of Kendall v. Hamilton, 4 App. Cas. 504.

Now, I am not, I own, satisfied that the judgment in the case of Kendall lays down any doctrine of general law. It seems to me to depend largely, if not entirely, upon the application of certain rules of procedure established in the Common Law Courts in England, and not (according at least to the majority of their Lordships) affected by the Judicature Act of 1883. And if that be so, I am not aware that we are in this Court embarrassed by any such rule. It certainly does not occur to me that we should be much embarrassed by some of the practical difficulties which are figured by Lord Cairns, and which helped to determine his judgment.

Neither am I at all satisfied that, assuming all they say, the defenders could or can take any benefit from the doctrine of election. To an election it is at least necessary that the party supposed to elect has known that he had a choice. But here the pursuer is not proved to have known, before the dismissal of the appeal, or even before the final interlocutor approving of the Auditor's report, that the present defenders had been all along his true antagonists in the action. He, or rather his agent, may have suspected something of the kind. The latter seems certainly to have known or to have heard that the Shipbuilding Company were insured. But there is no evidence as to how much they knew, and the Court cannot in such a matter assume knowledge in the absence of proof.

Even, however, if all this was otherwise, there is, in my opinion, a defect in the defenders' argument which goes a good deal deeper. It may be true that the principle underlying —what I have called for

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shortness —the doctrine of dominus litis is the same as that which determines the liability of an undisclosed principal, with respect to contracts made by his agent in the latter's name. But it does not thence follow that the whole law of principal and agent, with all its incidents, is necessarily imported into the very special form of agency with which we have here to deal. There is at least one circumstance which makes it very difficult to hold that the dominus litis is freed whenever the nominal litigant is sued to judgment. For with us it is at least I think a rule of practice that the expenses of a cause, if they are to be recovered by the successful party, must be ascertained and decerned for in the suit in which they are incurred. If therefore the defenders' argument were to be held as sound, the right to sue the dominus by a separate action — a right which is well established —would be a dead letter. This of itself seems to show that the doctrine of dominus litis has rules of its own, and also that it is possible to state legal principles too broadly, and to apply them too literally.

Altogether, I see no reason why the pursuer should be now barred from his remedy against the defenders, and accordingly I propose to decern in terms of the summons, with expenses. “

The defenders reclaimed, and argued — They were not the true dominus litis, but even if they had been so, the pursuer was barred from proceeding against them by having accepted the Montrose Company as his debtor. It had not been established that the defenders were truly the principals in the action, and that the company was merely their agent. That was the criterion of liability laid down by Lord Kyllachy in Fraser v. Malloch, March 12, 1896, 23 R. 619. This was not the case of a man of straw put forward as a litigant for the purpose of prejudicing an opponent. Nor was a mere obligation in relief to the Montrose Company enough to found this action — Carrick v. Rodger, Watt, & Paul, Dec. 3, 1881, 9 R. 242. But even if the defenders had been in the position of an undischarged principal, they were entitled to plead that the pursuer having obtained judgment against the agent, no further action would lie against them — Kendall v. Hamilton, 1879, L.R., 4 App. Cas. 504.

Argued for the respondents — The reclaimers' argument depended on their being able to show that the law of dominus litis was identical with that of principal and agent, and also that the Montrose Company had been in the position of agents. It was quite evident that they were not, for they had done nothing at all in the case except allow their name to be used, having by the conditions of their policy assigned to the present defenders the entire right to conduct the action. Moreover, the pursuer would have had no right of action against the present defenders in the first instance, there having been no privity of contract between them, so the law of election had no application. After getting a decree against the nominal defender, it was quite competent to sue the dominus litis in a separate action for expenses — Stevens v. Burden, Nov. 21, 1823, 2 S. 507; Corson v. M'Lauchlan, Feb. 8, 1828, 6 S. 505; Hepburn v. Tait, May 12, 1874, 1 R. 875.