EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
Lord Eassie Lord Mackay of Drumadoon Lord Philip	[2012] CSIH 64 CA36/11 OPINION OF THE COURT delivered by LORD PHILIP in the Reclaiming Motion by THE ROYAL BANK OF SCOTLAND PLC Pursuer & Reclaimer; against NIGEL PERCIVAL MCKINNON MATHESON Defender & Respondent: _______

Act: Clark, QC; McGrigors LLP

Alt: Dunlop, QC, Pugh; MBM Commercial LLP

31 August 2012

[1] This is an appeal against an interlocutor dated 15 September 2011 by which the Lord Ordinary refused the motion of the pursuer and reclaimer ("the bank") for reduction of a decree in absence granted against them in Court of Session action A140/10 at the instance of the defender and respondent ("Mr Matheson"), and granted decree of absolvitor. The action was one of two actions raised by Mr Matheson against the bank both of which arose out of a complaint by him that the bank had wrongfully withdrawn an extension to a loan facility granted by them to a company of which he was a director. In action A140/10, Mr Matheson sued as assignee of the company for damages for loss suffered by the company. The other action, earlier in date, was raised in Perth Sheriff Court in about December 2008. In that action, he sues for psychiatric and other injury allegedly suffered by him personally. In both actions the sum sued for is £200,000 together with interest. The sheriff court action is still proceeding.

[2] The events leading up to the grant of decree in absence in action A140/10 were as follows. The summons was signetted and served on the bank on 15 March 2010. At that stage Mr Matheson was represented by MBM Commercial LLP, solicitors practising in Edinburgh. They ceased to act for him about September 2010. Thereafter he represented himself. The summons was lodged for calling on 15 February 2011. That fact was overlooked by McGrigors LLP, the solicitors acting for the bank, in the circumstances set out below. As a result no defences were lodged on behalf of the bank. Decree in absence was granted on 1 March 2011 and was extracted on 15 March 2011.

[3] On the morning of 14 March 2011 McGrigors became aware for the first time that decree in absence had been granted. They sought instructions from the bank and prepared defences. A motion for recall of the decree in terms of rule of court 19.2 was enrolled on 16 March 2011. McGrigors were unaware that the decree had already been extracted until after intimating their motion for recall to Mr Matheson. The motion came before the Lord Ordinary (Uist) on 18 March 2011 and was refused. No opinion was issued.

[4] Recall having been refused under rule of court 19.2, the bank raised the present action on 21 March 2011. On the following day, the Lord Ordinary (Hodge) suspended the decree in absence ad interim and interdicted Mr Matheson from instituting any diligence on it or taking any other steps to enforce it.

[5] As the action was a commercial action, it came before the court for a preliminary hearing in terms of rule of court 47.11 on 12 May 2011. At that hearing Mr Matheson argued that the action should be dismissed on the ground that the bank had failed to set out any relevant averments justifying reduction, while the bank reserved its position as to the relevancy of Mr Matheson's defences. The cause was appointed to a procedural hearing and debate to consider Mr Matheson's argument for dismissal, the bank's contentions as to the relevancy of Mr Matheson's defences, and submissions by both parties as to the scope of any proof. At the same time the Lord Ordinary (Glennie) appointed parties to intimate and lodge notes of argument, and appointed the bank to intimate and lodge affidavits relating to the question of "mistake", that is, the circumstances in which decree in absence was allowed to pass and to be extracted before the hearing on the bank's motion under rule of court 19.2.

[6] The procedural hearing and debate was held on 24 and 27 June 2011 when counsel for the bank addressed the court on the test to be applied in an action for reduction of a decree in absence. Mr Matheson argued that the bank's pleadings failed to reveal a relevant defence to his own action and that the action of reduction should be dismissed. Following the debate, the Lord Ordinary made an order allowing parties a proof before answer, restricted to the question of "mistake". His reason for doing so was that he was satisfied that the test for reducing a decree in absence was less strict than that applicable to an action for reduction of a decree in foro. There was no precise test which required to be met in order to reduce a decree in absence. The court was required to consider all the circumstances of the case and to exercise its discretion in the light of those circumstances. Since he was satisfied that the bank had a plainly arguable defence to the action brought by Mr Matheson, inquiry should focus on the "mistake" which led to the decree in absence having been allowed to pass and other avenues of redress being lost.

The circumstances in which decree was allowed to pass in absence
[7] As we have already recorded, the summons was signetted and served on the bank on 15 March 2010. On 1 April 2010 Mr James Cormack, the partner dealing with the matter at McGrigors, emailed MBM Commercial, who were then acting for Mr Matheson, and asked them to notify his firm when the summons was to be lodged for calling. McGrigors did not intend to rely solely on MBM notifying them, as they had their own system for checking whether a summons had called. In any event, they knew from about September 2010 that MBM were no longer instructed by Mr Matheson in connection with the sheriff court action and might have assumed that they were no longer instructed in the Court of Session action. The evidence was that the case was added to McGrigors' internal calling list which they used to check if cases in which they were instructed had been lodged for calling. It was the responsibility of a trainee to examine the Court of Session rolls each day to check whether any case on their internal list was on the calling list. This system was clearly necessary because of the consequences of failing to notice when a summons had called.

[8] Once a summons is called, the defender is required to enter appearance within three days and to lodge defences within seven days. Failure timeously to enter appearance and/or lodge defences entitles the pursuer to apply by motion for decree in absence in terms of rule of court 19.1, which provides that the court shall grant decree if satisfied that it has jurisdiction and that the rules of service have been complied with.

[9] Rule of court 13.13(6) provides that where a summons is not called within a year and a day after the expiry of the period of the notice, the instance shall fall. So the bank and McGrigors were both interested in knowing when action A140/10 would call as they hoped that it would not be lodged for calling in time. Mr David Eynon, a senior solicitor at McGrigors, who was responsible for the day to day conduct of action A140/10, was aware in February 2011 that it would require to call soon if it was not to fall and had made an entry in his diary to check with the court on the date the instance was due to fall. The summons had been served on 15 March 2010 and the period of notice was 21 days. According to the Lord Ordinary's reckoning the instance would have fallen if the summons had not called by 6 April 2011. By February 2011, Mr Cormack, Mr Eynon and others at McGrigors were aware that MBM Commercial were no longer acting on behalf of Mr Matheson and that he was conducting both actions himself. Ms Katherine Allan, of the bank's legal department, who had responsibility for the sheriff court action, was also aware of this. Accordingly neither McGrigors nor the bank would have expected to be told by MBM Commercial when the summons was to be lodged for calling, and the Lord Ordinary took the view that they had no reason to suppose that Mr Matheson would have been aware of the etiquette in this respect.

[10] Nevertheless, Mr Matheson did in fact intimate to the bank and to McGrigors that the summons was about to be, and subsequently had been, lodged for calling. There had previously been considerable correspondence between the bank and Mr Matheson, including correspondence with Miss Allan, who had since 2001 been employed as legal counsel in the legal-litigation division of the RBS Group. There had been a debate in the Sheriff Court action in late January and early February 2011, and on 2 February 2011, the day after the debate, Mr Matheson wrote to Miss Allan and towards the end of his letter said this:

"I am going to instruct solicitors to bring the action in the Court of Session live, but I am also going to try to regenerate the goodwill my business has lost through the bank's actions...I would like to think that there is a way forward...I would ask you to reply to me within seven days of this letter..."

[11] In cross examination, Miss Allan accepted that the expression "bring the action ... live" was a reference to the action being lodged for calling and that she had picked up the point at the time. She did not however recall having mentioned it to Mr Eynon. There was an indication in the letter that Mr Matheson was proposing to re-appoint solicitors and she regarded this as important and helpful. Her position was that she would hear from McGrigors in due course if and when the summons was lodged for calling, as she relied on them to update her on developments in any case. She replied to Mr Matheson by email on 14 February, and on 15 February Mr Matheson sent another email to her which, since she only worked part-time, she did not pick up until 17 February. In that email he said:

"I am aware that we are awaiting a decision in relation to the action in Perth Sheriff Court, but please do not be under the misapprehension that that may close the matter. The action in the Court of Session was brought live last week...".

[12] In evidence Miss Allan said that she did not recall reading the reference to the Court of Session action although, had she read it, she would have realised that it meant that the summons had been lodged for calling. She accepted that it was regrettable if she had not read the reference but explained that she was not looking out for references to court procedure. Had she noted the reference, she would have raised it with McGrigors, but since she thought that the letter did not require a response, she did not. If McGrigors had become aware that the action had called, she would have expected them to contact her for instructions before entering appearance and lodging defences. Had they told her that the action had called the bank would have instructed them vigorously to defend it. She understood that they were well advanced in their preparations to defend the action as a corollary to defending the sheriff court action.

[13] The action appeared in the calling list on the court rolls on 15 February 2011. The appearance of the action on the list was overlooked by the trainee in McGrigors when he checked the rolls that day. So no one at McGrigors was aware at that time that the action had called. In terms of rule of court 17.1 the bank required to enter appearance by 18 February 2011 and to lodge defences by 22 February (rule of court 18.1(2)). No appearance was entered and no defences were lodged. On 23 February 2011 Mr Matheson sent the following fax to Mr Eynon at McGrigors:

"Dear Mr Eynon,

I am sending you by fax a form of motion which I shall then send to the Court of Session on the timescale laid down in the rules. .......I am requesting the Action which was called on 15 February in the Court of Session, be moved to Perth Sheriff Court.

I found it very difficult to physically get from car parking to the Court of Session two weeks ago and I didn't have quite the same logistical problem at Perth, although nothing is guaranteed with the surgery and it carries certain risks".

Mr Eynon did not notice the reference to the action having called on 15 February 2011. In his affidavit he said that he was under the impression that the motion referred to in the fax was a motion before calling. He emailed Mr Matheson confirming receipt of the fax saying that he would take instructions from the bank "and get back to you". He never did "get back" to Mr Matheson on this topic. He accepted that, having raised the expectation that he would get back to Mr Matheson, he should have done so, but could not explain why he did not.

[14] At 14.35 on 23 February 2011 Mr Eynon emailed Miss Allan attaching a copy of Mr Matheson's fax seeking instructions and saying:

"As you will see, Mr Matheson is proposing to enrol a pre-calling motion seeking to remit the Court of Session action to the sheriff court. Procedurally we would expect the summons to be lodged for calling and defences to be lodged in response before any application is made to remit. Pre-calling motions are usually only enrolled where there is a matter of urgency".

Having overlooked the reference in Mr Matheson's fax Mr Eynon was proceeding in the belief that the action had not called, and reiterated in an email to the bank about the same time that the summons would fall if not lodged by 14 March.

[15] The Lord Ordinary recorded that Mr Eynon did not get back in touch with Mr Matheson to inform him that he had received instructions not to oppose the motion to transfer the case to Perth Sheriff Court, and went on, at paras [26] - [27]:

"Had he done so and entered into some form of dialogue with Mr Matheson, he might have discovered that the summons had indeed called and that the proposed motion was not a motion before calling; and he might have been alerted to the fact that he ought to take steps promptly either to enter appearance and lodge defences or to reach some agreement with Mr Matheson about transfer to the sheriff court...In the event Mr Matheson did not apply to have the action transferred to the sheriff court but enrolled a motion for decree in absence against the bank on Thursday 24 February 2011. The motion duly appeared on the rolls as an unstarred motion on the following Monday 28 February 2011. A colleague who checked the rolls on 28 February 2011 told Mr Eynon that an unstarred motion in that action had appeared on the rolls that day. Mr Eynon however thought that the timing was in line with his expectations following Mr Matheson's intimation of the motion to remit to the sheriff court, and no such motion having appeared on the rolls before that. Mr Eynon therefore took no steps to find out the nature of the motion that appeared on the rolls on 28 February. In fact, in terms of rule 23.8, a motion before calling, other than one for decree in absence, is not required to be published in the rolls of court. Had Mr Eynon been familiar with that provision, he might not have fallen into the error of assuming that the motion that appeared on the rolls on 28 February was the motion for transfer to the sheriff court".

In evidence, Mr Eynon said that had Mr Matheson not intimated any motion in his fax of 23 February 2011, he, Mr Eynon, when he was told that an unopposed motion had appeared on the rolls on the 28 February, would immediately have telephoned the General Department to find out what the nature of the motion was. Equally, if Mr Matheson had told him that he was not intending to proceed with his motion to remit, then, on seeing the motion on the rolls on 28 February 2011, he would have contacted the General Department to find out what it was. He would not have let an unknown motion go unchecked. Had he then learned that the motion on the rolls was a motion for decree in absence, he would have drafted opposition to it together with defences and a motion to allow the defences to be lodged late. If the opposition to the motion had been unsuccessful, and decree in absence had been granted, he would have then been alert to the possibility of applying for recall within 7 days in terms of rule 19.2. As it was, however, neither Mr Eynon nor anyone else at McGrigors checked to see the nature of the motion which had been enrolled, and decree in absence was granted on 1 March 2011.

[16] It was another two weeks before Mr Eynon discovered that decree in absence had been granted. Late in the morning of 14 March 2011 he telephoned the General Department in relation to another action in which the instance was due to fall. That reminded him that Mr Matheson's action would fall later that month if the summons had not called. He was also aware that he had not heard from Perth Sheriff Court that the action had been remitted to it. He therefore enquired about Mr Matheson's action and was told that decree in absence had been granted on 1 March 2011. Mr Matheson had applied for an extract of the decree on the previous Friday, 11 March, and the application was with the Extracts Department on Monday 14 March 2011 when Mr Eynon telephoned the General Department.

[17] In a supplementary affidavit, Mr Eynon explained that when he discovered that decree in absence had been granted two weeks earlier, he arranged to obtain a copy of the interlocutor. He found that the motion for decree in absence had been enrolled on 24 February 2011, and that there was no record of any motion to remit to Perth Sheriff Court. He also discovered that the action had appeared on the calling list on 15 February 2011. He reviewed the file and then realised that Mr Matheson's fax of 23 February had referred to the summons having called, and that he must have enrolled a motion for decree in absence rather than a motion to remit. He then discussed the matter with his senior colleague before telephoning Miss Allan at the bank to advise her that decree in absence had been granted and that they would seek recall, and lodge defences which would require to be approved by her.

[18] Having consulted the rules of court, Mr Eynon formed the view that a motion for recall in terms of rule 19.2 was "the main option". During the course of the afternoon he prepared full rather than skeleton defences, taking the view that this would maximise the prospects of success in a motion for recall. The 7 days allowed by the rule had already passed and, for the motion to be considered at all, the court would require to exercise its dispensing power under rule 2.1. Draft defences were emailed to Miss Allan at 4.50pm the same day and Mr Eynon prepared a draft motion for recall. The following day, 15 March 2011, a senior colleague advised him to check whether the decree had been extracted. That possibility had not occurred to Mr Eynon. In his dealings with the General Department on 14 March there had been no suggestion that the decree had been extracted. The Lord Ordinary accepted this evidence but took the view that Mr Eynon might have shown greater urgency on 14 March had he been alert to the possibility of extraction.

[19] Mr Eynon's note of his telephone conversation with the General Department at about 9am on 15 March records:

"Being advised to the best of their knowledge no application for extract has been received from Mr Matheson. (DAE enquiring). Were we to move for recall with the normal period of notice, would Mr Matheson be able to seek extract of decree in the interim. Being advised that he would and that the court would therefore suggest that we seek to dispense with the normal period of notice".

Mr Eynon explained that he contacted the General rather than the Extract Department because he had spoken to the General Department on all previous occasions and assumed that there was a centralised system whereby they would know whether an application for extract had been made. He did not ask specifically whether there was such a system but he said that the General Department "did not at any time suggest that I should check the position with the Extracts Desk or indicate that they were not able to answer my queries". It had not occurred to him to enquire at the Extracts Desk whether a extract had been requested or was in process.

[20] Having obtained approval from the bank and from the partner in charge at McGrigors of his defences and draft motion, Mr Eynon instructed a trainee to enrol the motion on the morning of 15 March 2011. The motion was enrolled more than 7 days after the date of decree and did not seek to dispense with the 7 day period. In addition, rule 9.2 requires a defender enrolling a motion for recall to have paid the sum of £25 to the pursuer and to lodge a receipt for that payment. The motion was not accepted by the General Department because no dispensation of the 7 day period had been sought and no receipt from Mr Matheson had been tendered because McGrigors had not attempted to contact him. The motion was amended to include a motion to dispense with the requirement to lodge a receipt. When the trainee sought to enrol the amended motion the General Department took the view that it was not competent and would require to be placed before a judge on the question of dispensation. The General Department's advice was to enrol the motion the following day, 16 March, along with some form of proof of posting a letter to Mr Matheson intimating the motion and enclosing the £25.00 payment. There was therefore no advantage in enrolling the motion on 15 rather than 16 March. In the event a letter to Mr Matheson was drafted and sent together with a cheque for £25.00 from McGrigors Glasgow Office on 15 March.

[21] Mr Eynon emailed Mr Matheson at 5.44pm on 15 March attaching a copy of the motion and defences, intimating that he would enrol the motion on 16 March and informing Mr Matheson of the time limit for opposing the motion. At the same time he attempted to telephone Mr Matheson with the same information but failed to contact him and left a message. On the afternoon of 16 March Mr Eynon received a fax from Mr Matheson containing his opposition to the motion on the ground that the decree had been extracted. After carrying out certain research and discussing the matter with senior counsel, he commenced preparing a summons for an action of reduction on the view that the prospects of the court exercising its discretion to recall the decree in absence in terms of rule 19.2 were at least doubtful. Mr Eynon unsuccessfully attempted to telephone the Extracts Department for advice on 16 and 17 March. He subsequently telephoned the General Department, from whom he ultimately obtained confirmation that the decree had been extracted on 15 March 2011. The motion for recall called before Lord Uist on 18 March 2011 and was refused. The action for reduction was then signetted on 21 March 2011.

The Lord Ordinary's Decision
[22] In refusing the motion for reduction the Lord Ordinary found that there was no precise test which required to be met before such a motion could be granted and there was no obligation on a pursuer to plead exceptional circumstances, (Robertson's Executor v Robertson 1995 SC 23). In his opinion he said that the cases cited to him directed the court to consider the culpability of the mistake or mistakes which had led to decree being allowed to pass in absence or failure to take advantage of procedures which might allow for the recall of the decree (para [36]). He accepted that absence of prejudice to the pursuer who had obtained the decree in absence was a factor to be taken into account, as was the availability to the defender of alternative remedies such as an action against his solicitors. On the other hand, the strength of the defence available to the defender was not a factor to be taken into account, but merely the existence of an arguable defence. He was satisfied that Mr Matheson would suffer no prejudice if the decree were to be reduced and that the bank had not acted in such a way that they had acquiesced in the decree. It appeared to him that the bank would have a claim against McGrigors subject to the qualification that they had been told by the pursuer direct that the summons had called and had failed to pass that information on to McGrigors.

[23] In the view of the Lord Ordinary the matter ultimately came down to an assessment of the degree of fault involved in allowing decree to pass. He quoted with approval a passage in the opinion of Lord Emslie in Sullivan v Sullivan 2004 SLT 118, at para (7).

"the remedy of reduction will not normally be granted to relieve a party of his own individual failures or the failures of agents for whose acts and omissions he must bear responsibility",

but acknowledged that the rules were not inflexible and that there might be exceptional cases where the error was to some extent excusable and might therefore mitigate the consequences.

[24] He considered that McGrigors' fundamental error was their failure to appreciate that the summons had called. That error was compounded by Mr Eynon's failure to check the nature of the motion for decree in absence which appeared on the rolls of 28 February, and his ignorance of the fact that a motion before calling to remit to a sheriff court did not require to be enrolled. There were no mitigating factors. McGrigors' system for checking the calling of cases failed through the human error of a trainee. Although they subsequently failed to act with the appropriate degree of urgency two weeks later when they became aware of the existence of the decree in absence, the Lord Ordinary was not persuaded that anything they could have done at that stage was likely to have rescued the situation. Extract decree had already been applied for and any motion under rule 19.2 was already out of time.

Submissions

[25] For the bank, Mr Clark, submitted that the test for reduction of a decree in absence was based on a consideration of the whole circumstances of the case. It was different from the test for reduction of a decree in foro, which required the existence of exceptional circumstances. Aspects of the circumstances which were relevant included the negligence or remissness of the party, the way in which the property had been dealt with since the passing of decree in absence, the time allowed to elapse without challenging the decree, and the availability of other remedies. In his submission, while the bank's agents had made mistakes, there had been no unreasonable delay, no intermediate dealing, and no legal or equitable considerations arising out of a lapse of time. The Lord Ordinary had accepted that Mr Matheson had suffered no prejudice. There were no other special circumstances bearing on the justice of the case which were adverse to the bank's position. The passage from the opinion in the case of Sullivan cited by the Lord Ordinary proceeded upon the agreement of parties and was in any event ill-founded. The cases referred to all predated the case of Robertson. Most of them involved decrees in foro and were Outer House decisions. Robertson was an Inner House decision and did not support the proposition that mistakes by parties or solicitors generally barred reduction.

[26] The court should be extremely reluctant to allow a decree pronounced against any defender to become final when there was a substantial defence which had never been heard, (McKelvie v The Scottish Steel Scaffolding Co Ltd 1938 SC 278-280). That approach had been taken in Johnstone & Clark Engineers Ltd v Lockhart 1995 SLT 440 and in Semple Cochrane PLC v Hughes 2001 SLT 1121, a case involving recall of a decree in absence where there had been inadvertent errors by solicitors. In summary, the cases in which mistakes by parties or solicitors had not been regarded as a bar to reduction involved consideration of the consequences for the parties of the circumstances bearing on the justice of the case, such as absence of prejudice, absence of actual knowledge of decree having passed and hence of the ability to pursuer an alternative remedy, and the existence of a defence which had never been investigated or heard.

[27] Although the Lord Ordinary had correctly identified the test which he required to apply, he had failed to apply it. In particular, he failed to identify each of the relevant circumstances and to consider and weigh them in the balance. He restricted the scope of his consideration of the circumstances to what he called the question of "mistake", ie the circumstances in which decree in absence was allowed to pass and be extracted, rather than considering the whole circumstances. He misdirected himself in the application of the test by concluding "ultimately the matter comes down to an assessment of the decree of fault involved in allowing decree to pass"; and he erred in adopting the view endorsed in Sullivan that mistakes by agents would generally bar reduction.

[28] Having found that the bank had a plainly arguable defence he failed to take that into account. He failed to take into account that if Mr Matheson in his fax of 23 February 2011 had not intimated his motion to transfer action A140/10 to the sheriff court, the subsequent motion for decree in absence would have come to light in time for McGrigors to oppose it. He accepted Mr Eynon's evidence that if there had been no intimation in the fax, he would have checked the nature of the motion on the roll on 28 February. The Lord Ordinary therefore failed to give any proper weight to the fact that Mr Eynon was misled by Mr Matheson's statement in the fax of 23 February. He found that Mr Eynon had made a further error by failing to check the nature of the motion which appeared on the rolls on 28 February, but he failed to consider whether that error was excusable and so should not be given weight. He failed to give proper weight to the finding that Mr Matheson would not suffer any prejudice by reduction of the decree in absence, and that if the decree in absence were not to be reduced, Mr Matheson would obtain a substantial and wholly unjustified windfall. He failed to have regard to the fact that there was no specification, justification or explanation in Mr Matheson's pleadings of how the sum sued for was made up, or any indication of a causal link between the alleged loss and the alleged wrong. He failed to have regard to the fact that McGrigors did everything they reasonably could as expeditiously as they could to retrieve the situation once it came to their notice, that no significant period of time elapsed after decree was obtained and extracted, and that there had been no intermediate reliance on the decree by Mr Matheson.

[29] The Lord Ordinary had also erred in relying unduly on the fact that Mr Eynon had not responded to Mr Matheson's fax of 23 February, and in speculating as to what might have resulted had he done so. He also erred in considering as a relevant factor the availability to the bank of a remedy against its solicitors. All the factors to which the Lord Ordinary failed to have regard bore upon the justice of the case. He failed to do substantial justice between the parties and reached a conclusion which was plainly wrong. Justice clearly demanded that the reduction should be granted.

[30] In moving the court to refuse the motion, Mr Dunlop for Mr Matheson submitted that the court should be reluctant to interfere with a discretionary decision of a Lord Ordinary based on evidence he had heard. In the absence of a transcript, the court was bound by the Lord Ordinary's findings in fact, Piglowska v Piglowski 1999 1 WLR 1360 per Lord Hoffman at 1372. The question was whether it could be said that the Lord Ordinary had gone plainly wrong. In considering that question it was not enough to say that he had attached too much or too little weight to any particular factor. The weight to be attached to a particular factor was a matter for him, Wood v Miller 1960 SC 86 97, Stevenson v Midlothian District Council 1983 SC (HL) page 50 at 56.

[31] Mr Dunlop accepted that the decision in Robertson's Executor v Robertson represented the law. There was no precise test for the exercise of discretion in reducing a decree in absence. All the circumstances had to be taken into account with a view to achieving substantial justice. However, in assessing the whole circumstances the fault of a party or his agents was an important consideration. One of the factors to be considered was the reason why a party had to seek reduction in the first place. Where a party or his agent had been at fault it might be difficult to say that there was an acceptable reason for resorting to an action of reduction where an alternative remedy existed or that substantial justice required the exercise of the exceptional power of reduction. Reference was made to Stewart v Lothians Construction (Edinburgh) Limited 1972 SLT (Notes) 75, Halliday v Pattison 1987 SC 259 and Gehlan v Saeed 1987 SCLR 668 all of which related to decrees by default. Counsel relied upon the passage cited from Sullivan v Sullivan and argued that it should be applied in the present case. Decisions in cases which dealt with Section 19A of the Prescription and Limitation (Scotland) Act 1973 were also capable of providing guidance as to the correct approach.

[32] In response to the argument that the Lord Ordinary had failed to apply the correct test, Mr Dunlop argued that the court should not readily assume that he had misdirected himself when he had stated the correct test twice in his judgment. In any event he had not restricted his consideration of the relevant factors. He had allowed proof on the question of "mistake" as that was the only matter which required enquiry. The answers to all other questions were apparent from his opinion and it was too late for the bank to complain about the restricted nature of the proof. When the Lord Ordinary said that the matter ultimately came down to the degree of fault he had already weighed all the other factors in the balance. He was not saying that in every case the degree of fault was decisive but only that in the present case it seemed to be the most compelling factor.

[33] It was not enough for a pursuer in an action for reduction to say, "I made a mistake". An action of reduction was not an escape route for the negligent solicitor. Fault was clearly a relevant factor and all the bank could argue was that the Lord Ordinary gave too much weight to it. That was not enough. The Lord Ordinary had not failed to take into account that the bank had an arguable defence. It was clear from paragraph [26] of his opinion that he had done so. He had given careful consideration to Mr Eynon's evidence and it could not be said that he had failed to take into account the argument that he had been misled by Mr Matheson's fax of 23 February. He had acknowledged the relevance of the absence of prejudice to Mr Matheson. He had not failed to consider whether the errors made by the bank and their solicitors were excusable or whether there were mitigating circumstances. He had come to the view that Mr Eynon had not acted with the urgency the situation demanded. So he had rejected the argument that the bank's agents had done everything they reasonably could as expeditiously as they could in order to retrieve the situation. The argument that the Lord Ordinary was wrong to consider the bank's remedy against its solicitors as a relevant factor was ill-founded. There could be little doubt that the bank had a claim against McGrigors. In all these circumstances there was no relevant factor which the Lord Ordinary had ignored.

Discussion
[34] The parties were agreed that the decision in Robertson's Executors v Robertson set out the correct approach to be adopted in determining whether reduction of a decree in absence should be granted. The court should look at the whole circumstances of the case. The Extra Division put it in this way; at 30B:

"It is plain that the whole circumstances include the failure of the party seeking reduction to avail himself of other remedies, the delays and the consequences and any other special circumstances bearing upon the justice of the case". (our emphasis).

That the substantial justice of the case should be the overriding consideration in deciding whether or not to grant reduction of a decree in absence or in foro is borne out by the short judgment of the Lord Justice Clerk in Forrest v Dunlop (1875) 3 R 15, at 16, which related to a decree by default.

"A decree in absence is not a nonentity. It will receive effect as long as it stands, though it may be brought under review by reduction or suspension.... It is also open to the party to bring a reduction of the decree on the ground that it was obtained through inadvertence, in which case the court, although it will require a strong statement of facts to support such an application, has the power to award substantial justice". (again our emphasis).

[35] The theme of doing substantial justice in the individual case seems to us to underlie the opinions of Lord President Normand and Lord Moncrieff in McKelvie v The Scottish Steel Scaffolding Co Ltd 1938 SC 279, a sheriff court case in which decree by default was granted after the defenders agent withdrew, and no appearance was made on their behalf after intimation under certification. Lord Normand said at 280,

"I should be extremely reluctant that a decree pronounced against any defender should become final where there was a substantial defence which had never been heard, and, although the decree was granted by default after certification...I should have been willing to consider whether the interlocutor should not be recalled if the case as pleaded before us had disclosed any substantial defence".

Lord Moncrieff said, at 281,

"I am of the same opinion. I also would be most reluctant, in any cases where prima facia there appeared to be a proper defence put forward, to allow decree to pass against the defender without investigation of that defence. Even if carelessness on the part of the defender or others for whom he had been responsible had delayed the course of the procedure of the action, I should in such a case always be willing to entertain an action for relief".

The cases of Forrest and McKelvie both dealt with reduction of decrees by default in which the test for reduction is higher than in cases of decree in absence.

[36] More recently Lord Osborne in Johnstone & Clark (Engineers) Ltd v Lockhart 1995 SLT 440, citing Lord President Normand in McKelvie and Lord Allanbridge in J & C Black (Haulage) Ltd v Altransport International Group Ltd 1980 SLT 154 adopted a similar approach, at 445D:

"What does emerge from such cases, in my view, is that the court is normally reluctant that a decree pronounced against a defender should be treated as unassailable in circumstances where there existed a substantial defence to the claim concerned, which had never been heard".

[37] In our view therefore the approach to be adopted by the court in a reduction of a decree in absence is more accurately stated as consideration of the whole circumstances bearing upon the justice of the case. In his opinion the Lord Ordinary referred to Robertson's Executor for the proposition that the exceptional circumstances test did not apply in relation to decrees in absence, and that the court would exercise its discretion in the light of all the circumstances of the case. He went on to derive guidance from unspecified previous cases which, he said, directed the court to consider the culpability of the mistake or mistakes which led to decree being allowed to pass in absence, or which led to the party against whom decree had passed failing to take advantage of some provision in the rules allowing recall of that decree. He then considered a number of factors which he accepted were relevant, viz. his finding that Mr Matheson would not be prejudiced by a decree of reduction (apart from the loss of the windfall which resulted from the failures of the bank and their agents); the availability to the bank of a remedy against McGrigors; the existence of an arguable defence to the original action on behalf of the bank; and his finding that the bank had not acquiesced in the decree. We agree with Mr Dunlop that the relative weight to be given to these factors was a matter for the Lord Ordinary. He then concluded: "Ultimately the matter comes down to an assessment of the degree of fault involved in allowing decree to pass".

[38] The Lord Ordinary went on to cite with approval one of a number of "principles" listed by Lord Emslie in Sullivan v Sullivan, at [20] which had been the subject of agreement between the parties in that case:

"The remedy of reduction will not normally be granted to relieve a party of his own individual failures or the failures of agents for whose acts and omissions he must bear responsibility",

and added the qualification that the rule might be flexible in cases where there were mitigating circumstances, making the error excusable.

[39] What is absent from the Lord Ordinary's opinion however is any indication that he applied his mind to the broader question of the substantial justice of the case. He did not ask the question whether, in a case in which the pursuer's pleadings were arguably irrelevant and unspecific, and the defenders had satisfied him that they had at least an arguable defence, justice would be done by allowing decree in absence become final. His approach rather was to decide the case by applying the "principle" we have quoted and asking whether there existed mitigating circumstances which might excuse McGrigors' failures. Having understandably found none, he exercised his discretion against granting decree of reduction.

[40] In our opinion the "principle" which the Lord Ordinary derived from Sullivan v Sullivan does not represent an accurate statement of the law. As was said in Robertson's Executor at 30C: "All the circumstances must be considered but the weight to be attached to each is bound to be a matter that can only be determined only on a case by case basis". By applying the "principle" the Lord Ordinary was proceeding on the basis that the weight to be attached to McGrigors errors and omissions required to be predominant. In these circumstances we have come to the view that the Lord Ordinary misdirected himself. That being so, the question at issue in this case is at large for this court.

[41] Applying our minds to the various factors which require to be taken into account in deciding whether decree of reduction should be granted including the substantial justice of the case, we obviously have to consider the series of errors and omissions made by McGrigors, for which there was little real excuse. Failing to notice the appearance of the action on the calling list was a serious error, especially against the background of having failed to note the references in Mr Matheson's correspondence to the action 'having gone live'. Further, while Mr Eyon may have believed that the unstarred motion in the court rolls on 28 February 2011 was in respect of the motion to remit to the sheriff which Mr Matheson had said he would enrol, no check was made and a proper acquaintanceship with the rules of court would have caused a solicitor to realise that something was amiss at that point. That said, once it was realised that decree in absence had been granted, there was no delay in taking steps to seek to rectify matters.

[42] While very mindful of the series of errors made by McGrigors, we have come to the view that this is a case which falls into the category referred to by Lord President Normand and Lord Moncrieff, namely, one in which a substantial defence has been put forward but decree has been allowed to pass against the defender without investigation of it. That in our view is the overriding consideration in this case. In coming to that conclusion we have proceeded on the view that the outcome of any action by the bank against McGrigors cannot be predicted with certainty. There is a prospect that it would develop into a lengthy arduous process in which the fact that Mr Matheson had informed the bank direct through Miss Allan of the calling of his case would add to the uncertainty of the outcome and be productive of delay. We therefore incline to the view taken by Lord Carloway in Semple Cochrane plc v Hughes that justice would be better served by allowing the issue between the parties to be determined in the original action. As a result we consider that justice requires that decree of reduction should be pronounced. We shall therefore recall the interlocutor of the Lord Ordinary and grant decree of reduction of the decree in absence pronounced on 1 March 2011 in action A140/10.