ECCLESIASTICAL INSURANCE OFFICE PLC AGAINST LADY IAM HAZEL VIRGINIA WHITEHOUSE-GRANT-CHRIST [2018] ScotCS CSIH_19 (23 March 2018)
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SECOND DIVISION, INNER HOUSE, COURT OF SESSION
[2018] CSIH 19
A2852/00
Lady Paton
Lord Drummond Young
Lord McGhie
OPINION OF THE COURT
delivered by LADY PATON
in the cause
by
ECCLESIASTICAL INSURANCE OFFICE PLC
Pursuers and Respondents
against
LADY IAM HAZEL VIRGINIA WHITEHOUSE-GRANT-CHRIST
Defender and Reclaimer
Pursuers and Respondents: Ellis QC; BLM Law
Defender and Reclaimer: Party
23 March 2018
Repudiation of a property insurance claim, and subsequent litigation
[1] In 1998 the defender purchased a former church in Boyndie, Banffshire, for £20,000.
She took out property insurance with the pursuers, and moved in. On 13 February 2000, the
property was seriously damaged by fire. The defender submitted an insurance claim. The
pursuers repudiated liability on the ground of alleged non-disclosure.
[2] In October 2000, the pursuers raised the present action seeking declarator that they
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were entitled to avoid the insurance policy on the ground that it had been obtained by non-
disclosure of material facts. The defender denied any non-disclosure, and defended the
action. On 9 March 2002, the defender lodged a counterclaim with conclusions for inter alia
declarator, payment, a public apology, and erasure of entries in newspapers and websites.
Later that year, on 31 October 2002, the action was sisted to enable the defender to seek Legal
Aid. The sist remained in place for a period of over nine years, from 31 October 2002
until March 2012, partly as a result of the defender’s health issues.
The defender’s counterclaim and issues of prescription and limitation
[3] In March 2012, the sist was recalled. On 16 August 2012, the court allowed the
pursuers’ minute of amendment adding an additional conclusion for declarator that any
obligation arising under the policy had been extinguished by the short negative prescription
in terms of section 6 of the Prescription and Limitation (Scotland) Act 1973. After various
procedures, it was held that the defender’s claim for damages for defamation and calumny
was time-barred in terms of section 18A of the 1973 Act, but that her claims for indemnity and
damages for breach of contract had not been extinguished by the quinquennial prescription
and should be remitted to probation (Ecclesiastical Insurance Office plc v Whitehouse-Grant-
Christ 2016 SLT 990).
The defender’s objection concerning an alleged conflict of interest
[4] After that decision, the pursuers instructed new agents, namely BLM Law. On
22 September 2016, the defender objected to the new agents’ involvement on the basis of a
conflict of interest, in that in 2000 she had consulted a partner of a legal firm which ultimately
amalgamated with BLM Law. After a debate on 4 November 2016, the court made avizandum.
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Ultimately the court repelled the defender’s objection by a majority decision dated 26 May
2017 (Ecclesiastical Insurance Office plc v Whitehouse-Grant-Christ 2017 SLT 697).
The pursuers’ minute of abandonment and minute of partial admission
[5] On 28 October 2016 (ie following the objection raised on 22 September 2016, but prior
to the issuing of the decision on 26 May 2017), the pursuers lodged a minute of abandonment
in the principal action, and a minute of partial admission in the counterclaim.
[6] The minute of abandonment stated:
“TAYLOR for the pursuer stated and hereby states to the court that the pursuer
abandons the principal action and seeks decree of dismissal in terms of rule of court
29(1)(b).”
[7] The minute of partial admission stated:
“TAYLOR for the pursuer stated and hereby states to the court that the pursuer admits
liability to indemnify the defender in terms of and to the extent undertaken in the
insurance contract between the pursuer and the defender for the loss suffered by the
defender as a result of damage to the property insured in the fire on or about
13 February 2000: for the avoidance of doubt the pursuer reserves all its rights and
pleas available to it to defend all other claims within the counterclaim and also in
respect of the quantum of any indemnity payment and any interest which may or may
not be due thereon. ”
[8] Those minutes gave rise to several issues, namely:
Whether there should be a decree of dismissal or absolvitor in the principal
action.
Expenses.
Further procedure, including pleadings.
Those issues were discussed at a hearing before the Inner House on 9 January 2018. At the
outset, the court intimated that the expenses of the counterclaim would not be dealt with at
that stage (as the counterclaim was a process which was continuing), and also that the court
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was satisfied that the issues in the case were of such a nature that they could not sensibly be
dealt with by summary decree.
The defender’s amendment
[9] By a previous interlocutor dated 26 September 2017 the defender had been permitted
to amend her pleadings to a limited extent, as requested in her motion enrolled on
6 September 2017, which was in the following terms:
“On behalf of the Defender and Reclaimer; under RCS 24.1(2)c) and 24.2.(2) to allow
amendment of the sum sued for in terms of the Defender ’relevant claim’ at Pleas-In-
Law No.9 in the Defences dated 27 May 2002 as adjusted and reasserted in the
Defences of the principal writ and the counterclaim under RCS 25 as follows.
1.
To delete, ‘NINE HUNDRED AND TWELVE THOUSAND SIX
HUNDRED AND THIRTY SEVEN POUNDS (£912,637.00) Sterling’
and all reference to (1) the formula calculations including (2) Index
linking applied monthly, (3) Compound (4) Compounded monthly,
(5) any interest rate above 8%
2.
And substitute with, ‘For Decree for payment by the Pursuer to the
Defender, the sum of EIGHT HUNDRED AND SEVENTY THREE
THOUSAND POUNDS (£873,000.00) Sterling, plus judicial interest at
the rate of 8% per year from 13 February 2000 until payment, should be
granted as sought and with expenses’
3.
That being the Pursuer liability, obligation and debt for payment to the
Defender for losses suffered by the Defender as a result of the damage
to the Defender home (property insured) in the fire on 13 February
2000. The sum sued for being a reasonable estimate of the Defender
fire indemnity claim under the insurance Policy Number HT9800273
issued by the Pursuer in favour of the Defender and which was current
on 13 February 2000; decree for payment should be granted as sought;
to be amended in the following:
a. OPEN RECORD (AS ADJUSTED) August, 2012 (No.41 of
Process); at Pleas-In-Law No.5 for the Defender (pp.23 to 24).
Conclusion No.1 of the Counterclaim (pp. 24 to 25).
Statement IV. of the Counterclaim (p. 35). Pleas-In-Law No.1 of
the Counterclaim (p. 52); and
b. CLOSED RECORD, March 2014/Reclaiming Print (No.83 of
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Process) at Answers 7.1 in the Defences (p.37 to 38). Pleas-In-
Law No.6 in the Defences (p. 210). Concuision No.II of the
Counterclaim (p. 250); and Pleas-In-Law No.3 in the
Counterclaim (p.274); and
c.
All the various Written Submissions and MOTIONS enrolled on
behalf of the Defender and Reclaimer up to and including the
Motion enrolled 14 March 2017.”
The reprinting of the record was dispensed with, and the defender was authorised to make
the limited amendments by manuscript alterations to the record. However at the hearing on
9 January 2018 it transpired that the defender had made some further manuscript alterations
to her pleadings as contained in the reclaiming print number 85 of process, as follows:
Page 250C-D third conclusion in the counterclaim: the sum of £121,759
substituted for the sum of £133,468.38.
Page 250D-E fourth conclusion in the counterclaim: the sum of £1 million
substituted for the current wording beginning with the words “the sum equal
to the amount”.
Page 274C-D plea-in-law 3 in the counterclaim: 1999 substituted for 2000 in
the phrase “Policy Renewal Notice dated 18th February 2000”.
Page 275B-C plea-in-law 5 in the counterclaim line 4: third line: “breach of
contract” inserted between the words “continued” and “calumny”.
Pages 275-279 pleas-in-law 5, 6, 7, and 8 of the counterclaim: the dates “2
October 2000 to 22 August 2012” deleted and the dates “7 September 2000 to
date” substituted.
Page 276C: 13 lines down from the top of the page, the words “up to
15 August 2012” deleted and the words “to date” substituted.
These proposed alterations (also listed in a sheet entitled “Note of amendments for the
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defender and reclaimer” tendered at the bar on 9 January 2018 and subsequently
numbered 135 of process) have not been authorised by the court.
The defender’s submissions concerning dismissal/absolvitor, expenses, and further
procedure
[10] The defender had prepared a 77-page written submission number 134 of process for
the hearing on 9 January 2018. It comprised 216 paragraphs and several annexes. This
written submission was delivered to the pursuers’ agents and senior counsel at 9.40am on
9 January 2018. The defender also made oral submissions.
Expenses
[11] The defender sought the whole expenses of the cause from 2000 to the date of the
hearing (9 January 2018), with no award of expenses to the pursuers. The defender submitted
that she was the victim of abuse. The pursuers had used fraud and deceit. They had
knowingly, maliciously, and oppressively deceived the court, in particular the Lord Ordinary
(Lord Boyd). They had known of the existence of plea-in-law 9 (referred to in Ecclesiastical
Insurance Office plc v Whitehouse-Grant-Christ 2016 SLT 990 inter alia at paragraph [41]) but had
nevertheless sought to argue that her claim had prescribed. The defender emphasised the
pursuers’ fault, breach of contract, fraud, deceit, malice, defamation of her reputation, and the
resultant personal injury which she had suffered. But for those wrongs, she would not have
suffered the protracted litigation from 2000 to date, involving as it did time, effort, resources,
and expense. The pursuers were guilty of an abuse of process (cf Willers v Joyce
[2016] UKSC 43 and other authorities relating to fraud and deceit). Payment of the whole expenses
by the pursuers should be made a condition precedent.
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Damages
[12] In her motions of 15 March 2016 and 14 September 2016 and in her written
submissions, the defender sought damages for harassment in terms of the Protection from
authorities) and on the ground of the tort of malicious prosecution and abuse of process
(Crawford Adjusters (Cayman) Ltd v Sagicor General Insurance (Cayman) Ltd [2013] UKPC 17,
particularly pages 366H to 367H; McKie v Strathclyde Joint Police Board 2004 SLT 982,
paragraph [46]). The defender claimed not only payment for indemnity but also damages for
foreseeable losses and personal injuries. References to “breach of contractual obligations”
and “breach of contract” could be found in the written submission number 134 of process (for
example, at paragraph 94, 108.2, 143, 149, 157, 161 and 175). The total claim amounted
to £5,498,729.95 (paragraph 76 of the written submission, as detailed in paragraphs 95 et seq;
111 et seq; 130 et seq; 177 et seq).
Interest
[13] The defender sought interest on any sum awarded at the rate of 8 per cent per annum.
Absolvitor
[14] In the light of the pursuers’ minute of abandonment, the defender sought absolvitor
from the conclusions of the summons in the principal action.
Set-off
[15] If any expenses were to be awarded to the pursuers, the defender requested the court
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to allow a “set-off” against the sums which were to be awarded to her, and to postpone
payment of any expenses found due to the pursuers.
Submissions for the pursuers concerning dismissal/absolvitor, expenses, and further
procedure
[16] Senior counsel for the pursuers adopted the order of proceedings outlined in the
court’s Note on the Order of Proceedings (number 127 of process).
The minutes of abandonment and partial admission of liability and their procedural
implications
[17] As abandonment was sought in terms of rule of court 29(1)(b), dismissal of the
principal action was available to the pursuers as of right upon payment of full judicial
expenses. Senior counsel explained that the reason for seeking dismissal was not to attempt
to evade the indemnity obligation (hence the clear admission in the minute of partial
admission of liability). The reason for seeking dismissal was the existence of certain passages
in answer 8 of the defences: for example page 71C-D of the reclaiming print, paragraph 8.61
(references to breach of contract, malicious abuse of process); page 157 paragraph 8.20
(indemnity), 8.21 (loss and damage as a result of breach of contract). The whole of answer 8
was incorporated in the counterclaim in various places, for example at page 252. By seeking
dismissal, senior counsel hoped to avoid any question of res judicata which might arise if
issues had been raised in the principal action in which absolvitor had been granted. The safest
way forward was dismissal of the principal action, whereupon the counterclaim could be
considered on its merits.
[18] As for further procedure, senior counsel submitted that it would be necessary to recall
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the sist of the counterclaim (the court’s interlocutor of 2 March 2016) and ultimately to remit
the counterclaim to the Outer House to proceed as accords, but, he submitted, under deletion
of any averments relating to malicious prosecution, calumny, and the like. Senior counsel
outlined the averments which he submitted should be deleted. Remaining averments might
still be the subject of challenge (for example, on relevancy), but that would be a matter for
debate in the Outer House. The pursuers were keen to have a proof about (i) the indemnity
claim and (ii) any damages for breach of contract. Remoteness of damage might be in issue.
Possible amendments sought
[19] Senior counsel opposed the defender’s proposed amendments (other than those
allowed by interlocutor of 26 September 2017) mainly on the ground that this was a matter
better dealt with in the Outer House. If a claim for damages (including solatium) was to be
based on breach of contract rather than libel and defamation, clear averments were required.
If a minute of amendment were to be allowed, the pursuers would wish to answer it.
Expenses
[20] Senior counsel invited the court to find the defender liable in the expenses of the
debate before Lord Boyd on the ground that the pursuers had been wholly successful and
expenses should follow success. The Lord Ordinary had reached a correct conclusion on the
basis of the material placed before him (as the closed record had not included the defender’s
plea-in-law 9, apparently through oversight or inadvertence on the part of those responsible
for preparing the closed record, namely the pursuers). No-one (in particular the defender)
had, during the debate, mentioned plea-in-law 9. Thus the pursuers had been wholly
successful before the Lord Ordinary, and expenses should follow success.
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[21] In relation to the Inner House hearing concerning prescription (2016 SLT 990), senior
counsel submitted that there had been divided success. The defender was successful in
relation to the question of prescription of the indemnity claim, but on the basis of a new
argument. The pursuers were successful in that the defamation claims remained time-barred.
The defender’s motion for decree de plano was also rejected. The defender’s fifth to thirty
third pleas inclusive in the principal action were repelled following the reclaiming motion.
There should be a finding of no expenses due to or by either party. Alternatively, if there
were to be an award of expenses in favour of the defender, there should be some modification
to reflect the element of success on the part of the pursuers.
[22] In relation to the Inner House hearing concerning conflict of interest (2017 SLT 697),
the defender had been unsuccessful. Again, expenses should follow success, and the
defender should be found liable in expenses.
[23] Senior counsel acknowledged that, in terms of rule of court 29, a party was entitled to
dismissal (rather than absolvitor) if that party paid “full judicial expenses”. However he
submitted that, in this particular case, it was appropriate for the court to deal with the
procedural aspects of the case in discrete parts as the prescription debates before Lord Boyd
and the Inner House (2016 SLT 990) involved the counterclaim, which complicated the issue,
as not all of the expenses of those hearings could be attributed to the principal action which
was being abandoned. In any event, senior counsel submitted, the debate on conflict of
interest (2017 SLT 697) took place after the lodging of the minute of abandonment on
28 October 2016. Senior counsel submitted that the court always had the power to modify
any award of expenses: the current wording of rule of court 42.5 permitted modification in
any circumstances. The decision in Nobel’s Explosives Company Limited v The British Dominions
General Insurance Company Limited 1919 SC 455 had been made in the context of a common
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law power, and prior to the current wording of rule of court 42.5. Nobel’s Explosives could not
therefore be regarded as determinative in the present case.
Set-off
[24] In relation to the defender’s submissions relating to set-off, senior counsel advised the
court that the pursuers would be content (if they obtained an award of expenses) that extract
should be superseded until the end of the case.
Other matters raised by the defender
[25] Turning to the defender’s assertions of harassment, malicious prosecution and
malicious abuse of process, senior counsel submitted that there were no pleadings supporting
such claims. An action might be abandoned for many reasons. The fact that an action was
abandoned did not imply that it had been improper to raise the proceedings. In the present
case, the principal action was being abandoned on legal advice, to some extent due to the
passage of time and the fact that a witness on the merits had died. Senior counsel agreed
with observations from the bench that it was arguable that judges who had participated in the
litigation criticised as “malicious” should not hear any case concerning alleged harassment,
malicious prosecution and malicious abuse of process based on that litigation: such matters
would be best dealt with by judges who had not previously been involved.
[26] Any personal injury claims made by the defender (possibly arising from any breach of
contract claim) would require to be properly focused in the pleadings. The defender
appeared to be changing her claim for damages for defamation into a claim for damages for
personal injuries arising from, for example, breach of contract. In such circumstances, the
question of time-bar might have to be considered.
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Final reply by the defender
[27] The defender submitted that she was indeed claiming damages for solatium for breach
of contract. But the claim for calumny and defamation should remain, as those matters were
related to the breach of contract. The defender opposed the removal of the passages which
the pursuers’ senior counsel had invited the court to excise. Damage had been caused while
the action was in process, long before the action would be finally determined (cf Crawford
Adjusters (Caymen) Ltd v Sagicor General Insurance (Cayman) Ltd [2013] UKPC 17 pages 366H to
367H). Now that the principal action had been abandoned, the defender was pursuing the
personal injuries claim.
Discussion
Dismissal or absolvitor in the principal action
[28] We note the terms of rule of court 29.1(1)(b) and the authorities relating to dismissal
on payment of full judicial expenses. However many of the issues in the principal action in
this case are, in our view, reflected or repeated to a substantial extent in the counterclaim.
While the principal action is to be abandoned, the counterclaim is to continue. We therefore
consider that a mechanical application of rule 29 is inappropriate in this particular case. We
propose to exercise the discretion which is always open to a court in a matter of expenses, in
the manner set out in paragraph [29] et seq below. As for the question of dismissal or
absolvitor, we are prepared to grant decree of dismissal in the light of senior counsel’s
explanation noted in paragraph [17] above.
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Expenses in the principal action
[29] An important feature of this case is that the defender’s counterclaim is to continue,
and its outcome is as yet unknown. We are satisfied that (i) the debate before Lord Boyd; (ii)
the reclaiming motion concerning prescription (2016 SLT 990); and (iii) the debate concerning
conflict of interest (2017 SLT 697) were relevant not only to the principal action, but also to the
counterclaim. We consider that we should take that special feature into account. In other
words, any award of expenses made by this court at this time should reflect the fact that
many of the issues discussed in the three hearings (i) to (iii) were relevant to both the
principal action and the counterclaim.
[30] Having carefully considered the issues discussed at these hearings and their related
outcomes, it is our opinion that an appropriate award in respect of each of the three hearings
is one of “no expenses due to or by either party”. While the defender was unsuccessful
before Lord Boyd, a significant plea-in-law had been omitted from the closed record and was
not drawn to the Lord Ordinary’s attention. When the plea-in-law was subsequently taken
into account in the reclaiming motion, the pursuer’s indemnity claim was held not to have
prescribed, although her defamation claim was held to be time-barred (Ecclesiastical Insurance
Office plc v Whitehouse-Grant-Christ 2016 SLT 990). In other words, there was divided success.
That divided success should in our view be recognised in the expenses of both prescription
hearings (ie (i) before Lord Boyd and (ii) before this bench in the Inner House). As for (iii) the
conflict of interest debate, we consider that the point raised was one which required to be
fully ventilated in open court, resulting in an authoritative ruling by the court. It is therefore
our view that the award in respect of that hearing should also be one of no expenses due to or
by either party.
[31] In relation to any other parts of the principal action for which no ruling on expenses
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has as yet been made, we award the expenses in respect of those matters in favour of the
defender.
[32] In relation to any rulings on expenses which have already been made in the principal
action:
Where expenses have been “reserved” by the court, we award those expenses
in favour of the defender.
Where expenses have been awarded against the defender, those awards
remain unaltered (subject to the supersession of extract noted in
paragraph [24] above).
Where there has been a finding of “no expenses due to or by either party”,
such a finding remains unaltered.
Where expenses have been ruled to be “expenses in the cause”, we award
those expenses in favour of the defender.
[33] The expenses reserved in the interlocutor dated 8 September 2017 (concerning the
hearing on that date resulting in the court’s refusal of the defender’s motion for Lord McGhie
to recuse himself, and the refusal of the defender’s application for permission to appeal to the
United Kingdom Supreme Court against the interlocutor of 26 May 2017) are to be “no
expenses due to or by either party”: cf paragraph [30] (iii) above.
Pleadings and further procedure in the counterclaim
[34] To assist the court in making decisions about the pleadings and further procedure in
the counterclaim, the court should be provided with a reprinted record containing only the
pleadings in the counterclaim (without the pleadings in the principal action). Only those
amendments permitted by the court’s interlocutor dated 26 September 2017 should be
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included in the print. There should also be an appendix to the reprinted record, containing
any passages originally in the principal action but adopted by the defender in the
counterclaim. Such passages should be clearly identified and printed in full in the appendix,
to enable the reader to see precisely what passages have been adopted and where they have
come from. As the pursuers have the benefit of professional services, we have decided that
the best way forward is to make the pursuers responsible at this stage for the carrying out,
and the cost, of this reprinting exercise. The question of ultimate liability for such expense is
reserved meantime. We wish again to emphasise that this is a case in which the defender
would benefit from legal representation. The court would also benefit. The complicated way
in which the defender (as a party litigant) has set out her pleadings to date may not assist her
cause. Also we have a concern that much of her material (for example, claims based on
assertions of malice and abuse of process) may be based on a misunderstanding of the
relevant law.
[35] To assist the court further, the pursuers’ agents are requested to send the draft record,
reprinted as outlined in paragraph [34] above, to the defender. The defender should intimate
to the pursuers’ agents any suggested typographical corrections (but note that new material,
intended amendments, or desired alterations to the existing text are not permitted at this
stage). If necessary, the pursuers’ agents should be prepared to discuss any aspects of detail
with the defender. Once a final copy of the reprinted record has been agreed, a copy should
be intimated and lodged in court.
Decision
[36] In the principal action, we shall issue an interlocutor dealing with dismissal and
expenses as outlined above. In the counterclaim, we shall postpone issuing an interlocutor
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concerning pleadings and further procedure until we have had sight of the record reprinted
as specified in paragraphs [34] and [35] above. We continue the following matters:
The defender’s application for permission to appeal to the United Kingdom
Supreme Court against the court’s interlocutor of 2 March 2016.
The defender’s motion enrolled on 14 September 2016 insofar as seeking
declarator and decree for damages for loss, injury and damage on the grounds
that the defender is a victim of the pursuers’ malicious prosecution, malicious
defence et separatim malicious abuse of process et separatim abuse of process et
separatim bad faith and unfair dealing.
The defender’s motion enrolled on 14 March 2017 insofar as seeking decree for
payment to the defender of the relevant claim under plea 9 of the defences in
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