Cruden unable to exercise his right of recourse against the construction manager

An Outer House judge of the Court of Session dismissed an action by the Defender in a settled action seeking a third party’s right to redress in the case following the granting of the absolution in their favor.

Cruden Buildings and Renewals Ltd had been the first defender in an action originally brought by Loretto Housing Association which was settled before proof in August 2021. Cruden argued that the case of National Coal Board v Thomson (1959), who decided with authority that there was no right of recourse at common law in this type of case, could be distinguished or else it had been badly decided.

The case was heard by Lord Braid. Howie QC represented Cruden and Manson, Counsel, for the third party, Sheila Bunton, whose relief was sought.

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The action brought by Loretto Housing Association concerned allegedly faulty construction work carried out by Cruden Buildings and the Second Defender at a development site in Glasgow. Ms Bunton was called in as a third party to the case because she, trading as John Arnott Associates, had been a work clerk on the construction contract. A full and final settlement of £ 971,250 was paid by Cruden to Loretto in the summer of 2021, after which Cruden was associated with the end of the summons.

It was established that any loss suffered by Loretto had been caused or materially contributed to Ms Bunton’s breach of her separate contract with Loretto, and therefore the Defender was entitled to a right of redress against her under Section 3. (2) of the Law Reform (Miscellaneous) Act 1940 (Scotland). In the alternative, it was asserted that Cruden had a right of recourse at common law of one-third of the amount paid.

Counsel for Ms Bunton argued that it was clear from the wording of Article 3 (2) that a person seeking a right of redress should be held liable to the injured party. Since a judgment of absolution had been pronounced against the defender, the opposite was true and no legal right of reparation could therefore be exercised.

In his own writings, the defender pleaded for the expression “considered responsible” to be interpreted as including a person in favor of whom an absolution decree had been granted following an amicable settlement. A decree which only gave effect to an agreed settlement was void of content and facade; a decree of absolution following an amicable settlement was no less so.

Alternatively, it was submitted for the defender that Thomson differed from the present case on the grounds that payment there was considered to be voluntary, made before the proceedings were initiated. In this case, payment was made under a binding settlement agreement to settle an outstanding dispute, which effectively liquidated the debt.

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In his decisionLord Braid began: “The opening words of Article 3 (2) make it clear that the party invoking this provision should have paid the sum specified in the decree – the sum ‘for which he was held responsible’. This requirement cannot be satisfied in the case of a judgment of absolution which, by definition, does not contain any reference to a sum, and even less that it condemns the defender to pay a sum.

Turning to common law case law, he observed: “In some respects the law can be considered to be in an unsatisfactory state, in that the defender who consents to a decree against him for an agreed sum will have a right of redress. ; while the one who arrives at the same settlement but pays it to the injured party before the judgment, thus obtaining a judgment of absolution, will not do so. This can be seen as having no logical basis and contrary to the principle first stated in [Stair’s Institutions]. “

However, he went on to say, “Nonetheless, it has the advantage of certainty, in that advocates know that in order to retain a right of redress, a decree must be granted; and the recovery will always be in the right amount. The position defended by the defender would also lead to an unsatisfactory state of affairs, for, if correct, the basis for redress for any common wrongdoer would vary depending on whether the decree was obtained.

Noting that the decision in Thomson had attracted some minor criticism over the years, Lord Braid added: ‘It is true that in two Inner House cases the opinion has been casually expressed that it might need to be reconsidered someday, but this hardly constitutes a sharp criticism. But whether it is an unsatisfactory decision or not, I am bound by it. It is not open to me to prefer Lord Strachan’s dissenting opinion, which is heavily based on the Defender’s lead counsel.

He concluded: “There is no valid basis for distinguishing the facts in Thomson of those in the present case, since an out-of-court settlement is just that, whether it takes place before or after the proceedings are instituted. In neither case is a payment decree passed. Indeed, as argued by counsel for the third party, from a point of view, the defender is here in a weaker position than the prosecutor in Thomson since there is a court decision to the effect that he is not responsible.

Lord Braid therefore dismissed the Defender’s action against the third party.

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