Henderson (Respondent) v. 3052775 Nova Scotia Limited (Appellants) (Scotland)

Summary decree under rule 21.2 of the Rules of the Court of Session is appropriate only where the available material permits the court to conclude that the defender is bound to fail. The court may look beyond the pleadings to facts clarified by documents, articles and affidavits. It must not resolve genuine factual disputes or forecast the probable outcome of a proof.

The court must be satisfied that no issue requires resolution at proof and that, even if the defender proves the substance of the clarified defence, the defence must fail. The remedy remains discretionary and is unsuitable for prolonged examination of disputed facts or difficult questions of law.

A company in liquidation sought reduction of a disposition of a hotel and two golf courses as a gratuitous alienation under section 242 of the Insolvency Act 1986. The disposition narrated a price of £248,100. The purchaser maintained that it had also assumed £1.85 million of the company's debt as part of the consideration.

The Lord Ordinary granted summary decree of reduction. The Extra Division refused the purchaser's reclaiming motion and adhered to that decree: 2005 1 SC 325. The purchaser appealed to the House of Lords.

The central issue was whether the available pleadings and documentary material permitted the court to conclude summarily that the defence was bound to fail, or whether the alleged assumption of debt raised factual issues requiring proof.

1. Appeal allowed unanimously. The Appellate Committee—Lord Bingham of Cornhill, Lord Hoffmann, Lord Hope of Craighead, Lord Rodger of Earlsferry and Lord Mance—delivered a single opinion to which all members contributed. The Extra Division's decision could not be supported.

2. Rule 21.2 of the Rules of the Court of Session gives the court a discretionary power to grant summary decree where no defence is disclosed. Its purpose includes preventing a defender from using skeleton pleadings or a factual smokescreen to delay an action which the defender is bound to lose. The summary procedure is not suitable for a prolonged examination of fact or law, and it does not replace a procedure-roll debate on difficult legal questions.

3. A legally irrelevant defence may justify summary decree where, even if every averment is proved, the defence must fail. The test mirrors the test for the relevancy of a pursuer's averments stated in Jamieson v Jamieson. Rule 21.2 is not, however, confined to irrelevancy. The court may examine documents, articles and affidavits to clarify the substance of a defence which is legally relevant but said to be demonstrably unfounded.

4. The Committee formulated two requirements. The judge must be satisfied that no issue raised by the defender can properly be resolved only at proof. The judge must also be satisfied that, on the facts capable of clarification without resolving factual disputes, the defender has no defence. Summary decree is unavailable where the court can say only that the defence is unlikely to succeed.

5. The documents could support the purchaser's contention that it assumed £1.85 million of debt as part of the consideration. The precise language used by a person who was not a native English speaker could not properly determine that disputed issue before proof. Questions concerning the timing, legality and effect of the alleged assumption of debt also potentially required evidence or detailed legal argument.

6. The court could not conclude that the defence was bound to fail or that it was neither genuine nor authentic. The purchaser had to be allowed to lead evidence. The cause was remitted to the Inner House to proceed as accords, with costs and expenses attributable to the summary-decree motion awarded to the purchaser.

1. House of Lords: Allowed the appeal unanimously, rejected the grant of summary decree and remitted the cause to the Inner House to proceed as accords: [2006] UKHL 21.
2. Extra Division of the Inner House: Refused the reclaiming motion and adhered to the Lord Ordinary's interlocutor granting summary decree: 2005 1 SC 325.
3. Outer House: Lord Carloway granted summary decree of reduction after a further hearing on amended pleadings.
4. Inner House: At an earlier stage, recalled the first summary decree and remitted the cause to the Outer House for reconsideration in light of amended pleadings.
5. Outer House: Lord Carloway initially granted the liquidator's motion for summary decree.