EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
	[2013] CSIH 98
Lady Paton Lord Drummond Young Lord Marnoch	PD2948/10 OPINION OF LADY PATON in the cause GORDON DAVID BAVAIRD AND OTHERS Pursuers and Reclaimers; against (FIRST) SIR ROBERT McALPINE LIMITED; (SECOND) WATSON CONSTRUCTION LIMITED; (THIRD) JAMES LAIDLAW & SONS LIMITED; (FOURTH) SOUTH LANARKSHIRE COUNCIL Defenders (Fourth Defender and Respondent) _______________

Pursuers and Reclaimers: Marshall, Solicitor Advocate, Christine; Thompsons

(Non-participating parties: Second and Third Defenders)

Fourth Defender and Respondent: A McLean QC, Watson, Solicitor Advocate; Simpson & Marwick WS

20 November 2013

Introduction

[1] The late Mr Bavaird was a joiner. He had several employers during his working life. In this personal injuries action at the instance of his executor and relatives, seeking damages for his death due to mesothelioma, it is averred that he was employed by East Kilbride Development Corporation (EKDC) from 1971/2 until 1973/4. It is further averred that, while working for EKDC, he -

"carried out general maintenance work on local authority housing stock. In the course of this work he required to cut and fix Asbestolox tiles to repair damaged roof soffits. He did this by cutting and adapting the tiles with a hand saw. He then drilled through the tiles and fixed [them] in place with screws [Statement 4(d)]."

That work, it is averred, exposed Mr Bavaird to asbestos negligently and in breach of statutory duty.

[2] During 1992 to 1995, EKDC was wound up. In 1995 and 1996, its assets and liabilities were transferred to South Lanarkshire Council (the fourth defenders). At that time, Mr Bavaird showed no signs of illness. It is therefore accepted that the pursuer was not, at that time, in a position to raise an action of damages for negligence against any employer, even if the thought had crossed his mind.

[3] In 2007 Mr Bavaird began to suffer illness. He was diagnosed as having contracted mesothelioma as a result of exposure to asbestos. He died on 25 March 2008.

[4] Mr Bavaird's executor and family raised the current action seeking damages from Mr Bavaird's former employers, namely the defenders designed in the instance. The fourth defenders contend that, as Mr Bavaird was not suffering from any asbestos-related illness in 1995-1996, there was no concurrence of damnum and injuria, and accordingly any delictual liability on the part of EKDC did not at that stage exist. A non-existent liability could not be transferred. Thus they contend that they have no liability for Mr Bavaird's subsequent development of mesothelioma, and they should be assoilzied from the present action. They aver:

"As at that date, there was no such right or liability relative to the pursuers or to the deceased and relative to the deceased's employment with East Kilbride Development Corporation. [Answer 2 page 13C-D of the Reclaiming Print]"

That averment is referred to again in answer 6.

[5] The pursuers' averments in response are as follows:

"... The fourth defender is the statutory successor to the property, rights and liabilities of East Kilbride Development Corporation by virtue of the New Town (East Kilbride)(Transfer of Property, Rights and Liabilities Order 1996 (SI 1996/445). Those liabilities included the contingent liability to make reparation to the pursuer by virtue of the negligent exposure to asbestos of the deceased during his employment with the development corporation as described in paragraph 4(d) of the statement of claim. With reference to the fourth defender's averments in answer, admitted the property, rights and liabilities of the development corporation vested in the fourth defender on 1 April 1996 ... [Statement 2]"

Decision in the Outer House

[6] A debate on the issue took place between the pursuers and the fourth defenders before Lord Brailsford. The second and third defenders did not participate. The first defenders had been assoilzied on 6 December 2011.

[7] In his opinion dated 5 October 2012, the Lord Ordinary concluded that no liability had been transferred to the fourth defenders, for the reasons he gives. In particular he noted the requirements for the existence of a contingent obligation; the guidance given in Dunlop v McGowans 1980 SC (HL) 73 and Rothwell v Chemical & Insulating Co Ltd and another [2008] 1 AC 28; and concluded:

"[16] ... at the date of the dissolution of EKDC in 1996 there was no obligation owed by that body to the deceased. There plainly existed a risk that the deceased would develop a condition that would give rise to an actionable right but at the critical date there existed 'a mere possibility of damnum'. It follows that, in my opinion, there was in 1996 no obligation capable of being transferred from EKDC to any successor authority.

[17] I am accordingly of the view that no contingent liability existed as at 1996 which was capable of being transferred by the 1996 order. I am therefore satisfied that the argument advanced by the fourth defenders is well founded and will dismiss the action insofar as against them."

[8] By interlocutor dated 5 October 2012 the Lord Ordinary duly dismissed the action insofar as directed against the fourth defenders, and on 15 October 2012 awarded them expenses. The pursuers reclaimed.

The statutory framework

[9] The New Towns (Scotland) Act 1968 as amended by the Enterprise and New Towns (Scotland) Act 1990 provides inter alia:

"Winding up of development corporation.

36. - (1) Where the Secretary of State is satisfied that the purposes for which a development corporation were established under this Act have been substantially achieved he may by order (a 'winding up order') provide for the winding up of the corporation ...

(3) A winding up order shall name the day on which the winding up of the corporation is to commence and the day by which it is to be completed and may -

(a) stipulate a timetable for the winding up ...

(f) contain such incidental, consequential, supplementary, transitional or ancillary provisions (including provision modifying the effect of any enactment as it relates to the corporation) as the Secretary of State thinks necessary or expedient ....

36D. - (1) At any time after a winding up order has been made the Secretary of State may by order (a "transfer order"), made by statutory instrument ... provide for the transfer or any property, rights and liabilities of a development corporation to any person, including (without prejudice to this generality) ... a local authority or a statutory undertaker.

(2) A transfer order may

(a) transfer the property, rights and liabilities on such terms (which may include transfer either with or without consideration) as the Secretary of State may provide in the order ...

(c) contain any such incidental, consequential, supplementary or ancillary provisions as the Secretary of State thinks necessary or expedient for the purposes of the order.

(3) Any property, right or liability transferred to any person by a transfer order shall vest in that person on such date as may be specified in the order ..."

[10] The New Town (East Kilbride) Winding Up Order 1992 (SI 1992/355) provided:

"3. The development corporation shall be wound up and the winding up shall - (a) commence on 1^st March 1992; and (b) be completed by 31^st December 1995."

[11] The New Town (East Kilbride) (Transfer of Property, Rights and Liabilities) Order 1995 (SI 1995/3068) - "the 1995 transfer order" - came into force on 31 December 1995 and provided inter alia:

"2.- (1) Subject to the provisions of this Order -

(a) the heritable property specified in the Schedule to this Order, insofar as owned by the development corporation immediately before the day on which this Order comes into force; and

(b) the development corporation's interest immediately before the day on which this Order comes into force in the standard securities, minutes of agreement, policies of assurance and other contracts and agreements specified in the Schedule to this Order, shall, together with the development corporation's rights, liabilities and obligations pertaining thereto, transfer to and vest in the council at the beginning of the day on which this Order comes into force."

[12] The New Town (East Kilbride) (Transfer of Property, Rights and Liabilities) Order 1996 (SI 1996/465) - "the 1996 transfer order" - came into force on 1 April 1996 and provided inter alia:

"Transfer of property, rights and liabilities to the council

2. Any property, rights or liabilities of the development corporation shall transfer to and vest in the council on 1^st April 1996.

Incidental and supplementary provisions

3. Anything done before 1^st April 1996 by, or on behalf of, or in relation to, the development corporation for the purposes of or in connection with the property, rights and liabilities transferred by article 2 of this Order shall, on and after 1^st April 1996, be treated as having been done by, or on behalf of, or in relation to, the council; and, accordingly, without prejudice to that generality, on and after 1^st April 1996 -

(a) any legal proceedings by, or in relation to, the development corporation, or to which the development corporation is a party, for the purposes of, or in connection with, the said property, rights and liabilities may be continued by, or in relation to, the council; and, accordingly, references to the development corporation in any process or other document issued, prepared or employed for the purposes of any such proceedings before any court, tribunal or other body shall be taken as referring to the council;

(b) every contract or agreement, whether written or not, to which the development corporation is a party for the purposes of, or in connection with, the said property, rights and liabilities shall have effect in relation to such property, rights and liabilities as if the council was the party thereto in place of the development corporation and as if for each reference therein to the development corporation there was substituted a reference to the council;

(c) every deed, bond, instrument and other document relating to the said property, rights and liabilities shall have effect in relation to such property, rights and liabilities as if, where the development corporation is a party thereto, the council was substituted as that party and as if for each reference therein to the development corporation there was substituted a reference to the council.

4 For all purposes connected with, or arising subsequent to, the transfer to the council of the property, rights or liabilities by article 2 of this Order, the council is to be treated in respect of the property, rights and liabilities so transferred as the same person in law as the development corporation ..."

[13] By The New Town (East Kilbride) Dissolution Order 1996 (SI 1996/1066) the EKDC was dissolved as at 5 April 1996.

Submissions
Submissions for the pursuers
[14] The original version of section 36 of the 1968 Act referred to a transfer of "the undertaking", suggesting that everything was to be transferred. The amended version did not use the same language, but rather empowered the Secretary of State to select what to transfer, thus leaving the option that certain property, rights and liabilities could remain with the EKDC during the period leading up to its ultimate dissolution (1 March 1992 to 31 December 1995).

[15] Nevertheless, the essence of the 1996 transfer order was continuity and certainty for those dealing with EKDC. Land and land-related obligations had been transferred by the earlier order (the 1995 transfer order). The 1996 transfer order transferred all that remained. The order, purposively construed in its statutory context, included contingent or potential liabilities: cf Walters v Babergh District Council (1983) 82 LGR 235. Articles 3 and 4 of the order indicated that the transferee was to take the place of EKDC. EKDC, once dissolved, could not thereafter be resurrected (in contrast with a company which could be restored to the company register). That factor pointed to a transfer of everything to the fourth defenders. Reference was made to Downie v Fife Council 2001 SC 793, paragraph [11]; Walters v Babergh District Council cit sup pages 237-239, 242; Anton v South Ayrshire Council 2013 SLT 141, paragraphs [51] to [53]. The decision in R (National Grid Gas plc) v Environmental Agency [2007] 1 WLR 1780 could be distinguished, because it was only after the defenders' actings (which were legal at the time) that subsequent environmental legislation made the actings illegal. It was accepted that more specific wording was used in other legislation, such as Schedule 2 of the Water Act 1989 paragraphs 2(2)(c) and 3(c). But such wording was not necessary. The effect of the fourth defenders' argument would be to cut off the legal consequences of something which had happened in the past, and thus would be in a sense retrospective. That would be unacceptable (Wilson v First County Trust Ltd (No 2) [2004] 1 AC 816, paragraphs 18, 19, 98, and 200).

[16] In conclusion, the pursuers' primary submission was that, on a proper construction of the 1996 transfer order, the word "liabilities" in article 2 was wide enough to include "potential liabilities". The pursuers' alternative submission was that, immediately before 1996, EKDC was under a contingent liability (which the order was also wide enough to include). The concept of contingent liabilities in delict was supported by In re T & N Ltd [2006] 1 WLR 1728 paragraphs 46-48, 51, 60-61, 63, 66, 67; Rothwell v Chemical & Insulating Co Ltd [2008] 1 AC 281; Erskine's Institute (3^rd ed) III.1.6; Gloag, Contract, page 272.

[17] The interlocutors of 5 and 15 October 2012 should be recalled; the averments in answer 2 (referred to in paragraph [4] above) and the cross-reference in answer 6 should be deleted; quoad ultra a proof before answer should be allowed; and the case should be remitted to the Lord Ordinary to proceed as accords.

Submissions for the fourth defenders

[18] Senior counsel for the fourth defenders pointed out that the pursuers' argument had changed and developed since the Outer House debate. Nevertheless the pleadings remained unaltered, and were based on "contingent liability" in delict. That was the case which the Lord Ordinary had, correctly, found to be irrelevant. No delictual right, obligation, or liability came into existence until there had been a meeting of damnum and injuria: The Wagon Mound [1961] AC 388, page 425; Rothwell cit sup, paragraphs 27, 36, 47, 83, 87; Renfrew Golf Club v Ravenstone Securities Ltd 1984 SC 22. Thus the pursuers' position appeared to be that the 1996 transfer order should be construed as transferring something which did not exist at the time of transfer. But a "future liability" was not a possession (In re T & N Ltd cit sup). Also in the context of delict, the concept of a contingent liability had to be approached with care. It would be a new category. The passages in Erskine and Gloag dealt with contract, not delict: cf dicta in In re Sutherland decd [1963] AC 235, at pages 248 to 249; Liquidator of Ben Line Steamers Ltd, Noter 2011 SLT 535.

[19] Transferring something which did not exist at the time required particular wording, such as that found in the Local Government (Scotland) Act 1889, sections 15 and 105; the Insolvency Rules (SI 1986/1925) rule 13.12(2); and the Water Act 1989 schedule 2, paragraph (3)(c). There was no such wording in the 1968 Act, and nothing stating that, at the end of dissolution, "everything" had to be transferred to the fourth defenders. Section 36D of the 1968 Act contained permissive terms, flexible enough to cater for the 31/2 years during which the corporation continued to function prior to ultimate dissolution. But there was nothing in the Act stating that at the end of the dissolution procedure, "everything" was to be transferred to the fourth defenders.

[20] Downie did not deal with the pursuers' argument. Anton was distinguishable, as the present case was not a local government reorganisation, nor an attempt to evade liability: it was simply that a non-existent liability did not transmit to the local authority. The current case was wholly different from Anton in terms of policy considerations: certainty as to what was being transferred from a single-purpose development corporation was desirable, as contrasted with ongoing local government during reorganisation. Parliament intended that certain things should not last beyond the dissolution of EKDC (in particular, non-existent liabilities).

[21] Mr Bavaird had been employed by EKDC, not by the fourth defenders. If the pursuers' argument succeeded, the burden of Mr Bavaird's claim would fall upon the local authority, and there was no known insurance cover. Walters was wrongly decided and should not be followed. Woolf J had gone too far with the purposive approach, and had in effect invented the concept of "potential liability". It was possible that, in the 1996 transfer order, Parliament had simply failed to achieve what it wanted to achieve.

[22] Senior counsel concluded by submitting that the reclaiming motion should be refused.

Discussion

[23] Negligence and breach of statutory duty, said to have caused or contributed to Mr Bavaird's mesothelioma and death, are averred to have occurred when he was in the employment of EKDC during 1971 to 1974. However Mr Bavaird's symptoms did not emerge until 2007, by which time EKDC no longer existed. EKDC had been dissolved in 1996. It cannot be resurrected (in contrast with a defunct limited company). The assets and liabilities of EKDC were transferred to the fourth defenders by inter alia the 1996 transfer order. The fourth defenders contend that the liabilities so transferred did not include any delictual liability relating to Mr Bavaird's illness, as no such liability existed in 1996, there having been no concurrence of injuria and damnum (Dunlop v McGowans 1980 SC (HL) 73, Lord Keith at page 81, Rothwell v Chemical & Insulating Co Ltd [2008] 1 AC 281 paragraphs 36, 64-65, 87-91). The consequence, it is said, is that any claim in delict which could have been made against EKDC simply disappears, and cannot now be brought against the fourth defenders as EKDC's successors.

[24] In my opinion, the correctness or otherwise of the fourth defenders' contention depends upon the proper construction of the 1996 transfer order.

[25] Before examining the provisions of that order, I note that similar types of statutory order have been considered in other cases. While I accept that each statutory order must be construed on its own terms, dicta in two such cases are of particular relevance.

[26] In Walters v Babergh DC (1983) 82 LGR 235, a case concerning local government reorganisation, Woolf J observed at pages 242-243:

"The whole tenor of the order is designed to ensure that the reorganisation would not affect events which would otherwise have occurred further than is absolutely necessary because of that reorganisation. That the public should be able to look to the new authority precisely in respect of those matters which it could look to the old authority; that the public's position should be no better or no worse."

[27] In another local government reorganisation case, Anton v South Ayrshire Council 2013 SLT 141, Lady Clark commented at paragraphs [52] and [53]:

"[52] ... If one considers the purpose of this delegated legislation, it is to transfer a range of legal rights, liabilities and obligations in addition to a range of property rights which are transferred under separate provisions in the 1973 Act to the new authorities. The purpose is not to relieve the new local authorities from the effects of legal rights, liabilities and obligations which have been incurred by predecessor authorities. The reorganisation of local government was a complicated statutory exercise but it was no part of the purpose of the resultant legislation to take away remedies from individuals which they would have had but for the reorganisation. In the present case, but for the reorganisation, the pursuers would have had a remedy against Ayr County Council for the death of the deceased if that local authority had not ceased to exist as a result of the local government reorganisation.

[53] I have also considered the effect and implications of the conflicting interpretations which have been put before me by the defenders and the pursuers. The result of the defenders' interpretation is that the pursuers would have no remedy against anyone for the exposure of the deceased by Ayr County Council to asbestos over many years. I consider that outcome unacceptable. I draw some comfort from the fact that Woolf J and Lord Penrose [in Downie v Fife Council 2001 SC 793] were also very critical of such an outcome. In my opinion the wording of the delegated legislation does not lead me to any such inevitable outcome."

[28] I agree with the general principles and with the approach underlying these observations. However I now turn to examine the precise terms of the relevant statutory order in this case, namely the 1996 transfer order.

[29] Article 3 of the 1996 transfer order provides inter alia as follows:

"Incidental and supplementary provisions

3. Anything done before 1^st April 1996 by, or on behalf of, or in relation to, the development corporation for the purposes of or in connection with the property, rights and liabilities transferred by article 2 of this Order shall, on and after 1^st April 1996, be treated as having been done by, or on behalf of, or in relation to, the council; and accordingly, without prejudice to that generality [here follow certain examples of the continuity envisaged by the Order, including existing legal proceedings, contracts and agreements, deeds and bonds]."

[30] In my opinion, this particular statutory order envisages and specifically provides for circumstances such as those arising in Mr Bavaird's case. Any negligent exposure to asbestos occurring during the existence of EKDC, being something done before 1 April 1996 by, or on behalf of, or in relation to, EKDC for the purposes of its property, rights and liabilities (for example, general maintenance work on housing stock, including roof repairs) is to be treated as having been done by, or on behalf of, or in relation to, the fourth defenders. With that specific deeming provision, when the damnum occurred in 2007, the alleged injuria (which is averred to have occurred during 1971 to 1974) is that of the fourth defenders. Accordingly the statutory order expressly imposes liability in respect of that alleged injuria upon the fourth defenders: they have the responsibility for the acts done during 1971 to 1974; if the acts were negligent or in breach of statutory duty, they are liable for any loss, injury or damage arising from those acts.

[31] As for article 2 of the 1996 transfer order, the word "liabilities" is not defined, and is not used as a term of art or a technical term. I consider that the word "liabilities", properly construed, includes "potential liabilities", for the following reasons.

[32] The Oxford English Dictionary defines "liability" as "The condition of being liable or answerable by law or equity", and "liable" as inter alia "3a ... likely to suffer from (something prejudicial)". The Chambers Dictionary defines "liability" as "the state of being liable" and "liable" as inter alia " ... exposed to a possibility or risk". In my opinion, these definitions, applied in the context of this case, mean that the "liabilities" being transferred include the possibility or risk of the transferee becoming responsible for the delayed development of industrial disease in employees who worked during an earlier period for the transferor. In other words, "liabilities" includes the possibility or risk that EKDC employees such as Mr Bavaird might, post-transfer to the fourth defenders, develop mesothelioma due to pre-transfer exposure to asbestos.

[33] Moreover, as Woolf J said in Walters v Babergh DC (1983) 82 LGR 235, at pages 242-243:

"... as long as the ordinary meaning of the word 'liabilities' in article 16(3)(a) is capable of applying to contingent or potential causes of action, it undoubtedly would accord with the intent of the draftsman of the order to give the order a meaning which would be sufficiently wide to extend to such potential liabilities.

The whole tenor of the order is designed to ensure that the reorganisation would not affect events which would otherwise have occurred further than is absolutely necessary because of that reorganisation. That the public should be able to look to the new authority precisely in respect of those matters which it could look to the old authority; that the public's position should be no better or no worse.

... I regard the word 'liabilities' as capable of having amplitude of meaning. In the context of this case I consider that it is wide enough to apply to contingent or potential liabilities ... I have no hesitation in choosing an interpretation which makes, in my view, sense of this part of the order, rather than leaving a large gap between obligations and causes of action which have accrued ...

[Counsel] drew my attention to the fact that it would have been possible for the draftsman to have made it clear that the word 'liabilities' in this context was that contended for by the plaintiff. I accept that is so. He drew my attention in particular to the fact that in earlier Local Government Acts there are to be found definition sections where that is indicated; one being the Local Government Act 1888. It is always desirable for a draftsman to take care to ensure that what he is seeking to do is achieved. Therefore, inclusive definitions are often helpful. However, the fact that there is no definition provision in this order does not prevent me from applying what I would regard as the ordinary meaning of the word 'liabilities' in the way that I have ..."

[34] I respectfully adopt Woolf J's reasoning in its entirety. The clear purpose of the 1996 transfer order was to transfer rights, liabilities and obligations of EKDC to the fourth defenders, including potential liabilities (see the terms of articles 3, 4, and 5 of the order). Construing the order as a whole, and adopting a purposive construction, it is my opinion that the word "liabilities" in the transfer order includes contingent liabilities and potential liabilities, such as liabilities which emerged after the date of transfer as a result of "[a]nything done before 1^st April 1996 by, or on behalf of, or in relation to, the development corporation for the purposes of or in connection with the property, rights and liabilities transferred by article 2" of the transfer order. Such a construction would not treat as negligent actings which were not so categorised in 1971-74 (contrast with the circumstances in R (National Grid Gas plc) v Environmental Agency [2007] 1 WLR 1780). Thus the order covers potential liabilities such as delictual liabilities emerging after 1 April 1996 (because of the later emergence of loss, injury or damage) even although attributable to actings before 1 April 1996. The circumstances of Mr Bavaird's illness and death clearly qualify in terms of the order.

[35] In the result therefore it is my opinion that, on a proper construction of the 1996 transfer order, any liability arising from negligent exposure of the late Mr Bavaird to asbestos which might have been attributed to EKDC is now the liability of the fourth defenders.

[36] This reasoning and conclusion is obviously different from the Lord Ordinary's. In that context, the following comments should be noted.

(i) The pursuers' argument had changed and developed since the debate in the Outer House. In the Outer House, the pursuers periled their case on contingent liability, whereas in the Inner House they relied primarily upon the concept of potential liability, failing which contingent liability.

(ii) Nevertheless I do not agree with the Lord Ordinary's view, contained in paragraph [13] of his opinion, that:

"... in the end of the day the only regulation of direct applicability was ... regulation 2 of the 1996 order ..."

On the contrary, I consider that the order must be read as a whole, including articles 3 and 4. Article 3 in particular assists in the ascertainment of the intention of Parliament and the proper construction of the order. Thus to the extent that the Lord Ordinary suggests that the sole focus for the proper construction of the order is the word "liabilities" in article 2, I disagree.

(iii) On the view which I have reached, I have not found it necessary to analyse authorities such as Liquidator of Ben Line Steamers, Noter 2011 SLT 535, In re T & N Ltd [2006] 1 WLR 1728, Erskine III.1.6, or Gloag, Contract page 272, or the question whether contingent liabilities may arise ex delicto.

Decision

[37] For the reasons given above, I propose that this court should refuse to delete the averments in answers 2 and 6. Quoad ultra I propose that we allow the reclaiming motion, recall the interlocutors of the Lord Ordinary dated 5 and 15 October 2012, allow parties a proof before answer, and remit to the Lord Ordinary to proceed as accords. However I note that the pursuers' pleadings continue to refer to a "contingent liability" (Statement 2 at page 12B-C). Thus before the necessary interlocutor is pronounced, the case will be put out by order to ascertain whether any amendment is desired. Meantime any question of expenses should be reserved to enable parties to address us on that matter.

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
	[2013] CSIH 98
Lady Paton Lord Drummond Young Lord Marnoch	PD2948/10 OPINION OF LORD DRUMMOND YOUNG in the cause by GORDON DAVID BAVAIRD AND OTHERS Pursuers and Reclaimers; against (FIRST) SIR ROBERT McALPINE LIMITED; (SECOND) WATSON CONSTRUCTION LIMITED; (THIRD) JAMES LAIDLAW & SONS LIMITED; (FOURTH) SOUTH LANARKSHIRE COUNCIL Defenders (Fourth Defender and Respondent) _______________

Pursuers and Reclaimers: Marshall, Solicitor Advocate, Christine; Thompsons

(Non-participating parties: Second and Third Defenders)

Fourth Defender and Respondent: A McLean QC, Watson, Solicitor Advocate; Simpson & Marwick WS

20 November 2013

[38] I am in entire agreement with the opinion of your Ladyship in the chair. I add some comments of my own in view of the fundamental importance of the primary issue that arises in this case. That issue is the construction of statutory provisions such as article 2 of the New Town (East Kilbride) (Transfer of Property, Rights and Liabilities) Order 1996, which transfer the "undertaking", to use a neutral word, of one statutory body to another. That raises another, even more general matter: the approach that courts should follow to questions of statutory construction.

[39] In my opinion statutory construction should always be approached in a manner that is both contextual and purposive. The statute must be construed in the legal and factual context in which it is designed to operate, and regard must be had to the general purposes that the legislation is designed to achieve; those will themselves frequently be apparent from the context in which the legislation operates. Historically, courts have often adopted a literal approach to the construction of statutes. This involves paying close attention to the text: to niceties of wording and language, and to the grammatical and linguistic structures that are used. Lawyers typically spend a great deal of time considering documents, and it is easy to succumb to the temptation to adopt a crudely literal approach to the construction of documents of every sort. Such an approach has an apparent advantage: discussion can be confined to a particular text, in fairly short compass, with no need to look at wider issues of commercial or administrative or practical context. That appears to focus the problem, to shorten the discussion, and possibly to simplify the reasoning that is required. Those advantages seem particularly strong when it is a statute that is being construed. Nevertheless, such an approach is in my opinion fundamentally wrong. All legal texts, including statutes and statutory instruments, are written in a particular factual and legal context. If the text is to be properly understood, it is essential to have regard to that context. Similarly, all legal texts are intended to achieve specific purposes. If an attempt is made to construe the text without having regard to its purpose, discussion of its meaning can degenerate into a morass of largely irrelevant detail, losing sight of the main issues that the text is meant to determine.

[40] Such an approach is in my opinion of universal application. It was long thought that tax statutes were an exception, and must be construed in a literal manner, without regard to context or purpose. That is no longer the law: see Barclays Mercantile Business Finance Ltd v Mawson, [2004] UKHL 51; [2005] STC 1, per Lord Nicholls of Birkenhead at paragraphs [32]-[36]. The result is that the provisions of tax statutes are given

"a purposive construction in order to determine the nature of the transaction to which [the relevant provision] was intended to apply and then to decide whether the actual transaction (which might involve considering the overall effect of a number of transactions intended to operate together) answered the statutory description": ibid, at paragraph [32].

Contracts raise analogous issues, and in construing them a contextual and purposive approach has been standard since at least the decisions in Prenn v Simmonds, [1971] 1 WLR 1381, and Reardon Smith Line Ltd v Hansen-Tangen, [1976] 1 WLR 989: see Investors Compensation Scheme Ltd v West Bromwich Building Society, [1998] 1 WLR 896, at 912‑913 per Lord Hoffmann. In Scotland a similar approach was adopted many years before that: see authorities cited in Gloag, Contract, 2^nd ed, 373-375, and notably Houldsworth v Gordon Cumming, 1910 SC (HL) 49, at 55 per Lord Kinnear.

[41] The present case is an excellent example of why a contextual and purposive approach to construction should be employed. Paragraph 2 of the 1996 transfer order provides, starkly, that "Any property, rights or liabilities of the development corporation shall transfer to and vest in the council on 1 April 1996". The issue that arises in the present case is the meaning of the word "liabilities" in this provision. That word can have a range of meanings, as the dictionary definitions cited by your Ladyship illustrate. According to context, it might refer merely to obligations that exist at present, or it might refer to obligations, as yet non-existent, that might come into being in the future. When the context of the 1996 transfer order is considered, however, the correct meaning becomes very clear. The context is that the East Kilbride Development Corporation was being wound up in accordance with the 1992 winding up order. It was contemplated that in due course the Development Corporation would be dissolved, as was effected by the 1996 dissolution order. The result of dissolution was that the Development Corporation ceased to exist for all purposes. This was not a case where, as with a limited company that has been dissolved, the legal person could be resurrected by restoration to the register. Nor was it an entity analogous to a dissolved partnership, where a form of shadowy afterlife exists through the persons of the former partners or their estates. Here the legal person disappeared completely, and all of its rights and obligations, existing or potential, would necessarily disappear with it unless they were transferred to the successor authority, the fourth defenders. Any claim against the Development Corporation that was not so transferred would disappear into a legal black hole. That is plainly undesirable.

[42] It is against that context that the 1996 transfer order must be construed. On that basis, I am of opinion that the very clear purpose of the latter order was to ensure that all possible rights and obligations of the Development Corporation were transferred to the fourth defenders. That includes obligations that were in existence at the date of the transfer order or the dissolution of the Development Corporation, which occurred five days later. It equally includes any obligations that might have been incumbent on the Development Corporation thereafter, had it not been dissolved. Otherwise the legislation would have resulted in the destruction of claims such as Mr Bavaird's. That plainly cannot have been intended in an order that was designed to ensure continuity of rights and obligations between the Development Corporation and the successors, the fourth defenders. That conclusion is made even clearer by paragraph 3 of the 1996 transfer order, which is intended to effect a total transfer of all legal acts and documents relating to the property, rights and liabilities that are transferred by paragraph 2. Yet further support is found in paragraph 4 of the order, which provides for a deemed continuity of personality between the Development Corporation and the fourth defenders. These two provisions strongly indicate that the transfer in paragraph 2 is intended to be total and comprehensive, comprising rights and obligations of every sort even if they do not come into existence until after the date of the Development Corporation's dissolution. Thus a contextual and purposive approach to the construction of paragraph 2 makes its scope and ambit very clear. That in my opinion is sufficient to allow the reclaiming motion and to permit a proof before answer against the fourth, as well as the second and third defenders.

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
	[2013] CSIH 98
Lady Paton Lord Drummond Young Lord Marnoch	PD2948/10 OPINION OF LORD MARNOCH in the cause GORDON DAVID BAVAIRD and OTHERS Pursuers and reclaimers; against (FIRST) SIR ROBERT McALPINE LIMITED; (SECOND) WATSON CONSTRUCTION LIMITED; (THIRD) JAMES LAIDLAW & SONS LIMITED; (FOURTH) SOUTH LANARKSHIRE COUNCIL Defenders (Fourth Defender and respondent) _______________

Pursuers and Reclaimers: Marshall, Solicitor Advocate, Christine; Thompsons

(Non-participating parties: Second and Third Defenders)

Fourth Defender and Respondent: A McLean QC, Watson, Solicitor Advocate; Simpson & Marwick WS

20 November 2013

[43] For the same reasons as those summarised by Woolf J at pps 242-243 of his judgment in Walters v Babergh DC (1983) 82 LGR 235 and in agreement with the Opinions delivered by your Ladyship and your Lordship insofar as they elaborate on that reasoning I consider that the meaning of the word "liabilities", where it appears in article 2 of the New Town (East Kilbride)(Transfer of Property, Rights and Liabilities) Order 1996 (SI 1996/465), is broad enough to encompass potential liabilities and that, subject to a possible need for amendment, this reclaiming motion should accordingly be allowed.