A Canadian company, 3052775 Nova Scotia Limited, which was repeatedly denied the chance to defend itself in a Scottish Court against a claim by liquidators that it had acquired the assets of Letham Grange Development Company Limited for less than their full value, has had its appeal to allow its case heard upheld by the House of Lords, the highest court in the UK.
In their judgment issued today, five Law Lords agreed that the company is entitled to defend the action raised against it by Matthew Henderson, formerly a partner in Edinburgh accountancy firm Grant Thornton.
The decision of the Scottish courts that 3052775 Nova Scotia Limited should not be allowed to prove its defence to Mr Henderson’s claim has now been overturned. In a strongly worded decision five Law Lords of the House of Lords said that the decision of the Court of Session “cannot be supported”. The House of Lords held that the summary decree procedure “must not be applied in a way that would cause injustice by denying a defender the opportunity to prove averments which could provide a defence to the whole or any part of the claim against him.”



The ruling has wider implications as for the first time it provides clear guidance on when courts should grant summary decree. At present this is granted when in the opinion of a Judge a defence to an action has been offered but is unlikely to be successful in court. But using this mechanism effectively removes the right of an individual or company to have their evidence heard in full. In their judgment, the Law Lords state the need for cases to be heard where a defence is offered and for evidence to be fully tested.



Welcoming the judgment, Dong Guang Liu, Director of 3052775 Nova Scotia Limited, whose actions had been criticised by Mr Henderson in the action, said:



“We took this case to the House of Lords on a point of principle, namely that everyone has a right to their day in court to defend themselves. The Scottish Courts would simply not allow us to do that.



“It is clear however from the House of Lords’ judgment that they do not regard the summary decree procedure as an acceptable or fair way to administer justice. I welcome the decision and clarity they have introduced around this rather dubious means of delivering judgment.”