Mackay v Dick “Prevention” Principle Confirmed as Scots Law (Despite King Crude), But Not a Shortcut to Maximum Earnout

3.1 The “prevention/purification” doctrine in Scots law

Lord Sandison undertook an unusually detailed institutional and historical survey to identify what Scots law actually contains in this area and how it should be understood after King Crude.

3.1.1 Institutional and civil-law roots

The judgment grounds the doctrine in Scots institutional writing and its civil-law sources:

• Erskine’s Institute (III, I, 6) is cited for the orthodox rule that a conditional obligation has no obligatory force until the condition is purified; but (III, iii, 85) for the exception that where non-performance is due to the opposition of the party with an interest in non-fulfilment, “the law … looks on it as purified or fulfilled.”
• Bell’s Principles (§50) states: “If the debtor, bound under a certain condition, have impeded or prevented the event, it is held as accomplished …”.
• The court traces the doctrine to Digest texts (including 50.17.161) and to the commentators, notably Pothier (Traité des obligations, part 2, chap. 3, sec. 212) and Domat, emphasising the idea that a party should not profit from unconscionable obstruction of a condition.

3.1.2 Scottish case-law development and constraints

The court then synthesises the Scots authorities, showing both recognition and careful limiting of the doctrine:

• Pirie v Pirie (1873) 11 M 941 is treated as a foundational Scottish articulation, explicitly adopting civil-law texts and the broad proposition that one cannot plead a condition which one has defeated.
• Mackay v Dick & Stevenson is analysed at both Inner House and House of Lords level. The judgment stresses a key distinction: Lord Watson’s “condition purified” reasoning differs from Lord Blackburn’s approach rooted in (i) implied co-operation and (ii) a constructional move treating the trial as (effectively) a condition subsequent. The judgment rejects the view that Lord Blackburn simply concurred with Lord Watson on the prevention doctrine.
• Paterson v McEwan's Trs (1881) 8 R 646 is used to illustrate important limitations: the doctrine does not automatically apply to “casual” conditions dependent on third parties; nor where the alleged prevention occurs through the exercise of independent rights; and courts are wary of converting “fictional purification” into outcomes that the instrument cannot properly bear.
• Kedie's Trs v Stewart & McDonald Ltd 1926 SC 1019 is used to show a fault-line between (a) treating the matter as damages for breach of an obligation to set up a structure (the fund) versus (b) treating the contingent payment as “immediately prestable” where the debtor deliberately obstructs the condition. The majority emphasised “debtor” status and directness/naturalness of the causal link; the dissent would not allow speculation on what would have happened absent the obstruction.
• More modern Outer House handling includes Credential Bath Street Ltd v Venture Investment Placement Ltd [2007] CSOH 208, SDG Tulloch Homes Ltd v European Development Company (Hotels) Ltd [2016] CSOH 36, Scottish Ministers v Scotland Gas Networks plc [2023] CSOH 77, and Beaton v Beaton [2024] CSOH 41, reflecting judicial caution about deploying the doctrine where ordinary breach and damages analysis suffices.

3.1.3 Engagement with King Crude: why Scots law does not follow the English rejection

Lord Sandison accepts that King Crude contains serious criticisms (uncertainty, “fiction”, threat to settled contract doctrine), but holds these do not dislodge Scots law’s doctrine. The key holding is categorical:

“In summary, the Mackay principle is too deeply rooted in Scots law to be capable of being blown over by a southerly side wind.” ([67])

The court’s reasoning is that (i) Scots law has institutional and civil-law foundations independent of English authority; (ii) the doctrine’s practical reach has been constrained by developed limits rather than proving systemically destabilising; (iii) the doctrine can be explained without “fiction” as an equitable constraint preventing unconscionable self-advantage; and (iv) modern construction and implied term doctrines may overlap with—but do not necessarily exhaust—the equitable function the doctrine can serve.

3.1.4 The operative “refinements” identified by the court

Importantly, Lord Sandison distils multiple refinements (at [55]) which operate as gatekeepers to the doctrine’s application. These are not merely descriptive: they frame what litigants must plead and prove:

1. Intention/directness: the preventative act should be direct and intended to prevent fulfilment (Pothier; Lord Deas in Paterson; Lord Anderson in Kedie's Trs), though “fraud” here is not necessarily narrow or purely dishonest.
2. Independent rights: prevention is not relevant where it is merely an incident of exercising an independent right (Paterson).
3. Ascertainability (seminal but not absolute): the condition must be the only barrier to enforcing an otherwise ascertainable obligation (majority in Kedie's Trs; Scottish Ministers).
4. Breach v equitable supplement: if the act is itself a breach sounding in damages, equitable “purification” may be unnecessary; but there may be rare cases where equity supports implement rather than damages.
5. Construction first: the doctrine cannot override the proper construction of the instrument.

3.2 Why the Sellers could not obtain “maximum earnout” decree at debate

Having confirmed the doctrine’s existence, the court explains why it does not yield the Sellers’ desired result on the pleadings in this earnout dispute.

3.2.1 No clear basis for “intentional prevention”

The Buyer’s failure to supply the Schedule 3 format accounts might stem from post-acquisition integration rather than a direct intention to prevent the contractual conditions from being met ([68]). That matters because the doctrine (as understood in the authorities) is aimed at conduct akin to a “fraud on the contract” in the broad sense of unconscionable obstruction.

3.2.2 Where breach and damages analysis suffices, equitable “purification” is unnecessary

On the Sellers’ own case, non-supply of management accounts is itself a breach sounding in damages; and they did not contend that damages would be inadequate ([69]). This continues a theme from Scottish Ministers v Scotland Gas Networks plc [2023] CSOH 77 and Beaton v Beaton [2024] CSOH 41: if ordinary contractual remedies can address the wrong, courts may not need an equitable shortcut.

3.2.3 Even if conditionality “flies off”, what sum is payable remains fact-dependent

The decisive practical problem is quantification ([70]–[71]). The SPA’s deferred/earnout sums are not a single fixed debt that becomes payable merely because accounts were not delivered; they depend on underlying performance metrics (turnover, gross profit, gross profit percentage). Treating “accounts provision” as satisfied does not itself establish whether the metrics trigger payment, nor in what amount.

The court notes (without endorsing) that an alternative “Blackburn line” argument might have been that the Sellers were entitled to the clause 3.1 maxima unless accounts were produced showing otherwise ([70]); but the Sellers pleaded the opposite: that accounts were a condition precedent to liability. On that framing, purification does not itself answer “liable to pay what?”.

3.3 Construction issues specific to earnout SPAs: “Post-Completion Reorganisation” and curability

The court flags interpretive issues that make proof appropriate:

• Material breach / purposive compliance: if the Buyer provided alternative financial information sufficient to perform the Schedule 4 exercise, it might be arguable there was no breach, or no material breach, depending on what the SPA is construed to have required in context ([72]).
• Post-Completion Reorganisation clause (Schedule 4, para 1.2): if there was a qualifying transfer of the business/assets to a Buyer Group entity before 31 January 2026, references to “the Company” in Schedule 4 are deemed to include the transferee. That may alter what “management accounts” were required and whether any breach is curable ([73]).
• Interaction with Schedule 5 protections: the reorganisation’s permissibility may depend on whether it was “agreed between the parties” (e.g., Schedule 5, para 1.3), which again points towards evidence.

3.4 Personal bar, waiver, mora/taciturnity/acquiescence, and “no waiver/no oral variation” clauses

3.4.1 The fact-sensitive turn: Sarwar

Lord Sandison relies heavily on the Inner House in Sarwar v Phlo Technologies Ltd [2026] CSIH 20, 2026 SLT 384 to refuse to strike out the Buyer’s personal bar-type averments. The key propositions adopted are:

• implied waiver/personal bar are fact-sensitive and normally require evidence;
• “fairness” is the touchstone; reliance often matters but is not invariably essential, depending on context;
• categorisation (waiver vs personal bar vs acquiescence etc) is itself context-dependent and may be resolved only after the facts are found.

This directly answers the Sellers’ pleading attack that the Buyer had not averred reliance ([76]).

3.4.2 Clause 11 (writing requirements) does not end the inquiry at debate

Clause 11 required variations and waivers to be in writing and stated delay/failure to exercise rights was not waiver. The Sellers argued that this defeated any suggestion that informal acceptance of alternative reporting could bar them.

The court’s approach is two-stage:

1. Scope: Clause 11, on its face, addresses “variation” and “waiver”, not necessarily personal bar per se or acquiescence; and the same factual matrix may later be characterised in different doctrinal terms ([77]).
2. Overcoming formality clauses: drawing on MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2018] UKSC 24, CGI IT UK Ltd v Agilisys Ltd [2018] CSOH 112, GPP Big Field LLP v Solar EPC Solutions SL [2018] EWHC 2866 (Comm), Sumitomo Mitsui Banking Corp Europe Ltd v Euler Hermes Europe SA (NV) [2019] EWHC 2250 (Comm), and Barclays Bank Plc v VEB.RF [2024] EWHC 3088 (Comm), the court accepts that formality clauses are generally enforceable, but may themselves be “overwhelmed” by later conduct in limited circumstances—requiring something beyond the bare informal promise, such as unequivocal conduct indicating effectiveness notwithstanding non-compliance ([78]–[80]).

Consistently with McMullen Group Holdings Ltd v Harwood [2011] CSOH 132 and Serco Ltd v Forth Health Ltd [2020] CSOH 48, the court holds the Clause 11 issue is better decided after proof when the full factual context is known ([80]).

3.4.3 Practical pleading consequence

The judgment reinforces that parties should expect personal bar/waiver arguments in commercial disputes to survive early dismissal if there is any plausible factual matrix, particularly where ongoing performance and alleged “acceptance” of altered processes (such as earnout reporting) are central.

3.5 Remedies and “windfalls”: the judgment’s calibrated stance

The Buyer’s submissions emphasised “windfall” and the compensatory principle. The court’s response is nuanced:

• It does not accept that Mackay is illegitimate merely because it can outperform damages in some cases; rather, the doctrine exists to prevent a party gaining from unconscionable obstruction.
• But the court is careful to confine the doctrine’s practical use, particularly where it would be invoked to leap from a procedural default (non-delivery of accounts) to the maximum contractual payment without establishing the underlying performance facts.

The result is a distinctly Scottish position post-King Crude: the doctrine survives, but its deployment is tightly controlled by intention, construction, adequacy of ordinary remedies, and (crucially here) ascertainability of the obligation said to become unconditional.

3.6 Likely impact

• Scots-law divergence affirmed: commercial litigants cannot assume that the UK Supreme Court’s narrowing of “prevention” in English law (in King Crude) will be mirrored in Scotland.
• But no “automatic maxima” in earnouts: the decision signals scepticism about using non-delivery of contractual accounts as a mechanism to secure the top-line earnout without proving performance. Even where breach is arguable, proof of the financial triggers remains central.
• Drafting and integration risk: buyers integrating acquired businesses should anticipate disputes where SPA accounting formats are no longer straightforward. This case highlights the importance of (i) reorganisation clauses like Schedule 4 para 1.2, (ii) clear definitions of required information versus format, and (iii) express cure mechanisms.
• Formality clauses are helpful but not absolute shields: Clause 11-type provisions remain powerful, but the court keeps open (fact-dependent) routes by which subsequent conduct may still found personal bar/waiver-type outcomes.
• Procedure: the judgment encourages proof before answer where disputes turn on how earnout processes operated in practice, what information was provided, and whether any “acceptance” occurred.