Parent-Company Support as a Defence to Diligence on the Dependence

In-Depth Commentary on Mermaid Subsea Services (UK) Ltd v James Fisher Offshore Ltd
[2025] CSOH 68, Court of Session (Outer House)

1. Introduction

The decision of Lord Cubie in Mermaid Subsea Services (UK) Ltd v James Fisher Offshore Ltd concerns a petition for provisional protective measures in Scotland—“diligence on the dependence”—designed to support substantive proceedings pending before the courts of England. The petitioner (Mermaid) secured, ex parte, a warrant of arrestment and inhibition over the respondent’s (JFO’s) Scottish assets under section 27 of the Civil Jurisdiction and Judgments Act 1982 (“the 1982 Act”). JFO subsequently moved to recall that warrant on the basis that the statutory pre-conditions—principally the existence of a “real and substantial risk” that enforcement of any eventual English judgment would be defeated—were not in fact satisfied.

The core factual dispute centred on solvency. Mermaid alleged that JFO’s 2023 accounts revealed a £21 million deficit and that the parent company’s financial position was uncertain; hence the risk of non-payment. JFO countered with fresh 2024 accounts and evidence of group refinancing, arguing that any perceived risk was removed by continuous, public and financially robust support from its FTSE-listed parent, James Fisher & Sons plc. Mermaid sought a formal parent-company guarantee; JFO said none was necessary.

Lord Cubie granted JFO’s motion, recalled the diligence and awarded expenses against Mermaid. The judgment therefore establishes guidance on how Scottish courts will assess (and re-assess) “real and substantial risk” where a defendant subsidiary relies on open-ended parental support rather than a formal guarantee.

2. Summary of the Judgment

• The Court accepted that Mermaid had a prima facie cause of action, satisfied by the existence of the ongoing English litigation.
• However, upon the recall hearing—armed with up-to-date financial information—the Court was not satisfied that enforcement faced a “real and substantial risk”.
• Key considerations included:
  • Improved 2024 financial statements for both JFO and its parent group (higher turnover, reduced losses, refinancing of debt).
  • The parent’s public commitment, stated in audited accounts, to provide liquidity to subsidiaries (ring-fenced internal liquidity of £25 million).
  • The relatively modest exposure in the Scottish diligence (compared with the parent’s £190 million net asset base).
  • Reputational and regulatory constraints on a stock-exchange-listed parent reneging on published commitments.
• Consequently, the warrant for arrestment and inhibition was recalled in its entirety (save for an agreed technical restriction on movables).
• Mermaid was found liable in expenses because the decisive 2024 accounts had been available before the ex parte motion was made.

3. Analysis

3.1 Precedents Cited and Their Influence

1. Mex Group Worldwide Ltd v Ford (No 2) [2024] CSOH 52
   Provided the tripartite statutory test for both initial diligence and recall: (i) prima facie case; (ii) real and substantial risk to enforcement; (iii) overall reasonableness. Lord Cubie adopted that test wholesale.
2. Gaelic Seafoods (Ireland) Ltd v Ewos Ltd 2009 SCLR 417 & Fallimento La Pantofola d’Oro SpA v Blane Leisure Ltd (No 2) 2000 SLT 1264
   Though concerning caution for expenses, these cases stress the court’s vigilance where a limited company may shield investors from liability. Mermaid relied on them to argue that a vulnerable subsidiary deserved no indulgence. Lord Cubie distinguished them: there, the claimant companies were insolvent and unsupported, whereas JFO enjoyed ongoing parental backing.
3. Caterpillar (NI) Ltd v John Holt & Co (Liverpool) Ltd [2013] EWCA Civ 779
   Cited to show that courts may “look behind” a company to directors or backers. Again, Lord Cubie found the factual matrix different; in Caterpillar the directors refused support, whereas here the parent gave overt support.
4. Additional comparative references (McCormack v Hamilton Academical FC, Beaghmor Property Ltd v Station Properties Ltd) were used illustratively by the Court to highlight scenarios where reliance on uncertain third-party support has triggered protective measures. None matched JFO’s factual comfort blanket.

3.2 Legal Reasoning

Lord Cubie’s reasoning turned on a dynamic, evidence-sensitive application of the statutory test:

1. The Court’s satisfaction as to risk is assessed at the time of hearing, not when ex parte diligence was granted (para 26). Updated evidence may completely alter the equation.
2. “Real and substantial risk” is qualitative, not merely arithmetic. Despite JFO’s balance-sheet deficit, qualitative factors—group refinancing, liquidity reserves, reputational constraints—negated the risk.
3. Group support need not take the form of a formal guarantee. Where support is: (a) long-standing, (b) publicly declared in audited accounts, and (c) commercially rational for the parent, it can suffice.
4. Reputational incentives for a listed parent are a legitimate, cognisable factor (para 38).
5. The petitioner bears the onus at the recall stage just as at the ex parte stage (Mex Group principle). Mermaid failed to discharge that onus once the new evidence emerged.

3.3 Impact on Future Litigation

• Protective Measures in Cross-Border Litigation: The decision clarifies Scottish practice under s.27 of the 1982 Act, signalling that Scottish courts will scrutinise updated financial data and will not maintain diligence merely because a subsidiary lacks a formal guarantee.
• Corporate Group Dynamics: A subsidiary’s plea that the parent will stand behind it is now a potent defence, provided the support is credible, documented, and commercially rational. Conversely, petitioners seeking arrestment will need concrete evidence questioning that support (e.g. covenant breaches, parent distress, market disclosures).
• Cost Consequences: Parties seeking ex parte diligence must place the most recent financial information before the court. Failure may lead to expenses awards against them if diligence is later recalled.
• Influence Beyond Scotland: English and Irish courts dealing with analogous “freezing” or “security for costs” applications may find persuasive the weighting given here to audited parental assurances and reputational factors.

4. Complex Concepts Simplified

Diligence on the Dependence

A uniquely Scottish suite of interim attachment remedies (arrestment, inhibition, etc.) granted in dependence of ongoing proceedings, effectively “freezing” a defender’s assets until judgment.

Arrestment

Attachment of moveable property or debts owed to the defender (e.g. money in a bank account) to prevent dissipation.

Inhibition

A prohibition recorded against the defender’s heritable property (land/buildings), blocking sales or new securities.

Real and Substantial Risk

The statutory threshold requiring the applicant to show that, without protective measures, an eventual decree might be unenforceable—risk must be genuine and non-trivial.

Parent-Company Guarantee

A contractual promise by a parent company to fulfil the obligations (including judgments) of its subsidiary. Although desirable for certainty, Mermaid shows it is not legally indispensable if other credible assurances exist.

5. Conclusion

Mermaid Subsea Services v James Fisher Offshore serves as a leading Scottish authority on the interplay between subsidiary solvency concerns and parent-company support in applications for diligence on the dependence. The Court of Session has confirmed that:

• Assessment of “real and substantial risk” is fluid and evidence-driven; applicants must keep the court fully informed of the most current financial picture.
• Parental support, even absent a formal guarantee, can neutralise perceived enforcement risks when that support is demonstrably credible and commercially sensible.
• The reputational calculus of listed parents is a legitimate factor negating risk.
• Petitioners who over-state risk or fail to present full information may face adverse costs orders.

Going forward, practitioners seeking protective diligence must marshal hard evidence that parental assurances are unreliable or illusory, while defenders can rely on well-documented group support as a shield. The judgment thus recalibrates the balance between necessary creditor protection and undue interference with solvent corporate groups operating across borders.