Factual and Procedural Background
The Petitioner invoked the Court of Session's power to grant a warrant for diligence in dependence of proceedings raised in England, pursuant to section 27 of the Civil Jurisdiction and Judgements Act 1982. On 19 June 2025, an ex parte motion resulted in the Lord Ordinary granting a warrant to do diligence on the dependence, which was then effected. The Petitioner is part of a corporate group, with the parent company being a separate entity within the group.
On 10 July 2025, the Respondent moved to recall the warrant for diligence, any arrestment or inhibition executed pursuant to it, and sought expenses for the petition process. The test for recall was identified as whether there remains a prima facie case, a real and substantial risk that enforcement would be defeated or prejudiced, and whether it is reasonable to grant the warrant. Both parties agreed this test applied despite the petition proceeding under section 27 of the 1982 Act.
Legal Issues Presented
- Whether the warrant for diligence granted on 19 June 2025 should be recalled.
- Whether there remains a real and substantial risk that enforcement of any decree obtained in the English proceedings would be defeated or prejudiced.
- Whether it is reasonable in all circumstances for the warrant for diligence to remain in place.
- Whether the Petitioner should be liable for the Respondent’s expenses of the petition procedure.
Arguments of the Parties
Petitioner's Arguments
- The warrant should remain in place except for the removal of a purported warrant against moveable items which was granted per incuriam.
- Despite some improvement, there remains a real and substantial risk of insolvency defeating the Petitioner's claim in the English proceedings.
- The financial position of the Respondent company itself, rather than the parent company, is central; enforcement would be against the Respondent.
- The 2024 accounts show some improvement but still reveal a substantial deficit and significant debtors, with continued reliance on the parent company’s support.
- The parent company has not provided a formal guarantee, which the Petitioner sought, thus failing to remove the risk.
- The corporate structure allows the parent company to cut off support to the Respondent, which is a real risk given the limited liability framework.
- Reference was made to relevant case law indicating that courts should be cautious when dealing with limited companies that appear vulnerable or insolvent, especially where no security or guarantee is provided.
- The absence of a parent company guarantee is significant given the modest sum sought relative to the parent company’s assets.
- It is legitimate to consider the wider financial interests behind the Respondent, including directors and backers, in assessing risk.
Respondent's Arguments
- The petition and warrant were unreasonable and unwarranted; the Petitioner failed to demonstrate the preconditions for the warrant were met as of June 2025.
- Although the 2023 accounts showed a deficit, the group’s financing uncertainties had been addressed and replaced with more stable arrangements.
- The Respondent is solvent when considering the support provided by the parent company, which has restructured debts and reduced costs.
- The parent company’s support predates the proceedings and is substantial; the financial exposure in dispute is minor relative to the parent company’s overall value.
- It is wholly unreasonable to speculate that the publicly listed parent company would renege on its commitment due to the reputational damage that would ensue.
- The risk that the parent company would withdraw support is hypothetical and insufficient to constitute a real and substantial risk.
- The authorities cited by the Petitioner concerning caution or security for costs were distinguished as not directly applicable to the current circumstances.
- The warrant should be recalled or, at minimum, restricted.
Petitioner's Response
- The Petitioner accepted that the arrestment should be restricted as to moveable items.
- Despite changes in the financial landscape, the real and substantial risk remains given ongoing financial pressure on the Respondent.
- The absence of a formal parent company guarantee leaves the risk unmitigated.
- Subsidiaries can and do fail due to limited liability; the parent company’s informal support is insufficient assurance.
- The directors of a public limited company owe duties that may not necessarily prevent withdrawal of support despite reputational concerns.
- The parent company failed to provide any justification for not granting a formal guarantee.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Mex Group Worldwide Ltd v Ford (No 2) [2024] CSOH 52 |
Test for recall of warrant for diligence: existence of prima facie case, real and substantial risk of prejudice, and reasonableness of warrant. |
The court applied this test as the standard for deciding whether to recall the warrant granted on 19 June 2025. |
| Glasgow City Council v The Board of Managers of Springboig St John's School [2014] CSOH 76 |
Support for the recall test regarding warrant for diligence. |
Referenced in establishing the burden of proof and criteria for recall. |
| Gillespie v Toondale [2005] CSIH 92, 2006 SC 304 |
Consideration of defences and submissions by defenders in recall motions. |
Used to underline the court’s approach to considering submissions in recall proceedings. |
| Gaelic Seafoods (Ireland) Ltd v Ewos Ltd 2009 SCLR 417 |
Consideration of insolvency and security for expenses in limited companies. |
Used to illustrate judicial caution in dealing with limited companies that might be insolvent or vulnerable. |
| Fallimento La Pantofola D'Oro SpA v Blane Leisure Ltd (No 2) 2000 SLT 1264 |
Principles regarding security for expenses and limited company liabilities. |
Discussed in conjunction with Gaelic Seafoods to explain the court’s approach to limited companies. |
| DSQ Property Co Ltd v Lotus Cars Ltd [1987] BCLC 60 |
Recognition that limited companies may need to provide security for costs due to their commercial nature and asset management. |
Quotations used to support the argument that limited companies can manage assets to the detriment of creditors. |
| Caterpillar (NI) Ltd v John Holt & Company (Liverpool) Ltd [2013] EWCA Civ 779 |
Legitimacy of considering the financial interests behind a company when assessing security for costs. |
Applied to support the proposition that the wider financial backing behind a company is relevant in assessing risk. |
| McCormack v Hamilton Academical Football Club Ltd [2009] CSIH 16 |
Reference to financial support and solvency issues distinct from conventional creditors. |
Referenced to distinguish the nature of financial support in the present case. |
| Beaghmor Property Ltd v Station Properties Ltd [2009] CSOH 133 |
Consideration of solvency and reliance on prospective asset sales. |
Used to contrast the Respondent’s reliance on parent company support rather than asset sales or creditor support. |
Court's Reasoning and Analysis
The court acknowledged the existence of a prima facie case due to the ongoing English proceedings and accepted that the test for recall requires demonstration of a real and substantial risk that enforcement would be defeated or prejudiced, and that it is reasonable to grant the warrant.
The court considered updated financial information, notably the 2024 accounts, which showed an improved financial position for the Respondent and the group compared to the 2023 accounts. The refinancing of the group’s credit facilities and the reduction in losses supported a more stable outlook.
The court noted that the Respondent’s continuing viability relied on financial support from the parent company, which had publicly committed to maintaining liquidity and providing necessary funds. The parent company’s net assets had increased, and it maintained earmarked reserves to support subsidiaries.
Despite the Petitioner’s concerns about the absence of a formal parent company guarantee, the court found the risk of the parent company withdrawing support to be hypothetical rather than real and substantial, especially given the reputational risks the parent company would face. The court also recognized that the sum at issue was relatively modest compared to the parent company’s overall financial position.
Drawing on relevant case law, the court considered that the financial improvements and assurances from the parent company distinguished this case from others where security or caution was required due to insolvency or lack of support.
Accordingly, the court concluded that the Petitioner had not demonstrated the real and substantial risk necessary to justify maintaining the warrant for diligence.
Holding and Implications
The court GRANTED the Respondent's motion to recall the warrant for diligence and any related arrestment or inhibition orders made on 19 June 2025.
The court further held the Petitioner liable for the Respondent’s expenses of the petition procedure, noting that the 2024 accounts were available prior to the initial hearing and would have informed the earlier decision.
The direct effect of this decision is that the interim diligence measures against the Respondent are lifted, reflecting the court’s assessment that there is no longer a real and substantial risk to enforcement of any decree. No new legal precedent was established; the ruling applies the established legal test to the facts as updated by the latest financial information.