Summary of Opinion — Court of Session (Outer House)

Factual and Procedural Background

This action was raised by the Pursuer seeking declarator as to the legal effect of an undertaking given to the Court of Session by the Defender in petition proceedings to restore a struck-off predecessor company ("Company A") to the register. Company A traded in seafood until 31 January 2005. Company A's goodwill passed to the Pursuer. The same family have interests in Company A and the Pursuer; an individual connected to that family was a respondent in the petition. Company A was struck off on 17 August 2007. The Defender opened enquiries into Company A's tax liabilities for 2003–2005. The Defender gave an undertaking to the Court of Session on 19 May 2010 (the "undertaking") in petition proceedings which referred to "Company" (common ground: Company A). As a result of the undertaking the Court ordered restoration and Company A was restored to the register on 16 March 2011 after an unsuccessful appeal.

The text of the undertaking (as recorded in the opinion) provided that on restoration the Defender would issue closure notices and assessments as practicable, would "make not further demands", "raise no further enquiries" into the Company's trade to the date it ceased (31 January 2005), permitted appeals against closure notices, and stated the Revenue would have no power to raise assessments in relation to that trade save on discovery of fraud or negligent conduct within s.29 of the Taxes Management Act 1970.

The Pursuer contends the undertaking is a unilateral obligation on which it may rely and that it precludes the Defender making further enquiries into Company A's trading for periods prior to 31 January 2005. The Defender disputes that the Pursuer may rely on the undertaking. There are multiple related proceedings in the tax tribunals; some are sisted pending resolution of this action. The Court considered three preliminary pleas advanced by the Defender and an opposed motion for summary decree enrolled by the Pursuer.

Legal Issues Presented

1. Whether the ordinary action of declarator is an incompetent form of action and the matter should instead have been raised by petition to the supervisory jurisdiction (i.e. whether the action is barred by availability of alternative remedies).
2. Whether the plea of lis alibi pendens succeeds because substantially the same issue is pending in the tax tribunals.
3. Whether the Pursuer has title and interest to bring the action (no title and interest).

Arguments of the Parties

Pursuer's Arguments

• The ordinary action for declarator is competent and appropriate to determine whether the undertaking is a unilateral obligation and who may rely on it.
• If the action is not competent as an ordinary action, the Court should exercise its discretion to transfer it to the supervisory jurisdiction rather than dismissing it.
• The Pursuer has title and interest because the undertaking is a unilateral obligation which may affect the Pursuer's tax position; it need not have been a direct party to the petition to rely on the undertaking.
• The Pursuer relies on prior tribunal and Upper Tribunal commentary (including the decision of Lord Glennie in the Upper Tribunal) that assists the construction of the undertaking.

Defender's Arguments

• The action is incompetent as an ordinary action and should have been brought by judicial review; the existence of alternative remedies in the tax tribunals bars the claim.
• The plea of lis alibi pendens: the same question is raised in ongoing tax tribunal proceedings, so this action should be dismissed.
• The Pursuer lacks title and interest because it was not the recipient of the undertaking and was not a party to the petition proceedings in which the undertaking was given.
• The Defender also contends the undertaking may not contain sufficiently clear words to create a unilateral obligation; it wishes to put the Pursuer to proof about the circumstances in which the undertaking was given.

Table of Precedents Cited

Court's Reasoning and Analysis

The court's reasoning proceeded in discrete stages:

1. Competence of an ordinary action: The court held an ordinary action for declarator was an appropriate form because the dispute concerned whether an undertaking given to the court constituted a unilateral obligation and who may rely on it—issues akin to private law obligations rather than classic judicial review. The court relied on authorities recognising declarators may be granted in such contexts and emphasised the practical effect the declarator could have for ongoing tribunal proceedings.
2. Supervisory jurisdiction / alternative remedies: The court considered that even if the action ought to have been brought in the supervisory jurisdiction it would have transferred rather than dismissed the action (Rule 58.15). The court would not have barred the petition by alternative remedies given the exceptional features: the undertaking was given to this court, the matter concerned a private law obligation appropriate to this court, the tribunals had sisted proceedings to permit Court determination, and a prior Upper Tribunal decision had not ended the dispute.
3. Lis alibi pendens: The court analysed the elements of the plea and found they were not met because the tax tribunal proceedings concern tax assessments and amounts of revenue due, whereas the Court of Session proceedings concern the nature, extent and enforceability of the undertaking. The two proceedings do not raise precisely the same issue and allowing both to proceed was not oppressive in the circumstances.
4. Title and interest: The court rejected the Defender's contention that the Pursuer lacked title and interest. Relying on authority about unilateral promises, the court held a unilateral juristic act may be binding and enforceable by persons who were not parties to the act; a wide interpretation of "party" for title to sue supports the Pursuer's standing. The Pursuer showed an interest because the undertaking could affect what revenue is properly due from the Pursuer.
5. Relevance/specification of defences and summary decree: The court examined procedural rules (Rule 18.2 and Rule 21.2). Although the Defender's current defences were skeletal, Rule 18.2 permitted lodging jurisdictional defences first and then amending. Because the Defender had legitimate reasons for current skeletal defences (wishing to put the Pursuer to proof on the context and to argue the undertaking lacked sufficiently clear words), it was premature to sustain the Pursuer's plea about relevancy/specification or to grant summary decree. The motion for summary decree was refused in hoc statu.

Holding and Implications

Primary Holding: The court held that the ordinary action of declarator is competent and repelled the Defender's three preliminary pleas (competence/alternative remedies, lis alibi pendens, and no title and interest). The Pursuer's motion for summary decree was refused in hoc statu.

Direct consequences and procedural orders:

• The Defender is permitted to lodge any minute of amendment to its defences under Rule 18.2(2) within 14 days, with a short timetable for receipt, answers and adjustment as set out by the court.
• The court fixed a by-order hearing to determine further procedure in 10 weeks' time (subject to earlier disposition if amendment and related procedure conclude matters).

Broader implications: The decision allows the Court of Session to determine the legal nature and enforceability of an undertaking given to it where exceptional features make that appropriate; the court did not purport to determine revenue due, which remains for the tax tribunals. The opinion does not purport to establish a new general precedent beyond the application of existing authorities to these facts.

Administrative Information

Judge: Judge Poole

Pleadings and representation (anonymised): Pursuer represented by Attorney Welsh; Defender represented by Attorney Webster and Attorney Tosh.