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Scottish Appeal Court confirms local authorities' liability for exposure by predecessors in mesothelioma case

Decision

The Scottish appeal court’s decision in this case confirms that Scottish local authorities are liable for claims for wrongs done during periods of employment with the authorities’ statutory predecessors, even where the resulting injury manifests itself after the date on which the statutory predecessors ceased to exist following local government reorganisation.

Background

Following local government reorganisation, arguments have been made on behalf of Scottish local authorities that the relevant legislative provisions transferring liability from their statutory predecessors should be interpreted in such a way as to exclude liability for a breach of obligation committed by those predecessors.  That argument was unsuccessfully advanced in 2001 in the case of Downie v Fife Council when Mr Downie was allowed to proceed with a claim for compensation following exposure to asbestos while employed by Fife Council’s statutory predecessor. The Court interpreted the relevant legislation as effectively transferring liability from the statutory predecessor to Fife Council.

The argument was renewed and refined in two cases in 2012 – Anton v South Lanarkshire Council and Bavaird v South Lanarkshire Council - and two conflicting decisions were issued.

Both cases involved mesothelioma claims.  In both cases the individuals had been exposed while employed by South Lanarkshire Council’s statutory predecessors, but the mesothelioma symptoms only manifested years after the local government reorganisation.

The Council argued that liability under Scots law could only arise when there was both (a) a wrong done – in this case, exposure to asbestos; and (b) a resulting loss - the development of mesothelioma.  As only the first of these elements existed at the time of the local government reorganisation, there was nothing which could be transferred as a “liability” from the previous body to the local authority in terms of the relevant legislation governing the reorganisation. Consequently, as nothing had been transferred under the relevant legislation, the Council could not be liable when the loss later arose.

In both cases, the judges who heard the cases initially had to interpret the legislation which transferred the rights and liabilities from the various statutory predecessors to the current local authorities and in particular, they had to consider the meaning of the word “liabilities” as used in that legislation.

In Anton, Lady Clark decided that the exposure to asbestos created a potential liability and held that the legislation (and the word “liabilities”) was to be interpreted so as to cover potential liability which would be validly transferred to the Council.  She thought that policy considerations dictated that this was the correct decision, as a claimant should not be deprived of an otherwise valid claim, simply because of local government reorganisation.  She allowed the compensation claim to proceed.

In Bavaird, Lord Brailsford arrived at the opposite view, effectively upholding the local authority’s argument and deciding that an actual liability involving both elements – that is, a harm being done and a loss being incurred - had to exist at the date of transfer if a liability was to be transferred to the local authority under the legislation.  On that basis, he did not allow the compensation claim to proceed.  

The claimants in Bavaird appealed that decision.

Appeal Court Decision

The Scottish appeal court has overturned Lord Brailsford’s decision.  It has held that local authorities are liable for claims for wrongs done during periods of employment with the authorities’ statutory predecessors and “liabilities” in the relevant legislation should be interpreted as covering potential (or contingent) liabilities.  Where an employee has been exposed to asbestos while employed by the Council’s statutory predecessor, this is a potential liability which existed at the time of the reorganisation. On that basis, liability was transferred to the Council at the time of reorganisation in terms of the legislation.

Comment

The appeal court’s decision clarifies the position following the conflicting decisions in Anton and Bavaird.

It will be interesting to see if the Council appeals to the Supreme Court.  If no appeal is taken, or an appeal is unsuccessful, the liability of Scottish local authorities for relevant types of claim is now clear.

The decision most obviously applies to asbestos claims given the latency periods.  It has a bearing in both divisible and indivisible asbestos claims. Although clarification of the position may result in more court actions being pursued against local authorities, it may have more immediate relevance for defenders in other actions who are seeking to involve local authorities in proceedings and/or seeking contributions to financial settlements from local authorities as the appeal court’s decision now provides a clear basis for doing so.

In its submissions to the court in Bavaird, the Council highlighted, if the claim was to succeed, the burden of meeting this would fall on the local authority as it had no known insurance cover, and it may be that the wording of insurance policies requires to be reviewed; the concepts of “potential” and “contingent” liabilities may cause some conceptual difficulties, but the general comments of the Scottish appeal court make clear that policy considerations played a role in its overall decision, with the court being averse to allowing claims to disappear into a “legal black hole” simply because the statutory predecessor of a local authority no longer exists.

The wider comments of one of the Appeal Court judges, Lord Drummond Young, about the interpretation of statutory provisions are of interest and are also likely to have wider legal consequences.  Lord Drummond Young stressed the need to interpret such provisions in a way that took into account the context of in which the provisions were designed to operate and the purpose they were intended to achieve, rather than simply focusing on the literal interpretation.  Lord Drummond Young commented that he considered this approach to be of “universal application”.

One interesting point, which Lady Paton mentioned, related to the wording of another provision of the statutory order which transferred the assets and liabilities of the previous body to the new local authority.

The provision in question stated:

“3. Anything done before 1st April 1996 by, or on behalf of, or in relation to, the development corporation for the purposes of or in connection with the property, rights and liabilities transferred by article 2 of this Order shall, on and after 1st April 1996, be treated as having been done by, or on behalf of, or in relation to, the council….."

Lady Paton indicated that, in her view, this provision “envisages and specifically provides for circumstances such as those arising in Mr Bavaird's case” as any negligent exposure to asbestos that occurred during the existence of the local authority’s predecessor, being something done before 1st April 1996 by, or on behalf of, that body, was to be treated as having been done by, or on behalf of, the local authority in terms of that provision.

It appears from the terms of the judgement that the claimants did not advance a specific argument based on that particular provision. This may have been because, in the previous Scottish cases on this issue, the point for determination was the definition of “liabilities” and what this covered. Against this background, it may have been decided to seek an appeal court decision (with the weight that this would carry) based on the definition of liabilities as this had already been given judicial consideration and a decision on the scope of that term would be capable of a more general application and as such could be relied on in future cases.

Finally, it is worth noting that the appeal court in Bavaird stressed that its decision was consistent with English law (adopting Woolf J’s reasoning in Walters v Babergh DC 1983).

Contact

For further information contact Van McKellar  on +44 (0) 141 228 8209

By Van McKellar

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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