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Council properly sued for predecessor's unknown liability: court

22 November 2013

The "liabilities" of a dissolved development corporation transferred by statutory order to a local authority, included those that were unknown and only potential at the time of transfer, judges in the Court of Session have ruled.

Lady Paton, Lord Drummond Young and Lord Marnoch gave their decision in allowing an appeal by the family of the late David Bavaird, who died in 2008 of mesothelioma said to have been caused by his exposure to asbestos during his working life.

One of his employers had been the then East Kilbride Development Corporation, for whom Mr Bavaird worked during the 1970s. The Corporation was wound up in the 1990s, its assets and liabilities were transferred to South Ayrshire Council, and the Corporation was dissolved on 5 April 1996. Unlike a limited company, it could not be restored for the purposes of legal action. Mr Bavaird did not become ill until 2007.

Dismissing the action so far as brought against the council, the Lord Ordinary, Lord Brailsford, held that the council could not be sued because there had been no liability, actual or contingent, in existence in 1996 that could transfer to it, but only the mere possibility of harm.

Giving the leading judgment in the Inner House, Lady Paton said that the question turned on the interpretation of the 1996 statutory order, which vested "Any property, rights or liabilities of the development corporation" in the council. Looking at the order as a whole, she agreed with the reasoning of the then Mr Justice Woolf in an English case, Walters v Babergh District Council, who said that the ordinary meaning of the word "liabilities" included potential causes of action, and the intention of the transfer provisions was to leave the public no better and no worse off as a result of the reorganisation.

"Construing the order as a whole," she said, "and adopting a purposive construction, it is my opinion that the word 'liabilities' in the transfer order includes contingent liabilities and potential liabilities, such as liabilities which emerged after the date of transfer as a result of" anything done by the development corporation before April 1996, "for the purposes of or in connection with the property, rights and liabilities transferred".

Such a construction would not treat as negligent actings which were not so categorised in 1971-74, but covered potential liabilities such as delictual liabilities emerging after 1 April 1996 (because of the later emergence of loss, injury or damage) even although attributable to actings before 1 April 1996.

She concluded: "In the result therefore it is my opinion that, on a proper construction of the 1996 transfer order, any liability arising from negligent exposure of the late Mr Bavaird to asbestos which might have been attributed to EKDC is now the liability of [South Ayrshire Council]."

The case against the council was allowed to go to proof.

Click here to view the judgment.

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