Scottish Court of Session Decisions

The pursuer in this action is George Douglas Laing, the permanent trustee on the sequestrated estates of Alexander Short ("the bankrupt"). In terms of the first conclusion of the summons, the pursuer seeks decree ordaining the defender Tai Lee Chung to execute and deliver to the pursuer a disposition of two flats on the ground floor of a tenement building at 62 Great George Street, Glasgow, title to which is registered in the defender's name in the Land Register of Scotland under title Nos. GLA13339 and GLA13328. The defender's pleas-in-law include a plea to the effect that the matters condescended upon being res judicata, the action should be dismissed. By interlocutor dated 14 October 1997, the Lord Ordinary repelled the defender's pleas-in-law, and granted decree de plano in terms of the first conclusion of the summons, ordaining the defender to execute and deliver to the pursuer a disposition of the two flats in question. On behalf of the defender, it was not and is not disputed that this decree de plano would be appropriate if the Lord Ordinary was justified in repelling the plea of res judicata. However, the defender reclaims, contending that the Lord Ordinary's interlocutor should be recalled, that the plea of res judicata should be sustained, that the pursuer's pleas should be repelled and that the action should be dismissed.

The defender is the widow of the late Shek Chung. In 1986, the bankrupt granted dispositions of the two flats in question in favour of Shek Chung. Shek Chung subsequently granted dispositions of the two flats in favour of the defender. The defender's title to the two flats was registered in the Land Register of Scotland, following upon these dispositions, on 28 May, 1987. On 3 June 1987, decree of sequestration of the bankrupt's estate was pronounced in the Sheriff Court at Hamilton. Thereafter, in an action at the instance of the present pursuer, against the present defender both as an individual and as the personal representative of her late husband Shek Chung, the pursuer sought and obtained reduction of the two dispositions by the bankrupt to Shek Chung, and also the two dispositions by Shek Chung to the present defender. Notwithstanding the reduction of these dispositions, the defender's title to the flats stood, being registered in the Land Register of Scotland. Founding upon the reduction of the dispositions which had led to that registration, the pursuer sought rectification or alteration of the Land Register; but this was refused by the Keeper of the Registers of Scotland, and a petition by the pursuer seeking judicial review of that refusal was dismissed by the Lord Ordinary in December 1992. A reclaiming motion against that dismissal was unsuccessful, as was a subsequent appeal to the House of Lords. The proceedings in the action of reduction (which we shall refer to as "the original action") both in the Outer House and before the Second Division are reported at 1991 S.L.T. 472; and the proceedings in the petition for judicial review are reported at 1993 S.L.T. 1291, 1994 S.L.T. 65 and 1996 SLT 166. These reports show the basis upon which decree of reduction was granted, and the reasons for upholding the refusal by the Keeper of the Registers of Scotland to rectify or alter the Land Register, notwithstanding the reduction of the dispositions. Put shortly, the reductions were granted in terms of section 34(4) of the Bankruptcy (Scotland) Act 1985, the dispositions by the bankrupt being for inadequate consideration, and the dispositions by Shek Chung to the defender being gratuitous. In the proceedings for judicial review, it was held that Parliament could not have intended that the reduction should be an "event which...was capable...of affecting the title to a registered interest in land" within the meaning of section 2(4)(c) of the Land Registration (Scotland) Act 1979: the two systems of title and land registration rested upon entirely different principles. The present action proceeds upon the basis both that the dispositions have been reduced, and that the defender's title to the flats stands. It is to be noted that in circumstances where title is not registered in the Land Register of Scotland, reduction of a disposition affords a means of effectively restoring heritable property to the previously infeft proprietor, but that reduction does not have that effect where title has been so registered: in such circumstances, restoration of property to the previously infeft proprietor, if appropriate, will require a disposition in his favour by the person whose title is so registered. Hence the present action.

In submitting that the plea of res judicata should be sustained, counsel for the defender and reclaimer acknowledged that the present case was unusual: this was not a case where a pursuer, having failed to obtain the decree which he sought in an earlier action attempted to obtain a decree on similar grounds in subsequent proceedings. The present pursuer had obtained the decree which he sought in the original action: reduction. Correspondingly, the decree which he sought in the present action had not been sought in the original action. But it was submitted that upon a correct reading of section 34 of the 1985 Act, and a proper consideration of the pleadings in the original action and this action, it could be seen that the pursuer was now attempting to raise anew matters which had been disposed of in the original action. This submission took a number of forms, and before turning to the contentions advanced on behalf of the defender and reclaimer, it is convenient to consider in greater detail the terms of section 34 of the Bankruptcy (Scotland) Act 1985, the history of the original action and the pleadings in both actions.

Section 34(1) of the 1985 Act provides that where that subsection applies, an alienation by a debtor "shall be challengeable" by certain creditors, the permanent trustee or certain others. Section 34(2) provides that subsection (1) applies in a number of specified circumstances; and subsection (3) makes a number of provisions supplementary to subsection (2). Subsection (4) provides as follows:

It is provided however that the court shall not grant such a decree if the person seeking to uphold the alienation establishes one or other of certain specified matters. Subsection (4) also contains a general proviso, to the effect that the subsection is to be without prejudice to "any right or interest acquired in good faith and for value from or through the transferee in the alienation".

In the original action, the first conclusion sought production and reduction of the dispositions by the bankrupt in favour of Shek Chung "or for such restoration of property to the debtor's estate or other redress as may be appropriate". The second conclusion, for production and reduction of the dispositions by Shek Chung in favour of the defender, did not contain these additional words. A corresponding difference is to be found in the pursuer's pleas-in-law. The reason for this difference is not perhaps clear; but it is not suggested that the contentions advanced on behalf of the defender and reclaimer, relying upon the presence of these words in the conclusions, are affected by their absence from the second conclusion. Equally, while the first conclusion in the original action can be seen as directed primarily against the defender as personal representative of Shek Chung, it was not suggested that her interest as an individual defender in that action did not extend to the first conclusion.

We were informed that notwithstanding the presence of these additional words in the first conclusion, the pursuer did not, at any stage in the original action, seek any decree for restoration of property or other redress: what was sought was reduction, and indeed the defender's contention that "other redress as appropriate" could and should be granted in preference to reduction was resisted by the pursuer. While the primary issue in the original action was whether the defender could establish, as she sought to do, that the alienations were made for "adequate consideration" a further substantial issue arose, the court having held that the alienations were not made for adequate consideration: it was submitted on behalf of the defender that reduction was inappropriate, it being contended that the court had a discretion to grant "such other redress as may be appropriate". This matter was fully argued in the presentation of the reclaiming motion, it being contended that in the whole circumstances the appropriate remedy was to grant decree in a specific sum of money. The court however held that the reference to "other redress as may be appropriate" was not intended to give the court a general discretion to decide a case on equitable principles, but was designed to enable the court to make an appropriate order in a case where reduction or restoration of the property was not a remedy which was available. It was held to be clear, from a reading of section 34(4), that the general purpose was to provide that "as far as possible any property which has been improperly alienated should be restored to the debtor's estate". The court goes on to say that in the case of a disposition of heritable property this can easily be done by reduction of that disposition; and that as reduction was available in this case, they considered that it was the proper remedy. While the fact of registration in the Land Register of Scotland was evident from the pleadings, there does not appear to have been any submission, or even suggestion, that reduction of the dispositions would not achieve restoration of the property to the debtor's estate; and as we have indicated, the court proceeded upon the basis that reduction would indeed achieve such restoration. In these circumstances, it is evident that in the original action no issue as to restoration of property, as something distinct from reduction, arose, apart from the reference to restoration in the concluding part of the first conclusion of the summons. In that connection, we note that the court expressed the view that "the fact that the pursuer has added these unnecessary words to the first conclusion does not in our opinion absolve the defender from raising the issue of what is appropriate other redress, and averring a factual basis upon which the court can decide what that redress should be".

The present action proceeds upon the basis that the dispositions being gratuitous alienations, or alienations at undervalue from the bankrupt's estate, are "the occasion of a right in the pursuer to effective redress therefor" under section 34 of the 1985 Act, and that reduction affords no such redress. In the light of the inefficacy of the decree of reduction as a method of providing such redress, it is contended that decree ad factum praestandum is an appropriate mode of redress. These propositions, contained in the pursuer's pleas-in-law, are the basis upon which decree ordaining a disposition of the properties is sought. Failing execution and delivery of a disposition, the pursuer seeks adjudication of the properties. While questions as to the parties' substantive rights are of course quite separate from the question of res judicata, it is to be noted that the defender does not dispute the pursuer's entitlement to the decrees which are sought upon any basis other than res judicata: it being accepted that decree de plano is appropriate, if the plea of res judicata is not to be sustained, we were not addressed upon the merits of the action, in terms of competency, relevancy or otherwise.

Before turning to the plea of res judicata, we would note in particular that senior counsel expressly acknowledged that in terms of section 34(4), it would be competent for the court to grant decree for both reduction and execution and delivery of a disposition, in order to restore heritable property to the debtor's estate in situations where reduction alone did not achieve that. As we understood the submissions by junior counsel, it had been suggested that the structure of section 34(4) involved the court in choosing between (i) reduction, (ii) restoration of property and (iii) other redress. Senior counsel however proceeded upon the basis that the decree now sought could in principle be sought and granted along with decree for reduction, provided this was done in a single action. What the pursuer could not do was opt for the remedy of reduction alone, as he had done in the original action, and then come back to court, as he was doing in the present action, seeking a further or better remedy.

The defender and reclaimer could not of course succeed with a plea of res judicata, on the basis that a matter had not been previously litigated, when it could and should have been. The basis for such a plea is to the opposite effect: that a matter which a pursuer seeks to litigate has already been litigated. The contention advanced was therefore not that the first conclusion in the present action should have been contained in the earlier action, and having been omitted then, could not be litigated now. The contention was rather that what had been litigated in the original action was the whole issue of whether the various dispositions were challengeable in terms of section 34(1) and if so, what decree, of all those available under section 34(4), should be granted by the court. Adopting that approach, the basis upon which the court should refuse to entertain the present action, which rested upon section 34(4), would indeed be that the matter had already been litigated in the original action. The original action was to be seen not merely as one in which reduction had been sought and granted, but as one in which the possibility of any other remedy in terms of section 34(4) had inevitably been in issue, and had therefore been disposed of by the eventual decree for reduction alone. That contention was founded partly upon general submissions as to the nature of the original action, partly upon the scope of the first conclusion in that action and the positions adopted by the parties in the course of that action, and partly upon a construction of section 34 itself.

In relation to the general nature of the original action, it was submitted that what the pursuer was doing was asserting his right to challenge alienations, and seeking the remedy which the pursuer regarded as appropriate. The decree of reduction was not expressly a rejection of any alternative; but if one regarded the action as the pursuer's demand for an appropriate remedy, the whole issue of what remedy was appropriate had been put in issue and disposed of, so that those matters not included in the decree had been as truly litigated as those matters which were included in the decree. It was submitted that this analysis of the nature of the original action was borne out by the terms of the conclusion and the conduct of the proceedings: the question of restoration and alternative redress had been put expressly in issue in terms of the first conclusion; and the argument advanced for the defender, to the effect that an alternative to reduction was appropriate, showed that the whole issue of appropriate remedy had been dealt with by the court in the original action, in practical terms as well as by pronouncing a decree in terms of the first part of the first conclusion, rather than either of the remaining parts. Moreover, the view that all issues between the parties under section 34 had been litigated in the original action, and could not be litigated again, was said to be confirmed by the terms of section 34. In terms of section 34(1) to (3), an alienation was "challengeable" by certain persons and upon certain bases. If the requirements of these subsections were established, so that a particular alienation was "challengeable" subsection (4) would come into play, and it was to be noted that in terms of that subsection, it was "On a challenge being brought under subsection (1)..." that the court (subject to the exceptions and provisos contained in the subsection) was to grant decree of reduction or for restoration or other redress. It was submitted that upon a correct understanding of the section, it was plain that the bringing of a challenge was regarded as establishing various matters which gave rise to a right to one or other of these decrees (subject to the exceptions and proviso). That being so, it was plain that the granting of decree was envisaged as arising, and arising only, in the action whereby that challenge was brought. More fundamentally perhaps, when as here the challenge had been brought, and brought successfully, in the original action, the same alienations could not again be challenged, leading to further decrees in consequence of that new (and apparently superfluous) challenge, in a subsequent action. In seeking restoration of property, in terms of the first conclusion of the present action, the pursuer was either challenging anew alienations which he had already challenged successfully; or if the original challenge was seen as simply a datum, he was seeking a decree not on the challenge being brought, as required by section 34(4), but as a new and separate claim which that subsection did not envisage. The court had a choice, in terms of subsection (4); but it had already exercised that choice (in response of course to what was asked of it) in the original action. That being so, the pursuer was not merely debarred from seeking alternative remedies to reduction. He was also debarred from seeking additional or supplementary remedies which he had not sought on bringing the original challenge.

We have found it convenient to set out the arguments advanced on behalf of the defender and reclaimer before considering the various authorities relating to the plea of res judicata to which we were referred, and without reference to the terminology which has been used in defining the scope of that plea. It is not disputed that in principle, the basis of the plea is public policy, its purpose being to prevent repetition of litigation between parties. The fundamental question is accordingly this: what are the common features which will lead the courts to hold that a second action would entail this unacceptable "repetition" of litigation? The familiar answer is that the parties, the subject matter and the media concludendi must be the same. It is not disputed that in the present case, the parties are the same. Submissions accordingly related to subject matter and media concludendi.

In Grahame v. Secretary of State for Scotland 1951 S.C. 368, Lord President Cooper at page 387 describes the plea of res judicata as based upon considerations of public policy, equity and common sense, "which will not tolerate that the same issue should be litigated repeatedly between the same parties on substantially the same basis". After noting that he uses the word "substantially" advisedly, and referring to Glasgow and South Western Railway Company v. Boyd and Forrest 1918 SC (HL) 14 for the proposition that the courts are "to look at the essence and reality of the matter rather than the technical form, and simply to enquire - What was litigated and what was decided?", the Lord President goes on to say that "the difficulty, as so often happens, is not in stating the principle but in applying it". In the present case, it appears to us that in tackling this difficulty, the expressions "subject-matter" and "medium concludendi" are of less assistance than the language used by Lord Cooper, and in particular the question "what was litigated and what was decided?". That formulation of the question, adopted by Lord Shaw of Dunfermline in the Boyd and Forrest case at page 32, derives from the opinion of Lord Kinnear in Edinburgh and District Water Trustees v. Clippens Oil Company Limited, 1899 1 F. 899 at page 909, where his Lordship observes that the validity of the plea of res judicata "must necessarily depend upon the pleadings and decision in the previous action", and goes on to say that "The question always is, what was litigated and what was decided".

In propounding the arguments which we have described, counsel for the defender and reclaimer emphasised the importance of looking at the "essence and reality of the matter" rather than the technical form. While it was true that there was a difference of technical form between what had been sought in the original action and what was now sought, the essence and reality was the same: the pursuer was seeking the appropriate remedy for a challengeable alienation. The "same issue" was being litigated, and upon substantially, or indeed exactly, the same basis. If it were to be accepted that, as had been held by the Inner House in the original action at 1991 S.L.T. 476, the general purpose of section 34(4) was to provide that "as far as possible any property which has been improperly alienated should be restored to the debtor's estate", then the essence and reality of the matter had always been restoration. That remained the essence and reality of the matter, notwithstanding that an ineffectual mechanism, reduction, had been sought and granted. What was being attempted in the present action was the substitution of a new mechanism, but it was the same issue which the pursuer was attempting to litigate, and upon the same basis, that there was a challengeable alienation. Comparisons were drawn between the present case and the facts in the cases cited; and reference was made both to the facts in those cases, and the definitions and comments which they contain, in relation to "subject-matter" and "medium concludendi". The latter expression in particular was equiparated with the "grounds" of an action, which in turn was described as the underlying justification for the specific conclusions contained in the pleadings. It appeared to us, however, that in the contentions advanced in this case, and perhaps in what had been said in the cases cited, the apparently distinct concepts of subject-matter and medium concludendi were invoked in varying and overlapping senses, and that little was added (except perhaps confusion) by working back to this terminology from the simpler and more direct terminology used by Lord Kinnear and Lord Cooper. That being so, we do not consider that this is a case in which it would be useful to attempt any new or more detailed analysis of these familiar and perhaps hallowed expressions. The tests as described by Lord Cooper and Lord Kinnear seem to us to be more useful, at least in this case.

On behalf of the pursuer and respondent, it was submitted that the essence and reality of a litigation was to be discovered by looking at the pleadings and the decision, rather than at the underlying or supposed purpose or motive behind the action. Essence and reality were the same as, not different from, what was litigated and what was decided. What had been sought in the original action was reduction, and what had been decided was that reduction was justified. Having regard to the contentions advanced by the defender in the original action, it could also be said that what had been decided was that where reduction was possible, it would be inappropriate to refuse it and grant pecuniary redress. It was no doubt unfortunate that an assumption had been made by all concerned, that reduction would achieve restoration of the property to the debtor's estate; but the question of whether it would achieve such restoration had been litigated not in the original action, but in the proceedings for judicial review. Whether one said that the subject-matter was different, or that the media concludendi were different, the short truth was that the present action was one in which the pursuer sought to litigate a matter different from that which had been litigated and decided in the original action. The decision in the original action reflected what had been litigated; and that decision stood. What the pursuer now sought to litigate lay beyond the boundaries of what had been litigated, or in issue, in the original action. The nature of the action was different. Despite the additional words contained (wholly inspecifically) in the conclusion, all that had been at stake in the earlier action had been reduction. And in relation to the construction of section 34, while it was plain that the decrees authorised by section 34(4) could only be granted where a challenge had been brought under subsection (1), the general purpose of the section, to allow restoration of property where there was a challengeable alienation, lay at the heart of the section, and was not to be subverted by assumptions as to required procedure. What was now sought had not been, and could not competently have been, dealt with upon the basis of the pleadings in the original action.

In our opinion these submissions are sound. What is being litigated is a new matter. That being so, certain submissions presented to us, as to whether the House of Lords' decision constitutes a new matter justifying litigation upon points which would otherwise be res judicata, do not require consideration. The issue in the present case is not res judicata and the reclaiming motion is refused.