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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Watson v. The Cheque Shop Ltd [2005] ScotCS CSOH_114 (23 August 2005)
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Cite as: [2005] CSOH 114, [2005] ScotCS CSOH_114
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Watson v. The Cheque Shop Ltd [2005] ScotCS CSOH_114 (23 August 2005)
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OUTER HOUSE, COURT OF SESSION [2005] CSOH 114 |
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P1466/05
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OPINION OF LADY PATON in the petition of THOMAS WATSON Petitioner; against THE CHEQUE SHOP LIMITED Respondents: for Suspension and interdict and suspension and interdict ad interim ________________ |
Petitioner: J.G. Thomson; Heggie Alexander
Respondents: Logan; Fyfe Ireland, W.S.
23 August 2005
Funding for a building project and litigation
[1] The respondents (The Cheque Shop Limited) have two shops in Edinburgh. They offer a cheque-cashing service to customers without bank accounts. They charge their customers for that service. [2] The petitioner is a roofer and jobbing builder. During 1998 to 2001, he was bankrupt, and had a trustee in bankruptcy in charge of his affairs. The petitioner nevertheless cashed cheques at the respondents' shops. He also did work for the respondents, or for Geoff Wilson, one of the respondents' directors. The petitioner was discharged from bankruptcy on 10 November 2001. [3] The present dispute between the parties arose as a result of building work carried out by the petitioner at 25 Ellensglen Road, Edinburgh, for Gordon Wilkie. The petitioner was trading as Amalgamated Roofing and Building Company ("Amalgamated Roofing"). It is not clear whether he was acting as a sole trader, or whether his son was in partnership with him. The respondents became involved because they provided some funding for the project. [4] Ultimately the cost of the building work amounted to £76,123.50. That sum was owed by Gordon Wilkie to Amalgamated Roofing. Amalgamated Roofing raised an action for payment against Mr. Wilkie. The respondents assisted with the costs of litigation. On 23 September 2001, decree in absence passed against Mr. Wilkie. [5] Prior to decree passing, and despite the existence of an inhibition on the dependence, Mr. Wilkie managed to sell the property at 25 Ellensglen Road to a third party named Patrick McCarthy. Amalgamated Roofing raised an action seeking reduction of the disposition in favour of the third party (reported in 2004 S.L.T. 509). Solicitors' indemnity insurers became involved. Meantime however both the sum owed by Mr. Wilkie to Amalgamated Roofing and the funding and financing provided by the respondents remained unpaid. [6] In April 2005, Amalgamated Roofing attempted to recover the sum due by raising an action of adjudication for debt against Mr. Wilkie in the Court of Session. In that action, Amalgamated Roofing sought to have 25 Ellensglen Road adjudicated to the company in satisfaction of the debt. [7] On 7 July 2005, the respondents sought to be sisted to the action of adjudication, on the basis of their interest arising from a Minute of Agreement described below. The court refused to sist the respondents. [8] A second action of adjudication was raised against Mr. Wilkie by the respondents. The summons had been served, but not lodged for calling.The signing of a document
[9] The current contentious issue is whether the respondents can recover the sums due to them by enforcing a Minute of Agreement said to have been entered into between the parties on 20 August 2003. [10] The respondents' position is that a formal typed three-page Minute of Agreement, prepared by Messrs. MacKay and Norwell, solicitors, was entered into between the respondents (referred to as "the Company") and the petitioner (referred to as "Mr. Watson"). According to the respondents, the Minute of Agreement was signed by the petitioner and by the respondents on 20 August 2003. [11] A document bearing to be a Minute of Agreement has been lodged as number 7/1 of process. It appears to be a formal, typed Minute of Agreement between the parties, with the preamble: "Whereas the parties wish to resolve certain financial and other issues between them, they have agreed and hereby agree as follows". [12] Thereafter, in terms of Clause 1, it is agreed that the petitioner "is due and obliged to instantly pay to the Company the sum of £61,539.85 in respect of funds advanced to Mr. Watson by the Company in the past. He is further due and obliged to instantly pay to the Company, all legal fees, outlays and disbursements which they have incurred or may incur to any Law Agents in relation to the pursuit of Mr. Watson's claims against Gordon Wilkie, Patrick Gerard McCarthy and the Governor and the Company of the Bank of Scotland ... The total of such legal fees, outlays and disbursements incurred by the Company to this date amounts to £6,442.68 ...". Any further fees and outlays were to be certified by a solicitors' letter. [13] In terms of Clause 2, the petitioner assigned to the respondents his title and interest to any claims against Mr. Wilkie, Mr. McCarthy, and the bank, including the action by Amalgamated Roofing against Gordon Wilkie and others, case reference number A1693/02. (The reference number has been inserted in manuscript, and initialled "TW".) [14] In terms of Clause 3, considering that the petitioner "holds a decree against Gordon Wilkie for payment of a sum of £76,123.50 together with interest ... [and] ... expenses", the respondents undertake not to accept any settlement offer of less than the total due without consulting the petitioner. The respondents would be entitled to receive payment of the whole proceeds of any action or claims covered by the agreement. [15] In terms of Clause 4, the petitioner certifies that he "is not, and never has been, in partnership with his son Mark Watson in relation to the firm of Amalgamated Roofing and Building Company." [16] The remaining Clauses (Clauses 5, 6, and 7), together with the signatures, appear on page 3 of the Minute of Agreement. Clause 5 reinstates Messrs. Archibald Campbell & Harley W.S. as "acting solicitors in relation to the conduct of the current proceedings" and makes certain authorisations about receiving and disbursing sums of money. In terms of Clause 6, the parties agree that should one or other of them become the owner of 25 Ellensglen Road, the subjects are to be owned jointly. In the event of sale, the petitioner is obliged to repay the respondents in full from his share of the proceeds (failing earlier payment). Clause 7 records the parties' consents to registration of the Agreement for preservation and execution. The place and date of signature are noted in manuscript as Edinburgh, 20 August 2003. The signature on behalf of the respondents is illegible, and no witness details appear opposite that signature. The petitioner's signature appears as "T Watson", and witness details are given as "Keith Hanley, 19/5 East Kilngate (or Kirkgate) Rigg, Edinburgh".Attempted diligence and petition for suspension and interdict
[17] On 8 July 2005, the respondents registered the Minute of Agreement for preservation and execution. On 15 July 2005, a charge for the sum of £93,556.36 was served on the petitioner. [18] The petitioner responded with a summons seeking reduction of the Minute of Agreement, and the present petition seeking suspension of the charge ad interim, and interdict against the respondents ad interim from taking any steps to enforce the purported Agreement. The petitioner's position, as explained in the summons, the petition, and in submissions by counsel in the Vacation Court on Friday 29 July 2005, was that the petitioner had been asked by Geoff Wilson of the respondents to sign a document consisting of one page only - not a three-page document. At the time, the petitioner had been suffering from cataracts; he did not have his spectacles; he had not been able to read the text; he was given to understand by Geoff Wilson that what he was signing was a mandate concerning fees due to Messrs. Archibald, Campbell & Harley W.S. (the firm which had acted for Amalgamated Roofing). Subject to that explanation, the petitioner accepted that he had signed a document, and that his signature appeared on the document now known as page 3 of the Minute of Agreement number 7/1 of process. However he maintained that there had been no witness to his signature. He did not know a "Keith Hanley". He had not seen pages 1 and 2. He had not intended to sign anything which resulted in his having to pay money to the respondents. He had not written the initials on page 2. The other pages of the alleged Minute of Agreement must have been added after he had signed the document now described as page 3.Submissions for the petitioner
[19] Counsel for the petitioner moved for interim suspension and interim interdict. The petitioner's position was that he had not signed the Minute of Agreement. He had signed one page only (page 3), following upon a misrepresentation by a person whom he trusted, namely Geoff Wilson. The purported Minute of Agreement should be reduced. Reference was made to the copy summons seeking reduction of the Minute of Agreement. Pending resolution of that action of reduction, any diligence should be suspended and interdicted ad interim. [20] Counsel referred to some mandates (which the petitioner accepted as genuine and effective), and to some correspondence relating to the parties' dealings which, it was submitted, gave the respondents a strong warning that the petitioner had concerns about the purported agreement. There was a strong prima facie case and a real issue to try. [21] In relation to balance of convenience, counsel submitted that the petitioner ran a small company. He had no employees, but engaged people on a self-certification basis. The business was not large, and was dependent on cash flow. If the charge were not suspended, the ensuing diligence would have a catastrophic effect on the business. The petitioner had lived in Edinburgh all his life. He was not going to abscond. If the motion for interim suspension and interdict were to be refused, sequestration of the petitioner would be inevitable.Submissions for the respondents
[22] Counsel for the respondents contended that no prima facie case had been made out. In any event, the balance of convenience was in their favour. [23] There had been no suggestion that the petitioner did not owe the respondents money. The Minute of Agreement had followed upon several mandates signed by the petitioner, relating to increasing sums due to the respondents. The parties' business dealings had been characterised by disputes followed by reconciliations, but the final parting of the ways had occurred in about January or February 2004, just after decree of reduction had been obtained in the case reported at 2004 S.L.T. 509. [24] The respondents' proposition was simple. If the parties had signed the Minute of Agreement, and one party was permitted to act to his detriment in reliance upon that agreement, then the other party to the agreement was personally barred from challenging the terms of that agreement: Gatty v Maclaine, 1921 S.C. (H.L.) 1, at page 7. The respondents' belief had been that they had a Minute of Agreement which could be relied upon. The petitioner knew that. The respondents then acted in that belief, to their detriment. The petitioner could not now be allowed to challenge the Minute as invalid. In the correspondence referred to, the petitioner had not challenged the validity of the Minute, nor had he mentioned the matters now complained of (for example, having cataracts, being without his reading glasses, signing a single sheet on a certain understanding). The proper construction of the correspondence was that the petitioner had signed a three-page agreement knowing what he was doing. The correspondence wholly contradicted the averments in the summons and the petition and also the submissions made for the petitioner. Once the Minute of Agreement had been entered into, the respondents lent further funds in reliance upon that agreement. There was a presumption against donation, and accordingly the basis upon which the further funds were made available was the security provided by the Minute of Agreement. The respondents had therefore been allowed to act to their detriment in reliance upon the terms of the Minute of Agreement: cf. Gatty v Maclaine, cit. sup. Accordingly no prima facie case had been made out. Alternatively, any prima facie case was weak. [25] Turning to the balance of convenience, counsel for the respondents stated that at the hearing on 7 July 2005, the petitioner claimed to be in partnership with his son Mark. On that basis the petitioner had contended that the Minute of Agreement could not have any effect, as the decree belonged to the partnership, not to the petitioner. Clearly the petitioner was making a misrepresentation - either on 7 July 2005, or in the present proceedings. Against that background, the court should be cautious about granting any relief to the petitioner. [26] Furthermore, the petitioner was sequestrated during the period 1998 until 2001: yet during that period, he obtained loans from the respondents. That was possibly an offence, although there was a question whether the trustee had been aware of the lending. [27] In addition, as a result of his bankruptcy, the petitioner had sold his one half pro indiviso share of his house to his wife. Accordingly the only asset which the petitioner had was his claim against Mr. Wilkie. [28] The urgency underlying the attempt to enforce the Minute of Agreement was two-fold. First, it was anticipated that the professional indemnity insurers involved with 25 Ellensglen Road would ultimately offer a payment to the inhibiting creditor (Amalgamated Roofing). The respondents' concern was that if the petitioner received payment from the professional indemnity insurers, the money would disappear, and the respondents would be unable to recover the sums due to them. Accordingly the respondents wished to do diligence against the petitioner, and in the event of non-payment, to seek his sequestration. In that way, any payment from the professional indemnity insurers would go to the trustee in bankruptcy, and the respondents' claim would be properly dealt with. It was therefore a matter of some urgency to have the sequestration in place, to avoid the petitioner reaching an agreement with the professional indemnity insurers and taking the money. [29] Secondly, the inhibition taken against Mr. Wilkie was by now almost five years old. It would expire in September 2005. Unless the respondents could take effective steps before then, the one asset owned by Mr. Wilkie (namely 25 Ellensglen Road, Edinburgh) might disappear. The inhibition would fly off before any action of reduction raised by the petitioner could be resolved. The respondents might lose any right of recovery of funds thought to be secured by the Minute of Agreement. [30] The respondents were based in Edinburgh. They had five employees, and two shops. Their business would be severely damaged if the respondents lost the opportunity of recovering the substantial sums outstanding. The respondents' aim in having the charge served and in proceeding to sequestrate the petitioner was to ensure that matters were properly dealt with, and that the monies which the professional indemnity insurers would have to pay to clear the title would reach the respondents in repayment of what they were owed. [31] In answer to a question concerning the feasibility of consignation of funds in joint names on deposit receipt, counsel for the respondents indicated that the petitioner had changed his agents: the respondents could not have confidence in such an arrangement. Nor, according to counsel, was arrestment in the hands of the professional indemnity insurers a practical option. The respondents considered that the course which they had adopted was the only way of securing the funds owed to them.Reply for the petitioner
[32] Counsel for the petitioner responded by submitting that the question of personal bar was so dependent upon factual issues that it could not be determined without proof: cf. dicta of Lord Keith in Armia Ltd v Daejan Developments Ltd, 1979 SC (HL) 56. [33] In relation to the sums claimed by the respondents, the petitioner accepted that there had been a course of dealing between himself and the respondents, but did not accept that the sums specified in the charge were due to the respondents. [34] In relation to balance of convenience, counsel reiterated that if the motion for interim suspension and interim interdict were not granted, sequestration of the petitioner would be inevitable.Decision
[35] Whether or not a sequence of events amounts to personal bar is very much a question of fact and circumstances: cf. the observations of Lord Keith in Armia v Daejan, cit. sup. It is not possible at this stage, without hearing evidence, to form a view about the circumstances surrounding the signing of the document on 20 August 2003, the proper construction to be placed upon any references to that document made in subsequent correspondence, the basis underlying any further funding made available by the respondents following upon 20 August 2003, and whether counsel for the respondents is correct in his contention that the petitioner is personally barred from challenging the validity of the Minute of Agreement. [36] It follows that, until the question of personal bar has been resolved after evidence and submissions, it is impossible for the court to ignore the fundamental challenge which the petitioner makes concerning the Minute of Agreement. In both the summons for reduction and the petition for interdict, the petitioner makes serious allegations which, if proved, may well result in the Minute being reduced. The court will be asked to make decisions about the credibility and reliability of witnesses, the proper construction to be placed on contemporaneous correspondence, the sufficiency of evidence, and other similar matters. Without hearing evidence, the court cannot at this stage dismiss the petitioner's allegations as being without foundation. Accordingly on the basis of the pleadings in the summons and the petition, the productions made available to the Vacation Court, and the submissions made in the Vacation Court on 29 July 2005, I am satisfied that a reasonably strong prima facie case challenging the validity of the Minute of Agreement has been made out. [37] So far as balance of convenience is concerned, it is my view that the balance favours the petitioner. I am advised that, if interim suspension and interim interdict are refused, the petitioner will undoubtedly be sequestrated. That will have irrevocable consequences both for his business and for his personal life. By contrast the respondents are a limited company who continue to trade and to make an income from sources other than the petitioner. It is not suggested that they will cease to trade, or go into receivership or liquidation, if the petitioner's motion for interim suspension and interdict is granted. Furthermore, I was not satisfied that there were no avenues open to the respondents (other than the petitioner's sequestration) which would have the desired effect of supervising or safeguarding any payments which the professional indemnity insurers might be minded to make in respect of 25 Ellensglen Road, Edinburgh. In my view, the detriment which the petitioner would suffer in the event of his motion for interim suspension and interim interdict being refused would far outweigh any detriment which might be suffered by the respondents if the petitioner's motion were to be granted. In all the circumstances, I shall grant the interim suspension and interim interdict sought.