OUTER HOUSE, COURT OF SESSION [2008] CSOH 174 |
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OPINION OF LORD MATTHEWS in the cause MARY VANCE ARMSTRONG Pursuer; against ROBERT LINDSAY FORBES, Chartered Accountant, as judicial factor on the Sequestrated Estates of G. DUNLOP & SON First Defender; and MICHAEL CAMERON DUNLOP Second Defender: ________________ |
Pursuer:
Party
First Defender: Govier; Morison Bishop
Second Defender: MacPherson; Simpson and
Marwick
[2] At
the outset, on the second defender's unopposed motion, I granted decree of
dismissal in his favour and found no expenses due to or by either him or the
pursuer. I continued the cause until
the following day for the hearing of evidence.
[3] When
the case commenced Miss Armstrong embarked on a discussion about the
background. I was prepared to allow her
some leeway in that regard but it became apparent that she was straying into
matters which might be contentious and I indicated to her that if she wished to
proceed with her proof she would require to adduce evidence in the normal way. This she duly did.
[4] Before
discussing the evidence I should indicate that the background to the proof is
set out in a number of decisions. See
for example G Dunlop & Sons' Judicial
Factor v Armstrong 1994 SLT 199
(Lord Kirkwood); G. Dunlop & Sons' Judicial Factor v Armstrong 1995 SLT 605 (Lord Penrose),
an Opinion of Lord Cameron of Lochbroom in the petition of the second
named defender dated 25 October 2000; an Opinion of Lord Drummond Young
in this very action at an earlier stage of proceedings dated 10 January 2003;
and the Opinion of the Court delivered by Lord Marnoch chairing an Extra
Division on 26 September 2003.
In these circumstances I do not need to go into the background in any
great depth.
[5] The
pursuer seeks declarator that she is entitled to ownership and occupation of
property at Clachan of Penninghame Farmhouse, Newton Stewart, free of any
claims by the first defender as judicial factor in virtue of a joint minute, of
which more later. She also seeks
declarator that the first defender is bound to effect a disposition of said
property in her favour. In addition she seeks
production and reduction of a pretended decree granted by the sheriff at
Stranraer on
[6] After
she was sworn as a witness she told me that her full name was Mary Vance
Armstrong. She lived at Clachan of Penninghame,
by Baltersan, Newton Stewart. She was 61
years of age, divorced and had three daughters.
She and her ex-husband, the second defender, had been equal partners in
the firm of G. Dunlop & Son, Farmers. She and he married in 1970 and lived
at Baltersan. This was a farm of some
650 acres which was shown on No. 6/28 of process, a map.
[7] The
partnership, which was initially on an equal basis, was entered into in 1972
and her father, the late Hugh Graham Armstrong had gifted funds to it. In 1972 £70,000 was borrowed from the
Clydesdale Bank and was secured over Baltersan by way of a standard
security. In 1975 £25,000 was borrowed
to procure Clachan of Penninghame Farm.
That loan was secured in the same way.
Clachan of Penninghame Farm extended to some 90 acres.
[8] The
three children were born in 1976, 1979 and 1982. Things started to deteriorate in the marriage
and in 1983 her ex-husband was already considering divorce. By some means he altered the partnership
ratio from 50/50 to 95/5 in his favour.
I queried how this was done and she indicated that it was by
fraudulently siphoning off the assets. Without
her knowledge or consent he advertised the Clachan of Penninghame Farm for sale
on this 95/5 basis and that was when his machinations came to light. From 1983 to 1986 she was working on the farm
and bringing up her children.
[9] Her
husband sold off the farm and dairy cattle and things deteriorated to such an
extent that she went for legal advice in about 1985. She was concerned, amongst other things,
about the new partnership ratio but hoped to go to arbitration. There was an arbitration clause in the
partnership agreement but, for some reason, they never went down that route. She said that there were 31 acres of
land on the east side of the map where Moss 90 is marked. This apparently became an issue later on. The land had been conveyed to a brick or tile
company either Whistleberry Brick Company or Carty Tile Company, so that clay
could be extracted. The land was to be
re-conveyed to the partnership but her ex-husband had it conveyed to a Limited
Company of his by the name of Noltan.
There was no security over that land in favour of the Clydesdale Bank and
to that date it had not been sold on the open market. All these events led up to the dissolution of
the marriage. The Clydesdale Bank had
been concerned about the overdraft. The
farm should have been doing well, with a busy dairy herd, beef cows and
sheep. Her ex-husband was away a lot,
however, and the partnership was getting into debt. Her father offered a further £10,000 every
year but the ex-husband was so bad that he took money out of the children's
bank accounts. Then her father offered
£100,000 to get the farm up and running again.
Negotiations with the bank continued through the Spring of 1986 but her
ex-husband would not accept any offers of help from her father. He wanted the property sold. There was sufficient property to enable a
division to have taken place. There were
two farms, each of which could have been split into around 350 acres, give
or take a few acres. Her father offered
either half to her ex-husband, the main consideration being to keep farming,
but the latter determined that the bank would have to call up the standard
securities. The commitment to the bank
of £70,000 in 1972 had quadrupled.
[10] Calling-up notices were served on
[11] She then referred me to No. 6/27 of process, which was an
assignation by the Clydesdale Bank of the standard securities in favour of her
father. The consideration for the
assignation was the payment of £316,053.75 paid to the bank by her and the
assignation was to take effect from
[12] In December 1986 her husband went to the Court of Session
and petitioned for the appointment of a judicial factor. He was not happy that the farm had not been
sold. An appointment was made on
[13] In 1987 there were a number of proposals for settlement
which continued throughout the year. Her
ex-husband, however, wanted the judicial factor to sell the property. In 1987 there were a number of orders
made in the Court of Session. The
judicial factor claimed the power to sell and her father claimed certain
powers. According to her, her father
held the title. In 1988 the
standard security was assigned to her brother Gordon Graham Armstrong due to
her father's illness. The judicial
factor was hell bent on pursuing eviction and that took place. She and the children were evicted from their
own house in July 1988. At that
time there was no alternative accommodation available, although at one point
there had been nine houses on the farm. They
were homeless. The judicial factor paid
her ex-husband a greater allowance than he paid to her since the latter had to
pay aliment.
[14] Her lawyers persuaded her that she had to seek a divorce. It was hoped that a settlement would entail
the division of the property rather than its sale. That was what led to the joint minute which
lies at the heart of the current action.
She had been begging for accommodation.
The judicial factor had boarded up the house. She obtained a part-time job, having been on
State benefits and was able to work 17 hours. The girls' schooling had to be taken care of
and there were court appearances and things were all over the place. She rented a cottage where she could get a
lambing job but it was far from schools and the like. She and the children were not even allowed to
recover their possessions from the house, not even toys. This all led to the divorce. Proceedings were raised in 1987 and there
were a number of attempts by Counsel to persuade her ex-husband to agree to a
division. She said that there were 15 pages
of evidence which she might seek to lodge in process later on. The parties spent days in Parliament House
trying to sort matters out and 20 witnesses were in attendance. No. 16/28 was a document containing
proposals for settlement, apparently drafted by Counsel. The judicial factor had to be called back to
give evidence, and that was what was contained in the 15 pages which she
had mentioned. The hope was still that
Clachan of Penninghame would be ceded from the farm. Her father and brother were going to leave
money in the farm without interest but it was not to be. Her ex-husband's Counsel resigned.
[15] Her father died in September 1989 but there had been a Commission
at his bedside in the summer of that year.
He reiterated that he had tried his best for all the partners. She said, however, that this was not
pertinent since things had moved on. She
could not get the keys of the house which was awarded to her. The defender had arranged for the locks to be
changed and did not want to give them keys.
There had been some 14 different proposals put forward culminating in
the divorce proceedings. The judicial
factor was part of the divorce proceedings in the sense that he had been a
witness. According to him the division
of the property had been a matter for the parties to agree between them and it
was not for him to stand between them.
[16] The proof had been held between 8 and
[17] In 1992 matters came to a head with the decision by Lord Kirkwood. The farm at Baltersan was being depleted by
the judicial factor and it became insolvent.
The moveables and the dairy herd and fixed equipment were sold and the
farm ceased to be a going concern. Its
value would not then have met the outstanding debts. The judicial factor wrote a letter to the
Accountant of Court asking for directions since he had no funds. It was therefore insolvent in 1992 and
the judicial factor claimed that it was still insolvent today, as he had done
in the course of the hearing before Lord Drummond Young in 2003. Lord Kirkwood had decided that the
heritable creditor had a "pre-emptive" right to sell. The heritable creditor was by then her
brother, Gordon Graham Armstrong, and he sisted himself into the court action
which had been raised by the Clydesdale Bank in 1986. Decree in his favour was granted by the
Sheriff Principal on
[18] He then started restoring the farm. There had been grazing tenants in it but they
had to remove. He started a reparation
programme to cure the various depletions, being a farmer himself. Four years of court action followed as to who
had the right to sell. He wanted the
property to be divided rather than sold as that would have been the most
equitable thing to do. A declarator was
sought by the judicial factor in 1989 but that action was abandoned. While the judicial factor was insolvent he
had been solvent the year before. The
property had been built up again and lots of offers were made to the judicial
factor to divide it. One of these came
from her brother. That was contained in 6/33
of process. It was dated
[19] In 1994 there was a massive turn around with the judgment
of Lord Penrose. Her brother was in
the process and the judicial factor's position was that he would consider
nothing other than a sale on the open market.
On the other hand the 31 acres had apparently been sold but not on
the open market. The judicial factor
would not countenance public roup but he insisted that Baltersan had to be sold
after Lord Penrose's judgment in September 1994. The judgment had not gone in favour of her
family.
[20] In 1994 the property was advertised for sale and she was
interdicted from tying to prevent the sale, with the exception of the property
at Clachan of Penninghame. She referred
me to No. 6/34 of process, a copy interlocutor in terms of which Lord Clyde,
on
[21] Condescendence 3 opens as follows:
"The pursuer having regard to the duties imposed upon him by said interlocutor, is desirous of selling the greater part of said subjects under the exception of the farmhouse at Clachan of Penninghame which is currently occupied by the defender, and certain other lands ... ".
[22] The following words appear in Condescendence 5:
"The pursuer has assured the defender that the house which she occupies, and which forms part of the security subjects will not be exposed for sale. Said house and the land immediately around it have been specifically excluded from the subjects exposed for sale."
There is a map attached to that production and I was told that the excluded part referred to therein is the house and land with which this action is concerned.
[23] No. 6/29 consisted of extracts from correspondence between
agents for her brother, as heritable creditor, and agents for the judicial
factor dated 27 November and
[24] No. 6/48 was a document written by her brother, as
heritable creditor, on
"The Judicial Factor has no intention of selling the farmhouse and when we indicated that the Clachan would be sold we should have said that the sale would be under exception of the farmhouse. As far as we are aware, provided the sale of the farm goes through at the agreed price, the Judicial Factor will be able to convey that farmhouse to you, although at this point in time we are not sure how the value of the farmhouse will be calculated when the Judicial Factor accounts to you for your share of the surplus of any estate."
[25] There was a grey area from about 1993 when her brother and
the judicial factor were arguing over their powers. During that period her brother put a great
deal of time and money into the farm, which was in a dilapidated condition, to
such an extent that it doubled, if not trebled, in value.
[26] I was referred to No. 6/35 of process, a letter from her
then agents to the Accountant of Court setting out concerns which she
shared. The principal ones were as follows:
1. Was the judicial factor justified in rejecting the Armstrong family offers in 1987? and
2. In light of the ongoing costs, was he justified in his continued insistence that
the heritage should only be sold on the open market?
She wondered whether there was another agenda with this insistence on selling.
[27] In December 1994, there was an action raised in the Court
of Session about the Noltan land. That
action cost a lot of money. At this time
the judicial factor was citing insolvency as the reason for not transferring
the title to her but there was a great deal of money flying around. The judicial factor could have sold the 31 acres
from day one. In the accounts for a year
which she thought was around 1999 there was a sum of money from her ex-husband
put into the account, but it was not a sale on the open market. She did not know the details of the
sale. Her brother had offered £1.45m for
Baltersan. Another brother, on her
behalf, made an offer for the Clachan area, the area on the map. She could not remember exactly how much he
was offering but she thought that it was about £320,000 or so. She said that she was not allowed to see the
offers but the offer which was accepted by the judicial factor for Baltersan
was lower than her brother had offered.
No. 6/11 shows the sale as realising £1,350,000.
[28] In September 1995, following her late brother Roger's
ejection from the Clachan of Penninghame lands, the judicial factor put them on
the market too. Meanwhile she was
pleading to have the title transferred to her and had an assurance that it
would not be sold. The judicial factor
and her husband were wanting everything sold.
The defender was determined to prevent division.
[29] The balance of funds in March 1997 was around £400,000 and
there was nothing to prevent the house being transferred. The 31 acres and the road up to High
Baltersan Farm, where her ex-husband lives, were two pieces of property which
were transferred without being sold on the open market. At the same time the judicial factor was not
accepting her brother's offer or indeed an offer from any member of her family
representing her. Her children had even
offered to pay their father half of the top price for the Clachan. She pointed out that no special powers were
sought by the judicial factor for the sale of these properties. That concluded, she said, her exposition
about the background. It can be seen, I
think, that her evidence was quite difficult to follow.
[30] She then turned again to 6/25 of process, the joint minute. According to her, since she and her ex-husband
were the only claimants on the estate she was entitled to be granted a
disposition. She said that clause 6
related to property other than matrimonial property. I tried to explore this. She said that she had been wrongfully
excluded from the matrimonial home prior to the divorce proceedings. Baltersan was considered the matrimonial home
and she had been evicted from it before the divorce was granted. The date of separation was November 1996,
two years prior to the divorce, and the judicial factor was appointed in
February 1997. Her home then was
the farmhouse in Baltersan. There had
been nine houses at one time. She had
lived for 18 years in Baltersan and was evicted from there in July 1988. Vegetables were grown at Clachan of Penninghame
and it was boarded up by the judicial factor in 1997 before she moved in
there in 1998. She said that it was
recognised that the transfer of property in the joint minute was in lieu of a
transfer of matrimonial property. In any
event, her ex-husband clearly renounced his one-half share of Clachan of Penninghame
in her favour. Thereafter the judicial
factor proceeded "in reliance and in implement thereof". In 1989 correspondence was entered into
about drawing up a plan for the purposes of her getting a disposition in terms
of the joint minute. By letter dated
[31] I was referred to Nos. 6/39 and 6/40 of process. This was simply correspondence on
[32] She referred me to 6/48 of process again.
[33] The second defender had previously reported to the first
defender that he did not want to be held bound by clause 6, but this
formed no part of his defence to the action when he was still in it and
therefore he presumably still held himself bound. The first defender sought to claim the
property for the factory, despite her entitlement to a disposition, but he was
not a party to the divorce, only being a witness. Without Clachan of Penninghame being
transferred there had been no settlement whatsoever on divorce. There was no financial provision for her and
no fair and equal division of the farm, despite the necessary consent of the
heritable creditor having been obtained.
[34] She referred to section 15 of the 1985 Act. The joint minute had not been implemented due
to the intervention of the first defender, who was an outside party to it. The agreement had been ratified by the
court. Since, in the absence of
agreement, no provision had been made for her there had been a failure to
adhere to the principles of family law as set out in the 1985 Act. After failing to evict his daughters and the
pursuer her ex-husband had petitioned for the appointment of a judicial factor
to hound her for the next 20 or indeed 22 years and ensure that she
would not obtain an equitable settlement.
Her three daughters were also affected by this. Her ex-husband had used the first defender to
come in by the back door to question the validity of the order of the court in
granting divorce and in order to render his irrevocable consent to the transfer
of the property unenforceable. I asked
her in terms if she was saying that her ex-husband was manipulating the
judicial factor and pulling the strings and her answer, after some hesitation,
was in the affirmative. He was trying to
achieve their eviction from the property yet again. I posed the question whether the property was
outwith the partnership estate and she said that that was a grey area but the
31 acres to which she had referred was the only property with which the
judicial factor could intromit. The
present action covered property which, in 1988, had "fallen outwith" the
partnership estate. With effect from
[35] I was referred to 7/11 of process. This was the disposition by Christopher Robin
Grieves in favour of the pursuer and her ex-husband and it showed that the
property was disponed to them as Trustees for the firm. The disposition was granted on
[36] While the heritable creditor wanted to protect her interests
and those of her family, the first defender had been appointed by the second
defender to promote the latter's interests in order to defeat hers and those of
her children. The first defender was not
entitled to prejudice her right of relief against the partnership and/or the
second defender upon repayment by her of the figure of £300,000 to the bank in 1986. I asked about this in some detail as best I
could. She told me that it was her father
who had repaid the money on her behalf.
I asked her if her father had done this out of the goodness of his heart
and she said that he had. I also asked
if he expected anything in return and was told that he was protecting the
interests of her family and her. She
never asked him why. There were no
conditions attached to his payment. He
was protecting their interests.
[37] She told me that her understanding from Counsel was that the
judicial factor could not assume more powers than the partnership had. There had been many opinions and cases on the
matter. However, her concerns were as
reported by a letter dated
[38] After the divorce action the first defender, in February 1989,
brought an action of declarator and seeking reduction of the Clydesdale Bank's assignation
in favour of her father. He also sought
declarator that he was entitled to sell the farms free of encumbrances. In other words he wanted confirmation about
his rights, recognising that the securities and assignation in favour of the
heritable creditor pre-empted any rights he claimed. Yet, at the same time, a draft disposition of
the property was to be prepared in favour of her. She understood that a disposition could not
be drafted by the judicial factor and that it was more appropriate to have come
from the heritable creditor. I asked why
a disposition had not been granted if the judicial factor was willing to grant
it, she was willing to receive it and the heritable creditor was willing to
consent. She had no real answer to that.
[39] Discussions and negotiations were ongoing about settling the
partnership. If an agreement had been
reached about those matters then Clachan of Penninghame could have been
transferred without splitting the title.
By that she meant that there had been negotiations about division
involving splitting the farm into two halves.
While the joint minute had agreed for the transfer of the house the
issue of the land, which was part of the western half, had not been dealt with. That land was all held on the same title as
Clachan of Penninghame. Her comments on
this, however, were made with the benefit of hindsight. There was a grey area about who held powers
over the lands, the judicial factor or the heritable creditor, and as far as
she was concerned this was still a grey area in law. She understood that when the divorce
settlement was being negotiated the issue whether Clachan of Penninghame was or
was not part of the sequestrated estate was not a relevant one. The law did not necessarily provide for the
situation where a heritable creditor paid off the debt for personal and family
reasons, rather than for financial ones.
However, she could only speak to the position as she understood it to be
at the time of the divorce.
[40] The joint minute was not a relevant issue before Lord Penrose. The key point in that dispute had been which
of the judicial factor and the heritable creditor had power to sell. She said that she and her daughters stayed in
the house throughout by virtue of the rights of ownership and occupation
granted by the joint minute. That was
property over which the judicial factor had been appointed. The factor had full knowledge of the joint
minute. While giving evidence he had
stated that he would not stand in its way.
She said that costs had been meted against her because of needless
budgeting, while regular interim distributions had been made to her
ex-husband. There had been no fair or
equal division of the partnership assets.
She referred to No. 6/36 of process, a letter of
[41] Objection was taken to her embarking on an examination of the
accounts. She had, however, flagged this
up in her pleadings and I allowed the evidence to be led subject to questions
of competency and relevancy. After I had
done that she referred to Lord Drummond Young's Opinion. She said that the second defender had used
the process of seeking interim distributions from the factory estate in order
to make the joint minute unenforceable through placing the focus on the
insolvency of the first defender. The
joint minute did not make transfer of the property conditional on the solvency
of the judicial factory. She again
referred to Lord Drummond Young's Opinion to the effect that it was not
obvious why she should be prejudiced by distributions made to the other
party. The accounts submitted for the
year ending
[42] She referred to No. 7/15 or process, a statement of affairs of
the judicial factory as at
[43] No. 6/57 was a letter of
"Any cash deficit arising out of further costs incurred since February 2003 as well as any future costs should also be met by Mr Dunlop. In addition to the two above mentioned payments (£15,000 made in 2001 and £10,000 made in 1998) which were made to Mr Dunlop, £11,500 was paid out in January 1996 and a further £50,000 in December 1997, totalling £61,500. An equal distribution of £61,500 should also have been made to myself at this time. However, of this amount £24,288.03 was arrested and paid out to the Bank of Scotland. £20,000 was also arrested by Gillespie, Gifford and Brown, although this arrestment was not enforced. A total of £37,211.97 should therefore have been made out to myself at this stage. Whilst I received a cheque for the amount of £17,211.97, as part payment of the above £37,211.97, the cheque was never honoured by the judicial factor. Yet again, an unequal distribution was therefore made by the judicial factor to the amount of £37,211.97. The above illustrations made here are but a sample of the gross irregularities which have occurred in distributions made from this judicial factory estate."
No. 6/7, the 1999 accounts, showed a payment of £10,000 to her ex-husband. There was a reference in it to £6,151.98 attributable to maintaining the pursuer's property (Schedule 2). This related, amongst other things, to the keeping of ponies and the like. No. 6/4, the 2002 accounts, showed £15,000 paid to her ex-husband but they also showed funds of £12,527.24 arrested by her creditors. She said she did not know what that was about. She also said that there were a number of other payments made. These are set out in Article 6 of Condescendence and amount to £133,700.
[44] I was then referred to 6/52 of process, a letter from her
solicitor to the judicial factor's solicitor.
That set out a number of concerns, principally about payments made to
her ex-husband as compared to payments made to her.
[45] No. 6/56 was a letter, dated
[46] She was concerned about the expenses of litigation conducted
against her over the years. She had not
taken the actions which she had just for the sake of it but in order to secure
her title and obtain a fair and equitable division of the assets. She could not reasonably be expected to sit
back and take the next blow. In trying
to defend her position and that of her daughters she had been labelled
obstructive by the judicial factor.
[47] He had engaged in unwise conduct and litigation causing expense
to the factory. This was referred to in
Article 4 of Condescendence. In
particular he had failed to consign the sum of £333,826.07 in September 1987,
incurring substantial liability for interest and wasting a great deal of time
and expense. Secondly, he had brought an
action of declarator in February 1989 which he abandoned in about December 1990. Thirdly, on
[48] She then turned to her case in as much as it was based on medical
evidence. She said that she suffered a
mental breakdown and chronic depression after a very serious road traffic
accident on
[49] She then referred me to a number of medical reports, 6/15 to
6/22 of process and 6/71 to 6/73 of process.
The first of these, 6/15 was a report dated
"throughout
2001, Mrs. Armstrong became quite depressed with her general
condition. She was seen on
He had noted that her case was
reviewed by a Miss Costigan on
[50] No. 6/16 was a letter from her general practitioner, Dr David Baird,
dated
[51] No. 6/18 was another letter from Dr. Baird, dated
[52] No. 6/19 was a letter from Dr. John R.K. Neil
dated
[53] No. 6/20 was another letter from Dr. Neil dated
[54] No. 6/21 of process was a further certificate from Dr. Neil,
dated
[55] No. 6/22 was a letter, dated
[56] There were further letters, Nos. 6/71, 6/72 and 6/73 from
Dr. Baird, dated
REVISED
[57] The pursuer was then
cross-examined by Mr Govier. He
pointed out to her that in the pleadings she averred that she did not know, and
did not admit, whether the farmhouse was part of the sequestrated estate. She said that that was irrelevant at the time
the joint minute was entered into. There
was no consideration of that matter. She
was asked what her position was now and she said that Clachan of Penninghame
belonged to the partnership. It formed
part of the assets of the farm when the judicial factor was appointed. Mr Govier suggested that it was an asset
of the judicial factor but she made no answer.
She understood that the duty of a judicial factor was to preserve and
protect the property. On being asked
what were the assets with which he started out, she said they were the farms of
Baltersan and Clachan of Penninghame and the 31 acres. It was put to her that she had said
previously that the 31 acres was the only property the judicial factor could
deal with and she accepted that she had misinterpreted the meaning of asset and
estate and sequestration. On being asked
again if she accepted whether Clachan of Penninghame was part of the
partnership assets she said she did not know.
She was referred to 6/25, the joint minute which was signed prior to the
granting of divorce on
[58] The judicial factor had been in post since February 1987
and the divorce was granted in November 1988. He was not a signatory to the joint
minute. Furthermore, the court had not
interponed authority to clause 6 of the joint minute which was the basis
of the pursuer's claim. No extract of
the decree was available. She was asked
whether the judicial factor had expressed the hope that he would be able to
transfer title to her. Reference was
made to No. 6/36 of process, which has already been referred to. Eventually, she appeared to agree that as
early as 1989 the judicial factor perhaps hoped to give her a title. She said that she had no reassurance because of
the ongoing negotiations with the agents for the judicial factor. She was again asked whether it was made clear
that the judicial factor hoped to give her a title to Clachan of Penninghame
and she said that she did not know. I
have to say that I found that answer surprising.
[59] She was then referred to Article 4 of the
Condescendence. The first few sentences
are in the following terms:
"Thereafter the parties to said Joint Minute and the first defender proceeded in reliance and in implement thereof. In particular in 1989 the parties hereto entered into correspondence to agree a plan of the property at Clachan of Penninghame Farmhouse for the purpose of the first defender granting a Disposition in favour of the pursuer of said property in implement of her entitlement in terms of said Joint Minute."
By letter dated
[60] She was then referred to No. 6/29 of process, extracts
from a letter from the solicitors for her late brother to the judicial factor's
agents and the reply thereto, dated
" You have already corresponded with us in the past about giving Mrs Dunlop a title but Mrs Dunlop felt she could not accept a title from the Judicial Factor. Events have proved that she was absolutely right in this. We believe the Clachan of Penninghame should be excluded from the sale under the Standard Security & for Standard Security accounting purposes its value should be nil. Do you agree?"
She said it was not her position that she would not accept a title from the judicial factor. To that extent the letter from her brother's agents, who were also her own agents, was not correct. She could only obtain a title from the judicial factor but the letter was encouraging her brother to sell. I have to say I could not quite follow that answer. She confirmed that she had accepted that Clachan of Penninghame formed part of the sequestrated estate. She did not regard the permission to stay on the property granted by her brother, as heritable creditor, as some form of transfer of title or ownership. The judicial factor was the only one who could grant a disposition. She did not know what was meant by "excluding the property from the sale", as the extract from the letter narrated. The second extract, from the judicial factor's solicitor, indicated that they could not agree with the other solicitor's contention about Clachan of Penninghame. The pursuer said that the judicial factor's solicitors were saying it should be sold. She agreed that her solicitor was a Mr Pumphrey. He was the person to whom Hewats had written about the title. It was put to her that Mr Pumphrey had, in the early 90s, told the judicial factor's solicitor that she had refused to take title and that she did not recognise his appointment. On being asked whether she told Mr Pumphrey that, she said "Certainly not". She said that the writer of the first letter in 6/29 could have been Mr Pumphrey.
[61] She was then referred to No. 6/39 and 6/40. 6/39 was addressed to David Reid of Alex
Morison & Co., Solicitors who were the agents for the judicial factor. It was dated
"Dear Mr Reid,
Our position is clear; I trust that the undernoted instructions have been made clear to the judicial factor, his agents and the court."
It goes on:
"On behalf of myself, Justine, Josephine and Rowan, consistent with our home being at Clachan of Penninghame, we unequivocally reiterate our acceptance of a clear and proper title to our home at Clachan of Penninghame. For the avoidance of doubt, our position has never altered, in that we as a family reiterate our wish to remain here and the right to retain a clear and proper title to Clachan of Penninghame. Our constructive position remains that we have long awaited and expected a clear title to be rightfully transferred to us. Regrettably, as long as those empowered have withheld a clear and proper title from us, and to date not transferred title to us, title is not yet in our name."
She confirmed that she wanted a clear and proper title. No. 6/40 was a letter from Primrose & Gordon, her own solicitors. Mr Pumphrey is named as one of the partners and his reference appears on the letter. It is also addressed to Alex Morison & Co. and starts off:
"We have received a fax from our client dated 15 February stating that we have apparently misrepresented her position and the position of her three daughters to you. In this fax Miss Armstrong states as follows."
There then follows a reiteration of the material contained in the document to which I have just referred. Part of the second paragraph of 6/39 is contained within this. It runs as follows:
"It has been
unfortunate on your part to misrepresent me as seemingly refusing to take title
to Clachan of Penninghame. Please take
immediate steps to remedy the misconceived statements within correspondence
falsely stated as coming from ourselves and erroneously reinforced between
yourselves and agents for the Judicial Factor in recent communications between
yourself and them specifically against my instructions of 2 and
The letter goes on:
"There are other aspects of the facts which bear on other issues but it would appear that Miss Armstrong's position now is that she would be prepared to take title to the Clachan of Penninghame. We say 'appears' because we cannot be absolutely certain that she is prepared to take title from the Judicial Factor, although if it is the case that the Judicial Factor will have to be involved in some way in transferring title then it would appear to be the only way she is going to get a title. That is what her fax says she wants.
It is of course unfortunate when agents misunderstand the instructions of their clients and we can only apologise if any misunderstandings have arisen as a result of our misunderstanding our client's position."
She would not accept that this meant that her position had changed. When asked how she interpreted the letter from Mr Pumphrey she said that she did not write it. That was not her position, although Mr Pumphrey might have thought it was. She said that he had been her solicitor on and off between 1989 and 1999. She did not accept that he was comparing her position in 1999 with her previous position when he used the word "now". I asked her who she was complaining about when she mentioned being misrepresented. She said that it must have been Mr Pumphrey. She said that this was all in the context of the farm being sold and her being under pressure.
[62] She was referred to No. 6/9 of process, the accounts to
February 1997 which indicated that the farm was sold between 1996 and
1997. The letter therefore was some 2 years
later. She said that there was still
pressure and the matter was still concerning.
Mr Govier returned to No. 6/40. It was suggested that the letter showed that Mr Pumphrey
was not absolutely certain what her position was but she denied that. She had to agree that that was what appeared
on the printed page. She then said that
he was not present at the divorce hearing, but the relevance of that escaped
me. Mr Govier put it to her
formally that her original position was that she was not prepared to take a
title from the judicial factor and she decided in 1999 that she had no option
but to do that. She denied this.
[63] She was then taken to the events around the action in
"In the
foregoing circumstances, the decree of
It then goes on to indicate that at
the material times in 2001 and 2002 she was suffering from a mental breakdown
and unable to give instructions. She
referred to the medical reports which I have already mentioned. Mr Govier did not dispute that she had
suffered a serious road accident on
[64] She was then referred to No. 7/9 of process, a stated case
by Sheriff J.R. Smith at Stranraer.
She said she had never seen that document before. Mr Govier went through it with her to
some extent. It appeared from the
document that Mr Pumphrey appeared on
[65] With the consent of Mr Govier I allowed the pursuer to
lodge late two productions, a copy letter from Primrose & Gordon,
Solicitors dated
"Dear Justine,
As explained to you on the telephone a summons has now been prepared and will be served upon Lindsay Forbes on Friday. It may possibly be tomorrow but more likely to be Friday."
The summons was the one in this
case. Although she did not know it had
been prepared she agreed that it looked as if it had been prepared shortly
before
"Having looked at the Summary Cause Rules the letter from the sheriff clerk is correct and therefore there would be no point in trying to state otherwise. It is not the practice of Dumfries Sheriff Court to issue such a letter - at least not with the final paragraph in it - but technically what the sheriff clerk has said in his letter is unobjectionable and in accordance with the Rules."
The letter from the sheriff clerk was not a production and she had never seen it. She was referred again to No. 7/9 of process. The first paragraph at page 3 read as follows:
"At the diet of
Paragraph 3 of the letter read:
"I have sent a
copy of the summons to Mr Cavers in Kirkcudbright and so you need not
bother to intimate anything to him. I
however am precluded from saying anything to the
Paragraph 4 read:
"It is absolutely essential that somebody appears on Friday in Stranraer to (a) explain that a summons has been served which relates to the same subject-matter and (b) explains why it was not possible for Mary to attend on 13 November."
It appeared likely that the Friday
would be the Friday of that week, which was probably
"At the diet of
14 December 2001 the appellant was now represented by a Mr W. McVicar,
solicitor, Dumfries and the respondent again by Mr Cavers, solicitor,
Kirkcudbright. Mr McVicar made a
submission in terms of Rule 20(2)(b)(ii) to the effect that the appellant
could show good cause why she had failed to appear or be represented at the
diet of
It would seem therefore that Mr Pumphrey had been suggesting that someone should appear and Mr McVicar had been that somebody. The last paragraph of the letter read:
"I enclose a copy of the summons herewith. It will not be to your mother's liking. However, for the moment I do not wish to hear her comments on it. I will, however, be more than happy to discuss its contents with either her or you during the course of next week."
[66] The pursuer was then referred to the original summons in this
action and, in particular, to Article 1 of the Condescendence. It reads as follows:
"The parties are
as designed in the instance. The
defender is domiciled in
She was asked about the
contradiction between the averment that there were no other proceedings relating
to the same subject-matter and the contents of the letter, to the effect that
someone had to appear to explain that a summons had been served which related
to the same subject matter. She had no
useful comment on that and said that Justine, her daughter, was dealing with
it. She wondered whether the subject matter
was in fact the same and she did not know if Mr Pumphrey was dealing with
the matter. She said that she had never
met Mr McVicar and never gave him instructions. He appeared twice, on 14 and
[67] She was referred to No. 6/76, the extract of evidence from
the divorce proceedings, and this was read out.
She agreed that, according to what was said, the judicial factor
appeared to be willing to dispone the farmhouse to her provided that it be
purchased at present day valuation, that the standard security should be
discharged and that the consent of her ex-husband should be obtained. It appeared also from that that the judicial
factor said that it was a matter for the parties to agree between themselves
and it was not for him to disagree.
[68] The sheriff granted decree against her on
[69] She agreed that in 1992 Mr Pumphrey returned the
titles. She denied though that she had
told him that she would not take a title from the judicial factor, whose
appointment she did not recognise. She
went back to Mr Pumphrey in 1999 and asked him to write to Hewats saying
that she wished to take a title from the judicial factor because he had sold
all the lands and that was all that was left.
She said that the judicial factor's agents would have told her that
there were insufficient funds in the factory to enable the farmhouse to be
transferred. That, however, was not a
condition of the joint minute. She was
sure that she was given an explanation for there being insufficient funds. It was because too much money was being spent
on legal expenses and fees over many years.
It could all have been sorted out at the time of the divorce but she
agreed that her husband's agreement was not forthcoming. It was suggested to her that there was
nothing the judicial factor could have done since he had duties to the court
and she said that they now had a joint minute.
The representatives of the second defender had said that it was the
judicial factor who did not want to give her a title. There was a concern that the judicial factor
wanted her to pay his expenses. It was
suggested that the expenditure was incurred because of her delay and
obstruction and she denied that. She was
asked if she agreed that in 1989 she refused to remove from Baltersan Farmhouse
and that the factor required to raise an action in the
[70] On
[71] She was asked if in February 1996 she was ordered by the
Court of Session to remove livestock she had put on part of the heritage which
the judicial factor was trying to sell.
She said that she had not put it there - it had been there for 20 years. She agreed, however, that she had been asked
to remove it. It was suggested that she
had failed to do so and appeared at a hearing for breach of interdict on
[72] Clachan of Penninghame Farm was sold in 1996. No. 6/9 of process refers. She was asked to look at 6/36, a letter from
David Reid, dated
"For the avoidance of doubt the house was valued for the purposes of preparing a draft scheme of division. The judicial factor has no intention or need to sell the farmhouse at the moment and hopes that it may be possible for him to give your client title to the farmhouse at its valuation."
That was a letter addressed to Mr Pumphrey. No. 6/46 was a letter from Mr Reid
to the pursuer dated
"The judicial factor is now in a position to finalise the affairs of the judicial factory.
I enclose herewith a copy of a draft schedule setting out the possible final position.
The judicial factor has been advised by counsel that the joint minute in your divorce action is not binding upon the judicial factor. Accordingly, if you wish to retain the farmhouse then the valuation thereof will require to be taken into consideration in the final division of the surplus estate between you and your ex-husband. As at 29 February, in addition to the house you were to receive cash of £6,436. This will vary quite a bit depending on what further expense the judicial factor has to incur."
No. 7/5 was a letter dated
"We also need to know what your intentions are in respect of the future occupancy of the farmhouse. Having regard to the ongoing increase in legal expenses you are due the Judicial Factor, there is a real possibility now that the amount of your entitlement to the residue of the estate will not be enough to meet the valuation of the farmhouse. We will not be taking any increase in value due to the installation of the velux windows into account, even if their installation has increased the value of the farmhouse. The Judicial Factor may have some work to do to obtain retrospective Planning Permission and Building Warrants and could even be required to remove the velux
windows.
Accordingly, we would be grateful if you would let us know by Thursday 13th. July whether you are prepared to meet such a shortfall if it occurs."
Mr Govier asked the pursuer to compare the financial position as set out there with the one in the earlier letter. He then turned to paragraph 4 of 7/5. That was in the following terms:
"We also need to know whether you accept that you have to account for the value of the farmhouse in a final accounting of the residue of the Judicial Factory estate between you and your ex-husband.
If you are not prepared to
(a) Give us an undertaking that you will not carry out any further structural work without the Judicial Factor's permission, and
(b) Confirm you will meet any shortfall between what you are entitled to
and the valuation, and
(c) Accept that the value of the farmhouse has to be taken into account in
the final scheme of division between you and your ex-husband
all by Thursday 13th. July, we would want you to vacate the farmhouse by 31st. July so it can be put on the market.
I first wrote to you about this on 31st. May and have had no response at all. Obviously, I am aware that the cottage is your home and the home of your three daughters but we have to make progress to the final winding up of the Judicial Factory and I would prefer to work it out with you and your agents rather than application to the Court, which I am obliged to attempt to make you pay for."
No. 6/47 was a letter dated
"In the meantime I note that I have not heard back from you or Messrs Primrose & Gordon in respect of the other outstanding matters of my letter of 5th. July. I know that you still consult Messrs Primrose & Gordon on some matters but you intend to act on your own behalf on other matters. To be on the safe side, I therefore write to both you and Primrose & Gordon.
Since I have not heard back from you or Primrose & Gordon in respect to the matters raised in paragraph 4(a) to 4(c) the Judicial Factor now requires you and your family to vacate the farmhouse at Clachan of Penninghame by 31st. July 2000 so it can be put on the market.
If you continue
to occupy the farmhouse beyond that date, we consider that such occupation
would be in breach of the Interim Interdict pronounced by Lord Clyde on
I would much prefer if this matter was resolved by negotiations with you or your agents, but if we hear nothing from you or them then we have to proceed without your co-operation."
In fact they did not hear from her
and that gave rise to the
"The Pursuer
requires possession of said Clachan of Penninghame Farmhouse and the garden
ground pertaining thereto for the purposes of selling the same and completing
his duties as Judicial Factor foresaid.
By letter dated
[73] It was suggested that, starting out with correspondence in
1989, through representations in the summons in 1994, and in the correspondence
of 2000 the judicial factor had been quite prepared to grant title to the
Clachan of Penninghame Farmhouse. In
response to that suggestion the pursuer simply made reference to the land.
[74] Mr Govier then turned to the question of uneven
distributions made by the judicial factor.
In particular he turned firstly to the averments in Article 6
relating to known payments amounting to £133,700. The first of these was said to be £23,703
paid out in the 80s. The accounts for
the 80s were not in process. The
information about this was contained in the letter from Scott Martin, No. 6/52
of process. Paragraphs 6 and 7
thereof contained the figures which amounted to the £23,703. She agreed that payments to her in that time
were £2,400.60, £4,401.10 and £1,175.
She did not know why there was a discrepancy. It was put to her that part of the reason was
that she refused to provide receipts for certain payments and on the advice of
the Accountant of Court, who told the judicial factor not to send her any money
until she came to her senses, the payments were stopped. She said that she had had no notice of
that. Eventually she agreed that the
judicial factor was making payments through her ex-husband by way of payments
to account so that he could pay money to her to fulfil his obligation to
aliment the children. I understood her
to accept that that was the position but she was of the view that this meant
that she was paying for the aliment as well, because it was coming out of the
judicial factory. It was suggested to
her that this was simply an advance of the money due to her ex-husband and she
did not appear to accept that.
[75] The next payments referred to in Article 6 were £11,500
and £23,500 paid in 1996. She said that
she did not get £11,500 herself in 1996.
No. 6/10, the accounts for 1995/1996 were put to her. On the second page thereof there appears an
entry showing that each of the former partners, her ex-husband and herself was
paid £11,500. She said that she was not
aware that she got a cheque for £11,500.
It was possible that it was arrested by other creditors of hers. No. 6/9 of process was an account of
charge and discharge for 1996/97. It
showed a payment to her ex-husband of £23,500.
It was suggested that this was paid because he had applied to the court
for it and it was sanctioned, despite opposition by the judicial factor. She agreed with that at first and then said
that she did not recall the proceedings.
It was put to her that if an advance payment was made to one beneficiary
then that would have to be accounted for in the final payments. She said that she was just learning that and said
that she was confused.
[76] The next payment referred to in Article 6 was £50,000 in
1997. No. 6/8, the accounts for
1997/1998 showed that payment to her ex-husband. At the same time there is an entry for her
showing that a payment to her of £24,288.03 was made in the sense that funds to
that amount were arrested. She was asked
if she was aware that the payment of £50,000 was the result of a petition to
the court and at first she said yes. She
said though that she was not aware that the judicial factor had the consent of
the Accountant of Court to make the payment.
She was asked if she was aware that a lot of expense was allotted to her
because she had refused to take back certain items of property in the form of
furniture, animals and the like and the judicial factor had retained money in
respect thereof. She said that it was
not necessary to remove her animals.
[77] Schedules 2 and 3 of those accounts were examined. Schedule 2 shows fees incurred by the
judicial factor relating to Mrs. Mary Armstrong amounting to
£5,095.37. Schedule 3 shows
payments made in respect of her property (furniture, ponies, caravans and farm
sundries) amounting to £8,725.29.
[78] As far as the payments of £10,000 and £15,000 in 1998 and 2001
respectively were concerned she was not aware that they were ordered by the
court. If motions had been enrolled in
connection with those payments she could not remember if she had opposed
them. In 2001 she was very ill.
[79] With that the cross-examination was closed.
[80] She took the opportunity then to indicate that she was still
very seriously ill when the summons was served in 2001. Mr Pumphrey had acted on and off for her
for a long period of time and certainly for some time prior to her car
accident. The preparation of the summons
had been discussed before the car accident.
Indeed, at the time of her accident her legal aid application was
outstanding. Her only instructions
before the sheriff and the sheriff principal had been to have the action sisted
until she was well enough to deal with it herself. The letter to Justine (6/75) showed that the
summons was served without her knowledge and not on her instructions. She presumed that, given the urgency, Mr Pumphrey
had prepared it on the basis of the earlier discussions.
[81] As far as the extract from the divorce action was concerned
(6/76) she said that this showed that although the judicial factor was not a
party to the agreement, he had been a witness and had said that he would not
stand in the way of the agreement. As
far as the three conditions were concerned the condition as to her ex-husband's
divorce was purified by his giving his irrevocable consent in the joint
minute. Thereafter, the judicial factor
claimed until 2003 that he could not transfer title to the house because he
required her ex-husband's consent. That,
however, had been given back in 1988.
[82] She then called, as her only witness, George Frank Moore,
a chartered accountant. He had acted for
the Armstrong family since he became a partner in his firm in 1975. He had acted both for the father, H.G. Armstrong,
and his son, Gordon, when he became heritable creditor by assignation. He had also acted for Roger Armstrong
and for Gordon Armstrong in his own business. He was aware that the pursuer's father had
assigned his interest in the standard security to his son Gordon. He was aware of the family's involvement with
Baltersan. When Gordon took possession
of it, as heritable creditor, his firm prepared a report on the state of the
farm at the time. They also prepared the
annual accounts of his intromissions with the farm. He had a fair knowledge of the farm's
activities from 1993 to 1995. Before
that he had been advising her late father and acted as his accountant in 1985
and 1986. He was asked whether he was
consulted by her late father about the accounts in the years before the
appointment of the judicial factor and in particular whether he was aware of
the change in the profit sharing ratio.
Objection was taken to this, but I allowed the evidence, subject to
competency and relevancy. His position
was that there was a change from an equal partnership to a 95%/5% share in favour
of Mr Dunlop as against the pursuer.
This was a matter which should have been agreed between both
parties. The matter was changed in the
accounts by another firm. If Clachan of Penninghame
had been sold then the allocation of profit would have been different. Her father made efforts to try to keep the
farm business running when the overdraft was increasing. He had discussed with him the methods he
would use to keep the business running and pay off the Clydesdale Bank. He was not aware that her father had put in
£100,000 to keep the business going. Her
father was interested in raising the funds required to pay off the bank. He was very concerned to keep the land and the
farm in the hands of the family and did not want to see it sold. If that had happened she would have been
evicted. When he paid the money to the
bank and the standard security was assigned to him with effect from
[83] A proposal had been made in 1993 when her brother was in
possession. Her brother had obtained a
decree in his favour, which was 6/30 of process. Following that decree he was able to obtain
possession of the farm and enjoy it peaceably.
He took over the farm when it was in a run down condition and tried to
get it together again. He made a very
substantial difference and was left in peace to do that. He thought it prudent to make a complete
record of the farm and he went round it with Gordon Armstrong and his
brother Roger and made a detailed report on the state of it. A copy of that was sent to the Accountant of
Court. There was some doubt as to
whether, had the farm been sold, it would have covered the debt.
[84] He was then referred to 6/31 of process. This was a letter from the judicial factor to
the Accountant of Court dated
[85] There were still a number of negotiations and proposals put on the
table with a view to settling matters.
No. 6/33 was a set of proposals prepared by Gordon Armstrong. I have already dealt with these. The witness suggested these proposals to Mr Dunlop. Initially he made no comment but shortly
afterwards his solicitor wrote to say that he was offended that the witness had
contacted him directly and it was suggested that he might be guilty of contempt
of court. He was not surprised that the
proposal lay on the table for about a year.
In his letter to the Accountant of Court the judicial factor said that
all of this was to the detriment of Mr Dunlop and his ex-wife but the witness
did not agree that the actings of Gordon Armstong were to their
detriment. The work that was done to the
farm was hugely beneficial in terms of its value. The witness had seen the accounts prepared by
the judicial factor since the date of his appointment. That included the statement of affairs
prepared up to February 2007. Not
all these accounts were in process but, of consent, Mr Govier lodged the
earlier accounts for years ending 1988/1990.
These were allocated the process numbers 7/18 to 7/20. No. 6/11, the accounts for year ending
28 February 1995, showed the sale of Baltersan Farm for £1,350,000
and the sale of the roadway at High Baltersan for £1,000. They also showed the sale of silage,
realising £18,564 and the sale of hay at £970.94. No. 6/10, the accounts for the year to
[86] Of the sums realised £135,673 had been paid to Mr Dunlop
and £22,311 had been paid to the pursuer; £24,288 was allocated to her as
arrested funds and of that £12,703 was returned to the factory. Therefore the total paid to her or arrested
on her account was £33,890. The
beneficiaries had received £168,000 between them. He was asked whether, in light of the ongoing
costs, the judicial factor was justified in his insistence that the heritage
should be sold and he answered in the negative.
It would have been better to have reached a settlement for
division. He was not aware of the offer
made by the heritable creditor for the farm.
After the farm was sold £530,000 was paid to Gordon Armstrong to
account. This could be seen in 6/11. £29,018.23 was paid to Roger Armstrong at
the same time. Expenses of £253,544.58
were paid in 1997 and could be seen in 6/9.
That was described as interest due following a decision in Court of
Session as to the basis of the calculation of interest due on his debt. He thought that that sum included legal
expenses, which were quite considerable.
He was asked whether Clachan of Penninghame could have been allocated to
the Pursuer at the time of the divorce and what the balance of funds in the
hands of the judicial factor was then.
He said that in 1988 the judicial factor had no funds but had
considerable assets. He could see no
reason why title could not have been transferred then.
[87] He was then asked about interim distributions to Mr Dunlop. According to 6/10 of process, the accounts to
1996, a payment of £11,000 was made to each partner. In 1997 £23,500 was paid to Mr Dunlop
and nothing to her. In 1998 £50,000 was
paid to Mr Dunlop and £24,288 allocated to her as arrested funds. As he had indicated before, £12,703 was
subsequently returned to the factory. In
1999 £10,000 was allocated to her ex-husband and nothing to her and in 2002
£15,000 was allocated to her ex-husband and nothing to her. All of these distributions were made
following the sale of Baltersan and Clachan of Penninghame Farms.
[88] There was quite a substantial balance in the bank then and
nothing was standing in the way of transferring title to Clachan of Penninghame
Farmhouse to her. He thought that there
were sufficient assets to clear the liabilities at that time. He thought that the failure to divide up the
assets when there were sufficient funds had operated to the disadvantage of the
beneficiaries. The judicial factor had
spoken to him and suggested that title could be transferred if she was prepared
to meet the liabilities of the estate, but he thought that that was
inappropriate. Expenses should be
divided equally amongst the beneficiaries and should not be her responsibility.
[89] In cross-examination he agreed that the judicial factory
accounts were prepared on a non-accrual or prepayment basis. It was therefore not possible to say from a
perusal of any particular account whether there were other liabilities which
were not included in that account. He
said, however, that if subsequent accounts were looked at one could see whether
the factory was solvent at a particular time.
One could not see that on looking at any particular account. He agreed that these were proper accounts for
a judicial factory.
[90] He was then referred to 6/11.
The discharge showed payments to the heritable creditor Gordon Armstrong
of £530,000 to account and a payment to Roger Armstrong of
£29,018.23. There were funds held on
joint deposit with Hewats for the judicial factory and Primrose & Gordon
for Gordon Armstrong amounting to £470,000, funds held on joint deposit
with Hewats and solicitors for Messrs Service (the purchasers of Baltersan
Farm) amounting to £260,000 in connection with the value of the milk quota to
be transferred.
[91] The cash in bank was shown to be just under £40,000. Quite probably the accounts did not show what
liabilities the judicial factor had as at
[92] He was then asked to look at the accounts for the year ended
1999, No. 6/7 of process. He was
aware that, at that time, the pursuer and her family were living in the
farmhouse at Clachan of Penninghame and that there was a dispute about certain
property of hers which the judicial factor had to store and look after. Reference was made to Schedule 2,
showing certain payments made by the judicial factor in connection with ponies,
vet fees and the like amounting to £6,151.98.
There was a payment to account to Michael Dunlop that year in the
sum of £10,000 and he was asked how he suggested that the payments for the
pursuer should be accounted for. His
opinion was that they were simply part of the judicial factory. There had, over the years, been a number of
costs incurred by the judicial factor in operating the farm and he had accrued
income as well. That was what judicial
factors did. It was up to them to
protect and preserve the estate. He was
aware that it was possible for a prospective beneficiary to petition the court
for an advance payment. In answer to a
question from me he said that he had never acted as a judicial factor
himself. He accepted that where one
party petitioned the court for a payment the court might or might not order a
payment to be made and might or might not order an equal payment to be made to
an equal beneficiary. He accepted that
if there was evidence that one or more of the payments was the result of a
petition to the court then that might provide a partial explanation for apparently
unequal payments.
[93] He was asked about negotiations and proposals and in particular
about 6/33 of process, the proposal dated
[94] Before Gordon Armstrong had taken possession of the farm
in virtue of his heritable security the judicial factor had placed a manager on
it. The judicial factor himself was not
a manager and neither was the witness.
He agreed that sometimes farmers, for one reason or another, did a good
job and sometimes they did not. When
Gordon Armstrong took over, the farm was in a fairly run down state. He went with Gordon and Roger Armstrong
and made a report. Although he had a
number of farming clients he had no particular farming expertise. He was, however, accompanied by two
farmers. Gordon Armstrong did not
believe at that time that if the farm had been sold it would have been in
anyone's interests. There was some
speculation that it might not realise very much in excess of the debt. That was a consideration which the judicial
factor would have had to have in mind when deciding how to deal with the asset.
He thought that it would be incumbent on
a judicial factor to be prudent, to make sure that assets were preserved and
not to spend more money than he had.
This particular judicial factor had been acutely aware of that over the
years. If he took advice from experts
then that was what he should have done.
The advice might have been erroneous but it was up to him to act in good
faith.
[95] In re-examination he agreed that Gordon Armstrong had
obtained advice from others, such as GM Thompson & Company about the state
of the farm.
[96] Reference was made to 6/37 of process and objection was taken
to this. I allowed the witness to read
part of this, subject to competency and relevancy. This was a letter from Gordon Armstrong
to the Accountant of Court dated
"In January 1993
the HC (Heritable Creditor) took possession of a very different farm from that
in December 1986. The JF had
vacated taking everything that could be taken or sold. The farm was completely empty, no farm
machines, moveables or livestock.
Further to that it was left in a deplorable state of repair, broken down
buildings, fences and gates almost non-existent, buildings littered with
rubbish and dung, slatted shed stocked with solidified slurry the effluent
running from the buildings and silage pits, fields barren after crop failures
etc. On the whole a very depressed
site! I enclose a copy of the report
dated 4th. February 1993.
It will be unlikely you have seen this.
Photographs can support this if necessary. Geo. Gourlay of GM Thompson, Estate
Agents,
The HC set about effecting all such repairs and making good such defects as was necessary to maintain the Security Subjects in good and sufficient repair, and effecting such reconstruction, alteration and improvement on the subjects as would be expected of a prudent proprietor to maintain the market value of the subjects. This was done within the severe financial constraint of the Baltersan Farm Account set up by the HC to account for all the intromissions of the HC. During this period under the management by the HC the Security Subjects made a profit, and that profit became available for the Judicial Factory."
In the opinion of the witness the intromissions of the heritable creditor had a beneficial effect on the property. It sold for a very good price in due course. The efforts of the heritable creditor contributed to its nearly doubling in price.
[97] With that the pursuer's case was closed.
(It should be noted that the sale
of the 31 acres is included in 6/6 of process, the accounts to
[98] The defender then gave evidence. He was 64 years of age and a Chartered
Accountant. He had started as a Chartered
Accountant in 1968 and had held an insolvency permit since 1985. He was a member of his Institutes'
Disciplinary Tribunal and had been for approaching 15 years. He had three judicial factories ongoing and
had completed a number of others.
[99] Production 7/8 was a certified copy interlocutor
appointing him judicial factor in this case.
Before that he had been appointed ad
interim in November 1986. The
first duty of an interim appointee was to take an inventory and valuation of
the estate, report that to the Accountant of Court who thereafter fixed caution.
Once caution was found and intimated, confirmation
of the appointment could be made. That
was what happened in this case. The
principal assets when he investigated them were the farms of Baltersan and
Clachan of Penninghame, the livestock and the moveable equipment. He was appointed because of the apparent
actings of one party towards the other.
No agreement could be reached between them. The Clydesdale Bank as the heritable
creditors intended to sell the property and a date for offers was set but
Michael Dunlop petitioned for his appointment when his solicitors heard
that the standard securities had been paid off and assigned to Miss Armstrong's
father. Eventually the judicial factor
appointed a farm manager.
[100] No. 7/18 were the accounts for 1986/88 and the discharge
showed the management expenses of the farm.
The appointment of a farm manager was normal practice for a factory like
that. He ran the farm on that basis
until Gordon Armstrong took possession as heritable creditor. No. 6/30 was a decree in his favour
dated
[101] Baltersan Farm was sold in around 1994/95 and the assistance of
the court was required before that. All
attempts to repay the standard security had failed. He could not get the heritable creditor to
quantify the debt due to enable it to be repaid.
[102] No. 6/34 was an interlocutor of Lord Clyde, to which I have
already made reference. It interdicted
the pursuer ad interim from taking
certain steps to interfere with the proposed sale. He recalled that litigation. Article 4 and 5 of the Condescendence
were read. As far as the witness
recalled, that related to the sale of Clachan of Penninghame, although 6/9
would tend to indicate that that was sold in 1996/97. No. 6/11 of process indicated that
Baltersan was sold between April 1994 and February 1995. In any event, the present pursuer had
attempted to interfere with the sale by, amongst other things, distributing
leaflets which had the potential to deter prospective purchasers. Article 5 of the Condescendence in that
action contained an averment that he, as pursuer, had assured the defender that
he had no intention of selling the farmhouse and that was his position. When Clachan of Penninghame was sold the
farmhouse was not included. He had
always hoped to be able to transfer the title of the farmhouse to the pursuer
with the consent of Mr Dunlop. It
could go to her at valuation. He was
aware that that was the pursuer's wish, although he qualified that by saying
that it probably was not her wish that it be transferred at valuation. There was an error in his accounts. When Clachan of Penninghame was sold, as
reflected in 6/9 (the accounts for the year ending 1997), it realised
£130,600. The valuation till then had
been £93,000. Unfortunately, he omitted
to include the value of the farmhouse in his accounts, the farmhouse having
been excluded from the sale. That
omission was not noticed by the Accountant of Court either. It was eventually put right in the account
for the year ending February 2003 (7/14 of process). It was included at a valuation of £60,000 as
valued by GM Thompson & Company, Chartered Surveyors in April 1999. That had caused no prejudice to the
pursuer. Throughout that entire period
she had been living in the farmhouse on no real basis at all. He did not charge
her rent, but he insured the property.
There had been difficulties over the terms of repayment of the standard
securities which had been assigned to the pursuer's father and then to her
brother. That was the subject of
substantial litigation which was eventually resolved with the decision of Lord Kirkwood,
to which I have already referred.
Eventually, repayment was made to the brother. No. 6/9 (the accounts for year ending
1997) showed a payment of interest etc. of £253,444.58 to him. No. 6/11 (accounts for year ending 1995)
showed the principal sum of £530,000 paid to him to account of his debt. No. 6/8 of process (the accounts for the
year ending 1998) showed a final payment of £50,000 being paid to him in
settlement of all claims. That was the
negotiated figure to reach a final settlement.
With that payment the standard securities were discharged.
[103] He thought that the sale of stock, crops and implements was in
respect of both farms. After the sales
all that was left was the farmhouse.
[104] No. 7/14 was the accounts to February 2007. That was the most recent set of accounts
prepared and submitted. It did not
disclose accruals and repayments, so did not reflect ongoing liabilities.
[105] Clachan of Penninghame Farmhouse was still valued in the account
at £60,000, the historical valuation.
No. 7/15 was a statement of affairs as at
[106] He was then referred to No. 6/76, the transcript of evidence
from the divorce proof. He was reminded
of the terms of this and of the fact that Lord Morison referred to three
objections to the transfer of title. The
first of these was the discharge of the security and that objection had now
been met. The second one related to the
existence of a lease. That would require
to be resolved by payment by the judicial factor to Mr Armstrong rather
than a payment to the judicial factor of £20,000. That payment had been made as was reflected
in the accounts. The judicial factor
found it difficult to recall what precisely was in his mind when he was
answering Lord Morison's questions.
He was saying that any agreement was a matter for the parties and it was
not for him to interfere. It was
difficult, though, to remember the context of all that. He presumed that he would have been
indicating that any agreement by them was not binding on him. He was aware that Miss Armstrong could
get the farmhouse provided there was no interference with his duties as judicial
factor. His solicitors wrote to hers
asking them to draft a disposition. That
was shortly after the divorce and on his instructions. At that time she might have been living in
Baltersan farmhouse and he raised eviction proceedings against her.
[107] He agreed that in 1994 per article 5 of the condescendence
to which I have referred it was not his intention to sell the farmhouse. 6/44 was a letter dated
[108] 6/47 was another letter from Mr Reid 9 days later
telling her to vacate by 31 July.
[109] She did not and had not vacated the farmhouse and Mr Cavers
was instructed to raise the proceedings in
[110] 7/6 was a letter to Anderson Strathern, who acted for her, dated
[111] The farmhouse had increased in value and the factory had a cash
deficit of just under £28,000. The
statement did not reflect costs which had been incurred from February 2003. The judicial factor was looking for the
pursuer to provide funds of around £46,000 on the understanding that any
surplus following taxation would be refunded to her. Mr Dunlop had agreed to the settlement
proposal. The judicial factor would have
been happy to settle the matter on this basis.
Indeed that had been his position all along. It had not happened because Miss Armstrong
refused to accept his appointment as judicial factor or to appreciate what he
was required to do. That had been her
position from the outset.
[112] 7/17 was a valuation of the farmhouse dated
[113] He was asked what had caused the state of liquid insolvency. He said that the cause was the costs he was
forced to make in trying to progress the factory. There were costs of litigation, costs of
maintaining and looking after personal belongings of Miss Armstrong during
and following the sale of Clachan of Penninghame Farm and costs incurred in
[114] The distributions to account did not help either. The more that was paid out, the less money
there was in the bank. When he first
became involved in the factory the pursuer was living in Baltersan
farmhouse. He had to raise proceedings
to have her evicted and that was successful but he thought that there was an
appeal. That was in the late 1980's.
There were also proceedings to have him
removed raised by the pursuer in the Court of Session. He could not remember when but they were held
to be incompetent. He had raised an
interdict action in which interim interdict was granted by Lord Clyde in
September 1994. There was also a
move by the pursuer to interdict him from carrying out his duties. That was granted ad interim but recalled when the Court was made aware of the
interdict granted by Lord Clyde.
[115] After she was evicted from Baltersan farm she moved into a
caravan on Clachan of Penninghame Farm and then into the farmhouse itself. There was some livestock on the farm
belonging to her and her daughters. The
sheds were also full of her personal belongings including various items of
furniture. When he sold the farm she was
asked to remove the belongings and she refused.
Missives had been concluded for the sale and he took what steps he could
to try to remove the belongings but to no avail. He had to take action in Court to try to
obtain guidance or orders. He sought an
order in connection with the livestock and various decisions were made but
eventually he obtained an order. She did
not comply. He could not remember the
precise nature of the action but there was a hearing before Lord Milligan
in connection with the livestock. The
livestock consisted of sheep and ponies but no cattle. He thought that he obtained some sort of
order for the removal of the livestock.
She was repeatedly asked to co-operate.
He eventually had it removed and every time he asked her where he was to
deliver it she told him to return it to the farm. Eventually she was held to be in contempt of
Court and imprisoned for 60 days.
She had been asked by Lord Milligan if she would co-operate with
his reasonable requests, acknowledge his appointment and let him carry out his
duties but she point blank refused in Court.
He arranged for her personal belongings to be stored at various
locations and for the livestock to be looked after by his former farm
manager. Expenditure was incurred as a
result.
[116] The
[117] He was then asked about distributions. He said that at the commencement of the
judicial factory he approached his bank and was able to obtain overdraft
facilities. He arranged with both
partners that they would get certain monies.
Part of the monies payable to Mr Dunlop were to enable him to meet
his liabilities to aliment the children.
He paid him by Standing Order although he did not know whether Mr Dunlop
handed the money over.
[118] He initially asked both parties to give him receipts so that he
could confirm to the Accountant of Court that payments were made. Mr Dunlop complied with that but Miss Armstrong
refused. Ultimately he told her that if
she would not give receipts then he would cease making payments and that is
what he did. He was also concerned about
the level of the bank borrowings and took advice from his solicitor. The latter confirmed his views and he stopped
making payments to both.
[119] He referred to number 6/52 of process, the letter from Anderson
Strathern setting out various concerns about payments made. He said that the references in paragraph 6
to payments of around £2,800 and £2,400 were in fact the wrong way round. The pursuer had received the greater payment
and the difficulty was that the bank had failed to implement his orders
timeously.
[120] He also said that a full reply had been made to that letter.
[121] If there was any difference between the two partners in respect
of advance payments then that would be brought out in the final account and the
final split would be 50 - 50.
[122] As far as the averments in condescendence 6 were concerned
he was referred to 6/10 which showed not only a payment of £11,500 to Mr Dunlop
but also one to the pursuer. She had
indicated that she had not received it and a perusal of schedule 3 in 6/7
of process showed that the sums had in fact been arrested. Therefore it had not been paid to her.
[123] His initial explanation about distribution related to the £23,703
in the 1980's. The third figure
mentioned was £23, 500 paid in 1996.
That appears in the account number 6/9 of process. He recalled that there had been a hearing in
front of Lord Dawson. Mr Dunlop
was seeking an interim distribution which he opposed. Lord Dawson found in his favour but
indicated that it appeared that according to the figures the possibility of a
distribution was a live one and that the judicial factor should consider it. He told the Accountant of Court about this and
the latter confirmed that the distribution should be made.
[124] He did not recall the format in which Mr Dunlop sought the
payment to account and said that Miss Armstrong at that time did not seek
a similar or, indeed, any sum.
[125] As far as the payment of £50,000 in 1997 was concerned, reference
was made to 6/8 of process. £20,000 was
shown as a payment to Mr Dunlop and £24,288.03 was allocated to the
pursuer as arrested funds. Again there
had been an action by Mr Dunlop for a distribution. Number 6/7 showed the arrested sums of
£24,288.03.
[126] Certain creditors of the pursuers had arrested funds in his hands
including the Bank of Scotland and a previous firm of solicitors. The Bank of Scotland had raised an action of
furthcoming and the Accountant of Court was kept informed. The debt was paid by him and other funds were
retained by him. Mr Dunlop obtained
£50,000 and as he recalled it the pursuer should have received the same amount
but because of the arrestments she did not.
There was a balance remaining in her favour of approximately £17,000 and
he wrote her a cheque for that amount.
Having taken legal advice he cancelled the cheque because of various
expenses which had been incurred in storing her livestock and dealing with
court actions and the like. Schedules 2
and 3 of 6/8 of process showed some of these expenses amounting to £5,095.47
and £8,725.29.
[127] In any event the Accountant of Court had seen the accounts and
approved them and any discrepancies would be made good in the final accounting.
[128] 6/7 related to the payment of £10,000 in 1998. He did not recall the circumstances of
that. Schedule 2 in 6/7 dealt with
certain payments in connection with the pursuer's property. They amounted to 6,151.98. There was no
reference to sheep in that schedule but as far as he recalled it when the
Clachan farm was sold he came to an agreement with the purchasers that the
sheep could remain on part of the farm until they were removed. Eventually they were removed by the pursuer's
brother Gordon.
[129] He then referred to Number 6/6 on which appeared no payments
to account. There was a heading "Other
Expenses" containing a figure of £3,361.87 attributable to the pursuer for
storage and legal fees.
[130] 6/5 was yet another example of this type of thing.
[131] 6/4 showed the payment of £15,000 to Mr Dunlop in 2001. He thought that that was a matter which was
dealt with by Temporary Judge Coutts QC. The factor opposed the payment but was
required to make it. No motion was made
by the pursuer for a payment to her at that time and he did not offer to make
her one. Again the account was approved
by the Accountant of Court.
[132] In cross-examination he said that he did not require to obtain an
insolvency practitioner's permit because he was practising in that field before
the changes in 1985. There was some
discussion about the 1985 Act and he said that he was not appointed under
that Act. He was not a Trustee in
Bankruptcy. Such a trustee did not
necessarily discharge his duties merely by realising all the assets and selling
them. It depended on the circumstances
of each case. He was asked if Trustees
in Bankruptcy had to investigate the reasons for the sequestration and he said
that he would take a statement from the debtor as to what caused it. In principle a judicial factor and a Trustee
in Bankruptcy could be regarded as fairly similar, although there were
limitations imposed on a Trustee in Bankruptcy in relation, for example, to the
sale of a matrimonial home.
[133] The letter of
[134] He was asked about the different types of relationship between a
judicial factor and the estate and people involved with it and a Trustee in
Bankruptcy and the debtor. A Trustee in
Bankruptcy acted for the benefit of the creditors. In a judicial factory he might be realising
assets with a view to paying out the beneficiaries of the business to which he had
been appointed. He would not always
concentrate on selling assets. He
recalled one sequestration where he managed to pay the creditors in full
leaving the debtor in possession of the heritage.
[135] He was asked whether in this particular judicial factory he was
acting in the interests of the family and said effectively that he was carrying
out his duties in terms of the interlocutor.
There was then a discussion about the existence of a heritable creditor
in the judicial factory and he said that ultimately the right of a heritable
creditor was to be repaid. The judicial
factor should be a neutral person and was ultimately accountable to the Court. He was not responsible for the people involved. He objected to a suggestion that he was
anxious to sell assets and said that he tried to provide financial means for
the pursuer at the commencement of the judicial factory but ultimately because
of the reliance of it on bank borrowings he had to stop. She suggested that she had asked him to pay her for the work she had been doing and
was doing on the farm and he said that he had decided not to employ her as a
farm manageress. He was prepared to make
allowances to her and to her ex-partner.
He regretted his error in leaving out of certain accounts the residual
value of the farmhouse.
[136] It was suggested that he had failed to budget prior to
distributions and that that had led to insolvency. He said that he was not required to budget as
was indicated. He was not responsible
for the costs which had been accrued. He
had not sought special powers to sell heritage.
Neither had he sold Noltan. The
31 acres to which some reference had been made was held by Noltan Limited,
over which he had no authority. When it
was sold he had persuaded Mr Dunlop to remit the proceeds to the judicial
factory. He was asked why he had done
that and said that if he had not done so he would have been criticised. He did not think that the 31 acres had
been in the inventory of the sequestrated estate which was prepared when he
first took up office. The sale of the
land was referred to in 6/6 of process.
It was suggested that he had incurred legal fees and obtained counsel's
opinion as well as raising an action in the Court of Session about the 31 acres
and he said that if so that would be correct but it was for the benefit of the
sequestrated estate. There was a
discussion about the question whether a judicial factor insisted upon open
market valuations when he was selling property but I am afraid that it was
rather difficult to follow. What it came
to, I think, was that the suggestion was that the 31 acres were not sold
on the open market so the question was why was the judicial factor insisting on
selling the rest of it on the open market.
[137] He agreed that the pursuer had intimated that her intention was
to take heritage rather than its price, which presumably meant its value. She said that there was no point in her
taking money on the sale of the property just so she could buy it back
again. She claimed that she had made
that point before Lord Kirkwood and the defender agreed that she may have
done. He had a vague recollection of her
seeking a court order on
[138] He was asked if he agreed that an undertaking given by him was an
undertaking in effect given by the court and he said he was not certain about
that. It was then suggested that he had
given some undertaking which appeared, as I understood it, to be based on the
proposals set out in 6/33 of process. He
said that he had given no undertaking.
The suggestion appeared to be that there had been some document in
writing but there had been no evidence about that given in the pursuer's case
and nothing was produced. In any event
he denied giving any such undertaking.
He accepted giving evidence in the divorce action before the agreement
was reached by the parties thereto. He
also agreed telling the court that he would not stand in the way of any
agreement reached by the parties. He
denied, though, that that was an undertaking given by him in the terms
suggested by the pursuer. He reiterated
that the agreement was not binding on him.
His agents wrote to the pursuer about the house but he did not recall
doing so himself. It was put to him that
he did write to her to the effect that he was going to withdraw the insurance
but he did not remember that, although he accepted that there was some correspondence
about insurance. He remembered that
water was a big issue for her. His
solicitors wrote offering to transfer the title because there was a hope that
he could let her have that for value.
There was an undertaking in the Joint Minute that neither party would
impede the judicial factor in carrying out his duties and that never
happened.
[139] 6/36 was a letter from the judicial factor's Edinburgh solicitor
to the pursuer dated 18 November 1994 indicating that he had no
intention of selling the farmhouse. He
reiterated that his hope was that he could convey the farmhouse to her at the
value in the accounts. She suggested
that there was no mention of a valuation in the Joint Minute and he repeated
that he was not bound by that. He was
asked why he had not sold the house along with the rest and said that in
hindsight he should have done. The
agreed price referred to in that letter was £130,000 which was more than the
valuation. He had not known what the
sale of Clachan farm would raise. He had
not conveyed the farmhouse to her on sale of the land because she was impeding
everything he was trying to do in selling the farm.
[140] 6/39 and 6/40 were letters dated
[141] 7/5 was a letter of
[142] 6/56 was a letter of
[143] It was suggested that even when the three conditions mentioned by
Lord Morison were satisfied he still followed the wishes of Mr Dunlop. He said that the position of the judicial
factory had changed over the course of it because he had had no
co-operation. The transfer would have
been at valuation if all things had been equal and he had not been forced to
cover all the expenses he was forced to incur.
He was asked in what way the removal of the animals was in the interests
of the factory and the family and he said that his duty was to realise the
assets as judicial factor. He required
vacant possession to sell the land. He
did not have any duties to the family as such.
It had been necessary to sell the farm for the benefit of the
factory. It was not done for his own
benefit. It appeared that she was
seeking to attribute some moral and social responsibility to him but he had a
duty to realise the assets to the best of his ability. At the beginning of the factory Clachan of Penninghame
Farm was valued at around £93,000. The
house was later valued at £60,000 after the sale of the farm. He was asked what persuaded him to put the
house into the factory accounts. He said
that counsel had mentioned something and he realised it was not in the
accounts. It was suggested that it was
not in the accounts for the next 14 years but he denied that since it was
included in the land. He apologised for
his error in forgetting to put it into the accounts separately following the
sale of the land. He was asked if the
omission of the house could create a reasonable expectation in her mind that
the house was not part of the factory estate and he answered in the
negative. He could not comment on what
her expectations might be. The house was
an asset in the judicial factory from day one.
It was suggested that he refused to transfer the title to the pursuer in
order to bail himself out financially because of his inability to budget and he
repeated that he had not been required to budget. Throughout the history of the factory he had
been impeded by her in his efforts to realise the assets. She had caused the factory a vast amount of
expense in litigation and looking after belongings and the expenses had
accumulated. He had to meet these
expenses and the only asset left was the farmhouse. He either had to sell it and make a full
account to the partners or funds had to be injected. It was suggested that when he removed the
possessions he had no consideration of whether it was partnership property or
not and he said that the property was not partnership property. It was suggested that he should accept
responsibility for his failures and make a claim on his insurer but he retorted
that this showed a lack of knowledge on her part as to what a bond of caution
was for.
[144] He then turned to the question of unequal distributions as she
put it. He had had to pay a number of
these by order of the court even when he had opposed distribution.
[145] The payment of £50,000 to Mr Dunlop referred to in 6/8 of
process was one which he made having consulted the Accountant of Court. He could not remember if he had been ordered
to do it but he had taken the Accountant of Court's advice. In 1998, when the £50,000 was paid, she
was effectively paid as well, in that her creditors were paid. The cheque for £17,000 which she was sent was
stopped because of the reasons he had already explained, i.e. legal expenses
and expenses he was incurring through looking after her personal property. She complained that he had himself incurred
expense by raising an action of declarator and abandoning it and he said that
he may have done but he could not remember.
The action that he raised in the Court of Session about the security was
raised for good and valid reasons.
[146] 6/10 showed the payment of £11,500 to each partner. These payments might not have been with the
consent of the Court. The amount allocated
to her was arrested.
[147] 6/7 showed a payment of £10,000 to Mr Dunlop and 6/4 showed
a payment of £15,000. He thought that
that one was because of an order made by Temporary Judge Coutts QC. She asked why the funds which were arrested
were not returned to her when they became available to the factory and he said
it was because he received advice that they should be offset against the
expenses incurred in looking after her animals.
[148] It was suggested that Mr Dunlop had received £135,674 and
she had been allocated £33,811, most of which was arrested. She wanted to know how that was
equitable. She did not agree with the
figures about funds allocated to her but he said that matters would be adjusted
in the final account. He was asked again
why he had not budgeted wisely and he said that he could not budget for the
costs of these court actions. He had
sought directions in 1993 when there were no cash funds available but he still
had the farm at that time. He was asked
why he did not run the farm and he said that that was because her brother had
taken possession of it. The payments had
possibly been made following the sale of the farm and at a time when the
factory had plenty of money.
[149] In the 1998 accounts the sum of £86,185.63 was said to be in the
bank. In 1999 it was
£58,146.47. In 2000 it was
£79,948.26. In 2001 it was
£58,267.35. In 2002 it was £40,031.29. In 2003 it was £28,494.01 and in 2004
it was £22,779.60. According to the
accounts, whether statements of affairs or accounts of charge and discharge,
for 2005, 2006, 2007 and 2008 the figures were £5,964, £6,000, £5,265 and
£5,218 respectively. He was asked why he
was not able to transfer the farmhouse when there appeared to be money in the
bank and his answer was that there were a number of ongoing expenses that were
being incurred and he required funds to carry out his duties and wind up the
factory. It was put to him that out of
an estate sold for around £1,941,000 payments of £182,000 had been made to the
beneficiaries and the pursuer wanted to know how this could be regarded as a
competent judicial factory. He referred
to the costs of litigation, the costs of maintaining property and the costs of
the
[150] He agreed that the costs of maintaining property were incurred
some time ago during the 1990's. Lord Cameron
had been asked to give him certain powers in that regard, his opinion being
number 6/3 of process. He had not in
fact granted the powers sought. It was
suggested that he had said the expenses could not be set off but as I read his
judgment he had simply decided that that was not a matter to be decided in that
particular process. The factor had set
off these costs having taken advice.
[151] He was asked if he had done anything to recover these expenses in
the proper way such as by raising an action and he said that he could do
that. He did not believe that he had in
fact raised an action in
[152] He had not replied to that letter but his agents might have. Reference was also made to 6/60 of process, a
letter of
[153] It was suggested that Mr Dunlop had given up his half share
and Mr Forbes said that he may have done but that was not his (the
witness') position. It seemed to be
suggested that the witness was using Mr Dunlop's lack of consent as an
excuse not to transfer the property and he said that he needed his consent only
in the sense that if it was not to be sold on the open market then the property
would have to go at a valuation.
[154] In re-examination he said that the omission in the account of the
farmhouse was not the subject of any correspondence from the pursuer or any
agent on her behalf. He thought perhaps
that he had become aware of it because of something that had been said in Court
by counsel. It should have entered the
accounts after he sold the Clachan of Penninghame Farm but as soon as he became
aware of it he reported the matter to the Accountant of Court and included it
in the next year's accounts.
[155] The next witness was Neil Cavers, 59, a solicitor. He had acted for the judicial factor
throughout the period of the factory. At
the commencement of the factory the assets consisted of two farms, Baltersan
and Clachan of Penninghame, along with stock and machinery. He acted in the sale of Baltersan and also
the sale of Clachan of Penninghame Farm.
The only remaining asset apart from cash was the farmhouse. When he was first involved the pursuer was
living in Baltersan farmhouse and he thought that she stayed there for about a
year. An action was raised against her
for recovery of possession of the property and decree was granted. He could not recall if that was appealed.
[156] She then moved to another property and then to a mobile home on
Clachan of Penninghame Farm. He did not
know how long she stayed there but eventually she moved into the
farmhouse.
[157] He was not involved in any way in the divorce negotiations.
[158] The farmhouse, when she moved in was, as it was still, an asset
of the judicial factory. He understood
that after the divorce she had been permitted to take possession by the
judicial factor. There was no lease and
no payment of rent. He was told by the
judicial factor to communicate with her solicitor Mr Pumphrey of Primrose
and Gordon in connection with a transfer of the title of the farmhouse to the
pursuer. That was in 1989. He wrote to Mr Pumphrey. The proposed transaction would have involved
a disposition by the judicial factor to Miss Armstrong but he did not know
what the consideration was. He expected
that there would be some balancing exercise in the accounts to account for its
value. She was not getting it for
nothing. There was a brief exchange of
correspondence and he instructed a plan which he sent to Mr Pumphrey for
approval. That was duly forthcoming but
nothing happened after that. Two or
three years later he required the titles back and was sent them. That was in 1992. Baltersan was sold in around 1992 and Clachan
of Penninghame in around 1995.
[159] He was asked why no progress was made and said that Mr Pumphrey
told him that the pursuer would not accept the title from the judicial factor. Something was said to the effect that she did
not recognise his appointment.
[160] He could not recall if he had mentioned, when corresponding with
Mr Pumphrey, that the transfer would have to be for value. His letter would just have been a simple one
sending the titles. He was not aware of
the pursuer's position changing and he did not recall Mr Pumphrey
reverting to him later about the arrangements for the transfer of the title.
[161] He did not recall being in correspondence with Mr Pumphrey
in February 1999. He had been
involved in a significant number of litigations on behalf of the judicial
factor both in
[162] He acted in the sale of Clachan of Penninghame farm and had no
problems in satisfying the purchaser of the judicial factors title. This was based on the disposition to the
partners as partners and trustees of the firm in about 1975 and his
appointment by the Court of Session in February 1987.
[163] In 2000 he was instructed by the judicial factor to proceed
with an action for recovery of possession of the farmhouse. 7/1 was a copy of the summons.
[164] 7/11 was the disposition in favour of the trustees for the firm J Dunlop
& Son and 7/12 was a disposition by the judicial factor, to a number of
people called Ferguson, of part of the lands. The farmhouse was specifically excepted from
that disposition and was shown on a plan attached to it. Paragraphs 2 and 3 of the statement
of claim in 7/1 were in the following terms:_
"2. The pursuer is the judicial factor on
the sequestrated estates of J Dunlop & Sons, Farmers, Baltersan
and Clachan of Penninghame, Newton Stewart, conform to interlocutors of the
Court of Session dated
3. The pursuer requires possession of said
Clachan of Penninghame farmhouse and the garden ground pertaining thereto for
the purposes of selling the same and completing his duties as judicial factor
foresaid. By letter dated
The letter of 5 July was number 7/5 of process.
[165] The first calling of the action was
[166] That was appealed to the Sheriff Principal and a diet was fixed
for March 2001. The daughter
appeared again and another lay representative.
They addressed the Sheriff Principal and he continued the appeal till
May, telling the daughter that she would have to state a defence at that
point. In May the pursuer was
represented by Mr Pumphrey. The
appeal was upheld, a defence was stated and the case was remitted to the
Sheriff. 7/2 was the defence which Mr Pumphrey
stated. The case called before the
Sheriff in June 2001 and Mr Cavers was again present as he had been
for all the diets. Mr Pumphrey
again represented the pursuer. He moved
for a sist for legal aid which was opposed but granted. At some stage Mr Pumphrey moved the
Sheriff to disqualify himself but that was refused. The application for legal aid was intimated
shortly afterwards to the judicial factor but Mr Cavers saw the intimation
and opposed it. In or around August he
heard from the Scottish Legal Aid Board that the application was being treated
as abandoned but a few weeks later there was an intimation that it had been
resuscitated. He was made aware that it
was granted after September. He was in
Court when the sist was recalled and a Proof was set for November 2001. 7/9 was the stated case. He had received a draft to which he had the
opportunity to make adjustments and this was the final copy signed by the
Sheriff. He did not know if the defender
in that case had had any adjustments. A
diet of Proof was assigned for
[167] Mr Pumphrey's assistant, Mr Anderson, appeared at the
diet of Proof and said that his firm was withdrawing from acting. Mr Cavers was present with Miss McGavin,
Advocate. The Sheriff fixed a peremptory
diet for
[168] In answer to a question from me he said that Mr McVicar had
seemed to be in possession of the relevant facts enabling him to draft the
Joint Minute without taking further instructions.
[169] Mr Cavers wrote to Miss Armstrong that day and advised
her of the position. He advised her to
consult another solicitor and expressed the hope that matters could be
negotiated to a solution. There was then
an assessment of expenses and a hearing to approve them. When they were approved, final decree was
granted and when that happened the case was appealed again to the Sheriff
Principal. He did not know who organised
that.
[170] A diet was set down for May 2002, when he attended, but
there was no appearance by or on behalf of Miss Armstrong. The appeal was dismissed with expenses and
following assessment and approval of the expenses an extract decree was
issued. 7/10 was a copy of it dated
[171] In cross-examination he indicated that he could not recall any
suggestion in the correspondence in 1989 that the transfer of title was to
be at value. He was aware of the divorce
action. He was asked whether one could
understand that the pursuer was being offered the title to the farmhouse as a
result of the Joint Minute and he said that that would clearly be the reason he
wrote to her solicitor. She had been
permitted to take possession after the divorce by the judicial factor. He was asked whether it was explained to her
on what basis she was being permitted to take possession and he said that as
far as he recalled the only correspondence he had was with Mr Pumphrey
when he asked him to prepare a disposition.
The Joint Minute would be the basis of her being permitted to take
possession. He was asked why she was
evicted from the matrimonial home when she was now being offered the title to
the farmhouse and he said that he did not evict her. He had been instructed to evict her from
Baltersan farm. She again asked why she
was permitted to take possession of the farmhouse as a result of the Joint
Minute and he said that he had not permitted her. He had had nothing to do with it.
[172] He agreed that in 1999 the judicial factory was not in a
financial position to transfer the title without taking a risk. He was asked about an injection of £36,037.81
from Noltan Limited, which appeared in the accounts for the year to
[173] As far as the letter 6/40 from Mr Pumphrey was concerned,
the pursuer said that a lot of focus had been placed on the word "now". She asked whether from the use of the word
"appears" that Mr Pumphrey was not entirely sure what the position was and
Mr Cavers agreed. He also agreed
that there was a reference to her solicitors apparently misrepresenting her
previously.
[174] She said that she was not in a position to cross-examine about
the
[175] Finally it was put to Mr Cavers that the current action had
been in preparation for some time and he agreed with that. It was suggested that it was in contemplation
before her road accident in October 2000 and he said that he was aware of
a letter at the beginning of November 2000 from Mr Pumphrey about a
proposal to raise an action of declarator.
[176] In re-examination Mr Govier took it from the witness that he
did not know when he had first become aware of the Joint Minute and with that
the evidence was concluded.
[177] Mr Govier then tendered a Minute of Amendment seeking to
amend certain of the averments in answer 1 to take account of the fact
that there had been an appeal to the Sheriff Principal following Sheriff Smith's
decision in Stranraer. This was opposed
by Miss Armstrong and I indicated that I would deal with the matter when I
dealt with the general submissions on the evidence.
[178] When the case next called before me Miss Armstrong was
unwell and produced medical certificates to that effect. In the circumstances I adjourned the hearing
on evidence until a later date on the understanding that she would provide
written submissions with the help of her daughter. Mr Govier also undertook to prepare
written submissions in support of his motion to allow the pleadings to be
amended.
[179] When the case next called the pursuer also had a Minute of
Amendment which consisted, in effect, of answers to Mr Govier's
Minute.
[180] Of consent, I allowed both Minutes to be received and the Record
to be amended accordingly. Miss Armstrong
very helpfully provided a copy of the Closed Record in its amended form.
Submissions for the pursuer
[181] At this stage Miss Armstrong
did not wish to make any oral submissions and contented herself with the
written submissions which had been lodged. These consisted of 48 numbered paragraphs
and much of the material consisted in either assertions of fact which were
repetitions of the evidence led or which had not been the subject of
evidence. Accordingly I do not intend to
rehearse the submissions in full.
[182] As far as I understand them the salient parts are as follows.
[183] The pursuer stressed that Clachan of Penninghame was her home and
that of her daughters. The position was
that upon divorce she became entitled, by virtue of the joint minute, to a
disposition. No other financial
provision was made for her in the divorce action. She made a number of detailed criticisms of
some of the conduct of the judicial factor which had not been the subject of
evidence and I do not propose to mention those.
[184] She was concerned that the humanitarian aspects of the case had
been subordinated to the judicial factors insistence on selling the property. If the assets had been dissipated this meant
that there was no fair and equitable division of the property following the
divorce. A number of offers had been
made and rejected over the years. Had
they been accepted by the judicial factor the matter could have been settled
years previously. No account had been
taken of the principles of family law.
[185] Her entitlement to ownership and occupation of the house stemmed
particularly from clause 6 of the joint minute and as a result of that
agreement she and her family had resided in the house and had been solely
responsible for its upkeep and maintenance since 1988.
[186] The judicial factor was not a signatory to the joint minute but
the extract of evidence from the divorce proof which was lodged as a production
showed that he had stated during the proceedings that he would not stand in the
way of any agreement reached between the parties.
[187] The Court had not been asked to grant decree of divorce in terms
of clause 6 (meaning I think that the Court did not interpone authority to
it) but the joint minute was nevertheless an agreement between the parties and
she reiterated that the initial factor had indicated that he would not stand in
the way of any agreement reached between them.
[188] From the outset the judicial factor never acted as a pro-active
mediator nor arbiter. "He failed as a
factor pending dispute, to give recognition to the legal encumbrances and
limitations to his initial appointment in 1987 over a partnership with
diminished rights" (sic). He had preferred to engage in battles for
20 years. Her family wished to
preserve the farm but he was bent on selling it. She questioned what title he acquired in
terms of the interlocutor of February 1987.
[189] Immediately after divorce was granted he offered the pursuer
title to the house and she could only presume that such an offer was made as a
result of the joint minute having been entered into. Mr Cavers stated in cross-examination
that following the divorce action she was permitted to take possession by the
judicial factor and he confirmed that the joint minute was the reason he wrote
to her solicitors and also confirmed that that would have been the basis upon
which he was instructed to give the pursuer title to the house. It was clear that she was being offered the
title to the house as a result of a joint minute. The judicial factor clearly felt bound to
implement its terms although he was not a signatory to it. It was reasonable to expect that immediately
following the divorce she was being offered the title to the house as a result
of the joint minute.
[190] Gordon Armstrong's efforts to restore the farm and lands
were met with obstruction by the judicial factor and Michael Dunlop.
[191] In 1994 after the "spurious" interdicts against
Gordon Armstrong and the pursuer which solicitors "feared to recall", a
letter from the judicial factor's agents (no 6/36), indicated that the
factor had no intention of selling the farmhouse. Until then the farmlands and house had
remained intact under the protection of Gordon Armstrong. The letter from the judicial factor's agents
was a false reassurance.
[192] The events of 1994 to 1996 were reminiscent of the 19th century
clearances. The family was interdicted
from entering upon or trespassing on the lands of Clachan and Penninghame and
this was having a dire effect on them.
[193] It was only in 2003 before Lord Drummond Young that the
question of solvency became an issue yet the factory was insolvent
in 1992. Following the sale of Clachan
of Penninghame lands, the house was not listed in the factory accounts. The judicial factor gave evidence that this
was simply an oversight but the representations made to the pursuer
since 1988 that the house would not be sold and the time which had passed
during which she and her daughters continued to live in it only served to
reinforce the pursuer's understanding of the position that she and her
daughters had the right to remain in the home and that it would at no stage
from any part of the judicial factor's accounting.
[194] During 1999 requests were made of the judicial factor to
transfer title (no 6/39 and 6/40 of process) but by that stage the
reason given for not being able to transfer the title was not anything to do
with the pursuer not having a right to receive it but that there might not be
sufficient funds in the factory.
[195] I have to say that that observation does not seem to square up
with the submission that it was only in 2003 that solvency became an
issue.
[196] In any event the pursuer went on to submit that a reasonable
expectation had been created that she would receive title to the house.
[197] She submitted that it was not until 2000 in terms of correspondence
received from the judicial factor's agents (nos 6/46 and 6/47 of process)
that it was made clear to her that there might be some dispute as to her right
to receive title to the house and that it would only be transferred at
value. Her submissions go on as follows:
"Again the
question must be asked what "title" did the First Defender "acquire" in terms
of the Interlocutor of February 1987?
What title did he retain or lose on
I confess that I do not quite understand that submission.
[198] She submitted that the previous offer to grant a disposition had
not become a conditional one. A number
of conditions were attached over the years not least that the agreement of
Michael Dunlop be sought but that agreement was already expressed in the
joint minute. That consent was
irrevocable so any change in his position should not have affected the judicial
factor. Nonetheless it did. He adopted Michael Dunlop's tactic of
using alleged non compliance with another clause of the joint minute as a
reason to render the whole agreement ineffectual. He claimed that there had been a breach of
clause 10. The Court had not
interponed authority to clause 10 either, nor for that matter to
clause 9. The factor stated that he
could only transfer the title at value because the conditions in the clause
regarding the requirement not to intervene had not been met. Yet no mention had ever been made in the
joint minute of transferring the house at a valuation and any valuation of the
house was irrelevant. In any event where
a valuation was required it should be at the time of the separation.
[199] The judicial factor's position had resulted in inordinate delay
and made it necessary to bring this action.
[200] Before the judicial factor was appointed the standard securities
over the farms and lands had been called up by the bank by the service of
calling up notices. The partnership had
relinquished its rights and title to the bank including the right to redeem as
early as September 1986. Rather
than evict the family the bank assigned all its extended rights and powers to the
pursuer's late father. The heritage of
the partnership over which the judicial factor purportedly claimed to have
powers was ceded to the Clydesdale Bank before he appeared on the
scene. He did not receive any
appointment to "administer" any area subject to the "prestatutory, pre-eminent
rights of a Bank in their contract with a partnership-in-default". Nevertheless as judicial factor he still
"purportedly claims to have held rights and powers not held by the partnership
to which he was novated".
[201] Having lost the matrimonial home in 1988 Clachan of Penninghame
farmhouse became and has remained the family home. The estate sold for £1,941,000, yet out of
the £33,811, said to have been paid out to the pursuer as arrestments, only
nominal amounts ever reached her. She
had to borrow money for survival. She
was humiliated by the arrestments, having never borrowed before and after
£300,000, had been paid on behalf of her family to avert eviction at the hands
of Michael Dunlop by the Bank, to suffer unlawful eviction at his hands
again through the judicial factor was unjust and inequitable.
[202] A great deal of evidence had been led about the inequality of
payments made. The payment of £50,000 to
Michael Dunlop for which the authority of the Court was not sought, ran
counter to the judicial factor's position that all payments made were on
an equitable basis or on the instructions of the Court.
[203] There had been sufficient funds in the factory to allow the title
to be transferred and many years had passed in which further fees and expenses
had been incurred. There had been twenty
years of unreasonable delay on the part of the judicial factor.
[204] Substantial payments of money had been made to
Michael Dunlop and not to the pursuer with the exception of arrested funds. The judicial factor had stated that if
payments were made to one of the eventual perspective beneficiaries those
payments would be set against the final payment due. This would suggest that she should get credit
as some stage where Michael Dunlop had received payments and she had
not. However there was no means by which
such credit could be given when there was no money left in the factory. No explanation had been provided as to how
unequal payments were to be set off against final payments due in those
circumstances.
[205] While reference had been made to what had been termed her
obstructive litigations, the pursuer could not have been expected simply to
take no action in the face of the factor's continuing determination to prevent
division of the assets by selling them off.
[206] The judicial factor himself had raised a number of actions which
had incurred considerable time and expense.
The action of declarator raised by him incurred fees of
£0.5 million pounds. There were
others listed in the pleadings and which had been referred to in evidence. "However, the task of allocating
responsibility for each respective action which has been brought during the
course of this judicial factor would be a huge task and not one for the confines
of this current action".
[207] By that submission I take it that the pursuer does not seek to
rely on this matter.
[208] At various stages of the factory there have been sufficient
funds. For example, in March 1997
the balance of funds was £400,040. Title
therefore could have been transferred to her.
[209] At the time of the divorce the question of whether Clachan of
Penninghame formed part of the estate of J Dunlop & Son was
irrelevant. The issue had nothing to do
with the powers and duties of a judicial factor. "However, due to the failure to transfer
title to the property following the agreement between myself and my ex-husband,
it thereafter did become an issue".
[210] The agreement had been cast to one side through the actings of
the judicial factor. He had failed for
the last 20 years to give effect to it.
[211] There was no legislation or case law which showed that the powers
of a judicial factor in the circumstances should defeat the terms of the
agreement reached between herself and her ex-husband.
[212] Thereafter she referred to Miller's
Trustees v Miller (1890) 18 R 301
and Yuill's Trustees v Miller (1902) 4 F815. I will refer to these submissions in more
detail later.
[213] In relation to the question of reduction she submitted that it
was necessary for her to show that exceptional circumstances existed. She referred to the medical evidence which
she had produced. It had been claimed by
the judicial factor that the service of the summons which commenced this action
was evidence of the fact that she was capable of instructing solicitors at the
relevant time but that was not the case.
The letter from Mr Pumphrey to her daughter Justine (no. 6/75)
was prepared without her instructions and lodged in Court without her having
had sight of it. It had been in the
pipeline for many months beforehand, before the time of her accident. Mr Cavers had in his evidence referred
to Matthew Pumphrey's having stated his intention to raise the declarator
action as early as 2000, before the Stranraer action. He had also referred to a letter of
November 2000 from Mr Pumphrey to the judicial factor proposing to
raise this action. She had no input
whatsoever into the preparation of this action during the period in which she
was unable to instruct or attend to Court matters in the action before the Sheriff
at Stranraer. In connection with the
plea of lis alibi pendens she
submitted that the judicial factor had led evidence to show that the case
before
[214] As far as res judicata
was concerned, in common with the question of lis alibi pendens, it was relevant to consider whether the action
for declarator covered the same issues as the action for recovery of possession
previously raised in the Sheriff Court.
She referred to the case of James
M Sutherland & Sons v Pottinger
1989 SLT 679, to which I will turn later.
She submitted that it was held there that success in the
[215] She made further submissions on the question of reduction, which
were slightly out of order in her written document. In reference to the case of Adair v
[216] She submitted that in the case of Bain v Hugh
L S McConnell Ltd it was held that, whilst in general where other
means of review were provided and those means had either been utilized or the
parties had failed to take advantage of them, reduction was incompetent, a
decree might be reduced in exceptional circumstances in order to produce
substantial justice or where there had been a miscarriage of justice.
[217] In conclusion she submitted that the crux of the matter was the concentration
on assets instead of the human resource.
That obsession had destroyed the very resource itself. Division of the assets could easily have been
made and there was never any need for sale.
The judicial factor had acted in the sole interests of the previous
second defender, Michael Dunlop. As
the result of that there had been unnecessary dissipation and diminution of the
residual value of the assets. The pursuer
should not be held financially responsible for that and therefore transfer of
title should be made forthwith. At worst,
if the Court was of the opinion that funds were required to be put forward in
order to give effect to the joint minute, those funds should be sought from
those who were responsible for the loss of the last 20 years who refused
to come to any agreement to solve the problem.
The judicial factor's delay in transferring title at the behest of the
previous second defender Michael Dunlop, should not be allowed to
extinguish a right in this way simply through the lapse of time and the fact
that costs were incurred during this period.
Submissions for the defender
[218] Mr Govier submitted that
the
[219] He submitted that if the pursuer's plea-in-law 3 was
sustained and that decree was reduced then the effect of that would be that the
action would require to be returned to the Sheriff Court in Stranraer. The jurisdiction of this Court was not an
appellate one in this process. He
imagined that the case would be returned to the
[220] To that extent the plea of lis
alibi pendens should be upheld in relation to the declarator which was
sought in the current process.
[221] If reduction was not granted, then he submitted that since the
same parties were discussing the same issues and the same subject matter in
Stranraer then the decree of the Sheriff Principal was res judicata as far as the current action was concerned.
[222] Either the plea of lis
alibi pendens or the plea of res
judicata would come into play depending on my decision on the question of
reduction. That was why that question
had to be considered first.
[223] If both the defender's pleas of lis alibi pendens and res
judicata were repelled then I required to address the pursuer's
conclusions.
[224] Mr Govier divided the submissions into a number of segments
as follows.
Credibility and reliability
[225] He submitted that the pursuer
displayed at various times a casual attitude to the truth when giving her
evidence. For example, on 13 March
early in the afternoon in cross-examination he asked her about her medical
condition after the road accident which had occurred on
[226] There was also a question mark over her evidence about
Mr McVicar. In the morning of
13 March at the end of her evidence in chief there was a reference to
Mr McVicar's representing her at the diet of proof and she said that on
4 December he was on the telephone to her and raised the defence that
there were other proceedings. Later on
in the afternoon of 13 March in cross-examination she said that she
remembered telephoning Mr McVicar asking him to have the case put
off. However, early on in the afternoon
of the following day she said that she had no recollection of any telephone
call. That was perhaps a small point but
it was indicative of her being prepared to say one thing one minute and another
the next. These were simple examples
that she was prepared to say things that were not true if it might assist her
case.
[227] I had to consider her evidence very carefully on two principal
issues, namely her medical condition at the material times in 2001 and 2002 and
her attitude to the judicial factor in general and to the fact that title to
the farmhouse was vested in him.
[228] There were also important issues to be raised in connection with
personal bar.
[229] It was raised at least once in the evidence with her whether she
accepted that the farmhouse was vested in the judicial factor and the
impression in the evidence was that there may have been a blank refusal on her
part to accept that that was the position.
[230] Her only other witness was Mr Moore, who was an experienced
accountant and assisted the family for many years. Mr Govier accepted that he came across
as a credible witness but reminded me that he was not an expert in farming and
had no expertise in the law and practice of judicial factors.
[231] Mr Forbes, the defender, was also an experienced chartered
accountant who specialised in insolvency work and in judicial factories. Indeed he had a number of factories
ongoing. He gave evidence cautiously and
maintained his position in cross-examination.
His position was consistent with the Record and with what he had said in
chief. He repeatedly stressed that he
had been in a position of having to proceed with his duties as an officer of
court in dealing with this judicial factory and with the realisation of assets
and distributions to creditors and former partners in circumstances where there
was no agreement between those parties.
He was pressed on his responsibilities and he said that he a
responsibility to the court. He was not
sure if he had any responsibility to the people involved but that comment was
in response to pressure to the effect that he had some duties almost as an
arbiter or mediator or family advisor.
He undoubtedly had problems recalling some matters but that was hardly
surprising given the fact that the judicial factory was over 21 years
old. It had involved a number of court
actions and some of the questions, for example about water supplies and insurance
premiums were not flagged up on Record and related to events a long time
ago. He did however recall, under
pressure in cross-examination, that he hoped that he could have let the pursuer
have the house for value but he did not see how he could give it to her without
exposing it on the market if the other party was not agreeable. That effectively was his fundamental position
and it was difficult for the pursuer to get round that.
[232] The defender also stated that he had a duty to realise the assets
and did so to the best of his ability. He
was perfectly credible and reliable subject to the parameters set out in
connection with the passage of time.
[233] Mr Cavers was an experienced professional. He had acted for the judicial factor since February 1987. He was measured, thoughtful and careful and
made no assumptions. He did not agree
with the propositions put to him until he had considered them and was sure that
his answers would be correct. He spoke
to the titles to the property and indicated that he title to the farmhouse was
an asset of the judicial factory. He
attempted in 1989 to deal with Mr Pumphrey in transferring the house to
the pursuer and he spoke to Mr Pumphrey later telling him that the pursuer
would not accept title from the judicial factor. He spoke to attempts to affect the transfer
and the various court actions and correspondence leading up to the action in
Stranraer.
[234] He had some problems in recollecting details of events long ago
but overall he was credible and reliable.
Relevancy and specification
[235] Mr Govier had a general
plea-in-law 4 to the relevancy and specification of the pursuer's
averments and plea-in-law 5 related to the relevancy and specification of
the averments on personal bar.
[236] He drew my attention to the terms of the first conclusion which
were as follows:
"To find and declare that the Pursuer is entitled to ownership and occupation of the property at Clachan of Penninghame Farmhouse, Newton Stewart free of any claims by the First Defender as Judicial Factor in virtue of the Joint Minute entered into by the Pursuer and the Second Defender in respect of which decree of divorce was granted by the Court of Session in the action between them on 15 November 1988; and that the First Defender is bound to effect a Disposition of said property in favour of the Pursuer in implement of said entitlement."
It was clear that the pursuer's claim was based on the Joint Minute and indeed she had said as much in evidence. It followed from the fact that she was basing her claim on that Joint Minute that any averments that any other circumstances gave her the rights she sought were irrelevant, even if proved. There were, for example, averments that the farmhouse did not form part of the sequestrated estates. Presumably they were there to support the claim that it should belong to her but she was not insisting on Mr Dunlop's granting her a disposition.
[200] In the Joint Minute it was specifically narrated that there would
be a disposition granted by Mr Forbes.
She was seeking to occupy the farmhouse etc in virtue of the Joint Minute
and any averments that the farmhouse did not form part of the sequestrated
estate were irrelevant to those claims.
[237] Mr Govier understood part of the pursuer's argument to be inter alia that because of the
involvement of the heritable creditors the defender did not have any title to
the farmhouse. The true position was
that he did have title but subject to the rights of the heritable creditors and
that was a matter which had been worked out over the years in the course of a
number of actions. The farmhouse was not
held on a different title. It was
difficult to see how it could be suggested that the factor who had sold off the
other parts of the farm did not have title to it but the main difficulty was
that if the farmhouse was not part of the sequestrated estates then on what
basis could the judicial factor grant her a disposition of it?
[238] The second proposition that followed from her claim being in
virtue of the Joint Minute was that, because that conclusion was put forward as
a matter of right and did not refer to any financial consideration in exchange
for which the disposition should be granted, it appeared that she was claiming
that she had a right to receive a disposition and the defender had a duty to
grant it and that issues about the effect on the transfer of the farmhouse on
the solvency of the factory were irrelevant to the case.
[239] Mr Govier undertook to return to the general question of relevancy
and specification in due course.
Personal bar
[240] Mr Govier submitted that
personal bar was a shield not a sword.
It was a response to the defenders' position as opposed to being the
basis of an assertion of right by a pursuer.
The plea-in-law was itself in irrelevant terms. Personal bar did not create a right but
prevented a party from maintaining that a position was different from that
which he had previously maintained.
[241] He drew my attention to the averments in support of the plea
which he said could be found in Articles 4, 5 and 6 of Condescendence as
follows:
"Cond. 4. Thereafter the parties to said Joint Minute
and the first defender proceeded in reliance and in implement thereof. In particular in 1989 the parties hereto
entered into correspondence to agree a plan of the property at Clachan of Penninghame
Farmhouse for the purpose of the first defender granting a Disposition in
favour of the pursuer of said property in implement of her entitlement in terms
of said Joint Minute. By letter dated
Cond. 5. Thereafter the first defender did nothing to displace his representations and the pursuer's understanding of his position that the Judicial Factory estate made no claim to said property and made no dispute with the pursuer's entitlement to receive a Disposition in her favour. ...
Cond. 6 In reliance on said position the pursuer occupied said property which was dilapidated and carried out improvement works at her expense. The property was over time substantially renovated and its value increased significantly."
Answer 6 contained the following averments:
"Not known and not admitted what works the pursuer carried out, at whose expense and why. Not known and not admitted on what basis the pursuer considered that she was occupying said property. Quoad ultra denied. Explained and averred that the pursuer was allowed to occupy the property whilst the Judicial Factory was proceeding and only until the Judicial Factor was either able to give her title to the property or until he required to sell the property. Further explained and averred that the defender discovered that the pursuer had installed velux windows in Clachan Farmhouse without his permission. Accordingly, his solicitors wrote to the pursuer on 5 July 2000, asking about this and seeking her written confirmation that she would carry out no further structural alterations to the farmhouse without seeking the defender's permission. The pursuer did not reply to that letter. That letter is produced herewith and referred to for its terms which are held to be incorporated herein brevitatis causa."
[242 That letter was 7/5 of process.
[243] What representations were being relied on by the pursuer? When were they made? It could only be the correspondence about
drafting a disposition and that was quite insufficient.
[244 There had been no evidence about any improvement works or any increase in value. It was impossible to see how the pursuer could claim that her occupation of the property rent free had been in some way to her detriment.
[245] There was no evidence that in reliance on the defender's
representations, whatever they were, she had carried out improvements.
[246] The classic statement on personal bar was to be found in the
well-known case of Gatty v Maclaine 1921 SC (HL) 1, in the
speech of Lord Birkenhead, the Lord Chancellor, at page 7, as
follows:
"Where A has by his words of conduct justified B in believing that a certain state of facts exists, and B has acted upon such believe to his prejudice, A is not permitted to affirm against B that a different state of facts existed at the same time."
[247] In the current context A would be Mr Forbes and if he had by
words or conduct justified B (the pursuer) into thinking that a state of facts
existed and she had acted on it to her prejudice then so be it.
[248] But where were the words or conduct of the defender which were
being relied on? Where was any evidence
that she had acted upon any relevant belief to her prejudice?
[249] I raised with him the following point. If the judicial factor was not in a position
to grant the pursuer a disposition anyway how could he be ordered to do so even
if he was personally barred from denying that he had a duty to do so? If he made representations upon which the
pursuer relied to her prejudice, by, for example, spending money on
improvements, then that would not avail her in receiving a title to the
property if the judicial factor were not in a position to grant one in the
first place.
[250] Mr Govier submitted that, given the definition in Gatty v Maclaine and the lack of specification as to the words or conduct
relied on by the pursuer and as to what she did to her prejudice, the plea of
personal bar was irrelevant.
[251] Mr Govier had further arguments on this point and referred
to the case of Grant v Glen Catrine 2001 SC 901. He referred in the first place to the rubric
where the following appears:
"Held (1) that it was essential to the doctrine of personal bar that the defender should have been induced to act and change his position by his reasonable belief that the pursuer was consenting, and in the present case the defenders accepted that they had used the name 'Grant' because they believed they were entitled to do so, not in reliance on a belief induced by the pursuers."
[252] He submitted that there was more than a taste of that in the
current proceedings. Miss Armstrong
believed she had a right but there was no reasonable basis for that
belief.
[253] Mr Govier then turned to the Opinion of the Lord President
at paragraph 47 as follows:
"But there is another, equally important, reason for repelling the defenders' plea. As I highlighted in paras 27 and 28, the defenders invoke the plea of acquiescence, not to bar an action of damages by the pursuers for loss suffered due to the defenders' completed acts of passing off, but in order to bar the pursuers' conclusions for interdict against acts of passing off which the defenders will commit in the future. In Earl of Kintore v Pirie & Sons Ltd at pp. 838-839, Lord Kyllachy went so far as to say that acquiescence could never have this effect: 'Now, I am not aware that the doctrine of acquiescence - taken at its widest - has ever been applied to a case of this kind. Acquiescence may bar objection to what is past - to what has been done. But it can never, so far as I know, establish directly or indirectly a continuing and perpetual right. I may have allowed my neighbour, it may be for years, to draw and to use, say, my share as well as his own of a certain stream or of a water supply; but I may resume my own share at my pleasure. Nor will it, I suppose, be a bar to my doing so, that my neighbour has, relying on my continued consent, spent money, say, in enlarging his mill or in taking water into his house. And similar illustrations may be readily figured. The truth is that, to serve the defenders' purpose, what they call acquiescence would require to be something of the nature of an agreement."
[254] There was nothing supporting the nature of an agreement in this
case. The plea-in-law might be a defence
to the position taken by the defender but it did not provide the basis for any
positive right on the part of the pursuer.
[255] That, in effect, was what the pursuer was trying to achieve by
that plea. One could not be personally
barred to effect a disposition.
[256] I raised the issue of whether, in effect, in an old-fashioned rei interventus or homologation case one
might indeed find oneself personally barred from denying that missives had been
concluded and therefore be required to effect a disposition but Mr Govier
said that the difficulty with the current plea-in-law was that it was
irrelevant as it stood. It stood by
itself. There had to be something from
which one was personally barred and there was nothing averred or indicated in
the plea-in-law.
[257] Finally on this point Mr Govier referred to the recent case
of The Advice Centre for Mortgages v McNicoll 2006 SLT 591 and in
particular to paragraph 17 thereof where Lord Drummond Young, in
dealing with sub-sections (3) and (4) of section 1 of the
Requirements of Writing (Scotland) Act 1995 said the following:
"The fact that the provisions of sub-ss (3) and (4) set up a form of personal bar has two important consequences. In the first place, where those provisions apply they operate as a defence available to the first person; they prevent withdrawal from the contract, obligation or trust in question, and the contract, obligation or trust is not to be regarded as invalid. Those sub-sections do not, however, make any claim or positive right available to the first person. According to the classic metaphor, they operate as a shield rather than a sword."
[258] The averments were irrelevant and lacking in specification as was
the plea-in-law. In any event there was
no evidence to support them.
[259] If I were with him on the evidential point then the preliminary
pleas could be regarded as superseded.
[260] At this point he turned to look at what Miss Armstrong had
said about personal bar herself in her written submissions and in particular in
paragraphs 18 and 20 thereof. These
were in the following terms:
"18. It was only in 2003 after the action
by the Defender against me, before Lord Drummond Young and the
20. Throughout this whole period, from 1988 to 1999, it is reasonable to say that in legitimate expectation, that the Pursuer would receive title to the house at Clachan of Penninghame as a result of having entered into the Joint Minute, a legitimate expectation had been created by the First Defender. As a result of the Joint Minute entered into divorce and the position adopted by the First Defender immediately following this, a position which in terms of representations made to the Pursuer over the course of the next 9 years, never changed, there was nothing to suggest anything other than that the Pursuer would receive title to the house." (sic)
[261] It was accepted as a matter of fact that the house was not listed
in the factory accounts for a time but there was a good deal of difference
between the house not being listed and the house being hers. She had no justification in law or in
rationality to say that she thought that the house was hers.
[262] As far as the words "in light of the terms of the Joint Minute"
were concerned, it was true to say that it had been agreed between Mr and
Mrs Dunlop that certain things would happen but that was not agreed to by
the defender. How did that amount to
personal bar by words or conduct on his part?
[263] The words "representations made to the Pursuer since 1988
that the house would not be sold" might be a reference to a particular letter
6/36 of process from Garden Haig, relating to the sale of the farm. The letter was written on
[264] As far as the words "and the time period that had passed during
which she and her daughters continued to live in the house at Clachan of Penninghame"
were concerned, it was quite impossible to consider that the time spent in the
house could either in law or in rationality be held (1) to give rise a right on
her part to the farmhouse or (2) to amount to an action or conduct by the
defender to her prejudice. She had lived
in the property rent free.
[265] Paragraph 20 did not add very much to paragraph 18 or
what he had said about it. It referred
however to legitimate expectations. That
was a concept of public law and had no relevance in relation to personal
bar.
Reduction
[266] The pursuer sought reduction
of two decrees in terms of plea-in-law 3.
Mr Govier accepted that it was competent for the Court of Session
to reduce decrees granted in the Sheriff Court and invited me to have regard
first of all to the case of Adair v Colville 1926 SC (HL) 5. In particular he referred to the speech of Viscount Dunedin
at pages 55-56 as follows:
"That the remedy of reduction may be competent to set aside a judgment, when other means of review are not, is true. Instances can be found where it has been so utilised, but it is a remedy which does not exist of right, and must be most carefully applied. I shall not attempt, for I think such attempt would end in failure, to define categorically the cases in which reduction is competent. One obvious instance would be where a judgment had been obtained by reason of some fraud practised on the court; but, generally speaking, it is certainly not competent when other means of review are prescribed, and these means have either been utilised or the parties have failed to take advantage of them".
He also referred to the speech of Lord Carson at page 67 as follows:
"The appellants have already, prior to the appeal to this house, appealed against the judgment of the Sheriff to the Court of Session, and that appeal failed, because, in accordance with the rules of procedure which have the force of statute, no shorthand notes of the proceedings had been taken - a course which was adopted in accordance with the wishes of the pursuers and the defenders. It is evident, therefore, that the appellants can only succeed if they are able to establish that there was such a miscarriage of justice as renders the whole proceedings fundamentally null."
[267] Mr Govier submitted that reduction of a decree was generally
incompetent when other means of review were prescribed and had either been
utilised or the parties had failed to take advantage of them. He submitted also that it would be competent
to reduce a decree if the pursuer had established such a miscarriage of justice
in the process in which decree was granted as rendered the whole proceedings
fundamentally null.
[268] He then referred to Bain v
Hugh L S McConnell Ltd 1991 SLT 691
and in particular to the Opinion of the Court delivered by Lord Justice Clerk Ross
at pages 695-696 where he said the following:
"So far as
reduction of the sheriff's decree under conclusion 2 is concerned, counsel
for the defenders submitted that reduction of the decree was not competent
since other means of review had been provided and had either been initiated or
parties had failed to take advantage of them.
He referred to Adair v Colville & Sons. In that case
Viscount Dunedin said (at 1926 SLT p.592): 'but, generally speaking, it is
certainly not competent when other means of review are prescribed, and these
means have either been utilised or the parties have failed to take advantage of
them'. Counsel submitted here that since
appeal against the sheriff's interlocutor had been competent and the pursuer
had utilised the appeal procedure, it was thus not competent for him now to
seek reduction. In our opinion however,
it is important to observe that in the passage which we have quoted from
Viscount Dunedin, he prefaced his remarks with the words 'generally
speaking'. The use of these words must
mean that there are exceptions to the rule which he was propounding. Indeed in his speech Viscount Dunedin
was at pains to point out that it was not possible to define categorically the
cases in which reduction was competent.
He also stressed the importance of there being a miscarriage of justice
if reduction was to be justified: 'But
of this I am certain that, unless a miscarriage of justice is affirmatively and
clearly shewn, there is no room for reduction'.
(p.593). Likewise in the same
case Lord Carson makes it plain that reduction will be competent if the
pursuer can 'establish that there was such a miscarriage of justice as renders
the whole proceedings fundamentally null'.
(p.599). In our opinion that is
just the sort of case which the pursuer in the present case is seeking to
make. He has averred that in pronouncing
the interlocutor of
[269] In the current case there was no relevant admission and no evidence
that the pursuer had a substantial case to plead in the sheriff court if
reduction were granted.
[270] Reference was then made to the case of Zannetos v Glenford
Investment Holdings Ltd 1982 SLT 453.
That was a
decision of Lord Ross sitting in the Outer House. In that case the pursuer was seeking to
reduce a decree of the Sheriff of Glasgow and
"It is also open to the
party to bring a reduction of the decree on the ground that it was obtained
through inadvertence, in which case the Court, although it will require a
strong statement of facts to support such an application, has the power to
award substantial justice."
It is, of course, recognised
that the remedy of reduction will not be allowed if the pursuer has failed to
utilize other means of redress open to him...
In the present case there is no question of the pursuer having failed to
appeal timeously against the decree of
[271] That
case was referred to in argument in vain and it was not suggested that it was
bad law. In any event it represented
pure common sense. There was no point in
sending the case back to the sheriff court if there was no merit in the
pursuer's defence.
[272] One had
to consider whether the tests in Adair
and Bain had been satisfied. The first part of the test was whether there
were other means of review which were available and which had not been
utilised. An appeal would lie from the
sheriff's original decision and indeed that was taken. Following upon the Sheriff Principal's
decision it was open to the parties in terms of Rule 84 of the 1976 Summary
Cause Rules, to attempt to apply to the Court of Session. There had been no evidence at all about any
attempts to utilise that avenue of appeal.
[273] The
second test which had to be overcome was to show that the circumstances were
exceptional and it was necessary to reduce the decree in order to produce
substantial justice. Where were such
exceptional circumstances rendering the proceedings fundamentally null or indicating
a miscarriage of justice?
[274] The
circumstances which were relied on by the pursuer were set out in
Article 11 and proceeded upon the basis of chronic depression. Mr Govier submitted that the medical
evidence was insufficient to support the pursuer's contentions.
[275] He
looked first of all at 6/15, Mr Nimon's report dated
[276] At the
bottom of that page, he also referred to her depression occurring throughout
the year 2001. Over the page he indicated
that she required to be on an anti-depressant.
[277] Mr Nimon
was a consultant orthopaedic surgeon and there was no indication that he had
any psychological or psychiatric qualifications. The reference to the pursuer's having
depression throughout 2001 did not square with the references at
pages 4 and 5 to her being reviewed by a Miss Costigan and a
Mr Saad. The account of their
review did not contain any reference to depression until the final review in
October 2001 where Miss Costigan was said to have noted the history
and also noted her "new symptom of depression".
That was somewhat anomalous, although it might be a small point.
[278] 6/16 was
a report from Dr David Baird dated 23 November 2001
indicating that the pursuer had severe anxiety and depression with symptoms of
low mood, impaired concentration, inability to sleep without sedation and
frequent episodes of tearfulness. She
indicated that she was not "fit to attend court at the time of her recent
scheduled appearance". That letter was
shortly before the proof diets of 14 and
[279] 6/16 did
not indicate that the pursuer was unable to give instructions to lawyers.
[280] 6/17 was
a letter from Dr Baird dated 13 February 2002 and indicated that
she still had depression and anxiety and was not currently fit to attend to
legal matters with respect to her ongoing "case". A delay of six months was requested. 6/18 was a certificate from Dr Baird
dated
[281] 6/19 was
a letter from Dr J R K Neil dated
[282] 6/20 was
another letter from Dr Neil dated 13 February 2002 indicating
that the pursuer was neither medically fit to attend court nor to instruct
legal representation on her behalf regarding court matters at present and in
the near future. It requested that a
meeting on
[283] 6/21 was
another report from Dr Neil dated 14 May 2002 certifying that
the pursuer continued to suffer from a depressive illness and remained
medically unfit both to attend to court matters and to arrange or instruct
legal representation on her own behalf.
[284] 6/22 was
a letter dated
[285] Mr Govier
submitted that none of the reports had been prepared by an expert in the field
of psychology or psychiatry. He accepted
that to an extent Miss Armstrong had spoken to the reports herself but he
had not had the benefit of being able to examine any of the authors of them or
cross-examine them on any issues such as the anomalies in Mr Nimon's
report or the distinctions between attending court and instructing
solicitors. There was no chance to put
to them the fact that notwithstanding everything they wrote there had been a
succession of agents appearing for the pursuer.
Mr Pumphrey was her solicitor on and off for many years and at
least as far back as 1989.
Mr McVicar, an experienced solicitor, was on the telephone to her
and took sufficient instructions to allow him to feel able to represent her in
court and was able to persuade Sheriff Smith in Stranrar that there was
good cause why she had not appeared at the proof diet in November. He was also able to explain at some length in
December why he was withdrawing from acting.
[286] The
medical evidence therefore was not sufficient to support the pursuer's case.
[287] The
pursuer claimed in Article 11 that if she had been in a position to do so,
she would have instructed her lawyers as to the erroneous basis on which the
action was proceeding.
[288] He had
noted Mr Cavers to say that she herself wrote to the court in connection
with the calling date of
[289] Given
that litany of members of the local bar who had appeared it was difficult to
understand how it could be said that she was not able to instruct lawyers as to
the erroneous basis of the action.
[290] Furthermore,
Mr Govier referred to the letter of 12 December written by Mr Pumphrey,
which was 6/75 of process. That related
to the raising and signetting of the present action. Miss Armstrong said that at the time of
the proof diet of 14 December and
[291] For
obvious reasons the pursuer had failed to prove that she was unable to give
adequate instructions for the defence of the summary cause action.
[292] If so
then there were no exceptional circumstances and no miscarriage of justice
rendering the proceedings fundamentally flawed.
[293] If I
were against him, and found that there were such circumstances then reduction
should still not be granted on the basis of Zannetos.
[294] Zannetos was not binding on me although Bain was. It did, however, conform to common sense. There was no point in going back to
Stranraer. I had heard the evidence and
I should refuse to grant the declarator.
Lis Alibi Pendens and Res Judicata
[295] Mr Govier submitted again that if
reduction was granted lis alibi pendens
came into play in connection with the declarator and consequently the interdicts
sought. If a conclusion for reduction
was not granted then res judicata
applied.
[296] He
referred to Maclaren on Court of Session Practice at page 383 where it is
said that lis alibi pendens "consists
in the averment that the same question is depending in a prior suit before
another Court of competent jurisdiction".
If the decree were reduced then the matter would go back to the sheriff
court and the action would plainly be in dependence. After some discussion Mr Govier argued
that if I were to reduce anything I should reduce both decrees and restore the
case to the position it was in before the proof diet in December.
[297] There
was no doubt that the
[298] Mr Govier
submitted that the same parties were involved, the issues were the same as they
were in this court and the same questions were raised as were before the court
in Stranraer.
[299] Paragraph 4
of the defences submitted in
"It has always been
recognised by the Judicial Factor that the property in question is owned by the
Defender. The Pursuer has no title to
recover it for that reason."
[300] That was
the same issue as was before the court in this action.
[301] At
page 385 of Maclaren it was said that the same question must be raised in
the prior action, otherwise the plea of lis
alibi pendens in the second action would not be sustained.
[302] If
reduction was granted then the plea of lis
alibi pendens operated and struck at the other conclusions of this action.
[303] If the
decrees were not reduced then res
judicata would apply.
[304] There
had been a final decree in foro. Defences had been lodged and a proof heard.
[304] It did
not matter that there appeared to have been no evidence led before the sheriff
about the joint minute on which the pursuer was relying in the current case and
no other evidence to support what she was claiming now.
[306] In these
circumstances the lack of evidence on the point which was in issue before me
did not matter since that was an issue raised in the sheriff court.
Res Judicata
[307] Mr Govier
submitted that this would be relevant if I refused to grant decree of reduction. If so, the decision in foro in the sheriff court would stand and given the terms of
that decision and the terms of the declarator which was sought the plea would
come into play.
[308] He
submitted that there had been a proper judicial determination of the cause in
Stranraer in an action where the parties were identical, as were the subject
matter and the grounds.
[309] He
referred again to Maclaren at page 396 and subsequent pages where the
circumstances giving rise to the plea were set out. In the first place, there had to be a proper
judicial determination of the subject in question. He submitted that the decree in foro in the sheriff court fulfilled
that requirement. In the second place,
the parties had to be identical and there was no dispute about that.
[310] In the
third place, there had to be an identity of the subject matter. It was not sufficient that the same point had
previously been determined in formal proceedings between the same parties but
it was necessary that the same subject matter should have been disposed of by
the judgment. Mr Govier submitted
that there was such identity between the proceedings in the sheriff court and
the declarator sought. He referred me
paragraphs 2 and 3 of the Statement of Claim in the summons No. 7/1
of process which are in the following terms:
"2. The Pursuer is the Judicial Factor on the sequestrated estates
of G Dunlop & Son, Farmers, Baltersan and Clachan of Penninghame,
Newton Stewart, conform to interlocutor of the Court of Session dated
3. The Pursuer requires possession of said Clachan of Penninghame
Farmhouse and the garden ground pertaining thereto for the purposes of selling
the same and completing his duties as Judicial Factor foresaid.... The Defender has no right of abode in said
property..."
[311] The
pursuer was asserting that he was the judicial factor and that the farmhouse
formed part of the sequestrated estates.
That showed that the subject matter of the dispute, namely ownership of
the property, was in issue. The pursuer
wanted to sell the property and there would of course be problems in doing that
if he did not own it so his ownership was in issue. The action required possession of the
subjects so the question of ownership and possession were put firmly in issue
as well as questions of occupation.
[312] Paragraph 4
of the defences showed that the defender asserted a right of ownership. It was suggested that the judicial factor
recognised that right and the pursuer was seeking to persuade the court to
recognise it also. Questions of title
were obviously put in issue.
[313] In the
current action, there was sought, inter
alia, a declarator that the defender was bound to effect a Disposition of
the property but that was merely ancillary and was a necessary adjunct to the
first part of the declarator. There was
no need for that to have been dealt with in the sheriff court.
[314] In short,
in the sheriff court Mr Forbes was seeking to remove the pursuer and her
defence was to the effect that he could not so because she owned the
property. That was the nub of the action
here.
[315] The
fourth circumstance set out in Maclaren is that there must be identity of media concludendi. As is said in Maclaren at page 400:
"A medium concludendi is a ground of action either in law or in
fact. 'The validity of a plea of res judicata must necessarily depend
upon the pleadings and decision in the previous action and not upon any rights
or equities which may have arisen antecedent to the pleadings or from any
extrajudicial communications between the parties. The question always is - what was litigated
and what was decided'. The manner in
which this question could be solved is 'to read the whole of the record in each
case - summons (or note), averments and pleas - and grasp the substance of
each, and then compare the two.'"
[316] Mr Govier
said that he found it difficult to distinguish between the question of what was
litigated and the previous discussion of the identity of the subject
matter. What was decided in Stranraer
was that on the basis of the assertion that the pursuer was judicial factor on
the property and the defender had no right of occupation a decree for recovery
of possession should be granted. In the
present case Miss Armstrong, as the pursuer, was claiming on the basis of
her asserted ownership that she was entitled to continue in occupation of the
property and that a Disposition should be granted to her.
[317] The
fourth requirement had been met according to Mr Govier.
[318] Miss Armstrong
had referred in her written submissions to the case of Sutherland & Sons v Pottinger 1989 SLT 679.
Her submissions ran as follows in paragraph 47:
"In the case of James M Sutherland & Sons v Pottinger 1989 SLT 679, it was held
that success in the sheriff court action in that case would not afford the
pursuers the remedies sought in the Court of Session action and that the
pursuers must therefore be entitled to proceed with the action at their own
instance. In our case, success in the
sheriff court action would only have put a stop to the action of recovery of
possession. It would not have confirmed
our right to the ownership and occupation of the house, as is sought in this
action."
[319] In that
case, farmers raised a Court of Session action for interdict and damages in 1988
against a neighbouring farmer. They
alleged that his actings in altering the drainage from his land had caused
flooding on their land. The defender
tabled a plea of lis pendens founded
on the existence of an action commencing in the sheriff court in 1986 at his
instance and transmitted to the Court of Session in March 1988 in which he
sought interdict to prevent the pursuers from blocking or interfering with the
drainage arrangements. He argued that
the issues in the two actions were the same but it was argued for the pursuers inter alia that the issues were not
identical in that the questions of interdict and damages in their favour did
not arise in the sheriff court action.
[320] It was
held by Lord Coulsfield that success in the sheriff court action would not
afford the pursuers the remedies sought in the Court of Session action and that
the pursuers must therefore be entitled to proceed with that action and the
plea was repelled. At page 681 his
Lordship said the following:
"Counsel for the pursuers
submitted, first, that the issues were not identical, and, secondly, that, even
if they were, the plea of lis pendens
could not succeed unless it was shown that it was equitable to sustain
it.... The question in the sheriff court
action was not simply whether Pottinger's actions were justifiable but whether
Sutherland & Sons were to be interdicted upon various grounds including
trespass, the existence of a servitude right, and interference with Pottinger's drainage. The question of nuisance also arose and so
did the question of the position of the boundary between Sutherland & Sons'
lands and those of Pottinger. In the
Court of Session action, the question was whether Pottinger should be
interdicted on the ground of nuisance and also on the ground of delict. The question of the existence of a servitude
was raised but so also was the question of liability to pay damages. That was not an issue in the sheriff court
action. In my opinion, the pursuers'
submissions should be upheld. In
[321] Mr Govier
submitted that the issue of negligence presumably referred to the damages
claim. There was no equivalent of that
in the present case and there was no separate issue from the issue of ownership
and occupation.
[322] Furthermore
the pleas of res judicata and lis alibi pendens were not necessarily
co-extensive. In the current case the
sheriff must have decided the issue of ownership since that was raised in the
pleadings and would have been an absolute bar to granting decree for recovery
of possession. Had he decided not to
grant decree for recovery it could only have been on the basis that the pursuer
owned the property and if so she could have pleaded res judicata against the defender if he had resisted a claim by her
for a Disposition.
[323] The
topic of res judicata is dealt with
in Macphail on Sheriff Court Practice
(3rd Ed.) at paragraphs 2.104 and subsequent paragraphs and
effectively follows the same sequence as Maclaren. In the first place, the prior determination
must have been made by a competent tribunal and that was not in dispute. In the second place, the prior determination
must have been pronounced in foro
contentioso without fraud or collusion.
It was not necessary that the action should have been fully
litigated. In this case defences had
been lodged and indeed there had been a proof.
[324] In the
third place, the subject matter had to be the same and, in the fourth place,
the media concludendi had to be the
same.
[325] Paragraph 2.108
goes on as follows:
"The media concludendi are not the same unless the specific point raised
in the second action has been directly raised and decided in the first. An unsuccessful pursuer has a right to raise
a further action against the same defenders relating to the same subject
matter, provided that the second action is based on different grounds. Whether the media concludendi are the same will appear from a study of the
pleadings and decision in the previous action:
the court looks at the essence and reality of the matter rather than the
technical form and considers the question, what was litigated and what was
decided".
[326] Mr Govier
submitted that even looking at the matter technically the issues were the same.
[327] Lastly
the parties had to be identical and there was no difficulty with that.
[328] I asked Mr Govier to address me on the case of Hynds v Hynds 1966 SC 201. In that case a wife raised an action of separation and aliment on the ground of cruelty in the sheriff court and the husband was assoilzied of consent. She then raised an action for divorce averring more or less the same acts of cruelty. The husband pleaded res judicata. Lord Cameron held that as decree in terms of the crave of the first action would have left intact the matrimonial tie, while decree in terms of the conclusion of the second would break it, the subject matter of the actions was not the same and the plea was repelled. Incidentally that case is authority for the view that provided the necessary conditions are fulfilled a competent decree in the sheriff court is res judicata in the Court of Session. At page 203 his Lordship said the following:
"For the
defender, Mr Cameron in his careful speech argued that not only were the
parties the same, but that both subject matter and media concludendi are identical.
If the test laid down by Lord Kinnear in Edinburgh & District Water Trustees v Clippens Oil Co., Limited, (1899) 1F 899, is applied, then the
answer to the question of what was litigated and what was decided could only be
that it was the question of the defender's cruelty that was litigated, and the
decision was that he was absolved from the charge of cruelty, and therefore,
counsel maintained, his plea must be sustained.
But I think this is to simplify the matter too much, and I do not think
it covers the issues to be isolated and determined. There must be identity of subject-matter as
well as identity of media concludendi
and the two are obviously not the same nor do they refer to the same
thing. I think however that defender's
counsel was correct in his submission that the grounds of action or media concludendi are the same in both
actions, because the ground on which the conclusions of the summons and the
crave of the writ were based were the same:
in both actions the grounds are cruelty and, as I have already
indicated, based upon substantially the same items. The question of subject-matter is very
different. What was the subject-matter
of the earlier action as opposed to the grounds of action or media concludendi? In my opinion it was the right of the pursuer
to obtain protection and support for herself by means of a decree of separation
and aliment leaving intact the matrimonial tie, the status of the parties not
being in issue. In the present case the
subject-matter is the right of the pursuer to break the matrimonial tie and to
change her status with consequential rights against the defender's estate. I do not think that it alters the position that
the point to be decided in evidence may be the same i.e. has the defender been
guilty of cruelty in law towards his wife.
This is well illustrated by the case of Leith Dock Commissioners v Miles
(1866) 4 Macph. (H.L.) 14. I think
that some help may be obtained from a consideration of the case of Wilson v Dunlop, Bremner & Co., Ltd 1921, 1 S.L.T. 35 cited by the
defender in support of his argument on the plea of res judicata. In addition to
a plea of res judicata the defender
in that case pled lis alibi pendens. The Lord Ordinary (Lord Anderson)
in refusing to sustain the latter plea said:
'But the point which is fatal to the defender's contention is this, that
the two actions do not raise for determination precisely the same question; on
the contrary they raise questions which are entirely different. In the
[329] The media concludendi
in the current case, or the grounds of action, were the same as those in the
sheriff court action, said Mr Govier.
These were that the judicial factor was vested in the property and the
pursuer had no right to be there. The
question came to be whether the subject matter was the same. In Hynds
the subject matter in the sheriff court action was whether the parties should
be separated. In the Court of Session
action it was whether the pursuer should be divorced. The Lord Ordinary found that the subject
matters were different but there was no comparable distinction in the current
case said Mr Govier. I suggested to
him that one difference might be that in the sheriff court action the issue to
be determined was the possession of the subjects. The action was after all one of recovery of
possession. In the Court of Session the
question at issue was one of heritable title.
[330] Mr Govier submitted that that might be a distinction without
a difference.
[331] He said that the two parties had different starting points. In the sheriff court action the judicial
factor was someone who was confident in his ownership of the property and did
not require any confirmation of his ownership.
The only reason for the issue of ownership arising as part of the
subject matter in the present proceedings was the fact that the parties had
different starting points.
[332] I did not quite follow that.
[333] Mr Govier submitted, however, that the difference in the two
actions in Hynds was principally the
effect of them on the status of the pursuer.
In the sheriff court her status would remain the same but in the Court
of Session she would be divorced and that was a consideration which weighed
heavily with Lord Cameron.
[334] He repeated that there was nothing comparable in the current
proceedings.
[335] He said that neither in the Stranraer case nor in the current
action was there any suggestion by the pursuer that she had any right of
occupation based on a lease, licence or tenancy of any description. Her occupation followed directly from the
issue of ownership. That was the same
issue before each court. The only
defence to the action in Stranraer was the issue of ownership and that was what
she had raised. Mr Govier accepted
that the Stranraer proceedings were in the form of an action for recovery of
possession of heritable property and questions of title were not raised
directly but the issue was raised in the defences.
[336] In Hynds and certain of
the other cases referred to therein there were distinctions between the two
actions concerned but they were of a different category from the distinctions
we were dealing with here. In all of
these cases there was a difference between the true subject matter of the cases
but the true subject matter of both the cases we were dealing with was the
issue of ownership.
[337] The reasons that the actions appeared to involve different
subject matters were two in number. Firstly,
the form of the action in Stranraer was convenient and relevant to raise the
issue of recovery of the property. That
was the issue the judicial factor wanted to raise. If, as she did, the pursuer chose to defend
that by raising the issue of ownership she was entitled to do that and that was
what she did. She had no claim to any
tenancy etc, and she raised the current action to establish a right of
ownership.
[338] In the second place, Mr Forbes was content to raise the
matter of her occupation of the farmhouse in the form of an action for recovery
of possession because he was confident in his own ownership. The question of ownership was not an issue as
far as he was concerned. Although the
two actions had different conclusions that was simply a function of the
starting point and the type of action available to the parties.
[339] I must confess that I still have some difficulty with that
submission.
[340] The case of the Leith
Harbour Commissioners, referred to by Lord Cameron, dealt with the
payment of poor-rates. In an action for
payment of poor-rates assessed on a harbour and for declarator of liability the
Court of Session sustained a plea of exemption in regard to certain funds. That was held not to sustain a plea of res judicata in defence to a subsequent
claim for poor rates made after the application of the harbour revenues had
been changed by statute.
[341] The differences in Wilson v
Dunlop etc. could be seen readily,
from a perusal of Lord Cameron's narration of Lord Anderson's
opinion. In Stewart v Stewart a
status question arose. The differences
in character between the two cases arose from the consequences which would
follow for status and succession. Stevens was also a matrimonial
case. In an earlier action of divorce by
the husband against the wife on the ground of desertion a defence that she was
justified in not adhering by reason of his cruelty was sustained by the
Court. In the later action raised by the
wife against her husband for separation and aliment she pleaded that the fact
of her husband's cruelty should be taken as res
judicata but that plea was repelled.
The Second Division adhered to the Lord Ordinary's
interlocutor. In his opinion the two
actions had totally different effects which he set out in his Note. Amongst other things, he said the following,
at page 731:
"The point to be determined in the present action was not determined by the judgment in the divorce action, and the husband is now entitled, when he is put upon the defensive, to vindicate himself by adducing other and additional evidence - if he possesses it - than what he was able to produce in the action of divorce."
[342] Mr Govier submitted that it was difficult to see how it
could be said that the point to be determined in the present action was not
determined in the sheriff court action.
The declarators
sought
[343] Mr Govier submitted that I only had to
deal with this issue if decree of reduction were granted and the plea of lis alibi pendens were refused or if I
refused to grant reduction and refused to hold that the matter was res judicata. He submitted three reasons why the conclusion
for declarator should not be granted.
[344] In the
first place, the claim was firmly rooted in the joint minute. That was a document entered into between the
pursuer and her then husband in about November 1988, sometime after the
partnership property, including the farmhouse, was sequestrated and the estate
vested in the defender as judicial factor.
The joint minute indeed acknowledged the defender's position to the
extent that it was in contemplation that Mr Dunlop would signify his
consent to a Disposition to be granted by Mr Forbes. The judicial factor was not a party to the
joint minute. He did not sign it. Neither of the two parties to it was the
owner of the house at the time and neither had since become the owner. It was a basic principle of law that it was
not legally possible in virtue of a document signed by A and B to bind C who
was the owner of property to transfer it or grant any deed in connection with
it. The document simply could not be binding
on the judicial factor.
[345] In the
second place, the document was executed shortly before the divorce in
1988. Whatever the terms of the decree
of divorce, clause 6 of the joint minute was not incorporated into it and
no authority was interponed to it. The
document was signed before the Requirements of Writing (Scotland) Act 1995
came into force and in order to be binding on the parties so far as it related
to heritage it required for its constitution to be attested, holograph or
adopted as holograph. It was an obligatio litteris. It was not attested, holograph or adopted as
holograph. It was signed by the
pursuer on the fourth page but not witnessed or adopted as holograph. There was no evidence about any actings by Mr Dunlop which might give rise to any question of rei interventus or homologation. Given that, while the first point was maintained, the document was not even binding on the parties to it.
[346] In the third place, the conclusion was based on a view of what
Lord Drummond Young had said in his Opinion when interim orders were sought and granted and in particular his
discussion of the cases of Miller's
Trustees v Miller (1890) 18 R 301
and Yuill's Trustees v Thomson (1902) 4 F 815. His Opinion is 6/51 of process and the
pursuer's arguments on the matter are contained in her written submissions at
paragraphs 38-40 as follows:
"38. There is no precedent for this case, neither legislation nor case law which can be used to show that the powers of a Judicial Factor in the circumstances should defeat the terms of the agreement reached between myself and my ex-husband.
39. The closest analogy that is used is the position under trust law. Regarding the principles of trust and whether the Judicial Factor has a duty to implement an agreement between the former partners, I would say that from what I understand the position under trust law to be, that I have a legal right to a conveyance of the farmhouse at Clachan of Penninghame from the defender on the basis of the principle of trust law set out and explained in Miller's Trustees v Miller... and Yuill's Trustees v Miller... Whilst the judicial factor has tried to argue on previous occasions that the principle expressed in those cases could have no application to a situation where the sequestrated estates of a partnership are held, and are in the process of administration, by a judicial factor, I can see no reason why the principles should not apply. This is not simply a straightforward sequestration case. Instead it is a case in which the principles of family law became overshadowed by the involvement of a Judicial Factor.
40. The right of vesting as set down in Miller's Trustees and supported by Yuill's Trustees, could only be restricted where there are other ulterior trust purposes to be served which necessitate the retention of the estate in the hands of the trustee. While the payment of creditors may be a trust purpose, surely the payment of debts since incurred due to the delay of the trustee in dealing with matters, in this case the delay caused simply by following the objection of the previous Second Defender to the transfer of the property, is not a trust purpose as such? There were numerous occasions when there were no other trust purposes to be met and at which time the Judicial Factor was solvent, therefore there was nothing to restrict title being transferred. The meeting of costs incurred during a period in which the previous Second Defender was allowed to stand in the way of title being transferred, should not be regarded as a true trust purpose, for the purposes of disapplying the principles in Miller's Trustees and Yuill's Trustees. The Judicial Factor has based his refusal to transfer title on his belief that the further consent of Michael Dunlop is required. Whilst Michael Dunlop later confirmed that he is quite happy for title to be transferred, this only came at a stage by which the financial position of the factory was then used as an alternative reason for not giving effect to the Joint Minute. Such a position should not be used to prevent the application of the principles set down in Miller's Trustees and supported by Yuill's Trustees, particularly given the expectation which was created right up until the year 2000, that title was to be transferred on the basis of the agreement entered into between myself and my ex-husband."
[347] Mr Govier referred to paragraphs 11, 12 and 13 of
Lord Drummond Young's Opinion.
Paragraph 11 indicates that the pursuer had to demonstrate two
matters, namely that she had a legal right to a conveyance of the farmhouse and
that she was entitled to suspension of the sheriff court decree of
"
[12] The effect of clause 6 is in my opinion
as follows. Prior to the date of the
joint minute the pursuer and her then husband owned the farmhouse jointly, but
on trust for the firm of G. Dunlop & Son.
They were the sole partners in the firm.
At that time the firm was understood to be absolutely solvent, in the
sense that its assets were thought to be sufficient on realisation to cover its
liabilities. In those circumstances the
pursuer and her then husband were in my opinion entitled to direct the disposal
of the farmhouse, provided that that did not compromise the solvency of the
firm. It is a general principle of trust
law that beneficiaries of full legal capacity who are entitled to the fee of
trust estate may at any time compel trustees to make over the trust property to
them: Miller's Trustees v Miller, 1890, 18R 301; Yuill's Trustees v Thomson, 1902, 4 F 815.
In my opinion that principle is capable of applying to cases where the
trust relates to partnership property; the rationale of the rule, relieving
those beneficially entitled to the property of unnecessary trust
administration, applies equally to cases involving a partnership. In the present case, the pursuer and Michael Dunlop
were jointly entitled to the fee of the farmhouse. Provided that the firm and the judicial
factory of its estate were solvent, they were accordingly entitled to direct
that the fee of the farmhouse should be disposed of. In clause 6 of the joint minute, I am of
opinion that they agreed that it should be made over to the present pursuer,
and they directed the defender as judicial factor on the partnership estate to
give effect to that agreement. In my
view the principle in Miller's Trustees applies
in these circumstances, and the defender as judicial factor was obliged to give
effect to the wishes of the partners, who were the beneficiaries of the
partnership estate. He was thus obliged
to grant a disposition of the farmhouse to the present pursuer. Nothing has happened since 1988 to alter
the agreement contained in clause 6, or to revoke the direction contained
in that clause. Counsel for the defender
submitted that the pursuer's former husband had declared that he was no longer
bound by the joint minute because the pursuer had been in breach of clause 10
thereof. Clause 10 provided that
neither party would take any steps by use of legal process or otherwise to
impede or interfere with the implementation of the joint minute or with a sale
of the estate of the partnership by the judicial factor. It was not submitted, however, that the
pursuer's former husband had rescinded the joint minute, and indeed it might be
difficult for him to do so because many of the provisions of the deed had
clearly been implemented. In these
circumstances, I consider that clause 6 of the joint minute is still
binding, and I attach no significance to the attitude of Michael Dunlop to
either the joint minute or the subsequent actings of the pursuer. Counsel for the defender further referred to
the failure of the present pursuer or her agents to take steps to obtain a
disposition of the farmhouse. While that
failure might in certain circumstances be relevant to the balance of
convenience, it does not appear to have any bearing on the pursuer's right to
the subjects. That right could be
extinguished by prescription, but the long negative prescription, which applies
to obligations relating to land, has not expired. Otherwise, nothing has happened to destroy
the pursuer's right.
[13] The agreement and direction contained in
clause 6 are, however, dependent for their effectiveness on the
partnership's remaining solvent. If the
partnership becomes insolvent, it is obvious that the creditors must be paid in
full before any partnership property is made over to the partners. Counsel for the defender submitted that the
judicial factory was already insolvent.
He stated that the balance of funds in the judicial factory estate as at
[348] Mr Govier submitted that Lord Drummond Young was
stressing the importance of the agreement between the parties but of course
there now was an issue whether there was such an agreement or at least whether
it was valid.
[349] In the second place, for some reason, as became clear in the
evidence, Mr Dunlop did not later agree to the Disposition by the judicial
factor of the farmhouse. Mr Govier
accepted that in terms of Lord Drummond Young's Opinion that issue
was of no moment but the first point remained relevant.
[350] In the third place, as Lord Drummond Young stressed,
the whole principle of Miller's Trustees
depended on the solvency of the factory.
Whatever the position was in 2002 there was evidence now from
Mr Forbes that the factory would become insolvent if the farmhouse were
disponed out of it.
[351] Mr Govier referred then in some detail to Miller's Trustees.
[352] In that case a testator directed his trustees to hold and manage
"as absolute proprietors" certain heritable property for behoof of his second
son until he attained the age of 25 when they were to denude in his favour,
declaring that the property should not vest in him until he attained the age of 25
or married with the consent of the trustees after attaining the age of 21. After attaining the latter age but before attaining
the age of 25 he married with the trustees' approval. It was held that, the son's right to the
heritage and to his share of the moveable estate having vested in him upon his
marriage with the consent of the trustees, he became then entitled to call upon
the trustees to denude in his favour. At
page 305 the Lord President said the following:
"There is, in my opinion, a general rule, the result of a comparison of a long series of decisions of this Court, that where by the operation of a testamentary instrument the fee of an estate or parts of an estate, whether heritable or moveable, has vested in a beneficiary, the Court will always, if possible, relieve him of any trust management that is cumbrous, unnecessary, or expensive. Where there are trust purposes to be served which cannot be secured without the retention of the vested estate or interest of the beneficiary in the hands of the trustees, the rule cannot be applied, and the right of the beneficiary must be subordinated to the will of the testator. But I am not aware of any case in which the mere maintenance of a trust management without any ulterior object or purpose has been held to be a trust purpose in the sense in which I have used that term."
[353] Mr Govier submitted that payment of creditors fell into the
category of an ulterior object or purpose or a trust purpose to be served.
[354] It was quite clear from Miller's
Trustees that where there were trust purposes to be served which could not
be served without retaining the funds then the funds could not be made over to
the beneficiaries.
[355] Mr Govier stressed that Miller's
Trustees was a case dealing with testamentary provisions. It was difficult to see an equivalent in the
current case to "the will of the testator" and queried what could be said to be
"subordinate to the will of the testator" other than perhaps the purposes of
the judicial factory itself. If a trust
had no purpose other than its own existence then the fees should be made over
to the beneficiary. If funds had to be
paid out which could not be met if property were to be disposed of in that way
then the property had to be retained in the hands of the trustees.
[356] He referred back to paragraph 13 of
Lord Drummond Young's Opinion, where he said:
"At worst, the financial position of the factory was one of doubtful solvency. In that event, however, it appeared to me that the pursuer should be given an opportunity to provide the necessary funds to ensure the solvency of the judicial factory."
[357] There was evidence from Mr Forbes and Mr Cavers that
the pursuer had been given the opportunity to provide the necessary funds, in
other words if she had given the judicial factor sufficient money to cover the
expenses etc and to enable him to wind up the judicial factory and obtain his
exoneration and discharge, then the house could have been transferred to her.
[358] I asked what the effect would be if it were shown that the factor
had in fact paid out too much to Mr Dunlop, for example. The pursuer's position appeared to be that
she was entitled to the house by virtue of the joint minute and that the
insolvency to the factory, caused by distributions and various payments, was a
problem for the judicial factor but was nothing to do with her. Mr Govier submitted that that was not a
matter which was raised in the pleadings and in the conclusions. It was for another day and that day would
come when the judicial factor applied for his discharge and exoneration and
when he produced a final accounting of his intromissions. Reference was made to section 34 of the
Judicial Factors Act 1849, section 6 of the Judicial Factors (
[359] Mr Govier's argument was that Lord Drummond Young
clearly suggested that if the judicial factory was or became insolvent that
would elide the effect of Miller's Trustees. He suggested that the pursuer could be given
an opportunity to secure the factory solvency by obtaining the funds necessary
to do so and, if so, the house could be transferred to her.
[360] Whatever the position was in 2002, the factory would become
absolutely insolvent if the farmhouse were taken out of the equation by being disponed
to the pursuer. That would elide the
effect of Miller's Trustees, even if
it applied to the current set of circumstances.
Lord Drummond Young was dealing with matters at an interim
stage but there had been evidence now to show the state of insolvency and of
course he was dealing with matters against the background of the balance of
convenience.
[361] Mr Govier moved me to recall the interim orders made, to uphold his pleas-in-law where necessary and
to repel the appropriate pleas-in-law for the pursuer. He also submitted that expenses should follow
success in the normal way.
[362] Before he sat down, however, he reiterated an offer which had
been referred to in Production 7/6.
[363] He said that, even if I were with him, the judicial factor would
transfer the house to the pursuer if she were to pay for the expenses of
winding up the factory and the exoneration and discharge. The factor had the consent of Mr Dunlop
to that course of action.
Response by the pursuer
[364] Miss Armstrong submitted
that even if the sheriff court action had successfully been defended there
would have been no change in status. She
would have continued in occupation but she would have had no title.
[365] As far as the medical evidence was concerned she said that she
was appalled at the approach taken by Mr Govier. She seemed disappointed at the fact that a
professional would criticise other professionals.
[366] Under reference to 6/15 she said that Mr Nimon and the
other professionals referred to therein were concerned with her physical
symptoms rather than her depression.
Mr Nimon was a new consultant in
[367] As far as reduction was concerned, she submitted that if she
succeeded then the whole sheriff court process should be rendered null and
void. There was no question of going
back to the sheriff court to resume half way through.
[368] In connection with the declarator, she dealt first with the suggestion
that since the judicial factor was not a signatory to the agreement then it was
not binding on him. She said that he had
stated in evidence that he would give effect to it.
[369] 6/28 contained certain proposals for settlement of the divorce
action and the ending of the judicial factory.
Clause 8C of that indicated that Mr J G Armstrong would
grant to the judicial factor any deed necessary to provide a clear title to
enable the factor to grant such conveyances as might be necessary upon an
agreed division. She submitted that the
factor did not hold a clear title at the time of the divorce.
[370] Secondly, for the last 20 years there had been no suggestion
that the joint minute was not valid.
Mr Dunlop had argued that he was not bound by it on the basis of an
alleged breach of another clause to which the Court had not interponed
authority. Otherwise he had believed
that the joint minute was binding. The
provisions about aliment for example had been acted upon, which showed that the
agreement as a whole was binding.
[371] In relation to insolvency and the question of the application of Miller's Trustees she submitted that correspondence showed that the solvency
of the factory was always a concern of hers as were the unequal
distributions. The offer made to her was
on condition that she would put in funds to meet the judicial factor's expenses
as well as his exoneration and discharge and that she would not object to the
latter. Mr Govier had suggested
that she could take advantage of the judicial factor's petition for his
discharge to object on the basis of any defects in his administration but that
would not be open to her if she accepted the offer.
[372] She then turned to the question whether Clachan of Penninghame was
the last remaining asset before the sheriff court proceedings were
undergone. She referred to the
31 acres of Noltan land and to the fact that the evidence disclosed that
money from the sale of that land went into the factory.
[373] I confess that I had some difficulty with her submissions on this
point given that it is quite clear that the Noltan lands were never part of the
sequestrated estate. As I understood her
position there was in existence a deed of reconveyance showing that the
property was to come back to the partnership but that was in the period when
her ex-husband was altering the partnership ratio. There had been no evidence about this deed of
reconveyance and I am afraid that I have to disregard it.
[374] Mr Govier had submitted that the judicial factor would not
have been able to sell properties if he was not vested in the title and she
said that her brother in fact had the title.
She complained that the judicial factor was insisting on selling Clachan
of Penninghame Farmhouse on the open market but the 31 acres had not been
disposed of on that basis. The claim
that Clachan of Penninghame was the last asset was false. Funds from the sale of Noltan amounting to some
£36,000 had come into the factory per 6/6 of process and she said that that was
about half of its worth. She had had it
valued.
[375] She also referred to the fact that the judicial factor had to
take action in the Court of Session about the Noltan lands but again I had
heard no evidence about that. She
submitted that Mr Govier had not said that the judicial factor held title
over the lands of Baltersan and Clachan of Penninghame between 1986 and
1994. He thought that it was strange
that the judicial factor would have been able to sell the properties if he did
not have title and there was no reason given why his title did not also include
the farmhouse.
[376] She submitted in terms that the title was not held by the
judicial factor but by her brother, although quite clearly she was mistaking
his position as heritable creditor with that of a heritable proprietor.
[377] Given the difference between the two actions and the exceptional
circumstances brought out in the evidence she asked me to repel the defender's
pleas and grant the remedies she sought.
[378] Then, in a somewhat emotional passage she questioned the "tyrannical"
rule of the judicial factor. She
questioned to whom he was accountable and described his activities as the "rape
of our resources, our life, our land and our home". Why was he insisting on selling the property
and why had he hounded her and her family for 20 years?
[379] Lastly, she said that she would have asked for expenses against
the judicial factor personally but she had been unsuccessful in that motion in
the past and appeared content that if she succeeded then the expenses would
come out of the factory.
Discussion
[380] In view of the decisions
which I have reached I do not think it necessary to deal with the individual
objections which were made during the course of the Proof. Mr Govier did not,
in any event, refer to them during his closing submissions. I have set out the
evidence in this case in some detail. It
is a matter which obviously concerns the pursuer and her family greatly and I
would not wish it to be thought that I had missed anything out. As a witness she was often emotional and I
hope I do her no disservice when I say that at times she appeared obsessional
but I do not mean that as any form of criticism. However it seems to me that her
understandable lack of detachment has perhaps clouded her understanding of the
legal position and in my opinion has to some extent at least skewed her
interpretation of events.
[381] I do not intend to make any particular findings as to the
background in the case since, as I indicated at the outset, this has been set
out in a number of previous actions and in any event the general picture as
painted in the evidence of the various witnesses who gave evidence before me
was fairly consistent.
[382] In particular, it is not for me to comment on the motivation of
such as Michael Dunlop or the division of partnership assets in respect of
which I have not had the benefit of his evidence. It is plain that the judicial factory
encompassed property which was far more extensive than that which is the
immediate subject of this action and the pursuer spent some time going into
that. Again, however, I do not think
that it is necessary for me to embark on a detailed discussion of these matters
since the essential issues in the current case can be encapsulated in fairly
brief terms. For some reason the purser
does not appear to understand what the role of a judicial factor is. She seems to be off the view that he has some
sort of pastoral duties but, whilst no doubt many judicial factors will
interact with those who are affected by their duties, that is not why they are
appointed. The pursuer's evidence was tempered
with suggestions that the defender in this case was effectively in the pocket
of her ex-husband, Michael Dunlop, or at least danced to his tune but I am
afraid that I cannot accept that. I
found him to be somewhat world weary when giving his evidence, which is only to
be expected given the twenty odd years which have elapsed since his
appointment. On the other hand, whilst
he was perhaps vague as to certain matters of detail, which is again
understandable after all this time, I thought that he was doing his best to
tell the truth and I generally preferred his evidence to that of the pursuer's
where there was conflict.
[383] He has of course since the start of this factory been under the
supervision of the Accountant of Court.
While that is no guarantee that he has performed his duties properly, it
does at least provide some safeguards for those affected by his administration. It is plain that he has applied to the Court
on a number of occasions where he has thought it necessary, albeit not always
successfully. This is not a man who has
deliberately attempted to do down the pursuer and her family.
[384] The pursuer's witness, Mr Moore was patently credible. He was a professional man who had acted for
the family for a number of years and I had no difficulty in accepting his
evidence as to the background. That
background however is, in my opinion, only of limited relevance in the current
dispute and in so far as he ventured any opinions as to the manner in which the
factory should have been conducted, particularly with reference to
distributions and the attribution of expenses, I preferred the opinions of the
defender. Mr Moore, whilst an
experienced accountant, had never acted as a judicial factor. Neither was it clear to me whether he was
fully aware of the circumstances and conduct of the pursuer which gave rise to
the actions which the judicial factor took against her. This included the conduct which led to her
imprisonment for contempt of court.
[385] Mr Cavers was another professional man whose credibility and
reliability were not in question in my opinion.
His evidence was of more immediate relevance to the current proceedings,
bearing as it did, amongst other things, on the action in
[386] It is a matter of record that the defender is the judicial factor
on the sequestrated estates of the firm of J Dunlop & Sons,
conform to interlocutor of this Court dated 11 February 1987. It is also well established that prior to his
appointment the bank called up the standard securities over the partnership
property which was covered by them.
Before any sale was effected the standard securities were assigned to
the father of the pursuer on
[387] This is plainly misconceived.
The pursuer has confused the title of a proprietor with that of the
holder of a heritable security and the suggestion that the judicial factor's
appointment did not encompass the secured lands, including the farmhouse at Clachan
of Penninghame which is the subject of this action, does not get off the
ground. However, the matter can perhaps be looked at in a different light when
one considers the position of the ex-partners inter se.
[388] I
have a great deal of sympathy with Mr Govier's point that the pursuer
appears to be asking the court to ordain the judicial factor to grant a
disposition of property with which, according to her, he has never had any
concern. As a matter of relevancy, I
think his point is a good one but as a matter of fact I find that the farmhouse
did form part of the sequestrated estates vested in the first defender as
judicial factor on his appointment. The
farmhouse was not included in the factory accounts as a separate element after
the sale of the surrounding land but I accept that that was an oversight on the
part of the factor. It did not affect
the inclusion of the farmhouse in the estate under his charge.
[389] There is no dispute that the pursuer and her ex-husband
Michael Dunlop were divorced on 15 November 1988 and that prior to
the divorce the joint minute (6/25 of process), was entered into by
them. The judicial factor was not a
party to that joint minute and it seems to me that nothing in the evidence he
gave before Lord Morrison can be interpreted as showing that he considered
himself bound by it.
[390] I will come in due course to consider in so far as relevant, what
happened thereafter but I think I ought immediately to proceed to a
consideration of the pursuer's second conclusion, for production and reduction
of the decree granted by the Sheriff at Stranraer on 19 December 2001
for recovery of possession of the farmhouse and also the final extract decree
of ejection pronounced on 14 June 2002 and extracted on
1 July 2002. It is a matter of
record that on
[391] It is averred by the defender that the expenses of the said Sheriff
Court action remain unpaid but nothing was made of that in submissions on his
behalf and I say no more about it, despite the case of Flannigan v British Dyewood Company Limited 1971 SC 110.
[392] Mr Govier had a number of submissions to make on relevancy but
I will deal with these later. Broadly
speaking where other means of review are provided and have been utilized, or
the parties have failed to take advantage of them, reduction of a decree is
incompetent but there are exceptions to this rule. It seems to me that in the current case the
pursuer has to satisfy me, firstly, that there was a good reason why she did
not follow the established procedures and, secondly, that reduction is
necessary in order to produce substantial justice. I do not think that the
precise formulation of the second leg is of particular moment for present
purposes.
[393] Mr Govier's submissions on relevancy did not impinge on the first
aspect of this and the second aspect is intrinsically linked to the merits of
the first conclusion, to which I will come in due course. However, before I can turn to the merits of
either conclusion it seems to me that I ought to discuss the pleas of lis alibi pendens and res judicata.
[394] I can deal with the first one, I think, fairly briefly. As I have indicated, the question of payment
of expenses or otherwise did not form part of Mr Govier's submissions
under this head. The first part of his
argument was that if reduction were granted then the process in
[395] No authority was cited in support of this proposition and in the
absence of any authority I reject it. As I understand it, reduction of a
Sheriff Court Decree is available as an exceptional mode of review. Leaving aside the issue whether a bare
reduction is competent, it has been regarded as at least unsatisfactory if it
had the effect of leaving parties' rights and obligations unresolved. Hence it was often accompanied by ancillary
conclusions where it was necessary to define those rights and obligations. See,
for example,
[396] One wonders why those conclusions were thought to be necessary if
the process in the
[397] That in itself would dispose of any argument on lis alibi pendens but, while that plea
cannot be regarded as co-extensive with the plea of res judicata, the observations which I am about to make on the
latter do, I think, have equal force in connection with the former. The essence of Mr Govier's plea is, I
think, that if reduction is refused then the issue governed by the first
conclusion, (for declarator that the pursuer is the owner of the property and
that the judicial factor is bound to effect a disposition of it in her favour) has
already been decided in favour of the judicial factor by the Sheriff of
Stranraer and, not having been appealed, is res
judicata and binding.
[398] This is where the discussion on Hynds v Hynds comes into
play. The
[399] While a very crude analogy, these could be equiperated with the
difference between a decree of separation and aliment and a change in status,
as in Hynds.
[340] In the circumstances if I refused to grant decree of reduction in
terms of the second conclusion of the summons, I would still have to make a
decision on the first conclusion. This
would also have been the case if I had decided that the
[341] I turn now to the merits of the pursuer's contention that she was
medically unfit to attend to the
[342] That being so, the pursuer has failed to negotiate the first
hurdle standing in the way of reduction of the Sheriff Court decrees and I
cannot therefore grant decree in terms of the second conclusion of the
summons.
[343] However, that is not an end of the matter. As I have indicated I require to consider
whether there is any merit in the pursuer's case in support of the first
conclusion. If I find that there is,
then that would indicate that the pursuer would have been able successfully to
negotiate the second hurdle standing in the way of reduction, namely that a
substantial injustice has occurred. It
would have been appropriate in any event for me to consider that matter and to
indicate my views thereon notwithstanding my decision as to the pursuer's
medical condition.
[344] As I indicated earlier, I have sympathy with the submissions on
relevancy made by Mr Govier in connection with the fact that the pursuer's
pleadings on the one hand are to the effect that the farmhouse was not part of
the sequestrated estates and on the other hand require the judicial factor to take
certain action in respect of it. These
appeared to me to be mutually contradictory.
I also have certain sympathy with his submission that since the pursuer
claims entitlement to the farmhouse with no conditions attached, it is
difficult to see what relevance there is in pleadings and evidence about alleged
uneven distributions and general maladministration by the judicial factor.
[345] I will have more to say on the latter point in due course but
since I heard evidence and have made a decision on the matter which effectively
supersedes questions of relevancy, I will not require to say very much.
[346] There is no doubt that the farmhouse formed and forms part of the
sequestrated estates. At the time of the
divorce the parties retained power, in my opinion, to agree as to its eventual
disposal, although any such agreement could have been frustrated by subsequent
events in the administration of the factory, particularly its insolvency. Under
reference to Miller's Trustees, Lord
Drummond Young opined that the ex-partners were jointly entitled to the fee of
the farmhouse and, provided that the firm and the judicial factory were
solvent, they were accordingly entitled to direct how the fee of the farmhouse
should be disposed of. The case of Hunter
v Hunter 1998 SLT 1152 was included in the defender's bundle of authorities
but not referred to in argument. I do not think I need to ask for further
submissions on it, however. In that case Lord Osborne held that a judicial
factor was a trustee and accordingly had power to sell assets but it was his
duty to use due diligence to obtain the best price. However, if all those
having an interest in the partnership agreed, and if the Accountant of Court
approved, it would be open to the judicial factor to sell the assets, at an
appropriate valuation, to the ex-partner. I respectfully agree. Furthermore, I
see no reason in principle why the assets could not be transferred to an
ex-partner for no consideration and without any balancing payment or adjustment
to the ledger in favour of the other partner or partners if all concerned are
in agreement and provided the solvency of the factory is not compromised. This
could be done at the conclusion of the factory or, I dare say, by way of
interim distributions, there being no reason why those could not be in the form
of property rather than cash. Where there is agreement there is unlikely to be
any difficulty and I think it correct to say that the judicial factor, subject
to the approval of the Accountant of Court, would be bound to give effect to
it. I do not think, however, that it can properly be said to be the duty of a
judicial factor to seek to enforce an agreement which is disputed by one of the
parties to it, which is, or at least has been, the situation here. I will say
something about the joint minute later but I do not intend to make any finding
as to its being an obligatio literis. I say this because, while Mr Govier made
submissions on the matter, nothing he said was predicated in the
pleadings. I would have expected the
point to have been raised specifically and if it had been that would have given
the pursuer an opportunity to make such reference in the pleadings as she
thought appropriate, and as she was able to, in connection with the matter,
including such averments amounting to rei
interventus or homologation as befitted.
[347] Leaving that particular issue aside, it might me that in other
circumstances, had the judicial factory come to an end with sufficient
resources to enable property, including the farmhouse, to be distributed to the
partners, reliance could have been made on the joint minute by such means as
were considered appropriate.
[348] That situation did not, however, come to pass and the factory is
now insolvent, or rather it will be if the farmhouse is transferred out of it
for no consideration.
[349] The pursuer's position seems to be that the judicial factor is
somehow personally barred from denying that he is bound by the joint
minute. Once again, however, I find
myself in agreement with Mr Govier.
The averments in so far as directed to personal bar are, I think,
irrelevant. Leaving aside the question
of whether personal bar is a shield or a sword the pursuer says in the
pleadings that "Thereafter the parties to said Joint Minute and the First Defender
proceeded in reliance and in implement thereof.
In particular in 1989 the parties hereto entered into correspondence to
agree a plan of the property at Clachan of Penninghame Farmhouse for the
purpose of the first defender granting a Disposition in favour of the pursuer
of said property in implement of her entitlement in terms of said Joint Minute. By letter dated
[350] In condescendence 6 it is said that "In reliance on said
position the pursuer occupied said property which was dilapidated and carried
out improvement works at her expense.
The property was over time substantially renovated and its value
increased significantly".
[351] I cannot see any other averments which should go to personal bar based on representations made by the judicial factor and the pursuer's acting in reliance thereon to her detriment. Such averments as there are are vague and quite insufficient in the circumstances to allow me to entertain such a case.
[352] As it happens however, some evidence was led. I am satisfied that it was the judicial
factor's intention initially to transfer the farmhouse to the pursuer. I am also satisfied that the existence of the
joint minute had a bearing on that, with the factory estate being in a position
to allow the transfer to be made, and since the relevant parties agreed, it
would have been appropriate and sensible to effect it. The question of
accounting for it at an appropriate valuation was something of a stumbling
block but it seems to be that that could have been resolved later.
[353] Initial arrangements for the conveyancing were made and the
pursuer's solicitors were asked to draft a disposition. The evidence from the correspondence
thereafter is quite clear. I find that
the pursuer was unwilling to accept a disposition from the judicial factor at
that time - a time when the factory was solvent.
[354] She thereafter remained in the premises for many years but her
occupation was precarious. She lived
there rent free and the only acting I can find established to her prejudice was
the installation of velux windows. There
is simply no basis on the pleadings or in the evidence for my making a finding
that she acted to her prejudice having been induced into a false belief by any
representations, actions or inactions of the judicial factor. There was no basis for her entertaining any
expectations at all, far less legitimate ones. Nothing happened thereafter
which entitled the pursuer to claim personal bar against the judicial factor,
even is she were entitled to use this doctrine as a sword rather than a
shield.
[355] As I have indicated there was a great deal of evidence and
submissions about distributions made by the judicial factor and previous
proceedings in Court either at his instance or against him. There was also a great deal of evidence about
the pursuer's obstruction of his administration. I do not think it is necessary for me to go
into the latter in any great detail.
Suffice it to say that I accepted his evidence about her obstruction and
I also accept, pace Mr Moore,
that it was appropriate, generally speaking, to balance the costs and expenses
of her activities against distributions made to Mr Dunlop.
[356] The evidence, however, was insufficient to enable me to form my
own view as to the final accounting and as to whether in fact any balance is due
to be paid to either party as against the other. All that has a bearing on what was one of the
pursuer's principal submissions, namely that, the principles of Miller's Trustees ought to be applied in
this case. I have some difficulty with
the application with Miller's Trustees
to the current set of circumstances. As
I have said, in Lord Drummond Young's opinion, the pursuer and
Michael Dunlop were jointly entitled to the fee of the farmhouse and
provided the firm and the judicial factory were solvent, they were entitled to
direct how the fee of the farmhouse should be disposed of. The defender as judicial factor was obliged
to give effect to the wishes of the partners, who were the beneficiaries of the
partnership estate.
[357] Whilst I agree with that, I think, with respect, that the analogy
with Miller's Trustees is somewhat
strained. That case involved a
testamentary trust. In the circumstances which arose there was no point or
benefit in its continuing and the beneficiaries were effectively entitled to
have it brought to an end. In the present case the judicial factor was
appointed by the Court to administer the estates, which were sequestrated. The estates were taken out of the control of
the partners and their rights to intromit with the estate were suspended.
[358] Subject to what I have said about Hunter, I was not directed to any other authority to the effect
that partners on a sequestrated estate under the control of a judicial factor
have any right to direct him what to do.
He is after all under the supervision of the Accountant of Court and is
an officer of the Court. If the parties
are in agreement and the factory is in a position to be brought to an end then
one would expect that that is what would happen. Thereafter the estate could be distributed
according to their wishes and the provisions for the factor's obtaining his exoneration
and discharge would come into play at that time.
[359] However, it is not easy to identify anything which could be said
to be analogous to a trust purpose.
[360] There are doubtless certain parallels to be drawn but I am
somewhat uneasy about equiparating the two.
[361] The foregoing brief discussion, though, is really nothing to the
point. Even if Miller's Trustees does indeed govern the current situation, I am in
full agreement with Lord Drummond Young that it can only apply as
long as the estate is solvent.
[362] That was the position when the pursuer's solicitors were asked to
draft a disposition but on the evidence which I accept, it will not be the
position now if the farmhouse is taken out of the equation.
[363] The pursuer's submissions are generally to the effect that that
is not her concern. The situation has
been brought about by maladministration by the judicial factor, the raising of
unnecessary Court actions and uneven distributions made to her ex-husband. The judicial factor on the other hand claims
that he has had to lay against her the
cost of actions taken in connection with her own obstructive behaviour and that,
at least generally, speaking payments made to Mr Dunlop were made with the
authority of the Court.
[364] Is all this relevant?
Mr Govier's position is, I think, that these are all matters which
require to be dealt with when the judicial factor petitions for his exoneration
and discharge. On the other hand, can it
be right that a if a judicial factor has improperly administered an estate
under his charge, making unequal distributions and generally wasting the
estate's money, that that cannot be pleaded against him in an action such as
this? Does the innocent party have to suffer the loss meantime until the final
accounting? No authority was presented
to me in argument either way and I do not intend to proffer any comments of my
own on the problem as I have not had the benefit of views of the parties on
them. A further, and indeed the main, reason
for not doing so is that as a matter of fact I am not satisfied that the
pursuer has established that the administration of the judicial factor was
deficient in the respects about which she complains. As I have indicated, full details of the
accounts were not poured over in evidence, the accounts were prepared each year
and submitted to the Accountant of Court, the pursuer in her submissions did
not seek to elaborate upon the appropriateness or otherwise of the court actions
in which the judicial factor engaged and I found the judicial factor's own
account of what he had done and the reasons for it to be perfectly
acceptable.
[365] At an interim stage Lord Drummond Young said that it
was not obvious why the pursuer's right to the farmhouse should be compromised
by distributions made to the other partner.
I heard evidence on that matter and I am satisfied that the judicial
factor has established that the distributions were properly made. No doubt any balance due, if any, to the
pursuer can be calculated in the final accounting.
[366] The failure to include the house in the factory accounts for a
period was to say the least unfortunate but it was not sufficient in my opinion
to give rise to any expectation on the part of the pursuer and did not amount
to a misrepresentation on the part of the judicial factor.
[367] For completeness, I should also say that the evidence about the
Noltan lands was, in my opinion, irrelevant to the issue before me.
[368] The most up to date financial statement (as at
[369] A number of offers have been made over the years to settle this
longstanding matter and I regret to say that it was largely the pursuer's
attitude which led to matters remaining unresolved. However, I do have a degree
of sympathy for her in relation to the question of valuation. I do not see how the judicial factor could
have transferred the farmhouse to her without accounting somehow for its value.
Nonetheless, in a question between the partners, if the joint minute is
binding, then there should be no balancing payment or ledger adjustment in
favour of Michael Dunlop if the farmhouse is disponed to the pursuer. In other
words, it should not be regarded as part of her share in the estate, as between
the partners. It may be that what is what lay behind her insistence that the
property had fallen outwith the partnership estates. It is a different matter,
of course, in a question with creditors. I have said already that I do not
consider that it was for the judicial factor to enforce the obligation. However
I venture to express an opinion on it. On the basis of the evidence which I
heard and those submissions which I was prepared to entertain, I am in
agreement with Lord Drummond Young that the agreement was binding and
accordingly Michael Dunlop should not be credited with any part of the
farmhouse or its value in the adjustment of sums due to the ex-partners.
However, I do not see how that conclusion can be binding on Mr Dunlop. The
action was dismissed against him. He did not withdraw his defences or consent
to decree so it seems to me that it remains open to him to challenge the
agreement if he so chooses. For example, I apprehend that he could base an
argument on the submission advanced by Mr Govier that the joint minute fell
into the category of obligatio literis.
That would be a matter for him although the pursuer may well have a good
argument that, while the Court did not interpone authority to the joint minute,
she proceeded with the divorce action in reliance on it and did not receive any
other financial provision by way of capital payment or periodical allowance. In
other words, she may be able to establish rei
interventus. I only mention these matters tentatively and in the hope that
they might assist parties in bringing this matter ultimately to a satisfactory
resolution.
[370] As I understand it the judicial factor is now looking for the
pursuer to provide funds of around £46,000 on the understanding that any
surplus following taxation would be refunded to her. That offer still stands. It may be, I know not, that the pursuer could
obtain funds to enable her to make such a payment to the factor and allow the
farmhouse to be disponed to her. It may
be that Mr Dunlop agrees to this course of action. On the final accounting if it appeared that
the distributions were unequal for no good reason or that for any reason she
was entitled to a balancing payment hen no doubt she could take appropriate
action at that stage to recover what was due to her, if it were not
forthcoming.
[371] It is high time that this unhappy matter was brought to a close
but in the meantime I am driven to find in favour of the first defender.
Decision
[372] I shall recall the
interim orders granted by Lord Drummond Young on
[373] Accordingly I refuse to grant decree in terms of the pursuer's 1st.,
2nd., 4th. and 5th. conclusions, assoilzie the
first defender from the conclusions of the Summons and find the pursuer liable
to the first defender in the expenses of process as taxed, except insofar as
otherwise dealt with.