|
EXTRA DIVISION,
INNER HOUSE, COURT OF SESSION
|
Lord Menzies
Lady Dorrian
Lord Wheatley
|
[2013]
CSIH 54
CA147/11
OPINION OF
THE COURT
delivered by
LORD MENZIES
in the cause
by
(FIRST)
PROSPER PROPERTIES LIMITED; (SECOND) INKERSALL INVESTMENTS LIMITED
Pursuers and
Respondents;
against
THE SCOTTISH
MINISTERS
Defenders
and Reclaimers:
_______________
|
Act: MacColl; Tods
Murray LLP
Alt: Martin QC, Burnett;
Harper Macleod LLP
18
June 2013
Introduction
[1] This
action concerns the validity and efficacy of two arrestments served on the
Scottish Executive Environment and Rural Affairs Department ("SEERAD") on
behalf of the pursuers on 13 October 2006. In this action the pursuers
seek damages from the defenders for not retaining sums held by them, and thus
having acted in breach of the arrestments. The defenders deny that the
arrestments were valid and effective, and have pleas to the competency of the
action and the relevancy of the pursuers' averments. The action proceeded
under the Commercial Cause Rules to a debate before the Lord Ordinary. In his
opinion dated 23 August 2012 Lord Woolman concluded that the
arrestments were valid. On 4 September 2012 he decerned against the
defenders for payment to the first pursuers of the sum of £31,934.64, and for
payment to the second pursuers of the sum of £25,653.44. Against that
interlocutor the defenders now reclaim.
[2] The Lord
Ordinary helpfully and succinctly set out the circumstances at
paragraphs [2] to [15] of his opinion dated 23 August 2012 as
follows:
"[2] Michael Woodcock is the
principal of two related companies: Prosper Properties Limited and Inkersall
Investments Limited (respectively "Prosper" and "Inkersall"). In 2006 they
owned adjacent land at Kirkconnell, Dumfrieshire. Prosper owned Nether Cairn
Farm. Inkersall owned Rigg Farm. Together the subjects are known as "the Rigg
Estate".
[3] For
a number of years Robert Bell acted as the agent for both Prosper and
Inkersall. He dealt with various matters relating to the Rigg Estate, including
the letting of cottages. Between 2000 and 2004, Mr Bell was granted a number of
short term grazing lets at Nether Cairn Farm and at Rigg Farm. In 2004, the
relationship between Mr Woodcock and Mr Bell broke down. Disputes arose about
Mr Bell's right to occupy various parts of the Rigg Estate. These disputes
translated into several sets of legal proceedings. At some stage Mr Bell
vacated the subjects.
The
Prior Action
[4] In
2006 Prosper and Inkersall raised proceedings against Mr Bell in this Court.
They combined their claims in one action ("the Prior Action"). They each
asserted that they had sustained damage by reason of Mr Bell's wrongful occupation
of the two farms. The greater part of the pleadings relates to matters that are
common to both claims.
[5] Articles
six and seven of condescendence concern the individual claims, which are very
similar in their terms. Both Prosper and Inkersall sought to recover (a) lost
rental income; and (b) the cost of undertaking weed control, mowing grass and
repairing fences and dykes arising out of Mr Bell's alleged neglect of the
subjects. In the case of Rigg Farm, there was also a claim for damage to a steading.
Prosper
sought payment of £95,750 in respect of Nether Cairn Farm. Inkersall sought
payment of £76,917 in respect of Rigg Farm. These were respectively the second
and third conclusions. They also sought interest and expenses. Mr Bell lodged
defences.
Arrestment
on the Dependence
[6] Tods
Murray LLP have acted throughout as the solicitors for Prosper and Inkersall.
The summons in the Prior Action was signetted on 8 October 2006. On the same
date Lord Hodge granted a warrant to arrest on the dependence. Tods Murray
sought the warrant because they believed that Mr Bell was entitled to a payment
under the Single Farm Payment Scheme ("SFPS"). It is an agricultural subsidy
paid annually to qualifying farmers. For the purposes of SFPS, Scotland is a region
and the Scottish Ministers are the competent authority: Common Agricultural
Policy Single Farm Payment and Support Schemes (Scotland) Regulations 2005.
[7] Mr
Bell had in fact applied for an SFPS payment on 15 May 2006. During the whole
period relevant to the present dispute, the scheme was administered on behalf
of the Scottish Ministers by SEERAD. After the change of administration in
2007, SEERAD ceased to exist. Responsibility for SFPS was transferred to the
Scottish Executive Environment Directorate.
[8] On
12 October 2006, Tods Murray instructed Scott & Co, Messengers at Arms, to
serve the summons on Mr Bell and to arrest on the dependence of the action "in
the hands of the Scottish Executive Environment and Rural Affairs Department,
Dumfries office". The following day, officers from Scott & Co went to
SEERAD's office in Dumfries and served two arrestments.
[9] Apart
from the names and the sums due, the arrestments are in identical terms. Each
schedule is timed at 9.45 am and is addressed
to "The Scottish Executive Environment and Rural Affairs Department, 161 Brooms
Road, Dumfries". The schedule of arrestment for Prosper was for a figure of
£105,325, and the one for Inkersall for £84,608.70. Those figures included
estimated amounts for interest and expenses. By
letter dated 19 October 2006, Scott & Co reported to Tods Murray that they
had "effected service of the Arrestment on the Dependence". The certificate of
execution states that the schedules were left with Quintin Donald, Principal
Agricultural Officer.
[10] Harper
Macleod act for the Scottish Ministers in this matter. On 25 October 2006 they
wrote a very short letter to Scott & Co. It is in the following terms:
"Scottish
Executive - Arrestments v Mr Robert Bell
We refer to
the above matter and confirm our clients have passed to us a Schedule of
Arrestment and dependence (sic) served upon them on 13 October 2006. We
confirm the arrestment is invalid as it incorrectly designs the arrestee."
[11] The
following day, Tods Murray wrote to SEERAD to enquire whether the arrestment
had caught any funds due to Mr Bell. On 27 October 2006, SEERAD acknowledged
receipt of that letter and said it had been passed to a named member of staff
for a reply. SEERAD did not, however, send a further response to Tods Murray.
Payment
to Mr Bell
[12] On
14 December 2006 SEERAD authorised an SFPS payment to be made to Mr Bell in
terms of his application. The Scottish Ministers state that they paid him
£53,000 on 15 January 2007. Prosper and Inkersall did not learn about the
payment until much later. They believe Mr Bell received a higher sum, perhaps
£70,000.
[13] Tods
Murray understood that Mr Bell might be due a further SFPS payment. On 24
January 2007 they instructed Scott & Co to serve further arrestments on the
dependence of the Prior Action. In order to avoid any doubt, they were served
(i) in the hands of
SEERAD (on behalf of the Scottish Ministers)
(ii) in the hands of the
Scottish Ministers (on behalf of SEERAD)
They
were served at Dumfries and at the Scottish Ministers' principal office at
Victoria Quay, Edinburgh. In fact no sums were caught by those arrestments.
[14] Mr
Bell was sequestrated on 21 May 2008. The trustee in the sequestration was the
Accountant in Bankruptcy. Subsequently, he informed the court that he did not
intend to enter the process and insist upon the defences. On 14 October 2008
Lord Drummond Young granted decree by default in the Prior Action.
[15] At
that stage Prosper and Inkersall sought release of the arrested sums. The
Scottish Ministers denied that any sums were due. Prosper and Inkersall raised
the current action on 6 October 2011. They concluded for furthcoming of the
sums arrested, or for damages for breach of arrestment. Since early 2012, the
action has proceeded solely on the alternative ground. Mr McColl explained that
the first ground was deleted after the defences disclosed that there are no
sums to arrest."
The
issues
[3] Four
arguments were advanced before the Lord Ordinary on behalf of the defenders in
support of their position that they were not liable to pay any sums to the
pursuers. First, it was incompetent for the pursuers to combine their claims
in one action. Secondly, the arrestments should have been served on them, not
SEERAD. Thirdly, there was no arrestable obligation on the date of service.
Fourthly, the pursuers had not properly averred that they suffered loss, as
another creditor might have had a better claim. The Lord Ordinary resolved
each of these issues in favour of the pursuers. The same arguments formed the
basis for the grounds of appeal for the defenders and reclaimers, and were
focused in their note of argument and submissions to us. We propose to deal
with each of these issues in turn.
The
competency of a single action
[4] It
was held in HM Feuars of Orkney v Steuart (1741) Mor.11986 that
"different parties could not accumulate their actions in one libel, unless they
had connection with one another in the matters pursued for, or had been
aggrieved by the same act". Lord President Dunedin observed in Killin v
Weir (1905) 7 F 526 at 528 that, on considerations of expediency, it
would be regrettable if any amplification of these two principles had to be
allowed. The matter was further considered by the First Division in Boulting
v Elias 1990 SC 135 - see particularly the Opinion of the Court
delivered by the Lord President at 146/147. The question in the present
case (as in nearly all the authorities in which this issue has been considered)
is whether the pursuers can bring themselves within one or other of the
exceptions noted in HM Feuars of Orkney.
[5] The
Lord Ordinary considered separately the present action and the prior action.
He decided that although the second exception did not apply to the prior
action, there was the requisite coincidence of interest in the prior action to
bring it within the first exception. With regard to the present action, he
considered that both exceptions applied.
[6] With
regard to the prior action, counsel for the reclaimers submitted that the
Lord Ordinary had fallen into error in holding (at paragraph [21] of
his opinion) that there was the requisite coincidence of interest. There were
similarities of circumstances between the two pursuers, but not a common
interest. Neither pursuer had a legal interest in the other's contract.
Counsel for the reclaimers referred to the statement of the law in Boulting v
Elias (at page 147):
"Where
the action is one for breach of contract it is necessary that all those who
combine together as pursuers should be able to demonstrate that they have a
title to enforce that contract or at least that they have an interest to do
so."
[7] The
claims by each pursuer in the prior action related to different contracts with
Mr Bell in relation to two different companies and two different
properties. The grounds of action were not identical. The fact that no issue
was taken as to competency in the prior action is neither here nor there - this
cannot render an incompetent action competent. The validity of an arrestment
on the dependence depends on the underlying action being competent at the time
the arrestment was granted.
[8] Counsel
for the reclaimers also submitted that the Lord Ordinary fell into error
in holding that both exceptions applied to the present action. This action
arose out of the prior action. Separate arrestments were served on behalf of separate
pursuers, and there are separate wrongs complained of. If service of the
arrestments was effective, separate duties were owed to separate legal
entities. Moreover, the Lord Ordinary was wrong to categorise breach of
arrestment as an intentional delict - on the basis of Inglis and Bow v
Smith and Aikman (1867) 5 M 320, counsel submitted that breach of
arrestment is not a delictual wrong but is in a category of its own. It is
analogous to (but not identical to) a finding of contempt of court; as such,
it is not a form of delict that falls within either of the exceptions to the
general rule. Counsel also referred to Ruddy v Chief Constable
Strathclyde Police [2012] UKSC 57 (particularly at paragraph 32).
[9] Senior
and junior counsel for the reclaimers accepted that the question of whether a
particular case fell within one of the exceptions to the general rule required
to be answered by reference to an assessment of the facts and circumstances in
that case. They submitted that the Lord Ordinary had erred in his assessment
of these in both the prior action and the present action.
[10] Counsel
for the pursuers and respondents submitted that the reasoning of the Lord Ordinary
was sound in respect of both the prior and present actions. With regard to the
prior action, that was not a claim based on breach of contract; it sought
damages for wrongful occupation of property. As was averred in article 4
of condescendence in the summons in the prior action, Mr Bell claimed that
he had a single tenancy over the whole of the Rigg Estate. Mr Bell had
raised a single action in the Court of Session against both the present
pursuers, and both present pursuers had raised another single action against
Mr Bell in the sheriff court. It was clear from the pleas in law that this
was not an action for breach of contract, so the statement of the law given in Boulting
v Elias and relied on by the reclaimers was not applicable.
[11] Mr Bell's
assertion that he had a tenancy interest over the whole estate, including the
lands belonging to each of the pursuers, was sufficient connection to bring the
prior action into the first exception to the general rule (and, indeed, counsel
submitted that it might bring the pursuers into the second exception as well).
No issue of competency was raised by the defender in the prior action. The
Lord Ordinary granted warrant for arrestment on the defenders and no issue
of competency was taken at that stage, nor at any stage in the proceedings.
Decree was pronounced in foro, and was not challenged. No steps were
taken to reclaim or to reduce that decree. With regard to the present action,
the Lord Ordinary was correct (at paragraph [19] of his opinion) to
hold that both exceptions to the general rule applied. There was both
coincidence of interest between the pursuers and a single act on the part of
the defenders which gave rise to a claim by both pursuers.
[12] We
are unable to identify any error of law in the Lord Ordinary's approach to
this issue. We agree with him that there was the requisite coincidence of
interest between the pursuers in the prior action to justify the conclusion
that it fell within the first exception to the general rule. The two companies
were linked - Mr Woodcock was principal of each, and the registered office
of the first pursuers is at the Estate Office, Inkersall Farm, Inkersall,
Bilsthorpe, while the registered office of the second pursuer is at the Estate
Office, Inkersall Farm House, Inkersall, Bilsthorpe. The lands owned by the
pursuers were adjacent to each other, and together formed the Rigg Estate.
Mr Bell had acted as agent for both companies, and it was after his
relationship with Mr Woodcock deteriorated that problems arose between him
and the pursuers. He asserted that he was the tenant of the whole Rigg Estate,
and the claims of each pursuer against him were strikingly similar. We cannot
say that the Lord Ordinary erred in his assessment that, in light of these
facts and circumstances, the prior action fell within the first exception.
Moreover, it was not an action founded on breach of contract, so the statement
of law in Boulting v Elias quoted above is not applicable to this
action.
[13] Moreover,
no issue was taken by the defender as to the competency of that action at any
stage. Mr Bell entered appearance in that action and was legally
represented. No attack on the competency of the proceedings was made when
warrant for arrestment on the defenders was granted, nor at any stage
thereafter. Decree in foro was granted; no steps were taken to reclaim
or reduce that decree. While counsel for the reclaimers may be correct in
observing that this history cannot render an incompetent action competent,
these are factors to which the court is entitled to have regard when
considering all the facts and circumstances of the case. Although not part of
our reasoning, we observe that it would be unfortunate for an action in which
warrant for arrestment was granted in October 2006 and a final decree in
foro was pronounced in October 2008, and in which no challenge to
competency was maintained by either party to the proceedings at any stage,
should be declared incompetent as a result of an attack on its competence by defenders
in separate proceedings at this time.
[14] Be
that as it may, we do not consider that the Lord Ordinary fell into any
error in his disposal of this issue, and we reject the submissions for the
reclaimers on this point.
The
validity of the arrestments served on SEERAD
[15] Counsel
for the reclaimers submitted that SEERAD had no separate legal personality from
the Scottish Ministers, but was simply the name given by the reclaimers to the
organisation of those civil servants who at the material time dealt with
matters related to the environment and rural affairs. The acts of those civil
servants gave rise to rights and liabilities in respect of the reclaimers and
not in respect of any other party. Reference was made to the Scotland Act
1998, sections 44, 52 and 59. A grouping of civil servants employed by
the Scottish Ministers has no legal persona. This contrasts with the position
of some departments of the UK government, which do have separate legal
personalities and may raise and be served with legal proceedings; reference
was made to the Crown Proceedings Act 1947 and particularly sections 17,
18 and 42 thereof.
[16] Counsel
for the reclaimers observed that it was an important matter of policy that the
interpretation of whether an arrestment has been validly served is based on
certainty. A strict approach is taken - see Graham Stewart on Diligence,
page 35. Effective service of an arrestment imposes legal obligations
upon an arrestee, and it should not rely on the arrestee's interpretation of
whether the designation of the arrestee is "close enough" to be valid. The
Lord Ordinary asked himself the wrong question at paragraph [31] of
his opinion when he asked himself whether there was any real misunderstanding
as to the true identity of the true arrestee, and answered that query in the
negative. The question should be not what the arrestor intended to do, nor
what the understanding of the arrestee was, but what was actually done.
[17] Both
senior and junior counsel for the reclaimers accepted that there was some
degree of flexibility in the application of the rule of strict interpretation
when applied to arrestments. A minor clerical error in the recording of the
date of a decree will not invalidate an arrestment: Henderson v Rollo
(1871) 10M 104. In Spalding v Valentine & Co (1883) 4 R
1092 an error in the Christian name of the defender was not sufficient to
invalidate proceedings, the Lord Justice-Clerk observing that "nowadays no
favour would be shewn to such a purely technical objection". In Hannan v
Kendal (unreported, 30 March 1897, an excerpt from which is
appended at page 849 of Graham Stewart on Diligence) two errors in
the designation of an arrestee which were described as "careless blunders" but
which were not said to have occasioned any mistake or misunderstanding were
held not to invalidate the arrestment, and the court observed that:
"the
errors in this case were nothing but clerical, and produced no
misapprehension. There is, I think, no authority for holding the diligence inept
on account of them. The case of Henderson's Trustees (1831) 9S
618 is not strictly in point, and it may be that there is less tendency now
than then to give effect to a technical objection."
[18] Counsel for
the reclaimers accepted that the courts tended to look less favourably on such
technical objections, and that the trend away from technicality which could be
traced from Henderson's Trustees in 1831, through Henderson v Rollo
in 1871 to Hannan v Kendal in 1897 had continued to the present
day. However, the Lord Ordinary had taken this tendency too far in the
present case.
[19] Senior
counsel for the reclaimers accepted, on the basis of the authorities referred
to above, that a de minimis typographical error will not invalidate an
arrestment, but anything more than that will have such an effect. The present
case was an example of something far greater than a mere typographical error.
The point was of importance to the Scottish Ministers, as there might have been
sums owing or arrestable obligations owed to Mr Bell from other
departments. Were all departments of the reclaimers caught by this arrestment,
or only debts/obligations owed by SEERAD? The reclaimers' position was
analogous to a company which traded under several different trading names; if
an arrestment is served on one trading name, would it attach all obligations
owed by the company, including those owed under different trading names, or
only those obligations owed by the company under the particular trading name
specified in the arrestment? He submitted that this highlighted the need for
objective certainty, and supported the rule that any arrestment with an error
greater than a de minimis typographical or clerical error will not be
effective. If the test were to be what a reasonable arrestee should understand
to have been the intention of the arrester, what factors should be taken into
account? Once in the arena of the subjective judgment of the arrestee, a
variety of circumstances may arise. Service of an arrestment is a formal procedure
by order of the court, creating a nexus between the arrestor and the arrestee.
Strict accuracy is required. In the present case, SEERAD is no more than a
name adopted by the Scottish Ministers for administrative convenience, and is
not a legal entity. This is no de minimis typing error, but a
fundamental flaw which invalidates the arrestment.
[20] Counsel for
the pursuers and respondents observed that at no time have the reclaimers
challenged the Lord Ordinary's view (at paragraph [32] of his opinion)
that the Scottish Ministers knew that the arrestment was for them, they knew
they were the intended recipient and that no other person could be the intended
recipient. The reclaimers do not challenge the Lord Ordinary's analysis
in this passage. The question therefore is, is it appropriate for the Scottish
Ministers to disregard this arrestment, which they knew was for them? The
Lord Ordinary identified the correct question at paragraph 31 of his
opinion, namely whether there was any real misunderstanding as to the true
identity of the intended arrestees. This had been the central question since
the 19th century - the ratio of Hannan v Kendal was
based on the fact that the errors in that case "produced no misapprehension"
and "it is not said that these careless blunders occasioned any mistake or
misunderstanding". It had always been the case that, provided there was no
mistake or misapprehension, service on a person who was not strictly the
correct arrestee did not invalidate an arrestment. In support of this
proposition counsel referred to Graham Stewart on Diligence at 40/41:
"Trustees savings banks are not bodies
corporate, and strictly the arrestment should be laid in the hands of the
trustees nominatim; but in practice it is sufficient to arrest in the
hands of a principal official, e.g the treasurer."
This was an example
of an arrestment which was intended to affect the obligations of a particular
legal person being effective, by practice, by service on another person,
because it was perfectly apparent whose obligations were being arrested. This
undermined the absolute rule argued for on behalf of the reclaimers.
[21] We agree
with the submissions on behalf of the pursuers and respondents on this issue.
We do not seek to detract from the statement in Graham Stewart on Diligence that
arrestments and all such diligences are strictly looked at, and the omission
from or misstatement in the execution of anything essential will be fatal
(page 35), nor do we disagree with the statement (at page 38) that
"where the arrestee is not an individual, but a company, association, corporation,
etc care must be taken that the arrestment is laid in the hands of the proper
parties as arrestees". However, it is clear that, at least since the latter
part of the 19th century, Scots law has applied this general rule
pragmatically, and without undue regard to merely technical objections. It is
not in dispute that de minimis clerical or typographical errors, such as
the spelling of an arrestee's name, or the specification of a first name, or
the specification of the date of a decree, will not invalidate an arrestment.
However, the categories of cases in which absolute strictness is unnecessary is
not confined solely to typographical or clerical errors, as the example of
trustees savings banks quoted above from Graham Stewart on Diligence
shows. The author there makes the distinction between the strict requirement
of the law, and what in practice is sufficient and regarded as enforceable.
The same might be said of actions against, or arrestments laid in the hands of,
the Scottish Ministers; many types of court proceedings should strictly be
raised by or against the Lord Advocate as representing the Scottish
Ministers, but in practice many proceedings are raised by or against the
Scottish Ministers themselves.
[22] We endorse
the view that it is important that care must be taken that an arrestment is
laid in the hands of the proper party as arrestees, and that arrestments and
all such diligences will continue to be strictly looked at. However, the court
is no more attracted by a purely technical objection in the 21st
century than it was in the late 19th century. Where there has been
an error in the designation of an arrestee, whether this is a purely clerical
or typographical error or otherwise, we consider that the real question which
will inform the decision as to whether the arrestment is valid or not is
whether the error would be likely to give rise to a mistake, misunderstanding
or misapprehension in the reasonable observer as to the identity of the
arrestee or the scope of the arrestment. The test is not that of whether a
particular arrestee subjectively misunderstood or misapprehended the intention
of the arrestor, but whether the reasonable observer would be under any
misunderstanding or misapprehension when faced with the terms of a particular
arrestment. In the circumstances of the present case, as the
Lord Ordinary observed at paragraph [32] of his opinion, the
reclaimers knew that the arrestment was for them. SEERAD has no separate legal
persona; it forms part of the reclaimers. We do not consider that any
reasonable observer would have been under any misunderstanding or
misapprehension as to whom the arrestment was directed. It was clearly directed
at the reclaimers. In these circumstances we do not consider that the
Lord Ordinary has erred in law in his treatment of this issue, and we
answer this point in favour of the pursuers and respondents.
Was there an
arrestable obligation at the time that the arrestment was served?
[23] As the
Lord Ordinary observed, for an arrestment to be effective, there must be
an arrestable obligation - a liability to account by the arrestee to the common
debtor. It is not enough for there to be only an expectation or hope of
payment. But the fact that the date upon which a debt falls to be paid has not
yet arrived does not mean that there is no obligation to account - Costain
Building and Civil Engineering Limited v Scottish Rugby Union 1993
SC 650 at 661F-G. The Lord Ordinary observed that a creditor can attach
rent for a term, even though it is not due until a future date: Livingston v
Kinloch 1795 Mor 769. The right to receive an SFPS payment is set out
in Council EC 1782/2003. Article 28 provides inter alia as
follows:
"Payment
Save as otherwise provided for in this
Regulation, payments under support schemes listed in Annexe 1 shall be
made in full to the beneficiaries.
2. Payments shall be made once a year
within the period from 1 December to 30 June of the following
calendar year."
[24] The
Lord Ordinary took the view that although when the arrestments were served
in October 2006 no payment had been authorised to Mr Bell, this did not
matter because as he qualified under the scheme, he had a right to payment
which was to be made between 1 December and 30 June. The
Lord Ordinary accordingly held that the arrestments were a valid diligence
in respect of the reclaimers' obligation to account to Mr Bell under SFPS.
[25] Counsel for
the reclaimers did not take issue with the rule stated in Costain v SRU;
however, the real question was when did the common debtor obtain a vested right
to payment under the SFPS. Payment could not have been made to Mr Bell
prior to the payment window commencing on 1 December 2006. The submission of
an application form for payment did not inevitably lead to a payment being made
under the SFPS - the application required to be verified, and Mr Bell
required to continue to fulfil his obligations in relation to the SFPS. Although
there may be an ultimate entitlement to payment, the obligation to make that
payment will not arise until an application has been administered - R v Ministry
of Agriculture, Fisheries and Food ex p Lower Burytown Farms Limited [1999]
EuLR 129, in which Laws J observed (at page 134):
"As it seems to me there is not the
slightest doubt that the Community Law Regime which established the scheme for
set-aside payments created a legal entitlement in the farmers to recover the
grant or aid in question provided the qualifying conditions were fulfilled. So
far as the amounts fell to be diminished by imposition of the sanctions laid
down for over-declarations, the balance remaining due fell as surely within
this entitlement as in the case where the farmer makes no over declaration. As
I have said, there is no discretion in the respondent whether or not, or how
much, to pay. This is as true in a case such as the present as in one where no
sanctions are imposed; there is no more discretion in the ascertainment of any
amounts to be deducted by way of penalty or sanction than in the ascertainment
of the grant on a 100% basis. The rules are fixed and certain."
[26] Counsel for
the reclaimers submitted that the obligation to make payment did not arise
until the amount of that payment had been ascertained. No entitlement to
payment under the SFPS vested in the applicant until verification and
authorisation had taken place - that is, in this case, 14 December 2006.
[27] There was
no obligation on a farmer to make an application for payment under the SFPS,
and if no application was made, the reclaimers were under no obligation to
pay. Where an application had been made, the farmer still required to comply
with cross-compliance obligations throughout the period - ie he had to continue
to own the land and manage it satisfactorily. His application required to be
verified. Even after these steps had been fulfilled, payment could not be made
until after 31 December. Senior counsel for the reclaimers suggested that
the obligation to make payment either vested on the date of application or on
the date of authorisation (ie 14 December 2006). If the latter were
correct, no arrestable obligation existed when the arrestment was served.
[28] Counsel for
the pursuers and respondents submitted that the Lord Ordinary's reasoning
at paragraphs [33] to [37] of his opinion was correct. It was clear from Costain
v SRU (at page 661) that all personal debts due to the common
debtor may be arrested and that these debts may be pure or conditional,
constituted or unconstituted, liquid or illiquid. For his purposes it mattered
not much whether this debt was a future or contingent debt - it was clearly at
the very least contingent. The language of the EC Regulations was couched
repeatedly in terms of entitlement in the farmer to receive payment - see
articles 21, 22, 23 and 28. Not surprisingly, there was a requirement for
verification before the money was paid out, but at the least this was a
contingent obligation. This was entirely consistent with the observations of
the court in Lower Burytown Farms. In addition to the passage quoted
above, counsel referred to page 131 of the report, at which Laws J
observed:
"It is enough to notice that if an
applicant for aid follows and fulfils the detailed rules to which entitlement
to the grant or grants is made subject, he has a settled legal right to the
appropriately calculated amount and there is no discretion in the UK authority
charged with administering the scheme (the respondent Ministry) whether or not,
or how much, to pay."
[29] Counsel for
the pursuers and respondents observed that senior counsel for the reclaimers
accepted that if a farmer makes a genuine application, there may be a
presumptive entitlement to payment of the money. In terms of Costain v SRU
that is sufficient. The reclaimers had no discretion as to whether or not to
make payment to Mr Bell; this was not a discretionary payment. They
could not simply refuse to verify the application. Mr Bell had made an
application to be paid, he was entitled to be paid, and ultimately he was
paid. This was not in the category of merely a "hoped for" payment, it was an
entitlement which crystalized at the date on which the application was made.
This was a future obligation, or at worst for the pursuers and respondents, a
contingent obligation.
[30] We consider
that the submissions for the pursuers and respondents are well founded on this
point too. The respondents had no discretion as to the payment that
Mr Bell should receive. They were obliged to verify his application and
then to make payment under the SFPS. These are circumstances which fall within
the categories of debts held to be arrestable in the full bench decision of Costain
v SRU. It is unnecessary to analyse whether the debt was contingent
or future, as both categories of debt were arrestable; in the circumstances of
this case we consider that the debt owed by the reclaimers to Mr Bell was
contingent. This contingent debt arose at the date on which Mr Bell's
application was submitted to the reclaimers, ie 15 May 2006. There was
accordingly an arrestable obligation at the time that the arrestment was served
on 13 October 2006.
Absence of averments
of loss
[31] Junior
counsel for the reclaimers advanced an argument (albeit with no obvious
enthusiasm) which was foreshadowed in the reclaimers' note of arguments, to the
effect that as at the date of the debate before the Lord Ordinary the
pursuers' averments of loss were irrelevant. By the time decree had passed
against Mr Bell in the prior action, he had been sequestrated, and the
claims of the pursuers and respondents might have been defeated by a better
claim. The point was advanced before the Lord Ordinary, and in his
opinion he explained that before issuing a final interlocutor he intended to
put the case out by order to enable the reclaimers to investigate with the
Accountant in Bankruptcy whether there were any other creditors with better
rights. This course of action was adopted, and parties entered into a joint
minute agreeing the point.
[32] Junior
counsel recognised that this argument had been overtaken by the joint minute,
and that even if the court were to be with him on this point, this would not
result in the Lord Ordinary's interlocutor being recalled. At the outset
of his speech senior counsel for the reclaimers intimated that he intended to
say nothing about this ground, which he accepted was to an extent now
academic. We do not propose to address this issue further, beyond observing
that the Lord Ordinary's disposal of this aspect of the dispute was well
within the flexible powers available to a commercial judge. It was a pragmatic
approach which resulted in a resolution of the issue, and we see no force in
any criticism of the Lord Ordinary's approach on this point.
Conclusion
[33] For each of
these reasons we consider that this reclaiming motion must fail. We shall
accordingly refuse it, and adhere to the interlocutor of the Lord Ordinary
dated 4 September 2012.
