Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION
	[2014] CSOH 60
A332/11	OPINION OF LORD BURNS in the cause MARY McGILP EDGAR Pursuer; against WILLIAM GORDON EDGAR Defender: _______________

Pursuer: Burr, advocate; Drummond Miller LLP

Defender: Beynon, advocate; Balfour + Manson LLP

28 March 2014

Introduction

[1] This is an action of production and reduction of a disposition dated 11 December 2008 of one half of the pursuer's interest in Flat 1/2, 67 Nicholson Street, Greenock (the property) in favour of the defender. The disposition was granted for love, favour and affection. As an alternative, the pursuer seeks a declarator that she is entitled to insist on an action of division and sale of the property and that the proceeds of sale should be divided between her and the defender in the proportion of 99% to her and 1% to the defender.

[2] The defender has lodged a counter-claim seeking declarator that he is entitled to insist on an action of division and sale and for decree that the property be sold and the proceeds of sale divided equally.

[3] A proof took place before me between 26 and 29 November 2013. The pursuer was represented by Mr Burr and the defender by Mr Beynon.

The evidence

[4] Certain matters of evidence were not the subject of dispute. The pursuer was born on 27 March 1934 and, at the date of the signing of the disposition on 11 December 2008, was 74 years of age. She was at that time retired and a widow. She had married on 23 March 1956. Her husband died in 2006 after which she suffered a severe depressive reaction for which she was prescribed fluoxetine, an antidepressant and continued to take that medication until about October 2007. She has two children, a daughter Elspeth Allan and a son William Gordon Edgar, the defender in this action. Her husband worked for many years as a civilian in the police force in Greenock. Upon retiring he received a pension. He became seriously ill shortly after he retired. The pursuer had also worked but stopped in order to look after her husband. Upon his death, the pursuer was in receipt of the state widow's pension, a pension from her own employment and the residual part of her husband's pension. As at December 2008 she had no debts and was able to meet her living expenses from her own resources.

[5] Shortly after their marriage the pursuer and her husband moved into a top floor flat at 67 Nicolson Street and subsequently rented the flat on the first floor at 1/2 67 Nicolson Street (the property). They purchased the property under the right to buy scheme and obtained a mortgage in order to do so. That mortgage was paid off by about 2008. Upon the death of her husband, the pursuer became the sole proprietor thereof. Until December 2008 the defender made no financial contributions towards the property.

[6] In the latter part of 2008, the defender's financial position was precarious and he had accumulated substantial debts as detailed below. He was keen to pay those off and discussed with the pursuer how that could be done on a number of occasions. Eventually, they attended the Halifax Bank of Scotland (HBOS) in about November 2008 and saw Derek Robertson, a mortgage advisor, who subsequently contacted David Armstrong, a partner in the solicitors firm of Neill, Clerk and Murray, Greenock about the transfer of the title to the property into the joint names of the parties and a re-mortgage in relation to a loan of £26,000 (see Mr Armstrong's letter to the parties of 19 November 2008 (7/1 of process page 20).

[7] As a result of that letter, the pursuer and defender went to the offices of Neill, Clerk and Murray, Solicitors in Greenock on 11 December 2008. In the course of that meeting, the pursuer signed a disposition conveying the property into the joint names of the parties (and to the survivor of them) "in consideration of the love favour and affection" she had and bore towards the defender (6/1 of process). At that meeting she also signed a non-evacuation declaration in respect of her late husband (see the conveyancing file of Neill, Clerk and Murray 7/1 of process page 6) and a standard security over the property in favour of HBOS (6/4 of process). The evidence also showed that the parties went to collect the cheque from the bank and it was paid into the defender's account. Although the defender had said to the pursuer that some of the money would be spent on a new kitchen, that did not happen.

[8] There were a number of chapters of evidence which were the subject of dispute and I will deal with them under the following headings.

Medical Issues

[9] The pursuer suffered ill health. Her medical history was spoken to by her general practitioners, Dr John Thomson and Dr Wallace under reference to her medical records 6/26 of process. Dr Wallace also produced and spoke to two reports prepared by him, numbers 6/27 and 6/34 of process. The pursuer has had Meniere's disease for many years, one of the symptoms of which is vertigo. Her balance mechanism does not work properly. She suffered from acute attacks of vertigo about 5 or 6 times per year but by 2008 these were becoming increasingly frequent. During these attacks she would have to go to bed for 2 or 3 days and would be very distressed and anxious. She would need support and would not be able to function independently. Her reasoning would not be good, she would not be able to focus and could not get up. Thereafter, she would have to recover for a few more days before she was back on her feet. After 4 or 5 days she would be back to normal. He described these attacks as "serious and debilitating". She was given repeat prescriptions of stemetil on a regular basis which is ingested in tablet form. Dr Thomson also required to inject her with stemetil on many occasions. He attended at her home on a number of occasions because of the attacks of vertigo. When she ran out of that medication and was suffering an acute episode, she would phone her GP surgery and was given buccastem which is a tablet designed to dissolve under the tongue as a temporary measure. If she contacted the surgery and was given buccastem, Dr Wallace said that she would have been feeling nauseous or was vomiting. On 14 July 2008 she had an episode of vertigo but had a supply of stemetil at that time. On 28 July 2008 she was given buccastem as an acute prescription and was suffering from nausea and sickness according to the entry of that date.

[10] The next relevant entry in her medical records after this is on 15 December 2008 when she was again prescribed buccastem. Dr Thomson interpreted this entry as showing that the pursuer was not well, was suffering from vertigo but had run out of stemetil and phoned the surgery. Dr Wallace said that she would have been suffering from vertigo on that date or a few days prior thereto, had run out of medication and needed to call the surgery for more. These episodes began with unsteadiness and could come on quite quickly. More typically the symptoms build up over some hours and become more dramatic. He could not speak directly to the pursuer's condition on 11 December 2008 but thought that the inference from "clear evidence" was that she was having episodes of disabling Meniere's symptoms in the form of vertigo at that time and in the preceding months. There was, however, no indication in the medical records of when the attack of vertigo had started and he had had no direct contact with the pursuer around this time.

[11] In cross-examination Dr Thomson stated the pursuer got attacks of vertigo 5 or 6 times a year. She would have a couple of days in bed and a couple of days getting back on her feet. After 4 to 5 days she would be back to normal. In 2008 and 2009 the pursuer's mental capacity was normal, there being no dementia or the like. She had no problems with her memory. She was depressed after the death of her husband and have been prescribed the drug fluoxetine which was a strong drug. But by the end of 2007 she had begun to cope better although she was a "slightly changed character". In 2008 to 2009 she would have been able to look after her own legal and financial affairs.

[12] From this evidence I am able conclude that in December 2008 the pursuer was suffering from a recurrence of Menieres Disease and symptoms of vertigo. There is, in addition, the evidence of the pursuer herself as to the effects on her of this illness and of her condition at the meeting on 11 December 2008. She described in general terms the effects of attacks of Menieres disease. She had good and bad days. Sometimes the dizziness would take 3 or 4 days to pass over. She could do nothing during an acute attack and would go to bed. Her son had to give her a baby cup from which to sip liquids. Over the ensuing days she would start to recover slowly. She said that on 11 December 2008 at the meeting with the solicitor she was "fluffy" in her head because of the medication she was on (by which she meant that she felt as if she was going to faint), not with it and not really interested. She also said that she had "given up and did not want to go on living" and felt miserable. She was missing her husband. While Dr Thomson's evidence was that in 2008 and 2009 she would have been able to look after her own legal and financial affairs, it must be borne in mind that he was speaking in that context of her general state during that period and that was, as he said in re-examination, simply an impression he got over that period as her general practitioner. It was not, and could not be, an opinion as to her abilities at any specific time. As stated above, his evidence was that the attacks of vertigo were serious and debilitating

[13] The defender also gave some more general evidence about the effects of vertigo upon her. He said that the vertigo would make his mother poorly for 1 to 11/2 weeks but then might be alright for a month. He said that in December 2008 she was in high spirits but he did not mean by that that there was nothing wrong with her. He accepted in cross-examination that she had medical problems. When she was having attacks of vertigo he had to help her and he took time off work. He had to carry her to the lavatory for example. She could not be left on her own. She had good and bad days. He said that "I was her body".

[14] From this evidence I find that on 11 December 2008 the pursuer was probably in the early stages of an acute attack of Menieres disease. I accept that she was suffering from the effects of vertigo, was dizzy and unsteady on her feet and would have difficulty in concentrating. She would be feeling that she was going to faint and was generally in an enfeebled condition. In addition, although she was no longer suffering from an acute depressive reaction to the death of her husband, she stated that on 11 December 2008 she was missing him, did not want to go on living and felt miserable. Due to those distractions, I find that her ability to absorb information given to her and to assert her will was substantially diminished. By 15 December 2008, she had run out of her medication and thus required to contact the surgery on that date for an acute prescription.

The meeting at HBOS

[15] The pursuer said that the defender introduced the idea of obtaining a loan in order in part to pay off his debts and to carry out improvements to the property such as the installation of the new kitchen and carpets. The defender, she said, could never get enough money and lived beyond his means. She was not keen and did not at first agree. He kept pestering her and eventually she stopped arguing with him and agreed. She said that he "wore her down". The defender made an appointment to arrange for what she understood to be the loan and she then went with him to a solicitors' office. She was asked whether, before that meeting, she had gone to a meeting in a bank but she could not recall any such meeting.

[16] The defender accepted that he was not good at managing money. He was "terrible with it" and sometimes spent more than he earned. The pursuer was financially generous to him. He had debts in 2008. He owed £8000 to Welcome Finance on a purchase contract for one of his motor cars. He owed £3000 to Blackhorse and £1000 to Capital One credit card. At the time he was employed at T Mobile and earned about £1100 net per month. He was paying £700 or £800 per month in respect of these debts. Overall he described his financial position as terrible. The pursuer was aware of this. He was unable to get a further loan in his own name and he discussed his debts with the pursuer. He also said that they discussed some improvements to the property including a new kitchen, carpets and a bathroom. Having done some research on the internet he concluded that £25,000 would be required in order to pay off his debts and to carry out improvements to the property. He stated that she offered to help but also said that, at first, she had not been interested. However, "eventually" they both went to speak to HBOS in Greenock in September or October 2008. He accepted that this was at his prompting. In cross-examination he said that the first meeting at HBOS was not prearranged but they were in the town centre visiting the optician and happened to drop in to the Bank. There was thus an element of conflict in his evidence about the first meeting at the Bank but in any event, he accepted that before the meeting the pursuer would not have been aware that any loan would involve a transfer to him of half of the property since it was only at that meeting that this was discussed.

[17] At that meeting the defender said that they saw a mortgage advisor who went through the options with them. He said that they were advised that neither could get a loan due to the age of the pursuer and because of his existing debts. The defender also said that the advisor went through the "pros and cons". According to the defender the "pro" was that "mum signed over the house to me" and the "con" was if he defaulted the house could be taken away from both of them. After this meeting the defender said that the pursuer was not happy. No mention of the subject was made for a couple of weeks but then the pursuer brought it up. She had said that if he really was in financial straits, "we would go for it". They therefore returned to the mortgage advisor who again explained "the pros and cons". He claimed that they both understood what was to happen and decided to go ahead with it. The mortgage advisor said that he would arrange for them to see a lawyer. The defender told the pursuer that he would make the re-payments on the loan and would set up a standing order to do that. In cross-examination he accepted that prior to the first meeting at the bank he did not know that this would involve a transfer of the title to the property.

[18] Derek Robertson, 43, was the mortgage advisor with HBOS involved in this matter. He gave evidence in the defender's case. He had been in that position for about 12 years at the date of the proof. He had no memory of any meetings or whether one or two meetings took place. Over the intervening 5 years since this matter he had seen about 4500 customers. Due to his lack of specific recollection, Mr Beynon asked him about the practice that he adopted at such meetings under reference to the letter dated 19 November 2008 (7/1 of process page 20) written by David Armstrong to "Mrs M Edgar and Mr W Edgar", the first two paragraphs of which are in the following terms:

"I have been contacted by Derek Robertson of Halifax Bank of Scotland in connection with your transfer of title and remortgage of 67 Nicolson Street.

Derek has advised me that the title to the property is currently in the sole name of Mrs Edgar and that this is to be transferred into your joint names, at which time you will also obtaining (sic) a secured loan of £26,000 over the property."

[19] Mr Robertson said that that this would have been the information obtained from the customer or customers (he could not recall whether one or both were present). His practice at a meeting of this sort, if both had been present, would have been to discuss the transaction and to ensure they were aware of it. He would explain that ownership would be joint and the finance would be secured over the property which would be at risk if the loan was not repaid. He would confirm that they were happy to proceed. He also said that an unsecured loan of up to £25,000 could at that time have been given. Above that amount, security would have to have been in place. Much would depend on the financial circumstances of the borrower.

[20] The evidence as to what transpired at HBOS was therefore unclear. The pursuer had no recollection of any such meetings. The defender claimed that he and the pursuer attended two such meetings, the latter at the instigation of the pursuer who had, by then decided, to proceed with the transaction. Mr Robertson had no recollection of any meetings and did not know whether both parties attended or only one. He could only speak to his practice at such meetings. In coming to a view of what this evidence establishes, I must record that I did not form a good impression of the defender when he gave his evidence. I did not find him credible or reliable. I considered that he was glib in some of his answers, was untruthful in others and he plainly departed from some of his averments on record while giving his evidence. I preferred the evidence of the pursuer where their evidence conflicted and was unwilling to accept the defender's evidence where no support for it existed.

[21] The defender claimed that his mother habitually opened all mail which was addressed to him, read its contents and informed him thereof. No such suggestion was put to the pursuer and I am quite unable to accept that she would have acted in such a way. He also claimed that she had opened the letter of 19 November 2008 from Mr Armstrong and handed it to him upon his return from work. He said she had "the letter in her right hand and the envelope in her left". He claimed that she has no difficulty in understanding the contents of the letter. In her evidence the pursuer had said that the first she knew of the title to the property being in joint names was when she received a letter from the defender's solicitors dated 14 February 2011 (6/3 of process). It is not averred in the pleadings nor was it suggested to the pursuer by Mr Beynon that she had seen and understood the letter of 19 November 2008 and thus knew, prior to going to the offices of Neill Clerk and Murray, that title to the property was to be put into joint names. Such a circumstance would have been of importance in the context of this litigation. I was therefore unable to accept his evidence on this point and considered it incredible.

[22] In answer 3 on page 9C it is averred by the defender that the pursuer's financial position after her husband's death was "materially difficult" and that she had debts of £6000 in November and December 2008. The inference is that this was one of the catalysts, along with the financial position of the defender himself, for the decision to obtain finance from the bank. Mr Burr asked the pursuer in chief about whether she had debts of £6000, without any indication from Mr Beynon that this allegation was not to be insisted upon. There was no evidence to support any such contention. The defender was asked by his own counsel what the pursuer's financial position was after the death of his father. He answered that he did not discuss his mother's finances with her. In cross-examination he claimed that he did not know what she had "to this day". The averment about the £6000 was wrong and he claimed that he told his counsel about this error. The defender therefore departed from his own pleadings in this respect and his explanation that the allegation in his pleadings about his mother's debts was a mistake which he had pointed out to his counsel was not convincing.

[23] It is clear that a meeting of some sort took place with Mr Robertson at HBOS prior to the letter of 19 November 2008 written by Mr Armstrong. I am prepared to accept that the pursuer attended one such meeting, although she has no recollection of it and Mr Robertson could not specifically recall that two people attended any meeting held. I find that the defender pestered her about the taking out of a loan and that he probably mentioned this matter every couple of days, as the pursuer maintained. Eventually, he wore her down and she agreed to attend the bank. The defender said that at the first meeting the options were canvassed and the "pros and cons" discussed. It is significant that the only advantage that he saw was that the title of half the property would be transferred into his name and that he claimed that he did not see the transaction as a way of getting himself out of debt. I am only prepared to hold, on the available evidence, that the pursuer was present at a meeting with Mr Robertson during which the possible routes by which a sum of about £25,000 could be raised were canvassed. One of those was by the transfer of the property into joint names and the grant of a standard security over it. Another was the obtaining of an unsecured loan of less than £25,000. I accept the pursuer's evidence that, after that meeting, the defender proceeded to pester her about a loan and that she eventually agreed that a loan should be obtained. I am not prepared to accept the defender's evidence that the pursuer initiated a second meeting or that she was present at such a meeting. Nor do I accept his evidence that she subsequently agreed that the loan should be secured by a standard security over the property the title of which would require to be put into the joint names of her and the defender. Such a step would have been contrary to her clear understanding of her late husband's wishes that she should remain in the property until her death when it should pass to their children. The disposition she signed means that, upon her predeceasing the defender, he would become the sole proprietor of the property and his sister would be excluded. That is also quite contrary to what the pursuer's husband intended. In addition, it is inherently improbable that she would agree to anything which would jeopardise her continued occupation of the property by gifting half of it to her son and risking being put out of it if he failed to make the loan repayments.

[24] I also find that she did not see the letters of 19 November and 10 December 2008. I reject the defender's evidence on that matter. The pursuer stated in chief that all correspondence about the loan was addressed to them both but his name appeared first on the envelope and she did not see the contents of such correspondence. The letters from Mr Armstrong are addressed to her first but I understood her to be referring in this connection to the correspondence with HBOS rather that to other correspondence such as from solicitors.

The meeting of 11 December 2008 with Mr Armstrong

[25] By arrangement, the pursuer and the defender attended at the offices of Neill Clerk and Murray Mr Thomson and saw David Armstrong, a partner of that firm who dealt with conveyancing transactions on 11 December 2008. That meeting was probably arranged by the defender. Mr Armstrong gave evidence about what had occurred and was shown 7/1 of process which is the conveyancing file for this transaction which includes a file note of the meeting of 11 December at page 12. He is an experienced solicitor having qualified in 1991 and he became a partner in Neill Clerk and Murray in 2001 having been a partner in another firm prior to that. Prior to 11 December he had not met either of the parties. He had prepared the documents which were for signature before the meeting which he said comprised the disposition, the standard security and affidavits. The meeting itself lasted about 10 or 15 minutes. He was sure that he did explain to the pursuer what the effect of the disposition was and would not have got her to sign it without having gone through it line by line. Nor would he have witnessed the signatures on both the disposition and the standard security without being satisfied that the pursuer and defender understood what they were signing. Having been contacted by HBOS to act in this transaction he was simply implementing what he understood was an agreed course of action between the parties.

[26] The pursuer, on the other hand, was adamant that Mr Armstrong had not explained to her the effect of the disposition and, in particular, she was not aware that what she was signing was a transfer of half the title of the property to the defender. She had no recollection of signing any more than one document although it is clear that she signed not only the disposition but the standard security (see 6/4 of process) and the "non-evacuation clause" (see 7/1 of process page 6). She said that she could not read the document that she did sign since the print was too small, although she was able, in the course of her evidence, to read the print on bank statements for example.

[27] The defender said in chief that Mr Armstrong had explained to them both what the meeting was about, what the paperwork was and that his mother had to sign certain documents. He thought that she signed something first and that she understood that what she was "signing over her house". He then added that she knew that because it had been explained at the meeting at HBOS that she would be giving up "full ownership of the house". Mr Beynon then asked him whether that was discussed with the solicitor and he said that it was.

[28] There is a clear conflict on the evidence on the matter whether Mr Armstrong explained to the pursuer what the effect of the disposition was. It seems that Mr Armstrong was wrong in saying that he got the pursuer to sign affidavits. There is specific mention of these in the file note but no other record of these exist and no copies were within his file. Mr Armstrong said that affidavits were not required in this case but since there was mention of them in the file note, they may have been prepared and then destroyed. I find it highly unlikely that he would have taken the unnecessary step of preparing affidavits, had them signed by the parties and presumably himself and then destroyed them. I have to conclude that no such documents were prepared or signed. The file note, where it says that affidavits were explained and signed, and Mr Armstrong's recollection about them are both inaccurate in that respect at least.

[29] In addition, Mr Armstrong said in chief that he wrote to the parties advising them of a potential conflict of interest between them and that they should get independent advice. That was because they were related. He was asked to examine the file to find where that advice was given. Neither the letter of 19 November or that of 10 December contain any such advice. He said that had the pursuer asked him for advice, he would have sent her to another firm of solicitors.

[30] Accordingly, Mr Armstrong's recollection of these events is not wholly accurate and I cannot conclude that he is entirely reliable in his evidence of the detail of the meeting of 11 December. However, I am able to conclude that he did, as he said, go through with the pursuer the terms of the disposition, as he would in any such case. But, since this meeting was a short one and there were at least three documents to be signed by those present, I consider that the exercise of explanation he went through was somewhat cursory and that he did not explain the nature and effect of the disposition in such a way to enable the pursuer, given her state of health at that time, properly to appreciate what she was signing. That may be because he thought that all he was doing was to complete a course of action which the parties had already agreed upon. No doubt Mr Armstrong thought that she had grasped its import otherwise he would not have witnessed her signature. However, I conclude on the whole available evidence that she did not.

[31] This conclusion is fortified by the evidence of the defender himself. When first asked about this matter by his counsel, he explained that his mother knew that what she signed was "about her house" because this was explained to her by the mortgage advisor at HBOS. He did not say that this was all discussed with Mr Armstrong until Mr Beynon specifically asked him. Thus even the defender cannot have derived a clear picture of the nature of the disposition from the meeting of 11 December since he ascribed the pursuer's understanding thereof to what had occurred at HBOS rather than what had occurred at Mr Armstrong's office.

[32] I therefore accept the pursuer's evidence that she did not appreciate that the document she signed had the effect of conveying to her son one half of the property. I find that she thought that she was signing a document which related to a loan and which did not alter her title to the property. The pursuer stated that the defender kept telling her that "they would get a loan" and that "they could have a new kitchen" and that he eventually wore her down. As a result, her understanding was that "it was just a loan" which would not interfere with her title to the property in any way. I accept that evidence. I had no reason to doubt her evidence that she only recalled signing one document. That was plainly wrong and indicates that she was not taking in all that occurred during that meeting. In addition, I find it inherently improbable that, had she appreciated that the disposition not only transferred one half of the property to the defender but meant that, upon her death, it would become his sole property, she would have been prepared to sign it. As stated above, such an arrangement was quite contrary to the stated wishes of her husband who had expressed the wish that the pursuer should remain there until her death when it should be divided equally between his children. It was evident that the pursuer honoured the memory of her husband and I cannot accept that she would consciously have done anything which she knew to be contrary to his wishes. She also said that she could not read the document which she signed. She was able to read bank statements which were put to her when giving evidence. However, I accept that on 11 December 2008 she could not read what was placed before her, due to her state of health which I have described above.

The proceeds of the loan

[33] The cheque was paid into the defender's account. The defender spoke to the bank statements of his account 6/21 of process. On page 2 the sum of £25,273.95 is credited to the account on 15 December 2008 by cheque representing the mortgage funds. Various debits then appear representing the payment of his debts. On 19 December £3778.11 is paid to Black Horse Ltd. The next day £9953.47 is paid to Welcome Finance. These were creditors of the defender. In addition, the evidence showed that he bought a car to replace his existing one. The sum of £4995 is paid to Western Saab on 29 December. It can also be seen that money is paid via a standing order to HBOS until August 2009. By 29 January 2009 the balance on his account had fallen to £203.01.

[34] The defender said that the money was originally going to be used for the flat but it was "eventually agreed" that it would pay off my debts. He said his debts were all cleared and he paid the mortgage payments until he stopped working in August 2009 after which he could no longer do so. He claimed that he received unemployment benefit which he paid into the pursuer's account but there was no evidence led to support that. He also claimed that he sold the Saab motor car in September or October 2010 and gave £2500 to the pursuer to pay the arrears on the mortgage but again there was no evidence to support that. I do not accept that he gave money to the pursuer. He said that carpets were purchased for the flat from the proceeds. However, the pursuer denied that and her daughter Mrs Allan and her husband, who had visited the property from time to time since December 2008, both said that this was not the case and the original carpets were still there. I accept their evidence on this matter. A further claim by the defender was that he had paid off a council tax debt owed by the pursuer with the loan. However, on it being pointed out that arrears of council tax had been paid off in February 2008, prior to the mortgage being taken out (6/30 of process), he accepted that this claim was incorrect. I conclude that the whole of the funds obtained from HBOS was spent by the defender in a matter of weeks following the payment of the cheque into his account.

The pursuer's submissions

[35] Mr Burr moved that decree in terms of the first conclusion be pronounced and that the conclusion in the counter-claim be refused. Alternatively, he asked me to grant decree in terms of his second conclusion.

[36] In relation to the pursuer's case based on error, he submitted that the evidence adduced by the pursuer should be accepted and was sufficient to justify the conclusion that the disposition should be reduced on the ground of essential error on the part of the pursuer. He accepted that it was difficult to found a case based on "unilateral essential error" and that the present circumstances amounted to an application to reduce an "onerous contract". It fell, therefore, within that category of cases which was dealt with by Professor McBryde at paragraphs 15-23 and following in The Law of Contract in Scotland (3^rd Edition). The pursuer had to prove that she was under error as to the essentials of the deed that she signed and further that that error had been induced by some form of bad faith on the part of the defender ("error plus" in the phraseology of McBryde). The element of bad faith was demonstrated by the defender taking advantage of the pursuer's frailty and ill health, pestering her to take out a loan and not explaining to her the real effect of the disposition she signed. The features he would rely upon in his case based on facility and circumvention constituted the necessary elements of bad faith on the defender's part.

[37] As these submissions developed and the nature of the disposition granted in this case focussed upon, Mr Burr came to recognise that the pursuer had granted the deed "for love favour and affection" and thus it could be said that the disposition was a gratuitous one. In those circumstances, Mr Burr submitted that it was not necessary for the pursuer to show "error plus" and that this was an exceptional type of case in which unilateral error as to the essential nature of the deed granted might alone be sufficient.

[38] Turing to the case based on facility and circumvention, Mr Burr referred me again to McBryde paragraphs 16-13 to 16-20 where this topic is discussed. He emphasised that it was not necessary for the pursuer to show lack of mental capacity or the like at the precise time of the granting of the deed but evidence of facility in general and circumvention by the defender. He referred to the defender's own evidence that the pursuer was highly dependent upon him especially when she was subjected to an acute attack of vertigo. The pursuer had described how the defender pestered her about the loan and thereby wore down her resistance to assisting him in paying off his debts. He asked me to conclude on the evidence that at the time she signed the disposition, she was facile having been the subject of circumvention by the defender. He referred me to Ross v Gosselin's Executors 1926 SC 325 and Pirie v Clydesdale Bank PLC 2007 SCLR 18.

[39] If I was to find against the pursuer on these matter, he asked me to grant the second conclusion and to divide the proceeds of sale in the proportion of 99% to the pursuer and 1% to the defender. He referred me to Ralston v Jackson 1994 SLT 771 as authority for such a remedy. It was not necessary to advance such a case on the basis of unjust enrichment.

The defender's submissions

[40] Mr Beynon moved that I refuse the pursuer's conclusions in the principal action and to sustain the defender's pleas in law numbers 1, 2, 3 and 6. In the counter-claim, he asked for decree in terms of the first and second conclusions.

[41] In respect of the principal action, Mr Beynon submitted that the pursuer required to establish that there was a specific misrepresentation by the defender which induced the pursuer to sign the deed and that restitution remains possible. He referred to McBryde paragraphs 15.66-15.73. The averments made by the pursuer on record anent the misrepresentation were irrelevant and the evidence had failed to establish that any essential error existed when the pursuer signed the deed. He submitted that the evidence demonstrated that the pursuer had understood the effect of the disposition in transferring title into the joint names of the parties. The parties had obtained advice from two professionals, Mr Robertson and Mr Armstrong both of whom explained the nature of the proposed secured loan and the need for the property to be in joint names. Her evidence that nothing was explained to her was implausible as was her evidence that she could not read the print. She had been able to read the bank statements put to her in the witness box. No misrepresentations had been made to her by the defender and, in any event, anything the defender may have said to her had been superseded by the explanations given by Mr Robertson and Mr Armstrong. There was no basis on the evidence for any finding that the defender had selected "tame" advisors. Both were unknown to each party and the defender could not know what information they would give to the pursuer at the meetings. There was evidence that the pursuer and her daughter Mrs Allan had visited Mr Armstrong in about February 2011 after receiving a letter from the defender's solicitors intimating that he wanted to sell the property. There was no evidence, however, that the pursuer made any complaint to Mr Armstrong when she saw him in February 2011 about having only recently found out about the transfer of title or that she was annoyed or indignant that such a thing had happened as would be expected if she had only just found out.

[42] Mr Beynon accepted that in gratuitous contracts, reduction was possible in the absence of any actions by a defender to induce that contract. It was not accepted, however, that this was a gratuitous contract.

[43] As to the case based on facility and circumvention, the evidence of Dr Thomson contradicted the assertion that the pursuer suffered from any relevant degree of weakness or facility at the material time. She had recovered from the depression brought on by the death of her husband and there was no evidence that she was suffering from a vertigo attack at the time she signed the disposition. The evidence of Dr Wallace was speculative. The pursuer's daughter Mrs Allan and that of her husband gave evidence supportive of the contention that the pursuer was fit and able to look after her own affairs.

[44] As to the pursuer's alternative conclusion, there was no basis in the pleadings or in the evidence for any basis for a division and sale on any other basis than an equal division of the proceeds. There was no plea based on equity and no relevant basis on the evidence for the division concluded for. He referred me to the opinion of Sheriff-Principal Lockhart in McKenzie v Nutter 2007 SLT (Sh Ct) 17. I was accordingly asked to grant the defender's conclusion in the counter-claim.

Discussion and Decision

[45] I have set out above my findings on what I consider to be the central issues in this case. I have found that, on 11 December 2008, the pursuer was suffering from the effects of an attack of vertigo which, although in its early stages, substantially affected her ability to take in and understand what was being said to her. In addition, she was distracted by the loss of her husband. I find that the defender had pestered her in the weeks preceding that meeting to agree to take out a loan and that she finally acceded to course. She was not aware, however, prior to the meeting that this would involve a transfer of the title to the property. Although I accept that Mr Armstrong did go through the terms of the disposition with her, I conclude that the pursuer was not in a condition to be able properly to appreciate the meaning and consequences of what she was being asked to sign. I find that she was under the misapprehension that the document she was signing related only to a loan, due to the repeated pestering by the defender about that matter and did not appreciate that it disponed one half of the property to the defender or that it contained the survivorship clause. The information given to her by Mr Armstrong did not dislodge the pursuer's understanding from her mind. Such an error is a substantial and material one and can properly be classified as "essential". She thought that she was signing a document very different in nature to that she was actually signing and which had significant consequences on her ownership of the property which she was not in a position to consider.

Reduction on the ground of essential error

[46] The pursuer disponed one half of the property to the defender "for love, favour and affection". The deed of which reduction is sought in this action is, in my view, a gratuitous one. The pursuer received no benefit from the defender in return for giving him a one half share of the property and, on her death, the entire property. As she understood it, the purpose of the document she signed was to enable a loan to be obtained in order to pay off the defender's debts. I accept her evidence that she had no need of a loan. As a result of the disposition and the standard security being signed, a loan was obtained but the evidence showed that the defender obtained and used the money for his own purposes. I have rejected his claim that any of it went to the pursuer or to improving the property itself for the reasons set out above. The pursuer thus obtained no benefit from the loan. She did, however, acquire liability for it and she has subsequently had to make payments in respect of it. The house is subject to the standard security in favour of the lenders and can be sold by the lenders in the event of default. There is, accordingly, lesion. As for the defender, he came under no obligation by the granting of the half share of the property to him. The decision to obtain a mortgage over the property in joint names was a separate and subsequent one and entered into by a separate deed.

[47] The gratuitous nature of the deed is of some consequence. It was held in Hunter and another v Bradford Property Trust Ltd 1970 SLT (HL) 173 that a gratuitous obligation entered into under essential error was reducible. The First Division had refused a reclaiming motion by the defenders against a decision of the Lord Ordinary (Lord Migdale) who granted decree of reduction of a Minute of Agreement signed by the pursuers. The Lord President agreed that the deed was gratuitous and at page 177 said:

"Although an error by one party to an onerous contract where the error is not induced by the other party is not a ground for reducing it (Gloag, Contract p 452) gratuitous obligations, just because they are gratuitous , are in a different position. In this latter case error by one party may entitle him to reduce it, and the statement of this proposition in Gloag (Contract, p453) there is nothing to suggest that the error which can found the reduction of a gratuitous obligation is in any way restricted to an error of fact only."

He went on to deal with essential error further down page 177 and said:

"To be essential the error must be such that but for it the party would have declined to contract (Lord Watson in Menzies v Menzies 1893 20R (HL) 108 at 142)."

Lord Russell said at page 181:

"The question remains whether the legal remedy of reduction is competently available to the pursuers on the basis that they signed the deed challenged gratuitously and under essential error. The error was unilateral, and mere error by one party in giving assent to a contract under a mistake has by itself no legal effect, apart from a case in which it can be shown that there is truly no agreement to enforce. It is however, in my opinion, well settled that where one party had under error executed a deed and therein has entered into obligations gratuitously he may reduce the deed so as to free himself from the obligations."

The majority in the House of Lords agreed. Lord Reid said at page 86:

"Then the appellants maintained that it is not the law that a gratuitous contract can be reduced by reason of essential error of only one party. There is no decision of this House to that effect but I think that it follows from the decision of McCaig's Trustees v The University Court of the University of Glasgow (1904) 6 F 918. That decision followed on earlier decisions which could perhaps be explained on other grounds. But it has stood unchallenged for over half a century, and it appears to me to be reasonable and in accord with the principles of Scots Law that a person should not be entitled to retain a gratuitous benefit given under essential error on the part of the person conferring the benefit."

Lord Morton of Henryton said at page 188:

"If your Lordships agree that the second agreement was gratuitous on the part of the respondents, and that they entered into it under an essential error as to their private rights, I apprehend that there can be no doubt that they are entitled to reduce it"

Lord Keith of Avonholm said at page 191:

"That a gratuitous obligation entered into under a material error reasonably entertained is a ground for reduction under the law of Scotland is, I think, well settled by authority. The error may sometimes be essential error as to the nature of the obligation undertaken........Material error with regard to some extrinsic deed or circumstance is illustrated, I think, in the cases of Dickson v Halbert (supra) and McCaig v The University Court of the University of Glasgow 1904 6 F 918. In the matter of gratuitous obligation entered into through error it does not, in my opinion, matter whether the error is essential error as to the nature of the deed, or error as to some extrinsic circumstance material to the granting of the deed. In either case the deed is, in my opinion, reducible. "

[48] The dissenting opinions of Lords Denning and Cohen were directed to the question whether the deed was a gratuitous one. The case is high authority for the proposition that a gratuitous obligation granted under unilateral material error can be reduced although that error was un-induced. As McBryde sets out at paragraph 15-39, there need be no "error plus".

[49] The pursuer gifted to the defender the one half share of the property by the signing of the disposition. I have concluded that when she signed that disposition, she did not appreciate that she was transferring one half ownership of the property to the defender but thought she was signing a document related only to a loan. She did so, therefore, under a material and substantial error. Had she realised the true import of what she was being asked to sign, she would not have done so. I consider that the disposition ought to be reduced.

[50] Mr Beynon submitted that it would have to be shown that restitution remained possible. Mr Burr did not address this but no reason was advanced as to why the property could not now be returned to the sole ownership of the pursuer. Mr Beynon very properly informed me at the start of the proof that HBOS were aware of these proceedings and were not interested in becoming involved in them. The evidence from both the pursuer and her daughter Mrs Allen was to the effect that together they had made the repayments on the mortgage for some considerable time and were prepared to continue to do so. HBOS can continue to have security over the property for the mortgage in the event of reduction of this disposition.

[51] I should add that, even if I had concluded that the disposition is not gratuitous but onerous, I would have granted reduction thereof. There was, I consider, a sufficient element of bad faith on the part of the defender, which had the effect of inducing the pursuer to sign the disposition, to justify that remedy, as Mr Burr contended. The defender was aware that pursuer was of a facile nature generally due both to her continuing grief and because of the symptoms of her Meniere's disease. He subjected her to repeated pestering about obtaining a loan to pay off his debts. This conduct led the pursuer to understand that all that was to occur was that a loan was to be obtained and that no change to the title to the property was to be made. He did nothing to disabuse the pursuer from that understanding, although he must have known of it. He was in a position to exert his influence upon her and took advantage both of her condition and her lack of understanding. He thus materially contributed to that misunderstanding of the purpose of the document she signed which the meeting with Mr Armstrong did not dislodge.

[52] In advancing a case based on unilateral error Mr Burr referred to Ellis v Lochgelly Iron Co Ltd 1909 SC 1278. There the pursuer signed a discharge purporting to be in full satisfaction of his claims against his employers past and future thinking that he was signing a receipt for past compensation. At page 1282 Lord President Dunedin discusses the situation where:

"the real error in the person's mind is not as to the true legal effect of the document which he has signed - a case in which, I have no doubt, the error must be induced by the opposite party, and in which it is not enough simply to say that there was error in his own mind - but a case where there is actual error as to the corpus of the document which is being signed at the time. A case is put by Professor Bell where a person is thinking he is signed one thing while he is in fact signing another."

He points out that the two things, error as to the true legal effect and error as to the corpus of the document, often run into one another but cites the example of someone signing a cheque thinking it was a visitor's book and asks why, in those circumstances, one could not "get rid of the cheque". He concludes that it was difficult to say into what category the case fell. But it was not necessary to decide on the matter since he found that the error, whatever it was, was induced by the cashier.

"It is a very pregnant finding that the cashier took the receipt in the belief that the respondent had fully recovered. That belief would make him, in perfectly good faith, offer to the other party for his signature a document as and for a total discharge, and not a receipt for weekly payment, and yet all the time the other man might be thinking it was a receipt for the weekly payment, and the error such as it was, might be induced by the action of the cashier".

On that basis he found no error of law in the opinion of the Sheriff-substitute who had acted as arbiter and had found that the discharge was no bar to recovery of compensation.

[53] Mr Burr also referred to the opinion of Lord Brodie in Parvaiz v Thresher Wines Acquisitions Ltd 2009 SC 151. At paragraph 20 his Lordship considers some cases dealing with this area and accepts that averments of essential error together with an element of bad faith (such as the defender knowing about the pursuer's error and taking advantage of it) were sufficient to allow a proof before answer.

[54] Had I found this to have been an onerous transaction, I would not have done so on the basis that the pursuer was in error as to the corpus of the document she signed. She was aware that it related to a loan and it cannot be said that her understanding between what she thought she was signing and what she did sign was as radical as the difference between a cheque and a visitors' book. However, in Ellis (cited above) Lord President Dunedin found that the "pregnant finding" of the cashier's actings on a bona fide but mistaken belief of the workman's full recovery amounted to inducement to the pursuer in signing the discharge.

[55] Here, I consider that the facts and circumstances set out above, taken together, are pregnant not only of inducement (by the defender repeatedly pestering her to take out a loan leading her to understand that no alteration to the title to the property would occur) but also of mala fide on the part of the defender and justify reduction of this deed. The pursuer was facile and under substantial error when she signed it. The defender took advantage of that facility and was responsible to a significant extent for the error under which the pursuer laboured. As such, these considerations would be sufficient to warrant reduction of this disposition on the basis of a unilateral error induced by the mala fide actings of the defender.

Facility and Circumvention

[56] Mr Burr also asked me to find that the disposition fell to be reduced on the basis that it was signed under facility and circumvention. No case was advanced on the basis of undue influence. He referred me, however, to Ross v Gosselin's Executors (cited above) where Lord Clyde canvassed the distinction between these two concepts at page 334:

"On the other hand the essence of circumvention and facility is that a person practises on the debility of another whose individuality is impaired by infirmity or age, and moulds the inclinations of the latter, to his own profit........ there are no doubt cases in which the holding of a position of influence may be no more than an item of evidence of circumvention, as was held in the case of a nurse in McCallum v Graham."

[57] I have concluded that in the latter part of 2008 the pursuer had been subjected to repeated pestering from the defender about the taking out of a loan which wore her down until she agreed. He knew her to be subject to attacks of vertigo which reduced her ability to take in information and it must have been obvious to him that she was suffering to some extent from that condition on 11 December 2008. He was also aware that during the acute phase of these attacks that she was heavily dependent upon him. He was in a position to exert a substantial degree of influence upon her and I conclude that he did so. I reject his claims that she was so strong willed that he was in no position to do so.

[58] I conclude that the pursuer was facile in December 2008 and easily imposed upon. The defender had taken advantage of that facility in the previous weeks and thus eventually persuaded her to agree to a loan being taken out. On 11 December 2008 I have found her state to be as I have set out in paragraphs 12-14 above. She said that she had "given up and did not want to go on living". That seemed to me to indicate that at that point, due both to the effects of vertigo and to the fact that she was missing her husband, she was not in a position to assert her will and simply went along with what the defender wanted. The evidence of her daughter and son in law to the effect that she was a fit woman able to look after her own affairs must be seen in the context that in 2008 to 2009 they were only seeing her infrequently.

[59] Mr Beynon made a number of points about the pursuer's credibility. I acknowledge, as he pointed out, that the pursuer was able in the witness box to read bank statements and I bear in mind his contention that the pursuer's evidence that she was unable to read the document placed before her by Mr Armstrong was untruthful. As stated above, I accept her evidence on that matter. I do not consider that she was necessarily saying that the inability to read the disposition was due to poor eyesight. He submitted that the medical evidence was not supportive of the contention that she was suffering from any degree of vertigo on 11 December 2008 and that she was not telling the truth as to her condition. However, I accept her evidence of that matter. She was supported by the medical evidence in respect of the timing of the request to medication and the inferences drawn by both GPs from it. I therefore consider that the disposition ought to be reduced on this ground also.

The pursuer's second conclusion

[60] The pursuer's second conclusion is an alternative remedy in the event of the court not being minded to grant decree of reduction in terms of her first conclusion. In condescendence 9 it is averred that the defender made minimal, if any, contributions to the mortgage repayments, benefited from the loan proceeds whereas the pursuer did not. It is averred that it is reasonable in any division and sale that the free proceeds be divided in the proportion of 99% to the pursuer and 1% to the defender. Ralston v Jackson was an action of division and sale between former partners. The defender raised a counter-claim in which she sought payment from the pursuer in respect of a debit balance in the pursuer's capital account and in respect of one half of the loan repayments paid by her since dissolution. The sheriff on joint motion, had found initially that there should be an equal division but after the actions were conjoined and a proof took place. There was also an action for division and sale. These actions were conjoined after the joint motion was granted. The sheriff then found that the crave for declarator had been superseded by the previous interlocutors but found and declared that the free proceeds of sale should be divided in unequal proportions. The sheriff principal upheld the sheriff's interlocutor and the pursuer appealed to the Inner House. The question was whether the Sheriff was correct in making a deduction from the free proceeds of sale in respect of the repayment of the loan by the defender. The court found that the sheriff had been entitled to find as he did on the basis that the defender had discharged the whole debt over the property herself and it was equitable that she should be given the credit for that when determining how the proceeds were divided.

[61] At page 774 the court quotes Gloag on Contract (2^nd Edition) page 206 and D&S Miller v Crichton 1893 1 SLT 262 as supporting that course of action. Although, as Mr Beynon pointed out, the pursuer has no plea based on equity, the averments on condescendence 9 make it clear that it is on equitable grounds that the second conclusion is based. However, had I been refusing reduction of this disposition and instead been granting division and sale, I would not have divided the proceeds in the proportion concluded for by either the pursuer or the defender. I would have asked the parties for an agreement as to what payments the pursuer had made or which had been made on her behalf by her daughter in repayment of the mortgage and would have made a deduction from the defender's share equal to those payments. I do not see any proper basis for the allocation of 99% to the pursuer and 1% to the defender were the property to be sold on the basis that the parties legitimately held equal shares. I would have dealt with the counter-claim accordingly.

Decision

[62] In the light of these findings, I will sustain the pursuer's first plea in law and grant decree of reduction in terms of the pursuer's first conclusion. I will repel the defender's pleas in law and will refuse the counter-claim.