Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION

[2015] CSOH 148

A8/13

OPINION OF LORD BOYD OF DUNCANSBY

In the cause

DR RAVINDRA GARG

Pursuer;

against

(FIRST) DONALD McNAUGHT, (SECOND) ARNOLD ROSEN and
(THIRD) KENNETH WILSON PATTULLO

Defenders:

Pursuer:  Beynon;  Drummond Miller LLP

Third Defender:  Jansch, solicitor advocate;  Gilson Gray LLP

5 November 2015

[1]        This is an action for reduction of an award of sequestration granted by the sheriff at Grampian Highland and Islands at Aberdeen on 13 January 2010.  The third defender was confirmed as trustee in accordance with section 28 of the Bankruptcy (Scotland) Act 1985 in place of the original appointee formerly the first defender who had resigned.  The case came before me for debate on third defender’s first and second pleas-in-law.   Having heard submissions I dismissed the action and gave an ex tempore judgment.  This is an edited version.

[2]        The background is set out particularly at condescendence 2 and 3 of the closed record.  Briefly the pursuer is a medical doctor working as a psychiatrist.  He was subjected to a serious assault as a result of which he lost an eye.  He made a claim for criminal compensation arising out of that assault but was apparently dissatisfied with the award.  He instructed the second defender, a solicitor in England, to act for him in an application for judicial review in England.  Subsequently the second defender raised proceedings in the Central London County Court for recovery of fees and outlays.  A judge’s certificate for the sum of £11,116.50 was issued on 26 August 2009.  That certificate was registered in the Books of Council and Session for preservation and execution on 21 September 2009. 

[3]        On 2 October 2009 sheriff officers served a charge on the pursuer personally.  He was by then apparently living in Aberdeen.  The pursuer avers that he failed to appreciate its significance or to take advice.  The charge having expired without payment a petition for the pursuer’s sequestration was served at an address in Aberdeen, where a friend of the pursuer’s was living, on about 20 November 2009.  The pursuer avers that although at one time he had owned a one-half share in the flat along with this friend he had by this time transferred his share to the friend.  He further avers that by this time he had returned to India.

[4]        Sundry procedure took place before the sheriff during which this friend had herself appeared.   She explained to the sheriff that the pursuer had left for India and that she had been unable to contact him by telephone, email or other means.  An affidavit from a sheriff officer was presented to the court to the effect that he had spoken to the occupier of the adjacent flat who said that the pursuer had been seen at the locus approximately 3 days prior to 13 January 2010.  The pursuer avers that that information was erroneous.  In any event the award of sequestration was granted on 13 January 2010.  Again the pursuer avers that he did not become aware of the award of sequestration until January 2011.

[5]        The pursuer accepts that reduction of an award of sequestration can only take effect if the pursuer is able to plead exceptional circumstances:  see Central Motor Engineering Co v Galbraith 1918 SC 755.  The exceptional circumstances relied on by the pursuer are set out at pages 20D-22 of the closed record.  These are as follows. 

“The pursuer seeks reduction of the award of sequestration on the grounds that exceptional circumstances are present.  These circumstances comprise the following.  Firstly, the second defender is a petitioning creditor and was represented by his solicitors Aberdein Considine at each of the said three hearings.  As a result the second defender was, or should have been, made aware of the absence of the pursuer from the United Kingdom and Aberdeen in particular and should not have insisted on sequestration being awarded.  Secondly, the second defender proceeded with his said petition for the sequestration of the pursuer at a time when he knew or should have known that the proceedings pending in England in respect of his claim and the counterclaim from the pursuer remained to be determined.  The sheriff who awarded sequestration on 13 January 2010 was not made aware of the subsistence of those proceedings as he should have been.  Thirdly, the second defender was, or should have been, aware of the pursuer’s said history of poor physical psychiatric health, having acted for him in the said judicial review application in England.  Fourthly, the pursuer had at the time of his sequestration available cash resources in the sum of £20,000 which, if necessary, could have been utilised for placing on joint deposit receipt or similar arrangements pending the determination of the said prior litigation in the County Court.   At most the petition for sequestration should have been sisted pending resolution of the party’s said litigation in England.  Vouching comprising a copy of the pursuer’s passport, airline tickets and medical invoices covering the period from the pursuer’s departure from Aberdeen to India in or about 19 November 2009 and his return there from India in or about 24 November 2010 will be produced.  Vouching confirming the pursuer’s then available cash deposits available to him in 2009 in the sum of £20,000 with the State Bank of India will also be produced.   The purpose of the pursuer’s lengthy visit to India was to see his elderly mother who died in the course of that visit”. 

Submissions

[6]        The submissions for the third defender were set out in the comprehensive note of argument supplemented by a brief oral submission by Mr Jansch, solicitor advocate.  He submitted that the pursuer had failed to challenge the underlying debt.   The extract costs order has the same effect as a decree granted by this court;  Civil Jurisdiction and Judgments Act 1982, schedule 6, paragraph 6.  Although the pursuer averred that a counterclaim had been lodged, the fact was that the underlying debt still remained unchallenged.  The prescribed manner for challenging the extract costs order is by way of petition:  see rule of court 62.37(2)(b).  That had not been done.  Moreover there were no averments that any steps had been taken or considered for recall of the bankruptcy in terms of section 17 of the Bankruptcy (Scotland) Act 1985.  Accordingly the pursuer’s averments in respect of his indebtedness were irrelevant and the pursuer’s first plea-in-law should be repelled.

[7]        The remedy of reduction was one of last resort Polley v West Lothian Council [2014] CSOH 98, [2015] CSIH 19.  It could not be used if recall was available.  Although time limits did apply to applications for recall of the sequestration, they did not apply if an application was made under section 17(1)(a) of the Bankruptcy (Scotland) Act 1985.  In so far as the exceptional circumstances were concerned, the third defender submitted that there were no averments to the effect that the second defender was prevented from or under a duty to refrain from moving the sheriff to grant the petition.  The pursuer avers that the second defender should have made the sheriff aware of the existence of a counterclaim.  However, that did not address the issue of apparent insolvency which was a matter of agreement.  Thirdly, the pursuer avers that the second defender was, or should have been, aware of the pursuer’s history of poor psychiatric health, having acted for him, but there were no averments that the second defender was thereby prevented from presenting a petition for sequestration.  Fourthly, the fact that there were available funds could not of itself constitute an exceptional circumstance which would enable the court to grant a decree of reduction.

[8]        Mr Beynon for the pursuer submitted a brief note of argument to the effect that he accepted that the legal test was whether or not there were exceptional circumstances present.  Reference was made to a list of authorities.  He submitted that whether there were exceptional circumstances could not be determined prior to a proof before answer.  In oral argument he referred me to Walker on Civil Remedies, page 186 which vouched that reduction of an award of sequestration is competent but only in very exceptional and special circumstances and where recall under the Bankruptcy Act is not open.  The issue was whether or not there was a colourable explanation for the pursuer’s failure to seek recall prior to the due date, Brown v Middlemiss of Kelso Ltd 1994 SC 401 at 404H-I.   In answer to Mr Jansch’s submission he submitted that there was nothing in the Bankruptcy Act that precluded the court from exercising the common law discretion of reduction even where an application for recall had not been made.   Recall was not the same as having it reduced.  There was a legal distinction between the two.  There was a stigma attached to an award of sequestration, which the pursuer wished to avoid.

Decision
[9]        I shall sustain the first and second pleas-in-law for the third defender and repel the first plea-in-law for the pursuer and dismiss the action.  Parties are agreed that the valid cost certificate was made on 26 August 2009.  It was registered in the Books of Council and Session.  The charge was validly served on the pursuer.  Indeed it was served on him personally.  The days of the charge expired and apparently insolvency constituted.  It is not disputed that on the basis of that charge the second defender was entitled to present a petition for the pursuer’s sequestration.  The pursuer makes averments that a counterclaim was lodged with the defences and that that claim was still outstanding.  It appears to me that the counterclaim must have been lodged no later than 2009, yet 6 years later the pursuer is unable to make any averments as to its progress.  In any event I doubt the relevancy of this, given the fact that apparent insolvency is admitted.  The pursuer also avers that on or about the end of October 2010, that is after the certificate was issued, a district judge at the Central London County Court ordered the second defender to lodge and intimate the costs judge’s order under penalty that if there was no such a filing and intimation then the second defender’s claim in that court would be struck out.  The pursuer further avers that no such filing took place and the claim has accordingly been struck out.  There is no specification of this or what is meant by the phrase “claim struck out”.  There has been no attempt to challenge the underlying indebtedness or the extract costs order or to seek recall of the sequestration.

[10]      Turning to the exceptional circumstances I cannot hold that any of them, even if proved, would amount to exceptional circumstances.  The first one that is averred is that the second defender through his solicitors should have in fact have stayed his hand, knowing of the absence of the pursuer from the United Kingdom and Aberdeen in particular.  He should not have insisted on sequestration being awarded.  Yet the pursuer’s own averments narrate there was an affidavit from a sheriff officer to the effect that the pursuer had been seen at the address 3 days prior to 13 January 2010.  The pursuer avers that that information is wrong.  That may well be, but given that information there was no reason for the second defender to stay his hand and not move for sequestration.  In any event that seems to me to be irrelevant.  There is nothing in the pleadings to the effect that there was some legal obligation on the second defender not to move for sequestration.  Secondly, it said that the second defender proceeded with the petition for sequestration at a time when he knew or should have known that the proceedings pending in England in respect of his claim and the counterclaim for the pursuer remained to be determined.  It appears from the pleadings that very little, if anything, has been done to pursue this counterclaim and in my view it is irrelevant, given the apparent insolvency.  Thirdly, it is said that the second defender was, or should have been aware of the pursuer’s history of “poor physical psychiatric health”, having acted for him in the judicial review application in England, yet there is no specification of what that constituted.  It is averred that in August 2009 the pursuer was not fit to represent himself at an employment appeal tribunal and that unfitness continued until his sequestration.  There are no averments to the effect that the pursuer suffered from any legal incapacity.  Fourthly, it is said that at the time of the sequestration he had available cash resources of the sum of £20,000.  If he had the cash resources then he could have paid the debt.  He could still have pursued the counterclaim and he would have been able to make an application for recall of sequestration under section 17(1)(a).   For these reasons I found the pursuer’s averments irrelevant and dismissed the action.  There was no motion for expenses.