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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> PROMONTORIA (HENRICO) LIMITED AGAINST JAMES FRIEL [2019] ScotCS CSOH_2 (08 January 2019)
URL: http://www.bailii.org/scot/cases/ScotCS/2019/[2019]_CSOH_2.html
Cite as: [2019] ScotCS CSOH_2, [2019] CSOH 2, 2019 GWD 3-37, 2019 SCLR 808, 2019 SLT 153
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Page 1 ⇓
OUTER HOUSE, COURT OF SESSION
[2019] CSOH 2
CA105/16
OPINION OF LORD ERICHT
In the cause
PROMONTORIA (HENRICO) LTD
against
JAMES FRIEL
Pursuer
Defender
8 January 2019
Pursuer: Dunlop QC, Welsh; Addleshaw Goddard
Defender: Ferguson QC; Pinsent Masons LLP
Introduction
[1] The defender was a director and shareholder of Glen TV Rentals Ltd (the
“Company”). The Company’s bankers were Clydesdale Bank Plc (the “Bank”). The Bank
subsequently sought to transfer part of their loan book, including the lending to the
Company, to the pursuer. The pursuer now seeks payment under a personal guarantee
which the pursuer says was granted by the defender in favour of the Bank on 28 November
2008. The pursuer sought to prove the tenor of the guarantee and sought the sum
of £800,000 under the guarantee.
Page 2 ⇓
2
[2] The defender opposed the proving of the tenor and also defended the action on a
number of technical grounds, submitting:
(a) The copy of the assignation produced to the court purporting to transfer the
loan book by the Bank to the pursuer had not been proved in accordance with
the laws of evidence and accordingly the pursuer had failed to prove its title
to sue;
(b) On a proper construction of the terms of the assignation, the lending to the
Company had not been assigned by the Bank to the pursuer and so the
pursuer had no title to sue;
(c) The pursuer had failed to rebut the presumption against delegation;
(d) Esto the defender was liable under the guarantee, the pursuer had not proved
that £800,000 was due.
The pursuer’s response was that the defender’s position was a highly technical one, resting
on putting the pursuer to strict proof of its claim, but that the pursuer had proved its case on
the balance of probabilities.
Background
[3] The background to the dispute was largely agreed in the joint minute and was
otherwise uncontroversial.
[4] As at November 2008, the defender and his daughter Miss June Friel were directors
and shareholders of the Company. The defender is now the sole director and shareholder of
the Company.
[5] The Bank entered into facility agreements with the Company in and after 2007.
Page 3 ⇓
3
[6] The first such facility agreement was for a Tailored Business Loan and was dated 23
March 2007 (‘the 2007 Facility Agreement’).
[7] Clause 14.2 of the Terms and Conditions of the Tailored Business Loan provides:
“14.2 Our rights and obligations
(a) We may assign or otherwise transfer any of our rights and/or
obligations under the Finance Documents to any person.”
[8] Clause 17.4 of the Terms and Conditions of the Tailored Business Loan provides:
“Certificates
Any certificate or determination by us of a rate or amount under a Loan Document
is, in the absence of manifest error, conclusive of the matters to which it relates.”
[9] The second such facility agreement the Bank entered into with the Company was for
overdraft facilities and was dated 29 July 2011 (‘the 2011 Facility Agreement’), and renewed
on 30 March 2012.
[10] Clause 4.2 of the Schedule to the 2011 Facility Agreement provided:
“All notifications, determinations and calculations given or made by the Bank under
this letter will be conclusive and binding except in any case of manifest error.”
[11] Clause 6 of the Schedule to the 2011 Facility Agreement provided:
“6 Transfer and Disclosure
6.1 The Borrower may not assign, transfer or otherwise deal with any of its rights
or obligations in respect of this letter or the Loan or any other Relevant Document.
6.2 The Bank may (l ) assign any of its rights or benefits and/or (2) transfer by
novation any of its obligations, under this letter or any other Relevant Document to
another bank or financial institution or to a trust, fund or other entity which is
regularly engaged in or established for the purpose of making, purchasing or
investing ln loans, securities and other financial assets or to any other person or
persons and/or (3) otherwise deal with its rights, benefits and/or obligations under
this letter or any other Relevant Document, in whole or in part.”
Page 4 ⇓
4
[12] On 9 October 2012, the Bank received from the sale of the Company’s premises in
Byres Road, Glasgow the sum of £1,242,850.80. The Bank used some of the said sum
of £1,242,850.80 to discharge in toto the amount due to it by the Company in terms of the
2011 Facility Agreement, applied £470,542.80 to the outstanding capital, and £578.57 to the
interest due to it, on the loan advanced to the said company in terms of the 2007 facility
agreement, leaving surplus funds at that time of £21,729.43.
[13] By letter dated 28 October 2014 the Bank demanded of the Company repayment by 5
November 2014 of an overdraft of £57,224.89.
[14] That sum not being repaid, on 7 November 2014 the Bank issued a demand letter to
the Company in the following terms:
“Dear Sirs
Glen T.V. Rentals Limited (Company Number SC092146) (the ‘Company’)
Business Account 82-56-04/80266348
Business Term Loan TBLKFL33028
Business Credit Card 5473536360012587
We, Clydesdale Bank PLC (the ‘Bank’), refer to:
(i) the business term loan facility letter issued by the Bank to the
Company on 23 March 2007 relating to a business loan facility of up
to £1,400,000 (reference TBLKFL33028) (the ‘Business Term Loan’) and made
available on the terms and conditions set out therein (as the same may have
been supplemented, varied or amended from time to time);
(ii) the unauthorised debit balance on the Company’s business current
account (account number 80266348, sort code 82-65-04) (the ‘Account’), which
constitutes unplanned borrowing; and
(iii) the £9,000 business credit card facility made available to the Company
(account number 5473536380012587) (the ‘Business Credit Card’).
Event of Default
We further refer to the letter issued to the Company on 28 October 2014, demanding
repayment of the unauthorised debit balance on the Account by 5 November 2014.
Page 5 ⇓
5
No repayment has been made by the Company and no repayment proposals have
been received by the Bank. As a result, an Event of Default has occurred under
clause 13.1 of the terms and conditions which apply to the Business Term Loan.
Pursuant to clause 13.2(b) of the applicable terms and conditions, while an Event of
Default is continuing, the Bank may demand immediate repayment of all sums due
by the Company under the Business Term Loan, together with accrued interest. All
amounts outstanding from the Company to the Bank under the Business Credit Card
are repayable on demand.”
[15] The letter went on to formally demand repayment of the total sum of £1,180.403.61 as
certified on an annexed Stated Account which was in the following terms:
“
Stated Account showing the sums due by Glen T.V.
Rentals Limited to Clydesdale Bank Public Limited
Company
Balance at debit of current account
80266348 in name of Glen T.V. Rentals Limited
Interest accrued thereon to 6th November 2014
Tailored Business Loan TBLKFL33028
Interest accrued thereon to 6th November 2014
Business credit card number 5473536360012587
Interest accrued thereon to 6th November 2014
TOTAL
£ 56,029.66
£
763.14
£ 1,112,403.08
£ 1,967.74
£ 9,119.39
£
120.60
£ 1,180,403.61
GLASGOW, 7th November 2014, I certify that the gross amount of principal and
interest due at this date by Glen T.V. Rentals Limited to Clydesdale Bank Public
Limited Company is £1,180,403.61 (On million, one hundred and eighty thousand,
four hundred and three pounds and sixty-one pence Sterling).
Signature: Andrea Stuart
Manager
National Australia Bank Ltd
For and on behalf of Clydesdale Bank PLC”
[16] The Company did not make payment of the sums demanded under the 7 November
2014 letter and certificate.
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6
[17] On 20 March 2015, Her Majesty’s Revenue & Customs presented a petition to this
court which sought orders to wind up the Company. On 2 April 2015, Mr Derek Forsyth
and Mr David Hunter of Campbell Dallas LLP were appointed Administrators of the
Company.
[18] On or about 7 July 2015, the pursuer wrote to the defender giving notice of the
assignment of the Guarantee and demanding payment of £800,000 under it.
[19] The defender has not made payment to the pursuer of the sums demanded as falling
due under the Guarantee.
Proving the Tenor of the Guarantee
[20] The pursuer sought declarator that the personal guarantee granted by the defender
in favour of the bank in respect of the company on 28 November 2008 and executed by him
on that date was of the tenor of a copy document lodged in process.
Evidence on proving the tenor of the guarantee
[21] The copy document was in the form of a standard form bank guarantee. It provided
that the defender’s liability was limited to £800,000 plus, if applicable, certain interest and
costs.
[22] The signature page included a proforma testing clause. The testing clause stated:
“Signed by the above-named Mr James Friel
At Glasgow (place of signing)
On 28/11/08 (date of signing before this witness)
Signature: Pamela McHarg
PAMELA MCHARG, 151 St Vincent Street, Glasgow.”
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7
A signature which looked like the name “James Friel” appeared to the right of the proforma
testing clause. The following words appeared in bold capitals letters in a box immediately
above the proforma testing clause:
“IMPORTANT
BY SIGNING THIS GUARANTEE AND INDEMNITY YOU MAY BECOME LIABLE
INSTEAD OF OR AS WELL AS THE BANK’S CUSTOMER. THE MAXIMUM OF WHICH
YOU MAY BE REQUIRED TO PAY IS LIMITED TO THE SUMS REFERRED TO AT THE
BEGINNING OF THIS DOCUMENT.
YOU SHOULD TAKE INDEPENDENT LEGAL ADVICE BEFORE SIGNING THE
GUARANTEE AND INDEMNITY.”
[23] In his oral evidence the defender maintained that he had not signed the bank
guarantee in the form of the copy which the pursuer sought to use to prove the tenor. His
evidence was that he had signed a guarantee but liability under the guarantee which he had
signed was limited to £600,000 and not £800,000. However he did not accept that
that £600,000 was due under the guarantee which he claimed to have signed.
[24] In her oral evidence, the pursuer’s daughter, June Friel, who had been a director of
the Company from 1999 to 2012 maintained that there had been a guarantee signed on
28 November 2008 but it was not the one a copy of which was now produced to the court.
There had been a £600,000 limit in place for decades and the limit was to be kept as that.
[25] Affidavit evidence was led from Pamela McHarg. She is a solicitor specialising in
real estate finance. She qualified as a solicitor with Maclay Murray & Spens in 2008. Her
evidence was that in Glasgow on 28 November 2008 she had witnessed the defender sign
the guarantee in the form now produced to the court. While she could not recall the
specifics of the meeting with the defender, she could confirm that the copy she had been
shown bore her signature. She would not have witnessed the guarantee had the defender
Page 8 ⇓
8
not executed the principal document first. She was shown a copy of a letter from Maclay
Murray & Spens to the bank dated 27 January 2009. She confirmed that the letter had been
signed by her. The letter was in the following terms:
“Dear Andrena
Clydesdale Bank plc (‘Clydesdale’)
Glen TV Rentals Limited (the ‘Company’)
I refer to the above matter and enclose the undernoted original documentation for
your retentions. I also enclose our fee invoice in respect of this matter for all work
undertaken to date and would be grateful if you could arrange for payment just as
soon as possible.
...
Yours sincerely
Pamela McHarg
Maclay Murray & Spens LLP
Note referred to:-
1. Certified true copy floating charge by the Company in favour of Clydesdale
dated 23 November 2008 together with original Certificate of Registration of a
charge dated 28 November 2008;
2. Original Board Minutes of the Company dated 28 November 2008;
3. Certificate by Guarantor to Clydesdale confirming Independent legal Advice
dated 28 November 2008; and
4. Original Guarantee by Mr James Friel in favour of Clydesdale on behalf of the
Company dated 28 November 2008.”
The certificate confirming independent legal advice referred to in the note to that letter was
in the following terms:
“Certificate by Guarantor to Clydesdale Bank (‘the Bank’)
I confirm that prior to signing the guarantee (‘the Guarantee’) given by me to secure
the liability to the Bank of
Glen T.V. Rentals Limited
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9
(‘the Customer’) for a sum of £800000 together with interest as provided in the
Guarantee.
1. I was given full opportunity to read the Guarantee at a private meeting with a
solicitor acting for me.
2. I was told by my solicitor and understand that:
(a) if at any time in the future the Customer fails to pay the monies then
due and owing by the Customer to the Bank the Bank can make a
demand for payment on me under the terms of the Guarantee; and
(b) if I do not make a payment then the Bank can take legal proceedings
against me to recover the monies then due by me to the Bank under
the Guarantee.
3. I took the independent legal advice of a solicitor of my own choice.
I acknowledged receipt of a copy of the Guarantee and a copy of this certificate.
Signed
J Friel
Full name of the Guarantor MR JAMES FRIEL
I confirm that prior to the signing of this certificate the full effect of its contents was
explained to and understood by the Guarantor and that this certificate was signed in
my presence.
I further confirm hat in advising the Guarantor I am acting independently of the
Bank and the Customer.
Signed
J Friel
Pamela McHarg
Full name of the witness PAMELA McHARG
Dated this 28 day of
November 2008”
[26] Marta Piwowarska was an employee of the bank who gave evidence as to efforts
which had been made to find the original of the guarantee. She had been part of the team at
the bank who assisted in relation to “Project Henrico” from December 2014 to June 2015.
That was the project of the transfer of parts of the Bank’s loan book to the pursuer. Her
work involved checking whether there was any discrepancy between what was recorded on
Page 10 ⇓
10
the electronic system and the physical principal documents actually held by the Bank. She
had not personally dealt with documents relating to the Company. Her evidence was that
the principal personal guarantee was not available within the bank storage facilities by the
time of Project Henrico. This was apparent from the electronic systems she checked in
June 2018, and in addition there was no record of the personal guarantee having been
returned to the pursuer by the bank. There was no record of the personal guarantee having
been destroyed, and this would not be usual practice. Her searches had been unable to
locate it. After she performed the electronic checks she also went to the storage facilities.
She asked the member of staff who is responsible for looking after the physical documents to
physically search the storeroom. No documentation in respect of the company was found in
the storeroom. Miss Piwowarska was unable to locate the principal personal guarantee
granted by the defender.
[27] There was also affidavit and oral evidence from Laura Balloch and Andrea Stuart
who were employees of the Bank but as they had little direct involvement with the issues in
dispute in this case their evidence was of no assistance other than background.
Pursuer’s submissions on proving the tenor of the Guarantee
[28] Counsel for the pursuer submitted that on the evidence of Miss Piwowarska, the
personal guarantee did not appear to have been sent to the pursuer as part of the project of
transfer of the loan book , nor could it be found in the bank’s records: it had been lost. On
the evidence, it had been established that the production lodged was a true copy, and was
thus of the tenor, of the guarantee signed by the defender on 28 November 2008.
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Defender’s submissions on proving the tenor of the Guarantee
[29] Under reference to Walkers on Evidence paragraph 20.4.2 counsel submitted that
proving the tenor required proof of three things: execution, tenor of the document and the
circumstances of their loss. These three matters were not wholly independent and the
burden of proof of each depended on the way to evidence in relation to the other elements.
The fact that a pursuer was unable to produce a document of debt on which he founded
raised a presumption that the debt had been paid and the document in consequence
destroyed (Gloag on Contract (2nd edition) page 717; Walkers paragraph 3.9). Very clear proof
of the casus amissionis was required (Gloag). The loss must be proved in such a manner as
implied no extension of the right (Walkers paragraph 20.7.1).
[30] Counsel accepted that the court could be satisfied in relation to the first two of these
things. The defender accepted the signature in evidence that the signature on the copy was
similar to his signature, and there was no evidence that it was not in fact his signature. The
weight of the evidence established that the tenor of the document as being a personal
guarantee for £800,000 and not £600,000.
[31] However he submitted that the circumstances of disappearance of the guarantee had
not been proved: all that had been proved was that the principal guarantee could not be
located after a short search. It had not been established that the primary evidence had been
lost: all that was established was that no one had been able to find it (Scottish & Universal
Newspapers Ltd v Gherson’s Trustee 1987 SC 27 at page 51 and 54.)
Page 12 ⇓
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Discussion and decision on proof of tenor of the Guarantee
[32] In order to succeed in proving the tenor of a document, a pursuer must prove (1) the
execution of the document (2) its tenor (in other words its terms) and (3) the casus amissionis ,
(in other words the circumstances of the loss) (Walkers on Evidence para 20.4.2).
[33] I am satisfied that the pursuer has proved the execution of the document and that its
tenor was that of the copy produced by the pursuer to the court. There was no dispute that
a guarantee document was signed that day. I accept the evidence of Pamela McHarg that
the document she witnessed the defender signing is the document a copy of which was
produced by the pursuer to the court. I found her to be a credible and reliable witness. Her
evidence was supported by the other contemporaneous documentation relating to the
transaction. The certificate relating to independent legal advice signed by the defender
specifically referred to a guarantee for £800,000. The letter from Ms McHarg sending the
original guarantee to the Bank specifically referred to a guarantee for £800,000.
[34] I do not accept the evidence from the defender and Miss Friel that what was signed
was a different guarantee for the lesser sum of £600,000. I found them neither credible nor
reliable on this matter. Their oral evidence was inconsistent with the contemporaneous
documentation I have just referred to.
[35] I am also satisfied that the pursuer has sufficiently proved the casus amissionis, ie the
circumstances of the loss.
[36] What is required for proof of the circumstances of the loss in an action for proving
the tenor depends on the circumstances of the case and is not to be considered in isolation
from proof of the execution and tenor. As long ago as 1847 Lord Jeffrey stated the principle
that:
Page 13 ⇓
13
“where the tenor was clearly instructed by proper adminicles, under the hand of the
granter (which of course also settled its authenticity), a very general and slight proof
of the casus amissionis would be sufficient.” (Graham v Graham (1847) 10D 45 at 49).
[37] The case of Scottish and Universal Newspapers Ltd v Gherson’s Trustees does not detract
from this principle as that case is clearly distinguishable from an action of proving the tenor.
That case deals with proof of casus amissionis not in relation to proving the tenor but in
relation to the best evidence rule. The Lord President explained at p 47 that secondary
evidence of the contents of missing documents will be admitted as an exception to the best
evidence rule only if it is shown that they have been destroyed or lost without fault on the
part of the pursuers who had effective control of the records when the action began. He
further explained that fault means failure in a duty to take all proper steps and use all
diligence to see that the documents are preserved and remain accessible for use in the proof.
In my opinion, the requirement to show destruction or loss without fault applies only in
relation to the leading of a document in evidence as an exception to the best evidence rule,
and does not apply to an action of proving the tenor.
[38] One particular circumstance which can be relevant proof of the casus amissionis
arises when the document whose tenor is sought to be proved is one which is normally
destroyed, cancelled or returned when the obligations in it are extinguished.
[39] Winchester v Smith ([1863] 1 M 685) was an action of proving the tenor in which the
judges were equally divided on the issues and therefore directed the cause to be judged by
the Inner House judges of both divisions. The Lord President, giving the opinion of the
consulted judges, stated:
“But proof of [execution and tenor] is of no avail in such an action as the present,
unless there be likewise sufficient proof of what is called the casus amissionis – and
which, as we understand the phrase, means not only that the writing has actually
been destroyed or lost, but that its destruction or loss took place in such a manner as
implied no extinction of the right of which it was the evident.
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Such casus amissionis requires to be supported by much stronger evidence in some
cases than in others…..If it be such a writing as is usually cancelled or destroyed
when it has served its purpose – as, for example a bill of exchange or promissory
note, or a personal bond; and if it has been destroyed, or has been found in the hands
or in the repositories of the granter actually cancelled, the presumption is that the
right of which it had originally been the evident no longer subsists; and very clear
evidence is requisite to overcome the presumption… In order therefore to judge the
sufficiency of the evidence of the casus amissionis of a writing in an action of proving
the tenor, the nature of the writing must be carefully attended to” (p689)
[40] In my opinion the presumption does not apply in the current case. The defender did
not direct me to any legal authority or custom or practice which suggests that a personal
guarantee to a bank is usually cancelled or destroyed after it has served its purpose. Indeed,
the copy Guarantee specifically provides the opposite: clause 15 provides that even if the
defender has paid all the sums due by him under the Guarantee the Bank may keep the
Guarantee in its custody as evidence of its contents. In any event, the presumption applies
to cancellation or destruction, neither of which the pursuer is seeking to prove in this case:
the pursuer’s first plea in law refers only to the principal Guarantee “having been lost”.
[41] In my opinion the pursuer has led sufficient evidence of the loss of the principal
guarantee. I accept the evidence of Ms McHarg that she sent the principal Guarantee to the
Bank. I found Ms Piwowarska to be a credible and reliable witness and I accept her
account. I accept her evidence that the electronic record showed that the principal
guarantee was not available in the bank storage systems and was not found in a physical
search of the storeroom, and that there was no record of the principal Guarantee having
been returned to the defender. In the whole circumstances, the loss of the principal
Guarantee implies no extinction of the obligation: there was no suggestion from any Bank
witness, nor from the defender himself, that the Bank had at any time agreed to release him
from it, or that the Guarantee had been formally discharged in writing. In all the
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15
circumstances, including the strong evidence of execution and tenor, I find that the pursuer
has proved the casus amissionis.
[42] Accordingly, I shall uphold the pursuer’s first plea in law and repel the defender’s
first plea in law and grant declarator that the guarantee was of the tenor of the copy lodged
and equivalent to the original deed.
Proof of pursuer’s title to sue: proof of copy Assignation
[43] The Guarantee is in favour of the Bank. However, the Bank is not the pursuer in this
action. The pursuer averred that by Assignation dated 1, 2 and 5 June 2015, the Bank
assigned the Guarantee to the pursuer.
[44] The defender’s position was that the Assignation had not been proved in accordance
with the laws of evidence. As the pursuer’s title to sue depended on proof of the
Assignation, the pursuer’s title to sue had not been established and the defender should be
assoilzied.
The evidence relating to proof of the Assignation
[45] The original of the Assignation was not produced to the court. Instead, the pursuer
founded on a copy Assignation which bore a certificate on the cover page in the following
terms:
“CERTIFIED TO BE A TRUE
COPY OF THE ORIGINAL
Linklaters LLP
DATE 13 April 2018”
[46] The words “Linklaters LLP” and “13 April 2018” were in manuscript, with the other
words having been applied by a rubber stamp.
Page 16 ⇓
16
[47] The certified copy Assignation was by National Australia Bank Limited (defined as
the “seller”) and Clydesdale Bank PLC (defined as “Clydesdale”) in favour of Promontoria
(Henrico) Limited (defined as “the Novated Buyer” or the “buyer”).
[48] The certified copy Assignation was governed by Scots law. It bore to have been
signed on behalf of the Bank, National Australia Bank Limited and the pursuer on
respectively 1, 2 and 5 June 2015.
[49] The substantive clauses of the certified copy Assignation were as follows:
“1. Interpretation
1.1 Definitions
Words and expressions used in this Assignation shall (unless otherwise expressly
defined) have the meaning given to them in the Sale and Purchase Agreement and
‘Ancillary Rights and Claims’ means:
(a) all claims, suits, causes of action, and any other right of the Seller or
Clydesdale, whether known or unknown, against any Obligor, or any
of their respective affiliates, agents, representatives, contractors,
advisers, or any other person but only to the extent that they are based
upon, arise out of or relate to the Specified Loan Assets and which are
held by the Seller or Clydesdale in its capacity as Lender or as holder
of the benefit of any security or guarantee in relation to such assets;
and
(b) all claims (in contract or in tort or delict), suits, causes of action, and
any other right of the Seller or Clydesdale against any auditor, valuer,
legal, tax, financial or other professional adviser, or other person
arising under or in connection with the applicable Relevant
Documents in respect of any Specified Loan Asset.
‘Effective Time’ means the Settlement Date immediately following the receipt by the
Seller of the Purchase Price for the Specified Loan Assets.
‘English Assignment and Assumption Deed’ means the assignment and assumption
deed dated on or around the date of this Assignation between the Seller, Clydesdale
and the Buyer.
‘Excluded Liabilities’ means in relation to each Specified Loan Asset:
Page 17 ⇓
17
(a) all Liabilities of the Seller or Clydesdale with respect to payment
obligations due to, or to be performed by, the Seller or Clydesdale (as
applicable) under the Relevant Documents prior to the Pricing Date;
(b) all Liabilities of the Seller or Clydesdale to any Obligor for breaches
by the Seller or Clydesdale (as applicable) of their obligations (other
than payment obligations) under the Relevant Documents prior to the
Settlement Date;
(c) any Liability expressly reserved to the Seller or Clydesdale under this
Assignation or the Sale and Purchase Agreement;
(d) any Liability that does not relate to the Specified Loan Asset, or that
relates to the Seller’s or Clydesdale’s obligations in respect of the
Specified Loan Asset in any capacity other than as a Lender;
(e) any Liability that arises out of the Seller’s or Clydesdale’s fraud or
wilful default;
(f) any Liability that arises out of the Seller’s or Clydesdale’s breach of
any Applicable Law where such breach has a material and adverse
effect on the value of such Specified Loan Asset (as against the value
of such Specified Loan Asset had such breach not occurred) provided
that such Liability shall not constitute an ‘Excluded Liability’ if the
Seller or Clydesdale (as the case may be) makes a compensation
payment to the Buyer with respect to such deterioration in value,
and/or
(g) any Liability in respect of any Existing Litigation,
provided that, for the avoidance of doubt, a Liability in relation to such Specified
Loan Asset which has been discharged or otherwise extinguished as a result of any
Remediation Action which has been finally concluded shall not constitute an
‘Excluded Liability’.
‘Novation Agreement’ means the novation agreement dated 21 April 2015 between
the Seller, Clydesdale, Promontoria Holding 93 B.V. and the Novated Buyer whereby
the rights and obligations of Promontoria Holding 93 B.V. under the Sale and
Purchase Agreement were novated to the Novated Buyer.
‘Party’ means a party to this Assignation.
‘Related Security’ means, in relation to a Specified Loan Asset:
(a) any Collateral which is subject to (or which is purported to be subject
to) any Encumbrance Security in favour of the Seller or Clydesdale in
Page 18 ⇓
18
respect of the Financial indebtedness of an Obligor under that
Specified Loan Asset, and
(b) any guarantee or right of indemnity granted by an Obligor in favour
of the Seller or Clydesdale in respect of the Financial Indebtedness
owed to the Seller or Clydesdale (as applicable) under that Specified
Loan Asset.
‘Relevant Documents’ means, in respect of a Specified Loan Asset, each facility, loan
or credit letter or agreement (including aL schedules and appendixes to that facility
or credit agreement), security document, guarantee, contingent funding or indemnity
agreement, letter of credit, performance bond, fee letter, restructuring agreement,
subordination agreement, intercreditor agreement, ranking agreement, deed or
priority, common terms agreement, consensual sale agreement, duty of care
agreement, collateral warranty and/or any other document evidencing any Related
Security in each case governed by Scots law and relating to that Specified Loan Asset
(including any written amendment, supplements, consents, accessions, waivers or
variations to each document but excluding any release letters, discharges, deeds of
release or agreements of release in respect of any assets which no longer comprise
the Property Collateral).
‘Relevant Borrower Asset Group’ means in relation to any Specified Loan Asset, the
Borrower Asset Group to which that Specified Loan Asset relates.
‘Relevant Loan Asset’ means a loan asset or debt claim described in the Schedule
(Relevant Loan Assets) to this Assignation.
‘Sale and Purchase Agreement’ means the sale and purchase agreement dated
15 December 2014 between the Seller, Clydesdale and Promontoria Holding 93 B.V.
(as the Initial Buyer), as amended by the Novation Agreement.
‘Settlement Date’ means 4 June 2015 or such other date as may be agreed by the
Parties in writing.
‘Specified Loan Asset’ means:
(a) a Relevant Loan Asset; and
(b) a Relevant Loan Asset as defined in the English Assignment and
Assumption Deed.
1.2 Construction
Clause 1.2 (Construction) of the Sale and Purchase Agreement shall be incorporated in
this Assignation as if set out in full herein.
2. Assignation and Acceptance
Page 19 ⇓
19
2.1. Assignation
Subject to the terms of this Assignation and in consideration for the payment by the
Buyer to the Seller of the Purchase Price for each Relevant Borrower Asset Group,
with effect on and from the Effective Time in relation to each Specified Loan Asset
comprised within that Relevant Borrower Asset Group.
(a) each of the Seller and Clydesdale (with the consent of the Seller)
hereby assigns absolutely to the Buyer the following in relation to
each such Specified Loan Asset comprised within that Relevant
Borrower Asset Group:
(i) all of its right, title, benefits and interests under, in or to each
Relevant Document;
(ii) each of the Seller’s and/or Clydesdale’s rights in its capacity as
Lender (if any) under, to and in connection with the Relevant
Documents, to demand, sue for, recover, receive and give
receipts for all monies payable or to become payable to it in its
capacity as Lender (howsoever and whenever arising);
(iii) the right to exercise all rights and powers of the Seller or
Clydesdale (as applicable) in its capacity as Lender (if any)
under, to and in connection with the Relevant Documents,
and, in such capacity, to enforce its rights (if any) under the
Relevant Documents including (without limitation) any such
rights (if any) arising under or in connection with any Related
Security comprised within or evidenced by the Relevant
Documents; and
(iv) all Ancillary Rights and Claims in respect of the Relevant
Documents, and the Specified Loan Assets;
but for the avoidance of doubt, excluding the Excluded Liabilities;
(b) each of the Seller and/or Clydesdale (as applicable):
(i) are released of all of their respective obligations under the
Relevant Documents; and
(ii) resigns from each Relevant Document in its capacity as the
Lender;
but, in each case and for the avoidance of doubt, other than in respect
of, and excluding, the Excluded Liabilities; and
Page 20 ⇓
20
(c) the Buyer becomes a party to each Relevant Document in the capacity
of the Lender and is bound by obligations equivalent to those from
which the Seller and/or Clydesdale (as applicable) are released under
paragraph (b) above but, in each case and for the avoidance of doubt,
other than in respect of, and excluding, the Excluded Liabilities.
2.2 Acceptance
The Buyer agrees that with effect on and from the Effective Time:
(a) it accepts the assignation of the rights, title, benefits, interests, powers
and Ancillary Rights and Claims referred to in Clause 2.1(a)
(Assignation) above; and
(b) It shall assume, perform and comply with the terms of and the
obligations of the Lender under the Relevant Documents as if
originally named as a party in the Relevant Documents in place of the
Seller and/or Clydesdale (as applicable) but, in each case, and for the
avoidance of doubt, other than in respect of, and excluding, the
Excluded Liabilities.
3. Notification
On the Settlement Date, the Seller shall notify the Buyer in writing promptly upon
receipt by it of the Purchase Price for each Relevant Borrower Asset Group and shall
confirm to the Buyer in such notice that the Effective Time has occurred.
4. Sale and Purchase Agreement
Each of the Seller, Clydesdale and the Buyer hereby agree that this Assignation is a
Transaction Document for the purposes of the Sale and Purchase Agreement. Each
of the Seller, Clydesdale and the Buyer hereby agree and acknowledge that their
entry into this Assignation is without prejudice to the rights and obligations granted
and assumed by them, as appropriate, by virtue of their entry into the Sale and
Purchase Agreement.”
[50] The Schedule started on page 7 which stated:
“This is the Schedule referred to in the preceding Assignation by National Australia
Bank Limited and Clydesdale Bank PLC in favour of Promontoria (Henrico) Limited.
SCHEDULE
Relevant Loan Assets”
Page 21 ⇓
21
[51] The rest of page 7 was blank. The remainder of the certified copy Assignation
consisted of six pages containing a table with headings and then row giving information
about the Company under these headings. There were no further rows giving information
about any other company.
[52] The table was in the following terms:
Tranche ID
(31/10/2014)
TRANCHE
1
Connection
ID
1232
Connection
Name
Glen Tv
Rentals Ltd
Borrower
ID (CIF)
837817
Borrower Data
Borrower Borrower
Name Transfer
Status
Glen Tv
Rentals
Ltd
Ready
for
Transfer
How are
the
borrowers
within this
connection
aggregated
(please
select from
drop
down
options)
n/a - Single
entity/
payment
Is there an
outstandin
g event of
default (eg
repayment
default,
covenant
breach
etc)? (Y/N)
Yes
If yes, please
confirm type of
default (where
multiple please
state the principal
default (using the
following order):
a) Interest
repayment
b) Principal
repayment default
(including
expired/matured
facilities)
c) Covenant breach
default - LTV
d) Covenant breach
default - ICR
e) Covenant breach
default -
Information default
f) Covenant breach
default - Other
g) Bankruptcy/
liquidation
h) Other
Covenant breach
default - Other
Page 22 ⇓
22
Have
there
been
any
waiver
letters
issued
in
respect
of the
default
(Y/N)
No
Have there
been any
reservation
of rights
letters
issued in
respect of
the default
(Y/N)
Yes
Have any
demand
letters
been
issued in
respect of
the
default?
(Y?N)
Yes
Is the
borrower in
an
insolvency
Process /
Receivership
(Y?N)
Is in an
insolvency
process,
does the
IP/
Receiver
have any
overdraft
facilities
(Y/N)
Yes
No
I yes (in
insolvency
process and
IP/ Receiver
has an
overdraft)
please
provide sort
code(s) and
account
number(s).
N/A
Type of
process
Name of
Insolvency
Practitioner/
Receiver
Borrower
Default
(Y?N)
Administration Campbell
Yes
Dallas LLP
Type of
Default
Does the
Bank
hold
equity in
the
borrower
(Y?N)
Are the Bank’s
borrowings to
this borrower
syndicated with
a third party?
Defaulted -
NO
No
IP/LPA
appointment
Please confirm any
notices of default,
reservation of rights
letters and related
correspondence have
been provided to the
review team. Please
copy the file name(s) of
the document here.
GLEN TV RENTALS
LTD _ Enforcement _
Demand Letters _
826504 - 80266348 _ 18-
24 _ West Blackhall
Street _ PA15 1UE _ 28-
Oct-14 _ v01
Please confirm any
standstill agreements
and/or waivers and related
correspondence have been
provided to the review
team. Please copy the file
name() of the document
here
CATEGORISASTION
N/A
DEFAULT WITH NO
LOSS
[53] During the course of this litigation, the pursuer had produced two other versions of
the Assignation which to differing extents redacted some of the wording set out above . On
the first day of the proof the pursuer sought to lodge a late inventory of productions
containing yet another version of the assignation, which I refused to allow on the ground of
lateness. Accordingly the proof proceeded on the basis that the pursuer was founding on
the copy which bore to have been certified by Linklaters on 13 April 2018 and is set out
above.
Page 23 ⇓
23
Evidence on the Assignation
[54] Johane Murray gave affidavit and oral evidence. She is a solicitor and a partner and
head of real estate at Brodies LLP. Her evidence was that the pursuer had instructed
Linklaters LLP to act on their behalf in relation to the acquisition of a portfolio consisting of
debt and related security from the Bank. Brodies were instructed, via Linklaters, to act for
the pursuer in relation to Scots law aspects of the transfer from the Bank to the pursuer of
the debt and related security. At a conference call on 5 June 2015 between the various
solicitors and others completion of the loan acquisition was confirmed. She was shown the
certified copy Assignation.
[55] Johane Murray gave further evidence that the principal of the Assignation was
delivered to Brodies in triplicate and following receipt Brodies sent two principal copies to
the Bank’s Scottish solicitor and one principal copy to Linklaters to retain on behalf of the
pursuer.
[56] In cross-examination, Ms Murray stated that the principal Assignation would have
been scanned into Brodies file and that she had compared the copy to the scanned version.
[57] Johane Murray further gave evidence that Brodies submitted assignations by the
Bank in favour of the pursuer of standard securities over the Company’s property to the
Land Register of Scotland for registration. The defender objected to this evidence on the
basis that there was no record for it. In the event, the pursuer did not found on these
assignations, and accordingly I have taken no account of it.
[58] Ms Murray gave further evidence in which she sought to explain the nature of the
agreement and certain clauses and parts of it. This was objected to on the ground that the
agreement had been reduced to writing and oral evidence of its content was not best
Page 24 ⇓
24
evidence and was inadmissible. In my view there is merit in that objection and accordingly
any view I express on the certified copy assignation is based on the wording of that
document and not this witnesses’ explanation of it.
[59] Darren Janes gave evidence. He was a Commercial Loan Servicing Manager for
Pepper (UK) Limited trading as Engage Commercial. He joined Engage Commercial in or
around February 2016. One of the services provided by Engage Commercial is loan
servicing for lenders. This means that Engage Commercial manages and administers loan
portfolios on behalf of lenders. Mr Janes’ role was to provide primary and special servicing
facilities in line with client service level agreements and to manage the day to day
relationship with clients. He gave evidence that the pursuer acquired a portfolio of
commercial loans from the Bank. The portfolio included facilities that had been granted to
the Company and a personal guarantee by the defender. Although in submissions counsel
for the defender commented that this was not best evidence, he did not object at the time to
the evidence in this paragraph, and I take it into account but place little weight on it as it
adds little if anything to what is said in the certified copy assignation.
[60] Mr Janes also gave evidence that the pursuer instructed Engage Commercial to
provide loan servicing in respect of the portfolio. He gave evidence that the facility letter
dated 29 July 2011 and renewal letter dated 30 March 2012 were provided to Engage
Commercial by the pursuer when Engage Commercial were instructed to manage the
Portfolio. Only an electronic copy of the document was provided to Engage.
[61] Mr Janes also gave evidence that an electronic copy of the personal guarantee was
provided to Engage Commercial by the pursuer when Engage were instructed to manage
the portfolio.
Page 25 ⇓
25
[62] Mr Janes explained that after the transfer of the portfolio to the pursuer the accounts
comprising the portfolio were migrated onto the systems of Engage Commercial, a system
referred to as “boarding”. The boarding process was completed on 5 June 2015. When the
accounts were transferred, the Bank provided the pursuer with a data tape containing the
Bank’s data in relation to the outstanding balance as at the date of transfer to the pursuer.
[63] In cross-examination, Mr Janes accepted that he had joined Engage in February 2016,
that is after the transfer. He was not personally responsible for the boarding process. He
had not seen an original copy of the Assignation, merely an electronic copy. That electronic
copy was not of the whole Assignation but only parts of it.
[64] In his evidence, the defender was referred to a letter to him from Clydesdale Bank
dated 5 June 2015.
“Further to our letter dated 01/05/2015 we are writing to advise you that National
Australia Bank Limited and Clydesdale Bank PLC (trading as both Clydesdale Bank
and Yorkshire Bank) completed the same on 05/06/2015 of the facility / facilities made
available to C/O DEREK FORSYTH (together with all related rights and benefits,
including, without limitation, guarantees and security) to Promontoria (Henrico)
Limited (‘Promontoria’) an affiliate of Cerberus Global Investors.
Please find enclosed a copy of our letter to C/O DEREK FORSYTH in respect of this
matter.
An introductory letter will be sent to you from Engage Commercial, which is a
trading name for Pepper UK Limited, who will be servicing the loan accounts on
behalf of Promontoria.
In the meantime, if you have any queries, please contact Engage Commercial directly
via the contact details listed below.”
[65] The enclosed letter to Mr Forsyth, the joint Adminstrator of the Company, was in the
following terms. Mr Forsyth was the joint administrator of the Company.
“
IMPORTANT INFORMATION ON YOUR FACILITIES
Further to our letter dated 01/05/2015 we are writing to inform you that National
Australia Bank Limited and Clydesdale Bank PLC (trading as both Clydesdale Bank
Page 26 ⇓
26
and Yorkshire Bank) (together the ‘NAB Group’) have completed a sale of all
amounts owing to the NAB Group to another lender, Promontoria (Henrico) Limited
(‘Promontoria’) an affiliate of Cerberus Global Investors. Accordingly, all of the
NAB Group’s rights and benefits in, to and under:
your loans (the accounts details of which are set out below) (the ‘Loan
Accounts’);
the loan agreements, facility letters and any other credit
documentation in connection with the Loan Accounts (the ‘Loan
Agreements’); and
all related security, mortgages, guarantees, other collateral and other
rights in connection with the Loan Accounts and Loan Agreements
(such security documents, together with the Loan Accounts and the
Loan Agreements, being the ‘Loan Assets’).
in each case, have been transferred from the NAB Group to Promontoria (the
‘Transfer’) with effect on and from 05/06/2015 (the ‘Transfer Date’). This letter
constitutes notice to you of the Transfer and that, from the Transfer Date, all
payments, amounts and obligations owing by you or that may become due or owing
in respect of the Loan Assets will be owed to Promontoria. Please note that, in
respect of the Loan Assets, the balance transferred to Promontoria will include the
rights to all outstanding amounts, including all principal, interest, costs, charges and
expenses (together with, as applicable, any third party professional fees.)
The details of the Loan Accounts are as follows:
Account number / s 80266348; CRCUTBLKFL33028
We can confirm that your obligations under the terms and conditions applicable to
the Loan Accounts will not change as a result of the Transfer. Your transactional
banking arrangements will remain and you will still be able to use branches of
Clydesdale and Yorkshire Banks for your day to day transactional banking. Please
be aware that the data we hold about you, both on computer systems and in paper
files, will be transferred to Promontoria, although we will retain your details for a
further seven years in accordance with The Data Protection Act 1998.
A letter will be sent to you shortly from Engage Commercial, which is a trading
name of Pepper UK Limited. Engage Commercial will be servicing the Loan Assets
on behalf of Promontoria and will confirm to you how to make loan payments.
With effect on and from the Transfer Date, we irrevocably authorise and instruct you
(without any reference to or further authority from the NAB Group):
to disclose to Promontoria and/or Engage Commercial such
information relating to the Loan Assets as Promontoria and/or Engage
Page 27 ⇓
27
Commercial may at any time reasonably request in accordance with
the Loan Assets;
to deal with the Promontoria and/or Engage Commercial in relation to
the Loan Assets unless you receive written instructions from
Promontoria and/or Engage Commercial to the contrary; and
to comply with any written notice or instructions from Promontoria
and/or Engage Commercial in any way relating to the Loan Assets.
If you have any questions concerning the Loan Accounts and their ongoing
administration please contact Engage Commercial directly via the address or
telephone number listed below.”
[66] The defender agreed in cross-examination that the letter to Mr Forsyth was enclosed
with the letter to him and informed him that there had been a transfer from the Bank to the
pursuer.
Defender’s submissions on pursuer’s title to sue: proof of copy assignation
[67] The defender submitted that what had been produced as the certified copy
assignation was inadmissible evidence and accordingly the pursuer had failed to prove their
title to sue.
[68] The defender submitted that the best evidence rule excluded secondary evidence of a
document. The court had no discretion to allow secondary evidence. The only way in
which the effect of the rule may be tempered is if a copy of the document meets the
requirements at section 6(2) of the Civil Evidence (Scotland) Act 1988 (in Walker and Walker
on Evidence (4th edition) para 20.1 and 20.2.2; Dickson on Evidence, paras 195, 196, 203, 204 and
206; Scottish and Universal Newspapers Limited v Gherson’s Trustee 1987 SC 27; Japan Leasing
(Europe) PLC v Weir’s Trustee (No 2) 1998 SC 543). Counsel submitted that certification under
that section needs to be by a natural person, not a legal person such as an LLP, and in any
event, the copy had not been signed in a way that had any legal effect.
Page 28 ⇓
28
[69] Developing his submission that certification can be done only by natural persons,
counsel referred to the Interpretation Act 1978 and submitted that the general rule that
person includes legal persons is qualified by the words “unless the contrary intention
appears”. Here the contrary intention appears from the fact that the court had a discretion
as to whether to deem a document to be a true copy. If the court directed that a document
was not to be a true copy it would be necessary to lead oral evidence from a person to speak
to the copy that was made – that person could only be a natural person. That was the
position here: it was obvious that what had been produced as a true copy of the Assignation
was not in fact a true copy. While it was acceptable for a document to be lodged under
redaction of sensitive or confidential information that is not material to the issue before the
Dowling v Promontoria (Arrow) Limited, 11 September 2017, Chancery Division Bankruptcy
beyond what was permissible. The court could not properly understand what had been
agreed between the parties to the Assignation if only part of the Schedule had been
produced. The failure to produce all relevant parts of the document that is alleged to found
title to sue is an abuse of process (Shetland Sea Farms Ltd v Assuranceforeningen Skuld 2004
SLT 30 at paras 143 to 146.) The poor quality of the evidence before the court was striking.
None of the witnesses were involved in the transfer. There was no evidence from Chris Lee,
the relationship manager at the time the Bank was demanding payment, and no direct
evidence from a bank employee as to the security insisted on by the Bank in 2007 to 2008.
The integrity of the court’s procedure was being undermined by the deliberate withholding
of material potentially irrelevant to the issue for determination. The copy Assignation
Page 29 ⇓
29
should not be deemed to be a true copy as the original Assignation was in the hands of
Linklaters LLP on 13 April 2018.
[70] Counsel for the defender further submitted that esto certification could be by a
natural person, the copy document had not been properly authenticated by Linklaters and
was not self-proving. The statutory formalities for execution by a limited liability
partnership set out in Whitaker The Law of Limited Liability Partnerships (4th edition: 2016)
paragraph 413 citing SI2009/184 and under the Requirements of Writing (Scotland) Act 1995
had not been complied with.
[71] Counsel for the pursuer submitted that the certified copy Assignation was
admissible in evidence. It was the subject of an admission in the defender’s pleadings
(Macphail at 9.60). It had been certified as a true copy by Linklaters LLP, who hold the
principal and was accordingly admissible as if it were a principal (Civil Evidence (Scotland)
Act 1988, section 6).
[72] Counsel further submitted that an Assignation need not be in writing so it could not
be the case that writing was needed to prove the Assignation (Requirements of Writing
(Scotland) Act 1995, section 11(3). There was unchallenged evidence that the Bank sold its
loan book to the pursuer and the sale included the indebtedness of the Company.
Darren Janes give evidence of the provision of the data tape and the copy guarantee to
Engage, which would not have happened if the sale had not happened. Marta Piwowarska
was involved in the sale of the loan book to the pursuer which completed. Johane Murray in
her oral evidence deponed that the transaction to sell the loan book to the pursuer
completed on 5 June 2015. The defender accepted receiving the letter from the Bank dated
5 June 2015 and the enclosed letter to Mr Forsyth which clearly indicated that the Bank had
sold the facilities to the pursuer.
Page 30 ⇓
30
[73] Counsel further submitted that the defender’s title to challenge the Assignation was
limited as he was a stranger to it (Walker v The Bradford Old Bank Limited (1884) 12 QBD 511;
Shear v Clipper Holdings, unreported, Lord Bannatyne, 26 May 2017 at para [3].) The
defender’s only interest was in ensuring that he did not pay the wrong party as he should
not be called upon to pay twice given the clear intimation by the Bank, it would be barred
from attempting to seek payment from the defender now, and in any event there was
unchallenged evidence that the Bank no longer has any financial interests in either the
company or the defender. As there were only two candidates for the party with title to sue,
that is the Bank or the pursuer, on the balance of probabilities the pursuer enjoys title to sue.
Where the defender leads no evidence on the issue, the evidential bar is low (Vehicle Control
Services Limited v Laird [2018] SAC (Civ) 18).
[74] Counsel acknowledged that the certified copy of the Assignation contained the
Assignation in full but not the Schedule in full. He submitted that the Schedule would be
very large indeed and contain highly confidential material and therefore it was acceptable
for parts of it to be excluded. (Alliance Trusts Savings Limited v Fraser Currie and others
[2016] CSOH 154 at [44]-[46])
Statutory provisions
[75] Section 6 of the Civil Evidence (Scotland) Act 1998 provides:
“Production of copy document
(1) For the purposes of any civil proceedings, a copy of a document, purporting
to be authenticated by a person responsible for the making of the copy, shall, unless
the court otherwise directs, be—
(a) deemed a true copy; and
(b) treated for evidential purposes as if it were the document itself.
Page 31 ⇓
31
(2) In subsection (1) above, “copy” includes a transcript or reproduction.”
[76] Section 6 of the Interpretation Act 1978 (c 30) provides:
“In any Act, unless the contrary intention appears—
…
‘person’ includes a body of persons corporate or unincorporate”
“Act” is defined in Schedule 1 as meaning an Act of Parliament.
[77] Section 3 and Schedule 2, paragraph 3A(5) of the Requirements of Writing (Scotland)
Act 1995 provide:
“… where
(a) a traditional document bears to have been subscribed on behalf of a
limited liability partnership by a member of the limited liability
partnership;
(b) the document bears to have been signed by a person as a witness of
the subscription of the member of the limited liability partnership and
to state the name and address of the witness; and
(c) nothing in the document, or in the testing clause or its equivalent,
indicates–
(i) that it was not subscribed on behalf of the limited liability
partnership as it bears to have been so subscribed; or
(ii) that it was not validly witnessed for any reason specified in
paragraphs (a) to (e) of subsection (4) below,
the document shall be presumed to have been subscribed by the limited
liability partnership.
(1A) Where a document does not bear to have been signed by a person as a
witness of the subscription of the member of the limited liability partnership it shall
be presumed to have been subscribed by the limited liability partnership if it bears to
have been subscribed on behalf of the limited liability partnership by two members
of the limited liability partnership.”
Page 32 ⇓
32
[78] The following provisions apply to the formalities of doing business by a limited
liability partnership under the Companies Act 2006 as modified by law of England and
Wales under the Limited Liability Partnerships (Application of Companies Act 2006)
Regulations 2009:
“LLP contracts
43.—(1) Under the law of England and Wales or Northern Ireland a contract may be
made—
(a) by an LLP, by writing under its common seal, or
(b) on behalf of an LLP, by a person acting under its authority, express or
implied.
(2) This is without prejudice to section 6 of the Limited Liability Partnerships Act
2000 (c. 12) (members as agents).
(3) Any formalities required by law in the case of a contract made by an
individual also apply, unless a contrary intention appears, to a contract made by or
on behalf of an LLP.
Execution of documents
44.—(1) Under the law of England and Wales or Northern Ireland a document is
executed by an LLP—
(a) by the affixing of its common seal, or
(b) by signature in accordance with the following provisions.
(2) A document is validly executed by an LLP if it is signed on behalf of the
LLP—
(a) by two members, or
(b) by a member of the LLP in the presence of a witness who attests the
signature.
(3) A document signed in accordance with subsection (2) and expressed, in
whatever words, to be executed by the LLP has the same effect as if executed under
the common seal of the LLP.
Page 33 ⇓
33
(4) In favour of a purchaser a document is deemed to have been duly executed
by an LLP if it purports to be signed in accordance with subsection (2).
A ‘purchaser’ means a purchaser in good faith for valuable consideration and
includes a lessee, mortgagee or other person who for valuable consideration acquires
an interest in property.
(5) Where a document is to be signed by a person on behalf of more than one
LLP, or on behalf of an LLP and a company, it is not duly signed by that person for
the purposes of this section unless he signs it separately in each capacity.
(6) References in this section to a document being (or purporting to be) signed by
a member are to be read, in a case where that member is a firm, as references to its
being (or purporting to be) signed by an individual authorised by the firm to sign on
its behalf.
(7) This section applies to a document that is (or purports to be) executed by an
LLP in the name of or on behalf of another person whether or not that person is also
an LLP.
Common seal
45.—(1) An LLP may have a common seal, but need not have one.
…
(6) This section does not form part of the law of Scotland.
Execution of deeds
46.—(1) A document is validly executed by an LLP as a deed for the purposes of
section 1(2)(b) of the Law of Property (Miscellaneous Provisions) Act 1989 (c. 34) and
for the purposes of the law of Northern Ireland if, and only if—
(a) it is duly executed by the LLP, and
(b) it is delivered as a deed.
(2) For the purposes of subsection (1)(b) a document is presumed to be delivered
upon its being executed, unless a contrary intention is proved.
Execution of deeds or other documents by attorney
47.—(1) Under the law of England and Wales or Northern Ireland an LLP may, by
instrument executed as a deed, empower a person, either generally or in respect of
specified matters, as its attorney to execute deeds or other documents on its behalf.
Page 34 ⇓
34
(2) A deed or other document so executed, whether in the United Kingdom or
elsewhere, has effect as if executed by the LLP.”
[79] Section 6 of the Limited Liability Partnership Act 2000 (c 12) provides that every
member of a limited liability partnership is the agent of the limited liability partnership.
Discussion and decision on pursuer’s title to sue: proof of copy Assignation
[80] If parties were required to prove the original of every document on which they rely,
then the efficient and cost-effective administration of justice would be impeded as much
court time would require to be expended on proving documents rather than addressing the
substance of a case. There are various ways in which it such inefficiency can be avoided.
For example, parties can agree documents by admissions on record or by signing a joint
minute. However in this case the defender chose to put the pursuer to his proof.
[81] Another method of avoiding such inefficiency is by the lodging of a copy document
authenticated under sec 6 of the Civil Evidence (Scotland) Act 1998. Such a document is
deemed by law to be a true copy and is treated as if it were the document itself. The issue
which arises in this case is whether the certified copy assignation lodged by the pursuer was
“a copy of a document, purporting to be authenticated by a person responsible for the
making of the copy” in terms of section 6.
[82] In my opinion the word “person” in sec 6 is not limited to a natural person. There is
nothing in the wording of sec 6 which shows the contrary intention which would be
required to displace the normal position under the Interpretation Act that it includes both
legal and natural persons. The practical consideration that a legal person cannot give
evidence in court does not demonstrate such a contrary intention. Accordingly, in my
Page 35 ⇓
35
opinion the correct interpretation of sec 6, as interpreted in accordance with the
Interpretation Act, is that authentication may be by a legal or a natural person.
[83] The certified copy assignation produced in this case was certified by a firm of
solicitors as being a true copy. The defender says that this is not enough: the certification
must comply with the formalities of execution relevant to the type of legal person which that
firm of solicitors is. If the defender is correct, then this would mean that as the copy
assignation was signed by an English Limited Liability Partnership, the certification as a true
copy would have to have the common seal of the firm of solicitors attached to it, or would
have to be signed by two members or by one member in the presence of a witness (Limited
Liability Partnerships (Application of Companies Act 2006) Regulations 2009). In my opinion this
high level of formality is not required when certifying under sec 6 of the 1988 Act. Section 6
is clear. It does not require any particular formality of execution. It merely requires that it
purports to be authenticated by the person making the copy. In this case the certificate is
signed in the name of a firm of solicitors acting for the pursuer in a manner consistent with
section 43(1)(b) and 44(6) of the Companies Act 2006 as it applies to an English Limited
Liability Partnership. In my opinion that is sufficient to satisfy the requirement under
section 6 of the Civil Evidence (Scotland) Act 1998 for a copy document “purporting” to be
authenticated by the person responsible for making the copy.
[84] I am fortified in my view by consideration of the consequences for the administration
of justice if the defender’s argument is correct. If certification under sec 6 required to
comply with the statutory requirements for formal execution, the method of execution could
vary depending on what form of legal person the certifier happened to be. If a solicitors
firm was a traditional partnership under the Partnership Act 1990, it would execute
differently from a solicitors firm operating as a Limited Liability Partnership or a limited
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company, or from a solicitor signing his or her own personal name. It is in the interests of
justice that sec 6 facilitates the efficient conduct of court business by providing a simple
straightforward method for certifying copy documents for use in court, rather than a
method which requires various differing highly technical formalities with the attendant
possibility of confusion and technical errors.
[85] In my view the production of a duly certified copy of a legal document under
redaction of parts not relevant to the issues before the court is not an abuse of process. On
the contrary, it assists in the efficient conduct of judicial business. This is particularly so in
commercial cause procedure where a party who is not satisfied with redactions can seek
appropriate orders from the court at preliminary and procedural hearings.
Title to sue: construction of the Assignation
[86] The defender’s position was that on a proper construction of the terms of the
assignation, the lending to the Company had not been assigned by the Bank to the pursuer
and so the pursuer had no title to sue.
Defender’s submissions
[87] Counsel for the defender invited me to apply the well-settled principles of
Travel Services 2016 SC 243 at paragraphs 17 and 44. He submitted that there was no
evidence of the purpose of the Assignation or that there was a wider purpose to the transfer
of the Company’s debt claim: nothing was known about the circumstances surrounding the
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grant of the Assignation or what other debts may have been transferred, just that the
company was not the only customer that this transaction affected. The pursuer had
withheld the whole document from the court, as well as the Share and Purchase Agreement
and there was no record for and no evidence of those surrounding circumstances. There
was a very limited factual matrix and the court could not embark on the exercise of
reviewing the surrounding circumstances as an aid to construction.
[88] Counsel submitted that all that was known from the evidence was that a price was
paid on 5 June 2015, which was spoken to by Johane Murray. No weight should be attached
to the evidence of Marta Piwowarska to the effect that the Bank had no ongoing financial
interest with the Company as supporting a transfer of all debts owned by the Company and
the Bank. She could not competently give evidence as to the subjective intention of either
the Bank or the pursuer at the time of transfer. The Assignation was reduced to writing and
that was a measure of what was transferred. She was administrative officer with no legal
qualifications and had no direct involvement in checking the electronic records and physical
documentation. On her own evidence the Bank knew that they did not have all the
documentation necessary to enforce the guarantee against the defender. In any event, it did
not follow that if it was correct to say the Bank did not have any ongoing financial interest
then that was because any such interest had been transferred.
[89] Counsel further submitted that taking clauses 1 and 2 together, it was clear that the
parties intended to transfer to the pursuer rights in the Relevant Documents in relation to
each Relevant Loan Asset comprised within a Relevant Borrower Asset Group: the rights
that were assigned were defined by reference to a loan asset or debt claim, the rights were
not transferred by reference to the borrower’s identity or any reference number that might
identify a loan asset or debt claim.
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[90] Counsel further submitted that there was no description of a loan asset in the
Schedule. The words used in the Schedule were unambiguous and did not describe a loan
asset. The borrower ID is the identification of a borrower, not a description of a loan asset or
debt claim. The boarding process was carried out after transfer so the number allocated by
Engage cannot inform the understanding of what was transferred.
[91] Counsel further submitted that there was no description of a debt claim in the
Schedule. The reference to the demand letters was far removed from a description of a debt
claim. The use of the words “ready for transfer” implied that transfer had not taken place
on the date of the Assignation. The only description that might conceivably be considered to
be a description of debt claim is for the unplanned borrowing in the region of £57,224.89.
There was nothing which could amount to a description of a debt claim on the 2007 facility
agreement and on no reasonable interpretation of the Assignation could it be said to have
been a transfer of a debt claim in relation to the loan account or a credit card. The letter of
22 September 2014 was a letter of concern not a demand letter and the terms of the letters of
intimation and boarding were not part of the surrounding circumstances as they post-date
the Assignation.
Pursuer’s Submissions
[92] Counsel for the pursuer submitted that the unchallenged evidence of Johane Murray
established that the “effective time” was 5 June 2015 . There was plain identification of the
borrowing to the Company in the Schedule: the Company was named and there was
express reference to the letter of 28 October 2014. Clause 2.1(a) catches the guarantee as it is
included within the definition of “Relevant Documents”. Even if that is wrong, the pursuer
as assignee may call upon the defender as cautioner to make payment under the principle
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accessorium sequitur principale (Promontoria (RAM) Limited v Moore [2017] CSOH 88 at paras
[49] and [88]).
[93] Counsel further submitted that there was no difficulty with the assignability of
either the loan facility or the guarantee as clause 14.2 of the loan facility permitted
assignation and the guarantee defined the “Bank” as meaning Clydesdale Bank and any
other person to whom rights under the guarantee were transferred. Intimation had taken
place in terms of the two letters of 5 June 2015, and a further demand made of the defender
on 7 July 2015. This sufficed for the purposes of intimation: Libertas-Kommerz GmbH v
Dounis, unreported, Lord Tyre, 26 January 2016.
Discussion and Decision
[94] Having concluded that the certified copy assignation is admissible, the next question
for the court is whether the pursuer has proved that the Bank’s claim against the defender
was assigned to the pursuer.
[95] In my opinion the pursuer has done so. I find the wording of the certified copy
Assignation to be unambiguous and clear.
[96] Clause 2.1 contains an assignation by the Bank to the defender in relation to each
Specified Loan Asset comprised within a Borrower Asset Group. A “Specified Loan Asset”
is defined as inter alia a “Relevant Loan Asset” which in turn is defined as a loan asset or
debt claim described in the schedule.
[97] The Schedule is headed up “Relevant Loan Assets” The certified copy Assignation
does not include the entire schedule, but only the part which the pursuer sought to found
upon as being relevant to the defender. In my opinion the pursuer was entitled to lodge
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only the part of the schedule which it was founding on in this action. The court expects that
parties will endeavour to focus their case before the court. It is clear from the wording of the
Assignation that the schedule would have included details of other borrowers apart from
the Company. The wholesale lodging of an extensive schedule of information which is not
relevant to the pursuer, and contains confidential commercial information about third
parties, does not assist in the focussing of the case before the court.
[98] The part of the schedule which has been produced is headed up “Borrower Data”
and lists the Borrower Name as “Glen TV Rentals Ltd”. It states that there has been a
Covenant breach default and that the borrower is in administration, naming Campbell
Dallas LLP as the insolvency practitioner. The schedule clearly identifies that the Company
has borrowed from the Bank. In my opinion this is sufficient description of a loan asset or
debt claim to bring lending by the Bank to the Company within the definition of “Relevant
Loan Asset”, and therefore within the definition of “Specified Loan Asset”. On a correct
interpretation, the purpose of the reference in the schedule to the demand letter of 28
October 2014 is not to restrict the assignation to sums demanded in that letter, to the
exclusion of other borrowing by the Company. The purpose of that reference is to provide a
record of which documents had been seen by a review team.
[99] Clause 2.1 (a) goes on to assign certain rights under each “Relevant Document”
There is a lengthy definition of “Relevant Document” but in essence it includes documents
of debt and security documentation. In particular it includes facility, loan or credit letters or
agreements and guarantees. Accordingly it includes the documentation setting out the
lending to Company by the Bank, and the guarantee of that lending which is sought to be
enforced in this action.
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[100] The assignation was intimated both to the administrator of the Company and to the
defender by the letters dated 5 June 2015.
[101] In all the circumstances, I find that the pursuer has proved on the balance of
probabilities that the Bank has assigned its rights against the Company, and its rights under
the guarantee, to the pursuer. Accordingly, the pursuer has title to sue.
Delegation
[102] The defender’s position was that the pursuer had failed to rebut the presumption
against delegation and accordingly the assignation was ineffective.
Defender’s submissions
[103] Counsel for the defender submitted that there was a strong presumption against
delegation and the onus was on the pursuer to prove that the defender had assented
(W J Harte Construction v Scottish Homes 1992 SC 99 at pages 110-111; Erskine III, IV, 22,
Gloag on Contract(2nd edition, 1929), page 258). The assignation was an attempt to
substitute the pursuer for the Bank as a party to the relevant documents. What the
agreement between the Bank and the pursuer sought to do was to delegate to the pursuer
the obligations of the Bank to the customer. The Bank had undertaken certain obligations to
the customer under the terms and conditions . There was no evidence that the defender or
Miss Friel or the Company had consented or assented to novation of the contract with the
Bank, with the consequence that there had been no delegation. The transaction was a
unitary transaction which sought to transfer the rights and obligations of the bank to the
pursuer. The absence of consent rendered the whole ineffective.
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Pursuer’s Submissions
[104] Counsel for the pursuer submitted that the Bank and the Company contracted on
the basis that the Bank could assign its rights and delegate its obligations. In any event the
defender was not a party to the assignation and had no title nor interest to raise questions
liable to disturb the assignation’s prima facie validity, force and effect.
Discussion and decision
[105] The pursuers in this action are suing on a personal guarantee which has been
assigned to them by the Bank for payment of a principal sum which has also been assigned
to them by the Bank. The defender’s argument is that the assignation of the right to
payment and of the personal guarantee fall because even if the Bank’s right to payment
was validly assigned then this is invalidated because the Company’s rights against the Bank
were not transferred.
[106] The defender founds upon WJ Harte Construction Limited v Scottish Homes. However,
the circumstances of this case are very different from the current case. That case involved a
building contract under which the pursuer was obliged to construct 24 houses. In that case,
there was no evidence that the intention was for the pursuers to be discharged from the
contract and another party substituted in its place (p111).
[107] By contrast, in the current case, the contractual arrangement between the Bank and
the Company expressly provided for the substitution of another person for the Bank. This is
set out in Clause 14.2 of the Terms and Conditions of the Tailored Business Loan and Clause
6 of the Schedule to the 2011 Facility Agreement. Accordingly the Company’s intention
was that there could be such a substitution. That intention was given effect to by clause
2.1(c) of the Assignation, which provided for the substitution of the pursuer for the Bank as
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party to the contract with the Company. In my opinion in these circumstances the
Assignation is valid and the pursuer is entitled to seek recovery under the personal
guarantee.
Whether the pursuer has proved that £800,000 was due.
[108] The defender’s position was that esto he was liable under the guarantee, the pursuer
had not proved that the principal sum of £800,000 concluded for was due.
The pursuer’s submissions
[109] Counsel for the pursuer submitted that the defender in his evidence had accepted
that the amounts demanded by the Bank on 7 November 2014 were then due and have never
been repaid. The amount demanded exceeded the limit in the guarantee. The events of
default having occurred, the term business loan was repayable by the company and by the
defender as its cautioner subject to limitation of liability.
The defender’s submissions
[110] Counsel for the defender submitted that the furthest the evidence goes is the sum
of £56,029.66 with interest of £763.14. This was the amount certified in the letter of 7
November 2014 in respect of the current account. The other amounts certified in that letter
were for the Tailored Business Loan and the credit card and these debts had not been
transferred under the Assignation. There was no evidence to allow the court to pronounce a
decree for a sum of accrued interest or to pronounce decree for interest at a particular
percentage from 6 November 2016.
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Discussion and decision
[111] In this action the pursuer seeks £800,000, which is the maximum liability of the
defender under the Guarantee. In order to succeed the pursuer does not need to establish
the full amount due under the principal obligation. He merely needs to establish that the
amount due under the principal obligation is at least £800,000.
[112] In its demand letter of 7 November 2014, the Bank certified a total sum due
of £1,180,4031,61. The contractual documentation between the Bank and the Company
provided for a certificate by the Bank to be conclusive of the amount due. This was set out
in clause 17.4 of the conditions relating to the Tailored Business Loan and clause 4.2 of the
Schedule to the 2011 Facility Agreement. The effect of these clauses is that the Company
agreed that a certificate by the Bank of the amount due would be conclusive for evidential
purposes. The Company has contractually agreed to a mechanism to conclusively determine
the amount due. The mechanism is that the amount is certified by the Bank.
[113] In my opinion the certification of the amounts due was unaffected by the
Assignation. The assignation assigns to the pursuer the Bank’s rights to recover all monies
payable by the Company. The contractual mechanism for determining the amount due has
been complied with. Certification was made by the Bank prior to the date of the assignation.
That certification exceeds £800,000. The defender is obliged under the guarantee to pay all
sums due up to the limit of £800,000. In these circumstances I hold that the pursuer has
proved that the principal sum due under the guarantee is £800,000.
Order
[114] I shall sustain the pursuer’s second plea in law and repel the defender's second and
fourth pleas in law and grant decree in terms of the second conclusion.
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[115] The third conclusion was for expenses on an agent client, client paying basis. Parties
invited me to put the case out by order to hear submissions on expenses and I shall do so. I
reserve all questions of expenses in the meantime.