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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> JAMES STEPHEN AND ANOTHER AGAINST DOROTHY MELVILLE AND ANOTHER [2020] ScotCS CSOH_10 (23 January 2020)
URL: http://www.bailii.org/scot/cases/ScotCS/2020/2020_CSOH_10.html
Cite as: 2020 GWD 5-72, (1821) 2 Mur 484, [2020] ScotCS CSOH_10, [2020] CSOH 10
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Page 1 ⇓
OUTER HOUSE, COURT OF SESSION
[2020] CSOH 10
A335/16
OPINION OF LORD BRAILSFORD
In the cause
(FIRST) JAMES STEPHEN AND ANOTHER
Pursuers
against
DOROTHY THOMPSON MELVILLE AND ALISTAIR MELVILLE
Defenders
Pursuer: Borne, QC; MBM Commercial LLP
Defender: Dewar; Balfour + Manson LLP
23 January 2020
[1] The first pursuer is the trustee in the sequestration of Stuart McCallum Melville
(“SMM”) having been appointed in that capacity by the sheriff at Aberdeen on 27 July 2017.
The second pursuer is the Accountant in Bankruptcy in his capacity as the trustee in
sequestration of Calum Gerrard Melville (“CGM”) having been appointed in that capacity
by the sheriff at Aberdeen on 7 January 2016. The defenders are spouses and reside together
at an address in Largs.1 They are the parents of SMM and CGM. In the present action the
pursuers seek payment by the defenders jointly and severally of (1) the sum of €2,000,400
and (2) the sum of €749,624.
1 They will be referred to as “DTM” or “AM” or, if the context is of them as spouses, “the defenders”
Page 2 ⇓
2
[2] The action called for proof on 9 April 2019 and concluded on 26 April 2019. The
pursuer adduced evidence from the following witnesses:
(i) SMM
(ii) John Butler
(iii) Deborah Wilkinson
(iv) Ross Atkinson
(v) John Rutherford
(vi) Steven George
The defender adduced evidence from the following witnesses:
(i) CGM
(ii) Peter Macari
(iii) Dr Evelyn Gillies
(iv) AM
(v) DM
In addition the parties entered into a joint minute tendered to the court on the first day of
proof.2 In essence the joint minute agreed that a significant number of documentary
productions which featured in the evidence were true copies of the original documents. In
addition, in terms of paragraph 42 of the joint minute, the parties agreed a chronology of
events which form the background to the issues in the action. For convenience and clarity
the agreed chronology is incorporated in this opinion as an appendix.
[3] The action concerns the authenticity or otherwise of a document bearing to be a loan
agreement dated 27 August 2008 between on the one hand SMM and CGM as lenders and
the defenders as borrowers. That document was produced and referred to for its terms
2 No 28 of process
Page 3 ⇓
3
which were incorporated in the pleadings. The document bore to be prepared by a firm of
solicitors. In terms of the document the defenders received a single advance of €2,000,400.
The defenders’ position was that although the signatures which appeared on pages 7 and 8
of the document were genuine and their own, they did not knowingly sign any loan
agreement in favour of the lenders on the purported date of signature. The creation of the
document, the terms of the document and the circumstances of signature are contentious
and were the subject of evidence adduced at proof. They will be discussed in detail at a later
stage in this opinion.
Background summary
[4] Notwithstanding the contentious nature of the loan document and its creation there
was less contention in relation to a significant portion of the background prior to the
creation of the loan agreement. This background was spoken to in evidence by a number of
witnesses and is necessary to put those matters which are in contention in context. It is
however in my view possible, on the basis of the evidence adduced, to state this background
relatively succinctly.
[5] In or about 1990 the defenders set up a company to provide services to the offshore
oil industry in Aberdeen. The company was from August 1990 named Grampian Test &
Certification Ltd. At inception AM was the managing director of the company with, at a
later date DTM becoming a finance director, initially on a part-time basis. SMM and CGM
were employed by the company as test engineers from its inception.
Page 4 ⇓
4
[6] In terms of a document entitled “Agreement” dated 19 September 20013 SMM and
CGM entered into a contract with the defenders the effect of which was that they acquired a
controlling interest in Grampian Test & Certification Ltd. Thereafter it would seem there
was some corporate restructuring, the details of which are not germane to the issue in
dispute but resulted in the creation of a company named GTC Holdings Ltd which was the
holding company for Grampian Test & Certification Ltd. SMM and CGM were directors of
GTC Holdings Ltd. Records show an issued share capital of GTC Holdings Ltd as being
10,000 ordinary shares with SMM and CGM each owning 4,250, DTM and AM owning
250 and Uberior investments, a vehicle of the Bank of Scotland who had provided funding to
SMM and CGM for the buyout of the defenders’ interest in Grampian Test & Certification
Ltd owning the remaining 1,000 shares
[7] In 2006 it came to light that sums amounting to approximately £1 million had been
withdrawn from the accounts of the group of which GTC Holdings Ltd was the holding
company without notification or authority. Whilst there was no agreement between the
parties as to the cause of this occurrence and, further, the evidence on the matter was
limited, it was established that at the insistence of the Bank of Scotland a report into the
unauthorised withdrawal of funds from the company was commissioned from PWC, a firm
of chartered accountants. The conclusion of the report was that the unauthorised
withdrawals had been instigated by CGM and on that basis, CGM was required to resign as
a director of GTC Holdings Ltd, which occurred on 12 June 2006.4 The Bank of Scotland also
required that the company funds misappropriated is repaid. The final settlement figure in
that regard was £1,274,980.70. Payment of that sum was made in November 2006.
3 No 6/26 of process
4 No 6/49 of process
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5
[8] In October 2006 the defenders entered into a loan agreement. The purpose of that
loan was to repay to GTC Holdings Ltd the funds misappropriated by CGM. In
November 2006 the sum of £1,274,980.70 was paid to GTC Holdings Ltd in full and final
settlement of any claims arising from the actions of CGM in relation to the unauthorised
withdrawal of funds from that company.5 On 28 November 2006 in terms of a Share
Purchase Agreement DTM acquired CGM’s shareholding in GTC Holdings Ltd6.
[9] Broadly contemporaneously with the ascertainment of CGM’s activities in
withdrawing funds from GTC Holdings Ltd without authority, the subsequent report by
PWC and CGM’s sale of his shareholding in that company, the Bank of Scotland exerted
pressure on SMM as the largest shareholder to sell the company. There was evidence that
the bank as lenders to the company would compel a sale in the event that SMM did not take
effective steps in that direction of his own volition. It was commercially advantageous to the
shareholders of CTC Holdings Ltd to retain control of any sale of the company and to that
effect the company entered into negotiations, which ultimately proved successful, with a
third party company, Cosalt Offshore Ltd (“Cosalt”). GTC Holdings Ltd were ultimately
sold to Cosalt in terms of a Share Purchase Agreement dated 12 and 13 September 2007.7
[10] On 15 October 2007 an initial consideration from the sale of GTC Holdings Ltd was
paid to the defenders in the sums of (i) £2,254,955.22 – which was transferred to an account
held with Credit Suisse (UK) Ltd and (ii) £2,186,859.83 which was transferred to an account
in the name of ATM held with the Bank of Scotland.8 On 30 October 2007 the sum
of £2,087,000 was transferred by DTM to an account with Credit Suisse (UK) Ltd. On
5 No 6/21 of process
6 No 7/22 of process
7 No 7/29 of process
8 Nos 6/57 and 7/23 of process
Page 6 ⇓
6
25 February 2008 a further sum of £1,381,407.71 was transferred by solicitors to an account
held with Lloyds Bank.
[11] On 20 August 2008 a senior associate in McGrigors LLP, a firm of solicitors, sent
drafts of a document entitled “Loan Agreement” to CGM.9 These documents appear to have
formed the basis of the “Loan Agreement” that constitutes the contentious issue in the
present action. On 10 October 2008 a further draft loan agreement was sent by email from
McGrigors to CGM.
Evidence
(1) Pursuers
(i) SMM
[12] SMM gave evidence about the matters which I have summarised in paragraphs [4]-
[10] hereof. I do not consider his evidence in relation to these matters requires to be
rehearsed at length. In essence he gave information in relation to his and CGM’s acquisition
of a substantial shareholding in GTC Holdings Ltd from his parents in 2001. In relation to
the events in 2006 when an unauthorised withdrawal of funds from the company was
discovered, his position was that whilst he was aware of the occurrence and that PWC had
been instructed to prepare a report, he had no knowledge of either the investigation or the
details of the outcome. He indicated that his understanding was that CGM had created
what he described as “bogus invoices” in order to embezzle money from the company. It
was his position that CGM was responsible for this. He stated that CGM resigned as both a
director and employee of the company in 2006.
9 No 6/23 and 6/24 of process
Page 7 ⇓
7
[13] SMM gave evidence, of relatively limited scope, in relation to the sale of GCT
Holdings Ltd to Cosalt. The gravamen of that evidence was that a sale was necessary to
satisfy the Bank of Scotland and that it was in all shareholders’ commercial interests if they
retained control of such a sale. He gave further evidence in relation to the funds released to
the shareholders as a consequence of the sale. This involved the creation of the Credit Suisse
account. His evidence was that the shareholders, essentially himself and his parents the
defenders agreed that it would be advantageous to create a pool of money from the
proceeds of sale of GCT. On his evidence these pooled resources were to be used as an
investment fund for property purchase and other investments. It was also designed to be a
means whereby the defenders could be paid. To that end funds created by the sale of GCT
to Cosalt were used to purchase heritage from the purchasing company which had prior to
the sale been owned by GTC Ltd. A company, Denmore Investments, was also set up to act
as an investment vehicle. The intention was that he and CGM would be responsible for the
management of the portfolio represented by the funds in the Credit Suisse account. He
stated that it was agreed that he, CGM and his mother, the first named defender, would all
require to sign off any crash transaction being paid from the funds at credit with Credit
Suisse.10
[14] In relation to the disputed loan which is the subject matter of the dispute, his
evidence in chief was that the defenders had taken out a mortgage over Spanish property
they owned and wished to borrow from the Credit Suisse funds in order to repay this
mortgage. The matter was discussed between SMM, CGM and the defenders. After these
discussions SMM’s position was that CGM consulted McGrigors and instructed them to
draw up a document which would be used as part of this arrangement. It is a matter of
10 No 6/57 of process
Page 8 ⇓
8
agreement that a draft of a loan agreement was sent to CGM by email timed 17.05 on
18 August 2008.11 A revisal was sent timed 12.33 and dated 20 August 2008.12 A further
draft was sent by McGrigors to CGM at 14.37 on the same day.13
[15] SMM’s evidence in relation to the signing of this document was as follows. The Loan
Agreement was prepared by Ross Atkinson of McGrigors LLP acting on the instruction of
CGM. The signing took place on 27 August 2008 within the offices of Cosalt, formally the
offices from which GTC Holdings Ltd traded. Signing took place in the office occupied by
SMM. The final draft of the loan agreement had been sent by email to CGM on 20 August
2008 and had then been forwarded by email to SMM. The copy used for signing was
printed by SMM using a printer located in CGM’s office in the building. Two copies were
printed. CGM asked Steven George, a long-standing employee of GTC Holdings Ltd to act
as a witness. The defenders were present in the office. The document was signed by all
signatories whilst they were present in SMM’s office. The authenticity of the signatures is
not disputed in this action. SMM’s evidence was that the signed Loan Agreement was
thereafter kept by him at his home.
[16] SMM also gave evidence in relation to his knowledge of a disposition in his and
CJM’s favour relative to heritable property at 252 Queen’s Road, Aberdeen, known as
“Rocksley”. This property was in 2009/10 the defenders’ matrimonial home.
[17] At proof SMM was shown a disposition of that property, granted for love, favour
and affection in favour of himself and his brother CGM. The disposition bore to be signed
by Alistair Melville and witnessed by Steven George and was dated 10 May 2010. SMM’s
evidence was that he could not remember where the document came from. He stated “My
11 No 6/52(a) of process
12 No 6/52(b) of process
13 No 6/52(c) of process
Page 9 ⇓
9
father would have had it done by a solicitor”. He was then shown a letter dated 13 October
200914 from McGrigors to the defenders. That letter stated that the solicitors has been
advised that the defenders had agreed to transfer ownership of the property at 252 Queen’s
Road, Aberdeen to CGM and SMM. SMM claimed no knowledge of that letter. He stated
that at or about that time McGrigors acted for CGM and added to that “probably for me as
well”. He further maintained that the signed disposition15 was the document that was
appended to McGrigors’ letter of 13 October 2009. He could not explain why McGrigors’
letter was dated in October 2009 and the disposition was signed on 10 May 2010. He
asserted that the defenders would know of this disposition, saying “It’s rubbish of my
parents to say they knew nothing of this”. He was asked to explain why his parents would
enter into a contract with third parties to sell the said premises in April 2010,
notwithstanding the terms of the letter from McGrigors dated 13 October 2009 and the
signed disposition. He could offer no explanation for this. He did however state that he
accepted that his parents agreed to sell the said property to independent third parties and,
further, that the sale was given effect to.
(ii) John Butler
[18] John Butler is a digital forensics expert employed by Geode Forensics Ltd. His
expertise is in the analysis of material generated by computers, mobile phones and the like.
His qualification and experience were provided in a report he prepared and were not the
subject of challenge by the defenders.
14 No 7/20 of process
15 No 6/46 of process
Page 10 ⇓
10
[19] Mr Butler had been asked to “assess the significance or otherwise of differences in
layout between documents as printed by the originating author and the revisions that were
returned having been transmitted electronically to another party ...”. To enable him to carry
out this task Mr Butler was provided with the draft of the “Loan Agreement” sent by
McGrigors to (CM on 20 August 2008 at 14.3716 and the signed “Loan Agreement” dated
27 August 200817 . On the basis of these instructions he had produced a report.18 In terms of
his instructions Mr Butler was concerned with commenting on why different printed
versions of an electronically stored source document might show changes. His view was
that if deliberate reformatting of the document was set to one side then there were two
principal reasons why this could occur. These were digital factors and optical factors. He
then explained how this could occur.19 He then carried out two sets of experiments to test
what he had stated having regard to the documents he had been sent. His conclusions
having undertaken this work were as follows:
“It would not surprise me at all if the documents as printed by the recipient
contained differences in white space, pagination, page numbers, margins, type-face
and scaling and visible metadata from the original and in my opinion this is a natural
consequence of sending document in Word rather than in PDF or TIFF. I am actually
quite surprised that the source and final documents that I saw are as close to
identical as they are.
The experiments demonstrate that documents with different print, copy and
scanning histories show scaling and distortion that cannot be the result of any digital
process. They have to be the result of the optical copying or scanning processes
between the document originals and the final copies. Different copies will produce
different results.”20
16 No 6/24 of process
17 No 6/1 of process
18 No 6/51 of process
19 See page 4 of 6 in No 6/51 of process
20 See page 6 of 6 in No 6/51 of process
Page 11 ⇓
11
[20] Mr Butler had further been asked to consider a report prepared on behalf of the
defenders by Dr Evelyn Gillies. For reasons explained in his report Mr Butler did not agree
with the conclusions arrived at by Dr Gillies. Mr Butler expressed his opinion in the
following way:
“... Without a clear statement of the printing history of the documents examined by
expert Dr Gillies, in my opinion her results are flawed and cannot be applied to any
copies other than the exact ones that she was given. The best test is a comparison of
the original documents with copies that have been laser printed from the original
Word file and even then if different printers were involved then some differences
cannot be ruled out.”
(iii) Deborah Lorraine Wilkinson
[21] Ms Wilkinson had been employed as a personal assistant by Cosalt Plc in Grimsby
in 2007. At or about that time she met on several occasions CGM who then worked for GTC,
a part of Cosalt, and was a relatively frequent visitor to Cosalt’s offices in Grimsby.
Ms Wilkinson’s evidence was that she left the employment of Cosalt in 2009 when she
moved to live in South Wales. She had informed CGM of her resignation and relocation. He
then offered her employment as his personal assistant. He indicated to her that her
residence was irrelevant and he was happy that she worked from home. Her recollection
was that she left the employment of Cosalt on 30 October 2009 and commenced employment
with CGM immediately thereafter. She was employed by CGM until September 2015.
[22] Her evidence was that when she commenced employment with CGM he was still
involved with Cosalt/GTC. She stated that he also had an interest in a company called
Global Integrity Services. In about 2013 she was told that she was to “put her salary
through” a company called Oilfield Integrity Management. She also said that CGM was
involved in a number of other companies. She was asked about the number of employees
Oilfield Integrity Management had and when the figure of 135 employees was put to her
Page 12 ⇓
12
stated that it was definitely not as many as that. Her position was that her employment with
CGM did not end well. He had not been in the habit of paying her salary promptly. By
August 2015 she was due two months of arrears of salary. She could not continue on this
basis and accordingly resigned.
(iv) Ross Atkinson
[23] Mr Atkinson was at the time he gave evidence employed as an Investment Banker.
He had qualified as a solicitor in 2000 and had been employed as a senior associate solicitor
by McGrigors LLP between 2006 and 2008.
[24] When employed by McGrigors he had met CGM who was a client of that firm. His
recollection was that he had met SMM on only one occasion. In relation to the Loan
Agreement in dispute he took no instructions from SMM and had only taken instructions
from CGM.
[25] Mr Atkinson was examined in relation to any knowledge he had relative to
misappropriation of funds from GTC in 2006. His evidence was that CGM had consulted
him. CGM had informed him that he owed GTC money which Mr Atkinson believed arose
from misappropriation of funds from GTC. CGM also informed Mr Atkinson that GTC
were going to terminate his employment contract and “liquidate his shares”. Mr Atkinson
agreed to act for him in relation to these matters. He was told that Dundas and Wilson, a
firm of solicitors, acted for GTC and the Bank of Scotland in relation to the issue of
misappropriation of funds from the company. He entered into discussions on behalf of
CGM with Dundas & Wilson. He was shown a number of documents relative to these
Page 13 ⇓
13
discussions.21 He accepted that these documents “looked accurate”. Whilst he had no actual
recollection of the matters contained within the documents he took no issue with the
gravamen of these.
[26] He was questioned and gave further evidence in relation to the loan agreements
created on 20 August 2008. He was shown these documents and the accompanying emails22.
Whilst he could not say that he drafted these agreement he agreed that he had sent them to
the recipient identified in the header part of the emails, that is CGM. He thought the
documents were probably based on a template that had simply been amended to identify
the intended parties to the agreement. He was unable to explain the reasons for the change
between the first and second drafts but did not appear to consider they were any more than
corrections.
(v) John Rutherford
[27] Mr Rutherford was at the time he gave evidence a consultant with Shepherd &
Wedderburn LLP. Between 2006-2012 he had been Head of Corporate at McGrigors LLP.
[28] Mr Rutherford confirmed that in 2006 he had acted for CGM in relation to the
misappropriation of funds from GTC. He also confirmed that at that time Ross Atkinson
acted under his immediate supervision.
[29] In relation to the loan agreement created by McGrigors in August 2008 his evidence
was that this was all handled by Ross Atkinson and he had no precise recollection of the
matters.
21 Nos 6/12, 6/14 and 6/18 of process
22 No 6/23 and 6/24 of process
Page 14 ⇓
14
(vi) Steven George
[30] Mr George was a technical manager employed at the time of giving evidence by a
company named First Integrated Solutions.
[31] He had stated he had known the Melville family since the late 1980s. He had initially
met CGM when they played football together at that time. Thereafter he was employed by
GTC from December 1991. His recollection was that at that time CGM was employed as the
operations manager of that company. In addition to a friendship with CGM he had, through
his employment, become familiar with SMM and both defenders in this action. His position
was that he had known all these four persons well until approximately ten years ago when
due to a change in employer he ceased having much regular contact with them.
[32] In relation to the loan agreement in dispute in the present action he acknowledged
that the signature purporting to be his “looks like my signature”. He also confirmed that the
address given for him on the document was his address at the time the document was
created.
[33] He was questioned about the circumstances of the creation of the document and how
it came to be signed by him. In his evidence in relation to those matters he said that it was a
long time ago. He further stated that in the course of his work he had to sign many
documents. He said that he required to sign lifting certificates certifying the safety of
equipment used in the oil industry. Consequently he said he had no particular recollection
of the signing of the documents in dispute in this action. He could go no further than say
that the signatures he was shown “all appear to be my signature”. He accepted the
possibility that he witnessed the signing of the documents by the defenders but said he had
no recollection of that.
Page 15 ⇓
15
(2) Defenders
(i) CGM
[34] CGM’s evidence in relation to matters from the inception of GTC Ltd until the
events of 2006 did not differ materially from that given by SMM and does not therefore
require repetition.
[35] In relation to the events of 2006 he accepted that “I took money out of GTC”
although he asserted that SMM was also involved in the wrongful removal of funds from
the company. His position was that he and SMM took £1.1 million from the company over a
period of about year and he accepted that “we shouldn’t have”.
[36] In relation to the loan document in contention in this action CGM was shown the
principal23 and confirmed that he recognised the document and that he had signed it. In
examination in chief his initial account of the creation of the document and its signature was
as follows: He stated that SMM was not “comfortable” with the defenders retaining a
proportion of the share capital of GTC Ltd. He said the concern relating to the defenders
maintaining a significant shareholding was that on the event of their deaths a third brother,
who was neither a party to this action nor apparently a prominent player in any of the
events with which this litigation is concerned, might through inheritance acquire a
commercially valuable interest in the shareholding of the company. In order to avoid that
eventuality his position was that he and SMM essentially created a fictitious loan agreement
with the intention that they could “utilise” in the event that the third brother stood to benefit
as a result of inheritance. To that end CGM stated that he contacted McGrigors, he could not
recall whether Mr Rutherford or Mr Atkinson, and told them that he and SMM were lending
their parents, the defenders, money and to facilitate that wished McGrigors to prepare a loan
23 No 6/1 of process
Page 16 ⇓
16
agreement. He then said with reference to his parents, the defenders, “we got them to sign
it” and intended to keep it until their death and then produce it to preclude their brother
from inheriting.
[37] In relation to the signing of the document CGM’s position was that he and SMM
signed it with Steven George as a witness. He said signing of the document by himself,
SMM and Steven George took place in SMM’s office at Cosalt’s offices in Aberdeen. He
stated that “no one else was in attendance”.
[38] At this stage in his evidence in chief CGM also stated that he and SMM “made up a
three page document saying we would pay mum and dad £300,000 a year”.
[39] The description of the creation of the loan agreement and the signing thereof given in
evidence by SMM was put to CGM. He described SMM’s version of events as “utter tripe”.
He maintained that his mother had never visited the office of GCT Ltd. Although he
accepted that his father occasionally visited these premises he maintained that his parents
were never there as a couple to sign the document. He stated, again in cross-examination,
that he took the loan agreement to his parents’ house and they signed it there. He said that
he took two copies of the loan agreement to his parents’ house. His evidence was that
essentially he told them that the document provided that SMM and he would pay them
£300,000 per annum and that they would leave the money in the Credit Suisse account to
him and SMM. He said this arrangement was designed to ensure that their brother did not
benefit from the company by way of inheritance. His position was that both copies of the
agreement he had taken to his parents’ house were signed and he took them both away.
[40] I should record that at the end of examination in chief counsel for the defenders put
to CGM that he had acted dishonestly in relation to a number of matters, including the
creation of the loan agreement and representations made to various persons, including the
Page 17 ⇓
17
police, in relation to his involvement with the company Oilfield Integrity Management. He
accepted those matters and expressly accepted that he had acted dishonestly in regard to
these matters. The matter was put again to him quite bluntly in cross-examination where
senior counsel for the pursuers suggested that he was a liar, a proposition which he
answered in the affirmative.
(ii) Peter Anthony Macari
[41] Mr Macari is a retired solicitor. He practiced for 46 years. The defenders were his
clients when he was a partner in the firm of Ian Smith & Co. The defenders were his clients
for more than 20 years.
[42] In or about the spring of 2010 Mr Macari said he was consulted by the defenders in
relation to their intention to sell their family home, a property in Aberdeen named
“Rocksley”. Another firm of solicitors were to be responsible for marketing of the property
but Mr Macari was engaged to negotiate and conclude missives and draft any necessary
disposition.
[43] Mr Macari negotiated a sale for the house for a price of £875,000. Subsequent to the
conclusion of the bargain Mr Macari received at his office a document purporting to be a
disposition of the defenders’ said house in favour of CGM and SMM. He was shown a copy
disposition which he was able to identify as being similar to that which had been delivered
to his office in April 2010.24 Mr Macari’s recollection was that the document had been
pushed through the letterbox of his office without an envelope. He said the document
caused him some confusion. In the first place there was a header in bold at the top of the
document in the following terms:
24 No 6/46 of process
Page 18 ⇓
18
“This is an important document, you should take independent legal advice before
signing and sign only if you want to be legally bound.”
Mr Macari described it as unusual to find such a header on a disposition. He could not
understand, given that the document purported to represent a concluded bargain, why he
had not received the deed prior to completion of a bargain with third party purchasers of
the property. Attached to the document was a handwritten note bearing SMM’s name.
Mr Macari attempted to contact SMM by email. He sent the document to the defenders with
an accompanying letter. Mr Macari was sufficiently concerned about the disposition that
had been pushed through his door to consult the Law Society of Scotland for advice on how
he should proceed.
[44] Mr Macari also gave evidence about file notes he took in 2012 when on two occasions
SMM had attempted to borrow money from the defenders. On both of these occasions the
defenders consulted Mr Macari for professional advice. On both occasions Mr Macari said
he had advised the defenders not to proceed.
(iii) Dr Evelyn Gillies
[45] Dr Gillies was a forensic document examiner employed by an organisation named
Forensic Documents Bureau. Prior to that employment she was employed for 13 years as a
forensic document examiner by Grampian Police. She was instructed by solicitors acting on
behalf of the defenders to prepare a report on the document 6/1 of process. Her report was
produced.25 In addition she produced an addendum.26 She adhered to her report and the
25 No 7/11 of process
26 No 7/12 of process
“
Page 19 ⇓
19
addendum in evidence. Having considered and examined the Loan Agreement27 Dr Gillies
identified six features in the layout thereof which “seem unusual”28. These features were:
The mismatch of the index pagination with the pages the Clauses actually
appear on.
The inclusion of the file name, location and path on eight of the pages.
Several of the pages, appear to have been crammed with as much detail as
possible, as shown by the lack of space at the bottom of these pages.
The title of clause 7 on a different page separated from all the details of the
clause.
The differences between the top margins of pages 7 and 8, both with each
other and the preceding pages ...
The differences between the spacing of the signing lines on pages 7 and 8.”
On the basis of these findings her conclusion was that “the original document produced by
McGrigors LLP may have been altered”. Her evidence in relation to potential alteration of
the document was consistent with the account of the creation and signing of the document
given by SMM. Further it was not wholly consistent with the account of the creation and
signing of the document given by CGM.
(iv) Alistair Melville
[46] Mr Melville’s evidence was in short compass. His position was that he had not
signed the loan agreement which is the subject matter of the principal dispute before the
27 No 6/1 of process
28 No 7/11 of process at page 7 of 18
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20
court.29 He maintained that he had never seen the document before shown it for purposes of
the present litigation. He further stated that he had not signed any document of loan
wherein his sons SMM and CGM were syndicated lenders. He did not borrow €2.04 million
from the said persons. Beyond this his position was that he and his wife had never agreed
to transfer title in their residence to their sons SMM and CGM for no consideration and for
love, favour and affection. They had decided to sell their private residence and move to
another part of Scotland when he and his wife felt pressurised by the demands SMM and
CGM were making upon them for money.
(v) Dorothy Thompson Melville
[47] Mrs Melville confirmed that she and her husband had disposed of the majority of
their shareholding in GTC Ltd to their sons SMM and CGM in 2001. She further stated that
in or about 2006 CGM had misappropriated a large sum of money from the company. The
Bank of Scotland had as a consequence insisted that CGM be divested of his shareholding in
the company which was achieved by means of the sale of shares held by CGM and the
company to the defenders. At or about the same time in order to repay the funds CGM had
misappropriated funds from the company she and her husband raised a loan of €1.9 million
over property they owned in Cadiz, Spain. Her position was that she and her husband
never received the loan funds which were paid direct to GTC Ltd. In this connection she
was shown a Bank of Scotland suspense account statement30 and acknowledged that the sum
received by GTC Ltd from the defenders amounted to £1,284,802.01. The position she stated
in evidence in relation to the loan secured over the Spanish property was that it was repaid
29 No 6/1 of process
30 No 7/18 of process
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21
out of what she termed “a communal fund” when GTC Ltd was sold. The communal fund
was identified as the bank account held with Credit Suisse (UK) Ltd. Her position was that
the funds within that account belonged to herself, SMM and CGM. She was shown a
payment instruction dated 29 July 200831 addressed to Credit Suisse (UK) Ltd. Her position
was that this was an instruction in order to effect repayment of the secured loan over the
Spanish property to the appropriate lender. She stated that the instruction was given by
herself, SMM and CGM. She was shown a Credit Suisse account statement32 and confirmed
that this reflected the instruction to make a payment to the lender in relation to the Spanish
property. It was put to her that the funds paid to the Spanish lender was a loan facility
extended to her by her sons. Her response to this suggestion was that it was “rubbish”.
[48] In relation to the Loan Agreement in issue she accepted that the signature beside her
name on the document “looks like” her signature. She further stated that she “did not
believe that the back two pages belonged to this”, by which I understood that she meant that
the back two pages of the document were not properly or originally part thereof. Her
position in general was that “I wouldn’t have signed a loan agreement”. She did express
awareness in evidence of a stated wish on the part of SMM and CGM to ensure that her
third son would not benefit by way of inheritance on the death of her and her husband. She
said that her sons CGM and SMM had put pressure on her to attempt to ensure that this
would not happen.
[49] In relation to the purported disposition for a nil consideration and love, favour and
affection purportedly granted by her and her husband to SMM and CGM her position was
31 No 7/19 of process
32 No 7/32 of process
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22
that at no time had she and her husband decided to transfer their title to these sons for a nil
consideration. She disputed that the signature on the rear of the document looked like her
signature. She said that if the document had been genuine she would have taken it to
Mr Macari and “he would have told us not to be so stupid” and she would have declined to
sign the same.
Submissions
Reliability and credibility
[50] In this case, perhaps somewhat unusually, the submissions of counsel for both
parties relied heavily on attacks to the credibility and reliability of a number of witnesses.
Having regard to the prominence of this matter in the presentation of their cases by counsel
it is sensible if I deal with it before summarising the arguments on behalf of each party.
[51] In submission counsel for the pursuers invited me to accept as credible and reliable
all the evidence adduced on behalf of the pursuer. So far as the defenders’ evidence was
concerned senior counsel did not challenge the reliability and credibility of Mr Macari and
Dr Gillies. He did not directly challenge the credibility of Alistair Melville but submitted
that that witness had “very little recollection of the events in question” primarily as a factor
of his age. Moreover it was submitted that Mr Melville’s evidence was in any event
“extremely limited in scope”. Having regard to these factors I was invited to place very little
weight on such evidence as Mr Melville gave. The evidence of CGM and Dorothy Melville
was challenged as being neither credible nor reliable.
[52] Turning to the submission on behalf of the defenders no challenge was made to the
reliability or credibility of Mr Butler, Ms Wilkinson, Mr Atkinson or Mr Rutherford. SMM
and Mr George were however characterised as being neither reliable nor credible.
Page 23 ⇓
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Reliability and credibility - Pursuers’ submissions
(i) CGM
[53] In challenging the reliability and credibility of CGM senior counsel for the pursuer
firstly observed that the witness had, on his own evidence, fraudulently induced his parents
to sign the Loan Agreement. The submission was developed by stating that CGM’s
evidence in relation to the Loan Agreement was largely unsupported by contemporaneous
documentation. Further, in relation to the Loan Agreement CGM’s evidence was both
internally inconsistent and at variance with evidence in relation to the matter given by other
evidence presented by the defenders. More generally counsel submitted that CGM had been
evasive in his giving of evidence and cited a number of examples. These were a refusal by
the witness to accept that he was dismissed for fraud by Global Integrated Services
notwithstanding the express terms of a letter to that effect which was an agreed
production.33 Reference was yet further made to CGM’s own admission in evidence that he
had submitted a fabricated invoice using a fabricated email address to his own advantage
but not withstanding these admissions a refusal to accept that his conduct amounted to a
“scam”. Reference was further made to his evidence in relation to the evidence of
Deborah Wilkinson which he entirely rejected albeit that witness’s evidence was not
subsequently challenged by either counsel for the pursuer or defender. My attention was
also drawn to CGM’s assertion that his brother, SMM, was complicit in the fraudulent
misappropriation of in excess of £1 million from GTCH Holdings Ltd despite that allegation
33 No 6/37 of process, letter from Global Integrated Services to CGM dated 6 December 2013
confirming the termination of a service agreement with the company of immediate effect on the
grounds of gross misconduct
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24
being unsupported by the evidence of any other witness and directly contradicted by the
terms of the investigation carried out into the misrepresentation by PWC.34
(ii) Dorothy Melville
[54] Senior counsel’s submission was that although Mrs Melville was prepared to accept
aspects of the history of GTC Holdings Ltd and, further, that it was plain from her own
evidence and from that of her husband and sons that she was “astute and financially well
informed” her evidence in relation to the critical aspect of the litigation, that is the
circumstances of the signing of the Loan Agreement, was evasive and inconsistent. There
was inconsistency between her oral evidence and the defenders’ pleadings. Moreover her
evidence was inconsistent with other persons who spoke to the signing of the document.
Having regard to these features the submission was that her evidence in relation to the
signing of the document was neither credible nor reliable. The submission in relation to
Mrs Melville’s credibility was developed by the invitation to the court to take into account
the fact that she was present throughout the entirety of the other evidence in the case with
the exception of that given by CGM and her husband. It was accepted that whilst she was
entitled to be present throughout the evidence the practice of a defender being present when
contentious evidence is adduced has been described as:
“undesirable ... in arriving at any conclusions upon facts which are in dispute
between the parties I may have occasion to comment on the circumstances that they
were present.”35
It was observed that the Inner House has described the practice of a defender being present
during the hearing of contentious evidence as “inexpedient”.36 I was invited to have regard
34 See No 7/28 of process
35 Perman v Binny’s Trustees 1925 SLT 123 per Lord Constable at 124
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25
to Mrs Melville’s presence during the evidence in the case when assessing her reliability and
credibility.
Reliability and credibility - Defenders’ submissions
(i) SMM
[55] Counsel for the defender submitted that this witness’s evidence was neither credible
nor reliable. The basis of this submission was based, in so far as I could determine, on a
consideration of the totality of SMM’s evidence. It was submitted that the evidence was
“obviously self-serving”. It was said that SMM “tended to fence with questions during
cross-examination and, on occasion, became argumentative”. SMM’s answers to “simple
questions were convoluted”. He was said to have given two inconsistent accounts
concerning the circumstances of the execution of the Loan Agreement37. Further it was
submitted that he continued to maintain the genuineness of the love, favour and affection
disposition in favour of himself and CGM relative to the defenders’ matrimonial home38
despite “a considerable body of evidence to the contrary”. In this connection it was pointed
out that he was unable to offer any adequate explanation to the question of why such a
document was either necessary, or indeed appropriate, in circumstances where a
commercial sale had already been agreed in relation to the relevant property.
[56] The submission was that the court should have regard to all these factors and view
the totality of SSM’s evidence with them in mind. Having regard to these factors it was
36 Fraser v Smith 1937 SN 67 per Lord Moncrieff
37 No 6/1 of process stating initially “I’ve printed it off and we signed it” and subsequently “Callum
brought it back and it was signed”
38 No 6/46 of process
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26
submitted that the court “... should be slow to accept as true anything he has said which is
uncorroborated.”
(ii) Steven George
[57] Counsel for the defender drew my attention to Mr George’s position that he had no
recollection of the circumstances whereby his signature came to be on the Loan Agreement.39
It followed that he could not say whether or not the defenders had been present at the time
the document was submitted. It was accordingly submitted that the evidence of this witness
was of no assistance to the pursuer. The submission did however go further asserting that
Mr George presented as “... a reluctant, nervous and evasive witness. His stated position
that he has forgotten anything that happened is altogether suspect.” I was invited to take an
adverse inference from his claim to have ceased dealing with the defenders following their
retirement. I was invited to consider that Mr George could not be regarded as a credible and
reliable witness “... albeit he declined to lie on oath.”
Pursuers’ submissions
[58] The submission was that the principal dispute in the litigation was the validity of the
Loan Agreement entered into between the defenders, SMM and GCM.40 Whilst a number of
other issues between the parties were canvassed in evidence these were said to be not
directly relevant to the validity of the loan agreement and, as I understood it, primarily
relevant to the issue of reliability and credibility of a number of witnesses.
39 No 6/1 of process
40 No 6/1 of process
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27
[59] The Loan Agreement was submitted to be valid and accordingly that the pursuers
were entitled to enforce their rights under it. It was noted that the pursuers relied upon a
signed, probative document the principal of which was produced. It was trite law that the
Loan Agreement was presumed to be valid and presumed to have been signed on the date
which it bears.41
[60] It was noted that the defenders’ position in relation to the Loan Agreement was that
it was fraudulently created. That allegation was said to require proof of fraudulent actings
contrary to the express terms of the written document. It was accepted that the standard of
proof was the balance of probabilities however my attention was drawn to authority that
supported the proposition that cogent, clear, careful and precise evidence will be required to
satisfy the civil standard of proof when fraud is averred.42
[61] In relation to the facts founded upon to support the proposition for the pursuer
senior counsel submitted that SMM had given a straightforward account of the signature of
the Loan Agreement. The account which had been given was consistent with the terms of
the agreement. That account was essentially that the agreement was drafted by
Ross Atkinson of McGrigors on the instructions of CGM. An initial draft was emailed to
CGM on 18 August 2008 with a revised draft sent first at 12.33 on 20 August and later at
14.37 on the same date. The final document sent was identical in terms, albeit not
appearance, to that signed by the defenders.
[62] So far as the signing of the document was concerned the account of SMM was that
this was achieved in his office with all signatories present. The version signed was printed
by SMM using a printer located in CGM’s office. While SMM did this CGM went and got
41 Requirements of Writing (Scotland) Act 1995, section 3(1), and (8)
42 Walker & Walker “The Law Evidence in Scotland” (4th edition) paragraph 4.3.1; Cowans Trustee v
Johnston (1865) 3 M 935 per LP Colonsay at 937-8
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Steven George to attend as a witness to signatures. Thereafter the document was signed by
all parties. The signatures appearing on the Loan Agreement were acknowledged by each of
the signatories to be genuine. The signed Loan Agreement remained in the possession of
SMM thereafter.
[63] This evidence was then contrasted with the position presented by the defenders. The
defenders’ evidence was said to show differing and inconsistent accounts of the manner in
which the Loan Agreement came to be signed. The submission was that none of the
accounts given were credible and that none met the test of cogency and clarity to which my
attention had been drawn.
[64] I was reminded that in Answer 2 of Condescendence in the defenders’ written case it
was averred that the Loan Agreement was brought to the defenders’ home by CGM in the
form of a three page document which had earlier been created by SMM, witnessed by CGM,
by “tampering with the purported Loan Agreement”. It was further averred that the third
page of the document alleged to have been brought to the defenders was the signature page.
The averments then proceeded that the defenders were told that the agreement provided for
an annual payment to them of £300,000 in return for their agreement to leave the balance of
the Credit Suisse account to SSM and CGM, rather than to their brother. It was averred that
DTM was given only a brief opportunity to review the terms of the document but
notwithstanding noticed a “specific discrepancy namely that the page numbers at the foot of
each page did not coincide with the Table of Contents”. It was further averred that DTM
would, if she had been content with the entire document, have initialled each page but that
she did not do so. Further that she did not “see fit” to retain a copy of the document.
[65] CGM in evidence gave an account of the production and signature of the document
which was inconsistent to that which was narrated in the pleadings. This was said to be of
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29
significance because on the defenders’ own version of events only CGM and SMM were
involved in the creation of the Loan Agreement presented to the defenders for signature and
the manner in which it was alleged to have been created. It followed that on the defenders’
version of events CGM’s account became critical to the credibility of the defenders’ version
of events.
[66] CGM’s credibility and reliability as a witness was already the subject of criticism in
the pursuers’ submission. The general attack on CGM’s credibility and reliability was
however developed in relation to the Loan Agreement. His account was said to be
internally inconsistent, inconsistent with evidence of other witnesses and further
inconsistent with available contemporaneous documentation. It was submitted that CGM’s
evidence was that the agreement signed by the defenders was produced by combining the
signature pages from the agreement drafted by McGrigors and emailed to him on 20 August
2006 with another agreement which CGM maintained SMM “hacked up” to merge with the
Loan Agreement. This other agreement was, again on CGM’s evidence, a further legal
document which happened to be in his and SMM’s possession. This account is inconsistent
with that found in the defenders’ pleadings where no other agreement is mentioned. In
CGM’s own evidence he subsequently departed from his original account stating “I think
there is a separate document ... but I wasn’t specifically involved in that so I don’t have the
details.” A further point was made that there was no support for the version given by CGM
in any documentary evidence. No alternative agreement was ever produced. The only
other agreement produced by McGrigors was one in terms of which the defenders were to
be paid £300,000 per annum. This document was not however produced until October 2008,
more than two months after the signing of the Loan Agreement and does not appear to have
advanced beyond draft form.
Page 30 ⇓
30
[67] In terms of their written pleadings the defenders’ position was that the agreement
presented for signature was a three page document. In evidence CGM was inconsistent
referring to both a four page and a three page document. Either version was submitted by
counsel for the pursuer to be improbable. The Loan Agreement has two signature pages in
the contents page, which are founded upon by the defenders in their pleadings. It would
follow that a three page document would consist only of the contents and signature pages.
Even if CGM was correct that the document was four pages the entire substantive contents
of the false agreement said to have been produced from a style provided by a firm of
solicitors would require to have been compressed into one page.
[68] CGM also stated in evidence that he explained to the defenders that the document
presented to them provided that he and SMM would pay them £300,000 per year. There
was, as already indicated, no evidence of any agreement to that effect beyond the draft
produced some months later in October 2008. In any event CGM’s explanation to the
defenders is rebutted by DTM’s own evidence who was clear that she considered she was
signing, and had been told by CGM that she was signing, a will.
[69] It was further pointed out that CGM’s evidence was that two copies of the false
agreement were produced, with SMM retaining both. This was inconsistent with the written
pleadings and with the evidence of DTM both of which describe one copy of the agreement
only.
[70] It was also observed that CGM’s evidence given in court differed from that in an
affidavit sworn by him on 23 October 2016.43 That affidavit made no mention of a second or
further legal document from which the false agreement was said to have been “hacked”. It
43 No 7/14 of process
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31
mentioned only one signature page being attached in contrast to the two signature pages
found in the Loan Agreement.
[71] Having regard to the foregoing matters the submission was that the defenders
version on record was not supported by the evidence of CGM which was critical to the
position they adopted.
[72] Senior counsel for the pursuer then addressed the evidence of DTM, the first
defender. Her evidence was also said to be inconsistent. It was pointed out that in evidence
she stated that she was aware that the numbering of the document was inconsistent, with
the first page of the document not having 13 clauses to allow clause 14 on the signature page
to follow. This was inconsistent with the terms of her pleadings making specific reference to
a table of contents. In contrast to the evidence of CGM her evidence was that only a copy of
the agreement was presented to her. There was no reference made by her in her oral
evidence to her alleged usual practice, as set out in her pleadings, of initialling each page for
signature as a means of verifying that she had checked each page of a document.
[73] The first defender maintained she had never been present in the office in Aberdeen
where SMM worked and where the document was said to have been signed. The breadth of
this statement was challenged as being improbable given that the premises in question had
been formerly owned by the company of which she had been finance director. It was
observed by senior counsel that this matter was not put to SMM or Mr George in cross-
examination. The evidence of DTM where she stated that she had never been in the building
concerned emerged, unsolicited, in cross-examination at a stage when DTM was being put
under pressure due to inconsistencies in her account of the signing. This was of importance
given that the location of the signing of the Loan Agreement had formed part of the
pursuers’ case as pled. If it was DTM’s position that she had never been present in the office
Page 32 ⇓
32
where the document was said to have been signed this should have been made the subject of
averment. Had it been challenged in the defenders’ pleading the matter could have been
explored in evidence. Having regard to these considerations no weight should be given to
DTM’s contention that she had never been present in the office where the pursuers
maintained the singing of the document took place.
[74] In the submission of senior counsel for the pursuer the most significant element of
DTM’s evidence was her contention that she believed that she had been signing a will. This
position was maintained in both evidence in chief and cross-examination. The evidence
contrasted with that given by CGM who made no mention of any will. Moreover DTM’s
evidence was that the agreement to pay her and her husband £300,000 per annum was
“different” and done “in a different place”. This was submitted to be fundamentally
inconsistent in a central element of her account of the signature and is “highly significant” in
assessing her credibility and reliability in relation to her account of the signature. A further
strand was developed by counsel for the pursuers. He observed that the witness stated that
the purpose she attributed to a loan document was that this was to “make sure that the
money in the Credit Suisse went only to Stuart and Callum”. It was said that such an
account, and the belief that the primary purpose of the document was to act as a “will”, is
consistent with evidence given by SMM as to the purpose of the document.
[75] Senior counsel for the pursuer dealt relatively briefly with the expert evidence
adduced by Mr Butler, on behalf of the pursuers, and Dr Gillies on behalf of the defenders.
He observed that neither expert could comment on the events of the signature of the Loan
Agreement itself. It followed that the evidence was secondary to the primary factual
evidence led by the parties. It was however accepted that it formed a background to which
evidence may be assessed by the court.
Page 33 ⇓
33
[76] In that regard it was noted that Mr Butler’s evidence concerned discrepancies in
scaling and spacing observed in the final version of the Loan Agreement. It was noted that
Mr Butler’s evidence as set out in his report was that such discrepancies were likely to be the
result of digital factors and optical factors. Mr Butler’s evidence, which I was invited to
accept, was that discrepancies of that nature could not be assessed as significant without
knowing the full history of the document.
[77] In relation to Dr Gillies’ evidence it was noted that the witness had, quite properly,
conceded that while she was able to comment on the appearance of the document as it was
presented to her she was unable to draw any factual inferences or make conclusions from its
examination. She also accepted that the inconsistencies which she had noted could simply
be caused by the underlying computer files, an explanation which is consistent with what
was described by Mr Butler in his report. Dr Gillies did give evidence on the numbered of
staple holes which could be observed in the document. The submission on behalf of the
pursuer was that very little weight could be attached to this evidence as it related only to
holes which were found when the document was examined by Dr Gillies many years after
they were created. Dr Gillies was in no position, nor in fairness did she claim to be able to
explain how the holes came to be present.
[78] Having regard to these factors the submission was that no material assistance was to
be gained from the expert evidence in the case. It was essentially neutral.
Defenders’ submissions
[79] The defenders’ submissions on the evidence was predicated upon a number of well
recognised legal propositions, none of which as I understand it were disputed by the
pursuers. Given that consensus of view the propositions may be briefly stated. First, that
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34
the burden of proof rests with the party disputing the authenticity of a probative deed. That
onus may be discharged by direct testimony or by proof of facts and circumstances from
which an inference in favour of the challenger to the deed may be drawn44. Second, that an
admission on record that money has been received is not proof of a loan, nor does it raise a
presumption in favour of a loan. Where written evidence of a loan exists the onus lies on the
borrowing party to prove repayment or that the money was not given in loan.45 Third, that
modern statutory provisions, where applicable, contemplate that the witnessing of a
traditional document should be done in one continuous process.46 Fourth, the court’s
attention was drawn to the general rule against the admission of collateral evidence. It was
however submitted that there is an exception to that general rule where what is sought to be
demonstrated is a “system of actings” or “a consistency of actions” or a “nexus”. Lastly, it
was observed that forgery per se is not an offence and that the actus reus of the crime is
complete when the document is deliberately placed in the hands of a third party as genuine.
[80] Counsel for the defender then proposed and answered five questions which were, in
his submission, determinative of the outcome of the case. These questions were: (a) where,
as in this case, the pursuers seek enforcement of an ex facie probative deed have the
defenders discharged the onus accepted to be incumbent upon them by direct testimony or
by proving facts and circumstances from which an inference in his favour may be drawn?
(b) In any event was there a loan by SGM and CGM to the defenders? (c) Were the
documents which constitute numbers 6/1 and 6/46 of process witnessed in one continuous
process or ex intervallo by Steven George and, if ex intervallo, how long was the interval and
what was the reason for it? (d) Has a course of conduct on the part of SMM and CGM
44 Hendry v Clanline Steamers Ltd 1949 SC 320 at page 328
45 Fraser v Bruce (1857) 20 D 115; Thomson v Geekie (1861) 23 D 693; Bishop v Bryce 1910 SC 426
46 Requirements of Writing (Scotland) Act 1995, section 3(4)(e)
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35
emerged during the evidence such as to render collateral evidence about “Rocksley”
relevant? and (e) Are numbers 6/1 and 6/46 of process forged documents?
[81] In relation to the first of those questions, have the defenders discharged the onus of
proof incumbent upon them, there were a number of propositions based on the evidence.
There was said to be a compelling body of oral evidence, supported by the evidence of a
skilled witness, which evidence “casts real and substantial doubt on the validity of ...”
numbers 6/1 and 6/46 of process. It was noted that only one witness, SMM, maintained the
validity of both documents.
[82] Further, it was submitted to be “inconceivable” that DTM and AM would have
knowingly signed a loan agreement in favour of their sons. They were persons who had
accrued “significant wealth and entitlements” following the sale of the company to Cosalt.
Their financial position was “in no way eloquent of any need for a loan”. In any event they
both stated in evidence that they had never seen the loan agreement number 6/1 of process
and did not sign it.
[83] It was then submitted that there was actual evidence of forgery of documents.
Reliance was placed on the evidence of CGM, DTM and AM who all contended that 6/1 of
process was a forged document. Reliance was placed on the explanation given by CGM in
evidence of how the forgery was achieved using the draft loan agreements obtained from
McGrigors. In this context reliance was also placed upon CGM’s “propensity for arranging
for copy signatures to be manipulated by others”. The evidence of Deborah Wilkinson was
relied upon in relation to this submission. On the basis of the foregoing it was submitted to
be more likely that the loan agreement 6/1 of process was manufactured by SMM and CGM.
It was also said to be more likely than not that Steven George did not witness DTM and AM
signing number 6/1 of process.
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36
[84] Lastly, in relation to this question, it was submitted that “it does not stand to reason
that 6/46 is a genuine document when viewed in the context of the defenders’ concluded
bargain of the sale of Rocksley”. It was noted that such a transfer of title would have
resulted in a material breach of contract and, further, that it would have implied that the
defenders divested themselves for no consideration of a house with a market value
of £875,000. The testimony of Mr Macari was said to lend credence to this proposition. It
was also observed that only SMM maintained that number 6/46 was genuine.
[85] The second question proposed for the defenders was the question whether there was
a loan by SMM and CGM to the defenders. In relation to this question it was submitted that
the pursuers founded upon the payment to “an account operated by the first defender” on
30 July 2008.47 It was however noted that this payment has been explained as a repayment
of the bailout funds raised by the defenders and secured over their Spanish property and
paid to the group on 8 November 2006. It was also observed that CGM and DTM and AM
dispute that a loan was ever made and that whilst SMM maintains a loan was made, he did
accept that the payment instructed from funds held with Credit Suisse to the defenders was
“to pay off the loan over the villa”.
[86] The third question posed by counsel for the defenders concerned the signing of 6/1,
were the signatures done in one process or over a period of time and if the latter, what was
the reason for it? The submission in relation to this question depended upon the inability of
the witness Steven George to assist the court in any respect in relation to the signing of 6/1 of
process. It was said that a negative inference could be drawn from Steven George’s inability
to assist the court. This was developed by saying that when this factor was considered
47 Article 2 of Condescendence
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37
along with what was said to be differing accounts given in evidence by SMM of the signing
of 6/1, the court could no longer be confident in regarding the process as “probative”.
[87] The fourth question posed was, as I understood it, aimed at persuading the court
that ostensibly collateral evidence relative to the signing of the disposition relative to DTM
and Alistair Melville’s heritable property known as “Rocksley” was relevant to the
determination of the main issue in the case, the authenticity or otherwise of the loan
document number 6/1 of process. The court was urged to answer this question in the
affirmative reliance being placed on the whole content of CGM’s testimony. That evidence
was said to be “crystal clear”. It was said to demonstrate a system of actings by CGM and
SMM that were designed as a means of acquiring the defenders’ assets with the intention of
denuding their brother of any prospect of inheritance from his parents’ estate.
[88] The last question was the blunt one of whether or not 6/1 and 6/46 of process were
forged. The submission was again that that question should be answered in the affirmative.
As I understood the proposition the court was invited to answer the question in the
affirmative based on the foregoing submissions which I have outlined.
Analysis and Conclusions
(i) Reliability and Credibility
[89] Following the structure of submissions on behalf of both parties and the potentially
fundamental role of the question in determining the outcome of this action I deal firstly with
the question of reliability and credibility.
[90] The reliability and credibility of four witnesses was challenged in this case. The
pursuers challenged the reliability and credibility of CGM and DTM. The defenders
challenged the reliability and credibility of SMM and Steven George. In the context of
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reliability and credibility I should note that senior counsel for the pursuers whilst not
challenging the reliability and credibility of AM did submit that through age, that witness
had very poor, if any, memory of the matters about which he was questioned. In terms of
his evidence he had plainly relied on the assistance of his wife, DTM, in relation to decision-
making. Having regard to these considerations senior counsel for the pursuers limited his
submission in respect of the evidence of AM to an invitation to the court to place very little
weight upon it. In my view that position regarding the evidence of AM was justified and I
adopt it in my determination of the factual issues in the case.
[91] Turning to the issue of the reliability and credibility of the other two witnesses
whose evidence in this respect was challenged by the pursuers, I deal firstly with DTM. The
challenge was to the effect that this person who was plainly astute and financially well
informed, both matters she accepted in cross-examination, gave evidence which was evasive
and inconsistent in relation to her signing of the loan agreement. Inconsistency was said to
be found first between her pleadings and the evidence she gave in court. Second, there was
said to be inconsistency between her evidence and other witnesses to the circumstances of
the signing of the loan agreement.
[92] I accept that a factually senior counsel for the pursuers was correct in relation to both
these submissions. In relation to discrepancies between the pleadings and DTM’s oral
evidence. In Answer 2 of the Closed Record it is averred:
“Dorothy Melville briefly glanced at other pages of the document at the time. She
noticed a specific discrepancy namely that the page numbers at the foot of each page
do not coincide with the Table of Contents.”
In her oral evidence DTM did not mention this matter offering another explanation for her
evidence that the numbering on the document 6/1 of process was inconsistent. It was also
averred in Answer 2 that:
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39
“It has always been Dorothy Melville’s practice to initial each page of any document,
having checked the terms thereof, as well as signing the signature page of the
document.”
She gave no evidence to this effect in court. I should also note when considering the
pleadings the absence of any averment by the defenders to the effect that DTM had never
been in the office premises where it was averred by the pursuers that 6/1 of process was
signed. The statement to that effect was made unsolicited. Given the importance of the
issue of signature of 6/1 I consider there was force in the submission of senior counsel that
DTM’s assertion, if correct, could and should have been the subject of averment as a matter
of fair notice.
[93] Secondly, the evidence given by DTM was not wholly consistent with the evidence
given by CGM or, for that matter, SMM.
[94] Whilst such inconsistencies cannot be ignored and must be considered when
evaluating evidence I have to consider whether they are of sufficient gravity to enable me to
treat all evidence given by this witness as being incredible and unreliable unless supported
by evidence from another reliable and credible source. In considering that issue I was
invited by senior counsel for the pursuer to have regard to DTM’s demeanour in court. In
my opinion reliance on a witness’s demeanour is both a difficult exercise and one which
must be exercised with great care. It is, again in my view, to be expected that witnesses will,
as a matter of probability, be anxious and nervous when giving evidence. Allowance must
also, again in my view, be made for the consideration that a witness will, quite properly,
have given thought in advance to their evidence and that this process might, quite
legitimately and without any conscious intent to deceive the court, be influenced by their
own perception of the matters about which they are giving evidence. Having regard to
those consideration, whilst I accept that DTM at times during her evidence appeared
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40
defensive and indeed at some stages reluctant to be forthcoming, I am not persuaded that
her demeanour whilst giving evidence could, of itself, objectively judged, entitle me to
disregard her evidence in total. I am however more concerned in relation to the
discrepancies in this witness’s evidence with the case pled by her on record, in the case of
her presence or otherwise on any occasion in SMM’s office the absence of averment or prior
disclosure anent this potentially important matter and, thirdly, inconsistencies in DTM’s
evidence and that of CGM. These factors are material and collectively cause me to be
cautious about accepting the evidence of DTM. I have concluded that I can only accept
DTM’s evidence if supported by evidence from another credible and reliable witness.
[95] The position in relation to the challenge by senior counsel for the pursuer to the
reliability and credibility of the evidence of CGM is, in my view, in a different category.
Somewhat unusually, at least in my experience, CGM was a witness who accepted that he
had on occasion been untruthful. At the outset of his cross-examination he freely accepted
that he was a person who both in the context of the matters about which he was giving
evidence in this case and, further, in relation to other aspects of his business dealings had
told lies. Indeed at one point his evidence went so far as to accept that he was a liar. Such
acceptance of dishonesty would entitle me, without consideration of any question of
demeanour, to seriously entertain a submission that CGM’s evidence should be wholly
disregarded as being incredible and unreliable unless supported by evidence from a credible
and reliable source. I should however indicate that CGM’s demeanour in court was, as a
matter of my observation, far from satisfactory. He was truculent and at times belligerent.
On one occasion he required to apologise to the court for his verbal hostility to counsel who
was questioning him. Put bluntly he was a witness about whom I had many misgivings.
Having regard both to his accepted untruthfulness, further matters which were put to him
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and where he denied untruths but which on the basis of documents proved in evidence
appear to be correct, his demeanour in court and his overall attitude I have formed the view
that this witness was incredible and unreliable. Accordingly I am prepared to accept any
evidence uttered by CGM only in circumstances where there is acceptable evidence on the
same point from a credible and reliable witness or from a document which has been proved
in evidence.
[96] In relation to the challenges in respect of reliability and credibility made by the
defence I deal initially with the witness Steven George. The challenge by counsel to
Mr George was general. In both chief and cross Mr George denied any recollection of the
circumstances of the signing of the loan agreement.48 The submission was that when giving
this evidence Mr George “presented as a reluctant, nervous and evasive witness.” On this
basis it was said that I was entitled to draw an adverse inference from his evidence.
[97] I am not persuaded that there is merit in these submission for the defender. My
impression was that Mr George was attempting to assist the court. He was, I accept,
nervous when giving evidence but as I have already indicated I would not regard that as
either unusual or unexpected when a person unfamiliar with the court process is required to
give evidence in court. It is true that he professed no memory of the signing of the loan
agreement. He advanced two reasons for this. First, the simple lapse of time. He was
giving evidence more than 10 years after the events about which he was being questioned.
Second, he indicated that he was in the habit of signing many documents during the course
of his employment with GTC Holdings Ltd. I took this to mean that he would have
difficulty in remembering any particular occasion when he signed a document. I consider
both the explanations proffered by Mr George for his lack of memory about the signing of
48 No 6/1 of process
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42
the loan agreement to be plausible. I consider that I am entitled to treat the evidence he
uttered, for what it may be worth, as reliable and credible.
[98] The last witness challenged was SMM. There was a general challenge to the
demeanour of SMM in the witness box. In relation to that matter I accept that when being
cross-examined by counsel for the defender SMM was, on occasion, aggressive and
somewhat defensive. For reasons I have already rehearsed I did not find that particularly
surprising. I am not prepared to regard the demeanour of SMM as giving me any basis
upon which to consider him incredible or unreliable in total. In relation to his evidence itself
it is correct, as was submitted by counsel for the defender, that his account of the signing of
the loan agreement stood on its own and was contradicted by the evidence of CGM and
DTM. The evidence of the last two witnesses was however, as already noted, not consistent
with each other. I accordingly do not consider the version of events in relation to the
signing of the loan agreement given by SMM can be discounted simply on the basis that it
did not match other evidence.
[99] There are, however, two aspects of SMM’s evidence which do require careful
consideration in the context of his reliability and credibility. First, in relation to the funds
taken from the Credit Suisse account and paid to the defenders I have noted, as also
apparently did counsel for the defender, that at one stage in cross-examination SMM
appeared to accept that these funds were intended to be utilised in repayment of a loan
taken by the defenders, secured over their Spanish property, and utilised to repay the funds
CGM had dishonestly appropriated from GTC Holdings Ltd. That explanation would be
inconsistent with the explanation of the loan constituted in the agreement which is sought to
be enforced in this action. The second area where I have concerns with the evidence of SMM
relates to the purported disposition in favour of SMM and CGM granted by the defenders in
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43
relation to their residential property known as “Rocksley”. Counsel for the defenders
forcefully submitted that there was no obvious, or genuine, reason for this disposition.
There was evidence from DTM that she had not agreed or signed the disposition. She also
stated that she would have consulted her longstanding private client solicitor, Mr Macari
about this matter. Mr Macari gave clear and effectively unchallenged evidence to the effect
that he would not have advised his clients, the defenders, to enter into this transaction.
There is the further consideration that prior in time by approximately a month to the love,
favour and affection disposition in favour of SMM and CGM there was a contract for the
sale of the defenders’ heritable property “Rocksley” between the defenders and third parties
with no connection to the issue in dispute in this action. Implementation of the love, favour
and affection disposition would have had the effect of potentially rendering the defenders in
breach of contract in relation to the third party purchasers of “Rocksley”. Mr Macari gave
further evidence as to the unusual circumstances in which he came to be in possession of the
disposition. Unsolicited, the apparently signed disposition was simply deposited through
the letterbox of his office. When all those matters are considered I am unable to accept that
the love, favour and affection disposition apparently granted by the defenders in favour of
their sons SMM and CGM was a bone fide document. A necessary implication of that finding
is that I reject SMM’s evidence in relation to the involvement he had with this document as
being credible or reliable evidence.
[100] There are two considerations which I consider arise out of these findings. The first is
whether my conclusion in relation to the love, favour and affection disposition should have
any bearing on my consideration of other evidence given in the case by SMM. This arises
from the fact that the transaction, if there was one, in relation to the heritable property
“Rocksley” was, in my view, collateral to the issue in this case. As already noted counsel for
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44
the defender accepted that there is a general rule against the admission of collateral
evidence. As a matter of relevance collateral issues to the main issues of fact are generally
inadmissible. The exception to this rule, again something which was not as I understand it a
matter for dispute, is that where the collateral fact sought to be addressed demonstrates a
“system of actings” or “a consistency of actions” the evidence can be relied upon. The
“consistency of action” which counsel for the defender says arises in the present case is a
tendency by SMM to be dishonest in relation to matters concerning the finances of his
parents and, more particularly, an intention to arrange the affairs of the defenders by SMM
and CGM in such a way as to preclude a third brother from gaining any benefit from the
estate of the defenders. On the basis of the evidence I have heard I accept that submission. I
am accordingly prepared to have regard to the evidence in relation to the love, favour and
affection disposition in assessing the credibility and reliability of SMM. When both the
factors I have adverted to are considered I have formed the view that in relation to the loan
agreement and, further, the love, favour and affection disposition there have been efforts by
SMM to mislead the court. For this reason, as with the witness CGM, I am not prepared to
accept SMM’s evidence unless supported by the evidence of another credible witness or by
documents proved to the satisfaction of the court.
(ii) Expert evidence
[101] I can deal briefly with this aspect of matters. The pursuers’ skilled witness, Mr John
Butler, spoke to his report. He was able to account for apparent inconsistencies between the
draft loan agreements and that which was signed on the basis of technical factors. I have
already quoted the relevant passages in Mr Butler’s reports in paragraphs [18] and [19] of
this opinion. The report and evidence of the defenders’ skilled witness Dr Gillies was
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45
criticised by Mr Butler because it proceeded without a clear statement of the printing history
of the documents examined by her. As I understood Dr Gillies accepted the validity of this
criticism in her evidence. Other factors upon which Dr Gillies founded were, as again she
accepted, artefacts which could have taken place after the documents had been signed.
Having regard to these considerations I prefer the evidence of Mr Butler to that of Dr Gillies.
That said I regard the skilled evidence as being essentially neutral in this case, a position
which I understand was ultimately accepted by counsel for both parties. It follows that I do
not consider that there is skilled evidence which assists the court in determining whether or
not the disputed loan agreement was genuine or not.
(iii) General considerations
[102] Having disposed of those matters I can turn to more general considerations arising
out of the evidence. I start with acceptance of the proposition made by senior counsel for
the pursuers that the principal issue in the dispute is the validity of the Loan Agreement
number 6/1 of process. The Loan Agreement is, or at least purports, to be a probative
document. That being the case both parties are at one in accepting that the Loan Agreement
requires to be given effect to unless, in the context of this case, it can be proved by the
defenders that the document was a fraud. The standard of proof in relation to the issue of
fraud is, again a matter which was common between the parties, on the balance of
probabilities. It should however be noted that notwithstanding that factor there is
longstanding authority that:
“[T]he law in no case presumes fraud, - in no doubtful matter does the law lean to
the conclusion of fraud. Fraud is a thing that must be clearly and conclusively
established.”49
49 Cullens Trustees v Johnston (1865) 3M 935 per Lord President Colonsay at 937-8
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46
[103] The submission made by counsel for the defenders did not, in my view, seriously
differ from the approach of senior counsel for the pursuers. It was however presented
somewhat differently by posing five questions which it was submitted by him the court
should consider to be of assistance. The first, and in my view most important, question was
whether the defenders have discharged the onus which they accepted was incumbent upon
them to prove that there was no loan. I consider that question falls to be answered in the
affirmative so far as the defenders are concerned. This answer is not easily arrived at having
regard to the adverse findings of reliability and credibility I have made in respect of SMM,
CGM and DTM. I consider the correct analysis to be that having regard to SMM’s admission
in relation to the intention for which the Credit Suisse funds were credited to the defenders’
account and the defenders rejection of the existence of a loan the loan agreement, falls to be
regarded as a device. Notwithstanding its terms the purpose of the loan agreement was not
as stated in the writ but was intended by SMM and CGM and, as a matter of probability, the
defenders as a means to deprive a third son of the defenders from the full extent of any
entitlement he might have in their estate.
[104] Beyond those considerations based on the evidence the conclusion I have reached is
that the purported loan agreement was not what it bore to be, I express the view that it was
a scheme or device to prevent a third party benefiting from the defenders’ estate which view
finds support in general consideration of the affairs and dealings of SMM, CGM and the
defenders.
[105] The foregoing finding effectively deals with the second question posed by counsel
for the defenders. I answer that question in the negative. In my view on the evidence there
was no loan by SMM and CGM to the defenders. The transaction noted in the Credit Suisse
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47
account was, in my opinion, intended to repay the sums which the defenders had borrowed
on the security of their Spanish property.
[106] The third question posed by counsel for the defenders relates to the signing of the
documents. These questions are, in my view, superseded. I am however bound to observe
that there is no consistency in evidence adduced by either party in relation to the signing of
the loan agreement. I am not satisfied that I can form any concluded view as to the
circumstances in which the document number 6/1 of process was signed.
[107] The fourth question relates to the relevance of the evidence in relation to the
property in “Rocksley”. In dealing with reliability and credibility I have already answered
that question. I consider that I am entitled to have regard to that evidence.
[108] The fifth and final question raised the issue of whether the document 6/1 and 6/46
were forged. As will be apparent I answer both these questions in the affirmative.
(iv) Determination
[109] Having regard to all the foregoing I consider that the defenders have discharged the
onus incumbent upon them. I am not satisfied that the pursuers have proved their case. I
will accordingly uphold the defenders’ first, third and fourth pleas-in-law and assoilzie the
defenders from the conclusions of the summons.
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48
Appendix
DATE
EVENT
REFERENCE
19 September
2001
Agreement entered into between the defenders,
Calum Melville and Stuart Melville in relation to the
proceeds of a sale of any of the shares in Isandco Three
Hundred and Seventy Five Limited.
Production
6/26
12 June 2006 Calum Melville resigns as a director of GTC Holdings
Limited
Production
6/49
25 October
2006
The defenders enter into a loan agreement with the Bank of Production
Scotland and draw down €1,999,000.
7/1
November
2006
£1,274,980.70 paid to GRC Holdings Limited in full and final Production
settlement of claims arising from Calum Melville’s actions. 6/21
28 November
2006
Share Purchase Agreement between Calum Melville and the
first defender in terms of which the first defender purchased
the 4,250 ordinary shares in GTC Holdings Limited held by
Calum Melville.
Production
7.22
12 September Deed of Gift granted by Stuart Melville in favour of the
2007
defenders.
Production
7/9
12 September
2007
Share Purchase agreement between the first defender and
Stuart Melville, in terms of which Stuart Melville purchased
2,125 ordinary shares in GTC Holdings Limited from the
first defender.
Production
7/24
12 and 13
September
2007
Share Purchase Agreement concluded for the sale of GTC
Holdings Limited to Cosalt Plc
Production
7/29
12 and 14
September
2007
Declaration of trust entered into by the first defender in
favour of Calum Melville over the issued ordinary shares in
Denmore Investments Limited held by the first defender.
Production
6/6
15 October
2007
Initial consideration from the sale of GTC Holdings Limited
paid by Maclay Murray & Spens LLP to Stuart Melville and
Dorothy Melville in the sums of £2,254,955.22 (transferred to
Credit Suisse (UK) Limited) and £2,186,859.83 (transferred
to the first defender’s account with the Bank of Scotland)
respectively.
Productions
6/57 and 7/23
Page 49 ⇓
49
30 October
2007
£2,087,000.00 transferred by the first defender to Credit
Suisse.
Productions
and 6/53 and
7/30
25 February £1,281,407.71 transferred by Maclay Murray & Spens LLP to Production
2008
account …1746 with Lloyds Bank.
7/26
29 July 2008
€2.4 million transferred from Credit Suisse to the following
accounts and in the following proportions: €2.2 million to
the first defender’s account held with Confederacion
Espanola De Casas De; €180.00 to Calum Melville’s account
…4344 held with the Bank of Scotland.
Productions
6/22 and 7/19
20 August
2008
Drafts of loan agreement sent by Ross Atkinson (McGrigors Productions
LLP) to Calum Melville in emails sent at 12.33 and 14.37.
6/23, 6/24
10 October
2008
Draft loan agreement sent by email by John Rutherford
(McGrigors LLP) to Calum Melville in respect of a Yearly
Advance by Calum Melville and Stuart Melville to the
defenders.
Production
6/8