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Cite as: 2021 GWD 1-3, [2020] CSOH 101, [2020] ScotCS CSOH_101

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OUTER HOUSE, COURT OF SESSION

[2020] CSOH 101

A240/18

OPINION OF LORD ARTHURSON

In the cause

THE JOINT BANKRUPTCY TRUSTEES OF GREGORY HUGH COLIN KING

Pursuers

against

HUGH COLIN GODFREY STANLEY KING

Defender

Pursuers: C Sandison QC; Dentons UK and Middle East LLP Solicitors

Defender: D ThomsonQC, N Tosh; MacRoberts LLP

16 December 2020

Introduction and pleadings

[1] The pursuers in this action seek, firstly, declarator that the issued shares in Randin

S.A (“Randin”) are held by the defender on constructive trust for them and, secondly,

payment by the defender of the sum of £6 million with interest. The pursuers are the Joint

Bankruptcy Trustees of Gregory Hugh Colin King (“Mr King”).

[2] The defender is the father of Mr King. The framework of facts advanced on record

by the pursuers can be summarised as follows. The pursuers are the assignees of Heather

Capital Limited (in liquidation) (“Heather”). The right to vindicate certain rights enjoyed by

Harvest Finance Limited (in liquidation) (“HFL”) in respect of the defender is further vested

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in the pursuers. HFL was formerly known as Mathon plc and then Mathon Limited

(“Mathon”). Mathon was a company related to Heather which carried on the business of

providing bridging finance secured over heritable property by lending money advanced to

it for that purpose by Heather. Mr King was a director of Mathon from 1 May 2007 until

20 July 2007 and controlled its activities at all material times. On 4 April 2008 Mr King

caused Mathon to transfer the sum of £12 million held by it to an account controlled by a

Manchester-based law firm, which firm transferred the sum received by it from Mathon to a

Glasgow law firm on or around 22 April 2008. The pursuers have thereafter on record set

out a continuing narrative in respect of the flow of certain funds, amounting to £6 million, to

a Spanish law firm (“DBT”), which averments make reference to the purchase of a property

in Marbella, Spain, and to the signing of a purchase deed on 30 April 2008. The pursuers

thereafter aver that the Glasgow firm exhibited a Deed of Gift bearing to have been executed

by Mr King on 30 April 2008 and bearing to gift the sum of £6 million from him to the

defender and further aver that the defender had no good reason to suppose (because none

existed) that Mr King was genuinely making him a gift of £6 million, and that he did not

receive that sum in good faith.

[3] The pursuers’ pleadings continue with the averments that the monies transferred

from the Glasgow firm to DBT were used to purchase the property in Marbella; that title

thereto is held by a Spanish registered company, La Zagaleta Parcella 25 SLU (“LZP”); and

that the sole shareholder in LZP is a Uruguayan-registered company, Randin, the defender

being the sole shareholder in Randin. The pursuers thereafter assert by way of averment

that:

“The defender is therefore in control of Randin and, thus, LZP. The defender’s

shares in Randin were acquired as part of a unitary scheme to secure for him the

beneficial (but not apparent) ownership of the Property acquired with the funds

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taken in breach of fiduciary duty from Mathon by Mr King, and no separate

substantive consideration was paid by him for their acquisition. He, his wife and

other members of his family have since 2008 occupied the property from time to time

as a holiday home.”

[4] On the basis of these asserted collective factual averments, the pursuers’ case against

the defender on record is thereafter put in Articles 11 and 12 of Condescendence as follows:

“The sum of £6 million claimed to have been gifted by Mr King to the defender was

not Mr King’s to give. It was … part of an unlawful diversion of funds by Mr King

from Mathon, in breach of the fiduciary duties owed by him to it . No beneficial right

of title to the funds made available to him by Mr King in this manner vested in the

defender... He held, and holds, those funds and their fruits (including the shares in

Randin) as a constructive trustee for the pursuers as assignees of Mathon. With

reference to the defender’s averments in answer, the defender was the recipient of

£6 million belonging to Mathon. That he used that sum to purchase the Property

through the mechanism of LZP and Randin does not alter the nature of his liability to

account for it to Mathon as a constructive trustee… The exact circumstances in

which, and the reason(s) why, the sum of £6 million was transferred by Mr King to

the defender are not known and not admitted.”

Submissions for the defender

[5] Senior counsel for the defender invited me to sustain his eighth plea-in-law in

respect of prescription and to pronounce decree of absolvitor, which failing to sustain his

second plea-in-law to the relevancy of the pursuers’ averments and to dismiss the action.

He submitted that the pursuers had failed relevantly to aver that the defender was a

constructive trustee in respect of the sum of £6 million, there being no relevant averments on

record of breach of fiduciary duty by Mr King and no relevant averments of knowledge of

any such breach of fiduciary duty on the part of the defender. Senior counsel further

submitted that, even if the defender was otherwise liable to account to the pursuers in the

sum of £6 million received by him, any obligation which he had to account to them in

respect of that sum was an obligation to redress unjustified enrichment, which obligation

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had been extinguished by application of short negative prescription in terms of section 6 of

the Prescription and Limitation (Scotland) Act 1973.

[6] Addressing the first chapter of his submissions, namely the relevancy of the

pursuers’ averments of a constructive trust, senior counsel observed that insofar as the

pursuers had offered to prove that the defender had no good reason to suppose that

Mr King was genuinely making him a gift of £6 million, that was not the same as offering to

prove that the defender knew or ought to have known of any breach of fiduciary duty.

Although the pursuers had averred that the sum had not been received by the defender in

good faith, there were no averments of primary fact on record to support such an assertion.

Senior counsel noted that the pursuers in their averments in answer had accepted that they

did not know the circumstances in which Mr King had made the claimed gift to the

defender. The defender’s position was that there was nothing untoward in respect of the

gift, which the defender had duly received in good faith . Putting matters shortly, senior

counsel contended that there was a distinct absence of any averment pertaining to

knowledge or breach of fiduciary duty by Mr King set out on record. The reference to the

defender’s shares in Randin having been acquired as part of a un itary scheme were not

accompanied by any offer to prove that the defender ought to have known of this purported

scheme and of any breach of fiduciary duty. The pursuers had not explained what fiduciary

duties were owed by Mr King at the date of the relevant transfer of funds in April 2008, it

being a matter of agreement on record that Mr King was not at that time a director of

Mathon.

[7] Turning to the gravamen of the pursuers’ case against the defender on record,

namely the defender’s status as a constructive trustee for the pursuers in their capacity as

assignees of Mathon, senior counsel argued that it was unclear why the contention on the

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part of the pursuers was that it was the defender, rather than LZP, who had become a

constructive trustee for Mathon. It was further unclear why the pursuers had asserted that

the asset said to be subject to the constructive trust was a sum in the hands of the defender,

rather than the property in Marbella itself.

[8] Senior counsel for the defender proceeded to develop his submissions under

reference to an article by Professor Gretton, “Constructive Trusts” (1997) 1 Edin LR 281, that

author in turn therein referring to Wilson and Duncan, Trusts, Trustees and Executors, 2nd ed

(1995), para 6-61, to the effect that conventional wisdom has it that Scots Law recognises that

a constructive trust may arise in two main types of case, namely:

“(1) Where a person in a fiduciary position gains an advantage by virtue of that

position.

(2) Where a person who is a stranger to an existing trust is to his knowledge in

possession of property belonging to the trust.”

Senior counsel submitted that the present case was within the second category of case

identified in Professor Gretton’s article, the stranger being the equivalent of the defender

and the trust relationship being established between Mathon and Mr King. This appeared to

be the pursuers’ case on record, but, in order to make that case good, the pursuers would

require relevant averments (i) that the monies in question had been paid over in breach of a

fiduciary obligation of trust, and (ii) that the defender knew about that. In respect of these

two essential requirements concerning the creation of a constructive trust the pursuers’

averments had failed to achieve the requisite standard.

[9] In what both senior counsel agreed to be the leading case in this area of law, namely

Commonwealth Oil & Gas Co Ltd v Baxter 2010 SC 156, under reference to dicta of Lord Nimmo

Smith at paragraphs 84 to 87 and paragraph 94 and of Lord President Hamilton at

paragraphs 16 and 17, it was plain that the element of knowing receipt was a vital

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requirement of any claim to enforce a constructive trust, the relevant requirements being put

by Lord Nimmo Smith at paragraph 94 in the following manner:

“It appears to me to be clear from the authorities quoted above that knowing receipt

depends in the first place on the prior existence of an asset which is subject to a trust

in favour of a beneficiary. It is the disposal of that asset, in breach of fiduciary duty,

and receipt of that asset by the recipient in knowledge of that breach, which together

give rise to a constructive trust over that asset in the hands of the recipient.”

[10] Senior counsel founded further upon certain dicta of Lord Drummond Young in the

subsequent authority of Ted Jacob Engineering Group Incorporated v Robert Matthew, Johnson-

Marshall and Partners 2014 SC 579, in particular at paragraphs 98 and 99, which dicta refer

back in turn to those of the Lord President and Lord Nimmo Smith in Commonwealth Oil &

Gas Co Limited, supra. Senior counsel observed that there may well be circumstances in

which, on the facts averred by the pursuers in the present case, an obligation under

unjustified enrichment may arise, but not, he submitted, a claim based on constructive

trusteeship. The requirements of the constitution of a constructive trust are quite particular,

senior counsel submitted, and in this case these had not been met by the pursuers. Absent

an averment of knowledge on the part of the recipient that the sum in question had been

received in breach of trust or of fiduciary duty, the claim could not be characterised properly

as one under a constructive trust. In any event, the pursuers had failed to set out what

fiduciary duties were owed by Mr King, who was not a director at the time of the transfer.

In passing senior counsel referred to dicta of Lord Hodge in Macadam v Grandison [2008]

CSOH 53 at para 35 for the short proposition that even where trust property is no longer

traceable in his or her hands, a person who has been enriched by the consequences of

another’s breach of trust cannot retain the gratuitous benefit but is liable to reverse the

unjustified enrichment.

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[11] The second and shorter chapter of the defender’s submissions focused upon

prescription, proceeding upon the basis that the nature of the remedy sought by the

pursuers in this case was restitutionary rather than proprietary an d in particular that it was

based on an obligation to redress unjustified enrichment. That being the case, the five year

short negative prescription would apply and the claim ought properly to be regarded as

having been extinguished by prescription: section 6 of the 1973 Act. In schedule 1 of the

Act, defining the obligations to which section 6 has application, it is clear from the terms of

paragraph 1(b) thereof that the short negative prescription is applicable to any obligation

based on a redress of unjustified enrichment, including any obligation of restitution. The

short negative prescription is not applicable, however, to any obligation specified in

schedule 3 of the Act as an imprescriptible obligation: schedule 1 paragraph 2(h). Senior

counsel contended that the only potentially applicable imprescriptible obligation which

could be said to apply to th e defender in terms of schedule 3 would be that described in (f),

namely “any obligation of a third party to make furthcoming to any person entitled thereto

any trust property received by the third party otherwise than in good faith and in his

possession.” Schedule 3(e), relating to certain obligations of a trustee, could not apply, on

the basis that a constructive trustee could not be said to be a genuine trustee for these

purposes.

[12] In support of that contention senior counsel referred to a Supreme Court decision in

respect of certain English limitation provisions, namely Williams v Central Bank of Nigeria

[2014] AC 1189, and in particular to Lord Sumption at 1199E-F. Senior counsel submitted

that “constructive trustee” was a shorthand expression for someone who was treated as a

trustee, even though he was not a trustee as such. Senior counsel submitted on that basis

that in terms of the schedule 3 list of imprescriptible obligations, applying the same

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reasoning to the 1973 Act as set out by Lord Sumption in Williams, supra, a constructive

trustee could only thus potentially be caught therein in terms of schedule 3(f). That having

been said, senior counsel’s position, under reference to the first chapter of his submissions,

was that the pursuers’ averments did not relevantly engage schedule 3(f), any trust property

in that category of imprescriptible obligation requiring to have been received otherwise than

in good faith, and there being no relevant averments on record to the effect that the defender

was not in good faith. In addition, schedule 3(f) made it clear that any trust property

required to be in the possession of the defender, and in the present case the pursuers’

pleadings did not set out any averment to the effect that the defender’s shares in Randin had

been acquired by him using the contested sum of £6 million. If the defender had not used

that sum, the Randin shares could not be considered to be trust property, or the fruits

thereof. For Schedule 3(f) to be applicable, therefore, the pursuers would require to aver

that the defender had acquired the trust property otherwise than in good faith and further

that he was still in possession of th e trust property, and on both counts the pursuers’

averments plainly fell short. Discounting therefore any imprescriptible obligations in

schedule 3, one fell back of necessity upon the applicability of the short negative

prescription in terms of schedule 1 paragraph 1(b). The transaction complained of in this

case having occurred in 2008, and the action itself having been raised in 2018, any putative

obligation to make restitution had duly been extinguished by the operation of prescription

in terms of section 6 of the Act.

Submissions for the pursuers

[13] Senior counsel for the pursuers proposed that further procedure take the form of a

proof before answer, submitting that the applicable law was uncertain in a high degree and

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that proper resolution of the cause would be likely to be a fact-sensitive matter and a task

best undertaken on established facts after proof.

[14] The pursuers’ case in outline was a simple one, senior counsel submitted, and could

be stated succinctly as follows. Mr King, the son of the defender, in breach of fiduciary

duty, diverted £12 million from a company which he controlled, Mathon, whose assignees

the pursuers are. For no consideration (and it was of note that the defender accepted that

there was a gift in this case), Mr King transferred £12 million to the defender and in turn the

defender used part thereof, through Randin and LZP, to buy a villa in Marbella. In this

action the pursuers sought recovery of the value of the sum extracted, contending that the

defender presently holds that value. The nub of the pursuers’ case was that the £6 million in

issue had been part of an unlawful diversion of funds by Mr King from Mathon; that the

defender held and holds the funds and fruit thereof, including the shares in Randin, as a

constructive trustee for the pursuers as assignees of Mathon; and that the contested sum, or

its surrogate, vests with them. In short, this was a proprietary claim, the defender having

refused to make restitution to the pursuers in respect of the value of the relevant funds .

[15] While senior counsel was not at this stage prepared to jettison his averments of lack

of good faith, maintaining that an inference thereof could be properly drawn after probation,

for the purposes of the debate on the defender’s preliminary pleas the pursuers proposed to

rely upon their position, accepted by the defender, that the relevant money was received by

the defender gratuitously. This position was sufficient for the pursuers to pass the stage of

debate and to enter the stage of enquiry. The pursuers sought declarator that the shares in

Randin were held by the defender in constructive trust for the pursuers, and insofar as LZP

owned the house in Marbella, Randin owned LZP and the shares in Randin were owned by

the defender, it was clear that the ultimate reservoir of the funds lay in the Randin shares.

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The pursuers’ case turned on Mr King having acted in breach of fiduciary duty by

abstracting funds in Mathon, and the pursuers accepted for the purposes of debate that they

required to show that this breach of fiduciary duty by Mr King had affected the defender in

some way. Senior counsel for the pursuers emphasised that the pursuers did not seek at this

stage to make a “knowing receipt” case, but that their case for the purposes of the discussion

of their pleadings at debate was that the transfer was gratuitous. Senior counsel referred to

Menzies, The Law of Scotland Affecting Trustees (2nd ed, 1913), para 1271, as it was cited by the

Lord President in Commonwealth Oil & Gas Co Ltd, supra, at paragraph 16, in the following

passage dealing with the requisites of liability for knowing receipt:

“It is, however, clear that its foundation lies in the law of trusts, under which a

stranger to a trust may in certain circumstances become liable to the trustees (or the

beneficiaries) in respect of trust property. Menzies, Trustees (para 1271) in a section

headed ‘Following Trust Estate’ identifies the second situation where a constructive

trust may arise as ‘where funds affected with a trust come into the hands of another

than the beneficiary, either gratuitously or with knowledge of a breach of trust, the

transferee is a constructive trustee’.”

[16] On this authority senior counsel submitted that it was plain that a constructive trust

can come into existence either gratuitously or where there is knowledge of a breach of trust,

and in each the transferee was properly to be regarded as a constructive trustee. The same

passage in Menzies, Trustees, had been cited by Lord Nimmo Smith in the same case at

paragraph 85. From these dicta in this leading authority there was no suggestion that

knowledge was an absolute prerequisite for the creation of a constructive trust. Senior

counsel submitted that in the present case all that the pursuers required to establish was

gratuitous receipt, and it was of note that this was not disputed by the defender. The

pursuers accordingly contended that their case was one of the gratuitous transfer of trust

funds taken in breach of fiduciary duties, and that, while there were indeed averments

concerning lack of good faith in the pursuers’ pleadings, these averments were not required

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for the purposes of surviving the challenge advanced at debate on behalf of the defender.

These averments may in due course allow consideration after enquiry of matters of bad faith

and knowledge, but it could n ot be said for the purposes of the present discussion of the

pleadings that the pursuers’ case was bound to fail.

[17] The pursuers were accordingly seeking to assert their title to trace funds abstracted

from them, and their claim could properly be regarded as a propriet ary one. Senior counsel

submitted that where assets abstracted in breach of trust, in this case from Mathon, could be

traced, this amounted to a proprietary claim. Senior counsel referred at this stage in his

submission to dicta concerning the availability of a proprietary tracing claim in Style

Financial Services Ltd v Bank of Scotland 1996 SLT 421 at 425B-F.

[18] Addressing the criticisms advanced on behalf of the defender, senior counsel

observed that there was no suggestion in Commonwealth Oil & Gas Co Ltd, or in Ted Jacob

Engineering Group Incorporated, supra, that gratuitous receipt was not a case which could

come under the umbrella of a constructive trust. While it was accepted by the pursuers that

their claim was restitutionary in nature, it was properly more fully characterised as a

proprietary restitutionary claim. The concept of gratuitous receipt h ad also been recognised

by Lord Hodge in Macadam, supra, at paragraph 35, and in Bank of Scotland v MacLeod Paxton

Woolard & Co 1998 SLT 258, per Lord Coulsfield at 274D-G, in which latter passage

Lord Coulsfield referred to Paget, Banking (10th ed) at 231 to 232, for the proposition that the

form of liability may be either proprietary or personal.

[19] Senior counsel conceded that the pursuers’ case could not get off the ground if there

were no averments of breach of fiduciary duty on the part of Mr King. Having said that, his

position was that Mr King did not require to be a director in order for Mr King to have been

a fiduciary in this sense. The pursuers had averred that Mr King had controlled the

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activities of Mathon at all material times. The position of a director was simply an example

or subset of a wider category of person able to control or direct the affairs of ot hers and in

this case the title or hat that Mr King happened to have or to be wearing at the material time

was irrelevant. It could not be said that the pursuers would necessarily fail in their

contention that Mr King’s intromissions with Mathon were essentially fiduciary in nature.

In Commonwealth Oil & Gas Co Ltd, the Lord President at paragraph 10 had cited Brooke LJ in

In Plus Group Ltd v Pyke [2002] EWCA Civ 370 at para 75 for his observation that “the facts

and circumstances of each case must be carefully examined to see whether a fiduciary

relationship exists in relation to the matter of which complaint is made”. Senior counsel

submitted that the pursuers’ averments about Mr King being able to direct Mathon were

amply sufficient to entitle them to enquiry on the existence of fiduciary duties on his part.

[20] Turning finally to the topic of prescription, senior counsel made it plain that while

the pursuers’ remedy was restitutionary in nature, he could not on their behalf accept that

such a remedy could not also be proprietary in nature: see Style Financial Services and Bank

of Scotland, supra. The present case involved an identifiable fund taken in breach of fiduciary

duty in the hands of the defender. On the matter of the location of such a proprietary

restitutionary claim within the scope of the 1973 Act, senior counsel made plain that he was

not relying on schedule 3(f) for the purposes of the present debate. Electing not to argue the

bad faith point at debate, he submitted that it was open to argument that after proof the

pursuers’ claim could fall to be treated as an imprescriptible obligation in terms of

schedule 3(e)(iii), namely any obligation of a trustee to make furthcoming to any person

entitled thereto any trust property, or the proceeds of any such property, in the possession

of the trustee, or to make good the value of any such property previously received by the

trustee and appropriated to his own use.

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[21] Addressing the contention advanced for the defender to the effect that in this context

a constructive trustee was not a trustee at all, senior counsel submitted that the ex ercise

being embarked upon was to identify such circumstances as the drafter of the 1973 Act had

in mind in respect of the position of a trustee in terms of schedule 3(e), and argued that it

was unlikely that parliament would have been seeking to exclude constructive trustees from

that category. A constructive trust was a real trust, albeit that it was not created by the

voluntary acts of those intending to create a trust. In the event that the defender in this case

was somehow not a trustee under the Act, he nevertheless properly fell to be treated as one.

In this regard senior counsel referred to Williams, supra, and in particular to the dissenting

speech of Lord Mance at paragraphs 156 and 157, submitting on behalf of the pursuers that

the Supreme Court in Williams was dealing with English law provisions which themselves

perhaps ought not to be regarded as matters of settled law. Senior counsel’s short

submission on prescription was accordingly to the effect that the reference in Schedule 3(e)

to “trustee” could not be said to exclude the variety of trustee founded upon in the present

case, namely the constructive trustee. In such circumstances it was arguable that the

pursuers’ case would not therefore be subject to the short negative prescription.

Discussion and decision

[22] Having considered the pleadings in the present case and listened with care to the

clear and concise submission s of senior counsel at debate, I have concluded that it cannot be

said that the pursuers’ case must necessarily fail. Further, standing the developing nature of

this rather niche area of private law, I find myself inclinin g to the view that the present case

is a paradigm one for the appointment of proof before answer with all parties’ pleas-in-law

left extant, standing the intimate relationship between matters of fact and law potentially

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arising. Such a determination would allow a final disposal of the cause to be properly made

on a mature consideration of the applicable law once an established set of facts emerges in

due course following probation.

[23] The de quo of the pursuers’ case is based on the gratuitous receipt by the defender of

the sum of £6 million belonging to Mathon which he in turn used to purchase a Spanish villa

through the mechanism of LZP and Randin and on the consequent proposition that in such

circumstances the defender is obliged to account for that sum to the pursuers, as assignees of

Mathon, as their constructive trustee. As such, therefore, the pursuers’ case is not one of

knowing receipt but is instead one of gratuitous receipt, in terms of which no averments of

knowledge on the part of the defender of any breach of fiduciary duty by Mr King are

required. This alternative route, namely by way of gratuitous receipt, to the creation of a

constructive trusteeship is expressly envisaged in Menzies, Trustees, supra, at para 1271 and

by the citation thereof, without demur, of the Lord President and Lord Nimmo Smith in

Commonwealth Gas & Oil Co Ltd at paragraphs 16 and 85 respectively. The relevant passage

in Menzies (para 1271) bears repeating at this juncture: “[W]here funds affected with a trust

come into the hand of another than the beneficiary, either gratuitously or with knowledge of

a breach of the trust, the transferee is a constructive trustee.”

[24] On the basis therefore of the case averred on behalf of the pursuers as so o utlined, in

order to establish the constructive trusteeship on the part of the defender which they

contend for I am satisfied that all that the pursuers require to establish is gratuitous receipt.

It is notable that, under a particular explanation of course, the defender in his pleadings

accepts that Mr King gifted to him the sum of £6 million. Insofar as the sum sought to be

recovered by the pursuers represents a trust fund, it is plain that, following the flow of

transfer of that fund as set out with care in the pursuers’ pleadings it remains in a very

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readily identifiable form in the hands of the defender, being the villa in Marbella purchased

by the defender through LZP and Randin. I am further satisfied that the pursuers’ claim can

potentially be characterised properly as a proprietary tracing claim, albeit one which is

restitutionary in its nature, under reference to the passages cited, supra, in Style Financial

Services Ltd and Bank of Scotland.

[25] Turning to the further challenge faced in the relevancy chapter of the defender’s

contentions at debate, namely whether relevant averments of breach of fiduciary duty by

Mr King can be found on record, while the pursuers’ pleading in this matter is relatively

sparse and amounts in effect to an assertion that Mr King controlled the activities of Mathon

at all material times, and indeed that he was not a director of Mathon at the time of the

relevant transfer in April 2008, I have nevertheless reached the view that there is a

sufficiency pled on this matter by the pursuers to allow the court at this stage to conclude

that it cannot be said that their case must necessarily fail by an omission of pleading on the

point. The averment of control at all material times is sufficient to merit enquiry into

whether a fiduciary relationship existed and indeed into related matters of its scope and

scale: see Commonwealth Oil and Gas Co Ltd, per the Lord President at para 10 citing Brooke

LJ at para 75 in In Plus Group Ltd, supra. The determination of any fiduciary relationship

may require to be a fact-sensitive exercise. Although the pursuers’ averments on this issue

are somewhat brief, notice of the point has in my view been relevantly stated in the

pleadings.

[26] Before leaving the first chapter of the defender’s critique of the pursuers’ case on

record, I wish to deal with the position adopted at debate by senior counsel for the pursuers

to the effect that for the purposes of testing the pleadings he proposed to make nothing of

his case that the sum was not received in good faith but at the same time did not wish to

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jettison this case on the basis that an inference to that effect could be drawn properly on the

facts established after proof. Senior counsel for the defender had of course for his part on

this point contended that the assertion that the sum had not been received in good faith

ought properly to be regarded as a conclusion to be drawn from the establishment of an

averred primary fact or set of facts. I see the force in the submissions advanced for the

defender on this matter but have concluded, albeit with some hesitation, that the sentence

containing the pursuers’ averments to that effect need not be excluded from probation . The

defender has expressly in his own pleadings accepted that Mr King gifted him the sum of

£6 million, albeit under a particular circumstantial explanation. At a pragmatic level the

pursuers would not perhaps be expected to know the details averred upon in relation to this

matter by the defender. In such circumstances, the pursuers’ clear case of gratuitous receipt

being sufficient to pass the test of relevancy, in my opinion it would not on balance be

necessary or right to exclude the issue of good or bad faith prior to establishment of what

could well be a nuanced series of facts after enquiry.

[27] Turning to the shorter but important chapter of the defender ’s submissions on

prescription, on the face of matters an essentially restitutionary claim ought rightly to be

captured by the short negative prescription applicable under section 6 of the 1973 Act by

virtue of schedule 1 paragraph 1(b). Senior counsel for the pursuers, of course, instead

sought to locate his case within the list of imprescriptible obligations set out in schedule 3 of

the Act. In considering whether the pursuers’ claim on record can potentially be so located

in schedule 3, and located in particular in schedule 3(e) as contended for on behalf of the

pursuers, I have reached the view that, the pursuers having presented an arguable case that

the defender is a constructive trustee on the basis of gratuitous receipt, it cannot be said

without enquiry that a constructive trustee is not a trustee for the purposes of schedule 3(e).

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I have reached that conclusion notwithstanding the dicta referred to by senior counsel for the

defender in Williams, supra. No Scottish authority on the point was placed into the

discussion by either senior counsel, and, there being no obvious policy or practical argument

against it, I can at this stage see no reason why the reference to trustee in schedule 3(e) must

necessarily exclude the variety of trustee featuring in the present case, namely the

constructive trustee. It may well be in addition or alternatively in due course arguable that,

esto the said dicta in Williams related to the 1980 English limitation provision dealt with

therein are indeed to be applied to the scheme set out in the 1973 Act, nevertheless a

constructive trustee, even if not strictly a trustee for the purposes of the 1973 Act, should in

any event be regarded as a person who falls properly to be treated for such purposes as a

trustee, and this approach would give the pursuers another potential route into the

protective territory of schedule 3(e).

[28] For all of these reasons I have concluded that the proper disposal in this case is to

allow parties a proof before answer with all their averments and pleas standing, having

regard to the mixed and complex issues of fact and law arising. I consider that there is a

range of possibilities of fact which could arise on the parties’ pleadings, and it is further very

apparent that the law in this area is one of particular complexity and indeed, on one view,

fluidity.

Disposal

[29] The court will accordingly allow parties a diet of proof before answer with all

averments and pleas standing. Any issues related to expenses are meantime reserved.