Scottish Court of Session Decisions

You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> LD PARTNERSHIP FOR RETURN OF MISSING FUNDS [2023] ScotCS CSOH_7 (08 February 2023)
URL: http://www.bailii.org/scot/cases/ScotCS/2023/2023_CSOH_7.html
Cite as: [2023] ScotCS CSOH_7, [2023] CSOH 7, 2023 GWD 7-75

[New search] [Printable PDF version] [Help]

OUTER HOUSE, COURT OF SESSION

[2023] CSOH 7

P505/22

OPINION OF LORD CLARK

In the petition of

LD PARTNERSHIP

for return of missing funds

Petitioner

Petitioner: G Dosoo; Lay representative

Respondent: Anderson; DLA Piper Scotland LLP

8 February 2023

Introduction

[1]

The petitioner, LD Partnership, had a loan agreement with the respondent, the Royal

Bank of Scotland ("RBS"). The petitioner claims that in 2012 it discovered that funds were

debited by RBS from the petitioner's current account, but were not in fact used as loan

repayments. The petitioner seeks orders for disclosure of the whereabouts of the missing

funds, return of the funds with interest, and payment of consequential losses.

[2]

The respondent opposes this application and denies the allegations made. In

addition, the respondent raises three preliminary points: that the petition is not competent,

because raising an action is the proper procedure in a case of this kind, rather than

proceeding by petition; that in any event there are no relevant averments supporting the

orders sought; and, even if there were any obligations on the part of the respondent, these

have been extinguished by the operation of prescription.

[3]

A substantive hearing was fixed to resolve these preliminary issues. The respondent

was appointed to lodge its Note of Argument 14 days in advance of the petitioner's Note of

Argument, so as to give the petitioner, and its lay representative Mr Dosoo, sufficient time to

consider and deal with the points made by the respondent.

The petitioner's averments

[4]

Perhaps understandably, having been prepared by a lay representative, the petition

does not have the level of clarity that tends to be present in pleadings drafted by

experienced counsel. I have taken into account all of the averments, although there are

certain passages which do not appear to have a direct bearing for present purposes. What

follows in this section is a brief summary of the petitioner's own version of events.

[5]

George Dosoo and Brian Leslie set up the firm of LD Partnership for the purpose of

purchasing a hotel. The firm, through these individuals, entered into a loan agreement with

RBS on 30 June 2005. The loan given by RBS was £2,080,000. The firm bought the hotel.

In 2010, the hotel was sold and the remaining balance of the loan was paid to RBS.

(In passing, I note that the petition refers to the "hotel/business" being sold, but whether the

price included payment for the business is not of any direct relevance for present purposes.)

In 2012, Mr Dosoo obtained a completion statement. The petitioner avers that:

"After analysing the completion statement and the bank statements [Mr Dosoo]

discovered that monies debited to [LD Partnership's] current account

totalling £142,549.55 and a further £7,336.65 debited (which were all debited without

a mandate and without authority) had not been accounted for in the completion

statement. [Mr Dosoo] then complained to RBS and asked RBS to disclose where the

funds are? The complaint handler sent a letter essentially refusing to disclose where

the funds are and said his Supervisor should tell [Mr Dosoo] to take complaint to the

Financial Ombudsman Service"

[6]

Mr Dosoo lodged three separate complaints with the Financial Ombudsman Service

("FOS") between 2012 and 2020, about the missing funds and "other banking misconducts

by RBS". On each occasion, the FOS refused to investigate, on the basis that RBS had

objected to any such investigation. The complaint about missing funds was also lodged in

the RBS Global Restructuring Group review process and RBS again refused to address the

issue. That decision was appealed to the Independent Th ird Party appointed by RBS,

Sir William Blackburne. Mr Dosoo instructed an advisor who analysed the banking

documents and agreed that RBS had not accounted for the missing funds and had

overcharged on the loan. The Independent Third Party refused to investigate these findings,

on the basis that he had no mandate to investigate missing funds.

[7]

Mr Dosoo reported the missing funds to an organisation named Action Fraud who

said that the behaviour of RBS was fraud and abuse of trust and referred it to Police

Scotland, but Police Scotland refused to investigate saying it was a civil matter. In 2021, a

further complaint was lodged with the British Business Resolution Service, but it determined

that the complaint was not eligible to be investigated within its remit.

[8]

The orders sought are to have RBS disclose where the missing funds are, to return

the funds with statutory interest, and to "[p]ay consequential loss and return the partners to

where their finances would have been if RBS had not lent them the money to buy the

hotel/business". The first plea-in-law for the petitioner states:

"1.

The Petition is competent because of non disclosure by the Respondent, as it

could be as a result of fraud, concealment or error. Resulting in the Partners being

significantly financially disadvantaged"

The second and third pleas-in-law say, in turn, that the petitioner's averments are relevant

and not lacking in specification and that the petitioner has title to sue. The fourth plea-in-

law states:

"4.

The five years prescription rule should not apply because of lack of disclosure

by the Respondent and it is in the interests of justice, fairness and certainty to grant

the prayer."

Lay representation

[9]

In March 2022, Mr Dosoo lodged an application under Rule of Court 4.2(5), which

deals with the situation where a party litigant is unable to obtain the signature of counsel or

another person having a right of audience and requests the Lord Ordinary to grant leave to

proceed without such signature. I considered the application and refused it. The decision to

refuse was reached because this is a claim by a partnership, with Mr Dosoo acting on its

behalf. It is not a claim by a party litigant and so is not covered by rule 4.2(5). In terms of

the Act of Sederunt (Lay Representation for Non-Natural Persons) 2016 (SSI 2016 No 243), if

a partnership is to bring proceedings an application for lay representation of the partnership

in the form stated in the Act of Sederunt is needed.

[10]

In due course, Mr Dosoo lodged an application on behalf of the partnership for him

to be the lay representative. The authorisation document stated that Mr Dosoo and

Mr Leslie agreed that he should be the lay representative and was signed by each of them.

On 9 June 2022, I granted leave under section 97(2) of Courts Reform (Scotland) Act 2014,

allowing Mr Dosoo to act as the firm's lay representative. In the letter sent to him by the

court's petition department Mr Dosoo was, on my instructions, told:

"Although leave has been granted to proceed, any other matters, including whether

it is competent for the case to proceed by a petition rather than a summons, are not

dealt with at this stage and remain open for consideration once proceedings

commence."

The issues

Competency

Submissions for the respondent

[11]

The petition and the prayer were incompetent. Petition procedure is appropriate

where an action is inappropriate, or the law requires a petition: Hooley Ltd v Ganges Jute

Private Ltd 2019 SC 632. A dispute about the parties' patrimonial rights and obligations

should ordinarily be resolved in the course of the court's ordinary procedure, namely by

action. The first order sought in the prayer could not be granted. The court had no free-

standing jurisdiction to order, by petition, one party to a litigation to disclose where

something was, when no legal basis was identified. The terms of the first order could not be

complied with because bank moneys are not segregated pots of hard cash and it would be

impossible to comply with an order seeking the disclosure of "where" funds are. The

second and third orders sought in the prayer were essentially unquantified pecuniary craves

or conclusions. In any event, Mr Dosoo was supplied with documentation in 2012 and 2013.

Submissions for the petitioner

[12]

Mr Dosoo referred to what had been said in the letter from the court on 9 June 2022

about the competency of proceeding as a petition remaining open for consideration once

proceedings commence. He took this to mean that the court would deal with this matter on

its own initiative and submitted that no decision had yet been made to that effect. There had

been no disclosure by RBS about where the monies are, even though Mr Dosoo had made a

number of attempts to have it investigated. Reference was made to several of the

productions for the petitioner. Points about competency are also made in the petitioner's

first plea-in-law, noted above.

Decision and reasons on issue 1

[13]

I acknowledge that as a lay representative Mr Dosoo may not have fully understood

what was said in the letter from the court. However, its wording is tolerably clear and

Mr Dosoo should have understood that any other matters, including competency, would be

considered as part of the adversarial court process. It is not for the court to give advice

about competency to a person seeking permission to act as lay representative in a petition

process or to decide ex proprio motu how a case should proceed. In any event, Mr Dosoo

must have been aware of the position from the answers lodged by the respondent some

4 months before the substantive hearing. These very plainly argued that use of the petition

procedure was incompetent, including making averments to that effect along with a

plea-in-law seeking dismissal on that ground.

[14]

Further, the point was again made clear in the discussion that took place at the

procedural hearing, over 3 months before the substantive hearing, and is reflected in the

resulting interlocutor. It was made known to Mr Dosoo that the competency of the petition

would be challenged at the substantive hearing. Mr Dosoo also saw the arguments on

competency and the proposed outcome of dismissal sought by the respondent fully

articulated in the respondent's Note of Argument, lodged more than 5 weeks before the

substantive hearing. In these circumstances, the petitioner had ample notice about the

competency issue.

[15]

Turning to the merits of the point, Scots law has obviously for very many years had

the different procedures of petition or action available to parties in Court of Session

proceedings. It is unnecessary and indeed inappropriate to embark upon a detailed analysis

of their distinctive features. In broad terms, a summons will generally have a contradictor,

involve contentious or adversarial disputes, will be about enforcing or vindicating a legal

right and involve the application of rules of law rather than discretionary powers. In

contrast, a petition may be ex parte, non-contentious or non-adversarial, can seek a remedy in

respect of which the petitioner has no legal right against the respondent, and commonly will

involve the discretionary exercise of statutory or common law powers.

[16]

However, when one looks at the authorities and how procedures have developed,

there is some degree of blurring, or perhaps better put, flexibility, of the two processes and

the broad points made above are not comprehensively or universally true. By way of

example, a petition for judicial review will very commonly have a contradictor and will

involve a contentious or adversarial dispute, seeking the application of a legal right or a rule

of law. Cases in which a party has been allowed to seek declarator by means of a petition

rather than in an action, or seek suspension in an action rather than by petition, illustrate the

overlaps.

[17]

There are examples of some vintage of the court finding a petition process to be

incompetent and holding that an action is required, such as: Mackenzie v Macfarlane 1934

SN 16; Simeone, Petitioners 1950 SLT 399; and Heggie v Davidson 1973 SLT (Notes) 47.

However, these were all cases involving petitions to appoint a judicial factor and the

approach in the latter case, in which the Lord Ordinary referred to the earlier two cases,

turned largely on the point that a disputed question of right, which was difficult and

complicated, should not be decided indirectly in a petition for the appointment of a judicial

factor (Lord Keith, at 48).

[18]

But there is a clear explanation of the distinctive features between petitions and

actions in the more recent decision of the Inner House in Hooley Ltd v Ganges Jute Private Ltd,

Lord Drummond Young giving the Opinion of the court, at [14]-[21]. The court summarised

the position thus:

"[21] Accordingly, in our opinion petition procedure will be competent in any case

where either it is necessary to innovate on existing legal norms or the court's order is

likely to have an effect on parties who are not represented in the proceedings... We

do not suggest that these are the sole criteria that may justify the use of petition

procedure, but those two categories perhaps cover the great majority of such cases.

The critical feature is that in such cases the court is obliged to exercise an

independent element of judgment, or discretion, that goes beyond the interests of the

parties and the submissions that they may make in the litigation."

In that leading case, the fundamental reason for allowing the case to proceed by petition was

(as stated at [24]) that the orders sought were not confined to determining the parties'

pre-existing rights; rather, the orders met the established criteria for petition procedure.

[19]

The present case is, on the face of it (albeit not on a clearly averred basis, as discussed

below) simply a dispute about the parties' patrimonial rights and obligations, arising from

their contractual relationship. The first order sought does not go beyond the interests of the

parties. Moreover, it is not something the court can realistically make, when there is no

basis averred or otherwise available to the court for concluding that the missing funds are

currently held somewhere, and no legal ground for the order is identified. If the respondent

debited the amounts and wrongly failed to take them into account in the completion

statement, they will no doubt have formed part of the funds in the bank's possession. But a

bank's funds do not remain static and are used for a variety of purposes and transactions.

Attempting to trace the current location of the debits made in the years before 2010 is of no

moment, since the petitioner's key claim is about the loss of the monies caused by t he

conduct of RBS. The second and third orders sought are plainly appropriate to be dealt with

in an action rather than in a petition. If need be, in such an action commission and diligence

could be sought in relation to documents relevant to the debiting of sums from the account.

As such, the dispute in this case is a matter to be resolved by an action rather than a petition.

[20]

The petitioner's first plea-in-law quoted above, which refers to competency, states

that the non-disclosure by the respondent "could be as a result of fraud, concealment or

error" and that expression is repeated in the petition. The court was given no reason as to

why that has any bearing on the competency issue.

[21]

I therefore conclude that this petition is incompetent. The appropriate disposal is to

dismiss the petition. If that was to be the only reason for doing so, the petitioner could of

course have gone on to raise an action. However, as will be explained, the petition is also

dismissed on the ground of prescription.

Relevancy

Submissions for the respondent

[22]

Even if the petition is competent, there were no relevant averments supporting the

prayer of the petition. There are no relevant averments identifying an actual private law

basis for the claims, still less any relevant averments of causation or quantum in relation to

consequential losses.

Submissions for the petitioner

[23]

The claims made were relevant. The petitioner's position is that its money has gone

missing from the bank account. The partners had lost everything they worked for. The

court does have an inherent power to try and force the bank to disclose where the funds are

and if the bank is exceeding its powers in order to prevent justice, the court has an inherent

power to help the partners with that issue.

Decision and reasons on issue 2

[24]

I have already explained the difficulties in relation to the first order sought. No

relevant case is made for the court to order the respondent "to disclose where the missing

funds are". The reference in the first plea-in-law and the petition that non-disclosure "could

be as a result of fraud, concealment or error" is of no substance. It refers only to "could" and

raises three possibilities, neither of which is the subject of any further averments. If fraud

were to be alleged, the averments would of course have to be capable of yielding an

inference of fraud and there would require to be averments of primary fact capable of

supporting that inference. There are none.

[25]

The second order that is requested, for return of the funds along with statutory

interest, is based on the relatively simple premise that the respondent debited sums from the

petitioner's account and did not apply those funds for the purposes of the completion

statement. In short, they were debited but not used to reduce the loan debt and so should be

repaid. It is correct that the petitioner does not aver a clear legal basis for recovery of these

sums, such as breach of the terms of the loan agreement, or unjust enrichment. However, in

the absence of any reference to the former ground, by implication it must be the latter.

[26]

Following the well-established approach, this aspect of the claim cannot be

dismissed as irrelevant unless it must necessarily fail even if all the pursuer's averments are

proved (Jamieson v Jamieson 1952 SC (HL) 44, Lord Normand at 50). It is undesirable, except

in a very clear case, to dismiss an action on the ground that the pursuer's averments are

irrelevant and insufficient in law (Miller v South of Scotland Electricity Board 1958 SC (HL) 20,

Viscount Simonds, at 32). There is some force in the respondent's position that

quantification of the alleged loss is not made out. But proceeding upon the basis that the

allegation is that a sum just short of £150,000 was debited from the petitioner's account but

not applied as a loan payment and is to be accounted for by RBS, this claim is relatively

straightforward and the respondent's challenge to relevancy in relation this part of the case

must fail. Accordingly, if the petition had not been dismissed on the other grounds of

competency and prescription, this part of the claim would have proceeded.

[27]

The third order sought refers to payment of consequential loss and returning "the

partners to where their finances would have been if RBS had not lent them the money to buy

the hotel/business." There are a several serious difficulties in this part of the claim. There is

no explanation of the legal or factual basis for recovery of consequential loss. Given that the

previous order seeks repayment plus interest and this third order refers to what would have

happened if the loan had not been given, it seems clear that it is loss consequential upon the

loan having been given. But there are no averments of any legal ground for the loan to have

been unlawful or in breach of any duty or obligation, or as to why it should not have

occurred. Moreover, there is simply nothing averred about causation or quantum. It is

therefore a wholly irrelevant and inspecific part of the case. If the petition had not been

dismissed, this part of the claim would have been excluded from probation.

Prescription

Submissions for the respondent

[28]

Even if the petition was competent and relevantly averred, any obligation relied

upon by the petitioner had been extinguished by prescription. Crave 2, for payment of a

liquid sum, was presumably on the basis of contract or unjustified enrichment. Crave 3 was

for payment of damages, presumably on the basis of a breach of contract. The thrust of the

petition appeared to be an allegation that, properly construed, the first 12 months of the loan

were interest free. That is an argument of contractual construction. The redemption moneys

for the loan were, in fact, paid by the petitioner's agents to the respondents on or around

22 July 2010. Any claim arising out of contract or unjustified enrichment which the

petitioner might have had to repayment would have arisen at that time. Mr Dosoo alleged

in correspondence between June and August 2013 that there had been an overpayment.

Information and documentation was demanded from the respondent to "avoid court

action". The petitioner was not in error as to its rights, nor was it ignorant of the claim. Any

such claims have thus prescribed.

Submissions for the petitioner

[29]

Mr Dosoo explained that the petitioner had attempted to try and resolve the issues

without coming to court, taking various steps up until 2021. The petitioner had tried all

avenues without success and court action was now the only way forward. The claim could

not prescribe because the petitioner did not know where the money is and what happened

to the money, hence the motion to have the respondent disclose where the funds are held.

In order to be able to make complaints to the regulatory bodies and have them determined,

the petitioner had to undertake not to take action against RBS. So, prescription would only

commence after the claim had been refused. Prescription was also interrupted by the

complaint application procedures and the required undertaking not to take proceedings.

Moreover, the prescriptive period should only start after the respondent discloses where the

missing finds are. In the petitioner's fourth plea-in-law, and in the petition itself, it is said

that the 1973 Act is not applicable because there had been no disclosure by the respondent of

where the missing funds are and also that there is a wider interest of fairness, justice and

certainty for the court to take into account.

Decision and reasons on issue 3

[30]

The starting point on the question of prescription is when the obligation(s) relied

upon by the petitioner became enforceable. As noted above, there are significant problems

with the petitioner's averments, as the legal basis for the claims is not specifically identified.

The respondent makes the point that the thrust of the petition is that, properly construed,

the first 12 months of the loan were interest free and that contention by the petitioner is

based on the contract (the loan agreement). The productions lodged by the petitioner do

indeed show that one major issue raised in correspondence on behalf of the petitioner with

RBS was that the first 13 months of the 20-year loan agreement were "a honeymoon period"

in which no interest or capital was to be paid, but nonetheless the interest was deducted for

that period. It may well be the case that these deductions contribute materially to, or indeed

constitute, what is described as the missing funds, but the petitioner's position in its

averments is simply that payments were taken by RBS from the current account and not

accounted for in the completion statement. Accordingly, it is not made clear that the

petitioner founds upon the contract.

[31]

As noted earlier, by necessary implication the basis for the second order appears to

be unjust enrichment. However, if it is indeed tied in to the contractual terms about interest

(which is not averred), it may seek to found upon a breach of contract. The reference to

"fraud, concealment or an error" is not developed and, as mentioned earlier, if fraud had

been founded upon that would require precise supportive averments. No other legal

ground for the second order is capable of being identified in the pleadings. No legal ground

for the third order is made out. But whatever basis is relied upon, viewing the petition as

openly as possible the claims must concern obligations that became enforceable, at the latest,

in July 2010 when the redemption sums were paid to RBS.

[32]

There are of course various grounds stated in the Prescription and Limitation

(Scotland) Act 1973 upon which the prescriptive period can be postponed, or interrupted

and re-started. These include, in terms of section 6(1), the creditor making a relevant claim

(defined in section 9), or the debtor making a relevant acknowledgment (defined in

section 10), or, in terms of section 6(4), excluding any period in which by fraud or error,

induced by the debtor, the creditor was induced to refrain from making a relevant claim.

The petitioner makes no averments on any of these matters, which of itself excludes them

from consideration. But even if they are considered in light of the submissions and

documents referred to, I am unable to accept that any of these provisions is capable of

applying to the facts here.

[33]

In submissions, Mr Dosoo referred to the petitioner having to undertake not to raise

proceedings if its complaint was to be investigated. Following the debate, without objection,

Mr Dosoo lodged additional documents said to support that proposition. The first

document is described as "RBS/GRG Review eligibility rules". It states that customers who

have commenced or threatened to commence legal proceedings against RBS will not be

eligible for redress unless they agree to put those proceedings on hold while the complaint is

considered within the review. This does not meet the test for any of the provisions on

postponing or interrupting the prescriptive period. In particular, section 6(4) could have no

application, with no error having been induced. In any event, the reference is to putting

proceedings on hold, which would still have allowed protective proceedings raised by the

petitioner to be sisted pending the outcome of the complaint.

[34]

The next document, referred to as the "BBRS Scheme Rules" states "you must not be

in, or have obtained any ruling from, any court proceedings with your bank about your

complaint." One insurmountable difficulty with the petitioner's reliance on this point is that

the complaint under that scheme was made in 2021, some 11 years after the prescriptive

period had commenced and 6 years after it ended. But in any event this proviso would not

satisfy any of the provisions which deal with interrupting or postponing prescription.

[35]

Nothing was referred to which could constitute a relevant claim or a relevant

acknowledgment and nothing can be found in the submissions or productions to that effect.

No basis for the application of section 6(4) of the 1973 Act is identified.

[36]

Accordingly, to the extent that they are ascertainable, the obligations relied upon in

this petition have been extinguished by the operation of prescription.

Ancillary points

[37]

Counsel for the respondent raised two other matters. The first is that the respondent,

at the procedural hearing, sought to draw the petitioner's attention to the proper way in

which a descriptive partnership should be designated in the instance. A process instigated

in the name of a firm with a descriptive name (i.e. a name not disclosing the names of the

partners) by one of the partners bearing to act as a representative of the firm, was argued to

be defective and fatal to the proceeding: Kerr v Clyde Shipping Company (1839) 1 D 901 and

J Maclaren, Court of Session Practice (1916) 212.

[38]

I accept that this was raised at the procedural hearing and the petitioner had the

opportunity to amend, but in light of the limited procedural relevance of the point and the

involvement of a lay representative, I would not have dismissed the petition on this ground.

Instead, I would have given the petitioner a further opportunity to amend, essentially to add

the other partner's name in the instance. As I noted at the procedural hearing, that other

partner, Mr Leslie, had signed the authorisation document lodged with the application for

lay representation.

[39]

The second ancillary point raised for the respondent is that the court should not

adopt a different approach to the consideration of the petition because the petitioner is

unrepresented by a legal practitioner: Barton v Wright Hassall LLP [2018] UKSC 12,

[2018] 1 WLR 1119 at [18] and [42]. That is plainly correct and on the substantive issues I have taken

that approach (as was also done by Lady Paton in AW, Applicant [2018] CSIH 25, at [14]). As

noted, I would have allowed some leeway on purely procedural matters such as allowing

greater time to amend, but not in permitting the rules of court or the legal rules on

competency, relevancy or prescription to be departed from.

[40]

In final adjustments to the petition, the court was asked on behalf of the petitioner to

give its view:

"on any possible conflict of interest on the fact that it was DLA Piper LLP's

involvement in the calling up notices and inhibitions between November 2008 and

July 2010 that caused the life changing financial losses to the partners..."

There are no grounds for reaching a conclusion that there is a conflict of interest. There is

nothing to suggest that the firm of solicitors which acted on the instructions of RBS several

years ago did so other than in a properly responsible manner or that, for any reason, the

firm cannot remain in that position.

Conclusions

[41]

The orders sought in the petition do not fall within the range dealt with by petition

procedure and can only competently be raised in an action. In relation to relevancy, there is

no relevant basis for the first and third craves in the prayer of the petition. There is just

enough to conclude that the second crave is based upon relevant averments. As to

prescription, the obligations apparently or potentially relied upon came into existence much

more than 5 years before the petition was raised and the fact that the petitioner took up the

various complaint procedures did nothing to interrupt the quinquennium. The petition is

therefore dismissed on the ground that it is not competent and, separately, that any

obligations relied upon have been extinguished by prescription.

Disposal

[42]

I shall sustain the first, second (in part) and fifth pleas-in-law for the respondent and

dismiss the petition, reserving in the meantime all questions of expenses.