Scottish Sheriff Court Decisions

Russell v. Van Overwaele [2005] ScotSC 15 (02 March 2005)

Alt: Edward

(Messrs Maclay Murray & Spens, Edinburgh)

DUMBARTON, 2 MARCH 2005

The Sheriff Principal having resumed consideration of the cause Refuses the appeal and Adheres to the interlocutor of the sheriff dated 4 September 2003; Certifies the appeal as suitable for the employment of junior counsel; Finds the defender and appellant liable to the pursuer and respondent in the expenses of the appeal procedure; Allows an account thereof to be given in and Remits same when lodged to the auditor of court to tax and to report thereon; thereafter Remits to the sheriff to proceed as accords.

BA Kerr

NOTE:

In this action decree in absence was granted and the sheriff refused the reponing note presented to him in an amended form superseding that originally lodged. He did so on the basis that he did not accept the stateability or soundness of any of the five lines of proposed defence set out therein and moreover was not impressed by the explanation given for the failure to enter appearance. In so doing he followed correctly the approach required by the decision in Forbes v Johnstone 1995 SLT 158. Against this refusal of her reponing note the defender has appealed and shortly before the hearing of the appeal there was lodged on her behalf a supplementary note of appeal whereby the court was asked to consider an additional ground of appeal. At the hearing of the appeal this supplementary note of appeal was allowed without objection to be received and I was informed that the former note of appeal was now superseded by it and the appeal was to be based entirely on the ground stated in it which set forth a proposed defence to the action founded on article 8 of the European Convention on Human Rights and to a lesser extent on article 1 of the first protocol thereto.

At the hearing on the reponing note several months previously the sheriff had been presented with an explanation for the failure to enter appearance (which was concerned chiefly with arrangements, or the lack thereof, for effective onward redirection of the defender's mail) and a set of five proposed defences to the action. The fifth and last of these asserted in bald terms that the granting of the craves in the writ would constitute an infringement of the defender's human rights under article 8 of the ECHR: an extra paragraph in the amended reponing note gave some details of the defender's state of health, etc. In his note appended to his interlocutor the sheriff dealt with this proposed line of defence on his last page (page 11) and rejected the argument underlying it for two reasons, indicating at the same time that the matter had not been explored in any great detail. At the hearing of the appeal the matter was explored in much greater detail, on the basis of the much fuller argument set forth in the supplementary note of appeal, but neither party sought to support the sheriff's two reasons for rejection of the argument as briefly presented to him and I myself do not consider them to be supportable. The position adopted for the respondent was that the sheriff had reached the correct result on the stateability or soundness of this line of defence albeit for the wrong reasons. At the appeal therefore the sole question for decision was whether this fifth line of defence had correctly been held by the sheriff to be unstateable and unsound or not, a matter of law to which the answer affected directly the correctness or otherwise of the sheriff's approach to his exercise of the "balancing discretion" desiderated by Forbes v Johnstone. In the event of my being persuaded that the sheriff had wrongly held the proffered defence to be unstateable then it would be for me to exercise of new that "balancing discretion" myself, but I was not addressed at any length if indeed at all on how I should go about doing so. The solicitor for the appellant adopted, so far as the explanation for the defender's failure to enter appearance was concerned, the second section (numbered "2") of the original note of appeal.

The propositions advanced for the appellant in support of the view that a stateable "human rights" defence existed to the action were based on the doctrine or principle of proportionality. It was said that the court must apply the provisions of the Bankruptcy (Scotland) Act 1985 in a manner compliant with the ECHR which involved the application of that doctrine of proportionality. It was pointed out that the present sequestration of the defender had in February 2000 proceeded on an original principal debt of £230.87 or thereby and that a shop which had formed part of the debtor's estate had been sold by the pursuer/trustee for £45,000 (an address at 74 West Clyde Street, Helensburgh). The charge (dated 15 November 1999) whereon the sequestration had proceeded had sought payment of £1573 in total and the debts due to other creditors (chiefly local authorities) which required to be satisfied out of the sequestration amounted to some £17,000. All of these debts (totalling around £18,500) could have been met out of the sale proceeds of 74 West Clyde Street had it not been for the expenses of administration, fees and other charges levied or incurred by the pursuer/trustee and in the circumstances the various charges, etc incurred in the administration of the sequestration were manifestly disproportionate to the amount of debt requiring to be satisfied out of it. From a "receipts and payments account" of the pursuer covering the period from 24 January 2000 to 23 January 2004 and a "proposed scheme of division" as at 13 November 2003 (produced as a schedule to the supplementary note of appeal) it was apparent that the expenses of realisation and administration of the estate amounted to £27,032.69; that the various fees to be charged, inclusive of remuneration to the pursuer, amounted to £46,612.49 (inclusive of VAT); and that according to a letter of 17 May 2004 additional time costs now amounted to £7,600. All this came to a grand total of £81,245.18 which was clearly disproportionate to the debts due. The pursuer/trustee it appeared, had not considered any other means of satisfying the creditors in respect of the debts due to them than pursuit of the present course of ingathering the whole of the debtor's estate including the castle in which she resided alone but whose sale would deprive the defender of her home. Apart from Forbes v Johnstone already mentioned I was referred to sections 31, 38, 39 and 40 of the Bankruptcy (Scotland) Act 1985 and later to section 3(7) (see below); to sections 3 and 6 and schedule 1 of the Human Rights Act 1998; and to paragraphs 9.34 and 9.35 of a textbook on human rights (entitled "A Practical Guide to Human Rights in Scotland", edited by Lord Reed) on the doctrine of proportionality, where particular emphasis was laid on the second paragraph at page 356 and the third bullet point in the third paragraph on the same page. It was suggested that the pursuer/trustee might be selling the debtor's property at a price lower than its true value in order to satisfy only a small amount of debt or that he might be running up excessive administration costs when regard is had to the amount of those debts due to the creditors: in either event he would be acting in a disproportionate manner and so offending against the principle applicable to regulate the degree of derogation from the rights conferred by the Convention. The ejection here of the appellant/defender/debtor from her home would be a disproportionate remedy, especially where it was apparent that the pursuer/trustee had himself become the most substantial creditor in the sequestration which was in effect being run for his benefit. The 1985 Act it was said makes provision for the duties of a permanent trustee and reference was made to section 40 wherein the definition given of "family home" covered in this case the defender's castle. Emphasis was also placed on section 3(7) as showing that the court had power on considering representations from the debtor as to the actings of the trustee to give such directions as it might think fit. The defence now proposed would lead to an examination of the trustee's actings in the sequestration and an investigation of the question why a sale of Knockderry Castle had now become necessary in order to satisfy debts of such small amount: the appellant reserved the right to challenge the level of the expenses and remuneration claimed by the pursuer/trustee and the manner in which they were allegedly incurred. The court must be satisfied that the implementation of the decree sought by the pursuer is compatible with the human rights of the defender and the sheriff here was obliged to take account of the doctrine of proportionality in deciding whether a stateable defence founded on article 8 of the ECHR was being advanced, which he had failed to do. When the doctrine was correctly applied it could be seen that there existed a stateable defence of which account had to be taken in carrying out the "balancing exercise" required by Forbes v Johnstone. That exercise had to come down in the defender's favour when the existence of a stateable defence was considered along with the explanation given for the defender's failure to enter appearance, she being unaware of the writ. The sheriff had accordingly fallen into error and the sheriff principal should now recall his interlocutor of 4 September 2003 and substitute an interlocutor granting the reponing note and remitting the cause to the sheriff for the fixing of a timetable for defences to be lodged and the case to proceed to an options hearing.

For the pursuer and respondent it was maintained that there was no basis for differing from the sheriff on the non-acceptability of the explanation proffered for the failure to enter appearance. The sheriff was correct to have found that the defender had in effect taken no meaningful steps to arrange her affairs so that she remained aware of events affecting her in Scotland while she was away in the south of England. Indeed the reasonable inference was that she had been seeking to achieve the opposite effect. Her position therefore on this matter was an unreasonable one which had to weigh in the balance against her. In any event service of the writ had been properly effected by sheriff officer on 19 June 2002, as demonstrated by number 1 of process. Section 40 of the 1985 Act had no application to the present circumstances since at the relevant date the defender/debtor was living in the castle by herself. On the matter of the supposed "human rights" defence (the fifth defence adumbrated in the amended reponing note) the sheriff had come to the correct conclusion albeit the reasons he had given in the note appended to his interlocutor were not good ones. There was here no breach of the defender's rights under article 8 of the ECHR and there was nothing intrinsically objectionable in someone being ejected from his/her home on account of debts due to others. In this connection I was referred to the cases of Keveling & Legerstee v The Netherlands (an unreported decision of the European Commission of Human Rights dated 10 September 1997 in an application numbered 31717/96); Meads & Ors v The United Kingdom (an unreported decision of the European Court of Human Rights dated 9 October 2001 in an application numbered 69471/01); and Jackson v Bell & Anr 2001 BPIR 612. Counsel for the respondent took no issue with the applicability here of the principle of proportionality but maintained that no sufficient basis of fact had been laid before the sheriff principal to bear out the contentions of the appellant founded on it: in other words it was not enough simply to make a claim, as had been done in this appeal, of disproportionality based on figures thrown up by accounts and other documents. What was required was some demonstration of how and why those figures had come to be there and in the present case they were due to the unreasonable attitude adopted by the defender/debtor throughout which had generated enormous expense. There was no proper basis here for saying that the trustee had behaved recklessly or improperly: on the contrary there had been a gross lack of co-operation on the debtor's part and it was wrong to assert by implication merely from figures without more that the trustee had run up costs disproportionate to the interests of the creditors. Section 3(7) of the 1985 Act (as amended) now allowed a debtor among others to complain of the actings of the permanent trustee but so far this had not yet happened in the present case and there had as yet been no proper challenge mounted to the incurring by the pursuer of the expenses and remuneration shown in the documents produced. Nor had any real suggestion been advanced as to what alternative route(s) the trustee might have followed. The proposed defence was essentially speculative and unclear and it could not be said that any stateable defence was being advanced. The sheriff had accordingly reached a correct result in refusing the reponing note and the sheriff principal should adhere to his interlocutor of 4 September 2003 and refuse the appeal.

In my opinion it is not enough in order to mount a stateable defence under article 8 in circumstances such as the present based on the doctrine of proportionality simply to point to figures set out in the accounts and schemes of division of a trustee in bankruptcy, observe that the expenses and fees incurred substantially exceed the debts due to the creditors and declare the former therefore to be excessive and disproportionate. Before the conclusion can be drawn that the trustee has acted in a manner which flouts the proportionality principle there must be asserted some colourable basis of fact for thinking that the charges levied in the conduct of the sequestration have been improperly imposed or incurred by the trustee: in other words there must be some positive assertion laid before the court that he has been acting improperly in the discharge of his duties with appropriate specification of how and when and in what respects he has so acted. No such averments or assertions are made here, neither in the supplementary note of appeal nor in what was said to me at the hearing of the appeal, and I am not prepared to accept the implied proposition that improper conduct on the part of the trustee is self-evident from an examination of the figures alone. When it is stated on the appellant's behalf in the present context that she reserves the right to challenge the level of the charges made by the trustee and the manner in which they have been incurred what is really being said is that the debtor is dissatisfied with the actings or decisions of the trustee. Such dissatisfaction is a matter for which express provision is now made in section 3(7) of the 1985 Act, whereby an application may be made to the sheriff who may inter alia annul or modify acts or decisions of the trustee, make orders or give directions. I am not willing to treat submissions made to me at the hearing of this appeal or statements made in the supplementary note of appeal as amounting to such an application, neither as a matter of procedure nor as a matter of substance. So far as substance is concerned they lack, as I have already observed, any positive assertion of specific misconduct on the part of the trustee in carrying out his duties. So far as procedure is concerned an application of the type envisaged by section 3(7) requires to be made by way of note in the sequestration process (see rule 12(1) of the schedule to the Act of Sederunt (Sheriff Court Bankruptcy Rules) 1996) and for this procedural requirement there is in my view good reason. Only by setting forth the matters complained of in such a note to be lodged in the sequestration process can proper notice be given of the allegations made against the trustee of improper acts or decisions and an appropriate opportunity be given for them to be answered specifically. In the present case the pursuer/trustee asserts, as his counsel stated in broad terms before me, that the large expense incurred in the sequestration has been brought out by the gross and persistent lack of co-operation exhibited toward the sequestration process by the debtor. For these disputed matters to be properly investigated a note setting forth the specific allegations of impropriety on the trustee's part and answers setting forth the specific failures of the debtor to co-operate, thus causing extra expense, are required. No such procedure has however been embarked upon, nor was any indication given to me that it was imminently about to be embarked upon, and as already stated above I am not willing to accept the bald assertion made to me in the present appeal as the equivalent of such a process. In my view the assertions made to me lack the elements of clarity and specification required to amount to a stateable or sound defence based on alleged breach of the doctrine of proportionality and consequent breach of the defender and appellant's human rights under article 8 of the Convention.

For the reasons given in the preceding paragraph no stateable or sound defence has yet been put forward to the present action and from that circumstance alone it follows in my view that the present appeal must fail. It might be that the following out of a proper procedure by way of application under section 3(7) could eventually lead to a finding by the court that the trustee in the present case has not acted in a satisfactory manner and it might be that if a sufficiently strong case to that effect were presented in proper form the Court of Session might be persuaded to suspend the present proceedings until that matter had finally been adjudicated upon. As matters currently stand however no such procedure under section 3(7) appears even to be in prospect and in that state of affairs I see no sufficient basis for calling the present proceedings to a halt and sending them back to the sheriff to become a defended action. Even if a sufficient and satisfactory explanation had now been laid before the court for the defender's failure to enter appearance at the outset (which in my opinion there has not: see below) that would not be enough to justify an exercise of the discretion conferred on the court in her favour by allowing the reponing note in the absence of a sound and stateable defence.

Although what has been said above is sufficient for the disposal of the appeal there are a number of matters raised in submission on which I should briefly comment. Before doing so however it is I think worthy of remark in the first place that there is nothing in the available papers nor in what was said to me at the hearing of the appeal to indicate that the concept of proportionality was even mentioned within the hearing of the sheriff at the hearing before him on the amended reponing note on 27 August 2003. It is also worthy of note that despite the submission that the trustee had failed to consider any course other than that now pursued by him in order to satisfy out of the debtor's estate the debts due to the creditors no concrete suggestion was advanced to me as to what suitable alternative course might or should have been followed by him.

The decided cases to which I was referred by counsel for the respondent (Keveling & Legerstee v The Netherlands; Meads v The United Kingdom) do not appear to me to be material to the issue of proportionality here discussed. They assert merely that the eviction of a person from his or her house or home in order to satisfy the debts due to the creditors of a bankrupt is not of itself a breach of the human rights conferred by article 8 of the Convention but is covered by the provisions of the second paragraph of that article concerning the protection of the rights of others. They say nothing about proportionality, nor is anything added in that regard by the decision in Jackson v Bell & Anr. If therefore no stateable or sound defence is made out here on the basis of the doctrine of proportionality (as I hold there has not been) the pursuer's present action seeking to obtain vacant possession of the castle falls within the second paragraph of article 8 and does not constitute an infringement of the defender's human rights thereunder. I should add for completeness that article 1 of the first protocol (concerning protection of property and an entitlement to peaceful enjoyment of possessions), to which no real separate reference was made in the submissions before me, does not in my view raise in the circumstances of the present case any separate considerations or matters for decision from those raised under article 8: the same issues of proportionality apply and in the absence of a sound defence based on that principle the present case falls within the proviso concerning deprivation of possessions in the public interest and subject to conditions provided for by law in the same way as it falls within the second paragraph of article 8.

Mention was made of section 40 of the Bankruptcy (Scotland) Act 1985 but it appears to me clear that none of the consents or authority referred to therein as prerequisites to the sale of a "family home" arise for consideration in the present case because the defender is the sole occupant of the castle and no spouse or children of her family reside there with her.

I was referred as narrated above to certain passages in the textbook "A Practical Guide to Human Rights in Scotland" (paragraphs 9.34 and 9.35 at pages 355 to 358) but I entertain some doubt as to whether the learned author of that chapter intended those passages to be referable to a situation of the type thrown up by the present case. They occur in a chapter devoted to consideration of public law and judicial review and are couched in terms apparently applicable primarily to administrative or governmental action having the effect of curtailing the rights or freedoms of citizens.

Turning now to the explanation proffered to the sheriff in the reponing note for the defender's failure to enter appearance at the outset and at the hearing thereon, the sheriff manifestly was unimpressed by what was urged upon him on her behalf (as appears from pages 7 and 8 of his note to the interlocutor of 4 September 2003). The more satisfactory the explanation given the more it will weigh in the balance favourably to the defender's interest in having the reponing note allowed. It is I think wrong since Forbes v Johnstone to speak or think of whether or not there is a reasonable excuse but an unsatisfactory explanation will do little or nothing to help in persuading the court to exercise its discretion in favour of the defender whose application is then likely to fail unless it appears that there is clearly a sound defence which will otherwise go untested. In the present case it is maintained that the defender was in fact unaware of the writ and that the sheriff erred in his assessment of the explanation given because he accepted that she was unaware of it but nevertheless discounted the explanation. It is however not enough to say simply that she was unaware of the writ as if that amounted of itself to an explanation: the question is why was she unaware of it and the answer seems to be a set of assertions to the effect that effective arrangements were for one reason or another not made for the onward forwarding of the defender's mail from her local post office on the Kilcreggan peninsula to her address(es) in the south of England while she was away from Knockderry Castle. Like the sheriff I find this profoundly unimpressive: it was incumbent on the defender to organise matters so that she kept in touch with her affairs and this she failed to do. Whatever problems may have existed "on the ground" in the immediate vicinity of the castle it would not have been difficult to see to it that matters were effectively regulated at a prior stage before any mail even approached the castle by instructing the local post office to forward it all to the English address(es). Having failed to take that relatively simple step it seems to me, in common with the sheriff, that the defender cannot properly complain that she never received the writ: had she fulfilled her own responsibilities in the matter she would have done so. In these circumstances I find the explanation proffered to be unimpressive and unsatisfactory.

When the approach desiderated in Forbes v Johnstone is applied and one consideration is balanced against another taking account of all the known circumstances I find, as the sheriff did, that the explanation for failure to enter appearance is unimpressive and that in addition no sound or stateable defence is currently placed before the court. In that situation there can be only one conclusion, namely that the court's discretion has to be exercised against allowance of the reponing note and the sheriff was correct to refuse it. For these reasons the appeal, which has been more in the nature of a re-hearing because of the different argument under article 8 of the ECHR which was presented to me, fails and will be refused.

It was agreed before me that in the event of the appeal being refused its expenses should follow success which they will do in favour of the pursuer and respondent. A motion was made for certification of the appeal as suitable for the employment of counsel which was not opposed and will be granted.

BAK