SHERIFFDOM OF SOUTH STRATHCLYDE DUMFRIES AND GALLOWAY

F67/08

	JUDGMENT OF SHERIFF PRINCIPAL B A LOCKHART
	in the cause
	MARGOT JANE BROWN or ROBERTSON
	Pursuer and Appellant
	against
	JAMES WEIR ROBERTSON
	Defender and Respondent

Act: Ms Linda Brabender, Counsel, instructed by Messrs Turcan Connell

Alt: Cockburn, of Messrs Maxwell MacLaurin

DUMFRIES: 11 November 2008

The Sheriff Principal, having resumed consideration of the cause, refuses the appeal and sustains the sheriff's interlocutor of 4 September 2008 complained of; finds the pursuer and appellants liable to the defender and respondent in the expenses of the hearing before the sheriff on 28 August 2008 and of this appeal; allows an account of expenses to be given in and remits same when lodged to the Auditor of Court to tax and to report; certifies the cause as suitable for the employment of junior counsel.

NOTE:

Background to the appeal

1.            This is an action for divorce where the parties seek a variety of orders in relation to their matrimonial property. The pursuer sought interim interdict in terms of crave 6 which is in the following terms:

"To grant interim interdict against the defender, or any one on his behalf, from taking any steps to dissolve, whether by notice of dissolution or otherwise, the firm of J Robertson & Son (Becks) & Co, constituted by a limited partnership agreement between Granton Assets Ltd, James Robertson and James Weir Robertson dated 20 August and 10 September, both months in 1991 and as subsequently amended by (1) Minute of Agreement between Granton Assets Ltd, James Robertson, James Weir Robertson and the Buccleuch Estates Ltd dated 3 November and 5 December, both months in 1997; and (2) Minute of Agreement between Granton Assets Ltd, James Weir Robertson, Margot Jane Robertson and the Buccleuch Estates Ltd dated 13 and 17 December 2001."

2.            The sheriff, on the basis of ex parte statements on behalf of the pursuer, granted interim interdict on 19 August 2008. He heard counsel for the pursuer and appellant and solicitor for the defender on 28 August 2008 on a motion for the defender to recall the interim interdict. He granted that motion. The sheriff wrote a note giving reasons for his decision. The pursuer now appeals against that decision.

3.            As the sheriff pointed out in his note, interdict is an equitable remedy and is exercised only where there is a prima facie case to be tried and answered (National Dock Labour Board v Sheppard (Group) Ltd 1989 SLT 661 and Lux Controls Ltd v Healy 1994 SLT 1153). It is to prevent the infringement of a legal right or to prevent a legal wrong. In addition, the balance of convenience must favour the granting of interdict. The infringement of a legal right or a threatened wrong must be averred. Prejudice alone is not enough. Under partnership law, if one party to a partnership wishes to dissolve the partnership, provided he or she did so in terms of the provisions set out in any partnership agreement that existed, he or she would be entitled to do so. There would be no infringement of a legal right and no threatened wrong.

4.            Section 18 of the Family Law (Scotland) Act 1985 introduced a statutory basis for the granting of interdict in certain circumstances. The section is in the following terms:

"18(1) "Where a claim has been made (whether before or after the commencement of this Act), being -

(a)      an action for aliment,

(b)      a claim for an order for financial provision, or

(c)      an application for variation or recall of a decree in such an application or of an order for financial provision,

the person making the claim may, not later than one year from the date of disposal of the claim, apply to the court for an order -

(i)        setting aside or varying any transfer of, or transaction involving property effected by the other party not more than five years before the date of the making of the claim; or

(ii)      interdicting the other person from effecting any such transfer or transaction.

(2) Subject to subsection (3) below, on an application under subsection (1) above, for an order the court may, if it is satisfied that the transfer or transaction had the effect of, or is likely to have the effect of, defeating in whole or in part any claim referred to in subsection (1) above make the order applied for or such other order as it thinks fit."

Accordingly in an action for divorce, where there is a claim for aliment or financial provision, one party may apply to the court for an order interdicting the other party from effecting any transaction involving property. The court would only make such an order if satisfied that the transaction would have the effect of, or would be likely to have the effect of, defeating in whole or in part any claim for aliment or financial provision.

5.            The court must be satisfied that (a) what one party proposed to do was a transaction involving property and (b) the proposed transaction would have the effect, or would be likely to have the effect of, defeating in whole or in part any claim for aliment or financial provision by the other party. If satisfied on these two matters, provided the balance of convenience favoured such a course, the court would be entitled to grant interdict.

6.            I deal with these matters as follows:

(a) Whether what the defender proposed to do was a transaction involving property in terms of the 1985 Act

7.            In this case the concern of the pursuer and appellant is that the defender and respondent, or any one on his behalf might take steps to dissolve, whether by notice of dissolution or otherwise, the firm of J Robertson & Son (Becks) & Co, of which both parties are partners with Granton Assets Ltd.

8.            It was explained to me that the firm of J Robertson & Son (Becks) & Co had been constituted by three agreements:

(i) a limited partnership agreement between Granton Assets Ltd (a company owned by Buccleuch Estates Ltd), James Robertson and the defender and respondent dated 20 August 1991 and 10 September 1991 (5.6.79 of process). In terms of that document the partnership commenced on 28 May 1991. The parties married on 6 August 1983 and separated on 19 January 2004. Accordingly the defender and respondent's interest in the partnership, so far as obtained in terms of that agreement, was acquired by him during the marriage. In terms of section 10(4) of the 1985 Act it was matrimonial property. I was advised that the partnership entered into a lease with the Buccleuch Estates Ltd (5.6.78 of process) in respect of Becks Farm. The tenant in terms of that lease was the firm J Robertson & Son (Becks) & Co.

ii. Minute of Agreement (5.6.80 of process) between Granton Estates Ltd, James Robertson, the defender and respondent and the Buccleuch Estates Ltd dated 3 November 1997 and 5 December 1997. The agreement changed the constitution of the partnership and did so with the agreement of the heritable landlord in terms of the lease. It dealt with the retiral of the defender and respondent's father and provided for the transfer of the defender and respondent's father's share in the partnership to the defender and respondent. There was a dispute in the pleadings as to whether the transfer was a gift. The defender and respondent claimed it was. The pursuer and appellant claimed it was not. This could not be resolved until proof. Clause 2 of this agreement provides the basis for dissolution. It provided either the defender and respondent as the general partner or Granton Assets Ltd as the limited partner could dissolve the partnership but only on giving six month's notice. The second agreement provided that, in all other respects, the original partnership agreement remained in full force and effect. On the face of the pursuer and appellant's pleadings any interest acquired by the defender and respondent in terms of either of these two agreements was matrimonial property.

(iii) Minute of Agreement (5.6.87 of process) between Granton Assets Ltd, the defender and respondent, the pursuer and appellant and the Buccleuch Estates Ltd as heritable landlords dated 13 and 17 December 2001. It was that agreement which gave the pursuer and appellant her interest in the firm. It was after the date of marriage and before the separation. It was not disputed that it was matrimonial property. That third agreement continued the original limited partnership agreement except as varied by the second and third agreements. What the third agreement did not do was extend the right to dissolve the partnership to the pursuer and appellant. After 2001, the only parties who could dissolve the partnership were the defender and respondent and Granton Assets as the limited partner.

9.            It was argued by counsel for the pursuer and appellant that what was proposed was a transaction involving property. I was referred to para 16 of the sheriff's note:

"In my opinion it can be so described. The solicitors for the parties discussed the word "transaction" only in terms of its meaning. I was referred to no authority as to what the word might mean in the context of section 18. Accordingly it takes its ordinary meaning. To transact is to carry through negotiations, to have dealings, to do business, to treat and to manage or settle affairs. It is difficult to see that giving notice to dissolve a business relationship with another person can be other than these things. So I reject the submission by the defender that what he proposes is not a transaction to which section 18 applies."

Counsel for the pursuer and appellant adopted that position. She further argued that the respective interests of the parties in the partnership were matrimonial property. The value of that matrimonial property could be affected by notice of dissolution of the partnership. The serving of the notice was accordingly a transaction involving property.

10.        Solicitor for the defender and respondent maintained the position which he adopted before the sheriff that what was involved here was not a transaction involving property. When dealing with the dissolution of a partnership, one was not dealing with any change in the ownership of partnership property. During the subsistence of the partnership, the partners were trustees. When a partnership was dissolved, provided one was an equity partner, that partner is empowered to dispose of the assets of the partnership in order to effect an accounting and distribution to each party. I was referred to section 38 of the Partnership Act 1890:

"After dissolution of a partnership the authority of each partner to bind the firm and other rights and obligations of the partners continue notwithstanding the dissolution so far as may be necessary to wind up the affairs of the partnership and to complete transactions begun and unfinished at the time of dissolution, but not otherwise."

I was also referred to section 39 of the 1890 Act:

"On the dissolution of a partnership every partner is entitled, as against the other partners in the firm, and all persons claiming through them in respect of their interests as partners, to have the property of the partnership applied in payment of the debts and liabilities of the firm, and to have the surplus assets after such payment applied in payment of what may be done to the partners respectively after deducting what may be due from them as partner to the firm; and for that purpose any partner or his representatives may on the termination of the partnership apply to the court to wind up the business and affairs of the firm."

I was further referred to section 7 of the Limited Partnership Act 1907:

"Subject to the provision of this Act, the Partnership Act 1890, and the rules of equity and common law applicable to partnership, except insofar as they are inconsistent with the express provisions of the last mentioned Act, shall apply to limited partnerships."

Accordingly section 38 and 39 applied to limited partnerships. It was submitted that in terms of partnership law there would be no intromission with the property of the partnership by the service of a notice of dissolution.

11.        In my opinion the act of giving notice to dissolve a partnership is not a transaction involving property. Parties enter into partnership and in most cases commit their agreement to writing. Normally there are provisions whereby each party would be entitled to give notice of dissolution of the partnership. There was no material placed before me to the effect that the defender and respondent in terms of the partnership agreement which exists between the parties was not entitled in terms of that agreement to give notice of dissolution - in this case six months' notice.

12.        In Clive on Husband and Wife, fourth edition, at para 24.131 the learned author states, with reference to section 18 of the Family Law (Scotland) Act 1985:

"These provisions on anti-avoidance measures are basically similar to those in the pre-1985 Act law but are slightly wider in several respects. In the previous law, for example, the court could set aside only a written "settlement or disposition" and had no power to set aside, say, a gift of money. The use of the words "transfer" and "transaction" in the 1985 Act is designed to close this gap. Under the previous law, moreover, an applicant for an anti-avoidance order had to show that the settlement or disposition was made, or was about to be made, wholly or partly for the purpose of defeating his or her claim in whole or in part. It was difficult to prove the necessary purpose and so the new law adopts a more objective test relating to the effect which the transfer or transaction had or is likely to have. Section 18 only gives a power. The court is not bound to make an order under it and presumably would not do so if satisfied that a transaction was a genuine one made in good faith and with no avoiding intention."

The author envisaged the purpose of the provision was to extend the category of transaction which might be affected. The new provision would apply not only to settlements and dispositions, but also to gifts, and in particular gifts of money. I cannot accept that the learned author envisaged this provision being used as a vehicle to compel partners to a business partnership to remain in that relationship. It is perhaps significant that Professor Clive was one of the Law Commissioners whose report led to this particular provision being inserted in the Act.

13.        It is necessary to consider the appropriate definition of the words "transaction". It is described in the Oxford English Dictionary, fourth edition as:

"The action of passing or making over a thing from one person, thing or state to another; transference"

This would certainly appear to be the type of transaction to which Professor Clive was referring in the para 24.131 of his book to which I have referred.

In Chambers Twentieth Century dictionary "to transact" is defined as:

"to conduct, negotiate: to perform: to deal with: to have to do" and a transaction is described as "act of transacting: an agreement: a piece of business performed ..."

In Collins English Dictionary "to transact" is defined as:

"to do, conduct or negotiate (business, a deal etc)" and a "transaction" is defined as "1. something that is transacted especially a business deal or negotiation".

14.        I consider that the dicta of Professor Clive put the words "a transaction involving property" into the context of section 18 of the 1985 Act. He considered that the purpose of the provision was to reduce gifts or dispositions by one party in a divorce which might prejudice the ability of the other party to obtemper any order for financial provision. The mischief it was designed to attack was the giving away of money or property to the prejudice of the claimant. The making of gifts or giving of money could clearly be said to be "transactions involving property".

15.        In my opinion the giving of a notice of dissolution of a partnership is not in this context a transaction involving property. It is merely a notice indicating that one party to a contract of partnership proposes to give six months notice of dissolution of the partnership. It is something the defender and respondent is entitled to do in terms of the partnership agreement. I do not believe it was the intention of the legislation to prevent partners withdrawing from a business relationship which they did not wish to continue. A partnership may be making losses and dissolution would prevent further losses being incurred. When the dissolution actually takes place, as opposed to when the notice of dissolution is served, there may well be results from the dissolution of the partnership which might involve property. For example the lease of Becks Farm will be terminated. However, in my view that does not make the giving of notice of dissolution a transaction involving property.

16.        That decision alone has the result that the pursuer and appellant's claim for interim interdict fails and with it her appeal. I consider it is proper that I comment on the second issue relating to section 18(2) of the 1985 Act, namely:

(b) Whether the pursuer and appellants could, prima facie, established that the service of the notice would have the effect of, or would be likely to have the effect of, defeating in whole or in part any claim for aliment or financial provision.

17.        Counsel for the pursuer and appellant submitted that there was a prima facie case on this issue established in three separate ways:

i.               Both parties' interests in the partnership were matrimonial property. The effect of dissolution would be to reduce the resources available to the defender and respondent to make payment of the capital sum and aliment claimed by the pursuer and appellant.

It was said that effect of dissolution of the partnership would terminate the lease between the partnership and Buccleuch Estates Ltd (an action which, it should be observed, the defender and respondent was at his own hand entitled to do in terms of the documents constituting partnership agreement which I have set out in para 7 hereof). It was submitted that Becks Farm was the defender and respondent's principal source of income. He lived in Becks Farm. Termination of the lease would require him to find another source of income and somewhere to live which would fundamentally affect his resources. Even if he was able to meet the financial claim for a capital sum, his reduction in income would effect his ability to meet any periodical allowance. All that the pursuer and appellant required to do was, prima facie, satisfy the court that her claims would be defeated in part of likely to be defeated in part. Termination of the lease would adversely affect the ability of the defender and respondent to meet any financial award. It was said that this was a secure agricultural tenancy in terms of the Agricultural Holdings (Scotland) Act 2003. The benefit of this secure agricultural tenancy would be lost if the partnership were dissolved and this would likely to effect the defender and respondent's ability to fund any capital sum or periodical allowance. I was referred to the terms of section 8(2) of the Family Law Scotland) Act 1985 which provides:

"subject to section 12 and 15 of this Act, where an application has been made under subsection (1) above, the court shall make such order, if any, as is-

(b)      justified by the principles set out in section 9 of this Act and

(c)      reasonable having regard to the resources of the parties."

18.        I accept that, if the partnership is dissolved, certain consequences would flow therefrom. I accept that if the lease with Buccleuch Estates Ltd in respect of Becks Farm comes to an end, this could effect the defender and respondent's income. However, it seems to me that the purpose of section 18 is exactly what Professor Clive states, namely to reduce gifts and the mischief it was designed to attack was the giving away of money or property to the prejudice of a pursuer's claim. I do not consider it is the proper application of section 18 to say that the giving of notice to dissolve of a partnership, which the defender and respondent was entitled to give in terms of the partnership agreement, was likely to have the effect of defeating in whole or in part any claim for aliment or financial provision on the part of the pursuer. The partnership agreement, to which the pursuer and appellant was a signatory, entitles the defender and respondent to terminate the lease over Becks Farm. There may be good economic reasons for the defender and respondent to take this course. This was not canvassed with me.

ii. Dissolution of the partnership is likely to have an effect on the property Todlaw Farm - the farm for which the pursuer and appellant seeks an order for sale in terms of crave 5, and the defender and respondent seeks an order for transfer in terms of crave 1.

19.        As I understand the position in 2002/2003 Todlaw Farm was purchased jointly and equally by the pursuer and appellant and the defender and respondent. The funds for the purchase came from those of the partnership. This was reflected in the accounts for the year to 28 May 2003 by an identical debit to the capital accounts of the parties, then the two general partners. As the pursuer and appellant has contributed no capital to the partnership this has resulted in a large debit balance on her capital account. I cannot see how dissolution of the partnership would have any effect on the pursuer and appellant's position. If the farm was sold, she would be entitled to her equal share. If the sheriff decided to transfer her share the current value of the farm would be taken into account by the sheriff in making any determination of her entitlement.

iii. Dissolution of the partnership will have an effect on alimentary payments which have been deducted from the pursuer and appellant's capital account in the partnership.

20.        It was suggested on behalf of the pursuer and appellant that alimentary payments had been wrongly dealt with in the partnership accounts which had been produced and were shown as debits against the pursuer and appellants drawings, as opposed to alimentary payments. This may be the case. However, in my view this matter would be canvassed in evidence at a proof and, if there was substance in the submission for the pursuer and appellants, that would be recognised by the sheriff in the disposal of the case.

21.        Accordingly, even if I was satisfied that giving notice of dissolution of the partnership was a transaction involving property, I would not have been satisfied that a prima facie case had been made out that the serving of a notice of dissolution would have the effect of, or would likely to have the effect of, defeating in whole or in part any claim at the instance of the pursuer and appellant.

22.        I have to say that, had I taken the view that section 18 did apply to the present position, I would have accepted the view expressed by both parties that the balance of convenience would have favoured the granting of interim interdict.

23.        I was asked by parties to deal with the expenses of both the hearing on 28 August 2008 before the sheriff and the appeal before me. As the defender and respondent has been successful at both diets, I award the expenses in his favour. I am prepared to certify the cause as suitable for the employment of junior counsel.