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Armstrong v. Forbes, [2003] ScotCS 4 (10 January 2003)

OUTER HOUSE, COURT OF SESSION
CA 55/95	OPINION OF LORD DRUMMOND YOUNG in the cause MARY VANCE ARMSTRONG Pursuer and Respondent; against ROBERT LINDSAY FORBES, Chartered Accountant, as Judicial Factor on the sequestrated estates of G Dunlop and Son, Defender and Reclaimer:   ________________

 

 

Pursuer and Respondent: Bovey, QC; Anderson Strathern W.S.

Defender and Reclaimer: Bennett; Morisons

10 January 2003

1. The pursuer avers that she and Michael Cameron Dunlop were spouses and were partners in the firm of G Dunlop and Son, Farmers, Baltersan and Clachan of Penninghame, Newton Stewart. The defender is the judicial factor on the sequestrated estates of that firm, having been appointed by interlocutor dated 11 February 1987. The pursuer has raised an action in which she concludes for declarator that she is entitled to ownership and occupation of the heritable property known as Clachan of Penninghame Farmhouse, Newton Stewart, free of any claims by the defender, by virtue of a joint minute entered into by her and Michael Dunlop in the course of a divorce action in the Court of Session, and that the defender is bound to grant a disposition of the property in her favour in implement of the foregoing entitlement. She further concludes for reduction of a decree granted by the Sheriff at Stranraer on 19 December 2001 for recovery of possession of Clachan of Penninghame Farmhouse, and for suspension and interim suspension of that decree. Finally, she concludes for interdict and interim interdict against the defender or anyone acting on his behalf from taking any steps to evict or eject her from Clachan of Penninghame Farmhouse.
2. The pursuer's averments in support of those conclusions are as follows. In a divorce action raised by the present pursuer against Michael Dunlop the parties entered into a joint minute in consequence of which decree of divorce was granted on 15 November 1988. That joint minute contained the following term:

"That the defender has relinquished and hereby irrevocably relinquishes his whole right, title and interest as one-half pro indiviso proprietor of the Clachan of Penninghame Farmhouse and relative garden ground and to the moveables presently contained therein and shall forthwith signify his irrevocable written consent to a Disposition to be granted by R. Lindsay Forbes, Esq, CA, Judicial Factor on the Sequestrated Estates of G. Dunlop & Son in favour of the pursuer of ALL and WHOLE the said dwellinghouse and relative garden ground (as presently laid out) together with all necessary servitude water rights to Clachan of Penninghame, Newton Stewart; said Disposition to be granted (with the formal consent of parties as beneficial owners if necessary) as soon as reasonably practicable hereafter. Notwithstanding any reasonable delay by the Judicial Factor in granting said Disposition, the defender has agreed and hereby irrevocably agrees that the pursuer shall be entitled to take immediate occupation of the said dwellinghouse, and upon taking such occupation the pursuer will assume sole responsibility for the upkeep of the said house and garden ground".

Thereafter, the pursuer avers, the parties to the joint minute and the defender proceeded in reliance thereon and in implement thereof. In 1989 the parties entered into correspondence to agree a plan of the property at Clachan of Penninghame Farmhouse for the purpose of a disposition by the defender in favour of the pursuer in implement of the joint minute. By letter dated 2 February 1989 the defender's agents invited the pursuer's agents to draft a disposition. Nothing appears to have followed that invitation. The pursuer avers, however, that she has occupied the property, which was dilapidated, and carried out improvement works at her own expense. As a result, she avers, its value has increased significantly. Although it is not averred in terms, it seems clear that the defender has allowed the pursuer to occupy the property and to carry out such works. The pursuer goes on to aver that Michael Dunlop has now represented to the defender that he does not wish to the bound by the clause of the joint minute quoted above. The pursuer avers that the defender has entertained that representation, and now seeks to claim the property for the factory estate and to dispute the pursuer's entitlement to receive a disposition of the property. On 19 December 2001 the Sheriff granted decree evicting the pursuer from the subjects. The pursuer then avers that, because there are no other claimants on the judicial factory estate apart from her former husband and herself, she is entitled in terms of the provision of the joint minute quoted above to receive a disposition of the property.

3. The pursuer further avers that, in seeking to dispose of property to which she is entitled, the defender is acting unlawfully. The pursuer's former husband has renounced his interest in the property, and there is accordingly no reason that it should not be transferred to the pursuer in accordance with the joint minute. The pursuer avers that the property is her home and that of her three adult daughters. Since a serious road accident and nervous breakdown, she requires the care of one or more of her daughters. Neither she not her daughters have any other place to live.
4. In relation to the Sheriff Court action, the pursuer avers that the Sheriff's decree of 19 December 2001 sanctions the unlawful conduct of the defender, and falls to be reduced accordingly. She states that, at the material times in 2001 and 2002 when the action was in dependence in the Sheriff Court, she was suffering from a mental breakdown in the form of chronic depression and was unable to give instructions to her lawyers. On 24 October 2000 she suffered a serious road accident. Reference is made to a number of medical reports. She states that, had she been in a position to do so, she would have instructed her lawyers as to the erroneous basis on which the action was proceeding. In the present proceedings she seeks suspension and suspension ad interim of the decree in question. I was referred to the medical reports referred to in the pursuer's pleadings. A report dated 16 January 2002 from Mr G. A. Nimon, a consultant orthopaedic surgeon, disclosed that she suffered serious injuries in a road accident on 24 October 2000, including a fractured spine, sternum and ribs and a lacerated bowel. Since discharge from hospital, she has suffered from migraine attacks, decreased hearing and visual blurring and constant neck pain. The reports included certificates from the pursuer's general practitioner, dated 23 November 2001 and 13 February and 14 May 2002, to the effect that she was not fit to attend court by reason of her suffering from severe anxiety and depression. Finally, reports were produced from a Dr J. R. K. Neil, dated 6 November 2001 and 13 February and 14 May 2002, to the effect that the pursuer had been attending him since April 2001 for the treatment of post traumatic stress disorder following the road accident. Dr Neil stated that the pursuer suffered from a number of symptoms of the disorder, including panic attacks, flashbacks, insomnia, bouts of uncontrollable sobbing, poor concentration and symptoms suggestive of a depressive illness. As a result she had been unable to attend to court matters over the year since the accident. The report of 13 February 2002 specifically stated that the pursuer was "totally unfit to attend to Court Matters and to arrange representation on her behalf". A similar statement was made in the report of 14 May 2002.
5. Counsel for the defender stated certain further facts about the conduct of the Sheriff Court litigation. The action was raised in September 2000. On 1 November 2000 the present pursuer's agents had written to the present defender's agents to suggest that the action should be sisted. No suggestion was made that the present pursuer was unable to give instructions at that time. At a hearing on 8 November 2000 the present pursuer's daughter had appeared, and stated that the present pursuer intended to defend the action. The Sheriff nevertheless granted decree on that occasion. Thereafter the Sheriff's decision was appealed to the Sheriff Principal, apparently on the present pursuer's instructions. The present pursuer was permitted to state a defence, and the appeal was allowed and the case remitted to the Sheriff in May 2001. By this stage the present pursuer was represented by agents. A proof was fixed before the Sheriff on 13 November 2001, but on that occasion the present pursuer's agents appeared and intimated that they were withdrawing from acting further. Thereafter a peremptory diet was fixed for 14 December 2001. New agents, Messrs John Henderson & Sons, appeared for the present pursuer at that diet, although she was not present. The Sheriff stated that the action should be concluded that day, and he suggested that a joint minute of admissions should be agreed between the agents acting for the parties. Such a joint minute was in fact agreed between the agents. The Sheriff was not able to deal with the case that day, however, and it was continued until 19 December 2001. At that hearing Messrs John Henderson & Son indicated that the present pursuer had terminated their appointment as her agents. The Sheriff allowed the proof to proceed as undefended, and granted decree. The present pursuer then marked an appeal to the Sheriff Principal, but there was no appearance on her behalf at the time of the hearing of the appeal, with result that the Sheriff's decree of 19 December 2001 remained.
6. Counsel for the defender also summarised the history of the judicial factory and litigation between the parties. The defender had been appointed judicial factor on the partnership estate in 1987. In 1989 he had been willing to grant a disposition of the farmhouse, and on 2 February 1989 the defender asked the pursuer's agents for a draft disposition. No reply had been received, and in 1992 the title deeds had been returned. Counsel stated that the pursuer had refused to take title from the defender because she did not recognise his appointment. On 15 February 1999, however, the pursuer's agents had written to say that she wanted title. At that stage the defender had decided that he should not grant title because there were insufficient funds in the judicial factory. At the same time the pursuer's former husband had claimed that he was not bound by the joint minute because of a breach of paragraph 10 thereof; that paragraph provided that neither party would take steps, by use of legal process or otherwise, to impede or interfere with the implementation of the joint minute or with the sale of the assets of the partnership by the judicial factor.
7. Litigation between the parties began in July 1987, when the pursuer had refused to remove from another farmhouse to which the partnership was beneficially entitled; the defender had raised successful proceedings for her removal. Thereafter the pursuer had moved a mobile home on to the land, and in July 1988 the defender had obtained interim interdict against her entry on to the lambs. Subsequently, in May 1994, the pursuer had attempted unsuccessfully to have the defender removed from office. On 9 September 1994 the defender had obtained interim interdict against the pursuer in the Court of Session, to prevent her from obstructing him in marketing and selling the land to which the partnership was beneficially entitled. In December 1994 the pursuer obtained interim interdict against the defender's selling the land, but in doing so she did not mention the interdict of 9 September 1994, and the interdict was subsequently recalled. A reclaiming motion was refused on 13 March 1996. On 13 February 1996 the pursuer had been ordered by the Court of Session to remove livestock, and when she failed to do so she was ordained to appear at the bar. When she failed to do so Lord Milligan ordered her apprehension, and she was sentenced to 60 days' imprisonment for contempt of court. In March 1996 the defender obtained a further interim interdict against the pursuer and her family, to prevent them from obstructing the removal of livestock. Finally, the present dispute had arisen in July 2000.
8. The case called before me in the vacation court on 17 July 2002, on a motion by the pursuer for suspension ad interim of the Sheriff's decree of 19 December 2001 and for interim interdict against the defender's taking any steps, except in the present process, to evict or eject the pursuer from the Clachan of Penninghame farmhouse. Counsel for the pursuer referred to the joint minute entered into in the course of the divorce action, and contended that it was the source of the pursuer's claim to the farmhouse. The pursuer and Michael Dunlop were the only persons interested in the farmhouse, and the result of the joint minute was that Mr Dunlop renounced his one-half share. In relation to the Sheriff Court decree, counsel submitted that the defender, as an officer of the Court, was still obliged to act lawfully; consequently he had to give effect to the pursuer's rights, regardless of the decree in his favour. In any event the pursuer had been unable, for the reasons disclosed in the medical reports and certificates, to present an adequate defence to the Sheriff Court action. Consequently the Sheriff's decree resulted in an injustice to the pursuer. Reference was made to Bain v Hugh LS McConnell Ltd, 1991 SLT 691, as authority for the proposition that a decree might be reduced in exceptional circumstances if reduction is necessary to produce substantial justice. For that reason counsel submitted that the pursuer had a prima facie case. So far as the balance of convenience was concerned, the farmhouse at Clachan of Penninghame was the home of the pursuer and her daughters. Eviction would have serious consequences for the pursuer.
9. Counsel for the defender, in addition to providing the statements of fact set out in paragraphs [5], [6] and [7] above, submitted that interim suspension and interim interdict should be refused. He submitted that the pursuer's pleadings did not disclose a prima facie case. Interim suspension of the Sheriff's decree of 19th September 2001 was essential to the pursuer's case. In the absence of exceptional circumstances, however, suspension was only competent if no other means of appeal or review were available. Reference was made to Adair v Colville & Sons, 1926 SC (HL) 51, and to Ali v Ali, 2001 SC 618. In the present case a right of appeal to the Sheriff Principal and to the Court of Session had been available, and there were no exceptional circumstances. Furthermore, the joint minute relied upon by the pursuer did not give rise to any contractual liability, and in any event the pursuer's former husband had claimed that he was not bound by the joint minute because the pursuer was in breach of clause 10 thereof. Thus there was no obligation on the defender to dispone the farmhouse to the pursuer. So far as the balance of convenience was concerned, counsel submitted that the accounts of the judicial factory disclosed a deficit on the cash account. The judicial factory was only in surplus if the farmhouse were taken into account. I deal with the financial position of the judicial factory below in paragraph [13]. In addition, the pursuer had delayed in raising the present proceedings; the present action had been raised in December 2001, but had not called. Finally, counsel submitted that the present action was incompetent because raising it involved the breach of an interim interdict pronounced by Lord Clyde on 9 September 1994. That interdict prohibited the present pursuer from obstructing or attempting to obstruct the pursuer in his attempts to market and sell the heritable property of the sequestrated estates of the partnership. Raising the present action, it was said, involved a contravention of that interdict.
10. The defender's argument on competency appeared to me without foundation. On 9 September 1994 Lord Clyde pronounced an interlocutor which interdicted the present pursuer

"from obstructing or attempting to obstruct the [present defender] in his attempts to market and sell the heritable property of the sequestrated estates of the firm of G Dunlop & Son... in any way, and in particular by approaching the [present defender], his agents and professional advisers, and any prospective purchasers, and from issuing leaflets or any other printed material, the contents of which may be apt to impugn the [present defender's] right to sell the aforesaid subjects, or which may otherwise dissuade such prospective purchasers from prosecuting their interests in the purchase of the aforesaid subjects, or from performing any other act whether physically or verbally, which may have the effect of preventing the marketing and sale of the aforesaid subjects, or which may depress the market therefor, or diminish the price obtained in such a sale".

It is clear from the full terms of that interlocutor that it was concerned with attempts by the present pursuer to approach the present defender and his agents and advisers and prospective purchasers, in order to dissuade the present defender from attempting to sell the heritable property and prospective purchasers from attempting to make offers for it. It was not in my opinion intended to prevent the present pursuer from maintaining a bona fide defence to proceedings brought against her, or from raising bona fide proceedings in court to assert her rights in law. For that reason I am of opinion that the raising of the present action is not struck at by the interdict.

11. The question of whether the pursuer has made out a prima facie case I found considerably more difficult. The pursuer requires to demonstrate two matters: that she has a legal right to a conveyance of the farmhouse at Clachan of Penninghame, and that, in furtherance of that right, she is entitled to suspension of the Sheriff's decree of 19 December 2001. On the first of those matters, the pursuer founds on the joint minute concluded between herself and her former husband in 1988. Prior to 1988 Clachan of Penninghame farm, including the farmhouse, was held by the pursuer and her then husband jointly as trustees for the partnership of G Dunlop & Son. Clause 6 of the joint minute provided as follows:

"That [Michael Dunlop] has relinquished and hereby irrevocably relinquishes his whole right, title and interest as one-half pro indiviso proprietor of the Clachan of Penninghame Farmhouse and relative in garden ground and to the movables presently contained therein and shall forthwith signify his irrevocable written consent to a disposition to be granted by H. Lindsay Forbes, C.A., Judicial Factor on the sequestrated estates of G. Dunlop & Son in favour of [the present pursuer] of ALL and WHOLE the dwellinghouse and relative garden ground (as presently laid out) together with all necessary servitude or water rights to Clachan of Penninghame, Newton Stewart: said disposition to be granted (with the formal consent of parties as beneficial owners if necessary) as soon as reasonably practicable hereafter".

There followed a provision entitling the present pursuer to take immediate occupation of the farmhouse.

12. The effect of clause 6 is in my opinion as follows. Prior to the date of the joint minute the pursuer and her then husband owned the farmhouse jointly, but on trust for the firm of G. Dunlop & Son. They were the sole partners in the firm. At that time the firm was understood to be absolutely solvent, in the sense that its assets were thought to be sufficient on realisation to cover its liabilities. In those circumstances the pursuer and her then husband were in my opinion entitled to direct the disposal of the farmhouse, provided that that did not compromise the solvency of the firm. It is a general principle of trust law that beneficiaries of full legal capacity who are entitled to the fee of trust estate may at any time compel trustees to make over the trust property to them: Miller's Trustees v Miller, 1890, 18R 301; Yuill's Trustees v Thomson, 1902, 4 F 815. In my opinion that principle is capable of applying to cases where the trust relates to partnership property; the rationale of the rule, relieving those beneficially entitled to the property of unnecessary trust administration, applies equally to cases involving a partnership. In the present case, the pursuer and Michael Dunlop were jointly entitled to the fee of the farmhouse. Provided that the firm and the judicial factory of its estate were solvent, they were accordingly entitled to direct that the fee of the farmhouse should be disposed of. In clause 6 of the joint minute, I am of opinion that they agreed that it should be made over to the present pursuer, and they directed the defender as judicial factor on the partnership estate to give effect to that agreement. In my view the principle in Miller's Trustees applies in these circumstances, and the defender as judicial factor was obliged to give effect to the wishes of the partners, who were the beneficiaries of the partnership estate. He was thus obliged to grant a disposition of the farmhouse to the present pursuer. Nothing has happened since 1988 to alter the agreement contained in clause 6, or to revoke the direction contained in that clause. Counsel for the defender submitted that the pursuer's former husband had declared that he was no longer bound by the joint minute because the pursuer had been in breach of clause 10 thereof. Clause 10 provided that neither party would take any steps by use of legal process or otherwise to impede or interfere with the implementation of the joint minute or with a sale of the estate of the partnership by the judicial factor. It was not submitted, however, that the pursuer's former husband had rescinded the joint minute, and indeed it might be difficult for him to do so because many of the provisions of the deed had clearly been implemented. In these circumstances, I consider that clause 6 of the joint minute is still binding, and I attach no significance to the attitude of Michael Dunlop to either the joint minute or the subsequent actings of the pursuer. Counsel for the defender further referred to the failure of the present pursuer or her agents to take steps to obtain a disposition of the farmhouse. While that failure might in certain circumstances be relevant to the balance of convenience, it does not appear to have any bearing on the pursuer's right to the subjects. That right could be extinguished by prescription, but the long negative prescription, which applies to obligations relating to land, has not expired. Otherwise, nothing has happened to destroy the pursuer's right.
13. The agreement and direction contained in clause 6 are, however, dependent for their effectiveness on the partnership's remaining solvent. If the partnership becomes insolvent, it is obvious that the creditors must be paid in full before any partnership property is made over to the partners. Counsel for the defender submitted that the judicial factory was already insolvent. He stated that the balance of funds in the judicial factory estate as at 28 February 2002, excluding the farmhouse at Clachan of Penninghame, was £40,000. The debts due by the estate comprised fees due to Morison Bishop, Solicitors, amounting to £17,806, fees due to Hewats, Solicitors, amounting to £9,847, and fees due to the defender as judicial factor amounting to £4,000. In addition, further fees for work to date were estimated at £10,000. That was a total of £41,647, which excluded fees for work performed in future. Counsel for the pursuer submitted that, if the estate were insolvent, the main reason was that extensive payments had been made by the defender to Michael Dunlop. The pursuer should not be penalised for those payments, standing the clear agreement that she should receive the farmhouse. He further stated that, if the estate were rendered insolvent, the pursuer could obtain capital to ensure the solvency of the judicial factory. I formed the view that the financial position of the judicial factory was not entirely clear, as the debts alleged by counsel for the defender included an estimated figure of £10,000. At worst, the financial position of the factory was one of doubtful solvency. In that event, however, it appeared to me that the pursuer should be given an opportunity to provide the necessary funds to ensure the solvency of the judicial factory. The joint minute involved an instruction to the defender to make over the farmhouse to the pursuer, and I am of opinion that the pursuer should be given a reasonable opportunity to secure the conditions necessary for the implement of that instruction. That includes securing the solvency of the judicial factory. The sum required to achieve that did not appear to be particularly large, and I thought it quite likely that the pursuer could meet the necessary condition. In addition, it appears from the defender's account of charge and discharge for the year ended 28 February 2002 that £15,000 was made over to Michael Dunlop during that year. He was a party to the agreement contained in the joint minute. It is not obvious why the pursuer's right to the farmhouse should be compromised by distributions made to the other partner. For these reasons I formed the view that the state of solvency of the judicial factory was not a bar to the implement of the instruction contained in paragraph 6 of the joint minute, although funds might be required from the pursuer to enable such implement to take place.
14. The second matter that the pursuer must establish in order to have a prima facie case is that she is entitled to suspension of the Sheriff's decree of 19 December 2001. On this matter, I am of opinion that the relevant principles are those stated in Bain v Hugh LS McConnell Limited, supra. In that case an action for damages raised in the Sheriff Court was dismissed by the Sheriff ex proprio motu. The pursuer appealed to the Court of Session. The parties agreed that the Sheriff had acted ultra vires, and that the appeal should not be opposed. The pursuer's agents, however, failed to enrol a motion giving effect to that agreement, and to lodge the necessary papers for the appeal. The pursuer was deemed to have abandoned the appeal. The pursuer then raised a further action seeking reduction of the deemed abandonment of the appeal and of the Sheriff's interlocutor. The defenders argued that the action was incompetent, because the abandonment did not fall within the class of acts which could be a reduced, and reduction of the interlocutor was incompetent because other means of review, in the form of an appeal, were provided and had not been taken advantage of. The Second Division held that the action was competent. LJC Ross stated

"In our opinion, it is incorrect... that reduction will never be competent where other means of review have been prescribed, and these means have either been utilised or parties have failed to take advantage of them. It is, in our opinion, well established that a decree may be reduced in exceptional circumstances if the reduction is necessary to produce substantial justice".

The court held that the pursuer's pleadings revealed exceptional circumstances which would justify reduction.

15. In the present case the pursuer avers that at the material times in 2001 and 2002 when the Sheriff Court action was independence the pursuer was suffering from a mental breakdown in the form of chronic depression and was unable to give instructions to her lawyers. That averment is supported by the medical reports summarised in paragraph [4] above. She further avers that, had she been in a position to do so, she would have instructed her lawyers that the Sheriff Court action proceeded on a erroneous basis. If those averments were proved, they would in my opinion be sufficient to allow the pursuer to reduce the Sheriff's decree on the principle laid down in Bain v Hugh LS McConnell Limited. The circumstances of the pursuer's mental breakdown and chronic depression were exceptional. If the statements made in the medical reports were proved, they would in my opinion disclose that the pursuer was incapable of giving adequate instructions for the defence of the action. If that were so, I am of opinion that substantial justice requires that the pursuer should be entitled to reduce the Sheriff's decree of 19 December 2001. That is in my opinion sufficient to establish a prima facie case.
16. It remains to consider the balance of convenience. If the Sheriff's decree of 19 December 2001 remains in force, the pursuer is liable to be evicted from her home. In my opinion that circumstance is decisive by itself; no inconvenience to the defender in the administration of the judicial factory can compare with the loss of a home. I should add that the pursuer's counsel, both in averment and in submission, made reference to article 8 of the European Convention on Human Rights, which provides that everyone has the right to respect for his private and family life and his home. In the circumstances of the present case, that provision could not in my opinion confer a separate substantive right of action. Nor is it necessary in my view to take it into account in assessing the balance of convenience; the broad principles of the common law are more than sufficient to protect such rights as the pursuer has in her home.
17. For the foregoing reasons I decided that the pursuer had established a prima facie case and that the balance of convenience favoured the grant of interim suspension and interim interdict. I accordingly pronounced the interlocutor of 17 July 2002, which ad interim suspends the decree of 19 December 2001 for recovery of possession of Clachan of Penninghame farmhouse and ad interim interdicts the defender from taking any steps, except in the present process, to evict or eject the pursuer from the farmhouse.