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	Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Unity Trust Bank Plc v Frost & Anor [1999] ScotCS 308 (30 December 1999) URL: http://www.bailii.org/scot/cases/ScotCS/1999/308.html Cite as: [1999] ScotCS 308

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The pursuer in this action is Unity Trust Bank plc ("the Bank") and the defenders are Martin Frost ("Mr Frost") and Linda Stewart Anderson or Frost ("Mrs Frost"). The action was originally raised in the Sheriff Court at Jedburgh by Initial Writ which was lodged on 23 March 1994 containing a pecuniary crave only. On 20 October 1994 the sheriff remitted the cause to the Court of Session. Even by then there had been a troubled series of events in connection with both the state of the written pleadings and the proceedings before the sheriff. When the case called before me on the procedure roll the parties were much at variance about these events and the interpretation to be placed on them. It is sufficient to say that after a great deal of discussion and investigation of the process (which is both voluminous and chaotic) the parties were agreed that a record, which is stamped as having been received in the Sheriff Clerk's office at Jedburgh on 29 June 1994 and marked as No.9 of process, was thereafter before the sheriff. The significance of this record, which I shall discuss more fully in due course, is not only that the principal action is defended, but also that there are counterclaims by both Mr and Mrs Frost.

The history of the action in this Court has been no less troubled. Perhaps the only event of significance for present purposes is that by interlocutor of 6 September 1996 Lord Cameron of Lochbroom allowed counterclaims for Mr and Mrs Frost to be received and marked Nos.31 and 32 of process. In due course a closed record, No.52 of process, was lodged on 28 November 1997. When the case called before me on the procedure roll, this was the version of the pleadings to which the parties directed their respective submissions. It is a rambling document which conspicuously fails in the purpose which it is intended to serve, which is that the parties should give to each other and to the Court fair notice of the cases to be made by them in such a way as to enable the issues between them to be clearly identified. I have read the closed record repeatedly, but there is still much of it of which I am unable to make sense. I regard it as a consolation that this was a difficulty which was obviously shared by counsel for the Bank and by Mr Frost, who represented himself and Mrs Frost, during the course of the debate.

The Initial Writ now contains five craves. The Bank seeks (1) payment by Mr and Mrs Frost of £306,178.80 with interest from 9 March 1994; (2) declarator that Mr and Mrs Frost are bound in terms of a personal bond dated 25 May 1989 and recorded in the Books of Council and Session on 5 May 1994 granted by them in favour of the Bank, and that the amount resting owing by Mr and Mrs Frost to the Bank as at 9 March 1994 is £306,178.80; (3) declarator that Mr and Mrs Frost are bound in terms of a Standard Security dated 25 May 1989 and recorded on 3 March 1993 granted by them in favour of the Bank over the heritable subjects known as Edenside House, Kelso, Roxburgh and that the Bank is entitled to enter into possession of the said subjects and to exercise in relation to them all other powers competent to a creditor lawfully in possession of security subjects by virtue of section 20 of the Conveyancing and Feudal Reform (Scotland) Act 1970; (4) decree ordaining Mr and Mrs Frost to remove from the said subjects; and (5) declarator that Mrs Frost is bound in terms of the Standard Security dated 19 February 1993 and recorded on 3 March 1993 granted by her in favour of the Bank over the heritable subjects known as Langlands Mills, Newtown St Boswells, Roxburghshire. The gist of the Bank's averments appears to be that during 1989 it lent £210,000 to Mr and Mrs Frost. By 9 March 1994 the sum owed by Mr and Mrs Frost to the Bank, inclusive of interest, was £306,178.80. The Bank relies on the personal bond referred to in the second crave and a certificate of balance dated 9 March 1994. Mr and Mrs Frost appear to admit receipt of the sum of £210,000, but deny that it was borrowed from the Bank. They advance various grounds for resisting payment, of which I mention only two. The first of these is that the Bank in any event has been paid, and the second is that Mr and Mrs Frost are entitled to retain any sum due to the Bank pending resolution of their counterclaims. The conclusions in the counterclaims are the same as each other, except in one respect. In terms thereof Mr and Mrs Frost conclude (1) for declarator that the personal bond and Standard Security of 25 May 1989 are an absolute nullity; (2) for reduction of the personal bond and both Standard Securities; (3) for payment of £2,000,000 with interest from 25 November 1989; (4) for declarator that the personal bond and Standard Security of 25 May 1989 were part of a larger agreement which the Bank breached by its failure to deliver funds as promised; (5) for the restitution of Mr and Mrs Frost's "private (as opposed to assigned) financial position" as at 30 June 1989 being the sum of £5,000,000 or such lesser sum as the Court might determine with interest from 30 June 1989; (6) for the restitution of Mr and Mrs Frost's "corporate as per the assigned financial obligations" due by the Bank as at 30 June 1989 and "as per the assignment made at later dates as condescended upon", being the sum of £8,000,000 or such lesser sum in whole or in part as the Court may determine with interest from 30 June 1989; (7) for declarator that the Bank has defamed Mr Frost and that Mr Frost is entitled to insist that the Bank, either solely or jointly with or as a manager or agent has done so in a malicious and harmful manner; (8) for payment to Mr Frost by the Bank of the sum of £1,000,000 or such greater or smaller sum as the Court shall deem proper with interest from 29 August 1994; (9) for interdict against the Bank attempting to take possession of any property owned by Mr or Mrs Frost and for interim interdict; and for expenses. Mrs Frost has an additional tenth conclusion, which is for payment by the Bank to her of the sum of £364,500 with interest from 25 May 1989. The averments in support of these conclusions start with this statement:-

There then follow averments, the essence of which, as I understand it, is that in 1989 the Bank agreed to lend money (in addition to the £210,000 already referred to) to enable various projects involving Mr Frost, Mrs Frost, Mr Caine and the abovementioned companies to proceed. The Bank then failed to lend the money which it had agreed to lend, and thereby failed in certain duties allegedly owed to Mr Frost, Mrs Frost, Mr Caine and these companies, with resulting financial loss to each of them. There are further claims in respect of debts alleged to be due by the Bank. There are also claims in respect of personal injuries allegedly suffered by Mr Caine and in respect of alleged defamation of Mr and Mrs Frost by the Bank. One averment, of particular significance, is to do with the Bank's statutory lending ratios and the involvement of the Bank of England, which resulted in the loan's not being made.

Before I turn to the arguments which were advanced to me, I should mention that there was also another action in this Court at the instance of Mr and Mrs Frost against the Bank. The summons that action was signetted on 22 July 1994 and I assume it was served shortly thereafter. In it Mr and Mrs Frost concluded for reduction of the personal bond and Standard Securities, for payment by the Bank of £821,582.36 with interest from 25 November 1989, for interdict to prevent the Bank from taking any steps to eject Mr and Mrs Frost from the property at Edenside House and Mrs Frost from the property at Langlands Mill, and for expenses. During the course of the procedure in that action, Mr and Mrs Frost sought inter alia to amend their pleadings by adding several further conclusions and averments, roughly on the same lines as the present counterclaims, but this was refused by Lord Hamilton by interlocutor dated 20 October 1995. On 2 February 1996 the Temporary Lord Ordinary, J M S Horburgh, Q.C., dismissed the action, but Mr and Mrs Frost reclaimed, and by interlocutor dated 11 October 1996 the First Division inter alia recalled the Temporary Lord Ordinary's interlocutor and allowed to parties a preliminary proof before answer of their respective averments on record restricted to the issue of whether or not the defenders (the Bank) knew during the period between 1 January 1989 and 25 May 1989 that they had exceeded their lending ratios. A diet for this preliminary proof was fixed to take place on 5 March 1997, but on that date Lord Osborne discharged the diet and gave effect to a Minute of Abandonment which had been lodged by Mr and Mrs Frost. The present action is accordingly the only one which is still current between the parties.

The procedure roll debate took place in various instalments, during which I heard wide-ranging and frequently acrimonious submissions. I shall refer to only such of these submissions as appear to me to have a direct bearing on the motions which were advanced. I find that I can deal with the motions relating to the principal action quite briefly. Mr Frost moved me to dismiss the principal action, while counsel for the Bank moved me to allow a preliminary proof in the same terms as had been allowed by the First Division in the action at the instance of Mr and Mrs Frost, together with a preliminary proof on any other matter which I felt able to identify as being suitable for that procedure. The ground advanced by Mr Frost for seeking dismissal was as follows. Under the provisions of the Insolvency Act 1986 applicable to England and Wales, he had entered into an individual voluntary arrangement ("IVA") which was approved by his creditors on 16 January 1997. The IVA was endorsed by a Court in England in March 1997, thereby making the parties to the arrangement contractually bound. The Bank had chosen to enter into the arrangement and to vote at the meeting of creditors on 16 January 1997, at which time it valued its security at £200,000. At a meeting in May 1999 the Bank had opposed the IVA and had voted as creditors in the sum of £793,807. By voting in this way the Bank had effectively voted away its security and was now an unsecured creditor. Moreover, without the approval of the Court in England they had no locus in the Scottish proceedings. The situation could only be remedied by an application to the High Court in England. Mr Frost referred to certain provisions of the Insolvency Rules 1986. Some of what I have summarised here is set out in Mr Frost's pleadings, but the pleadings do not refer to the meeting in May 1999 or the alleged consequences of the Bank's participation as a creditor at that meeting. The averments, so far as they go, are denied by the Bank. The straightforward answer to the motion for dismissal is therefore that, irrespective of whether there is any merit in it, the point is not one which arises from the Bank's pleadings and is not therefore one which is capable of leading to dismissal as a matter of relevancy at this stage. If there is any merit in the point, it will have to be made the subject of appropriate averment, extending to the events at the meeting in May 1999, and the consequences thereof under English law, which would in turn require to be averred and proved as a matter of fact in this Court. As I understood it, Mr Frost agreed that if I was against him on his motion for dismissal of the principal action there should be a preliminary proof as suggested by counsel for the Bank. Having considered the pleadings and the submissions addressed to me I have decided to allow a preliminary proof also on the question whether the Bank (as distinct from any other lender) lent £210,000 to Mr and Mrs Frost, and the question whether, if so, Mr and Mrs Frost have repaid the whole or any part of that sum to the Bank.

I turn now to the submissions in respect of the counterclaim. Counsel for the Bank moved me to dismiss it in its entirety, while Mr Frost moved me to grant decree de plano in terms of the conclusions of the counterclaim in their entirety. I shall discuss first the submissions of counsel for the Bank. I can dispose of one point at the outset. Initially he based a submission, under reference to Rule 27.1 of the Rules of Court, on the fact that no title to the claims allegedly assigned to Mr Frost had been exhibited by him. This was dealt with in the course of subsequent procedure by the lodging by Mr Frost of certain documents, which led counsel for the Bank to state to me that he did not insist further on the point at this stage and that the sufficiency of Mr Frost's title to the claims allegedly assigned to him could only be determined after inquiry. This being so, I need not discuss the point further. I should however make it clear that in the circumstances I have not thought it necessary to examine in detail the documents lodged by Mr Frost, and I am not to be taken as having expressed any view about their sufficiency for the purpose for which he seeks to rely on them.

Counsel for the Bank advanced two main submissions. Firstly, he submitted that it could be taken from the averments in the counterclaims that the claims at the instance of Mr and Mrs Frost had prescribed and accordingly that the Bank should be assoilzied. Secondly, in any event, he submitted that the claims of Mr and Mrs Frost were barred by mora, taciturnity and acquiescence, a matter which could be established by reference to their own pleadings, and accordingly that the Bank should be assoilzied. I must emphasise that at no time did counsel seek to advance an argument that any part of the counterclaims was either irrelevant or lacking in specification. His submission was that it could simply be taken from the pleadings for Mr and Mrs Frost that the prescriptive period had expired before any claim was made in this action or in the action at the instance of Mr and Mrs Frost. Counsel initially advanced a comprehensive submission on the prescription point, under reference to sections 6 and 11 of and Schedule 1 to the Prescription and Limitation (Scotland) Act 1973 and Dunlop v McGowans 1980 S.C.(H.L.) 73. The effect of these is inter alia that any obligation, whether arising from any rule of law or from or by reason of any breach of a contract, to make reparation for loss, injury or damage caused by an act, neglect or default prescribes at the end of the period of five years from the first concurrence of iniuria and damnum if no relevant claim, which for present purposes means a claim made in appropriate proceedings, has been made by then. Counsel came to recognise, however, that the claim in respect of Mr Caine's personal injuries would be affected by the three-year limitation period provided by section 17 of the 1973 Act, and I allowed an amendment which added a plea directed to this. Counsel also appeared to recognise that the claim in respect of alleged defamation would be affected by the three-year limitation period provided by section 18A of the 1973 Act, but he did not seek to add a plea in law directed to this. Initially, counsel made no attempt to separate out the various claims. He recognised, however, when I pointed it out to him, that each of the assigned claims should properly be considered separately and might be affected by a different prescriptive period (or, in the case of Mr Caine's claim, limitation period). Counsel then addressed me on each of these claims.

I am unable to accept this submission. Although it appears from the pleadings for Mr and Mrs Frost that the first of their alleged difficulties with the Bank occurred in 1989, they also aver that there was an intermittent course of dealing between the parties up to and including 1993. It is in this context no doubt that the granting of the second Standard Security in 1993 would fall to be considered. The pleadings for Mr and Mrs Frost, taken as a whole, do not appear to me to point clearly to any particular moment in time prior to 1993 when they, Mr Caine, or any of the companies suffered loss. Although section 11(2) of the 1973 Act was not specifically referred to in the course of the debate, I bear in mind that it provides that where as a result of a continuing act, neglect or default, loss, injury or damage has occurred before the cessation of the act, neglect or default the loss, injury or damage shall be deemed for the purposes of section 11 (1) to have occurred on the date when the act, neglect or default ceased. It may be therefore that the counterclaims in their present form, Nos.31 and 32 of process, which were lodged on 6 September 1996, were lodged well within the quinquennium. Likewise, it may be that the claim in respect of personal injuries signed by Mr Caine was lodged within the triennium. The alleged defamation of Mr and Mrs Frost by the Bank is said to have occurred in particular in 1995, so again the claim may have been lodged within the triennium. I am not therefore able to say, on the basis of the pleadings for Mr and Mrs Frost, that any of their claims is out of time. On this approach, it is unnecessary to itemise the claims; though I doubt whether, if it were necessary, the state of the pleadings would permit such an exercise. If the Bank wishes to insist in its prescription and limitation pleas, then proof will be required. I am not to be taken as expressing any view about the sufficiency of the Bank's pleadings for this purpose.

While this is sufficient to dispose of the submissions relating to prescription and limitation, I should mention a further submission advanced by counsel for the Bank. This submission took as its starting point the record, No.9 of process, to which I have referred. In Answer 2 for Mr and Mrs Frost there is an averment that the failure of the Bank to honour its promises damaged the existence of projects relating to Sabrebright Limited, Heathfield Court associated with Merlin Assets Limited and Biolife Products Limited "and was responsible for the loss of some £610,000 by Martin Frost and his associated companies". The counterclaims seek payment of £610,000 to Mr Frost and £210,000 to Mrs Frost, the latter under reference to alleged wrongful diligence. As I understood it, counsel accepted that in any event these pleadings might be effective to interrupt prescription in respect of some at least of the claims. Counsel referred to the cases of GA Estates Limited v Caviapen Trustees Limited 1993 S.L.T.1051, George A Hood & Co v Dumbarton District Council 1983 S.L.T.238 and British Railways Board v Strathclyde Regional Council 1981 S.C.90 and related these to a suggestion that the counterclaims in the record which was before the sheriff did not form part of the process in this Court, and it was only in September 1996 that there was any counterclaim in the process in this Court. As is apparent, I do not need to decide this point. If I did, I would only feel able to decide it after proof, on the basis of appropriate averments, about the state of the process at any particular time. This is a regrettably contentious issue. It seemed clear from what was said to me that Mr and Mrs Frost believed not only that they had lodged counterclaims by the time that the record No.9 of process was before the sheriff, but that these counterclaims remained part of the process until they were overtaken by the counterclaims lodged in September 1996. I certainly do not see how it would be open to anyone but Mr and Mrs Frost and their representatives, if any, to decide what pleadings to lodge and what pleadings to withdraw. If the Bank's position, as it appears to be, is that the counterclaims were in some way withdrawn by the time that the process reached this Court, they will have to bear this consideration in mind. At one stage I thought that by careful examination of the process I would be able to satisfy myself as to the state of the pleadings at any particular time, but I have come to the view that this is not possible when there was so much disagreement before me. From time to time Mr Frost made allegations about the Bank's representatives which I need not repeat here. I merely wish to make it clear that the foregoing passage does not depend on my accepting that there is any force to these allegations. I am simply concerned with what, as a matter of fact, has been in process at any particular time.

The second main submission by counsel for the Bank was that Mr and Mrs Frost were barred by mora, taciturnity and acquiescence in insisting in their counterclaims. This is a plea to the merits, and consistently with it counsel sought absolvitor for the Bank from the conclusions of the counterclaims. Counsel referred to McLure v McLure's Executrix 1997 S.L.T.127 and Assets Co Ltd v Bain's Trustees (1904) 6F 692. He accepted that the mere passage of time short of the statutory periods for prescription and limitation could not bar a claim, but submitted that it could be shown by reference to the pleadings for Mr and Mrs Frost that they had acquiesced in the alleged failures of the Bank. Counsel referred particularly to the following passage at p35 of the closed record:

I am quite unable to construe this passage as amounting to an admission of acquiescence in the alleged failures of the Bank. Counsel sought to relate this passage to the fact that there were subsequent dealings between Mr and Mrs Frost and the Bank, and in particular the second Standard Security which was granted in 1993. He submitted that this amounted to an alteration of position on the part of the Bank which was a further reason for holding that Mr and Mrs Frost had acquiesced in the alleged failures of the Bank. This approach appears to me to overlook the possibility, to which I have made reference in discussing the prescription and limitation pleas, that time did not begin to run in respect of any of the claims until 1993. Counsel's submissions on the plea of mora, taciturnity and acquiescence appear to me to be based on the assumption that the pleadings for Mr and Mrs Frost confine the alleged failures of the Bank to 1989. For the reasons I have already discussed, I do not think that this is so. Accordingly, I do not feel able to sustain the plea at this stage, and instead regard it as a matter of proof; this is particularly so when it is a plea to the merits. Again, I am not to be taken as expressing any view about the sufficiency of the Bank's pleadings for this purpose.

It remains to mention Mr Frost's submissions in seeking decree de plano in terms of the counterclaims. All the averments in the counterclaims are denied by the Bank. Mr Frost, however, presented an elaborate argument to the effect that these denials should be treated as admissions. He referred to what he claimed were the rules of logic and pleading, and submitted that if the Bank's denials could be shown to be false in any respect then the whole denials fell to be disregarded. I do not accept this. It is a straightforward feature of pleading that one party is entitled to deny the other's averments and thereby put him to his proof. This is the position here, and it is therefore for Mr and Mrs Frost to prove, if they can, the averments in their counterclaims.

There may, therefore, in due course require to be a proof relating to all the issues I have discussed, apart from those in respect of which I propose to allow a preliminary proof. As I understand it the issue of whether or not the Bank knew during the period between 1 January 1989 and 25 May 1989 that they had exceeded their lending ratios has a bearing on the counterclaims as well as the principal action. I shall accordingly leave all pleas standing at this stage and shall allow to parties a preliminary proof before answer of their respective averments on record restricted to the issues of (1) whether the pursuers (as distinct from any other lender) lent to the defenders the sum of £210,000 referred to on record, (2) whether, if so, the defenders have repaid all or any part of that sum to the pursuers and (3) whether or not the pursuers knew during the period between 1 January 1989 and 25 May 1989 that they had exceeded their lending ratios.