"The Lord Ordinary having resumed consideration of the cause allows 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: appoints said proof to proceed on the day of at 10 a.m.; grants diligence for citing witnesses and havers; reserves to parties the right to raise any question of further procedure, to be determined as appropriate by the Lord Ordinary, which may arise in the circumstances obtaining on disposal of said preliminary proof before answer; continues the cause on the question of the expenses of the procedure roll diets."

"The Lord Ordinary having resumed consideration of the matters raised at the preliminary proof before answer (1) finds in fact that the pursuers (as distinct from any other lender) lent to the defenders the sum of £210,000 referred to on record; (2) finds in fact that no part of that sum has been repaid by the defenders or either of them; (3) finds the defence based on the issue of whether or not the pursuers knew during the period between 1 January 1989 and 25 May 1989 that they had exceeded their 'lending ratios' to be irrelevant; and (4) appoints parties to be heard By Order on Wednesday, 8 October 2003 at 10 a.m."

No reclaiming motion was enrolled against that interlocutor. Following further procedure, by interlocutor dated 28 November 2003, the cause was restored to the procedure roll. Before that procedure roll discussion took place, on 13 February 2004, the Lord Ordinary sisted a Mr. Stephen L. Conn, in his capacity as supervisor of the first-named reclaimer's Individual Voluntary Arrangement as an additional defender to the action. However, the third defender's agents subsequently withdrew from acting and, on 30 March 2004, he was ordained to appear personally at the Bar of the court, or be legally represented thereat to advise the court of the identity of his new solicitors and to confirm if he was insisting in his defence to the action. He did neither of these things, in consequence of which, on 2 April 2004 he was found liable in certain expenses. Since that time Mr. Conn has taken no part in these proceedings.

Submissions for the reclaimers

The decision

1(a) This ground is an explicit criticism of the approach followed by the Lord

Ordinary in his interlocutor of 2 October 2003. It is not open to the reclaimers now to seek to review that interlocutor on its merits. It is complained in this ground that the Lord Ordinary failed to follow certain previous interlocutors pronounced in the Inner House. The first of these is an interlocutor pronounced in other proceedings than the present. We have difficulty in seeing what point is sought to be made in relation to that. It was not developed in argument. As we have already observed, the scope of the preliminary proof before answer was determined by the Lord Ordinary's interlocutor of 30 December 1999, as adjusted in the Inner House. Among the issues which were to be the subject of the preliminary proof before answer was the issue of whether or not the pursuers knew during the period between 1 January 1989 and 25 May 1989 that they had exceeded their lending ratios. While that issue was made the subject of the preliminary proof before answer, at no stage prior to that proof was the relevancy of the reclaimers' case in relation to those matters affirmed. As appears from paragraph [29] of the Lord Ordinary's Opinion of 2 October 2003, it was argued on behalf of the respondents that, even if it were the case that a bank had exceeded its "lending ratio", that was not a relevant defence by a borrower to an action for recovery of money lent to the borrower by the banking institution. That was a submission which plainly counsel for the respondents was entitled to make in the context of a preliminary proof before answer. For the reasons stated in paragraphs [30] to [33] of that Opinion the Lord Ordinary accepted the respondents' contention, as he was entitled to do. Indeed, in paragraph [32] he records that the first-named reclaimer "frankly stated that as respects recoverability of the loan no consequences flowed from that fact by virtue of any provisions of the Act. He added that none of the case law shown to him by those to whom he referred as his 'legal advisers' demonstrated that a breach of 'lending ratios' rendered the loan to him and to his wife irrecoverable by reason of any provisions in the Banking Acts." In all these circumstances, in our opinion the Lord Ordinary was quite entitled to make finding 3 in his interlocutor of 2 October 2003. That decision was not inconsistent with any determination relevant to the matter made in the Inner House. Accordingly, we reject this ground of appeal.

1(a)(i) Once again, this matter arises out of the conduct of the preliminary proof by

the Lord Ordinary. It appears to relate to the extent of the recovery of documents sought by the reclaimers at a commission held in connection with that proof. It is not clear to us whether the reclaimers are complaining about the conduct of the commission, or alternatively about the extent to which the Lord Ordinary allowed documents so recovered to be produced for use in the preliminary proof. That was not clarified. In any event, the contention made in this ground of appeal is that, had the reclaimers secured all the documents they sought, then "an appeal would have been easier". It is not clear to us what appeal is referred to. There was no appeal against the interlocutor of 2 October 2003. The matters concerned appear to us to have no bearing upon the present reclaiming motion. In all these circumstances we reject this ground of appeal.

1(a)(ii) The complaint made in this ground of appeal is that the Lord Ordinary refused

the reclaimers' request for a transcript of the proceedings in the preliminary proof before answer. Once again, it is not made clear what relevance that matter has to the present reclaiming motion. Plainly, had there been a reclaiming motion against the Lord Ordinary's decision in the preliminary proof, the provision of a transcript of the proceedings in that proof might well have been appropriate. However, that was not the situation with which the Lord Ordinary was concerned. In terms of Rule of Court 36.11.(3) the making available of a transcript of a proof is a matter for the exercise of the Lord Ordinary's discretion. Nothing said to us indicates that the Lord Ordinary erred in any way in the exercise of that discretion by refusing to allow a transcript of the proceedings in that proof. In any event, the reclaimers' contention in this ground is merely that "such transcript would have greatly assisted the Frosts and their advisers during and after the proceedings. We regard that contention as irrelevant. Accordingly, we reject this ground of appeal.

1(a)(iii) The first-named reclaimer in argument before us contended that the Lord

Ordinary presiding over the preliminary proof had "refused to allow" the reclaimers to call a witness, Mr. Clive Franks. In discussion of this complaint, the first-named reclaimer accepted that this individual had not been cited as a witness, although, it appears, he was personally present at the proof. Furthermore, it was not indicated what material Mr. Franks could have given in evidence, had he been called as a witness. There is no reference in the minute of proceedings to any refusal by the Lord Ordinary to allow Mr. Franks to be called as a witness. We do not now have the benefit of any report from the Lord Ordinary as to the circumstances surrounding this matter, although, had the reclaimers considered it necessary, such a report could have been obtained. Against this background, we are not prepared to proceed on the assumption in the reclaimers' favour that the Lord Ordinary did in fact refuse to allow them to call Mr. Franks as a witness. In our view, no judge would refuse to allow a party to a proof to call a witness. To have done so would have been a fundamental contravention of the principles of natural justice. We are not prepared to assume, on the basis of the reclaimers' assertion alone, that any such thing occurred.

1(a)(iv) As we understand it, this ground of appeal is intended to be a criticism of the

decision by the Lord Ordinary at the preliminary proof not to allow certain transcripts of evidence at a commission for the recovery of documents to be admitted as evidence in the preliminary proof proceedings. The reclaimers did not go into detail as regards what might have been produced. In any event, once again this is a criticism of the Lord Ordinary in his conduct of proceedings which are not the subject of this reclaiming motion. The decision concerned appears to amount to the exercise of a discretion on the part of the Lord Ordinary. Nothing was said to us to suggest that the exercise of that discretion was in any way flawed. The ground of appeal goes on to criticise the Lord Ordinary in respect of evidence which he accepted in preference to other evidence. The first-named reclaimer suggested to us that the Lord Ordinary had been gullible in believing the evidence of certain of the respondents' witnesses. The assessment of credibility and reliability is plainly a matter for the judge of first instance conducting the preliminary proof. We reject this ground of appeal.

1(b) This ground involves a criticism of the Lord Ordinary in relation to the

calculation of so-called "lending ratios". Having regard to the fact that the Lord Ordinary decided that the reclaimers' case in relation to lending ratios was irrelevant, we do not think that this criticism possesses any force. In any event, it is a matter which is not a subject for review in this reclaiming motion.

1(c) So far as we understand this ground of appeal, it appears to relate to the

matters set forth in paragraph 26 of the counterclaim for the first-named reclaimer. Certain of the elements in that counterclaim appear to pre-date the making of the loan by the pursuers to the reclaimers, others post-date that transaction. An examination of the items concerned seems to us to show that they are of the nature of a series of illiquid claims made on behalf of the first-named reclaimer against the pursuers. Our attention was not drawn to any documentary material or vouchers to validate these claims, which would accordingly require to be the subject of the proof which the Lord Ordinary has allowed. At this stage, we do not see how those claims could be set off against the liquid debt owed by the reclaimers to the respondents. Unless and until those claims are established by evidence, there can be no question of set-off. Further, in the circumstances, they give rise to no right of retention. Accordingly, we reject this ground of appeal.

1(d) As we understand it, this ground of appeal, which again relates to the Lord

Ordinary's conduct of the preliminary proof, which is not the subject of this reclaiming motion, is focused upon his acceptance of the respondents' explanations that, on account of the passage of time, they had destroyed certain relevant papers. It appears to be suggested that that explanation is inconsistent with the introduction by them of certain documents into the proceedings on the occasion of the procedure roll debate in 2004. It appears to be assumed by the reclaimers that a lack of integrity on the part of the respondents is demonstrated. It was not indicated to us in what way any documents that may have been produced at the procedure roll debate in 2004 demonstrated the inaccuracy of the explanations that may have been given by the respondents at an earlier stage in the course of the preliminary proof. In any event, in our opinion, this allegation has no bearing whatsoever upon the issues raised by the review of the Lord Ordinary's interlocutor of 4 March 2005 with which we are concerned.

2(a) This ground of appeal seems to amount to a complaint that the respondents

have been permitted repeatedly to amend their pleadings, whereas the reclaimers have not been permitted to amend their pleadings since 1998. It is said that this has created unfairness. In our opinion this ground of appeal possesses no substance. If, at any time, the reclaimers had good reason to amend their pleadings, no doubt they would have tendered the appropriate minutes of amendment. If the court decided not to allow any proposed amendments, they could have sought to have those decisions reviewed. It was not said that any such things had occurred. In any event it was not indicated to us in what respect the reclaimers considered that their present pleadings did not accurately reflect the matters in issue between the parties.

2(b) In this ground it is complained that the Lord Ordinary's Opinion and

interlocutor following the procedure roll debate is in conflict with a number of listed decisions. In the ground it is said that a full analysis of these inconsistencies, with appropriate references and law would be provided in the appendix to be lodged. No such full analysis has been put before us. In the absence of any detailed justification for this ground of appeal we reject it.

2(b)(i) In this ground of appeal it is asserted that the second-named reclaimer has a

joint and several right with the first-named reclaimer. However, it is not made clear in what way this is said to bear upon the matters which arose at the procedure roll debate. No explanation was given to us regarding this contention. We reject this ground of appeal.

2(b)(ii) In this ground of appeal the reclaimers assert that certain unspecified

assigned rights have not been interpreted by the Lord Ordinary in the same way as they were interpreted by other unspecified judges. We are unable to follow what point is being made here in the absence of any fuller explanation, which was not given to us.

2(b)(iii) In this ground of appeal it is stated that the heritable properties to which we

have referred are no longer in the direct ownership of the reclaimers, but are held in trust by them for the first-named reclaimer's Individual Voluntary Arrangement. We have already narrated the fleeting part played by Mr. Stephen L. Conn, supervisor of the first-named reclaimer's Individual Voluntary Arrangement, in this action. So far as we are concerned, this court can have no concern at present for this arrangement, which is not before us at the behest of any interested party and, in particular, Mr. Conn. Accordingly, we consider that this ground of appeal possesses no substance.

2(b)(iv) This ground of appeal does not make plain the subject-matter with which it is

concerned. It was not elaborated in discussion before us. We reject it.

2(c) This ground is a complaint that the Lord Ordinary has not allowed a proof

upon the issue of why the respondents failed to lend money to two companies, Heathfield Limited and Sabrebright Limited. It was explained to us that the first-named reclaimer himself had furnished funds to these companies. As we understand it, this ground of appeal is a reference to the matters dealt with by the Lord Ordinary in paragraphs [9] to [13] of his Opinion of 4 March 2005. In paragraph [11] the Lord Ordinary holds that the contention that the loan on which the pursuers found was part of a larger contractual arrangement between them and the companies named was misconceived. He points out that the loan on which the respondents now found makes no reference to any such arrangement involving any company. Rather it bore to be a bridging loan pending the sale of Edenside House. The Lord Ordinary records that, at one point in the course of the first-named reclaimer's address to him at the debate he stated that the loan was indeed a bridging loan over Edenside House until it was sold, since he and his wife had been thinking of buying a small farm. The Lord Ordinary concluded that there was no proper basis in averment, or in the documentation lodged in process, for a multi-party contact of the nature contended for by Mr. Frost. Nothing said to us suggests that that conclusion was in any way in error.

2(d) This ground of appeal contains further reference to the first-named reclaimer's

Individual Voluntary Arrangement, which is said to have given rise to complex insolvency issues. It promises that an analysis of these issues will be provided. So far as we are concerned, that has not occurred. We do not consider that whatever arrangements may have been made by the first-named reclaimer with creditors in England is of any present concern to us, given that no person having an interest in the matter has in fact participated in these proceedings.

2(d)(i) This ground of appeal raises a question upon a factual basis which was not put

before us. We reject this ground.

2(d)(ii) This ground of appeal also raises a question but contains no contention. We

reject it.

2(d)(iii) This ground of appeal also raises a question. It suggests that authority

indicates that the pursuers have in some way compromised their position by virtue of their actings in relation to the first-named reclaimer's Individual Voluntary Arrangement. This matter was not elaborated in argument. We reject it.