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OUTER HOUSE, COURT OF SESSION
[2006] CSOH 8
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A2113/02
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OPINION OF LORD GLENNIE
in the cause
EDAN HUGH NELSON
KENNEIL
Pursuer;
against
(FIRST) DAMON
BALFOUR NELSON KENNEIL and
(SECOND) ALISTAIR THOMAS
NELSON KENNEIL
Defenders:
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Pursuer:
S. Smith;
Turcan Connell
First Defenders: J. McNeill, Q.C.; Maclay Murray & Spens
Second Defender: C. Wilson; PSM Law Group
Reporter: G Hawkes; Shepherd & Wedderburn
P O'Brien; McClure Naismith
Parties Present: Caroline Kenneil and Laura (known as Bonnie)
Kenneil
18 January 2006
Introduction
[1] This
is the continuation of a hearing on a Report by Andrew Rettie FRICS, a
partner in Strutt & Parker, (hereafter referred to as "the Reporter") in an
action of division and sale. The
particular dispute before the Court raises a question of some difficulty as to
the capacity in which a Reporter, appointed by the Court in terms of Rule of
Court 45, acts when he conducts the sale of heritable property.
[2] By
interlocutor dated 12 May 2004,
the Reporter was appointed to conduct the sale of Ardpatrick Estate, Argyll
("the subjects"). Edan, Damon and
Alistair Kenneil, who are respectively the pursuer, the first defender and
the second defender in the action, are the pro
indiviso proprietors of the
subjects. The interlocutor expressly
allowed any one or more of the three pro
indiviso proprietors to bid for
and purchase the subjects. A later
interlocutor of 4 August 2004
made provision, in such an event, for the pro
indiviso proprietor to include in
his bid, in addition to an offer of cash, a waiver of his entitlement to his
one third share of the price. This provision was referred to before me as a
"voucher system" and I will adopt that terminology. A bid submitted by the second defender in the
sum of г3.7 million, was successful.
Missives (to which I shall refer as the "first missives") were concluded
on 20 September 2004. In terms of the first missives, the second
defender paid a "non-refundable" deposit of 10% (г370,000). The date of entry was agreed to be 1 December 2004. The second defender failed to pay the balance
of the price at that date. It appears
from the Reporter's Note lodged in process on 29 March 2005 that extensions of time were allowed
until 11 March 2005,
but the balance of the price was still not paid. By interlocutor of 8 April 2005, on the application of the
Reporter by said Note, the Court authorised the Reporter inter alia to resile from the first missives, on the basis that the
second defender had been in material breach of contract, and to contact the
underbidders with a view to a re-bidding process being commenced.
[3] The
re-bidding process has been the subject of some controversy. The highest bid received by the Reporter was
from Caledonian Trust plc dated 4 May
2005 at a price of г2,558,775, over one million pounds less
than the price the second defender had earlier agreed to pay. A draft qualified acceptance has been
adjusted between the Reporter and CT but missives have not yet been
concluded. By a Report ("the Report")
received into Court on 21 September
2005, the Reporter applied for authority to conclude missives in
terms of the draft qualified acceptance and for certain ancillary orders. Those ancillary orders referred inter alia to the manner in which the
Reporter should deal with the sale price when he received it; and with the
payment and discharge of certain securities over his share of the subjects
granted by the second defender.
[4] On
17 November 2005,
after a hearing on the Report lasting two days, I made orders on such points in
the Report as were necessary to be dealt with to enable the sale to
proceed. However, I left over for
further argument all questions relating to the manner in which the Reporter
should deal with the sale price when received and, in particular, any arguments
about the payment and discharge of the securities. I appointed parties to exchange pleadings,
notes of argument and lists of authorities relating to these questions and
fixed a hearing for 9 and 10 January
2006.
The dispute between the parties
[5] The
present dispute arises between the pursuer and the first defender on the one
hand and the second defender on the other.
It concerns claims by the former against the latter for damages for
breach of the first missives; and their claim to reduce, on the grounds that
they amount to fraudulent preferences, standard securities granted by the
second defender in favour of members of his family. It comes before the Court in the following
circumstances.
[6] In
paragraph 5(viii) of his Report, the Reporter sought authority to redeem
the sums secured by the standard securities (and any further securities that
may have been put in place by the second defender) from the second defender's
one-third share of the net proceeds of sale of the subjects, in exchange for
valid discharges in relation to all securities.
[7] There
are four securities in issue. These were
granted by the second defender between March and May 2005 in favour of
(1) his wife Caroline (the first and third standard securities),
(2) his three children, Ivor John Walter Kenneil ("Ivor"), Laura Frances
Bonnie Kenneil ("Bonnie") and Jeanne Gabrielle Cara Kenneil ("Jeanne")
(the second standard security) and (3) McClure Naismith, his former
solicitors (the fourth standard security). The total sum secured is in excess of г1 million. It follows that if the sale to CT goes ahead
there will be a significant shortfall between the second defender's share of
the net proceeds of sale and the amount secured on his share of the
subjects. McClure Naismith, in
particular, stand to receive nothing if the other
securities are valid. The Reporter,
therefore, in paragraph 5(x) sought an order that the standard securities
be discharged albeit payment was not made in full and authorising, if
necessary, the Deputy Principal Clerk of Session ("DPCS") to sign discharges on
behalf of the relevant parties.
[8] At
paragraph 5(xii) of his Report, the Reporter sought authority to consign
the proceeds of sale in accordance with the interlocutor of 12 May 2004, under deduction of
(1) the expenses of sale and (2) such proportion of the second
defender's share of the sale proceeds as is necessary to obtain discharges of
the securities. The interlocutor of 12 May 2004 had appointed the
proceeds of sale, under deduction of the expenses thereof, to be lodged in a
special deposit account in the name of the Accountant of Court to await further
orders of the Court.
[9] It
was anticipated by the Reporter that the pursuer and the first defender either
had or proposed to intimate claims against the second defender in respect of
his breach of the first missives. The
Reporter proposed in paragraph 5(xiii) of his Report, as an alternative in
whole or in part to the authority sought in paragraph 5(viii)
to pay off the standard securities, that the second defender's share of the
proceeds of sale should be consigned with the Accountant of Court to await the
outcome of those claims. The Reporter
was correct to anticipate that the pursuer and the first defender would make
such claims. In their Answers to the Report,
they both intimated (1) that they had claims against the second defender
arising from his breach of the first missives and (2) that they would seek
to reduce the standard securities in favour of his wife and his children as
fraudulent preferences at common law.
They asked that the second defender's share of the proceeds of sale,
under deduction of his share of the expenses of sale, be consigned into Court,
effectively as proposed by the Reporter in his paragraph 5(xiii). At the hearing in November 2005, the
second defender and his wife and children were, not unnaturally, concerned at
the prospect of the second defender's share of the proceeds of sale being held
up in this way, possibly for a lengthy period.
It was for that reason that, having explored briefly with parties the
nature of the contentions likely to be advanced, I fixed the hearing for 9
and 10 January so that, if at all possible, these issues could be resolved
before the sale was completed.
[10] As already indicated, the parties, as well as the second
defender's wife and children as holders of the standard securities, exchanged
pleadings (in the form of Minutes by the pursuer and the first defender and
Answers to those Minutes) and notes of argument. At the hearing, the pursuer and the first
defender were represented by counsel, as was the second defender, who had
appeared in person at the November hearing.
Caroline Kenneil appeared in person, as did Bonnie Kenneil. Although the latter could not formally
represent her brother and sister, they made it clear to me that they wished to
adopt her submissions. The Reporter and
McClure Naismith were also represented.
I was satisfied, therefore, that all interested parties were present and
had the opportunity to be heard.
The parties' submissions
[11] The argument took the form of a debate in which Mr Wilson,
for the second defender, in submissions which, on this aspect, were adopted by
Caroline and Bonnie Kenneil, presented his arguments as to why the pursuer
and the first defender were not entitled to challenge the standard securities
in these proceedings or, indeed, at all.
His first argument was an argument as to competency, namely that
reduction should be sought in an action for reduction under Rule 53 of the
Rules of Court. It was incompetent to proceed by Minute in ancillary procedure such as was before
the Court. The case did not fall within
the terms of Rule 53.8, which allowed challenges to deeds by way of
exception. That Rule was to be narrowly
construed.
[12] His second argument was to the effect that the pursuer and the
first defender had no title to challenge the standard securities since they
were not creditors of the second defender.
There were two limbs to this argument.
The first focused on the way in which the claim for damages for breach
of the first missives was sought to be justified in the Minutes for both the
pursuer and the first defender. Their
primary case in those Minutes was that the Reporter entered into the missives
as agent for the pro indiviso proprietors as principals. They were therefore parties to the missives
and could sue for damages for breach. Mr Wilson
pointed out that if this was the correct analysis, then the consequence was
that the missives bore to be a contract between, on the one hand, the pursuer,
the first defender and the second defender as pro indiviso proprietors
and, on the other, the second defender.
It was trite law that a party could not contract with himself in the
same capacity. A person could not be a
creditor and a debtor in the same obligation.
He referred me to a number of cases in support of this point. These were Church of Scotland Endowment Committee v Provident Association of
London Ltd 1914 SC 165, Barclay
v Penman 1984 SLT 376
(a case of an alleged lease between three pro
indiviso proprietors and one of
their number), Kildrummy (Jersey) Ltd v Inland Revenue Commissioners 1991 SC 1 and Clydesdale Bank v Davidson 1996 SLT 437 (IH), 1998 SC(HL) 51. The
first missives were therefore a nullity and the second defender could not be
liable in damages for breach.
[13] The second limb of this argument, which stood as a separate
reason why the pursuer and the first defender were not creditors and therefore
had no title to challenge the standard securities, was that their claim (if
they had one) was future or contingent only.
He referred me to In re E.J. Casse [1937]
1 Ch 405 for the proposition that "creditors", in the field of insolvency,
did not include those with contingent or future claims. There was as yet no loss. The obligation became enforceable only when
there was concurrence of damnum and injuria: Dunlop v M'Gowans 1980
SC(HL) 73.
Any loss only arose upon a subsequent disposal of the subjects, or at
earliest the conclusion of missives.
Further, until the Court granted final decree, any debt was
contingent. In this connection he referred
me to Forbes v Whyte (1890) 18 R 182.
[14] Mr Wilson's third argument was that the pursuer and first
defender had not pled a relevant case of fraudulent preference. The case was made at common law; but there
was no averment that the second defender was absolutely insolvent at the time
that the relevant securities were executed.
Absolute insolvency at the time of the transaction (or as a consequence
of it) was a requirement of the jurisdiction at common law: Gloag &
Henderson, Introduction to the Law of Scotland (11th ed.) at pp.987-988. The same view was taken in Goudy, The Law of
Bankruptcy in Scotland
(4th ed.) at pp.32 and 41.
Goudy cited in support of that proposition the case of M'Cowan v Wright 1852 14 D 968.
McBryde, Bankruptcy, at paragraph 12-32, puts forward a different
interpretation of that case, namely that it was sufficient that the grantor of
the deed had acted in fear of insolvency.
Goudy's interpretation was to be preferred. In any event, Goudy was authoritative in its
own right. The averments by the pursuer
and the first defender in their Minutes did not instruct a case of absolute
insolvency at the time of execution of the securities. The most that was said was that the second
defender granted them in fear of insolvency.
The case was therefore irrelevant.
[15] For the pursuer, Mr Smith argued that the present
procedure was competent. In actions of
division and sale the Court will often be asked to consider questions
concerning the validity of standard securities in the context of answering the
basic question what to do with the proceeds of sale. The case could be regarded as falling within
Rule of Court 53.8 though this would require the word "party" to include
holders of the standard securities who appeared in the action. Even if that Rule did not apply, the Court
had an inherent power to deal with the matter as ancillary to the question of
what to do with the proceeds. All
relevant parties were before the Court.
[16] In response to the arguments on title to sue, and addressing
first the argument that a party could not contract with himself, he submitted
that the three pro indiviso owners could enter into an agreement
between themselves which was binding on them.
He referred me to the speech of Lord Hope in Clydesdale Bank at p.55.
But he submitted that the analysis that this was an ordinary case of agency
was wrong. The Reporter was a Court
appointed agent acting under the direction and authorisation of the Court. He had been authorised by the Court to
proceed with the sale in terms of interlocutors which recognised that one of
the three pro indiviso proprietors might bid and, if
successful, enter into missives to purchase.
The Court could not have intended that the contract which it authorised
the Reporter to enter into might be invalid.
In such circumstances, the ordinary rule that a party could not contract
with himself had no application. If he
was wrong on these points, he submitted that the second defender by entering
into the first missives and paying the deposit was personally barred from
taking any point on invalidity.
[17] However, if he was wrong as to that, he submitted that the
Reporter was not agent for the pro indiviso proprietors at all. None of the usual incidents of agency were
present here. The Reporter was appointed
by and took his instructions from the Court, not the pro indiviso
proprietors. The Reporter simply
conducts the sale under the authority of the Court. The pursuer and the first defender could
nonetheless sue on the contract created by the first missives by virtue of the jus quaesitum tertio. As to this, I was referred to the discussions
of the jus quaesitum tertio in Gloag
on Contract (2nd ed.) at pp.234-241 and McBryde on Contract (2nd ed.)
at chapter 10. I was also referred
to the Opinion of Lord Clyde in Scott
Lithgow Ltd v GEC Electrical Projects
Ltd 1989 SC 412, in which there is a discussion of the relevant indiciae and of the question whether the
tertius had a right to sue for
damages as well as for implement.
[18] Mr Smith joined issue with the argument that the pursuer
was only a contingent or future creditor by saying that in a claim for breach
of contract, the claim arises immediately upon breach even though the loss
flowing from the breach can only be estimated at that time.
[19] So far as concerned the argument about relevancy, Mr Smith
submitted that I should prefer McBryde's interpretation of McCowan v Wright to that
of Goudy. It was sufficient at common
law for the pursuer to show that the transactions were entered into at a time
when the second defender was in fear of insolvency, even if he was not actually
insolvent at the time.
[20] Turning to the merits of the case that the standard securities
should be reduced, Mr Smith took me to the terms of the Minutes and
Answers. The essential facts were
matters of admission. The second
defender admits that he has no significant assets other than his share of the
estate. But when he granted the standard
securities he knew that the claims against him in respect of his breach of the
first missives would exceed the value of that share. The date of entry in the first missives was 1 December 2004. The second defender was in breach as from
that time and knew that he was in breach.
He knew that any new price obtained for the subjects was likely to be
considerably lower than that agreed in the first missives. On 8 April
2005 the Court had confirmed that breach and allowed the Reporter
to resile from the missives. The
standard securities were granted on dates in March, April and May 2005,
all after the date on which he was in breach, for amounts totalling in excess
of his share of the proceeds. Those
facts were sufficient to raise the inference that the standard securities were
executed for fear of being exposed to damages claims arising from his breach. Mr Smith pointed to a number of
additional factors which he said were present in this case. The close family relationship between the
grantor and grantees of the security put the onus on those parties to rebut the
presumption: Bell's Commentaries on
the Law of Scotland (7th ed.), volume II, at p.184,
Goudy p.32. The obvious knowledge
of the grantees of the securities as to the grantor's position raised an
inference of fraud: McCowan. Collusion might be inferred: Jones' Trustee v Jones (1888) 15 R 328.
Further, the granting of the securities were not acts within the
ordinary acts of administration of the second defender's estate but were
extraordinary. Even if it could be shown
that the standard securities were granted in respect of genuine pre-existing
debts (as to which there were no relevant averments), still the granting of the
securities in circumstances of fear of insolvency amounted to a fraudulent
preference: Thomas v Thomson (1866) 5 M 198, Wylie, Stewart & Marshall v Jervis 1913
1 SLT 465 - even in some cases if the securities were granted pursuant to
a pre-existing obligation, if that obligation was simply a device to defeat
creditors in the event of failure: Gourlay v Mackie (1887) 14 R 403.
All that the second defender and his wife and children had averred in
their answers to the Minute was that the transactions were all in respect of
true and just debts owed by the second defender to the grantees of the
securities and were not entered into by the second defender with any view to
his own insolvency. That was wholly
insufficient to rebut the presumptions to which he had referred. Those averments should not be admitted to
probation and the standard securities should be reduced.
[21] For the first defender, Mr McNeill QC adopted the
submissions made by Mr Smith and simply added a few further points. As to the proper characterisation of the
Reporter's position, he said that if the Reporter was agent for the pro indiviso proprietors, then that agency was a very limited one. The agent could not take instructions from
the owners and could not be dismissed by them.
The Reporter reported to the Court and not to the owners. The Court takes away from the owners of the
subjects the power to sell or to thwart a sale, and gives such powers to the
Reporter. Although the end result was to
create a benefit for the owners, even then the Reporter is not agent to pay the
proceeds of sale to the owners. He has
to pay into Court. It was therefore not
easy to attach the tag "agent" to the Reporter.
He stands in place of the owners for the purposes of the sale. But, equally, there were difficulties in
describing him as agent for the Court.
As to the argument about a person not being able to contract with
himself, he submitted that to put the proposition in such sweeping terms went
too far. It may be that a party could
not create a new right by such means. In
the present case the second defender made an offer because that was what the
interlocutors allowed. But the first
missives clearly did not create a money debt by the second defender to himself. There was no
true contract between the second defender and himself
in that there was no true exercise of the second defender's mind as
seller. What the first missives created
was an obligation on the part of the person authorised by the Court (the
Reporter) to convey the subjects to the second defender or to procure their
conveyance to the second defender. The
terms of the first missives themselves did not lead inevitably to a disposition
from the pro indiviso proprietors to the second defender -
the sale could have been achieved, consistently with the missives, by a
transfer to the second defender of the interests of the pursuer and the first
defender. In adopting Mr Smith's
submissions that it was sufficient to show that the transactions were entered
into in fear of insolvency, he submitted that granting securities, rather than
paying off debts, is the paradigm of fraudulent preference. No tolerable explanation had been put forward
sufficient to go to proof. However, if
the Court was against him on this, it should simply order the whole net
proceeds of sale to be consigned with a view to further procedure akin to a
multiplepoinding. He accepted that if
the test was one of absolute insolvency at the time of entering into the transactions,
then he could not succeed. The first
defender was not, as yet, able to make averments that the second defender was
actually insolvent at the material times.
[22] Mr O'Brien for McClure Naismith said that his clients took
a neutral stance. They did not seek to
reduce the standard securities in favour of Mrs Kenneil and the children,
even though if they remained in place the standard security in favour of his
clients would be worthless.
[23] I invited Mr Hawkes, for the Reporter, to address me on
the question of the capacity in which he acted.
He submitted that the Reporter's rights and duties derived from the
authority of the Court as articulated by the Rules of Court and the
interlocutors to which I have referred.
He also submitted that the features which would usually be characteristic
of a relationship of agency between the Reporter and the pro indiviso proprietors
were absent. It was difficult to see how
the Reporter could be an agent for them.
It was not helpful to ask "on whose behalf" the Reporter was acting -
the question was rather "by whose authority?"
Properly analysed, it could not be said that the Reporter was acting for
the pro indiviso proprietors in concluding missives for the sale of the
subjects.
[24] Replying on the question of the jus quaesitum tertio in the event that the Reporter was not acting
as agent for the pro indiviso proprietors, Mr Wilson
submitted that the present case was not even in that territory. The Reporter acted under the authority of the
Court and was required to consign the net proceeds for distribution according
to the Court's discretion. It was clear
that the pursuer and first defender could not have sued directly for the price,
since that would have been to cut across the Reporter's obligations in terms of
the Rules of Court and the Court's interlocutors. That was sufficient to exclude the jus quaesitum tertio. If the third party could not sue for the
price, he could not sue for damages for failure to pay the price. He made further submissions under reference
to paragraph 10-08 of McBryde on Contract.
The contract revealed no intention to confer a benefit on a third
party. The intention of the Reporter,
one of the parties, was simply to comply with the directions of the Court. Further, he submitted that the word "benefit"
as used in this context meant something more than that to which he was entitled
in return for his share of the subjects.
This was a simple contract of sale and purchase. A party who provides part of the thing sold
does not "benefit" by receipt of the price.
Further, the first missives did not identify the tertius who was intended to benefit. To this end, Mr Wilson submitted that
the contract in the first missives required to be construed as a stand alone
contract and that regard could not be had to the context - the action of
division and sale, the Rules of Court and the interlocutors - in which the sale
was agreed.
[25] In answer to Mr Smith's contention that the second
defender was personally barred from asserting that the first missives were
invalid, Mr Wilson referred me to Penman
v Fife Coal Co 1935 SC
(HL) 39 as authority that there could be no personal bar in such
circumstances.
[26] On the merits of the claim to reduce the missives, Mr Wilson
recognised that the Answers for the second defender were less than full and
that, standing the arguments as to the shifting onus of proof, the second
defender might wish to expand his pleadings.
He indicated that he had a list giving further details of the underlying
debts in respect of which the standard securities were granted. These points were taken up by Bonnie Kenneil
and Caroline Kenneil. Their Answers to
the Minutes gave rather more detail than those for the second defender. In outline, they sought to show that the
underlying debts were bone fide. They
included the sum of г370,000 which, so I was told, was advanced by
Caroline Kenneil to the second defender to enable him to pay the deposit
under the first missives. Other debts
included the sum of г200,000 owed by the second defender in respect of his
use of property in London which he
had made over to the children in 1998.
It had always been agreed that the children would be given an interest
in the subject, or security over them, in return. I was given details of the breakdown of other
amounts. Further, it could not be said
that there was any reason at the time of the grant of the standard securities
to believe that there was a threat of the second defender becoming
insolvent. The second defender denied
the claims by the pursuer and first defender.
At the time of the grant of the securities it was not known at what
price the subjects might be re-sold and therefore what was the size of any
shortfall. In addition, the second
defender had claims against McClure Naismith and against the first defender
arising from his entry into the first missives.
These claims were disputed but, if successful, would mean that he was
not insolvent. I was invited, as I
understood it, to allow a proof of all these matters if, contrary to their
primary case, the pursuer and first defender had title and interest to
challenge the validity of the standard securities.
[27] Mr Smith and Mr McNeill accepted that I should treat
these arguments as if they were applications to amend the Answers so as to make
averments along the lines of the oral submissions. If I was persuaded that they were relevant I
could put the matter out by order so as to give appropriate directions for
further pleading and such proof as was necessary.
Discussion
[28] The first question to be determined is whether the pursuer and
the first defender have any claim against the second defender for breach of the
first missives. If they do not have such
a claim, it is accepted that they cannot challenge the standard securities granted
by him in favour of his wife, his children and McClure Naismith.
[29] In the course of argument I was handed a copy of the Summons in
a separate action, intimated in July 2005, in which the pursuer advances
his claim for damages against the second defender. I was told that the first defender's claim,
sued in a separate action, is in materially identical terms. In the Summons there is no mention either of
agency or of the jus quaesitum tertio. But the Record is not yet
closed and it would not, in my opinion, be appropriate to examine the present
pleadings too critically. I was
also referred to the terms of the first missives and of the draft missives with
Caledonian Trust. In the first missives
the seller is defined as follows: "for the purposes of carrying through the
sale of the subjects in terms of the interlocutor of the Court of Session dated
12 May 2004 as amended by interlocutor dated 4 August 2004, Andrew Rettie,
Partner of Strutt & Parker [address]".
There is no mention of Andrew Rettie acting on behalf of the pro indiviso proprietors. There was,
however, a requirement for a disposition or dispositions signed "on behalf of
all three brothers". The draft missives
with Caledonian Trust are somewhat different.
They begin by describing the Reporter as having been "appointed and instructed
to carry through the sale of the Subjects on behalf of the Owners in terms of
Interlocutors of the Court of Session ..." and define the Seller in these terms:
"for the purposes of carrying through the sale of the Subjects on behalf of the
Owners in terms of the Interlocutors, Andrew Rettie, Partner of Strutt
& Parker [address], but, for the avoidance of doubt the personal liability
of the said Andrew Rettie in relation to the Missives or any matter
arising therefrom is hereby expressly excluded".
[30] This wording is capable of suggesting that
the Reporter is selling on behalf of the pro
indiviso proprietors. But I do not consider that that would reflect
the true position of the Reporter. In my
opinion a sale under Rule of Court 45 is not a sale by the parties at
all. The Reporter does not act as their
agent. Most of the ordinary incidents of
agency are absent. The pro indiviso proprietors can give the Reporter no instructions; nor can they
either add to or countermand his authority.
The Reporter can procure dispositions in their name, against their will,
signed in terms of Rule of Court 45.2(3) by the Deputy Principal Clerk of
Session ("DPCS"). He accounts to the
Court for the proceeds of sale, deducting therefrom (in accordance with the
interlocutors of the Court) his expenses of sale. To my mind the proper analysis is that in
conducting the sale of the subjects the Reporter acts in his own right as a
Court authorised officer. He sells by
authority of the Court. There is,
therefore, no difficulty in him selling the subjects to one or more of the pro indiviso proprietors, such as there would have been if he had acted as
their agent in conducting the sale. Had
the position been otherwise, in other words had the Reporter been the agent of
the owners for the purpose of conducting the sale, I would have accepted the
argument advanced by Mr Wilson that the first missives were a nullity.
[31] It is true that, even of the basis that
the Reporter is not agent for the owners in selling the property, to complete
the sale there requires to be a disposition in favour of the purchaser. It is contemplated by the Rules of Court,
and, in this case, by the relevant missives, that that disposition will be by
or on behalf of the owners (the DPCS, if necessary, signing on behalf of the
owners). The question was raised in
argument before me as to whether this was possible where, as here,
the purchaser was one of the pro indiviso proprietors. Gretton & Reid, Conveyancing (3rd ed.)
and McDonald's Conveyancing Manual (7th ed.) express
different views on this question. Since
hearing the argument, I have seen the Opinion of Lord Menzies in The Board of Management of Aberdeen College v Stewart Watt Youngson and another
(unreported 25 February 2005). He held, after hearing full argument on the
point, that a disposition in favour of oneself in the same capacity is
invalid. There requires to be the intervention of another party. Lord Menzies puts it in this way, in
paragraph 12:
"A deed or conveyance
whereby a person purports to sell to himself does not
involve any transfer nor any delivery.
Without some independent third party or separate persona, it is no
transaction at all."
I would
accept that analysis in the case of an ordinary transaction. But in the context of a sale by the Court, or
under the authority of the Court, it is the Reporter who enters into the
missives and in terms of the missives undertakes to procure a disposition. It those circumstances the signature of the owner
of the subjects on the disposition is effectively ministerial. It can be dispensed with altogether if the
DPCS signs the disposition. Although he
signs on behalf of the owner, he does so at the instance of the Reporter. There is in such a case delivery and transfer
by the Reporter to the purchaser, even where the purchaser is one of the pro indiviso proprietors whose property the Reporter is selling under the
authority of the Court. Accordingly I
see no difficulty in there being a sale by the Reporter in his own name to one
of the owners of the property, even though that requires a disposition signed
in name of the owner in favour of himself.
[32] If the Reporter is not agent for the pro indiviso proprietors, clearly the pursuer and the first defender are not
parties to the first missives and cannot, in that capacity, sue the second
defender for breach. The argument that
they could nonetheless sue by virtue of the jus
quaesitum tertio has, at first blush, some attraction. But, after further consideration, I am
satisfied that it must fail, substantially for the broad ground advanced by Mr Wilson. The Reporter owes his duties to the
Court. Although in one sense it can be
said that he contracts for the benefit of the owners of the property, in the
sense that he is getting in the price for them, the reality and the form are
both somewhat different. The price, less
expenses of sale, are consigned into Court in terms of Rule 45.2(4)(a). They are
distributed according to further order of the Court in terms of Rule 45.2(5)(a). I
do not think it is right to talk in terms of the Court having a discretion as
to how the proceeds are distributed, save to the extent that the Court may take
account in its order of matters, such as expenses, arising during the course of
the action. But equally it is wrong, in
my opinion, to regard the consignation into Court as being the equivalent to
payment to the owners of the property.
The owners have no right to demand payment from the Accountant of Court. The nearest analogy may be that the
Accountant of Court holds the proceeds of sale in trust. But whatever may be the precise legal
analysis, it seems to me to be clear that the pro indiviso proprietors
of the subjects could not sue the purchaser for the price. That would be to circumvent the need for
further orders of the Court before the sale proceeds can be distributed. If that is so, I do not see how the owners
can have a right to sue the purchaser directly for damages if he fails to pay
the price and is, as a result, in breach of the missives. For this reason I consider that the argument
based upon the jus quaesitum tertio
must fail. However, I should not be
taken to accept Mr Wilson's more specific submissions (1) as to the
meaning to be given to "benefit" in the passage in McBryde upon which he relied
or (2) as to having to read the missives in isolation from the context in
which the sale occurred, which context (be reference to the interlocutors) is
specifically referred to in the missives themselves.
[33] In those circumstances I do not need to
consider in detail the arguments on competency, on relevancy or on the
merits. In case the matter should go
further, I should simply say that I reject the argument that it is incompetent
to seek to reduce the standard securities in the present action. I consider that Rule of Court 53.8
applies to a case such as this and that it is right to treat grantees who have entered the process to found on the securities as
"parties" for the purpose of the Rule.
But even if the Rule did not apply in terms, I see no reason why the
question should not be decided in this type of proceeding provided that the
Court is satisfied that all interested parties are before it. As to the arguments on relevancy, I accept
the argument for the pursuer and the first defender that it is sufficient for
the exercise of the common law jurisdiction to reduce a standard security for
fraudulent preference that the security was granted in fear of insolvency. Actual insolvency at the relevant date need
not be shown. I prefer McBryde's
analysis on this point to that of Goudy.
The pursuer and the first defender have therefore, subject to my
decision on title and interest, pled a relevant claim. Had I had to consider the merits, I would
have been minded, in light of the submissions made to me in argument, to allow
further investigation of the position, probably (as Mr McNeill suggested)
by a form of multiplepoinding, and to this end would have put the case out By
Order for further discussion. Although
there was much force in the submissions by Mr Smith and Mr McNeill
that the second defender's averments were insufficiently specific to be allowed
to probation, there was possibly more substance in the points raised in the
Answers for Caroline and Bonnie Kenneil.
But in light of my decision on the earlier questions, this does not
arise.
Decision
[34] I therefore uphold the second plea-in-law
for the second defender and for the second defender's wife and children and
dismiss the Minutes for the pursuer and the second defender. As a result I am minded to make an order
authorising the Reporter to act in the manner indicated in
paragraphs 5(viii) and (x) of the Report. I should, however, allow the parties an
opportunity of addressing me on the question whether such an order adequately
deals with all the consequences of this decision. I shall therefore put the case out By Order
on a date to be afterwards fixed, but unless any party indicates, within seven
days from this date, that such a hearing is necessary then an Interlocutor will
be pronounced in the above terms, without further appearance, and the By Order
hearing will be discharged.
