3052775 Nova Scotia Limited V. Matthew Purdon Henderson
| Jurisdiction | Scotland |
| Judge | Lord Hodge |
| Neutral Citation | [2006] CSOH 147 |
| Date | 19 September 2006 |
| Docket Number | A580/06 |
| Court | Court of Session |
| Published date | 19 September 2006 |
| OUTER HOUSE, COURT OF SESSION [2006] CSOH 147 | |
| A580/06 | OPINION OF LORD HODGE in the cause 3052775 NOVA SCOTIA LIMITED Pursuers; against MATTHEW PURDON HENDERSON Defender: ________________ |
Pursuer: Sandison; Boyds Solicitors LLP
Defender: Ellis Q.C., Ms Higgins; Balfour & Manson for Levy & McRae, Solicitors
19 September 2006
The motion
[1] This is a motion seeking an interim order under section 47(2) of the Court of Session Act 1988 to allow the pursuers to enter and possess heritable subjects at Letham Grange, by Arbroath. Section 47(2) of the 1988 Act provides:
"In any cause in dependence before the Court, the Court may, on the motion of any party to the cause, make such order regarding the interim possession of any property to which the cause relates, or regarding the subject matter of the cause, as the Court may think fit."
In this action the pursuers seek declarator that they are entitled to possession of the subjects at Letham Grange unless and until the disposition in their favour is reduced by the Court. In their second conclusion the pursuers seek an order granting a warrant to Messengers-at-Arms to remove the defender from the subjects and to facilitate the pursuers' possession. The pursuers also seek payment of a sum in damages arising out of the defender's allegedly vitious possession of the subjects since 2002.
[2] It is clear therefore that the order sought is concerned with a property to which the action relates. That is the first matter to be considered in relation to an application under section 47(2). The other matters that are relevant are (a) whether the pursuers have a prima facie case, and (b) the balance of convenience having regard principally to (i) the respective strengths of the parties' cases and (ii) the likelihood of either party suffering harm as a result of the grant or refusal of the order. Although parties did not cite authority on the correct approach, their submissions were consistent with this approach which reflects the guidance set out by the Extra Division in Scottish Power Generation Ltd v British Energy Generation (UK) Ltd 2002 SC 517 and by Lord Drummond Young in V A Tech Wabag UK Ltd v Morgan Est (Scotland) Ltd 2002 SLT 1290 and in Purac Ltd v Byzak Ltd 2005 SLT 37. As the enrolment of the motion triggered a caveat lodged on behalf of the defender, I had the benefit of submissions on behalf of both parties.
Background
[3] Letham Grange comprises a hotel and golf courses. The subjects are owned by the Letham Grange Development Company Limited ("LGDC") which ran a business known as the Letham Grange Country Club and Resort on the subjects. LGDC encountered financial difficulties and by disposition dated 12 February 2001 disponed the subjects at Letham Grange to the pursuers. On delivery of the disposition of the subjects, the pursuers immediately presented it for registration in the Land Register for Scotland. The Keeper of the Registers has not registered their title since then and the pursuers aver that they remain the uninfeft proprietors of the subjects.
[4] On 15 November 2002 the defender was appointed provisional liquidator of LGDC by the Sheriff of Glasgow and Strathkelvin at Glasgow. Thereafter, on 3 December 2002 the defender was appointed interim liquidator of LGDC. The pursuers contest the defender's appointment as liquidator of the company at a creditors' meeting held on 14 February 2003 as they dispute his decision to recognise certain creditors as entitled to vote and his refusal to recognise others. The pursuers are making that challenge in an action in Glasgow Sheriff Court and, in a separate Note in the liquidation process, are seeking the removal of the defender as liquidator.
[5] The defender raised proceedings in April 2003 against the pursuers under section 242 of the Insolvency Act 1986 ("the 1986 Act") seeking reduction of the disposition on the ground that it was granted for inadequate consideration and was thus a gratuitous alienation. That action has had a remarkable history. On 9 December 2003 the Lord Ordinary granted the defender summary decree but gave the pursuers leave to reclaim, and, after the pursuers amended their pleadings in the Inner House and the case was remitted back to him, he again granted summary decree on 21 April 2004. The pursuers again reclaimed with the leave of the Lord Ordinary and the Extra Division (2005 1 SC 325) refused the reclaiming motion and adhered to the Lord Ordinary's interlocutor. The pursuers appealed to the House of Lords, who on 10 May 2006 allowed the appeal and remitted the case to the Inner House to proceed as accords (2006 SLT 489). The action has thus been in court for over three years and is now at closed record stage at which the court at first instance will have to consider the defence which the pursuers put forward and which I discuss below.
[6] The pursuers accept that LGDC were insolvent at the date of the disposition and that they were associates of LGDC. Their defence is put forward under section 242(4)(b) of the 1986 Act, namely that the alienation was made for adequate consideration. As the merits of that action are relevant to the balance of convenience and therefore of some importance to the determination of the motion, it may be useful if I summarise the parties' positions. The liquidator avers that the board of LGDC, which was controlled by Mr Dong Guang Liu ("Mr Liu"), resolved to sell the subjects to the pursuers for £248,100, that LGDC signed a disposition which bore to be granted in consideration of that sum and that the pursuers paid stamp duty on the basis that that sum was the consideration for the conveyance on sale. In their defence of that action the pursuers aver that they had assumed liability for debts amounting to £1,850,000 that LGDC owed to members of the Liu family. The liquidator challenges this account, averring that no records exist of the transaction in the accounts and books of LGDC or in the files of the solicitors who acted for both parties in the sale of the subjects. The liquidator also avers that the pursuers' assertion is inconsistent with claims made by members of the Liu family in the liquidation. The pursuers on the other hand refer to contemporaneous advice from their solicitors of the danger of a transfer at an undervalue, to a resolution of the pursuers dated 7 February 2001 and signed by Mr Liu under the pseudonym of "J Michael Colby" whereby the pursuers resolved to assume £1,850,000 of debt owed by LGDC to the Liu family, and to a letter from Mr Liu (writing as "J Michael Colby") on behalf of the pursuers to himself (in his real name) on behalf of LGDC setting up a lease between the pursuers and LGDC.
[7] Following his appointment as provisional liquidator, the defender in the present action took possession of the subjects and has maintained them as a going concern since then. The hotel ceased to operate as a hotel in about October 2004 but part of the building is used as a clubhouse and the whole building is kept wind and watertight. The golf courses are maintained in operation by the continued employment of ground staff. The defender as liquidator has no assets of any significant value beyond the subjects themselves. In order to preserve the business and fund the litigation against the pursuers, the defender entered into an arrangement with a company or other legal entity called Viol,...
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