Bank of Scotland v Brunswick Developments (1987) Ltd and Another
| Jurisdiction | Scotland |
| Judgment Date | 25 April 1997 |
| Date | 25 April 1997 |
| Docket Number | No 32 |
| Court | Court of Session (Inner House - First Division) |
FIRST DIVISION
Lord Hamilton
Agent and principalPersonal barSignatories executing writ instructing transfer of funds between accounts with bank in name of wrong companyCorrect company having no intention to transfer funds but instruction within apparent or ostensible authority of signatoriesWhether bank entitled to rely upon doctrine of personal bar in petition for rectification of writWhether intention of signatories imputed to correct companyLaw Reform (Miscellaneous Provisions) (Scotland) Act 1985 (cap 73), sec 8(1)1
PracticeWritRectificationSignatories executing writ instructing transfer of funds between accounts with bank in name of wrong companyCorrect company having no intention to transfer funds but instruction within apparent or ostensible authority of signatoriesWhether signatories grantors of writWhether correct company grantorWhether court should order rectificationLord Ordinary's discretionLaw Reform (Miscellaneous Provisions) (Scotland) Act 1985 (cap 73), sec 8(1)1
Two companies, G and B, held accounts with a bank with operations on the accounts over a certain limit requiring signatures of authorised signatories. In July 1989 the treasurer of G telephoned the bank to transfer a sum from B's account as being a loan from B to G. The transfer was effected on that date. On the same day two authorised signatories of B, who were also authorised signatories of G, executed a letter purporting to be an instruction to the bank to transfer the sum into G's account. The letter was written on headed notepaper of G and purported to be signed on its behalf. The board of B had not resolved to grant the loan although it had resolved to use funds in its hands to offset G's overdraft for which G would pay interest to B. The bank then petitioned the Court of Session under sec 8(1)(b) of the Law Reform (Miscellaneous Provisions) Scotland Act 1985 to rectify the letter by substituting the name of B for that of G. The cause called before the Lord Ordinary (Hamilton) who granted decree for rectification. B and its liquidator thereafter reclaimed. The respondents argued, inter alia, that the intention of the signatories could be imputed to B on the basis that the bank acted on their apparent or ostensible authority.
Held (aff judgment of Lord Hamilton) (1) that before a court could order rectification under sec 8(1)(b) it had to determine first of all (a) who was the grantor of the document and (b) what was that grantor's intention; (2) that the grantors of the letter had been the persons who had adhibited their signatures to the letter; (3) that that error was remediable under sec 8(1)(b); (4) that the court had to examine the facts independently with its own eyes and to decide whether the document accurately expressed the intention of the grantors and could not be affected by any question of personal bar by which the bank could seek to rely upon the apparent or ostensible authority of the signatories to bind B as that arose solely from the relationship between the parties and no-one else; (5) that at the time of signature the grantors had intended to sign as authorised signatories of B to instruct the transfer of funds; (6) that the fact that the bank's officials had been careless was not a sufficient reason for refusing to grant the order particularly as B had also been careless and had not challenged the transfer even though their account had shown the resulting debit and, in any event, as it had not been argued at proof that the
Lord Ordinary should exercise his discretion to refuse to order rectification, it could not be shown that his Lordship had exercised it wrongly in the circumstances; and reclaiming motion refusedOpinion (per the Lord President (Rodger)) that, in any event, it had not been proved that the bank had acted in reliance on the apparent or ostensible authority of the signatories.
Opinion reserved (per the Lord President) on the question of whether it was a principle of the law of agency that the intention of an agent was imputed to his principal.
Observed (per the Lord President) that a person who applied under sec 8(1) was not seeking to enforce a right against another party but was asking the court to provide him with a remedy which only the court could provide and it was irrelevant who sought the remedy.
Observations (per the Lord President and Lord Marnoch) on the differences between applications made under sec 8(1)(a) and (b) whereby if an agent signs a contract for a disclosed principal, it is the principal who is a party to the contract and whose intention is relevant under sec 8(1)(a) whereas, on the authority of Bank of Scotland v. Brunswick Developments (1987) LtdSC1995 SC 272, if the agent signs a unilateral document it is his intention rather than the principal's which is relevant in an application under sec 8(1)(b).
Bank of Scotland v. Brunswick Developments (1987) LtdSC1995 SC 272, followed.
The Governor and Company of the Bank of Scotland presented a petition under sec 8(1) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 in which they sought rectification by the court of a letter dated 31 July 1989 to them on headed notepaper of A Goldberg & Sons plc purporting to be signed for A Goldberg & Sons plc by substituting Brunswick Developments (1987) Ltd for A Goldberg & Sons plc.
Brunswick Developments (1987) Ltd and Raymond Ellis Blin, the liquidator thereof, were called in the petition as respondents.
The facts found after proof are sufficiently set forth in the opinion of the Lord President (Rodger).
The cause called before the Lord Ordinary (Coulsfield) on the respondents' pleas to the competency and relevancy of the action.
At advising, on 28 October 1993, the Lord Ordinary repelled the respondents' plea to the competency and allowed a proof before answer [seeBank of Scotland v. Brunswick Developments (1987) Ltd 1994 SLT 623].
The respondents reclaimed.
The reclaiming motion called before the First Division, comprising the Lord President (Hope), Lord McCluskey and Lord Weir for a hearing on the summar roll.
At advising, on 26 January 1995, the First Division refused the reclaiming motion [seeBank of Scotland v. Brunswick Developments (1987) LtdSC 1995 SC 272].
The cause called for proof before answer before the Lord Ordinary (Hamilton).
At advising, on 16 January 1996, the Lord Ordinary granted decree of rectification [seeBank of Scotland v. Brunswick Developments (1987) Ltd (No 2) 1997 SLT 48].
The respondents reclaimed.
Cases referred to:
Bank of Scotland v. Brunswick Developments (1987) LtdSC1995 SC 272
Bank of Scotland v. Brunswick Developments (1987) Ltd (No 2) 1997 SLT 48
Freeman & Lockyer v. Buckhurst Park Properties (Mangal) LtdELR [1964] 2 QB 480
Hudson v. St JohnSC 1977 SC 255
Textbooks referred to:
Gloag, Contract (2nd edn), p 152
Gloag & Henderson, Introduction to the Law of Scotland(10th edn), para 22.25
The cause called before the First Division, comprising the Lord President (Rodger), Lord Marnoch and Lord Cowie for a hearing on the summar roll.
At advising, on 25 April 1997
LORD PRESIDENT (Rodger)In this petition under sec 8 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 the petitioners are the Bank of Scotland (the Bank). They seek an order for rectification of a letter dated 31 July 1989 which is in the following terms:
A Goldberg & Sons Plc
Candleriggs
Glasgow G1 1LD
Telephone 041-552-4959,
Fax 041-552-8126
31st July 1989
Bank of Scotland
PO Box No 9
110 Queen Street
Glasgow G1 3BY
For the attention of Mr C Pollok
Dear Sirs
Transfer of funds from Brunswick Developments Limited to A Goldberg & Sons Plc
Please transfer today, 31st July 1989, the sum of 1,500,000.00 (one million five hundred thousand pounds) from Brunswick Developments Limited account number 17217727 to A Goldberg & Sons PLC account number 30468801.
These monies will form a loan repayable on demand from Brunswick Developments Limited to A Goldberg & Sons PLC which will attract interest at one over base rate.
Yours faithfully
for A. Goldberg & Sons PLC
I. W. Steven, Director.
A. Leon, Secretary.
The petition was opposed by the respondents, Brunswick Developments (1987) Limited (In liquidation) and Mr Raymond Ellis Blin, the liquidator. For convenience I shall refer to Brunswick Developments (1987) Limited, whether before or after the liquidator was appointed, as Brunswick. After proof the Lord Ordinary granted the prayer of the petition and rectified the letter by (a) deleting in the letter heading the words A Goldberg & Sons PLC and substituting Brunswick Developments (1987) Limited therefor; (b) deleting 17217727 in the third line of the second paragraph of the letter and substituting172177 therefor; (c) deleting in the...
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