O'Boyle's Trustee v Brennan
| Jurisdiction | Scotland |
| Judge | Lord Doherty |
| Judgment Date | 22 January 2020 |
| Neutral Citation | [2020] CSIH 3 |
| Court | Court of Session (Inner House) |
| Date | 22 January 2020 |
| Docket Number | No 12 |
[2020] CSIH 3
First Division
Lord Doherty
Blackburn v Alexander [2015] CSOH 179; 2016 GWD 2–48
Cay's Tr v Cay 1998 SC 780; 1999 SLT 321; 1998 SCLR 456
Grampian Maclennan's Distribution Services Ltd (Joint Liquidators of) v Carnbroe Estates Ltd [2018] CSIH 7; 2018 SC 314; 2018 SLT 205; 2018 SCLR 532; [2018] BPIR 461
Henderson v Bulley (1849) 11 D 1470
Henderson v Foxworth Investments Ltd sub nom Liquidator of Letham Grange Development Co Ltd v Foxworth Investments Ltd [2014] UKSC 41; 2014 SC (UKSC) 203; 2014 SLT 775; 2014 SCLR 692; [2014] 1 WLR 2600; 158 (27) SJLB 37 and [2013] CSIH 13; 2013 SLT 445
Heritable Reversionary Co Ltd v Millar (1892) 19 R (HL) 43; [1892] AC 598
MacFadyen's Tr v MacFadyen 1994 SC 416; 1994 SLT 1245
Oceancrown Ltd (Joint Administrators of) v Stonegale Ltd [2016] UKSC 30; 2016 SC (UKSC) 91; 2016 GWD 20–359 and [2015] CSIH 12; 2015 SCLR 619; 2015 GWD 8–156
Short's Tr v Chung (No 1) 1991 SLT 472; 1991 SCLR 629
Gretton, GL, “Trusts Without Equity” (2000) 49 (3) ICLQ 599
McBryde, WW, Bankruptcy (2nd ed, W Green, Edinburgh, 1995), paras 1.07, 18.57
McKenzie Skene, DW, Bankruptcy (W Green, Edinburgh, 2017), para 18.04
Reid, KGC, “Patrimony not Equity: The trust in Scotland” (2000) 8 (3) ERPL 427
Scottish Law Commission, Report on Trust Law (Scot Law Com no 239, 2014), para 3.4 (Online: https://www.scotlawcom.gov.uk/files/4014/0904/0426/Report_on_Trust_Law_SLC_239.pdf (20 February 2020))
Bankruptcy — Sequestration — Sums repaid two years after alienation and subsequent to discharge of debtor from sequestration — Whether adequate consideration — Whether gratuitous alienation — Bankruptcy (Scotland) Act 1985 (cap 66), sec 34(4)
Yvonne Quinn, as trustee in the sequestration of John O'Boyle, raised an action under the commercial cause rules (Act of Sederunt (Rules of the Court of Session 1994) 1994 (SI 1994/1443), Ch 47) in the Court of Session against Karen Brennan, seeking declarator and payment in relation to payments made to the defender on the grounds that they were gratuitous alienations. The cause called before the commercial judge (Lord Doherty) for debate. At advising, on 4 September 2018, the commercial judge put the case out by order ([2018] CSOH 90). At the hearing by order, on 12 September 2018, the commercial judge granted decree of declarator and decree for payment in respect of the first of the alienations. The defender reclaimed.
The Bankruptcy (Scotland) Act 1985 (cap 66), sec 31, provides, inter alia, “(1) Subject to section 33 of this Act … the whole estate of the debtor shall by virtue of the trustee's appointment, vest in the trustee as at the date of sequestration for the benefit of the creditors”. Section 34 provides, inter alia, “(1) Where this subsection applies, an alienation by a debtor shall be challengeable by– … (b) the trustee, the trustee acting under the trust deed or the judicial factor as the case may be. … (4) On a challenge being brought under subsection (1) above, the court shall grant decree of reduction or for such restoration of property to the debtor's estate or other redress as may be appropriate, but the court shall not grant such a decree if the person seeking to uphold the alienation establishes– … (b) that the alienation was made for adequate consideration … . (6) For the purposes of the foregoing provisions of this section, an alienation in implementation of a prior obligation shall be deemed to be one for which there was no consideration or no adequate consideration to the extent that the prior obligation was undertaken for no consideration or no adequate consideration.”
In August 2014, a debtor sold a property which was owned by him and, with the proceeds from the sale, purchased a house in Atlee Road, East Kilbride, with sole title to the property being taken in the name of the defender, his partner. The debtor was subsequently sequestrated on 11 February 2015, and discharged from sequestration in May 2016. The debtor and the defender continued to live together in the Atlee Road property until, in January 2017, the defender sold the house and paid the sum of £197,462.20 to the debtor. The debtor's trustee in sequestration raised an action against the defender seeking declarator that the payment was a gratuitous alienation and seeking repayment of the funds. The defender contended that the payment of the sale proceeds by the defender to the debtor had constituted ‘adequate consideration’.
Following debate, the commercial judge held that the payment had constituted a gratuitous alienation on the basis that consideration would not be adequate unless at the time of the alienation something of more or less equivalent value was obtained in exchange for it. The defender reclaimed and contended that there was no requirement for a temporal nexus between the alienation and the consideration and that a subsequent repayment of the alienation could therefore be taken into account.
Held that: (1) for a payment to amount to ‘consideration’ it had to be a counterpart of the alienation, which required a fundamental element of exchange or reciprocity, determined on objective grounds and at the time when the exchange was agreed, and a payment made two years later without any prior obligation to make such a payment could not satisfy such a test (paras 23–25, 28, 29); (2) a payment made to a debtor after the date of discharge was made to that debtor's own patrimony, not to the debtor's estate held by his trustee in sequestration on trust, and such a payment could not amount to consideration for an alienation made by the debtor prior to his sequestration (paras 30, 34); and reclaiming motion refused.
Observed that it was not the position that the defender would be obliged to repay the alienation twice, as it was likely that she would be able to claim repayment of the sum paid to the debtor relying on a restitutionary remedy (para 38).
MacFadyen's Tr v MacFadyen 1994 SC 416 considered.
The cause called before the First Division, comprising the Lord President (Carloway), Lord Brodie and Lord Drummond Young, for a hearing on the summar roll, on 23 October 2019.
At advising, on 22 January 2020, the opinion of the Court was delivered by Lord Drummond Young—
Opinion of the Court— [1] The pursuer is the trustee currently acting on the sequestrated estate of John O'Boyle (‘the debtor’). The debtor was sequestrated on 11 February 2015, on his own application, and was subsequently discharged from sequestration on 1 May 2016.
[2] In December 2017, the pursuer raised an action on the commercial roll seeking declarator that certain payments made by the debtor to the defender were gratuitous alienations in terms of sec 34 of the Bankruptcy (Scotland) Act 1985 (cap 65). Payments of £190,960 (‘the first alienation’) and £67,837.97 (‘the second alienation’) were said to have been made by the debtor to the defender in August and September 2014, and it is to those payments that the declarator relates. The pursuer also concluded for payment of those sums by the defender. The first of those payments, of £190,960, was used to acquire a house at 16 Attlee Road, East Kilbride, title to which was taken in the defender's name. The defender admits the payment of £190,960 made in August 2014 and the acquisition of the house, but she avers by way of defence that the house was sold in January 2017, and that on 17 January 2017 she paid the sum of £197,462.20 to the debtor. She contends that the payment made by her on 17 January 2017 constituted adequate consideration for the alienation, and that she thus restored the relevant property to the debtor's estate. The critical question is accordingly whether the defender is correct in averring that she provided adequate consideration for the alienation of £190,960 made in August 2014.
[3] The action proceeded to a debate before the Lord Ordinary, on 17 May 2018. At the hearing, the pursuer accepted that the defender's averments relating to the second alienation were suitable for inquiry, and accordingly the only challenge was to the defender's pleadings in respect of the first alienation. The Lord Ordinary, in an interlocutor dated 12 September 2018 and corrected by a further interlocutor of 12 October 2018, held, inter alia, that the defence in respect of the first alienation was irrelevant, and that declarator should accordingly be granted that that payment was a gratuitous alienation. He further decerned against the defender for payment to the pursuer of the sum of £190,960. The defender has now reclaimed against that interlocutor of 12 September 2018 as corrected by the interlocutor of 12 October.
[4] The date of sequestration precedes the coming into force of the Bankruptcy (Scotland) Act 2016 (asp 21). The issues in the present case are accordingly governed by the Bankruptcy (Scotland) Act 1985 (‘the 1985 Act’), as amended by, inter alia, the Bankruptcy and Diligence etc (Scotland) Act 2007 (asp 3). The relevant provisions of the 1985 Act are as follows:
‘Vesting of estate at date of sequestration
31.–(1) Subject to section 33 of this Act … the whole estate of the debtor shall by virtue of the trustee's appointment, vest in the trustee as at the date of sequestration for the benefit of the creditors. …
Gratuitous alienations
34.–(1) Where this subsection applies, an alienation by a debtor shall be challengeable by–
(a) any creditor who is a creditor by virtue of a debt incurred on or before the date of sequestration, or before the granting of the trust deed or the debtor's death, as the case may be; or
(b) the trustee, the trustee acting under the trust deed or the judicial factor, as the case may be.
(2) Subsection (1) above applies where–
(a) by the alienation, whether before or after the coming into force of this section, any of the debtor's property has been transferred or any claim or...
To continue reading
Request your trial
-
Hugh Kennedy Against (first) The Right Reverend Paul Bonnici, (second) The Right Reverend James Warren Cuthbert Madden And (third) Denis Alexander
...(“The SLC DP”) (paras 2.16ff). The dual patrimony concept was given the judicial imprimatur of approval in O’Boyle’s Trustee v Brennan [2020] CSIH 3; 2020 SC 217 (“O’Boyle”), in which Lord Drummond Young, giving the opinion of the court, observed: (at para 31): “…. The dual patrimony theory......
-
The Accountant In Bankruptcy Against (first) Graeme Allan (second) Anna Ragnarsson
...30); 5 (5) any consideration given must properly fall to be regarded as the “counterpart” of the alienation (O'Boyle's Trustee v Brennan 2020 S.C. 217 at para 20). 16. The Defenders did not offer to prove that any relevant consideration was paid. At highest, they pled that without the Secon......