Douglas Hugh Cowan V. The Royal Bank Of Scotland Plc
| Jurisdiction | Scotland |
| Judge | Lord Brodie |
| Neutral Citation | [2011] CSOH 85 |
| Court | Court of Session |
| Year | 2011 |
| Date | 17 May 2011 |
| Published date | 17 May 2011 |
| OUTER HOUSE, COURT OF SESSION [2011] CSOH 85 | |
| OPINION OF LORD BRODIE in the cause DOUGLAS HUGH COWAN Pursuer; against THE ROYAL BANK OF SCOTLAND PLC Defender: ________________ |
Pursuer: Bell; Balfour + Manson LLP
Defender: MacCall; DLA Piper Scotland
17 May 2011
[1] On 27 April 2011 I heard motions before calling of the summonses in two separate but related actions in respect of which a caveat had been lodged on behalf of the defender. The application to which this opinion relates was made by the pursuer in the action at the instance of Douglas Hugh Cowan. The other application was made by the pursuer in the action at the instance of Robert Robertson Holden. The defender in both actions is the Royal Bank of Scotland Plc. In both actions the pursuers seek to avoid liability under a guarantee in favour of the defender and sequestration consequential on the guarantee being called up. Each pursuer was represented by Mr Bell, Advocate. Mr MacCall, Advocate, appeared for the defender. In very large part the respective arguments presented by counsel related to both pursuers' applications.
[2] In this action the pursuer concludes:
"(1) For production and reduction of the guarantee granted by the pursuer in favour of the defender in respect of the debtors Small Burn Developments Limited dated 20 November 2008;
(2) For reduction of the pretended charge served on the pursuer by the defender for payment of debt dated 22 November 2010;
(3) For interim suspension of the said pretended charge dated 22 November 2010;
(4) For interdict against the defender from applying for or obtaining an award of sequestration against the pursuer on the grounds of any debt due under the said guarantee; and
(5) For interdict ad interim".
The motion for the pursuer was for interim suspension of the charge dated 22 November 2010 as second concluded for, and for interdict from applying for or obtaining an award of sequestration on the ground of any debt under the guarantee in terms of the fourth conclusion.
[3] The averments of fact in support of the application for interim suspension and interim interdict were as follows:
"2. The pursuer is a director of the company Small Burn Developments Limited (Small Burn). The said company had an on going relationship with the defenders in respect of providing business financing by way of providing loan facilities to Small Burn with the directors providing personal guarantees and standard securities in respect of such facilities. Over the period of the companies' business relationship the pursuer executed various guarantees in respect of such facilities and granted a standard security over an area of land known as Legaston in favour of the defenders specifically as security for any facilities provided to Small Burn. This land is valued at approximately £1,000,000. All negotiations and the provision of such facilities were dealt with by Mr. Bruce Davidson an employee of the defenders. During the negotiations that preceded the execution of the said guarantees, Mr. Davidson specifically stated to the pursuer that the personal guarantee would only be called up if the defenders were unable to recover any debts due thereunder from Small Burn after the defenders had taken all steps to recover the money from Small Burn, including the company being put into administration or liquidation and the defenders having received payment as creditors in respect of such administration or liquidation. Mr. Davidson also advised the pursuer that the only asset owned by him that might be affected by the calling up of the guarantee was the land at Legaston. In or about November 2008, the pursuer and Robert Robertson Holden residing at Stoneywood, Small Burn Farm, Greystone, Arbroath approached the defenders requesting that they provide further funding for Small Burn. Mr. Davidson advised the pursuer that the defenders would require a joint and several guarantee to be executed by the pursuer and Mr. Holden for debts up to a level of £400,000. The said guarantee was to replace any prior guarantee's provided by the pursuer and Mr. Holden. Mr. Davidson did not indicate that the position he had stated with regard to when the pursuer would be required to make payment in respect of this new guarantee had varied or that any of his assets other than the land at Legaston would be at risk under the guarantee. The pursuer therefore understood that he would not be required to make payment under the said guarantee until all steps had been taken to obtain repayment from Small Burn, including obtaining payment as a creditor were Small Burn to be put into administration or liquidation at the conclusion of such administration or liquidation. The pursuer and Mr. Holden were advised that they required to execute the said guarantee and attached waiver immediately if they wished the financing to be provided. They did so on the basis of the prior assertions made by Mr. Davidson as to when the guarantee previously executed by the pursuer and Mr. Holden might be called up."
[4] The first feature of these averments to which I would draw attention is that Mr Davidson is averred to have said that the guarantees "would only be called up" after the defender had taken "all steps" to recover the sums due by the company. On the face of it that is a statement of intention relating to the future. However, when he came to make the application on behalf of the pursuer, Mr Bell explained that what these averments were meant to mean was that Mr Davidson had said that the guarantees in question could only be called up in the event that all steps had been taken to make recovery from the companies. That is a statement about the present in the sense that it is a statement as to how documents are properly to be construed or, put slightly differently, what is their legal effect. This provides an explanation as to why in the pleadings what Mr Davidson is said to have said about the effect of the guarantees is described as a "representation" (as opposed to a promise or undertaking). The second feature to which I would draw attention is that it is not averred that Mr Davidson's representation was made in respect of the specific guarantee which it is sought to reduce. Rather the complaint is that Mr Davidson having made representations in respect of previous guarantees, did not say anything different in relation to the new guarantee. The way it is put is:
"Mr Davidson did not indicate that the position he had stated with regard to when the pursuer would be required to make payment in respect of this new guarantee had varied".
[5] The legal theory upon which the pursuers in each action proceed is that they were induced to execute the guarantees as a result of Mr Davidson's false representations. It is further said that Mr Davidson knew the representations were false or, if he did not know they were false, he made them negligently. It is said that the pursuers are accordingly entitled to seek reduction of the guarantee.
[6] Mr Bell's position on behalf of the pursuer was put quite shortly. He accepted that it might appear somewhat extraordinary that experienced businessmen such as the pursuers had conducted their affairs in this way but for the present purposes the averments had to be treated pro veritate. Mr Bell referred me to McBryde The Law of Contract in Scotland (3rd Edition) at para 15-67 but otherwise did not elaborate the legal basis of his case.
[7] Mr MacColl, on behalf of the defender, moved me to refuse the application broadly on two grounds; first that no prima facie...
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