Elizabeth G Mackay As Trustee In The Sequestration Of Mark Edward Fortune Against Cooper Watson Limited

JurisdictionScotland
JudgeLord Jones
Neutral Citation[2015] CSOH 140
CourtCourt of Session
Published date21 October 2015
Year2015
Docket NumberCA30/15
Date21 October 2015

OUTER HOUSE, COURT OF SESSION

[2015] CSOH 140

CA30/15

OPINION OF LORD JONES

In the cause

ELIZABETH G MACKAY AS TRUSTEE IN THE
SEQUESTRATION OF MARK EDWARD FORTUNE

Pursuer;

against

COOPER WATSON LIMITED

Defender:

Pursuer: Cormack, Solicitor Adovcate; Pinsent Masons LLP

Defender: D Mclean, Advocate; T C Young LLP

21 October 2015

Introduction
[1] The point at issue in this case is a short one. It concerns the proper construction of section 44(4)(c) of the Conveyancing (Scotland) Act 1924 (“the 1924 Act”).

[2] The case came before the court on 9 July 2015, for debate. As the result of a combination of the parties’ pleadings, their notes of argument and statements made during the hearing, the following agreed factual matrix emerged. The pursuer is the trustee on the sequestrated estate of Mark Edward Fortune, having been appointed on 7 February 2011. In consequence of that appointment, Mr Fortune’s whole estate vested in the pursuer for the benefit of his creditors as at 24 December 2010. At that date, Mr Fortune owned a number of heritable properties in Edinburgh. On 7 March 2014, a disposition of one of these properties, bearing to be granted by Mr Fortune in favour of the defender, was recorded in the Land Register of Scotland. On 27 March 2014, a disposition of a second property, bearing to be granted by Mr Fortune in favour of the defender, was recorded in the Land Register. On 1 April 2014, dispositions of two further properties, each bearing to be granted by Mr Fortune in favour of the defender, were recorded in the Land Register. On 17 April 2014, a disposition of a fifth property, bearing to be granted by Mr Fortune in favour of the defender, was recorded in the Land Register. The consideration for the grant of the first of these dispositions was stated to be "certain good and onerous causes". The consideration for the grant of the second, third and fourth dispositions was stated to be “certain good causes and no consideration”. The consideration for the grant of the last disposition was stated to be “certain good causes”. At all material times in March and April 2014, the defender was aware of Mr Fortune’s continuing sequestration.

The relevant statutory provisions

[3] So far as is relevant for the purposes of this opinion, section 31 of the Bankruptcy (Scotland) Act 1985 (“the 1985 Act”) provides that, subject to exceptions which are not applicable in this case, the whole estate of the debtor vests in the trustee by virtue of the trustee’s appointment, as at the date of sequestration, for the benefit of the debtor’s creditors. It is also provided that it is not competent for the trustee, or any person deriving title from the trustee, to complete title to any heritable estate in Scotland before the expiry of 28 days, beginning with the date on which “the certified copy of the order of the sheriff granting warrant [to cite the debtor] is recorded” in the register of inhibitions, under section 14(1)(a) of the 1985 Act.

[4] In terms of section 32(8), subject to provisions that do not apply in the circumstances of this case, any dealing of or with the debtor relating to his estate vested in the trustee shall be of no effect in a question with the trustee.

[5] The order of the sheriff granting warrant of which a certified copy is recorded in the register of inhibitions is pronounced in terms of section 12(2) of the 1985 Act. Where a petition for sequestration of the debtor’s estate is presented by a creditor, the sheriff to whom the petition is presented must grant warrant to cite the debtor to appear before him, to show cause why sequestration should not be awarded. Subsection (1)(a) of section 14 of the 1985 Act provides that, after the sheriff grants such warrant, the sheriff clerk is to send “forthwith” a certified copy of the order to the keeper of the register of inhibitions and adjudications (“ the keeper”, “the register”) for recording. Subsection (2) of section 14 provides that such recording has “the effect”, as from the date of sequestration, of an inhibition and of a citation in an adjudication of the debtor’s heritable estate at the instance of the creditors who subsequently have claims in the sequestration accepted under section 49 of the 1985 Act. (In this opinion, where I refer to “the prohibitory effect”, I am referring to the effect mentioned in subsection (2).) Section 49 prescribes the mechanism for adjudicating claims.

[6] In short, the recording of the certified copy of the sheriff’s order granting warrant has the following consequences which are of interest in this case: it has “the effect as from the date of sequestration of an inhibition and of the citation in an adjudication of the debtor’s heritable estate” at the instance of creditors (the 1985 Act, section 14(2)); and it is the first of the 28 days during which it is not competent for the trustee or any person deriving title from the trustee to complete title to any heritage (the 1985 Act, section 31(1A)).

[7] In terms of section 14(3), the prohibitory effect mentioned in subsection (2) expires on the happening of either of two specified events. Neither of the specified events occurred in this case. If neither of the specified events occurs, the effect expires “at the end of the period of three years beginning with the date of sequestration”, subject to subsection (4). Subsection (4) provides that, if not discharged, the trustee may send a memorandum in prescribed form to the keeper for recording, before the expiry of the period of three years from the date of sequestration. In terms of subsection (4A), the recording of a memorandum renews the prohibitory effect for a further period of three years beginning with the expiry of the first period of three years. Subsequent renewals are also provided for.

[8] Section 44(4)(c) of the 1924 Act, so far as is relevant in the circumstances of this case, is in the following terms:

“No deed… granted… by a person whose estates have been sequestrated under… the Bankruptcy (Scotland) Act 1985,… relative to any land or lease or heritable security belonging to such person at the date of such sequestration or subsequently acquired by him shall be challengeable or denied effect on the ground of such sequestration if such deed… shall have been granted… at a date when the effect of recording… under subsection (1)(a) of section 14 of the Bankruptcy (Scotland) Act 1985 the certified copy of an order shall have expired by virtue of subsection (3) of that section, unless the trustee in such sequestration shall before the recording of such deed… in the appropriate Register of Sasines have completed his title to such land… or heritable security by recording the same in such register…

[9] In this case, the order granting warrant to cite Mr Fortune was contained in an interlocutor of the sheriff, dated 24 December 2010. At the hearing before me, it was the parties’ understanding that no certified copy of the sheriff’s order granting warrant to cite was recorded in the register before 17 April 2014, the date on which the last disposition was registered, and the debate proceeded on that premise. The possible explanations were that the sheriff clerk had failed to send the certified copy to the keeper; that it was sent but not received; or that, having received it, the keeper had failed to record it. In any event, there was no dispute that, if the certified copy had been recorded before 7 March 2014, the date on which the first disposition was registered, the three year period specified in section 44(4)(c) of the 1924 Act would, by then, have expired. By the date of the registration of the dispositions, which occurred after the expiry of three years from the date of sequestration, the pursuer had not completed title to the properties identified in those deeds.

[10] The requirement placed on the sheriff clerk to send a copy of the warrant to the keeper was an innovation, introduced by the 1985 Act on the recommendation of the Scottish Law Commission. Previously, it was the responsibility of the party applying for sequestration to present an abbreviate of the petition and first deliverance to the keeper. Recording of the abbreviate had the prohibitory effect which is now achieved by the recording of the copy order granting warrant. It is unfortunate that the order granting warrant was not recorded in the manner provided for by section 14, but no blame for that can be attached to the parties to this action, or Mr Fortune, or the creditors. Even if the pursuer, or any person deriving title from her, had attempted to complete title to the heritable properties which are the subject of the deeds under challenge, they could never competently have done so, so long as the copy order remained unrecorded. (Section 31 of the 1985 Act)

The debate

[11] It was the pursuer’s position that, with one possible exception which I shall mention later, Mr Fortune had “no title” to dispone the properties. Subject to that possible exception, therefore, the dispositions are voidable, and the pursuer is entitled to reduction thereof. Alternatively, subject again to the possible exception, the dispositions are of no effect, in terms of section 32(8) of the Bankruptcy (Scotland) Act 1985. In these circumstances, decree should be pronounced de plano in respect of all but the possibly excepted deed.

[12] The defender contended that, having regard to the terms of section 44(4)(c) of the 1924 Act, the properties were no longer vested in the pursuer when the dispositions were recorded, three years having expired after the date of Mr Fortune’s sequestration without the pursuer having completed title to them. The court should sustain the defender’s first plea-in-law, a standard plea to the relevancy, and dismiss the action.

[13] In response, counsel for the pursuer submitted that, on a proper construction of section 44(4)(c), the three year period relied on by the defender never started to run because the...

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