Frank Houlgate Investment Company Limited V. Biggart Baillie Llp
| Jurisdiction | Scotland |
| Judge | Lord Glennie |
| Neutral Citation | [2011] CSOH 160 |
| Date | 30 September 2011 |
| Docket Number | CA25/09 |
| Court | Court of Session |
| Published date | 30 September 2011 |
| OUTER HOUSE, COURT OF SESSION [2011] CSOH 160 | |
| CA25/09 | OPINION OF LORD GLENNIE in the cause FRANK HOULGATE INVESTMENT COMPANY LIMITED Pursuers; against BIGGART BAILLIE LLP Defenders: ________________ |
Pursuers: Dewar, Q.C.; Wilson Terris & Co SSC
Defenders: Hanretty, Q.C., Patterson; HBM Sayers
30 August 2011
Introduction
[1] The pursuers are a company set up by Mr Frank Houlgate as a vehicle for investment in stocks, shares and the like. He and his wife each own 50% of the shares. The pursuers claim damages of £300,000 against the defenders, a well known firm of solicitors. The action arises out of a fraud on the pursuers perpetrated by a fraudster who persuaded the pursuers to advance significant sums of money, as security for which the fraudster offered a standard security over a property, Balbuthie Farm in Fife, which he pretended to (but did not) own. The defenders (or, strictly, their predecessors in title, but I shall simply refer to them as "the defenders") became involved in the transaction in connection with preparing and witnessing the standard security on behalf of the fraudster, and subsequently in connection with a deed of variation. Being unable to recover from the fraudster, and the standard security over a property not owned by the fraudster obviously being worthless, the pursuers look to recover from the defenders.
[2] This action has had an untidy history. Initially the pursuers put their claim in two ways: first, they said that the defenders were in breach of a duty of care owed to them while acting on behalf of the fraudster in connection with the transaction; and, second, they claimed that the defenders were in breach of an implied warranty or authority. The defenders tabled a plea to the relevancy of the action and, after hearing a debate on that plea, the Lord Ordinary, Lord Drummond Young, sustained that plea to the relevancy and dismissed the action. His Opinion is reported as Frank Houlgate Investment Company Limited v Biggart Baillie LLP 2010 SLT 527. The pursuers reclaimed. In the course of that reclaiming motion, they sought to amend. The Inner House allowed their Minute of Amendment to be received and, in due course, without hearing argument, recalled the interlocutor dismissing the action and remitted the case to the Lord Ordinary to proceed as accords. After further amendment and adjustment, the matter came before me for debate, again on the defenders' plea to the relevancy of the action. In the course of the debate the pursuer amended yet again to attempt to deal with issues raised in argument on behalf of the defenders. In consequence of these various amendments since Lord Drummond Young issued his opinion in December 2009, some of the averments critical to the pursuers' case have altered, and it would be unhelpful (and potentially confusing) if I were simply to adopt his summary of the pursuers' averments in the action. I must therefore set them out anew, while trying to point out the main differences between my summary and his.
The pursuers' averments
[3] This debate proceeds, of course, on the basis that the pursuers' averments are to be taken pro veritate. The action will only be dismissed at this stage if it is clear that the pursuers' case cannot succeed even if they prove everything which they offer to prove: see Jamieson v Jamieson 1952 SC (HL) 44, 50 and Mitchell v Glasgow City Council 2009 SC (HL) 21, 26. Because this case involves allegations of negligence and participation in fraud by professional people, it is important to emphasise that no evidence has yet been led in the case. The account that follows is an account only of the pursuers' case. It does not set out facts found by the court to be true.
[4] The pursuers aver that in about May 2004 Mr Houlgate was introduced by his investment advisers, St. James Place Partnership (formerly Rothschild's), to a man called "John Cameron". Mr Houlgate was told that the said Mr Cameron resided at Flat 3, 191 Roundhay Road, Leeds, LS8 5AN. The pursuers aver, for the avoidance of doubt, that Mr Houlgate did not know until around July 2007 that the said Mr Cameron's full name was John McGregor Cameron or John M Cameron. (This part of the pursuers' case differs materially from that presented to Lord Drummond Young, where the averment was that the pursuers were introduced to a man called "John M Cameron" (see para.[2] of his Opinion), and consequently the abbreviations used in the up-to-date pleadings and in this Opinion differ to some extent from those used by Lord Drummond Young.) The "John Cameron" to whom the pursuers were introduced in May 2004 is referred to in the pursuers' pleadings, and in this Opinion, as either "the said Mr Cameron" or "JMC". At that stage, i.e. in or around May 2004, because the introduction to him was made through the senior partner of St James Place Partnership, who indicated that he had acted for the said Mr Cameron for a number of years, Mr Houlgate carried out no research of his own as to the identity or background of the said Mr Cameron. It is averred, and this is admitted by the defenders, that the said Mr Cameron, or JMC, was and is a fraudster, though this was not known to Mr Houlgate when he was first introduced to him - he understood JMC to be a businessman who was looking for investors in his company, Securimax, which carried on business in connection with the provision of secured storage for motor cycles. Between June and August 2004, the pursuers advanced the sum of £100,000 to JMC by way of investment in Securimax.
[5] In about the middle of 2005, Mr Houlgate, acting on behalf of the pursuers, had discussions with JMC about further investment in Securimax. Mr Houlgate indicated that the pursuers were willing to increase their investment in Securimax to £500,000 but that they would require to be given some security for that further investment. JMC told him that he had an ancestral estate in Scotland known as "Balbuthie", which was valued at £2.6 million, which could be offered as security. That property was Balbuthie Farm, in Fife. At about this time, Mr Houlgate's son found out from the internet that Balbuthie Farm was owned by a man called John Cameron, who the pursuers understood to be JMC. There were, however, no pictures on the internet of the John Cameron who owned the property. No inquiry was made on any official website such as that of the Registers of Scotland. The pursuers and JMC agreed that the pursuers would advance a further £500,000 to JMC by way of investment in Securimax, to be secured on Balbuthie Farm, in return for which they would in due course be paid £800,000. Mr Houlgate and JMC also discussed the possibility of setting up a company for the purpose of converting Balbuthie Farm into a luxury golf course development. The details of that proposal do not matter for present purposes.
[6] In due course JMC instructed the defenders to act on his behalf in respect of the transaction. Mr Mair, a partner in the firm at the time, handled the matter on his behalf. The pursuers, for their part, instructed the firm of AB & A Matthews ("ABAM") to act as their solicitors. The first contact between ABAM and the defenders was in late January 2006.
[7] In about the middle of 2006, Mr Houlgate was taken to see the property by JMC. During the course of the visit, JMC told him that the farmhouse was let out to the Church of Scotland and that the tenants were not at that time aware of his proposals. They therefore retired to a local public house to discuss matters further. JMC said that they should be discrete because the local community were not aware of his proposals. Thereafter, they went to meet planning consultants who had been engaged by JMC in relation to the proposed development.
[8] So far as concerns the position of the defenders, the pursuers say that they reasonably do not know what instructions, information or documents were given to them by JMC concerning his identity and his right and title to grant security over the property. They say, however, that, when accepting instructions from JMC, the defenders were obliged by the Money Laundering Regulations 2003 to obtain satisfactory evidence of his identity, and that they, the pursuers, were entitled to assume that they had done so. They also refer to statements recorded as having been made by Mr Mair in disciplinary proceedings brought against him by the Council of the Law Society, from which, so they say, it appears that, when acting for JMC at various times in 2004, 2005 and 2006, Mr Mair had been given a number of different, conflicting and implausible explanations by JMC as to ownership of Balbuthie Farm and the fact that a property search revealed it to be registered not in his name but in the name of JBC. The pursuers aver that they had had no reason to doubt that JMC was the proprietor of Balbuthie Farm during their earlier dealings with him. They also aver that during the whole course of the dealings between ABAM and the defenders, the defenders did not at any time indicate that they were not acting for the registered title holder of Balbuthie Farm. To the contrary, so they say, the defenders' consistent conduct throughout was to the effect that they were acting for "John Bell Cameron, residing at Balbuthie Farm, ... ("JBC") who was at all material times and still is the registered title holder." That conduct culminated, they say in Article 4 of Condescendence, with Mr Mair witnessing deeds which bore to be executed by JBC, the registered title holder, but which he knew were not so executed. I should, however, note here the defenders' submission that the averment that Mr Mair knew when he witnessed it that the standard security was not executed by JBC is an inference which is not justified by the averments which I have summarised, since one of the explanations said to have been given to Mr Mair was that "John Bell Cameron" was a name which JMC sometimes used to keep him "at arm's...
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