Gillian Thompson, Accountant In Bankruptcy V. Stella Rae Sneddon+the Keeper Of The Registers Of Scotland
| Jurisdiction | Scotland |
| Judge | Lord McEwan |
| Neutral Citation | [2008] CSOH 11 |
| Date | 18 January 2008 |
| Docket Number | A316/06 |
| Court | Court of Session |
| Published date | 18 January 2008 |
| OUTER HOUSE, COURT OF SESSION [2008] CSOH 11 | |
| A316/06 | OPINION OF LORD McEWAN in the cause GILLIAN THOMPSON, Accountant in Bankruptcy Pursuer; against STELLA RAE SNEDDON and THE KEEPER OF THE REGISTERS OF SCOTLAND Defenders: ________________ |
Pursuer: Duthie; Burness, W.S.,
Defenders: MacKenzie; Blacklocks
18 January 2008
[1] The case before me is at the instance of the Accountant in Bankruptcy who is the permanent trustee on the sequestrated estate of one Matthew Sneddon (the son) of 35 Peploe Drive, Glenrothes. The first defender is his mother to whom, in June 2005, Matthew disponed his half share of the Glenrothes property for no consideration. On 10 June it was registered in the Land Register of Scotland kept by the second defender (for whom there was no appearance in this action).
[2] The Trustee challenges the alienation. The mother pleads one of the statutory defences. The Trustee has responded by saying that the mother has made no relevant averments in her defence. The only contentious issue before me related to the Glenrothes property. Put simply, unless there are relevant averments that on 10 June the son's assets exceeded his liabilities the mother's defence cannot succeed.
[3] I should record here that I was referred to a number of authorities, a few in detail, but others only in passing or as examples in other fields. I list them as follows. Goudy on Bankruptcy (4th edn); Erskine, Institute iii, 6,8; Bell's Commentaries both volumes; Wilson, Scottish Law of Debt; McBryde on Bankruptcy; Miller v McIntosh (1884) 11 R 729; Hodge v Morrison (1883) 21 SLR 41; Stuart's Trustees v Chung 1991 SLT 472; S.N.E.R. v Napier (1859) 21 D 700; McGruther v Walton 2004 SCLR 319; HMA v Salmon & Moore 1998 SCCR 740; Phillips v Brewin Dolphin Ltd [2001] 1 All ER 673; re Thoars [2003] 1 BCLC 499.
[4] Counsel for the first defender (the mother) said that he had averred that the debtor (the son) was solvent at the date of alienation in June 2005 and that there were no relevant averments to counter that. Any liability in a Court action producing a decree by default in August 2005 was until then an illiquid claim. The sequestration did not follow until November and there was no Trustee until December. Counsel referred me to his averments about the son's assets and to section 34 of the Act.
[5] There required to be a proof before answer into the facts of the Sheriff Court case. The test had to be absolute insolvency. The case of Phillips was after trial. He also referred to Wilson on Debt, Bell's Commentaries and Short's Trustees v Chung. Counsel relied on the carefully reasond decision of Sheriff Principal Dunlop in McGruther v Walton (also decided after proof). He distinguished Miller as a case involving practical insolvency. If it was, there was no warrant for imparting any legal fictions. In any event in the present case it was a fiction too far. (Counsel referred by analogy to the criminal case of Salmon and Moore). The English cases were complicated, depended on different statutory provision and had to be treated with caution. Even the case of Thoars was sent for trial.
[6] Counsel referred me to various passage in McBryde and concluded by arguing that it was a question of mixed fact and law whether the son was absolutely insolvent in June. I should allow a proof before answer with all pleas outstanding.
[7] Counsel for the pursuer argued thus. The issue concerned the claim and counterclaim in the Sheriff Court action. The debtor and his father were partners in a firm which was suing people called Taggart for fees worth £20,000. They, in turn, counterclaimed for £30,000. In August at a proof diet there was no appearance for the firm and decree was granted for the sum counterclaimed. The question was whether that sum ascertained in August could figure in the alleged solvency in June. Clearly if it could the debtor was insolvent at the time of the alienation to his mother. Whether the debt was illiquid or contingent to begin with, once decree passed a liquid sum became known and the authorities say that such a sum was drawn back to the date of the alienation when solvency had to be determined.
[8] With no definition of liabilities in the 1985 Act, the proper test under section 34 was a "balance sheet" test. The claim and counterclaim would have to feature in that. Miller v McIntosh was clear authority for that even though the value of the claim had to be quantified later. Section 34 was to protect creditors and had to include pending claims. By the same reasoning the £20,000 would become a nil value after August. Counsel referred me to Erskine at 835 and Goudy at page 181. He also drew a distinction between claims which were illiquid and those which were contingent. He referred me to the English cases of Phillips and in re Thoars which he said showed a reasoning consistent with his argument that the purpose of section 34 was to protect net assets. If the Court debt was not a section 34 liability then he could defeat his creditors. The claim was in existence at the date of alienation and the decree simply made it liquid. There was no need for a debt to be liquid for it to be considered on a "balance sheet" test.
[9] The case of McGruther was not in point as it dealt with contingent assets not illiquid ones. There was no need to relitigate any of the Sheriff Court matters which were satellite litigation. The decree was final and was admitted.
[10] Counsel said that decree should be given in terms of the first and second conclusions and certain averments in Answer 6 should be excluded from probation.
[11] It is important to note what are the issues on Record. In the first place it is averred and admitted that the disposition by the son to the mother of the Glenrothes property was made for no consideration (Cond 3 and Answer 3). In Answer 5 the mother makes averments about the Falkirk property and states a figure of equity of £15,810 to which the son and his wife were entitled to one half. The pursuer does not admit these averments. Then in Article 6 the pursuer avers that the son granted a security over the Falkirk property for a sum of money in favour of his mother. The pursuer avers it was granted for no consideration and was a fraudulent preference. The mother denies this and alleges that proper consideration was given in the shape of an undertaking to fund the refurbishment of the Falkirk house. Clearly on that one point there is an issue to try and a proof will be required. Examples were either cited to me or produced to me where the Court has undertaken the exercise of seeing whether value has been given. Stuart's Trustees v Chung is a good example as is Hodge where different findings were made within a family as to what...
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