Henderson v 3052775 Nova Scotia Ltd
| Jurisdiction | Scotland |
| Judgment Date | 18 February 2005 |
| Docket Number | No 26 |
| Date | 18 February 2005 |
| Court | Court of Session (Inner House - Extra Division) |
Court of Session Inner House Extra Division
Lord MacLean, Lord Philip, Lord Hardie
Companies - Liquidation - Gratuitous alienation - Whether assumption of debt by company was part of consideration for sale of subjects - Insolvency Act 1986 (cap 45), sec 242
Practice - Summary decree - Test - Act of Sederunt (Rules of the Court of Session 1994) 1994 (SI 1994/1443 (S 69)), r 21.2
Rule of Court 21.2 provides, inter alia, that a pursuer may apply for summary decree on the ground that there is no defence to the action, or a part of it, disclosed in the defences. The court may grant the motion or make other orders "if satisfied that there is no defence to the action disclosed or to any part of it to which the motion relates".
A company granted a disposition of certain subjects in favour of the defenders. The same person was managing director of the company and also director, president and secretary of the defenders at the relevant time. He had a number of aliases. Contemporaneous documents, including resolutions of the two companies, the offer to sell and the disposition, recorded that the purchase price was £248,100. Stamp duty was calculated on that basis. The liquidator of the company raised an action of production and reduction of the disposition on the ground that it was a gratuitous alienation. The defenders maintained that the true consideration included an assumption of debt due by the defenders of £1.8million. On 9 December 2003 the Lord Ordinary granted summary decree. The defenders reclaimed and lodged a minute of amendment. On 17 March 2004 the Inner House recalled the summary decree and remitted the cause to the Lord Ordinary for a further hearing on the amended pleadings. On 21 April 2004 the Lord Ordinary again granted summary decree. The defenders reclaimed. They maintained that the issue for the court was whether the defenders' averments and the documents produced disclosed a case to try on the issue of whether the disposition had been granted for adequate consideration. They further submitted that before summary decree could be granted there had to be near certainty that the defenders would fail. They conceded that if the court concluded that the true consideration was £248,100, that was inadequate. They also conceded that it was legitimate for the court to look behind the terms of the disposition and to consider the various documents lodged as productions. The pursuer maintained that all the contemporaneous documents were unequivocal in demonstrating that the purchase price was £248,100, and that subsequent events including the company's accounts and the claims in the liquidation by creditors whose debts were allegedly transferred as part of the consideration pointed to the lack of authenticity of the defence.
Held that: (1) in determining applications for summary decree the court must achieve near certainty as to the absence of a defence; it must consider the state of the action as it stood, and not forecast the outcome of a proof; and it was entitled to look beyond the pleadings to assess the authenticity of the defence (para 5); (2) the evidence of the contemporaneous documents that the consideration was £248,100 was incontrovertible, and the subsequent documents produced only confirmed that the purchase of the subjects and the assumption of the debt were separate transactions (paras 9, 12); (3) the affidavit evidence relied on by the defenders was of no value in relation to the issue of what was the agreed consideration for the transfer of the subjects, the witnesses' understanding of the arrangements being irrelevant to the determination of the terms of the contract between the company and the defenders (para 13); (4) the absence of certain documents such as formal transfer of indebtedness prior to delivery of the disposition confirmed the conclusion based on the contemporaneous documents (para 15); (5) a different approach to an application for summary decree may be appropriate in simpler cases than in complex cases, and in the present case it was possible to conclude that the defence was neither genuine nor authentic (para 17); and reclaiming motion refused.
Matthew Purdom Henderson as liquidator of Letham Grange Development Company Ltd raised an action in the Court of Session for production and reduction of a pretended disposition granted by the company in favour of 3052775 Nova Scotia Ltd, who were called as defenders.
On 9 December 2003 the Lord Ordinary (Carloway) granted summary decree. The defenders reclaimed, and lodged a minute of amendment. On 17 March 2004 the Inner House recalled the summary decree and remitted the cause to the Lord Ordinary for a further hearing on the amended pleadings. On 21 April 2004 the Lord Ordinary (Carloway) again granted summary decree.
The defenders reclaimed. The cause called for a hearing on the summar roll before an Extra Division, comprising Lord MacLean, Lord Philip and Lord Hardie, on 30 September 2004.
Cases referred to:
Keppie v Marshall Food Group (The) 1997 SLT 305
Nottay's Tr v Nottay 2001 SLT 769
Sinclair (P & M) v Bamber Gray Partnership (The)SC1987 SC 203; 1987 SLT 674
Three Rivers DC v Bank of England (No 3)ELRWLRUNK [2003] 2 AC 1; [2000] 2 WLR 1220; [2000] 3 All ER 1
At advising, on 18 February 2005, the opinion of the Court was delivered by Lord Hardie-
Opinion of the Court- [1] This is an action of production and reduction of a pretended disposition granted by Letham Grange Development Co Ltd (hereinafter referred to as 'the company') in favour of the defenders dated 12 February 2001 and recorded in the General Register of Sasines for the County of Angus under title no ANG11868 in respect of the Letham Grange Country Club and Resort, Arbroath (hereinafter referred to as 'the subjects'). The pursuer sues in his capacity as liquidator of the company.
[2] On 2 December 2003 the pursuer moved for summary decree of production and reduction of the said pretended disposition. On 9 December 2003 the Lord Ordinary granted that motion by sustaining the pursuer's first plea in law to the effect that the disposition was a gratuitous alienation in terms of sec 242 of the Insolvency Act 1986. On 6 January 2004 leave to reclaim against that interlocutor was granted and while the cause was pending before the Inner House the defenders lodged a minute of amendment expanding upon their defences. On 17 March 2004, as a result of the amendments, the Inner House recalled the summary decree and remitted the cause to the Lord Ordinary for a further hearing in light of the amended pleadings. After a further hearing the Lord Ordinary again pronounced summary decree on 21 April 2004 by repelling the defenders' second and third pleas in law and sustaining the pursuer's first plea in law. The defenders reclaimed against that decision.
[3] Counsel for the defenders submitted that in applications for summary decree in terms of RC, r 21.2 the court should take a relatively broad view of the prospects of successfully defending the action. In the present case the issue for the court was whether the averments of the defenders and the documents lodged as productions disclosed a case to be tried on the single issue of whether the grant of the disposition by the company had or had not been made for adequate consideration. Counsel for the defenders further submitted that the test to be applied by the court was a stringent one and that, before summary decree could be granted, there had to be...
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