Macallans, Sheena Diane Adam And Ian Grant Against W Burrell Homes Limited And Brian Anthony Mccardle And Dominic Martin Sweeney
| Jurisdiction | Scotland |
| Judge | Sheriff S Reid |
| Neutral Citation | [2016] SC GLA 79 |
| Court | Sheriff Court |
| Date | 15 November 2016 |
| Docket Number | A827/14 |
| Published date | 22 November 2016 |
SHERIFFDOM OF GLASGOW AND STRATHKELVIN AT GLASGOW
[2016] SC GLA 79
A827/14
JUDGMENT OF SHERIFF S REID Esq
in the cause
MACALLANS, SHEENA DIANE ADAM and IAN GRANT
Pursuers & Real Raisers
against
W BURRELL HOMES LIMITED
First Defender
and
BRIAN ANTHONY MCCARDLE
Second Defender
and
DOMINIC MARTIN SWEENEY
Third Defender
Act: No appearance
First Defender: No appearance
Second Defender: Young, Advocate instructed by Complete Clarity Solutions, Glasgow
Third Defender: Stevenson, Russells Gibson McCaffrey, Glasgow
GLASGOW, 15th November 2016. The sheriff, having resumed consideration of the cause, ex proprio motu in terms of Rule 40.16 of the Ordinary Cause Rules 1993, Finds that the adjusted claim of the second defender (no. 15 of process) and the adjusted claim of the third defender (no. 18 of process) upon the fund in medio are incompetent; Repels the said claims; Reserves the issue of expenses meantime; Appoints parties to be heard thereon at a case management conference before Sheriff Reid on a date to be hereafter assigned.
SHERIFF
NOTE:
Summary
[1] This action of multiplepoinding has now spawned two debates, each raising separate issues of competency.
[2] In the first debate, I adjudicated upon the competency of the action itself. The issue in dispute in the second debate concerns the competency of the second and third defenders’ claims upon the fund in medio, in particular whether they qualify as “riding claims” in the context of a multiplepoinding.
[3] The background is set out more fully in my earlier judgment dated 22 June 2015. The pursuers, a firm of solicitors, acted for the first defender, W. Burrell Homes Limited (“the company”) in the sale of heritable property owned by the company. That sale generated net free proceeds of £229,000. It is not in dispute that that sum of money, now constituting the fund in medio, was and remains properly due and payable to the company. The second and third defenders are the co-directors of, and equal shareholders in, the company. They have fallen out. As a result, the company is in a state of paralysis. There being no joint and unequivocal instruction from the company’s directors regarding disbursement of the sale proceeds due to the company, the pursuers commenced this action seeking inter alia judicial authority for the consignation of the fund in the hands of the sheriff clerk at Glasgow.
[4] An issue then arose as to the competency of the action. It was argued that there was no double distress because all parties acknowledged that the fund in medio was due to the company. Following debate, I concluded that the action was competent, principally because the pursuers qua trustees were entitled, by means of a multiplepoinding process, to be relieved of their obligation to hold the fund, and to obtain a judicial discharge.
[5] I also opined that, esto the pursuers did not hold the fund qua trustees, the action remained competent because, properly understood, there were at that stage competing claims upon the fund. I analysed those competing claims as comprising conflicting asserted rights of the second and third defenders, as co-directors of the company, to manage, control and direct the distribution of the fund in medio.
[6] That said, even at the stage of that first debate, an alternative basis of claim to the fund in medio was foreshadowed in the pleadings. It was articulated in the following terms in the second defender’s adjusted defences (item 11 of process):-
“Esto the second defender as a director of the first defender has no claim on the funds in medio (which is denied) the second defender as a private individual is owed funds by way of loans to the first defender (directors’ loans) and accordingly has a claim on the funds in medio”.
In this alternative formulation, the second defender’s interest in the fund was founded upon his capacity as an alleged creditor of the company.
[7] Claims were subsequently lodged by the second and third defenders upon the fund in medio. Each claims as a creditor of the company et separatim as a co-shareholder in the company. Preliminary pleas were taken to the relevancy and specification of these competing claims. Accordingly, the action proceeded to a second debate.
[8] No claim has ever been lodged by the company itself to any part of the fund.
[9] At the second debate, a discussion evolved concerning the competency of the claims. Having considered the parties’ careful submissions, I have concluded that the claims of the second and third defenders are indeed incompetent and fall to be repelled. That is because, principally, they do not constitute direct claims upon the fund in medio and they do not qualify as riding claims in the context of a multiplepoinding. I explain my reasoning below.
Submissions for the second defender
[10] At the outset of the (second) debate), counsel for the second defender, acting in the proper discharge of his duties to the court, expressed concerns regarding the competency of both claims. He acknowledged difficulties in analysing the claims as anything other than purported “riding claims”. Reference was made to The Royal Bank of Scotland v Stevenson (1849) 12 D 250; Home’s Trustees v Ralston’s Trustees (1834) 12 S 727; Gill’s Trustees v Patrick & Ors (1889) 16 R 403; Canning v Glasgow Caledonian University & Ors 2016 SLT (Sh Ct) 56; Clark’s Executor v Clark 1953 SLT (Notes) 58.
[11] Counsel submitted that if the claims were found to be incompetent, the appropriate disposal was to sist both claims to afford the second and third defenders the opportunity properly to constitute their claims against the first defender (the company), or, alternatively, to await the liquidation of the company.
[12] Alternatively, if I was satisfied that the claims were competent, I was invited to dismiss the third defender’s claim and allow a proof before answer on the second defender’s claim. Counsel challenged the relevancy of the third defender’s principal claim of £165,000. The related averments were said to be confusing: sometimes the claim was characterised as repayment of a loan; sometimes it appeared to be in the nature of an unjustified enrichment claim. If the claim was founded upon unjustified enrichment, it was said to have prescribed. Either way, the third defender had failed to explain why or how the money allegedly disbursed by him had come to be paid; and, if it was a loan, the term of the loan. There was also said to be a lack of essential specification of the computation of the £165,000 claim.
[13] Counsel also challenged the competency of the third defender’s secondary claim to the extent that it sought an equal distribution between the second and third defenders of the residue of the fund, following deduction of the third defender’s primary claim for £165,000. The justification for this equal distribution was said to be that the second and third defenders were the company’s sole and equal shareholders. This secondary claim was said to be incompetent as it constituted an unlawful and unprecedented return of the company’s capital to its shareholders, outwith the proper statutory mechanism for an approved reduction in capital.
[14] In contrast, the second defender’s claim was said to be straightforward. It was founded upon unjustified enrichment. Reference was made to Reid v Lord Ruthven (1918) 55 SLR 616. Relevancy and specification criticisms sought to be levelled at the second defender’s claim were dismissed. Reference was made to Court of Session Practice (Macfadyen), F/722; Longmuir v Moffat 2009 SC 329; MRS Distribution Ltd v DS Smith (UK) Ltd 2004 SLT 631; Ocra (Isle of Man) Ltd v Anite Scotland Ltd 2003 SLT 1232; and Sim v Howat [2011] CSOH 115.
Submissions for the third defender
[15] The third defender’s solicitor conceded a concern regarding the competency of the claims, but opposed dismissal of the claims or a sist. He submitted that, given the lengthy procedure to date, the position had “evolved” and the present claims should simply be determined on their merits.
[16] The third defender maintained the relevancy and validity of his claim. It comprised a claim for reimbursement of a single payment made by the third defender on behalf of the company to an identified creditor, with the date and mechanism of payment being averred. There was said to be no defence to this claim.
[17] I was invited to dismiss the second defender’s claim. Specifically, the claim was said to lack specification of the alleged “debts” of the company that were allegedly paid by second defender; of the identities of the company’s alleged creditors; of the dates when sums were said to have been expended by the second defender on behalf of the company; of the manner in which the company’s alleged indebtedness to creditors was said to have been settled; and, in any event, of the computation of the claimed sum of £127,000 (which sum, it was noted, differed from the aggregate claim set out in the table on page 6 of the second defender’s claim).
Discussion
[18] In my judgment, the claims of the second and third defenders are not competent and should be repelled.
What is a riding claim?
[19] Broadly speaking, claims in a multiplepoinding fall into two categories: they may be direct claims or indirect (or riding) claims. A direct claim involves a direct nexus between the claimant and the whole or part of the fund in medio. Illustrations of direct claims are the assertion of a right of ownership of the fund; the assertion of a right of possession of the fund; an asserted right to have custody of the fund (Canning v Glasgow Caledonian University 2016 SLT (Sh Ct) 56); an asserted personal right to manage, administer or direct the disposal of the fund (Macallans v W. Burrell Homes Ltd & Ors 2015 SLT (Sh Ct) 243).
[20] A further illustration of a direct claim is that of a creditor of a person to whom the whole or part of the fund may be due, where the creditor has...
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