MacFadyen's Trustee v MacFadyen
| Jurisdiction | Scotland |
| Judgment Date | 11 March 1994 |
| Docket Number | No 41 |
| Date | 11 March 1994 |
| Court | Court of Session (Inner House - Extra Division) |
EXTRA DIVISION
Temporary Judge G H Gordon, QC
BankruptcyHeritable property and conveyancingGratuitous alienationDebtor transferring one-half share in dwellinghouse to motherTitle to dwellinghouse in joint names for administrative reasons, mother having paid purchase price and all running costsWhether "adequate consideration"Bankruptcy (Scotland) Act 1985 (cap. 66), sec. 341
Words and phrasesStatutory interpretation"Adequate consideration"Bankruptcy (Scotland) Act 1985 (cap. 66), sec. 34
In 1984 an individual purchased a dwellinghouse the price of which was partly financed by a bank. As a condition of the granting of the loan, the bank insisted that the disposition be granted in favour of the debtor and her son as both were to be jointly and severally liable for repayment. The loan was paid off in 1988 with the mother being the one who had repaid all of the sums to the bank. She had also paid all of the running costs in respect of the dwellinghouse. In 1990 the property was transferred into the name of the mother alone. The son became bankrupt and his permanent trustee in bankruptcy brought an action against the mother in which he sought reduction of the 1990 deed as being a gratuitous alienation in terms of sec. 34 of the Bankruptcy (Scotland) Act 1985. The defender argued that adequate consideration had been given for her son to transfer his one-half pro indiviso share in the property to her, so that the deed could not be reduced. She also averred that the reason that the consideration for the 1990 deed should have been "for certain good and onerous causes" was that neither she nor her son had ever intended that he should have any beneficial interest in the property. The Temporary Lord Ordinary (Gordon, Q.C.) allowed a proof restricted to ascertaining the value of the property. The defender reclaimed.
Held (1) that "consideration" meant something which was given or surrendered in return for something else and had to be something of material or patrimonial value which could be vindicated in a legal process, whether by being claimed or possibly by being pled in answer to another's claim; (2) that sec. 34 of the 1985 Act used the term "consideration" to mean something which had patrimonial worth at the time when it was given; (3) that there were no averments to justify the conclusion that there had been a continuing legal relationship or enforceable obligation between the defender and her son; and accordingly, (4) that no adequate consideration had been granted for the 1990 disposition; and reclaiming motion refused, and decree of reduction de plano granted.
Robert C. Wallace, the permanent trustee in bankruptcy of Kenneth Alistair MacFadyen, the son of the defender, brought an action against Mrs Grace MacFadyen in which he concluded, inter alia,for production and reduction of a pretended disposition granted by the son to the mother dated 14th and registered in the General Register of Sasines on 18th June 1988 in respect of subjects known as and forming 36 Lochy Road, Inverlochy, Fort William.
The cause called in procedure roll before the Temporary Lord Ordinary (G. H. Gordon, Q.C.). At advising, on 31st March 1993, the Temporary Lord Ordinary inter alia allowed a proof restricted to ascertaining the value of the subjects.
The defender reclaimed, the reclaiming motion calling before an Extra Division, comprising Lord McCluskey, Lord MacLean and Lord Wylie, for a hearing.
At advising, on 11th March 1994, the opinion of the court was delivered by Lord McCluskey.
Opinion of the CourtThis reclaiming motion is against an interlocutor pronounced by the temporary judge (Sheriff Gordon, Q.C.) after a procedure roll debate on 31st March 1993. As appears from his opinion of the same date the temporary judge decided certain procedural matters in relation both to this action and to a related action before he heard the procedure roll debate. The first four grounds of appeal related to his decisions on those procedural matters. However, counsel for the reclaimer accepted, and counsel for the respondent did not dispute, that in the absence of any interlocutor dealing with those decisions they could not be brought under review at this hearing. In any event, counsel have agreed before us that the issues raised by a fifth ground of appeal were the only significant issues that fell to be resolved in the reclaiming motion. The fifth ground of appeal is somewhat oddly worded; but all that this court is asked to decide is whether or not the temporary judge was right to hold that the defences on the merits were irrelevant. The order that this court should pronounce once that matter has been decided will be addressed in the light of our decision.
Relying upon sec. 34 of the Bankruptcy (Scotland) Act 1985, the pursuer, as trustee in bankruptcy of the defender's son ("the debtor"), challenges an alienation of property by the debtor to the defender, being an alienation made within the five-year period mentioned in subsec. (3) and having the effect of favouring the defender, an "associate" of the debtor within the meaning of the section (cf. sec. 74). The property consists of his interest in heritable subjects, namely a house at 36 Lochy Road, Inverlochy, Fort William. That interest, as pro indiviso proprietor jointly with the defender in terms of a registered title, was acquired by disposition in 1984. The alienation was effected by a disposition of the subjects granted by the debtor and the defender to the defender; it was dated 14th and registered in the General Register of Sasines on 18th June
1990. The pursuer seeks (first) declarator that that alienation was one to which the provisions of sec. 34 apply; and (second) production and reduction of that 1990 disposition.
It was not in dispute that, in the circumstances of this case, the court had to grant reduction of that disposition unless the defender could establish that "the alienation was made for adequate consideration": sec. 34(4)(b) of the 1985 Act. It was also accepted that the onus lay upon the defender to establish adequate consideration. The 1990 disposition expressly narrated that the property was disponed "without payment of consideration". In another action (referred to as "the rectification action") the...
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