David Mcgraddie V. Rodger John Mcgraddie+lorna Esther Green
| Jurisdiction | Scotland |
| Judge | Lord Malcolm,Lord Bonomy,Lady Paton |
| Neutral Citation | [2012] CSIH 23 |
| Published date | 13 March 2012 |
| Date | 13 March 2012 |
| Court | Court of Session |
| Docket Number | A556/07 |
| EXTRA DIVISION, INNER HOUSE, COURT OF SESSION | |
| Lady Paton Lord Bonomy Lord Malcolm | [2012] CSIH 23 A556/07 OPINION OF THE COURT delivered by LADY PATON in the cause DAVID McGRADDIE Pursuer and Respondent; against ROGER JOHN McGRADDIE and LORNA ESTHER GREEN Defenders and Reclaimers: _______ |
Pursuer and respondent: J Brown; McClure Naismith LLP
First defender and reclaimer: E W Robertson; Balfour & Manson
Second defender and reclaimer: S P J Buchanan; HBM Sayers
13 March 2012
Introduction
[1] The pursuer, now in his seventies, lived and worked in America for about 25 years. He then decided to return to Glasgow. He asked his son, a property developer, (the first defender) to find a house for him. The first defender identified a flat at 23 St Helens Gardens as suitable. On 18 November 2005 the pursuer and his wife flew to Scotland. They initially lived with the first defender and his partner, a self‑employed accountant, (the second defender) at the defenders' home at 42 Burnhead Road, Glasgow. They viewed the flat at St Helens Gardens, and approved it. On 8 December 2005 the pursuer provided the necessary funds for the purchase by placing £192,703.88 in the first defender's bank account. However on 14 December 2005 the title to the flat was taken in the name of the first defender, and not in the name of the pursuer or the pursuer and his wife. How that came about is one of the disputed issues in this case.
[2] On 1 January 2006, the pursuer and his wife moved into St Helens Gardens. Six days later, on 6 January 2006, the pursuer's wife died of a long-standing heart condition. Thereafter the pursuer continued to live on his own at St Helens Gardens. He regularly visited the defenders at their home, which was nearby.
[3] About a year later, on Monday 19 February 2007, the pursuer gave the first defender a cheque made out in his favour for £285,000. The reason for the handing‑over of the cheque is in dispute, all as set out below. The first defender deposited the cheque in a bank account. The defenders used about £200,000 from the account (together with £90,000 raised by a mortgage) to purchase a newly-built house at 6 Lochrig Court, Stewarton, taking the title in their joint names. They began to occupy the house in May 2007, although also retaining their home at Burnhead Road for a period before selling it. They used the balance of the £285,000 inter alia to pay off credit cards, buy two cars, put finishing touches to 6 Lochrig Court, and decorate their existing home at Burnhead Road in preparation for its sale.
[4] The pursuer then raised the present action, seeking inter alia to have the titles to the properties at St Helens Gardens and Lochrig Court transferred into his name. The action was defended. During a proof before answer, the court was faced with two diametrically opposed accounts of events, outlined in the Opinion of the Lord Ordinary and recorded verbatim in the transcript of the evidence contained in an Appendix.
The pursuer's account
[5] According to the pursuer, he trusted his son. He provided the funds, and relied upon his son to identify a suitable property and to carry through the legal formalities. When living in the USA, the pursuer had bought heritable property and had taken title in the name of himself and his wife. He had expected the title to St Helens Gardens similarly to be taken in their joint names. The first defender had raised the possibility that the title might be taken in the name of his 17-year-old son Richard (the pursuer's grandson), but the pursuer and his wife thought that inadvisable, partly because Richard had Asperger's syndrome. There had been no discussion about the title being taken in the first defender's name.
[6] In relation to 6 Lochrig Court, the pursuer explained that, after a year of mourning, he wanted to move out of St Helens Gardens as it had too many memories. Also he wanted a house rather than a flat. He asked the first defender to find another property. A housing development at Stewarton, Ayrshire, was identified. The first defender negotiated a builders' discount of about ten per cent, but the pursuer gave evidence that he managed to reduce the price further by visiting Stewarton personally and negotiating a further £10,000 discount. The pursuer then gave the first defender a cheque for £285,000. The pursuer denied any suggestion that the money might be a gift, or intended as inheritance tax planning, or that he did not want the authorities to know that he had any interest in a property. He said that he had expected the title to be taken in his name.
[7] When the pursuer subsequently discovered that the titles to both houses, purchased with his money, were not in his name, he raised the present action.
The defenders' account
[8] According to the defenders, the first defender's mother (the pursuer's wife) wanted the title to St Helens Gardens to be taken in the name of her grandson, the defenders' 17-year-old son Richard, although she and the pursuer were to occupy the property. The property was in fact reserved in Richard's name, and missives were concluded in his name. However both the lawyer and the pursuer thought that Richard was too young to own such a property. An additional concern was that there might be risks for the pursuer and his wife, as Richard would be free to sell, mortgage, or lease the property; also Richard's possible bankruptcy or death had to be taken into account.
[9] Ultimately the title was taken in the first defender's name. The first defender (aged 53 at the proof) gave several explanations for that development. At various stages in his evidence, he stated that his mother's wishes were to be respected, and that the flat would in any event ultimately go to Richard; that the pursuer had not wanted the property to be taken in his name ("Well, he's left [America], hasn't paid his bills and he was terrified that they would trace him here through his bank; so, if nothing was in his name, they could get nothing from him": Appendix pages 146F to 147B); that if title were to be taken in the pursuer's name, the pursuer would have to visit the lawyer in order to go through various formalities relating to inter alia identification and money‑laundering: but the pursuer had not wished to be troubled by any of the practical or legal aspects of the purchase. The first defender also stated that he had just left matters in the hands of the professionals, possibly implying that the lawyer had simply proceeded to take the title in the first defender's name. It was put to the first defender in the course of cross‑examination that there had been no discussion about St Helens Gardens being a gift. His response was: "I can't comment. It's something that wasn't discussed" (Appendix page 264D).
[10] The second defender for her part stated in evidence that the pursuer's wife had become too ill to discuss matters. However the pursuer himself had specifically instructed that the title to St Helens Gardens should be taken in the first defender's name. The second defender had accordingly instructed the lawyer in those terms. At one stage in her evidence, the second defender said that she regarded this as a "gift to Richard". She also said that the pursuer "didn't want anything to be in his name".
[11] As for 6 Lochrig Court, the defenders' evidence was that the pursuer visited them in their home at Burnhead Road on Monday 19 February 2007. He gave the first defender a cheque in his favour for £285,000, saying something along the lines of "Do what you want with it". The defenders understood the cheque to be a gift, possibly motivated by the pursuer's desire to minimise inheritance tax. The nil rate limit for inheritance tax relief during the year 6 April 2006 - 5 April 2007 was £285,000, which was of some significance. Admittedly the nil rate for inheritance tax relief for the year in which the pursuer's wife died (6 April 2005 - 5 April 2006) was £275,000; also there was no limit on the amount of an inter vivos gift, subject to a 7‑year tapering relief: but lay people could become confused about those matters. In any event, according to the second defender, the pursuer had been carrying about a piece of paper on which was written, as she put it in her evidence, "the amount of 285, with that being the ceiling for inheritance tax" (Appendix page 366D‑E). Thus there was support for their evidence that the cheque had been a gift given with inheritance tax in mind. The defenders were surprised and grateful for the gift. They thanked the pursuer. On Tuesday 20 February 2007 the first defender paid the cheque into a bank account. The second defender then saw an advert for a new housing development in Stewarton. On Saturday 24 February 2007 they visited Stewarton and reserved a house. In order to qualify for a discount and special offers, the date of entry had to be 31 March 2007. The sum required for settlement was £290,768.89. The defenders used about £200,000 of the gift from the pursuer (transferred into a client account in joint names of the defenders at the solicitor's office), and £90,000 from a joint mortgage raised on the property. The gift was about £5,768 short of the sum required for settlement. Title was taken in the defenders' joint names. The defenders used the free balance of the gift to buy cars, decorate and furnish 6 Lochrig Court, decorate 42 Burnhead Road for selling purposes, and pay off credit card debts. In May 2007 the defenders began to occupy 6 Lochrig Court. The pursuer was aware that they had done so. He himself had never seen or visited the house.
[12] Subsequently the pursuer changed his mind (according to the defenders, following a disagreement between the pursuer and the first defender at about the end of July 2007, possibly concerning the pursuer's relationship with another woman). The pursuer consulted lawyers in July 2007, stating that he wanted both properties to be in his name, and raised the...
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