Michael James Meston Reid (permanent Trustee On The Estates Of Carlene Rose Burnett) V. Harvey Leighton Grainger And Moira Elizabeth Grainger
| Jurisdiction | Scotland |
| Judge | Lord Coulsfield,Lord MacLean,Lord Hamilton |
| Docket Number | XA169/00 |
| Date | 15 May 2002 |
| Court | Court of Session |
| Published date | 15 May 2002 |
| EXTRA DIVISION, INNER HOUSE, COURT OF SESSION | |
| Lord Coulsfield Lord MacLean Lord Hamilton
| XA169/00 OPINION OF LORD COULSFIELD in the cause MICHAEL JAMES MESTON REID (permanent Trustee on the estates of CARLENE ROSE BURNETT) Pursuer and Appellant; against HARVEY LEIGHTON GRAINGER and MOIRA ELIZABETH GRAINGER Defenders and Respondents: _______ |
Act: Hodge, Q.C.; Balfour & Manson (for Iain Smith & Co., Aberdeen) (Pursuer and Appellant)
Alt: Gale, Q.C., Webster; Ledingham Chalmers (Defenders and Respondents)
15 May 2002
[1]The pursuer and appellant is the permanent trustee on the estate of Carlene Rose Burnett ("the debtor") who was sequestrated on 29 May 1991. The appellant's Act and Warrant was dated 23 July 1991. In this action, the appellant seeks declarator that heritable subjects at 94 Malcolm Road, Peterculter, which were formerly vested in the debtor, are and, have been since the date of the sequestration, vested in him as permanent trustee. The appellant recorded a Notice of Title to the subjects in the General Register of Sasines on 10 December 1991. The debtor had, in October 1990, entered into missives of sale of the subjects to the defenders. On 8 November 1990 a duly executed disposition of the subjects by the debtor was delivered to the defenders in exchange for the purchase price. On 9 November 1990, the defenders took entry to the subjects. They did not, however, record their disposition until one month after the appellant's Notice of Title had been recorded. There seems to be a suggestion, not fully explained, that the delay was due to difficulties over a proposed contract of excambion in relation to areas of garden ground at the subjects, but no explanation has been given for the apparent gross failure of the defenders' solicitors to take appropriate action to protect their clients' position.
[2]The action was raised in January 1994. It eventually came before the Sheriff for debate and on 25 July 1995 the Sheriff granted decree in favour of the appellant. Before the Sheriff, the only arguments advanced related to questions of personal bar. The defenders appealed to the Sheriff Principal and the Sheriff Principal sisted the cause pending the outcome of the appeal to the House of Lords in Sharp v Thomson 1997 S.C.(H.L.) 66. After the publication of the decision in that case, the Sheriff Principal heard the appeal on 9 June 1998. Ultimately, on 28 August 2000, he recalled the decision of the Sheriff and dismissed the action. The appellant now appeals to this Court.
[3]In Sharp v Thomson the holder of a delivered but unrecorded disposition who had paid the price for, and taken occupation of, heritable subjects successfully maintained that the subjects were not part of "the property and undertaking" of the disponers, who were a limited company, so as to fall under a floating charge which crystallised before the date of recording of the disposition. The central question in the present case is whether the speeches in the House of Lords disclose any ratio or principle which applies to the present case. Two substantial speeches were made in the House of Lords, by Lord Jauncey and Lord Clyde, and the remaining members of the House concurred with both. The question whether there is agreement or disagreement between Lord Jauncey and Lord Clyde has already been much debated in academic and professional literature. The Sheriff Principal took the view that there was no material inconsistency between the speeches of Lord Jauncey and Lord Clyde and agreed with the ratio which counsel for the defenders drew from them. The essence of the view which he took is found in a passage in his Note in which he said:
"Their Lordships' conclusion is that, where the seller of heritage has received payment of the price and delivered a disposition to the purchaser, he has divested himself of all beneficial interest in the subjects to such an extent that they are no longer his property notwithstanding that the title is still recorded in his name.
That view is not wholly novel, having been foreshadowed in the (admittedly non-authoritative) opinions of the learned editors of Goudy on Bankruptcy 4th Ed. at p. 251, footnote (c) and Green's Encyclopaedia of the Laws of Scotland Vol. 13 para. 990. Underlying the reasoning of both Lord Jauncey and Lord Clyde is a clear desire to avoid what they perceive as a grave injustice, namely that if the subjects were regarded as the property of the company on the basis of the recorded title, the receiver would acquire not only the subjects, but the price which the purchasers had paid while, conversely, the purchasers would have neither the price nor the subjects."
[4]The Sheriff Principal thus took the view that the conclusions of the House were not restricted to the specific situation of receivership, that their Lordships were seeking to give the word "property", in the interpretation of legislation a meaning which was practical, sensible and equitable as between the seller and purchaser of heritage and that the defenders should enjoy the same protection against the trustee in sequestration as had been given to the purchasers of the heritage in Sharp v Thomson against the receiver.
[5]The central question in this case is, as I have said, the proper understanding of the ratio of Sharp v Thomson. I think, however, that, before addressing the question of interpretation of the speeches in Sharp v Thomson directly, it should be pointed out there are differences between the terms of the legislation which is relevant in this case and that which was relevant in Sharp v Thomson. The trustee's claim is founded on section 31(1) of the Bankruptcy (Scotland) Act 1985 which provides:
"Subject to section 33 of this Act and section 91(3) of the Pensions Act 1995, the whole estate of the debtor shall vest as at the date of sequestration in the permanent trustee for the benefit of the creditors; and
(a) the estate shall so vest by virtue of the Act and Warrant issued on confirmation of the permanent trustee's appointment; and
(b) the Act and Warrant shall, in respect of the heritable estate in Scotland of the debtor, have the same effect as if a decree of adjudication in implement of sale, as well as a decree of adjudication for payment and in security of debt, subject to no legal reversion, had been pronounced in favour of the permanent trustee."
[6]Notwithstanding the terms of section 31(1), the trustee does not obtain a real right to any heritable property until he records his title in the Register of Sasines (see e.g. McBryde Bankruptcy p.103). Sub-section (4) which provides:
"Any moveable property, in respect of which but for this sub-section -
(a) delivery or possession; or
(b) intimation of its assignation, would be required in order to complete title to it, shall vest in the permanent trustee by virtue of the Act and Warrant as if at the date of sequestration the permanent trustee had taken delivery or possession of the property or had made intimation of its assignation to him, as the case may be."
[7]Sub-sections (8) and (9) make provision in regard to items which are and are not to be regarded as included in "the whole estate of the debtor" but the terms of those sub-sections are of no assistance in the present question. It is, however, relevant to notice the provisions of section 33(1) which are as follows:
"The following property of the debtor shall not vest in the permanent trustee - (a) property exempted from poinding for the purpose of protecting the debtor and his family;
(b) property held on trust by the debtor for any other person."
Section 33(1)(b) therefore gives statutory recognition to the exclusion of trust property from the sequestration which was the subject of the decision in Heritable Reversionary Co Ltd v Millar (1892) 19 R.(H.L.) 43.
[8]The statutory provisions which were under consideration in Sharp v Thomson were section 462 of the Companies Act 1985 and section 53(7) of the Insolvency Act 1986. Section 462 provided, inter alia,:
"(1)It is competent under the law of Scotland for an incorporated company (whether a company within the meaning of this Act or not) for the purpose of securing any debt or other obligation (including a cautionary obligation) incurred or to be incurred by, or binding upon, the company or any other person to create in favour of the creditor in the debt or obligation a charge, in this part referred to as a floating charge, over all or any part of the property (including uncalled capital) which may from time to time be comprised in its property and undertaking ...
(5)Subject to this Act, a floating charge has effect in accordance with this Part and Part 3 of the Insolvency Act 1986 in relation to any heritable property in Scotland to which it relates, notwithstanding that the instrument creating it is not recorded in the Register of Sasines or, as appropriate, registered in accordance with the Land Registration (Scotland) Act 1979".
[9]Section 53(7) of the Insolvency Act 1986 provided:
"On the appointment of a receiver under this section, the floating charge by virtue of which he was appointed attaches to the property then subject to the charge; and such attachment has effect as if the charge was a fixed security over the property to which it has attached ..."
[10]The expression "fixed security" was defined by section 70 of the 1986 Act as a security which in a winding up would be treated according to the law of Scotland as an effective security.
[11]There are therefore some differences between the legislation governing floating charges and that governing sequestrations. Firstly, a floating charge is not registered in the Register of Sasines and crystallises, and therefore has its statutory effect on the appointment of a receiver, even before notice of that appointment has been registered. Secondly, a floating charge applies to "the property and undertaking" of a company as opposed to "the whole estate" of the debtor....
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