Peart v Promontoria (Henrico) Ltd
| Jurisdiction | Scotland |
| Judge | Lady Wise |
| Judgment Date | 22 May 2018 |
| Neutral Citation | [2018] CSIH 35 |
| Date | 22 May 2018 |
| Court | Court of Session (Inner House) |
| Docket Number | No 32 |
[2018] CSIH 35
Extra Division
Lady Wise
Aitken v Aitken [2005] CSOH 105; 2005 Fam LR 59; 2006 GWD 12–222
Armia Ltd v Daejan Developments Ltd 1979 SC (HL) 56; 1979 SLT 147
Arthur v SMT Sales and Service Co Ltd 1999 SC 109; 1999 SLT 783
Central Motor Engineering Co v Galbraith 1918 SC 755; 1918 2 SLT 177
Gillespie v Toondale Ltd [2005] CSIH 92; 2006 SC 304; 2005 GWD 31–590
Grampian Maclennan's Distribution Services Ltd (Joint Liquidators of) v Carnbroe Estates Ltd [2018] CSIH 7; 2018 SC 314; 2018 SLT 205; [2018] BPIR 461; 2018 GWD 4–69
Holden v Royal Bank of Scotland plc [2011] CSOH 84; 2011 GWD 18–424
Joel v Gill (1859) 21 D 929
Polley v West Lothian Council [2015] CSIH 19; [2015] RVR 228; 2015 GWD 9–160
Royal Bank of Scotland plc v Carlyle [2015] UKSC 13; 2015 SC (UKSC) 93; 2015 SLT 206
Schuh Ltd v Shhh … Ltd [2011] CSOH 123; 2011 GWD 26593
Scottish Milk Marketing Board v Wood 1936 SC 604; 1936 SLT 470
Scottish Power Generation Ltd v British Energy Generation (UK) Ltd 2002 SC 517; 2002 SLT 870; 2002 SCLR 691
Sutherland v Sutherland (1843) 5 D 544
Wright v Tennent Caledonian Breweries Ltd 1991 SLT 823; 1991 SCLR 633
Scottish Law Commission, Report on the Consolidation of Bankruptcy Legislation in Scotland (Scot Law Com no 232, May, 2013), p 6 (Online: https://www.scotlawcom.gov.uk/files/7113/6853/1202/Report_on_the_Consolidation_of_Bankruptcy_Legislation_in_Scotland.pdf (6 July 2018))
Bankruptcy — Sequestration — Interdict against sequestration — Whether competent
The firm of Barry and Susan Peart, Barry Peart and Susan Peart raised an action for declarator and interdict against Promontoria (Henrico) Ltd in the Court of Session. The cause called before the Lord Ordinary (Wise) on the pursuer's motion before calling for interdict ad interim on 28 November 2017. The Lord Ordinary pronounced interdict ad interim. The defender reclaimed.
On 3 November 2017, the defender served charges for payment on the pursuers to recover a loan assigned to it. From 6 November, the pursuers made enquiries to arrange a meeting with their existing solicitors before the days of charge expired, but to no avail. The defender presented a petition for the pursuers' sequestration and the sheriff granted warrant to cite them. The pursuers instructed new solicitors and raised an action for declarator and for interdict against the defender from proceeding with the sequestration petition. The Lord Ordinary held that the failure of the pursuers' previous agents to progress matters and the absence of any other remedy to halt the sequestration proceedings were exceptional circumstances and granted interdict ad interim. The defender reclaimed.
The defender submitted that the court could only intervene in sequestration proceedings if to do so was consistent with the underlying policy and statutory regime, and that therefore the court had a limited discretion at common law rather than a general equitable discretion.
The pursuer argued that there was no basis in the bankruptcy legislation for excluding common law remedies such as interdict and that the Lord Ordinary was entitled to reach the conclusion she did.
Held that: (1) as an action for reduction of an award of sequestration is competent in exceptional circumstances, a claim for an interim remedy ancillary to such an action is also competent, and thus it was competent to seek an interim remedy after expiry of the days of charge but prior to the award of sequestration (paras 51–53); (2) the policy of bankruptcy legislation did not restrict or qualify the power at common law to grant interdict and interim interdict prior to any award of sequestration, the court had the full general equitable power normally available at common law to grant interdict in exceptional circumstances (para 54); (3) the fundamental policy underlying sequestration did not require the court take a more critical view than would normally be taken of an exercise of discretion, the Lord Ordinary's exercise of discretion could not be criticised (paras 55, 59, 64); and reclaiming motion refused.
Aitken v Aitken 2005 Fam LR 59 followed.
The cause called before an Extra Division, comprising Lady Paton, Lord Brodie and Lord Glennie, for a hearing on the summar roll, on 9 February 2018.
At advising, on 22 May 2018, the opinion of the Court was delivered by Lady Paton—
Opinion of the Court—
[1] In this reclaiming motion, a bank (Promontoria (Henrico) Ltd, as assignee of the Clydesdale Bank plc) seeks the recall of an interim interdict granted on 28 November 2017, interdicting the bank ad interim from (i) proceeding to apply for the pursuers' sequestration in terms of a petition presented to Edinburgh Sheriff Court on 21 November 2017, or (ii) otherwise applying for the pursuers' sequestration in reliance upon apparent insolvency constituted by charges for payment served upon the pursuers on 3 November 2017.
[2] The sheriff court proceedings have been sisted since December 2017.
[3] The pursuers are a married couple. They own the Old Golf House, Newbattle, Midlothian, which was (until April 2011) their home. As set out in their pleadings and affidavits dated 24 January 2018, the pursuers made a decision in 2007 to move to a smaller property, known as the Powerhouse. Their plan was to purchase that property, refurbish it as their home, and re-establish a working hydro-electric scheme to provide income.
[4] The pursuers required loans for their project. They aver that, after a refinancing arrangement, they acquired two loan accounts with the Clydesdale Bank, namely (i) a homeowner's loan and (ii) a loan for the purchase of the Powerhouse. As the Old Golf House was averred to be valued at approximately £1.25 million, any borrowing was expected to be quickly reduced as and when it was sold.
[5] The documentation for the loans comprised inter alia a facility letter and a standard security over the Old Golf House and the Powerhouse. The documentation provided that the loans were repayable on demand. The pursuers were designed as a commercial firm (‘the firm of Barry and Susan Peart’).
[6] While refurbishing the Powerhouse, the pursuers lived in the Old Golf House, at the same time advertising it for sale. The pursuers aver that, by letter dated 10 February 2010, the bank stated that no offer should be declined without its consent. The pursuers' position is that the bank had, in effect, a veto in any decision whether to accept an offer. They aver that offers were refused on the bank's advice.
[7] In condescendence 5 (see para 18) the pursuers refer to a meeting on 3 February 2011 involving the pursuers and three representatives of the Clydesdale Bank. The situation was discussed, as further described in the pursuers' and one representative's affidavits (not available at the interim interdict hearing in November 2017).
[8] The pursuers' position is that, at the meeting, a bank representative (Mr Cunningham) in effect undertook that the bank would not call up the loans until the Old Golf House had been sold. Relevant passages in the pursuers' affidavits include paras 47 to 50 of the third pursuer's affidavit, and para 13 of the second pursuer's affidavit. Mr Cunningham's affidavit gives a different picture. In para 13 he explains that the bank's intention was to be supportive; he had reassured the pursuers; but he did not agree to put enforcement on hold indefinitely until the Old Golf House had been sold.
[9] On 4 February 2011 another of the bank's representatives (Mr Balson) sent the pursuers an email documenting what had been agreed at the meeting. The email makes no reference to a variation of the loan documentation or to an undertaking not to demand repayment until the completion of the sale of the Old Golf House.
[10] On 6 April 2011, the pursuers moved from the Old Golf House to the Powerhouse.
[11] The pursuers further aver in their pleadings, as amplified by their affidavits, that in July and August 2011, two offers for the Old Golf House were refused on the advice of the bank. They describe four years passing, with little contact from the bank. The Old Golf House remained unsold.
[12] In condescendence 6, the pursuers refer to a letter from the bank dated 9 March 2015 advising them that there would be no further lending, and that while the bank did not currently intend to call up the loans, it:
‘[Reserved] its right to demand immediate repayment of each lending facility in full and/or take whatever action [was] necessary in the future to protect its position in respect of sums due’.
The bank added that all sums due were repayable immediately on written demand for payment.
[13] In about June 2015 the bank assigned the pursuers' debt to Promontoria (Henrico) Ltd, the current defender. Subsequently, the pursuers received intimation that the loans would be called up. By letter dated 2 March 2016, the pursuers made a complaint to the Financial Ombudsman concerning, inter alia, misselling by the Clydesdale Bank. On 18 April 2016 Promontoria served charges on the pursuers for payment of £3.4 million. The pursuers responded with a petition for suspension and interdict. Promontoria undertook not to take any further steps until the complaint had been dealt with.
[14] In mid-2017, the Financial Ombudsman rejected the pursuers' complaint. By letter dated 12 September 2017, agents for Promontoria sent the pursuers' then solicitors a certificate of debt dated 6 September 2017. By letter dated 31 October 2017, those agents intimated that fresh charges would be served on the pursuers. By letter dated 19 September 2017, the pursuers' agents pointed out that the pursuers were in negotiation with Promontoria's agent ‘Engage’, and...
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