Rosemary Winter-scott, The Accountant In Bankruptcy V. Balfour & Manson
| Jurisdiction | Scotland |
| Judge | Sheriff Principal Mhairi M. Stephen |
| Court | Sheriff Court |
| Date | 06 September 2013 |
| Docket Number | A391/12 |
| Published date | 23 September 2013 |
| SHERIFFDOM OF LOTHIAN AND BORDERS Case Number: A391/12 | |
| Judgment by SHERIFF PRINCIPAL MHAIRI M STEPHEN in appeal in the cause ROSEMARY WINTER-SCOTT, THE ACCOUNTANT IN BANKRUPTCY Pursuer and Appellant against BALFOUR AND MANSON LLP, having its registered office at 54-66 Frederick Street, Edinburgh and the firm of Balfour & Manson formerly having a place of business at 54-66 Frederick Street, Edinburgh, and Andrew T F Gibb, David PH McLennan, Brenda L Rennie, James L J Craig, John M Hodge, Alfred J Tyler, A J Spencer Kennedy, Murray A A Burns, Margaret M Neilson, Kenneth S Robertson, Anne M Pacey, Pamela H Loudon, David S McIntosh, Elaine J Motion, Marjory C MacGregor, Christine A Stuart, Shona H Smith, Robin J Hill all as partners of the now dissolved firm of Balfour & Manson formerly having a place of business at 54-66 Frederick Street, Edinburgh Defenders and Respondents ___________________________ |
Act: Hawkes
Alt: Richardson
EDINBURGH, 9 September 2013
The Sheriff Principal, having resumed consideration of the cause, refuses the appeal; adheres to the sheriff's interlocutor of 21 January 2013; certifies the appeal as suitable for the employment of junior counsel, thereafter finds the appellant liable to the respondents in the expenses of the appeal; allows an account thereof to be given in and once lodged remits the account of expenses to the Auditor of Court to tax and to report.
(signed) Mhairi M Stephen
NOTE:
1. This appeal lies against the sheriff's interlocutor of 21 January 2013 which followed proof on the respondents' first plea in law. The sheriff's interlocutor sustained the respondents' first plea in law and assoilzied them from the craves of the initial writ; repelled all remaining pleas and found the appellant liable to the defenders in expenses of the action.
2. The pursuer and appellant in the action is the Accountant in Bankruptcy qua permanent trustee on the sequestrated estates of Patricia Anne Phillip of Denmark Farm, Colliston, near Arbroath. The Accountant in Bankruptcy was appointed permanent trustee by Act and Warrant of 3 May 2002. She appointed David A S Gellatly as her agent all in terms of the Bankruptcy (Scotland) Act 1985.
3. The respondents' and defenders are a firm of solicitors in Edinburgh and the individual partners of that firm at the relevant time.
4. The present action is for damages as a result of the defenders' alleged negligence. The action is defended and liability is denied. Furthermore, the respondents' first or preliminary plea is to the effect that any obligation incumbent on the defenders to the pursuer has prescribed. In particular Answer 7 sets out the averments in support of that plea. The plea refers to the terms sections 6 and 11 of the Prescription and Limitation (Scotland) Act 1973 (As Amended). The sheriff's judgment under appeal follows a preliminary proof. It is clear that no evidence was required in view of the facts admitted or agreed in joint minutes.
5. It appears to be beyond dispute that in the course of his enquiries as the agent for the appellant, Mr Gellatly, discovered that the debtor, Patricia Anne Phillip (the "debtor") had executed a disposition of Denmark Farm in favour of her husband Alexander Phillip. Mr Gellatly considered that the disposition fell within the terms of section 34 of the Bankruptcy (Scotland) Act 1985 as an alienation of the debtor's asset and was challengeable by the pursuer as being a gratuitous alienation. The appellant instructed that proceedings be raised in court to reduce the disposition. The appellant instructed Messrs Blackadders, solicitors and subsequently Messrs RSB Macdonald, solicitors. In turn the respondents were instructed as the Edinburgh agents or correspondents in relation to the proceedings in the Court of Session. An action of reduction was signetted at the Court of Session on 16 April 2003. The action was defended. Significantly, in the course of these proceedings in the Court of Session the debtor's husband, Mr Phillip, who was the defender in the action of reduction, granted a standard security over the subjects at Denmark Farm in favour of iGroup Mortgages. The standard security was registered in January 2004 and subsequent investigations ascertained that the sum secured over the property was approximately £212,500. According to the pleadings the value of the subjects at the time the security was registered was less than the standard security. Accordingly, there was no free equity in the property at that stage. As the appellant avers in Article 4 of Condescendence: "The effect of the security was that the value of the subjects was lost to the Debtor's estate. "
6. Central to this action is the defenders' failure or alleged failure to lodge a notice of litigiosity timeously. The sheriff records these matters at findings in fact 10, 11 and 12. It is not disputed that no notice of litigiosity was in place prior to the grant of the standard security. The respondents' dispute whether such a notice should have been lodged by them.
7. The preliminary proof related solely to the question of prescription, the action having been served on Balfour & Manson LLP on 25 May 2012. The sheriff records at Finding in Fact [23] "The present action was not served on any of the defenders before 25 May 2012 when it was served on Balfour and Manson LLP."
8. The absence of a notice of litigiosity having been recorded in advance of the debtor's husband granting the standard security is crucial to the question of negligence and loss. It is not disputed that no notice was recorded by any of the solicitors instructed by the appellant. Failure to lodge and record the notice of litigiosity meant that the appellant was unable to reduce the standard security. By 15 February 2007 the respondents had intimated their withdrawal from acting as Edinburgh agents to RSB Macdonald and to the Deputy Principal Clerk of Session. By that stage the sheriff finds that the appellant was aware:
(1) that the standard security had been granted over the subjects on 15 January 2004;
(2) that as at 15 January 2004 no notice of litigiosity in respect of the action had been recorded at the instance of the pursuer (appellant);
(3) that the sum secured over the subjects by the iGroup Security was in excess of £212,000;
(4) that Messrs Bell Ingram, surveyors had valued the subjects Denmark Farm at approximately £170,000 in December 2000;
(5) that as a result of the absence of the notice of litigiosity being recorded prior to the standard security being recorded it was not possible for the standard security to be reduced at the instance of the appellant; and
(6) that the respondents had withdrawn from acting for the appellant on 7 February 2007 and Messrs RSB considered that the failure to lodge a notice of litigiosity was a difficulty which had been caused by the defenders.
9. The respondents withdrew from acting as Edinburgh agents because of their concern as to the conflict of interest which might arise due to no notice of litigiosity having been recorded. Subsequently Messrs Harper Macleod were instructed by the appellant by which time RSB had been requested by the appellant to cease any further action in the litigation involving the debtor's husband.
10. On 24 May 2007 the respondents' file of papers was transmitted to Messrs Harper Macleod, solicitors by DX. These facts constitute the essential background information which led the sheriff to conclude that any obligation which the respondents had towards the appellant to make reparation had prescribed.
11. For the reasons given by the sheriff he considered that the appellant had actual knowledge of loss and that it was actionable in the sense described by Lord Emslie in AMN Group Limited v Gilcomston North Limited 2008 SLT 385. [Para 58]
12. The Prescription and Limitation (Scotland) Act 1973 provides:
"Section 6 - Extinction of obligations by prescriptive periods of five years
(1) If after the appropriate date, an obligation to which this section applies has subsisted for a continuous period of five years-
(a) without any relevant claim having been made in relation to the obligation, and
(b) without the subsistence of the obligation having been relevantly acknowledged,
then as from the expiration of that period the obligation shall be extinguished:
Provided that in its application to an obligation under a bill of exchange or a promissory note this subsection shall have effect as it paragraph (b) thereof were omitted.
(2) Schedule 1 to this Act shall have effect for defining the obligations to which this section applies.
(3) In subsection (1) above the reference to the appropriate date, in relation to an obligation of any kind specified in Schedule 2 to this Act is a reference to the date specified in that Schedule in relation to obligations of that kind, and in relation to an obligation of any other kind is a reference to the date when the obligation became enforceable.
(4) In the computation of a prescriptive period in relation to any obligation for the purposes of this section-
(a) any period during which by reason of-
(i) fraud on the part of the debtor or any person acting on his behalf or,
(ii) error induced by words or conduct of the debtor or any person acting on his behalf,
the creditor was induced to refrain from making a relevant claim in relation to the obligation, and
(b) any period during which the original creditor (while he is the creditor) was under legal disability,
shall not be reckoned as, or as part of, the prescriptive period:
Provided that any period such as is mentioned in paragraph (a) of this subsection shall not include any time occurring after the creditor could with reasonable diligence have discovered the fraud or error, as the case may be, referred to in that paragraph.
(5) Any period such as is mentioned in paragraph (a) or (b) of subsection (4) of this section shall not be regarded as separating the time immediately before it from the...
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