William Cleghorn As Trustee In The Sequestration Of Mark Edward Fortune Against Cooper Watson Limited
| Jurisdiction | Scotland |
| Judge | Lord Tyre |
| Neutral Citation | [2017] CSOH 74 |
| Court | Court of Session |
| Docket Number | CA30/15 |
| Published date | 05 May 2017 |
| Date | 05 May 2017 |
| Year | 2017 |
OUTER HOUSE, COURT OF SESSION
[2017] CSOH 74
CA30/15
OPINION OF LORD TYRE
In the cause
WILLIAM CLEGHORN AS TRUSTEE IN THE SEQUESTRATION OF MARK EDWARD FORTUNE
Pursuer
against
COOPER WATSON LIMITED
Defender
Pursuer: Cormack (Solicitor Advocate); Pinsent Masons LLP
Defender: G R Middleton; Aitken Nairn WS
5 May 2017
Introduction
[1] The pursuer is the trustee on the sequestrated estate of Mr Mark Edward Fortune, having succeeded Elizabeth Mackay, who was appointed as the original trustee on 7 February 2011. The date of Mr Fortune’s sequestration was 24 December 2010. This action was raised to seek inter alia reduction of dispositions in 2014 by Mr Fortune in favour of the defender of five properties in Edinburgh at a time when, to the defender’s knowledge, Mr Fortune’s estate remained sequestrated. By interlocutor dated 4 December 2015, Lord Jones granted decree of reduction of four of the five dispositions (see [2015] CSOH 140). On 1 July 2016, the Inner House refused a reclaiming motion by the defender against Lord Jones’s interlocutor (see Fortune’s Tr v Cooper Watson Ltd 2016 SC 824; [2016] CSIH 49).
[2] With regard to the fifth property, to which I shall refer as “the EB property” or “EB”, the defender asserted before Lord Jones and in the Inner House that as at the relevant date (ie the day before the date of his sequestration) it fell within the definition of a “family home” for the purposes of section 39A of the Bankruptcy (Scotland) Act 1985, with the consequence that it had ceased to form part of Mr Fortune’s sequestrated estate three years after the date of sequestration, and before the date of the disposition to the defender. By interlocutor dated 9 November 2016, a proof before answer was allowed on this matter.
[3] It was common ground that the onus of proving that the EB property fell within the statutory definition of a family home rested upon the defender. Evidence was given on behalf of the defender by Mr Fortune and, to a limited extent as explained below, by Mr Fortune’s former partner, Ms Marsha Beveridge. Evidence on behalf of the pursuer was given by the former trustee and members of her staff, and by Ms Yvonne Morgan, a solicitor who in 2014 had prepared an affidavit for execution by Mr Fortune.
The Relevant Law
[4] Section 39A of the 1985 Act, which had been inserted by section 19(2) of the Bankruptcy and Diligence (Scotland) Act 2007, provided inter alia as follows:
“(1) This section applies where a debtor’s sequestrated estate includes any right or interest in the debtor’s family home.
(2) At the end of the period of 3 years beginning with the date of sequestration the right or interest mentioned in subsection (1) above shall –
(a) cease to form part of the debtor’s sequestrated estate; and
(b) be reinvested in the debtor (without disposition, conveyance, assignation or other transfer).
…
(6) If the debtor does not inform the trustee or the Accountant in Bankruptcy of his right or interest in the family home before the end of the period of 3 months beginning with the date of sequestration, the period of 3 years mentioned in subsection (2) above –
(a) shall not begin with the sequestration; but
(b) shall begin with the date on which the trustee or the Accountant in Bankruptcy becomes aware of the debtor’s right or interest.
…
(9) In this section, ‘family home’ has the same meaning as in section 40 of this Act.”
[5] Section 40 of the 1985 Act set out the procedure that required to be followed by a trustee who wished to dispose of a right or interest in the debtor’s family home. It was, as noted by McBryde, Bankruptcy (2nd ed, 1995) at paragraphs 9-70, essentially a measure for protection of the debtor’s family members rather than the debtor himself. The definition of family home in section 40(4)(a) was as follows:
“any property in which, at the relevant date, the debtor had (whether alone or in common with any other person) a right or interest, being property which was occupied at that date as a residence by the debtor and his spouse or civil partner or by the debtor’s spouse or civil partner or former spouse or civil partner (in any case with or without a child of the family) or by the debtor with a child of the family”.
The section also contained definitions of “child of the family”, which term included inter alia any child of the debtor, and of “relevant date”, being the day immediately preceding the date of sequestration. (The material provisions of sections 39A and 40 can now be found in sections 112 and 113 of the Bankruptcy (Scotland) Act 2016.)
[6] It will be apparent that, in relation to a particular debtor, more than one property could fall within the definition of “family home”. Hypothetically, a debtor could at the relevant date own three houses, one of which was occupied as a residence by himself with his child, one by a current spouse/civil partner from whom he was separated, and one by a former spouse/civil partner. All three properties would fall within the definition and could be subject to section 39A. Perhaps less obvious is the answer to the question whether the same person (the debtor himself and/or a current or former spouse/civil partner) could at the relevant date occupy more than one property as a residence. In my opinion it is very unlikely that this could be the case. The focus of the definition is upon the situation as at a particular date. Clearly the benefit of falling within the definition would not be lost by a short‑term absence by the occupier, for example on business or on holiday, or, as in the circumstances of this case, because of detention in custody. But if the reason for absence from Property A was that the person concerned was occupying Property B as a residence, then in my opinion it is unlikely that it could be argued that he or she was nevertheless also still occupying Property A. Even if both properties could reasonably be described as residences, only one or other could at any given time, save in exceptional circumstances, be occupied as such.
The Issue
[7] It is not in dispute that as at 23 December 2010 (ie the day preceding the date of Mr Fortune’s sequestration), the EB property was (i) owned by Mr Fortune and (ii) occupied as a residence by Ms Beveridge and by J, the son then aged 9 of Mr Fortune and Ms Beveridge. Mr Fortune was not and has never been married to Ms Beveridge. Accordingly, in order for section 39A to apply, the defender required to prove that as at 23 December 2010, the EB property was occupied as a residence by Mr Fortune with J.
Mr Fortune’s Evidence
[8] Mr Fortune’s evidence was to the following effect. He acquired the EB property in 2003 and moved into it with Ms Beveridge and J. For some time thereafter it was the residence of all three except when they went on holiday or when he travelled abroad on business. From about 2006, however, issues arose in the relationship between himself and Ms Beveridge, and he spent some periods staying in a hotel or with his father. He, Ms Beveridge and J continued to spend summer and other holidays together abroad. By the beginning of 2008 he was back at EB most of the time. In about April 2008, he purchased a house near Cannes in the south of France, with the intention of using it as a family holiday home. He spent much of the remainder of 2008 there, either on holiday with Ms Beveridge and J or supervising work on the house. By the end of 2008, Mr Fortune’s relationship with Ms Beveridge had deteriorated. She moved out of the EB property on 30 November 2008, living for the next six months in a flat in Edinburgh and thereafter for a time with her mother. J spent most of the time with her.
[9] Mr Fortune spent the first half of 2009 living in the EB property, visited from time to time by J. All three went on holiday together during July and August to the house in France. In September they returned to live together at EB. Mr Fortune went to France from time to time to check the security of the house.
[10] During the first half of 2010, Mr Fortune spent most of his time at the house in France. There was work to be done on it, and he was considering whether all three should relocate there. Ms Beveridge and J spent the Easter and summer holidays in France with him. At the end of August, they all returned to EB for the beginning of the school term. Mr Fortune returned to the house in France during the first week in September. He required to return to Scotland for a business matter at the end of September. During October and the first part of November he stayed at EB with Ms Beveridge and J. On 26 November he was arrested and remanded in custody. He remained in custody until 10 February 2011, when he was released on bail. He returned without warning to EB, where Ms Beveridge and J were living with Ms Beveridge’s mother who promptly left. After two or three weeks at EB, he went to the house in France where he stayed until the beginning of April. His relations with Ms Beveridge were strained at this time, and he returned to Edinburgh mainly to deal with legal issues. He spent most the remainder of 2011 at EB, interspersed with holidays and other visits to the house in France. In 2012 he spent around 60% of his time at EB.
Documentary and Circumstantial Evidence
[11] In support of his account of periods of residence at the EB property, Mr Fortune was referred to a large number of items of correspondence addressed to him at EB during the period from 2004 until after the date of sequestration in December 2010. These included bank statements, business correspondence, communications from HMRC, council tax demands in relation to EB and other properties, and correspondence from J’s school. Some of the items bear dates falling within periods when, according to Mr Fortune’s evidence, he was absent from EB. No documents bearing to have been sent by Mr Fortune from EB were produced.
[12] Other evidence is considerably less supportive of Mr...
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