EXTRA DIVISION, INNER HOUSE, COURT OF SESSION

Lord Nimmo Smith

Lord Drummond Young

Lord Penrose

[2009] CSIH 2

A488/05

OPINION OF THE COURT

delivered by

LORD DRUMMOND YOUNG

In the cause

ACCOUNTANT IN BANKRUPTCY as Trustee on the sequestrated estates of GEORGE BROWN

1^st Pursuer and Reclaimer:

and

STUART WILKIE

2^nd Pursuer and Respondent:

against

WINIFRED MARGARET BROWN

Defender and Reclaimer:

_______

Act: (1^st Pursuer and Reclaimer): Haddow, QC; Burness LLP

Act: (2^nd Pursuer and Respondent): Party

Alt: (Defender and Reclaimer): Dalgleish; Brodies LLP

15 January 2009

[1] On 31 October 2003 the Accountant in Bankruptcy was appointed permanent trustee on the sequestrated estates of George Brown. The defender is the wife of the debtor, George Brown. The minuter was the petitioning creditor in the proceedings that led to the sequestration.

[2] The debtor and the defender owned a house at 10 West End, St Monans, Fife, which was their family home. By disposition dated 25 February 2001 and recorded in the General Register of Sasines on 6 March 2001 the debtor and the defender together disponed the subjects to the defender alone. Following her appointment as permanent trustee, the Accountant in Bankruptcy raised proceedings for reduction of that disposition on the ground that it was a gratuitous alienation of the debtor's property falling under the provisions of section 34 of the Bankruptcy (Scotland) Act 1985.

[3] The summons was signeted on 28 July 2005; decree in absence was granted on 8 December 2005, but that decree was recalled on 16 December 2005. Sundry procedure followed, including a sist from February to December 2006. On 23 April 2007 the minuter lodged a minute of sist and enrolled a motion to the effect that he be permitted to become a named party and pursuer in the action. Opposition to that motion was intimated on 24 April. On 24 April the defender's solicitors lodged a joint minute that bore to settle the action (no 13 of process) and enrolled a motion to have the joint minute received and authority interponed thereto. The joint minute was signed by counsel for each of the pursuer and the defender. It narrated that the action had been settled extrajudicially and that the parties moved the court to assoilzie the defender from the conclusions of the summons and to find no expenses due to or by either party.

Procedure before the Lord Ordinary
[4] The minuter's motion first came before the Lord Ordinary on 25 April 2007. On that date the minuter appeared in person and the pursuer was represented by counsel. The motion was continued to the following day to enable the minuter to prepare his submissions and to give the defender an opportunity to consider whether she wished to be represented. At the continued hearing both the pursuer and the defender were represented by the same counsel but instructed through separate agents. The Lord Ordinary dealt with three preliminary motions made by the minuter, none of which is relevant to the present reclaiming motion, and then proceeded to hear submissions upon and to determine the minuter's principal motion, to have himself sisted as a party to the action. The minuter submitted to the Lord Ordinary that the pursuer had not acted in the best interests of the unsecured creditors on the debtor's estate, who included himself and his father; the minuter was due approximately £170,000 as a result of a decree pronounced by the Inner House in an action raised in Fort William Sheriff Court, and his father was due approximately £33,000. The pursuer had delayed raising an action for reduction of the disposition of 25 February 2001, and had indicated a willingness to compromise the action on the basis of a payment of £70,000 by the defender; the minuter had been informed of that decision by a letter dated 18 April 2007. The minuter submitted that that figure bore no proper relation to the current market value of the one half share of the subjects which had been conveyed by the debtor to the defender. In addition, although the pursuer had succeeded in obtaining a payment from the defender, she was prepared to settle the action on the basis that no expenses would be due to or by either party; the pursuer's expenses amounted to a sum in excess of £33,000. The result was, the minuter submitted, that it was possible that the unsecured creditors would receive nothing by way of dividend in the sequestration. For the pursuer and defender it was submitted to the Lord Ordinary that a judicial settlement had been reached between the pursuer and the defender, and that a joint minute had been signed by counsel for both parties and a cheque in settlement had been sent by the defender's agents to the pursuer's agents. It was further submitted that it was not competent for the court to allow the minuter to be sisted as an additional pursuer in the present action. If the minuter wished to challenge the pursuer's conduct it was open to him to raise proceedings for judicial review of the pursuer's decision to settle the action. Once the court interponed authority to the joint minute settling the action, the court's decree would be res judicata. In addition, section 65(1) of the 1985 Act, which conferred power on a permanent trustee to compromise any claim made against or on behalf of the sequestrated estate, prevented the minuter from now embarking on proceedings to reduce the disposition. Finally, the minuter had an alternative procedure available under section 3(7) of the 1985 Act, which permitted him to apply to the sheriff to consider the pursuer's actings.

[5] By interlocutor dated 27 July 2007 Lord Ordinary granted the minuter's motion and allowed him to be sisted as an additional pursuer in the action. He held that it was competent for the minuter to raise an action for reduction of a gratuitous alienation under section 34 of the 1985 Act, even though the pursuer had already done so; nothing in the 1985 Act prevented such a course of action. Nor had the position changed merely because the pursuer and the defender had entered into an agreement to compromise the action. If the pursuer and defender wished to argue that the joint minute amounted to res judicata as against the minuter it would be appropriate if that were addressed in the context of the action rather than in separate proceedings. It was not clear precisely when the joint minute had been signed, but the court had not yet interponed authority to it. Different considerations might have applied had the court done so. The pursuer and the defender had argued that section 65(1) of the 1985 Act prevented the minuter from exercising his right under section 34. The Lord Ordinary thought that it would be more sensible for that issue to be addressed and resolved in the present action. He accordingly concluded that it was competent to grant the minuter's motion.

[6] The remaining question was whether the Lord Ordinary should exercise his discretion and allow the minuter to be sisted as an additional pursuer. He concluded that he should do so. It was arguable that, in reaching a compromise with the defender as to the amount to be paid to reimburse the sequestrated estate for the gratuitous alienation, the pursuer had erred in law as to the extent of the defender's right to receive reimbursement for the funds that she had expended in connection with the subjects and in respect of the increase in value of the subjects that had taken place since March 2001. Nevertheless, any such error had no bearing on the nature of the minuter's right to seek reduction of the disposition by founding on section 34; consequently the possibility of an error of law should be left out of account. It was, however, arguable that, if the minuter were able to move for decree of reduction, the court might have evidence before it that would enable it to find in the minuter's favour. The result of that could well be that more assets were available to the pursuer for distribution among the creditors of the debtor. Matters would become more complicated for all parties if the minuter were required to raise further proceedings, whether relying upon section 34(1) of the 1985 Act or by applying to the sheriff in terms of section 3(7) of the same Act. The Lord Ordinary accordingly decided to grant the minuter's motion

[7] After granting the minuter's motion, the Lord Ordinary appointed the action to call by order, first to enable submissions to be made on the defender's motion to interpone authority to the joint minute and secondly to discuss further procedure. Before that happened the pursuer and defender had enrolled motions for leave to reclaim the decision to sist the minuter as an additional pursuer. At the by order hearing, which was held on 28 September 2007, counsel for the pursuer submitted that if authority were to be interponed to the joint minute the pursuer would no longer have any interest in the action. Counsel for the defender stated that the defender intended to implement the agreement that she had reached with the pursuer and to pay the sum that had been agreed between them. If authority were to be interponed to the joint minute and decree granted in terms thereof the minuter would require to decide what he intended to do. Counsel for the defender recognized that, in view of the interlocutor sisting the minuter as a party, it would be necessary to amend the joint minute to provide that the court was being moved to assoilzie the defender from the conclusions of the summons in so far as they were directed against her by the pursuer. The minuter intimated that he opposed the motion for decree in terms of the joint minute and also the motions for leave to reclaim.

[8] The Lord Ordinary decided to refuse in hoc statu the motion to grant decree in terms of the joint minute. He took the view that to grant such a decree would possibly pre-empt and would in any event complicate the issues that the minuter wished to raise in the present action. It was, moreover, unclear on the information available when any agreement between the pursuer and the defender was entered into and when the joint minute was signed. On any view, interponing authority to the joint minute might increase the difficulties in the action. The Lord Ordinary nevertheless granted leave to reclaim against that decision.

Submissions before the Inner House
[9] The agreement between the pursuer and the defender to settle the action assumed some significance in the arguments presented, and we should accordingly note the explanation that we were given by counsel for the pursuer as to how settlement had come about; his explanation was acquiesced in by counsel for the defender. In her defences to the action the defender had averred that the value of the subjects after deduction of a secured loan was approximately £50,000; consequently the value of the one half share disponed to her was approximately £25,000, and she had offered to pay that sum to the pursuer to settle the action. She further averred that she had used an inheritance from her mother to pay off the total indebtedness secured over the subjects and had expended further sums in improving the subjects, which had increased their value. She accordingly contended that in any settlement between the pursuer and the defender account should be taken of these matters, and also of the increase in market value of the subjects by reason of the passage of time following the sequestration; otherwise the pursuer would be unjustifiably enriched. The pursuer had taken advice on the defences and had been advised that it was appropriate to deduct from any sum payable by the defender to the pursuer the amount of the secured indebtedness repaid by the defender and any increase in value attributable to her expenditure. That led to a suggestion that the value of the defender's half share of the property was approximately £85,000. That figure had been put to the defender as a basis for settlement. The proposal had been refused by the defender, who reiterated her offer of £25,000. Negotiations had followed, and the defender agreed to increase her offer to £70,000. That was accepted, and it was further agreed that no expenses should be due to or by either party. Counsel thought that the expenses of process were in the region of £2,000.

[10] Counsel for the pursuer submitted that the Lord Ordinary had erred in law in sisting the minuter as an additional pursuer; such a course was not competent, or was in any event an unreasonable exercise of his discretion. The Lord Ordinary had failed to give weight to the fact that the pursuer and the defender had agreed to settle the action on the basis that the defender would pay the pursuer £70,000 in return for absolvitor; that agreement had been embodied in a joint minute. The parties' agreement brought the action to an end; that agreement was binding as soon as the joint minute had been signed, and it was not necessary for a binding agreement to settle an action that the joint minute should be lodged in court: Jongejan v Jongejan 1993 SLT 596, at 597; McAthey v The Patriotic Investment Society Ltd 1910 SC 584, at 586; Lothian v Lothian 1965 SLT 368. On that basis, the Lord Ordinary ought to have given effect to the joint minute and to have pronounced decree of absolvitor; at the same time he should have refused to allow the minuter to be sisted as a party.

[11] Counsel for the pursuer further submitted that the Lord Ordinary had erred in law by failing to give weight to the powers and duties of the pursuer as permanent trustee under sections 3(1)(a), 34(1)(b) and 65(1)(b) of the Bankruptcy (Scotland) Act 1985. Furthermore, the Lord Ordinary had failed to give weight to the possibility that the minuter could have the pursuer's actions as permanent trustee considered by the sheriff under section 3(7) of the Act. Counsel's analysis of these provisions was as follows. Section 3(7) provided a remedy to any creditor who was dissatisfied with any act of the trustee. It conferred wide powers on the sheriff. In an appropriate case it would be possible to reduce an agreement between the permanent trustee and the debtor, although in the present case, if the minuter were successful in such an application, it is more likely that an award would be made against the permanent trustee, who might be obliged to make a contribution to the sequestrated estate. Until the sheriff had reached a determination in an application under section 3(7), however, the status quo should prevail, especially as any remedy was likely to be financial if the pursuer were wrong in concluding the settlement. Section 31(1) and (8) provided that the whole estate of the debtor should vest in the permanent trustee. Against that background, section 34 provided that gratuitous alienations were challengeable by either a creditor or the permanent trustee. In the present case the challenge had been made by the permanent trustee. Section 65 then provided that the permanent trustee might make a compromise with regard to any claim of whatever nature made on behalf of the sequestrated estate, and that such a compromise should be binding on the creditors and the debtor. Thus the permanent trustee could settle an action and bind a creditor such as the pursuer.

[12] Counsel for the pursuer further submitted that the Lord Ordinary had erred in law by giving weight to the contention by the minuter that the minuter had separate title and interest to seek reduction of the disposition by the debtor of his share of the subjects, even though the pursuer had already raised such an action and had reached agreement with the defender as to the disposal of that action and the pursuer's claim against the defender. In that way any interest of the minuter had been elided.

[13] Counsel for the defender adopted the submissions for the pursuer. He further submitted that the scheme of the 1985 Act was that the permanent trustee held a trump card. Under sections 3 and 31 the whole estate vested in the trustee. Section 65(1)(b) then permitted the trustee to act on behalf of all of the creditors in compromising an action. He had power to deal with the estate and reach agreement in such a way as to bind all other creditors. Otherwise the scheme of the Act would be imperilled.

[14] The minuter appeared in person. He presented certain arguments dealing with the competency of the reclaiming motion, but in view of the decision that we have reached it is unnecessary to say anything about those in this opinion. In the course of his submissions he adopted the reasoning of the Lord Ordinary. In particular, he submitted that section 34(1) of the Bankruptcy (Scotland) 1985 permitted a creditor to challenge a gratuitous alienation; that was of particular significance in cases where a creditor had the main interest in challenging an alienation, or where a creditor had an interest adverse to the permanent trustee.

The Bankruptcy (Scotland) Act 1985

[15] The minuter founds on the provisions of section 34 of the Bankruptcy (Scotland) Act 1985. Section 34(1) is in the following terms:

"Where this subsection applies, an alienation by a debtor shall be challengeable by -

(a) any creditor who is a creditor by virtue of a debt incurred on or before the date of sequestration ...; or

(b) the permanent trustee, the trustee acting under the trust deed or the judicial factor, as the case may be".

According to its terms, therefore, the section contemplates two distinct rights of challenge: that of a qualified creditor and that of the permanent trustee or equivalent. Under the previous law, both the trustee in sequestration and a qualified creditor were entitled to challenge a gratuitous alienation, whether at common law or under the Act 1621 c. 18: Goudy, The Law of Bankruptcy in Scotland (4th edition, 1914), 33-34, 52-53; the trustee's title was conferred by section 9 of the Bankruptcy (Scotland) Act 1913. The right of a creditor to challenge gratuitous alienations and fraudulent preferences can be important. This is illustrated by Brown & Co. v McCallum 1890, 18 R 311; the case deals with illegal preferences, but the same principles have been treated as applying to gratuitous alienations: see the passages in Goudy cited above. In that case the trustee in sequestration had not attempted to reduce a security granted by the bankrupt as an illegal preference. The court nevertheless held that individual creditors had title and interest to bring an action for reduction of the security as an illegal preference. Lord Kinnear (at page 316) stated that the pursuers had a special interest of their own because the security granted by the bankrupt, if it were permitted to stand, would exclude their plea of retention over part of the sequestrated estate. He further held that the pursuers had a good title under the Act of 1696 because they were admitted to be prior creditors. It had been argued that the Bankruptcy Act 1856 had transferred the title of individual creditors to the trustee in sequestration, but that argument was rejected. On this point Lord Kinnear stated (at page 317):

"It may very well be that a single creditor, by reason of a security which he holds over part of the bankrupt's estate, may have an interest either adverse to the general body of creditors, or in which they do not participate; and in such a case the trustee may have no interest, and therefore no title to reduce for behoof of the general body. But then the trustee takes the estate for behoof of the general body, subject always to the securities which existed at the date of the sequestration; and it seems to me to follow that the creditors who hold such securities cannot be deprived of their right to make them effectual by setting aside any fraudulent or illegal preference which may stand in the way of their legal operation, merely because the statute has extended to the whole body of creditors the benefit of certain challenges, which were previously available only to a particular class".

[16] The Act 1621 c.18 has been replaced by section 34 of the 1985 Act. The enactment of the latter section followed a recommendation of the Scottish Law Commission, contained in their Report on Bankruptcy and Related Aspects of Insolvency and Liquidation (Scot. Law Com. No. 68), published in 1982. The question of title to challenge alienations and preferences is considered at paragraph 12.21 of the report:

"We have already noted that challenge under the 1621 Act may be made by any creditor whose debt was contracted before the date of the alienation. It might be suggested that a requirement of sequestration or its equivalent before a statutory challenge can be made would remove the need for individual creditors to retain their right of challenge, because the creditors will ex hypothesi be represented by a trustee in sequestration or a person similarly empowered to make the challenge. The reported cases show, however, that there may be circumstances where an individual creditor is the person mainly interested in the reduction of an alienation or has an interest in the reduction adverse to that of the trustee [reference was made to Brown & Co. v McCallum, supra]. Accordingly, it would be unsafe to exclude an individual creditor from the benefits of the statutory challenge. We recommend, therefore, that the statutory challenge should be available to any creditor in respect of a debt incurred by the debtor at any time before the date of the latter's sequestration...".

The draft Bill annexed to the report dealt with gratuitous alienations at clause 33; clause 33(3) is in terms which are almost identical for all material purposes to those of section 34(1) of the 1985 Act. It is accordingly clear that the reference to the creditor's right in the latter subsection was deliberately inserted in order to deal with cases where one creditor is the person who has the principal interest in the reduction of an alienation, or where the interest of a creditor conflicts with the interest of the trustee or the generality of creditors. For this reason we are of opinion that the separate right of the creditor is an important feature of section 34, and that it should be given full effect unless there are compelling reasons to the contrary.

[17] The existence of separate rights in the trustee and individual creditors can no doubt give rise to procedural complexities. It seems to us, however, that these can be dealt with in a commonsense fashion, for example by permitting the trustee to refrain from active participation in proceedings, or by ensuring that a creditor who brings a successful challenge accounts for any benefit to the sequestrated estate so far as that is appropriate. In any event, we are of opinion that procedural considerations should not be an obstacle to the existence of a separate right in a creditor. Rules of procedure are designed to facilitate the proper application of the law, not to obstruct it. The result is that the minuter has clear title and interest to reduce the gratuitous alienation under section 34.

[18] The pursuer relied on section 65(1) of the 1985 Act to argue that she was entitled to compromise the present action and that any such compromise would bind the minuter as an individual creditor. In our opinion this argument cannot be sustained. Section 65(1) is in the following terms:

"The permanent trustee may (but if there are commissioners only with the consent of the commissioners, the creditors or the court) -

(a) refer to arbitration any claim or question of whatever nature which may arise in the course of the sequestration; or

(b) make a compromise with regard to any claim of whatever nature made against or on the half of the sequestrated estate;

and the decree arbitral or compromise shall be binding on the creditors and the debtor".

Under section 172 of the 1913 Act the trustee was entitled, with consent of the commissioners, to "compound and transact... any questions which may arise in the course of the sequestration regarding the estate, or any demand or claim made thereon". Any such compromise or transaction was declared to be binding on the creditors and the bankrupt. Under the 1913 Act the election of commissioners was mandatory, but under the 1985 Act this is no longer so. The Scottish Law Commission recommended that provision should be made for the continued participation of creditors in the supervision of the trustee's administration through commissioners (op. cit., paragraphs 4.30 and 10.9) and that in the absence of commissioners the Accountant in Bankruptcy should exercise general supervision of the actings of the trustee. Despite this recommendation, the election of commissioners is in practice relatively unusual; there were no commissioners in the present sequestration. Section 65(1) is perhaps somewhat curiously framed, in that if there are commissioners the creditors or the court may supply consent in place of those commissioners, but if there are no commissioners the trustee has an apparently unfettered power to reach a compromise. We do not think, however, that that affects the present case; because there are no commissioners it seems that, on the wording of the subsection, the permanent trustee can act without obtaining any consent.

[19] Nevertheless, we are of opinion that on its proper construction the pursuer's power under section 65(1) to make a compromise cannot be used to defeat the independent right of a creditor to reduce a gratuitous alienation under section 34, or indeed at common law. A number of reasons exist for this conclusion. In the first place, section 65(1) permits the permanent trustee to compromise "any claim... made against or on behalf of the sequestrated estate". The right of an individual creditor under section 34(1) to bring proceedings for reduction of a gratuitous alienation is an independent right conferred on the creditor; it is not in any sense a right derived from the permanent trustee; nor does the creditor act on behalf of the sequestrated estate. Consequently it cannot in our view be regarded as a claim "made on behalf of the sequestrated estate". In some cases, no doubt, the creditor will have to account in whole or in part for any benefit obtained through the reduction, but that is merely the consequence of a successful reduction; it does not affect the creditor's independent title to challenge the alienation. The independent nature of the right appears to us to be clear from the wording of section 34(1). It is also noticeable that under the law prior to 1985 the right of a creditor to challenge an alienation was regarded as independent of the trustee, and the clear intention of the Scottish Law Commission (op. cit., paragraph 12.21) was to maintain an independent right. In the second place, the independent nature of the creditor's right becomes important where his interests conflict with those of the permanent trustee or the general creditors. That is mentioned by Lord Kinnear in Brown & Co. v McCallum, supra, and also by the Scottish Law Commission (op. cit., paragraph 12.21). Where such a conflict of interest exists it would clearly be most unsatisfactory if the permanent trustee had power to defeat the creditor's independent right. If the intention of the statute were to achieve such a result clear language would be required, and in our opinion section 65(1) comes nowhere near the requisite clarity. This seems to us to be a point of considerable importance. In the third place, section 34 is part of the substantive provisions of the 1985 Act; indeed the power to challenge gratuitous alienations can be regarded as one of the most important features of the legal regime that applies to sequestration and its corporate equivalents. Section 65, by contrast, is found in the part of the statute headed "Miscellaneous and supplementary", and is essentially concerned with matters of procedure. It is unlikely that a provision falling within the latter part of the Act would be capable of defeating a right that is expressly conferred upon a creditor by the substantive provisions in the earlier parts of the Act.

[20] In the present case we are satisfied that there is at least a potential conflict of interest between the pursuer and the minuter. The compromise embodied in the joint minute between the pursuer and the defender was no doubt more than adequate to pay the pursuer's own fees and outlays, and might confer some dividend on creditors. The minuter, however, claims that it represented an undervaluation of the claim against the defender and that he, as the principal creditor in the sequestration, will suffer from that undervaluation. There may well be substance in this contention. After taking advice from counsel the pursuer had initially valued the defender's half share of the property at £85,000. After negotiation, the pursuer had accepted £70,000. In addition, the settlement had been reached on a basis that no expenses would be payable by or to either party; those expenses were said by the minuter to amount to in excess of £33,000, although the judicial expenses would be a lesser amount. The concessions made by the pursuer seem substantial. In these circumstances we are of opinion that it would be a startling result if the pursuer were able to use the power in section 65(1) to prevent the minuter from exercising his independent right under section 34(1).

[21] The pursuer and the defender further founded on section 3(7) of the 1985 Act. This subsection provides as follows:

"Where the debtor, a creditor or any other person having an interest is dissatisfied with any act, omission or decision of the permanent trustee, he may apply to the sheriff and, on such an application being made, the sheriff may confirm, annul or modify any act or decision of the permanent trustee or may give him directions or make such order as he thinks fit".

This subsection did not form part of the original version of the 1985 Act; it was added by paragraph 1 of Schedule 1 to the Bankruptcy (Scotland) Act 1993. The argument for the pursuer and the defender was that section 3(7) provided the minuter with a remedy if he wished to challenge any decision made by the pursuer as permanent trustee. The availability of that remedy meant that the minuter should not be entitled to intervene in any action brought by the pursuer for reduction of a gratuitous alienation.

[22] Section 3(7) is part of the section dealing with the functions and duties of the permanent trustee. It is a provision of general application, but it is essentially procedural in nature; it is designed to enable any person with an interest in the sequestrated estate, including a creditor, to challenge any act, omission or decision of the permanent trustee without embarking on proceedings for judicial review, a remedy which is of course only possible in the Court of Session. We are of opinion that this subsection does not remove or detract in any way from the right of a creditor to raise proceedings under section 34(1). As explained above, section 34(1) confers a substantive right on a creditor, and the availability of a remedy in lieu of judicial review does not appear to us to affect that substantive right. Moreover, the independent right of a creditor under section 34(1) assumes particular importance where there is a conflict of interest between that creditor and the permanent trustee. In that situation the remedy provided by section 3(7) appears a much less satisfactory remedy. Indeed, counsel for the pursuer accepted that if in the present case the minuter were successful in an application under the latter subsection, the remedy would probably take the form of financial redress provided to the sequestrated estate by the pursuer. That suggests that the minuter would require to demonstrate that the pursuer had not acted properly, rather than merely requiring to demonstrate that there had been an alienation by the debtor at an undervalue. Establishing improper conduct on the part of the pursuer seems to us to place a significantly higher burden on the minuter than merely permitting him to enter an action for reduction of a gratuitous alienation.

[23] For the foregoing reasons we are of opinion that the minuter has an independent right of action under section 34(1) and that that right is not affected by the existence of either section 65(1) or section 3(7). On that basis we consider that the Lord Ordinary was fully entitled to permit the minuter to be sisted as an additional pursuer in the action. As he pointed out, to follow that course would allow the parties' rights and obligations to be settled in one process, which is likely to be less expensive than raising a separate action and is likely to lead to a more rapid resolution of the dispute.

The joint minute
[24] The pursuer presented a further argument that the execution of the joint minute had settled the action, at least as between the pursuer and the defender, and that the Lord Ordinary ought for that reason to have interponed authority to the joint minute and to have assoilzied the defender from the conclusions of the summons, at least so far as directed against her by the pursuer. The chronology of the joint minute was as follows. We were informed that on 20 April 2007 agreement was reached between a member of the pursuer's staff and a representative of the defender's agents. The defender's agents were told to put to the agreement into a joint minute, which was duly done. The second signature on the joint minute was appended on 23 April, between 4.30 and 4.45p.m. The joint minute was lodged the following day, 24 April. The minuter's motion was enrolled on 22 April, and the hearing was fixed for 25 April. The status of the joint minute was of course raised at that hearing.

[25] It is clear that a joint minute is binding on the parties to an action as soon as it is signed on behalf of all of them; it is not necessary for its validity that it be lodged in court or that it should have authority interponed through an interlocutor of the court: Jongejan v Jongejan 1993 SLT 596, at 597; McAthey v The Patriotic Investment Society Ltd 1910 SC 584, at 586; Lothian v Lothian 1965 SLT 368. In the present case, however, the joint minute could not bind the minuter because he was not a party. This appears to have been accepted by the representatives of the pursuer and the defender because they executed a second version of the joint minute. The original joint minute was made available to us. This simply narrated that the action had been settled extrajudicially and moved the court to assoilzie the defender from the conclusions of the summons and to find no expenses due to or by either party. In the Lord Ordinary's second opinion, however, it is stated that at the hearing held on 29 September 2007 counsel for the defender accepted that, in view of the Lord Ordinary's interlocutor of 27 July 2007, which allowed the minuter to be sisted as an additional pursuer, it would be necessary to amend the joint minute to the effect that the court was being moved to assoilzie the defender from the conclusions of the summons in so far as they were directed against her by the pursuer. That difference appears to us to be material. By the time any amended joint minute was executed, the minuter had been sisted as a party, and any joint minute could not affect his position; hence the tendering of the amended joint minute. That is the version of the joint minute that the Lord Ordinary ultimately had to consider, and on any view that version post-dated the Lord Ordinary's decision to allow the minuter to be sisted as an additional pursuer.

[26] In the circumstances we consider that the Lord Ordinary was fully entitled to refuse to give effect to the joint minute. He did so on the basis that another party, the minuter, had been permitted to intervene in the action; consequently to grant decree in terms of the joint minute would possibly pre-empt and would in any event complicate the issues that the minuter wished to raise. The Lord Ordinary further remarked that it was unclear when any agreement between the pursuer and the defender was entered into and when the joint minute was signed. We were given a full explanation of these matters; it appeared that the joint minute had been entered into after the petitioner's motion was enrolled, and in any event the joint minute that was finally put forward was different in a material respect from the original version. Either of these factors might have been a good reason for refusing to interpone authority to the joint minute. Perhaps more importantly, as we have mentioned above at paragraph [20], there were substantial doubts about the terms of the settlement that was embodied in the joint minute; that was why the Lord Ordinary permitted the minuter to be sisted as an additional pursuer, and that in turn was why he refused to give effect to the joint minute. The matter was ultimately one that fell within the Lord Ordinary's discretion. It cannot be argued that he erred in law; nor can it be argued that his decision was one that no reasonable judge could properly reach. We accordingly decline to interfere with the Lord Ordinary's decision.

[27] We should add that, even if effect were given to the joint minute, a further problem would arise. The result of the joint minute would be that the defender was assoilzied from the conclusions of the action brought against her by the pursuer. The question would then arise as to whether that would give rise to a plea of compromise against the minuter if he were to raise a separate action as a creditor. It is not necessary for us to express an opinion on this matter, although it can be said that, if the grounds in the second action were not precisely the same as those in the present action (for example, actual fraud in one action but a mere alienation at an undervalue in the other), the plea of compromise might not be available.

Decision
[28] For the foregoing reasons we are of opinion that the Lord Ordinary's opinion cannot be challenged. We will accordingly refuse the reclaiming motion and remit to the Lord Ordinary to proceed as accords.