ELIZABETH G MACKAY AS TRUSTEE IN THE SEQUESTRATION OF MARK EDWARD FORTUNE AGAINST MEDWIN INVESTMENTS LIMITED
OUTER HOUSE, COURT OF SESSION
[2015] CSOH 139
CA29/15
OPINION OF LORD JONES
In the cause
ELIZABETH G MACKAY
as trustee in the sequestration of Mark Edward Fortune
Pursuer;
against
MEDWIN INVESTMENTS LIMITED
Defender:
Pursuer: Cormack, Solicitor Advocate; Pinsent Masons LLP
Defender: D McLean; TC Young LLP
21 October 2015
Introduction
[1] The point at issue in this case is a short one. It concerns the proper construction of section 44(4)(c) of the Conveyancing (Scotland) Act 1924 (“the 1924 Act”).
[2] The case came before the court on 9 July 2015, for debate. As the result of a combination of the parties’ pleadings, their notes of argument and statements made during the hearing, the following agreed factual matrix emerged. The pursuer is the trustee on the sequestrated estate of Mark Edward Fortune, having been appointed on 7 February 2011. In consequence of that appointment, Mr Fortune’s whole estate vested in the pursuer for the benefit of his creditors as at 24 December 2010. At that date, Mr Fortune owned a number of heritable properties in Edinburgh. On 25 April 2014, he purported to grant a standard security in favour of the defender over four of these properties (“the standard security properties”). On the same date, a disposition of three other properties owned by him as at 24 December 2010, granted by Mr Fortune in favour of the defender, was registered in the Land Register of Scotland (“the disposition properties”). (I was informed after the hearing that the standard security was registered in the Land Register on 29 April 2014.) At all material times in April 2014, the defender was aware of Mr Fortune’s continuing sequestration.
The relevant statutory provisions
[3] So far as is relevant for the purposes of this opinion, section 31 of the Bankruptcy (Scotland) Act 1985 (“the 1985 Act”) provides that, subject to exceptions which are not applicable in this case, the whole estate of the debtor vests in the trustee by virtue of the trustee’s appointment, as at the date of sequestration, for the benefit of the debtor’s creditors. It is also provided that it is not competent for the trustee, or any person deriving title from the trustee, to complete title to any heritable estate in Scotland before the expiry of 28 days, beginning with the date on which “the certified copy of the order of the sheriff granting warrant [to cite the debtor] is recorded” in the register of inhibitions, under section 14(1)(a) of the 1985 Act.
[4] In terms of section 32(8), subject to provisions that do not apply in the circumstances of this case, any dealing of or with the debtor relating to his estate vested in the trustee shall be of no effect in a question with the trustee.
[5] The order of the sheriff granting warrant of which a certified copy is recorded in the register of inhibitions is pronounced in terms of section 12(2) of the 1985 Act. Where a petition for sequestration of the debtor’s estate is presented by a creditor, the sheriff to whom the petition is presented must grant warrant to cite the debtor to appear before him, to show cause why sequestration should not be awarded. Subsection (1)(a) of section 14 of the 1985 Act provides that, after the sheriff grants such warrant, the sheriff clerk is to send “forthwith” a certified copy of the order to the keeper of the register of inhibitions and adjudications (“the keeper”, “the register”) for recording. Subsection (2) of section 14 provides that such recording has “the effect”, as from the date of sequestration, of an inhibition and of a citation in an adjudication of the debtor’s heritable estate at the instance of the creditors who subsequently have claims in the sequestration accepted under section 49 of the 1985 Act. (In this opinion, where I refer to “the prohibitory effect”, I am referring to the effect mentioned in subsection (2).) Section 49 prescribes the mechanism for adjudicating claims.
[6] In short, the recording of the certified copy of the sheriff’s order granting warrant has the following consequences which are of interest in this case: it has “the effect as from the date of sequestration of an inhibition and of the citation in an adjudication of the debtor’s heritable estate” at the instance of creditors (the 1985 Act, section 14(2)); and it is the first of the 28 days during which it is not competent for the trustee or any person deriving title from the trustee to complete title to any heritage (the 1985 Act, section 31(1A)).
[7] In terms of section 14(3), the prohibitory effect mentioned in subsection (2) expires on the happening of either of two specified events. Neither of the specified events occurred in this case. If neither of the specified events occurs, the effect expires “at the end of the period of three years beginning with the date of sequestration”, subject to subsection (4). Subsection (4) provides that, if not discharged, the trustee may send a memorandum in prescribed form to the keeper for recording, before the expiry of the period of three years from the date of sequestration. In terms of subsection (4A), the recording of a memorandum renews the prohibitory effect for a further period of three years beginning with the expiry of the first period of three years. Subsequent renewals are also provided for.
[8] Section 44(4)(c) of the 1924 Act, so far as is relevant in the circumstances of this case, is in the following terms:
“No deed… granted… by a person whose estates have been sequestrated under … the Bankruptcy (Scotland) Act 1985,… relative to any land or lease or heritable security belonging to such person at the date of such sequestration or subsequently acquired by him shall be challengeable or denied effect on the ground of such sequestration if such deed… shall have been granted… at a date when the effect of recording… under subsection (1)(a) of section 14 of the Bankruptcy (Scotland) Act 1985 the certified copy of an order shall have expired by virtue of subsection (3) of that section, unless the trustee in such sequestration shall before the recording of such deed… in the appropriate Register of Sasines have completed his title to such land… or heritable security by recording the same in such register…”
[9] In this case, the order granting warrant to cite Mr Fortune was contained in an interlocutor of the sheriff, dated 24 December 2010. At the hearing before me, it was the parties’ understanding that no certified copy of the sheriff’s order granting warrant to cite was recorded in the register before 29 April 2014, the date on which the standard security was registered, and the debate proceeded on that premise. The possible explanations were that the sheriff clerk had failed to send the certified copy to the keeper; that it was sent but not received; or that, having received it, the keeper had failed to record it. In any event, there was no dispute that, if the certified copy had been recorded before 24 April 2014, the date on which the standard security was granted, the three year period specified in section 44(4)(c) of the 1924 Act would, by then, have expired. By the date of the registration of the standard security and of the dispositions, which occurred after the expiry of three years from the date of sequestration, the pursuer had not completed title to the properties identified in those deeds.
[10] The requirement placed on the sheriff clerk to send a copy of the warrant to the keeper was an innovation, introduced by the 1985 Act on the recommendation of the Scottish Law Commission. Previously, it was the responsibility of the party applying for sequestration to present an abbreviate of the petition and first deliverance to the keeper. Recording of the abbreviate had the prohibitory effect which is now achieved by the recording of the copy order granting warrant. It is unfortunate that the order granting warrant was not recorded in the manner provided for by section 14, but no blame for that can be attached to the parties to this action, or Mr Fortune, or the creditors. Even if the pursuer, or any person deriving title from her, had attempted to complete title to the heritable properties which are the subject of the deeds under challenge, they could never competently have done so, so long as the copy order remained unrecorded. (Section 31 of the 1985 Act)
The debate
[11] It was the pursuer’s position that Mr Fortune had “no title” to grant a standard security over the standard security properties, or to dispone the disposition properties. The standard security and the dispositions are, consequently, voidable, and the pursuer is entitled to reduction thereof. Alternatively, the standard security and dispositions are of no effect, in terms of section 32(8) of the Bankruptcy (Scotland) Act 1985. In these circumstances, decree should be pronounced de plano.
[12] The defender contended that, having regard to the terms of section 44(4)(c) of the 1924 Act, neither the disposition properties nor the standard security properties remained vested in the pursuer, three years having expired after the date of Mr Fortune’s sequestration without the pursuer having completed title to these properties. The court should sustain the defender’s first plea-in-law, a standard plea to the relevancy, and dismiss the action.
[13] In response, counsel for the pursuer submitted that, on a proper construction of section 44(4)(c), the three year period relied on by the defender never started to run because the certified copy of the order granting warrant to cite was not recorded before the challenged deeds were registered. As result, the three year period could not have expired by the date of registration of the challenged deeds. Further, when the deeds were executed in favour of the defender, it knew that Mr Fortune was sequestrated. Read in the context of the whole statutory scheme for sequestration, Parliament intended that section 44(4)(c) should operate for the protection only of parties acting in good faith. Read in any other way, section 44(4)(c) is in direct conflict with section 32(8).
[14] In the course of argument, counsel referred me to the cases of Rodger (Builders) Ltd v Fawdry and Others 1950 S C 483 (Rodger Builders) and Burnett's Trustee v Grainger 2004 SC (HL) 19 (Burnett's Trustee).
The parties’ further submissions
[15] After this case was taken to avizandum, the solicitors acting for the pursuer advised the court and the defender that, on 6 February 2014, the sheriff at Edinburgh had pronounced an interlocutor by which he allowed the warrant to cite, dated 24 December 2010, to be amended, and ordained the sheriff clerk to intimate to the keeper a certified copy of the interlocutor of 6 February and of 24 December 2010, “reserving to pronounce further”. Thereafter, the sheriff clerk sent certified copies of both interlocutors to the keeper, and, on 11 February 2014, the keeper recorded them in the register. The certified copy of the order granting warrant to cite is headed “The City of Edinburgh Council v Mark Fortune”, bears the date 24 December 2010, and it is in these terms:
“The sheriff, having considered the foregoing petition, together with the productions and having heard the solicitor for the petitioners and from the debtor personally thereon, grants warrant to cite the debtor by serving a copy of the petition and of this warrant and appoints the debtor, if so advised, to appear within the Sheriff Courthouse, 27 Chambers Street, Edinburgh, on 7 February 2011 at 10.00 a.m. to show cause why sequestration should not be awarded.”
By the amendment which was allowed on 6 February 2014, the name and address of Mr Fortune were inserted after the word “debtor” in the third line. The pursuer’s solicitors also advised the court and the defender that, by interlocutor dated 22 May 2014, the sheriff authorised: (i) the keeper to record the certified copy of the order of 24 December 2010; (ii) the defender to send to the keeper a memorandum in terms of section 14(4) of the 1985 Act for recording, “notwithstanding the expiry of the period of three years mentioned in subsection 14(3)(b) of the said Act”; and (iii) the keeper “to record the said memorandum or as near as may be, notwithstanding the expiry of the period of three years mentioned in subsection 14(3)(b) of the said Act”. Following intimation of that interlocutor, on 2 June 2014 the following entry was recorded in the register:
“Mem. of Renewal, dated 30 May 2014, in respect of the sequestrated estate of MARK FORTUNE, [address], Date of Sequestration 24 Dec 2010; with Certified Copy Interlocutor, dated 22 May 2014, in terms of the Bankruptcy (Scotland) Act 1985 authorises the Keeper of the Register of Inhibitions to record the said memorandum or as near as may be, notwithstanding the expiry of the period of three years mention(ed) in subsection 14(3)(b) of the said Act.”
[16] The sheriff’s interlocutors of February and May 2014 were pronounced in the context of an application by the pursuer under the provisions of section 63(1) of the 1985 Act, which, so far as is relevant to the circumstances of this case, is in the following terms:
“The sheriff may, on the application of any person having an interest—
(a) if there has been a failure to comply with any requirement of this Act… make an order waiving any such failure and, so far as practicable, restoring any person prejudiced by the failure to the position he would have been in but for the failure;
…”
It is averred on behalf of the pursuer that the section 63 application was made after it was discovered that the certified copy of the warrant to cite was not recorded in the register. That discovery was made when the pursuer “sought to send in a memorandum in terms of section 14(4) of the Act.”
[17] In light of that further information, the parties lodged supplementary written submissions for consideration by the court. It is convenient to record the substance of these submissions in the following section of this opinion.
Decision and reasons
[18] In my judgment, in order to determine the issue in this case, it is necessary to begin by understanding what it is that expires after three years. It is the prohibitory effect of recording the certified copy of the order granting warrant. Within its statutory context, that effect is an important safeguard of the interests of creditors. Whilst section 31 of the 1985 Act vests the whole estate of the debtor in the trustee, the trustee has no more than a personal right to the debtor’s heritable property, subject to certain exceptions which are not relevant here. The trustee can perfect his or her right to the heritage by registering a notice of title in the Land Register. Until that is done, the recording of the certified copy of the order protects the creditors, because, by virtue of the inhibition, the debtor is prevented from disposing voluntarily of any of his or her heritable property. Further, an inhibition recorded in the register is publication “to all the world” that the debtor is prohibited from voluntarily dealing with his property. (See Burnett's Trustee per Lord Hope of Craighead at paragraphs [22] and [25]) Consequently, voluntary deeds granted by the debtor subsequent to sequestration, and while the prohibitory effect is still in force, are reducible at the instance of the trustee in sequestration. (See Graham Stewart: Law of Diligence, pages 551 and following)
[19] In enacting section 14(3), Parliament clearly intended that the prohibitory effect of recording the certified copy of the order should not endure indefinitely. Where it is not extended by the recording of a memorandum, and has not expired on the happening of one of the other specified events, it expires at the end of the period of three years beginning with the date of sequestration. That raises the question of what is intended to be the consequence of the expiry of the prohibitory effect.
[20] The answer to that is supplied by the provisions of section 44(4)(c) of the 1924 Act. Unless the trustee in sequestration completes title before a deed granted by the debtor is registered in the Land Register, the latter deed is unchallengeable and cannot be denied effect “on the ground of such sequestration”. It is clear that the immunity from challenge is inexorably linked to the recording of the certified copy of the order granting warrant. There can, obviously, be no “effect of recording” unless and until the certified copy has been recorded. The recording has the effect of an inhibition etc., as from the date of sequestration. In the circumstances of a case such as this, it is only when that effect has expired in terms of section 14(3) that a debtor’s deed may become free from challenge.
[21] The construction of section 44(4)(c) contended for on behalf of the defender, which I reject, is, in effect, a rewrite:
“No deed granted by a person whose estates have been sequestrated shall be challengeable on the ground of such sequestration if such deed shall have been granted after three years from the date of sequestration unless the trustee has before the recording of such deed in the appropriate Register of Sasines completed his title by recording the same in such register or has recorded a memorandum in such register.”
[22] I have mentioned that it is averred on behalf of the pursuer that, when it was discovered that no certified copy of the sheriff’s order granting warrant was recorded in the register, she sought relief in terms of section 63 of the 1985 Act. It is also averred that the sheriff granted such relief in May 2014. On that narrative, there could have been no “effect of recording… the certified copy” in April 2014, when the standard security and dispositions were registered. There could have been no effect, therefore, that could have expired. The process by which immunity from challenge could accrue would never have begun.
[23] In light of the information provided by the solicitors for the pursuer after the conclusion of the debate, however, it is necessary to consider the consequences of the sheriff’s pronouncing the interlocutor of 6 February 2014 and the keeper’s making the entry of 11 February 2014.
[24] In his supplementary note of argument for the defender, counsel contends that the keeper recorded the interlocutor of 24 December 2010 on 11 February 2014. When that was done, it had the effect provided for in section 14(2). As counsel puts it, it was the “trigger event” for operation of the rule in section 44(4)(c) of the 1924 Act. When the various deeds which are challenged in this litigation were registered in April 2014, the prohibitory effect of the recording of the certified copy order had expired, over three years having elapsed since the date of sequestration.
[25] Counsel for the pursuer disputes the defender’s contention that the certified copy order was recorded on 11 February 2014. He submits that the sheriff “deferred consideration of authorising the keeper to record the warrant to cite when granting the interlocutor dated 6 February 2014 which expressly reserved to pronounce further.” The sheriff dealt with that aspect of the section 63 application before him in the interlocutor of 22 May 2014. The purpose of the intimation of the interlocutor of 6 February 2014 and of the warrant to cite “was so that an entry could be made in the register of inhibitions alerting parties searching it to the existence of the sequestration, that the warrant to cite had not been duly recorded at the time and that an application was before the sheriff in that regard.” Parties searching the register after that would have knowledge of the sequestration.
[26] The question whether the inhibitory effect of the recording of the certified copy of the order had expired by the date of registration of the deeds under challenge ultimately turns on a question of fact: was the certified copy order recorded under section 14(1)(a) of the 1985 Act before these deeds were registered? That question falls to be answered in the affirmative. Counsel for the pursuer may be correct to say that the sheriff did not intend the certified copy order to be recorded until he had made a further order but, in the event, it was. The reality, therefore, is that the prohibitory effect of the recording had expired by the time when the challenged deeds were recorded in April 2014, three years having elapsed since the date of sequestration. What, therefore, was the effect of the expiry of the prohibitory effect?
[27] I reject the defender’s contention that, having regard to the terms of section 44(4)(c) of the 1924 Act, neither the disposition properties nor the standard security properties remained vested in the pursuer. I do so for three reasons. The first is that the terms of section 31 are clear and unambiguous. Subject to an exception which is of no application here, “the whole estate of the debtor shall, by virtue of the trustee’s appointment, vest in the trustee as at the date of sequestration for the benefit of the creditors.” Second, by contrast with the terms of section 39A, which makes provision in respect of the debtor’s family home, section 44(4)(c) of the 1924 Act does not provide that, on the expiry of three years, the debtor’s heritable property “ceases to form part of (his or her) sequestrated estate … and (is) reinvested in the debtor”. The terms of section 39A demonstrate that, if Parliament had intended the debtor’s heritable estate to be reinvested in the debtor on the expiry of the prohibitory effect, it would have expressed that intention. No mention of investing or reinvesting heritable property is made in section 44. Indeed, the heritage must remain vested in the trustee after the expiry of the prohibitory effect, because he or she can still complete title “by recording the same in (the appropriate) register”. Third, section 44(4)(c) provides only that no deed, etc., shall be challengeable “on the ground of such sequestration if such deed … shall have been granted … at a date when the effect of recording … the certified copy of an order shall have expired” and if “such deed” is recorded before the trustee completes title. In other words, the creditors simply lose the protection of the prohibitory effect of the recording of the order. That is what happened in this case.
[28] That is not, however, the end of the matter. When the challenged deeds were executed, the debtor remained sequestrated. His whole estate remained vested in the pursuer in terms of section 31 of the 1985 Act. The pursuer’s personal right to the sequestrated estate was prior to any personal right that the defender might claim to have by virtue of the standard security or dispositions. Nevertheless, the prohibitory effect of the recording of the certified copy having expired, once the standard security and dispositions were recorded they were beyond challenge “on the ground of such sequestration”. (Section 44(4)(c)) Counsel for the pursuer argues that these words limit the scope of the immunity from challenge provided for by the section. I agree.
[29] In Rodger Builders, the owner of heritable property (Fawdry) entered into missives with purchasers (Rodger (Builders) Ltd) for its sale. Part of the price was paid at the date of the missives, the remainder being payable at the date of entry. A fortnight after the date of entry, the balance of the price not having been paid, the seller warned the purchasers that, failing payment within three days, the contract would be at an end. On the expiry of that ultimatum without payment, the seller entered into missives with a second purchaser, Mr Bell, assuring him that the prior contract, of which he was fully aware, was no longer in force. The second purchaser made no independent enquiry into the matter. The seller executed a disposition in favour of the second purchaser’s wife, which was recorded without delay by the second purchaser’s solicitors, in the knowledge that the first purchasers were asserting their rights. The first purchasers then brought an action in which they concluded for reduction of the second missives and the disposition following thereon. They did not suggest that there had been any dishonest intention on the part of the second purchaser. The court granted decree of reduction.
[30] In finding for Rodger (Builders) Ltd in the Outer House, Lord Sorn said this:
“The law applicable to this situation is, I think, well established. It is that, where there has been a prior purchase and a second purchaser comes on the scene, the second purchaser is, if he has knowledge of the first sale, put upon his inquiry. This means that he is not in safety simply to accept the seller's statement that he is free to sell, but must make inquiry of his own—and the natural direction for him to turn is towards the previous purchaser. If he does not do this, he is not treated as a bona fide purchaser and, in the event of the prior sale turning out to be a subsisting one, he is not entitled to the protection of his [heritable} title [created by the recording of a disposition]. It may seem hard for someone, like Mr Bell, who has been guilty of no fraud and who has implicitly accepted the seller's statement, to find that he is not treated as a bona fide purchaser; but in the eyes of the law he is put upon his inquiry and, by proceeding without inquiry, he proceeds at his own risk.” (Page 495)
[31] When the action came before the Inner House, Lord Justice-Clerk Thomson famously expressed the following view:
“The appellants [Mr and Mrs Bell] assumed that their title would be safe once the goal of the Register House was reached. But in this branch of the law, as in football, offside goals are disallowed. In certain states of knowledge a purchaser is regarded as not being in good faith and goes to the Register House at his peril. Where, as here, Mr Bell and his advisers knew that a prior contract had existed and that the Rodgers were asserting that it still existed, they took the risk of the Rodgers being right when they themselves went to the Register House. The Rodgers having been shown to have been right, Mr Bell is not allowed to rely on the registration which in the knowledge which he possessed he succeeded in obtaining.
That is enough for the decision of the case, but the same principle applies at the missives stage. Mr Bell and his advisers knew that a prior contract had been entered into. So long as that contract subsisted, any contract entered into by Mr Bell could be provisional only.” (Page 501)
[32] The authorities which the Lord Ordinary cited in support of the proposition which he enunciated at page 495 of the report dated back to 1828. Another example of the application of the principle can be found in National Bank v Union Bank (1885) 13 R 390 at page 394, in the opinion of Lord Rutherford Clark, who expressed the following view:
“We have in our law cases where title will not prevail against right. An example, though not of common occurrence, is where a person takes a disposition to land and is infeft on it in the knowledge that his author had already granted another disposition of the same subjects. The second disponee has the first, and indeed the only feudal title, because the feudal title depends on priority of infeftment. But his title will not avail him against the right of the prior disponee, simply because he took a disposition which he knew his author had no power to grant, or, in other words, he knew that it was a fraud on the prior disposition. So here, the formal title of the National Bank cannot prevail against the prior right of the Union Bank, of which the former bank was cognisant.”
[33] In my judgment, there is no legal or practical difference between the position of a disponee who takes title knowing that the property disponed is the subject of a prior contract for sale, and that of a disponee who takes title knowing that the property has vested in a trustee in sequestration, in terms of section 31 of the 1985 Act. In both cases, the disponee knows that another party has a prior right to the subjects.
[34] In Burnett’s Trustee, the question was whether the infeftment of the trustee in the debtor’s heritable estate trumped the purchase in good faith for value before sequestration of third parties who had not completed their real right, the trustee having been aware of the prior sale. In holding that it did so, the members of the Appellate Committee contrasted the position of a trustee in sequestration with that of a purchaser with notice of the existence of a prior contract. Nothing said by any member of the committee casts doubt on the continuing authority of Rodger Builders. On the contrary, Lord Rodger of Earlsferry cited with approval the passage from the opinion of the Lord Justice-Clerk in Rodger Builders which is set out in paragraph [31] of this opinion. His Lordship went further and observed that, from time to time, purchasers will be aware of a previous transaction and disposition by the seller. “If so, they are not entitled to ignore that information on the ground that the disposition is not recorded in the register. If, knowing of the previous transaction and disposition, they record their disposition, they are not in good faith and will not obtain a valid title – the offside goals rule applies.” (Paragraph [80]) There was “a difference in this respect between a purchaser and a trustee in sequestration”. “In order to maximise the assets available to the creditors, the trustee can deliberately set out to destroy” the right of a prior purchaser to complete his title. “The offside rule does not apply” to the trustee, “and the offside goal is allowed”. (Paragraph [67])
[35] It is necessary to reconcile the terms of section 32(8) of the 1985 Act - any dealing of or with the debtor relating to his estate vested in the trustee shall be of no effect in a question with the trustee - with the terms of section 44(4)(c) of the 1924 Act - no deed relative to any land, by a person whose estates have been sequestrated, shall be challengeable on the ground of such sequestration where the prohibitory effect of the recording of a certified copy of an order granting warrant to cite has expired, unless the trustee has completed title before the debtor’s deed is recorded.
[36] Such reconciliation is, in my view, not difficult to accomplish. At common law, on receipt of a disposition, a purchaser of heritage has a personal right to take possession of the subjects. On recording the disposition, the purchaser obtains the real right of ownership. (Burnett’s Trustee per Lord Rodger at paragraphs [87] to [93]) If, however, the seller is the subject of an inhibition, that person acts in contravention of the prohibition from selling, and the disponee is vulnerable to an action of reduction of the disposition to the extent that the inhibitor is prejudiced. “Parties contract with each other on the basis of what is published to all the world in the register. In practice a good marketable title with clear searches in both the property register and the personal register is demanded of the seller by the purchaser.” (Burnett’s Trustee per Lord Hope at paragraph [25]) In terms of section 14(4)(c) of the 1985 Act, the immunity which is conferred is from challenge “on the ground of… sequestration”. The practical consequence of that provision is that, where the prohibitory effect has expired, the register is to be regarded as clear. Consequently, a purchaser of heritage from the debtor need make no further enquiry, and his or her disposition is not open to challenge on the ground that, in fact, the debtor remained sequestrated.
[37] Where such a purchaser is aware that the debtor remains sequestrated, however, he or she is aware that the trustee continues to have a prior right to the subjects, and the rule in Rodger Builders applies. The challenge which is open to the trustee is not “on the ground of such sequestration”, but on the ground that the purchaser has acquired his right in bad faith. (Burnett’s Trustee per Lord Rodger at paragraph [67]) If the purchaser has acted in good faith, the only ground on which the trustee could challenge the deed, but for the provisions of section 44 of the 1924 Act, would be that the debtor remained sequestrated. It is that ground of challenge which is removed by operation of the terms of section 44.
[38] For the foregoing reasons, the standard security and dispositions which are challenged by the pursuer are voidable, and fall to be reduced. Accordingly, I shall sustain the pursuer’s seventh plea-in-law and grant decree de plano. I shall reserve all questions of expenses.