ANTHONY BYRNE SEEKING RECALL OF THE SEQUESTRATION AWARDED IN GLASGOW SHERIFF COURT ON 28 MARCH 2011 AND THE RECALL OF THE PERMANENT TRUSTEE ON THE ESTATE OF THE PETITION
EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
[2015] CSIH 23
XA88/14
Lady Dorrian
Lord Malcolm
Sheriff Principal Pyle
OPINION OF THE COURT
delivered by LADY DORRIAN
in the appeal
in the petition at the instance of
ANTHONY BYRNE
Petitioner and appellant;
seeking recall of the sequestration awarded in Glasgow Sheriff Court on 28 March 2011 and the recall of the permanent trustee on the estate of the petition
Appellant: Party
Respondent: Mundy Solicitor Advocate; TLT LLP Edinburgh
24 February 2015
[1] The appellant was sequestrated on 28 March 2011 at the instance of Lombard North Central plc, following upon an action by them for payment under a guarantee signed by the appellant in respect of a lease purchase agreement entered into with Lombard North Central by a company of which he was a director. On 28 March 2011 Kenneth Robert Craig was appointed permanent trustee of the appellant’s estate. (By minute of sist in proceedings in this court Mr Thomas Campbell MacLennan, as new trustee on the estate, was sisted in room and place of Mr Craig.) On 6 April 2011 the appellant presented a petition for recall of sequestration in Glasgow Sheriff Court. On 16 August 2011 the sheriff refused the appellant’s motion for summary decree and allowed parties a proof of their respective averments, 27 and 28 October 2011 being assigned as proof dates. The appellant sought to appeal to the Sheriff Principal of Glasgow and Strathkelvin, but did so out of time. The Sheriff Principal refused to allow the appellant to lodge a note of appeal out of time. At the same time, he granted a motion on behalf of the trustee seeking to ordain the appellant to lodge caution in the sum of £5,000 sterling. He was ordered to find caution in this sum within 14 days of 13 October 2011, as a condition precedent of further procedure. He having failed to do so, the sheriff pronounced decree of default, granting absolvitor in favour of the trustee. There followed an appeal to the Court of Session, which allowed the appeal so far as relating to the Sheriff Principal’s decision on caution, and the decree of default pursuant thereto. The court remitted the case to the sheriff to proceed as accords.
[2] When the matter came before the sheriff, he proceeded on the basis that the interlocutor of the Inner House restored matters to the position as it stood prior to the appeal to the Sheriff Principal and that the proof before answer originally allowed by him, should now proceed.
[3] At the outset of the proof hearing two motions were advanced on behalf of the appellant. The first was that the court should dispense with the proof, since the appellant was entitled to decree (i) by virtue of certain concessions said to have been made in the Inner House on behalf of the trustee; and (ii) on the basis of an argument which had previously been advanced to the sheriff, and rejected by him in August 2011. The sheriff explained that it was not appropriate for evidence to be led about what had taken place before the Inner House, and that he considered that the opinion and interlocutor of the Inner House was the only valid measure of any concessions made before it. Only two concessions were recorded: at paragraph 16 where it was conceded that the sheriff had been wrong to pronounce decree by default and decree of absolvitor, and that those decrees required to be recalled; and at paragraph 22, where it was accepted that if the appellant established fraud on the part of Lombard North Central it would be open to the sheriff to recall the sequestration. The sheriff considered that neither of these concessions was of such a kind as to entitle the appellant to decree. As to the remaining part of the motion, which rested on the argument that the petitioning creditor not having entered the process to resist the petition, the appellant was entitled to decree as craved, the sheriff also refused that, adhering to his previous opinion that a motion for summary decree in proceedings of this kind was not competent.
[4] The second motion made by the appellant was essentially for discharge of the proof, on the basis (i) that the appellant challenged the mandate of the solicitor advocate appearing to represent the trustee; (ii) that the appellant had identified a new witness; and (iii) that the appellant wished to amend his pleadings to take account of this witness, and to reflect the decision of the Inner House. In relation to the first part of this motion, it appears to have had its basis in the fact that the firm to which the trustee had belonged at the time of appointment had ceased to trade, and he was now a partner in another firm. It seems to have been suggested that this called into question the instructions of the solicitor advocate appearing for the trustee. The sheriff was satisfied that he could accept her assurances, as an officer of the court, that she did indeed have instructions. As to the “new witness” the appellant indicated in the written text supporting the motion that he was unaware of the identity of the witness and “whether he is entitled to be involved in this case or what his remit is and qualifications are”. The sheriff considered that the proof could not be discharged on such a speculative basis. Otherwise, the sheriff was not persuaded that a minute of amendment would focus the issues in controversy. It was already clear that allegations of fraud were the basis upon which the appellant sought recall of the sequestration, even if there was a lack of specification as to the nature of the fraud. Accordingly, this second motion was also refused in its entirety.
[5] Having refused a motion for leave to appeal against those decisions, since the appellant had not advanced any stateable argument upon which the exercise of his discretion could be challenged, the sheriff proceeded to hear the proof. Having done so, he concluded that there was no material before him which would entitle him to consider that it was appropriate to recall the sequestration. He therefore dismissed the petition, and found the appellant liable in expenses.
[6] The appellant’s case of fraud turned on a document produced by the appellant in connection with the appeal hearing before the Sheriff Principal. This was an investigation report by HPI, an independent register of finance agreements and other interests in connection with motor vehicles. The report contained an entry dated 9 March 1998 relating to a Mitsubishi vehicle which was the subject of the finance agreement guaranteed by the appellant. The entry showed that a company, First National Motor Finance, had registered a finance agreement relating to the vehicle, but there was no entry relating to Lombard North Central. The sheriff in the original proceedings which led to the sequestration had made a finding that there had been a relevant finance agreement, with Lombard North Central, relating to the vehicle. The appellant argued that this finding was demonstrably false given the terms of the HPI report. This was a fraud on the court and everything which followed thereafter was tainted by the fraud.
[7] In the proof in the original proceedings the sheriff had before him a copy of the relevant lease purchase agreement in the name of Lombard North Central, in respect of which no objection was stated nor any challenge mounted. In the appeal against that decision the appellant had maintained that the document was a forgery, whilst at the same time maintaining that the signature thereupon was his. In the course of evidence in the current proceedings, the solicitor for Lombard North Central, Mr Munro, suggested that the entry in the HPI report was a clerical error. In support of this he pointed out that the address given for First National Motor Finance was Lombard House. The two companies were at the time associated in some way. The suggestion that a clerical error had occurred was supported by the fact that the HPI report recorded that on March 2000 there had been an amendment showing Lombard North Central as having an interest in the vehicle. This explanation seemed to the sheriff to be significantly more likely than a fraud, the purpose of or benefit from which would be difficult to understand. He considered that the guarantee and indemnity signed by the appellant pointed overwhelmingly to Lombard North Central having transacted in relation to the vehicle. The appellant had also produced an email from HPI in which they indicated that, being dependent upon third parties for the information in their reports, they did not warrant the contents of the register.
[8] It was suggested to Mr Munro in cross examination that he had suppressed certain entries in a log, part of which was lodged in process, since those entries would have shown that the appellant had provided the guarantee at a later date than that claimed. Mr Munro denied this. He appeared surprised by the suggestion and explained that he had provided the entries which seemed relevant to the proof. The sheriff believed him.
[9] The appellant also advanced a new argument, relating to the fact that the HPI registration in relation to the agreement lapsed, with Lombard North Central taking no action to continue or maintain the registration. The appellant argued that by virtue of this lack of action Lombard North Central had surrendered their security, and thus the appellant was released from his guarantee. Leaving aside whether it was open to the appellant to advance such an argument at this late stage, the sheriff noted that the argument would not stand scrutiny. The interest which Lombard North Central held in the vehicle was as owner, not as a security holder. Registration with HPI did not create any security, it was merely a method by which Lombard North Central could protect their interest by making it known to the world.
[10] In the course of the proof the sheriff showed considerable indulgence towards the appellant as a party litigant, and towards his witness. Neither of them appeared to be able to distinguish between submissions and evidence, and it became impossible to proceed by means of the usual procedures for examination of witnesses. Most of the evidence of the appellant and his witness was entirely irrelevant, being concerned with matters which had taken place before the Inner House. The sheriff had to restrict questioning on this matter as being irrelevant.
[11] The grounds of appeal from the sheriff’s decision run to some 13 pages, and come nowhere near to meeting the requirements of RC 40.18. Although some grounds may reasonably be discerned, the document contains a great deal of narrative and much material which is irrelevant, as relating to matters which are not in issue in the present proceedings.
[12] Doing the best we can to distil from this document the essence of the grounds, they seem to be as follows: That although the interlocutor of 3 July 2013 did not so specify, the Inner House had indicated that they would have granted decree against Lombard North Central. The sheriff should have taken account of the whole terms of the court’s decision and recalled the sequestration. Furthermore, the appeal having been conceded without reservation the sheriff erred in proceeding with the proof. He should simply have recalled the sequestration. The same result should have followed from the fact that Lombard North Central, the petitioning creditor had not answered the petition for recall, the trustee having no locus to resist. By failing to resist the petition for recall, Lombard North Central required to be taken as admitting the fraud averred by the appellant. The title and interest of the trustee in sequestration was challenged, particularly that of Mr MacLennan; as was the mandate of the solicitor advocate appearing for the trustee. The sheriff’s decisions on the various motions made at the proof were also attacked, as was his assessment of the witnesses.
[13] At the outset of the appeal, the appellant sought permission to advance a fresh argument, based on material which he said had come to his notice after the procedural hearing in this case. This related to a further challenge to the title of the trustee, based on an argument that having granted a power of attorney in respect of sequestrations in which he was the trustee to a partner of Mr McLennan’s in March 2014, Mr Craig ceased to be trustee. Since Mr MacLennan was not sisted as trustee until November 2014 there had therefore been no competent opposition during a substantial part of the proceedings before the sheriff.
[14] We refused this motion. As we note below, it was clear from the papers that a trustee had been in place throughout. The argument which the appellant sought to advance was a new argument produced too late in the day, and of which no advance notice had been given.
[15] This did, however, cast light on the appellant’s 14th ground of appeal, which had been somewhat difficult to follow. It appears that the trustee, Mr Craig, whose firm had ceased trading, had made a business arrangement with a Mr Fraser, a partner of Mr MacLennan, under which he granted a power of attorney to Mr Fraser in respect of all insolvency business in which he was acting in any capacity. The court inquired about this procedure, but we were told that it commonly occurs in insolvency practice. In any event, regardless of any business proceedings between Mr Craig and Mr Fraser, the Accountant of Court authorised Mr Craig to resign by letter dated 14 August 2013, his resignation being effective only when a new trustee was appointed by the sheriff. Mr MacLennan was appointed on 19 March 2014. The position is thus that, for the purposes of these proceedings Mr Craig remained the trustee until his substitute, Mr MacLennan, was appointed, and remained liable as trustee until that date, whatever agreement had been reached between Mr Craig and Mr MacLennan. The authority under which Mr MacLennan acts is the authority of the sheriff. There has not accordingly been any period during which no trustee was in place. The matter is therefore incidental to any relevant issue in the case, the central point of which is whether the sheriff erred in refusing the petition for recall.
[16] The interlocutor of 3 July 2013 put into effect the opinion of the court of that date, delivered by Lord Mackay of Drumadoon. It is abundantly clear from that opinion that the sheriff was correct in his understanding that the appeal was allowed only to the limited extent of recalling the Sheriff Principal’s decision to order caution, and the results which had flowed from any failure to obtemper that interlocutor. The effect of the appeal, as the sheriff rightly noted, was to restore matters to the position immediately prior to the Sheriff Principal’s decision, namely that there was to be a proof before answer. The sheriff correctly interpreted the court’s interlocutor in full. The notion that the respondent conceded the earlier appeal, or that he has no locus to resist the petition, are entirely misguided and appear to result from a failure to understand the effect of the court’s decision of 3 July 2013. The suggestion that Lombard North Central, having failed to resist the petition for sequestration, must be taken to have admitted the fraud alleged is simply wrong in law. It remained at all times for the appellant to satisfy the court that sequestration should be recalled, and he failed to do so. In particular, it was for him to establish the grounds of fraud as averred by him, and he failed to do so. There was no basis upon which the sheriff could conclude either that the trustee had no title or interest, or that his agent’s mandate was in any way defective.
[17] During the course of the proof the sheriff had refused certain other motions made on behalf of the appellant, thus: a motion to delay commencement of the proof to allow additional preparation time – refused on the basis that the date of the hearing having been fixed several months ahead there had been ample time for preparation; motions to order the attendance of certain witnesses – refused because it was not obvious that the witnesses would have anything to say regarding the grounds for recall, and moreover that there was no reason why these individuals could not have been cited for proof in the usual way; a motion for leave to appeal from these latter motions – refused on the basis that it was inappropriate to grant leave during a proof hearing; and a motion to recuse himself – refused on the basis that there was no good reason for him to do so. We see no basis upon which any of these decisions may be challenged.
[18] The decision whether to recall an award of sequestration is one for the discretion of the sheriff. Decisions whether to allow discharge of a proof, to delay commencement, or to allow additional witnesses all equally fall within the ambit of the sheriff’s discretion. An appeal court will only interfere with an exercise of discretion where it is clear that the judge at first instance has taken account of some irrelevant matter, left out of account some relevant matter, or otherwise has clearly gone wrong. Equally, the assessment of evidence, and in particular the assessment of credibility and reliability, is essentially a matter for the first instance court with which an appeal court can interfere in only limited circumstances, none of which applies here. In all the circumstances we consider that there is no merit in the appeal, which must be refused.