WORK LEGAL E-LIMITED (in luquidation) AND CLAIRE MIDDLEBROOK, the liquidator thereof AGAINST DAVID CHARLES ALLEN
OUTER HOUSE, COURT OF SESSION
[2015] CSOH 12
CA134/14
OPINION OF LORD DOHERTY
In the cause
WORK LEGAL E-LIMITED (in liquidation) and
CLAIRE MIDDLEBROOK, the liquidator thereof
Pursuer;
against
DAVID CHARLES ALLEN
Defender:
Pursuer: Catto, Solicitor Advocate; HBJ Gateley
Defender: Logan; Campbell Smith LLP
10 February 2014
Introduction
[1] The pursuer is a company (“the company”) incorporated under the Companies Acts in England and Wales and having its registered office at 83 Baker Street, London. Claire Middlebrook is the liquidator of the company. At a general meeting of the company held on 26 July 2013 it was resolved that the company could not by reason of its liabilities continue its business and that it should be wound up by putting it into creditors voluntary liquidation. A statutory meeting of creditors in terms of s. 98 of the Insolvency Act 1986 took place on the same date. The defender has been the sole director and shareholder of the company since 23 November 2009.
[2] In this commercial action the pursuer seeks to recover from the defender £2,200,000 averred to have been paid by the company to the defender during the period between 18 May 2011and 19 August 2011, and £650,000 said to have been paid by the company to agents of the defender on 5 January 2011. The pursuer avers that the payments were gratuitous alienations in terms of s. 242 of the Insolvency Act 1986.
[3] The action was signetted on 2 July 2014. Service of the summons was effected on 9 July 2014 by messengers-at-arms delivering a service copy summons to the defender’s wife at Culter House, Coulter, Biggar. In Condescendence 1 the pursuer avers:
“The defender is David Charles Allen, residing at Culter House, Coulter, Biggar, ML12 6PZ. He has been resident in Scotland for more than three months prior to the raising of this action. He is domiciled there. This Court accordingly has jurisdiction.”
In Answer 1 of the defences the defender denies that he was resident in Culter House or elsewhere in Scotland during the said period. He denies that he was domiciled there, or that the court has jurisdiction. He avers that he and his wife separated in August 2013; that for a time therafter he lived in a separate wing of Culter House with his daughter; that he has not resided at Culter House “since at the latest 27 April 2014”; that he signed a tenancy agreement for a property in Dubai on 19 March 2014 since which time he had been resident in Dubai, albeit he resided at the Palace Hotel Dubai while the property was made ready for occupation by him; that he obtained a permanent visa permitting him to reside in the United Arab Emirates (“UAE”) in June 2014; that in the months prior to the raising of the action he returned to the UK when he required to do so in accordance with his duties as a director of the company but that he did not reside in Scotland or have a permanent address there; that he does not own any heritage in Scotland, has no material connection with Scotland, and is neither resident nor domiciled there; that he is no longer UK domiciled for tax purposes; and that the court does not have jurisdiction. The defender’s first plea-in-law is in the following terms:
“1. Ante Omnia, the defender not being resident within the jurisdiction of this Court and the Company being registered in England this Court has no jurisdiction and these proceedings should be dismissed.”
[4] On 11 and 12 November 2014 I heard a preliminary proof on the question of jurisdiction.
The evidence
[5] Signed witness statements had been lodged in advance of the proof and were
treated as the substance of each witness’ evidence-in-chief (in some cases there was also further limited oral examination-in-chief). The pursuer called six witnesses to give evidence (the liquidator, her colleague Donald Shanks, Mark Reilly (from HMRC), Mark McMurdo, Adam Armstrong and Robert Weir (all messengers-at arms). The defender gave evidence and evidence was also led on his behalf from his daughter, Emma Allen, and from James Hughes (a tax adviser). A good deal of the evidence was not contentious. I shall set out findings in relation to such matters first, before turning to more contentious matters.
[6] The defender is 61 years old. He was born in Watford. He was formerly a solicitor in England and Wales, but latterly he had interests in and was a director of several companies including the pursuer. His wife is Amanda Allen. They married in Edinburgh on 14 August 2011. Emma Allen was one of his children from a previous marriage.
[7] Culter House is a substantial Georgian country house with extensive grounds. The
defender acquired it in January 2011. It is registered in the Land Register for Scotland under two separate titles, the main part of the house being title LAN158581 and the south-east wing being LAN73418. Culter Place is a neighbouring dwelling house which is situated adjacent to Culter House and its grounds. In former times it was the stables for Culter House. It is registered in the Land Register under title LAN4398. After their marriage the defender and Amanda Allen lived in Culter House. It was their matrimonial home. When the defender acquired it he and his wife became pro indiviso proprietors of the main part of the house, but the defender was the sole proprietor of the south-east wing. In August 2013 the defender disponed to his wife his one-half pro indiviso of the main house. That disposition was registered in the Land Register on 20 August 2013 the consideration was noted as being “Love, Favour and Affection”. On 15 August 2013 the defender disponed to his wife a one-half pro indiviso share of the south-east wing, which disposition was registered in the Land Register on 20 August 2013 and the consideration was noted as being “Love, Favour and Affection”. On 7 January 2014 the defender disponed to his wife the remaining one-half pro indiviso share of the south-east wing, which disposition was registered in the Land Register on 27 January 2014 and the consideration was noted as being “Implementation of Agreement”. On 15 May 2013 the defender and his wife were registered in the Land Register as pro indiviso proprietors of Culter Place. In August 2013 the defender disponed his pro indiviso share to his wife, which disposition was registered in the Land Register on 20 August 2013 and the consideration was noted as being “Love, Favour and Affection”.
[8] A minute of agreement dated 30 October and 4 November 2013 (6/18 of process) between the defender and his wife narrated that they separated on about 26 August 2013 and that they wished to regulate financial and other matters between them with a view to divorce. In terms of clause one it was agreed that the defender would convey his whole right and title to Culter House to his wife. In terms of clause two the defender agreed to convey his whole right and title to Culter Place to his wife. The defender’s wife waived her rights to make any claim on specified assets of the defender. Each party waived his/her right to make claims in respect of the other’s pensions. The defender waived all claims relating to the furniture and plenishings at Culter House and Culter Place. In terms of clause ten it was agreed that no payment would be made by either party to the other in respect of personal aliment or periodical allowance in all time coming. Clause thirteen provided:
“Proceedings for divorce will be instituted by either party on the ground that the marriage has broken down irretrievably as evidenced by one year’s non cohabitation on or after 26th August 2014. Such action shall proceed as undefended provided no other order is sought in the said action which is at variance with this Agreement and provided that no award of expenses is sought. In the event of an action being raised on the grounds of one year’s separation on or after 26th August 2014 the other party hereby undertakes to consent to the said divorce action and to do all things or cause all things to be done which are necessary to signify said consent to the court so that decree of divorce may be granted.”
[9] By letter dated 28 March 2014 (6/8 of process) the solicitors for the liquidator wrote to the defender stating that she had identified that the company had made payments totalling £2,850,000 to, or on behalf of, the defender; and that it did not appear to her that there had been any proper basis for those payments being made. She indicated that unless the £2,850,000 was paid to her by 17 April 2014 a court action would be raised against him. The letter concluded:
“This letter is written in terms of the Pre-Action Protocol as set out in paragraph 11 of the Court of Session Practice Note 6 of 2004.”
The letter was sent to the defender at Culter House. That letter was replied to (6/9 of process) in the following terms:
“11th April 2014
….
Dear Sirs,
Work Legal-E Limited (in liquidation) (“the Company”)
I have received your letter re above, which I have discussed with my Tax Consultant, Mr Alan Thomson, of Thomson Consultancy, and have been through the monetary lodgements and explanations.
I have had to travel and my return was delayed, so I will be able to produce the necessary documentation within the next 21 days, which I hope you will find acceptable.
Yours sincerely
For and on behalf of
David Allen
Culter House
Coulter
Biggar….”
[10] On 24 April 2014 the defender’s solicitor emailed the pursuer’s solicitor requesting that his interest on behalf of the defender be noted and asking that all correspondence be directed to him. At 12 noon on 9 July 2014 the pursuer’s solicitors emailed the defender’s solicitor attaching the summons and indicating that they were arranging for service on the defender directly. By email of 18.25 that day (7/11 of process) the defender’s solicitor replied:
“…I believe Henderson Loggie are fully aware that the Defender does not reside at Coulter [sic] House…”
The pursuer’s case
Claire Middlebrook
[11] Ms Middlebrook is a partner in Henderson Loggie and is an insolvency practitioner. She indicated that in addition to being liquidator of the pursuer she was liquidator of six other companies of which the defender was a director (including Aberfoyle Medicare Limited (“Aberfoyle”)). Five of those other companies were incorporated in England and Wales. The pursuer and those five companies had traded from an office at 101 George Street, Edinburgh. The sixth company was registered in Scotland but had not traded. Ms Middlebrook had had regular contact with the defender between May 2013 and October/November 2013 (when she started maternity leave). She had returned to work in April 2014. In her absence a colleague, Donald Shanks, had communicated with the defender. Her contact with the defender had been face-to-face or by email or when he telephoned her. Correspondence with the defender had not been by post but by email. The face-to-face meetings had taken place at her office or at the office at 101 George Street. The company had stopped trading there when it had gone into liquidation. During her contact with the defender he had not indicated that he had ceased to reside at Culter House. She had heard rumours of the defender’s marital difficulties and she might have seen the minute of agreement (6/18 of process) in late 2013. To the best of her knowledge by early 2014 none of the companies was trading. To the best of her knowledge the defender did not own any heritable property in Scotland.
Donald Shanks
[12] Mr Shanks is employed by Henderson Loggie as a senior manager. He spoke to having dealings with the defender between May 2013 and about June 2014. He had last met him face to face towards the end of 2013. Thereafter he had communicated with him by email and telephone.
[13] In about March 2014 the defender had had discussions with Mr Shanks about putting Aberfoyle into creditors voluntary liquidation. The defender had instructed him by email on 27 May 2014 to proceed with that liquidation, and Mr Shanks took the required steps to hold statutory meetings of members and creditors on 1 July 2014. However, prior to the proposed meetings taking place HMRC had taken steps to have Aberfoyle wound up.
[14] In paragraph 5 of his witness statement Mr Shanks stated:
“My view is that the defender wished to disassociate himself from all of the companies with regards to his Code of Practice 9 Investigation. He did this by dissolving the companies, liquidating them or transferring them to his daughter.”
Mr Shanks indicated that the defender had transferred his interest in Technical-E Limited to his daughter, and that she was a director of Watson Hastings Limited. In cross‑examination Mr Shanks was asked whether by June 2014 any company the defender had an interest in was still trading. Mr Shanks said he was unsure. He thought it possible that Health-E Limited might have been.
[15] The defender had never indicated to Mr Shanks that he no longer resided at Culter House. Mr Shanks had not known where the defender was residing - he had simply assumed he was still staying at Culter House.
Mark Reilly
[16] Mr Reilly is a senior officer with HMRC. He is a special investigator dealing with tax fraud investigations - Code of Practice 9 Investigations. There is a Code of Practice 9 Investigation relating to the defender’s affairs - which includes several companies. On 25 June 2014 James Hughes had emailed him (6/42 of process) with a scanned attachment of a Form 64-8 (6/33 of process). The form had been signed by the defender and dated 25 June 2014. The address provided on the form for the defender was Culter House. Mr Reilly did not deal with residence issues - he had no expertise on that subject. So far as he understood when a person left the UK “the easiest way” for them to inform HMRC was to complete a Form P85. The defender had not done that. Accordingly, as far as HMRC was concerned the defender remained resident in the UK. In cross-examination it was suggested to Mr Reilly that the defender said he had been advised that he could simply indicate when completing his tax return that he was not resident in the UK. Mr Reilly’s response was to the effect that residence was not his area of expertise.
Mark McMurdo
[17] Mr McMurdo spoke to serving the summons at Culter House on 9 July 2014. Prior to doing so he had stopped at two properties about half a mile from the House and he had asked residents there, Gillian Jones and her sister, Lorna Doig, whether the defender lived at Culter House. They had confirmed that as far as they were aware he did. Culter House is not visible from their properties. Mr McMurdo had then gone to Culter House to try to effect service. A male had answered the intercom. He had said that the defender did not live there. He had been quite abusive. Mr McMurdo had then spoken to Andrew Gamba. Mr and Mrs Gamba’s home is situated near the A702 road at the entrance to a long driveway leading to Culter House. Culter House is visible from the driveway outside the Gambas’ home, but Culter House’s garage area is not visible from that vantage point. Mr Gamba had confirmed to Mr McMurdo that the defender lived at Culter House. Mr McMurdo had returned to Culter House. On this occasion the defender’s wife had come out to meet him. She had been distressed. She had told him that the defender did not live there and that he had not been there for some time.
[18] On 9 September 2014 Mr McMurdo had returned to the Gambas’ home and had spoken to Mrs Gamba. Mr Gamba had been more confident of having seen the defender’s car than he had been of seeing the defender, but Mrs Gamba had confirmed that she had seen the defender at Culter House in the early part of July 2014; and that to the best of her knowledge he was residing there at that time.
Adam Armstrong
[19] Mr Armstrong spoke to visiting Mrs Gamba on 22 July 2014 and 9 September 2014. On the first visit she had indicated that she had last seen the defender at the house a week or two before. On 9 September 2014 she had confirmed that information.
Robert Weir
[20] Mr Weir spoke to attending at Culter Ales Lodge on 17 July 2014. The male occupant had indicated to him that to the best of his knowledge the defender resided at Culter House.
The defender’s case
The defender
[21] The defender indicated that he and his wife had had matrimonial difficulties. As a result of their difficulties they had separated in August 2013, but that he had continued to live in a separate self-contained part of Culter House (the east wing) until about November 2013. At that time the separation was formalised and he had moved in to the neighbouring property at Culter Place where his daughter Emma was living. He had spent Christmas 2013 with his mother in Watford. From the beginning of 2014 he had rarely been at Culter Place. He had transferred his interests in Culter House and Culter Place to his wife. He had agreed with his wife that he would do that. Some of the transfers had been before the separation and had been with a view to ameliorating the marital difficulties. The disposition to his wife of 7 January 2014 (6/20 of process) had been granted in implement of his obligations under the minute of agreement. Notwithstanding what was said in the testing clause, it had been sent to him in Dubai and he had signed it there.
[22] The defender had not worked since early 2013. He had been looking for an opportunity to get back into work. Colin McGovern, whom he knew, had a Glasgow based company, Carnegie Import and Export, and was seeking to develop business for medical supplies in the Gulf. The defender had started looking into the possibility. He had been to Dubai on a number of occasions and had friends and contacts there. He had visited Dubai in September 2013 to make initial inquiries. He had started to “firm this up in more detail” in early 2014 and had visited Dubai several times to progress matters. During January and February 2014 he looked for somewhere to live in Dubai. On 18 February 2014 he paid a holding deposit of 10,000 dirhams for a villa. On the same day he found business premises at Oryx World, Empire Heights, Podium Floor, Business Bay, Dubai. On 20 March 2014 he signed a tenancy contract (dated 19 March 2014) for the villa (7/12 of process). The period of let was for one year from 3 May 2014 to 2 May 2015. The rent was 370,000 dirhams. He paid six months rent - approximately £30,000 - in advance. In fact, because the landlord was decorating the villa he continued to live in the hotel operated by the landlord until 18 June 2014 (7/6 and 7/7 of process). He had retained a formation agent in Dubai. A Dubai company, Pro Optimum Medical Supplies LLC (“Pro Optimum”), was formed and it obtained a trade licence. Under the law of the UAE a company incorporated there must have an Emirati national as the majority shareholder. The defender held a 49% stake and the Emirati national a 51% stake. The Emirati’s first name was Jamal; his second name was very long and the defender could not recall it in the witness box. Jamal took no active part in the running of Pro Optimum.
[23] On 8 April 2014, after Pro Optimum had been incorporated, the defender applied to the UAE authorities for a residence visa. He could not have done that prior to Pro Optimum being set up. His residence visa had been issued on 16 June 2014 (7/1 of process). The visa was valid for three years, until 15 June 2017. It confirmed that he was a partner in, and that his sponsor was, Pro Optimum. In terms of the residence visa he was not permitted to be outwith the UAE for more than a total of six months in any year. Prior to obtaining his residence visa the defender had obtained visitor visas valid for stays of up to 30 days each visit.
[24] In 2014, up until 29 October, the periods which the defender spent in Dubai were 5‑25 January, 17-20 February, 10-25 March, 2-15 April, 27 April to 16 May, 5-18 June, 21 July - 10 September, and 15 September - 29 October. In the defender’s view, by April 2014 he was resident in Dubai. He had set up Pro Optimum; he had a lease of the villa; and he had applied for his residence visa. From that time onwards he was resident and intended to remain in Dubai developing the business of Pro Optimum. His recollection was that he had mentioned to Mr Shanks that he had moved to Dubai. He had left some clothes at Culter Place in case he needed them on the rare occasions he was in Scotland. In early 2014 his daughter had had to move out of Culter Place. She had moved to rented property in Symington. He had never stayed there (though a few of his suits had been kept there for a time). He had a girlfriend, Peggy, who lived in Dubai but who had business interests in Dublin. He had travelled to Dublin and they had arranged to meet there. On his visits to the UK he had visited his mother and other family in England. He had stayed with them and in hotels. He had returned to Scotland on a number of occasions in connection with his duties as a director of the pursuer and the other companies which were in liquidation; in connection with Pro Optimum; to see professional advisers; and to see solicitors after the present action was raised. When in Scotland he had stayed with a friend and former employee Alan Marchini at Mr Marchini’s home (about half a mile distant from Culter House on the opposite side of the A702), or in hotels. On one occasion towards the end of May 2014 he had met some professional advisers at the Dakota Hotel, South Queensferry. He had returned to Culter House on only two occasions since his departure from Culter Place. That had been at the beginning of July 2014 or a little bit earlier. He had picked up some tack on one occasion. On another occasion, at the request of his wife, he had collected a horse which had to be taken to be put down. On these occasions he would have been staying with Mr Marchini. When the summons had been served on 9 July 2014 he had been in Watford with his mother.
[25] In cross-examination it was put to the defender that Pro Optimum was a sham - that it had been created for the purposes of the present action. The defender stated that was not so - Pro Optimum had been set up, and the residence visa had been applied for and obtained, before the action was raised. At the time Pro Optimum had been set up, at the time he had arranged to lease the villa, and when he had applied for his residence visa, he had no idea that the present action was to be raised against him. The defender indicated that the certificate of incorporation and other documentation relating to Pro Optimum (including the documentation relating to the business premises) were in Dubai. The preliminary proof had been fixed at very short notice, and the defender had been asked to return to the UK as soon as possible. He had not been asked to bring Pro Optimum documentation with him. A printed copy of a web page was put to the defender by Mr Catto during cross-examination. Mr Catto suggested that it was Pro Optimum’s webpage and that a link to it could be found on his wife’s personal home page. The defender indicated that Pro Optimum did not have a website and that he had never seen the document which Mr Catto put before him. The defender accepted that in the letter dated 14 April 2014 his address had been given as Culter House. He had been in Dubai when it was written. It had been dictated by him to his daughter Emma, who had signed it. He could not recollect if he had dictated the address or not. He had not had any permanent address for correspondence at that time. He indicated that he and his wife still spoke and were on reasonable terms. On 24 October 2014 she had transferred air miles to him when he had asked her to. He still wore his wedding ring. He had no immediate plans to divorce. One of the reasons for the trip to the UK beginning on 18 June 2014 was that there were suppliers in the UK that he had wanted to see. It was early days for Pro Optimum. Plenty of samples had gone out and there were agreements with suppliers in the UK, but no sales had been achieved yet. It was put to the defender that on 25 June 2014 he had signed an HMRC Form 64-8 on which his address had been given as Culter House. The defender stated that he had signed the form in blank and his agent had filled in the address. In response to Mr Catto’s observation that he had not taken steps to become registered with HMRC as non-UK domiciled, the defender indicated that his understanding had been that all he required to do was to declare his position when making his self-assessment tax return. He had previously worked in Russia for five years and that was what he had done then. The defender agreed that he had previously been a solicitor in England and Wales but had been struck off in 2003.
James Hughes
[26] Mr Hughes is a tax adviser specialising in VAT. The defender was referred to him by another adviser. He met the defender on 24 June 2014 in Edinburgh. He got the defender to sign the Form 64-8 authorising him to act as the defender’s agent in dealings with HMRC. When they met the defender had said he was resident in Dubai. When the defender had signed the Form the address details had not been filled in. Mr Hughes had done that later. Mr Hughes had used Culter House as the defender’s address because that was the address on the HMRC Penalty Review letter dated 28 April 2014. He had assumed from that that Culter House was owned by the defender’s family and that correspondence directed there would reach him. He had discussed using that address with Mr Reilly.
Emma Louise Allen
[27] Miss Allen lived at Culter Place from about May or June 2013. She is managing director of Watson Hastings Limited who carry on business from 101 George Street, Edinburgh. She confirmed that the defender and his wife separated in the summer of 2013; that after the separation the defender spent less and less time in the UK; that he began to look to set up a business in the Gulf States; that she believed he got an opportunity to sell medical supplies there; that he had stayed at Culter Place for short periods; that from early 2014 she saw very little of him because he was either in the Gulf or away elsewhere; that he left a few clothes at Culter Place in case he needed to wear them on trips back; and that she had moved from Culter Place to Symington on 4 April 2014. Since then the defender had never visited her in Symington, but she had seen him on about two occasions elsewhere in Scotland.
Submissions for the pursuer
[28] Mr Catto submitted that the court had jurisdiction. The defender was domiciled in Scotland. He had been resident in Scotland at the time the action was raised and for the three months before that. Accordingly, the presumption was that he had a substantial connection with Scotland. In any event, the nature and the circumstances of his residence indicated that he had a substantial connection with Scotland (Civil Jurisdiction and Judgments Act 1982 (“the 1982 Act”), s. 20 and Sched. 8; s. 41(3), (6)). None of the grounds of special jurisdiction in Sched. 8 were relied upon.
[29] Mr Catto’s primary position was that the defender’s only place of residence at the material times was in Scotland, and that he was not resident in Dubai. His secondary position was that even if the defender had been resident in Dubai, he had also continued to be resident in Scotland. Reference was made to Levene v Commissioners of Inland Revenue [1926] AC 217, per Viscount Cave LC at pages 222-3; Fox v Stirk [1970] 2 QB 463, per Lord Denning MR at page 475E-F; Shah v Barnet London Borough Council [1983] 2 AC 309 per Lord Scarman at pages 342, 344; Daniel v Foster 1989 SLT (Sh Ct) 90 per Sheriff Palmer at page 92; OJSC Oil Company Yugraneft (in liquidation) v Abramovich and others [2008] EWHC 2613 (Comm) per Christopher Clarke J at paragraphs 441-487; Anton and Beaumont, Private International Law (3rd ed.), paragraphs 8.184-8.188.
[30] The defender’s stays in Dubai prior to the service of the summons did not involve him residing there. His villa tenancy did not commence until 3 May 2014 (and in fact he remained in hotel accommodation until after service of the summons). He used 30 day visitor visas. He did not obtain a residence visa until 16 June 2014. He could not be regarded as being employed in business in Dubai before then. The only evidence confirming the existence of Pro Optimum was the residence visa. No other documentation had been produced. That was surprising, to say the least. It suggested that if Pro Optimum existed at all it was simply a sham to enable the defender to get a residence visa, and that in reality the defender had no employment in Dubai. There could be no question of settled residence before that date because the character of his presence was as a visitor rather than as a resident; and in fact two days later he had returned to the UK until 21 July 2014. The defender could not have been resident in Dubai before, at the earliest, 21 July 2014. As a matter of law a person could not be resident unless and until the law of the host country permitted him to reside there.
[31] Even if, contrary to Mr Catto’s primary submission, the defender was resident in Dubai for all or any part of the three month period prior to service of the summons, he also continued to reside in Scotland at Culter House at the time the action was raised. There was no doubt at all that he had continued to reside at Culter House/Culter Place until April 2014. Thereafter he had not informed those he had dealings with that he had ceased to reside there and that he was residing in Dubai. Reliance was placed on the evidence of the messengers-at-arms and their reports of what neighbours had told them. The defender’s wife had remained in Culter House and it was plain he had retained a substantial connection with it. On his own account the defender remained on good terms with his wife (as was demonstrated, e.g., by her transferring air miles to him when he requested her to). He had been at Culter House on a least two occasions in the weeks leading up to service of the summons. His daughter Emma lived in the locality, and he had a friend nearby – Mr Marchini - whom he visited. Culter House was his settled and usual abode in Scotland. He had given it as his address in correspondence - in the letter of 11 April 2014 and in the Form 64-8 of 25 June 2014. In the email to Mr Shanks of 10 June 2014 (6/31 of process) he had advised that he was “currently out of the UK”. Other considerations which required his presence in Scotland were (i) his duties as a company director of the pursuers and Aberfoyle; (ii) meetings with professionals and others in connection with the companies and liquidations, the claim made against him by the liquidator, his tax affairs, and (if his account was accepted) his new business. He had not submitted a Form P85 declaring that he was non-UK domiciled. The defender was not a credible and reliable witness. He had been struck off as a solicitor. He was the subject of a Code of Practice 9 Investigation. Mr Catto questioned the genuineness of the defender’s separation from his wife. The defender still wore his wedding ring. He and his wife had not divorced. The reality was that the separation and the transfer of the defender’s interests in Culter House and Culter Place had been carried out because of the Investigation and the present claim. That would explain why the defender had disponed interests to his wife before the date of separation which had been narrated in the minute of agreement, and before the minute of agreement had been executed. The defender’s evidence as to where he had stayed during those parts of the three month period when he had not been in Dubai was vague, uncorroborated, and unsupported by any documentation. If he had spent periods in hotels that could easily have been vouched. Similarly, if he had been with relatives evidence could have been led from them confirming that. It was notable that while the defender’s wife and Mr Marchini had been on the defender’s list of witnesses neither had been called to give evidence. The defender had had a settled abode in Scotland for a number of years. On the evidence the defender had not ceased to reside in Scotland before the action was raised.
Submissions for the defender
[32] Where, as here, jurisdiction was challenged, the onus was on the pursuer to establish on the balance of probabilities that the court did have jurisdiction. It had failed to do so.
[33] The fact of the matter was that by May 2014 the defender was resident in Dubai. That was where he was living and where he intended to continue to live. He had a yearlong lease of a villa. He had set up Pro Optimum. He had submitted his application for a residence visa. He was spending more time there than anywhere else. The arrangements for the villa, the setting up of Pro Optimum, and the submission of the application for a residence visa had all taken place before the defender was made aware that there was to be a claim against him. The suggestion that it was all a sham to elide the court’s jurisdiction did not stand up to scrutiny. The residence visa was sufficient confirmation and support of the establishment of Pro Optimum and of the defender’s residence status.
[34] There was no adequate evidence of the defender residing in Culter House when the action was raised or in the three months before that. Mr Logan cautioned against attaching weight to hearsay evidence given by the messengers-at-arms. He made reference to Sanderson v McManus 1997 SC (HL) 55, per Lord Hope of Craighead at p. 61B. What the messengers-at-arms recounted was said by Gillian Jones, Lorna Doig and the occupant of Culter Ales Lodge was of no real value. The messengers-at-arms’ evidence as to what was said by Mrs Gamba was less vague, but all that it amounted to was that she recalled seeing the defender at Culter House on an occasion in about early July 2014. The letter of 14 April 2014 and the Form 64-8 of 25 June 2014 gave the defender’s address at Culter House. As for the latter, it was clear on the evidence that it had been Mr Hughes who had inserted the address - notwithstanding that the defender had told him he lived in Dubai. As to the former, it was unclear on the evidence whether the defender had asked that the address be used or whether the decision to use it had been his daughter’s. Either way, the letter had been written at a time before the defender connections with Dubai became as strong as they ultimately did.
[35] Nor was there any satisfactory basis for concluding that the defender was resident in Scotland when the action was raised or in the three months before that. On the evidence he returned on a number of occasions in connection with his duties as a director; to see professional advisers; in connection with Pro Optimum; and in order to see family and friends. He owned no heritage in Scotland and did not have a settled or usual place of abode here.
[36] The pursuer would have jurisdiction to sue the defender in England and Wales. The summary remedy under s.212 (3) of the Insolvency Act 1986 would be available to it there.
Decision and reasons
[37] Section 41(3) and (5) of the 1982 Act provide:
“41.— Domicile of individuals.
…
(3) Subject to subsection (5), an individual is domiciled in a particular part of the United Kingdom if and only if—
(a) he is resident in that part; and
(b) the nature and circumstances of his residence indicate that he has a substantial connection with that part.
…
(6) In the case of an individual who—
(a) is resident in the United Kingdom, or in a particular part of the United Kingdom; and
(b) has been so resident for the last three months or more,
the requirements of subsection (2)(b) or, as the case may be, subsection (3)(b) shall be presumed to be fulfilled unless the contrary is proved.
…”
The first question is whether the pursuer has established that the defender was resident in Scotland when the action was raised. The onus of proving that matter is on the pursuer. If it discharges that onus it then also has to demonstrate that the nature and circumstances of the defender’s residence indicate that he had a substantial connection with Scotland at the relevant date. In relation to the latter requirement if the pursuer discharges the onus upon it of establishing that the defender has been resident in Scotland for three months before the action was raised the onus would then be upon the defender to prove that the requirements of subsection 2 (b) are not fulfilled.
[38] There was no significant disagreement between the parties as to the law relating to residence. Rather, the dispute was as to the facts, and as to the application of the law to those facts.
[39] I deal first with the credibility and reliability of the pursuer’s witnesses. Subject to my observations below, I found each of them to be generally credible and reliable. Each appeared to me to be doing his or her best to assist the court.
[40] While there was evidence that the defender is the subject of a Code of Practice 9 Investigation, and that in 2003 he was struck off the roll of solicitors in England and Wales, the circumstances of the Investigation and the circumstances of the striking off were not explored at the proof. The bare facts that an Investigation is current, and that the defender was struck off in 2003 (for reasons which were not gone into), do not assist me to any material extent in my approach to the defender’s evidence.
[41] Some parts of the defender’s evidence were unsatisfactory. In large part the transfer of his heritable property to his wife pre-dated the date of separation narrated in the minute of agreement. I found the defender’s explanation for that implausible. I think it more likely that, at least in relation to some of the transfers, he was pursuing a deliberate policy of divestment of assets for reasons unrelated to marital difficulties or separation planning. The absence of vouching of Pro Optimum’s incorporation, business premises, and business dealings was surprising: the defender’s explanation in that regard was unconvincing. His evidence as to his whereabouts when he was in the UK was largely lacking in detail. To a considerable extent it was also unsupported by the oral testimony of other witnesses or by documentary evidence. Notwithstanding these reservations there is no escaping the fact that significant parts of the defender’s evidence are confirmed or supported by other evidence (which I accept). I accept those parts of the defender’s evidence.
[42] Emma Allen’s evidence confirms the defender’s account of his separation from his wife, and it provides some support for his explanation of his activities thereafter. Of course, Miss Allen’s relationship with the defender, and her involvement in businesses formerly carried on by him, are reasons for treating her evidence with some caution. But she appeared to me to be a straightforward witness doing her best to tell the truth; and, significantly, the essentials of her account were not challenged in cross-examination. Mr Catto did not make any submissions which were specifically directed to persuade me that any of her evidence was incredible or unreliable. In those circumstances I proceed on the basis that she is a credible witness and that I can rely upon her evidence on each of the material matters to which she spoke.
[43] I accept the defender’s evidence as to the periods he spent in Dubai. This aspect
of his evidence was not challenged and, in the main, it was vouched by other evidence. For much the same reasons I also accept his evidence in relation to his search for, and securing the let of, a villa there; and that on 16 June 2014 he was granted a three year residence visa in relation to which the business sponsor was Pro Optimum.
[44] During cross-examination of the defender Mr Catto suggested to him that the separation from his wife was a sham; and that Pro Optimum did not exist - it was “a sham for the purposes of this action”. When it came to submissions Mr Catto’s principal submission in relation to Pro Optimum was that on the evidence it did not exist; but he also advanced a secondary submission that if it did exist its only purpose was to sponsor the defender’s visa application. This secondary position was not put to the defender in cross-examination. Mr Catto also sought to make something of the copy web page he had put to the defender: but the only evidence before me in relation to it was that given by the defender. The copy web page was not lodged; and there was no other evidence which established its existence, or what it was, or any connection it might have with Pro Optimum, the defender or his wife.
[45] I accept the evidence of the defender and Miss Allen that the defender and his wife have been separated since about August 2013. I am also satisfied that the separation was not devised for the purposes of defending this action. The separation and the minute of agreement pre-date the pursuer’s intimation of claim by several months. Standing the terms of the defender’s residence visa I also accept his evidence that Pro Optimum does exist as a company. The UAE authorities were satisfied as to that, and I am not persuaded on the evidence that I should decide otherwise.
[46] I do not attach any significant weight to what Mr Reilly said about the defender’s residence. Quite properly, he made it clear that residence was not a matter within his expertise. He understood that the relevant department of HMRC considered the defender to be resident in the UK, but he was not in a position to set out the factual basis or reasoning which formed the foundation for that view. Further, I do not regard the fact that the defender has not submitted a Form P85 to HMRC as being of any significance. A Form P85 enables a taxpayer to claim tax relief or repayment of tax where he is leaving the UK to work abroad. A taxpayer is not obliged to complete a P85 when he goes to live abroad (indeed the form specifically directs that the taxpayer should not do so if he has completed or requires to complete a self assessment tax return for the tax year that he leaves).
[47] As at the date of service of the summons the defender had spent very substantial periods of time in Dubai in the previous months and he had made arrangements to continue to do so. He had let a villa for a year at a significant rent. He had friends and contacts there. He neither owned nor let a home elsewhere. He had applied for, and obtained, a residence visa valid for three years. Before that he had obtained successive visitor visas. At no time was his presence in the UAE illegal. (Even if it had been, it would not fall to be ignored in determining whether he was resident there: Mark v Mark [2006] 1 AC 98). On the basis of these facts I am in no real doubt that the defender had a settled and usual abode in Dubai when the action was raised.
[48] If, as the defender maintains, Pro Optimum was an active company for which he worked, his connection with Dubai would have been be even stronger. But in the circumstances of this case - where there is no evidence the defender was employed or carrying on business anywhere else at the material time - I do not regard the issue whether he was in fact actively engaged in business in Dubai as being critical to the conclusion that he was resident there. Had it been critical, because of the lack of adequate confirmation or support for this aspect of his testimony, I would not have been prepared to hold it established that he was actively so engaged.
[49] As both parties recognised, the fact that the defender was resident in Dubai at the relevant time does not mean that he could not also have been resident in Scotland (see e.g. Fox v Stirk, supra, per Lord Denning MR at page 475E-F; Daniel v Foster, supra, per Sheriff Palmer at page 92). I turn then to the evidence bearing on residence in Scotland.
[50] There was unchallenged evidence from Emma Allen, which I accept, that she left Culter Place on 4 April 2014. Up to that date it could be argued that the defender had had a settled or usual abode available to him at Culter Place when he returned to Scotland. Was Culter House a settled or usual abode for him after that date?
[51] There is no direct evidence that the defender spent even a single night at Culter House during the three months prior to the action being raised. Indeed, the only witness who gave direct evidence of the defender having been at Culter House at any time during the relevant period was the defender himself. His evidence as to the circumstances of his two visits was not indicative of him residing there.
[52] Apart from that evidence of the defender, Mr Catto relied largely upon hearsay evidence and circumstantial evidence to support his contention that the defender resided at Culter House. The hearsay evidence comprised the messengers-at-arms’ accounts of what was said to them by Gillian Jones and Lorna Doig, by the unidentified occupant of Culter Ales Lodge, and by Mr and Mrs Gamba. The hearsay evidence of what Ms Jones, Ms Doig and the unidentified occupant of Culter Ales Lodge had to say is so vague as to be of no real probative value. The hearsay evidence of what Mr and Mrs Gamba said is less vague - but it indicates no more than that the defender was seen in the precincts of Culter House on one occasion at about the beginning of July 2014. The main pieces of circumstantial evidence relied upon by the pursuer were the letter of 14 April 2014 and the Form 64-8 of 25 April 2014. In both documents the defender’s address was given as Culter House. However, standing Mr Hughes’ evidence as to the circumstances in which the address came to be written by him, its inclusion on the Form 64-8 is not of any great assistance to the pursuer. As for the letter, even if the address was dictated by the defender, his use of it as a correspondence address in April 2014 falls well short of showing that he resided there on that date (still less that he did so when the action was raised).
[53] I recognise that with circumstantial evidence adminicles of evidence which are individually of little probative weight might, when taken together with other evidence, be sufficiently compelling to provide proof of a necessary fact or necessary facts. In my opinion this is not such a case. Here, taking the evidence as a whole, it does not establish that the defender was resident at Culter House when the action was raised; or that he was resident there during the three month period which preceded that date.
[54] I now consider whether, even if the defender was not residing in Culter House, he was nonetheless resident in Scotland (i) at the time the action was raised; (ii) during the three month period prior thereto. In addition to the evidence already discussed, the pursuer prays in aid that the defender spent time in Scotland in connection with his duties as a director of the companies which were in liquidation and Aberfoyle (which he was taking steps to place in liquidation); that he met lawyers, accountants and tax advisers; that (on his account) he was engaged on business for Pro Optimum; and that he visited family and friends.
[55] It is clear that the defender was not employed in Scotland during the three months before the action was raised, but that he did have personal and business reasons which caused him to return here on a number of occasions. However, in my view he did not have a settled or usual abode in Scotland. His presence here lacked the degree of permanence or continuity needed for it to amount to residence.
[56] It follows that the defender was not resident in Scotland when the action was raised. The requirement of s. 41(3)(a) of the 1982 Act has not been met. The pursuer has failed to prove that the defender was domiciled in Scotland.
[57] Finally, Mr Logan made submissions directed to persuading me that the High Court in England and Wales would have jurisdiction to grant the pursuer suitable redress by virtue of the power conferred on it (as the court having power to wind up the company) by s.212 of the Insolvency Act 2006. However, since the availability or unavailability to the pursuer of that remedy is not relevant to the issue which I require to decide, it is not appropriate that I make any observations on that matter.
Disposal
[58] I shall sustain the defender’s first plea-in-law and dismiss the action. I shall reserve meantime all questions of expenses.