Young, Re Petition for Sequestrations of the Estates of Alison Janet Campbell [2007] ScotCS CSOH

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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Young, Re Petition for Sequestrations of the Estates of Alison Janet Campbell [2007] ScotCS CSOH_194 (07 December 2007) URL: http://www.bailii.org/scot/cases/ScotCS/2007/CSOH_194.html Cite as: [2007] ScotCS CSOH_194, [2007] CSOH 194

OUTER HOUSE, COURT OF SESSION

[2007] CSOH 194

P3181/06

OPINION OF LADY PATON

in the petition of

WILLIAM LEITH YOUNG

Petitioner;

for

sequestration of the estates of Alison Janet Campbell, residing at Leanaig Cottage, Conon Bridge, Ross-shire, IV7 8DQ

___________

Petitioner: Dalgleish, Advocate; Semple Fraser, Solicitors

Respondent: Party

7 December 2007

Introduction

[1] In early 2005, Alison Campbell ("the respondent") found herself in financial difficulties. Her husband had been sequestrated in June 2004, and her salary as a teacher was insufficient to meet all their debts in addition to maintaining themselves, their six children, and their jointly-owned home, Leanaig Cottage.

[2 ] On 1 February 2005, the respondent granted a Trust Deed for creditors (6/2). The deed provided inter alia:

" ... Declaring that any income of whatsoever nature received by me during the said period of three years, other than income arising from estates which are vested in my Trustee, shall vest in me but my Trustee shall be entitled to receive out of such income vested in me a contribution to be fixed, failing agreement between my Trustee and me, by the Court, comprising the amount by which such income is in excess of a suitable amount to allow for my aliment and my relevant obligations (within the meaning of Section 32(3) of the Bankruptcy (Scotland) Act 1985) ...

And, in the event that my Trustee shall consider it desirable to present a petition for the sequestration of my Estates, I consent to the appointment of an Interim Trustee under section 2 of the Bankruptcy (Scotland) Act 1985 prior to sequestration being awarded."

[3 ] In a Statement of Undertakings dated 28 January 2005 (6/29), the respondent confirmed inter alia the following:

"4. I shall immediately inform the trustee of any change of address or change in my financial circumstances during the period of the trust deed ...

8. I understand that a trust deed normally lasts for three years. I understand that my trustee may petition for my sequestration if I fail to co-operate or if he considers that it is in the best interests of the creditors. I understand that any assets which existed at the date of signing the trust deed or which are acquired by me in the period of the trust deed continue to vest in my trustee notwithstanding any discharge from the trust deed."

[4 ] The trustee appointed under the Trust Deed was a chartered accountant with an office in Glasgow, Kenneth Le May. However Mr. Le May was subsequently replaced at a creditors' meeting on 14 March 2006 (6/5). The creditors represented at that meeting included:

Gordonstoun School
The Bank of Scotland
Highland Council
Loretto School.

All the creditors represented at the meeting agreed that William Leith Young, a chartered accountant based in Nairn ("the petitioner") should be appointed as trustee under the Trust Deed in place of Mr. Le May.

[5 ] By recorded delivery letter dated 16 May 2006 (7/21), the petitioner advised the respondent that he had been appointed as her trustee in place of Mr. Le May. He further advised inter alia that:

"I am aware that the Trust Deed you granted is of a voluntary nature which requires that you fairly give up your estate and it also requires that you co-operate fully with the trustee. If you fail to do so, the trustee has the authority to petition the court for your sequestration ..."

[6 ] On 22 December 2006, the petitioner lodged the present petition, seeking the respondent's sequestration. The petition is based on sections 5 and 12 of the Bankruptcy (Scotland) Act 1985, as amended.

Sections 5 and 12 of the Bankruptcy (Scotland) Act 1985

[7 ] Section 5 of the Bankruptcy (Scotland) Act 1985 as amended provides inter alia:

"(2) The sequestration of the estate of a living debtor shall be on the petition of -

... (c) the trustee acting under a trust deed if, and only if, one or more of the conditions in subsection (2C) below is satisfied ...

(2C) The conditions mentioned in subsection (2)(c) above are -

(a) that the debtor has failed to comply -

(i) with any obligation imposed on him under the trust deed with which he could reasonably have complied; or

(ii) with any instruction or requirement reasonably given to or made of him by the trustee for the purposes of the trust deed; or

(b) that the trustee avers in his petition that it would be in the best interests of the creditors that an award of sequestration be made ...

(6) The petitioner shall, on the day the petition for sequestration is presented under this section, send a copy of the petition to the Accountant in Bankruptcy."

[8 ] Section 12 of the 1985 Act provides inter alia:

"(3) Where, on a petition for sequestration presented by a creditor or a trustee acting under a trust deed, the court is satisfied -

(a) that, if the debtor has not appeared, proper citation has been made of the debtor;

(b) that the petition has been presented in accordance with the provisions of this Act;

(d) that, in the case of a petition by a creditor, the requirements of this Act relating to apparent insolvency have been fulfilled; and

(e) that, in the case of a petition by a trustee, the averments in his petition as to any of the conditions in subsection (2C) of the said section 5 are true,

it shall, subject to subsection (3A) below, award sequestration forthwith.

(3A) Sequestration shall not be awarded in pursuance of subsection (3) above if

(a) cause is shown why sequestration cannot competently be awarded; or

(b) the debtor forthwith pays or satisfies, or produces written evidence of the payment or satisfaction of, or gives or shows that there is sufficient security for the payment of -

(i) the debt in respect of which he became apparently insolvent; and

(ii) any other debt due by him to the petitioner and any creditor concurring in the petition."

The petition for sequestration

[9 ] In the petition, the petitioner avers inter alia-

"The Current Position - The Property

4. That the debtor jointly owns the property in which she resides with her husband at Leanaig Cottage, Conon Bridge, Ross-shire, IV7 8DQ ("the property"). However the debtor owned a portion of land adjacent to the property in her own name. The petitioner has learned that on 20^th October 2004 the debtor disponed to her daughter, Kirsty-Mary Alison Campbell that land at Leanaig Cottage, Conon Bridge, Ross-shire. This land is land onto which the property has been extended and on which the kitchen of the property and part of the garden is situated. That disposition was granted by the debtor in favour of her daughter for a consideration of £250. The disposition was registered in the Sasine Register on 30^th November 2004. A copy of the disposition and the entry in the Sasine Register is produced. At the time of the disposition the debtor was subject to an inhibition at the instance of one of her creditors, Gordonstoun School.

5. That given the land disponed by the debtor has the kitchen of the property built onto it and part of the garden the effect of the disposition is to remove from the debtor the ability to confer a valid title to the whole property. Whilst the debtor and her husband remain pro indiviso owners of the remainder of the property neither can now give good title to the house and garden. The debtor's daughter effectively holds a ransom strip.

6. That the petitioner has taken professional advice on the value of the property. It was worth £245,000 in June 2004. The debtor has obstructed attempts by the petitioner to obtain an up-to-date valuation. It is believed and averred that property values in the area have risen since 2004 and continue to rise. As at 15^th December 2006 the Bank of Scotland confirmed that the outstanding mortgage secured over the property stood at £175,855.41. The Bank's letter is produced. In such circumstances the petitioner has formed the reasonable view that the disposition by the debtor in favour of her daughter of the land at the property for a consideration of just £250 in 2004 was a gratuitous alienation. That alienation was and is to the prejudice of the debtor's creditors. The said disposition is challengeable at common law and in terms of section 34 of the Act.

7. That the debtor's husband and pro indiviso owner of the property is sequestrated. His trustee is the Accountant in Bankruptcy. He is not in a position to purchase the debtor's half of the property. He is uncooperative and obstructive and lengthy negotiations with him and his trustee have come to naught. Similarly, despite considerable attempts by the petitioner to negotiate with the debtor's daughter she has refused to agree any matters with regard to the property. She has encumbered the land disponed to her by the debtor with a mortgage of £6,000. It is not possible to realise the value of the debtor's interest in the property for the benefit of the creditors without the property's kitchen.

8. That in these circumstances it is in terms of section 5(2C) of the Act in the best interests of the creditors that an award of sequestration be made. The petitioner may thereafter proceed to seek reduction of the disposition in favour of the debtor's daughter as a gratuitous alienation and proceed, with the trustee of the debtor's husband, to sell the whole property for the benefit of the creditors of both the debtor and her husband.

The Current Position - Contribution

9. That the debtor is in a position to make a contribution to the trustee for the benefit of her creditors as allowed for in terms of the Trust Deed granted by the debtor. The deed allows for a contribution to be made by the debtor of any sums in excess of what is a suitable amount to allow for her aliment and any relevant obligations of the debtor in terms of section 32(3) of the Act. The petitioner has prepared an estimated statement of affairs as at 1^st February 2005. It shows a net deficit of £72,935.00. In that statement the trustee confirms his agreement with the debtor to contribute £100 per month into the trust deed for three years. Such a contribution would allow a dividend to be paid to the creditors. However, despite attempts to collect this agreed contribution from the debtor only nine payments have been made by her. The petitioner has examined the records and considers that the debtor was, as at September 2006, in arrears to the extent of nine payments, representing £900. On the 8^th September 2006 the petitioner wrote to the debtor seeking payment of the contributions to date. No response has been received from the debtor and no further payment of contributions has been made by her. The debtor refuses to make the agreed contribution and to make a full and fair surrender of her estate to her trustee the petitioner as required in terms of the trust deed.

10. That in these circumstances and in terms of section 5(2C) of the Act the debtor is failing to comply with the trustee and in particular with the obligation imposed upon her under the trust deed to make a contribution for the benefit of her creditors with which she could reasonably have complied. Furthermore, the debtor has failed and continues to fail to comply with a reasonable requirement reasonably made by the agreed contribution and to make a full and fair surrender of her estate to her trustee the petitioner as required in terms of the trust deed.

10. That in these circumstances and in terms of section 5(2C) of the Act the debtor is failing to comply with the trustee and in particular with the obligation imposed upon her under the trust deed to make a contribution for the benefit of her creditors with which she could reasonably have complied. Furthermore, the debtor has failed and continues to fail to comply with a reasonable requirement reasonably made by the petitioner upon her to contribute to her creditors in terms of the trust deed and for the purposes of the trust deed ..."

Initial hearing: need for legal representation

[10 ] The petition came to a hearing in the Court of Session on Thursday 22 Febuary 2007. Mr. Dalgleish, Advocate, appeared for the petitioner. The respondent appeared in person, accompanied by her husband, but unrepresented by a lawyer. The respondent had attempted to lodge Answers, but in accordance with practice, the Answers were not accepted: cf. McBryde & Dowie, Petition Procedure in the Court of Session, pages 12 and 128.

[11 ] Mr. Dalgleish moved the court to grant the prayer of the petition. He referred to the averments, a chronology of events, an affidavit, and to sections 5(6) and 12(3) of the 1985 Act, as amended. He confirmed that the petition had been served on the Accountant in Bankruptcy in terms of sections 5(6) and 12(3)(c) of the 1985 Act.

[12 ] At that point, I indicated concern about the lack of legal representation for the respondent. I continued the matter until 26 April 2007 to enable the respondent to make further attempts to obtain legal representation.

Subsequent hearings

[13 ] On 26 April 2007, the respondent advised that she had been unable to obtain legal representation, despite having contacted the Scottish Legal Aid Board, the Law Society, and about twenty firms of solicitors. The case therefore had to proceed against the respondent as a party litigant. Ultimately two days were required, 26 April and 22 May 2007.

The first hearing

Submissions for the petitioner

[14 ] Counsel for the petitioner moved the court to grant the prayer of the petition, and to sequestrate the respondent. Reference was made to section 5(2)(c), and 5(2C) (a) and (b) of the 1985 Act. Counsel submitted that the trustee had to satisfy one or more of the three conditions set out, namely (i) the debtor's failure to comply with an obligation imposed on her under the trust deed, with which she could reasonably have complied; (ii) the debtor's failure to comply with any instruction or requirement reasonably given to or made of her by the trustee for the purposes of the trust deed; or (iii) the trustee averred in his petition that it would be in the best interests of the creditors that an award of sequestration be made. In the present case, all three conditions were satisfied (although only one was required).

[15 ] Moreover the requirements of section 12(3) had been satisfied in that the petition was presented by a trustee acting under a trust deed; (a) proper citation had been made of the debtor; (b) the petition had been presented in accordance with the provisions of the 1985 Act; (c) a copy of the petition had been sent to the Accountant in Bankruptcy (6/20) in terms of section 5(6); (d) section 12(3)(d) was not applicable; and (e) "the averments in [the] petition as to any of the conditions in subsection (2C)" of section 5 of the 1985 Act were "true". Accordingly the court could be satisfied about the relevant matters (a) to (c), and (e). In that event, the court had limited discretion, and in terms of section 12(3) and 5(2C) "shall" award sequestration forthwith.

[16 ] Section 12(3A) was also relevant. The respondent had not paid or satisfied the debts in question, and had not produced written evidence of the payment or satisfaction of the debts, nor given or shown that there was sufficient security for the payment of the debts. Accordingly the court had no option but to grant sequestration.

[17 ] Counsel referred to Rule of Court 72.2, and to the commentary by Sheriff N.M.P. Morrison, Q.C. at paragraph 72.2.4, which was in the following terms:

"... The large and unanticipated call on public funds caused by the trust deed route to sequestration led to the reforms introduced by the 1993 Act. In the main, the 1993 Act restricts the ability of the debtor to arrange his own sequestration by this route. The trustee under a trust deed may now petition for sequestration only if the conditions of s.5(2C) of the Act of 1985 are met and the court is satisfied that the trustee's averments are true (s.12(3) of the Act of 1985 substituted by s.4(4) of the 1993 Act) ..."

The Trust Deed in the present case contained several references to the possibility that the trustee might apply for sequestration. The respondent had been given clear notice of that possibility, and on that basis had granted the Trust Deed. Moreover, the respondent had signed the Statement of Undertakings, paragraph 8 of which is quoted in paragraph [3] above. The respondent therefore envisaged the present sequestration proceedings as a possibility and as an entitlement of the trustee.

[18 ] Reference was made to McBryde, Bankruptcy (2^nd ed.) at paragraphs 5-50,

5-62 and 5-65. If the requirements of the Act were satisfied, the court had no discretion. The Act directed that certain things would happen in certain circumstances. There was a strict statutory regime. The procedure was summary and expeditious. There was no requirement for a proof. For example, in relation to sections 12(3)(e) and 5(2C) one condition which (if satisfied) resulted in the grant of sequestration was that "the trustee avers [italics added] in his petition that it would be in the best interests of the creditors that an award of sequestration be made". The focus was on the trustee's averments; the trustee was not put to a proof on the matter. The sequestration should be granted "forthwith": cf. observations in McBryde & Dowie, Petition Procedure in the Court of Session, pages 128-9. But if there was a genuine doubt about the debt, or if the debtor could satisfy the debt, sequestration should not be granted.

[19 ] The suspected gratuitous alienation defeated the bank's security and the interests of the creditors. There were now in effect three proprietors (two pro indiviso proprietors, and one sole proprietor of the ransom strip). No one proprietor could offer a good title: all three would have to concur in realising the property. The petitioner had made efforts to resolve matters. There had been correspondence and meetings involving the petitioner, the respondent, her husband, and her daughter. It was not possible for the respondent's husband to buy out the respondent, as he had been sequestrated. Nor was it possible to raise funding secured on the property, because of the tripartite ownership: the agreement of the respondent's husband and daughter would be required. Thus there was a deadlock. No progress could be made under the Trust Deed pending the realisation of the property. It was in the best interests of the creditors that the sequestration be granted, and the property be realised. The respondent's husband's trustee in bankruptcy was fully aware of the present proceedings.

[20 ] In relation to the payments by the respondent of £100 per month, the Trust Deed provided for a contribution fixed by agreement between the petitioner and the respondent: see paragraph [2] above. A Statement of Affairs as at 1 February 2005 (6/3) prepared by Mr. Le May contained the following note:

"3. The debtor has agreed to contribute the sum of £100 per month into the trust deed which is expected to last for 3 years."

In the Statement of Undertakings dated 28 January 2005, the respondent undertook to advise the trustee of any change in her financial circumstances: see paragraph [3] above. No such change of circumstances had been intimated, yet payment of the contributions had ceased after only nine payments. Those nine payments of £100 were recorded by Mr. Le May in a letter dated 6 July 2006 as having been made on 4 August 2005 (£200), 1 September 2005 (£200), 6 October 2005, 1 November 2005, 1 December 2005, 14 March 2006 and 4 April 2006 (Appendix 6 to the petitioner's affidavit number 9 of process).

[21 ] The petitioner had written to the respondent about the matter by letter dated 8 September 2006 (6/50), in the following terms:

" Whilst it is not stated in the response I note that I previously raised the question of the resumption of earnings contributions. It appears from the information I have obtained from Mr. Le May that you have made nine contributions of £100 the last one being in April 2006. I am however a little confused in that if your Trust Deed started in February 2005 there should have been 14 payments up to April 2006. No notes were provided by Mr. Le May for the discrepancy. Did you make an agreement to extend the Trust beyond the normal 36 months?

There would appear to be now nine months of arrears of contributions. I would provide you with this opportunity to rectify the matter ..."

[22 ] There had been no reply to that letter. There had been no intimation of a change of circumstances. No further contributions had been received. The debtor was thus not fulfilling obligations under the Trust Deed. She was not fulfilling the obligations imposed upon her in terms of the Statement of Undertakings signed by her. Thus the debtor was not complying with a "requirement reasonably given to or made of [her] by the trustee for the purposes of the trust deed" in terms of section 5(2C)(a)(ii) of the Bankruptcy (Scotland) Act 1985. She was not complying with an "obligation imposed on [her] under the trust deed with which [she] could reasonably have complied" in terms of section 5(2C)(a)(i) of that Act. The petitioner's position was thus that all the conditions of section 5(2C)(a) and (b) had been satisfied. It was clear that the conditions were alternative, and if any one of them were satisfied, sequestration should be granted.

[23 ] In relation to section 12(3A), no cause had been shown why sequestration could not competently be awarded. Nor had the debtor forthwith paid or satisfied the debt in respect of which she became apparently insolvent. Nor had she produced written evidence of such payment or satisfaction, or given or shown that there was sufficient security for the payment of that debt. The petitioner accordingly moved the court to grant sequestration in terms of section 12.

Submissions for the respondent

[24 ] The respondent accepted that she had entered a Trust Deed dated 1 February 2005. Her creditors had acceded to it. No-one had brought a petition for her sequestration. The respondent had been told that the petitioner had taken over as her trustee: but he had served no paper-work on her. The present petition had not been served on the respondent or on her husband at their address. No petition had been sent by Recorded Delivery. Accordingly service had not been correctly effected. Reference was made to Rule of Court 14.7.

[25 ] The respondent denied that she had failed to comply with the trustee. She believed that she had done everything to discharge her duties. She did not accept that the petitioner was acting in the best interests of her creditors. The petitioner had a conflicting interest, i.e. an interest which conflicted with the interests of her creditors (namely to receive some dividend on her estate). The petitioner had, as his clients and friends, the neighbours who wanted to acquire Leanaig Cottage. Before becoming the respondent's trustee, the petitioner had solicited from those neighbours the valuation and offer of £245,000 for Leanaig Cottage. He asked for an offer from those neighbours, and used their offer as a valuation of the property. The Accountant in Bankruptcy had stated that this was "not best practice". The petitioner's agenda was to have the property sold to the neighbours. The petitioner was prepared to incur any cost to achieve that end. For example, the present action could have been raised in the sheriff court, not in the Court of Session. Also the petitioner was planning further legal actions, for example, an action of reduction (which was unnecessary). The respondent had managed to raise finance and had achieved an informal offer with the help of MacRoberts, solicitors. However the petitioner had not shown that offer to the creditors despite the fact that it was his duty to do so. The petitioner's aim was to remove the respondent, her six children, and her husband, from their home, and to sell the property to the neighbours.

[26 ] The respondent admitted selling a piece of land to her daughter Kirsty. However that sale had been completed in March 2004, at a time when she had not been under any creditor's inhibition. Her solicitor, Alistair Fraser of Messrs. Fraser & Co, Inverness, had dealt with the transaction. The respondent explained that she had agreed to buy that piece of land from Angus MacDonald of Conon Brae Farms for £500 (6/25). The £500 had not been paid as such: instead, by arrangement with the farmer, the respondent had paid for the fencing of the land (at a cost of £250). Her daughter had used the land as security to raise £6,000, to help the respondent: but the £6,000 was not a measure of the value of the ground. The £6,000 had been used to pay off the sequestration raised by the neighbours (as the present sequestration proceedings represented the second time that proceedings for sequestration had been raised: cf. Minutes 6/5 paragraph 20).

[27 ] The respondent believed that adequate security could be given, and that funds could be raised for the creditors. Her daughter was willing to co-operate as necessary. A lender had agreed to take a second charge over the land. That would enable the respondent to raise £210,000. The respondent had sent MacRoberts' letter to the petitioner in November 2006, when the petitioner had been preparing the present petition. However the petitioner was not interested. He was "hell-bent" on having her sequestrated. The respondent's husband's case had been taken in-house by the Accountant in Bankruptcy after a number of complaints regarding the petitioner's practice. Her husband was to be discharged on 3 June 2007.

[28 ] The respondent stated that she had made three offers, namely: (i) her daughter could buy out the respondent's share in the property; (ii) her daughter could buy out both the respondent's and her husband's shares in the property; (iii) in November 2006, the respondent had offered the £210,000 referred to above. The petitioner had not sent the offers to the creditors for their consideration.

[29 ] In relation to the value of the house, while the neighbours had produced an offer of £245,000 in June 2004, Mr. Le May had received a valuation in August 2005 of £208,000. The reason for the decrease in value was the enormous building - a barn - which the neighbours had erected next door. The building obscured about two-thirds of the view from Leanaig Cottage. The respondent and her husband had tried to prevent the granting of planning permission for the building. They had resorted to the Court of Session. That had contributed to her husband's being sequestrated.

[30 ] Several of the averments in the petition were untrue. The respondent denied that the sale of the piece of land to her daughter was a gratuitous alienation. The land was a piece of garden ground, on which hens roamed. The intention had been that when her daughter Kirsty reached the age of eighteen, she would build her own property. There was no planning permission as yet. The kitchen extension had been built on that piece of ground before the bank became lenders, and the drawdown of money would not be affected. MacRoberts were happy with the security which could currently be obtained. Lenders had organised the finance (amounting to £210,000). It was simply a question whether the proposal was acceptable to the creditors.

[31 ] The policy underlying the legislation was that early attention should be given to matters affecting the family home. It was not good practice to leave such a property in limbo (7/1). The sale to her daughter had not been a gratuitous alienation, and another court action (an action of reduction) was unnecessary. The respondent and her husband were willing to buy out the whole mortgage and the extra equity.

[32 ] The most pragmatic and fair way to discharge the Bank of Scotland's mortgage was to take up the offer arranged by MacRoberts in November 2006, namely the offer of financing of £210,000. The involvement of Platform Finance would mean that the bank would receive £192,000, leaving £18,000 for the creditors (who would receive less than 10p in the pound). But if the respondent were to be sequestrated, she would be unable to draw down funds, and the creditors would be worse off.

[33 ] The petitioner's real agenda was to sell Leanaig Cottage. The petitioner had received copies of the offers of loan, but had failed to circulate them to the creditors. There had been a petition for the respondent's sequestration in Dingwall Sheriff Court. Sheriff MacFadyen had commented that the respondent's estate was small and fragile, and great care should be taken when considering the impact of legal costs on the dividend payable. The petitioner was failing to look after the property, and was spending money on court cases. He was denying the respondent the opportunity of preserving the family home by buying out the equity. All his actions were to the substantial disadvantage of the creditors. The petitioner was indulging in litigation, and was increasing costs. A hearing in the Court of Session was prohibitively expensive. The petitioner claimed that the respondent, her husband, and her daughter, were causing a deadlock: but it was in fact the petitioner who was causing a deadlock. He was not acting in the best interests of the creditors.

[34 ] As for the contributions of £100 per month, the respondent admitted having entered into a voluntary agreement, based on affordability. The respondent explained that she was a school teacher. Her husband did not work. They had six children. After the valuation of Leanaig Cottage in August 2005, Mr. Le May had said that the payments could stop whilst the respondent was raising finance, so that she could demonstrate a better income stream for the mortgage to be raised. Mr. Le May was willing to give evidence, if necessary. The respondent had advised the petitioner of the situation. There was also a tax rebate of £1,400 due to her. Mr. Le May was intending to write to get the tax rebate (which would have counted towards her contributions). The petitioner had failed to recover the rebate. His sole purpose was to sell their house to the neighbours, together with all the surrounding land. He was willing to go to no end of costs in order to gain control of the cottage and pass it to his clients. The petitioner had used the extraordinary offer to purchase made by the neighbours as a valuation of the house.

[35 ] The allegations that the respondent had failed to co-operate with a valuation of Leanaig Cottage were untrue. The respondent had stated that the valuer could come in and do a valuation. However her daughter, who had received threatening letters, acted on the advice of her own solicitor, and refused to let the valuer on the ground. But the respondent had not refused a valuation, and did not intend to refuse a valuation. In her view, the valuation should have been carried out long ago.

[36 ] The respondent repeated that she had grave concerns about the cost of the Court of Session action. The petitioner's averments about her alleged failures were untrue. The petitioner was not being honest. There were inconsistencies in the productions and the action itself. The petitioner was not acting in the best interests of the creditors.

Reply for the petitioner

[37 ] Counsel for the petitioner referred to Appendix 5 to the petitioner's affidavit number 9 of process. In an e-mail dated 28 August 2006, Derek Smillie (Insolvency Manager in the sequestration of the respondent's husband) advised the petitioner that:

" ... when the District Valuer attended on my instructions at the property [Leanaig Cottage] last Wednesday to carry out a valuation she was met by the daughter Kirsty Mary, who refused her entry to both the property and the garden ground itself, stating that she owned the driveway along with the garden and that she had been advised that allowing a valuation would be prejudicial to any court action that [the petitioner] raised against her.

The DV is going to provide me with a report and valuation based on an inspection carried out from the roadside and from other information available to her."

[38 ] In relation to the respondent's alleged desire to produce funds to buy out the equity, counsel explained that the petitioner had repeatedly requested evidence of the respondent's ability to raise or draw down funds, but to no avail. The petitioner's most recent letter to the respondent following the initial hearing on 22 February 2007 was dated 27 February 2007 (6/35), sent by recorded delivery, and was in the following terms:

"Dear Mrs. Campbell,

Your Trust Deed

Leanaig Cottage, Conon Bridge

As you will be aware, consideration of the petition for your sequestration has now been continued to 26 April 2007 to allow you the opportunity to obtain legal representation.

For the avoidance of any doubt I would confirm once again that my preferred way of proceeding would be to realise your assets without the necessity of having to petition for sequestration. Unfortunately so far this has not proved to be possible.

Your husband's trustee and I must realise our interest in the property at Leanaig Cottage. As previously advised, trustees normally try to reach agreement with the debtor or the debtor's family regarding the purchase of the property. If this is not possible the property must be sold.

You have indicated a willingness to purchase the trustee's interest in the equity in the property and in principle I would be agreeable to proceeding in this way. There are however several issues which would have to be addressed before this would be possible.

Return of Garden Ground to Your Estate

The transfer of the garden to your daughter constitutes a gratuitous alienation and as such this garden ground must be returned to your estate. The return of the garden ground to your estate is essential to allow Leanaig Cottage to be sold or a standard security to be granted over that property. At the moment, it is extremely unlikely that a lender would be prepared to accept a security over property where part of that property was built on ground owned by a third party.

I am aware that a standard security has been granted in favour of Mr. Redpath by your daughter. I would suggest however that in the overall scheme of things this should not be an insurmountable problem.

Access to be Given to a Valuer

An up to date valuation of the property must be obtained. I have already advised you that the Bank of Scotland obtained a valuation valuing the property at £245,000 and I have received an offer to purchase for that sum. I understand however that you consider the value of the property to be lower. Last year both you and your husband were requested to co-operate and allow access by the District Valuer, who had been commissioned by your husband's Trustee the Accountant in Bankruptcy. Despite this it was reported that the District Valuer could not obtain access to the property to carry out a valuation because your daughter claimed that she owned the access to the property and refused to allow entry.

From my examination of the title, I do not consider that your daughter owns the access to the property and she cannot therefore prevent the District Valuer from obtaining access. If you do not agree with this view I would be grateful if you would provide me with evidence to prove that your daughter does indeed own the access to the property.

Assuming however that your daughter does not own the access to the property, I would ask you to contact me within the next 7 days to confirm a suitable date for a qualified valuer to carry out a valuation. I also suggest that you discuss matters with your husband and daughter and ensure that they too are agreeable to the valuer having access. I must emphasise that it is extremely important for you to co-operate with me and allow access to be given.

Evidence of Ability to Finance an Offer to Purchase

Once we have the valuation of the property, if you and your husband do still wish to purchase the equity in the property I would need confirmation that you have sufficient funds to enable you to proceed with the purchase. In addition you would either have to raise funds to repay the loan to the Bank of Scotland or reach agreement with the Bank of Scotland that they would rely on their existing security. I understand that the Bank would not consider such an agreement unless the garden ground was returned to your ownership and the security position rectified.

To date I have received various offers from you but either the level of offer has been too low or, where there has been a possibility that an agreement could be reached, you have been unable to produce evidence that the funds will be available. I suspect the reason for this is that you have only ever received a conditional offer to lend which is simply not enough. You must have an unconditional offer of loan at a level acceptable to me and your husband's trustee. Without clear evidence of funding, an offer cannot be considered. If you are unable to purchase the trustee's interest in the equity the property would have to be sold.

Legal Advice

I would urge you to give the contents of this letter careful consideration and, if you are successful in obtaining legal representation would recommend that you let your solicitor have sight of this letter.

To avoid possible misinterpretation I would be grateful to receive your response in writing to the matters raised rather than by telephone calls or emails from your husband."

Continuation to a second hearing

[39 ] In the course of the first hearing, it became clear that some further inquiry should be made as to (i) the position being adopted by the respondent's husband's trustee in bankruptcy in relation to the realisation of Leanaig Cottage, and (ii) whether the respondent's husband was to be discharged in June 2007. The case was therefore continued to 22 May 2007 to enable inquiries to be made.

Submissions for the petitioner

[40 ] Counsel for the petitioner confirmed that the respondent's husband was to be discharged on 3 June 2007. That was the automatic discharge granted on the third anniversary of the bankruptcy. In terms of section 54 of the Bankruptcy (Scotland) Act 1985, such a discharge was not the end of the sequestration, nor did it divest the trustee of his role. Reference was made to McBryde, Bankruptcy, paragraph 18-56. There were certain consequences of the automatic discharge: for example, estate acquired vested in the debtor; income received by the debtor was not subject to contributions; and the debts due as at the date of the sequestration were treated as discharged. But the heritable property remained vested in the trustee until the end of the sequestration: cf. dicta of Lord Justice Clerk Hope in Henderson v Bulley (1849) 11 D. 1470, at page 1473. The automatic discharge did not re-invest the debtor in his estate.

[41 ] Thus despite the automatic discharge, the sequestration process continued. The question of the gratuitous alienation and the reduction of the disposition to the daughter remained with the trustee. The trustee continued to ingather the estate of the debtor.

[42 ] The position adopted by the trustee acting for the respondent's husband in respect of the current petition was set out in paragraphs 3 and 4 of an Affidavit by Derek Smillie (Insolvency Manager in the sequestration of the respondent's husband), number 10 of process, as follows:

"3. I have seen the petition for sequestration presented by William Young, trustee acting under the trust deed of Alison Campbell who is the wife of Mr. Campbell. I confirm that the Accountant in Bankruptcy supports this petition for sequestration as being in the best interests of the creditors of Michael Campbell.

4. With reference to the petition for sequestration I can confirm that the averments made in statement 4-8 of the petition are correct.

I can confirm that I am aware of Mr. Young's intention to seek a reduction of the disposition in favour of Alison Campbell's daughter as a gratuitous alienation. I can also confirm that the Accountant in Bankruptcy agrees that the whole property should be sold for the benefit of the creditors of both Michael and Alison Campbell as set out in statement 8. I can further confirm that the Accountant in Bankruptcy has always intended to realise her interest in the property for the benefit of creditors by selling her interest in that property. The discharge of the debtor will not alter the Accountant in Bankruptcy's position."

[43 ] Counsel confirmed that the Accountant in Bankruptcy was aware that the petitioner would be seeking reduction of the respondent's disposition to her daughter, and that the two trustees would then act together in realising the whole of Leanaig Cottage and grounds. Counsel submitted that unless the disposition in favour of the respondent's daughter was reduced, Leanaig Cottage was unsaleable as most of the property was owned by the respondent and her husband as pro indiviso owners, but the ground on which the kitchen was built belonged solely to the daughter and could not be forcibly realised by an action of division or sale. The petitioner had hoped to achieve the daughter's consent, either to a sale, or to the raising of funds by the granting of a security over the property: but her consent had not been forthcoming. As a result, the petitioner felt that he had a duty to seek reduction of the disposition to the daughter on the ground that it was a gratuitous alienation.

[44 ] Counsel also mentioned that the petitioner was present in person in court for the second hearing. The petitioner had tried to reach agreement with the respondent on a sensible business basis, but had failed. Accordingly the petitioner sought the sequestration of the respondent in terms of the petition.

[45 ] Counsel reiterated that in terms of section 12(3)(e) of the Bankruptcy (Scotland) Act 1985 the court required to be satisfied that "the averments in his petition as to any of the conditions in subsection (2C) of ... section 5 are true". It was not the court's function to conduct an inquiry into the conduct of the trustee. It was not the court's role to substitute its view about how to administer the trust deed and a sequestration. If the court were to be satisfied that the averments were true, then the court had no option but to grant sequestration.

[46 ] The peremptory nature of the procedure, subject always to the exceptions set out in section 12(3A), were emphasised in The Scottish Milk Marketing Board v Wood 1936 S.C. 604, at page 611; and The Royal Bank of Scotland plc v Forbes 1987 S.C. 99, 1988 S.L.T. 73. The procedure was summary. The debtor was not entitled to demand a proof or inquiry into the facts: National Westminster Bank plc v W. J. Elrick & Co 1991 S.L.T. 709, at page 713; McBryde, Bankruptcy at paragraph 5-65. Thus the court, acting within the statutory scheme, was not required nor empowered to make inquiries into the value of the property, the equity remaining in the property, or the level and existence of any contribution from the debtor. Those were matters for the trustee. While some of those matters were of limited relevance for the court's consideration, it was not the role of the court to second guess what the trustee should do, unless the trustee was clearly in breach of his statutory duties, or was clearly not fulfilling his statutory duties. If the trustee made averments, and produced evidence in support of those averments, it could only be in exceptional circumstances that the court could fail to treat the averments as being true. There would have to be compelling, strong, evidence to the contrary before the trustee's affidavit and averments could be held to be untrue. Such a finding would have serious consequences for the trustee, who was an officer of the court and a licensed insolvency practitioner. Counsel submitted that no evidence had been offered to the court to allow the court to conclude other than that the averments and the affidavit of the petitioner were true. Thus, unless the trustee's averments were untrue, or the petition was incompetent, or the debtor established an exception under section 12(3A), then the court must award sequestration forthwith.

[47 ] Counsel finally submitted that the petitioner's averments were true; the respondent had not established an exception in terms of section 12(3A); and sequestration should be granted forthwith.

Submission for the respondent

[48 ] The respondent submitted that the petitioner's insolvency permit (6/17) was out-of-date. Reference was made to the petitioner's affidavit number 9 of process, and his letter dated 16 May 2006 to the Accountant in Bankruptcy announcing his appointment in place of Mr. Le May (6/7). As a result, the respondent contended that it had been incompetent for the petitioner to cite her on 10 January 2007.

Reply for the petitioner

[49 ] Counsel for the petitioner explained that the first interlocutor in the process was dated 28 December 2006, which was within the currency of the permit number 6/17 of process as it ran from 1 January to 31 December 2006. The insolvency permit was renewed annually. It was not the practice to lodge the up-to-date permit. However counsel subsequently obtained and tendered a faxed version of the petitioner's current insolvency permit, which permitted him to act as an insolvency practitioner from 1 January to 31 December 2007.

Further submissions for the respondent

[50 ] The respondent submitted that the petition had not been served on her. It had been served on her husband. Accordingly service was incompetent.

[51 ] The respondent also submitted that she had been co-operative with the trustee. She referred to a letter dated 8 May 2007 from the former trustee, Mr. Le May (7/27) which stated inter alia:

"I am writing to confirm certain matters which I believe have been raised in connection with my administration of your trust deed and the subsequent handover to W.L. Young.

At the commencement of the trust deed, the offer to creditors was two-fold in that there was your share of the equity in your house and also the proposal that £100 per month be paid for the 3 year period. It was clear over my administration that you were struggling to meet the second part of this, bearing in mind that you were the sole salaried member of the household. I believe that you made every effort to maintain this, but of course I did ingather several hundred pounds from this source ..."

[52 ] The respondent added that before the petitioner took office, the plan had been that she would purchase the equity of Leanaig Cottage. She referred to a letter to her dated 7 July 2006 from the petitioner (7/22) which stated inter alia:

"I refer to our recent discussions concerning your proposals from you and your husband to purchase the equity from the respective bankruptcies.

The matter rests with your email indicating that the £15,000 which you were each offering is to be reduced to £12,000 in order to discharge the security granted to Mr. Redpath. That proposal is completely unacceptable and it is so far from any sort of even remotely plausible solution that I will not be continuing to debate the matter with you.

My concession to you is that I am prepared to allow you to purchase the equity based on a perceived value of £245,000.

That figure was not a guess, it was based on a valuation commissioned by the Bank of Scotland in 2004. That valuation was obtained at a time when there was no question of opinions being tainted by the supervening insolvencies and it was carried out by a very reputable firm of Chartered Surveyors with the appropriate qualifications.

The valuation is also supported by an indicative offer from Conon Brae Farms whom as I am sure you are aware are the adjoining landowners.

There is no question of disposing of the interest to them at this time due to the inability to pass on a title. I will deal with the disposal of the property in the appropriate manner at the appropriate time and basically the mechanics of this is none of your concern. However, their indicative offer is empirical evidence to support the valuation which the Bank of Scotland has provided and as far as the creditors are concerned it is essentially money in the bank.

I was prepared to allow you to purchase the equity at that perceived value which was established some considerable time ago, as distinct from a current valuation."

[53 ] The respondent stated that she refuted the suggestion that her disposition to her daughter was a gratuitous alienation. The date of entry in the Sasine Register was April 2004. There were inaccuracies in the petitioner's chronology of events. Further, while the petitioner stated that his concession to her was that he was prepared to allow her to purchase the equity based on a perceived value of £245,000, the truth of the matter was that he was not going to allow the equity to be bought out. He was going to sell Leanaig Cottage to Conon Brae Farms. He virtually stated that intention in the letter of 7 July 2006, while telling her that the mechanics of the disposal was none of her business. The approach being adopted by the petitioner was contrary to the interests of the creditors. Any offer to purchase put forward by the respondent was "not acceptable". The respondent confirmed that she was trying hard to raise funds. A standard security over the property could be granted by herself, her husband and her daughter. Funds had been made available. Reference was made to a file copy of a letter to the petitioner (said to be from MacRoberts) dated 22 January 2007 (7/4), which stated:

"We understand that the proposed re-mortgage has been explained to you by Norma Hastie of Crisp Financial Services, however we would confirm that Mrs. Campbell has obtained an offer of loan of £210,000 from Platform Funding. From the loan funds would fall to be deducted the amount of the secured loan from the Bank of Scotland which we understand is approximately £177,000 and, after deduction of the cost of the re-mortgage, the remainder would be paid to Mrs. Campbell's creditors.

We would be grateful if you would confirm that you have put this proposal to Mrs. Campbell's creditors and advise us of their response."

[54 ] The petitioner had not put the proposal to the creditors. Nothing had happened, except the raising of the current sequestration proceedings in the Court of Session. The respondent pointed out that if she were to be sequestrated, money could not be raised, whereas if she remained under the Trust Deed, funds could be raised. Other offers had been put to the petitioner, but he had ignored them, treating them as unacceptable. Mr. Le May, on behalf of the respondent, had instructed a valuation of Leanaig Cottage from a surveying and building engineering firm in East Kilbride, called Contemplor. That valuation, carried out by George Paton and dated 5 August 2005, was £208,000. The respondent had raised funds to buy out her half share, and could confirm that her daughter would co-operate.

[55 ] The respondent further complained that the petitioner had managed to become part of her husband's sequestration team. His sole interest was to sell Leanaig Cottage to the MacDonalds (partners in the firm of Conon Brae Farms). Reference was made to an undated letter to the petitioner's firm Ritsons (inventoried as "copy offer from T.S.H. Burns, solicitors) in which the MacDonalds offered to purchase the property for £245,000 with entry as at 4 March 2006. Mr. Le May had been the trustee at that date, but shortly thereafter had been replaced by the petitioner. The petitioner claimed that the offer of £245,000 had been "unsolicited" (paragraph 14 of his affidavit). However the respondent referred to the minutes of the creditors' meeting on 14 March 2006 (6/5). The sixth paragraph stated that a valuation of £245,000 found in a file had been "obtained for the bank and it tied in with the offer [the petitioner, recorded as representing Gordonstoun School] had received for the property from Conon Brae Farms". The sixteenth paragraph noted that the petitioner had "obtained the offer to illustrate the value of the property." Both paragraphs tended to contradict the suggestion that the offer from Conon Brae Farms had been unsolicited. The respondent again emphasised that the petitioner had an ulterior motive.

[56 ] The respondent also referred to a letter dated 22 September 2004 (7/23) to the petitioner from T.S.H. Burns, solicitors, acting for Conon Brae Farms. The partner in T.S.H. Burns had addressed the petitioner by his first name ("Dear Bill"), and had asked him to amend his records in relation to the respondent's husband's affairs "to take account of the fact that the sum entered as due to Conon Brae Farms has now been settled." The source of the funds used for payment was noted to be MacRoberts. The respondent suggested that the letter showed that the petitioner and the solicitor for Conon Brae Farms were working together in concert. The petitioner's interest was to sell the house to his friends and business associates, Conon Brae Farms. That interest ran counter to the interests of the creditors.

[57 ] There had been a suggestion that the petitioner, as trustee under a Trust Deed, could realise the property by an action of division or sale without resorting to the respondent's sequestration. However there had been a doubt as to whether the Trust Deed gave the petitioner sufficient power.

[58 ] A draft offer dated 6 September 2006 from Crisp Financial Services Ltd of Motherwell (7/24) was based on a property value of £245,000. It was in the following terms:

"Dear Mr. Young

Alison Campbell, Leanaig Cottage Conon Bridge, Ross shire IV7 8DQ

I note your response received today, and propose the following based on your valuation which will discharge yourself and the Bank of Scotland, note however this offer deals solely with Mrs. Campbell:

Property value	£245,000.00
Bank of Scotland Redemption	£177,000.00 approx
Joint Equity	£68,000.00
Mrs. Campbell's share	£34,000.00
Less Fees and lawyer costs	£5,312.50
Balance Payable to Ritsons	£28,687.50

I would require sight of your Valuation and the Valuation carried out in May 2005 along with a satisfaction of conduct letter for Mrs. Campbell.

I trust this offer is acceptable to be put to the Creditors. Please advise at your earliest."

[59 ] In a covering letter to the respondent containing a copy of the offer, Crisp Financial Services Ltd added a caveat as follows:

"However we understand there is a dispute with regards to this valuation [£245,000] and you have in your possession a second valuation carried out in May 2005, we can only advise you seek advice from the AIB [Accountant in Bankruptcy] whether or not this valuation stands and Mr. Young is under obligation to use this valuation, if this is the case then the enclosed proposal would be withdrawn."

[60 ] The respondent stated that MacRoberts confirmed both the letter of offer and the availability of the funds. The respondent was co-operating. This was the fifth offer she had placed before the petitioner. In response to her e-mail dated 25 May 2006 ("Will the house need to be revalued by you?") the petitioner had replied by e-mail dated 25 May 2006 (7/13):

"I probably have enough indicators of value that if an early cost effective settlement is being offered I can recommend to the creditors that they should take the exit route without insisting on further valuations.

Normal procedures are to calculate the equity on a current valuation. The existing valuations are now of some age and I suspect a current valuation would be higher. At this early stage the offer is to trade that risk for an early and cost effective exit. If either of these two parameters is not met then future negotiations would have to be on the basis of a current valuation."

[61 ] The respondent explained that Leanaig Cottage had been the family's home for twenty-two years. There were six children in the family. The respondent was offering to pay the creditors. The petitioner was thwarting her offers. The respondent drew attention to two letters dated 21 and 23 February 2006 (7/10 and 7/11) which proved that the petitioner had acted in her husband's sequestration. The letters demonstrated the petitioner's style. He refused to negotiate. He refused to pass information to the creditors, despite the fact that they were entitled to the information. The petitioner had been responsible for compiling the Statement of Affairs as at 3 June 2004 (7/31) in her husband's sequestration.

[62 ] The respondent reiterated that she had been fully co-operative with the trustee under her Trust Deed. Mr. Le May confirmed as much in his letter dated 8 May 2007 (7/27), when he noted:

"It is my opinion that in my dealings with you during my administration ..... you were totally co-operative and did not obstruct me in any way and in fact you were instrumental in assisting with the proposed transaction over the house but regretfully to no avail."

[63 ] The respondent had in the past asked to have a meeting with the petitioner, but he had refused. The petitioner was present in court, but that was the first time the respondent had seen him. The respondent believed that the petitioner had not passed the respondent's proposal to raise £210,000 to the creditors. He had chosen to come to court seeking her sequestration, which would prevent her from drawing down funds which would assist the creditors. The Court of Session action was expensive, and would reduce funds further. The petitioner's approach was manifestly unsound. The respondent pointed out that Mr. Le May in his letter of 8 May 2007 expressed the view that, had her daughter's earlier offer of £15,000 "to discharge [his] interest in [the respondent's] share of the house" been accepted, then "substantial funds would have been ingathered with little expense and this would have enabled a dividend to have been paid to the creditors at an early date".

[64 ] In relation to the monetary contributions of £100 per month, the respondent stated that she was entitled to an income tax refund of about £1,400. That had been arranged with Mr. Le May, who had also agreed that the refund would count towards her monetary contributions. The petitioner had been well aware of the question of the refund, as was evidenced by his letter to Mr. Le May dated 3 May 2007 (7/29) noting that, as at April 2006, "there may well have been a repayment due", and asking Mr. Le May whether he had made arrangements for the refund to be paid to the trust rather than to the respondent. Nevertheless the petitioner had done nothing to follow the matter up with the Revenue.

[65 ] Mr. Le May was based in Glasgow; the petitioner was based in Nairn. The respondent found it extraordinary that an insolvency practitioner from Nairn should come to Glasgow to "chase business". The petitioner had thwarted the respondent's efforts to raise funds. He was litigious. As could be seen from a Revised Estimated Statement of Affairs as at 3 June 2004 in the sequestration of the respondent's husband (7/31), the petitioner had acted for the Accountant in Bankruptcy in that sequestration at that date. Leanaig Cottage was shown with a value of £205,000 at that date. Neither the respondent nor her husband owed money to Conon Brae Farms. The respondent questioned the relevance of that Statement in relation to her sequestration proceedings. Another statement had been put before the Inner House on 22 September 2004 (an example of the petitioner being selective in his choice of productions): but there was no relevance to the respondent's sequestration. The Statement of Affairs, the chronology of events, the out-of-date and invalid insolvency permit, and other documents, all demonstrated that the petitioner was exaggerating, selective, incorrect, and false. He alleged that she was not co-operating while she was producing an offer to raise funds of £210,000. He did nothing about the tax reclaim. Meantime he sent the respondent's daughter a letter stating that it was necessary to obtain vacant possession. The petitioner had not put the offer of £210,000 to the creditors. MacRoberts, solicitors, were assisting in raising funds. The respondent had asked for a meeting with the petitioner. That had been refused. The petitioner had also failed to carry out an examination of the debtor in terms of the Bankruptcy (Scotland) Act 1985.

Submissions for the petitioner

[66 ] Counsel again referred to the letter dated 27 February 2007 (quoted in paragraph [38] above) which the petitioner had sent to the respondent following the initial hearing on 22 February 2007. That letter covered topics such as the need to recover the ground disponed to the respondent's daughter; the need to have Leanaig Cottage valued and the difficulties experienced by the valuer instructed on behalf of her husband's trustee; the need to have clear evidence of an unconditional offer of an appropriate loan. The petitioner's position was that he was not refusing reasonably-made, unconditional offers. The difficulty was that the offers were not backed up with evidence of funds actually available. As he put it in his letter of 27 February 2007:

"I suspect the reason for [the level of offer being too low, or the lack of evidence that funds will be available] is that you have only ever received a conditional offer to lend, which is simply not enough."

The disposition to the daughter had complicated matters to the extent that the respondent and her husband could not give good title. The offers were thus "hollow" in that they were entirely dependent on the title being adequate as a security. In relation to the offer involving MacRoberts, the petitioner had requested confirmation that funds would be available, and had mentioned the probable alienation to the daughter: nothing further had been heard.

[67 ] In any event, it was for the respondent to make funds available. It was for the respondent to arrange that adequate security was given, to obtain the funds. In terms of the Trust Deed, she was able to sign a standard security with the petitioner's consent. By that mechanism, funds could be made available instead of endless offers which were meaningless unless backed up by confirmation that funds were available. The letter dated 27 February 2007 outlined the difficulties faced by the petitioner. The respondent had not replied to that letter.

[68 ] It was not the court's function to carry out judicial inquiries. Minutes of the meeting of creditors on 14 March 2006 (6/5) recorded that Gordonstoun School had an inhibition against the respondent pre-dating the alienation of the strip of ground to the daughter. Gordonstoun could have challenged the alienation. However once the Trust Deed had been entered into, the right to challenge passed to the trustee (initially Mr. Le May). The majority of the creditors had been dissatisfied with Mr. Le May's actings, and had voted that he be replaced by the petitioner. At page 3 of the Trust Deed (quoted in paragraph [2] above) the respondent had expressly consented to the appointment of an Interim Trustee under section 2 of the Bankruptcy (Scotland) Act 1985, which, properly construed, also amounted to consent to a petition for sequestration should the trustee think it appropriate. Further in the respondent's Statement of Undertakings dated 28 January 2005 (quoted in paragraph [3] above) the respondent had expressly stated that she understood that the trustee might petition for her sequestration if she failed to co-operate or if he considered that it was in the best interests of the creditors.

Penultimate submissions for the respondent

[69 ] The respondent made the following points in reply:

[70 ] The petitioner claimed that the respondent and her husband could not give a standard security because of the disposition to her daughter. However the daughter would comply with their wishes. The petitioner claimed that access to Leanaig Cottage had been refused to the valuer. However the respondent and her husband had allowed access; it was their daughter who had been threatened and who had been advised by her own lawyer not to allow access. The petitioner's letter of 27 February 2007 urged the respondent to get legal representation. That had not proved possible, and as a lay-person, the respondent had found the letter difficult to deal with, and thus had not replied. In relation to the alleged "hollow offers", MacRoberts had on 22 January 2007 made an offer and had confirmed that funds were available (7/4): but the arrival of the petition for sequestration on 10 January 2007 had impeded the raising of the funds.

[71 ] The petitioner claimed that the Bank of Scotland was concerned about its security. However if the whole of the mortgage was bought out, the bank would be repaid.

[72 ] The inhibition had come into effect in October 2004: but the date of entry to the piece of land disponed to the daughter had been April 2004 (i.e. pre-dating the inhibition). The disposition had only been registered by her daughter's solicitors in November 2004.

[73 ] The petitioner suggested that Mr. Le May should have challenged the alienation: but Mr. Le May had been unable to, because the date of entry pre-dated the inhibition. Mr. Le May had been trying to do his job, and had been trying to accept the offers of funds made on behalf of the respondent. However if matters proceeded in the way envisaged by his replacement trustee (the petitioner) there would be no money left to pay to the creditors. That was not what the creditors wanted.

Penultimate submissions for the petitioner

[74 ] Counsel advised that the difficulty for the bank was that their standard security had been damaged by the alienation to the Campbells' daughter. The standard security had been taken over "Leanaig Cottage". The respondent had owned the strip of ground upon which the kitchen had been built. She had disponed that strip to her daughter. If the bank were to call up the standard security and arrange for possession of and an auction relating to Leanaig Cottage, no-one would wish to purchase the property because of the problem caused by the third party ransom strip.

Final submissions for the respondent

[75 ] The respondent stated that the kitchen had been built in 1990. The mortgage had been obtained from the bank in 1992. The standard security was an "all sums due" security. The respondent considered that the bank would have no difficulty realising their security.

Discussion

[76 ] In terms of section 12(3)(e) of the Bankruptcy (Scotland) Act 1985, the court must be satisfied inter alia:

"... that ... the averments in [the trustee's] petition as to any of the conditions in subsection (2C) of section 5 are true."

I have therefore to be satisfied that:

"(a) ... the debtor has failed to comply -

(i) with any obligation imposed on [her] under the trust deed with which [she] could reasonably have complied; or

(ii) with any instruction or requirement reasonably given to or made of [her] by the trustee for the purposes of the trust deed; or

(b) ... the trustee avers in his petition that it would be in the best interests of the creditor that an award of sequestration be made ..."

[77 ] Section 5(2)(c) expressly provides that only one of the above conditions in section 5(2C) need be satisfied such that the court must (subject always to section 12(3A) - payment or security) award sequestration. Accordingly I accept counsel's submission that if either condition 5(2C)(a)(i), or (a)(ii), or (b), is satisfied, the court must award sequestration.

Condition in section 5(2C)(a)(i): failure to comply with an obligation imposed under the Trust Deed

[78 ] In terms of the Trust Deed, the respondent is obliged to pay the trustee a contribution out of income received. The contribution has to be "fixed, failing agreement between [the trustee and the debtor], by the court, comprising the amount by which such income is in excess of a suitable amount to allow for any aliment and any relevant obligations (within the meaning of section 32(3) of the Bankruptcy (Scotland) Act 1985)."

[79 ] In this case, the respondent and Mr. Le May reached agreement about the appropriate contribution to be paid. That agreement was recorded in a note to a Statement of Affairs as at 1 February 2005 (6/3), as follows:

"3. The debtor has agreed to contribute the sum of £100 per month into the trust deed which is expected to last for 3 years."

[80 ] Nine payments of £100 were made on 4 August (£200), 1 September (£200), 6 October, 1 November, and 1 December 2005; and 14 March and 4 April 2006, all as set out in Mr. Le May's letter dated 6 July 2006 (Appendix 6 to the petitioner's affidavit number 9 of process).

[81 ] In her submissions during the hearing in the Court of Session, the respondent maintained that after the valuation of Leanaig Cottage in August 2005, Mr. Le May told her that payments could stop whilst she was raising finance, so that she could demonstrate a better income stream for raising a mortgage.

[82 ] However Mr. Le May in a letter dated 8 May 2007 (7/27) makes no mention of such a further agreement. He comments:

"At the commencement of the trust deed the offer to creditors was two-fold in that there was your share of the equity in your house and also the proposal that £100 per month be paid for the 3 year period. It was clear over my administration that you were struggling to meet the second part of this bearing in mind that you were the sole salaried member of the household. I believe that you made every effort to maintain this but of course I did ingather several hundred pounds from this source."

[83 ] Standing the timing of the payments (August to December 2005, March and April 2006) and the terms of the Mr. Le May's letter of 8 May 2007, I am unable to accept that Mr. Le May and the respondent reached a further agreement that the payments of £100 per month were to stop whilst the respondent sought to raise finance. Nor does it appear from Mr. Le May's letter that he agreed to waive the obligation or requirement to pay £100 per month. Nor does Mr. Le May's letter confirm any agreement that the obligation to pay £100 per month was to be regarded as satisfied, even to some extent, by a tax refund. (The question of the refund remained unresolved for some time. Ultimately, a tax calculation issued on 5 July 2007 and lodged by the respondent on 17 July 2007 (7/32) explained that a repayment of income tax of £3,074.57 was due to the respondent for the tax year 2005-2006. The refund was paid to the petitioner.)

[84 ] I accept that the purpose of agreeing the level of contributions was to fix something which was affordable to the respondent, bearing in mind that she was the sole wage-earner with many bills to pay. Nevertheless an agreement was reached that payments of £100 per month should be made. If that agreement became unsuitable as a result of a change of circumstances, it was for the respondent to liaise with her trustee (cf. paragraph 4 of the Statement of Undertakings dated 28 January 2005, quoted in paragraph [3] above), and to seek to agree a new level of payment failing which to have a new level fixed by the court.

[85 ] Accordingly on the information before me I am satisfied that the respondent has failed to comply with an obligation imposed on her under the Trust Deed with which she could reasonably have complied. Thus in terms of section 12(3) of the Bankruptcy (Scotland) Act 1985 I am satisfied that the averments in the petition as to the condition in section 5(2C)(a)(i) of the 1985 Act are true.

Condition in section 5(2C)(a)(ii): failure to comply with any instruction or requirement reasonably given or made for the purposes of the Trust Deed

[86 ] In this context, it seems to me that there have been at least two failures:

(a) There has been the failure to make the payments of £100 per month, as outlined above. That failure qualifies in my view in terms of both section 5(2C)(a)(i) and 5(2C)(a)(ii).

(b) There has been a failure to comply with the petitioner's "instruction or requirement reasonably given to or made of [her] by the trustee for the purposes of the trust deed", namely an instruction or requirement to allow a valuer to carry out a valuation of Leanaig Cottage.

[87 ] As noted in paragraph [35] above, the respondent in her submissions denied having failed to co-operate with an earlier attempt to value Leanaig Cottage, instructed in August 2006 by her husband's trustee. She explained that her daughter (to whom the respondent had sold the ground underlying the kitchen) had received threatening letters, and had acted on the advice of her own solicitor when she refused to let the valuer on the ground. The respondent maintained that she herself had not refused to allow a valuation, and that she did not intend to refuse a valuation.

[88 ] However on the information before me, I am satisfied that the respondent has indeed failed to comply with the petitioner's instruction or requirement reasonably given to or made of the respondent by him as trustee for the purposes of the Trust Deed, in that she has failed to allow a valuer instructed by the petitioner or his staff to gain access to Leanaig Cottage and grounds for the purpose of carrying out a valuation. I have reached that conclusion for the following reason:

[89 ] Some six months after the abortive visit by the valuer in August 2006, the petitioner wrote to the respondent by recorded delivery letter dated 27 February 2007 (quoted in paragraph [38] above) requesting that access be given to a valuer. In the light of the previous difficulties, he asked the respondent to contact him within the following seven days "to confirm a suitable date for a qualified valuer to carry out a valuation". The petitioner also suggested that the respondent ensure that her husband and daughter were agreeable to the valuer having access. The petitioner emphasised that it was extremely important for the respondent to co-operate with him, and to allow access to be given to the valuer. However he received no reply to that letter, and was offered no date on which a qualifed valuer could carry out the valuation. While I accept entirely that the respondent is a lay person without the benefit of legal representation, I do not accept that the letter was too difficult for her to understand and to respond to, certainly insofar as the letter requested a date for a valuer to visit.

[90 ] In the circumstances, I am satisfied that the respondent has, in at least the two respects outlined above, "failed to comply ... with any instruction or requirement reasonably given to or made of [her] by the trustee for the purposes of the trust deed" in terms of section 5(2C)(a)(ii) of the Bankruptcy (Scotland) Act 1985. Thus in terms of section 12(3)(e) of the 1985 Act, I am satisfied that the averments in the petition as to the condition in section 5(2C)(a)(ii) are true.

Condition in section 5(2C)(b): averments that it would be in the best interests of the creditors that an award of sequestration be made

[91 ] Counsel for the petitioner submitted that in terms of section 5(2)(c), 5(2C)(b), and 12(3)(e), all that was required of the court was an assessment whether or not it was true that the petitioner had averred in his petition that it would be in the best interests of the creditors that an award of sequestration be made. In the present case, the petitioner makes those averments in paragraph 8 of the petition. However I reserve my position on the question whether the court is entitled to assess the truth of those averments. As it happens, in this particular case, against the background set out in this Opinion, I consider that the petitioner's averments about the best interests of the creditors are true.

[92 ] Thus in terms of section 12(3)(e) of the 1985 Act, I am satisfied that the averments in the petition as to the condition in section 5(2C)(b) are true.

Miscellaneous issues raised by the respondent

[93 ] Service of the petition: The respondent in her submissions contended that there had been no, or inadequate, service of the petition: see paragraphs [24] and [50] above. The respondent gave two apparently conflicting versions: first, that the petition had not been served upon either herself or her husband; secondly, that the petition had been served upon her husband but not upon herself personally. Bearing in mind that conflict, and the terms of Rule of Court 16.1, I am not prepared to accept that service was not properly effected. In any event, the respondent duly attended the hearings in court. As is made clear by Rule of Court 16.11, and the commentary on the rule in paragraph 16.11.1, the object of service of the petition is to bring to the knowledge of the respondent the proceedings against her in order that she might take steps to protect her interests. If the object is obtained by the respondent appearing, it is immaterial whether or not there were irregularities in service.

[94 ] Insolvency permits: The petitioner produced appropriate insolvency permits for 2006 and 2007.

[95 ] Trustee's alleged conflict of interests: The respondent alleged that the petitioner has a conflict of interests and an ulterior motive, namely to bring about the sale of Leanaig Cottage to his friends and clients the MacDonalds of Conon Brae Farms: see paragraphs [25], [33], [53], [55] and [56] above. These are very serious allegations to make against a professional accountant with an insolvency permit who carries out work on behalf of the Accountant in Bankruptcy. I could see nothing in the documents and information before me to support such allegations.

Section 12: court to be satisfied on certain matters, whereupon sequestration to be granted

[96 ] Applying section 12(3) to the present case, I am satisfied that:

(a) the debtor has appeared at every hearing;

(b) the petition has been presented in accordance with the provisions of the Act;

(d) this sub-section is not applicable;

(e) the averments in the petition as to the conditions in section 5(2C)(a) and (b) are true.

Accordingly the court should grant sequestration forthwith, unless section 12(3A) applies.

Section 12(3A): possible reasons for refusing sequestration

[97 ] On the information before me, I was not satisfied that either subsection (a) or subsection (b) of section 12(3A) had been made out.

Further disposal by the respondent

[98 ] The petitioner's agents, Semple Fraser, by letter dated 16 November 2007, advised as follows:

"There have been some further developments in that property which is the subject of dispute has now been transferred to Mrs. Campbell's husband. This could have an adverse impact on creditors."

That information does not alter my opinion.

Decision

[99 ] For the reasons given above, I shall award sequestration.

Scottish Court of Session Decisions

Introduction

Sections 5 and 12 of the Bankruptcy (Scotland) Act 1985

The petition for sequestration

Initial hearing: need for legal representation

Subsequent hearings

The first hearing

Continuation to a second hearing

Discussion

Decision