Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2009] CSOH 56
A813/06	OPINION OF LORD BRODIE in the cause CAROL YOUNG aka CAROL BALLARD Pursuer; against WILLIAM BOHANNON Defender: ­­­­­­­­­­­­­­­­­________________

Pursuer: Komorowski; Macbeth Currie & Co (for Messrs Renfrew & Co., Solicitors, Glasgow)

Defender: Stephen Bell; Blacklocks (for Messrs Gebbie & Wilson, Solicitors, Strathaven)

17 April 2009

[1] The pursuer is bankrupt. She was sequestrated by decree of the sheriff at Hamilton on 6 November 2006. The petitioning creditor was the defender. His claim was in respect of £50,000, evidenced by a bond bearing to be granted on 15 April 2004 and registered in the Books of Council and Session on 1 May 2006. The bond bore to be witnessed by the pursuer's father, James McDonald. The pursuer's permanent trustee is Cameron King Russell.

[2] The pursuer has brought a petition for recall of her sequestration, to which the defender and the permanent trustee have lodged answers. She avers that, notwithstanding the bond, she was not indebted to the defender. She explains that she and the defender formerly had a relationship and during the period of that relationship the defender had paid her various sums of money, but as gifts, not as loans. In the petition the pursuer avers that the personal bond is fraudulent, that it was not signed by her, that it was signed and witnessed by James McDonald at the behest of the defender, that James McDonald was advised that a blank document needed to be signed by the pursuer to complete the sale of a property at 3 Feu Road, Glassford, Strathaven from the defender to the pursuer's now husband, Stephen Young, that James McDonald did not appreciate what he was signing and that the pursuer did not at any time owe the defender any substantial sum of money. It is on the basis of similar, but not identical, averments that in this action the pursuer seeks reduction of the bond and damages.

[3] The action came before me on the defender's motion for the pursuer to lodge caution for expenses in the sum of £20,000. A similar motion had been enrolled in the petition process. Mr Komorowski appeared for the pursuer. Mr Stephen Bell appeared for the defender.

[4] Under reference to Stephenson v Midlothian District Council 1983 S.C. (H.L.) 50, McTear v Imperial Tobacco Limited 1996 S.C. 514, Clarke v Muller (1884) 11 R. 418 and Thomson v Co-operative Bank 1999 S.L.T. 701, Mr Bell put forward a series of propositions which, he submitted, represented the relevant law. These were:

(1) the overriding principle was that a defender was entitled to be protected against incurring judicial expenses when the nature of the litigation or the conduct of the pursuer was such that the interests of justice required that such protection be granted;

(2) it was nevertheless wrong for a party with a stateable case to be excluded from court except in exceptional circumstances;

(3) there was no general rule that a legally aided party (such as the pursuer here) will not be ordered to find caution;

(4) an undischarged bankrupt will generally be required to find caution but, exceptionally, a bankrupt may be allowed to sue without being ordered to find caution where what was in issue was whether the pursuer should have been sequestrated.

However, submitted Mr Bell, the exception to the general rule that a bankrupt will be required to find caution which applied when the issue was whether he should have been sequestrated, lost much of its force in the present case because the pursuer was concluding for damages, her prospects of success were poor and her conduct of the litigation had been such that an order for caution was appropriate.

[5] Mr Bell then turned to discuss the circumstances which, in his submission, demonstrated that the pursuer did not have a stateable case for reduction of the bond dated 16 April 2004 and which were sufficiently exceptional to warrant an order for caution for expenses as a condition precedent of further procedure. He made reference to productions lodged on behalf of pursuer and on behalf of the defender. Mr Komorowski made no objection to Mr Bell proceeding in this way.

[6] Mr Bell acknowledged that the pursuer was in receipt of legal aid. Proof in the action of reduction had been fixed for 24 April 2009.

[7] In her pleadings in the action the pursuer avers:

"On 29 June 2006 the defender had a charge served upon the pursuer for the sum of £50,000. The basis of said charge was a personal bond allegedly signed by the pursuer on 16 April 2004. The signature on the purported document is not hers. The document is believed to have been signed in the name of the pursuer and witnessed by James McDonald, who is the father of the pursuer. In April 2004 the defender asked James McDonald to sign a document he claimed was needed for the sale of 3 Feu Road, Strathaven to Stephen Young. James McDonald did not see what he signed. He signed his own [name]. He may also have signed the pursuer's name. He had no authority to do so. He did so in reliance upon the false assurances given by the defender. ... At no time did the pursuer owe the defender any sum. At no time did she owe him £50,000. The said purported personal bond is a fabrication."

[8] In support of the averment by the pursuer that the signature on the bond was not hers, she has obtained the advice of, and lodged a report from, John McCrae, Consultant Forensic Document Examiner. Mr McCrae's report is 6/1 of process. The signature in question is "C Ballard". In his report Mr McCrae narrates that he had received a number of documents bearing "known signatures of a Carol Young - C Ballard". He had also obtained specimen signatures of James McDonald. On the basis of the material provided to him Mr McCrae concludes that: "There is nothing to indicate that the signature 'C Ballard' on the bond dated 16 April 2004 is a genuine signature of Carol Young" and that: "The signature 'James McDonald' and the entries at 'witness name and address' display the genuine writings of James McDonald." However, among the productions lodged by the defender there is a cheque in his favour signed "C Ballard" and dated 17 July 2002. It is the defender's position that this cheque was signed by the pursuer, delivered to him and paid when presented to the pursuer's bank. To a layman's eye there are similarities as between that signature and the signature on the bond. This cheque was not one of the documents provided to Mr McCrae for consideration prior to him providing his opinion in the report dated 18 April 2007, 6/1 of process. The local agents acting for the defender were anxious that the local agents acting for the defender would be aware of the cheque dated 17 July 2002 and the apparent similarity as between the signature on it and the signature on the bond. Accordingly the local agents of the defender sent a photocopy of the cheque to the local agents for the pursuer under cover of letter of 28 February 2007. Receipt of that letter and the enclosed photocopy was acknowledged by the local agents for the defender by letter dated 7 March 2007. However, as is evident from the terms of his report, Mr McCrae was not shown that photocopied cheque. Those acting for the defender instructed a further forensic document examiner, Ms Kathryn Thorndycraft. On the basis of the documents provided to her, including the cheque of 17 July 2002, Ms Thorndycraft concluded that it was probable that the signature on the bond was that of the pursuer. Ms Thorndycraft advised that Mr McCrae should have the opportunity of examining the documents which had been provided to her, including the cheque. Ms Thorndycraft's report of 12 August 2008 is lodged as production 7/14. In an addendum to that report, dated 21 August 2008, 7/15 of process, Ms Thorndycraft states that her main concern in the case is the fact that Mr McCrae had not had sight of the cheque and another document, being a loan application signed by the pursuer and dated 30 August 1998. By letter dated 5 June 2008 the Edinburgh agents for the defender wrote to the then Edinburgh agents for the pursuer, enclosing a further photocopy of the cheque and asking for confirmation that the copy cheque had been forwarded to Mr McCrae for his consideration. The then Edinburgh agents of the pursuer replied by letter dated 11 June 2008, advising that they had sent a copy of the letter of 5 June 2008 to the local agents for the defenders. They noted that they were under no obligation to forward a copy of the cheque to the handwriting expert instructed on behalf of the pursuer and stated that if the defender's agents wished to obtain their own expert report, then that was a matter for them. Despite further letters, dated 29 September and 2 October 2008 from the defender's Edinburgh agents to the then Edinburgh agents for the pursuer, the Edinburgh agents for the pursuer failed to confirm that a copy of the cheque had been shown to Mr McCrae. By letter dated 9 October 2008 the local agents acting for the defender put the local agents acting for the pursuer on notice that should Mr McCrae recant his opinion at proof, on the basis of the signature on the cheque, those acting for the defender would move for an award of expenses personally against the local agents of the pursuer. On 13 October 2008 the Edinburgh agents acting for the pursuer wrote to the Edinburgh agents acting for the defender advising that they were withdrawing from acting. The first diet of proof, which consequently had to be discharged, had been fixed for 15 October 2008. Notwithstanding the imminence of the new diet of proof, it was only on 11 March 2009 that Mr Komorowski had advised Mr Bell that Mr McCrae accepted that the cheque and the bond had been signed by the same person. It should be noted, stressed Mr Bell, that at no time during correspondence between the agents, has it been suggested that the cheque dated 17 July 2002 had not been signed by the pursuer.

[9] The above history was sufficient, submitted Mr Bell, to require that in the interests of justice the pursuer should be required to lodge caution prior to the defender incurring further expense, but there were other circumstances here giving rise to various serious doubts as to the pursuer's credibility and, accordingly, the basis for the action. Notwithstanding what the pursuer now avers, she made no attempt to suspend the charge on the bond and thereby avoid apparent insolvency. She made no attempt to suspend the charge prior to sequestration. She did not enter appearance in the sequestration proceedings. Subsequent to her sequestration she has given misleading information to her permanent trustee. In this regard Mr Bell referred me to a series of notes prepared by the permanent trustee, copies of which were lodged as Nos.7/20 to 25 of process and a letter, sent on behalf of the pursuer by her local agents dated 29 January 2007, 7/19 of process. In a file note of 20 November 2006, 7/21 of process, the permanent trustee notes that the pursuer and her father were going to meet with the police with regard to "the allegation of fraudulently signing both her name and her father's name". However, in the summons in the action for reduction, signetted on 30 November 2006, there is the averment that Mr McDonald "signed his own and his daughter's name". In file note (11), dated 16 January 2007, the permanent trustee records that he had obtained information from Conveyancing Direct Glasgow to the effect that missives had been concluded for sale of the pursuer's property at 44 Lesmahagow Road, Strathaven, that a search had indicated that sequestration proceedings had been taken against the pursuer but that the pursuer had telephoned Conveyancing Direct Glasgow to say that these proceedings had been dismissed. File note (19) dated 22 January 2007 records that when challenged the pursuer had no answer to the allegation that she was attempting to market the property at 44 Lesmahagow Road at a time when she was sequestrated. File note (20), 7/24 of process, records that it is clear that the pursuer has, at the very least, been disingenuous, and perhaps more likely has been dishonest with her trustee. The file note provides details as to the respects in which the pursuer has, in the view of the permanent trustee, been either disingenuous or dishonest. File note (25), dated 15 February 2007, records that the pursuer "admitted that she had lied in relation to her sequestration in relation to her property and she now stated that this was because she was desperate to ensure that no money was paid to [the defender] from the sequestrated estate since it was all as a result of a fraud on [the defender's] part". Referring to the file notes, Mr Bell described them as revealing one inconsistency after another. The defender was apprehensive that the real motive and purpose behind the action for reduction of the bond was to force the defender and the permanent trustee to expend the balance of the sequestrated estate in judicial expenses, thus preventing any dividend being paid to the defender and other creditors. A little over £30,000 was held by the permanent trustee as available for unsecured creditors. The unsecured creditors stood at a figure of £60,000. However, this did not include the sum of £140,000 certified by the pursuer on 25 January 2007 as being due to her former employer, Neil McLean. A certificate to that effect had been provided by the pursuer's local agents to the permanent trustee under cover of letter dated 29 January 2007.

[10] Mr Bell pointed out that notwithstanding its complete lack of specification, the defender faced a claim for damages in the sum of £10,000. He accordingly could not abandon his defence to the action, even if he were inclined to do so. It was, however, to be borne in mind that the sequestration would not necessarily fall with a reduction of the bond. Irrespective of the validity of the bond, the defender maintained that the pursuer was indebted to the defender in the sum of about £50,000. She was indebted to other creditors, including Neil McLean. She was insolvent. In summing up, Mr Bell submitted that the circumstances were exceptional. The pursuer's claim lacked merit. The supporting expert on the basis of whose opinion legal aid is likely to have been granted was not provided with full information despite the requests which were made by those representing the defender. There was a very serious question over the credibility of the pursuer given the inconsistent statements she had given to the permanent trustee and her admission that she had lied. There was no purpose in taking the action to proof other than to deplete the assets available for creditors. The making of an order for lodging of caution was a matter for the discretion of the Lord Ordinary. The interests of justice favoured an exercise of that discretion with a view to avoiding an abuse of the process of the court.

[11] I did not understand Mr Komorowski to take serious issue with the applicable law as it had been summarised by Mr Bell. He emphasised however that it was enough that a party had a stateable case for exceptional circumstances being required for an order for caution to be made. He accepted that his case was fraught with difficulties. He accepted that there was no general rule that the sisted person should not be ordered to find caution, but the fact that a party had been granted legal aid was a relevant circumstance pointing away from an order for caution being made. He reminded me of the statutory provisions for the modification of a legally aided person's liability for expenses to nil. He accepted that a bankrupt pursuer will generally be required to find caution but that the general rule suffered exception where the bankrupt wished to impugn her own sequestration and she had a stateable case. It would be at least odd if the conclusion for damages changed the balance as between making an order for caution and not doing so.

[12] Mr Komorowski conceded on behalf of his client that the pursuer had on occasion not told the truth to the permanent trustee. However his instructions did not go the distance of identifying the occasions when she had not told the truth and when she had told truth. He was not able to say whether the Scottish Legal Aid Board had been advised of Mr McCrae's opinion as to the importance of the cheque. Of course, much depended upon who it was who had originally signed the cheque. Mr Komorowski accepted that those acting for the pursuer might have been more helpful, but it was not said that they had breached any professional rule or failed to obey any rule of court. Accordingly, they could not be said to have acted improperly. As far as the purpose of the action was concerned, if the bond was reduced, the defender might not be able to make good his claim that he was owed money by the pursuer. The loan by Neil McLean was "a loan between friends". Mr McLean has not made a claim in the sequestration. The defender had been slow in coming forward with a motion for caution. In all the circumstances, where it could not be said that the pursuer does not have a stateable case, the court's discretion should be exercised in favour of refusing the motion for caution.

[13] I do not see this to be a case where the applicable law is in dispute. It is a matter for the discretion of the Lord Ordinary as to whether an order should be made for caution for future expenses in any particular case. Regard should be had to the whole circumstances. Among the relevant factors pointing away from an order for caution is the fact that the party concerned has been awarded legal aid. In such a case the Scottish Legal Board has satisfied itself that the party has a prima facie case and the statutory scheme applicable in such cases makes provision for the protection of a party in receipt of legal aid from the consequences of an adverse finding of expenses. Of course the weight to be given to the fact that a party has been granted legal aid will depend upon whether or not the assessment of prima facie case was made on the basis of all relevant information. In the present case I have reason to suspect that it was not.

[14] Irrespective of whether he or she is legally aided, the general rule is that a bankrupt will be required to find caution before being allowed to pursue an action. That general rule suffers exception where, as here, the bankrupt is seeking to impugn the sequestration. However, regard must still be had in the whole circumstances. That includes whether the bankrupt pursuer has a stateable case. Here I am not satisfied that the pursuer has a stateable case. In so saying I am conscious that the pursuer's case for reduction of the bond depends on a sharp issue of fact: whether or not the signature on the bond is hers and that, in turn, depends in large part on an assessment of her credibility when she denies signing. I am equally conscious that when a court is required to make an assessment as to whether there is a prima facie case or whether a case can be regarded as stateable, it is usual for the court to proceed on the basis that the relevant party will prove what he or she offers to prove, whereas here Mr Bell invited me to find the pursuer's credibility questionable and therefore that what she claims should not be accepted as true. On the basis of the material put before me, I consider that the pursuer's credibility is indeed questionable. In coming to that conclusion I have accepted the file notes prepared by the permanent trustee as objective assessments by an officer of the court of the information with which he was provided. I have had regard to the admission by the pursuer that she had lied in relation to the sequestration and in relation to her property, which is recorded in file note (25), 7/25 of process. This admission was confirmed by Mr Komorowski who, very properly, advised me that the pursuer has accepted that she has not told the truth to the permanent trustee. Mr Komorowski described the pursuer's case as fraught with difficulties. I would agree. The averments relating to James McDonald read oddly. Strictly, they do not commit the pursuer to the proposition that McDonald signed the pursuer's name to the bond. If they are intended to give rise to the inference that he did sign the pursuer's name and then witness it in his own name, it is difficult to understand why he should have done so. The averments provide no clear explanation. The version of events now on record is different from that given to the permanent trustee by the pursuer and recorded in file note (3), 7/21 of process. While it might he thought that the report, 6/1 of process, gives support to the pursuer, Mr McCrae's conclusion depends on him having been provided with examples of all forms of signature used by the pursuer in order to make his comparison. If the signatory of the cheque dated 17 July 2002 was the pursuer, and this has never been denied by her representatives, then Mr McCrae would identify her as also being the signatory of the bond.

[15] However, even if it were not legitimate to look behind the pursuer's averments in the way I have been prepared to do, it appears to me that the circumstances here are sufficiently exceptional to justify making an order for caution for expenses. I have regard to the way in which the case has been conducted and, in particular, the failure of the pursuer's representatives, until very recently, to put the photocopy of the cheque to Mr McCrae for his opinion. I have also had regard to the purpose which this litigation might serve. Were the bond to be reduced, the defender would still claim that the pursuer was indebted to him. As matters stand, it would be for the permanent trustee to adjudicate on that claim. It is by no means clear why, even if the bond were reduced, the sequestration should be recalled. The pursuer's failure to co-operate with the permanent trustee, which, through her counsel, she has admitted, would indicate that the permanent trustee would be a better person than the pursuer to deal with the pursuer's creditors. The failure of co-operation on the part of the pursuer and her inconsistent statements as to whether or not she is indebted to Mr McLean, makes the matter difficult to assess but the pursuer looks to be insolvent irrespective of what she owes to the defender. The sequestration process was regular and not subject to challenge prior to the presentation of the petition for recall. I consider that Mr Bell was accordingly well-founded in submitting that it was almost inconceivable that the sequestration would now be recalled, even were the bond in favour of the defender to be reduced.

[16] In all the circumstances it appeared to me that justice required that the pursuer be ordered to find caution for expenses as a condition precedent of proceeding to proof. It appeared to me that Mr Bell's estimate of £20,000 to cover a proof of about 4 days was not unreasonable. Mr Komorowski did not suggest otherwise. Accordingly, I fixed caution in the sum of £20,000.

[17] I announced my decision at the end of the hearing and enquired of parties as to whether they wished me to provide a written opinion. At that time neither counsel required me to write on the matter. However, subsequently I was advised that the pursuer wished to reclaim and, accordingly, I have prepared this opinion.