Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION

[2017] CSOH 78

 

A332/16

OPINION OF LORD ARMSTRONG

In the cause

ACCOUNTANT IN BANKRUPTCY

Pursuer

against

PAULINE FARRELL OR WALKER

Defender

and

THE LORD ADVOCATE

Minuter

Pursuer:  Ower; Harper Macleod LLP

Defender:  Clark; BLM

Minuter:  O’Neill, Solicitor Advocate; Scottish Government Legal Directorate

11 May 2017

Introduction
[1]        The pursuer is the trustee in the sequestration of John Gerard Walker (“the debtor”).  The defender is the debtor’s former wife.  This case raises inter alia the issue of whether the terms of section 34(4) of the Bankruptcy (Scotland) Act 1985 are ECHR compliant, and whether, in that regard, a declaration of incompatibility in terms of section 4(2) of the Human Rights Act 1998 should be made.  In these circumstances, in accordance with section 5 of the 1998 Act and Chapter 82 of the Rules of the Court of Session, the minuter entered the process as a party to the proceedings representing the Scottish Ministers.

[2]        At a procedure roll discussion, the pursuer insisted on her preliminary plea, challenging the relevance of the defender’s pleadings, and sought decree de plano.

 

The Facts
[3]        The defender and the debtor married on 9 November 2007, and were divorced by decree dated 3 August 2010.  The debtor was sequestrated on 1 April 2009, and the pursuer was appointed trustee on 11 May 2009.  Prior to his sequestration, the debtor was the sole proprietor of a property at 1A Beechwood Avenue, Rutherglen.  Around December 2007, that property was sold for £435,000.  After deduction of an outstanding mortgage, and the costs of sale, the net free proceeds of sale were £178,723.82.  The debtor mandated transfer to the defender of the sum of £172,895.25.  In this action of payment by the pursuer, that is the sum sued for.

[4]        The defender subsequently purchased property at 56 Picketlaw Farm Road, Carmunnock in her sole name.  She avers that in contemplation of marriage, both she and the debtor sold their respective properties in order to purchase that property as a matrimonial home.  She avers that the purchase price was £866,000 and that this was funded by (i) a mortgage of approximately £380,000, (ii) a contribution by the defender of approximately £313,000 from the sale of her property, and (iii) the sum of £172,895.25 which was transferred by the debtor to the defender as a gift in consequence of their marriage for use in the purchase of the matrimonial home.  She avers that she and the debtor separated in January 2008, but that she has continued to reside at the property, together with her son and daughter, and has continued to pay the mortgage and to maintain the property without contribution from the debtor.

[5]        The defender avers that the property has suffered a substantial fall in value since it was purchased, and is now valued at about £560,000.  The sum due on the mortgage remains £380,000.  She avers that if decree is granted in the sum sued for, this will result in a number of personal and financial consequences for her.  In the first place, she would require to sell her home, and its diminution in value would mean that she would lose her contribution of £313,000.  Secondly, she and her children would lose their family home with no means of buying or privately renting anther home.  Thirdly, she avers that the sale of the property would not allow her to make payment of the full amount to the pursuer and she herself would be sequestrated.

 

The Pursuer’s Case
[6]        The pursuer’s position is that the transfer of £172,895.25 was a gratuitous alienation by the debtor to the defender, and as such it is challengeable under section 34 of the Bankruptcy (Scotland) Act 1985.  The debtor received no benefit from the transfer, which was made at a time when the debtor’s business accounts from February 2005 to March 2006 showed a loss of £7,411 and business assets to be substantially exceeded by liabilities.  At the time of sequestration, the debtor considered that his liabilities amounted to £152,029.  The pursuer seeks payment of the sum transferred to the defender in order to restore it to the estate of the debtor for the benefit of the general body of creditors.

 

The Defender’s Case
[7]        The defender does not expressly dispute that the transfer of £172,895.25 was a gratuitous alienation.  She does not seek to invoke any of the defences afforded by section 34(4).  Her complaint is that the statutory defences to a challenge to a gratuitous alienation, set out in section 34(4), have no regard to the circumstances of the alienation, or to the reasonableness or proportionality of making the order sought, or to the personal or financial circumstances of the person against whom the order is sought.  In this regard, she maintains that the provisions of section 34(4) are incompatible with the rights of the defender and her family under Articles 6, 8, 14, and Article 1 of the First Protocol (“A1P1”), of the European Convention on Human Rights.  She maintains that section 34(4) can be read and given effect to in a way which is compatible with her Convention rights and those of her family, in terms of section 3(1) of the Human Rights Act 1998, by interpreting and applying the section in a way which permits the court to consider the circumstances of the person against whom an order is to be made, the reasonableness and proportionality of making the order sought, and where an order is appropriate, the nature and extent of any order to be made.  In the alternative, she seeks a declaration of incompatibility. 

 

The Submissions
[8]        Each of the parties tendered written notes of argument which I have taken into account, together with the oral submissions made at the bar.

 

(i)         Submissions for the Pursuer
[9]        The defender’s case that the provisions of section 34(4) violated her Article 6 rights was misconceived.  Article 6, which protected the defender’s right to a fair trial, was not engaged.  It was admitted that the sum sought was transferred by the debtor to the defender as a gift, that the defender was an “associate” for the purposes of section 34, and that the transfer took place within five years of the debtor’s sequestration.  In these circumstances, where none of the statutory defences were available to her, the defender’s concern was not with the fairness of the process for determining her substantive rights, but rather with the lack of a stateable statutory defence which reflected her circumstances.  The defender’s case, in that respect, was in reality a challenge to the substantive content of section 34(4).  No question of a breach of Article 6 arose.

[10]      In relation to Article 8, the defender’s position was that the grant of decree in the pursuer’s favour would compel the sale of her home, which would constitute an interference in her family life and that of her dependent children.  That argument too was misconceived.  The case was an action for the payment of a sum of money, and nothing more.  The pursuer was not seeking an order which would compel the defender to sell her home, or any other property to which she had title or interest.  If decree was granted, it would be a matter for the defender as to how it was to be satisfied.  If, following the grant of decree, its enforcement brought about the sequestration of the defender, then she would be entitled to the protection afforded by section 113(2) of the Bankruptcy (Scotland) Act 2016, which, effectively, re-enacted the provisions of section 40 of the 1985 Act.  In such circumstances, the defender’s means and financial resources and other relevant circumstances would be taken into account.  It did not follow that, as a consequence of the grant of decree for payment in this action, the defender would lose her home.

[11]      In relation to Article 14, the defender’s position was that the extended period referable to gratuitous alienations in relation to the spouse of a debtor was discriminatory, in that, in terms of section 34(3)(a), the relevant period in respect of associates of the debtor was one of five years, rather than that of two years in respect of others.  In that regard, however, Article 14 was not engaged.  The defender averred only that the family, and thus the defender and her family, was a category of status protected by Article 14.  She failed to specify the basis of discrimination on any grounds prohibited by Article 14.  In any event, the definition of associates in section 74(2) of the 1985 Act included other categories of person who were not spouses of the debtor.  Further, in the particular circumstances of this case, the transfer of the sum in question had, in fact, taken place within two years of the debtor’s sequestration.

[12]      In relation to A1P1, the defender’s position was that decree for payment would interfere with her peaceful enjoyment of her possession, in the shape of her home.  In that regard, it was to be noted that all that was sought by the pursuer was decree for payment of a sum of money.  No order was being sought in respect of the defender’s home.

[13]      In any event, the aims of section 34 were legitimate and struck a proper balance between the interests of a debtor’s creditors and those in the position of the defender.  Its effect was reasonably proportionate to that aim.  Any interference with the defender’s rights was proportionate and was necessary for the legitimate protection of the rights of others.  Reference was made to David Johnston’s Trustee v Baird (2012) CSOH 117, in which Lord Uist had found section 34(4) to be compatible with A1P1 (paragraphs 21, 26).

[14]      Section 34(4) included the following terms:

“On a challenge being brought under subsection (1) above, the court shall grant decree of reduction or for such restoration of property to the debtor’s estate or other redress as may be appropriate ...”

 

In anticipation of a submission by the defender as to how the phrase “or other redress” should be interpreted, it was submitted that the purpose of that specific provision had been authoritatively decided.  In Short’s Trustee v Chung 1991 SLT 472, at 476k-l, it had been stated:

“It is in our opinion clear from a reading of section 34(4) that the general purpose is to provide that as far as possible any property which has been improperly alienated should be restored to the debtor’s estate.  In the case of a disposition of heritable property this can easily be done by a reduction of that disposition.  We consider that the reference to ‘other redress as may be appropriate’ is not intended to give the court a general discretion to decide a case on equitable principles but is designed to enable the court to make an appropriate order in a case where reduction or restoration of the property is not a remedy which is available.”

 

That decision had been affirmed in the case of Cay’s Trustee v Cay 1998 SC 780, at 788B-D, and 788G.

[15]      With reference to the defender’s submission that section 34 should be read down so as to include the effect of the terms of section 35, which, in the context of orders for payment of a capital sum on divorce, allowed all relevant circumstances to be taken into account, it was appropriate to view the differences in the terms of the two sections of the Act as indicative of Parliament having adopted a different approach in relation to each.  The fact that in each case a different legislative alternative had been chosen, did not mean that either alternative was incompatible with Convention rights.  It was appropriate to conclude that, for good reason, Parliament had implemented a deliberate intention to exclude such consideration of all circumstances from the ambit of section 34.  In that regard, the Scottish Law Commission Report on Bankruptcy and Related Aspects of Insolvency and Liquidation, (Scot. Law Com. No 68) (1982) indicated, at paragraphs 12.30-32, that particular considerations had been taken into account in relation to orders for payment, or for the transfer of property, on divorce.  Where the difference in the terms of section 34 and section 35 was the result of deliberate parliamentary intention, the court should be slow to interfere.

[16]      The defender’s submission that any remedy arising from unjustified enrichment was not available to her was misconceived.  In circumstances in which it was accepted that the transfer from the debtor to the defender was a gift, and not given for value, there was no scope for unjustified enrichment, other than for the benefit of the defender at the expense of the general body of creditors.  If the transfer had been for value, and was reduced by the court, it would be open to the defender to submit a claim in the sequestration, but that was not the situation here.  There was no basis for such a claim because the transfer was a gift.

[17]      In conclusion, section 34 was compatible with Articles 6, 8 and 14 and A1P1.  In the context of the remedy sought, there was no risk of infringement of the defender’s rights in those respects.  There was no need for section 34(4) to be read, and given effect, in a way other than as had been authoritatively determined, and no need for a declaration of incompatibility.

 

(ii)        Submissions for the Minuter
[18]      It was accepted that the effect of section 34 was that if, as here, none of the statutory defences were made out, then the court had no discretion to vary the amount due.  The decisions in the cases of Short’s Trustee, supra, and Cay’s Trustee, supra, were correctly decided.

[19]      The minuter adopted the submissions for the pursuer.

[20]      In relation to Article 6, the defender’s rights were not compromised by the terms of section 34(4).  Article 6 did not concern the substantive content of civil rights and obligations in national law (James v United Kingdom (1986) EHRR 123, at paragraph 81).

[21]      In relation to Article 8, the present action was for payment of money and its focus was on the legitimacy or not of an alienation by the debtor in anticipation of his sequestration.  It did not concern an order in respect of the defender’s home.  It went too far to assert, as the defender did, that the grant of a decree for payment would compel the sale of her home, or that it would result in her inevitable sequestration.  In any event, where an individual could not afford to meet a claim for money, there were statutory protections in place in relation to a family home (section 40 of the 1985 Act; section 113 of the 2016 Act).

[22]      Further, what was proposed by the defender as a form of equitable defence, would undermine the legitimate aim of section 34.  A legislative scheme that provided for the court to decline to restore property alienated by an insolvent debtor, or to modify the extent of that restoration based on the financial circumstances of the person in whose favour the alienation was made, would run the real risk of encouraging such alienations and the dissipation of assets by the recipient. 

[23]      In relation to Article 14, in circumstances where the alienation concerned was made within two years of the debtor’s sequestration, no practical issue arose.  No “other status” had been identified by the defender.  She did not offer to demonstrate that there was no relevant objective justification for the alleged discrimination.  Further, the plain justification for the longer period referable to associates was that there was a greater likelihood of alienation where associates were concerned. 

[24]      In relation to A1P1, although it was accepted that the defender’s rights were engaged by the action, in that the money at issue comprised an asset for these purposes, section 34 was compatible with A1P1, for the reasons summarised by Lord Uist in David Johnston’s Trustee, supra.  Section 34 pursued a legitimate aim, namely the protection of the interests of creditors and the deterrence of action by an impecunious debtor to put funds beyond the reach of those creditors.  Any interference with the defender’s property was in accordance with the law.  Section 34 was in clear terms and prescribed the circumstances in which the court may not make an order.  The provision was rationally connected to the aims of protecting the interests of creditors and deterring conduct directed towards avoiding the consequences of insolvency.  It was proportionate, entitling the defender to establish that she fell within the exceptions of section 34(4)(a)-(c), and protecting her from action after five years, in the case of an associate, or two years, in any other case. 

[25]      In relation to the interpretation of the phrase “such other redress as may be appropriate”, the defender had failed to make any averment in her pleadings as to the appropriateness of some other form of redress.  In the absence of such pleadings, it was impossible to determine what other appropriate redress there might be (Short’s Trustee, supra, at 477b-c).

[26]      More generally, as was apparent from decided cases, principally in relation to matters concerning A1P1, it was important to recognise, when testing the proportionality of legislation, that non-discretionary rules may be proportionate.  In James v United Kingdom, supra, it was accepted that, in the circumstances under consideration in that case, it would have been possible for the legislation put into effect to have included a remedy which involved consideration of the whole referable facts and circumstances and the question of reasonableness, but that, in the event, Parliament had chosen instead to lay down broad and general categories within which rights would arise.  Where the reason for that approach was to avoid uncertainty, litigation, expense and delay, it was held that it was, in the first place, for Parliament to assess the advantages and disadvantages involved in the legislative alternatives available (paragraphs 35, 36, 39-41, 68).  Where anti-avoidance measures were concerned, it was particularly appropriate that the preferable alternative should be determined by Parliament. 

[27]      Similar issues were considered in AXA General Insurance Ltd and Others v Lord Advocate and others (20-11) UKSC 46.  In order to be compatible with Convention rights, a legislative provision must be shown to be pursuing a legitimate aim and to be reasonably proportionate to the aim sought to be realised (Lord Hope, at paragraph 28).  At paragraph 32, Lord Hope went on to state:

“But in the hands of the national courts too the Convention should be seen as an expression of fundamental principles which will involve questions of balance between competing interests and issues of proportionality.  ... in some circumstances, such as where the issues involve questions of social or economic policy, the area in which these choices may arise is an area of discretionary judgement.  It is not so much an attitude of deference, more a matter of respecting, on democratic grounds, the considered opinion of the elected body by which these choices are made.”

 

[28]      Lord Reed, at paragraph 124, under reference to James v United Kingdom, supra, stated:

“An interference with possessions requires to be justified as being necessary in the public or general interest.  In that regard, the Strasburg Court allows national authorities a wide margin of appreciation in implementing social and economic policies, and will respect their judgement as to what is in the public or general interest unless that judgement is manifestly without reasonable justification.”

 

And, at paragraph 126:

“In order for an interference with possessions to be compatible with A1P1, it must not only be lawful and in the general interest, but there must also be a reasonable relationship of proportionality between the means employed and the aim sought to be realised.  This involves an assessment of whether a fair balance has been struck between the demands of the general interests of the community and the requirements of the protection of the individual’s fundamental rights”.

 

[29]      Thus it was to be recognised that in relation to section 34, Parliament might have adopted an alternative approach, but that in fact it had chosen not to.  That choice was to be respected, unless it was manifestly without reasonable justification.  Reference was made to R (Animal Defenders International) v Secretary of State for Culture, Media and Sport (2008) 1 AC 1312, in which, at paragraph 33, Lord Bingham of Cornhill stated:

“The weight to be accorded to the judgement of Parliament depends on the circumstances and the subject matter.  ...  Legislation cannot be framed so as to address particular cases.  It must lay down general rules:  ...  A general rule means that a line must be drawn, and it is for Parliament to decide where.  The drawing of a line inevitably means that hard cases will arise falling on the wrong side of it, but that should not be held to invalidate the rule if, judged in the round, it is beneficial.”

 

[30]      The courts should be loathe to interfere with the choices which Parliament had made in that regard, particularly in the field of an anti-avoidance measure, such as section 34.  It did not follow that bright line rules, affording no discretion, but in the context of available statutory defences, were manifestly without reasonable justification (The Queen (McNiece) v Criminal Injuries Compensation Authority (2017) EWHC 2 (Admin), at paragraphs 82-84, 88, 104, 110, and 112).   Against that background, consistent with Lord Uist’s decision in David Johnston’s Trustee, section 34 was to be viewed as having a legitimate aim, implemented by proportionate means.

[31]      In relation to the defender’s submission that section 34 should be read down so as to include the effect of the terms of section 35, it was relevant to note that section 36, which concerned unfair preferences, provided for a similar inflexibility to that of section 34.  Thus, properly analysed, the effects of section 35 had been devised for specific reasons, whereas the terms of sections 34 and 36 reflected the generality of Parliament’s intention.

[32]      It was not a requirement of A1P1 that compensation must be available.  The case of AXA, supra, was illustrative of that, and concerned, as here, the regulation of legal rights, rather than expropriation which was the issue in the cases relied upon by the defender (Sporrong, infra;  Pinnock, infra;  Powell, infra;).  Since expropriation did not arise as an issue in this action, these cases were to be distinguished for that reason.

 

(iii)       Submissions for the Defender
[33]      It was submitted that the terms of section 34, as presently construed in the decision of Short’s Trustee, supra, were not Convention compliant, but that they could be construed in a Convention compliant manner; which failing, they could be read down in terms of section 3 of the Human Rights Act 1998, so as to allow the words “or other redress as may be appropriate” to afford the court a discretion to hear evidence and consider the whole circumstances of the defender and the proportionality of the order sought; which failing, there should be a declaration of incompatibility in terms of section 4 of the 1998 Act.

[34]      In that regard, the decisions in Short’s Trustee, and Cay’s Trustee, were wrongly decided.  The decision in David Johnston’s Trustee was not in point.  In that case, reliance had been placed on the availability of compensation.  In this case, the defender had no access to compensation and, accordingly, in relation to her rights under A1P1, she would be required to bear an individual and excessive burden.  As a matter of fairness, the court should consider whether, in the defender’s whole circumstances, decree for a lesser sum than that sought was appropriate.

[35]      The defender’s marriage to the debtor had been short, and she had had no knowledge of his business affairs.  Her equity in the family home had been diminished, but yet the effect of the grant of decree, as sought, would be to “ring-fence” the funds gifted to her by the debtor.  The possibility of the grant of decree, as sought, meant that she was but a short step from losing her family home.  She had no other assets.  Her interest in the equity of the property comprising the family home fell within A1P1 because it was beyond doubt that decree would be enforced.  That being so, it was an inevitable consequence of the grant of decree that the defender would lose her home. 

[36]      It was accepted that a wide margin of appreciation was to be afforded to the legislature in such matters, but, in relation to section 34, the absence of any discretion on the part of the court was manifestly without justification.

[37]      The interpretative obligation imposed on the court by section 3 of the 1998 Act was of unusual and far-reaching character, and required a broad approach which was stronger and more radical than the mere adopting of a purposive interpretation (Ghaidan v Godin-Mendoza (2004) UK HL 30).  By so interpreting the words “or other redress as may be appropriate”, the court would have a discretion to consider the defender’s whole circumstances.

[38]      Were that not the appropriate course, it would be appropriate to read down section 34 so as to include in its terms the effect of the provisions of section 35, which did allow the court, in particular circumstances, a discretion to consider all the relevant circumstances.  By doing so, section 34 would be rendered Convention compliant by allowing a proper balance between the interests of the defender and her family, and those of the general body of creditors.

[39]      In Sporrong and Lonnroth v Sweden 1982 5 EHRR 35, it was held that in a situation where that fair balance was upset, the resulting individual and excessive burden could be rendered legitimate only if there was the possibility of inter alia claiming compensation (paragraph 73).  In circumstances where no compensation was available to the defender, the resulting loss of her investment in her property would be an interference with her rights under A1P1.  There was no reasonable prospects of the defender securing compensation by way of unjustified enrichment (cf David Johnston’s Trustee, supra, at paragraph 21), because the relevant enrichment arose with legal justification, under the provisions of section 34(4).

[40]      The issue of the availability of compensation to the question of proportionality had been recognised in AXA, supra, at paragraph 34, under reference to Sporrong, supra, and to Draon v France (2005) 42 EHRR 807,  in which, at paragraph 79, it had been stated that a total lack of compensation could be considered justifiable under A1P1 only in exceptional circumstances.  In so far as the position of the defender was concerned in this case, there were no such exceptional circumstances.

[41]      In relation to David Johnston’s Trustee, supra, it was submitted that had the necessary careful consideration of the particular facts included recognition that there was no access to compensation, a different decision, as to the compatibility of section 34 with A1P1, would have been reached.  In any event, that case was to be distinguished on the basis that it did not involve the forfeiture of a family home.

[42]      In relation to Article 6, reference was made to Benthem v The Netherlands (1986) 8 EHRR 1, at paragraph 32.  The rights protected by Article 6 were not entirely procedural in nature.  Rather, Article 6 was engaged if the existence of the right itself, or its scope, or the manner in which it might be exercised. was in dispute.  In this case, the defender’s right to have the proportionality of the grant of decree as sought, considered by the court, was in dispute.  Article 6 was therefore engaged.

[43]      In relation to Article 8, the loss of a home was to be regarded as an extreme interference with the protected rights, and accordingly the need for an assessment of proportionality was essential (Manchester City Council v Pinnock (2010) UKSC 45;  Hounslow London Borough Council v Powell (2011) UKSC 8;  Cosic v Croatia (2011) 52 EHRR 39, at paragraphs 22-23).  Where general social and economic policy considerations arose in the context of Article 8, the scope of the margin of appreciation depended on the context of the case, with particular significance attaching to the extent of the intrusion into the personal sphere of the applicant (Zehenter v Austria (2011) 52 EHRR 22, at paragraphs 56-7).

[44]      The protection afforded to the defender’s rights under A1P1 required there to be access to compensation.  In circumstances where the current interpretation of section 34 denied such access, there would be a violation of A1P1.  In conclusion, it was submitted that the defender had raised issues of lawfulness, proportionality and absence of fair balance, that the decision-making process provided by section 34, in the absence of a power to consider the defender’s circumstances, was not fair and did not afford due respect to her interests, in circumstances in which she was at risk of losing her home, that the lawfulness and proportionality of the order sought ought to be determined by the court, and that section 34 ought to be read compatibly with the Human Rights Act 1998, so as to enable the court to consider the defender’s circumstances by hearing evidence and forming its own view on proportionality.

 

Discussion
[45]      It was not in issue that the structure of section 34(4) of the Bankruptcy (Scotland) Act 1985 is such that if it is demonstrated that a gratuitous alienation was made on a relevant day, then, in circumstances in which none of the available statutory defences are relied upon, the court has no discretion, and must grant decree of reduction or such restoration of property to the debtor’s estate or other redress as may be appropriate.  In this case, being an action for payment, the decree which would normally result in such circumstances would be decree for payment of the sum transferred by way of gratuitous alienation.

[46]      In considering the validity of the defender’s submissions that by affording no discretion to the court, in such cases, section 34(4) is not Convention compliant, it is necessary to take account of the status of the legislative provision, as enacted by Parliament, in that context.  In that regard, under reference to the rights protected by A1P1, it is accepted that in matters of discretionary judgement, involving a balance between the competing interests of the need to protect an individual’s rights, on the one hand, and of the general interest of the community, on the other, in the implementation of social or economic policy, Parliament is to be afforded a wide margin of appreciation (AXA, supra, at paragraph 32, 124, 126).

[47]      In that context, it must be inferred that Parliament has deliberately chosen to legislate as it has and, in particular, in so far as this case is concerned, that, in doing so, it made a positive decision to differentiate between the terms of section 35 of the 1985 Act, which does afford discretion to the court, and the terms of sections 34 and 36, which do not.  Where that was done for good reason, I accept that it was for Parliament to assess the advantages and disadvantages of the legislative alternatives, having regard to the aim sought to be achieved (James, supra, at paragraph 68).  In such circumstances, it must be recognised that the court will be slow to intervene, unless it can be shown that the relationship of proportionality between any particular aim sought to be realised by a legislative measure, and the means employed to achieve it, is unreasonable.

[48]      In the course of the submissions, it was not suggested that the aim of protecting the interests of the general body of creditors in a sequestration was anything other than a legitimate one.  Given the extent of the public and general interest in effecting and maintaining that protection, and the defences which are afforded by section 34, I am not persuaded that, in giving effect to the provision, any interference with the defender’s possessions, as defined for the purposes of A1P1, is unjustified or disproportionate.

[49]      In so far as the interpretation of the phrase “or other redress as may be appropriate” is concerned, I am not persuaded that the cases of Short’s Trustee and Cay’s Trustee were wrongly decided, and that, instead, it should be construed in a manner which would allow a consideration of the whole circumstances of the defender and the proportionality of the order sought.

[50]      For the defender, emphasis was placed on her inability to obtain compensation, but I do not accept that, as was submitted on her behalf, the availability of compensation is a requirement of A1P1.  The case cited in support of that contention (Sporrong, supra) concerned the particular facts of expropriation.  The passage in Draon, supra, at paragraph 79, to the effect that the availability of compensation is material to the assessment of whether a fair balance, in the matter of proportionality, has been struck, does not support the proposition that its absence will necessarily result in a breach of the protected right.  As submitted for the minuter, the case of AXA, supra, is an example of A1P1 not being breached in the absence of access to compensation.

[51]      On the specific issues raised by the defender, I find that the operation of section 34(4) would not result in illegitimate interference with her rights, amounting to breaches of Article 6, 8, 14 or A1P1 of ECHR. 

[52]      In relation to Article 6, the defender’s criticism is not directed to the procedural fairness of the process to be invoked in the determination of her substantive rights, but, rather, it is that she is denied the opportunity to present a defence not afforded by the relevant statutory provision.  That is, in effect, a challenge to the substantive content of section 34(4).  Article 6 does not, in itself, guarantee the content of civil rights (James, supra, at paragraph 81).  In any event, in relation to the issue of access to a relevant process, in the present case, on the likely post-decree scenario presented on her behalf, the defender, as a result of her sequestration, would have the opportunity, at that stage, to present her whole circumstances as relevant to the protection of her interests in her family home.  The case of Benthem, supra, on which reliance was placed, is to be distinguished on the basis that it concerned an existing right, its scope, and the manner in which it was to be exercised.  That situation is not in point with the circumstances of the present case, in which, by virtue of the terms of section 34(4), the defender has no right to ventilate the whole circumstances of her position.  For these reasons, I find that Article 6 is not engaged.

[53]      As to Article 8, in relation to the defender’s interest in the family home, I determine the matter on the basis that in this action for payment, no order is sought which would directly have the effect of interfering with her rights in that regard.  Emphasis was placed on what was said to be the likely consequence of the grant of decree, but I do not consider that to be a relevant consideration for these purposes.  For aught yet seen, it does not necessarily follow that the grant of decree will result in the defender losing the family home.  Whether or not that transpires to be the case is a matter which will become apparent in the future, and, on that basis, the raising of the issue at this stage is premature.  Accordingly, I find that Article 8 is not engaged.  It is relevant to note that if the defender’s fear of ultimate sequestration is well-founded, she will have the benefit of the protection afforded by section 113 of the Bankruptcy (Scotland) Act 2016.

[54]      In relation to Article 14, although the issue of discrimination was raised in the defender’s pleadings and note of argument, it was not pressed in oral submissions.  Given the fact that, in the event, the relevant transfer occurred within 2 years of the debtor’s sequestration, no practical effect arose in that respect.  In any event, for the reasons submitted by the pursuer and the minuter, I find that Article 14 is not engaged.

[55]      In relation to A1P1, given that the action is one for payment, I accept that, contrary to the position in relation to the family home, the sum at issue is a relevant possession, in respect of which the grant of decree would constitute an interference with the defender’s referable right.  For the reasons I have stated, however, I find that the aims of section 34 are legitimate and that the provision strikes an appropriate balance between the competing interests of the defender, on the one hand, and the general body of creditors, representing the public and general interest, on the other.  That being so, I find that the grant of decree would not result in a breach of the defender’s rights under A1P1. 

[56]      In the whole circumstances, I am not persuaded that the terms of section 34(4) are unjustified, arbitrary or disproportionate.  Rather, for the reasons submitted by the pursuer and the minuter, I find that the terms of the section strike an appropriate balance between its legitimate aim and the means of securing that aim, and that the degree of interference which might impact on the defender’s rights, is proportionate to the need to protect the interests of the general body of creditors, in the wider public interest.  On that basis, I determine, in particular, that section 34(4), as currently interpreted, is compatible with the European Convention of Human Rights.  I am fortified in that conclusion by Lord Uist’s decision in David Johnston’s Trustee, supra.  Accordingly, I am not satisfied that there is a requirement to read down the terms of section 34(4), in accordance with section 3 of the 1998 Act, or that a declaration of incompatibility, in terms of section 4 of that Act, is appropriate.

 

Decision
[57]      In the whole circumstances of the case, for the reasons I have given, I hold that the pleadings constituting the defender’s positive defence to this action are irrelevant.  Accordingly, having regard to the admissions made by the defender on Record, I shall sustain the pursuer’s first and second pleas-in-law, repel the defender’s pleas-in-law, and pronounce decree de plano.

[58]      I reserve, meantime, all questions of expenses.