PETITION OF UK AGRICULTURAL LENDING LTD FOR RECTIFICATION OF DOCUMENTS [2021] ScotCS CSOH

OUTER HOUSE, COURT OF SESSION

[2021] CSOH 54

P659/20

OPINION OF LORD CLARK

In the petition of

UK AGRICULTURAL LENDING LIMITED

Petitioner

for

Rectification of documents in terms of section 8 of the Law Reform (Miscellaneous

Provisions) (Scotland) Act 1985

Petitioner: Brown; Shepherd and Wedderburn LLP

First Respondent: Paul Newsham (Lay Representative)

Third Respondent: Party Litigant

Fourth Respondent: Party Litigant

21 May 2021

Introduction

[1]

The petitioner seeks rectification of the terms of certain standard securities granted in

its favour by the first respondent. The terms of the standard securities state that they are

granted in respect of the first respondent's indebtedness to the petitioner. The petitioner

contends that the intention of the parties at the time of the grant of the standard securities

was that these documents would grant security in respect of the indebtedness of the second

respondent to the petitioner. Rectification is sought to reflect that intention, said to be

shown in an antecedent agreement to that effect and to be supported by other evidence. The

petitioner's application is opposed by the first, third and fourth respondents.

[2]

The petitioner is a finance company, specialising in the agricultural market. The first

respondent is Hamilton Orr Limited. The second respondent is Orrdone Farms Limited (in

administration), previously named Avocet Agriculture Limited. On 23 January 2020, joint

administrators were appointed to the second respondent. No answers to the petition were

lodged by the joint administrators. Mr Martin Frost (who is subject to an order under

section 1 of the Vexatious Actions (Scotland) Act 1898) is the third respondent. He is a

director of the first and second respondents. His wife, who is also a director of the first

respondent and who became a director of the second respondent on 7 September 2016, is the

fourth respondent.

Background

[3]

The first respondent owned various farming properties, including Harcarse Hill

Farmhouse, Harcarse Hill Steading, Harcarse Hill Cottages and adjacent fields, and Sunwick

Farm. At the material time, two brothers of the fourth respondent, along with relatives of

those brothers, were directors of the first respondent. Accordingly, the directors of the

two companies had close family links. In July 2016, the first respondent was indebted to

Ilona Rose Investments Limited ("IRIL") in the sum of £2,375,942.81. Following

discussions, it was agreed that the petitioner would make a new loan in the sum

of £3.25 million which would allow that debt to IRIL to be discharged. The petitioner

contended that the arrangement was that it would make the loan to the second

respondent, in the form of offsetting the first respondent's debt to IRIL, with the

remaining monies being transferred to the second respondent. By email dated 27 July

2016, an adviser acting on behalf of the petitioner emailed Russell Spinks of Kerr Stirling

LLP, the petitioner's solicitors, advising of the new transaction. The adviser noted that the

borrower was to be the second respondent and stated that "The security is being provided

by [the first respondent]". On 3 August 2016, Mr Spinks emailed a solicitor who acted on

behalf of two of the directors of the first respondent and in due course came to act on its

behalf. He enclosed drafts of the standard securities, and stated that the petitioner had:

"agreed to lend [the second respondent] the sum of £3,250,000 secured over

30 months with an interest rate of 12% per annum. Martin Frost, the director of [the

second respondent], is, I am told, the brother in law of your clients Duncan and

Stewart Orr who have agreed to put up security and personal guarantees for the loan

as per the previous loan to [the first respondent]".

In a reply dated 4 August 2016, the solicitor noted that the petitioner was interested in

lending to the second respondent on a secured basis and said that "The land at Sunwick is

now owned by [the first respondent] (you are aware of this)". He also noted that he

considered there was a conflict of interest as between the first and second respondents and

so he would be unable to act for both in the transaction. On 8 August 2016 he sent a further

email to Mr Spinks noting that "On the face of it, [the second respondent] will borrow

£3.2 million [sic] and get [the first respondent] to put up security".

[4]

On 8 August 2016, the petitioner sent a Facility Letter to the second respondent.

Clause 1.1 of the letter stated:

"... the Facility will be made available to the Borrower [the second respondent] for

the purpose of repaying existing borrowing held against securities granted by [the

first respondent] in favour of Ilona Rose Investments Limited over the Property,

providing working capital and servicing of interest...".

The Facility Letter also provided that an unlimited personal guarantee was to be provided

by the individual directors of both the first respondent and the second respondent and

debentures were to be granted by the first and second respondent. The letter also stated "By

signing and returning the acknowledgment and acceptance ("the Acceptance") you have

agreed to the terms of the Facility set out in this letter".

[5]

On 15 August 2016, Mr Spinks advised the petitioner that there was a new proposal

that the properties be transferred by the first respondent to the second respondent. On

18 August, the petitioner's adviser told Mr Spinks that there had been a discussion with the

third respondent that morning "and it has been agreed that the transaction will complete

under the original structure i.e. [the first respondent] will provide the security for a loan to

[the second respondent]".

[6]

On 24 August 2016, final documentation was sent by Mr Spinks to the solicitor for

the first respondent for review and execution. On the same day, another solicitor was

instructed for the second respondent. On or around 25 August 2016, the first respondent

granted the standard securities ("the Harcarse Hill and Sunwick Farm Securities") in favour

of the petitioner. The Facility Letter was accepted on behalf of the second respondent on

25 August 2016. On or around 25 August 2016, the third and fourth respondents, having

received independent legal advice, gave personal guarantees in favour of the petitioner in

respect of the debt owed by the second respondent. Other directors also gave personal

guarantees. The Facility Letter was signed on behalf of the petitioner on 1 September 2016.

On 22 September 2016, debentures were granted by the first and second respondents,

executed on their behalf by the third respondent. The securities were registered in the Land

with the Registrar of Companies. After payment was made to the outgoing lender (IRIL)

and of sundry other charges, the remaining balance was paid to the second respondent,

through its solicitors.

[7]

In about September 2017, the first respondent disponed the subjects at Harcarse Hill

and Sunwick Farm to the second respondent. The consideration in the dispositions was

narrated as being for certain good and onerous causes. The second respondent was

registered as proprietor of Harcarse Hill and Sunwick Farm on 3 September 2018. The

petitioner's position is that the transfer of title took place without its knowledge or consent.

An action of reduction has been raised in this court by the first respondent against the

second respondent in respect of the Sunwick Farm disposition. The second respondent is

presently interdicted ad interim from taking any action to obtain possession of Sunwick

Farm. Bankruptcy proceedings have been raised in England by the petitioner in respect of

the third and fourth respondents.

Procedural history

[8]

Shortly after the petition was raised, permission for Mr Paul Newsham, a director of

the first respondent, to act as lay representative of the first respondent was granted by the

Lord Ordinary who dealt with that application. The case called for a by-order hearing on

12 November 2020. On behalf of the petitioner, it was said that the third and fourth

respondents did not have any proper interest to oppose the petition, although no motion to

deal with that issue at that stage was enrolled. The respondents' answers were also

criticised. Mr Newsham, as lay representative for the first respondent, and Mr and

Mrs Frost, appearing in person at the teleconference hearing, indicated that they were

seeking to obtain legal representation.

[9]

At the continued by order hearing on 7 January 2021, Mr Newsham again appeared

for the first respondent (no legal representation having been obtained) but senior and junior

counsel appeared on behalf of Mr and Mrs Frost. Counsel for the petitioner submitted that

the answers initially lodged for the respondents were patently untrue and deliberately

dishonest and that they sought to raise a number of irrelevant matters. Senior counsel for

the third and fourth respondents indicated that the answers had been substantially adjusted

with much material stripped out, but that some further information and investigation was

needed. A period of adjustment was allowed, with a continued by order hearing fixed for

5 February 2021 and a substantive hearing fixed for 12 March 2021. On 2 February 2021 the

solicitors who had acted for the third and fourth respondents withdrew from acting. On

5 February 2021 the third and fourth respondents, appearing personally, moved to have the

cause sisted, on the ground that it might be capable of being resolved by discussions

between the parties. Counsel for the petitioner advised the court that no such discussions

were occurring. The motion was refused.

[10]

Certain preliminary and other matters were raised at the beginning of the

substantive hearing. On behalf of the petitioner, objection was taken to any lines of defence

in the Note of Argument which were not in the pleadings. There were points which had

been in the original answers but then deleted when counsel became involved. There had

been no motion to amend the answers to re-open such lines. The affidavit of Mr Frost was

said to contain some extraordinary material but was of little relevance to the issues. If

Mr Newsham was merely following the arguments of the third and fourth respondents and

there was an absence of a legitimate interest on the part of the third and fourth respondents

then there was some concern that the first respondent should not artificially become a

conduit for them.

[11]

Mr Newsham submitted that the actual points of argument were very similar and

represented the first respondent's position. Mr Frost, making submissions on behalf of

himself and his wife, moved for the substantive hearing to be delayed so as to facilitate

(a) proper intimation by the petitioner to all interested parties and (b) the conclusion of

relevant investigations by Police Scotland and the outcome of a trial due to take place in

August 2021, which involved persons related to the first and second respondent companies

and the disposition of the land which is the subject of the standard securities. He advised

that no legal proceedings had been raised against the joint administrators seeking to

challenge their appointment. Counsel for the petitioner opposed this motion on the

following grounds. Any other persons who gave guarantees did not have interest in the

petition. Any motion that others should have been given intimation should have been made

some time ago. If any of those parties felt they had an interest then given the other

proceedings one could readily infer that if any of them wanted to become involved they

could have done so.

[12]

The question of whether a guarantor had an interest was an issue to be dealt with at

the substantive hearing. On the matter of the police investigations, I was not persuaded that

this caused any difficulty in proceeding with the substantive hearing. I therefore refused the

motion to adjourn the hearing.

Statutory provisions

[13]

Section 8 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985

provides, in part:

"(1)

Subject to section 9 of this Act, where the court is satisfied, on an application

made to it, that--

(a)

a document intended to express or to give effect to an agreement fails

to express accurately the common intention of the parties to the agreement at

the date when it was made; or

(b)

a document intended to create, transfer, vary or renounce a right, not

being a document falling within paragraph (a) above, fails to express

accurately the intention of the grantor of the document at the date when it

was executed, it may order the document to be rectified in any manner that it

may specify in order to give effect to that intention.

(2)

For the purposes of subsection (1) above, the court shall be entitled to have

regard to all relevant evidence, whether written or oral."

[14]

Section 9 includes the following provisions:

"(1)

The court shall order a document to be rectified under section 8 of this Act

only where it is satisfied--

(a)

that the interests of a person to whom this section applies would not

be adversely affected to a material extent by the rectification; or

(b)

that that person has consented to the proposed rectification.

(2)

Subject to subsections (2A) and (3) below, this section applies to a person

(other than a party to the agreement or the grantor of the document) who has acted

or refrained from acting in reliance on the terms of the document with the result that

his position has been affected to a material extent.

..."

Affidavits

[15]

The petitioner lodged affidavits from Emma Porter, one of the joint administrators of

the second respondent, and Russell Spinks, the solicitor who acted on behalf of the

petitioner in relation to the standard securities. Ms Porter explained that the joint

administrators were appointed by the petitioner following upon the second respondent

having been in default of its payment obligations under a debenture granted in favou r of the

petitioner. The joint administrators had no objection to the petition. She commented upon

the answers as originally lodged by the respondents, viewing these as being exceptionally

surprising and containing a number of quite strange claims and accusations which were

hard to follow. She commented upon a number of the financial matters raised in the original

answers. As these were removed in the adjusted answers, I need not summarise these

comments.

[16]

In his affidavit, Mr Spinks explained the correspondence, noted above, that had

occurred prior to the standard securities being executed. He said that all of the relevant

prior documentation identified the second respondent as the borrower. There was some

discussion of an alternative arrangement but that was not carried through. He also stated

that on 23 August 2016 he received a telephone call from the solicitor for the first respondent

saying that his client was now content to proceed on the basis set out in the Facility Letter

and the original exchange. The suggestion in the respondents' answers that the solicitors for

the three entities had agreed to lend the money to the first respondent rather than the second

was at odds with what all of the documentation vouched, and was vehemently denied as

simply untrue. He also referred to an email dated 23 August 2016, recovered from the

solicitor for the first respondent, in which that solicitor advised Mr Frost that the loan to the

second respondent was to be secured over land owned by the first responden t.

[17]

In relation to the terms of the standard securities, Mr Spinks explained that he had

used styles from earlier standard securities dealing with the first respondent as the

borrower. He had erred in failing to revise the terms to indicate that the loan was to the

second respondent, which was the clear understanding and position of the parties.

[18]

On behalf of the third and fourth respondents, an affidavit from Mr Frost was

lodged. Among other things, it narrated Mr Frost's own experiences and background and

made a number of peculiar and disparaging comments and insinuations about individuals

with whom he has had dealings. Virtually nothing in his affidavit is of any assistance or

relevance for present purposes.

Submissions for the petitioner

[19]

The third and fourth respondents had no interest to act in respect of the second

respondent, that being a matter for the joint administrators. It was quite wrong for the third

and fourth respondents to suggest that there was an issue in respect of the joint

administrators' appointment, when no challenge had been raised for well over a year since

that took place. In relation to whether their provision of guarantees formed a basis for title

and interest, if one asked where their liability could arise, the liability of the second

respondent was contractual, in terms of the agreed Facility Letter. Their liabilities as

guarantors subsisted regardless of the standard securities. The petitioner could have

demanded payment from the second respondent and then sought winding up, without

seeking to enforce the securities. These were guarantees granted by various individuals in

respect of the debt of the company. No guarantor would be exposed to a new liability if the

prayer of the petition is granted. The guarantors were not shielded from liability by the

current defect in the securities.

[20]

The arrangement was that, following upon existing borrowing by the first

respondent, the petitioner would lend to the second respondent and obtain securities from

the first respondent. The error was noticed when it became necessary to seek to enforce the

standard securities. All that was sought was to bring the standard securities into line with

the Facility Letter, as the agreed grant of the Harcarse Hill and Sunwick Farm Secu rities by

the first respondent in favour of the petitioner was intended by the petitioner and the first

respondent to secure the debt of the second respondent to the petitioner. The intention of all

three parties was that the funds advanced would be used firstly to repay borrowing by the

first respondent to IRIL. It was accordingly clear from the circumstances of the transaction

that the petitioner and first respondent (in addition to the second respondent) had agreed

that the first respondent would grant standard securities to secure the second respondent's

obligations as borrower. There was no other reason for the first respondent to grant the

Harcarse Hill and Sunwick Farm securities, given that the first respondent was repaying its

existing borrowing (using the funds from the second respondent), rather than borrowing

further sums from the petitioner.

[21]

As drafted, the Harcarse Hill and Sunwick Farm Securities bore to secure obligations

of the first respondent to the petitioner. They ought, instead, to have secured the liabilities

of the second respondent, as parties had intended. The standard securities accordingly

failed to express accurately the common intention of the parties. The securities should be

rectified (the changes required being the same in each document) by making a number of

specified alterations, including inserting a new definition of "Borrower" and making a

number of further references to the Borrower.

[22]

Where the answers claimed there never was an agreement of any debt by the second

respondent that was an untrue assertion and a false defence. It did not deal with the

overwhelming weight of the conflicting documentary evidence. To reinvent matters and say

that the three solicitors, acting contrary to instructions, and the lender all deliberately

proceeded with the standard securities in the existing terms was not supported by any

material. Further, there was no reason provided as to why a debenture was executed on

behalf of the second respondent or why guarantees were executed in respect of that

indebtedness if the intention had been that the second respondent was not the debtor. The

guarantors obtained independent legal advice, invoiced to the second respondent.

[23]

Moreover, the audited accounts lodged on behalf of the first responden t gave no

mention of the debt, while those for the second respondent expressly referred to the loan of

£3.25 million. In relation to the appointment of the joint administrators, no proper ground

of challenge was put forward. There was no need for a proof as the third and fourth

respondents had made plainly dishonest assertions.

Submissions for the respondents

[24]

Mr Newsham, on behalf of the first respondent, was content to follow the lines taken

in the Note of Argument for the third and fourth respondents and added only some brief

further points. When a company borrowed money, the legal documents would commonly

be prepared after the Facility Letter. If the petitioner was correct, then the question arose as

to why the debentures were drafted in the terms used. There were in fact three occasions

when the petitioner or its solicitor could have checked the wording of the securities, all

signed and approved by one of its directors. It had ample opportunity to make changes if

something else had been agreed. One needed to follow the flow of the money, which

supported the joint intention. The accounts for the second respondent in 2016 were not

audited.

[25]

Mr Frost made submissions on behalf of himself and his wife. In relation to title and

interest, by deeds of guarantee and indemnity dated 1 September 2016, the third

and fourth respondents guaranteed on deman d to pay to the petitioner the whole

and every part of all monies and liabilities then or in future to become due, owing

or incurred by the second respondent to the petitioner. If the prayer of the petition

is granted, the third and fourth respondents will become guarantors of obligations

which would become owed by the second respondent under and in terms of the

standard securities mentioned in paragraph 2 of the petition. They accordingly had

title and interest to oppose the prayer of the petition. In any event, they had title and

interest to oppose the prayer of the petition on behalf of and for the benefit of the

second respondent.

[26]

No intimation had been made to those others who had provided personal guarantees

in respect of the obligations of the second respondent to the petitioner and hence to whom

section 9 of the 1985 Act applied. The joint administrators of the second respondent had,

throughout their appointment, failed to acknowledge that their appointment was invalid for

the very straightforward reason that no loan was made by the petitioner to the second

respondent. The recipient of the loan referred to was the first respondent. Accordingly, the

qualifying floating charge, upon which the joint administrators were appointed, had not

become enforceable and any purported consent to their appointment was of no effect. The

appointment of the joint administrators was not valid. The purpose of the petition was to

seek permission, in effect, to rewrite the terms of the liabilities as stated in the standard

securities granted over both Harcarse Hill and Sunwick Farms. The joint administrators

falsely stated that the rectification action does not affect the status of the ownership of the

properties by the second respondent.

[27]

As to rectification, at the date of the execution of the securities (25 August

2016), no agreement had been reached amongst the parties on the essential terms

of the proposed loan. In particular, no agreement had been reached that the first

respondent would grant standard securities in favour of the petitioner to secure any

obligations of the second respondent. The essential terms of the proposed loan

were not agreed until the Facility Letter dated 8 August 2016 was executed by the

petitioner on 1 September 2016. Thus, the Harcarse Hill and Sunwick Farm

Securities did not give effect to any antecedent agreement. The rectification sought

should be refused. In any event, the terms of the loan agreed between the petitioner

and the second respondent were never implemented. The petitioner and the first and

second respondents agreed that the proposed loan should be made by the petitioner

to the first respondent rather than the second respondent. At that time, the first

respondent was indebted to IRIL in the sum of £2,375,942.81 or thereby. On or around

22 September 2016, the loan funds were offset. The petitioner settled the balance then

due by the first respondent to IRIL. The first respondent then arranged for payment

of the balance of the loan funds to be made to the second respondent. No loan was

ever made by the petitioner to the second respondent. The second respondent has

never owed any money or obligation to the petitioner.

[28]

The stated purpose of the petition was to rewrite the standard securities to create a

falsehood by substituting the second respondent as the debtor and borrower in place of the

first respondent. The true position was the complete opposite to what was stated in the

petition. The standard securities in their present form, signed and agreed by the parties to

the transaction and registered as appropriate, reflected the actual intended position of the

parties. Funds were not transferred from the second respondent to the first respondent to

repay their prior security. The security documents were an accurate reflection of the

actuality of events in 2016 which were agreed by the parties to the transaction at the time

and exampled by their signatures on the standard security.

[29]

Section 9 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 applied

to the guarantors and in particular to the third and fourth respondents. Logically, the

directors of the first respondent were of the view that the aim is to achieve repayment of the

loan to the petitioner. The simplest method of achieving that goal was to maintain the

existing standard securities as intended by the parties. The three farms must be restored

from the Crown through bona vacantia to the first respondent. This would enable the

three farms to be sold in order that repayment of the petitioner can be achieved. That

process would be a straightforward honest process involving no falsehoods. Personal

guarantees were not given in respect of the obligations of the first respondent to the

petitioner.

[30]

It was not suggested that the petitioner, when signing, was unaware of or disagreed

with the contents of the said standard securities. The draft standard securities were

reviewed three times, presumably to ensure that there was no dubiety, before being

completed. What the solicitors had done was in effect a novation. The solicitor who acted

for the first respondent must have agreed to offset part of the money that the petitioner was

lending against the debt to IRIL. He was not acting at that stage for the second respondent.

The balance of the funds was sent by the first respondent to the second respondent. The

loan funds were not sent to the second respondent or its solicitor. There was intended to be

a sale of the properties by the first respondent to the second respondent. Missives were

agreed. The petitioner was aware of that intended transaction and the petitioner's

representatives had attended meetings where it was discussed. If the loan had been made to

the second respondent there would have been no security and so the loan was to the first

respondent. If the sale had gone ahead the monies would have revolved and the first

respondent could have repaid the sums to the petitioner. That was the arrangement

reached. There was no point in the second respondent borrowing money from the petitioner

to then give it to the first respondent. That created no advantage to the second respondent.

The disposition granted in 2018 in respect of the security subjects had been wrongly

backdated and that had caused problems. There was no error in the standard securities.

They reflected what the lawyers thought was a prudent thing to do bearing in mind the

missives. The lawyers were attempting to cover up their errors. Reference was made to

other factual circumstances.

Decision and reasons

[31]

Dealing firstly with the issue of title and interest on the part of the third and fourth

respondents, submitted by them to arise because they have given personal guarantees and

also because the joint administrators had wrongly been appointed, I reject that submission.

The personal guarantees, given after independent advice, were in respect of the second

respondent's indebtedness to the petitioner. The Facility Letter sets out that agreement. The

second respondent is liable under that agreement. The present petition adds nothing to the

basis upon which the personal guarantees can be enforced. The third and fourth

respondents, and indeed any other guarantor, gave their guarantees based on an existing

obligation and will not be exposed to a new liability if the prayer of the petition is granted.

Accordingly, the existence of the personal guarantees does not assist in giving anyone title

and interest to oppose this application. As to the points made about the joint administrators,

they have the interest to act in respect of the second respondent and as there has been no

challenge to their appointment that excludes any right of the third and fourth respondents to

act on behalf of the company.

[32]

However, as Mr Newsham for the first respondent adopted the position advanced by

the third and fourth respondents, I do require to consider the substance of that position.

While I see some force in the submission for the petitioner that Mr Newsham could be

viewed as a conduit to ventilate the arguments for the third an d fourth respondent, he was

allowed to act as the lay representative and the fact that he has adopted arguments

presented by others who have no title or interest does not exclude those arguments from

consideration.

[33]

The law, with particular reference to evidence relevant to rectification, is set out by

Lord Hodge in Patersons of Greenoakhill Limited v Biffa Waste Services Limited 2013 SLT 729 (at

paras [32]-[47]) and I respectfully adopt that approach. For present purposes, the following

principles are of relevance:

"[34] ... that earlier agreement does not have to be legally binding ...

...

[40]

... the court has to assess the existence of the antecedent agreement and the

common intention of the parties objectively ...

[41]

The evidence that is relevant to rectification will include statements which

one contracting party (A) has made to the other contracting party or parties (B & C)

during negotiations about his intentions because it will show that B and C were

aware of A's subjective view. The court has to assess those statements and other

manifestations of the parties' intention to ascertain whether there was an agreement

and also a continuing shared intention at the time the document sought to be

rectified was executed.

...

[43]

It may also be relevant to consider the conduct of the parties after they signed

the impugned contractual document as that may cast light on parties' intention when

they entered into the contract ... The weight to be attached to such conduct will vary

depending on the nature and quality of the pre-contractual evidence.

[44]

Where the contract is negotiated by solicitors as well as by their clients, the

court looks to the disclosed intention of the principals. This flows from the statutory

wording, which refers to 'the common intention of the parties`. But because the

court assesses the intention of the parties objectively, it will look to the

communicated statements and conduct of an agent acting within his authority, actual

or ostensible, as well as the communicated statements and conduct of the principal to

discover the principal's intention.

...

[47]

... The question for the court is whether on a balance of probabilities the

party seeking rectification has proved the grounds of rectification under the 1985 Act

... Because proof of those grounds is an inherently difficult task ... [i]t is a stiff

hurdle."

[34]

This case has proceeded upon the basis of a petition and answers. Parties were

appointed to lodge, in advance of the substantive hearing, all documents and affidavits

upon which they intended to rely. At no stage did Mr Newsham or the third or fourth

respondents contend that a proof before answer was required. No witnesses were identified

by them and the only affidavit lodged was that of the third respondent. Ample opportunity

to lodge all relevant documentation was given. No evidence of any kind was produced

seeking to vouch the factual position advanced by the respondents, in particular that the

three solicitors had agreed (in contradiction of the terms of the Facility Letter) that the

proposed loan should be made by the petitioner to the first respondent rather than to the

second respondent and were now seeking to cover up their errors. In any event, this was a

matter removed from the pleadings when these were revised by responsible counsel and I

sustain the petitioner's objection to the respondents now founding upon it. In the whole

circumstances, there was no good reason to require a proof before answer rather than a

substantive hearing. In light of the material produced by the petitioner, including the

contemporaneous correspondence and documentation and the affidavit of Mr Spink, and

the absence of any vouching for the respondents' position, I conclude that the respondents'

assertions on the facts have no basis and indeed must be false. Nor is there anything that

warrants the application of section 9 of the 1985 Act.

[35]

I have already set out the factual position as disclosed in the productions. I have no

reason to question the terms of the affidavit of Mr Spinks. I accept that solicitors erring in

this manner, and not discovering it when reviewing the drafts, is unfortunate and perhaps

unusual. But Mr Spinks was entirely frank in fully explaining and accepting his mistake,

caused by adopting a previous style of standard security which did not deal with a separate

debtor. The petitioner's position on the parties' intention, and indeed their agreement, is

strongly supported by that evidence and by a number of other separate factors. The

correspondence prior to the Facility Letter makes clear the intention of the parties, that the

loan is to be to the second respondent. The Facility Letter itself expressly states that

agreement. In light of the reference in the Facility Letter to agreement being reached on

acceptance by the second respondent, this does constitute an agreement reached antecedent

to the standard securities being executed. Even if for some reason it was not at that point

legally binding, that is not a barrier to rectification. The respondents relied upon it not being

signed on behalf of the petitioner until 1 September 2016, but all that does is to further

reinforce the existence of the agreement. The actings of the second, third and fourth

respondents after 25 August 2016 also firmly demonstrate the existence of the agreement.

There was no reason for the grant of a debenture in favour of the second respondent,

executed by the third respondent, if there was no indebtedn ess by the second respondent to

the petitioner. The same applies in relation to the giving of personal guarantees of that

indebtedness. The route by which the balance of the funding reached the second respondent

is of no material consequence. The accounts of the first and second respondent, whether

audited or not, plainly show that the latter is the debtor and the former is not. In these

convincing circumstances, and in the absence of any support for the positions advanced by

the respondents, the stiff test is met and grant of the application for rectification is

appropriate. The Harcarse Hill and Sunwick Farm Securities were documents intended to

give effect to an agreement and they failed to express accurately the common intention of

the parties to the agreement at the date when it was made.

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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> PETITION OF UK AGRICULTURAL LENDING LTD FOR RECTIFICATION OF DOCUMENTS [2021] ScotCS CSOH_54 (21 May 2021) URL: http://www.bailii.org/scot/cases/ScotCS/2021/2021_CSOH_54.html Cite as: [2021] ScotCS CSOH_54

Scottish Court of Session Decisions