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Cases

Esquire Realty (Scotland) Limited v Thomas Bowie & William Johnstone
We acted for Esquire Realty in an action relating to the purchase of a company which operated five Nursing Homes in the West of Scotland. The pursuer's action was based upon breach of warranty and fraudulent misrepresentation.

In the Share Purchase Agreement, the Vendors warranted the number of registered residents and the occupancy levels within the Homes as at the Completion Date. In addition the Sheriff was persuaded that Esquire was induced to enter into the Share Purchase Agreement as a result of fraudulent misrepresentation by (or on behalf of) the Vendors.

Having found in favour of Esquire, the Court then turned to quantify the level of damages to award to Esquire.

It was argued for Esquire that (i) they were entitled to recover the financial loss to them which flowed directly from their having embarked upon the acquisition in terms of the Share Purchase Agreement; (ii) the measure of their loss was the difference between the purchase price and what the acquired business was truly worth at the Completion Date; and (iii) in the context of a purchase induced by fraudulent misrepresentation, the loss need not have been foreseeable.

The Defenders argued that the Buyer was only entitled to recover the difference between a "headline" valuation of the business assets (agreed between the parties prior to completion) and a notional price that the Buyer would probably have paid, if the true facts had been known (or alternatively, a "fair" price). They further contended that when a purchase was induced by a fraudulent misrepresentation, the measure of the damage ought to be the difference between the price paid for what was received and what would, in the actual circumstances, have been a fair price.

Sheriff Scott rejected the Vendors' argument and held that the pursuer had comfortably established a loss in the sum of £4.1 million (inclusive of interest). 

The Accountant in Bankruptcy v Graeme John Grant

Sequestration Procedure
In this case Mr Grant had been sequestrated back in 2008 and the AIB had acted as the trustee in sequestration. It had, however, come to light that Mr Grant had assets that the AIB had not been aware of at the time of the sequestration. These assets resulted from a claim Mr Grant had pursued against a third party. The problem created by this was that there were monies available but, given that the trustee had been discharged, there was no one in office to deal with the matter.

Sheriff Holligan held that the mere fact that both Mr Grant and the AIB had previously been discharged did not actually bring the sequestration to an end. The Bankruptcy (Scotland) Act 1985 ("the 1985 Act") provides that this kind of asset was property for the purposes of the sequestration and the discharges did not change that.

Having made this decision, however, Sheriff Holligan had to consider how the sequestration could be competently revived. He decided that the most appropriate method was through the application of s63 (1) (b) of the 1985 Act. This section provides that, when curing defects in procedure, the Sheriff may, on the application of anyone with an interest and if for any reason anything required or authorised to be done in connection with the sequestration process cannot be done, make such order as may be necessary to enable that thing to be done."

Click here to view Sheriff Holligan's Judgment.

Charles Benjamin v The Standard Life Employees Services Ltd

Fees for Expert Reports in Cases where Defences have been Lodged
This appeal arose out of a personal injury action in which absolvitor had been granted after defences had been lodged but before a Proof had been allowed. The Auditor of Court had objected to a Report which appeared on the defenders' account of expenses. The issue for the Court was whether the defenders should be allowed to claim for the cost of reports obtained from a consultant orthopaedic surgeon and a consultant agronomist - neither of whom had been certified as a 'skilled witness'.

Sheriff Bowen held that provided the work carried out by the expert was relevant and necessary for the Proof of matters on record, the costs were recoverable.

Click here to read Sheriff Principal Bowen's Judgment.

Legislation

Home Owner and Debtor Protection (Scotland) Act 2010
The Home Owner and Debtor Protection (Scotland) Act 2010 came into force on 30 September 2010 and, as the name suggests, provides homeowners and debtors with increased protection from creditors' actions for recovery of possession.

The raising of a Court action is now required in almost all instances where a lender wants to recover possession of residential property. As a result of this legislation lenders will now have to show that they have taken various steps in advance of raising proceedings. Those steps are:

• giving the debtor clear information about the default, including any charges due as a result of the default
• attempting to agree a repayment plan with the debtor
• avoiding seeking a court order if the debtor is working towards repaying the debt within a reasonable time. This will apply if the debtor has a pending claim under a mortgage payment protection policy, a pending application to a mortgage support scheme in which the lender is participating, or is marketing the property for sale at an appropriate price
• giving the debtor information on sources of debt management and advice.

Even if an action for possession is not defended, it will still have to call in court unless it is a case of voluntary surrender, where the creditor would need a formal affidavit from the debtor confirming the surrender of the property is voluntary.

When considering a defended creditor application the sheriff now has to take into account the following factors:

• the nature of and reasons for the default
• the likelihood of the debtor fulfilling his/her obligations under the standard security in a reasonable time
• any assistance the creditor has given the debtor to fulfil the obligations
• whether the debtor has been accepted onto a Debt Arrangement Scheme
• the ability of the debtor and anyone else living in the property to find alternative accommodation.

In addition, the maximum time period for which the court can order the sale of the debtor's family home to be suspended has been increased from 1 to 3 years.

This Act undoubtedly gives debtors and those living with debtors more protection from possession actions. Lenders will need to show the courts they have at least tried to help those in difficulty to fulfil their obligations. Cases will usually call in court, giving debtors more notice and opportunity to defend themselves.

Lenders, however, may find it more difficult to enforce securities over assets. Where commercial properties are let as residential homes, or commercial properties include residential accommodation, a court action will usually be necessary in order for the lender to sell the property. Lenders will no longer be able to call up their security over the property and resell the vacant property after giving the owner 2 months notice of their intention to recover the debt.

Contact Us

For more information please contact:

Tim Edward
Partner
0131 228 7241
tim.edward@mms.co.uk

Gareth Hale
Associate
0131 228 7243
gareth.hale@mms.co.uk

This briefing is written as a general guide only. It is not intended to contain definitive legal advice which should be sought as appropriate in relation to any particular matter.