Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2012] CSOH 136
CA147/11	OPINION OF LORD WOOLMAN in the cause (FIRST) PROSPER PROPERTIES LIMITED and (SECOND) INKERSALL INVESTMENTS LIMITED Pursuers; against THE SCOTTISH MINISTERS Defenders: ________________

Pursuers: MacColl; Tods Murray LLP

Defenders: Duncan; Harper Macleod LLP

23 August 2012

[1] This case concerns the validity and efficacy of two arrestments served on the Scottish Executive Environment and Rural Affairs Department ("SEERAD") on 13 October 2006.

The Circumstances
Introduction
[2] Michael Woodcock is the principal of two related companies: Prosper Properties Limited and Inkersall Investments Limited (respectively "Prosper" and "Inkersall"). In 2006 they owned adjacent land at Kirkconnell, Dumfrieshire. Prosper owned Nether Cairn Farm. Inkersall owned Rigg Farm. Together the subjects are known as "the Rigg Estate".

[3] For a number of years Robert Bell acted as the agent for both Prosper and Inkersall. He dealt with various matters relating to the Rigg Estate, including the letting of cottages. Between 2000 and 2004, Mr Bell was granted a number of short term grazing lets at Nether Cairn Farm and at Rigg Farm. In 2004, the relationship between Mr Woodcock and Mr Bell broke down. Disputes arose about Mr Bell's right to occupy various parts of the Rigg Estate. These disputes translated into several sets of legal proceedings. At some stage Mr Bell vacated the subjects.

The Prior Action

[4] In 2006 Prosper and Inkersall raised proceedings against Mr Bell in this Court. They combined their claims in one action ("the Prior Action"). They each asserted that they had sustained damage by reason of Mr Bell's wrongful occupation of the two farms. The greater part of the pleadings relates to matters that are common to both claims.

[5] Articles six and seven of condescendence concern the individual claims, which are very similar in their terms. Both Prosper and Inkersall sought to recover (a) lost rental income; and (b) the cost of undertaking weed control, mowing grass and repairing fences and dykes arising out of Mr Bell's alleged neglect of the subjects. In the case of Rigg Farm, there was also a claim for damage to a steading.

Prosper sought payment of £95,750 in respect of Nether Cairn Farm. Inkersall sought payment of £76,917 in respect of Rigg Farm. These were respectively the second and third conclusions. They also sought interest and expenses. Mr Bell lodged defences.

Arrestment on the Dependence

[6] Tods Murray LLP have acted throughout as the solicitors for Prosper and Inkersall. The summons in the Prior Action was signetted on 8 October 2006. On the same date Lord Hodge granted a warrant to arrest on the dependence. Tods Murray sought the warrant because they believed that Mr Bell was entitled to a payment under the Single Farm Payment Scheme ("SFPS"). It is an agricultural subsidy paid annually to qualifying farmers. For the purposes of SFPS, Scotland is a region and the Scottish Ministers are the competent authority: Common Agricultural Policy Single Farm Payment and Support Schemes (Scotland) Regulations 2005.

[7] Mr Bell had in fact applied for an SFPS payment on 15 May 2006. During the whole period relevant to the present dispute, the scheme was administered on behalf of the Scottish Ministers by SEERAD. After the change of administration in 2007, SEERAD ceased to exist. Responsibility for SFPS was transferred to the Scottish Executive Environment Directorate.

[8] On 12 October 2006, Tods Murray instructed Scott & Co, Messengers at Arms, to serve the summons on Mr Bell and to arrest on the dependence of the action "in the hands of the Scottish Executive Environment and Rural Affairs Department, Dumfries office". The following day, officers from Scott & Co went to SEERAD's office in Dumfries and served two arrestments.

[9] Apart from the names and the sums due, the arrestments are in identical terms. Each schedule is timed at 9.45 am and is addressed to "The Scottish Executive Environment and Rural Affairs Department, 161 Brooms Road, Dumfries". The schedule of arrestment for Prosper was for a figure of £105,325, and the one for Inkersall for £84,608.70. Those figures included estimated amounts for interest and expenses. By letter dated 19 October 2006, Scott & Co reported to Tods Murray that they had "effected service of the Arrestment on the Dependence". The certificate of execution states that the schedules were left with Quintin Donald, Principal Agricultural Officer.

[10] Harper Macleod act for the Scottish Ministers in this matter. On 25 October 2006 they wrote a very short letter to Scott & Co. It is in the following terms:

"Scottish Executive - Arrestments v Mr Robert Bell

We refer to the above matter and confirm our clients have passed to us a Schedule of Arrestment and dependence (sic) served upon them on 13 October 2006. We confirm the arrestment is invalid as it incorrectly designs the arrestee."

[11] The following day, Tods Murray wrote to SEERAD to enquire whether the arrestment had caught any funds due to Mr Bell. On 27 October 2006, SEERAD acknowledged receipt of that letter and said it had been passed to a named member of staff for a reply. SEERAD did not, however, send a further response to Tods Murray.

Payment to Mr Bell

[12] On 14 December 2006 SEERAD authorised an SFPS payment to be made to Mr Bell in terms of his application. The Scottish Ministers state that they paid him £53,000 on 15 January 2007. Prosper and Inkersall did not learn about the payment until much later. They believe Mr Bell received a higher sum, perhaps £70,000.

[13] Tods Murray understood that Mr Bell might be due a further SFPS payment. On 24 January 2007 they instructed Scott & Co to serve further arrestments on the dependence of the Prior Action. In order to avoid any doubt, they were served

(i) in the hands of SEERAD (on behalf of the Scottish Ministers)

(ii) in the hands of the Scottish Ministers (on behalf of SEERAD)

They were served at Dumfries and at the Scottish Ministers' principal office at Victoria Quay, Edinburgh. In fact no sums were caught by those arrestments.

[14] Mr Bell was sequestrated on 21 May 2008. The trustee in the sequestration was the Accountant in Bankruptcy. Subsequently, he informed the court that he did not intend to enter the process and insist upon the defences. On 14 October 2008 Lord Drummond Young granted decree by default in the Prior Action.

[15] At that stage Prosper and Inkersall sought release of the arrested sums. The Scottish Ministers denied that any sums were due. Prosper and Inkersall raised the current action on 6 October 2011. They concluded for furthcoming of the sums arrested, or for damages for breach of arrestment. Since early 2012, the action has proceeded solely on the alternative ground. Mr McColl explained that the first ground was deleted after the defences disclosed that there are no sums to arrest.

The Issues
[16] The Scottish Ministers maintain that they are not liable to pay any sums to Prosper and Inkersall. They advance four arguments in support of their position. First, it was incompetent for Prosper and Inkersall to combine their claims in one action. Secondly, the arrestments should have been served on them, not SEERAD. Thirdly, there was no arrestable obligation on the date of service. Fourthly, Prosper and Inkersall have not properly averred that they suffered loss, as another creditor might have had a better claim.

A. Combining Claims
[17] The rule which applies to claims made by two pursuers has stood for a long time. Different parties cannot "accumulate their actions in one libel, unless they had connection with one another in the matters pursued for, or had been aggrieved by the same act": HM Feuars of Orkney v Steuart (1741) Mor 11986. That formulation has been described as "tersely and epigramatically stated": Paxton v Brown 1908 SC 406, 414 per Lord McLaren. But it has been followed in a line of cases, which are collected in Boulting v Elias 1990 SC 135, 146, Opinion of the Court delivered by Lord President Hope.

[18] Several propositions can be drawn from the authorities:

(a) No attempt should be made to amplify the categories of exception: Killin v Weir (1905) 7 F. 526, 528 per Lord President Dunedin.

(b) Whether the pursuers have a connection with one another does not mean that they must have a joint interest in the legal sense: Paxton at 413 - 414.

(c) Riparian proprietors may combine in one action to protect their common interest: Killin at 528.

(e) Where one statement defames several persons, they are each aggrieved by the same act and can join in one claim: ibid.

(f) Two or more persons may combine in pursuing a claim for personal injury, provided that the grounds of action are identical and there is no material prejudice to the defenders: Boulting at 147, approving Buchan v Thomson 1976 SLT 42.

(g) If the court holds that an action infringes the rule, it will try to give the pursuers an opportunity to amend so that it only proceeds at the instance of one of them. The court would be concerned to leave a pursuer without a remedy: Boulting at 148 - 149.

[19] In most cases, the central question will concern the scope of the two exceptions. It is important to consider separately the present action and the Prior Action. In relation to the present action, I believe that both exceptions apply. There is a coincidence of interest between Prosper and Inkersall. They each seek damages for breach of arrestment. The arrestments were served on the basis of a single warrant. They were each served at the same time, upon the same person, in respect of obligations owed by the common debtor arising out of obligations at adjacent subjects owned by two related companies with the same principal. Apart from common interest, the two companies have been aggrieved by the same act. Breach of arrestment is an intentional delict: Walker Delict 2^nd ed. at 502.

[20] The Scottish Ministers level their principal challenge at the Prior Action. They do so against the background that the issue of competency was never raised by Mr Bell or by his trustee in sequestration. The court granted decree by default and the reclaiming days have long since expired. Accordingly, if the action was incompetent, it is too late to remedy matters now. It is not possible to restore matters to the position they were in when the Prior Action was still depending before the court. I also note that Harper Macleod's laconic letter to Scott & Co dated 25 October 2006 did not mention incompetency.

[21] However, in my view there was the requisite coincidence of interest. The claims possessed a number of common features: the two companies were linked, the two properties were adjacent to one another, Mr Bell had acted as agent for both companies and dealt with the same principal, and the claims were largely similar. Accordingly, I conclude that the case falls within the first exception.

[22] The position is different in respect of the second exception. In my view, it does not apply. Prosper and Inkersall were not aggrieved by the same act. Their claims concerned two separate interests regarding two separate properties.

[23] There is one other matter to address. Mr Duncan submitted that the two claims were potentially in conflict with one another. If the arrestments were both valid and enforceable, the Scottish Ministers could not know how much to pay to each arrestor. A multiple-poinding or similar procedure would be required. In my view, that argument largely disappeared when Mr McColl informed me that Prosper and Inkersall had agreed to apportion the sums recovered pro rata in accordance with their respective claims.

[24] I therefore reject the challenge based upon competency.

B. Were the Arrestments served on the Correct Person?
[25] Mr Duncan built his argument on two cornerstones. First, SEERAD was a government department with no independent legal personality. This was all evident from the provisions of the Scotland Act 1998 and in particular sections 44, 52 and 59. Any obligation could only be owed to Mr Bell by the Scottish Ministers. It followed that it was not possible to serve arrestments upon SEERAD.

[26] Secondly, a strict approach is taken to arrestments: "the omission from or misstatement in the execution of anything essential will be fatal": Graham Stewart Diligence, p.35. The service of an arrestment is similar to the service of a charge, where: "The debtor in the obligation must be correctly referred to and designed": ibid p.292. Underlying this approach was the concern that the arrestee could be liable to the common debtor if he wrongfully withheld sums on an imperfect arrestment. Mr Duncan pointed out that within 12 days of service, Tods Murray had been informed that the arrestments were invalid.

[27] How strict is strict? This is not a semantic question. In the present case it has practical consequences. If absolute accuracy in relation to the designation is required, then these arrestments were invalid. They were not served on the correct person.

[28] Scots law does not, however, adopt an inflexible approach. There are cases on each side of the line. Graham Stewart refers to the unreported case of Hannan v Kendal 30 March 1897. He discusses it at page 35 and provides a full report in the Appendix to his treatise. In that case the common debtor was "W. K. Kendal otherwise William Hunter Grimston". By mistake, he was designed as "W. K. Kendal otherwise William Hunter Grinnston". Lord Kincairney held that the discrepancy was "immaterial, it not being averred that the mistakes had caused any misunderstanding". He added that "There is no rule of law of which I am aware to the effect that every clerical blunder will vitiate a diligence."

[29] Another example is provided by Spalding v Valentine (1883) 4R 1092.. Decree in absence was taken in a small debt action. The defender sought to interdict the diligence that followed on the basis that her first name was "Barbara" not "Grace". Although no formal opinion was issued, the Lord Justice Clerk stated: "nowadays no favour would be shewn to such a purely technical objection, expecially when urged in order to avoid payment of a just debt". Similarly the error in a date does not invalidate an arrestment: Henderson v Rollo (1871) 10 M 104.

[30] Equally, however, there are examples which fall on the other side of the line. In one case, an arrestment was laid in the hands of "Sibbalds Brothers Leith" and its partners, John and William Sibbald. That was held to be inept as it should have been served on "Sibbalds Brothers and Co": Henderson's Trs (1831) 9 S 618.

[31] In my view, the question is whether there was any real misunderstanding as to the true identity of the intended arrestee. I answer that query no. The Schedules of Arrestment were both addressed to "The Scottish Executive Environment and Rural Affairs Department, 161 Brooms Road, Dumfries". To any reasonable recipient, the intention was plain. The aim was to arrest in the hands of a particular department of the Scottish Ministers.

[32] The Scottish Ministers knew that the arrestment was for them. That is patent from Harper Macleod's letter of 25 October 2006. They refer to "a Schedule of Arrestment ... served upon them [ie their clients]". Accordingly, they knew that they were the intended recipient and that no other person could be the intended recipient. There being no doubt in the matter, I hold that the arrestments were valid.

C. Was there an Arrestable Obligation?
[33] For an arrestment to be effective, there must be an arrestable obligation - a liability to account by the arrestee to the common debtor. It is not enough for there to be only an expectation or hope of payment. But the fact that the date upon which a debt falls to be paid has not yet arrived does not mean that there is no obligation to account. That is plain from the opinion of the full bench in Costain v SRU 1993 SC 650 at 661F -G:

"The rule is that debts and claims to which the common debtor has no right at all at the time of the arrestment cannot be arrested. This is because the debtor's claim exists only in spe at that stage and there is no right to payment which can be attached while it remains of that character. But claims to which the common debtor has a vested right but which are not yet due for payment can be arrested because there is here a debt which the arrestee must account for to the common debtor."

[34] The most common example relates to the arrestment of rent. The creditor can attach rent for that term, even though it is not due until a future date: Livingston v Kinloch 1795 Mor 769.

[35] The right to receive an SFPS payment is set out in Council EC No. 1782/2003:

Art 28 (1) - "Save as otherwise provided for in this Regulation, payments ... shall be made in full to the beneficiaries.

(2) Payments shall be made once a year within the period from 1 December to 30 June of the following calendar year."

Art 33 - "Farmers shall have access to the single payment scheme."

[36] When the arrestments were served on October 2006, no payment had been authorised to Mr Bell. But in my view that did not matter. Having regard to the terms of the scheme, he was going to be paid. As he qualified under the scheme, he had a right to payment, which was to be made between 1 December and 30 June.

[37] I therefore hold that the arrestments were a valid diligence in respect of the Scottish Ministers' obligation to account to Mr Bell under SFPS.

D. Did the Pursuers Suffer any Loss?

[38] By the time decree passed against him in the Prior Action, Mr Bell had been sequestrated. Mr Duncan queried whether the claims of Prosper and Inkersall to the arrested funds might be defeated by a better claim. He relied upon the opinion of Lord President Emslie in RBS Lord Advocate v Royal Bank of Scotland 1977 SC 155:

"an arrestment is not to be defeated by voluntary acts of the debtor, later arrestments, and by other diligences begun but not carried to completion. What is perhaps more important, however, is that litigiosity does not protect an arrestment from being defeated by other diligences carried to completion, i.e., by a better right created later. Poinding and sale is one example. Confirmation of an executor-creditor of a deceased debtor is another."

[39] It is important to begin with the effect of sequestration. A creditor who has arrested on the dependence of an action is in a privileged position. He is entitled to the whole sums arrested: sec 37(1) of Bankruptcy (Scotland) Act. That provision declares that the order of the court awarding sequestration shall have the effect of an arrestment in execution and decree of furthcoming. It's not normally necessary for the arresting creditor to take further steps to complete the diligence: McBryde Bankruptcy 13.45. Mr Bell was not sequestrated at the time of the service of the arrestments. His sequestration occurred long after they could have been cut down.

[40] As the discussion developed, this turned largely into a specification point. Mr Duncan submitted that it was not known whether there are any other creditors with better rights. In my view, that can easily be checked with Mr Bell's trustee in sequestration (ie the Accountant in Bankruptcy). As it is more difficult to prove a negative, the onus is on the Scottish Ministers to investigate this matter and aver if there is such a person.

Conclusion

[41] I therefore hold that the arrestments are valid. Before issuing a final interlocutor, I shall put the case out By Order to deal with three issues. First, to ascertain that there is no creditor who would have had a better claim to the arrested sums in Mr Bell's sequestration. Secondly, I wish to know the exact sum paid to him by the Scottish Ministers on January 2007. Thirdly, once that figure is known and agreed, I wish Prosper and Inkersall to state how that figure is to be apportioned between them so that the Scottish Ministers know how to discharge their obligation to them.