Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2011] CSOH 125
A1767/03	OPINION OF LORD McEWAN in the cause JOAN PENTLAND-CLARK AND OTHERS Pursuers; against ANNE MELDRUM ALISON MACLEHOSE AND OTHERS Defenders: ­­­­­­­­­­­­­­­­­________________

Pursuer: Party Litigant

For First defender: Campbell QC; McGrigors LLP

For Third & Fourth defenders: Clark QC et Barne; Balfour & Manson LLP

Third Party Respondents: Parties

4 August 2011

[1] The case before me is the latest in a number of actions which have arisen since the death in 1985 of a farmer James Clark. He had been married to the present pursuer (Joan). They had four children, three of whom survive. They divorced and he remarried the first defender (Anne). He left a Trust Disposition and also, shortly before he died made a Will, executed a deed of co-partnery with Anne and created a joint agricultural tenancy with her. Largely out of these last three deeds has the present action arisen. In it, the only two live issues, which are the complaint of the pursuer, concern the events shortly before he died and the actions of the executors in the months following his death.

[2] An action in similar form but differently pleaded was heard by a Temporary Lord Ordinary (Wise QC). She allowed before answer proof on a limited issue and refused to allow large parts of the pleadings to go to proof. Following that, the pursuer was allowed to amend and in effect re-introduced the averments but this time saying they amounted to fraudulent behaviour. It is clear that the reason for doing this is to avoid the operation of prescription on events of long ago. As far as I am aware the relevant matters have never hitherto been said to be fraudulent in spite of the pursuer in 1986, and after, having available to her the best legal advice of respected solicitors and counsel.

[3] The result of all of this has been very costly litigation over many years and which is ongoing.

[4] The pleadings before me are voluminous extending to some 100 pages. They are not drafted with any precision or clarity. The pursuer is a party litigant and presented her own case. I allowed her to have the assistance of her children (the respondents, Joanna, James and Carolyn). They are also referred to as "the three quarter beneficiaries".

[5] I allowed them to prompt her as they thought fit and also to address me. The pursuer lodged a written submission extending to many pages which she read out. She added to that some other written submissions. These were also substantially read out. I refer to all of these for their terms and will detail them in due course. It can be seen that they are unfocussed and contain copious references to evidence, documents, text books and decided cases. There was no agreement about documents but I allowed her to range over as many as she wished. The problem with that was that the case assumed the appearance of a proof, then a hearing on evidence. I did not think it possible or prudent to try to confine her to issues of relevancy. Obviously when the defenders came to reply I had to allow them the same leeway which to a limited extent they used. Plainly without proper incorporation, or a joint Minute or renouncing probation, it is not very satisfactory to approach the decision of the case in this way. I am not convinced that the documents have been properly incorporated. I could decide the matters purely on the Record alone but I feel that this would look unfair to a party litigant. I am conscious of what Lord MacFadyen had to say about this in Royal Bank v Holmes (at page 670)(referred to later). However, I will look at some of the early documents when coming to my decision, rather than taking an over strict approach.

[6] With that background I now turn to the amended Closed Record. As I have already said it is very lengthy extending to 107 pages and more. It contains averments about events in 1985/6 and later. Proof has been allowed on some of the later averments but I am only concerned here with the earlier matters up to about page 75 (though some later pages contain allegations about the earlier dates). There are really only three matters of relevancy where it is said fraud is in issue and only one of these is vital since the other two depend on it. These I categorise as follows viz, one, the events at the deathbed, two, the creation of the lease and three, the 40% valuation for the tenant to renounce. If the first of these is relevantly averred then the other two may be.

[7] The deathbed averments begin on page 11. It is said that late at night on 4 December the deceased was "persuaded" to sign the relevant documents. There are further averments at pages 34/35 and at page 36 that the lease "may" have been altered after death by the widow. Finally at page 41 it is averred that the widow or someone else (not named) added a "healthy" signature to the document.

[8] The lease is said to be a fraudulent document (page 36). That is linked at page 25 to an allegation that the 40% figure was a false pretence since the executors knew that the tenancy was not "secure" and that all of this was done by collusion and deception. There are further passages to like effect at pages 40, 46/8, 56, 62 and 89.

[9] Mr Clarke opened the argument by saying that the events in issue happened 25 years ago and for the first time fraud was being alleged. He moved me not to admit to probation certain averments of the pursuer and the children. He gave me a brief chronology. James Clark had divorced the pursuer in 1977 and was remarried in 1982 to the first defender. On 4 December 1985 (the eve of his death) he made arrangements with her. An agricultural partnership was created with a lease of two farms to the partnership. The deeds were signed before he died. There were two executors nominate and one assumed. Throughout the course of the events before and after the death all parties had legal representation. Counsel took me through some of the early documents to which I will return as, in my view, they are the substance of the complaint. By August of 1986 the widow had ceased to be an executrix and indeed she had since remarried. Two of the farms were sold in 1987 and 1989. Counsel made mention of the many actions which had followed the death of which this was the latest. I am not concerned with these save to note that a limited proof has been allowed on pleas 14 and 19.

[10] Counsel said that now a case had been amended back of dishonesty and fraud, capacity on deathbed and suspicion about the lease. There was simply no basis for such averments. Counsel took me to the leading case of Leslie v Lumsden (the Aberdeen Bank case) and to various passages in the opinions of Lords Ivory, Deas, Neaves, Ardmillan and McKenzie. There it was clear that allegations of fraud had to be unequivocal and express. General epithets would not do. Counsel also looked briefly at Royal Bank v Holmes, an Outer House case. Even a cursory examination of the Record showed there was no fraud and any suggestions of mere negligence had long prescribed. How would it possibly be a falsity to say there was a secure tenancy when the bank were told at once and several legal opinions confirmed it? The facts were also quickly given to the other interested parties. In any case it would never be a fraud for a testator to do what he was entitled to do, and it would have been wholly wrong for the executors to have challenged the clear wishes of the deceased. It was of great importance to take note of what the original Judicial Factor (Mr Macfie) had said. In his full and careful report he never alleged fraud.

[11] Counsel then, and later in his reply, examined a number of documents which I need not detail here since I will return to some of them in due course.

[12] Mr Campbell, following, adopted the arguments of Mr Clark and invited me to dismiss the action against his client. He pointed to the conclusions which involved her, viz, 2B, 3, 5 and 7. He maintained his client was accused of fraud no less than 38 times! He looked briefly at Leslie v Lumsden and Royal Bank v Holmes using them as authority for the point that averments of fraud had to be specific. Here at best there were only innuendoes. If the widow had fraudulently brought about the secure tenancy then it followed that the deceased must also have been involved. Such a result would have been surprising since the deceased did not leave all his estate to her.

[13] There were no averments of anything untoward happening at the deathbed. The writs executed there were certainly urgent, but not in any way clandestine. The witnesses were farm employees. There was no forcing and no trickery.

[14] It was said to be a false pretence for the widow to insist that she had a secure tenancy and then to conspire with others to procure a high value to relinquish it. There were two insuperable difficulties about that. Firstly the Bank was told at once and raised no objection. They would not in any event have wanted to run the farm. It might be seen as a commercial risk not to have asked their prior consent but that is not fraud. Secondly, the consistent advice of three eminent senior counsel confirmed that the tenancy was secure.

[15] Counsel then looked in detail at the Record commenting on the following pages, viz, 9, 13, 16, 17, 18, 27, 33, 36, 37; 42/47, 53, 58, 59. To summarise what he said of it all was that the use of the words "fraud" and "falsity" appear in an untidy narrative and were unrelated to time. There was no false pretence on the bank, quite the reverse. There was a suggestion of forgery, impetration and uttering. These were serious allegations but without any factual basis. There was no medical support for any suggestion that the deceased was incapax, and the advice of counsel sat uneasily with any such suggestion. There was no explanation as to why it had taken over 25 years to call these events fraudulent. There was a claim for £2 million but no relevant averments as to how it was due or calculated.

[16] In his brief reply he made these points. The executors knew their duties. There was no deception with the practical result of a tenancy and a payment in 1989. He asked me to sustain his pleas 3, 4, 5, 9, 10, 11 and 12.

[17] In her written submissions the pursuer produced some seven documents all lodged at the bar. These were an initial document, a restart, a clarification, prescription and three rebuttals. In total there are 80 pages. Within that there are references in part to no less than 42 cases from Scotland, England, the Commonwealth and I believe the USA. Some 11 textbooks are mentioned. I do not intend to list any of these since they are all unfocussed on the only two issues truly before me. There is no attempt to analyse the facts of any of these cases to see how, if at all, they apply to what happened here. It would be quite wrong for me to conduct my own research into them. Unsurprisingly, neither of the defenders found it necessary to deal with any of these cases or texts. This is unfortunate and I did try to ask the pursuer what point she sought to make out of some of the authorities but I feel she was unable to help the Court about that.

[18] Let me now look at the pursuer's written submissions read out almost in whole and added to by some oral argument. Any relevant passages have to be picked out from a whole lot of what is not to the point. In fact very little appears on the two relevant matters.

[19] There is nothing in the main submission about the deathbed events and it is only found in the document called "In Conclusion", pages 4 to 6. It seems to suggest undue influence but amounts to no more than an assertion. It does not back up the Record as to alteration of the documents.

[20] In the main submissions pages 30 and 31 and succeeding pages there is some suggestion of a conspiracy but only after the death. Even this seems self contradictory since it bears to suggest that one conspirator might have to sue another.

[21] Earlier, challenge is made to Mr Gill on whether the lease was valid and (by implication) to Mr Murray on the 40% figure (page 11). It is said, in my view quite incorrectly, that the bank never consented to the lease and wanted to eject the tenant (pages 17 and 23). That does not square with the correspondence.

[22] For the rest, the written and oral presentation is no more than unsustainable assertions in a mass of unrelated quotations from a host of authorities. Each of the Respondents made a brief submission. James said that he wanted a proof, and that his father wanted him to farm the estate. He then spoke about events in 1997 with which I am not concerned. His sister Joanna said she wanted an unrestricted proof and Carolyn spoke about events in 1997.

[23] Let me now turn to look at some of the letters and other documents. I have deliberately restricted this exercise to the documents which relate to relevancy. I begin with the three Opinions.

[24] Mr John Murray Q.C. (as he then was) gave his Opinion on 22 April 1986 (No. 6/26 doc 2, of Process). He was advising the executors who had submitted a Memorial to him. He was given a copy of the deceased's will, the contract of co-partnery and the original lease. He was aware that the bank had not objected but that the family challenged the lease. He was aware that the executors in March had credited 40% in consideration of the tenant renouncing. Counsel advised that the lease was valid and that the executors were entitled to act as they had done.

[25] In September the executors had a consultation with Mr Murray. Counsel must have confirmed to the executors that 40% payment to the tenant was correct. Indeed there is even mention of a higher percentage. This is seen in the executry letter of 2 October 1986 to Tods, Murray & Jamieson W.S. (No. 98/12 of Process). The second matter is another Opinion by Mr Murray on 12 October (No. 98/15). That deals with the sale of one of the farms but is not in point for the issue before me.

[26] The widow sought the Opinion of Senior Counsel (Mr Gill Q.C. as he then was) and a Memorial was submitted. Counsel was referred to the Partnership and the lease of 4 December 1985, and the purpose of these two documents. Counsel advised that the widow was the tenant under the lease and she should claim it. Counsel added that the widow might in due course have to resign as an executrix but not to do so meantime. The date of that Opinion was 26 May 1986.

[27] On 29 May 1986 a consultation was held with Mr J.A.D. Hope Q.C. (as he then was) to advise the beneficiaries. He gave his Opinion on 4 June. He advised that, though unusual, the lease was valid and the widow was entitled to remain as tenant. The tenancy would be protected on the expiry of the fixed term in 1988. Other advice was given about who should be and remain as executors, but for present purposes that is not in point.

[28] The deceased's will (No. 10/1 of Process) is dated 20 November 1985. It leaves his estate equally to his widow and three children. The widow and Mr John S. Wilson are to be executors. Patrick C. G. Wilson was assumed as an executor by them on 13 December 1985 (No. 10/2). The widow resigned on 25 August 1986 (No. 10/3).

[29] Prior to his death the deceased had bound himself not to grant leases over the farms without first obtaining the consent of the Clydesdale Bank and its predecessors (see No. 10/8 of Process dated 22 October 1954 and No. 10/9 dated 7 September 1960.)

[30] The contract of co-partnery dated 4 December 1985 is No. 10/10 of Process. It is signed and witnessed as is the lease of even date (No. 10/11). The Office Note of Mr Wilson (No. 10/12) shows that he probably prepared the documents on 2 December. It records that he had spoken to Anne whose husband was "up and down". It also records in the same bold script "We should intimate this to Bank". Mr Wilson wrote to his client on 3 December (10/12) saying the partnership and the lease were ready for signature, enclosing them and suggesting he attend for signature. Interestingly he seems to suggest that the ex-wife and daughter might be liable to interfere.

[31] It is of importance to notice what happened with the Clydesdale Bank. The executors notified the branch in Perth on 19 December and on 24 December received a rather stiff reply about the lease (No. 10/13). The Bank said they could not comment about the lease and that their consent was a requirement of the security. The Bank added "...it would be most unlikely that our consent would now be granted..." On 8 January 1986 the Bank's Law Department in Glasgow wrote to Mr Wilson (No. 10/13iii) stating inter alia "As heritable creditors we did not consent to the leases and do not consent now."

[32] However, the matter had been taken up informally by Mr Patrick Wilson with the Bank Chairman (Sir Eric Yarrow) (see his letter of 10 January and the reply on 13 January (Nos. 10/18 i and ii)). On 29 January, from Glasgow, the Bank wrote accepting the lease provided Anne granted a letter to give vacant possession on sale (No. 98/3). On 3 February the widow agreed to give vacant possession in the event of a sale (No. 10/19). All of these matters were quickly disclosed to the Edinburgh agents acting for the beneficiaries.

[33] It seems to me to be clear that the deceased must have been wary of his ex wife, and possibly one of the children interfering in the farming business. It was no doubt for that reason that he left a tenancy in the name of his widow. That is clear from Mr Wilson's letter to the deceased on 3 December 1985 (No. 6-10-12ii). By 1987 disputes had arisen with parties at arms length and on 1 July Mr Wilson wrote to Dundas & Wilson about the deceased's attitudes and intentions. The letter (No. 98/27) contains inter alia the following remarks:

"... Mr Clark understood that the arrangement proposed should leave his wife Anne a control of his business interests .... his mental faculties were in no way impaired .... His instruction conveyed no sense of urgency apart from the need to take care to ensure that his first wife and children should be excluded as far as possible from interfering with Anne's possession of his estate .... Mr Clark considered that Joan and her family were receiving more than enough ....".

That letter was of course written long after three separate Senior Counsel had advised that the lease was valid.

[34] Something was made of the executors meeting on 7 December 1985 (No. 6/10/15 of process). The Minute deals with a number of matters, most importantly to informing the Bank and avoid a sale under the security. The tenancy rights are to be postponed to the Bank's claims. Item 6 says this: "Mrs J Pentland Clark and children: can we send lease and partnership Agreement for perusal. Better to confuse them with main facts." (sic)

[35] There is one other important document which I must mention since all parties referred to it. That is the report by the Judicial Factor Mr Macfie, W.S. Lord Dawson appointed him interim factor on 27 May 1999 and his report to the Court (32 pages) is dated 11 October 2000. Mr Macfie was an eminent Writer to the Signet and who sadly died at a young age. He was personally known to me and enjoyed the confidence of the Supreme Courts in Scotland. He was a person of courage, learning and integrity.

[36] The report does not directly deal with the matters argued to me but has to touch upon the three areas I have already identified as important. I have looked at his whole report. It is critical of the way the executry was handled but nowhere does the reporter mention fraud. I am certain that if Mr Macfie had thought that any actions were fraudulent he would not have failed to say so. The silence is important.

[37] I now turn to look at the few authorities which are in point. The first and most important is Leslie v Lumsden and Others (1856) 18 D 1046. It concerned the affairs of the Banking Company of Aberdeen (later the Union Bank). Five of the twelve directors were defenders and fraud was alleged against them and generally against the directors. The result of the alleged fraud was that Leslie's shareholding in the Bank became worthless. There were allegations of false book-keeping concealment and paying dividends out of capital. Before the Lord Ordinary (Handyside) a number of documents were examined. In his opinion (delivered according to the style of the time in the third person) he found that some of the lending was hazardous but advances were made on the usual prospect of being repaid. Loans to companies of which their co-directors were partners was neither a fraud to make or receive. Taking no security was not fraud and he found that the advances, neither in amount or in proportion to the Bank stock were such as to support a fraud.

[38] The Second Division (with other consulted judges) agreed. There were eleven judges including the Lord Ordinary who sat also on the appeal. Only the Lord Justice Clerk dissented. I need quote only from some of the opinions. At 1063/4 Lord Ivory said inter alia ".... the defenders are charged with fraud .... the action therefore is one of a class in which directness and precision of averment is most peculiarly requisite .... a mere general flinging about of the word collusion etc will not suffice ....". Lord Deas at 1067 said inter alia ".... I do not attempt to specify every class of allegations in the Record which .... are in their own nature indifferent .... if so the mere use of the general epithets 'fraudulent', 'collusive' .... and the like .... will not make charges relevant which would otherwise be irrelevant ....". There are similar dicta by the other judges.

[39] The only other case really in point is Lord MacFadyen's decision in The Royal Bank of Scotland plc v Holmes 1999 SLT 563. The case concerned guarantees and indemnities arising out of losses at Lloyds. Having referred to the authorities on fraud and specification the Lord Ordinary said that it was ".... appropriate to apply the rigorous standards laid down in the authorities ...." (57OD) I agree with him and I am, of course, bound by the opinion of the whole court in Leslie. I note also what was said further at 570 about looking at documents. For the reasons I have given elsewhere I have looked at the documents I consider relevant.

[40] Having regard to the pleadings, the relevant documents and the guidance from the authorities, what now is to be done? I am satisfied that the action as now laid is not relevantly averred both as a matter of pure relevancy ("the mere use of general epithets") and of specification. The admitted consequence of that is that prescription has to operate, as well as excluding most of the Record from probation. So far as the first defender is concerned the action against her can now be dismissed.

[41] My reasons for so holding can be briefly expressed. As far as deathbed events are concerned there is no averment at all of lack of capacity supported by any facts or medical opinion, quite the reverse from the contemporary letters. There are no specific averments that any deed was altered or by whom. It is obvious from the documents and what is said that the deceased wanted to shift the balance in favour of his new wife and himself. That is not fraudulent. It is also obvious from the two letters already mentioned that he was apprehensive that his former wife would not take kindly to that. If these were his thoughts then he was right. Once the executors were faced with what they, in December 1985, saw as a valid lease they had to fulfil the wishes of the deceased. They would have been wrong to have sided with the early position of the Clydesdale Bank against the widow especially as their (correct) preliminary view of the lease was soon confirmed by counsel and the Bank's first position quickly changed.

[42] On this same point I am firmly of the view that to create the lease without telling the Bank was never fraudulent for a number of reasons. Firstly, it was dictated by expediency on the deathbed. Secondly, Mr Wilson knew he had to tell the Bank and did so at once. There was no attempt to conceal anything and finally in the circumstances there was not the remotest chance that the Bank would have wanted to step in and run the farms. At best for the pursuer what happened over the Bank might be categorised as "risky" in the same way as some of the lending in the Aberdeen Bank case. It could never, ever be described as fraudulent.

[43] The point made about the 40% is in my view unstateable. The pursuer categorised that figure as "a shock to the conscience". That did not appear to shock Mr Murray Q.C. who was prepared to concede an even higher figure.

[44] I should say one thing about the Minute of the Executors' Meeting on 7 December where the entry about "confusing" appears. It is hard to understand what is meant by this. It is perhaps at worst an unfortunate expression but whatever it means it does not fit with what the executors then did. They quickly settled with the Bank and in early course in 1986 told all the facts to the solicitors for the other parties. It is impossible to categorise that entry as a fraud.

[45] I was not asked to look at the Opinion of Temporary Lord Ordinary Wise, Q.C., but I have done so since two of the issues argued before me (the deathbed and the Clydesdale Bank) were also discussed before her. Her opinion is lengthy and detailed and demonstrates a fair and careful analysis of many points. She has allowed a limited proof before answer on matters not before me. However, I take comfort from the fact that on the two issues also before me she has reached the same conclusions. I refer to what she writes on pages 55 to 58 of her opinion with which I agree.

[46] In the result, I will give effect to the submissions of the defenders and reject those of the pursuer and the respondents. I feel bound to comment that I regard these continuing proceedings as unfortunate and disappointing. From what is before me I have no doubt that the deceased did intend to provide for his children and probably wanted his surviving son to run the farm or farms. James was only 16 when his father died. However, the many actions which have since been raised have frustrated that intention and left the estate much diminished. That is a matter of regret. Accordingly I deal with the pleas-in-law as follows. I will repel the pursuer's pleas 3 to 11 and 15 to 17. That leaves as live the two pleas where proof before answer has already been allowed. I will repel the pleas 1 to 5 for the respondents leaving two for proof before answer. With the first defender it is less easy to see what needs to be sustained as some pleas are covered by the other defenders. For the purposes of the debate before me I will sustain pleas 3 to 5, 10, 13, 14 and 15 to the extent of refusing to admit to probation what is specified in the interlocutor and finding also the matters added by the Minute of Amendment alleging fraud are irrelevant and have prescribed in any event. I also sustain plea 11. It is unnecessary to deal with pleas 12 and 16. Insofar as she was in the action before me, no fraud has been relevantly averred, the other complaints have long prescribed, and it is appropriate now to dismiss the action against her. For the other defenders I will sustain pleas 6 and 8 to the extent of excluding from probation what is specified in the interlocutor and plea 4 to the extent of finding that the said matters have in any event prescribed.

[47] I will deal with the pleas-in-law as follows.

I will delete from probation as I now indicate.

1. Conclusions 3, 4 and 5.

2. In Article 2.1 on page 9 six lines down from "The Defenders' entire averments ...." to the end at the bottom of page 9.

3. In Answer 2.1 for the beneficiaries on page 11, 6 lines down from "Explained that at the date of his death ...." to the end on page 13.

4. In Article 2.1(a)(i) on page 13, 15 lines from the bottom, from "The Respondents' answers are hereby ...." to the end on page 18.

5. In Answer 2.1(a)(i) for the beneficiaries on page 21, from "Explained and averred ...." 9 lines down to the end on page 27.

6. In Article 2.1(b) on page 33, 18 lines down from "in fraudulent breach of trust ...." to the end on page 37, under exception of the words "Quoad Ultra denied".

7. In Answers 2.1(b) for the respondents on page 39, 18 lines up from the bottom, from "on the ground that no action ...." to the end on page 41 under exception of the paragraph starting 3 lines up from the bottom of page 39 with "With reference to the 'live issues' ....".

8. Article 2.2 in its entirety (from pages 42 to 59).

9. Answer 2.2 for the beneficiaries in its entirety (from pages 61 to 69).

10. Article 2.3 in its entirety (from pages 69 to 71).

11. Answer 2.3 for the beneficiaries on page 71 to "interest as tenant" on line 10.

12. In Answer 3 for the beneficiaries, from "The Third and Fourth Defenders knew that the former executors ...." 2 lines down from the top of page 75 to "the Fourth Defender had knowledge of the true circumstances." 15 lines down from the top of page 75.

13. In Answer 4 for the beneficiaries:

a. on page 88 starting 7 lines up from the bottom with "Explained and averred that several actions ...." to the end of the paragraph on page 89 ending with "inequitable and improper administrative acts at the outset." and

b. on page 90, 14 lines down, from "The executors were fully aware of the issues ...." to the end.

14. In Answer 12 for the beneficiaries on page 98, 5 lines up from the bottom, from "Explained and averred that the First Defender having acted in fraudulent breach ...." to the end on page 99.

15. In Article 14, 7 lines up from the bottom on page 99, from "Under reference to the Defenders' Answers ...." to the end on page 100.

16. In Answer 15 for the beneficiaries, the words "(and the Third Defender's fraudulent Acts)".

17. Pleas-in-law for the pursuer (page 103): 3, 4, 5, 6, 7, 8, 9, 10, 11, 15, 16, 17.

18. Pleas-in-law for the beneficiaries (page 107): 1, 2, 3, 4, 5.

19. Delete the word "First" in Conclusion 2(B) and Plea 14 for the pursuer.