EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
Lord Clarke Lord Brodie Lord Kingarth	[2012] CSIH 97 XA48/12 OPINION OF THE COURT delivered by LORD CLARKE in the APPEAL by ALISTAIR KEDDIE Pursuer & Appellant; against RICHARD RICKER First Defender & Respondent; And MARY GOLDSMITH Second Defender & Respondent; _______________

Act: Party

Alt: Logan, advocate, Campbell Smith WS

19 December 2012

[1] In this sheriff court action, the appellant sues the respondents, who are trustees acting under the trust disposition and settlement of his former wife, Elizabeth Wells Keddie for payment of £52,256.85 with interest from 5 July 2008 at the rate of 15 per centum per annum until payment and for payment of the sum of £88,651.53. The first sum is averred to represent money lent by the appellant to his former wife during her lifetime and which is now said to be due for repayment. The second sum represents interest which it is said is due in terms of the loan agreement between the appellant and his former wife.

[2] The case came before the sheriff at Hamilton for proof before answer. The appellant was represented at that proof. The sheriff assoilzied the defenders and respondents from the craves of the writ.

[3] The appellant appealed to the sheriff principal. Before the sheriff principal the appellant represented himself as he did before this court. The sheriff principal, by interlocutor dated 9 February 2012, adhered to the interlocutor of the sheriff whereby he had assoilzied the respondent.

[4] The findings in fact of the sheriff reveal the following background to the proceedings. It should be noted that this court was not asked by the appellant to make any substitute findings in fact. The transcript of the proceedings before the sheriff was not before us.

[5] The appellant was married to Mrs Elizabeth Keddie but the marriage was dissolved in 1989. On 25 October 1989 Mrs Keddie executed a will in terms of which her whole estate was left to the appellant. Unknown, however, to him, Mrs Keddie revoked that will and made subsequent wills in 2004 and 2006. She died on 5 October 2006. The will which operated on her death had been executed by her on 6 March 2006. That will made no provision for the appellant except for a specific legacy of her entire shareholdings. After the terms of the relevant will were disclosed the appellant proceeded to make claims on Mrs Keddie's estate. He contended that pension payments due to him, which were collected by Mrs Keddie on his behalf in this country, were agreed between himself and Mrs Keddie to be treated as sums lent to her. He, furthermore, contended that other lump sum payments received by Mrs Keddie in 1994 and 1995 were also intended to be treated as loans by him to her which were repayable to him. These claims were not accepted by the respondents acting as trustees on Mrs Keddie's estate.

[6] The appellant proceeded to raise proceedings for payment of the sums in question by the respondents in the Central London County Court in November 2007. These proceedings were dismissed with expenses being awarded to the respondents on 13 May 2008. The appellant then raised the present proceedings.

[7] The appellant and Mrs Keddie had remained in contact with each other after their divorce. Mrs Keddie had told the appellant, that, in terms of her will of 25 October 1989, she had left her whole estate to him. As part of an informally agreed financial settlement on divorce, the appellant had, in 1989, transferred ownership of the former matrimonial home at Calderstones, Biggar Road, Edinburgh to Mrs Keddie. The appellant himself moved to Florida, USA, after the parties' divorce and he subsequently remarried. In or about 1991 the appellant negotiated the purchase of a Florida Company known as J D & B D Inc, which owned and operated a Holiday Inn hotel in Sarasota, Florida.

[8] The sheriff found, as a matter of fact, that Mrs Keddie had provided $250,000 towards the purchase of the said company. There had been an agreement between the appellant and Mrs Keddie that the appellant would hold 60% of the shares in J D & B D Inc and Mrs Keddie would hold 40% of the shares. In the event the company experienced financial difficulties and the hotel was repossessed by a heritable creditor. The company ceased trading and its assets became valueless. Both the appellant and Mrs Keddie lost the entirety of their investment.

[9] The sheriff found that to finance her contribution to the purchase of the company, Mrs Keddie had borrowed sums from the Bank of Scotland and from the Bradford & Bingley Building Society, and in January and July 1991 had granted securities, securing these borrowings against the former matrimonial home at Calderstones.

[10] By 1993, Mrs Keddie was experiencing financial difficulties and, in particular, found that she could not make the monthly loan payments due by her to the aforementioned lenders. By that time the appellant was entitled to payment of a retirement pension in the UK, although he continued to reside in the USA. The sheriff found that the pursuer and Mrs Keddie agreed that she could collect the appellant's regular pension payments and the appellant signed the necessary documentation for that purpose. Mrs Keddie collected all UK retirement payments due to the appellant from 12 April 1993 until 1 September 2003, the total sum of which came to £28,378. Mrs Keddie also, according to the sheriff's findings, received a total of ten further separate payments sent to her bank account by the appellant from the USA. These payments comprised one payment of $10,000, and nine payments of $3,000 between March 1994 and 27 January 1995.

[11] On 28 November 1997, Mrs Keddie sold the former matrimonial home at Calderstones. The appellant made no claim for payment in respect of any of the proceeds of sale of the property. In 1998 Mrs Keddie purchased a property in Burnside, Glasgow where she resided until her death of 5 October 2006. The appellant returned to the United Kingdom to live, in or about July 2003.

[12] As previously noted, Mrs Keddie revoked the will she had executed on 25 October 1998 and the will which operated on her death made no provision for the appellant, save for a specific legacy to him of her whole shareholdings. At the time of the death of Mrs Keddie the appellant occupied her home at Burnside, Glasgow. He refused to vacate the subjects until a decree of ejection was granted against him on 24 April 2007. He apparently refused to accept that the property at Burnside had not been bequeathed to him by Mrs Keddie. It was thereafter that the appellant raised the claims to which the present proceedings relate.

[13] At the proof the sheriff noted that none of the arrangements whereby Mrs Keddie provided funds for the purchase of the business in Florida was committed to writing. The appellant's evidence was that the agreement between himself and Mrs Keddie was that she would borrow his UK old age pension payments as they fell due, and were collected by her, in the United Kingdom. The agreement also provided that interest would run on each instalment of the pension at the rate of 15% per annum from the date when it was paid to the date when it was repaid. The appellant, in evidence, said that it was further agreed that full repayment would take place on the sale of the house at Calderstones. The appellant gave evidence that, by 1994, Mrs Keddie had received from him substantial sums in addition to his weekly pension to prevent a standard security over Calderstones being called up. The payments in question were made between 1994 and 1995 and were the ten separate payments referred to above. The appellant had no documentary proof relating to the payments actually being sent by him to Mrs Keddie. He relied on the terms of his ex-wife's bank account with the Bank of Scotland which showed payments being made into her account expressed in UK currency. These, the appellant contended, were loans to Mrs Keddie, orally constituted with interest at the rate of 15% per annum on each payment from the time paid until repayment. It was also the appellant's evidence that repayment of these sums fell due upon the sale of the house at Calderstones. It will be recalled that he, nevertheless, made no claim for payment out of the proceeds of sale of Calderstones when it came to be sold by Mrs Keddie in 1997 and no payment of any sum was made by her to the appellant then. The sheriff notes that, in his evidence, the appellant said that on his return to the United Kingdom Mrs Keddie had said that when her health improved she would sell the house at Burnside, and move into a flat. He would then, he said, be repaid and would use the money to open up a hotel development consultancy and "all would be rosy". He maintained that there were regular discussions between himself and Mrs Keddie that the house at Burnside would be sold for the purpose of making further investments in hotels. Mrs Keddie was diagnosed as suffering from cancer in 2006. It was after her death that the appellant discovered that he had not been left her interest in the house at Burnside.

[14] As well as hearing from the appellant, the sheriff heard from four witnesses for the respondents. The most significant of these was the first named respondent who is a qualified attorney practicing law in Massachusetts, USA. He is married to the niece of the late Mrs Keddie. The first named respondent and his wife had visited Mrs Keddie, in Scotland, from time to time, since 1982. Mrs Alison Ricker, the first named respondent's wife and Mrs Keddie were very close. On 6 December 1991 Mrs Keddie gave to the first named respondent a power of attorney to act for her in relation to what the first named respondent said were problems she told him that she was having getting information from the appellant about money she had borrowed in Scotland and forwarded to him in connection with his Florida hotel venture. The first named respondent gave evidence that Mrs Keddie had told him that she had borrowed money and sent it to the appellant and she was worried that she was not obtaining any answers from the appellant about what had happened to that money. The power of attorney was to enable the first named respondent to make enquiries with sources in Florida but it was his evidence that, in the event, he did not have to make use of it because he obtained certain information from the appellant himself.

[15] The first named respondent advised the court that his impression was that Mrs Keddie had lent the appellant $250,000 which sum she herself had borrowed, secured against the house at Calderstones. The purpose of Mrs Keddie lending the money to the appellant was to assist him in the completion of the purchase of the hotel in Florida. In conversation with the appellant in Florida in January 1993, the first named respondent was advised, for the first time, that Mrs Keddie was effectively a "partner" of sorts in the business in Florida and owned a 40% share in the company which owned the Holiday Inn. He, however, learnt that by then the corporation was basically worthless, bankruptcy proceedings having been brought. No documents appeared to be available, however, showing Mrs Keddie's interest.

[16] During 1993, Mrs Keddie informed the first named respondent that there had been a foreclosure on the Florida hotel and that the appellant was "out of business". She appeared to be very upset and embarrassed. She was not in a position now to meet the mortgage repayment due in respect of the security over Calderstones. In due course she required to sell Calderstones to meet her indebtedness.

[17] The first named respondent had no further involvement in relation to the appellant's business affairs thereafter. He, however, kept in touch with Mrs Keddie who had moved to Burnside, Glasgow. She then became ill with cancer and his wife visited her regularly. He was appointed as an executor by Mrs Keddie but left the administration of Mrs Keddie's estate to the second named respondent.

[18] In cross-examination the first named respondent said that he was aware that Mrs Keddie collected the appellant's pension and that she had received some other payments but it was his understanding that these later payments were payments towards the mortgage over Calderstones. He was unable to go into any further detail about the nature of the payments or how much was in fact paid. The sheriff found this witness to be "a generally credible and reliable witness". The evidence from the other witnesses, led on behalf of the respondents, was not contentious and did not further assist the sheriff in resolving the issue before him.

[19] In setting out his decision the sheriff said:

"As was agreed by both solicitors, the credibility and reliability of the pursuer is a crucial factor in this case. But simply, if his evidence is not believed about the nature and extent of the alleged loans, and the rates of interest thereon, then his claims will fail".

The sheriff then continued:

"Having considered all of the evidence and competing submissions, I do not find the evidence of the pursuer to be sufficiently credible and reliable for me to be satisfied to the standard to which the law requires for him to succeed in this action".

The sheriff accepted a submission made on behalf of the respondents that as Mrs Keddie herself was deceased, and unavailable to give evidence on the matter, the appellant's evidence had to be subject to careful scrutiny. The sheriff's conclusion was on a review of all the evidence, stated in the following terms:

"When I consider all the evidence, I can find nothing which directly contradicts the pursuer's contention that the payments he made to his ex-wife were loans. Equally there is nothing which supports his contention. It may well be the case that these payments were loans. There are, however, other possible explanations and I cannot hold, standing the lack of independent and supporting evidence, that the pursuer's version is more likely that any other to be correct".

The other possible explanations for the transactions were spoken to by the first named respondent who, as we have noted, was held to be credible and reliable. In his note the sheriff pointed to several important aspects of the appellant's evidence which he found to be unsatisfactory or incredible. He went on to say:

"In consideration of all the evidence, one likely explanation is of the pursuer using the security of the former matrimonial home at Calderstones, which he thought was ultimately going to revert to him, to obtain funding for the Florida hotel project. The payments remitted by him back to UK in 1994 and 1995, could have been loans, but could have also been to repay the mortgage, thereby preventing Bradford & Bingley Building Society from calling up the standard security, thus protecting the pursuer's perceived 'investments' in the former matrimonial home. I cannot be satisfied on the balance of probabilities that the payments were loans to Mrs Keddie, repayable upon the sale of Calderstones, as there is no evidence apart from the word of the pursuer to support that".

[20] It is clear, therefore, that the sheriff assoilzied the respondents, after proof, on the basis that the appellant had not discharged the onus of proof upon him and that, in particular, he could not find the appellant to be credible and reliable in relation to the essential elements of his claims. The sheriff principal refused the appellant's appeal saying that the sheriff had not erred in any respect and was entitled to make the findings he did.

[21] In his written note of arguments, as supplemented by his oral submissions to this court, the appellant sought to make certain criticisms of the approach taken by both the sheriff and the sheriff principal to his claims. He contended that their position had been undermined by a material misunderstanding on the part of the sheriff that the money provided by Mrs Keddie had been borrowed by her to finance a contribution to the purchase of the Florida hotel in January 1991 when, in fact, the money was borrowed by her in July or August 1991. But, as counsel for the respondents pointed out the sheriff's finding (finding 8), was that Mrs Keddie had granted a standard security not only in July 1991 but also in January 1991 which was consistent with the documents placed before the court. We are satisfied that there was no material misunderstanding on the part of the sheriff and the sheriff principal in this respect which affected the rest of their reasoning.

[22] One of the main points made by the appellant, in his submissions to this court, was that there was no finding or evidence to the effect that he had come under any obligation to make repayment of any sums to Mrs Keddie. There was, furthermore, no suggestion in the evidence that he had made a donation of the sums in question to Mrs Keddie and, in any event, there was a legal presumption against donation. In that situation the only reasonable explanation was that the sums in question had been lent to Mrs Keddie and were due to be repaid by her.

[23] In reply counsel for the respondent pointed out that the first respondent had provided the court with evidence, which it did not reject, of a possible explanation for payments being made to Mrs Keddie, namely that they were being made towards repayment of the mortgage on a property the appellant believed would be his, and which she had used as security to provide funds to assist the appellant in his Florida investments. Set against that the sheriff had found the appellant himself to be incredible and unreliable in a number of specific respects. The sheriff principal had been correct to refuse the appellant's appeal on the grounds he did. In particular, the sheriff had had the particular advantage of seeing and hearing the witnesses for the purposes of assessing their credibility and reliability - Thomas v Thomas 1947 SC (HL) 45 at pages 59 to 60. The trial judge on the facts on the present case had not been demonstrated to have gone plainly wrong - Murphy v East Ayrshire Council [2012] CSIH 47.

[24] We are entirely satisfied that the appeal must fail. The appellant's case stood or fell on the sheriff's conclusions regarding the effect of the evidence put before him of the credibility and reliability of the witnesses he saw and heard. Had the respondents been unable to place before the sheriff any possible explanation for the sums being paid by the appellant to Mrs Keddie, other than that these payments were made by the appellant as repayable loans by him, then the appellant's position might have had some force. But that was not the position. The respondents did provide evidence, which the sheriff accepted, and which came from a credible and reliable source, of another explanation for the payments being made. Moreover the sheriff found the appellant incredible and unreliable in certain significant respects. In those circumstances he was, in our view, entitled to reach the conclusion that he could not hold that the appellant had proved his case. There were a number of respects in which the appellant's position was undermined, as noted by the sheriff. It was a matter of note, for example, that the appellant had taken no steps whatsoever, to reclaim repayment of the sums in question when Calderstones was sold in 1997. Any documents relied upon by the appellant, for setting up these loans, were, for the reasons given by the sheriff, not in terms that the sums sent to Mrs Keddie were being sent as loans repayable on a certain date, or indeed, repayable at the rate of interest claimed by the appellant, as averred by the appellant.

[25] In all the foregoing circumstances, the appeal must be refused. It was pointed out to the court by counsel for the respondent that this court will require to remit the cause to the sheriff to deal with the respondents' outstanding motion in terms of section 19 of the Legal Aid (Scotland) Act 1986.