Inner House rules in favour of liquidator’s claim in respect of Letham Grange Hotel
8 March 2013
The dispute concerning the ownership of Letham Grange Hotel in Angus which arose out of the liquidation of Letham Grange Development Company Limited (the “Company”) has been ongoing since 2003. It is well known to those practising in insolvency law but, in summary, the history is as follows. Initially, the liquidator obtained summary decree for reduction of a disposition by the Company in favour of Nova Scotia, on the ground that it constituted a gratuitous alienation. Following a successful appeal to the House of Lords by Nova Scotia (2006 SC (HL) 85) the liquidator ultimately obtained decree of reduction of the disposition by default when Nova Scotia failed to appear the diet of proof. The present action was, however, raised when it became apparent that Nova Scotia had itself granted a security over the hotel in favour of Foxworth. The Lord Ordinary found in favour of Foxworth and Nova Scotia at proof (2011 SLT 1152), accepting the defence that, in addition to the price narrated in the disposition, there had been an agreement that Nova Scotia would assume responsibility for c£1.8m of debt.
The liquidator reclaimed, arguing, first, that even on the basis of the Lord Ordinary’s findings, he was entitled to decree of reduction of the security since the Lord Ordinary had not found that there had been any definite and enforceable agreement regarding the assumption of loans at the time the disposition was granted and, secondly and in any event, the Lord Ordinary’s findings in fact were unsound in that he ought not to have accepted the Defenders’ position regarding assumption of debt since it was plain from the circumstantial evidence before the Court that the Defenders had simply attempted to move the valuable asset which the hotel represented from the reach of the liquidator and the Company’s creditors.
An Extra Division of the Inner House found in favour of the liquidator on both points ( CSIH 13).
The leading Opinion was delivered by Lady Paton (with whom Lord Menzies agreed). A separate concurring Opinion was delivered by Lord Marnoch. The Opinions contain an important and clear analysis of the legal principles which are to apply in ascertaining whether adequate consideration has been given for the purposes of a claim for reduction based upon section 242 of The Insolvency Act 1986. In addition, an extensive and interesting examination of the circumstances in which an appellate court may interfere with findings in fact made by a court at first instance is to be found in the opinions.
The liquidator was represented by Lord Davidson QC and David Thomson, Advocate, both of Axiom.
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