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CASHBACK, QC: Investigation reveals Scotland’s ‘top’ Planning QC demanded cash payments & cheques from clients in Court of Session case linked to serious judicial conflicts of interest

John Campbell QC – Faculty rules breached by payments from clients. A MEDIA investigation has revealed a senior Scots Queen’s Counsel who claims to be at the top of his field in Planning law – demanded and collected cash stuffed envelopes from clients involved in a Court of Session case now linked to serious failures of the judiciary to declare conflicts of interest.

An investigation by the Sunday Mail newspaper has revealed John Campbell QC (67) of Hastie Stable & Trinity Chambers – sent emails to his clients demanding the cash be handed over “in any form except beads” to pay for legal services provided to his client – the well respected former National Hunt jockey & trainer – Donal Nolan.

Campbell QC then collected the cash stuffed envelopes from clients in locations such as restaurants, a garage specialising in servicing Bentley cars, and on a site at Branchal in Wishaw.

The Branchal site became the subject of a court case against Advance Construction Ltd – who later admitted in court they dumped highly contaminated material at the North Lanarkshire site.

John Campbell QC emailed his demands for cash. “I’m writing to confirm that we agreed at our meeting on Friday that we will meet in Dalkeith on TUESDAY morning, when you will give me £5000 towards the fees of your legal team” … “Please let me know if it’s OK to meet at the Mulsanne Garage, which is at 137 High Street, and what time would suit you?”

The reference to the “legal team” within Campbell’s email confirms other legal figures who were part of the same team received payments from the cash collected directly by Campbell.

One member of that team is ad-hoc Advocate Craig Murray – of Compass Chambers. Murray has previously refused to answer any questions on his role, or disclose how much cash he received from John Campbell.

Another email from Campbell QC to his clients, seeking another £5K – reads: “Tomorrow, I am looking forward to a serious talk with you and John, but I need to collect £5000 from you, in any form (except beads!)”

However, the demands for cash payments by the QC are a direct breach of rules of the Faculty of Advocates who forbid their members from demanding cash and bungs for legal services – even though the practice is well known to occur in both criminal and civil cases.

Section 9.9 of the Faculty of Advocate’s Code of Conduct states: “Counsel should not under any circumstances whatever discuss or negotiate fees with or receive fees directly from the lay client.”

Further rules from the Code of Conduct state clearly that fees to QCs and Advocates acting as counsel can only be collected by solicitors, and then paid over to clerks and Faculty Services.

“Normally Counsel’s fees are negotiated between the clerk and the solicitor. All fees should be paid to Counsel’s clerk.”

Additional guidance designed to cover over any direct payments ‘collected’ by Advocates states: “If any fee happens to be paid direct to Counsel, Counsel must account for it forthwith to his or her clerk.”

However, an ongoing investigation into a series of invoices issued by the Faculty of Advocates has since revealed at least one of the invoices – which had no date – was sent to the client’s solicitor.

The move by the Faculty to issue an undated invoice is now subject to allegations this is an attempt to cover up the dates of a cash collections by John Campbell.

It can also be revealed some of the payments to Campbell in cheque form were made out to to Oracle – a firm founded and co-owned by John Campbell QC and John Carruthers.

Mr Campbell and solicitor advocate John Carruthers set up Oracle Chambers in the mid 2000’s in order to create – as they claimed at the time – “a more modern, commercially responsive organisation” than they felt was provided by Faculty Services Ltd, the service company of the Faculty of Advocates.

Former Cabinet Minister Alex Neil MSP (SNP Airdrie and Shotts) – who is backing his constituents in their quest to obtain justice, has now called for a full probe into the allegations against Campbell.

The Sunday Mail Investigation report on John Campbell QC:

 ‘We gave top QC £5000 cash in an envelope four times’ Couple claim law expert broke guidelines as MSP calls for probe

By Craig McDonald Sunday Mail 2 APR 2017

A couple claim one of Scotland’s leading QCs breached strict guidelines and asked for legal fees to be paid direct to him in cash.

Melanie Collins and partner Donal Nolan said they made the unusual payment after John Campbell told them he needed “£5000 from you in any form”.

Melanie said she and a friend met Campbell, who once represented Donald Trump’s Scottish business, in a restaurant in Dalkeith where she handed over the sum in banknotes.

She said she paid the QC – one of Scotland’s top planning law experts – three further sums of £5000 in cash at other meetings.

The method of payment is a breach of strict guidelines issued by the Faculty of Advocates – the ­professional body all advocates and QCs belong to.

The couple’s MSP last week called for a probe into the payments.

Campbell wrote in an email to Melanie on October 10, 2012: “Tomorrow, I am looking forward to a serious talk with you and John but I need to collect £5000 from you in any form.”

The man referred to is solicitor advocate John Carruthers, who assisted in the case.

Four days later, Melanie received another email from Campbell which said: “I’m writing to confirm that we agreed at our meeting on Friday that we will meet at Dalkeith on Tuesday morning when you will give me £5000 towards the fees of your legal team.”

Melanie, 62, a former land developer, of Bonkle, Lanarkshire, said: “I and a friend met with Mr Campbell at a restaurant in Dalkeith where I gave him an envelope containing £5000.

“There were three other ­occasions when I paid him £5000 cash in envelopes.

“One was at the Dakota hotel in Lanarkshire, one was at my home in Bonkle and one was a site in Cambusnethan in Wishaw relating to the court case. Looking back it might seem odd – but I had never had any dealings with a QC before and just assumed this was the way they worked.

“I paid two further cheques, one to Mr Campbell and one to a law firm, of £5000 and £4000. The total was £29,000.”

The payments related to a civil case Donal initially planned against a construction firm in 2011. The case was heard at the Court of Session in 2013.

Melanie said: “We won the case but were awarded £20,000. Our total legal fees were in the hundreds of thousands.”

She reported the cash payments claims to the Scottish Legal Complaints Commission in 2014.

The SLCC said at the time: “The complaint has been considered carefully by the SLCC. It has been decided … will not be investigated as it has not been made within time limits, for the reasons set out in the attached determination.”

The couple’s MSP, Alex Neil, the SNP member for Airdrie and Shotts, said: “All these allegations have to be investigated.

“If there has been malpractice at any stage this has to be dealt with by the appropriate ­authorities. Donal and Melanie’s problem up until now is that they’ve not been listened to when they have made the complaints.”

The SLCC could not be contacted for comment.

The Faculty of Advocates’ guide to conduct states: “Counsel should not under any circumstances whatever discuss or negotiate fees with or receive fees directly from the lay client.”

Their disciplinary tribunal can hand out fines of up to £15,000. A member can also be suspended or expelled from the faculty.

The Faculty of Advocates refused to comment last week.

Campbell, 67, said: “I have no comment to make.”

FEATURE:

John Campbell QC:

The case in which Campbell represented Mr Nolan is that of Nolan v Advance Construction Ltd, a high value damages claim in the Court of Session.

A media investigation recently revealed Inner House judge Lord Malcolm (Colin Malcolm Campbell) sat on the case no less than eight times while his son held an interest and represented the defenders – Advance Construction Ltd.

There is no recorded recusal by Lord Malcolm in the case, even though he stood aside during 2012 after he ‘realised’ his son may have been a ‘potential witness’.

Court papers obtained by journalists have since revealed alarming inconsistencies in hearings which cast doubt on the conduct of legal figures in the case – spanning eight Court of Session judges – one (Lord Malcolm) a member of the privy Council, several Sheriffs, high profile QCs and Levy & Mcrae  – the Glasgow law firm now subject to multi million pound writs in connection with the £400million collapse of a Gibraltar based hedge fund – Heather Capital.

At the time the case began, during late 2011, Advance Construction Ltd were represented by a judge – the now suspended Sheriff Peter Black Watson, and the son of a judge – Ewen Campbell – who both worked for Levy & Mcrae.

It was only discovered well into hearings in the case that Ewen Campbell was the son of the judge Lord Malcolm, who sat on the case a total of eight times, and unprecedently returned to the case after stepping aside, to hand over £5K lodged by a third party for an appeal.

And, it can be revealed a recent key ruling in the Court of Session delivered by the same Lord Malcolm – scrapped a 30 year policy of regulating service & conduct complaints against members of the legal profession by the Law Society of Scotland & post 2008 – the Scottish Legal Complaints Commission (SLCC).

The 2016 ruling by Lord Malcolm, reported here: CSIH 71 XA16/15 – appeal against a decision of the Scottish Legal Complaints Commission conveniently allowed the Scottish Legal Complaints Commission to scrap 700 complaints against lawyers, advocates and QCs, and shattering the hopes of clients poorly served by their legal representatives.

Among the complaints to be taken advantage of by Lord Malcolm’s ruling and subsequently closed by the SLCC was the complaint against John Campbell QC – which included evidence presented to investigators in relation to Campbell’s demands for cash payments.

The complaint against Campbell also included allegations and evidence in relation the QC’s conduct and service in the proof heard by Commercial judge Lord Woolman.

During the second last day of the proof, Lord Woolman stated the pursuer – Mr Nolan – had a claim as the he had lost the use of his gallop and grazing.

Campbell then acted on his own – and significantly altered Mr Nolan’s claim in the Court of Session – removing Mr Nolan’s £4m head of claim. Unusually, John Campbell also removed a claim for legal and professional expenses.

There is no trace of any legal instruction from Mr Nolan to undertake this course of action in court, nor was there any consultation with Mr Nolan’s solicitor – who would have to had provided Mr Nolan with legal advice in relation to any proposed alteration of the claim by John Campbell QC. Similarly there is no trail of any communications between Mr Nolan’s solicitor, the Edinburgh Agents and Mr Campbell.

When a complaint against John Campbell QC was lodged with the Scottish Legal Complaints Commission, enquiries established the legal regulator heavily relied on a letter from Craig Murray to exonerate the aging QC.

However, enquiries by journalists have established two versions of Craig Murray’s letter now exist. Both versions of the same letter were used by legal regulators to exonerate Mr Campbell from investigations by the Scottish Legal Complaints Commission and the Faculty of Advocates.

Refusals by Murray to clarify the two separate versions of his letter have raised questions and concerns over his status as a prosecutor working for the Crown Office & Procurator Fiscal Service (COPFS), amid claims he enjoys success prosecuting criminal trials in the High Court of Justiciary.

Lord Advocate James Wolffe has yet to act on the allegations involving Campbell and Murray.

James Wolffe is now caught in a conflict of interest situation given  his role in the matter of the Faculty of Advocate’s investigation of Campbell and their failure to act after evidence of the cash demands were presented during Wolffe’s time as Dean of the Faculty of Advocates.

Investigations into the case are set to continue amid growing calls for a full probe of Mr Campbell’s activities, and demands for Lord Carloway to act to preserve public confidence in the judicial and legal system in relation to decisions taken by members of the judiciary and certain events which took place in the Court of Session.

Has your solicitor, advocate or QC demanded cash payments from you at any stage of a civil or criminal case? Tell us more about it in confidence, by email to scottishlawreporters@gmail.com

 

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BRIBES’HEAD REVISITED: Second version of Advocate Depute’s letter to legal regulator ‘removed bribe offer’ in evidence considered by Faculty under ex-dean, now Lord Advocate James Wolffe QC

Craig Murray – undated letter removed reference to bribe. DOCUMENTS obtained by the media have revealed two legal regulators acted on significantly different versions of a letter bearing the name of an Advocate who also works as a Prosecutor for the Crown Office & Procurator Fiscal Service (COPFS).

Listed in the Legal 500 Advocate Craig Murray of Compass Chambers– states on his website he represents clients in civil claims. Murray also states he works as an ad hoc Advocate Depute, prosecuting criminal trials for the Crown Office in the High Court of Justiciary.

However, an ongoing media investigation has established Advocate Craig Murray is the author of a letter to the Scottish Legal Complaints Commission (SLCC) – a letter of which two distinct versions now exist and were considered separately by legal regulators.

The investigation focuses on Murray’s role as Junior Counsel in Nolan v Advance Construction Ltd, and the conduct of legal figures in the case – spanning eight Court of Session judges – one a member of the privy Council, several Sheriffs, high profile QCs and Levy & Mcrae  – the law firm identified in the £400million collapse of a Gibraltar based hedge fund – Heather Capital.

The letter was sent by Mr Murray to the Scottish Legal Complaints Commission in relation to a complaint against senior QC, John Campbell – who claims to specialise in Planning law.

Crucially, however, a significantly altered version of the letter – still bearing the name of Advocate Craig Murray as the author – removes references to ‘offers of a bribe’ to elected councillors at a Scottish local authority, and detailed references to evidence in a high value civil damages claim in the Court of Session.

Enquiries have now established the version of Murray’s letter to the Scottish Legal Complaints Commission, on the subject of  found its way to the Faculty of Advocates via the law firm Clyde & Co (formerly, Simpson & Marwick) – who are known to represent members of the legal profession who are subject to complaints, allegations of dishonesty, corruption and negligence claims.

The complaint against John Campbell QC arises from his provision of legal services and representation to former National Hunt jockey & trainer Donal Nolan, who was the pursuer in – Nolan v Advance Construction Ltd – a case which is now likely to be heading to the UK Supreme Court for an appeal.

Questions have now arisen regarding extensive differences between the two versions of the letter, addressed to the Scottish Legal Complaints Commission. Both versions of the same letter bear Craig Murray’s name as author.

Significantly, certain references to allegations of bribery involving employees of a construction company and elected councillors, have been altered in a second version of Mr Murray’s letter – which bears no date.

Advocate Craig Murray’s letter to SLCC (Text marked in pink shows extent of deletions in Faculty’s version). In a letter dated 22 July 2014 to the SLCC, Craig Murray writes: “The most accurate account of Councillor Taggart’s position will be in that statement. My recollection of Ms Moore’s summary is that a person, whose identity was unknown to Mr Taggart, telephoned him about this case and offered a bribe. There was nothing to identify that person or connect that person to the defenders.”

However, the second version of the letter, has the references to bribery removed from the end of the sentence.

The undated letter still bearing Craig Murray’s name and Advocates address, then reads: The most accurate account of Councillor Taggart’s position will be in that statement. My recollection of Ms Moore’s summary is that a person, whose identity was unknown to Mr Taggart, telephoned him about this case. There was nothing to connect that person to the defenders.”

Then, both versions of the letter from Craig Murray to the SLCC continue: “An allegation that the defenders had been involved in bribing an elected public official to commit perjury in court would have been extremely serious. There was no basis upon which an allegation of that sort could have been made by a responsible solicitor or advocate. There could also be no further investigation (particularly in the midst of the proof diet) as it was not known who made the telephone call.”

Councillor John Taggart – who is referred to by Murray, was interviewed late last week.

Councillor Taggart’s role in discovering the dumping of contaminated waste by Advance Construction Ltd, and his further efforts to assist Mr Nolan, and constituents affected by events, was crucial in bringing the case to court and into the public eye.

In discussions with a journalist, Councillor Taggart made clear in his own view, the evidence in relation to the offer of an inducement related to an event occurred at the opening of Calderbridge Primary School (former site of Coltness Primary School), and NOT in a telephone conversation as Mr Murray claimed in his letter to the SLCC.

Further, Councillor Taggart indicated the “person, whose identity was unknown to Mr Taggart” – according to Craig Murray’s statement, had in fact handed his business card to the Councillor during the school opening event.

The Councillor further alluded to the identity of the person as an employee of a main contractor for North Lanarkshire Council.

It has since been established both Advocate Craig Murray, and Fiona Moore of Drummond Miller were present with the Councillor when his precognition of evidence was taken.

Further enquiries by journalists have now revealed the person who allegedly offered the inducement is an employee of a major construction contractor on North Lanarkshire Council’s list of approved contractors.

When it became known the incident involving the inducement was to be used in evidence, the person who approached the councillor left Scotland for Ireland and did not return for a number of months – despite being cited as a witness to attend court to give evidence in the Nolan v Advance Construction Ltd case.

The record later shows – John Campbell QC – failed to call the witness even though the individual alleged to have offered the inducement to the councillor appears on the final witness list for the proof hearing before Lord Woolman in 2014..

If the evidence of bribery had emerged during lines of questioning at the Court of Session, the testimony may well have had a significant impact on the case, and most probably initiated a Police Scotland investigation into the companies involved, and North Lanarkshire Council.

However, Senior Counsel for Mr Nolan – John Campbell QC – chose not to introduce the conversation about the allegations of bribery in court.

Undated & altered version of Advocate Craig Murray’s letter to SLCC. The removal of references to a bribe, and swathes of material removed from the second, ‘undated’ version of Craig Murray’s letter to the SLCC – raises further questions over the written testimony offered by the Advocate & some time Prosecutor to the Scottish Legal Complaints Commission.

Curiously, the undated version of Murray’s letter then surfaces at the Faculty of Advocates – who chose to rely on this heavily altered version of Murray’s original letter – in relation to an investigation which ultimately dismissed the complaint against John Campbell QC.

In a letter dated 7 October 2015 from the Faculty of Advocates to Melanie Collins, Iain WF Fergusson QC confirmed the Faculty of Advocates preferred the lesser content of the undated letter to be used in the complaint against the QC.

Fergusson wrote: ”The earlier of your two e-mails refers to two versions of a letter by Mr Craig Murray, Advocate to the SLCC. The committee relied on the undated version of the letter as support for Mr John Campbell QC’s version of events. This has brought to light an administrative error – the version of the letter dated 22 July 2015 was not before the committee when it considered and determined your complaint”

In a letter of 2 May 2016 to the Scottish Legal Complaints Commission, law firm Clyde & Co – acting as legal agent for John Campbell QC against the complaint attempted to explain the discrepancy between the two versions of Craig Murray’s letter and how the undated version ended up at the Faculty of Advocates.

Anne Kentish, of Clyde & Co wrote: “We have reviewed our files and have ascertained the sequence of events surrounding the letter. When the complaint was originally made against Mr Campbell, we were provided with a copy of the undated version of the letter from Craig Murray to the SLCC. It was provided to us on the basis that it set out the background to the complaint and Mr Murray’s recollection of events.. We did not, at that time appreciate that the letter was in draft. It resembled a file copy letter.”

“When senior counsel for Mr Campbell, Alistair Duncan QC prepared the response to the complaint on behalf of Mr Campbell, he indicated that Mr Murray’s letter to the SLCC should be included in the appendix to the response. When we prepared the appendix, we used the version of the letter that we had within our files which was the undated version. We did not at that time appreciate that the final, dated version, existed.”

“Later that day, Mr Duncan forwarded to us some emails which happened to have the dated version of the letter attached. We understand that Mr Duncan had been provided with the final version of the letter by Mr Murray. Neither we nor Mr Duncan realised that we were working from slightly different versions of the same letter (one being a draft and one being a final version)”

“As soon as we realised a final dated version of the letter existed (the day after the response was submitted to the Faculty) we provided Faculty with the final dated version of the letter and asked it to replace the undated version.”

“Mr Murray has confirmed that the undated version is a draft version of the final version dated 22 July 2014.”

However, the lengthy and laboured explanation from Clyde & Co to the Scottish Legal Complaints Commission, and the email from Iain Fergusson QC are completely at odds with a written explanation provided by Advocate Craig Murray to Mr Nolan’s partner, Ms Collins.

Seeking to explain the situation regarding his letter, an email dated 23 June 2015 from Craig Murray to Mr Nolan’s partner, Melanie Collins, stated the following: “I finished writing this letter on 22 July 2014. I signed it and sent it to the SLCC that day. Copies were also sent to you and to John Campbell QC. I did not submit one to the Faculty of Advocates, nor did any Office-bearer or member of Faculty staff see the letter before it was sent (or for that matter have I passed a copy to any Office-bearer or member of Faculty staff since). I do not know how the Faculty of Advocates came to have a copy of the letter. Could you possibly provide me with a copy of the letter or email from the Faculty of Advocates, enclosing my copy letter?”

“I note that you have provided two copies of the letter. One is dated 22 July 2014 and has page numbers and footnotes. That is the letter I submitted to the SLCC and copied to you. The letter you have labelled 5B has no date, no page numbers and no footnotes. This letter is not in a form which I saved on my computer or sent to anyone else. It appears to have the same content, font and (roughly) layout as the dated version, but I have not checked on a line-by-line basis.”

It is unusual for such material to be made public as papers submitted to the SLCC remain unreleased due to confidentiality rules.

However, the papers have been made available to journalists who are investigating the litigation process of Nolan v Advance Construction Ltd – after the case was brought to the attention of MSPs at the Scottish Parliament.

And, given the author of the letter – Craig Murray also works as an ad hoc Advocate Depute prosecutor in Scotland’s courts, there are now concerns over the implications of a Prosecutor being identified in various versions of the same letter, one version of which contains alterations to witness testimony in relation to criminal acts, and references to evidence in what has now become a key case of judicial failures to recuse, and accusations of bias in the courts.

Late last week, the Crown Office was asked for comment on the matter and the impact on Murray’s role as a prosecutor.

Initially, the Crown Office refused to comment, and demanded any request for media reaction be put in the form of a Freedom of Information request.

Pressed on the matter, a spokesperson for the Crown Office then suggested: “..as Mr Murray is not a COPFS employee any request for formal comment in relation to his professional conduct as an Advocate should be submitted to Mr Murray himself, the Dean of the Faculty of Advocates or the SLCC. Any allegations of criminal conduct should be raised with Police Service of Scotland.”

However, there are clearly public interest questions in relation to a prosecutor named as the author of a letter where one version, used by a law firm with direct connections to the judiciary – removed evidence in relation to criminal acts and bribery.

The Crown Office was then asked if the Lord Advocate intends to act to protect public confidence in the Crown Office and Procurator Fiscal Service by ordering an investigation into the use of altered versions of Mr Murray’s letter to the SLCC, and act on the status of Mr Murray as an Advocate Depute.

No reply was received.

However, it has since been established, the Dean of the Faculty of Advocates during the sequence of events which saw the Faculty investigation into John Campbell – is the current Lord Advocate James Wolffe QC.

As part of his current role as Lord Advocate – James Wolffe QC now oversees cases Craig Murray prosecutes while acting as an ad hoc Advocate Depute.

Earlier this month, DOI revealed a judge took part in a case on no less than eight occasions, where his son acted as a solicitor for the defenders. No recusal was ever recorded in this case by the judge – Lord Malcolm, who’s son Ewen Campbell had acted for the defenders – Advance Construction Ltd. The article featured here: Papers lodged at Holyrood judicial interests register probe reveal Court of Session judge heard case eight times – where his son acted as solicitor for the defenders

Additionally “The National” newspaper carried an exclusive investigation into the Nolan V Advance Construction Ltd case, here: Couple’s human rights breach claim raises questions about how judicial conflicts of interest are policed. The newspaper’s investigation revealed there are moves to take an appeal to the UK Supreme Court at a date to be decided.

Papers now under consideration by journalists for upcoming publication, are set to reveal allegations a legal team – of which Mr Murray was a member – received disbursements from a senior QC from funds the QC obtained after demanding and personally collecting substantial cash sums of thousands of pounds from clients.

The payments – outwith the normal procedure of paying advocate’s fees via a solicitor and to faculty services – are under investigation by journalists due to concerns in relation to irregularities and potential tax avoidance issues.

Craig Murray was contacted for his comments on material handed to the press.

Craig Murray was asked why there were significant differences between two versions of his letter to the Scottish Legal Complaints Commission, one dated, the other undated.

Craig Murray refused to comment.

Craig Murray was asked to confirm if his letter was altered by someone other than himself.

Craig Murray refused to comment

Craig Murray was asked if he was aware of Lord Malcolm’s true identity (Colin Malcolm Campbell) and his relationship to solicitor Ewen Campbell, one of the legal agents working for the defenders.

Craig Murray refused to comment.

Lastly, Craig Murray was asked to comment on both versions of the letter he sent to the Scottish Legal Complaints Commission. He was asked which one he wrote and if he was aware anyone altered the second undated version of his letter.

Craig Murray refused to give any comment.

A billing document from Craig Murray’s Compass Chambers to the client, reveals he was to be paid £800 +VAT per day for proof preparation and £1,250 + VAT per day for Court, which ran to 8 days. A bill was subsequently received from Mr Murray’s stables for around £39,000.

It has since been established, the SLCC relied on the dated version of Murray’s letter, while the Faculty of Advocates relied on the heavily altered undated version of Murray’s letter regarding their consideration of a complaint against John Campbell QC.

Papers obtained from case files and published in this investigation confirm the undated version of Craig Murray’s letter appears to have originated from the Edinburgh law firm – Clyde & Co (formerly Simpson & Marwick).

The letter from Clyde & Co also confirms the undated version of Murray’s letter was sent to the Faculty of Advocates, on the instructions of Alistair Duncan QC.

Duncan was tasked with defending John Campbell QC in relation to the complaint being considered the Scottish Legal Complaints Commission.

However, Court papers record the same Alistair Duncan QC – who was now defending John Campbell QC, once appeared for the defenders against Mr Nolan – in the Nolan v Advance Construction case – on 9 November 2011.

Late yesterday, the Scottish Legal Complaints Commission was provided with the two versions of Craig Murray’s letter, and a copy of a letter from Clyde & Co, admitting their role in providing the second, undated version with alterations to the Faculty of Advocates.

The Scottish Legal Complaints Commission was asked for a statement on the existence of the two versions of Craig Murray’s letter and what action the regulator intends to take.

The SLCC refused to comment.

However, the SLCC confirmed a meeting had taken place between their Chief Executive – Neil Stevenson – and former Cabinet Minister Alex Neil MSP – who has provided powerful backing for his constituent – Donal Nolan.

A spokesperson for the SLCC said: “I can confirm that a meeting between our CEO and Alex Neil MSP took place.   The meeting was to discuss the SLCC’s process: what powers we have; actions we can take; and what we can’t do.”

The case has now been brought to the attention of the Scottish Parliament’s Public Petitions Committee – who are probing judicial interests, failures of judges to recuse over conflicts of interest, and opposition of Scotland’s current Lord President – Lord Carloway – to calls for the creation of a register of judicial interests.

Had a comprehensive and publicly available register of judicial interests existed at the time of the Nolan v Advance Construction Ltd case, details of judicial links in the register could have prevented injustice in the Nolan case – and many others in the courts – from the very outset.

PROFILE: Craig Murray – Personal Injury specialist & Ad hoc Advocate Depute, of two letters:

Craig Murray – Year called: 2008

Qualifications: LLM in Commercial Law (Distinction),University of Edinburgh Member, Chartered Institute of Arbitrators Faculty Scholar, Faculty of Advocates LLM in Human Rights Law, University of Strathclyde, Dip Forensic Medical Sciences, Society of Apothecaries, Dip Legal Practice, University of Edinburgh LLB (Hons), University of Edinburgh.

Craig has a busy defender personal injury practice in the Court of Session, representing insurers and local authorities. A substantial practice part of his practice is in defending fraudulent claims at all levels, in particular employers’ liability cases and road traffic claims.Craig also represents claimants in medical and dental negligence claims.

Craig has been instructed in a number of complex product liability cases, including pharmaceutical cases (Vioxx and Celebrex) and medical products (mesh surgical implants and PIP silicone implants).

Craig has substantial experience in property damage claims and other aspects of reparation.Craig occasionally acts in public law and human rights cases, including judicial review, mental health appeals and immigration.Craig has previously been a tutor on the Diploma in Regulatory Occupational Health & Safety at the University of Warwick and on the Civil Court Practice course at the University of Edinburgh.

Craig was appointed as an Advocate Depute ad hoc in July 2015. He is a member of the Children’s Panel for the Scottish Borders.

Among references to recent cases listed on Craig Murray’s profile is Nolan v. Advance Construction [2014] CSOH 4, a land contamination case in the Commercial Court, with senior counsel.

 

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CROWN CORRUPTED: More corrupt Prosecutors revealed – New Lord Advocate clamps down on transparency amid call to release more details of criminal records of Crown Office & Procurator Fiscal Service staff

Media investigation exposes criminal records of Scots Prosecutors. AMID THE charm offensive around the appointment of James Wolffe QC to the position of Lord Advocate – the centuries old position in charge of what is now the £112m a year Crown Office & Procurator Fiscal Service (COPFS) – it has emerged transparency has been given the axe after the Crown Office refused to release further details of serous criminal offences committed by COPFS staff and prosecutors.

Among the criminal charges against Scots Prosecutors – revealed earlier  this year in a media investigation– are charges relating to misuse of drugs – thought to relate to the use of, or potential dealing of Class A substances such as cocaine, assaults against Police Officers, threats, perverting the course of justice, and breaches of the Official Secrets Act.

Journalists again approached the Crown Office again for information relating to specific charges against COPFS staff including those relating to Misuse of drugs offences, what kind or type of drugs related to the charges, and information contained in what specific charges were made against COPFS staff in relation to “offences against the police”.

However, the Crown Office refused to release any further details of the criminal offences committed by their own team –  on the basis disclosure of the information may lead to the identification of those found guilty of serious criminal offences.

The shocking move by the Crown Office under the charge of newly fast-tracked QC & Solicitor General Allison Di Rollo, and Lord Advocate James Wolffe QC – comes as figures emerge of even more criminal convictions of Crown Office Prosecutors and staff.

In addition to 15 cases of criminal charges raised against Prosecutors & COPFS staff already revealed in an investigation by the Scottish Sun newspaper in March 2016, the Crown Office have now been forced to admit a further 15 cases of criminal charges against their own team – between 2010 and 2013.

And, only 4 out of the 15 cases of newly revealed criminal charges against Crown Office employees & Prosecutors were taken to court.

In the new data released by the Crown Office in response to a Freedom of Information request, COPFS disclosed:

Between January 2010 and November 2013, we retain records showing 15 cases reported to COPFS containing allegations of criminal offences by COPFS staff. Court proceedings were taken in four of those cases, eight cases were dealt with by non- court disposal and no proceedings were taken in three cases.

The charges brought against staff include assault; road traffic offences; breach of the peace and computer misuse.

Guilty verdicts were recorded in the four cases where court proceedings were raised.

The new information comes after COPFS previously admitted it retained records from November 2013 to November 2015 showing 15 cases reported to COPFS containing allegations of criminal offences by COPFS staff.

Court proceedings were taken in 11 cases, three cases were disposed of by non-court disposal and no proceedings were taken in one case.

The charges brought against staff include assault and vandalism; road traffic offences; threatening and abusive conduct; breach of the peace; Misuse of drugs/offences against the police; data protection offences/attempt to pervert the course of justice.

In the 11 cases where court proceedings were raised, these were concluded as follows: Guilty plea accepted (4); accused found guilty after trial (1); case marked for no further action (1); court proceedings active (4).

And – the Scottish Information Commissioner (SIC) – who was asked to review the Crown Office refusal to disclose further details – said it could not become involved in the investigation, citing rules which allow the Lord Advocate to deem secret any information or data he so choses.

The SIC said it could not act because “Section 48 of the Freedom of Information (Scotland) Act 2002 states that no application may be made to the Commissioner following on from such a request for review where information held by the Lord Advocate as head of the systems of criminal prosecution and investigation of deaths in Scotland. This includes any information held by the Crown Office in connection with the investigation and/or prosecution of crime, or the investigation of sudden deaths and/or fatal accidents.

It has now been suggested internal COPFS processes governing which staff are assigned to cases have broke down on many occasions, resulting in Crown Office employees with criminal records working on key prosecution cases – some of which suspiciously collapsed.

A legal insider has backed up the notion certain high profile criminal cases and prosecutions resulting in significantly less sentences, and plea deals – instead of big time hits against well known crime figures – may have been affected by defence teams ‘familiarity’ with certain Crown Agents and staff

Speaking to Diary of Injustice earlier this week, a leading Criminal Defence solicitor suggested it may now be worth asking Procurators Fiscal to declare – in court- any criminal charges or convictions before they proceed to represent the Crown in a prosecution.

The solicitor said: “If my client is being prosecuted for a particular type of criminal offence, I believe it is in the interests of justice for the court to be made aware the Procurator Fiscal may have a criminal conviction for the same, or a potentially more serious offence.”

In certain cases, prosecutions may well have been compromised after Crown Office personnel leaked information to criminals – as occurred in one case (among others) where a COPFS employee was found guilty of breaking the Official Secrets Act and passing details to known crooks.

The revelations of Crown Office informants handing over key files and tips on COPFS investigations to crooks are a considerable blow to law enforcement organisations such as Police Scotland and international law enforcement organisations from other countries – who share evidence with the Crown Office in the hopes of putting away criminals, drug dealers and gangsters.

PROSECUTORS CRIMINAL RECORDS REVEALED:

Crooks among Them – Prosecutors own crime gang revealed. The only case where a COPFS employee was found guilty after trial relates to that of Iain Sawers, 27, from Edinburgh, who was found guilty of passing information to the criminal fraternity – during a seven-day trial at Edinburgh Sheriff Court in September 2014.

A jury found Sawers guilty on a charge of attempting to pervert the course of justice, the Official Secrets Act and nine under the Data Protection Act.

Sawers joined the Productions Office of the Procurator Fiscal Service in Chambers Street in the city in 2008.

His induction covered security of information and the warning that any breach could lead to disciplinary proceedings. He was also told, under the Official Secrets Act, the unauthorised disclosure of documents was an offence.

The offences by Sawers came to light when police began an investigation into the case of 27-year old Calum Stewart on charges of breach of bail and attempting to pervert the course of justice by threatening his ex-partner, Kelli Anne Smillie, if she gave evidence in a trial in July, 2013.

Stewart paid for her and her mother to leave the country and go on holiday to Benidorm on the week of the trial.

The police investigations led them to a number of phone calls and text messages between Stewart and Sawers between 24 and 29 January 2014.

These led to Stewart phoning Kelli Anne threatening her and her mother. They were to be witnesses in the outstanding trial which has since been deserted by the Crown.

The police also recovered Sawers’ iPhone. Although many messages had been deleted, forensic experts were able to recover them and the telephone numbers of the senders and receiver. They showed that between April 2008 and January 2014, Sawers had passed on information to other people on nine occasions.

A check on the productions office computer showed shortly after receiving a call, Sawers’ secret personal user number was used to access the information.

The jury also found Stewart guilty of attempting to pervert the course of justice and breach of bail. Neither men gave evidence during the trial – much to the relief of the Lord Advocate.

The Crown Office also admitted 40 staff  had been subject to disciplinary action, been suspended, dismissed or have been moved to other duties as a result of disciplinary action between January 2013 to late last year and  that 14 of those staff members were suspended in the period requested. The reasons for suspension included allegations related to potential criminal activity and/or charged by Police; and breach of trust.

Of the 40 members of staff who were suspended, 10 were dismissed from the Crown Office.

However officials refused to identify the reasons for their dismissal, insisting they wished to protect the identities of their colleagues and nature of the sackings.

A legal insider has since indicated former Crown Office staff including some of those who were sacked for disciplinary offences or had left COPFS in relation to allegations of criminal conduct or criminal charges – are back working with private law firms and public bodies with links to the Scottish Government.

The Scottish Sun newspaper reported further, here:

Crooks of the Crown: 15 legal staff on charges

EXCLUSIVE by RUSSELL FINDLAY 7 Mar 2016

COPS charged 15 Crown Office workers with crimes including drugs, police assault and perverting the course of justice.

Violence, vandalism, threats and data breaches were also among the alleged offences.

And 11 of those cases reported over the last two years went to court.

A source said: “The nature of the criminal charges are very serious.

“The Crown Office should be beyond reproach as it’s responsible for highly sensitive information about the most serious crimes and sudden deaths.”

Four of the 11 employees taken to court pleaded guilty, one case was dropped, four are ongoing and the outcome of one is unknown.

It’s thought Edinburgh procurator fiscal’s office worker Iain Sawers, 26, is the only one found guilty.

He was jailed for 18 months in 2014 for attempting to pervert the course of justice by leaking details of cases.

The information about staff charges from the two years to November 2015 was unearthed using freedom of information laws.

Similar data on police officers accused of crimes is published by the Scottish Police Authority.

Last night, Scottish Tory justice spokesman Margaret Mitchell said: “The Crown Office should be no different from Police Scotland in that they should routinely publish this information.”

The Crown Office is Scotland’s prosecution agency headed by the country’s most senior law officer Lord Advocate Frank Mulholland.

A spokesman said: “We employ more than 1,600 staff, the overwhelming majority of whom uphold our high standards of professionalism. Any breach of rules is dealt with swiftly and appropriately.”

For previous articles on the Crown Office, read more here: Scotland’s Crown Office – in Crown detail

 

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INQUIRY OF THE CROWN: Scottish Parliament’s Justice Committee launch inquiry into crime fighting ability of ‘institutionally corrupt’ Crown Office & Procurator Fiscal Service

Crown Crooked – MSPs to quiz £112m-a-year Scots prosecutors. OFTEN DESCRIBED as the most corrupt public body in all Scotland – the Crown Office & Procurator Fiscal Service (COPFS) – is to face a major investigation of it’s purpose and role in prosecuting crime – by the Scottish Parliament’s Justice Committee who want to hear from you by Wednesday 19 October 2016

Accused of being a haven of deceit, institutionally racist, sectarian, bigoted, prejudiced, corrupt, woefully incompetent and staffed with prosecutors who will – with ease – lie to victims of crime, misrepresent the facts in court, twist evidence of victims, witnesses and accused alike – this collection of swaggering lawyers and Crown Counsel who are paid a staggering £112.5 million of public cash this budget year to go after criminals – will now face questions on their own gangster-like existence in the annals of Scots Law.

The inquiry – which will take evidence in public during sessions of the Justice Committee over the coming months at Holyrood – will focus on the core role and examine the effectiveness and efficiency of the Crown Office, how well it works with its stakeholders, and the support it provides to witnesses and victims of crime.

The Committee will also examine its responsiveness to new challenges and opportunities, such as the evolving nature of crime and advances in technology. As part of the inquiry it will examine the role and function of the independent Inspectorate of Prosecution in Scotland.

Beware however – this is an enquiry which appears to focus more on questions of whether the Crown Office has enough resources – or the budget – to be effective at ‘fighting crime’.

Hands up those of you (not vested legal interests please) who believe £112.5 million of public cash a year – as part of an ever increasing budget – makes the Crown Office under budget or under resourced.

MSPs have also clarified the Justice Committee inquiry will not consider two other roles of the Crown Office – relating to establishing the cause of sudden, unexplained or suspicious deaths or investigating allegations of criminal conduct against police officers, except in relation to the general issue of whether the COPFS has the resources it needs to carry out its purpose.

This is a Crown Office gone bad – a prosecution service so rotten – the Scottish Government was forced to remove the law on double jeopardy to allow incompetent, often strange prosecutors – some with their own secret criminal histories – to bring persons before the court time and time again until convictions are eventually secured in front of increasingly worn out judges and juries.

The same Crown Office which shredded statistics on sectarian crime principally against Catholics and other religious minorities in Scotland shredded – to avoid being asked questions by MSPs considering the hated Offensive Behaviour at Football Matches & Threatening Communications Act and the impact of Scotland’s criminal justice system’s oh-so-obvious endemic religious bigotry.

The same Crown Office run by Prosecutors who present the deceased on witness lists at criminal trials.

The same Crown Office staffed by Prosecutors & employees who themselves have secret criminal records – on everything from assault, threats & perverting the course of justice to drugs offences.

The same Crown Office compromised by criminal informants among staff who leak details to crooks targeted by Police Scotland and other law enforcement agencies.

The same Crown Office who pride bonuses, junkets and higher salaries before obtaining justice for victims of crime.

The same Crown Office whose Advocate Depute did a runner from the High Court in 2007 during a major trial which resulted in the collapse of the first World’s End murder trial.

The same Crown Office run by a Lord Advocate who called into question the state of the judiciary in order to distract the public from Crown Office failures over the collapse of the same World’s End Trial –Top judge accused Lord Advocate of undermineg the judiciary in statements Angiolini made to the  Scottish Parliament.

The same Crown Office which campaigned for the removal of Corroboration – one of the cherished few safeguards of Scots law which cuts across every and all criminal cases and evidence presentation in our courts and helps to guard against miscarriage of justice.

And by removing corroboration – not, for any lofty aim of upholding justice and protecting the public – mind you.

The singular vested interest of the Crown Office in removing corroboration from the justice system was, and remains simply because – the Crown Office are so inadequate at prosecuting crime, they must have multiple chances to parade people in court to secure convictions, no matter how much it costs taxpayers, the reputation of Scots law.

Enter the man – no less than the ex Dean of the Faculty of AdvocatesJames Wolffe QC – who wanted – and was handed the job of Lord Advocate – tasked with steering, spinning and manipulating the Crown Office through the choppy murky waters of Scotland’s criminal empires, and not forgetting his own staff’s secret criminal pasts.

The accompanying fanfare and typical public relations exercise of Wolffe’s appointment to succeed former Lord Advocate Frank Mulholland, came with the usual fluff of a new broom to sweep away crime and criminality.

Yet Wolffe himself was – only a few months before his new commission of protecting Scots from big time crime barons – fretting with Scottish Ministers over his precious Faculty of Advocates spending of £320,000 on parts of Parliament House it had occupied without recorded title – yet somehow gained ownership of, reported here: WOLFFE HALL: Papers reveal Council’s legal action ‘abandoned’, £320K Faculty refurbishment of Laigh Hall.

And Scotland’s criminal justice system is so tipped against the rights of victims and accused – as the legal eagles waft in and out of jobs, earlier this week – Wolffe’s replacement as Dean at the Faculty of Advocates – Gordon Jackson QC – a leading lawyer who has rightly represented some of Scotland’s most hardened criminals and gangsters – lectured the Lord Advocate on the creeping rights of victims in an open letter to the press.

Mr Jackson expressed his concern that the “admirable principle” of an independent prosecution service, acting in the public interest, “is being eroded in practice”. Advocates depute and junior fiscals alike, he writes, are seen as reluctant to make decisions but refer cases to their superiors, and prosecutors have admitted to him that they are not following their own judgment on what can be proved “because of the family’s position” – referring to the now common practice of meeting victims’ families.

So now you know the views of the legal profession – picture the following – for it could, or may have already happened to you.

Your loved one has been brutally, mercilessly murdered by a criminal – a criminal perhaps not unknown to the authorities.

Or a victim of crime or has fallen to an untimely end at the hands of deceitful public servants or an unscrupulous business more interested in profits than the safety of their workforce.

Now – right in front of you- you face someone from the very same Crown Office talking at you – not to you – or with you

As you may begin to observe – they ask you questions – often the wrong questions – depending on their scheming ahead to figure out if they can secure a conviction or a grubby plea deal spun out by their public relations department as a win for justice. They may even tell you something in a meeting, face to face, then lie about it later. A big fat lie of a lie. No matter. The Lord Advocate will cover it up.

They claim they are going to put away the killer, the murderer, the fraudster, the crook who ruined your life, wiped someone’s very existence from life – yet you just know – that same Crown Office career monger has liar written all over their face. Unmissable, isn’t it – like a house on fire.

You’ll know it was all true – when the killer, crook or villain gets seven years and out in two.

Are you a victim of crime? Are you a victim of a miscarriage of justice? Are you a solicitor performing the testy task of representing accused persons against a prosecution service gone mad?

All of you have an interest in making your voice heard to this inquiry. Don’t leave it to vested interests, or the legal profession or those who cloak themselves in good deeds while concealing crime.

Make your voice heard – in writing – to the Scottish Parliament’s Justice Committee by 19 October 2016.

Those submitting are invited to restrict their submission, if at all possible, to the equivalent of approximately four sides of A4. Evidence should be submitted in electronic (preferably MS Word) format by email to justicecommittee@parliament.scot

Organisations and individuals who do not have access to a PC and the internet may submit a hard copy to: Clerk to the Justice Committee The Scottish Parliament Edinburgh EH991SP

For further information on this inquiry please contact the committee clerks by email at justicecommittee@parliament.scot or by phone at 0131 348 6241.

MSPs TO INVESTIGATE CROWN OFFICE:

The Scottish Parliament Justice Committee has agreed to hold its first major inquiry of this session into the role and purpose of the Crown Office and Procurator Fiscal Service (COPFS), with this remit:

The COPFS is Scotland’s independent prosecution service, acting in the public interest to help bring offenders to justice.

The core role of the COPFS is to consider reports about crime from the police and other agencies, to decide whether it is in the public interest to prosecute them, and, if so, to deploy the resources that are necessary to help ensure that justice is done.

The Committee’s inquiry will focus on this core role, examining in particular—

The Scottish Parliament Justice Committee has agreed to hold its first major inquiry of this session into the role and purpose of the Crown Office and Procurator Fiscal Service (COPFS), with this remit:

“The COPFS is Scotland’s independent prosecution service, acting in the public interest to help bring offenders to justice. The core role of the COPFS is to consider reports about crime from the police and other agencies, to decide whether it is in the public interest to prosecute them, and, if so, to deploy the resources that are necessary to help ensure that justice is done. The Committee’s inquiry will focus on this core role, examining in particular—

• The effectiveness and efficiency of the COPFS, and how well it works with other stakeholders in the criminal justice system;

• Whether the COPFS has the resources and skillsets it needs to carry out its core role;

• The COPFS’s responsiveness to new challenges and opportunities including the evolving nature of crime in 21st century Scotland, advances in technology, and changes in the delivery of court services that may affect access to justice;

• How the COPFS protects and supports witnesses and victims of crime.

The Committee will also take evidence on the role and function of the Inspectorate of Prosecution in Scotland. (The IPS is the independent inspectorate for the COPFS.)

The inquiry will not consider the COPFS’s two other roles of establishing the cause of sudden, unexplained or suspicious deaths or investigating allegations of criminal conduct against police officers, except in relation to the general issue of whether the COPFS has the resources it needs to carry out its purpose.”

Questions to consider:

Organisations and individuals are invited to submit written views to the Committee in relation to the inquiry. Those submitting views should feel free to address issues raised in the remit in whatever manner they prefer, but it would be particularly appreciated if they could aim to address some or all of the questions set out below, providing specific examples, data or other evidence to back up their views whenever possible—

1. Please outline your views on the overall efficiency and effectiveness of the COPFS in its core role of considering reports about crime from the police and bringing prosecutions. Are there ways in which the services provided by the COPFS could be improved – for instance, through increased use of technology, further reforms to criminal procedure, or better case management? If so, do those changes also bring risks, in terms of the overall interests of justice or of access to justice (bearing in minds the differing needs of people across Scotland; urban and rural communities, economically disadvantaged people, vulnerable groups, etc)?

2. Please outline how well you consider the COPFS works with other stakeholders in the criminal justice system, so as to provide a “joined up” and complementary service that helps meet the ends of justice. Other stakeholders might, for instance, include the police, defence lawyers, the courts, the prison service, criminal justice social work, and third party organisations working with victims or offenders.

3. Does the COPFS as presently constituted have the resources and skillsets it needs to carry out its core role effectively? And is it appropriately “future-proofed” – for instance to deal with new technologies available to criminals, changes in the overall profile of crime in 21st century Scotland, or withdrawal from the European Union? If not, what additional capacities does the COPFS need?

4. How well does the COPFS respond to the needs of victims of crimes and to witnesses (especially vulnerable witnesses) in criminal cases and meet its legal obligations towards them?

5. The Inspectorate of Prosecution in Scotland is the independent, statutory inspectorate for the COPFS. What is your awareness of the existence and role of the IPS and of its effectiveness in carrying out that role? How effective has it been in carrying out its role? Does it appear to have the resources it needs?

Committee convener Margaret Mitchell MSP commented: “The Crown Office & Procurator Fiscal Service is absolutely fundamental to the operation of an effective justice system in Scotland. This is why this committee has chosen to make it the focus of its first major inquiry.

“MSPs on the previous Justice Committee raised several concerns about the additional pressures that the organisation faced in recent times – including an increase in complex historic sex abuse and domestic abuse cases and new requirements required by legislation.

“The COPFS’s responsibilities towards victims and witnesses have also been increasing – and rightly. This has all taken place against a backdrop of tight budgetary settlements in recent years.

“It is likely these significant pressures will continue, so fundamental to this inquiry will be to determine if the COPFS has the resources it needs to bring offenders to justice, and is ‘future proofed’ to deal with new challenges.”

If you feel the Scottish Parliament should be asking many more questions of our prosecutors, don’t forge to make your views known to your own MSP, even ask them to go along to the hearings and make your issues more aware to the Justice Committee.

For previous articles on the Crown Office, read more here: Scotland’s Crown Office – in Crown detail

 

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WOLFFE HALL: Edinburgh Council racks up £53K legal bill in failed bid to recover ownership of Parliament House – as papers reveal Faculty of Advocates “occupied” Laigh Hall for 150 years without recorded title deeds

Costs mount for return of Scotland’s top court buildingsAN UNSUCCESSFUL legal action by the City of Edinburgh Council to recover public ownership of Parliament House – the sprawling, high value land estate situated in Edinburgh’s old town comprising Scotland’s top court buildings – has so-far cost taxpayers £52,991 – according to figures released to the media.

The costs of legal advice and other legal services provided to the council, revealed in a Freedom of Information disclosure, list law firm Burness Paul as the largest single expense at £38,726, followed by Counsel’s fees listed as £10,620K and ‘experts’ and other professional fees reaching a total of £2,400 after VAT.

However, the council’s legal action to recover the lost titles of Parliament House – which was to be heard in the very same court buildings it had lost ownership of – was later abandoned – reported in further detail here:  WOLFFE HALL: Papers reveal Council’s legal action ‘abandoned’, £320K Faculty refurbishment of Laigh Hall.

Documents released by the Scottish Government and published by DOI revealed the then Dean of Faculty of Advocates – James Wolffe QC (now Lord Advocate) – refused to give any expectation of success on attempts by Edinburgh Council to recover public ownership of titles to Parliament House and the Laigh Hall.

In one letter dated 2 April 2015 to former Cabinet Secretary for Social Justice  Alex Neil MSP – James Wolffe told the Minister he did not object to a meeting between representatives of the City of Edinburgh Council and the Faculty of Advocates. However, Wolffe added to the same letter “At the same time I would not wish to give any expectation to you or the council as to the outcome of any discussion.”

In a separate email to a senior Scottish Government civil servant – James Wolffe added: “I am advised that the of refurbishing the Laigh Hall following the grant of title to the Faculty was £242,270 plus VAT, with professional fees of £33,537 plus VAT.”

The Scottish Courts and Tribunals Service also disclosed their own figures incurred following legal fees in the action against the City of Edinburgh Council regarding the titles of Parliament House, Parliament Hall and the Laigh Hall. The SCTS admitted it had incurred legal costs in respect of advice from solicitors amounted to £4,388.20 and costs of £3,980 in instructing Counsel.

The full listing of Legal Fees to City of Edinburgh Council: Parliament Hall Titles: Burness Paull 38,726.40, Charges/Diligence-Other Registers search fees 108.00, Counsel’s fees 10,620.00, Courier Charge 30.90, Court Dues 213.50, Court Officer fees 479.28, Experts/Other Professional fees 2,400.00, Registers Form Reports 60.00, Registers – Copy/Extract Dues 236.40, Registers Direct search fees 21.60, Travel Expenses 94.92, Totals £52,991.00

LAIGH HALL ‘OCCUPIED’ BY FACULTY OF ADVOCATES WITH NO RECORDED TITLES:

In a separate 47 page Freedom of Information document release by Registers of Scotland (RoS)– the body charged with registering land ownership in Scotland – several documents highlight Scottish Government civil servants scrambling to protect Ministers from questions over the titles loss in the Scottish Parliament while vested legal interests are of a clear persuasion titles should be handed over to the Faculty of Advocates.

Additionally, the position of the Faculty of Advocates in relation to their ownership claim over the Laigh Hall becomes a little clearer in a chain of correspondence from the Edinburgh law firm of Shepherd and Wedderburn to RoS, which follows on from a letter from Registers of Scotland to a law firm marked “Destroy correspondence after archive”.

In a letter dated 19 January 2006, a solicitor – David A Smith of for Shepherd & Wedderburn appears to admit the Faculty of Advocates “occupied” a key part of Parliament House known as the Laigh Hall, but held no recorded title to it.

Mr Smith writes to Registers of Scotland, stating: The Disposition by The Scottish Ministers is stated to be for no consideration, and as I indicated to you In the course of our telephone conversation, the position with regard to the Laigh Hall is that the Faculty of Advocates has occupied the Laigh Hall for approximately 150 years, and the records of the Faculty indicate that although the Faculty did not have a recorded title to the Laigh Hall, the Senior Officer Bearers of the Faculty in the Nineteenth Century were of the opinion that the Faculty had “undoubted title” to the Laigh Hall.

Parliament House Is in the course of being redeveloped by The Scottish Court Service, and in the course of the redevelopment it became clear to all concerned that The Scottish Ministers did not have a registered title to the whole of Parliament House and it was agreed in the course of discussions between The Scottish Court Service and the Faculty that The Scottish Ministers would register a title to the entire building and they would then grant the Faculty a Disposition of the Laigh Hall in order to regularise the de facto position which has applied since the mid Nineteenth Century.

In the hope that this explanation will be sufficient for your purposes, I look forward to hearing from you with a receipted Form 4 and confirmation that the Registers of Scotland will now process the Faculty’s application for registration of its interest on the back of the application which was recently submitted on behalf of The Scottish Ministers in relation to the whole of Parliament House.

The solicitor at Shepherd  & Wedderburn acting for the ‘trustee’ for the Faculty of Advocates – David A Smith, was none other than David Alexander Smith – the husband of Court of Session judge Lady Anne Smith.

After his retirement from Shepherd & Wedderburn, David Smith served a term as a board member of the Scottish legal Complaints Commission (SLCC), where he sparked findings by Kevin Dunion – the then Scottish Information Commissioner – who demanded the release of censored comments by Smith targeting victims of corrupt solicitors who came before the pro-lawyer legal regulator.

PARLIAMENT HOUSE PUBLIC OWNERSHIP TITLE SWINDLE:

Last year Diary of Injustice reported on the City of Edinburgh Council’s efforts to recover the titles to Parliament House after land reform campaigner Andy Wightman – now an MSP – revealed land titles to the buildings of Scotland’s top courts were ‘gifted’ by Scottish Ministers to the Faculty of Advocates.

A disclosure of eighty eight pages of documents released to DOI under Freedom of Information legislation – revealed at the time the Scottish Government had no plans to act over their handing over of the Parliament Hall land titles to the Faculty of Advocates.

And, throughout the documents – which contain communications between civil servants, briefings to Ministers, land reports and letters from Edinburgh City Council asking for meetings, it was clear Scottish Ministers favour leaving the titles to the nation’s top courts with the vested interests of the legal profession.

During an earlier check on the titles to the Laigh Hall – Parliament House – Queen Street – ownership stood in the name of “SIDNEY NEIL BRAILSFORD Queen’s Counsel, Treasurer of HONOURABLE THE FACULTY OF ADVOCATES Edinburgh, as Trustee and in Trust for said Faculty”. Sidney Brailsford is none other than High Court Judge Lord Brailsford.

Scottish Government files reveal how court titles were handed over to advocates After a series of briefings with Ministers – involving everyone from the Lord Advocate & Solicitor General to the Cabinet Secretary for Justice, Minister for Legal Affairs and others, a position was adopted by Scottish Ministers “That we confirm to Council officials that it is the Scottish Government’s position that title to Parliament Hall was taken by Scottish Ministers in good faith and with the full knowledge and consent of the Council. The Scottish Court Service and Faculty of Advocates therefore have good title to the property and Ministers propose no further action.”

Lawyers for the Scottish Government also sought to distance themselves from the huge £58 million taxpayer funded spend on the Scottish Court buildings – long after titles were handed over to the advocates.

One lawyer stated in an email: “Was the PH [Parliament Hall] refurb about £60m? It went over in the SCS [Scottish Court Service] budgets I think but from my recollection of briefing on their budget it is not easily identifiable within their budget lines. So SCS [Scottish Court Service] spent the money not SG [Scottish Government]?”

In another memo, it is revealed Edinburgh City Council may be compelled to take legal action to recover the titles and details an example of how Common Good land disputes have affected legislation in the past.

As previously reported, Scotland’s First Minister Nicola Sturgeon has already given her blessing to the multi million pound title handover freebie to the Faculty of Advocates. The First Minister claimed there was “no easy solution to the issue of restoring title to the City of Edinburgh Council”. The First Minister’s response to a question from Green Party MSP Alison Johnstone during First Minister’s Questions, follows:

Parliament House handed over to Faculty of Advocates FMQ’s Nicola Sturgeon 19 February 2015

Official Report of debate: Alison Johnstone (Lothian) (Green): It transpired this week that the 17th century old Parliament hall in Edinburgh was transferred from the collective ownership of my constituents to Scottish ministers without knowledge or recompense to the common good fund.

The City of Edinburgh Council failed in its role as steward of the fund, but is now seeking to resolve the situation. Can the First Minister assure my constituents that any requests from the council to restore ownership of that common good asset to the council will be considered seriously and favourably?

The First Minister – Nicola Sturgeon: I will briefly state the background to this issue, of which I am sure that Alison Johnstone is aware.

The Scottish Government’s position is that title to Parliament hall was taken by Scottish ministers in good faith, and that that was done with the full knowledge and consent of the council. The Scottish Courts Service and the Faculty of Advocates, therefore, have now got good title to that property.

Of course, I am more than happy to ask the relevant minister, Marco Biagi, to; meet and discuss the matter with the City of Edinburgh Council, but as far as I can see there is no fault here on the part of the Scottish Government.

Further, of course, title has since been passed on, so it may very well be that there is no easy solution to the issue of restoring title to the City of Edinburgh Council. I think that any questions on how the situation has arisen probably have to be directed to the council.

 

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CAPITAL CLAIM: Court of Session ruling on Heather Capital writ paves way for legal confrontation between liquidators & law firm involved in £280m hedge fund collapse

Court of Session rules Law firm should face £28m writ proof. A RULING by Court of Session judge Lord Doherty has paved the way for a proof hearing of a multi million pound damages claim against Glasgow based law firm Levy & McRae – for their role in connection with a £280m collapsed hedge fund.

Current and former partners of law firm Levy & McRae who were named in the writ – including among them suspended judge Peter Black Watson (62) – now face a potential claim of up to £28million from Paul Duffy of Ernst & Young – the liquidators of collapsed hedge fund Heather Capital.

Allegations against numerous individuals were made before Lord Doherty in the Court of Session during a case which ran for several weeks.

This week, the Sunday Mail newspaper reported that “Pursuers including liquidator Paul Duffy say £19 million was paid from the firm’s client account to Panama-registered Niblick Investments SA – owned and controlled by jailed fraudster Nicholas “Beano” Levene. They claim the money had been sent from Heather Capital’s bank account to Levy & McRae on January 4, 2007, and transferred to Niblick five days later.

A second payment of £9.412 million was sent from Heather Capital to the firm’s client account before being transferred on to a firm of Gibraltar-based solicitors.

The liquidators’ case alleges King “created the false impression” that these companies had themselves entered into loan agreements against property with other Gibraltar firms.

The pursuers go on to state: “In fact, the money was never paid to them. It was instead paid out to third parties, undocumented and without security, out of various solicitors’ client accounts in which it had been deposited.

“Mr King and Santo Volpe (a co-director of Heather Capital) were co-conspirators in the fraudulent diversion of HC’s funds to third parties such as Nicholas Levene or companies owned and controlled by him or by Mr King, in contravention of the strategy and principles set out in Heather Capital’s investment particulars.”

Lord Doherty’s opinion ruled liquidators should not be time barred in bringing a case.

Finding for the liquidators, Lord Doherty said “The pursuer’s averments are suitable for inquiry.  A preliminary proof on prescription appears to me to be the appropriate way forward.”

SUSPENDED JUDGE NAMED IN £28M HEATHER CAPITAL WRIT:

The list of current & former Levy & Mcrae partners named in the multi million pound claim also include the solicitor & suspended sheriff – Peter Black Watson – who was suspended from the judicial bench by Scotland’s top judge Lord Gill.

Lord Gill suspended Sheriff Peter Black Watson in February 2015 – after demanding sight of a multi million pound writ against Glasgow law firm Levy & McRae – where Watson was formerly a partner.

It was reported Watson offered to step aside temporarily – while the litigation concluded – however a Judicial Office spokesperson set the records straight in a statement from the Judicial Office for Scotland which read: “Sheriff Peter Watson was suspended from the office of part-time sheriff on 16 February 2015, in terms of section 34 of the Judiciary and Courts (Scotland) Act 2008.”

“On Friday 13 February the Judicial Office was made aware of the existence of a summons containing certain allegations against a number of individuals including part-time sheriff Peter Watson.”

“The Lord President’s Private Office immediately contacted Mr Watson and he offered not to sit as a part-time sheriff on a voluntary basis, pending the outcome of those proceedings. “

“Mr Watson e-mailed a copy of the summons to the Lord President’s Private Office on Saturday 14 February. On Monday 16 February the Lord President considered the matter.”

“Having been shown the summons, the Lord President concluded that in the circumstances a voluntary de-rostering was not appropriate and that suspension was necessary in order to maintain public confidence in the judiciary. Mr Watson was therefore duly suspended from office on Monday 16 February 2015.”

This week, the Sunday Mail also revealed the Crown Office & Procurator Fiscal Service (COPFS) – now led by Lord Advocate James Wolffe QC – is yet to act after a three year probe initiated by Wolffe’s predecessor – Frank Mulholland QC following the police probe into Heather Capital and Mathon Finance.

Marbella based Gregory King, lawyer Andrew Sobolewski, 57, of Bridge of Weir, Renfrewshire, accountant Andrew Millar, 63, of Cambuslang, near Glasgow, and property expert Scott Carmichael, 44, of Thorntonhall, near Glasgow, were named in the police report on Mathon sent to the Crown Office in April 2013.

Wolffe’s predecessor – Frank Mulholland – who stepped down from post of Lord Advocate without making a decision on the Heather Capital case – was recently appointed as a judge at the Court of Session – by current Lord President Lord Carloway (real name – Colin Sutherland).

The Crown Office have so far declined to say whether any action would follow against any of the four.

Full opinion of Lord Doherty: OUTER HOUSE, COURT OF SESSION [2016] CSOH 107 CA207/14

OPINION OF LORD DOHERTY In the cause

HEATHER CAPITAL LIMITED (in liquidation) and PAUL DUFFY as liquidator thereof (Pursuer)
against :
(FIRST) LEVY & McRAE; (SECOND) WILLIAM MACREATH; (THIRD) ANDREW SLEIGH; (FOURTH) ANGELA MCCRACKEN; (FIFTH) DAVID MCKIE; (SIXTH) ALASDAIR GILLIES; (SEVENTH) GARY BOOTH; (EIGHTH) PETER WATSON; and (NINTH) ALASTAIR GOODMAN (Defenders)

Pursuer:  Lord Davidson of Glen Clova QC, Tariq;  Shepherd & Wedderburn LLP
Defenders:  Duncan QC, Brown;  Clyde & Co
22 July 2016

Introduction
[1]        The pursuer is a company (“HC”) in liquidation and its liquidator.  The liquidator was appointed on 7 July 2010 by order of the High Court of Justice of the Isle of Man (HC was incorporated in the Isle of Man).  The defenders are a firm of Scottish solicitors and the partners or former partners of the firm.  In this commercial action the pursuer seeks redress from the defenders on a variety of grounds.  The matter came before me for a debate.  The principal issue debated was whether the court could determine without further inquiry that each of the obligations upon which the pursuer founds has been extinguished by prescription.  The defenders also maintain that certain of the pursuer’s averments are irrelevant.

[2]        The debate took up two and a half of the three days which had been allocated for it.  Notes of argument had been prepared in advance.  These were supplemented with oral submissions, and there was reference during the course of the debate to productions which had been lodged in a joint bundle.  However, there was no joint minute relating to the productions and no agreement renouncing probation in respect of them.

The pleadings
[3]        The following is a summary of the pursuer’s averments.  Some of them are disputed.  Since they include allegations of impropriety against several people it is important to emphasise that they are averments and not established facts.  Thus, for example, Mr King has not been the subject of any criminal proceedings.  However, for the purposes of the debate the pursuer’s averments require to be taken pro veritate.

[4]        HC and its investors were defrauded by the diversion of invested funds exceeding £90 million (including £28.412 million which HC had entrusted to the defenders) under the guise of fictitious loans to various shelf companies incorporated in Gibraltar.  The mechanism of the fraud was essentially the same in each case.  A number of companies, owned and/or controlled by a director of HC, Gregory King, were incorporated in Gibraltar.  HC then entered into credit facility agreements with those companies (the “first-level special purpose vehicles” (“first-level SPVs”)), each agreement being secured by a debenture granted by the first‑level SPV.  Mr King created the false impression that the first‑level SPVs had themselves entered into loan agreements with other special purpose Gibraltar companies (the “second-level SPVs”) and that the loans to the second-level SPVs had been secured against heritable property.  On the information available to it, HC recorded loans to the first-level SPVs in its books of account.  In fact, the money was never paid to them.  It was instead paid out to third parties, undocumented and without security, out of various solicitors’ client accounts in which it had been deposited.  Mr King and Santo Volpe (a co-director of HC) were co-conspirators in the fraudulent diversion of HC’s funds to third parties such as Nicholas Levene or companies owned and controlled by him or by Mr King, in contravention of the strategy and principles set out in HC’s investment particulars.

[5]        On 4 January 2007 £19 million was transferred from HC’s bank account to the defenders’ client account.  On 24 January 2007 a further £9.412 million was transferred from HC’s bank account to the defenders’ client account.  The pursuer avers that HC was the defenders’ client; and that esto HC was not their client the defenders nevertheless received and held the payments on its behalf.  So far as HC was concerned each of the two payments was to be loaned to a first-level SPV, Westernbrook Properties Limited (“WBP”), once loan and security documentation had been executed; and WBP was to on‑lend it to a second-level SPV once a loan agreement had been executed and security over heritable property obtained.  In fact the monies were never paid to WBP.  On 9 January 2007 the defenders paid the £19 million to Niblick Investments SA (“Niblick”), a Panamanian company owned and controlled by Mr Levene.  On 29 March 2007 the defenders transferred the £9.412 million to a firm of Gibraltar solicitors, Hassans, under the reference Rosecliff Limited (a company controlled by Mr King).  In each case at the time of transfer the transfers were “undocumented, without security, and contrary to the strategy and principles set out in HC’s investment procedures”.

[6]        Early in 2007 HC’s auditors (KPMG Audit LLC (“KPMG”), the Isle of Man member firm of KPMG International Co-operative) raised questions about the propriety and recoverability of loans by HC to the first‑level SPVs.  In a memorandum dated 17 March 2007 KPMG identified concerns relating to the documentation provided in respect of loans by the first-level SPVs to second‑level SPVs.  KPMG suggested that further work should be undertaken and that additional information was required.

[7]        After KPMG had flagged up concerns Mr King and Mr Volpe compounded the fraud by taking steps, from March 2007 onwards, to conceal the true use of the funds, and to create the false impression that the fictitious loans had been repaid to HC between April and June 2007 by the first-level SPVs.  Between April and June 2007 Mr King instructed additional funds to be transferred from HC to Mathon Limited (“Mathon”) and Bathon Limited (“Bathon”).  Fictitious loans were created by Mathon and Bathon to give the appearance that those funds had been advanced to legitimate borrowers.  In fact the funds were transferred to Cannons Law LLP (‘Cannons’).  Cannons were instructed by Mr King to send payments to HC for amounts equivalent to the purported outstanding loans to (all but two of) the first‑level SPVs.  Cannons later stated to HC’s board of directors and KPMG that they had acted on behalf of the first‑level SPVs when making the repayments.  This gave the false impression that the loans to the first‑level SPVs had been repaid whereas in fact the “loans” (including the “loans” to WBP) were “repaid” by using HC’s own funds.

[8]        The board of directors of HC investigated the concerns raised by KPMG.  A board meeting was held on 6 September 2007.  Mr King and two non‑executive directors (John Bourbon and Robin James) were present and the company secretary, Andrew Ashworth, and David McGarry of KPMG were in attendance.  Mr King advised that Mr Volpe had executed loans to SPV companies where non-standard procedures had been followed, inadequate security had been given for some loans, and relevant accounting records had not been obtainable from Cannons.  Mr King stated that the loans to the SPVs had been repaid in full in May 2007.  Mr Bourbon sought to meet Mr Volpe to investigate matters but Mr Volpe refused to co-operate.  Later the same month Mr Bourbon met with Joseph Triay of Triay & Triay, Solicitors, Gibraltar to try and obtain information about the loans made by HC to the first-level SPVs.  Triay & Triay refused to provide access to the books or records of the first‑level SPVs without Mr Volpe’s consent.  Following a resolution at a board meeting of HC on 1 October 2007 Mr Bourbon, Andrew Beeman (another non‑executive director), and Mr Ashworth attended a meeting with the Isle of Man Financial Services Commission (the “FSC”) to discuss “the issues”.  On 8 October 2007, Mr Bourbon emailed Mr Triay asking whether he had contacted Mr Volpe to obtain authority to release the documents which he had requested at the meeting in Gibraltar.  On 10 October 2007 Mr Beeman made a disclosure of suspicious activity to the Isle of Man Financial Crime Unit (“FCU”).  The subject of the disclosure was Mr Volpe, and it narrated the efforts made by the non-executive directors to seek further information about the SPVs and the obstacles they faced from Mr Volpe and Cannons.  The FCU acknowledged the disclosure on 12 October 2007 and indicated that it would carry out its own enquiries.  This process did not disclose the fact that HC’s funds had been diverted to Mr Levene, Niblick, Rosecliff Limited or Mr King and that HC had accordingly suffered a loss.  On 18 October 2007, the FSC wrote to the directors of HC and asked to be kept informed of the situation.  On 26 November 2007, Mr King wrote to HC’s board of directors admitting that “an element of fraud” had been introduced into HC’s investment strategy.  Mr King blamed the fraud on Mr Volpe (who had by that time resigned as a director of HC) and Cannons.  Mr King falsely represented that the fictitious loans had been repaid.

[9]        KPMG qualified their audit opinion in the reports and financial statements for the 16 month period to 31 December 2006 and the 9 month period to 30 September 2007, both signed by KPMG on 17 December 2007.  KPMG recorded the additional steps taken to address their concerns in a file note in connection with the audits for the periods ending 31 December 2006 and 30 September 2007 (the “Completion Note”), which stated:

“The above matters had the following impact on the audit:

Fraud Risk

The risk of fraud increased to high as a result of the documentation issues surrounding the SPVs, where some form of fraud appeared to have been attempted.

This was addressed in our work by increasing audit procedures in the following areas:

• Full scope audit to 30 September 2007 to gain greater assurance over receipt of monies in relation to the SPV loans and their subsequent reinvestment

• Full audit of Mathon and Bathon accounts to 30 September 2007.  (All monies were invested in these companies as at 30 September 2007).  This audit was undertaken by their auditors, Gerber Landa & Gee, in accordance with ‘group’ audit instructions from us. As part of this work, they were instructed to perform a 100% circularisation and credit review of all significant loans.

… It was also decided by DKM, MJF and ND to undertake an audit of the nine month figures to 30 September 2007, in order to audit the receipt of monies in relation to the SPV loans and their subsequent reinvestment to assist with signing the 31 December 2006 accounts.

Audit report opinion

We have been unable to verify where funds advanced to the SPVs were invested. In addition, we were supplied with false documentation in relation to the SPVs, which appears to have been a deliberate attempt to mislead us. We consider therefore that sufficient appropriate audit evidence has not been obtained in relation to the loans advanced to the SPVs in 2006 and 2007. Given these loans were repaid in the period, we consider that the effect of this is not so material and pervasive that we are unable to form an opinion on the financial statements – instead we have issued an ‘except for’ qualified opinion.”

The qualification to the 31 December 2006 audit opinion stated:

“…[T]he evidence available to us was limited with regard to loans amounting to £38,950,000 advanced to a number of Gibraltar-incorporated special purpose companies (the ‘SPCs’). As further explained in note 5, there is uncertainty regarding the purposes to which these loans were applied. Loan and security documentation was provided to us, which purported to show that these monies had been on-lent to a number of further Gibraltar-incorporated special purpose companies. We could not validate this documentation.”

Note 5 to the December 2006 accounts noted the following:

“During the accounting period to 31 December 2006 £38,950,000 was advanced to 6 Gibraltar based special purpose companies (“the SPCs”); £41,269,250 was outstanding as at 31 December 2006, including amortised discount. The lending to the SPCs was effected using standard documentation between the Company and the SPC borrower. The SPCs have related party shareholders and directors – see note 10.

There is uncertainty as to where the monies lent to the SPCs were then subsequently invested. Loan and security documentation was produced in support of this onward investment by a firm of lawyers. This documentation purported to show that the monies had been on-lent to a number of further Gibraltar incorporated special purpose companies, owned by the underlying borrowers, and secured on property. This documentation could not be validated by the auditors.

Amounts equivalent to the outstanding balances on the loans to the SPCs (including accrued interest) were received in full during the period between April and June 2007. With the exception of an amount received from the Promoter (see below), the Directors have been unable to ascertain the source of these repayments which were made via a lawyer’s client account. The funds received included an amount of US$5,333,100 from Sargon Capital Limited, the Promoter – see note 10 regarding related party transactions. The Directors are satisfied, having taken legal advice that the funds that have been received have been properly applied in repaying the SPC loan balances and are free of any encumbrance.

Investigations continue to determine what party (or parties) were involved in and were accountable for these events and whether any action should be taken against them….”

KPMG’s audit report opinion in the 30 September 2007 accounts contained substantially the same qualification.  On 6 June 2008, KPMG signed their audit report opinion on HC’s accounts for the period ended 31 December 2007.  The audit report opinion repeated the qualifications concerning the SPV loans with reference to the comparative 2006 figures.  On 5 September 2008, KPMG signed their interim review report on HC’s interim accounts for the 6 month period ended 30 June 2008.  On 12 May 2009, KPMG signed their audit report opinion on HC’s accounts for the 12 month period ended 31 December 2008.  Neither of those reports contained an audit qualification.

[10]      In 2009 the Serious Fraud Office in England and Wales opened an inquiry into Mr Levene’s business affairs, as a result of which he was charged with, and pled guilty to, fourteen counts of fraud, false accounting and obtaining money by deception.  On 5 November 2012 he was sentenced to thirteen years’ imprisonment.

[11]      Following his appointment on 7 July 2010 the liquidator (assisted by staff from the Fraud Investigations and Dispute Service at Ernst & Young LLP) sought to reconstruct HC’s affairs and account for the losses HC and its investors sustained.  The process of identifying the destination of the funds commenced in February 2011.  It included a detailed review of electronic documentation recovered from various sources.  In around June 2012, the liquidator’s team identified documents which indicated that the payments of £19 million and £9.412 million had not been lent on to  second level SPVs but had instead been paid to Niblick and Hassans.  This was confirmed on 31 August 2012, when the defenders produced copies of their client ledger to the liquidator as part of a response to a request for information made by the liquidator under section 236 of the Insolvency Act 1986.

[12]      The pursuer’s case against the defenders is presented on a number of alternative bases.  The primary remedy sought is for an accounting by the defenders to it of the whole of their intromissions from 1 January 2007 to 30 June 2007 with HC’s funds received by them into their client account, and for payment of any balance found to be due.  The pursuer avers that the defenders held those funds in trust for it, and that they paid away £19 million to Niblick and £9.412 million to Hassans in breach of trust (conclusion 1, Cond. 25‑28, and the pursuer’s fourth plea‑in‑law).  Failing an accounting by the defenders the pursuer seeks payment of £28.412 million (conclusion 2, Cond. 28, and the pursuer’s fifth plea‑in‑law).  Alternatively it seeks payment of £28.412 million by way of restoration of the value of trust property in respect that the payments were wrongly paid away in breach of trust (conclusion 3, Cond. 25‑27 and 29, and the pursuer’s sixth plea‑in‑law).  Alternatively the pursuer seeks damages of £28.412 million on grounds of the defenders’ breach of trust et separatim breach of fiduciary duties et separatim breach of contract et separatim fault and negligence et separatim dishonest assistance.

[13]      The defenders maintain that all of the obligations upon which the pursuer founds have been extinguished by the short negative prescription.  The pursuer maintains that the obligation of accounting for trust funds et separatim the obligation to restore the value of the trust property paid away are not obligations to which the short negative prescription applies:  that while they are both prescriptible obligations they are subject only to the 20 year prescription.  In relation to the obligations which are subject to the short negative prescription, the pursuer maintains that they have not been extinguished.  It avers that it was not aware of having sustained loss until after the appointment of the liquidator, and that it could not with reasonable diligence have been aware that it had suffered a loss until less than five years before the action was raised (Prescription and Limitation (Scotland) Act 1973 (“the 1973 Act”), section 11(3)).  It also avers that a period when it was in error induced by the conduct of the defenders should not be reckoned as part of the prescriptive period (1973 Act, section 6(4)(a)(ii)).  I shall examine these averments more closely later.

The parties’ submissions:  Prescription

[14]      As one would expect, there was much common ground in relation to the law.  It was accepted that the pursuer’s claims for damages for breach of trust, breach of contract, fault and negligence, breach of fiduciary duties, and dishonest assistance were founded upon obligations to which the short negative prescription applied;  and that prima facie those obligations had been extinguished by prescription unless the running of the prescriptive period had been postponed by virtue of section 11(3), or a period was not to be reckoned as part of the prescriptive period because of the operation of section 6(4)(a)(ii).

[15]      Parties were at odds whether the obligations underlying the pursuer’s claims (i) for an accounting for trust funds and (ii) for restoration of the value of trust property paid away were obligations to which section 6 applied.

[16]      In relation to these two obligations Mr Duncan submitted that the defenders’ plea of prescription should be sustained and the action should be dismissed.  Cases such as Barns v Barns’ Trs (1857) 19 D. 626 demonstrated that prior to the 1973 Act obligations of a trustee to account for trust funds and to answer for transactions carried out as a trustee prescribed under the old long negative prescription.  In the present case the defenders had produced accounts ‑ the client account ledger showing the payments in and out.  While as a matter of averment the pursuer sought an accounting for trust funds in reality the claim was truly one for reparation for breach of trust.  Obligations to make reparation for breach of trust were obligations which were subject to the short negative prescription:  1973 Act, Schedule 1, paragraph l(d), and Clark’s Judicial Factor v.  Clark’s Executors [2015] CSOH 53 per Lord Burns at paragraph 132.  So far as the claim for restoration of the value of trust property was concerned Mr Duncan submitted, without developing the submission, that Hobday v Kirkpatrick’s Trustees 1985 SLT 197 was a doubtful decision which should not be followed.  In any case, Hobday was distinguishable on two grounds.  Any trust here would have been a trust which was incidental to a commercial transaction the terms of which were governed by contract, as distinct from a traditional trust.  Further, if the obligation here was not one to make reparation it was one to which paragraph 1(g) of Schedule 1 applied.  Moreover, even if section 6 did not apply to an obligation to restore the value of trust property the reality here was that the claim was really one for reparation for breach of trust.  The transactions in question had long ago been completed, any trust which may have existed was no longer in existence, and there was now no entitlement to have the trust fund reconstituted.  In such circumstances there was no right to restoration of the value of trust property, only a right to damages for breach of trust.  The observations of Lord Reed in AlB Group (UK) plc v Mark Redler & Co Solicitors [2015] AC 1503 at paragraphs [91] et seq. were relied upon by way of analogy in support of that proposition.

[17]      Lord Davidson submitted that on a proper construction of sections 6 and 7 and Schedules 1, 2 and 3 neither of these obligations were obligations governed by section 6.  They were both obligations to which the long‑stop 20 year prescriptive period (section 7) applied.  In relation to a trustee’s liability to account for trust funds reference was made to Cockburn v Clark 1885 12 R 707, Moir v Robertson 1924 SLT 435, Collins v EIS Financial Services Ltd 1995 S.C.L.R. 628;  and Barns v Barns’ Trs, supra.  Obligations of accounting for trust funds were specifically excluded from the obligations of accounting to which section 6 applied (Schedule 1, paragraph 1(f)).  The obligation of a trustee to produce accounts was an imprescriptible obligation (Schedule 3, paragraph (e)(i));  and the obligation of accounting for trust funds and a trustee’s obligation to restore to the trust the value of trust property wrongly paid away were obligations which were subject only to the long negative prescription (Johnston, Prescription and Limitation (2nd ed), paragraphs 3.23 to 3.29, and 6.31).  The trust purposes here had been to pay the money to WBP (cf. The Mortgage Corporation v Mitchells Roberton 1997 SLT 1305).  The money had been paid away to others in breach of trust.  The obligation of a trustee to restore to the trust the value of property wrongly paid away was not an obligation to make reparation to which s. 6 applied: Hobday v Kirkpatrick’s Trustees, supra;  Johnston, supra, paragraph 6.26.

[18]      Turning to section 11(3), it was common ground that the onus lay upon the pursuer to obtain the benefit of the subsection.  The parties differed as to the date when the pursuer actually became aware that it had suffered loss.  The pursuer avers that it did not become so aware until August 2012.  Mr Duncan submitted that averment could not be taken at face value in light of other averments which the pursuer made.  Standing what it had been told by KPMG and by Mr King the pursuer was aware by January 2008 that it had suffered loss.  The fact that it was told and understood that the loss had been repaid and made good was neither here nor there.  It knew that, until the supposed repayment, losses had been incurred.  It was irrelevant that the losses might have been reversed thereafter:  Jackson v Clydesdale Bank plc 2003 SLT 854.  In response Lord Davidson submitted that while the pursuer’s averments demonstrated knowledge by January 2008 that there had been an element of fraud down‑stream affecting purported loans between first‑level SPVs (including WBP) and second‑level SPVs, there had been no knowledge that the loans by HC to first‑level SPVs such as WBP were affected.  It had not been apparent then that HC had sustained any loss.

[19]      In relation to constructive awareness the pursuer avers that it could not with reasonable diligence have become aware that loss, injury or damage had occurred until February 2011 at the earliest.  Mr Duncan maintained that, once again, it was difficult to reconcile the pursuer’s averment about the earliest date for constructive knowledge with its averments about the earlier knowledge which the non-executive directors had obtained from KPMG and Mr King.  In some respects the pursuer’s pleadings were uncandid.  In particular, the pursuer did not admit the terms of the letter of 4 January 2008 from KPMG or provide any explanation of the steps, if any, taken in response to its contents.  That letter had made it very clear how serious the need for further investigation was, and that the further investigation required to be put in train by the pursuer.  The pursuer’s averments of reasonable diligence by it were vague.  For the period after 4 January 2008 there was no adequate explanation of precisely what was done and when it was done.  This was not the type of case where the sort of bald averments which the pursuer made could ever be sufficient (Beverage & Kellas WS v Abercromby 1997 SC 88; Heather Capital Limited v Burness Paul LLP [2015] CSOH 150;  Paragon Finance plc v DB Thackerer [1999] 1 All ER 400).  In response Lord Davidson submitted that in Cond. 5 and Cond. 19 the pursuer had set out a relevant case for inquiry that February 2001 was the earliest date for constructive awareness.  In Heather Capital Limited v Burness Paul LLP, supra, Lord Tyre had gone too far too fast in dismissing the pursuer’s case.  It could not be said at this stage that the pursuer had not done what an ordinary person would have done in all the circumstances: Glasper v Rodger 1996 SLT 44;  Adams v Thorntons WS 2005 1 SC 30.  While on record the pursuer’s response to the defenders’ averments concerning the despatch and terms of the KPMG letter of 4 January 2008 were met with a general denial, Lord Davidson accepted that the letter had indeed been received by the pursuer shortly after it was sent.  The lack of any appropriate response to the defenders’ averments about the letter had been an oversight.  He suggested that was regrettable but not of major importance, because all of the matters raised in the letter had in fact been addressed by the pursuer elsewhere in its pleadings.  The information which the pursuer had from KPMG had not pointed to the need for the pursuer to carry out further inquiries of its own.

[20]      The pursuer’s averments invoking reliance upon section 6(4) are contained in Cond. 39.  Mr Duncan submitted that they were irrelevant.  First, there was no relevant averment of error.  The pursuer appeared to rely upon the existence of a duty on the part of the defenders to advise the pursuer about a possible claim against them, but there was no such duty (Heather Capital Limited v Burness Paull & Williamson LLP, supra, per Lord Tyre at paragraphs 33-35).  Nor were there relevant averments that the error was induced by “conduct” of the defenders.  That word should be given its ordinary meaning, which was positive actings.  A pure omission was not “conduct” within the meaning of that term in section 6(4)(a)(ii):  Johnston at paragraph 6.126, Trustees of Rex Proctor & Partners Retirement Benefits Scheme [2015] CSOH 83, at paragraph 207, and Heather Capital Limited v Burness Paull & Williamson LLP, supra, per Lord Tyre at paragraph 34.  No assistance was to be gained from looking at particular statutory definitions of conduct applying to very different contexts from the present one.  The onus in relation to the proviso lay on the pursuer, just as it did in relation to all the other requirements of section 6(4).  Section 6(4) was an exception to the general rule set out in section 6(1) and it was for the pursuer to bring itself within the exception.  Properly read, Lord Penrose’s observations at paragraphs 33 and 66 of Adams v Thorntons WS were authority to that effect.  Those observations formed part of the ratio of the decision and were binding on the Outer House whether or not the court took the view that they conflicted with the observations of Lord Millett at paragraph 110 of BP Exploration Operating Co ltd v Chevron Transport (Scotland) 2002 SC (HL) 19.  In any case, the issue of onus was immaterial in the present case.  The pursuer’s averments as to reasonable diligence were irrelevant to instruct a case under section 11(3) for postponing the running of the prescriptive period, and the same averments were equally irrelevant to instruct a case that the proviso was satisfied.

[21]      Lord Davidson submitted that the pursuer’s averments were sufficient to satisfy the requirements of section 6(4)(a)(ii).  An error had been identified.  If I understood him correctly, there was error as to whom the funds in the defenders’ client account were remitted by them and error as to whether the pursuer had a possible right of action against the defenders.  The ordinary meaning of the word “conduct” was sufficiently wide to include an omission to act where, as here, the debtor owed the creditor a duty to act.  Construing “conduct” as being limited to positive acts was an unduly restrictive interpretation.  The tentative views to the contrary expressed in Johnston at paragraph 6.126, in Trustees of Rex Proctor & Partners Retirement Benefits Scheme, supra, at paragraph 207 (by me), and by Lord Tyre in Heather Capital Limited v Burness Paull & Williamson LLP, supra, at paragraph 34 should not be followed.  It was worth noting that in other statutory contexts “conduct” had not been restricted to positive acts (see e.g. Companies Act 2006, section 239(5);  Financial Services (Banking Reform) Act 2013, section 68(4);  Counter‑Terrorism and Security Act 2015, section 14);  and that in R v Rai (Thomas) [2001] 1 Cr. App. R 242 the expression “words or conduct” had been held to include circumstances where a person failed to inform a building authority that building works no longer needed to be carried out.  A broad view was to be taken when considering what the subsection required (BP Exploration Co Ltd v Chevron, supra, per Lord Hope at paragraph 31, Lord Clyde at paragraphs 66-67, Lord Millet at paragraph 97).  The subsection was not to be construed restrictively (Dryburgh v Scotts Media Tax Ltd 2014 SC 651, per the Opinion of the Court delivered by Lord Drummond Young at paragraph 20).  The onus of satisfying the requirements of section 6(4)(a)(ii) rested upon the pursuer; but that was not so in relation to the proviso to section 6(4).  It was for the defenders to invoke the proviso and it was for them to demonstrate that time should not be included in the period of error (BP Exploration Operating Co ltd v Chevron Transport (Scotland), supra, per Lord Millet at paragraph 110;  United Central Bakeries v Spooner Industries Limited [2013] CSOH 150, per Lord Hodge at paragraph 117;  Johnston, supra, at paragraphs 6.109 and 6.107).  Read in context, Lord Penrose’s observations at paragraphs 33 and 66 of Adams v Thorntons WS, supra, ought not to be read as saying anything different.  If Lord Penrose was to be read as stating that the onus in relation to the proviso lay on the creditor that was contrary to BP Exploration Operating Co ltd v Chevron Transport (Scotland), supra.  If that was indeed what Lord Penrose said it did not form part of the ratio of the decision, and it should not be followed.  In any event, if, contrary to the pursuer’s submission, the onus in relation to the proviso was on the pursuer, the averments of reasonable diligence made by it anent section 11(3) were also sufficient to make out a case under the proviso which was suitable for inquiry.

[22]      Finally, Mr Duncan submitted that the court should look at the averments which the pursuer had made in Heather Capital Limited v Burness Paull & Williamson LLP, supra.  In that case it had averred that Burness had had actual knowledge of instructions given to them to transmit funds to Mr Levene but did not report it to the pursuer.  Mr Duncan submitted that the knowledge that Burness had should be imputed to the pursuer in the present action because Burness had been HC’s agent (Chapelcroft Limited v Invergordon Egg Producers Limited 1973 SLT (Notes) 37;  Adams v Thorntons WS, supra;  Blackburn Low & Co. v Vigors (1887) 12 App Cas 531;  Muir’s Executors v Craig’s Trustees 1913 SC 349;  Johnston, supra, at paragraph 6.89).  If that was correct it would fix the pursuer with knowledge alerting it to the alleged fraud more than five years before the present action was raised, and there could be no question of either section 6(4) or section 11(3) saving the claim from prescription.  In reply Lord Davidson resisted the contention that Burness’ knowledge fell to be imputed to the pursuer in the present case.  Burness had been used by Mr King in the perpetration by him of the fraud.  It would be ludicrous and unconscionable in those circumstances to impute Burness’ knowledge to the pursuer for the purposes of the present action.

Decision:  Prescription

Introduction

[23]      If the defenders’ plea of prescription is to be sustained without inquiry into the facts the court needs to be satisfied that even if the pursuer establishes all the facts which it avers the obligations it founds upon have prescribed.

Pre-1973 Act law

[24]      Counsel made reference to the pre‑1973 Act law concerning the prescription of obligations of trustees.  I did not understand it to be disputed that prior to the 1973 Act obligations of trustees to account for trust property, or to restore the value of trust property disposed of in breach of trust, prescribed under the long negative prescription (see eg Barns v Barns’ Trs, supra, and the cases there discussed;  and the Scottish Law Commission Report no 15, Reform of the Law Relating to Prescription and Limitation of Actions, Part III, paragraphs 23-27, for a brief general summary of the previous law).  The issues of prescription which arise before me are governed by the 1973 Act.  While the excursus to the former law was not without interest, ultimately it has not assisted me in reaching the conclusions which I have reached.

Accounting for trust funds

[25]      The law relating to accounting for trust funds appears to me to be clear.  The short negative prescription applies to ordinary obligations of accounting, but it does not apply to obligations of accounting for trust funds (1973 Act, Schedule 1, paragraph 1(f)).  The obligation of a trustee to produce trust accounts is an imprescriptible obligation (Schedule 3, paragraph (e)(i)).  The liability is enforceable by means of an action of count, reckoning and payment (Johnston, supra, paragraph 3.28).  On the other hand, the liability to make payment of the sum due in an accounting for trust funds is neither imprescriptible nor is it subject to the short negative prescription.  It is governed only by the long negative prescription (1973 Act, section 7(2);  Johnston, supra, paragraphs 3.23 to 3.29, 6.31; Russell, Prescription and Limitation of Actions (7th ed), pages  73-74, 115).

[26]      On its averments the pursuer’s primary case is for an accounting for trust funds.  The defenders dispute that they held the relevant funds as trustee, but that is a matter which cannot be resolved on the pleadings.  Given that they deny the existence of a trust and of a liability to account for trust funds, it is difficult to see that they can maintain that they have produced trust accounts: and that is certainly not the position on the pursuer’s averments.  The obligation founded upon in the primary case does not bear to be an obligation to make reparation for breach of trust (Schedule 1, paragraph 1(d)) or an obligation arising from, or by reason of any breach of, a contract or promise (Schedule 1, paragraph 1(g)):  and I am not persuaded that at a debate ‑ where the pursuer’s averments require to be taken pro veritate – the court can or should re-characterise the obligation upon which the pursuer founds and treat it instead as if it were an obligation of a different nature.

[27]      In my opinion the pursuer’s averments as to the existence of a trust and of an obligation to account for trust funds are sufficient to entitle it to inquiry.  It cannot be said that the pursuer is bound to fail (or that the defenders’ prescription plea is bound to succeed) even if the pursuer establishes all it avers.

Breach of trust

[28]      As an alternative to an accounting for trust funds the pursuer seeks restoration of the value of trust property paid away in breach of trust.  The third conclusion and the sixth plea‑in‑law somewhat confusingly refer to “recompense”, but it is clear from the pursuer’s averments in Cond. 29 and 39 that restoration to the trust is what is sought.

[29]      In my opinion a trustee’s obligation to restore the value of trust property to the trust is not an obligation to which the short negative prescription applies.  I am not persuaded that Hobday v Kirkpatrick’s Trustees, supra, was wrongly decided.  I agree with Lord Cowie (1985 SLT 197, at page 199) that an obligation of that nature is not an obligation arising from liability to make reparation within the meaning of paragraph 1(d) of Schedule 1 (see also Johnston, supra, paragraph 6.26).  Rather, it is an obligation to which only the long negative prescription applies (section 7(2)).

[30]      I am not persuaded that it is possible to distinguish the present case from Hobday without any inquiry into the facts.  Mr Duncan’s first suggested ground of difference was that here the court could and should treat the obligation to restore the value of trust property to the trust as if it were a mere contractual obligation or an obligation arising by reason of breach of contract.  However, that is not the nature of the obligation upon which, on averment, the pursuer founds; and without establishing the facts I see no proper basis for proceeding as if it was.  Even if Lord Reed’s observations in AlB Group (UK) plc v Mark Redler & Co Solicitors, supra, had tended to support Mr Duncan’s suggested approach I would have been very hesitant indeed to treat observations on the English law of equitable compensation as being transferable to the Scots law of trusts: but in my opinion the observations do not assist Mr Duncan.  On the contrary, Lord Reed was at pains to distinguish claims for damages from claims for equitable compensation (see e.g. paragraphs 134, 137).  The second suggested ground of difference was that if the obligation here was not an obligation to make reparation it was an obligation arising from, or by reason of a breach of, a contract or promise and that it fell within Schedule 1, paragraph 1(g).  But prima facie the obligation to restore the value of trust property to the trust upon which the pursuer founds is an obligation of a different character from the obligations described in Schedule 1, paragraph 1(g) (cf. AlB Group (UK) plc v Mark Redler & Co Solicitors, per Lord Reed at paragraph 137).

[31]      Once again, in my opinion the pursuer’s averments of trust and of an obligation to restore the value of trust property are suitable for inquiry.  It cannot be said that the pursuer is bound to fail (or that the defenders’ prescription plea is bound to succeed) even if the pursuer establishes all it avers.

Cases to which the short negative prescription does apply

[32]      At the debate the pursuer proceeded on the basis that each of the remaining alternative cases advanced by it (viz claims for damages for breach of trust, breach of contract, fault and negligence, breach of fiduciary duties, and dishonest assistance) was subject to the short negative prescription.  I understood the pursuer to accept that these claims for damages will have been extinguished unless (in terms of section 6(4)) a period of time is not to be reckoned as part of the prescriptive period, or the commencement of the prescriptive period was postponed (by virtue of section 11(3)).

Section 11(3)

[33]      I am not persuaded that I can determine on the pleadings that the pursuer had actual awareness that it had suffered loss more than five years before the action was raised.  It avers it was not aware that it had suffered loss until a date later than five years before the action was raised.  I require to take that averment pro veritate unless other averments made by the pursuer are plainly inconsistent with it and clearly show actual awareness at an earlier date.  I am not satisfied that there are any such averments.  As a result of the events of 2007 the pursuer became aware (i) that substantial sums lent by it to first‑level SPVs, including the £19 million and the £9.412 million, had not been on‑lent by first level SPVs to second‑level SPVs;  (ii) that instead it had been transferred to other unknown recipients for unknown purposes;  (iii) that there had been no valid security granted to first‑level SPVs in relation to the transfers to such recipients;  (iv) that the loan and security documentation relating to the purported transactions with second‑level SPVs was invalid;  (v) fraud had been involved;  (vi) Mr King had alleged to the non-executive directors of the pursuer that Mr Volpe and Cannons had been responsible for the fraud;  (vii) that the pursuer had received via Cannons sums tendered as repayment of each of the loans to SPVs including the two purported loans to WBP.  In my opinion none of those matters are clearly indicative of awareness that loss had been sustained.  The pursuer’s position is that until 2012 it believed that each loan made by it had been duly advanced to the intended first‑level SPV and that the debenture granted by the first‑level SPV when the credit facility agreement with it was concluded would secure the loan; that each of its loans to SPVs had been repaid in about May 2007;  and that the irregularities which had been discovered had all been “downstream” in relation to on‑lending by the first‑level SPVs.

[34]      On the other hand I am persuaded that the pursuer’s averments do not adequately explain why it could not with reasonable diligence have discovered that it had suffered loss more than five years before the action was raised.

[35]      The letter of 4 January 2008 from KPMG made it very clear how serious the need for further investigation was, and that that further investigation required to be put in train by the pursuer.  I do not accept Lord Davidson’s contention that all of the matters raised in that letter had in fact been addressed by the pursuer elsewhere in its pleadings.  Nowhere does the pursuer acknowledge (i) that it was advised by KPMG that it was its obligation to take the actions needed to remedy the weaknesses which had been identified;  (ii) that it was advised that KPMG’s routine audit work was designed to enable it to form an audit opinion on the accounts of the companies and that that work should not be relied upon to disclose all irregularities that may exist;  (iii) that as at 4 January 2008 KPMG recommended that the Board of HC continue their investigation into the fraudulent loan and security documentation and formally document their decision as to whether or not to inform the criminal justice authorities;  (iv) that KPMG recommended that the Board of HC continue their investigation into the misapplication of funds for an unknown purpose and minute their actions and conclusions.  The report makes it crystal clear that further investigations were required and were recommended in relation to those matters.

[36]      It is plain from the averments in Cond. 5 that the audit opinions in the accounts for the 16 month period ending on 31 December 2006 and the 9 month period ending on 30 September 2007 contained very serious qualifications by KPMG; and that the audit opinion in the accounts for the year ending on 31 December 2007 (signed by KPMG on 6 June 2008) repeated the qualifications concerning the SPV loans with reference to the comparative 2006 figures.  The pursuer goes on to aver that on 5 September 2008 KPMG signed their interim review report on HC’s interim accounts for the six‑month period ending 30 June 2008 and that their “review opinion was unqualified”;  and that on 12 May 2009 KPMG signed their audit report for the 12 month period ending on 31 December 2008 and that the audit report was again unqualified.  The pursuer does not aver whether either of those reports referred back to 2006 or 2007 figures (and neither report was produced).  Apart from these averments the only other material averments were as follows (the emphasis is mine):

“Cond. 5 … Thereafter all avenues of enquiry were considered to have been pursued by HC’s board of directors, including discussing matters with the FSC and making a disclosure to the FCU; meeting with KPMG to discuss how the issue could be further investigated; obtaining legal advice; and seeking to obtain further information from inter alia Gregory King, Santo Volpe and Triay & Triay. These enquiries amounted to reasonable diligence in the circumstances of this case. HC’s board of directors, Abacus and KPMG believed that whilst there had been irregularities with the securities granted by the Second Level SPVs and as explained in the letter from Gregory King to the board of directors of HC dated 26 November 2007 that “some form of fraud had been deliberately introduced with invalid land registry details”, the funds advanced had been repaid in full, with interest, and HC had not suffered a loss. HC’s board of directors’ understanding was supported by KPMG’s investigations. KPMG verified HC’s accounts as reflecting a true and fair view of the HC’s financial conditions. This remained KPMG’s position in subsequent reports. In these circumstances, the board of directors of HC were not, and could not with reasonable diligence, have been aware that HC had suffered a loss until after the appointment of the Liquidator. The true destination of these funds was confirmed on 31 August 2012. From the date of his appointment the Liquidator (assisted by staff from the Fraud Investigations and Dispute Service at Ernst & Young LLP) sought to reconstruct HC’s affairs and so account for the losses HC and its investors sustained. This process of identifying the destination of the funds commenced in February 2011. This included a detailed review of electronic documentation recovered from various sources. In around June 2012, the Liquidator’s team identified documents which indicated that the payments to WBP had not been on lent to the Second Level SPVs but had instead been paid to Niblick and Hassans. This was only confirmed on 31 August 2012, when the First Defender produced copies of its client ledger to the Liquidator as part of a response to a request for information made by the Liquidator under section 236 of the Insolvency Act 1986. The ledger produced showed that the funds paid to the defenders by HC had been paid to Niblick and to Hassans.

Cond. 39. … Separatim, and in any event, neither the relevant board of directors of HC nor the Liquidator upon his appointment were aware, nor could they with reasonable diligence have been aware or discovered, at any point prior to the Liquidator’s appointment, that HC suffered loss, injury or damage as condescended above. Neither the relevant board of directors of HC nor the Liquidator could have, with reasonable diligence, have discovered prior to the Liquidator’s appointment that a loss of the sum of £28.412 million had been suffered by HC as previously condescended upon. Reference is made to the averments in Article 5 of Condescendence, dealing with the inquiries raised by KPMG in 2007 and the way in which those were dealt. KPMG verified HC’s accounts as reflecting a true and fair view of the HC’s financial conditions. This remained KPMG’s position in subsequent audit reports. Accordingly, the auditors had informed the relevant board of directors of HC that no loss had occurred and confirmed that position in subsequent years. Further as the witness statement dated 26 February 2010 (which is produced) by Mr Ashworth, then one of HC directors, shows, HC made an application to the High Court of Justice in the Isle of Man for the appointment of a liquidator due to cash flow (rather than asset insufficiency) reasons. This was in order that the liquidator appointed by the court could start as soon as possible with the process of realising the loans (and the real property collateral for those loans) transferred to HC by Mathon. At that point, the loans in question were HC’s main asset. Mathon, who had previously managed the loan portfolio, had been put into administration on 17 February 2010, and was therefore no longer available to perform the same service for HC. It was only following Liquidator’s investigations into the affairs of HC that the current loss, injury and damages was discovered. Accordingly, on that alternative basis, the prescriptive period had not started until some time after the Liquidator’s appointment, and at the earliest in or about February 2011. The pursuer was not aware, and it could not have with reasonable diligence been aware, that it had suffered loss of funds transferred to a third party in an undocumented and unsecured way, contrary to the HC’s investment approach and in breach of HC’s instructions. A person of ordinary prudence, exercising reasonable diligence, could not have become aware of the loss prior to February 2011. Further and in any event, in all the circumstances of the case, the pursuer had no reason either in 2007, when the transfers in question were made or at any point after that and prior to the Liquidator’s investigations to suspect the existence of a loss as previously condescended upon had occurred. Reference is made to section 11(3) of the Prescription and Limitation (Scotland) Act 1973.”

[37]      There are a number of problems with the pursuer’s approach. First, the averments in Cond. 5 that KPMG “verified HC’s accounts as reflecting a true and fair view of the HC’s financial conditions.”, and that “… KPMG believed that … the funds advanced had been repaid in full, with interest, and HC had not suffered a loss.”, and the averment in Cond. 39 that “Accordingly, the auditors had informed the relevant board of directors of HC that no loss had occurred and confirmed that position in subsequent years.” at best place a very favourable gloss on the facts given the qualifications in the accounts to 31 December 2006 and 30 September 2007 (which qualifications were referred to in the accounts for the year to 31 December 2007 signed on 6 June 2008) and the very serious concerns expressed in the letter of 4 January 2008.  Second, the question is whether the pursuer could not with reasonable diligence have become aware that it had suffered any material loss (not necessarily the full extent of the loss actually suffered).  Third, and critically, the pursuer’s averments setting out what it did in the exercise of reasonable diligence appear to me to be vague and unspecific.  The averments do not explain precisely what the pursuer did and when it did it. In my opinion in the circumstances of the present case that simply will not do.  In light of the issues raised in the defenders’ averments it was incumbent upon the pursuer to specify in detail each of the steps which it took after receipt of the letter of 4 January 2008.  It ought to have explained what, if anything, it did to comply with the recommendations in that letter; and if it did not comply with the recommendations it ought to have explained why it did not.  The pursuer has conspicuously failed to do any of those things.  All that it proffers are vague general averments which provide no real detail as to what was done and when it was done.  In my opinion the pursuer has not discharged the onus upon it of making relevant and specific averments setting out a basis for establishing that it could not with reasonable diligence have been aware that it had suffered loss more than five years before the raising of the action.  It has not made relevant and specific averments which if established would show that it took the steps that a person of ordinary prudence would have taken if he found himself in the circumstances which the pursuer did.

[38]      Accordingly, since in order to obtain the benefit of section 11(3) the pursuer requires to demonstrate both that it was not aware and that it could not with reasonable diligence have been aware that relevant loss, injury and damage had occurred, its averments that the running of the prescriptive period was postponed in terms of section 11(3) are irrelevant.

Section 6(4):

[39]      It is well established that it is for the creditor in an obligation to invoke section 6(4).  Where the creditor relies on an error it is for him to specify what the error was, when the error commenced, and when it ceased.  The pursuer’s averments invoking section 6(4) are contained in Cond. 39:

“…The Liquidator was appointed on 7 July 2010. The defenders never advised either the relevant HC or the Liquidator about a possible claim against them (before or after that date), an obligation that was incumbent upon them as an aspect of the overall duties they owed to HC. Accordingly, any period prior to the raising of this action should not be reckoned as part of the prescriptive period in this case, due to the error induced by the conduct of the defender, which induced the pursuer to refrain from making a claim. The error was induced, in particular, by the following: (i) sending the HC funds, which constituted the first payment (as described above) to a third party, undocumented and unsecured, (ii) sending funds which constituted the second payment (as described above) to a law firm in Gibraltar, under the personal reference of Gregory King and for the purposes still unknown, (iii) not advising the relevant board of directors of HC, Abacus, or the Liquidator at any point of the true sequence of events which led to the loss of the HC funds deposited in the defenders’ client account. Reference is made to section 6(4) of the Prescription and Limitation (Scotland) Act 1973.”

[40]      The averments do not specify with the clarity one would expect the error upon which the pursuer founds.  The formulation used is not commendable.  More precise pleading could have avoided the complaint of obscurity.  However, on a benign reading I think it is tolerably clear that error having two strands is identified ‑ error as to whom the funds in the defenders’ account were remitted by them and error as to whether the pursuer had a possible right of action against the defenders.

[41]      While no date of commencement of the error is specified, it may reasonably be inferred that the pursuer’s case is that the error arose shortly after each of the £19m and £9.412m payments were remitted by the defenders to the recipients.  The pursuer does aver an end date for the error (the date of raising of the action (23 October 2014)), but that is obviously not correct as it also avers (Cond. 5) that the true recipients of the payments were confirmed on 31 August 2012.  However, in my opinion that relatively immaterial inconsistency is not a good ground for not proceeding to inquiry.

[42]      Are the failures to advise as to whom the payments were remitted and as to the existence of a possible right of action “conduct” within the meaning of section 6(4)(a)(ii)?  That depends on whether a failure to act may be “conduct”.

[43]      I agree with Lord Davidson that the view expressed in Johnston at paragraph 6.126 is tentative:

“One case in which section 11(3) may be the only way forward is where what has induced the pursuer to refrain from making a relevant claim is a negligent omission by the defender.254 Since the only error which is covered by section 6(4) is error induced by ‘words or conduct’, it is not clear that the running of prescription would be suspended by an omission rather than a positive act;  certainly, this would not be an ordinary construction of the word ‘conduct’.255

For this reason, and owing to the relief available under section 11(3), it may be better to assume that omissions inducing error may not suspend the running of prescription but that they will be capable of supporting an argument for postponing its starting date.

254 For example, where the negligent failure of solicitors to notify the appointed executor of the existence or contents of the will prevented him from raising any proceedings until he was belatedly informed of those facts: Hawkins v Clayton (1988) 164 C.L.R. 539 at 590, per Deane J.

255 Although what was at issue in ANM Group Ltd, 2008 S.L.T. 835 appears to have amounted to omissions, there is no discussion of the point there.”

As noted in Johnston, in ANM Group Ltd v Gilcomston North Ltd Lord Emslie (paragraphs 75 ‑ 77) appears to have proceeded on the basis that omissions could be conduct.  It is also interesting to note that the Lord Ordinary (Lord Macfadyen) in Adams v Thorntons WS, unreported, 19 August 2003, observed at paragraph 67:

“…It does not seem to me that to fail to convey to another person information which one does not in fact possess can be said to constitute words or conduct within the meaning of section 6(4). The position might well be different if a person did not pass on information which he had, i.e. if there was active concealment. If, for example, a solicitor withheld from his client information of which he (the solicitor) was aware and which would have alerted the client to the possibility of a claim against the solicitor, that might well be held to constitute conduct within the meaning of section 6(4)(a)(ii). Since the point does not arise in the present case, however, I prefer to reserve my opinion on it …”

The Inner House (2005 1 SC 30) was critical of the approach taken by the Lord Ordinary in the first sentence quoted.  However, there was no criticism of the views expressed in the remainder of the passage, and the Inner House’s own approach appears to have been consistent with them.  Lord Penrose opined at paragraph 66:

“[66] In my opinion, the Lord Ordinary can be said to have misdirected himself in applying to the question whether Thorntons induced error in Mr Adams criteria that depended on personal knowledge of individual partners of the facts and circumstances from which the error arose rather than the knowledge of the firm of which he was client. As I have already commented, he was not assisted in this matter by argument. Counsel for the reclaimer’s submissions to the Lord Ordinary did not cover this ground. But the point could have been of materiality if the evidence had been available for the court to consider. Mr Adams’ complaint is against Thorntons, and is that at March 1995 and in and after 1997, he was left in ignorance of the possibility that he might have a claim against the firm by silence on the part of the firm associated with positive advice that he had a remedy against his former associate, and by the firm subsequently acting for him in pursuing that action….”

Lord Penrose went on to hold that on the facts found by the Lord Ordinary the obligation founded upon had prescribed.  While in the circumstances of that case silence was said to have been associated with positive advice and actings, it is not clear that was critical to Lord Penrose’s view that the matter might have been of some materiality.

[44]      I turn to the more recent decisions.  In Trustees of Rex Proctor & Partners Retirement Benefits Scheme, supra, I agreed (at paragraph 207) with the view expressed in Johnston that on an ordinary construction “conduct” requires a positive act.  In Heather Capital Limited v Burness Paull & Williamson LLP, supra, (at paragraph 34) Lord Tyre concurred with the views expressed in Johnston and by me in Rex Proctor.  In neither case does there appear to have been extensive submissions in relation to the matter.

[45]      On a fair reading of the pursuer’s averments in Cond. 39 it maintains that the defenders had an obligation to advise it of the true sequence of events which led to the loss of the funds and that there was a possible claim against them (cf. Rex Proctor, paragraph 207).  On the pleadings I am not satisfied that the pursuer is bound to fail to establish the grounds of action he puts forward, or that those grounds could not provide a basis for the obligation to advise it which the pursuer avers the defenders had (see eg Dryburgh v Scotts Media Tax Ltd, supra, per Opinion of the Court at paragraph 26).  In the present case, unlike Heather Capital Limited v Burness Paull & Williamson LLP (paragraph 35), my understanding is that the duty to advise is said to have arisen on several of the bases of action on which the pursuer relies.  (I also note in passing that I was unconvinced by Mr Duncan’s argument (which Lord Tyre accepted) that the existence of a continuing duty to advise would prevent prescription from ever occurring.  The operation of the proviso would be likely to prevent any such scenario).

[46]      Having heard fuller argument on the issue than I did in Rex Proctor, and having reflected further upon it, I think there is a tenable argument that to construe “conduct” as including only positive acts may be too restrictive an interpretation.  The Oxford English Dictionary (2nd ed.) defines “conduct” as:

“Manner of conducting oneself or one’s life; behaviour; usually with more or less reference to its moral quality (good or bad). (Now the leading sense)”.

In my opinion, on a proper construction of section 6(4) the word “conduct” has its ordinary meaning of behaviour.  The expression is wide enough to include an omission to act in breach of an obligation or duty.  It is very difficult to see why it should be given a more restrictive meaning, particularly since it is clear that a broad view is to be taken to the construction of section 6(4) (BP Exploration Co Ltd v Chevron, per Lord Hope at paragraph 31, Lord Clyde at paragraphs 66‑67, Lord Millet at paragraph 97;  Dryburgh v Scotts Media Tax Ltd, supra, Opinion of the Court at paragraphs 18 ‑ 20).  Resort to the mischief rule points in the same direction.  The mischief the error provision was intended to address is broad enough to encompass error induced by a failure of the debtor to act in breach of an obligation or duty.  A construction of “conduct” which confined it to positive acts would fail to address part of the mischief.  It would be very odd indeed if innocent action inducing error fell within the purview of the provision but reprehensible inaction in breach of duty did not.  The equitable case for the latter circumstance being included within the scope of the mischief, and within the meaning of “conduct”, is as strong as the case for reprehensible action being included and stronger than the case for innocent action being included.

[47]      I turn then to the proviso.  The defenders invoke it in Answer 39:

“Esto either HC or the liquidator were in error to any extent as to whether loss had been suffered (which is denied) they could with reasonable diligence have learned the truth by, at the very latest early 2008. Reference is made to the foregoing averments anent section 11(3).”

While strictly speaking the pursuer does not respond specifically to that averment other than by way of a general denial, both parties proceeded upon the basis that the pursuer’s averments anent section 11(3) were also the matters which it founded upon in response to the defenders’ reliance upon the proviso to section 6(4).

[48]      It is a well‑established principle of statutory construction that a party seeking to avail himself of a proviso must raise and prove it, as it is in substance an exception (see Bennion on Statutory Interpretation (6th ed.), section 242 and the authorities referred to in footnote 71).  Exceptionally, a provision may be in the form of a proviso but may in fact be an independent substantive provision (ie not a “true” proviso).  I am satisfied that that is not the case here.  I am also clear that, on a proper construction of section 6, subsection (4)(a) is an exception to the general rule in subsection (1) but that the proviso is an exception to that exception.

[49]      In BP Exploration Operating Co ltd v Chevron Transport (Scotland), supra, Lord Millet opined at paragraph 110 (emphasis added):

“[110] If the matter stopped there, any obligation on the part of Transport [the creditor in the obligation] to make reparation was not extinguished by the time it was served with the present proceedings. But Transport may still succeed in showing that its obligation was extinguished before 28 September 1995 by invoking the proviso to curtail the duration of the period to be excluded from the calculation of the primary period. If it can establish that the pursuers could with reasonable diligence have discovered the error at some time before 18 August 1995, then the excluded period will end at that earlier time.”

[50]      While none of the other members of the appellate committee addressed the issue of the operation of the proviso, none expressed any reservations as to what Lord Millet said in paragraph 110 (and at paragraph 33 of his speech Lord Hope made specific reference to, and agreed with, another aspect of Lord Millet’s speech).  Moreover, in my opinion when the pleadings and the decision are examined it is clear that the committee must indeed have proceeded upon the basis which Lord Millett described.

[51]      A vessel had caused damage to loading arms at a jetty at the pursuers’ terminal.  The pursuers raised an action against Chevron Shipping (“Shipping”) averring that that company were owners of the vessel.  The pursuers averred that more than five years after the incident Shipping indicated that the owners were Chevron Tankers (“Tankers”).  The pursuers raised a second action against Tankers.  In their defences Tankers admitted ownership but averred that the vessel had been the subject of a bareboat charter and that the charterers were Chevron Transport (”Transport”).  In both the Transport action and Tankers action the defenders pled that the obligation (to make reparation) relied upon had prescribed.  In both of those actions the pursuers averred that error as to ownership had been induced by the words and conduct of Shipping acting on the defenders’ behalf.  In both cases the defenders invoked the proviso to section 6(4)(a).  The defenders averred that the pursuers could with reasonable diligence have discovered the error within five years of the incident.  They set out steps they averred ought to have been taken by the pursuers.  They averred that letters of protest written to the pursuers after the incident by the master of the vessel alerted them to the true identity of the owners.  In each case the pursuers denied that they could with reasonable diligence have discovered the error more than five years before the action was raised.  In the Tankers case the pursuers averred that they had no reason to disbelieve what Shipping had told them as to ownership; that in the circumstances reasonable diligence did not require seeking verification;  and that no indication of the true identity of the owners had been given in any of the letters of protest.  In the Transport case the pursuers did not positively aver that they could not with reasonable diligence have discovered the error within five years of the incident:  but in response to the defenders’ averments they averred that they had had no reason to disbelieve Shipping; and that even if they had doubted what Shipping said they could not have ascertained by reference to any public register that Transport were bareboat charterers.  The Lord Ordinary allowed a proof before answer in relation to all three actions.  The First Division sustained the plea of prescription in the action against Transport and allowed a proof before answer in the other two actions.  The House of Lords recalled that interlocutor and allowed a proof before answer in all three cases.  In my opinion, since in the Transport case the pursuers did not positively aver that they could not with reasonable diligence have become aware of their error within five years of the incident, their Lordships must have proceeded on the basis that it was not incumbent upon the pursuers to do so.

[52]      In United Central Bakeries v Spooner Industries Limited [2013] CSOH 150 Lord Hodge followed the same approach as Lord Millett:

“117.… The burden of showing, for the purpose of the proviso to section 6(4), when UCB could with reasonable diligence have discovered the error rested on Spooner  [the debtor in the obligation]…”

The views expressed in Johnston at paragraphs 6.109 and 6.107 accord with those of Lord Millett and Lord Hodge.

[53]      In Adams v Thorntons WS, supra, the pursuer raised an action for damages for professional negligence against his former solicitors more than 10 years after the transactions in which they had acted for him and in consequence of which he averred that he had sustained loss.  A plea of prescription was taken.  In order to defeat the prescription plea the pursuer required to establish both that the date the obligation became enforceable was postponed by virtue of section 11(3), and that he had been induced to refrain from making a relevant claim against the defenders by reason of error induced by words and conduct of certain partners of the defenders (section 6(4)(a)(ii)).  The defenders invoked the proviso to section 6(4)(a), and the pursuer made certain averments in reply.  The Lord Ordinary allowed a preliminary proof before answer on the issue of prescription.  After proof he sustained the plea.  He concluded that the pursuer had failed to establish the facts required to enable him to benefit from section 11(3) up to a point sufficiently late to avoid prescription (Adams v Thorntons WS, unreported, 19 August 2003, paragraphs 45 ‑ 46, 55 ‑ 58, 59).  In addition he was not satisfied that the pursuer had proved (i) that an erroneous belief that he had no claim against the defenders had been induced in him by any words or conduct of the defenders’ partners;  and (ii) that his reason for not pursuing a claim against the defenders between 1995 and 2000 was such induced error (paragraph 69).  So far as is apparent from the Lord Ordinary’s Opinion the issue of the proviso does not appear to have featured in submissions, and he does not seem to have made any findings in respect of it in the section of his Opinion dealing with section 6(4).  An Extra Division of the Inner House refused the pursuer’s reclaiming motion.  It decided that the Lord Ordinary reached the correct conclusion in relation to the application of section 11(3);  and that having regard to findings in fact made in connection with section 11(3) (viz that the pursuer could with reasonable diligence have been aware of the facts relevant to his claim in December 1990) the period after 17 December 1990 was not to be included in the period of error upon which the pursuer could rely for the purposes of section 6(4)(a)(ii).  Lord Penrose delivered the principal Opinion.  He observed at paragraphs 36 and 66:

“36. For sec 6(4) to provide protection the creditor must establish that he was in error, that the error was induced in one or other of the ways identified, and that he has not become disabled from relying on the error by the operation of the proviso …

66. … The first issue is whether Mr Adams has established as a fact that he was in error as to the scope of his remedies and because of that error refrained from pursuing a claim against Thorntons. If he was in error, he must then establish that the error was induced by Thorntons. And finally he must show that the error could not have been discovered with reasonable diligence until a point in time after which the discovery was irrelevant to the running of prescription against him.”

Lord Marnoch and Sir David Edward concurred that the reclaiming motion should be refused.  Each reserved his opinion in relation to the more difficult points of construction of section 6(4) and section 11(3) which had been argued but did not require to be decided (paragraphs 1 ‑ 3, 76).

[54]      In these circumstances I have considerable doubt whether it is correct to say that Lord Penrose ruled on where the onus lay in relation to the proviso.  In my opinion Mr Duncan seeks to read too much into paragraphs 36 and 66 of Lord Penrose’s Opinion.  The context was a reclaiming motion following a preliminary proof where the Lord Ordinary had made findings in fact.  In view of the facts found the question of onus in relation to the proviso was immaterial.  Onus in relation to the proviso was not a matter the Inner House needed to consider, and there is no indication that it had the benefit of submissions on the point.  Had Lord Penrose really intended to express a view at odds with Lord Millet’s I would have expected him to acknowledge that and to explain his reasons for disagreeing.  He did none of that.  In fact, while he referred to several passages in BP Exploration v Chevron he made no reference to paragraph 110.

[55]      If, contrary to my view, Lord Penrose falls to be read as holding that the onus in relation to the proviso is on the creditor, I do not accept Mr Duncan’s submission that I am bound to follow Lord Penrose on that point.  In my opinion if that was indeed what Lord Penrose said it does not form part of the ratio of the decision.  I consider that I am free to follow BP Exploration v Chevron Transport (Scotland) and Lord Hodge in United Central Bakeries v Spooner Industries Limited, and I am satisfied that I should do so.

[56]      Accordingly, in my view it is for the defenders to establish that the proviso applies so as to exclude a period from the period of error founded upon by the pursuer.  This is important because, even though I am of the view that the pursuer’s averments in relation to its reliance on section 11(3) are not adequate to set forth a case that it could not with reasonable diligence have been aware that relevant loss, injury or damage had occurred more than five years before the action was raised, it does not necessarily follow that the defenders will succeed in discharging the onus upon them of establishing that the pursuer could with reasonable diligence have discovered the error upon which it founds at a date earlier than the pursuer in fact discovered it.

[57]      In my opinion the pursuers’ averments in relation to section 6(4) are suitable for inquiry.

Pragmatism?

[58]      Since inquiry is necessary in relation to the pursuer’s averments concerning section 6(4), and since the issues relating to reasonable diligence in connection with section 6(4) and section 11(3) would be likely to cover similar ground, I have considered whether I should simply allow inquiry in relation to both of those issues.  In my opinion it would not be right to be swayed by that consideration.  The pursuer has failed to discharge the onus upon it of pleading a relevant section 11(3) case.  It would be wrong to ignore that and to allow the pursuer to elide the consequences of that failure.

Imputed knowledge

[59]      The short answer to Mr Duncan’s “imputed knowledge” submission is that the hearing before me was to debate the relevancy of the pursuer’s pleadings in this action.  Nowhere in those pleadings does the pursuer aver knowledge on the part of Burness of the matters upon which Mr Duncan seeks to rely.  That is sufficient to deal with the submission.  At a preliminary proof on prescription it will be a matter for proof whether Burness had the relevant knowledge;  and, if they did, it will be a question of law having regard to the whole circumstances established at the preliminary proof whether that knowledge falls to be imputed to the pursuer;  and, if so, for what purposes.

Decision:  other matters

[60]      Mr Duncan attacked the relevancy of the pursuer’s pleadings in a number of respects.  Ultimately he accepted that some points were not capable of being determined at debate:  it is unnecessary to mention them.  So far as the remainder are concerned, while the criticisms had been set out at length in the defenders’ note of argument Mr Duncan acknowledged that the principal issue for debate was whether the defenders’ plea of prescription could be sustained at this stage or whether a preliminary proof on prescription was required.  Since that was so he dealt briefly with the additional submissions.  In short these were (i) that the pursuer did not have relevant averments of a solicitor-client relationship between it and the defenders in relation to the payments of £19 million and £9.418 million, nor were there relevant averments as to the scope of the retainer;  (ii) that the pursuer’s averments that it had sustained a loss were irrelevant;  (iii) that on the hypothesis that the pursuer was not the defenders’ client the averments (a) that the payments had been held by the defenders in trust for the pursuer were irrelevant, (b) that the defenders owed the pursuer fiduciary duties were irrelevant;  (iv) that the pursuer’s averments that the defenders owed the pursuer a delictual duty of care were irrelevant;  and (v) that certain of the pursuer’s averments involved collateral matters and were irrelevant.

[61]      I too consider it possible to deal briefly with these submissions.  So far as matters (i) to (iv) are concerned I am not persuaded that the pursuer’s averments are insufficient to entitle it to inquiry.  I am not satisfied that the pursuer is bound to fail to establish that the defenders acted as its solicitors when it received the payments, and that they breached the duties they owed to it, even if it succeeds in proving all its averments relating to those matters (Jamieson v Jamieson 1952 SC (HL) 44).  Similarly, I am not satisfied that if the pursuer proves its averments it will fail to prove that it has suffered a loss; or that it is bound to fail to establish that the defenders owed it the fiduciary duties condescended upon;  or that it is bound to fail to establish that the defenders owed it a delictual duty of care.

[62]      The averments said to be collateral are averments of links between the eighth defender and companies controlled by Mr King;  and averments that in December 2008 an unexplained payment of £200,000 was made to the eighth defender from the same Rosecliff Limited client account at Hassans into which the £9.412 million had been paid by the defenders.  Mr Duncan submits that since none of this pre-dates either of the dates when the pursuer’s loss was sustained (in January and March 2007) it can have no possible bearing upon any of the pursuer’s grounds of action, and that it is simply “mud‑slinging”.

[63]      The averments complained of serve to give notice to the defenders of the pursuer’s intention to explore these matters at proof.  The defenders offer no explanation as to why the £200,000 payment was made, nor do they clarify whether or not its source was the £9.412 million.  If its source was the £9.412 million then part of a sum which the pursuer avers was paid away in breach of trust was in fact returned to the eighth defender.  Moreover, the acceptance of the £200,000 payment and the eighth defender’s roles or involvement with Mr King and his companies in a period soon after the two payments might be relevant to the question what, if anything, the defenders ought to have advised the pursuer between the date of the payments and the pursuer discovering where they had gone.  The matters said to be collateral might raise issues of judgement or probity which, arguably, could be relevant to the credibility and reliability of the eighth defender.  Having regard to the whole circumstances which the pursuer avers on record I am not satisfied that I can conclude at this stage that the averments complained of are necessarily collateral and irrelevant.

Conclusions

[64]      With the exception of its section 11(3) case, the pursuer’s averments are suitable for inquiry.  A preliminary proof on prescription appears to me to be the appropriate way forward.  However at counsel’s request I shall put the case out by order to discuss the terms of an appropriate interlocutor to give effect to my decision, and to discuss further procedure.

[65]      I recognise that a number of my conclusions do not coincide with Lord Tyre’s conclusions in the case of Heather Capital Limited v Burness Paull & Williamson.  We have reached the same result on the pursuer’s section 11(3) case (even though the pursuer’s averments in that regard in the present case were somewhat fuller than those considered by Lord Tyre).  Some of the matters which I have had to decide are issues which Lord Tyre does not appear to have been asked to consider.  In Burness Paull it seems that the pursuer did not argue that the obligation of accounting for trust funds and the obligation to restore the value of trust property to the trust were obligations to which the short negative prescription did not apply.  In relation to other matters – in particular section 6(4) ‑ I may have had the advantage of hearing arguments which were either additional to, or more fully developed than, the submissions made to Lord Tyre.  Be that as it may, ultimately there is no escaping the fact that we have reached different conclusions on at least three material matters, viz (i) whether there are relevant averments of error;  (ii) whether there are relevant averments of conduct by the defenders inducing the error;  and (iii) whether the onus of averment and proof in relation to the proviso rests with the creditor or debtor in the relevant obligation.

 

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WOLFFE HALL: Papers reveal Council’s legal action ‘abandoned’, £320K Faculty refurbishment of Laigh Hall & new Lord Advocate refused to give expectations on move to recover public ownership of Parliament House

New Lord Advocate’s role in Parliament House titles fiasco. DOCUMENTS obtained from the Scottish Government reveal Scotland’s new Lord Advocate – James Wolffe QC – refused to give expectations of any success on efforts by the City of Edinburgh Council to recover public ownership of titles to Parliament House and the Laigh Hall.

Emails from James Wolffe to the Scottish Government also claim the Faculty of Advocates spent £320K on legal costs and work refurbishing the Laigh Hall – which Edinburgh City Council contend was wrongly taken from public ownership.

The series of exchanges between the former Dean of the Faculty of Advocates and Scottish Ministers in relation to the loss of public ownership of Scotland’s top court buildings – came to light in papers released by the Scottish Government in response to a Freedom of Information request.

In one letter dated 2 April 2015 to Alex Neil MSP  – the then Cabinet Secretary for Social Justice – James Wolffe told the Minister he did not object to a meeting between representatives of the City of Edinburgh Council and the Faculty of Advocates.

However, Wolffe added to the same letter “At the same time I would not wish to give any expectation to you or the council as to the outcome of any discussion.”

The long time lawyer & QC – recently selected by First Minister Nicola Sturgeon as Scotland’s latest Lord Advocate –  also felt confident enough to pass along details of the financial costs of ‘refurbishing’ the Laigh Hall – which the City of Edinburgh Council maintained were part of the common good & therefore owned by the council.

In a separate email to a senior Scottish Government civil servant – James Wolffe added: “I am advised that the of refurbishing the Laigh Hall following the grant of title to the Faculty was £242,270 plus VAT, with professional fees of £33,537 plus VAT.”

Responding to Wolffe’s claim the Faculty of Advocates paid out over £320K on refurbishing parts of buildings formerly in public ownership – an individual at the Scottish Government whose identity has been censored in the released documents – made light of further coverage of the Parliament House fiasco in the Scottish media.

In a further email, Wolffe alerted the secretive Scottish Government contact to additional coverage, pointing to an article written by Martin Hannan in The National, titled “Edinburgh asks: Can we have Parliament House back, please?

Meanwhile, unredacted sections of legal advice given by the Scottish Government’s own lawyers to Scottish Ministers revealed in the documents state the following:

• The Scottish Court Service (SCS) is the current proprietor and occupier of Parliament House.

Consequently it is that independent body (and not the Scottish Ministers) that would have to agree to a voluntary transfer of its title to the local authority. We don’t know what view the Lord President would be likely to take on that matter and whether he would agree to the transfer in circumstances where the public body has a valid title. He may, for example, be influenced by the fact that the SCS has recently undertake a major refurbishment of the building complex at a cost of around £58 million.

• The finance position is complex. SCS holds a valid title and will have accounted for bot the property and the recent refurbishment works in its accounts: Whilst a transfer to the council would retain the property in public ownership, there are tricky issues around accounting and public finance rules t at would require further investigation.

• Although neither a legal nor financial impediment, the title position is very complex. Parliament House is not one building but rather a number that are stitched together, built down the centuries. it is not clear whether the entire property was, and remained, part of the Common Good Fund when Scottish Ministers registered a title. This may be relevant when considering whether or not it would be appropriate to transfer the entire property. My understanding is that it would be an expensive exercise to undertake any further examination of the title and it is unlikely that it would in any event achieve any greater clarity.

• The Faculty of Advocates holds a registered title to the Laigh Hall. It mayor may not agree to a voluntary transfer, and if they were inclined to do so, we don’t know upon’ what basis.

As ministers sought to arrange meetings and seek views on the subject, Lord Brian Gill – then Lord President – wrote to Alex Neil MSP, asserting “this matter is best dealt with at official level”

Gill said he would ask Eric McQueen – Chief Executive of Scottish Courts and Tribunals Service, to meet with officials of the Council.

However, after a year of fruitless negotiations between council officials, the Scottish Government, and other parties, the City of Edinburgh Council served writs on Scottish Ministers, the Keeper of the Registers and the Scottish Courts & Tribunals Service on 25 November 2015.

The action by the council – seeking declarator that the City of Edinburgh Council is the owner of Parliament House, High Street, home of the Court of Session – has since been abandoned.

In response to media enquiries, the Scottish Courts and Tribunals Service confirmed the council’s legal action had ceased, and said : “SCTS holds legal title to Parliament House.”

PARLIAMENT HOUSE TITLE SWINDLE

Last year Diary of Injustice reported on the City of Edinburgh Council’s efforts to recover the titles to Parliament House after land reform campaigner Andy Wightman – now an MSP – revealed land titles to the buildings of Scotland’s top courts were ‘gifted’ by Scottish Ministers to the Faculty of Advocates.

A disclosure of eighty eight pages of documents released to DOI under Freedom of Information legislation – revealed at the time the Scottish Government had no plans to act over their handing over of the Parliament Hall land titles to the Faculty of Advocates.

And, throughout the documents – which contain communications between civil servants, briefings to Ministers, land reports and letters from Edinburgh City Council asking for meetings, it was clear Scottish Ministers favour leaving the titles to the nation’s top courts with the vested interests of the legal profession.

During an earlier check on the titles to the Laigh Hall – Parliament House – Queen Street – ownership stood in the name of “SIDNEY NEIL BRAILSFORD Queen’s Counsel, Treasurer of HONOURABLE THE FACULTY OF ADVOCATES Edinburgh, as Trustee and in Trust for said Faculty”.

Sidney Brailsford is High Court Judge Lord Brailsford.

Scottish Government files reveal how court titles were handed over to advocates After a series of briefings with Ministers – involving everyone from the Lord Advocate & Solicitor General to the Cabinet Secretary for Justice, Minister for Legal Affairs and others, a position was adopted by Scottish Ministers “That we confirm to Council officials that it is the Scottish Government’s position that title to Parliament Hall was taken by Scottish Ministers in good faith and with the full knowledge and consent of the Council. The Scottish Court Service and Faculty of Advocates therefore have good title to the property and Ministers propose no further action.”

Lawyers for the Scottish Government also sought to distance themselves from the huge £58 million taxpayer funded spend on the Scottish Court buildings – long after titles were handed over to the advocates.

One lawyer stated in an email: “Was the PH [Parliament Hall] refurb about £60m? It went over in the SCS [Scottish Court Service] budgets I think but from my recollection of briefing on their budget it is not easily identifiable within their budget lines. So SCS [Scottish Court Service] spent the money not SG [Scottish Government]?”

In another memo, it is revealed Edinburgh City Council may be compelled to take legal action to recover the titles and details an example of how Common Good land disputes have affected legislation in the past.

As previously reported, Scotland’s First Minister Nicola Sturgeon has already given her blessing to the multi million pound title handover freebie to the Faculty of Advocates. The First Minister claimed there was “no easy solution to the issue of restoring title to the City of Edinburgh Council”. The First Minister’s response to a question from Green Party MSP Alison Johnstone during First Minister’s Questions, follows:

Parliament House handed over to Faculty of Advocates FMQ’s Nicola Sturgeon 19 February 2015

Official Report of debate: Alison Johnstone (Lothian) (Green): It transpired this week that the 17th century old Parliament hall in Edinburgh was transferred from the collective ownership of my constituents to Scottish ministers without knowledge or recompense to the common good fund.

The City of Edinburgh Council failed in its role as steward of the fund, but is now seeking to resolve the situation. Can the First Minister assure my constituents that any requests from the council to restore ownership of that common good asset to the council will be considered seriously and favourably?

The First Minister – Nicola Sturgeon: I will briefly state the background to this issue, of which I am sure that Alison Johnstone is aware.

The Scottish Government’s position is that title to Parliament hall was taken by Scottish ministers in good faith, and that that was done with the full knowledge and consent of the council. The Scottish Courts Service and the Faculty of Advocates, therefore, have now got good title to that property.

Of course, I am more than happy to ask the relevant minister, Marco Biagi, to; meet and discuss the matter with the City of Edinburgh Council, but as far as I can see there is no fault here on the part of the Scottish Government.

Further, of course, title has since been passed on, so it may very well be that there is no easy solution to the issue of restoring title to the City of Edinburgh Council. I think that any questions on how the situation has arisen probably have to be directed to the council.

 

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