MacKay v Cooper Watson Ltd [2015] ScotCS CSOH_140 (21 October 2015)

MacKay v Cooper Watson Ltd [2015] ScotCS CSOH_140 (21 October 2015)

The expiry of the prohibitory effect under section 14 of the 1985 Act does not divest the trustee of the vested estate; it only removes the protection of the inhibition. Section 44(4)(c) of the 1924 Act prevents challenge to a debtor's deed on the ground of sequestration after expiry of the prohibitory effect, unless the trustee has completed title. However, if the disponee is aware of the sequestration, the disposition is voidable under the 'offside goals' rule, as the disponee is not in good faith.

Citation
[2015] ScotCS CSOH_140
Parties
Pursuer: Elizabeth G Mackay as Trustee in the Sequestration of Mark Edward Fortune; Defender: Cooper Watson Limited
Jurisdiction
Scotland
Judgment Date
21 October 2015
Procedural Posture
Civil Property/bankruptcy / Outer House, Court of Session Opinion After Debate
Outcome
Decree of reduction in favour of the pursuer (subject to possible exception for family home); case put out by order for further discussion on that matter.
Legal Topics
Sequestration, Trustee's Title to Heritable Property, Effect of Recording Inhibition, Challenge to Dispositions by Debtor, Good Faith Purchasers, Interpretation of Section 44(4)(c) Conveyancing (scotland) Act 1924
Bankruptcy Property Law Conveyancing Sequestration Trustee's Title to Heritable Property Effect of Recording Inhibition Challenge to Dispositions by Debtor Good Faith Purchasers +1 more

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Parties

Elizabeth G Mackay as Trustee in the Sequestration of Mark Edward Fortune

Pursuer

Cooper Watson Limited

Defender

Procedural Posture

Civil Property/bankruptcy / Outer House, Court of Session Opinion After Debate

Legal Issues

  1. 1 Whether dispositions of heritable property by a sequestrated debtor are voidable or unchallengeable after expiry of the prohibitory effect under section 14 of the Bankruptcy (Scotland) Act 1985 and section 44(4)(c) of the Conveyancing (Scotland) Act 1924
  2. 2 Whether knowledge of sequestration by the disponee affects the validity of the disposition
  3. 3 Whether the trustee's failure to complete title within three years removes the right to challenge the disposition

Ratio Decidendi

The expiry of the prohibitory effect under section 14 of the 1985 Act does not divest the trustee of the vested estate; it only removes the protection of the inhibition. Section 44(4)(c) of the 1924 Act prevents challenge to a debtor's deed on the ground of sequestration after expiry of the prohibitory effect, unless the trustee has completed title. However, if the disponee is aware of the sequestration, the disposition is voidable under the 'offside goals' rule, as the disponee is not in good faith.

Court Disposition

Decree of reduction in favour of the pursuer (subject to possible exception for family home); case put out by order for further discussion on that matter.

Orders

  • Dispositions challenged by the pursuer are voidable and fall to be reduced, except possibly the disposition of the family home, which requires further discussion.