Supreme Court case of some complexity in which the Liquidator of the Letham Grange Development Company sought reduction of a security over the Letham Grange resort near Arbroath. The case involves a number of companies all controlled by a Mr Liu and his family.

The Liquidator argued that the holder of the security, Foxworth (a company controlled by Mr Liu), had not acquired the rights under the security in good faith and for value. The Liquidator had previously successfully challenged a disposition by Letham Grange in favour of Nova Scotia Limited (also a company controlled by Mr Liu) on the basis that it was a gratuitous alienation. (The property which had been purchased by Letham Grange for £2,105,000 was sold to Nova Scotia for only £248,100.)

In the Outer House Lord Glennie found that there had not been a gratuitous alienation accepting Mr Lui’s evidence that the price had been reduced as there had been loans made by Mr Liu’s family in favour of Letham to finance the original purchase and that Foxworth (having assumed liability) was obliged to repay those loans to the family.

The Inner House have allowed an appeal finding that, to avoid a gratuitous alienation, the consideration given in exchange for the granting of the disposition of the resort to Nova Scotia required to be enforceable at the time when the disposition was granted. However, at that date, there was no enforceable obligation binding Nova Scotia to repay the loans to the family. Even if that had not been the case, taking account of all of the circumstances, the Inner House found that the various transactions surrounding Letham Grange had been intended to defeat the claims of lawful creditors.  For those reasons a decree granting reduction of the standard security was given. The Inner House also found that Lord Glennie had failed to give satisfactory reasons for the factual conclusions he had reached on the evidence.

The Supreme Court unanimously allowed an appeal of the Inner House decision.  Whilst the Inner House had been correct to identify that an appellate court can interfere where it is satisfied that the trial judge has gone “plainly wrong”, it had erred in concluding that Lord Glennie had been “plainly wrong” in this case.

Lord Glennie had clearly understood that the critical issue was whether “the alienation was made for adequate consideration”. He was aware that an obligation on the part of Nova Scotia could only constitute part of the consideration for the sale if it was undertaken as the counterpart of the obligations undertaken by Letham Grange. His opinion had focused whether, and not when, any obligation was taken to assume the Letham Grange debts and he had been entitled to accept Mr Liu’s evidence on that point. The Supreme Court noted that Lord Glennie had taken into account the various criticisms of Mr Liu’s evidence before concluding that his evidence was credible and reliable and also noted that the weight given to the material evidence was pre-eminently a matter for the trial judge (subject only to the requirement that his findings be reasonable).

The full judgement is available from the Supreme Court here.

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.