Appeal to the Inner House in respect of decision of the Outer House on 1 September 2011. The case relates to a disposition of flats at Queen’s Gardens in Aberdeen. Skene disponed the property to Mr Pocock in 2000. However, a page of the disposition was substituted changing the recipient of the property to Howemoss Properties Limited (a company of which Mr Pocock was a director) and the price (possibly for SDLT reasons) without Skene’s consent. In 2002 Howemoss sold one of the flats to a Mr Torr.
In 2003 Mr Pocock was sequestrated and Mr Alexander was appointed as permanent trustee and began to investigate Mr Pocock’s property transactions. A judicial factor was also appointed in respect of the law firm which had acted for Mr Pocock and who, following an investigation, produced a report in June 2004 outlining the changes made to the disposition. The trustee raised successful actions in relation to other properties transferred by Mr Pocock but in April 2005 was still trying to locate the conveyancing file relating to the Queen’s Gardens property. In July 2007 the trustee received an opinion from senior counsel relating to the Queen’s Gardens property and wrote to the Keeper of the Registers of Scotland and Mr Torr’s solicitors (in August and September 2007) indicating that he intended to raise an action proving the tenor of the original disposition in favour of Mr Pocock. The police became involved in November 2007 and in early 2008 the trustee instructed agents to commence proceedings.
Mr Torr granted a standard security over the flat in favour of Abbey National plc in February 2008 at which point Abbey National are believed to have discovered that the disposition in favour of Mr Torr had not been registered (despite being granted 6 years previously) although the extent of their title investigation was unknown.
In the Outer House Lord Uist rejected arguments by Abbey National that:
- the trustee’s action was barred by mora, taciturnity and acquiescence; and
- the trustee was personally barred from reducing the Howemoss disposition (meaning Howemoss had no title to grant the disposition in favour of Mr Torr) as a consequence of the common law principle of adoption of forgery.
The Inner House refused Abbey National’s appeal and indeed went further allowing the trustees cross appeal to the effect that Abbey National’s arguments relating to mora, taciturnity and acquiescence were irrelevant.
Mora, taciturnity and acquiescence
It was necessary to consider all the circumstances of the case. However, Abbey National’s arguments referred only to the date of the judicial factor’s report (in 2004) and the date the action was raised (2008) which was to ignore the events which occurred between those dates. Those events did not support a categorisation of the trustee’s conduct as taciturnity and acquiescence:
“On the contrary, the steps taken by the [trustee] amounted to investigation, consultation, the seeking of appropriate advice, warnings to both the Keeper and to a current heritable proprietor (Mr Torr), and the raising of an action. For this reason alone we find Abbey’s averments of taciturnity and acquiescence to be inadequate and irrelevant. Furthermore we agree with senior counsel for the [trustee] that the [trustee] was entitled responsibly to seek information and advice before raising a court action with all its consequences. In other words, while the [trustee] was alerted to the problem in June 2004 by [the judicial factor’s] report, he was entitled to take the steps he did before launching into a litigation which, if not well-based in fact and law, could result in considerable losses to the sequestrated estate.”
Adoption of forgery
The crucial element of adoption of forgery is that a person who knows about the forgery, and knows that a third party is being misled into relying upon the forgery, says or does nothing to alert the third party to the problem. In effect it was therefore necessary for Abbey National to prove that the trustee not only knew that the disposition was falsified, but also that Abbey National were intending to lend Mr Torr money in reliance upon that falsified disposition, and yet did nothing to prevent Abbey from relying upon the falsified disposition. Abbey National did not argue that they relied upon the falsified disposition itself – the nature and extent of their investigation into the title in respect of 5 Queen’s Gardens being unclear. Perhaps more importantly, there are no arguments made on Abbey National’s behalf that the trustee knew that Abbey National were, or were likely to, rely upon the falsified disposition. Furthermore, the trustees actings (in particular the letter to Mr Torr’s solicitor), did not disclose a picture of an adoption of forgery. On the contrary, the trustee had taken active steps to warn Mr Torr’s agents that his disposition was from a non-owner and that court proceedings challenging that disposition would be raised.
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