Judgments - Henderson (Respondent) v. 3052775 Nova Scotia Limited (Appellants) (Scotland)

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    30.  For present purposes we take nothing more from the affidavit than an indication that Mr Gardner recollected that Mr Liu had mentioned the assumption of debt very briefly around the time when the sale of the subjects was being discussed.

    31.  Since Mr Woolman accepted that the minute of 7 February and the letter of 8 February were to be treated as genuine, he was faced with a situation where these documents seem to indicate that, on 7 February, some days before the disposition of the subjects was delivered, Nova Scotia had undertaken to assume liability for £1,850,000 of Letham Grange debt. Mr Woolman submitted that there was nothing to show that the debt had "necessarily" been assumed as part of the consideration for the sale of the subjects, rather than simply as a free-standing transaction. That is, of course, correct, but it is also beside the point. In a motion for summary decree the question is not whether the available material necessarily shows that the debt was assumed as part of the consideration for the sale, but whether it may do so. In that regard, it is worth noticing that Mr Woolman was unable to point to any reason, apart from the sale transaction, why Nova Scotia might have undertaken this liability at that time. And, of course, there is some indication from Mr Gardner that Mr Liu mentioned the assumption of the liability for the debts in the context of the sale of the subjects.

    32.  As Mr Woolman pointed out, it may well be that if the assumption of liability for the debt was really part of the consideration for the sale, Mr Liu should have told Mr Gardner about it and it should have been taken into account in the calculation of stamp duty. He suggested that, if the transaction had been tainted by some illegality in this respect, any additional consideration by way of the assumption of liability for the debt would fall to be disregarded in deciding whether the alienation of the subjects had been for adequate consideration in terms of section 242(4)(b) of the Insolvency Act 1986. It is enough for us to say that such a contention would involve the exploration of legal issues which have not been ventilated in the proceedings so far and which would almost certainly require detailed legal argument of a kind that would be out of place in a motion for summary decree.

    33.  Mr Woolman also submitted, though somewhat tentatively, that any assumption of liability for the Letham Grange debt would fall to be disregarded as part of the consideration for the alienation of the subjects if it had not occurred by the time the disposition was granted. Again, that would seem to raise a significant legal question which has not been explored in the proceedings so far and which might well be unsuitable for decision on a motion for summary decree.

    34.  In advancing his submission, Mr Woolman attached importance to a letter dated 28 February from J Michael Colby, as Vice President of Nova Scotia, to Mr Dong-Guang Liu of Letham Grange:

    "This is to confirm that we have purchased all the assets of Letham Grange Development Co Ltd - inclusive of the golf courses, restaurants, curling rink, and related businesses on the grounds, and buildings.

    This is also to acknowledge that in addition to the purchase price, we will further assume 1,850,000 UK pound sterling of extra other debt liability of Letham Grange Development Co Ltd to the Liu Family. We will pay an 8.5% annual interest fee on the debt and it is to be repaid by February 27, 2004.

    Please sign at the bottom for your acceptance of the above."

    Mr Liu signed the acceptance docquet. Mr Woolman drew attention to the use of the future tense where the writer says that "This is also to acknowledge that in addition to the purchase price, we will further assume 1,850,000 UK pound sterling of extra other debt liability ..." This indicated, he said, that, while the purchase had already taken place, the liability for the debt had not yet been assumed and would be assumed only at some uncertain future date - too late to count as part of the consideration for the alienation of the subjects on 12 February. This line of argument found favour with the Extra Division who attached some importance to this use of the future tense. They said, 2005 1 SC 325, 330, para 12: "Thus the assumption of the debt is a future event unconnected with the purchase of the subjects and is contingent upon the agreement of the company." We need not decide whether such an inference would be justified, far less inevitable, in the case of a letter written by a native English speaker. In our view it would certainly be wrong, before proof, to attach any particular significance to the exact form of the language used by someone who is not a native English speaker in a letter to himself.

    35.  It is, however, neither necessary nor appropriate to come to a concluded view on any of these matters. The question for us is simply whether the defences, supplemented in the ways we have indicated, raise an issue or issues which can only properly be resolved by a judge who hears evidence at a proof. We are satisfied that they do, since on the material before us we are quite unable to say that the appellants would be bound to fail to show that they had assumed liability for £1,850,000 of Letham Grange debt as part of the consideration for the sale of the subjects.

    36.  This is not to say, of course, that the appellants will succeed in proving their case or indeed to make any prediction whatever about the outcome of the proof. As Mr Sandison readily conceded, there are many points on which the appellants' witnesses may expect to be challenged when they give evidence: for example, the fact that in the liquidation of Letham Grange the members of the Liu family claimed the full value of their debts; the fact that the appellants said that they would pay interest on the debt at 8.5% per annum, but in the Nova Scotia accounts it appeared as a non-interest bearing loan; the fact that the appellants have not pointed to any formal steps which they took to assume the liability of Letham Grange. We say nothing about these points precisely because they may be explored in evidence and it will then be for the judge to assess their significance, if any. But until a judge has heard the evidence, the court is not in a position to conclude, as the Extra Division purported to conclude, that the defence is "neither genuine nor authentic." On the contrary, there are issues about which the appellants must have an opportunity to lead evidence, since we cannot say that, if they do so, their case is bound to fail. We cannot forbear to point out that, if the case had simply gone to proof in the ordinary way, all these issues of fact would doubtless have long since been resolved.

    

 
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