Decision of the Scottish Land Court

Thrumster Estate Limited (Applicants) v Sonja Mindt (Respondent)

Case reference SLC 166/13
before
Lord Minginish, Chairman, and Mr John A Smith
16 November 2016

[1] On 20 September 2016 the Court received a motion from the applicants’ agents seeking (i) the discharge of a hearing which had been set down for 4 and 5 October, (ii) leave to withdraw the application under Rule 5 of the Court’s Rules and (ii) 14 days for the lodging of submissions on expenses. The views of the respondent’s agents having been taken, that motion was granted in terms of Mr Smith’s order of the same date. Both parties have now lodged their submissions on expenses.

[2] Unsurprisingly, the respondent, who has to all intents and purposes been wholly successful, seeks an award of expenses against the applicants. Rather more surprisingly, the applicants seek an award of expenses in their favour. In so doing their agents accept that, in the circumstances, it is incumbent on them “to point to the facts and circumstances which would make it appropriate that any award other than an adverse award of expenses against them should be granted”. They also say that “given that the Applicants ultimately did not insist on the Application proceeding to proof the Court may consider it appropriate to restrict [any award of expenses in their favour] to a certain percentage of costs only”.

[3] What the applicants’ position comes to is this: that it was the conduct of the respondent which necessitated, or at least justified, the bringing of the application but that a point was reached in the ensuing litigation at which it became clear to them that, as a result of improvements in the way the respondent was managing the croft, which improvements would not have happened but for the bringing of the application, the prospects of success did not justify running the risks of an adverse finding in expenses were the case litigated to a conclusion.

[4] In addressing that position we apply the guidance given in the well-known dictum of Lord President Robertson in Shepherd v Elliot (1896) R 695 at page 696:

“The principle upon which the court proceeds in awarding expenses is that the cost of litigation should fall on him who has caused it. The general rule for applying this principle is that costs follow the event, the ratio being that the rights of parties are to be taken to have been all along such as the ultimate decree declares them to be, and that whosoever has resisted the vindication of those rights whether by action or by defence, is prima facie to blame.”

[5] This approach involves consideration of who has caused the litigation and whose rights have been vindicated. This was an application for declarator that the respondent was in breach of the statutory conditions applicable to her tenancy of South Yarrows and for an order terminating that tenancy and removing her from the croft. It was based on an averred breach of condition 10 of the statutory conditions contained in Schedule 2 to the Crofters (Scotland) Act 1993, viz that “[t]he crofter shall not do any act whereby he becomes apparently insolvent with the meaning of the Bankruptcy (Scotland) Act 1985”. The breach had taken the form of granting a Deed of Trust for her creditors.

[6] In answers lodged on 17 March 2014, it was admitted that the respondent had granted such a deed on 26 November 2010 but it was explained that, having met her obligations under that deed, she had been discharged by her trustee by discharge recorded in the Register of Insolvencies on 13 February 2014. Accordingly, it is clear that the respondent’s conduct furnished the applicants with grounds for her removal. But we do not think it can be said that this conduct caused the litigation. It did not put the applicants in a position whereby they had no option but to come to court to vindicate their rights. There is no suggestion that the condition of South Yarrows had deteriorated to such an extent that they had to get her out. For what it is worth, the respondent (in a passage excised from her pleadings at debate) averred a quite different motivation for bringing the application, saying that it was “an opportunistic attempt by the Applicant to rid itself of a tenant to which its Director, Islay Macleod, is hostile, and in so doing to thwart the Respondent’s outstanding Application RN SLC/61/13, for an Order under section 13(1)(a) of the 1993 Act authorising her to acquire South Yarrows Croft …”. Whether that was so or not was irrelevant to the merits of the application but it does offer an alternative explanation for the bringing of the application which has some plausibility given this Court’s knowledge of the applicants’ determination to retain ownership of the croft if at all possible, as evidenced by their successful resistance to Miss Eva Waugh’s attempt to buy it in Waugh v Thrumster Estate Ltd 2006 SLCR 2 53. The significance of this is that there may have been more than one cause for the application being brought.

[7] It seems to us, therefore, that the position can be summarised as follows (i) the respondent furnished the applicants with grounds for the application, (ii) the applicants were perfectly within their rights to bring the application but (iii) they were not obliged to do so. In that situation it does not appear to us to be possible to conclude that the respondent caused the litigation.

[8] What of the vindication of rights? Plainly, in terms of judicial decision, there has been no vindication of anyone’s rights in this case. The applicants’ decision to bring the application may be said to have been vindicated by the respondent’s consequent (as the applicants aver) improvement in the husbandry of the croft but that is a different thing from the vindication of legal rights.

[9] It seems to us, therefore, that there is no basis for finding the applicants entitled to their expenses in this case. That would be a remarkable result in a case in which they lost, or at least failed to win, at debate and subsequently abandoned the application. There is no justification for it.

[10] Failing a general award of expenses, the applicants argue that two aspects of the conduct of the case by the respondent justify an award of expenses in their favour in respect of those discrete matters. One is the specification procedure to which the applicants had to resort for the recovery of certain documents and information and the other is amendment carried out by the respondent at debate. We deal with those in turn.

[11] By adjustments made on 10 July 2014, the applicants averred, in effect, that the respondent had not declared all of her creditors (of whom they were one but had not been advised of the trust deed) to her trustee and called for the production of various pieces of information calculated to show whether the respondent had become able to pay her debts as they fell due or, absent such vouching, remained apparently insolvent. These adjustments were met by adjustments for the respondent dated 3 September 2014 which included an averment that the respondent “has been discharged from the trust deed, lives within her means and is able to pay her debts, all of which are of the ordinary ongoing household variety, and pays them as they become due”. That in turn led, on 3 October 2014, to lengthy adjustments by the applicants which included the averment that the respondent had entered into another, earlier, trust deed in favour of a different trustee, on 11 June 2010. These adjustments went on to make calls on the respondent to produce certain information and documentation.

[12] These calls not having been answered in the course of subsequent adjustment, and being resisted on the ground that they were premature, they (and additional matters) were put to the Court on 14 January 2015 in the form of a motion for the recovery of certain information in the hands of the respondent, her two averred trustees and the Royal Bank of Scotland. The accompanying Specification contained 11 calls for the production of material relating, in essence, to the respondent’s solvency. After sundry procedure, by our order of 2 April 2015 we granted nine of these calls.

[13] We consider that the fair way of dealing with this matter is to restrict the award of expenses in favour of the respondent to exclude all work done in relation to the recovery procedure. Had the information been provided voluntarily that procedure would have been unnecessary. In a situation in which the application has been abandoned it would be going too far to make an award of expenses against the respondent but we are persuaded that she should not be entitled to her expenses against the applicants.

[14] So far as the amendment made in the course of debate is concerned, it was minor, merely clarifying the respondent’s position on matters on which her pleadings had until then been coy, that matter being whether she admitted or denied the debts said to be due to Angela Pope and Brian Sparks. It took virtually no time at all to deal with at debate and the applicants did not have to amend in response to it. It is simply of no significance in terms of expenses.

[15] In summary the position is this. The respondent has been taken to court, has successfully resisted the primary case made against her and seen the rest of the case abandoned. In that situation, while she has herself to blame for giving the applicants grounds for raising the proceedings in the first place, she has been wholly successful in the litigation and we see no basis upon which the interests of justice require a departure from the rule that expenses should normally follow success. Accordingly we have refused the applicants’ motion and found the respondent entitled to her expenses less those associated with the recovery of documents procedure.