Outer House judge dismisses partnership’s claim that bank took funds from account without legitimate cause

About this case:

• Citation:
  [2023] CSOH 7
• Judgment:
  External link
• Court:
  Court of Session Outer House
• Judge:
  Lord Clark

LD Partnership sought orders for disclosure of the whereabouts of the missing funds as well as their return with interest. RBS opposed the application on the grounds that it was incompetent and made out of time, the relevant obligations having since extinguished by prescription.

The case was heard by Lord Clark in the Outer House of the Court of Session. G Dosoo, one of the partners in the petitioner, appeared as a lay representative and Anderson, advocate, for the respondent.

No standing jurisdiction

The partnership was established by Mr Dosoo and another man, Mr Leslie, for the purpose of purchasing a hotel. They entered into a loan agreement with RBS in June 2005 for a loan of £2.08 million. In 2010 the hotel was sold and the remaining balance of the loan was paid to RBS. It was the petitioner’s case that, in 2012, it discovered that funds had been debited from its account by RBS but were not in fact used for loan repayments, having not been accounted for in the completion statement.

Between 2012 and 2020 the petitioner lodged three separate complaints with the Financial Ombudsman Service about the missing funds and “other banking misconduct” by RBS. On each occasion, the FOS refused to investigate on the basis that RBS had objected to any such investigation. A complaint was also lodged with RBS, which was appealed to an independent third party who also refused to investigate on the basis that he had no mandate to investigate missing funds.

It was submitted for the Bank that the court had no standing jurisdiction to order one party to a litigation to disclose where something was when no legal basis was identified for the making of an order. Further, it would be impossible to comply with an order to reveal the location of the funds as bank money was not made up of segregated pots of hard cash.

Counsel for the respondent further argued that, even if the issue would be dealt with more appropriately by raising an action, this was now impossible as the relevant obligations had extinguished by prescription. Any possible claim would have arisen in July 2010 and Mr Dosoo only alleged in correspondence that there had been an overpayment in the summer of 2013. In either case, the five-year prescriptive period had long extinguished by the time the petition was raised.

Nothing to interrupt

In his decision, Lord Clark said of the competency of the petition: “The present case is, on the face of it (albeit not on a clearly averred basis simply a dispute about the parties’ patrimonial rights and obligations, arising from their contractual relationship. The first order sought does not go beyond the interests of the parties. Moreover, it is not something the court can realistically make, when there is no basis averred or otherwise available to the court for concluding that the missing funds are currently held somewhere, and no legal ground for the order is identified.”

He continued: “If the respondent debited the amounts and wrongly failed to take them into account in the completion statement, they will no doubt have formed part of the funds in the bank’s possession. But a bank’s funds do not remain static and are used for a variety of purposes and transactions. Attempting to trace the current location of the debits made in the years before 2010 is of no moment, since the petitioner’s key claim is about the loss of the monies caused by the conduct of RBS. The second and third orders sought are plainly appropriate to be dealt with in an action rather than in a petition.”

Addressing the issue of prescription, Lord Clark observed: “Viewing the petition as openly as possible the claims must concern obligations that became enforceable, at the latest, in July 2010 when the redemption sums were paid to RBS. There are of course various grounds stated in the Prescription and Limitation (Scotland) Act 1973 upon which the prescriptive period can be postponed, or interrupted and re-started [but] the petitioner makes no averments on any of these matters, which of itself excludes them from consideration. But even if they are considered in light of the submissions and documents referred to, I am unable to accept that any of these provisions is capable of applying to the facts here.”

He concluded: “The obligations apparently or potentially relied upon came into existence much more than 5 years before the petition was raised and the fact that the petitioner took up the various complaint procedures did nothing to interrupt the quinquennium. The petition is therefore dismissed on the ground that it is not competent and, separately, that any obligations relied upon have been extinguished by prescription.”