Outer House judge sets aside prejudicial transactions by late farmer who suffered from lung condition

William Lindsay, the executor of the late Euan Lindsay, argued that Outlook Finance Ltd had persuaded his uncle to enter into a series of contracts by means of facility, circumvention, and lesion. The deceased, who had suffered from a lung condition commonly called “farmer’s lung”, died aged 59 on 3 June 2011. At all material times that he dealt with the company it was controlled by a Mr Derek Fradgley.

The case was heard by Lady Wolffe. The pursuer was represented by Thomson QC and MacDougall, advocate, and the defender by McIlvride QC and Kinnear, advocate.

Misrepresented debts

The deceased was the proprietor of Harperfield Farm in Sandilands, Lanark, as well as a second farm, Metal Bridge. In October 2009 he granted an all-sums standard security over the property in favour of the defender, replacing an earlier security restricted to £275,000. The month prior, he entered into a loan facility agreement with the defender for £1.335 million, which contained a personal indemnity by him in favour of the defender. A second loan agreement was also obtained later this month.

The pursuer averred that at the time the deceased entered into the agreements he was in a facile state by reason of his very poor lung health. His position was that Mr Fradgley had misrepresented to the deceased that he owed the sum of £2.6 million to Outlook under prior agreements and that entering into the agreements was the only way to stop “the bank” from selling his land and equipment. In truth there was no bank involved, something Mr Fradgley had previously admitted in another legal action in England.

Mr Fradgley died in July 2017. The current directors of Outlook denied the essentials of the pursuer’s case and averred that the Metal Bridge business had been unprofitable and required “propping up” by them. They contended that the deceased had access to legal advice and was motivated by a desire to assist his family at the time, and accordingly there was neither facility nor circumvention.

Counsel for the pursuer submitted that the totality of the evidence, including documentation and witness statements made by several members of the deceased’s family, suggested there was an invalidity of consent to the deeds in question. The remedy of reduction was sought as the contract was voidable rather than void, leaving it valid until it was reduced.

Persistent, domineering, and aggressive

In her decision, Lady Wolffe said of the late Mr Fradgley’s misrepresentation: “It was an effective instrument of oppression, because it led the Lindsays to believe that Outlook or Derek Fradgley had no leeway and that Outlook was powerless in the face of a third party bank pressing it for repayment. This was particularly so when used as a threat, that the bank was about to force a sale of Metal Bridge Farm and its cattle and equipment. That threat was made, and repeated, at the critical points to enable Derek Fradgle to secure an advantage for himself or Outlook.”

Assessing whether the deceased was facile at the relevant time, she said: “All of the Lindsay witnesses spoke to how Euan Lindsay’s mental and physical state deteriorated, and to his resultant low mood and anxiety. He was in and out of hospital in his later years, causing him to become more distant and withdrawn. None of this evidence was challenged.”

She continued: “On no view could Euan Lindsay be described as having a forceful personality. By contrast, Derek Fradgley was persistent, domineering and, at times, aggressive in order to get his way. The grant of the first standard security illustrates Derek Fradgley’s intellectual domination.”

On whether there was evidence of circumvention, Lady Wolffe noted: “In contrast to the position when Euan Lindsay granted the first standard security, Derek Fradgley’s leverage in August 2009 was significant. It is in this context that Derek Fradgley deployed the threat of ‘the bank’ repossessing ‘everything’ and coming after Harperfield, coupled with his ultimatum that Euan Lindsay had to buy off this threat in order to prevent the bank stepping in.”

She continued: “In the whole circumstances, this was a powerful ultimatum that Euan Lindsay was unable to resist and which continued to impel him when he entered into the Loan Agreements and to grant the impugned standard security.”

For these reasons, the pursuer was granted the remedies sought.