Minute of Amendment

for
Martin & Linda Frost
in

Unity Trust Bank Plc v Martin & Linda Frost
As at 16th November 2004

a)    From early January 1994 to its official conclusion in 1998 Martin Frost was the subject of three DTI (Department of Trade and Industry) & SFO (Serious Fraud Office) investigations which it is reasonably believed cost the taxman some £6 million. Martin Frost was never charged with an offence, and during this period he was prohibited by the DTI from working.

 The DTI claim that their investigation was initiated via a complaint from the South Wales Police. The South Wales Police claim that their information source was the Merseyside Police. The Merseyside Police claim that their sources were reliable and confidential to their Chief Constable. The current managing director of Unity Trust Bank Plc, Mr Ian Sim,  admitted to his colleague the late James Knapp that he, Sim,  provided information to his friend, the Chief Constable of Merseyside Police, but he, Sim, did so in good faith.

b)    Mr Clive Franks, on behalf of the Unity Trust Bank Plc, repeatedly bad mouthed Martin Frost stating that Martin Frost was dishonest, that he was a conman, that he was a fraudster, and that he was not to be trusted In particular, he bad mouthed Martin Frost to his legal agents. When in the summer of 1994, before, at, and after the Options hearing in Unity Trust Bank Plc v Frost at Jedburgh Sheriff Court Martin Frost’s counsel, Mrs Eirlys Smith, refused to follow Mr Clive Franks’ bad mouthing and cease acting for the Frosts, Mr Clive Franks reported her for professional misconduct in representing the Frosts to the Dean of the Faculty of Advocates. When later that year Mr Andrew Hardie Q.C., the Dean of the Faculty of Advocates refused to uphold Mr Franks’ complaint, Mr Franks’ complained to the legal services ombudsman, who in turn not only refused Mr Franks complaint but indicated that Mr Franks was in serious factual error.(the correspondence between Mr Franks and the Dean of the Faculty of Advocates, between Sheriff Paterson of Jedburgh Sheriff Court and the Dean of the Faculty, between Mr Franks and the Ombudsman and that between the Ombudsman and the Dean of the Faculty of Advocates will be produced and incorporated herein brevitatis causa).

c)    In the summer of 1994, on account of Mr Franks’ bad mouthing on behalf of the Unity Trust Bank Plc, the Frost’s were obliged to change their legal representation to Mrs Elaine Brailsford of solicitors Tods Murray. Mr Clive Franks, on behalf of Unity Trust Bank Plc, wrote in the late summer of 1994 to Mrs Brailsford suggesting that she should reconsider her agency with the Frosts because Martin Frost was widely being investigated for fraud; a fact the he, Franks, could confirm because he was in direct communication with the police. (A copy of Mr Franks’ letter will be produced and incorporated herein brevitatis causa). Mrs Brailsford expressed concern to the Frosts counsel, Mrs Eirlys Smith, but both continued to act though Tods Murray sought a feeing uplift.

d)    On account of the feeing uplift Martin Frost decided it would be appropriate to secure a less costly firm so he spoke with Mr Ian Smith, clerk to the Second Division of the Court of Session, (husband of Mrs Eirlys Smith who also happened to be a director of London & Edinburgh Ltd, a company which bought and sold legal disputes). Mr Ian Smith knew a sole practitioner solicitor, Mr Brown, to whom Mr Smith facilitated an introduction with Frost. Mr Brown accepted the Unity cause plus other London & Edinburgh business. Such other London & Edinburgh involvements passed at that time to Mr Brown consisted of the James Thomson business, the Bulman business, the Fleming business, Carnaby Caravans, Robinson and Wilkinson claims and various purchased assignments from a variety of companies. Shortly after accepting the agency, in early 1995, Mr Brown received bad mouthing warnings, similar as stated above, from Mr Clive Franks concerning Martin Frost’s status; such bad mouthing was reported by Brown to Mrs Eirlys Smith in or about February 1995. 

e)    Mr Clive Franks, on behalf of Unity Trust Bank Plc, employed from mid 1994 private detectives who promulgated a whispering campaign against Martin Frost. These private detectives visited friends and neighbours of the Frosts and generally allowed their presence to become known so as to foster and encourage further bad mouthing of Martin Frost. Via contacts made from these private detectives, Mr Franks, on behalf of Unity Trust Bank Plc, struck up an acquaintance with a Mr Donny McLeod. Mr McLeod was/is the current partner of Mrs Alison Minto or Thomson, ex wife of James Thomson. Mr McLeod was convicted and has served substantial prison sentences for physical violence and fire arms offences. Mr McLeod boasted at the Cross Keys Public House at Ancrum on or about the night of 20th October 1995 that Mr Franks for Unity had requested that he McLeod should cause fear and alarm to Martin Frost, James Thomson and their legal representatives. On or about 14th October 1995 Mr McLeod phoned Mrs Eirlys Smith, the Frost’s previous counsel, he inferred he was phoning on behalf of Mr Franks and McLeod abused her verbally and threatened her not to assist with the Frost’s Unity and Thomson actions.

f)    Explained that in the late nineteen eighties and early nineties Martin Frost was perceived by many as a very affluent man. Martin Frost regularly advanced substantial money to Scottish ‘society’ families who indulged in conspicuous consumption. In the summer of 1993, Mr Ian Smith approached a Mr R Blackstock, a friend of Martin Frost, to secure an introduction to Martin Frost. The Smiths said: ‘They were financially embarrassed because Eirlys Smith had been obliged to cease work with the late arrival of a further daughter’. Martin Frost made introductions to new bankers, the Midland Bank and agreed to assist Mrs Eirlys Smith in going back into practice both in Scotland and England where Frost had more business.

 Furthermore, it was agreed between Martin Frost and the Smith’s that they set up a dispute resolution company, London & Edinburgh Ltd, into which various assigned claims, opportunities would placed.

g)    As in (a) above in January 1994 the DTI formally commenced an investigation into Sabrebright Ltd and Heathfield Ltd. Mrs Eirlys Smith formally returned to work and via Martin Frost’s London lawyers represented Martin Frost’s interests against the DTI in England. In June 1994, Mr Ian Smith phoned Mrs Linda Frost and stated to her that he was very concerned that as his wife, Mrs Eirlys Smith, was overdue from her London trip with Martin Frost that he understood that she might be having an affair with Martin Frost. That was untrue, Martin Frost, was already home having left the train at Berwick, but the train was delayed between Berwick and Edinburgh. Subsequently, it appears that Mr Ian Smith had received anonymous phone calls to this effect which Mr Donny McLeod admitted so to have done on the 20th October 1995.

h)    In 1993 Martin Frost’s medical condition was diagnosed as being poor. During a bout of ill health Martin Frost gave Mrs Eirlys Smith his Power of Attorney. This Power of Attorney gave Mrs Eirlys Smith financial control over many properties. Mr Ian Smith and Mrs Eirlys Smith were still in dire financial circumstances, and whether it was in drink or whatever Mr Ian Smith suggested to Mrs Eirlys Smith that perhaps she or they could borrow or take, a few hundred thousand of property via the Power of Attorney. When Martin Frost was told of this suggestion he became very angry. He had trusted Mr Ian Smith with his shareholding and directorship in London and Edinburgh Ltd; likewise he had trusted Mr & Mrs Smith with his Power of Attorney. Martin Frost became very vindictive, spoke with the Daily Record who in turn published a front page article which resulted in Mr Ian Smith’s suspension, see the Lady Smith essay. Coterminous with his suspension Mr Ian Smith destroyed many of Martin Frost’s papers which were held at his home at 17Abercromby Place. Amongst these papers was a copy of Mr Bell’s letter to Mr Alan Caine.

i)    Following Mr Ian Smith’s re-instatement he sought his revenge on Martin Frost. Mr Clive Franks, on behalf of Unity Trust Bank Plc, befriended Mr Ian Smith, husband to Mrs Eirlys Smith and clerk to Lord Ross. Mr Franks then prompted further false stories about Mrs Eirlys Smith which led to her suspension from the Faculty of Advocates and as a consequence of which Martin and his wife Linda Frost were obliged to seek fresh legal representation. Enclosed is Lord Penrose’s letter to the Dean of the Faculty of Advocates which prompted Mrs Eirlys Smith’s suspension.

j)    Martin Frost was unable to secure legal representation and when Linda Frost obtained such Mr Franks again so mouthed Frost that Franks induced Linda Frost’s counsel to oppose Martin Frost in court although Linda Frost had not been consulted or approved of such action. Now both the Frost’s lacked legal representation.

k)    Mr Clive Franks, on behalf of Unity Trust Bank Plc, following Unity’s loss of the Reclaiming motion in Frost v Unity in October 1996 approached Mr Anderson of the Inland Revenue and persuaded Mr Anderson to forfeit the arrangement Frost had with Inland Revenue and for the Revenue to bring sequestration proceedings against Frost. Simultaneously, Unity Trust Bank Plc,( it is believed upon Clive Franks advice) chose to destroy most of their direct papers relating to the bank’s affairs viz the Frosts.

l)     To defeat the sequestration threat by the Inland Revenue in 1996 Frost entered into an individual voluntary arrangement (IVA); an English insolvency court contract with his creditors which was challenged in both the Scottish and English Courts by Unity Trust Bank Plc and the Inland Revenue upon jurisdiction and validity grounds. The Revenue and Unity lost but todate Unity has failed to pay the costs awards which were made against the bank.

m)    Lord President Roger of the Court of Session observed in Frost v Unity, in February 1997, Martin Frost’s IVA was a self administered English bankruptcy, overseen by a Supervisor, the accountant Mr Conn, and the English court.

n)    In 1999 Martin Frost’s IVA creditors with the consent of Martin Frost varied the contractual terms of his IVA contract. The upshot of this variance is that Martin Frost is obliged to continue with a legal action against the Unity Trust Bank Plc until some form of general agreement is reached. In January 2000 Martin Frost as an individual was discharged from his IVA except for his continuing obligation to assist in the realisation of his IVA estate trust fund for the benefit of his IVA creditors. In April 2004 before the First Division of the Inner House of the Court of Session Unity Trust Bank Plc undertook to withdraw the inhibitions Unity had placed upon Martin Frost re his IVA assets.

o)    Unity Trust Bank Plc has a first standard security (fixed charge) over the property of Edenside, and a second standard security (fixed charge) over Langlands Mill. In addition to this security Unity had placed an inhibition over Martin Frost in the IVA to block any property sales and had also taken out arrestments over shares. As a secured creditor at the first IVA creditor’s meeting in January 1997, Unity valued its security at £200,000 and voted against the IVA for £104,000. By voting as such Unity ranked its security at £200,000 and without leave of the court Unity is only entitled to receive £200,000 in terms of Unity’s security, if Unity was entirely successful in their dispute with Frost.

A crucial aspect to the voting at the creditor’s meeting was that Martin Frost’s IVA contract is similar to bankruptcy, and that Unity chose to vote. If Unity had attended the IVA creditor’s meeting but not voted then Unity would not have been bound by its valuation. A most important provision relating to the vote and proof is that expressed in paragraph (g) of rule 6.98(l), which ordains that a creditor's proof of debt must state particulars of any security held, the date when it was given, and the value which the creditor puts upon it. This is completed by the provision in rule 6.116, which states that if a secured creditor omits to disclose his security in his proof of debt he shall surrender his security for the general benefit of creditors unless the court, on application by him, relieves him from the effect of this rule on the ground that the omission was inadvertent, or the result of honest mistake.

 If the court grants that relief, it may require or allow the creditor's proof of debt to be amended, on such terms as may be just. Section 383(2) of the Act states that a debt is secured, for the purposes presently under consideration, to the extent that the person to whom the debt is owed holds any security for the debt (whether a mortgage, charge, lien or other security) over any property of the person by whom the debt is owed.

The significance of this definition is considered in relation to bankruptcy, but it must now be observed that such creditors are made the subject of further provisions governing the proof of debts. In addition to the sanction of forfeiture of his security for non­disclosure, a secured creditor who fails to comply with all the relevant provisions relating to the valuation of securities runs the risk under rule 11.10 of being wholly or partly excluded from participation in any dividend. This sanction maybe imposed by the court upon the application of the trustee in bankruptcy, and it therefore behoves a secured creditor to pay special attention to the detailed provisions of the Insolvency Rules, and to observe them meticulously.

Effectively, the secured creditor has to choose one of three options which are open to him.

First he may realize his security and prove for the balance, if any, which is due to him after deducting the net amount realized. Secondly, he may surrender his security to the official receiver or trustee, and prove for the full amount of the debt as if it were unsecured. Thirdly, if he does neither of these things, having stated in his proof the amount at which he values his security, the creditor is entitled to rank for dividend in respect of the balance due after deducting the amount so assessed by him.

 Unless the trustee otherwise allows, the creditor must produce any bill of exchange, promissory note, cheque or other negotiable instrument or security in respect of which he seeks to prove, before his proof can be admitted either for voting or for dividend.

This requirement that the creditor produce his security is a valuable adjunct to the provisions of rule 6.117, which empowers the trustee to redeem the security at any time on payment to the creditor of the assessed value. Thus if a creditor undervalues his security it may be required from him at that valuation, and will then become available for the benefit of the creditors generally. However, rules 6.115 and 6.117 (2) provide that a secured creditor may, with the agreement of the trustee or the leave of the court, at any time alter the value which he has, in his proof of debt, put upon his security. However, this is subject to a special limitation in cases where the secured creditor, being the petitioner, put a value on his security, or has at any time voted in respect of the unsecured balance of his debt: in either of these cases the security may be re-valued only with leave of the court.

There was formerly provision to the effect that a secured creditor might amend his valuation and proof upon his showing to the satisfaction of the trustee or the court that the valuation and proof were made bona fide on a mistaken estimate, or that the security had diminished or increased in value since its previous valuation.

These provisions no longer appear in the current Insolvency Rules, but it is submitted that, where the leave of the court is required, the essential principles should remain identical to those established under the former provisions. Thus if the creditor's conduct is unimpeachable he should be able to amend his valuation, but where the creditor is unable to plead bona fide mistake, or else to show that the value of the security itself has changed since his assessment was made, there are strong reasons in favour of holding a secured creditor irrevocably bound by his valuation throughout the bankruptcy, as a disincentive against any attempt at initially undervaluing a security, with a view to revaluing it in the event that the trustee discovers its true worth. Edenside on present estimates should fetch over £800,000. Unity lost its 262 challenge to break the IVA contract, therefore Unity is bound by its voting and ranking via the legal doctrines of estoppel, limitation, and the insolvency acts. Unity’s conduct with the IVA cannot be described as unimpeachable, Mr. Nicol counsel for Unity misled the Lord President in February 1997 and in February 1998 Mr. Justice Behrens preferred the evidence of Martin Frost to that of Mr. Clive Franks for Unity.

A further twist in the valuation of security then derives that on Martin Frost’s IVA variation in 1999 that Unity again voted; this time Unity chose not to value its security at all, ranked its security at zero and so voted away any entitlement to its security. By voting as such Unity has entitled the IVA creditors to either share in a dividend from all their securities or in all their securities less the £200,000 upon which Unity first ranked in January 1996. In short, by virtue of their votes Unity has allowed the IVA creditors to join into an additional surplus of some £600,000 to £850,000 dependant upon the veracity of the second 1999 vote.

p)    The final value of Martin Frost’s IVA Trust Fund will not be determined until the conclusion of litigation with the Unity Trust Bank Plc. With the passage of time this dispute has become more complex and the issues may be summarized as follows.

In Scotland there are four actions. Two sheriff court actions which are sisted, two Court of Session actions, one of which Court of Session actions, Frost v Unity has been abandoned in all but name, with the Frost claims there now forming the foundation of the Counterclaim in the cause Unity v Frost. In England there was one High Court action: Unity & Inland Revenue v Frost which the Revenue and Unity lost along with the right to appeal, and another pending against Unity by IVA creditors for Unity’s perceived breaches of contract under the IVA. A worse case scenario on the IVA is that all Unity cases are lost and that the IVA Trust Fund picks up the tab for all costs and expenses for both sides. Such a sum is likely to be around £700,000 of which Martin Frost and associates have paid out some £450,000 with another £50,000-£100,000 to go with a possibility of another £150,000 of Unity costs which may also have to be paid.

A reasonable guesstimate of the value of Martin Frost’s IVA Fund without any Unity litigation recovery and without any contribution from the likes of the Edenside property is likely to be in the region of £2.5 million plus. Upon the assumption of £2.5 million then the amount left for ordinary creditors is estimated at £1.4 million after expenses, fees, and tax charges are balanced out (capital gains being deducted by capital losses). In broad terms then an IVA creditor could expect to receive £0.25 in the pound.

However there remains factual problem and a legal problems with conflicting judicial opinions on both sides of the border. Under the original IVA contract and its variation to which Unity is bound, the proceedings between Unity and Frost, and Frost and Unity are encompassed and such provision for the costs incurred in respect of those proceedings ‘whether or not any costs order has been made or taxation completed in respect of those proceedings’.

 It has been determined in terms of cross border insolvency that first it is necessary to consider the current cost and expense position. In Frost v Unity, a Court of Session cause, the Frosts’ abandoned this cause and in so doing established the current case law on abandonment (see the annotated guide to the Rules of the Court of Session). Martin Frost paid the taxed costs of this cause with the exception of the VAT element which sum of £3,500 is currently on deposit with the Accountant of Court as a result of an arrangement reached before the Inner House of the Court of Session in December 2000

(Note: Martin Frost paid this amount in full so as to protect the ongoing action and the counterclaims in Unity v Frost as per the Scottish rule on abandonment which Martin Frost established as above; under his IVA contract such legal costs occasioned by Unity are bound within the IVA and such sum would normally enjoy a distribution dividend, which by English equity now falls not to Unity but the payee).

 In Unity & Inland Revenue v Frost, Unity has (with the exception of Mr. Conn, the IVA Supervisor’s direct costs) failed to pay the witness expenses which amount to some £30,000 for a 8 day trial. Martin Frost has largely paid these and as such this sum appears as a debtor in his sequestration statement of affairs. Verbally Mr. Franks for Unity has refused to pay this £30,000 contending currently that this sum is now time barred. Costs and expenses in the two sisted Sheriff Court actions amount to no more than a budgeted £2,000 against Mrs. Linda Frost and a budgeted £1,000 jointly and severally against Linda and Martin Frost (This sum of £1,000 is encompassed by the IVA). 

The Unity v Frost cause is more complicated. This cause was sisted in early 1997 and the sist recalled upon Unity’s insistence in May 1997 during the period of Unity’s 262 challenge before the English Courts. Though not taxed there has been various cost awards made. On balance there has probably been some £120,000 in favour of Unity and some £20,000 in favour of Frost. Given the terms of Martin Frost’s IVA and the wish of Martin Frost’s IVA creditors, payment of these costs would normally fall under the IVA and its continuing IVA Trust Fund.  The worse scenario is that Martin Frost’s IVA is found liable to absorb the above £100,000 costs as an unsecured creditor.

Factually, Unity breached the English insolvency rules which can be verified from an elementary analysis of the First Division Opinion of the Court of Session Feb 1997. This prompts a chain of cost recovery to the English IVA standpoint which (not withstanding the Scottish awards to Unity) allows all Frost costs to be paid by Unity on account of their blatant obstruction (viz. the English insolvency rules). Thus upon this interpretation Unity would also be bound to repay to the IVA Trust Fund those monies it had received in respect of the Frost v Unity cause.

This interpretation could be assessed as heads the IVA wins, and tails the IVA wins. Yes, it does, for Unity had a choice not to recommence the Scottish proceedings until Mr. Justice Behrens had determined Unity’s 262 challenge, but Mr. Franks for Unity was so convinced he would win his 262 challenge Mr. Franks failed to appreciate the downside of the action he was taking. Normally, a secured creditor rests upon its security and thereupon by negotiation with the Supervisor allows the property to be sold without recourse to lengthy legal proceedings.

 Unity chose not to follow this sensible route indeed Unity opposed the Frost’s motion proposed on behalf of the IVA in October 1997 ‘That this honourable court does instruct Unity Trust Bank Plc to allow the sale of Edenside, and Langlands Mill properties at open market value and that the proceeds of sale relating to Unity Trust Bank’s purported security be deposited at court to await the determination of the current cause.’

Incredible as it may seem this motion still remains unheard after 8 years with no less than 7 senators refusing to hear it; furthermore it was only in April 2004 before the First Division that Unity at long last agreed to withdraw it’s renewed inhibition against Martin Frost and thereby allow the sale of the Scottish IVA property assets.

Unity has repeatedly attempted to circumvent and break the IVA; Unity is in breach of the IVA contract. Unity is guilty of an abuse of process. Damages which automatically flow from such breach will be between £300,000 and £500,000. These damages are not dependant upon the outcome of the litigation between Unity and Frost. In short, even in the worse analysis of a total loss in the litigation between Frost and Unity there should be a further claw back of some £400,000 for the IVA creditors.

q)     On the 2nd November 04 Martin Frost was served with a petition by the Lord Advocate, Colin Boyd Q.C. claiming that Martin Frost is a vexatious litigant.  The Court of Session warrant with the petition is signed by the Lord President, Lord Cullen. Solicitor for the Lord Advocate was Claire Cullen. The prayer to the Petition seeks that Martin Frost will be barred from instituting legal proceedings unless Martin Frost first obtains leave from a Lord Ordinary.

In Martin Frost’s opinion the Petition paints an unrepresentative, contradictory and often factually incorrect or distorted picture. The Petition appears to break new ground for in the main the Petition relates to matters which are currently before the courts; thus in Frost’s analysis the Petition is a flagrant breach of his rights to a fair and an impartial hearing.

The Petition seeks to prejudge matters that todate Senators have deemed are worthy of consideration. Given that the Petition was prompted by Franks. MacAdam. Brown, agents for the Unity Trust Bank Plc (with whom Martin Frost is currently in litigation with) and thereafter by a combination of lawyers who have combined together to hurt Martin Frost economically; Martin Frost believes that this Petition is symbolic of Edinburgh’s socio judicial culture of cronyism and perceived corruption as he narrates in his Lady Smith and Art of Spying essays.

r) Unity Trust Bank Plc is thus repeatedly shown to have acted as agents provocateur, to have acted contrary to their fiduciary duty of care to their customer, the Frosts, to have acted unlawfully, to have civilly conspired against the Frosts and to have abused the English and Scottish Court procedures.’

Productions in support of the Minute of Amendment

1. STATEMENT OF MR RORY BLACKSTOCK

Filed on behalf of the Second Defender, Eirlys Lloyd Smith
Deponent: Rory Blackstock
1st Affidavit of Deponent
Productions & Exhibits attached: Blackstock 1;2;3;4;5;6;& 7
Date of Swearing     January 2000

A3774/97

SHERIFFDOM OF LOTHIAN AND BORDERS AT EDINBURGH
In the cause

THE GOVERNOR AND COMPANY OF THE BANK OF SCOTLAND, incorporated by Act of Parliament and having their Head Office at The Mound, Edinburgh
PURSUERS

Against

IAN FINDLAY SMITH,
residing at 87 Craigleith Hill Avenue, Edinburgh
FIRST DEFENDER

And

EIRLYS MORVEN SHEENA LLOYD SMITH,
Residing at 17 Abercromby Place, Edinburgh.
SECOND DEFENDER

Unity v Frost  Reclaiming Motion 20th January

top