Arthur William Simmers V. James Grigor Innes
| Jurisdiction | Scotland |
| Judge | Lord Osborne,Lord Kingarth,Lord Nimmo Smith |
| Neutral Citation | [2007] CSIH 12 |
| Court | Court of Session |
| Date | 02 February 2007 |
| Published date | 02 February 2007 |
| Docket Number | CA77/04 |
| Year | 2007 |
| EXTRA DIVISION, INNER HOUSE, COURT OF SESSION | |
| Lord Osborne Lord Nimmo Smith Lord Kingarth | [2007] CSIH 12 CA77/04 OPINION OF THE COURT delivered by LORD OSBORNE in RECLAIMING MOTION by ARTHUR WILLIAM SIMMERS Pursuer and Reclaimer; against JAMES GRIGOR INNES Defender and Respondent: _______ |
Act: J.J. Mitchell, Q.C., M.A. Stuart; Maclay Murray & Spens (Pursuer and Reclaimer)
Alt: Haddow, Q.C., Gardiner; Brodies (Defender and Respondent)
2 February 2007
The background circumstances
[1] In this action the pursuer and reclaimer seeks several remedies, concerned essentially with the implementation of certain provisions of a Shareholders' Agreement between the parties, dated 18 December 1998. The conclusions in the action, so far as material to this reclaiming motion, are in the following terms:
"1. For decree ordaining the defender forthwith to implement and fulfil his part of the Shareholders' Agreement entered into between the Pursuer and the Defender, Mrs. Simmers, Charles Simmers, Brian Simmers and Scotpigs Limited dated 18 December 1998 whereby pursuant to clause 10 thereof the defender agreed to sell and the pursuer agreed to purchase the Buy-out shares and the Buy-out properties defined therein at the Buy-out price being £400,000 for the Buy-out shares and £2,100,000 for the Buy-out properties and in particular to execute and deliver a valid disposition, a stock transfer form, warranty and discharges of the Buy-out properties securities in exchange for payment of said price.
2. Alternatively (in the event the Buy-out Valuation is invalid which is denied) for decree ordaining the Defender to implement and fulfil his part of the Shareholders' Agreement entered into between the Pursuer and the Defender, Mrs. Simmers, Charles Simmers, Brian Simmers and Scotpigs Limited dated 18 December 1998 whereby pursuant to clause 10 thereof the defender agreed to sell and the pursuer agreed to purchase the Buy-out shares and the Buy-out properties defined therein at the Buy-out price, being in respect of the Buy-out shares price £400,000 and in respect of the Buy-out properties price such figure as [is] validly determined, all within such time as the court may appoint from the date of decree, and in particular to join in instructing the valuer to determine the Buy-out Valuation, execute and deliver a valid disposition, a stock transfer form, warranty and discharges of the Buy-out properties securities in exchange for payment of the price.
3. For an order pursuant to section 47(2) of the Court of Session Act 1988 ordaining the Defender to execute and deliver (i) the disposition, stock transfer form and warranty provided to the Defender on 31 March 2004 under cover of the Pursuer's solicitor's letter of 31 March 2004 addressed to the Defenders' solicitors; (ii) the discharge of the securities over the Buy-out properties; all in exchange for payment by the pursuer of the Buy-out price being £400,000 for the Buy-out shares and £2,100,000 for the Buy-out properties. ... ".
[2] The present action was appointed to proceed as a commercial cause. On 7 September 2004, of consent, a proof before answer was allowed. However, on 31 January 2005, the Lord Ordinary, of new, allowed a proof before answer, restricted to those issues contained in the Agreed Joint Note of Issues, No. 36 of process. Proof was heard between 15 and 31 March 2005, on which latter date avizandum was made. On 11 July 2005 the Lord Ordinary pronounced an interlocutor by which he repelled the pursuer's second and third pleas-in-law, sustained the defender's second and third pleas-in-law and assoilzied the defender from the conclusions of the summons, reducing ope exceptionis the Report dated 22 March 2004 by John Rhind, and reserving questions of expenses. Against that interlocutor, the pursuer has now reclaimed.
[3] The background to the Shareholders' Agreement, entered into between the pursuer and the defender, Mrs. Simmers, Charles Simmers, Brian Simmers and Scotpigs Limited, dated 18 December 1998, which is at the heart of the dispute between the parties, is to be found in the pig farming industry. The pursuer had been engaged in pig farming since 1959. His business was to supply pigs to, among others, the family business of the defender. The pig farming industry, in general, suffered a recession in the years 1997 to 1998, as a result of which the pursuer's business was put into receivership. The pursuer then took advice from Messrs. Price Waterhouse Coopers and the Trustee Savings Bank about the possibility of buying back from the receivers the lands on which the business had been conducted, and the assets of the business. Such a proposal required the obtaining of finance. At that time the defender, who was anxious to secure a continuing supply of pigs for his business, proposed to the pursuer that he would assist in providing finance for the re-establishment of the pursuer's business. A new company would be set up, to be known as Scotpigs Limited. The shareholding in that company was to be split equally between the parties. The defender informed the pursuer that he would be obtaining the funding which he was to provide from his own bank. In the event, the defender invested £2,500,000. This sum was designed to pay for the purchase of the lands, on which the pursuer's business had been carried on, at £2,100,000 and at £400,000 for shares in the new company.
[4] In due course, on 18 December 1998, the Shareholders' Agreement was entered into between the pursuer, the defender, the pursuer's wife, Mrs. Myra Isobel Simmers, his two sons, Charles Alexander Simmers and Brian Arthur Simmers and Scotpigs Limited. It is No. 44/1 of process. In that agreement, Scotpigs Limited is referred to as "the company".
[5] Since the interpretation of certain parts of the Shareholders' Agreement is in controversy between the parties, it is necessary to examine the relevant terms in some detail. The preamble narrates:
"Whereas: (A) The Company has been formed by the parties for the purpose, inter alia of acquiring the Properties and the Business of the Simmers Companies, disposing of certain of the Properties and carrying on business in its own right. (B) The parties have agreed to subscribe for shares in the Company and wish to enter into this Agreement for the purpose of recording the terms and conditions of their Joint Venture and of regulating their relationship with each other and certain aspects of the affairs of, and their dealings with, the Company and the Company has agreed with the parties that it will comply with the terms and conditions of this Agreement in so far as they relate to the Company. Now therefore it is contracted upon and agreed between the parties as follows: ... ".
Clause 1 of the Shareholders' Agreement provides definitions of expressions used in it. For present purposes, it is necessary to notice the following:
"'the Base Properties Price' means two million one hundred thousand pounds (£2,100,000) sterling;
'the Business' means the business and undertaking of the Simmers Companies relating to pig, cattle and general farming, ownership and turning to account of properties and equipment for farming purposes and all related activities all as more particularly set out in the missives;
'the Buy-Out' means the simultaneous purchase by or on behalf [sic] Mr. Simmers of the Buy-Out Shares and of the Buy-Out Properties from Mr. Innes on the Buy-Out Date;
'the Buy-Out Date' means 31 March 2004;
'the Buy-Out Price' means the aggregate of the Buy-Out Shares Price and the Buy-Out Properties Price;
'the Buy-Out Properties' means the heritable subjects more particularly described in Part 2 of the Schedule less those or parts thereof that have been subject of a Part Sale;
'the Buy-Out Properties Price; means (a) the price payable by Mr. Simmers or his nominees to Mr. Innes on the Buy-Out Date being the higher of (i) the Base Properties Price; or (ii) the aggregate of the Base Properties Price and an amount equal to the figure brought out by the following formula: 1/2 x (Buy-Out Valuation - £2.1m) or (b) in the event that there has been a Part Sale, the Base Properties Price shall be adjusted as ascertained in clause 9 hereof;
'the Buy-Out Shares' means the 400,000 'A' Shares held by Mr. Innes and/or his permitted transferees in terms of the Articles;
'the Buy-Out Shares Price' means the price payable for the Buy-Out Shares being the higher of (i) four hundred thousand pounds (£400,000) sterling or (ii) four hundred thousand pounds (£400,000) sterling plus half [of] any [gain] in the net asset value of the Company as disclosed by the balance sheet produced to 31 March 2004 up to a maximum half share gain of four hundred thousand pounds (£400,000) sterling;
'the Buy-Out Valuation' means the valuation carried out by a valuer to be agreed between the 'A' Director [Mr Innes] and the 'B' Director [Mr Simmers] on or within one month prior to the Buy-Out Date; ...
'Joint Venture' means the joint venture created by this Agreement and as may be varied by any Agreement(s) supplemental to it executed by the parties; ...
'Joint Venture Objective's; means the objects set out at Part 1 of the Schedule;
'the Lease' means the lease to be entered into between Mr. Innes and the Limited Partnership a copy of which is reproduced at Part 4 of the Schedule;
'the Limited Partnership; means the Limited Partnership to be entered into between the Company and Mr. Innes at Completion, a copy of the Limited Partnership Agreement being reproduced in Part 5 of the Schedule; ...
'Valuation; means the valuation of the Properties carried out by Aberdeen & Northern Estates Limited on 2 December 1998 a copy of which is reproduced at Part 10 of the Schedule."
[6] The "Joint Venture Objectives" are set out in Part 1 of the Schedule to the agreement in the following terms:
"The objects of the Joint Venture are:
1. The acquisition of the Properties and the Business.
2. The...
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