David Fraser Glasgow In The Note By The Liquidator Of Glasgow And Weir Blacksmiths Limited V David Fraser Glasgow
| Jurisdiction | Scotland |
| Judge | Sheriff Principal M M Stephen QC |
| Neutral Citation | [2016] SCEDIN 20 |
| Court | Sheriff Court |
| Date | 29 February 2016 |
| Docket Number | CA11/15 |
| Published date | 11 March 2016 |
SHERIFFDOM OF LOTHIAN AND BORDERS
[2016] SCEDIN 20
CA11/15
JUDGMENT OF SHERIFF PRINCIPAL MHAIRI M STEPHEN QC
In the appeal by
DAVID FRASER GLASGOW
Defender and Appellant;
in the note
by
THE LIQUIDATOR OF GLASGOW AND WEIR BLACKSMITHS LIMITED
Noter and Respondent;
against
DAVID FRASER GLASGOW
Defender and Appellant:
Act: McColl; Thorntons Law
Alt: Edward; Thorley Stephenson
EDINBURGH, 29 February 2016
The Sheriff Principal having resumed consideration of the appeal, refuses the appeal, adheres to the sheriff's interlocutors of 25 November and 15 December 2015; certifies the appeal as suitable for the employment of junior counsel; finds the appellant liable to the noter and respondent in the expenses of the appeal and allows an account of expenses to be lodged and once lodged remits the same to the Auditor of Court to tax and to report.
NOTE:
1. The defender, David Glasgow, appeals the sheriff's judgment of 25 November 2015 together with the interlocutor of 15 December 2015 which disposes of any remaining questions regarding interest and expenses.
2. The noter was appointed provisional liquidator of Glasgow and Weir Blacksmiths Limited (the "Company") by interlocutor of 29 June 2012 at this court. He was appointed interim liquidator on 30 July 2012 and liquidator on 4 September 2012.
3. The defender and now appellant is the sole director of the company. He and his former wife are the sole shareholders. The company used to trade in the construction industry and supplied architectural metal work.
4. The noter brings these proceedings under section 212 of the Insolvency Act 1986 ("the 1986 Act") which is described in the heading of the statute as a "summary remedy against delinquent directors, liquidators etc". The section applies if a person who is or has been an officer of the company has misapplied or retained or become accountable for any money or other property of the company or been guilty of any misfeasance or breach of any fiduciary or other duty in relation to the company.
5. The sheriff issued an interlocutor and judgment on 25 November 2015 following a hearing on the note and answers which took place on 2 June, 8 and 9 September and 19 October 2015. The sheriff's interlocutor of 25 November 2015 followed an examination of the appellant's conduct as a Director of Glasgow and Weir Blacksmiths Limited. The sheriff found that the appellant had misapplied certain sums which should have been paid to the company. The sums are set out in the interlocutor under headings (a)-(e). The sheriff found that these sums ought to have been paid to the company and instead were wrongfully paid to a third party company namely Glasgow and Weir Windows Limited ("Windows"). The sheriff ordained the defender to contribute to the assets of the company a sum equal to the total of these sums by way of compensation. The sheriff makes a finding in fact and law that the appellant has misapplied sums contractually owing to the company by paying them or causing them to be paid direct to Windows rather than to the company. These include sums paid under contracts with Travel Lodge and Motel One where the main contractor is Sharkey. There is also a further sum paid by TKS Plumbing. The sheriff finds that he is, as such, guilty of misfeasance with company funds and has wrongly preferred the claims of Windows over the claims of the company's other creditors particularly HMRC. Accordingly, in terms of section 212(3) of the Insolvency Act 1986 it is appropriate that the defender is compelled to compensate the company for the sums which were diverted away from the company.
6. In the second finding in fact and law the sheriff finds that the defender has acted honestly but not reasonably in relation to these payments and he ought not to be excused from payment in terms of section 1157 of the Companies Act 2006.
7. The appellant is also a director of Glasgow and Weir Windows Limited ("Windows"). Again, he and his former wife are the sole shareholders of Windows which trades as a manufacturer and supplier of windows including sash and case windows.
NOTE OF APPEAL
8. It is contended on behalf of the appellant that the proceedings taken by the noter in terms of section 212 of the 1986 Act are procedural in nature and do not provide a remedy in law. Accordingly, the sheriff erred in finding that the defender became liable to make payment to the company.
9. The second ground of appeal is to the effect that the measure of any payment to the company by the defender should be based on any loss to the company caused by the defender's actings. In this case, as no overall loss resulted, the sheriff erred in ordering payment to the company of the amounts which the defender admits had been paid to Windows rather than to the company. The sheriff's order has placed the company in a better financial situation than it would have been had the contractual payments due to the company been paid.
OBJECTION TO THE COMPETENCY OF THE APPEAL
10. Counsel for the noter raised an objection to the competency of note of the appeal (lodged on 24 December 2015) which bears to be an appeal against the interlocutors of 25 November 2015 and 15 December 2015. He argues that, on any view, the latter interlocutor is an interlocutor pronounced on joint motion and therefore of consent. It is incompetent to appeal such an interlocutor (Macphail on Sheriff Court Practice 18.15). Clearly the appellant seeks to open up the prior interlocutors in particular the sheriff's judgment and interlocutor of 25 November in which he deals with the substance of the application. Simply put the appellant could not appeal the interlocutor of 15 December 2015 pronounced of consent.
11. Counsel for the appellant under reference to section 27 of the Sheriff Courts Act 1907 considered the terms of Rule 36 of the Sheriff Court Company Insolvency Rules 1986. An appeal is not competent without leave unless it is a final interlocutor or certain enumerated interlocutors. A final judgment means "an interlocutor which by itself or taken along with previous interlocutors disposes of the subject matter of the cause notwithstanding that judgment may not have been pronounced on every question raised, and that the expenses found due may not have been modified, taxed or decerned for." It is well established that an interlocutor is not final until expenses have been dealt with in the sense that liability for expenses has been determined. Mr Edward accepted that the interlocutor of 15 December 2015 proceeded on a concession by the appellant as to expenses together with agreement as to the rate of interest and the date when interest should be calculated from. Nevertheless, this does not prevent the appellant or losing party from appealing the substantive decision of the sheriff. (Gamble v Unison 1997 SLT (ShCt) 5). In any event the question whether the court may review an interlocutor pronounced of consent is not truly a question of competency but rather a question whether the court should entertain an appeal against such an interlocutor. The interlocutor of 15 December 2015 being simply the interlocutor which makes the judgment final is not the interlocutor which is truly under review but the operative interlocutor which allows an appeal without leave.
12. I repelled the objection to the competency. As this is a note in a liquidation process the Sheriff Court Insolvency Rules 1986 provide for appeals in Rule 36. Rule 36(1) as in force until the end of December 2015 states:-
"36 Appeals to the Sheriff Principal or Court of Session
(1) Where an appeal to the Sheriff Principal or the Court of Session is competent it shall be taken by note of appeal which shall……
(2) Such an appeal shall be marked within 14 days of the date of the interlocutor appealed against."
The provisions for appealing are prefaced by the words "where an appeal is competent". Accordingly, it is necessary to consider the terms of section 27 of the 1907 Act. The interlocutor of 25 November 2015 deals only with the merits of the application under section 212 of the 1986 Act. This is not a final judgment and it is therefore not competent to appeal that judgment at that stage without leave of the sheriff. Macphail at 18.36 states: "for an interlocutor to be a final judgment it is therefore normally essential that it should dispose of the question of expenses, not necessarily by deciding the amount of expenses payable, but by dealing with and determining the question of the liability of one or other of the parties for expenses." I regard that to be settled law. However I was also referred to Caledonian Railway Company v The Corporation of the City of Glasgow 1900 SC 871. In that case expenses were reserved. The Inner House decided that unless the interlocutor disposes of the question of expenses it does not dispose of the whole subject matter of the cause and cannot be reclaimed against without leave. The objection was sustained. The same or similar considerations which apply in reclaiming procedure in the Court of Session likewise apply in appeals to the Sheriff Principal.
13. The interlocutor of 15 December 2015 is the final interlocutor which disposes of the whole subject matter of the case. Interlocutors dealing with expenses and other ancillary matters such as interest following on the decision of the court on the merits may well be dealt with on joint motion or by concession where there is no issue to argue. It would be unfortunate and unusual if any such interlocutor was construed to be an interlocutor which is not appealable due to it possessing the nature of an interlocutor pronounced of consent. A losing party who is not in a position to argue against any finding of expenses should not be compelled to oppose that finding simply to avoid the argument that the final interlocutor was pronounced of consent or on joint motion and is therefore unappealable. The interlocutor of 15 December is the operative...
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