John Farquhar Anderson V. Ruaraigh Hogg
| Jurisdiction | Scotland |
| Judge | Lord Prosser,Lord Coulsfield,Lord Hamilton |
| Date | 14 December 2001 |
| Docket Number | P122/00 |
| Court | Court of Session |
| Published date | 14 December 2001 |
| EXTRA DIVISION, INNER HOUSE, COURT OF SESSION | |
| Lord Coulsfield Lord Hamilton Lord Prosser
| P122/00 OPINION OF LORD COULSFIELD in RECLAIMING MOTION in PETITION of JOHN FARQUHAR ANDERSON Petitioner; against RUARAIGH HOGG Respondent: for Order pursuant to Section 459-461 of the Companies Act 1985 in respect of T. Anderson & Company (Potato Traders) Limited _______ |
Act: Sellars, Q.C.; Balfour & Manson (Petitioner and Reclaimer)
Alt: Sandison; Morison Bishop (Respondent)
14 December 2001
[1]This is a petition under section 459 of the Companies Act 1985 at the instance of a director and shareholder in T. Anderson & Company (Potato Traders) Limited ("the company"). The petition was presented in 1996. The only person to whom the petition was intimated was the respondent, who is also a director and shareholder in the company. The interlocutor ordering service of the petition also granted a motion for interdict against the respondent convening a shareholders' meeting until after the petition had been disposed of. No attempt has been made to have the interdict recalled. It does not appear that much happened in the process until March 1999 when it was ordered that a record should be made up on the petition and answers for the respondent and a proof was allowed. In due course, a proof took place. The respondent represented himself at the proof and, although he did so, as the Lord Ordinary says, with courtesy and dignity, the Lord Ordinary did not have the benefit of legal argument from him. As will be seen, the factual background to the petition is somewhat uncertain, because the company was always run in an informal manner, without regard to the procedure required by company law. The Lord Ordinary, however, managed, with some success, to sort out the history of the company. On 28 January 2000, the Lord Ordinary sustained the second and fourth pleas for the respondent and refused the petition. The petitioner now reclaims.
[2]The company was established in 1983 to take over a part of a business which had previously been operated by the petitioner and the respondent in partnership. Simultaneously, another company took over another part of that business. The petitioner and his wife hold 80,000 shares in the company and the remaining 80,000 issued shares are held by the respondent, his wife and his sister-in-law. The petitioner and the respondent were the only directors. As has been said, the company was always run informally, decisions being taken by discussion among the members and directors. In February 1989, the petitioner, while formally remaining a director of the company, ceased to take an active part in the business. The respondent continued in the actual running of the company and its business. Not long afterwards, the two sides (that is the petitioner and his wife on the one hand and the respondent and his wife and sister-in-law on the other) agreed that the business should be run down and the assets sold off. This was done, the employees of the company being made redundant. Meetings to progress the process of running down were held in 1991 and 1992. At these meetings, a number of issues emerged which later figured in the petition. It is not clear from the narrative why, so far as appears, little happened in connection with these issues between 1992 and 1996. In 1996, however, there were attempts to remove the petitioner as a director and to wind up the company: these presumably explain why the petition was raised. In any event, when it was ultimately raised, the petition drew attention to four issues, namely (1) alleged unauthorised salary increases and bonus payments made to the respondent, totalling £28,612.40: (2) an unauthorised pension contribution of £1,000: (3) interest foregone on a bridging loan in favour of the respondent and his wife amounting to £1,894: and (4) a payment, described as a redundancy payment, made to the respondent amounting to £50,000, together with the value of a car which was taken at £10,000. The order sought in the petition was an order for the respondent to repay the relevant sums to the company. The petitioner had not, apparently, made any attempt to persuade the company to take action itself to recover these sums and, as has been seen, there was an interdict against the respondent calling a general meeting. The Lord Ordinary decided against the petitioner on all four issues. In the appeal, there was no challenge to his findings in relation to the first three issues and argument was addressed only to the question of the so-called redundancy payment. The payment was not a statutory redundancy payment. It might be regarded as a non-statutory payment in respect of the termination of employment or service. The respondent admits that he caused that payment to be made to himself. It is perhaps important to say at this point that the Lord Ordinary held that the respondent acted in good faith throughout and that finding also was not challenged.
[3]In his opinion, the Lord Ordinary summarises the evidence which he heard in relation to the redundancy payment and makes certain findings. In order to explain what he did find it is necessary to follow the same approach in this opinion. Firstly, the Lord Ordinary refers to the evidence of the petitioner in the following terms:
"In June 1992 there was a meeting at the offices of T. D. Young & Co., who acted as the Company's solicitors. During the meeting, the respondent asked for a redundancy payment of £50,000, together with his company car, which he said was worth £10,000. The petitioner said it could not be paid, and that he would not agree to it. The £50,000 was nevertheless paid, and the respondent received the car."
[4]Later the Lord Ordinary says:
"In relation to the redundancy payment, the petitioner said in cross-examination that, when the respondent had made his proposal at the solicitors' office, his reaction had been to say that he would need to think about it. He accepted that he might have asked why the proposed payment to the respondent was greater than the proposed payment to his own son, Gordon Anderson [an employee of the Company] and that the respondent might have explained that each payment had been calculated as equivalent to two years' salary. He accepted that he had come to see the respondent to discuss Gordon's redundancy payment, and that it was possible that the subject of the respondent's own payment might have come up. Asked if he had said, 'Go on and get it all done,' the petitioner responded that he had agreed nothing but the car: he had only agreed that the respondent should received his company car."
[5]In summarising the evidence of the company's solicitor, Mr Young, the Lord Ordinary says:
"Mr Young recollected the meeting at which the subject of redundancy packages for the respondent and Gordon Anderson had been raised. The respondent put forward a proposal The petitioner said he wanted to think about it, and asked why the packages were different. There was mention of the difference between the respondent's salary and Gordon Anderson's salary. The meeting ended with the petitioner saying that he would think about it and get back to the respondent direct. Mrs Scrimgeour [the respondent's sister-in-law] had also been at the meeting and had not objected to the proposal. Mr Young advised the respondent that the petitioner's consent was necessary."
[6]Gordon Anderson in evidence said that the respondent had proposed that he himself should receive £50,000 and his car and that Gordon Anderson should receive £20,000 and his car. The petitioner had said the difference was too great and felt that the business was 50/50 between the two families. Gordon Anderson also said that he had later received £20,000 plus the car and that his father's stance at the meeting had been that if he was to receive £20,000 and the respondent £30,000, that would have been agreed.
[7]The respondent's evidence is narrated in the following terms by the Lord Ordinary:
"In relation to the redundancy package, the respondent accepted that a payment of £50,000 for himself, and a payment for Gordon Anderson, had been proposed at the meeting at the solicitor's office, and that the petitioner had then said that he wanted to think about it. The respondent's note of the meeting recorded, in relation to that matter: 'Redundancy. RH 50 + car. GA 20 + S. JFA thinks unfair discrp. bet. RH and GA.' Subsequently the petitioner had visited the respondent and asked about Gordon's car and cheque, and also asked, 'What about yourself?' The respondent told him that it would take another two months to get everything wound up. The petitioner said, 'Get on and get it all done.' The respondent thereafter transferred Gordon's car into his name and gave him the cheque for £20,000. He was under the impression that the petitioner was by then agreeable to the respondent's receiving the £50,000 he had earlier proposed. Gordon was his assistant. His salary was less than half the respondent's."
[8]When the Lord Ordinary came to give his conclusions as to the redundancy payment he said:
"The issue on which the argument focused was whether the petitioner had in fact agreed to the proposed payment. I do not find that an easy matter to determine. It is clear that he did not agree at the meeting on 5 June 1992. It is also clear that he subsequently agreed that the respondent should receive the car. In relation to the £50,000 payment, I accept that the petitioner's concern at the meeting on 5 June 1992 was the differential between that sum and the amount to be paid to his own son. I accept that he was content that his son should receive £20,000, and that the respondent should receive £30,000 (plus the car). On balance, I am prepared to accept that the petitioner never gave his agreement to the proposed £50,000 payment. On the other hand, given that the petitioner's son was a 26 year old junior employee, and that the respondent was a much older man...
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