Mcgregor Glazing Ltd (in Liq) V. George Mcgregor
| Jurisdiction | Scotland |
| Judge | Sheriff Peter G.L. Hammond |
| Court | Sheriff Court |
| Date | 20 May 2013 |
| Docket Number | A399/11 |
| Published date | 22 May 2013 |
SHERIFFDOM OF GRAMPIAN, HIGHLAND AND ISLANDS AT ABERDEEN
A399/11
| JUDGMENT by SHERIFF PETER G.L. HAMMOND | ||
| in the case | ||
| McGREGOR GLAZING LIMITED (In Liquidation), a company incorporated under the Companies Acts with the Registered Numbered SC340640 and having its Registered Office at 7 Queen's Gardens, Aberdeen, AB15 4YD. | ||
| Pursuers | ||
| against | ||
| GEORGE McGREGOR, residing at 23 Links Road, Bridge of Don, Aberdeen, AB23 8DD. | ||
| Defender __________________________ |
Act: Artis, Counsel
Alt: McCallum
ABERDEEN, 15 May 2013.
The Sheriff, having resumed consideration of the cause, Repels the defender's pleas-in-law numbers 1 and 2; Sustains the pursuers' pleas-in-law numbers 4 and 5 and accordingly also the pursuers' pleas-in-law 1, 2 and 3; Quoad Ultra Repels the parties' pleas-in-law and accordingly (1) Grants decree against the defender for payment to the pursuers of the sum of FIFTY ONE THOUSAND ONE HUNDRED AND TWO POUNDS THIRTY FOUR PENCE STERLING (£51,102.34) with interest thereon at the rate of eight per centum per annum from the date of citation until payment; (2) Grants decree against the defender for payment to the pursuers of the sum of FORTY EIGHT THOUSAND SEVEN HUNDRED AND THIRTY NINE POUNDS TWELVE PENCE STERLING (£48,739.12) with interest thereon at the rate of eight per centum per annum from the date of citation until payment; Reserves meantime all question of expenses and sanction for the employment of counsel and appoints parties to be heard thereon within the Sheriff Court House, Aberdeen on 11 June 2013.
NOTE:
Introduction
[1] This is an action by the liquidator on behalf of a private limited company against one of the former directors of that company, seeking payment of sums alleged to be due by the defender to the company. There are two aspects to the pursuers' claim. Crave 1 seeks repayment of a sum of money shown in the books of the company as the outstanding balance of a loan account advanced by the pursuers to the defender as a director. Crave 2, craves payment from the defender of sums advanced by the pursuers to his co-director, Denis Stewart. Crave 3 is an esto crave, representing a fall-back position to crave 1 on the basis that if the defender's factual case were correct, the sums for which he claims credit would fall to be regarded as an unfair preference to the prejudice of other creditors.
[2] The defender's position is that he took no part in the day to day running of the business and was neither involved in the financial affairs of the company nor provided with management accounts. He maintains that the sums shown as directors loans in his name are wrongly recorded, and they in fact represent reimbursement by the company of sums expended by him personally on behalf of the company. He maintains that he did not authorise any lending by the company to Mr Stewart and is not responsible to the pursuers for any such lending.
[3] Both parties tabled preliminary pleas, attacking the relevancy and specification of the other's averments, and the debate proceeded in respect of both parties' preliminary pleas.
Defender's attack on the relevancy of the pursuers' case
Defender's submissions
[4] The defender's preliminary pleas are to be found in pleas-in-law numbers 1 and 2. In his submissions, Mr McCallum pointed out that for the purposes of the debate, he only sought to direct his criticisms towards the pursuers' averments in respect of crave 2, namely the loan to Denis Stewart. Mr McCallum invited me to sustain his preliminary pleas to the effect of dismissing the pursuers' crave 2. Mr McCallum accepted that in relation to the pursuers' craves 1 and 3, sufficient averments had been made to enable the case to go to proof.
[5] Mr McCallum reminded me of the parties' positions on Record dealing with the Denis Stewart director's loan. The pursuers sought to hold the defender liable for payment of the amount of the Denis Stewart loan in terms of Section 213(4)(d) of the Companies Act 2006. The pursuers aver that this is a transaction caught by Section 197 of the 2006 Act as it is a loan made to a director of the company which has not been approved by a resolution of the members of the company. Section 213 deals with the consequences of a contravention of Section 197. The effect of Section 213(4)(d) is that where a company enters into a transaction in contravention of Section 197, along with certain other persons, "Any other director of the company who authorised the transaction or arrangement" is liable to indemnify the company for any loss or damage resulting from the transaction or arrangement.
[6] However, in terms of Section 213(7)(b), a director is not liable under sub-section 4(d) if he shows at the time the transaction or arrangement was entered into, he did not know the relevant circumstances constituting the contravention. The defender has put Section 213(7) in issue by pleading a defence to the effect that he was unaware of any loan being made to Denis Stewart.
[7] Mr McCallum's succinct point was that for the pursuers to succeed on this part of his claim, they would have to prove that the defender approved or authorised the arrangement which was entered into with Denis Stewart. In condescendence 2 at line 22, it is averred that the accounts "were seen and approved by the directors". In condescendence 3, line 122, it is stated simply that the defender "had authorised" lending to Denis Stewart. On the basis of these averments, no foundation has been laid to enable the pursuers to lead evidence to bring home a case that authorisation or approval had been given or to show how such approval or authorisation had come about.
[8] Furthermore, the pursuers' position is that no management accounts were approved by the directors after 31 July 2009. The email traffic referred to by the pursuers in condescendence 2 from line 22 onwards was all sent after 31 July 2009 and therefore post-date the point at which the alleged authorisation would have occurred. For that reason, the email traffic referred to does nothing to assist the pursuers in laying out a case that authorisation of this lending to Mr Stewart was given by the defender.
[9] Quite simply, the pursuers' averments that the management accounts were "seen" by the defender and "approved" would seem to imply some further positive act by the defender having taken place, without specifying how exactly such approval was given, the form which it took or when it occurred.
[10] Mr McCallum also attacked the pursuers' averments in condescendence 3 about a sum of £49,178.68 included within the directors' loans and said to represent sums advanced to a business called The Heritage Window and Door Company Limited. Mr McCallum referred me to the averment at lines 129 - 130 that "That sum was allocated on a 50:50 basis to each of the directors' loans." The pursuer also referred at line 196 to the company's accountants, Ritson Smith, treating the respective sums "rightly" as being equal between the defender and Denis Stewart. In Mr McCallum's submission, however, there are no averments to show why it was appropriate to allocate the sums concerned on a 50:50 basis. In his submission, the pursuers' averments are irrelevant and lacking in specification and failed to give fair notice to the defender. These averments should not be admitted to probation and crave 2 should be dismissed.
[11] Mr McCallum criticised the averments in support of the pursuers' esto case that any sums paid to the defender to reimburse him for personal expenditure on behalf of the company would be caught by Section 243 of the Insolvency Act 1986 as an unfair preference in terms of Section 243. Mr McCallum submitted that the pursuer did not have adequate averments to establish that unfair preferences were granted In particular, there are no averments which would enable the pursuer to lead evidence to prove that there was collusion between the defender and the company. Therefore this case is also lacking in specification and fails to give fair notice to the defender.
[12] In relation to the question of the function of written pleadings and the giving of fair notice, Mr McCallum referred me to Macphail, Sheriff Court Practice, paragraph 9.07 at page 295. He further referred me to the cases of Lord Advocate v Johnston 1985 SLT 533, Morrisons Associated Companies Limited v James Rome & Sons Limited 1964 SC 160 and Ward v Coltness Iron Company 1944 SC 318.
Pursuers' submissions in reply
[13] Counsel reminded me of the tests to be applied when scrutinising a party's averments to decide if they are relevant and give fair notice to an opponent. An action will not be dismissed as irrelevant unless it must necessarily fail even if all the pursuers' averments are proved (Jamieson v Jamieson 1952 SC (HL) 44). Although it is incumbent upon a pursuer to give fair notice of matters requiring proof, it is not necessary to aver in the pleadings every point of evidence (Lord Advocate v Johnston 1985 SLT 533, at page 534). The pleadings should be read broadly (McMenemy v James Dougal & Sons Limited 1960 SLT (N) 84). I was reminded that the test is whether the other party is prejudiced in his preparation for proof (Avery v Hew Park School for Boys 1949 SLT (N) 6).
[14] In approaching the pursuers' averments, due allowance should be made for the degree to which the facts and circumstances are peculiarly within the defender's knowledge. In regard to the issue of approval or authorisation of the loan to Denis Stewart, the defender had a considerable advantage over the pursuers in terms of his personal knowledge of how the company was managed and what he did in relation to lending to the directors.
[15] In counsel's submission, the pursuers have given fair notice of the essential elements to bring themselves within Section 213 of the Act. At condescendence 3, line 4, the pursuers offered to prove that the defender authorised the lending....
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