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OUTER HOUSE, COURT OF SESSION
[2007] CSOH 207
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A823/05
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OPINION OF LADY
CLARK OF CALTON
in the cause
MR ALASTAIR ESPIE
MAXWELL
Pursuer;
against
GREENOCK MORTON
FOOTBALL CLUB LIMITED
Defenders:
ннннннннннннннннн________________
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Pursuer:
Upton; Brodies
LLP
Defenders: Henderson, Solicitor Advocate; Harper Macleod
21 December
2007
Procedural History
[1] This
case first came before me for a one day hearing on procedure roll on 14 February 2007 in respect of preliminary
pleas one to five for the defenders. An
offer of a proof before answer was made on behalf of the pursuer. The pursuer tendered a Minute of Amendment
(number 16 of process) which reduced the sum sued for from г18,693.38 to
the sum of г10,733.33 and added some specification about the quantification of
damages. The Closed Record was amended
in terms of the Minute of Amendment without objection. A further amendment to Article 3 of
condescendence was made at the bar by counsel for the pursuer to clarify that
the sums sought were for the period from 15 December 2000 to 31 May 2001.
Submissions on behalf of parties were not completed in one day.
[2] The
Court administration was not able to provide a date for a continued hearing
until 9 November 2007. On that date the parties lodged a Joint
Minute which clarified the procedural history of the employment appeal
proceedings referred to in the pleadings. There was no admission in the Joint Minute
that the pursuer was dismissed by the defenders or agreement about the effective
date of any dismissal. I was informed that the parties had not been able to
resolve the case despite the concerns which I had expressed on
14 February. My concerns related to
expense and delay in a case which was not advanced as a "test" case but was an
unresolved commercial dispute dating from 2001 of low monetary value.
Overview
[3] The defenders are a
football club which by letters dated 29 June, 1 and 5 July 2000 (7/1-7/3 of process) employed the
pursuer as head coach for a fixed period from 1 July 2000 until 15 May 2002. The
contract provided for payment to the pursuer of a basic salary and various
other payments including bonus payments.
Thereafter there was an offer to vary the contractual conditions by
letter dated 27 December 2000
on behalf of one of the joint interim administrators of the defenders. This offer was accepted by the pursuer on 28 December 2000. The terms of the contractual documents were
not in dispute. There was a dispute about the meaning and effect of the
variation which might have been capable of very short discussion but the nature
of the pleadings and submissions extended the hearing to two days. It is plain from the Record and the
submissions that parties in this action still dispute an important issue which
underlies the rights and remedies of the pursuer. According to the pursuer, the defenders
purported to terminate the pursuer's contract of employment with effect from 31 May 2001 (Article 6 of
Condescendence). According to the
defenders, the contract was lawfully terminated with effect from 31 May 2001 (Answer 6 and plea-in-law
10). No averments are made by the
defenders to explain the lawful basis of termination before the expiry of the
contractual fixed term. The solicitor
advocate for the defenders did not seek to argue plea-in-law 10, albeit in
oral submissions he appeared to try to introduce this in developing his
submissions about relevancy. As
presently pled, the pursuer does not aver any case seeking damages for breach
of contract for wrongful dismissal as an esto
case in response to the defenders' averments of termination. Insofar as there are averments for breach of
contract in this case, the alleged breach of contract is not the purported
dismissal of the pursuer, it relates to failure by the defenders to fulfil the
terms of the contract as varied. The
pursuer's case appears to be based on the contention that the contract
continued at least until September or December 2001 (the date is disputed
by the parties) when an incoming investor acquired a majority shareholding in
the defenders.
The pleadings
[4] In Article 2 of
Condescendence the pursuer refers to the letters dated 29 June, 1 and
5 July 2000 and the events leading up to the appointment of interim managers
and administrators to manage the affairs of the defenders in terms of section 9
of the Insolvency Act 1986. The pursuer sets
out the terms of a letter of 27
December 2000 7/4 of process) from one of the interim
administrators as follows:
"Unfortunately, the Club is
unable, at present, to meet the ongoing payroll and certain other costs due to
a lack of income. To enable the Club to
continue to trade whilst new investment is sought it will be necessary to
introduce various cost cutting measures.
As part of these cost cutting
measures, and subject to certain limits, I am therefore
having to write to each employee, including yourself, to ask you to
agree to a reduction in your remuneration package with effect from 15th December 2000 and
for the foreseeable future. (Under this
agreement, you would no longer receive appearance monies or "win" and "draw"
bonuses. You would also not be entitled
to any other payments that may otherwise be due to you by way of a bonus,
signing on fees or otherwise from 15th
December 2000 onwards).
This reduction will apply until
an incoming investor acquires a majority shareholding of the Club. You should also note that, unless you
agree otherwise, it will be made a precondition for an incoming investor
acquiring a majority shareholding in the Club that the investor abides by the
terms of your contract of employment with the Club as at 14th
December 2000 and agrees to make good any shortfall which you have suffered as
a result of this arrangement.
I would therefore ask you to
consider agreeing to this proposal by signing and dating the attached duplicate
letter acknowledging your acceptance of these terms as soon as possible".
The underlining in the text is
mine. It is averred that on 28 December 2000 the pursuer agreed
to the proposal. In response in Answer 2,
the defenders admit the terms of said letters and aver that the pursuer's
employment with the defenders was terminated with effect from 31 May 2001. The defenders make averments about financial
difficulties they were experiencing in late 2000 and narrate a history about
the appointment of joint administrators ad
interim of the defenders. With
reference to the letter of 27 December
2000, the defenders aver that "the pursuer signed and dated a
duplicate of Mr Martin's letter dated 27 December 2000 on or about 28 December 2000. By doing so the pursuer agreed to the
proposal". The defenders further aver
that following a Company Voluntary Agreement, the joint administrators were
discharged. It is then averred
that:
"on or about 4 December 2001 an incoming investor
acquired a majority shareholding in the defenders. The then owners of the majority of the shares
in the defenders did not make it a condition of the agreement to transfer those
shares to the incoming majority shareholder that the incoming majority
shareholder would make any payment or that the incoming majority shareholder
would procure that the defenders would make any payment to the pursuer".
[5] Article
3 of condescendence sets out the sums averred to be due by the defenders to the
pursuer described as "the shortfall".
[6] In
Article 4 the pursuer avers that on about 4 September 2001 an incoming investor
acquired a majority shareholding in the defenders, within the meaning of the
agreement of 27 and 28 December 2000.
In terms of said agreement it is averred "the defenders thus undertook
to procure that they were put in funds in order to pay the pursuer the
shortfall and to use those funds to pay him the shortfall. They have not done so. The pursuer seeks payment of the shortfall
from them. Esto they are not obliged to make payment (which is denied), they
are obliged to make reparation to the pursuer in the same sum for the loss
caused to him by their failure to fulfil the agreement. In response to this, in Answer 4, there
is a general denial by the defenders and averments are made about the
termination of the pursuer's contract of employment on 31 May 2001.
In plea-in-law 10 for the defenders (not a plea relied on before me) it
is made plain that the defenders aver lawful termination. It is averred that neither the defenders nor
the administrators had the power to impose a condition upon any incoming
shareholder concerning payment of any sums due to the pursuer. Further, neither the defenders nor the
administrators undertook to procure that any incoming shareholder would make
payment of any sums to the pursuer.
[7] In
Article 5 of Condescendence the pursuer avers an alternative case to the effect
that
"on a proper construction of the agreement the defenders
undertook to procure that the incoming investor would make payment directly to
the pursuer. It was accordingly their
duty to procure that the incoming investor made payment of the shortfall to the
pursuer. The incoming investor has not
done so. In that duty the defenders have
failed and so caused the pursuer's loss.
They knew or ought to have known that if they so failed they would cause
the pursuer that loss. Had they
fulfilled the said duty the pursuer would not have suffered that loss".
In answer 5, the defenders
make a general denial and further aver:
"Explained and
averred that on a proper construction of the agreement the defenders did not
undertake to procure that the incoming investor would make payment directly to
the pursuer".
[8] In
Article 6 the pursuer makes reference to a purported termination of the
pursuer's contract of employment with effect from 31 May 2001 and gives further specification about his
earnings.
[9] The
first plea-in-law for the pursuer is directed to the declarator
conclusions. The second plea-in-law states:
"The defenders
having agreed to make payment to the pursuer on the condition agreed in the
parties' contract, and that condition having been purified, decree of payment
should be pronounced in terms of the second conclusion."
The third plea-in-law states:
"Separatim, esto the defenders are not obliged to make payment to the pursuer
in terms of the parties' contract (which is denied), the pursuer having
suffered loss through the defenders' breach of that contract, he is entitled to
reparation therefore from them."
[10] The defenders have seventeen pleas-in-law of which pleas one to
five are preliminary pleas. The only
pleas-in-law insisted on by the defenders at the end of the procedure roll
debate were pleas 1 to 3. The first
plea-in-law is a general plea to the relevancy seeking dismissal of the
action. The second and third
pleas-in-law seek to restrict probation based on lack of relevancy et separatim specification and are directed
at Articles 4 and 5 of Condescendence.
Submissions on behalf of the defenders
[11] A detailed note of argument
no. 14 of process was submitted on behalf of the defenders. The list of authorities
provided are as follows:
1. Westlaw extract of
Schedule 1 to the Insolvency Act 1986.
2. Walker, "The Law of Contracts and Related Obligations in Scotland" (3rd edition), Chapter 5
(5.3; 5.56; 5.57; 5.63).
3. Walker, "The Law of Contracts and Related Obligations in Scotland" (3rd edition), Chapter 11
(11.6).
4. Pennington's Company Law (7th edition) pp.169-170.
5. Walker, "The Law of Contracts and Related Obligations in Scotland" (3rd edition),
Chapter 2 (2.1, 2.5).
6. Walker, "The Law of Contracts and Related Obligations in Scotland" (3rd edition), (7.6-7.69).
7. Gloag on Contract, (1929) Chapter XVI.
8. Harvey on Industrial Relations and Employment Law,
(December 2006), Volume A, Chapter 13.
The note of argument deals in
paragraph (d) with some points of specification in relation to damages but
after the amendments on behalf of the pursuer in relation to damages, the final
position of the solicitor advocate for the defenders, was that he was not
moving the Court to sustain pleas-in-law 4 and 5. His primary position was that he was seeking
decree of dismissal in terms of the first plea-in-law. In
support of the defenders' first plea-in-law, the solicitor advocate developed
his submissions which also underpinned his criticisms of Articles 4 and 5
of Condescendence.
[12] As I understood the thrust of the oral submissions, there were four
general legal issues underlying the particular points made on behalf of the
defenders. There was some overlap in
these submissions which I found difficult to follow. The issues may be summarised in this
way. Firstly, it was submitted that the
terms of the declarator were wrong in particular because the contract
terminated with effect from 31 May
2001. Secondly, it was
submitted that however the contract is construed it is not possible to construe
it in the ways averred by the pursuer. He did not offer any alternative construction
which gave effect to the words used by the parties. In relation to construction, the solicitor
advocate for the defenders also prayed in aid, Gloag on Contract, Chapter XVI, in particular pages 270,
275-276 and 279. This introduced into his
discussion the issue of impossibility of performance. This was not reflected in the written note of
argument. In developing the submission
about interpretation, the solicitor advocate for the defenders submitted that
the terms of the variation should be construed as a unilateral undertaking and
that the defenders had no power to grant such an obligation (Walker 2.1,
2.5). Thirdly, it was submitted that the
defenders or administrators of the defenders did not have the legal authority or
power to conclude a valid contract providing for imposition of a pre-condition
upon an incoming investor acquiring a majority shareholding of the
defenders. The defenders would not and
could not be a party to any acquisition agreement acquiring shares in
themselves. In developing these points,
the solicitor advocate made reference to the first four authorities cited in
the list at paragraph 11. Although his
submissions were primarily concerned with legal authority or power, he did at
times appear to shift the issue to impossibility. The solicitor advocate for the defenders also
sought to introduce, as a relevancy point, a fourth legal issue. This
was that the consequence of what the defenders aver to be a lawful termination
of the pursuer's employment by them with effect from 31 May 2001 was that by
the date the incoming investor acquired a majority shareholding, the contract
was terminated, it was accordingly too late to purify the contractual condition
and no sums were accordingly due. I was
referred to Harvey, Chapter 13.
Submissions on behalf of the Pursuer
[14] The list of authorities provided
by counsel for the pursuer and the categorisations which he applied to them are
as follows:
I. Preliminary remarks.
1 Jamieson
v Jamieson, 1952 SC (HL) 44, per Lord President Normand at p. 50.
2. Macphail, Sheriff Court Practice (3rd edtn) vol. 1, para. 9.33;
II Interpretation
3. Walker,
Civil Remedies, pp. 115-116;
4. McBryde Contract (2nd edtn) pp. 183, 491;
5. Charter
Reinsurance Co Ltd v Fagan [1997] AC 313 per Lord Mustill at pp.
384H & 388 B-D;
6. Gloag Contract (2nd edtn) pp. 373, 339-400, 402
;
7. Investors
Compensation Scheme Ltd v West
Bromwich B.S. [1998] 1 WLR 896, per
Lord Hoffmann at p. 912H;
8. Muirhead
& Turnbull v Dickson (1905) 7 F 686 per Lord Dunedin at p.
694;
9. Chitty, Contract (29th edtn), vol.1, paras. 2-154; 12-084;
10. Lewison Interpretation of Contracts, para.
7/07;
11. Howard
v Pickford Tool Co Inc [1951] 1 KB
417, per Asquith LJ at p. 421;
12. Harvey Industrial Relations & Employment Law
paras. 2255-2267;
13. F
Brown plc v Tarmac Construction
(Contracts) Ltd, Lord Macfadyen, 11 February 2000, pp.2-5;
14. Macphail, Sheriff Court Practice (3rd edtn), vol 1, para. 9.36;
15. Orion
Insurance v Sphere Drake Insurance
1990 1 LI.L.R. 465, per Hirst J.
at pp. 492-4;
16. R.
& J. Dempster v Motherwell Bridge
& Engineering Co., 1964 SC 308. per Lord President Clyde at pp. 327-8;
III Ultra
vires & impossibility
17. Stair, II, 12, 7;
18. Dickson, Evidence, vol. 1, p.99 and para. 158;
19. Palmer, Company Insolvency in Scotland, pp.30-32;
20. St Clair & Drummond Young, Corporate Insolvency (2nd
edtn), pp.104-5, 111;
21. Walker,, Contract, para.
5.56 at p. 77;
22. Insolvency Act 1986:-
section 1(1) & (3);
section 3(2);
section 5(2)(b);
section 8(3)(a)-(c);
section 14(1)(a) & (b);
section 14(5);
section 14(6);
Schedule 1, para. 18
23. Companies (Tables A to F) Regulations
1985 (S.I. No. 805), Table A, article 24;
24. McBryde
Contract (2nd edtn), para.
20-15;
25. Union
Totalisator Co Ltd v Scott 1951
SLT (Notes) 5 (OH, Lord Sorn);
26. Companies Act 1985, section 425.
[15] In his preliminary remarks counsel referred to the well known
test in Jamieson v Jamieson, 1952 SC (HL) 44, per Lord President Normand at p. 50:
"the true proposition is that an action will not be dismissed
as irrelevant unless it must necessarily fail, even if all the pursuer's
averments are proved. The onus is on the
defender who moves to have the action dismissed, and there is no onus on the
pursuer to show that if he proves his averments he is bound to succeed".
Counsel submitted that the
solicitor advocate for the defenders had not focused his submissions in
relation to that test.
[16] He defended the declarator conclusions on the basis that these
merely reflected the original terms of the contract as varied.
[17] In relation to interpretation, counsel made reference to
various authorities from both Scottish and English jurisdictions to vouch
general principles of interpretation which I did not understand to be in
dispute in the case. He submitted that
the contractual documents must be construed as a whole, that it is always
competent to lead evidence of the circumstances at the time when the contract
was made, that ordinary words are to be taken as used in the ordinary meaning
thereof and that if there is nothing in the context or in the rest of the
contract to imply the contrary in cases where parties differ as to the meaning
of an ambiguous expression, there is a general presumption in favour of its
construction contra proferentum. He emphasised the importance of approaching
interpretation taking into account the factual matrix and submitted that could best
be done only after proof.
[18] Turning
to the third issue relied on by the defender, counsel for the pursuer submitted
that it was sometimes unclear whether the defenders' submission was based on ultra vires or impossibility. He accepted that the shareholders were
separate from the defenders and that the defenders acting alone or acting
through an interim administrator did not have power or authority to directly
impose preconditions on shareholders. He
submitted that both points raised on behalf of the defenders were
misconceived. In any event, he submitted
that it was for the defenders to offer to prove that the administrator was
acting ultra vires. He highlighted the statutory powers of the
administrator discussed in St Clair & Drummond Young, Corporate Insolvency (2nd edtn), pp.104-5, 111 and made
reference to the Insolvency Act 1986, in particular section 14 thereof. He
submitted that an administrator has the power to put forward a scheme of
arrangement which may affect the shareholders in certain circumstances. He pointed out that section 14(6) provides
that:
"a person dealing with the administrator in good faith and
for value is not concerned to inquire whether the administrator is acting
within its powers".
He submitted that the pursuer in
dealing with the interim administrator gave up valuable rights, subject to the
terms of the contract agreed between the pursuer and the interim administrator. In any event he submitted the issues raised
on behalf of the defenders were not properly focused by the defenders in the
pleadings.
[19] Turning to consider the issue as one of impossibility, counsel
for the pursuer submitted that there was no legal or factual impossibility
preventing such an agreement. The mere
fact that the administrator might not be in a position directly to compel such
an agreement did not matter. He made
reference to McBryde Contract (2nd
edtn) pp. 183, 491 at paragraph 20.15:
"Impossibility
may arise in fact when a party to the contract cannot perform, but another
party could, for example if an obligant has a lack of funds,
or the seller does not own what is agreed to be sold, or a party cannot obtain
a permit. In general that form of
impossibility, or increased difficulty in performing the contract, is no answer
to a claim for damages arising from breach of contract".
[20] In answer to the defenders' submission in relation to the fourth
issue counsel submitted under reference to Howard
v Pickford Tool Co Inc [1951] 1 KB
417, per Asquith LJ at p. 421 that:
"an unaccepted repudiation is a thing writ in water and of no
value to anybody: it confers no legal
rights of any sort or kind".
He also made reference to Harvey Industrial Relations & Employment Law paras. 2255-2267 which has a discussion about the effect of dismissal by an employer
on the employment contract in comparison to the effect of a repudiatory breach
in an ordinary contract situation. Counsel submitted that if the
dismissal was effective in bringing to an end the contract, it was a breach of
contract by the defenders that did not bring to an end the pursuer's
entitlement to damages.
Discussion
[21] At the outset it may be helpful if I deal immediately with the
fourth legal issue raised by the solicitor advocate for the defenders and
referred to in paragraphs [13] and [20].
I do not consider that I am in a position to form any view, without
evidence, as to whether or not there was a lawful termination of the pursuer's
contract of employment with effect from 31
May 2001 or any other date.
There is no agreement in this case and I consider evidence would be
required to resolve that issue. While I
note the submission made by the pursuer's counsel in paragraph [20], I merely
comment that the commentary in Harvey makes it plain that the
determination of the circumstances in which an employment contract is
terminated and the legal effects thereof is not without difficulty. On disputed averments the Court is not able to
resolve the issue. I also note that the
pursuer in this case does not have any pleadings on an esto basis to meet the defenders' averments of termination. Albeit, as submitted by the pursuer's
counsel, it may be a breach of contract on behalf of the defenders to terminate
the fixed term contract early, this is not the case averred on behalf of the
pursuer. It is unfortunate, if this
issue is an important one in the case, that the
pleadings for both parties do not reflect and develop the issue in a more
focused way.
[22] I did not find the citation of authorities very helpful in the
context of this case. I did not consider
that the authorities assisted in a resolution.
I consider that a critical issue in the case is how to interpret the
meaning of the particular wording used by the parties in this particular case. The general principles of law about
interpretation are well settled. My task
is to consider the terms of this particular contract to assess whether the
interpretation is such that the pursuer must necessarily fail in this
action. In relation to the issue of ultra vires or impossibility, counsel
for the pursuer set out a detailed analysis relating to the powers of interim administrators and the powers of
shareholders in companies. As the legal
submissions progressed, however, it appeared that both parties agreed that the
defenders and or the interim administrator had no power or authority to impose directly
a precondition on the shareholders. It
was not contended on behalf of the pursuer that was the intention of the
parties. It was also agreed on behalf of
the parties that it was not illegal, ultra
vires or impossible for such a precondition to be made if that was the wish
of the shareholders, with or without, the request or intervention of the
defenders' interim administrator.
The declarator conclusion
[23] The solicitor advocate for the defenders made detailed
criticism of the form of the declarator in the first conclusion based on
paragraph 1(a) of his note of argument. He did not submit that such a
conclusion was incompetent. I do not accept his submission in which he tried to
persuade me to reach conclusions based on averments about documents and
representations made to another tribunal.
In effect he was inviting me to reach a conclusion about whether and
when the contract was lawfully terminated.
As I explain in paragraph [21] I am not prepared to do this. If the parties wish to continue to dispute
this, factual evidence will require to be led. I am satisfied that if one reads the
declarator as a whole, it is plain that the pursuer is trying to set out the
legal basis of the parties' contract which includes the stage of variation. I am satisfied that, if the pursuer is
otherwise entitled to a proof before answer of the averments in relation to the
merits of the case, the declarator conclusion is not obviously irrelevant
albeit it is unusual to find such a form of declarator conclusion in an action of this type.
Interpretation of the contract as varied
[24] I consider that a critical
decision in this case is to consider the interpretation of the terms of the contract
as varied and decide whether the action by the pursuer must necessarily fail
because the pursuer's averments about the interpretation of the contract as
varied are irrelevant.
[25] As I understood the submissions on behalf of the defenders, it
was contended that there was no agreement between the pursuer and the defenders
that it will be made a pre-condition for an incoming investor acquiring a
majority shareholding in the club ...to make good any shortfall which the pursuer
has suffered as a result of the variation.
It was submitted on behalf of the defenders that there was no such
condition in the letters dated 27 and 28 December 2000 and that the letters may not be
construed as containing such a condition.
The solicitor advocate stated that in terms of the agreement there was
no undertaking (by the defenders) that it will be made a precondition. That he said was particularly important in a
situation where the precondition relates to actions of shareholders in a
company structure. The action he
submitted is fundamentally flawed and irrelevant as it cannot be that the
defenders are under any obligation in terms of the variation. When pressed as to what meaning should be
given to the words underlined in the text, no clear answer was given. He seemed to suggest that this was narrative
only. The solicitor advocate for the
defenders repeatedly asserted that it could not mean what the pursuer narrated
but did not offer any alternative interpretation which gave meaning to the
words used by the parties. It may be
that the submission on behalf of the defenders about interpretation was
inextricably entangled with the submission about lack of power or authority and
or impossibility which I understood to be a separate submission. Be that as it may, I consider that the full
terms of the correspondence resulting in variation must be considered in construing
the parties' agreement.
[26] I consider that the words used by the parties should if
possible be given their plain and ordinary meaning. I have no hesitation in
concluding that prima facie the terms
have such a meaning. I am of the opinion
that the defenders made an offer to the pursuer explaining the defenders'
difficult financial circumstances and invited the pursuer to give up certain
contractual benefits to which he was entitled under a fixed term contract until
an uncertain event, that is an incoming investor
acquired a majority shareholding in the defenders. On the occurrence of such an event it was
stated in the offer "that it will be made a precondition". I consider that the plain meaning of the
words which I have underlined is that the interim administrator are offering to
the pursuer that something to the advantage of the pursuer (that is making good
the shortfall) which is in the power of a third party or parties will occur as
a precondition of the majority shareholders acquiring a majority shareholding. The parties are not agreeing that the
defenders or interim administrator
will make it a pre-condition for an incoming investor to do certain
things. In my opinion, if an arrangement
is lawful and not ultra vires, there
is nothing to prevent parties A and B agreeing with each other an obligation
which can only be undertaken by a third party C even in circumstances where A
and B have no power to control or influence that third party's conduct. (Gloag, page 339). The
interim administrator having agreed the pre-condition, in the words used in the
present case, the defenders in my opinion must bear the risk that the
shareholders might not make such a pre-condition. That in my opinion is a risk which is left to
fall on the defenders. It does not affect
the meaning of the agreement or the respective obligations of the pursuer and
the defenders as between themselves.
This variation was apparently initiated because of the defenders'
financial difficulties. The interim
administrator of the defenders formulated an offer to the pursuer which could
have been made in terms more favourable for the protection of the defenders,
for example, by introducing words of protection such as "the defenders or the
interim administrator will use their best endeavours" that a pre-condition will
be made. I am satisfied that prima facie the term of the agreed
correspondence narrated in the pleadings is that the parties contracted that
there should be a precondition as narrated in favour of the pursuer. It is not disputed that there was in fact no
such precondition made to reimburse the pursuer. That failure is the basis of the case made by
the pursuer.
[27] In developing his submissions, the solicitor advocate for the
defenders specifically criticised the averments in Article 4 and Article 5 of
Condescendence. In Article 4 of
Condescendence the pursuer avers that "in terms of the agreement, the defenders
had undertaken that it would be made a pre-condition for the incoming investor
acquiring a majority shareholding in the defenders that the investor abided by
the terms of the pursuer's contract of employment with the defenders as at
14 December 2000 and agreed to make good the shortfall which the pursuer
had suffered as a result of the agreement". In my opinion prima facie the plain words of the variation bear a meaning which
is wide enough and indeed wider than that averred by the pursuer. That wider meaning which I set out in
paragraph 26 is capable of covering the meaning averred by the
pursuer. That in my opinion founds a
sufficient basis for the case to proceed to a proof before answer. The pursuer makes further averments in
Article 4 and Article 5 of Condescendence and it may be that evidence
will enable the Court to come to a more informed understanding rather than a prima facie understanding of the
contractual terms and payment method agreed between the parties. Further, it
may not now be of any consequence what particular payment method was envisaged
by the parties. For present purposes it
may be sufficient for the pursuer to aver that the parties agreed a condition
whereby payment of the shortfall would be made to the pursuer. I am
certainly not persuaded at this stage for the reasons given that Articles 4 and
5 are irrelevant.
Lack of legal authority
[28] In the defenders' note of argument
an issue is raised in paragraph (c) where it is stated "the defenders did not
have the legal authority to conclude a valid contract providing for imposition
of a pre-condition upon an incoming investor acquiring a majority shareholding
in the defenders....the defenders would not be and could not be party to any
acquisition agreement acquiring shares in themselves....the administrators had
the power to manage the affairs of the defenders. The administrators did not have the power or
authority to impose such a pre-condition upon the incoming investor....Esto the parties reached such agreement,
the agreement was invalid because the defenders and the administrators did not
have the power or authority to conclude such an agreement. In my opinion the parties did not contract
that the defenders would impose such a pre-condition. It was accepted in oral submission by the
solicitor advocate for the defenders that it would not be illegal or beyond the
powers of the shareholders with or without the encouragement, request or other
intervention by the defenders, for the shareholders to agree such a
pre-condition. In my opinion, as I
explain in paragraph [26], this is an example of an arrangement where the interim
administrator of the defenders contracted with the pursuer that something to the
pursuer's advantage will be made a precondition by another or others with the
consequences that flow from that.
[29] The fourth issue is not one which I am prepared to decide at
this procedural stage and I refer to paragraph [21] to explain why I
consider proof is required.
[30] For these reasons I am not prepared to uphold the first plea of
the defenders and I grant a proof before answer.
